Lithuanian Investment Index growth of 11% in 2021 was the most in over a decade

Last year could be called a year of rising markets, and that shows in the Lithuanian Investment Index too. According to INVL, the investment group that has compiled the Lithuanian Investment Index for that past 26 years, the index’s growth last year of 11% was the most since 2011. Since its calculation began in 1996, the index has risen more than ten-fold. From 1996 to 2021, it has had an average annual gain of 9.6%. The investment index captures the annual returns on the country’s main asset classes, which are weighted equally: stocks, bonds, rental housing, and deposits.

“Despite the uncertainty in the markets, last year was marked by strong growth that continued throughout the year. The main contributors to the index’s increase in 2021 were a surge in housing prices and the continued rise of the stock market,” said Vaidotas Rūkas, the Head of INVL’s Investment Management Division.

Higher housing prices drove growth of the index in 2021

Data through the end of 2021 shows investments in housing earned the biggest investment return in Lithuania last year. Housing prices and rental income offered an impressive return of 26.4% (with housing prices up 22.4% and rental income adding another 4%). Over the last 5 years, the country’s housing market had an average annual return of 12.2%, the biggest among the asset classes. Over 10 years, the return was 9.7% and over the last 20 years it was 12.9%.

According to Vaidotas Rūkas, there were several reasons for the rapid rise of real estate prices: a good macroeconomic situation in the country as both employment and wages grew, higher costs of construction and especially raw materials, a continuing low interest-rate environment, and post-pandemic factors such as people’s desire to live in higher quality housing and to spend or invest savings. Eurostat data for the third quarter of 2021 shows housing prices grew on an annual basis in all EU countries, but the rate of growth in Lithuania (18.9%) was second only to the Czech Republic (22%) and was twice the EU average (9.2%).

Last year the Lithuanian stock market took second place for return on investment with 18.3% growth in value. Over the last 10 and 20 years, stocks had the biggest average annual return among the country’s asset classes, at 12.5% and 13.6% respectively.

“Last year was an excellent year for stock markets. Lithuanian equities kept pace with global stock market trends, rising 18.3%. Western European stocks recovered from a slight dip in 2020 and also had a very strong 2021. The average annual returns for European, global and Lithuanian stock markets over both the last decade and over the last 26 years are solid and well above inflation,” Vaidotas Rūkas says.

The mood in the bond markets was more subdued in 2021. With inflation hitting new highs around the world and interest rates at new lows, central bankers began to feel intense pressure to end stimulative monetary policy.

Expectations of interest rate hikes driven by high inflation contributed to a rise in government bond yields, resulting in a negative return of -2.8% on long-term German bonds and a 0.5% fall in the Lithuanian bond index. US 10-year sovereign debt fell even more in US dollar terms, by 4.4%.

Looking at the longer 26-year period, Lithuanian government bonds have generated an average annual return of 5.7%, though over the past 10 years the average return was just 1.3%. Whereas two decades ago Lithuania was seen as a risky country and had to pay high interest rates on its debt, now it is considered one of the safer countries whose bonds investors trust.

The return on Lithuanian deposits remained at zero in 2021 for a seventh consecutive year, reducing the average long-term return on this asset class since 1996 to 4.1%.

Pension fund returns in 2021 were double-digit

Assets held by Lithuanian residents in the country’s second pillar pension funds increased by almost EUR 1.5 billion during the year to EUR 5.9 billion, with a 21% annual rate of return.

“Fast rising equity markets in 2021 had a positive impact on pension fund returns, which strongly outperformed the long-term averages and inflation. Positive returns allow pension fund members to feel more confident that their investments will not only be protected from inflation but will also earn additional returns,” Rūkas notes.

The investment expert points out the importance of remembering that saving in pension funds is a long-term process, decades-long, and during that time fluctuations are inevitable. Besides, when investing periodically, falling markets are a chance to buy more pension fund units for the same amount of money. Another important advantage of pension funds is that they diversify their investments, taking perhaps thousands of different positions, thus reducing the risk of one or another losing value.

Steadfast investors have good prospects

The uncertainty due to the war in neighbouring Ukraine and the wide-ranging sanctions on Russia and Belarus make it difficult to talk about the outlook for Lithuania going forward. The war will undoubtedly impact the Lithuanian economy, but its small size, flexibility and westward focus should cushion the losses. Most importantly, Lithuania is energy independent from its eastern neighbour, and every new wind and solar plant and biofuel boiler mitigates the impact of import prices.

“Shares of Lithuanian and Baltic companies have already undergone a moderate decline. There has been a correction of about 10% from the start of the year to mid-March, though there should not be any major direct impact on the companies’ activities. If foreign investors have less nerve and try to flee investments that border on Russia or Belarus, thus depressing share prices, that will be an opportunity for listed companies’ shareholders and insiders to increase their holdings. Committed local investors can follow that path since over the long term the Baltic countries are expected to continue to enjoy sustainable economic growth,” Rūkas says.

In the housing segment, a squeeze will be felt between construction costs and people’s willingness and ability to pay more for housing. Already in 2021, as fast post-pandemic recovery began, increased demand for building materials could not be fully met and their prices rose quickly. Following the outbreak of war in Ukraine and sanctions against Russia and Belarus, the supply of some raw materials will be further disrupted, so construction cost challenges will only increase. The resulting weaker economic growth and uncertain future will limit demand. These two factors combined will likely lead not to falling housing prices, which may keep pace with inflation, but rather to fewer transactions.

No changes are due for holding money in deposits – the investment return will remain at nil. As for bonds, medium-term Lithuanian government bonds can already be obtained in positive yield territory.

Returns on Lithuanian asset classes

Asset class * 1996-2021 average annual return, % 2012-2021 average annual return, % 2021 return, %
Rental housing (net of expenses starting in 2016) 14.1 9.7 26,4
Housing prices in Lithuania 6.8 5 22,4
Lithuanian stocks 9.5 12.5 18.3
Short-term Lithuanian debt securities and money market instruments (deposits) 4.1 0.3 0.0
Lithuanian long-term bonds 5.7 1.3 -0.5
Lithuanian 2nd pillar pension funds 6** 7.6 21
Inflation 3.2 1.9 4.6
Lithuanian Investment Index                    9.6 6.2 11

 * Housing acquisition and rental returns calculated on the basis of Ober-Haus data.

** Since their creation in 2004.


For further questions about the Investment Index or additional comments from Vaidotas Rūkas, the head of INVL’s investment division, contact us by e-mail at

The information provided herein shall not be construed as a recommendation, offer or invitation to invest in funds or other financial instruments managed by INVL Asset Management. When investing, you assume the investment risk. Investments can be profitable or unprofitable and you may not receive any financial benefit, or you may lose some or even all of the amount invested. Past performance of an investment does not guarantee future performance. In deciding whether to invest, you should assess all the risks associated with investing as well as the Key Investor Information documents. INVL Asset Management is not liable for any inaccuracies or changes in this information, nor for any losses that may arise when investments are made based on this information.