The European Central Bank’s latest round of easing sent a signal to institutional investors that their inflation hedges may be growing more pointless by the day. In the northernmost corner of the euro zone, a $51 billion pension fund says ECB President Mario Draghi isn’t giving his industry much hope that things will improve. “So far, the less you’ve hedged, the better off you’ve been,”

Reima Rytsola, the chief investment officer of Varma Mutual Pension Insurance Co., said in an interview in Helsinki after the ECB presented its latest stimulus package. “And the more exposure you’ve taken duration wise, which is the inverse of an inflation hedge, the better off you’ve been.” Varma Mutual Pension Insurance Co.

Investments Fall 2.0% In 2018 Reima RytsolaPhotographer: Roni Rekomaa/Bloomberg “And when you listen to Draghi, you certainly don’t get the impression that inflation is about to come back,” Rytsola said. “So it’s pretty severe. And I’m not very optimistic that the ECB’s latest measures will do much to change the inflation outlook.” The absence of inflation is just one of a number of unsettling signs that has funds like Varma worried about the implications of the current monetary environment.

Far from reviving consumer-price growth, persistent ECB stimulus seems mainly to have created higher asset prices, making it increasingly difficult for pension funds to generate the returns they need to cover future liabilities.

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