Where does the Tuleva Additional Investment Fund invest?

The Tuleva Additional Investment Fund invests 100% of its assets in global stock markets, just like our Pillar II and III equity funds. When you invest in the Additional Investment Fund, you aren’t just buying fund units – you are gaining a stake in the world’s largest companies.

Which companies do you own through the fund?

The fund tracks the MSCI ACWI index, which includes nearly 2,500 of the world’s largest publicly traded companies from both developed and emerging markets. Chances are, you already use their services every day. (1)

For example, when you:

• buy a phone (Apple, Samsung);
• order a package online (Amazon);
• install Windows on your computer (Microsoft);
• search for something online (Google, Meta);
• use a credit card (Visa, Mastercard);
• drink a soda (Coca-Cola);
• take medicine (Eli Lilly, Novo Nordisk, Astra Zeneca);
• buy a new car (Toyota, Tesla, Mercedes, VW Group, etc.);
• buy a household appliance (Samsung, LG, Whirlpool).

Among these 2,500 global giants, you’ll also find some of Estonia’s largest employers: by investing in the fund, you own a piece of Ericsson, Swedbank, and Wise.

Each company is represented in the portfolio according to its market value. If a company’s shares make up 1% of the total value of the global stock market, our fund also invests approximately 1% of its capital there. This means the top holdings change over time. For instance, in 1996, the heavyweights would have included General Electric, Coca-Cola, and Shell; in 2006, Exxon, Microsoft, and Citigroup; in 2018, Apple, Microsoft, Alphabet, and Alibaba; and today, Nvidia, Apple, Alphabet, and TSMC. (2)

Don’t look for the needle – buy the haystack

How did we choose these specific stocks for the fund? The answer is simple: we didn’t.

Our fund is passive, meaning we don’t try to outsmart the market by picking individual stocks. Most funds that attempt to do so end up with lower returns than the market average in the long run, even if they get lucky for a short period. Instead of trying to find the one “needle” in the haystack that will grow the most, we buy the entire haystack.

Technically, we achieve this by purchasing units from six major fund managers (Vanguard, BlackRock, Amundi, DWS (Xtrackers), Invesco, and BNP Paribas) to replicate the MSCI ACWI index at the lowest possible cost. (3)

• See more: The Additional Investment Fund model portfolio (in Estonian).

We invest responsibly

All Tuleva funds follow ESG principles for responsible and sustainable investing. To achieve this, we exclude companies that:

• Derive 5% or more of their revenue from thermal coal or oil sands extraction, tobacco production or sales, or the sale of firearms to civilians;
• Are involved in the production or sale of controversial weapons or nuclear weapons;
• Violate the United Nations Global Compact principles.

In practice, this means we exclude about 200 companies from the nearly 2,500 in the MSCI ACWI index. The largest exclusions include Philip Morris (tobacco), Boeing (missiles in addition to aircraft), and Altria (tobacco).

Why so much exposure to the US and the tech sector?

Our Pillar II and III equity funds follow these exact same principles. Along with other equity pension funds, they have delivered the best returns for savers over the last 2, 3, and 5 years. (4)

Bank salesmen often warn that the weight of the US and the tech sector in index funds is too high, suggesting you should instead keep your money in the bank’s high-fee, actively managed funds. This is a common concern, but let’s look at the facts.

First, companies traded on US stock markets don’t just operate there. For example, while Apple and Coca-Cola are headquartered in the US, they sell products worldwide. Revenue earned within the US accounts for only about 40% of their turnover; 60% is generated elsewhere.

The same applies to the tech sector. While these companies develop new technologies and are categorized as “tech,” they earn a large portion of their revenue in other sectors like retail, manufacturing, or transport.

Second, the market is self-correcting. We haven’t “decided” to favor the US or tech; we are simply reflecting the state of the global stock market. Stock weights in our fund are based on their market capitalization. US-listed stocks make up 60% of the fund because that is currently the US share of the global market.

If India or China rises tomorrow and their companies grow larger than those in the US, the fund’s composition will adjust automatically.

Summary: Simple, logical, and low-cost

The core of the Tuleva Additional Investment Fund is simple:

1. We invest in the world’s most successful companies.
2. We bundle them into one portfolio (diversifying risk across 2,500+ firms).
3. We keep costs low so that the returns stay with you, not the middleman.

1. A careful observer might remember that a few years ago, the MSCI ACWI index included nearly 3,000 companies. Today, it’s around 2,500 because the index provider aims to cover 85% of the total value of all global listed companies using the largest players.
2. If you’re interested, take a look at this video, which provides an overview of how the market capitalization of the world’s largest publicly traded companies has shifted between 1979 and 2021.
3. The Additional Investment Fund portfolio must include instruments from at least six different providers because it is a UCITS fund. These regulations state that securities issued by a single entity can make up no more than 20% of the fund’s assets. This differs from pension funds, where the diversification rule applies at the fund level (up to 30% per fund), which is why our Second and Third Pillar portfolios consist solely of BlackRock sub-funds.