FINLAND – Ilmarinen, Finland’s second-largest pension provider, has seen strong listed and private equity returns boost its fortunes, recovering from 2011’s loss to post a 7.5% return.

The €29.5bn mutual insurer, which has seen assets rise above pre-2010 levels, also announced it has acquired part of a shopping centre in Lappeenranta, close to the Russian border, and that it will team with Citycon to develop the centre, expanding its leasable area by one-third.

Despite noting that 2012 began with stock markets destabilised by the euro-zone crisis, Ilmarinen saw listed equity – its largest portfolio, comprising 31% of assets – return 9.1%.

The mutual further saw its overall equity results boosted to 9.5%, through 15.4% returns from its private equity holdings, while unlisted equity grew 5.4% over the course of the year.

A €2bn allocation to money market instruments only returned 1.9%, while real estate funds and property joint ventures only returned 2.2%, far behind the 5.6% performance of Ilmarinen’s direct property holdings.

However, the 10% direct real estate portfolio’s stronger performance was nearly able to balance out the lower returns of the joint venture investments, resulting in a 5.1% return across all property.

The insurer nonetheless increased its exposure to real estate joint ventures, announcing a deal with Citycon to buy a 50% stake in a shopping centre in Lappeenranta.

In recent years, the university city close to Finland’s border with Russia has attracted growing numbers of Russian tourists, Citycon said, resulting in plans to expand the centre’s retail space by one-third.

The property developer further noted that the city’s tax-free sales last year were on par with spending in the Finnish capital of Helsinki.

Tom Aimosen, head of real estate at Ilmarinen, said precisely this increasing purchase power made the city an attractive investment proposition.

As part of the deal, Ilmarinen will buy a 50% stake in IsoKristiina and provide half of the €100m in financing needed to expand the development.

Aimosen added that the centre was an “essential part” of the city’s core, and that the expansion – on which construction should begin in April, with a scheduled opening by May 2015 – would aim to be sustainable, taking account of energy-efficient designs.

Marko Juhokas, senior vice-president of development and sustainability, added: “This is a unique solution even in an international scale, making IsoKristiina a novel indoor city space combining culture and retail services.”

Citycon said further that it had pre-leased 60% of the planned 14,000 square-meter expansion.