Finland's Elo updates strategic asset allocation to boost efficiency
Elo, the merged mutual pension insurance company of Finland’s Pension Fennia and Local Tapiola, is updating its strategic allocation and strengthening its in-house capabilities by reducing the number of managers this year.
Pension Fennia and Local Tapiola merged officially on 1 January.
The two firm’s combined investment portfolio is now worth €18.6bn.
Some €8.15bn of this originates from Pension Fennia, which transferred its assets to the new entity at Local Tapiola, which was already managing a portfolio of €10.44bn.
Hanna Hiidenpalo, CIO at Elo, told IPE the firm aimed to make its investment operations more effective over the current year.
At the moment, more than 60% of the firm’s assets are managed in-house – the company invests in hundreds of funds.
Prior to the launch of Elo, Pension Fennia had invested slightly more in external funds than Local Tapiola had.
“We are now analysing our portfolio and scanning all the funds in which Elo’s assets are invested, inspecting how they match with our strategy,” Hiidenpalo said.
“Our aim is to clarify the portfolio structure overall – and it is likely we will end up exiting some of the funds in the process.”
Today, the lion’s share of Elo’s assets is invested in fixed income including credit-related investment (less than 40%) and equities (approximately 30%).
The rest of the portfolio includes property (15%) and hedge funds (10%) and alternatives (5%).
Some 30% of Elo’s assets are invested in Finland, but on the equities side home-region makes up one-third of the portfolio.
The rest of Elo’s equities are invested in other EU stock markets (30%), the US (approximately 20%) and emerging markets (nearly 20%).
Prior to the establishment of Elo, the investment portfolios of Local Tapiola and Pension Fennia were quite similar to one another in terms of overall asset allocation.
The only notable difference was Pension Fennia’s slightly larger exposure to property – at 16.5% of all holdings, whilst Local Tapiola’s property exposure was 13.2%.
“Our primary target in using funds is to complement our own operations and strategy and investment policy,” Hiidenpalo said.
“Funds come into play in specific markets, industries and particularly challenging alternative strategies, where our team of some 50 investment specialists do not have notable long-term expertise.
“This year, we want to make our operations more effective and focus on our core operations – investing and analysis. This is of utmost importance in a big organisation like Elo.”