Finland’s Etera Mutual Pension Insurance is planning to grow its internally managed property portfolio and may reduce the number of external equity managers it uses, the fund’s head of real assets Jukka Reijonen told IPE.
“Emphasis in strategy will be on projects we are directly involved in, and less on property funds,” Reijonen said.
“I would say residential property, care homes and commercial property are the most promising sectors to be in here at the moment.”
Etera has a slightly higher than average exposure to property compared with other Finnish pension insurance companies; property assets comprised 18.6% of the whole portfolio at the end of September, according to the fund’s quarterly update.
Over the first three quarters of 2016, the asset class produced a return of 4.3%.
“We made a few good exits on our property funds, and that paid off on the real estate side of investments,” Reijonen said.
Etera launched several residential property projects this autumn, most recently in Tampere and Oulu.
It is also constructing the Tripla shopping centre in Pasila, Helsinki, and care homes for the elderly in various locations in Finland.
Overall, exposure to real assets will remain roughly the same, Reijonen said.
“Recently, we have increased direct investments in forest and indirect allocations to infrastructure funds that invest in energy, communication and traffic projects like airports in the European Union area, as well as in the US, for example,” he said.
“Of course, our plan is to keep our real assets holdings well-diversified in the future.”
On the equity side, Etera plans to boost its exposure.
The fund has a lower than average exposure to equities than peers, at 28.6% of all assets.
A new solvency framework coming into force in January will enable Etera to grow its equity portfolio during 2017-18, Reijonen added.
“Over the first three quarters of 2016, Finnish and emerging market equities continued to show a healthy performance, but euro-zone and Japanese equities were a bit of a disappointment for us,” he said.
“In the coming months, our plan is to become more cost effective on this front, and [we] may reduce the number of managers we have hired, emphasising our own role here, too.”
Etera manages assets worth €5.8bn.
Its return for the three first quarters of 2016 stood at 3.6%, with equities producing the strongest return among asset classes, at 4.6%.