Ilmarinen, the €36.5bn Finnish pensions insurer, has decided it may now accelerate its ongoing strategic shift in its listed equities investments towards the US due to the political uncertainties unleashed in particular by the UK vote to exit the European Union (EU), Donald Trump’s surprise win in the US presidential election and the referendum in Italy.

Italy’s prime minister Matteo Renzi resigned in early December after losing the popular vote on his proposed reform of the country’s constitution, in developments that are seen as further weakening the EU.

Ilmarinen has been in the process of adjusting its listed equities portfolio – which makes up around 30% of the overall investment portfolio – to reduce its significant structural overweight to Europe for 5-6 years.

The shift will mean increasing the allocation to US stocks to 20-30% from just under 20% now.

Ilmarinen CIO Mikko Mursula told IPE: “We might now speed it up a little because there are more uncertainties in the political landscape, but we will stick with the original plan.”

Asked whether Brexit, the Trump victory or the Italian referendum result had been the trigger for the decision to up the pace of the asset-allocation change, Mursula said they did not trigger it but were of course things that needed to be taken into account when making global asset-allocation decisions.

“If you think about the year 2017, with elections coming up in Germany, France and Holland, nobody knows what will happen,” he said.

“These events will have an influence on strategic investment thinking, and they certainly won’t make European political decision-making any easier.”

Already, the timescale for Brexit is a major contributor to the general uncertainty, he said, with the timescale of the EU exit quite unknown, and the series of national elections next year making it even harder for decisions to be made about this process.

At the moment, the listed equities portfolio is invested around 50% to Europe and just under 20% to the US, with Finnish equities – included in the European allocation – having a 30% weighting.

The remainder is invested elsewhere in the world.

Mursula said the portfolio, therefore, had a significant structural overweight to Europe, which has a weighting of around 23-25% in the MSCI World Index, and underweight to US stocks, which have a 57-58% weighting in the benchmark.

While some degree of home bias can be seen in the portfolios of most European investors, he said Ilmarinen was keen to redress some of the underweight it carries to US stocks.

“But all of this is subject to finding investment opportunities that are interesting enough from the valuation point of view in the US, so we are not forced to do anything,” Mursula said.

He pointed out that the valuation gap between the US and European stock markets had been widening in the last year or so, and one reason for this was the growing political uncertainty in Europe.

“So we have already seen it having an influence here,” he said.

The shift towards US stocks will be higher in absolute terms than it appears to be in percentage terms because Ilmarinen is also intending to decrease its allocation to fixed-income investments due to the low-yielding environment, with the money going instead into real assets and listed equities.

Geographical diversification is also a theme in Ilmarinen’s real estate investment, and Mursula said that, as the pensions provider increased its allocation to property, it would focus more heavily on buying assets abroad than in Finland.

In five years’ time or more, the proportion of the real estate portfolio invested outside Finland is expected to rise to 30% from 20% now, he said.

“I would say, going forward, we will actively seek real estate opportunities in both Europe and the US, but as real estate is such an illiquid asset class, it doesn’t make sense to speed this change up,” he said.

“But, of course, the political uncertainty has an influence here as well, and we are probably looking a little more closely at real estate opportunities in the US than we were one or two years ago.”