FINLAND - Finnish pension funds are continuing their recovery from the market downturn, with the Local Government Pensions Institution (Keva) and Valtion Eläkerahasto (VER), the State Pension Fund, both announcing double-digit returns for the nine months to September 2009.
In addition, VER said it would aim for a 40% equity allocation and to further increase its credit portfolio.
Figures released yesterday by Keva show that with a 15.5% return on investments and a rise in assets to €24.1bn, the company remains second behind Varma Mutual as the biggest pension fund in Finland.
Meanwhile, VER saw its return on investments rebound from -9.8% the same period last year to 13.5%. Timo Löyttyniemi, managing director of VER, said he was happy with the overall return on investments but was reluctant to say that his fund had weathered the worst.
"I would not make very strong conclusions about growth moving forward," he said, conceding that the markets were now "very normal" from an investor's point of view.
These reports come not long after Varma Mutual, Finland's biggest pension fund, saw its investment portfolio rise above €28bn with a return of just under 11% for the first nine months of the year. (See earlier IPE article: Varma posts 10.8% return year-to-date)
In a mostly positive report, the only area that did not yield any returns for Keva was private equity, where the company saw -7.8% returns. However, as only 3.2% of its investments are in private equity, the fund would be able to balance the losses against a stable 14.5% return from hedge fund investments, as well as a return of more than 11% from fixed-income.
VER's results were boosted by 7.3% return from fixed income investments, which makes up 58% of its total investments, but the company also had to absorb -14.4% returns on other investments. Overall, the total volume of invested assets was up by €1bn to €12bn.
However, both VER and Keva saw their biggest returns from investment in the equity markets, with 31.6% and 27.8% respectively. It is an area where Löyttyniemi, whose pension fund currently invests 37.5% in equities, sees an opportunity for expansion.
"We are planning on having 40% in equities," he noted. "In terms of the other investment parts we still have room to increase our credit portfolio somewhat."