FINLAND - VER, Finland's state pension fund, is increasing its weighting in alternative investments, following strong gains in alternatives and equities earlier this year.

Details of VER's first-half results reveal the €11.4bn fund's overall investment strategy yielded a return of 3.4% in the first six months of the year, boosted by a 9.3% gain on its 41% equity holding as well as a return of 7.6% on alternative investments.

The fund's 53.9% holding in fixed income investments saw a negative yield of -1.2%, as was generally the case for pension funds across Europe during this period, but this is likely to have been offset somewhat as the money market allocation was increased from 5% to 20% in this period to reduce interest rate risk.

Weighting in fixed income instruments is now being decreased again slightly, Timo Löyttyniemi told IPE, to increase diversification into alternative assets, such as property, private equity and absolute returns.

That said, while fixed income has delivered negative returns in recent months, current volatility has reaffirmed the importance of diversification and secure funding, according to Löyttyniemi.

"We are diversifying into other investments, besides equities and fixed income, for the last few years, and will continue that programme, moving mainly into real estate funds, as well as including private equity and absolute returns," said Löyttyniemi.

"But we have a limit [set by the Ministry of Finance] of investing up to 10% [in alternatives] and we are already close to that level. We had 6% invested by the end of the year, we have moved to 8% and during the remaining half of the year, it will increase to 9%.

"We have a diversified fund of funds strategy, we stick mainly to European products, and we are quite happy with our investments in absolute returns. The fixed income market has been challenging but in this latest turmoil of the market, fixed income has shown to be the safe haven in turbulent markets," he added.

The Finnish Ministry of Finance has rules stating VER's investment portfolio must hold at least 45% of its assets in fixed income, while it can hold no more than 41% in equities and no more than 10% in alternatives.

Assets generated by VER support the pensions income of 183,000 insured members, 300,000 pensioners while the State's annual pension expenditure is over €3bn.