FINLAND - Keva, the Local Government Pensions Institution, and VER, the Finnish State Pension Fund, have both shown bonds played a key role in the returns generated from investments in 2009, yet alternatives delivered a mixed result.

Additional return figures from VER indicated the "highest return of the decade [came] from fixed income investments" and the €12.3bn pension fund generated an 8% return on its bond 54.9% holding last year, even though it had actually cut the bonds holding from 61.8% held in 2008. (See earlier IPE story: Market timing pays off for Finnish pensions)

"Markets with higher credit risk performed well as risk premiums decreased, resulting in significant returns for the period," said VER in its latest returns statement.

The overall return was 16.4% and equities contributed to this by returning 38.7% on a 40.8% holding, thanks largely to Nordic and emerging markets activity.

However, alternatives were a disappointment for VER as real estate, private equity as well as infrastructure and absolute return funds collectively lost 14.7%, albeit absolute returns may have prevented this loss from slipping further.

Likewise, Keva generated a 13.3% return on its 48.3% fixed income allocation, contributing to the €24.8bn fund's 18.9% overall return.

Equity investments were the best performer in terms of asset class return as the 39.3% allocation delivered 35.5% on investments, accompanied by 17.7% gained on the fund's 1.1% holding in hedge funds.

In contrast, Keva lost 2.9% on its 8% real estate allocation and dropped 3.6% on its 3.3% in private equity investments.

The contribution income to Keva worth €4.1bn still outweighed the €3.1bn in pensions paid to over 331,000. The fund still has over 500,000 active local government employee members and the value of benefits accrued in €87bn.

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