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Finnish gov't pension fund increases assets by 10%

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  • Finnish gov't pension fund increases assets by 10%

FINLAND - The Local Government Pensions Institution has reported an increase in assets of €2.3bn, following investment returns of 6% in 2007.

Preliminary figures from Finland's largest pension fund revealed the fund, which covers 954 member organisations, exceeded its target benchmark as returns from private equity helped increase the total value of investments by 10% to €24.3bn.

Figures showed the 3.4% allocation to private equity returned 38.2%, although the institution admitted the returns on equity investments was below average at 6.3% following a "downward price trend towards the end of the year".

Fixed income investments also suffered with a return of just 2.5%, because of increases in interest rates, though the pension institution revealed real estate investments also performed well, generating a return of 10.1%.

In addition, the preliminary figures revealed the institution paid out €2.7bn in pensions, an increase of 6.9% from 2006, as it claimed a record number of 12,484 employees retired from the local government sector in 2007.

The pension institution, which manages the pensions of 490,000 local government employees, currently allocates 47.5% of the fund in equities, 39.8% into fixed income, 8% into real estate, 3.4% into private equity, 0.7% in hedge funds and 0.2% in commodities.

Of these investments, the Local Government Pensions Institution revealed approximately one-fifth of total assets are invested in Finland, and over the last five years the fund has generated a real rate of return of 7%, helped by 6% increase in contribution income to €3.7bn.

Markku Kauppinen, chief executive and managing director of the institution, claimed the performance in 2007 was "satisfactory" as the return on investments at fair value reached €1.4bn.

"Our investments showed a good return, 6%, in a difficult market environment and we exceeded our investment benchmark by a good margin. The pension operations performed excellently and our processing times keep improving," added Kauppinen.

The full 2007 annual report will be published in May, and the interim report detailing the figures for the first six months of 2008 will be available in August.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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