FINLAND - The Finnish state pension fund Valtion Elakerahaston is seeking to increase its allocation to alternatives to as much as 10% in the coming years as part of its plan to diversify its portfolio.
Valtion Elakerahaston's commitments to this asset class have slowly increased since the financial crisis. The pension fund, which allocated about 5% of alternative assets in 2007-08, has now raised this number to 7%.
Timo Loyttyniemi, managing director, told IPE: "We were quiet on the alternative front before the financial turmoil, but we have now changed our strategy, and new investments have been made over the last two years.
"This is part of our plan to diversify our portfolio in an asset class that offers a good return on investment and a stable cash flow over the long term."
Loyttyniemi went on to say: "We are looking to give a better representation to alternative assets in our portfolio, and we could raise the percentage to as much as 10%.
"However, we haven't established any timeframe yet. At the moment, we need to see how the investments are returning before making any further plans."
The Finnish pension fund, which managed €13.9bn of assets as of 31 December 2010, currently splits its portfolio between fixed income (53%), equities (40%) and alternative assets (7%).
Real estate funds account for the lion's share of investments in the alternative class, with around 40% dedicated to this sector.
The pension fund has also allocated more than 25% of its alternatives capital to private equity funds, around 22% to absolute return funds and almost 12% to infrastructure.
Loyttyniemi said: "We are mainly targeting investments in Europe. However, we are now looking at Asia to spread our geographical diversification, as we see some good opportunities in the region, especially in the real estate arena."
Investments in Asian non-listed property funds are expected to increase over the next months as growing confidence and maturity return.
Many pension funds and fund managers see better market conditions and better opportunities in Asia than in other markets.
Earlier this month, the fourth annual Asian Association for Investors in Non-listed Real Estate Vehicles investment intentions Asia survey showed that 78% of investors and 80% of fund of fund managers thought they were more likely to make investments into non-listed property funds than a year ago.