FINLAND - The €11.53bn Finnish first pillar Valtion Eläkerahasto (VER) pension scheme, is planning to increase its exposure to alternative  investments to 10%.

VER, which started investing in alternatives three years ago, said it will continue increasing its exposure to alternatives, and plans to add an extra 3% in the next two years.

Timo Löyttyniemi, managing director of VER told IPE the fund is expanding in alternatives for the purpose of diversification. The fund has an investment cap for alternatives of 12%.

Outlining his fund's diversification strategy of the last two years, Löyttyniemi said: "We have added some infrastructure, private equity funds, and also fund of hedge funds."

VER will continue expanding in these asset classes, according to Löyttyniemi, who added the fund is mulling investment in commodities, to which it currently has no direct exposure.

"What we have done so far is go overweight in our equity portfolio to some oil companies," he said, adding the fund is considering an investment in raw materials-based commodity funds.

The scheme said it also plans to expand its real estate portfolio over the next two years: "Unlike many other pension funds, we do not own any direct real estate; therefore, we have been expanding our fund programme in real estate."

A particular area of interest could be real estate and infrastructure investments in Asia, said Löyttyniemi.

But the move is unrelated to the VER's recently reported negative yield of -4.6%, officials at the fund stressed.

The interim report for VER showed the value of its investment portfolio had increased over a 12-month period from €10.8bn in March 2007, to €11.5bn at March 31 2008, although the yield on investments was -4.6% compared to a return of 1.4% in the first quarter of 2007.

VER which is managed both internally and externally, has an exposure to equities of about 40%, while fixed income takes up roughly 53% of the fund's assets.

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