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Ilmarinen sees equity portfolio boosted by Nokia deal

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Ilmarinen, the €31bn Finnish pensions mutual, has seen its listed equity holdings return more than 14% in the past quarter, boosted partially by its large stake in Nokia.

Deputy chief executive and CIO Timo Ritakallio told IPE the mutual was on course to lower its domestic equity exposure to around 30% at the beginning of 2013, but that it increased again during the third quarter.

“The main reason for this is that we are such a big owner of Nokia, and Nokia’s shares went up after the Microsoft deal,” he said.

September’s announcement that Microsoft would buy Nokia’s mobile phone business for €5.4bn resulted in Ilmarinen’s stake in the Finnish business being valued at €312m by the end of the month, up from €168.2m at June-end.

The company’s shares rose from €3.90 prior to the deal’s announcement to €7.15 at the beginning of the week.

The mutual’s listed equity holdings returned 14.6% over the quarter, lagging behind the 22% return from unlisted stocks but ahead of the 6.3% gains from its €1.4bn private equity portfolio.

Its fixed income portfolio, accounting for 45% of market value, returned 3.2%, led by its sovereign bond portfolio gaining 5.3%.

Ilmarinen’s real estate portfolio performed on par with fixed income, growing by 3.3%, while its €1.5bn portfolio composed of hedge fund, commodities and other investments lost 6.8%.

Ritakallio said the pension insurer, despite gains from Nokia’s increased share price, was not looking to meet any immediate targets by reducing its equity exposure.

However, he noted that the current exposure would not continue into the next decade, as proposed in its new investment approach, internally referred to as Investment Strategy 2020.

He said: “If I’m thinking about the situation at the end of the decade, I see that the Finnish share of our equity portfolio will be lower – it will be between 20% and 30%. Maybe closer to 20%.”

He also said the strategy would instead see capital redeployed towards other asset classes.

“It is part of our 2020 strategy that we will increase our real estate investments, especially abroad,” he said.

“Another area we will increase is infrastructure investments, and the third issue is to increase private equity investments

“They are nowadays 4.6%, and our target is that it would be 6%.”

For more on Ilmarinen’s investment approach, see the November issue of IPE

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