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IPE special report May 2018

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Keva appoints new head in the wake of expenses scandal

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The board of Keva, the Finnish €37.8bn local government pension institution, has appointed a new managing director, seven months after the fund’s former head was forced to resign due to questions over her personal expenses.

Jukka Männistö succeeds Pekka Alanen, who as deputy managing director has been acting as the fund’s interim head following the resignation of Merja Ailus.

The scandal rocked the scheme when Finnish media last November accused Keva’s then-managing director Ailus of charging the institution for some of her personal expenses, failing to inform the tax office of the full value of her employer-sponsored flat and receiving child benefits from two countries simultaneously.

The crisis led to Ailus’s resignation and Keva to launch a reform process of its management culture. Keva insures 1.3m Finns working or having retired from roles in local government, the state and the Evangelical Lutheran Church of Finland.

Männistö joins Keva from the Finnish Student Health Service (FSHS), where he has been managing director since 2009. He has also worked at the Finnish Centre for Pensions (ETK) and been a board member of Elo Mutual Pension Insurance Company. Previously, he was the chairman of the economy board of the Church Council at the Evangelical Lutheran Church of Finland, where he participated in the drafting of the council’s principles on ethical investments.

Männistö told IPE that his first priority would be participating in, and overseeing, the reform of Keva’s new management rules.

“Keva has embarked on thorough a revamp of its corporate culture and internal procedures, updating the rules on its management. Overseeing this and implementing the new rules is a significant duty,” he said.

Another important challenge Keva is currently facing, according to Männistö, is to maintain balance of assets and liabilities in an environment where municipalities are pressed to cut down on costs and, thus also salaries.

“The way municipalities are offering services is going through a fundamental change in Finland these days in the current economic environment,” he said. “The cuts in total salary expenses naturally reduce also the total pension contributions municipalities pay.

“In these circumstances Keva will need to establish better partnership with the municipal economy,” Männistö explained.

Keva’s investments returned 1.6% in 2013. The scheme’s portfolio was invested in fixed income (45.1%), listed equities (37.8%), property (7.1%), private equity (5.5%), hedge funds (3.9%) and commodities (0.6%).

Commenting on the results when the fund’s annual report was published, chief investment officer Ari Huotari said: “We have moved to a world of lower investment returns, that is something that cannot be denied.”

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