Ilmarinen, the €30.6bn Finnish mutual pension insurance company, is looking for new infrastructure investments in Finland and overseas to add to its portfolio over the medium term, according to deputy chief executive and CIO Timo Ritakallio.
“We are increasing investments in private equity from 4% to 6% of all assets by 2015 and are also increasing exposure to property, both direct and indirect,” he said.
“In infrastructure, we pay attention to two issues – the project must provide a stable cash flow and have a good protection against inflation risks.
“We are primarily interested in investment targets in Finland and the Nordic region but can consider also projects in the euro-zone.”
Ilmarinen’s current investments in the sector are electricity grids, like transmission system operator Fingrid and distribution system operator Elenia, and motorways like E18 from Koskenkylä to Kotka.
“However,” Ritakallio told IPE, “in principle, I would not close out any potential new sectors.”
Ilmarinen’s portfolio pulled in a 3% return over the first half of 2013.
Ritakallio said the result was driven by a sound performance of equities, which returned 6.3%, with returns on listed equities standing at 5.1%.
“US and Japanese listed equities generated particularly high returns, while emerging market equities performed the weakest,” he said.
Fixed income investments pulled in a return of 1.6%, “a fairly good achievement considering the market situation”, while direct property investments returned 2.4%.
Ilmarinen’s corporate credit portfolio continued to decline, and demand for premium loans remained very low.
“It seems companies’ investment appetite is currently at a low level,” Ritakallio said.
Ilmarinen’s portfolio is currently invested in fixed income (46.1%), equities (32.3%), property (11.6%), private equity (4.6%), hedge funds (1.3%) and other investments (4%).
Over the first half, the firm slightly reduced its exposure to domestic equities but increased investments in European equities.
Finnish equities now make some 31% of Ilmarinen’s equity portfolio, Nordic and European equities 33%, emerging market equities 18%, US equities 14% and Japanese 4%.
In 2013, Ilmarinen also cut down slightly on its emerging market exposure from 21% to 18%.
“We have taken underweight this year in Russian and Latin American equities,” said Ritakallio.
In the short term, emerging markets do now seem to be facing plenty of challenges, as both growth and currencies are weakening, but, in the medium to long term, these markets are still interesting, he said.
He added: “Outside the BRIC countries, the so-called N11 countries and China will offer most potential.”