Keva, Finland’s largest pension fund, is setting out on a 15-month equities buying spree which will see it add some €6.4bn of mostly listed shares to its portfolio, its chief investment officer has revealed.
The institution, which manages pensions for staff of local and state government, the Evangelical Lutheran Church, the Bank of Finland and other organisations, is beginning to implement a new investment strategy in accordance with the board decision to step up investment risk in order to chase higher returns.
Ari Huotari, CIO of the €64bn pension fund, told IPE that Keva’s board decision to raise investment risk involved a 10 percentage point increase in the equities allocation.
He said the board measured the total risk level of the portfolio using equity equivalent exposure (EEE) levels, which showed the level of risk as MSCI AC World equivalent.
“At the moment we are at EEE-level of 55%, and we will possibly raise the level of risk to about 65% by the end of 2024,” the CIO said, adding that this aim also depended on the markets.
This is the first time Keva’s board has made this kind of decision, he said.
“If you measure the increase of the risk level as a rise of the allocation to the listed equities, it would be equivalent to about 10% of the total portfolio,” Huotari said.
Asked about the timescale for the implementation of the strategy change, he said: “Depending on the market, till the end of the next year, 2024, starting right away.”
As to whether Keva will add listed or unlisted equities in order to gain the new exposure, Huotari said the extra weighting would be achieved mostly via listed equities – and that Keva would take a sector neutral approach to the additions.
At the end of June this year, listed equities and equity funds accounted for 32.1% of Keva’s total assets, with private equity investments accounting for 19.1%.
Fixed income, including the impact of derivatives, took up 25.4% of the portfolio, while real estate and hedge funds accounted for 7.6% and 7.1% respectively, according to Keva’s interim report.