Oslo Pensjonsforsikring (OPF), the Norwegian municipal pension fund for the country’s capital, reported strong returns on its real estate portfolio in the third quarter, while its chief executive officer called on parliamentarians to push for a change in the regulations for pension providers’ buffer capital.
The pension fund, whose customers include Oslo Nye Teater, Oslo University Hospital and local public transport firms alongside the municipality of Oslo, reported a 1.4% return for the third quarter of this year and 7.7% for the nine months to September.
Total assets rose to NOK122.4bn (€12.6bn) at the end of September from NOK112.4bn at the end of 2020, according to the interim report.
Åmund Lunde, OPF’s CEO, said: “The return on property has also been very good in the third quarter. It was 2.1% in the quarter and 8.6% so far this year.”
With a real estate portfolio worth around NOK24bn, the pension fund said it was one of the largest real estate investors in Norway.
Real estate and infrastructure constitutes OPF’s second largest asset class, making up 19.9% of the portfolio, up from an 18.7% slice at the end of December.
The heaviest portfolio weighting goes to amortised cost loans and bonds at 22.5% at the end of Q3. These fixed-income assets generated a 2.3% return between January and September.
Alongside the publication of OPF’s report, Lunde said he was disappointed with the bill submitted by the government this summer to amend the regulations for guaranteed products, with OPF having called for changes to these rules for a long time.
“Unfortunately, the ministry did not put forward proposals for changes in the regulations for buffer capital, which is the buffer we have next to equity to withstand bad times in the financial markets,” the CEO said.
“Both we and the rest of the industry, and not least Finanstilsynet, have called for more flexible rules so that, for example, municipal pension schemes have more freedom to manage the funds for the benefit of customers,” he said.
Back in 2019, Norway’s FSA (Finanstilsynet) proposed regulations that removed the restrictions on how much of the annual financial income could be set aside as buffers against future crises, OPF said, adding that the proposal would also have removed “unfortunate aspects of current regulations that motivate the purely transaction-motivated transfer of contracts at the expense of other customers”.
“We hope parliament (Storting) will get involved in this during the consideration of the proposal,” Lunde said, adding that it was an important change that could help ensure even better returns for OPF’s customers in the future.
“High returns on customers’ pension funds affect customers’ ability to provide residents and users with good services,” he said.