Finnish pension funds Varma and Ilmarinen today reported higher January-to-September returns than those of their public-sector pensions peer Keva, as they prepare for a legislative reform allowing them to boost equities allocations, as Keva has already done.
Ilmarinen reported its investments returned 4.8% in the first nine months of this year, with assets increasing to €65.7bn, and Varma announced a 4.5% investment return with its assets total rising to €66.7bn by the end of September.
Keva, which provides municipal and other pensions and with €73.1bn under management is Finland’s biggest pension fund, yesterday reported a 3.4% return for the nine-month period.
Keva has increased its allocation to equities in recent years in pursuit of higher returns, and had 61.8% of its portfolio in the asset class at the end of September – higher than the 52% and 57% equities allocations of Ilmarinen and Varma, respectively, according to their figures reported today.
As earnings-related pension providers on the private-sector side, Ilmarinen and Varma are more restricted than Keva in the proportion of assets they can invest in equities – something the upcoming pensions reform will address by loosening solvency rules and allowing a higher equity weighting.
Ilmarinen said today that the legislative drafting of the pension reform was currently underway, with changes to the regulation of investment operations at the core of the reform.
Annika Ekman, Ilmarinen’s new chief investment officer since the beginning of last month, said: “The reform allows us to increase the overall risk level of the investment portfolio, which in turn increases the long-term expected return.”
But she said common pension assets had to be invested profitably, securely and responsibly even after the pension reform.
“We are preparing for the reform with careful risk management and by analysing various market scenarios,” Ekman noted.
Meanwhile, Varma referred to the forthcoming pensions reform in today’s results announcement in saying it had made new investments in four Finnish growth companies.
“Investing in growth companies is part of the productive and secure investment of pension assets, with some investments diversified into investee companies with high return expectations,” the Helsinki-based pension fund said.
“Unlisted investments are an integral part of Varma’s investment operations and also align with the upcoming pension reform,” it added.
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