FINLAND - Valtion Eläkerahasto, the State Pension Fund, generated a return of -2.4% in the first quarter of this year, reducing the value of its investments to €10.16bn.

Quarterly figures from VER, which is used to finance future pensions and even out pension expenditure, showed the negative performance had reduced the value of the scheme by around €250m in the first three months from €10.4bn at the end of December 2008.

That said, the -2.4% return is an improvement on the same period in 2008 when the scheme yielded -4.6% - leading to an annual return of -15.8% - though the scheme still dropped €1.4bn between the end of March 2009 and the previous year as it fell from €11.5bn to €10.16bn.

In the first quarter, the scheme's fixed income protfolio returned 0.8%, however these gains were offset by a -7.8% return on equities, a loss of 11.4% on real estate investments and a -0.3% return on its other investments.

Timo Löyttyniemi, managing director of VER, claimed although the quarterly return is a "little bit less" than other funds, the overall return of -2.4% "is okay" as he pointed out VER has a "quite high" allocation to equities "so we were lucky to have that equity upturn in the last month and a half".  

The pension fund's asset allocation at the end of March comprised 30.6% in equities, 6.5% in other investments and 62.9% in fixed income, as its investment in Finnish commercial paper - part of the government's fiscal stimulus package - reached €288.9m at the end of April following an initial allocation of €100m in February. (See earlier IPE articles: VER drops €1.93bn as equity losses exceed 42% and VER may take 10% of local commercial paper)

Meanwhile, VER is also tendering a contract for custodian and securities clearing services for the scheme, after Nordea Bank, its current provider, sold its institutional investor custodian and securities clearing services.

VER confirmed Nordea Bank will continue to provide the services until the end of the year, but as a public body the pension fund is required to issue a public tender for the replacement provider.

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