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IPE special report May 2018

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VER may take 10% of local commercial paper

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  • VER may take 10% of local commercial paper

FINLAND - Valtion Eläkerahasto (VER), the state pension fund, has increased its allocation to commercial paper markets by €100m in February, although government plans to use it to help boost the economy could see it taking a 10% share of the market.

The decision to invest more of its assets in this market was announced by the Finnish government in January as part of its €2bn fiscal stimulus package, which also involved taking a stake in banks through interest-bearing subordinate loans. (See earlier IPE article: State fund to boost economy through corporate debt)

VER currently has total assets of €10.4bn and it confirmed it will increase its investments in commercial paper by up to €500m, depending on the market situation, with future allocations made on market-based terms to companies that "possess low credit risk".

Commercial papers are bonds issued by Finnish companies for less than a year, but the pension fund pointed out the size of the commercial paper market "shrunk considerably" last year, from around €7bn to €4-5bn, so if VER reaches the €500m investment limit it will equate to 10% of the total current market.

VER's current investment in money market instruments - which includes commercial paper - is worth €1.2bn, however the government claimed in January that increasing VER's investment would "promote the recovery" of the commercial paper market.

Timo Löyttyniemi, managing director of the state fund, said: "VER has started to increase its investments on commercial papers in Finland. In the beginning of February approximately €100m worth of commercial papers were bought by VER. VER will increase the number of commercial papers in its portfolio by no more than €500m depending on the market situation and these additional investments will be launched as quickly as possible, mainly during the next few months."
 
If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

 

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