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."
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