According to the National Association of Pension Funds, during the past decade the composition of Icelandic pension funds’ portfolios has changed significantly. Since 1990 the shares of lending for housing finance and direct lending for fund members have fallen, whereas the proportion of equity investing increased very significantly.
Figures from the association show that, at the end of 2001, the percentage of total pension fund portfolios invested in housing represented 22.6% of assets, whereas in 1990 it had represented 33.9%. Direct lending to fund members represented 11.4% of assets in 2001, almost half of the exposure registered in 1990.
Investments in financial institutions and mutual funds remained quite stable during the decade, accounting for 21.2% in 1990 and 23.6% of total assets in 2001.
Exposure to equity and equity funds experienced a huge growth during the same period. Whereas in 1990 equities only represented 1.2% of total pension fund assets, today they account for 27.3%. Changes in investment restrictions allowing investors to allocate more assets into equities and diversify invested strategies across foreign countries were the main drivers behind this trend, which is set to continue.