FINLAND - Ilmarinen Mutual, Finland's second-largest pension provider, is planning to increasing its private equity and property holdings in the coming years as well as diversify its equity holdings, IPE has learned.

Timo Ritakallio, head of investments at Ilmarinen said the insurance firm - with €25.2bn in assets under management - is planning to increase its private equity asset allocation from 2.3% to 3-4% over the next five years, and is also looking to expand its holding of emerging market equities of its stock portfolio.

"In  the longer term, we envision our private equity exposure will total 5% of all holdings as the asset class still offers good potential," he said.

On the property side, Ilmarinen will also increase its exposure to real estate as an asset class from its current allocation of 9% to 12% of all holdings over the next three years.

"Two-thirds of this [allocation] will consist of direct domestic investments and the rest will be in property funds investing abroad as a diversification tool," said Ritakallio.

"However, we are not going embark on this plan yet. We are waiting to see how property markets evolve and will make the first move when the moment is right," he added.

Regardless of the current global crisis, Ilmarinen plans to maintain its position as an equities investor in the future.

Some 40% of the fund's portfolio is currently invested in equities, though this also includes a 3% allocation to hedge funds.

"We will continue to be an equities investor with a clear focus on domestic equities in the future. At present, some 35% of our equities are invested in Finland. However, we are likely to diversify our international equity holdings further and slightly add the proportion of emerging markets," Ritakallio said.

Ilmarinen has also revealed it lost some €10m in September, in the form of senior bond investments in Lehman Brothers.

"However, as our portfolio is worth some €25.2bn, the loss did not have any major impact on our overall portfolio, it rather tested how our existing strategy works. Our solvency is still satisfactory," continued Ritakallio.

While the fund is determined to maintain its focus on equities, it reduced its exposure to equities in the first half of the year from 47% to 40%, and increased its bond holdings by 7%.

"Fixed income is still the most stable asset class, which over the first half of 2008 yielded a return of -0.7%," Ritakallio said.

Ilmarinen's portfolio yielded a total negative of -4.9% over the first half of 2008.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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