FINLAND - A dip in the equity markets earlier this year failed to impact strong returns for the Local Government Pensions Institution (LGPI), suggest the pension fund's first-half figures.

The Finnish municipal pension fund, the third-largest pension fund in the country, said assets under management rose €1.56bn to €23.6bn by the end of June 2007, as high returns from an equity holding worth more than half of its allocation boosted returns on investments to 5.4%.

Like many other pension funds across Europe, LGPI saw a negative return on its fixed income portfolio of -0.7% as bond yields dropped on interest rate rises, but a 53% allocation to listed stocks covered this short-term slide as equities yielded a 9.6% return.

A private equity holding of 3% also produced strong gains, according to deputy CEO Timo Viherkenttä, but it was predominantly the good growth from equities, as LGPI has found over several years, which has kept the fund in a healthy position.

That said, there are signs the pension fund may be watching recent market turbulence carefully as chief investment officer Ari Huotari hints LGPI is still undecided about its interpretation of trading activity prior to the latest global market moves.

"There has been turbulence on corporate lending and share markets at the beginning of the second half of the year," said Huotari.

"The general economic outlook, however, is still more than reasonable, so it remains to be seen whether this is a short-term correction or a longer-term trend shift," he added.

The Finnish municipal fund held 36% of its assets in fixed income in the first half of the year, along with 8% in real estate, and less than 1% in hedge funds, to help support the delivery of pensions to its insured members.

Pensions membership is mandatory in Finland so the municipal fund has over 483,000 members employed through local government organisations, which collectively contributed €1.8bn, 6% more in the year-earlier period.