The State Pension Fund of Finland (Valtion Eläkerahasto, VER) is setting out to increase its allocation to private assets by three percentage points in 2023, with new guidance from the government having given more scope for equities and other investments.

Timo Löyttyniemi, chief executive officer of the €21.6bn buffer fund, told IPE: “VER has steadily increased the allocation to private assets. We are continuing with the increase this year too.”

According to IPE’s calculations using figures in VER’s annual report, which was published yesterday, the Helsinki-based pension fund had 23.6% of its portfolio in private or illiquid assets such as non-liquid fixed income and equity investments as well as unlisted real estate funds, infrastructure funds and hedge funds. This was up from 20.2% the year before.

“Our internal aim is to increase the strategic allocation to private assets by 3% in 2023,” Löyttyniemi said.

This increase was partly down to the existing overweight to those asset classes, he said, although part of it would come about through new commitments and investments being made.

“The weights will be considered and assessed on the yearly basis as part of our investment planning process,” he said.

The Act on the State Pension Fund was amended in the spring of 2022, after the pension fund had reached its 25% funding ratio target, and the changes will lead to an increase in VER’s contribution to the government budget as of 2024.

Löyttyniemi said the new legislation provided a long-term perspective for investments but did not refer to strategic allocation, which is set by the fund’s board.

“The new guidelines from the Ministry of Finance after the Act give a bit more room for equities and other assets if we consider that as a good move,” he said.

“The key challenge for VER is the yearly negative cash flow of transfers for the government for paying out pensions,” he said.

The peak of negative outflows would come around 2034, he said, adding that they would then amount to -4.5% of the fund’s assets.

“This challenge will be addressed in the coming years and will be path-dependent,” he said.

“We have revised our strategy framework in January this year and will assess the strategic asset allocation on yearly basis,” the CEO said.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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