FINLAND - The e6.9bn Valtion Elakerahasto, Finland's State Pension Fund (SPF), posted a 9.6% return for 2004 on the back of increased equity weighting and positive performance from the asset class.
The defined benefit scheme, which is the buffer fund for state employees, increased its equity weighting from 34% at the beginning of 2004 to 40% at year-end.
“We are very happy with the performance,” said SPF’s managing director Timo Loyttyniemi (pictured).
“We were able to achieve good return rates for both fixed-income and equity investments. Increasing equity weighting to 40% proved a wise decision when the equity market showed an upward trend.”
SPF’s return on equity investments was 14.4%, compared to 20.7% the previous year. Performance was boosted by the Nordic and European equity markets and investment funds specialising in small companies.
Assets rose from e5.8bn in 2003 to e6.9bn. The return on fixed income investments rose to 7% (from 4% in 2003), amounting to e4.1bn at year-end, 60% of SPF’s total investment portfolio.
Loyttyniemi said the fund would further expand its diversification in 2005 towards real estate securities and inflation-linked instruments.
Both investment areas are relatively new to the fund’s portfolio with the first investments in real estate securities made this year and inflation-linked instruments introduced two years ago.
“We haven’t decided on a long term weight yet,” he said. “We are interested in both these instruments but the future allocations depend on the market prices and valuation development.”
Loyttyniemi said return expectations for 2005 were “quite moderate” considering the strong performance of the last two years.
“Of course it all depends on the future development of the equity market and of course the bond market,” he added.
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