FINLAND - The e18bn Ilmarinen Mutual Pension Insurance Company has added tactical asset allocation and currency overlay to its portfolio in 2005 and started investing in commodities in as part of its active risk-taking and absolute return strategy.
The fund has set up a new tactical asset allocation (TAA) and currency overlay team headed up by Mikael Simonsen, previously a strategist involved in analysing Ilmarinen’s longer term allocation.
Chief securities officer Jari Puhakka said under the new structure, which combines the TAA, fixed income and equity teams in the same level of organisation, it is easier to get uncorrelated bets.
“We organised ourselves in a new way at the beginning of the year,” he said. “Now we have this new team and I believe that with this uncorrelated alpha way of thinking - so there’s not one person having the house view - the less risk there is that we have all our bets in the same direction.”
Puhakka said the fund would outsource part of the TAA/currency overlay portfolio this year. One “small” mandate had already been awarded on the commodities side, he added.
“We started to invest in commodities this year,” he said. “It was a long process that we started talking over two years ago. We began investing in electricity price-linked bonds in 2003 but otherwise, energy and all these commodities, we started on this year, so they have some target allocation and we are doing more investment to reach this size.”
Ilmarinen plans to initially invest about 1% of the portfolio in commodities and monitor the returns.
“In commodities we will do some swap kind of structures and then increase the allocation gradually but we don’t have any long term target yet,” Puhakka said.
The fund manages the majority of its investments in-house, with only 30% of the equities portfolio outsourced to managers and 8% of the fixed income portfolio managed externally.
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