Varma drops equities for more bonds

Published: 05 May, 2008

Following recent market instability, Varma, the €28.7bn Finnish pension company, has significantly increased its bond holdings at the expense of equities and restructured its hedge fund portfolio. The fund has also made its first investments in commodities.

“We shifted from equities to fixed income because we wanted to decrease the overall risk in our portfolio,” said Risto Murto, chief investment officer.

Its listed equities, which returned 9 per cent in the first quarter, have been lowered from 35 per cent to 25 per cent of total assets since the beginning of the year. Bonds, which have been steadily reduced since 2006, comprise 44 per cent of assets compared to 36 per cent last year.

Varma is also restructuring its hedge fund portfolio following negative returns of 5.7 per cent in the first quarter. The firm, which invests €3.7bn in hedge funds, has the Finnish market’s highest allocation to the asset class.

“This year has been very challenging and we are adjusting our hedge fund allocations between different sectors and different funds,” said Mr Murto. About 2 per cent has so far been invested in commodities, but a long-term target is yet to be decided.

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