He said: “In our view there are some questions. If you want a beta risk, you can do it in many ways. Obviously we can have index-replicating by investing in direct equity holdings, futures, index funds and also ETFs.”

Varma currently has a very small amount allocated to the asset, one of which is a Chinese ETF. Yet despite the small allocation, the firm has indicated that it may trim its exposure to the vehicle, mostly because it believes it is not achieving its underlying target. ETFs have not proven particularly popular among other Finnish pension funds either.

However, Mr Murto said the firm rated ETFs somewhere in between futures and index funds. When questioned on what the firm would do with its ETF allocation, he replied that it was totally “opportunistic”.

Mr Murto’s comments followed a panel discussion on ETFs at the recent EDHEC conference in Paris on institutional investment. During the presentation, Lionel Martellini, professor of finance at EDHEC Business School, argued that ETFs were unique in their ability to have gain and loss ceilings, and could, therefore, soon become a mainstream asset in European pensions.

Mr Murto added: “In the presentation, ETFs were presented as something of a sidekick. The main point is actually how you dynamically control your risk level in a time-varying sense.”

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