“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 e3.7bn in hedge funds, has the Finnish market’s highest allocation to the asset class.

“Last year, our hedge fund portfolio performed excellently, but this year has been very challenging. We are changing our hedge fund strategy and adjusting our allocations between different sectors and different funds,” said Mr Murto, who says the fund still has 13 per cent allocated to the asset class.

The scheme has also made its first investment in commodities. About 2 per cent has so far been invested, but a long-term target is yet to be decided.

“It’s quite a diversified portfolio with around 20 different kinds of commodities. The main reason we started investing is because of diversification purposes, but the commodity market is very liquid and has good return expectations,” said Mr Murto.

He added: “We started out with private equity and hedge funds, but our long-term strategy also includes taking on additional asset classes, such as infrastructure.”

Varma posted returns of -3.4 per cent for the first quarter in 2008. The only asset classes that pulled in positive returns since the start of the year were fixed income, direct property investments and private equity.

Printer friendly version

Email this article to a friend