Some of Finland’s pension investors are diversifying their real estate portfolios globally. Rachel Fixsen profiles four funds 


Total assets: €49.6bn
Real estate: €3.2bn
CIO: Ari Huotari

Finnish municipal pension fund Keva has real estate assets of €3.2bn including about €900m of private equity real estate investments, and €2.3bn of investment in direct real estate.

In the first half of 2017, the pension fund’s property investments – which serve a diversification role within the overall portfolio – returned 2.6%.

The vast majority of Keva’s direct real estate is in Finland itself (98%), with 2% in Sweden.

On the indirect side, Keva’s holdings are located in Finland and other Nordic countries, elsewhere in Europe, in the Asia-Pacific region and in the US.

The pension fund invests in the asset class in many different ways – directly, through funds, multi-managers and fund-of-funds as well as via separate accounts and joint ventures.

Over the past year, it has committed about €546m of capital to funds and strategies, and awarded an APAC private equity real estate mandate.

The pension fund has been continuing with its private equity real estate strategy of targeting mostly value-added and opportunistic investments, while it added the US as a new geographical real estate category in its portfolio in 2016.

On the direct property side, Keva has started to invest outside Finland, in other Nordic countries.

Over the next year it aims to deploy between €300m and €500m of capital into private equity real estate and direct property investments, focusing mostly on Europe and the US, but also on APAC, to gain more diversification.

On the direct real estate side, the fund is focusing on the Nordics.

In terms of sectors, it is mostly looking at commercial property, as well as diversified investments. 

On the direct side, Keva is considering all property types, with a focus on commercial and residential.

Keva says the pension fund differs from many other real estate investors in that it is a long-term investor with a value-added and opportunistic focus with its global private equity real estate. On the direct side, it is a long-term investor with core and core-plus strategies in the Nordics.


Total assets: €45bn
Real estate: €3.7bn
Infrastructure: €500m
Head of real estate: Ilkka Tomperi

Varma, the largest of Finland’s pension insurance companies, invests in real assets as a way of providing diversification and stability of the returns to its overall €45bn investment portfolio.

It has a real estate allocation of about €3.7bn or 8% of the company’s total assets under management.

Infrastructure assets represent 1% of the overall portfolio at €500m, bringing total non-listed real asset allocation to about €4.2bn or 9.3% of Varma’s assets.

In the first six months of this year, real estate returned 2.5%.

Geographically, 80% of Varma’s real estate investments are located in Finland and 20% abroad – mostly in the main European markets. 

Infrastructure investments, meanwhile, are more globally diversified.

Investments in real estate are made directly, via funds, joint ventures and listed vehicles or REITs, and infrastructure investments are mainly made via funds.

In the past 12 months, the pensions firm has committed to a handful of European real estate funds and joint ventures, putting in about €300m of capital.

It has not awarded any mandates in that period, however.

In the coming 12 months period, Varma would like to commit around €200m to €300m of capital to real estate, says Ilkka Tomperi, head of real estate, with the focus remaining on Europe.

Tomperi will be looking at investments across all property types, but is not looking to award any new mandates.

Most of the investments will be via funds, co-investments or joint ventures.

Tomperi says what sets Varma apart as a real estate investor is that it likes to be an active co-investment partner – if suitable opportunities appear.


Total assets: €38.9bn
Real estate: €4.38bn
Head of non-listed investments:  Esko Torsti
Head of real estate: Tomi Aimonen 

Ilmarinen is currently the second largest pensions insurance company in Finland, but is set to become roughly equal to Varma in size once it merges with Etera next year.

In the past year, it has invested about €500m in real assets, and within this, has put some €100m into funds and strategies.

Within real estate, Ilmarinen has been continuing with the international diversification of its portfolio, expanding its investments in the US real estate market. 

Its newly-formed joint venture with American New York Life Insurance Company is investing in US office properties with a long-term view.

There have been no changes to its strategy or real assets allocation in that period, and the fund is still increasing its investment in real assets.

Looking ahead over the next year, Ilmarinen says it will continue with its prevailing strategy.

The insurer says it wants to deploy a few hundred million euros every year into real assets investments.

These future investments will focus on Nordic countries, the UK, northern Europe and the US.

In terms of sectors, Ilmarinen is interested in finding suitable real asset investments in real estate and within that, mainly offices, but it is not looking to award any mandates.

Ilmarinen does not invest in real estate funds, but does put capital to some extent into infrastructure funds directly.

The company has adopted a strategy of investing in real assets directly with like-minded investors, as opposed to using funds to gain exposure.


Total assets: €19.5bn
Real estate and infrastructure: €1.17bn
Portfolio manager: Johannes Edgren

Finlands State Pension Fund, Valtion Eläkerahasto (VER), has 6% of its assets invested in real assets — real estate and infrastructure.

In the nine months to September 2017, the pension fund, which backs the pension scheme for government staff in Finland made a return of 8.3% on its infrastructure investments, 2.2% for real estate. VER explains that this low return on real estate is due to technical reasons – partly because at the third-quarter stage, results for some funds were not yet available.

For the full year, VER says it is looking forward to a good return on property.

VER uses various approaches to gain exposure to real assets – mainly funds, but it has also done club investments, co-investments, invested via multi-managers especially outside Europe, and has some investments on the listed side, particularly for real estate.

The fund’s regulations do not permit it to own property directly.

The pension fund’s real asset investments are spread across Europe and it has some exposure to Asia and the US, having made its first US infrastructure investment within the past 12 months.

VER invests around a third of its real estate portfolio in its home market of Finland.

In the last 12 months, VER has undertaken a number of new fund investments within real estate as well as infrastructure, having allocated €300m of equity. 

It has added to its core and core-plus real estate investments, and made a club investment in Finland.

In addition, the pension fund has been building up its REIT portfolio.

VER is trying to increase its allocation to most real assets, and will continue to do this over the next 12 months, but says these investments will be market-dependent and selective.

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