FINLAND - The Finnish state pension fund Valtion Elakerahaston is seeking to invest in Asian real estate as part of its plan to increase its allocation to alternative assets.

Valtion Elakerahaston, which hopes to increase its allocation to the alternative asset class to 10% over the next years, is currently looking to diversify its portfolio.

Real estate funds account for a large part of Valtion Elakerahaston's investments in alternatives, with around 40% dedicated to this asset class.

Timo Loyttyniemi, managing director, told IPE: "We are mainly targeting investments in Europe. However, we are now looking at Asia to spread our geographical diversification as we see some good opportunities in the region, especially in the real estate arena."

Investments in Asian non-listed property funds are expected to increase over the next months as growing confidence and maturity return, and many pension funds and fund managers see better market conditions and better opportunities in Asia than in other markets.

Earlier this month, the Asian Association for Investors in Non-listed Real Estate Vehicles (ANREV) investment intentions survey for Asia showed that 78% of investors and 80% of fund-of-funds managers said they were more likely to make investments into non-listed property funds than a year ago.

Valtion Elakerahasto's commitments to the alternative asset class have slowly increased since the financial crisis, jumping from 5% in 2007-08 to 7% at the end of last year.  

Loyttyniemi said: "We were quiet on the alternative front before the financial turmoil, but we have now changed our strategy, and new investments have been made over the last two years.

"This is part of our plan to diversify our portfolio in an asset class that offers a good return on investment and a stable cash flow over the long term."

He added: "We are looking to give a better representation to alternative assets in our portfolio, and we could raise the percentage to as much as 10%.

"However, we haven't established any timeframe yet. At the moment, we need to see how the investments are returning before making any further plans."

Valtion Elakerahasto, which managed €13.9bn of assets as of 31 December 2010, currently splits its portfolio between fixed income (53%), equities (40%) and alternative assets (7%).

Its alternative asset portfolio is approximately 25% in private equity funds, 22% in absolute return funds and 12% in infrastructure.