Varma, one of Finland’s three largest pension funds, is divesting its direct residential portfolio to increase its stake in listed residential real estate firm Kojamo, a move aimed at improving investment efficiency ahead of changing solvency regulations.
The €66.7bn mutual pension insurer’s residential portfolio is being sold to Lumo Kodit for around €900m in cash and new shares issued by Lumo’s parent Kojamo, making Varma a 15% shareholder in Nasdaq Helsinki-listed Kojamo, Finland’s largest private residential real estate company.
Varma held nearly 8% of Kojamo’s shares prior to the transaction.
Markus Aho, deputy CEO, Varma, said: “We have reviewed our investment portfolio to determine efficient ways to invest in the Finnish residential market, also considering the upcoming pension reform.”
This was “a suitable moment” for Varma to implement this through share ownership, he said.
“Going forward, our gross exposure to the Finnish residential market and its return opportunities will remain roughly the same as before, but with less tied equity,” he said.
Solvency rules for Finland’s private-sector earnings-related pension providers, including Varma, are being changed mainly to allow the institutions to improve return prospects through higher equity weightings, in a reform set to be voted on by parliament this spring.
Aho told IPE Real Assets, this way of having exposure to domestic residential real estate worked better for Varma because it offered the institution indirect leverage, which meant less equity capital tied to achieve the same exposure.
“The pension reform will modify solvency framework so that we will be able to hold more equity exposure,” he said.
“Kojamo is also a large company specialised in this business. They should have economies of scale and deep capabilities in managing the portfolio going forward,” he said.
Aho said the deal makes Varma the second biggest shareholder in Kojamo after Swedish residential firm Heimstaden Bostad, which currently owns almost 20% of the firm.
Asked whether the deal allowed Varma greater freedom to invest in other ways, Aho said the deal on its own had limited impact on the wider portfolio, given its gross value was less that 1.5% of the portfolio, but he added: “The freed-up capital can be invested elsewhere but has not been earmarked.”
Varma’s residential portfolio represents around a third of its total direct real estate investments, which were worth €3bn at the end of September 2025, according to the pension fund’s third quarter report, of a total €5.7bn allocated to property assets.
Reima Rytsölä, CEO of Kojamo - who was CIO of Varma from 2014 to 2022 - said: “This transaction presents a unique opportunity for Kojamo to return to growth by acquiring a portfolio of significant size and with a strong alignment with our strategy.”
He said the properties were located in prime areas with a strong focus on growth centres, of high quality and in good condition.
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