FINLAND - The pension fund of Evangelical Lutheran Church of Finland is planning to increase its exposure to private equity and real estate over the coming year, IPE has learnt.

The fund's chief investment officer, Ira van der Pals, said at present the fund had 2% and 10% exposure to private equity and real estate, respectively.

"Our plan is to increase these both slightly on the expense of bond and equity investments over this year," she said. "Both in private equity and real estate, additional exposure will come in the form of European property funds, which include Finland."

At present, the fund's €950m portfolio is invested in bonds (43%), equities (45%), property (10%) and private equity (2%).

Over 2010, the portfolio yielded a total return of 13.8%, down from 18.4% in 2009.
In the beginning of last year, the fund had increased its exposure to equities from 42% to 45%.

"Year 2009 was a very exceptional year, as there was a major correction in equity markets since the drops in 2008," said Van der Pals. "Last year, on the other hand, the situation became more balanced. We could say that worst fears of another slump are now over."

The Finnish Lutheran Church is at the moment facing a significant challenge in terms of future funding as its membership is reducing.

In recent years, its membership has been on a steady but moderate decline. A major drop in members took place last year after a televised debate in which Finnish Christian Democrat Party chairwoman Päivi Räsänen openly voiced conservative views on gays and religion.

As a protest, some 50,000 Finns removed their names from the church registrar in the course of a few days.

If the decline in the number of tax-paying members of the church continues, parishes will receive less tax income and be able to employ fewer people, thus getting less pension contributions.

If the trend continued for the long term, the General Synod would have to consider charging higher pension contributions from its employees. 

"The church as an employer already pays higher-than-average employee pension contributions than the private sector," Van der Pals said. "Our contribution rate stands at 27%, while private sector employers pay 23%."