FINLAND - Etera, the Finnish mutual pension provider, posted negative returns of 2.3% last year driven by volatile equity markets, but saw its real estate portfolio rebound from returns of 0.7% to nearly 8%.

Jari Puhakka, the mutual's director of investments, said a modified investment strategy had allowed its solvency level to remain stable year-on-year despite the "market shock" witnessed in 2011's third quarter.

"Proactive risk management and the dynamic allocation of risks protected us from declining share prices," Puhakka said.

"As share prices began to recover, our returns developed favourably."

Puhakka noted that returns for the last three months of the year rebounded to 3%, with all asset classes posting positive returns.

Overall, Etera's real estate portfolio returned 7.9%, up from 0.7% the year before, with its direct real estate investment up 2.9 percentage points year-on-year to 5%.

It added that it was heavily involved in the development in the bay of Töölönlahti in Helsinki.

"Etera has three office buildings under construction there, which, when completed, will be occupied by Alma Media, KPMG and Ernst & Young," it said.

"Etera is also involved in the construction of wooden blocks of flats - for example, a five-storey timber-built apartment building in Helsinki's Viikki."

However, returns on its equity and fixed income holdings were less positive, with private equity's 15% growth higher than any other asset class - compared with the equity portfolio seeing returns crash from 16.8% in 2010 to -10.3% at the end of December.

"The equity portfolio's returns were especially weakened by the lower yield of the Finnish stock market in comparison with general market development," the scheme noted, saying quoted equities posted a negative return of more than 16%.

Unquoted equities performed noticeably better, with growth only down 0.8% percentage points to 9.2%.

At the end of 2011, the value of all of Etera's holdings was €5.3bn, a reduction of less than €100m year on year.

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