Stockholm (HedgeNordic) – An in-depth feature in the May issue of the Investment & Pensions Europe magazine highlights Varma, the largest private pension insurance company in Finland with €43 billion in AUM, and its continuing dedication to being a hedge fund allocator, despite the widening gulf between pension funds and hedge funds elsewhere in the Nordics in recent years.

According to CIO Reima Rytsölä, Varma distinguishes itself from other Finnish pension funds through this very hedge fund allocation. “We have a long history in alternatives,” he told IPE’s Carlo Svaluto Moreolo. “We started at the beginning of this century and we can say that, even though the industry has been under pressure, our hedge fund portfolio has been able to produce decent returns.” Varma began its foray into the hedge fund industry in the search for portfolio diversification, now employing three people devoted to that task alone.

Varma presently allocates 17% to hedge funds, of which 7% in private equity funds and 2% in unlisted equities via co-investments, producing a 5.6% return in 2016, “with relatively low volatility” and good fixed income returns, according to its annual report. The pension fund blends a core portfolio and an opportunistic portfolio of roughly equal size, IPE reports, with the former targeting low volatility with a market neutral approach and the latter accepting more volatility in exchange for higher returns by, for example, targeting strategies like illiquid credit. Rytsölä explained the hedge fund allocation to be among the tools Varma employs to fight inflation, but acknowledges the prevailing perception of high fees and underperformance as currently haunting the industry, which is “one of the explaining factors behind compressed returns.”

“Looking ahead, the interest-rate environment is strongly supporting the appeal of the hedge fund industry. We think what’s threatening the industry more is the emergence of systematic risk premia strategies that are becoming more popular among investors. Some hedge funds have tried to replicate the simple risk premia strategies, which are accessible for a much lower fee than what traditional hedge funds are charging,” accounting to some degree for compressed fee levels, Rytsölä suggests.

Despite the share dedicated to alternative investments indicating a potential preference for active management, Varma remains predominantly a passive manager, Rytsölä explains. Read the full feature in IPE here.

 

 

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Glenn Leaper

Glenn W. Leaper, Associate Editor with Nordic Business Media, completed his Ph.D. in Politics and Critical theory from Royal Holloway, University of London in the summer of 2015, and is currently involved with a number of initiatives, including advising businesses and writing his first post-doctoral book. While pursuing his academic career, Glenn is also in the process of founding a Communications Consultancy. Following experience with a number of international organizations, businesses and ventures, he believes there is always a way to objectively improve the presentation, and representation, of a company or individual, and thereby increase the confidence of investors, stakeholders, employers – and voters. In an era dominated by technological innovation, he believes the human component of communication and its inherent potential should be safeguarded and revitalized. Glenn’s services span a range of activities, from writing, editing and branding to speechwriting, delivery, and tactical and strategic advice. His objective is to always provide a client with the extra push that can make the difference between success and failure. His hope, over time, is to translate such contributions to the political arena. Glenn currently resides in Vienna, Austria, having an international background spanning the UK, US, France, Spain, Belgium and Denmark. He holds an MA in English from the University of London and a BA in International Relations from Webster University.

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