Stockholm (HedgeNordic) – Finnish institutional investors achieved solid returns from their hedge fund portfolios in the first half of this year, with returns ranging from 3.7 percent to 7.7 percent. Two of these pension investors appear to have increased their hedge fund allocations by a combined half a billion euros. These allocation increases, along with solid performance gains, pushed the total hedge fund investments of the six largest earnings-related pension investors in Finland beyond €25 billion for the first time.
Data from the Finnish Pension Alliance TELA, which tracks the four pension insurance companies, Keva, and the State Pension Fund, shows hedge fund investments climbed to €25.05 billion at the end of June this year. This was up from €23.15 billion at the end of 2023 and under €20 billion in early 2021, reflecting both strong hedge fund performance and increased allocations. The increase in the first half of 2024 reflects strong returns with an asset-weighted average return of 6.2 percent and additional allocations by Elo and Varma.
The hedge fund portfolio of Elo, the third-largest of the four pension insurance companies in Finland, led the performance with a 7.7 percent return in the first half of 2024. Elo’s hedge fund allocation grew to €3.0 billion in mid-2024, representing 9.6 percent of its €31.3 billion investment portfolio, up from 8.7 percent at the end of 2023. This increase likely resulted from a reallocation of hedge fund investments back to levels seen in mid-2023.
Varma, Finland’s largest hedge fund investor and the largest of the four pension insurance companies, posted a 6.1 percent return on its hedge fund portfolio for the first half of 2024. The portfolio stood at €10.4 billion or 16.8 percent of Varma’s total portfolio at the end of June, up from 16 percent at the end of 2023, reflecting both strong returns and an additional estimated €350 million in net investments during the first half of the year.
Finland’s largest pension fund, Keva, saw a 7.3 percent return on its hedge fund investments in the first half of 2024, growing its allocation from €4.54 billion at the end of 2023 to €4.84 billion by mid-2024. This allocation represents 7.1 percent of Keva’s €68.5 billion portfolio. The State Pension Fund of Finland also enjoyed strong returns from hedge fund investments, achieving a 5.9 percent gain on this segment of the portfolio, which totaled just under €1 billion at the end of June this year. The State Pension Fund’s team highlighted an “excellent” first half for hedge funds, with most investment styles performing well, especially quantitative and equity-focused funds. However, macro funds produced more modest returns, facing difficulties in navigating interest rate and commodity markets.
Ilmarinen, the second-largest of the four pension insurance companies with €60.5 billion in assets, achieved a 4.7 percent return on its hedge fund investments in the first half of 2024. Ilmarinen has €5.3 billion or 8.7 percent of its portfolio allocated to hedge funds at the mid-point of the year. Veritas, the smallest of the four pension insurers, reported a return of 3.7 percent return for the first two quarters of 2024. Veritas had 10.5 percent of its portfolio allocated to hedge funds at the end of June.
