Hedge funds continue to play a meaningful role in the portfolios of Finland’s largest pension investors. Combined hedge fund allocations across six major institutional investors surpassed €25 billion for the first time in 2024 and stood at €26.5 billion at the end of 2025, representing roughly 9.6 percent of total assets. However, differing approaches to building and positioning hedge fund portfolios led to significant performance dispersion in 2025, with returns ranging from -0.1 percent to 11.3 percent.
Data from the Finnish Pension Alliance TELA, which tracks Finland’s four pension insurance companies – Varma, Ilmarinen, Elo, and Veritas – as well as local government pension fund Keva and the State Pension Fund of Finland, show a steady structural increase in hedge fund allocations. Together, these six institutions account for the vast majority of pension assets under management in Finland.
Aggregate hedge fund allocations have grown steadily in recent years, increasing from approximately €18.1 billion at the end of 2020 to €21.6 billion in 2022, €23.2 billion in 2023, and €26.2 billion at the close of 2024. During 2025, allocations briefly peaked at €26.8 billion and represented 10.4 percent of total assets at the end of the first quarter, before gradually moderating to €26.5 billion, or 9.6 percent of assets, by year-end.
Hedge fund allocations as a percentage of total assets declined modestly across most institutions during 2025. The only exception was the State Pension Fund of Finland, which maintained its allocation unchanged, albeit at the lowest level among the six investors at 4.3 percent. Overall, the six institutions generated an asset-weighted return of 4.5 percent on their hedge fund portfolios in 2025.
Diverging Performance Outcomes in 2025
Varma, Finland’s largest pension insurance company and the country’s biggest hedge fund allocator, generated a 5.0 percent return on its hedge fund portfolio in 2025, following a 10.5 percent gain in 2024. Hedge fund assets totaled €10.6 billion at year-end, representing 15.5 percent of Varma’s overall portfolio, down from 16.6 percent a year earlier. The reduction reflects estimated net divestments of approximately €584 million during 2025.
Ilmarinen, the second-largest of the four pension insurance companies with €67.5 billion in assets under management, reported a 7.2 percent return on its hedge fund portfolio in 2025, following a 9.8 percent gain in 2024. Hedge fund allocations amounted to €6.1 billion at year-end, corresponding to 9.1 percent of total assets, marginally lower than 9.3 percent a year earlier.
Elo, the third-largest of Finland’s four pension insurance companies, delivered a more moderate outcome in 2025. After a strong 13.1 percent return in 2024, the hedge fund portfolio generated 2.4 percent last year. Elo’s allocation to hedge funds increased to €3.4 billion at the end of 2025, representing 10.0 percent of its €34.4 billion investment portfolio, up from €3.2 billion or 9.7 percent a year earlier. The increase reflects both positive performance and estimated net inflows of approximately €200 million during the year.
Veritas Pension Insurance, the smallest of the four pension insurers, reported a 2.6 percent return on its hedge fund portfolio in 2025. The allocation stood at roughly €500 million at year-end, corresponding to about 9.6 percent of total assets, broadly unchanged compared with the previous year.
Public-Sector Investors: VER and Keva
In contrast to the more moderate outcomes among several pension insurers, the State Pension Fund of Finland (VER) delivered the strongest hedge fund performance in the group of six investors for a second consecutive year. The portfolio returned 11.3 percent in 2025, following a similarly robust 10.9 percent gain in 2024.
VER allocates just over €1 billion to hedge funds and systematic strategies, corresponding to 4.3 percent of its €25.8 billion portfolio, the lowest allocation among the six institutions. Despite the strong performance, the percentage weight remained broadly unchanged year-over-year, with modest divestments during 2025 keeping the allocation unchanged year-over-year.
By contrast, Keva, Finland’s largest institutional investor with €74 billion in assets under management, recorded a marginal decline of 0.1 percent in its €4.7 billion hedge fund portfolio in 2025, following a strong 12.7 percent gain in 2024. Hedge funds represented 6.3 percent of Keva’s portfolio at year-end. During the year, Keva reduced its exposure by an estimated €257 million, approximately five percent of the €4.9 billion allocation reported at the end of 2024.
