October 1, 2013 / 3:36 PM / in 4 years

Finnish fund Ilmarinen to shift more to emerging markets

HELSINKI (Reuters) - Finnish pension fund Ilmarinen plans to cut the proportion of its equities portfolio it invests in domestic companies over the next 10 years so it can shift more into emerging markets, its chief investment officer said.

Timo Ritakallio also told the Reuters Nordic Investment Summit that the fund was happy with its current stake of nearly 2 percent in Nokia NOK1V.HE and that it planned no major change after the sale of the company’s handset business to Microsoft (MSFT.O).

Ilmarinen, the country’s second-biggest pension fund after Varma, has about 31 billion euros ($41.96 billion) in investments, and stocks form almost a third of its portfolio. Its investment decisions are closely followed by the region’s financial market players.

Finnish firms account for about 30 percent of its equities holdings, but the fund plans to eventually lower that proportion to around 20 per cent, Ritakallio said.

He said the fall in domestic equity allocation would mean more funds would be invested in emerging markets such as China and South America.

“It is going down,” he said. “From 30 (percent), over the next decade or the rest of this decade, to 20 percent or something like that.”

“In emerging markets, I see that in the long run, we will increase our investments there,” he said.

The Finnish economy is one of the few triple-A rated economies in the euro zone, but fell into recession earlier this year as Europe’s slowdown hurt exports.

Many economists say it may be stuck in slow growth for years, with former technology flagship Nokia selling off its handset business to Microsoft and its paper and metals industries struggling with sluggish European demand.

Ilmarinen’s top Finnish shareholdings include Pohjola Bank POH1S.HE and elevator maker Kone (KNEBV.HE) as well as Nokia.

    Ritakallio said investors would likely approve Nokia’s sale of the handset business, noting the surge in the company’s shares, which have risen over 60 percent since the deal was announced early last month.

    He added that Nokia Solutions and Networks (NSN), the telecom equipment unit that will account for around 90 percent of sales after the deal is closed, would make a solid investment.

    “We are happy with our current ownership. And we are owning two percent of Nokia,” he said. “And I see that NSN is a strong, global player in their own business.”

    Ilmarinen’s second-quarter report showed it held a 1.6 percent stake in Nokia as of the end of June. ($1 = 0.7387 euros)

    Follow Reuters Summits on Twitter @Reuters_Summits

    Additional reporting by Terhi Kinnunen and Jussi Rosendahl; Editing by Pravin Char

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