Risk management and solvency in investing pension assets

Solvency describes the ability to bear investment risks 

The goal of investing pension assets is to safeguard our ability to pay current and future pensions. That is why the pension assets must be invested both profitably and securely. Profitable investing always means taking risks. A key objective of investment operations is to make use of the company’s risk-bearing ability in order to maximise long-term returns without compromising compliance with regulatory solvency requirements in the short term.

We manage the market risk affecting our investment assets by following the solvency regulations and taking care of our solvency and sufficient diversification of the investment portfolio. The pension system also bears part of the market risk.

We have systematically linked our risk management priorities to our basic mission as well as our strategic and operative targets. The risk management system, which is independent of the business operations, is documented in the operating principles of the risk management system that encompass all of the company’s operations and which are annually reviewed and approved by the Board of Directors.

The table below shows the most recent investment allocations and returns disclosed by us. We present the figures in the comparable format agreed on jointly between employment pension insurance companies.

	Basic breakdown EUR mill.	%	Risk breakdown EUR mill.	%	Return %	Volataility
Fixed-income investments	16,547.2	32.9	14,857.5	29.5	-2.1
Loan receivables	1,540.0	3.1	1,540.0	3.1	0.0
Bonds	13,073.8	26.0	10,486.4	20.8	-2.3	6.9
Public corporation bonds	4,851.6	9.6	4,257.2	8.5	-2.5
Other bonds	8,222.3	16.3	6,229.1	12.4	-2.2
Other money market instruments and deposits (incl. investment receivables and payables)	1,933.3	3.8	2,831.1	5.6	-1.6
Equities and shares	23,427.8	46.6	22,460.5	44.6	1.4
Listed equities and shares	17,809.1	35.4	16,841.8	33.5	0.7	18.2
Private equity investments	4,651.1	9.2	4,651.1	9.2	43
Non-listed equities and shares	967.6	1.9	967.6	1.9	2.9
Real estate investments	6,440.2	12.8	6,457.8	12.8	1.1
Real estate investments	5,845.7	11.6	5,846.7	11.6	1.5
Real estate funds and joint investments	594.5	1.2	611.1	1.2	-3.1
Other	3,892.1	7.7	4,422.5	8.8	14.9
Hedge fund investments	2,769.4	5.5	2,769.4	5.5	2.2
Commodity investments	42.3	0.1	58.0	0.1
Other investments	1,080.4	2.1	1,595.1	3.2	49.9
Investments total	50,307.3	100.0	48,198.3	95.8	1.1
Effect of derivates			2,109.0	4.2
Investments at current value	50,307.3		50,307.3	100.0

The modified duration of bond investments is 2.1 years.
The open currency position is 16.9 of the market value of the investments.
The total return percentage includes income, expenses and operating expenses not allocated to any investment types.