PE comes out on top for Finland’s KEVA

The asset class returned 2.2% in the first quarter against a volatile backdrop characterised by pension reform and the threat of a trade war.

Private equity was the top performer for Finland Local Government Pensions Institution (KEVA) in the first quarter of this year, amid a challenging investment backdrop.

Private equity assets generated a return of 2.2 percent in the three months to 31 March, compared with -0.4 percent for Keva’s overall portfolio, according to a statement from the pension. Performance was weighed down by a 2.5 percent drop in returns from listed equity and equity funds, the results noted.

“A pension provider has a long-term mission: we are responsible for the payment of pensions paid also in decades ahead,” chief executive Timo Kietavainen said in the statement. “Keva’s non-capital weighted real returns have averaged 5.8 percent a year over the past five years.”

The rise in US interest rates and threats of a trade war were cited as partly responsible for the weak overall performance.

Closer to home, major local government pension reform is also causing uncertainty. From 1 January 2020, the private sector will have a greater role in the provision of healthcare and social services. The transition could lead to a loss of pension contributions and create pressure on Keva’s remaining members to increase their contributions.

“Now there is every reason to take up the challenge brought about by the health and social services reform in earnest,” Kietavainen said in the statement.

Keva has €3.68 billion in private equity assets, equivalent to an allocation of 7.1 percent, according to the pension’s annual report. Some of the pension’s largest commitments are in Warburg Pincus Private Equity XI, Advent International VII and EQT VI, according to financial statements. It has a total of €51.8 billion in assets under management across fixed income, equities, real estate, private equity and hedge fund investments.