Provision for the Bank of Finland's pension liability is made through the pension fund on the Bank's balance sheet. The pension fund assets constitute a separate entity, which is included in other assets of the Bank of Finland's balance sheet. On the liabilities side, there is a pension provision. The pension fund return derives from regular employee contributions paid by the Bank of Finland and return on investments, while the fund's expenses arise from pension payments and administrative expenses.
At the end of 2010, the pension fund's assets were valued at about EUR 526 million. Pension fund assets are invested so as to ensure the economy and efficiency of pension financing. The investment policy is based on an actuarial assessment of long-term developments in pension liability.
The strategic benchmark represents the core of the investment policy:
Bonds 55%
Euro area shares 15%
Non-euro area shares 15%
Real estate 15%
The investment policy and target allocation of the pension fund is reviewed every three years. The most recent review was undertaken in summer 2010.
Pension fund investment, or portfolio management, has been outsourced from the start of the fund. Assets have been invested in mutual funds which are also used by other investors. In 2007, bids were invited for portfolio management, mainly to ensure cost efficiency. Portfolio management is so organised that one portfolio manager is responsible for management of the assets in liquid asset categories against a benchmark index. Portfolio management takes a passive approach, ie the portfolio management aims for a level of return in line with the benchmark index, whereas the management of real estate funds is active.
The portfolio managers of the Bank of Finland's pension fund are:
Bonds: State Street Bank and Trust Company (Euro Government Bonds).
Equities: Vanguard Investments Europe SA/ICECAPITAL Varainhoito Oy.
Real estate funds: Pohjola Property Management Ltd / OKO/Pohjola Kiinteistösijoitus Real Estate Fund Finland I Ky (REFF I Ky) and Aberdeen Property Investors Finland Oy / Aberdeen Property Fund Finland.