Pension companies are significant investors in Finnish private equity funds

From the reader. Ilkka Paananen raised in the interview (KL 19.2.) brought up the concern that the Finnish pension system does not allocate funds efficiently enough. According to him, Finland would benefit more if Finnish pension funds dared to invest more actively in growth companies outside the stock exchange.

Paananen’s concern is easy to understand: growth companies need financing and companies move outside of Finland too often.

Finnish pension companies are actually significant investors in Finnish private equity funds. Even when viewed internationally, Finnish pension companies invest more in unquoted shares than in comparison countries. In addition to this, a significant part of the investments of pension companies is aimed at the domestic market.

Sweden gets 67, Finland 1 billion

For example I’m bleeding in the investment portfolio, 25 percent of the off-exchange equity investments are invested in Finland. Veritas invests in growth companies indirectly through funds and is an investor in several Finnish capital and venture funds.

There would also be a lot of potential in foreign investors. If it were also possible to collect foreign capital in Finnish capital funds, we would get international capital that would benefit domestic companies.

CEO of Pääpomajojjat ry Anne Horttanainen compared Finland’s situation with Sweden (KL 19.2.). “When the funds in Finland collect five billion euros, in the same time in Sweden they collect 72 billion euros. Of this amount, about one billion comes from abroad, and in Sweden, 67 billion,” commented Horttanainen.

In retrospect, it is easy to pick out successes and state that it would have been good to invest all your pension funds in them. Similar examples can be found in all markets.

The risks are really high

The risk of investments in growth companies is particularly high, because it is difficult to distinguish a successful company from other promising companies at an early stage. The profit potential of growth companies should therefore be viewed through risk, just like other investments.

Ultimately, the goal of all parties is the same: a strong and sustainable pension system and a vibrant Finnish business sector. By law, pension funds must be invested productively and securely.

Investment activities are based on risk diversification, which protects the system in challenging market conditions. Finding a balance between return, risk and long-term sustainability is central to investing pension funds.

In this context, it is also justified to consider who bears the risk if the investments do not succeed and the pension assets do not receive the return necessary for the sustainability of the system.