Investment portfolio

Keva’s investment portfolio consists of fixed-income investments, equity investments, real estate investments, private equity investments and hedge funds. The portfolio is diversified not only by asset class but also by geography, sector and style.

Fixed-income investments

Keva invests in bonds issued by parties including governments, governmental bodies and corporate bodies in both developed and emerging markets on a global scale. Our primary geographical emphasis is on Europe, however. We only employ active strategies in fixed-income investments. Keva focuses on investment-grade corporate bonds in its choice of fixed-income securities. When it comes to investment opportunities requiring local knowledge and specialised expertise, we draw on strategies prepared by our carefully selected partners.

Equity investments

Keva’s investments in listed equities have been diversified by geography, sector and investment style. In terms of geography, most of our investments are in Northern America, Europe and the emerging markets. Both active and passive investment strategies are employed when investing in equities. Active investment strategies are used when we have reason to believe that after costs, they will outperform index investing. Keva’s equity team focuses primarily on European investments. In other markets, we rely on the equity strategies of thoroughly vetted partners.

Real estate investments

Keva’s real estate portfolio comprises direct investments in real estate located in Finland and the Nordic countries as well as investments in Finnish and foreign real estate funds.

Other investments

Private equity investments

As a long-term investor, Keva capitalises on the investment opportunities provided by non-liquid and less effective markets also when it comes to private equity investments. Our widely diversified private equity investment programme consists of funds which focus on financing start-ups and growth companies as well as mergers and acquisitions on the part of established companies. The majority of these investments take place in Europe and the United States.

Private equity investments are primarily accomplished through funds. Investments may also be made in non-listed equities.

Hedge funds

Keva’s hedge fund investments and other alternative investments consist of both traditional absolute return funds as well as funds which have a longer duration and are often also of a more opportunistic nature.

The investments have been diversified by fund and investment style to accomplish a portfolio of moderate risk level which spans more than one market cycle and seeks to preserve capital under all circumstances. In many cases, the strategies employed by the hedge funds are designed to be relatively independent of the returns on the most common investment instruments, which boosts the portfolio’s risk diversification.

Hedge fund investments and other alternative investments are made via funds.

Responsible investment

Tasked with managing the local government pension assets, Keva is a long-term investor that under law must ensure the safety and return of investments. The responsible performance of its task requires Keva to have an excellent understanding of the risks and opportunities relating to factors such as the environment, social responsibility and good corporate governance.

Guidance is provided by our principles of Responsible investment. The core idea of the principles is to integrate responsibility into the entire investment process rather than to exclude certain corporations or industries from the investment universe.

Responsible investment at Keva applies equally to all asset classes but the specific methods and scope for action depend on the characteristics of each individual asset class. Keva’s responsible investment operations are coordinated by the Responsible Investment Steering Group, which has representatives from each of the Investments department’s units.

Keva became a signatory to the UN Principles for Responsible Investment (UN PRI) in 2008. Progress in the field of responsibility is monitored by means of the PRI questionnaire completed annually

Keva's Public Responsible Investment Transparency report (pdf)

Responsible investment in practice: environmental strategy for real estate investments

The energy consumption for electricity and heating in the properties managed by Keva was approximately 200 GWh in 2018. The greenhouse gas emissions from this energy use were approximately 34,000 tonnes of carbon dioxide per year.

We aim to become carbon neutral by 2030 in terms of CO2 emissions from the electricity used in our direct real estate investments. Our interim target is to halve these carbon emissions by the end of 2025.

To support the main goal, our other aims include:

• improving the energy efficiency in our properties by 12% by 2025 and by 20% by the end of 2030;
• increasing the share of renewable energy produced on site at the properties to 4% by 2025 and to 10% by the end of 2030.

Frequently asked questions

Question: What is the value of Keva’s investment assets?
Answer: At year-end 2022, the (market) value of Keva’s investment assets was altogether EUR 62.2 billion. Keva was the largest pension investor in the country.

Question: Who oversees Keva’s investment operations?
Answer: Keva is a pensions institution under public law founded in accordance with its own law. The general supervision of Keva is the task of the Ministry of Finance, and the Financial Supervisory Authority (FSA) supervises the financial planning and the investment of the pensions institution’s assets. They ensure that the pensions institution complies with the law and good insurance practices and employs appropriate procedures, and that for instance risk management is sufficient.

Question: What are the principles guiding Keva’s investment operations?
Answer: According to the law, earnings-related pensions institutions must invest pension assets in a profitable and secure manner. According to the law, Keva must ensure that its investments are secure and profitable, ensuring that they can be readily cashed and that they are spread over a diverse portfolio. Regarding investment operations, pensions institutions have not been placed in a disadvantageous position compared to other investors.

Question: What do profitability and security mean?
Answer: They mean that risks must be managed by diversifying investments across different markets and sectors, in different investments and instruments in a way that takes into account the investments’ security, profitability, capacity to be readily cashed, and diversity.

Question: What prudential regulations apply to Keva?
Answer: No prudential regulations apply to Keva, unlike private sector pensions insurance institutions, as there is no individual pension liability coverage within the public sector.

Question: What are the principles guiding Keva’s investment operations?
Answer: Keva has voluntarily committed to complying with key social responsibility principles ratified by the international community. Kevas has signed the UN principles for responsible investing, i.e. the so-called PRI-principles. Keva is also a member of FINSIF, an organisation that promotes responsible investing. Keva has also published its own guidelines for responsible investing. 

Question: Does Keva invest in tax havens?
Answer: Keva invests part of its assets in Finland, which is a “tax haven” for Keva, as Keva is not liable to pay income tax in Finland. Of course, tax is paid from the actual pensions. Keva does not directly invest in foreign tax havens, but it does invest a part of its assets in international funds. These in turn may have investments all around the world. Keva usually does not have a say in the domicile of the funds.

Question: Does Keva practice tax evasion?
Answer: No. In Finland, Keva is not liable to pay income tax. Keva also tries to avoid double taxation of its international investments, as do other investors. This is entirely legal.

Investment operations costs 2017

The Financial Supervisory Authority (FSA), which monitors pensions investors, requested data from its supervised entities on all investment operations costs from the year 2017.

Based on this data, the Finnish Pension Alliance TELA has published a report summarising the total costs of the investment operations of Finnish pensions institutions, and the distribution between direct costs and compensations paid to external asset managers.

In the following, Keva's investment operations costs in comparison with the published figures for the entire sector have been examined.

Keva’s investment operations costs clearly below average

Keva’s direct investment operations costs (personnel costs etc.) are well below the average for domestic pension investors. The direct costs of Keva’s investment operations are less than 0.04% in relation to the capital employed, whereas the sectoral average was 0.1% according to the report.

Keva’s costs for external asset management were 1.4% of the capital employed, which is also less than the sectoral average 1.5%.

Keva, as all other domestic pension investors, must aim for investments that safeguard pension funds and produce profit. Therefore, the net income of investment operations is the most important. The net investment income is used to finance pensions both now and in the future.

From an international point of view, Finnish pension investors work with small organisations, and in addition the domestic capital markets are very small in comparison with the investment capital.

In order to sustainably manage future pension liabilities, significant investments by domestic actors in international capital markets are also required. Thereby, the amount of assets invested by external asset managers is inevitably large; this entails greater absolute costs related to the investments.

The costs are however absolutely worthwhile if the net investment income obtained is sufficiently high in relation to the pension system.

Taking intergenerational fairness into account in the investment strategy

Keva’s total net investment income from the year 2017 was 7.7% after all costs had been deducted; the pensions sector average was 7.4%.  Examining the income from an isolated year is however rather irrational when it comes to long-term investors such as pension investors.

At Keva, we focus on the investment income over a longer period, at least 5 or 10 years, and even longer time periods when planning our operations. Our new investment strategy especially emphasizes both the long-term pension investor investment horizon as well as intergenerational fairness when it comes to the accrual and use of pension assets.