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Global WOW: single fund bagging €6bn from sole investor revealed

Global WOW: single fund bagging €6bn from sole investor revealed

Finnish pension fund for public sector workers Keva has allocated €6.1 billion to Mercer Investment Fund 2, which, according to the Citywire Global WOW (Who Owns What) database, is the largest allocation of a public institution to a single fund.

Data is based on the Global WOW research which analysed the holdings of public pension funds in 12 countries, including 95 UK local authorities, as well as a bulk of retirement schemes from Finland, Australia, Chile, Colombia, Czech Republic, France, Iceland, Israel, Peru, Portugal and Sweden. This data is accurate to the end of June 2015.

Keva, which manages a total of €41.4 billion as at the end of 2014, made the €6 billion investment in the Mercer Investment Fund 2, which is an open-ended equity fund registered in Ireland, in 2014. In comparison, the most popular fund among UK LGPS — the L&G UK equity index — runs €5.7 billion on behalf of 13 UK local authorities.

Commenting on Keva’s collaboration with Mercer, Maaria Eriksson, CIO, external equity and FI investments at the Finnish pension scheme, told Modern Investor that Keva doesn’t publish details about single funds.

However, when asked about whether she was happy with the performance of Mercer Investment Fund 2, she said: ‘Mercer Investment Fund 2 is a fund vehicle consisting of many different and mainly equity strategies and hence the performance of the fund reflects the market trends of risky assets.’

Investment Fund 2 is not the only Mercer fund in which Keva decided to put its money in. In 2014, the scheme allocated €1.2 billion to the fixed income Mercer Investment Fund 1. Combined, the two funds manage almost 18% of Keva’s €41.4 billion portfolio.

 

Customised investment

In its 2014 financial statement, Keva classified both Mercer products as the only 'balanced funds' in its portfolio — a category which didn’t appear in its reports until last year.

Publicly available data shows that Keva decided to put its money into the Mercer funds in the second part of 2014.

According to data from the Bank of Ireland, Mercer Investment Fund 2 was registered on 29 August 2014 as a sub-fund of the alternative investment fund (AIF) Mercer QIF CCF. The registration took place almost five months after winning the tender held by Keva, which results were published in April 2014 on the EU public procurement notices database TED.

The fact that no other pension funds or institutions are invested in the Mercer Investment Fund 2 may suggest that the fund was set up solely for managing Keva’s money.

A spokesperson from Mercer declined to comment on the funds it runs on behalf of Keva.

A source familiar with the matter told Modern Investor that the deal between Keva and Mercer is likely to be an arrangement through which Keva can use Mercer's fund umbrella in a flexible way as well as taking advantage of some of the consultancy firm's database resources.

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