Is Pension Investing Long-Term

Investing?

Managing Director

Timo Löyttyniemi

The State Pension Fund

Capital Markets Top Seminar

25.9.2014

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Aftermath of the Financial Crisis

To avoid another financial crisis

Sustainability of the financial and banking markets

Increased regulation, solvency and capital buffers

Increased crisis prepareness

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Over 15.000 billion USD (US) lost in the

USA due to 2008-2009 crisis

Agendas for Promoting Long-Term

Perspective

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• SME financing

• Infrastructure financing

• Anti-banking

• Anti-stock exchange

• Anti-speculation

• Anti-capitalism

• Systemic failure

• Economic growth

• Financial stability

• Shareholder value

• Long-term returns

Infrastructure Investments for Long-

Term

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Motivation for Governments Motivation for Investors

Challenging debt levels

Infrastructure needs

Transfering investment

value to yearly payments

Enhanced efficiency and

speed of implementation

Stable income stream

Government related

risk

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Characteristics of a Long-Term

Investor

Long-term perspective (LT liabilities)

More ”risky” asset classes and assets

More ”illiquid” assets

More ”real” assets

Ability to buy low and in crises

No forced selling

Avoiding human misbehaving

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An Example of Investment Horizon

- The State Pension Fund

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Asset Class Pension Investor

Level Horizon

Fund Level

Horizon

Fixed Income 1 year 1 year

Equities 5 years 2 years

Illiquid Alternatives 10 years 3-10 years

Time periods are based on average turnover for each asset class.

Conclusions

Pension funds have

long-term liabilities

Regulation, solvency,

governance, media,

short-term targets,

human behaviour

challenge long-termism

Pension funds have a

mixture of short-term and

long-term strategies

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