Basis of investment activities and investment beliefs

Objectives and planning of investment activities

In its operations, VER is called upon to ensure the security, return and convertibility of its investments as well as their due diversity and distribution. Investments have been spread and diversified as customary in employment pension systems.

VER is a long-term investor serving as a buffer fund whose returns may fluctuate sharply over short time spans. All investment decisions are based on the target return and yield potential offered by prospective investments with due regard to the risk levels involved. Risks are spread by investing in different asset classes, markets, industries, instruments, companies, sovereign bonds and maturities.

According to the target return established for VER by the Ministry of Finance, the investments are to generate a higher rate of return than an alternative investment considered risk-free from the State’s point of view. Here ‘the return on risk-free alternative investment’ means the cost of the State’s net debt, including the cost of the derivative contracts made for debt management purposes. Net debt refers to the difference between the State’s on-budget debt and cash assets. Additionally, VER’s risk-adjusted return on investments must outperform the benchmark index specified in the Fund’s investment plan.

Healthy overall return calls for a comprehensive partner network. This presupposes an active dialogue with the management of portfolio companies, the authorities, domestic and foreign investors and brokerage service providers as well as other pension investors in Europe.

VER prepares an investment plan annually. It determines the strategic allocation of the portfolio, i.e., how the investments are distributed among the various asset classes. The goal is to create an optimum investment portfolio that generates a maximum return at the selected risk level. The investment plan and policy are subject to confirmation by VER’s Board of Directors.

VER's investment management and performance evaluation is partly based on benchmark indexes illustrating overall market returns, which are included in the investment plan adopted annually by the Board of Directors. Benchmark indexes, to which the performance of given investments are compared, are determined for each allocation areas. 


VERs investment beliefs