​Icelandic pension funds tackle low rates by increasing equity allocation in 2022 | News

Icelandic occupational pension fund Birta, the country’s fourth largest, has presented its investment policy for 2022 which shows a shift in some allocations towards equities and away from bonds.

This follows the release of new annual policies from other Icelandic pension funds revealing a similar shift in investment priorities.

Birta announced that the main changes in the investment policy for 2022 compared to that of the previous year included a reduction in the proportion of government bonds and mortgage-backed bonds, which was compensated by a increase in the proportion of foreign equities, deposits and specialized investments – which include domestic and foreign venture capital investments.

Minor changes were also made to the margin of error allowed for individual asset class weightings, he said.

The target for domestic shares in politics remained unchanged between the two years, remaining at 13.5%, Birta said.

Birta’s changes are similar to those detailed by pension fund Frjálsi, which released its 2022 investment policy on December 22 last year.

Frjálsi said that in recent years his investment policy has focused on increasing the proportion and distribution of foreign assets, and at the same time has reduced the allocation to domestic assets.

“The investment policy for 2022 continues on this path, but in summary, the main changes are that the weight of foreign assets and equities is increased, while the weight of bonds is reduced,” Frjálsi said.

Outlining the main changes it is making to its investment portfolios this year, Almenni Pension Fund said at the end of November 2021 that it was increasing the weight of equities in the portfolios of its Life Portfolio II and its mutual (Samtryggingarsjóður) to 55 .% of 50% this year.

At the same time, the pension fund said it was reducing the bond weighting in those investment portfolios to 40%, from 43% since last year. The domestic equity allocation is being increased from 10% to 12%, he said.

“The objective of this change is to achieve a higher long-term return for the portfolios in the current low interest rate environment, both domestically and abroad,” Almenni told l. ‘era.

Birta specifies that although its investment policy is intended to be long-term, it is nonetheless reviewed annually by the fund’s board of directors, taking into account market conditions and the main changes in the fund’s environment.

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