Investment principles

Approved by the Supervisory Board on 19 April 2018.

The Employment Fund’s business cycle buffer and the Fund’s other assets must be invested in a productive and prudent manner taking into account the Fund’s liquidity.

The required rate of return on the Fund’s investments cannot be set high at the expense of risk.

Investments in securities can only be considered sufficiently secure if the securities are listed on exchanges in OECD countries and value trends can be monitored at all times. The maintenance of the real value of the investment must be taken into consideration when assessing how secure an investment object is.

A particular challenge for investing the business cycle buffer is the fact that investment assets acquired during an economic upturn must be liquidated during an economic downturn. For this reason, the covariation between developments in securities markets, economic cycles and employment trends must be taken into consideration in the diversification of asset classes, industrial sectors and geographical regions.

Responsibility and social acceptability must be observed in investment activities in the same manner as in the Fund’s other activities.

 

Limitations of investment activities

The business cycle buffer and other assets of the Fund shall primarily be invested in money market investments and bonds. Euro-denominated deposits must be invested in deposit banks and branches supervised by the Financial Supervisory Authority.

In order to secure liquidity, an amount corresponding to one month’s expenditure must be invested in less than one-year fixed-income investments. If the buffer falls below this threshold, short-term loans can be used to fill such temporary payment deficits.

No more than 20 % of financial assets may be invested in listed and non-listed shares.

The Board of Directors must set limits on investments in individual risk concentrations in the annual investment plans.

 

Principles of responsible investing

Investing responsibly means that the Employment Fund aims to make profitable and secure investments, thereby carrying its responsibility of financing earnings-related unemployment benefits.

In practice, responsibility in investment activities means that we pay attention to our responsibilities while making investment decisions, and we believe that this will help us to improve the balance between risk and return.

The Employment Fund's borrowing

Under the law, the Employment Fund can borrow to finance its expenditure. Setting unemployment insurance contributions to a sufficient and correct level is the primary means of discharging the obligations imposed on the Fund. The secondary means is to borrow. However, indebtedness is considered a temporary state for a few years at most, after which efforts are made to restore the business cycle buffer to positive equity.

If the Employment Fund’s balance sheet value is becoming negative, the Board of Directors must prepare a debt servicing plan. The plan must detail the Board’s decision on how money will be borrowed and how the debt can be financed in the least expensive and most secure way.

 

Investment plan

The Employment Fund’s Board of Directors must draw up an annual investment plan. The plan must include the general principles for investment allocation, the liquidity goals of investments, the target rates of return on investments, and the security goals set for investments.

The Board of Directors must revise the investment plan at least once a year and make an estimate of the potential liquidation of the investments.

The Employment Fund’s Board of Directors decides once a year on the principles of responsible investing while deciding on the investment plan for the next year.

Organisation and power of decision of the investment and financing function

The Employment Fund’s Board of Directors is tasked with deciding on investing the Fund’s assets and borrowing money.

The Board of Directors is entitled to approve the use of segregated asset management services in investment activities. In such cases, the Board of Directors must require that all the asset managers used regularly provide the Board of Directors with a written report on investments made and a report stating that the aggregate investments of the Fund are within the limits set in the investment plan.

The asset manager must have a sufficiently good financial standing, must be sufficiently well known and reputable, and must be licensed by an authority supervising financial and investment markets within the EU.

The asset management agreement must be in line with the investment plan. The custody of securities must be secure.

The Board of Directors decides on the principles applying to borrowing and approves loan agreements.

Reporting on investment and financing activities

The Employment Fund’s Board of Directors must provide the Supervisory Board with a report on investment and financing activities and the status of such activities at the meetings in the spring and autumn and whenever necessary.

Communication

When the investment plan, the principles of responsible investing and the debt servicing plan are approved and updated by the Board of Directors, they must immediately be brought to the attention of the chairperson of the Supervisory Board and the auditor.

 

Page updated: 11/12/2018