Varma has criticised exchange-traded funds (ETFs) for not providing anything different from existing investment options. The firm, Finland’s largest pension insurer, is considering reducing its exposure to the vehicle.

Risto Murto, the company’s chief investment officer, explained that many of the attributes he saw in ETFs could be found in other assets.

He said: “In our view, there are some questions. If you want a beta risk, you can do it in many ways. Obviously we can have index replicating by investing in direct equity holdings, futures, index funds and also ETFs.”

Varma currently has a very small amount invested in ETFs, one of which is a Chinese ETF. But, despite the small allocation, the firm has indicated that it may trim its exposure to ETFs as it believes it is not achieving its underlying target. Among other Finnish pension funds, ETFs have not proven particularly popular either.

However, Mr Murto said the firm rated ETFs somewhere in between futures and index funds. When questioned on what the firm would do with its ETF allocation he replied that the fund was totally “opportunistic”.

He added: “In the presentation, ETFs were presented as something of a sidekick. The main point is actually how you can dynamically control your risk level in a time-varying sense.”

Mr Murto’s comments followed a panel discussion on ETFs at the recent EDHEC conference in Paris on institutional investment. During the presentation, Lionel Martellini, professor of finance at EDHEC Business School, argued that ETFs were unique in their ability to have gain and loss ceilings, and could therefore soon become a mainstream asset in European pensions.

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