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1 ASSET ALLOCATION IN FINNISH PENSION FUNDS Accepted for publication in Journal of Pension Economics and Finance September 8, 2005 Noora Alestalo Mandatum Unioninkatu 22 FI-00131 Helsinki, Finland Email: noora.alestalo@mandatum.fi Vesa Puttonen* Helsinki School of Economics Runeberginkatu 22-24 FI-00100 Helsinki, Finland Email: vesa.puttonen@hkkk.fi KEY WORDS Pension fund, asset allocation, pension liability, asset and liability management * Corresponding author. The unique data set is collected from the Finnish Centre for Pensions (ETK) and from the Insurance Supervisory Authority (ISA), and the authors are grateful for both institutions for providing the access to the data. We would like to thank Eric Deighton, Seppo Ikäheimo, Markku Kaustia, Matti Keloharju, Samuli Knupfer, Tuomo Vuolteenaho, three anonymous reviewers and the Editor Steven Haberman for helpful comments and suggestions. In addition, the co-operation with Citigroup is gratefully acknowledged. 2 ASSET ALLOCATION IN FINNISH PENSION FUNDS Abstract This paper empirically examines the strategic asset allocation and the asset/liability issues in the Finnish defined benefit pension funds. The results indicate that there is a relationship between the liability structure and the asset allocation. While pension funds with younger participant