Finland’s Varma Mutual Pulls US Stocks in Response to Trump’s Performance

Fixed-income durations shortened using derivatives to prep for high interest rates.

Finland’s $53 billion Varma Mutual Pension Insurance Co. is slashing US stocks from its portfolio as a result of President Trump’s recent comments, specifically his response to demonstrations in Charlottesville, Virginia, according to Bloomberg.

“It seems as if there is no president in the US,” said Risto Murto, CEO, Varma Mutual Pension Insurance Co., in an interview in Helsinki on Wednesday. “If I look at what is the moral and practical power, there is no longer a traditional president.”

In Q2 2017, the fund bolstered its cash holdings when it cut its equity rate by 5%—a majority of which was US stocks. Using derivatives positions to prepare for higher interest rates, Varma has also shortened the length of its fixed-income investments.

When asked why Murto chose to reduce US equities, he cited growing concerns over the Trump administration, as Washington’s policies tend to have a ripple effect on the rest of the world.

“The lesson from 2008 is that if we have a problem in the US, then we all have a problem,” he said, calling the President’s reaction to the demonstrations in Charlottesville a “breaking point if you look at how business leaders reacted.”

Most of the fund’s stock portfolio is in Finnish companies that are dependent on Asian business, specifically China.

“In terms of direct exposure, the bigger news to us is that China is accelerating,” Murto said.

Murto was scheduled to meet with President Trump at the White House for the first time on Monday.

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