AaltoPEC’s 3+1 Interview: Head of Cross-Asset Allocation at Ilmarinen
In this series, we interview professionals from the Private Equity industry. The first two questions are about the career path of our interviewee and the third one is related to the company they represent. Last but not least, we ask what would they like to say to students interested in the fields of Private Equity and Venture Capital.
Esko Torsti, 57
Education
Master in Political Science 1983-1988, major in Economics, minor in Statistics (University of Helsinki)
Licentiate in Political Science 1988-1992 (University of Helsinki)
Career highlights
Research Assistant at Etla (part-time)
Economist at Protos
Economist at SEB
Head of Fixed Income at Ilmarinen
CIO at Pohjola
Head of Non-Listed Investments at Ilmarinen
Head of Cross-Asset Allocation and Vice CIO at Ilmarinen (present)
Family
Wife, three grown-up children, and a dog with a big nose
How have you ended up in your current position?
I started my studies at the University of Helsinki back in 1983. To be honest, I was first planning to take the entrance exam of TKK (Helsinki University of Technology) but the exam date was right after Midsummer and I wanted to go interrailing around Europe instead. Naturally, I was also intrigued by Economics but this scheduling issue made the decision slightly easier.
During my studies, I worked at ETLA as a Research Assistant which was a motivating and eye-opening experience. In 1988, I graduated with a Master of Economics. Back then it was possible to purchase a Master’s title for about 50 Finnish marks. “What would I do with a Master’s title?”, I thought and did not pay the price. However, I continued with my licentiate studies and graduated in 1992. I also started my doctoral studies but did not finish them because I felt more attracted to work life.
After having worked in various positions in banking, I ended up at Ilmarinen for the first time in 1998 as a Head of Fixed Income. I functioned as the Head of Non-Listed Investments for a long time from 2006 to 2019, but nowadays, I work in Cross-Asset Allocation.
What skills do you need in your daily tasks?
In the early stages of my career, it was crucial to learn basic technical skills, such as using IBM’s PC. These days technical skills do not play as vital a role for me. Overall, I think that the most important skills are learning from past mistakes and staying curious about the world around us.
These days social skills have a much larger role than back in the 80s or early 90s as organizational structures have evolved into a less hierarchical direction. Managers must see their subordinates as peers and encourage them to think and act independently. In short, I would say that the introverted nerd that I was back in the 80s has developed into an individual that recognizes the importance of social interaction and value creation in social contexts.
What kind of a private equity investor is Ilmarinen?
Ilmarinen is a large buyout investor that focuses on the US and Europe-based entities. Of course, there is also plenty of supply from Finland. In my opinion, we should select Finnish companies equally carefully, although especially in the past there has been pressure to be active in the Finnish markets due to the societal relevance of Ilmarinen. I find this pressure to be a positive one since societal visibility is a key part of our business.
In addition, private equity (PE) has been an extremely successful asset class at Ilmarinen. Thus, the question is whether the portfolio weight of the asset class is reaching its limits as the value of our private equity portfolio grows as a result of successful investment decisions.
From a strategic point of view, it is not worthwhile to grow PE investments' share of the total portfolio too much as they are illiquid investments. For instance, if there is a market crash or a sudden need for liquidity, PE investments are harder to get rid of than, for example, the stocks of listed companies.
In Finland, there is also a rather strict financial stability framework for pension funds. This means that the capital requirement of private equity investments is large due to their illiquid nature. This makes PE investments expensive for a Finnish pension fund, like Ilmarinen.
“Predicting the winners of the future might be the biggest challenge: Which firms are going to be the success stories of tomorrow?”
What is your message to students interested in the private equity industry?
PE is an intriguing field and asset class. Firstly, you need to have the necessary analytical skills to scrutinize the financial profile of the target company. However, predicting the winners of the future might be the biggest challenge: Which firms are going to be the success stories of tomorrow?
I would also like to point out that although Finland is a wonderful country, the capital market is pretty small compared to the international market. Therefore, it might be worthwhile for students to gain insights into international transaction activities.
In addition, globalization highlights the importance of economies of scale. If the operations of a company are globally scalable, the growth potential is much greater than if the company only operates domestically. The skill to identify these kinds of economies of scale is also becoming increasingly important.