Ilmarinen Mutual Pension Insurance Co., which oversees about EUR 48bn from its office in Helsinki, is trying to figure out how best to operate in a world in which large chunks of the debt market trade at negative yields.

The Cheif Investment Officer Mikko Mursula says that “the answer is, you need to be innovative and able to accept more, in some cases a lot more, illiquidity in your portfolio than before.”

The stockpile of negative-yielding debt globally is at around USD17tn, with the risk that the number may grow amid expectations the European Central Bank is set to deliver more monetary stimulus. That’s putting pension funds in an unprecedented position as they struggle to find securities that yield enough to cover their liabilities.

At llmarinen, Mursula says he needs to get more than 3 percent to cover the growth in the fund’s liabilities. Mursula says it’s now “unrealistic” to expect good returns in the fixed-income market. So Ilmarinen has been relying more on alternative assets to boost its performance. Mursula says the best opportunities are in real estate, as well as in the least liquid corners of the fixed-income market, such as private debt.

He’s also looking at private equity. “Every time we find opportunities there, we take money out mostly from our government bond portfolio,” he said in an interview in the Finnish capital. While it’s easy to offload government bonds, it can be challenging to find alternative assets to invest in, according to Mursula.