The investment chief of Veritas Pension Insurance Co. says he doesn’t understand why there are glimmers of hope in equity markets, as he sells stocks and buys government bonds to protect his portfolio.

“There is a lot of optimism at the moment in the equity market that the crisis will soon be over, but I don’t believe it will,” said Kari Vatanen, who oversees 3.3 billion euros ($3.6 billion) as chief investment officer of Veritas in Finland. “In the real economy, we are going to see data getting worse, week after week.”

Vatanen, who spoke after delivering first-quarter results that showed a 10% loss due to the rout triggered by Covid-19, says he’s been busy cutting risk in his portfolio since he started last month. That includes reducing holdings “in the most liquid, most risky assets, such as listed equities,” he said. Instead, the fund has shifted over to “more defensive investments, like government bonds,” he said.

The intense focus on swift reallocation of funds shows that institutional investors can’t rely on passive strategies, Vatanen said. “Diversification needs active moves, it doesn’t work automatically during a crisis,” he said.

Since starting as CIO at Veritas in March, Vatanen has from the get-go been in crisis mode. He says the allocations he’s settled on now are unlikely to last once markets stabilize.

”We have been buying high quality government bonds, and that is purely a risk management move. However, it isn’t our long-term view to keep long duration in treasuries or government bonds.”