Geroa EPSV is a defined contribution pension fund which was set up to complement the Spanish state pension scheme. It covers employees in Gipuzkoa, one of the three provinces making up the Basque Country region. The fund has 100,000 contributing members and is currently worth about €500m.
Geroa was started in 1996 by the trades unions and companies in the metalworking industry. It has since expanded to cover other industries such as construction, transport and textiles.
Employees pay a percentage of their salary into the scheme, and this is boosted by a further payment from their employers which also goes towards the scheme.
Around 70% of the Geroa pension fund portfolio is invested in short and long-term fixed interest investment, with about 25% in listed equities. Approximately one-fifth of the equity portion – 5% of the whole portfolio – is invested in private equity.
Geroa’s association with private equity started in 2002, when it formed an asset management company, Orza, in partnership with another pension fund. Geroa owns Orza 50:50 with Elkarkidetza, the local pension scheme for public employees such as teachers and those working in local government.
Orza’s aim was to invest direct in companies in the region, although it also invests in private equity funds. At present it has direct holdings in three Spanish companies in the technology sector. The companies make very specific optical products for hospitals and laboratories. Orza also has a stake in the Talde Capital SCR II Fund, run by Basque private equity company Talde.
Virginia Oregui, general manager of Geroa, says: “The people contributing to Geroa are workers and companies from this area, so if there is a company from this area which we believe is doing very well, we may decide we want to invest in it. That way, we can help them and work together. We believed it was easier to start off in private equity in partnership with another pension fund.”
Unlike most other European pension funds investing in private equity, the emphasis is on venture. Last year, Geroa also struck out on its own and bought a stake in the CDH Fund which invests in China.
“I went on a work trip to China and visited some companies, and thought it would be interesting to invest in Chinese enterprises,” says Oregui.
Geroa also bought stakes in another fund run by Talde, Talde SCR set up in 2001, in Adara Ventures, run by Adara Venture Partners, which focuses on Spain, and in Activos en Renta.
None of Geroa’s private equity investments have given returns yet as they are still in the J-curve.
The pension fund does not use external advisers, relying on both its own and Orza’s team and, for direct investment, its knowledge of local companies. “We have learned how to invest as we’ve gone along,” says Oregui. “When a company presents us with an idea, we go to its board meetings. We see many ideas, and companies, and we have to get the figures and information, analyse them, and then visit the company.”
She says the main difference between private equity and other types of investment is that with private equity, the fund is dealing directly with company management.
One of the problems, however, is the lack of a network with which to exchange information. “There are not many pension funds in Spain, so we don’t have many other funds to compare notes with,” says Oregui.
However, sometimes the fund can gain comfort in other ways. “For instance, although we carried out our analysis and due diligence before we invested in Adara Ventures, we also knew who else was going to invest in the fund, so that was a support for us.”
As for the future, Geroa intends to maintain its private equity holding at 5% of the portfolio. However, there are no plans to raise it further.

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