Germany’s largest pension fund – Bayerische Versorgungskammer (BVK) – will continue to allocate a large part of its assets to indirect real estate and stake investments this year while opportunistically looking at equity and bond markets, according to its financial statement for 2021.
The pension fund expects its assets to rise this year as it will reinvest the returns from maturing bonds from the interest-bearing directly held portfolio, meanwhile focusing on fund investments, according to the statement.
The fund held €107.3bn in assets under management at market value at the end of 2021, up €10bn year-on-year. It received €5.4bn in contributions and paid €3.9bn for pensions. It had just over two million active members.
BVK recorded net income from investments of around €3.2bn in the last financial year, an average net return of 3.64% for the 12 pension funds under management.
It invests 25.4% of its assets in real estate – over €25bn, including €19.1bn in fund investments and €6.6bn directly held and 17.1% in debt funds, 15.4% each in alternatives and equity, 16.9% in fixed income, and 9.8% in alpha/alternative risk premiums.
Approximately 53% of its equity portfolio is invested in Europe, 20% in North America, 18% in Asia and 9% in the rest of the world. It mostly focuses on Germany (46.46%), rest of Europe (22.61%) and North America (18.68%) for real estate investments.
It focuses on Europe and North America for private equity but it has built up an Asian share in its portfolio. BVK underwrites single funds in Europe, the US and Asia in the large/mega market and works with fund-of-funds partners in the small and mid-market. The largest part of its investments in infrastructure is in brownfield mixed with greenfield holdings.
It has continued to invest in secondaries on the real estate market signing a partnership with Goldman Sachs, following a similar one with Vintage Partners earlier this year and with StepStone in 2021, according to the statement.
BVK’s strategic asset allocation for 2022 will see an increase to 28.8% in real estate (24.3% in real estate funds and REITs and 4.5% in direct investments), 23% in fixed income, 15.2% in debt funds, 13% in private equity, infrastructure and timber, 12.5% in equity, and 7.5% in alpha/alternative risk premiums.
Macro view
The pension fund expects that the global pandemic will have an impact on equity markets this year as it did last year, alongside supply bottlenecks and the threat of climate change, it said.
Russia’s invasion of Ukraine is a “global turning point” and its long-term consequences are unpredictable, it said adding that with the sharp rise in energy prices higher inflation is to be expected along with central banks trying to neutralise the increase.
BVK underlined in its financial statement that the the conflict in Ukraine has shed a light on the “strong dependence” of the German economy on Russian energy, “which is why independent energy supply from renewable energy sources is likely to move further into focus”.
New management
BVK will make changes to its executive board over the next two years. Axel Uttenreuther will be the new chair of the board, effective 1 June 2023, succeeding Daniel Just who will retire.
The pension fund has named Stefan Müller as the new deputy chair of the board, starting 1 October 203, succeeding Ulrich Böger. Christine Draws succeeds Axel Uttenreuther as a member of the board from June 2023, the first woman at BVK to take this position.
Christian Ebersperger will be a new member of the board October 2023, taking over the seat of Ulrich Böger. BVK has also extended the contract of André Heimrich, management board member responsible for asset management, for a further five years starting from February 2023.
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