BASF Pensionskasse, the pension fund for the German chemical company with €9.84bn in total assets, has amassed equity and bond investments worth €4.67bn in two fund of funds (FoFs) recently set up to sharpen its portfolio and to have greater control over the distribution of dividends.
The book value of the two FoFs reached €4.67bn due to in-kind contributions of €4.92bn, with new investments of €124m and sales (divestments) of €373.7m. The divestments resulted in gains of €26.3m.
The scheme said in its 2023 annual report that it moved assets worth €3.29bn at book value from a bond fund to the two FoFs. New investments were made in two bond funds totalling €490m, and divestments of over €71.4m, resulting in gains of €0.1m and losses of €1.4m.
Overall, those transactions reduced the book value of the bond fund to €2.60bn, according to the report. The decision to make investments more effective has changed the regional diversification of the scheme’s bond investments.
BASF has seen an increase in its allocation to European bonds by 1.4 percentage points, and in global bonds by 0.5 percentage points, offset by a decline in emerging market bonds by 1.9 percentage points, it said.
Indirect investments in fixed income include corporate and government bonds, emerging market debt, covered bonds, convertible bonds, US municipal bonds and commercial real estate debt, it said. Investments are also made in alternative forms of investment such as infrastructure equity and credit opportunity funds.
The scheme also moved equity fund holdings worth €1.63bn at book value to the FoFs after divesting €184.2m worth of stocks, it added. Equity fund divestments resulted in gains of €40.8m.
This decision, and the changing market value of investments, also altered the regional distribution of the scheme’s equity investments.
BASF’s global equity allocation has increased by 2.1 percentage points, and its emerging markets equities also increased by 1.9 percentage points, while European equities saw a 4 percentage points decrease last year, the report said.
Investment fund holdings now stand at 81.8% of total assets, private equity at 10.1%, loans at 5.2%, while 0.2% is allocated to mortgages, and 2.6% to real estate, it added.
The scheme has also reshuffled fund investments, increasing allocations to private equity, which reached €996m last year, up from €868.9m in 2022.
Returns on invested assets was €396m last year, up from €365.8m in 2022.
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