The plan of Germany’s now-defunct traffic-light coalition of Social Democratic Party (SPD), Greens and liberal party (FDP) to turn KENFO into the country’s public and state sector’s central asset manager, included in the draft law to reform the first pillar pension system, could become reality despite the country’s recent political crisis.
At ministerial department level, there is the belief that setting up funds – so-called Sondervermöge – to finance large-scale, multi-annual measures, including pension assets, in the hands of one asset manager creates scale advantages and higher returns, IPE understands.
Heads of ministerial departments will go unchanged if the government or a parliamentary majority is replaced, guaranteeing continuity following an election cycle, according to an industry official.
According to the Federal Audit Office (Bundesrechnungshof), there are 29 Sondervermögen in Germany, holding assets totalling approximately €869bn, including the Versorgungsrücklage und Versorgungsfonds des Bundes, funds used to relieve public finances from pension expenses for civil servants, judges and soldiers.
The former traffic-light governing coalition intended to set up a central federal asset manager during this legislative period as part of the draft law reforming the first pillar pension system.
KENFO could become the country’s public and state sector’s central asset manager, taking on functions spanning from risk management to asset allocation, including direct investments in private markets, selection and control of external asset managers in liquid markets, and sustainability reporting, chief executive officer Anja Mikus told IPE earlier this year.
The first pillar reform of the traffic-light coalition government, aimed at stabilising the level of pensions and investing first pillar schemes’ assets through a public equity fund, won’t find a majority in parliament (Bundestag) after FDP ministers left government.
As a result, KENFO won’t manage the assets in the public equity fund, which has been set up to slow down the increase of contributions. Under the plan of the former governing coalition, KENFO was tasked with building a global diversified portfolio of assets until the end of 2026, with the possibility of extending the mandate beyond that date.
KENFO planned to start implementing the reform once the law came into force.
The Union, the alliance of Christian Democratic Union (CDU) and Christian Social Union (CSU) parties leading in the poll ahead of snap elections in February, has criticised the equity fund, questioning whether it will press ahead with the reform of the first pillar pension system once it takes office.
CDU and CSU will decide on their electoral campaign programme on 17 December.
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