Germany’s nuclear waste management fund KENFO, with assets worth €23.49bn, has exceeded its target return by 6.9 percentage points last year, as it continues to expand its illiquid investments portfolio, said chief executive officer Anja Mikus today introducing the 2023 results.
KENFO posted a return of 11.1% in 2023, the highest annual return to date, Mikus said, compared with -12.2% in 2022, and against a target return of 4.2%.
The 26 bonds and equities mandates exceeded their benchmarks last year, after deducting fees, by 1.03%, the CEO said, adding that the fund earned around €235m with the outperformance.
KENFO invested 46% of its assets in equities and real estate investment trusts (REITs), 28% in corporate and emerging market bonds, 9% in government bonds of developed countries, 9% in private markets, and 8% in cash, as of the end of 2023.
Rising interest rates and the lack of price adjustments led to the fund postponing significant investments in real estate in 2020 and also in 2021/2022. Last year, however, it made “very selective” investments in the asset class, on a manageable scale that met return expectations, Mikus explained.
The fund’s strategy targets 35.5% of total assets in equities and REITs, 26.4% in corporate and emerging market bonds, 9.1% in government bonds of developed countries, and 29% in private markets.
The CEO said that KENFO is “on the right track” to reach a 30% allocation to illiquid assets by 2030. Its allocation to the asset class went up 1.7 percentage points last year, compared with 2022, chief financial officer Thomas Bley added.
The fund plans to invest a further 3.7-5.7% of its assets in alternatives this year, according to the annual report.
KENFO will invest temporarily in equities or bonds, with a comparable risk profile, part of the capital intended to build up its illiquids portfolio, then it will gradually reallocate the assets to private markets, Mikus explained.
“That’s why, for example, our current equity exposure is higher than planned in our strategic asset allocation,” she added.
KENFO’s portfolio recorded an increase in value of almost 5% in the first half of this year, generating over €4bn. It expects to improve results in the upper range of €365-405m this year, depending on potential market losses in H2, Bley added.
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