Sascha Pinger, chief investment officer of WPV, the €5bn pension fund for auditors and chartered accountants in the state of North-Rhein Westphalia in Germany, is considering introducing a 5% allocation to infrastructure investments.
He said the move was a step in the right direction to having a uniform set of rules across Germany for pension funds to further diversify their investments.
“The infrastructure quota introduced nationwide ensures the same investment conditions will apply in all federal states in the future. The quota creates flexibility and thus room for diversification,” Pinger told IPE.
Co-managing director Silke Wolf added that it is not clear yet whether the Ministry of Finance in North Rhine-Westphalia, which is the supervisory authority of the pension funds for professionals (Versorgungswerke) in the state, will declare the changes to the investment ordinance approved by the Federal Ministry of Finance applicable by way of decree.
The state of North Rhine-Westphalia (NRW), where WPV is based, led the way in 2021 in Germany by introducing a separate 5% infrastructure allocation for pension funds for professionals.
“We are almost fully using [the 5% infrastructure quota] through investments in solar, wind, and hydropower, as well as student grants. Our use of this quota is tied, among other things, to the submission of an annual sustainability report,” Pinger added.
Moreover, since December 2020, pension funds in North Rhine-Westphalia can use a 5% so-called opening clause for infrastructure investments, in addition to the possibility of applying for a separate 5% quota, to further diversify investments.
The supervisory authority can extend the opening clause to up to 10%.
Stress test
The finance ministry in North-Rhine Westphalia, together with Germany’s 15 pension funds for professionals, moved forward to design a new stress test in light of pension schemes’ changing investment strategies, using general values to stress investments in real estate, infrastructure or mortgages.
The lack of a stress test for infrastructure is worrying for second pillar occupational pension vehicles that also fall under the new investment rules and are ready to start boosting investments in infrastructure and more broadly in private markets.
It is still unclear whether the financial supervisory authority BaFin will include infrastructure allocation in the stress test infrastructure.
“The regulatory framework has given so far pension funds in North Rhine-Westphalia the flexibility to meet today’s investment requirements, but in this context taking on higher risks in investments always requires maintaining sufficient reserves; riskier investments can and may only be made if the appropriate risk budget is also available,” Pinger said.
For this reason, the association representing the interests of professional pension funds in Germany (Arbeitsgemeinschaft berufsständischer Versorgungseinrichtugen, ABV), has established a working group to draft investment regulation applicable to all professional pension funds, Pinger said.
The latest digital edition of IPE’s magazine is now available
No comments yet