PNO Media has appointed Van Lanschot Kempen Investment Management as the new manager of its €195m European small-cap equity mandate.
The €7.6bn multi-sector pension fund achieved a -32.8% return on its European small cap equity mandate in 2022. The return, which had not met the pension fund’s expectations for several years, “played an important role” in the decision to look for a replacement manager, Erik Hulshof, a trustee at PNO Media, said.
PNO Media’s 2022 annual report had already expressed disappointment with certain choices made by the asset manager, whose name the pension fund declined to disclose.
“The asset manager managing the portfolio of European small cap stocks was still assuming strong economic growth in Europe at the beginning of 2022, investing in sectors such as technology and cyclical companies while divesting from sectors such as energy. The war in Ukraine led to record profits for energy companies while technology companies saw their valuations shrink,” according to the annual report.
In the first half of 2023, the company in question did manage to slightly beat the benchmark thanks to being overweight in the automotive and travel sectors, according to the recently published annual report for the year. But that was not enough for the manager to retain its mandate.
Indeed, in June, the pension fund switched to temporary index management pending the appointment of a replacement manager.
This replacement has now been found in Van Lanschot Kempen. “During discussions with the fund managers, we were impressed by their knowledge of the Dutch pension landscape and the European small-cap sector, their long-standing track record and integrated approach to sustainability within the investment policy,” Hulshof said.
Validated transition plan
In 2023, PNO Media also decided to tighten its exclusion policy for the oil and gas sector. The fund now expects those companies to provide ‘a validated transition plan’ to reduce CO2 emissions. After screening, only 36 companies remain investable for the fund while 160 have been blacklisted. The remaining investable companies are mainly European oil and gas producers such as BP and TotalEnergies. PNO Media, which has an active management style, can also still invest in Shell, although that company was not in its portfolio during the pension fund’s last investment update on 31 March.
This year, the pension fund is developing policies to monitor the remaining oil and gas companies on the progress of their transition plans. PNO Media currently invests around €10-€15m in oil and gas companies. This is less than 1% of its equity portfolio.
The additional exclusions of oil and gas companies have also further reduced the pension fund’s carbon footprint. By the end of 2023, the equity and corporate bond investment portfolio had over 40% lower emissions than the benchmark. That is well above the fund’s reduction target of 25%. Last year, PNO Media also appointed an external asset manager who, starting from the first quarter of 2024, will have a portfolio of green corporate bonds worth 2% of the portfolio. This constitutes a doubling of the value of the fund’s green bond investments to 4%.
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