German pension fund expects increase in private markets NAV
German pension fund Nordrheinische Ärzteversorgung (NAEV) has predicted that the net asset value (NAV) of its total private market assets will rise this year, both in percentage and absolute terms.
In an interview with Investments & Pensions Europe, NAEV’s chief executive officer Bernd Franken said that the fund has yet to reach its 2025 allocation targets in private equity, private debt and infrastructure.
The target allocation for private debt is set at nine per cent, while 12 per cent has been allocated to private equity, and 10.5 per cent is set to be invested in infrastructure.
According to its most recent financial statement, by the end of 2023 the pension fund had invested 10.7 per cent of its total assets in private equity, 7.8 per cent in infrastructure, and 8.8 per cent in private debt, leaving some space for new allocations to be made.
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NAEV increased its private markets allocations by a total of 3.4 per cent last year, compared with 2022. Franken said that these increases were in line with the fund’s ongoing investment strategy.
“Our [investment] strategy has not yet been changed,” said Franken.
“Our current three-year plan runs until 2025, and will continue to be implemented gradually. We then evaluate the results of the new asset-liability management study, and adjust the strategy where necessary.”
NAEV is the pension fund for doctors in the state of North Rhine-Westphalia. It has €16.3bn (£13.74bn) of total assets.
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By the end of last year, the portfolio contained a 22.7 per cent allocation to real estate, with 9.6 per cent invested in equities, 2.3 per cent in absolute return/hedge funds strategies, 12 per cent invested in mortgage loans, 4.5 per cent in fund-based interest-bearing investments, and 21.1 per cent in fixed income.
“Fixed income was and remains the secure, income-generating foundation of our investment [strategy],” added Franken.
“Listed equity markets have seen historic highs and [investors] are speculating that interest rates will fall soon and more.”
He added that NAEV plans to keep its fixed income allocations at a stable level, cutting down on listed equites in favour of private equity.
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