NETHERLANDS - The €209bn civil service pension fund ABP has announced that is has doubled its investment in emerging market micro credit. Its allocation now totals more than €15m.
ABP invests through a dedicated Luxembourg based SICAV managed by Geneva based specialist Blue Orchard Microfinance Investment Managers for Dexia Asset Management. This invests in portfolio of small loans - usually varying from $50 to $1,000 - to entrepreneurs in developing countries. So far the investment has returned 6%, ABP said.
The fund started with a €5m investment in the asset class in 2005 but its current allocation will make it the largest Dutch investor in micro credit.
According to ABP, micro credit is an attractive long-term investment for pension funds as it diversifies risk.
"The returns have little correlation with returns on equity and fixed income. Moreover, micro credit is hardly affected by macroeconomic developments such as interest rates and inflation."
ABP also underlined the positive effects of micro credit on developing societies: "It allows people to start businesses and build up assets independently."
Launched in 1998, Dexia Asset Management says its product was the first commercial investment fund designed to refinance microfinance institutions specialising in financial services to small companies in emerging markets.