Bayer Pensionskasse, the pension fund of the German pharmaceutical and agriculture company, considers an absolute priority investments in fixed income with high credit rating, it said in its 2022 financial statement.
The pension fund’s portfolio is tilted towards securities with very high credit quality, including bonds from the public sector (government and federal states), or issuers guaranteed by these institutions, covered bonds or investments with a special protection, the statement added.
The scheme has adjusted its strategic asset allocation after conducting an asset/liability modelling study last autumn, looking to build up its allocation to fixed income, an asset class that has become much more appealing with increasing interest rates, at the expense of risk assets or liquidity, it added.
Bayer invests 34.5% of its total assets – worth €9.45bn in 2022 – in promissory notes, 43.5% in investment funds, 2.9% in private equity, 9.1% in real estate, 0.6% in real estate loans and other credit products, and 9.4% in other investments, the statement added.
This year Bayer Pensionskasse will continue to primarily focus on downside risk management, and, as a secondary focus, on optimising returns, taking into account its risk-bearing capacity.
It invests in equities and bonds using a master KVG structure, through European standard equity mandates and associated (overlay) mandates, passive equity mandates, euro-denominated fixed income securities with a good credit rating (investment grade) and emerging market government bonds, it said.
Masterfonds recorded €517.1m write downs last year, and bonds in Spezialfonds, with assets worth currently €651m (market value), recording €99m write downs.
Equity investments are generally made strictly looking at risk and the scheme’s budget. New commitments in real estate are made exclusively on the basis of a strictly defined requirement and on project-specific target returns, adjusted for risks and cost, the statement explained.
In private equity, Bayer Pensionskasse plans new commitments on a scale roughly comparable to that of previous years, depending on market volatility. It conducts due diligence before investing in private equity through a SICAV investment company set up in Luxemburg specifically for this purpose, it said.
The Pensionskasse held around 61% of the SICAV last year, receiving a dividend payout of €40m at the end of the financial year, which prompted a capital call of €25.3m. In the course of 2022, as part of its strategy, the SICAV started to subscribe new commitments to target funds totalling around €142m.
The pension fund also plans further investments in alternative asset classes in the medium term to reach its strategic allocation target.
The financial statement also revealed that 50.5% of real estate assets worth €867.7m are invested in funds – 36.2% is directly held in a portfolio, 5.2% is invested in directly-held real estate properties used by Bayer, and 8% in further funds investing in Austria, Europe, and in the healthcare sector.
Year-on-year, the number of members fell by 1,896 from 93,357 in 2021 to 91,461 in 2022. Contributions decreased to €126.7m last year, from €138m in 2021, and pension payouts increased by around €11.3m to €364.4m last year, from €353.1m in 2021, according to the statement. Net return on investments last year stood at -4.8%.