AUSTRIA - Valida, the second largest pension fund in Austria, is planning to make its first foray into 'social infrastructure', investing in companies that manage nursing homes and taking over a loan for an energy service provider.
The €3.8bn fund reported a loss of nearly 3% last year, only slightly better than the market average.
To increase stable returns for the portfolio, Valida has now made its first commitments to social infrastructure projects both in its Pensionskasse as well as in the €997bn severance fund Valida Plus, which returned 1.6% last year.
In 2012, the Pensionskasse will invest €20m in listed companies running nursing homes in Austria.
It is also planning to take over a loan issued by Austrian bank Kommunalkredit to an energy service provider and guaranteed by Austrian energy giant EVN.
In total, Valida has earmarked €15m for public sector loans or loans for companies servicing the public sector.
The severance fund Valida Plus will be investing €15m in housing loans via bonds issued by building loan banks, as well as investments in housing cooperatives.
Earlier this week, Andreas Zakostelsky, chairman of the board at Valida, told journalists: "These investments will offer stable returns with high security, and they are part of our social responsibility to the Austrian economy and society."
Zakostelsky expects the nursing home and public sector loan investments to return 4-5% and the building loans to add 3.25% to Valida Plus's performance.
He pointed out that these investments "were just a start" to help the fund gain experience in those sectors.
Last year, competitor VBV Pensionskassen announced its first investments into nursing homes in Germany, where the market is further developed than in Austria.
Zakostelsky said Austria would "have to build up this sector fast" in the coming years, given the country's demographic situation.
In the rest of the portfolio, the Valida Pensionskasse has considerably downsized its equities exposure from 37.4% at year-end 2010 to 16.6%.
"We will continue to hedge equities very dynamically depending on the market movements," Zakostelsky said.
The Pensionskasse will further increase its real estate allocation of 3.5% (up from 1.4% at year-end 2010), as it sees "interesting momentum" in the property markets in Austria and the rest of Europe.
For its bond exposure, Valida Pensionskasse will continue to focus more on European corporate debt, especially in the blue chip sector, than government bonds from the core euro-zone, as those are stable but offer little return.
However, Zakostelsky said Italy would "definitely become interesting again over the medium term".
In its severance pay fund Valida Plus, the group exited equities completely last year, but added a 1.9% real estate allocation.