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Germany roundup: BVK, RP Crest, Willis Towers Watson

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Germany’s €65.6bn Bayerische Versorgungskammer (BVK), the country’s largest public pension fund, is growing its investments in alternative risk premia, having awarded a mandate to RP Crest for its volatility risk premium fund.

The pension fund will invest in the German investment manager’s sole product, the RP Vega fund, designed to give investors access to the so-called volatility risk premium.

In a statement, RP Crest said the mandate was awarded as part of a tendering out of absolute return mandates.

The size of the mandate has not been disclosed and is confidential, IPE was told.

A minimum investment of €250,000 is required for the fund, with RP Crest stating that the BVK mandate took assets under management in the RP Vega fund to €500m.

As at the end of December 2016, the fund was invested in equities, fixed income and currencies across Europe, North America and Asia.

BVK is expanding its involvement in volatility risk premia as a result of the investment in the Vega fund, according to the statement.

It said the asset class was attractive because it offered returns that uncorrelated with the equity and bond markets in the medium term.

Anselm Wagner, head of equity and alternative investments at BVK, said the pension fund made the investment in RP Crest’s fund in the expectation of achieving a yield of at least 4% per annum.

In other news, the funding position of German corporate pension plans improved in the final quarter of 2016 due to an increase in the average discount rate and scheme assets, according to Willis Towers Watson’s German Pension Finance Watch calculations.

The consultancy said the pension funds of companies listed on Germany’s DAX and MDAX stock exchanges were 58.2% and 43.8% funded, respectively, at the end of the year.

The discount rate (Rechnungszins) was 1.8% at the end of 2016, up by 28 basis points from the end of the third quarter but still significantly lower than the level at the end of 2015 (2.5%).

As of the end of 2016, liabilities in the occupational pension schemes were down by 5% and 5.2% for DAX and MDAX companies, respectively, as a result of the higher discount rate, according to the consultancy.

Pension assets across the companies grew by 0.7% and 0.6%, respectively, to reach €242.8bn and €28.6bn as a result of a year-end equity rally.

Thomas Jasper, head of retirement for Western Europe at Willis Towers Watson, said it would be interesting to see how the European Central Bank reacts to higher inflation rates, as this could affect the discount rate.

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