BVV, the pensions provider for the German financial sector, has “significantly strengthened” allocations to private debt to replace traditional bonds with a focus to finance infrastructure (mostly renewable energy), and real estate projects, its financial statement for 2022 stated.
The pension fund has already reached its target allocation for illiquid assets, which has been set at a “high level”, meaning that it will conduct further allocations in the future only “selectively”, it added. However, the financial statement did not disclose any specific allocation numbers.
BVV has continued to expand its alternative investment portfolio in infrastructure, private equity, private debt and real estate as planned, while significant capital flowed back despite further commitments and investment activities in private equity investment programmes, it added.
The average return on its investments was 5.6% last year, while the net re-run stood at 6%, well above expectations and its target for the financial year, according to BVV.
The pension fund returned €1.95bn on invested assets during the year under review and including gains from the disposal of investments amounting to €160m. Assets under management rose from €31.4bn in 2020 to €33.01bn in 2021.
BVV has conducted a re-allocation of its assets in recent years to build a broadly diversified portfolio with more volatile and illiquid asset classes that ultimately had a positive contribution on its results, particularly with regard to investments in private markets, it said, adding that against the background of a robust and diversified portfolio it still expects reasonable investment results in the longer term.
For this year, however, BVV expects investment returns, net returns and average returns to be lower than the previous year, it added.
Last year investments in fixed income recorded negatively but made a “significant contribution” to its positive investment returns, therefore continuing to represent an important component in investment portfolio, BVV said.
The number of member companies in the pension fund fell from 800 in 2020 to 784 in 2021, while the number of individual members entitled to pensions rose from 355,249 in 2020 to 356,273 in 2021, and the number of retirees from to 128,856 last year from 125,363 the previous year.
BVV paid a total of €856.4m last year in benefits, up from €891.3m in 2020, including benefits paid through the BVV Versorgungskasse (€138.7m) and €42.4m paid through the BVV Pensionsfonds. The contributions increased year-on-year by €22.3m net to €731.4 in 2021.