GERMANY - The €520m pension fund for tax consultants in the German province of Northrhine-Westphalia (NRW) is seeking to diversify its investments through specialist equity and Asian real estate mandates.
NRW, a first pillar fund (Versorgungswerk) for self-employed and employed professions, had started to include satellite investments in 2008/2009 with small exposures to private equity, mezzanine, high-yield bonds and hedge funds, each amounting to less than 2% of total assets under management.
"These investments have contributed very positively to our performance last year, which was our highest net result ever with 5.83% - after setting aside buffers," Volker Schmidt-Lafleur, managing director of the fund said.
In the coming years the fund will be looking to widen its real estate exposure, which currently consists of investments in two funds European real estate funds.
"We are considering to diversify into Asian property but so far we have not found adequate investment offers - maybe next year," he explained.
Together with its external consultant RMC, the fund is also looking to combine some of its bond and equity portfolio into a ‘master fund' and eventually add specialist equity mandates; half the bond portfolio will remain managed in-house, mainly consisting of high investment grade government and covered bonds.
"Over time the share of real assets in our portfolio, which is currently at 18-19% [20% including real estate] is set to increase to 25% - depending on the risk budget," said Schmidt-Lafleur.
"We do not have any overlay structures or value protection strategies as they are expensive, might lead to cyclical behaviour and have not performed that well in the past, especially in sideways-moving markets.
"Similar hedging effects can be achieved through a good diversification and we use some futures to hedge parts of our equity portfolio - and our strategy has so far proven us right, " he said.