BVV, the pensions provider for the German financial sector, will see the core element of its investment strategy focus this year on a high-degree of diversification with targeted use of alternative sources of returns, the “right option” in the current market environment, it said in the financial statement for 2020.
BVV will focus on strengthening the quality and profitability of its direct investments, it said, adding that however the reallocation taken place in recent years towards a broadly diversified portfolio with more volatile and illiquid asset classes inevitably leads to greater uncertainty.
The pensions provider achieved net returns on investments of 3.1% last year despite 2020 challenges. Returns fell year-on year to €863.1m in 2020 from €987.2m in 2019.
BVV returned €1.06bn, while total assets under management grew from €30.6bn in 2019 to €31.4bn last year, according to the statement.
Immediately after the end of the market downturn last year, BVV increased the risk capital for equity investments and put in place a broad purchase programme for its direct investments portfolio.
BVV was thus “able to benefit substantially from the recovery on the capital markets,” Rainer Jakubowski, member of BVV’s board , said at its annual general meeting on 25 June.
The provider further expanded allocations in illiquid asset classes last year according to plan. It will gradually continue to bolster its illiquid assets strategy, both for equity and debt, in 2021, it said.
For infrastructure and real estate, BVV reinforced its equity programme particularly in Asia to benefit from favourable long-term growth opportunities, it added.
It built up debt capital investments especially for corporate, real estate and infrastructure financing with external partners.
The number of companies counted as members BVV members remained flat year-on-year in 2020 at 800. The number of people entitled to pension benefits rose to 355,249, while the number of retirees grew to 125,364.
Income from contributions decreased from €733m in 2019 to €700m last year, while the amount paid for benefits increased from €818m in 2019 to €857m last year.
BVV is aiming to set business operations on climate neutrality by 2025, and apply a climate neutral strategy on all investments by 2050.
SOKA-BAU grows assets
Assets at SOKA-BAU, the umbrella organization of the two funds for the employees in the construction industry ULAK and ZVK, grew by €900m to a total of €10.4bn in 2020.
The Paid Holiday and Wage Equalisation Fund – Urlaubs- und Lohnausgleichskasse der Bauwirtschaft or ULAK – accounted for €2.8bn of the total assets, while the Occupational Pension Fund – Zusatzversorgungskasse des Baugewerbes AG or ZVK – for the largest part of €7.6bn.
SOKA-BAU’s funds also benefitted from revenues rising around 5% in the construction industry, although slightly less than the prior year. The number of employees in the industry rose by around 2% last year to just under 795,000.
ULAK and ZVK cared for a total of more than 1.4 million domestic and foreign companies, employees, trainees and pensioners.
“SOKA-BAU is sending an important signal for [its] customers” at a time of frequent financial troubles for pension funds that are at times no longer able to fulfil pension promises, said Gerhard Mudrack, member of the management board.