GERMANY – Bayerische Versorgungskammer (BVK), Germany’s largest pension fund with €38bn in assets, has awarded State Street Global Advisors a €300m mandate for enhanced equities.

“This mandate marks a further development of our long and successful cooperation with State Street Global Advisors,” said BVK’s director of portfolio management André Heimrich in an SSGA statement. He added that so far, BVK had used SSGA for passive investment strategies. He wasn’t immediately available for direct comment to IPE.

SSGA has so far been known in Germany’s institutional market as a specialist for passive investing. At last count, passive equity mandates made up around one-half of the €13.8bn in assets that SSGA runs in Germany. Passive bond mandates accounted for another quarter of that total.

Some 60% of SSGA’s institutional fund volume in Germany comes from pension funds.

Klaus Esswein, managing director of SSGA in Germany, noted that German institutional investors were becoming more interested in enhanced equity strategies as they “can provide higher returns while controlling risks”.

It is not clear whether SSGA won the mandate via a beauty contest.

Heimrich reports to Daniel Just, chief investment officer for the BVK, which serves a numerous professional trades in Bavaria.

Last month, Just said the BVK would raise allocations to hedge funds to €1bn by the end of 2006 and to 5% of its total assets in the long term.

In the effort, BVK is being advised by German investment consultant Alpha Portfolio Advisors. It hired Alpha in late 2004 for three initial fund-of-fund mandates, one of which went to a US hedge fund provider and two to Swiss ones.

Just noted that in its first year of exposure to hedge funds, the BVK achieved a return of 7% - above its own target of 5% and above the average for the asset class in 2005.

On the other hand, BVV, Germany’s second-largest pension fund, has been disappointed by its investments in hedge funds. The BVV, which serves Germany’s financial sector and has nearly €18bn in assets, also began investing in hedge fund in late 2004.

But the BVV recently told Germany’s Börsen-Zeitung that instead of meeting a return target of between 6% and 9% for 2005, its hedge funds underperformed its bonds.

The newspaper quoted BVV chief executive Rainer Jakubowski as saying that the scheme had given its hedge fund managers until the end of 2006 to show “an above average return”.