Germany's WPV restructures portfolio to focus on real assets
The WPV, the €2.3bn pension fund for German auditors and chartered accountants, is “more or less looking at everything” focusing on real assets in its search for risk-adjusted returns, according to chief executive Hans Wilhelm Korfmacher.
Korfmacher told IPE that high annual contributions allowed the pension fund to consider new investments, but, due an already high allocation to real estate, the pension fund has had to look at alternatives.
As such, the scheme has moved to strengthen its in-house staff in the area.
In October, Heiko Seeger joined the WPV from regional insurer Provinzial Rheinland as managing director and head of asset management, while Korfmacher also recently took on his role as chief executive.
The WPV recently increased its real estate exposure considerably, making its first foray into housing, participating in two Patrizia-run Southern German residential portfolios.
The pension fund was also one of the buyers of a part of Tower 185.
“We already have a 20% real estate allocation, which cannot be expanded very much anymore,” Korfmacher said.
Korfmacher added that exposure to residential investment was now “quite substantial”, comprising approximately 16% of the real estate portfolio.
He said the WPV also aimed to bring down its bond allocation to just over 50% – “already quite innovative”, particularly compared with insurance companies and most other German pension funds.
He added that asset-allocation changes had been made within a relatively short period of time, as the WPV, “being a relatively small and fast-growing pension fund, has high inflows compared with the actual assets under management”.
Korfmacher said it was of particular importance at the moment for the WPV to have the necessary in-house staff and expertise to “make the right investment decisions”.
“Investing in alternative assets is not an area in which you should try to save money on in-house and/or external advise,” he said.
“These investments need much more time for choosing the asset, or the hopefully right manager, and then you need to monitor the investment permanently.”
He said the pension fund had increased staff in investment management and risk management significantly in recent years.
In addition to a new head of asset management, among other hires, the WPV brought in Dajana Brodmann, former deputy head of alternative investments at the €53bn German BVK.
The WPV’s portfolio is undergoing restructuring into a single German Spezialfonds, as well as two Luxembourg vehicles for real estate and alternative investments.
These funds are constructed according to the new KAGB rules.
The WPV will include any direct real estate investments it might make in future, as announced late last year, into the Luxembourg vehicles, Korfmacher said.
He said categories such as core, core-plus or value-add were used “mostly for marketing”, and that it was more important to understand the opportunities or risks of a given real estate investment.
He also said he mostly preferred “investing opportunistically in core assets”.
Respecting indirect investments in Spezialfonds, he welcomed the SFIX index recently unveiled by IPD and BVI.
He said the SFIX index was “on its way to becoming a benchmark for peer group comparison of managers” and “perhaps an additional benchmark for performance-related fees”.
He added that it might be a future exclusion criterion if an asset management company failed to provide its data to the index.
“It would be a question of comply or explain,” he said.