The German government and the federal states of Hesse and Baden-Württemberg have appointed a consortium led by DWS to invest €3bn-€6bn of public pension reserve assets in European corporate bonds through a Spezialfonds.
Assets will come from the Baden-Württemberg pension reserve fund, the Hesse pension reserve fund, known as the ‘Alterssparbuch Hessen’, and special funds of the federal government and social security institutions.
The Bundesbank will acquire units in the Spezialfonds on behalf of the federal government and the participating states as the investment portfolio is built.
The Alternative Investment Fund (AIF) is structured as an index-based Spezialfonds and will invest exclusively in European corporate bonds that meet the requirements of the Paris-Aligned Benchmark (PAB). DWS Investment will manage the assets using a passive investment strategy.
The consortium also includes DekaBank as custodian and STOXX, which will provide the index solution.
“We are pleased to partner with DWS to provide a tailored index solution for the fixed-income Paris-Aligned Benchmark mandate,” said STOXX general manager Axel Lomholt.
Further diversification
Hesse finance minister Alexander Lorz said the state’s pension reserve fund will allocate around 10% of its €7bn in assets to the new corporate bond fund.
“In doing so, we are consistently pursuing a broadly diversified investment strategy that helps minimise investment risks and optimally achieve our investment goals of security, returns, and liquidity. This strengthens the resilience of our reserves against market volatility,” Lorz said.
Baden-Württemberg finance minister Danyal Bayaz said the newly established Spezialfonds complements the state’s pension reserve investment strategy by adding European corporate bonds, “and further diversifies the risks associated with our pension reserves.”
“We combine long-term pension provisions with sustainable investing,” Bayaz continued.
According to DWS chief commercial officer Dirk Görgen, the federal government and the participating states are adding another building block to the long-term, broadly diversified investment strategy for their pension reserves.
“We are contributing with our expertise to the structuring and management of a bespoke fund,” he added.
