Pensioenfonds KPN has invested €300m in a private loans mandate managed by M&G, with at least 45% directed towards impact investments aligned with the fund’s climate, technology and consumption themes.
These are climate and biodiversity, technology, and responsible production and consumption.
The investment is part of the €11bn pension fund’s objective, formulated in 2023, to invest €700 million in impact investments by 2026.
Previously, the fund had announced investments in infrastructure loans and real estate. Later this year, the fund intends to announce an investment in real estate debt to complete its impact investing pledge.
The KPN fund, together with its fiduciary manager Aegon Asset Management, ended up looking for a suitable manager for private impact loans for about two years, according to Menno Altena, an investment strategist at Aegon AM.
“Most managers we evaluated did not yet meet the strict impact objectives of the KPN pension fund,” he said.
“Some asset managers seemed to tick most boxes at first glance, but when we asked further questions, they could not prove their investments were making concrete impact. For example, they invested in loans where a slightly higher interest rate is paid if companies do not meet certain ESG targets (so-called sustainability-linked bonds),” Altena noted.
“But that is not enough for us. We want the loans to generate immediate impact, and we want clear key performance indicators that are in line with the three impact themes of KPN Pension Fund,” he continued.
Aegon AM launches multi-manager fund
M&G’s private impact loans will also be one of three building blocks in a new multi-manager fund to be established by Aegon Asset Management for its fiduciary clients.
Schroders will be responsible for managing infrastructure loans. A real estate debt manager has yet to be appointed. Two Dutch company pension funds will be the first two clients of this new fund, according to investment strategist Menno Altena. Altena declined to reveal the names of the funds.
M&G’s mandate does meet the criteria of the KPN scheme, as it invests at least 45% in impact loans. On top of this, 90% of the investments must be sustainable. This means investments should not contribute negatively to other sustainability goals.
As an example of an impact investment, Altena mentioned an investment in Bollegraaf Groep, a Dutch producer of sorting and recycling systems. The loan to Bollegraaf Group is one of 12 investments that M&G has already made on behalf of pension fund KPN.
US out of favour
In addition to M&G’s home market, the UK, these investments are mainly in the Netherlands and Germany, where M&G has now set up its own investment teams.
A maximum of 45% of the portfolio can be invested outside Europe, of which 35% in the US. However, the final allocation is likely to be below this. Of the 12 loans that have already been made, two are in the US and 10 in Europe.
“We see that pension funds prefer to make an impact close to home. We also see that pension funds no longer want to expand their investments in private loans in the US,” said Sander van der Wel, sales director for the Netherlands at M&G.
European asset managers tend to win impact requests for proposals (RFPs) too, Altena added. “American asset managers often do not pass pension funds’ strict requirements for impact mandates.”
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