GERMANY - The €5.9bn German pension fund for church employees in Rhineland and Westphalia has announced it will restructure its investment operations, while pushing for more alternatives and diversity through indirect real estate.
Volker Heinke, chief financial officer of the organisation which manages two church pension funds - the €4.5bn Kirchliche Zusatzversorgungskasse Rheinland- Westfalen (KZVK) and the €1.4bn of the Gemeinsame Versorgungskasse für Pfarrer und Kirchenbeamte (VKPB) - told IPE today it is planning to consolidate its investment portfolio via a single custodian and a Master-KAG.
The portfolio currently consists of direct security investments, which are mostly in fixed income managed in-house alongside smaller volumes in private equity, as well as investing via externally-managed investment funds - which make up the largest part of the portfolio - via ‘Spezialfond' global mandates.
"We currently have our securities with a number of depositories, while our asset managers come from a variety of investment companies, so the reporting comes from a number of sources in a number of formats," said Heinke.
The organisation therefore wants to unify these investments to simplify the reporting, controlling and increase transparency.
To achieve this, the fund wants to consolidate the custody service under one custodian which will also have to provide a social responsible investment system to the fund, while centralising the investment companies by integrating all assets into one legal vehicle administered by a German Investment Company (KAG), to streamline accounting, reporting and risk management.
Heinke stressed the separate asset managers will keep their mandates, as the operational change only affects the administration.
At the same time, the organisation also has a direct real estate portfolio, which is also managed in-house and is mainly made up of residential real estate in Germany, focused on the North Rhine-Westphalia region.
After reducing its direct real estate from 25% to a target allocation of around 15% a number of years ago, the fund is now planning to stick with its current asset allocation, though sees "potential for optimisation".
Heinke said the fund will look at further diversifying its indirect real estate holdings in the near future which are also focused largely on Germany, by investing in assets held in other European countries.
Lastly, the organisation is looking to expand into alternatives, such as real credits, or mortgage and construction loans, to which also consumers outside of the fund can apply.
"In the current interest rate environment, mortgages are a very important asset class for us, also considering our asset liability management," said Heinke.
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