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APK Pensionskasse is a multi-employer pension fund with around 65,000 members. It manages 20 plans, the plan sponsors typically being industrial corporations.
APK runs e1.8bn of plan assets, with about 1% of the portfolio invested in private equity.
The pension fund has been investing in the asset class since 2001.
“We consider private equity to be a worthwhile investment in economic terms, because it gives capital to young enterprises and therefore helps to finance innovation,” says Guenther Schiendl, APK’s head of investments. “We also expect returns which are slightly higher than average returns for listed equities.”
APK invests indirectly via private equity holding companies, with funds selected by the respective managements. The pension fund spreads risk by the selection of diversified portfolios.
However, APK does not work with gatekeepers.
Geographically, its portfolio includes both global and central European private equity. There is also a broad range of industry sectors.
In terms of development stage, the fund’s private equity strategy covers a combination of buy-outs, secondaries and venture capital.
However, APK’s experience with private equity has not been a complete success.
“Our private equity portfolio has developed more slowly than we expected,” says Schiendl. “This is partly because the asset class - though it is marketed as moving independently of equity markets - still has a positive correlation with them. So the recent market crises have inhibited us from increasing our allocation.”
However, performance potential is not the only consideration.
“In addition, the administration of private equity investments takes us more time than we expected,” says Schiendl. “Furthermore, the structuring of private equity investments is quite complex, and there are some providers with less structuring experience than they should have.”
For these reasons, the percentage of private equity held in the portfolio is currently static, although Schiendl says it might increase in the future.
“It is difficult to compare returns from our private equity portfolio with those from listed equities, because they are measured in a different way,” says Schiendl. “Since 2000, returns have been taking longer to achieve, as the exit possibilities and the exit prices via stock exchanges are now lower than before. So it takes longer to work out a profitable exit strategy, and this means that exit prices tend to be lower still.”
However, even allowing for the extended time frame over which they are measured, Schiendl says that so far the returns achieved by APK from private equity have not been superior to those from listed equities.
“They are certainly lower than the typical figures claimed by the private equity industry,” he says. “And the contribution to our portfolio performance from the private equity segment has been marginal.”
Looking to the future, however, Schiendl says that APK will change focus slightly to concentrate more on central and eastern European private equity.
“We will be looking for distressed real estate and buy-outs in Germany and western central Europe, in order to take advantage of the current situation and expectations,” he says. “And we will also be demanding more structuring expertise from providers.”

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