NETHERLANDS - PGGM, asset manager to the €88bn healthcare and social welfare scheme Pensioenfonds Zorg en Welzijn (PZW), has entered the microfinance market by allocating no less than €200m to this asset class for the next two to three years.
A first investment of €27m has been made in Dexia's Microcredit fund, managed by Swiss fund manager BlueOrchard Finance, PGGM announced.
"Through this investment program we'll provide families in developing countries with the prospective of a decent income," said Alex van der Velden, head of sustainable investment strategies at PGGM.
"This kind of investment fits exactly within our goal to invest pension assets against market returns," he added.
PGGM said it will invest in Africa, Asia, Latin America and Eastern Europe through the Dexia Microcredit Fund.
According to the scheme, BlueOrchard Finance invests in microfinance institutions (MFIs), which in turn issue microcredit to families and small companies who do not have access to regular credit providers.
PGGM's spokesman David UitdenBogaard declined to be specific about the expected returns but said: "Since the investments will be in families and starting companies as well as MFIs, we expect returns similar to fixed interest combined with private equity."
ABP, the €216bn civil service pension fund, has so far been the largest investor in microfinance in the Netherlands as it increased its investments in microcredit last February to US$57m (€36.1m).
"Since they are relatively non-correlated with most other asset classes, these investments are particularly fit for a pension fund as a risk diversifier," Paul Snijders, chief investment officer alternative investments at ABP explained at the time.
According to ABP's spokesman Thijs Steger, ABP's investments in microcredit have returned 6% on average so far. ABP began investing in microcredit in 2005 with a US$5m placement.
PGGM was separated as the pension provider and asset manager of the pension fund ‘Pensioenfonds Zorg en Welzijn' (PZW) on 1 January 2008. It has manages the assets of the pension fund on behalf of over two million workers, deferred members and pensioners within PZW.