GARP Retail Funding Gap 24 April 2013 Gert-Jan Sikking Managing Director Innovation 1
Who we are: PGGM in a few words Institutional clients: 5 Pension participants: 2,6 mln Assets Under Management: 130 bln Cooperative, members: >570.00 Employees: 1165 PGGM is a pension delivery organisation. PGGM offers institutional services: pension administration, integrated asset management, pension support services and policy advice. As a cooperative PGGM supports members realizing a valuable future. PGGM develeops alone or with strategic partners innovative services by combining pension, healthcare, housing and labour. 2
We serve 5 institutional clients Integrated services: 16.000 members 2.412.000 members 7.000 members Acquisition / Account Management / Management support Pension administration Asset Managmement Policy Advice Asset Management:
PGGM investment allocation process From future pension liabilities to responsible investment portfolio Liabilities Performance Analysis And Reporting R i s k M a n a g e m e n t Three steps of added value: Asset Liability analysis Benchmark construction Portfolio implementation
Asset Liability Management Balance between price, quality, security and solidarity PREFERENCES CONTRIBUTION INDEXATION LIABILITY MANAGEMENT PENSION SCHEME ASSET MIX SOCIAL SETTING
Benchmark construction
Portfolio construction process: qualitative judgment of arguments and constraints Higher allocation 1. Attractive risk-return profile 2. Diversification Lower allocation 1. Investable capacity 2. Concentration risk 3. Uncertainty Constraints 1. Liquidity and manageable 2. Complexity 3. Agility 4. Regulatory constraints Many alternative investments are interesting from a quantitative perspective, but constraints play an important role
Strategic choices within investment categories CTA Global Short Selling Convertible Arbitrage Distressed Securities Equity Market Neutral Global Macro Long/Short Equity Merger Arbitrage Emerging Markets Event Driven Fixed Income Arbitrage Funds of Funds Relative Value 0,3% 1,8% 3,9% 14,1% 3,6% 8,7% 8,7% 2,2% 17,6% 8,4% 8,7% 22,0% Weights Hedge Fund Index 12,5% 20,0% 12,5% 5,0% 12,5% 12,5% 12,5% 12,5% Weights Hedge Funds PGGM
Taking into account current valuations.
Building blocks investment portfolio Zakelijke waarden Grondstoffen Rente en Inflatie 33,6% 9,5% 12,0% 8,5% 1,4% 7,0% 28,0% Aandelen Hoogrentende obligaties Vastgoed Aanvullende Bronnen Overige zakelijke waarden Grondstoffen Rente en Inflatie Aandelen beursgenoteerd High Yield Beursgenoteerd Vastgoed Infrastructuur Grondstoffen RIA Private Equity Structured Credit Privaat Vastgoed Insurance Swaptions EMD Local Currency Hedgefunds Bedrijfsobligaties (inv. grade) 10
Building Blocks Investment Portfolio, example Strategische benchmark 2013 Beleggingscategorie Allocatie Benchmark**** Verdeling Zakelijke waarden** 65.0% Aandelen 33.6% Aandelen klassiek ontwikkelde markten* 11.2% FTSE Developed (ESG-customised and net of tax) Aandelen klassiek opkomende markten* 4.2% FTSE Emerging (ESG-customised and net of tax) Alternatieve aandelenstrategieën 10.2% S&P / PGGM Alternative Equity Indices (ESG-customised and net of tax) Responsible Equity Portfolio 2.5% FTSE Developed ex-asia Pacific ex-israel (ESG-customised and net of tax) Private Equity 5.5% Thomson Venture Economics Vastgoed 12.0% Beursgenoteerd vastgoed 6.0% FTSE EPRA/NAREIT Developed Index ex-australia (customised) Privaat vastgoed 6.0% Verenigde Staten: NFI-ODCE Index, net of fees (na belastingen) 27% Europa: INREV Core index 39% Australië: IPD Australian PPF Index 15% Azië: ANREV Index ex-australië 19% Hoogrentende obligaties 9.5% High Yield ontwikkelde markten 2.0% BoAML High Yield Master II 2% isuuer constrained index 80% BoAML European Currency High Yield 2% issuer constrained ex. Sub-Financials 20% High Yield opkomende markten 1.0% Merrill Lynch BB Emerging Markets Credit Plus, 3% constrained index Emerging Markets Debt Local Currency 4.0% JP Morgan GBI-EM Global Diversified Structured Credit 2.5% Eonia + CDX first and second loss tranches 50% Eonia + Itraxx first and second loss tranches 50% Aanvullende rendements-risicobronnen 8.5% Infrastructuur 3.0% Eurozone inflatie (HICP ex-tobacco) + 6.5% -/- 0,5% (J-curve) Hedgefunds 4.0% EDHEC Alternative Indexes (PGGM strategic weights) Insurance 1.5% Swiss Re BB Cat Bond Performance Index Overige zakelijke waarden 1.4% Real assets 0.6% +8.5% absolute return benchmark -/- 2.5% (J-curve effect) Mezzanine 0.3% Barclays Capital US Corporate High Yield 2% cap + 2% Quantitative Strategies 0.1% Eonia +4%-punt Illiquide leningen en aandelenposities 0.4% 7% (absolute return benchmark) Grondstoffen*** 7.0% Grondstoffen 7.0% S&P GSCI Petroleum Total Return Index (enhanced) 80% S&P GSCI Industrial Metals Total Return Index 10% S&P GSCI Agriculture Total Return Index 5% S&P GSCI Livestock Total Return Index 5% Vastrentende waarden** 28.0% Rente- en inflatiemandaat Samengestelde benchmark: 24.0% Eonia (+28,6%) % van de nominale rentegevoeligheid. (+9%) % van de reële rentegevoeligheid. Swaptions***** 0.0% Portefeuillerendement swaptions Bedrijfsobligaties ontwikkelde markten 3.0% Barclays Capital Euro Aggregate Corporates Index Bedrijfsobligaties opkomende markten 1.0% Merrill Lynch High Grade Emerging Markets Corporates Plus Constrained Index Kas 0.0% Eonia Totaal 100.0% 11 * De exacte verdeling is zodanig dat opkomende markten 5% overwogen worden t.o.v. de FTSE-all world en volwassen markten 5% onderwogen. ** Hedgeratio 70% voor JPY, CHF en USD. Valuta's overige volwassen markten hedgeratio 100%. Valuta's opkomende markten 0% hedgeratio *** 100% hedgeratio alle valuta's **** De customised benchmarks zijn gecorrigeerd voor niet terugvorderbare dividendbelasting en uitsluitingen o.b.v. het beleid verantwoord beleggen. ***** Uitganspunt is dat de swaptions 0,4% van het nominale renterisico afdekken.
Diversification over investment categories 100% Strategische allocatie 80% 60% 40% 20% 0% 2000 2005 2010 2011 Rente, inflatie en allocatie Aanvullende rendements-risicobronnen Vastgoed & Infrastructuur Grondstoffen Hoogrentende obligaties Aandelen
Related to Dutch Retail Funding Gap Current investments in The Netherlands Stocks, Bonds (Government & Financials) Infrastructure (roads, wind energy) Residential real estate (housing) Structured Credit Treasury Fit with investment mandate of client Current initiatives Nederlandse Hypotheek Instelling MKB Housing & Healthcare Fundamental shifts 13 Use pension premiums partly to prepay mortgages
APPENDIX 14
Investment Policy A higher, more stable and responsible return in relation to the ALM Basismix Higher higher net return over the economic cycle More stable lower absolute risk, ex-ante and ex-post smaller drawdown in times of market stress Responsible Where possible make a contribution to a more sustainable investment result