Europe’s biggest pension investor APG eyes private markets boost

[LONDON] Europe’s biggest pension investor, APG, will increase its allocation to private markets to slightly more than 30 per cent, said Patrick Kanters, chief investment officer for private investments.

He added that it views the current credit market flux as a potential buying opportunity.

APG invests around 600 billion euros (S$894.6 billion) for clients including ABP, the Netherlands’ biggest pension fund.

Around 26 per cent of its assets are currently in private markets, but it would add more after ongoing changes to investment rules in the Netherlands, Kanters said.

The new rules under the Future Pensions Act free Netherlands-based funds from committing to a defined retirement payout for workers, and allow more risk to be taken. This includes reducing the money kept in lower-yielding but liquid government debt.

The Act has been introduced in phases since 2023.

With people living longer and having more jobs over their lifetime, the new system gives younger workers their own pot of money that can potentially grow much more quickly.

APG has around 10 per cent of its total assets in real estate; 5 to 6 per cent in infrastructure, which would rise to 10 per cent over time; 8 per cent in private equity, up from 6 per cent historically; and a sub-1 per cent allocation to natural capital assets such as forestry.

It also has a “rather small” holding of 1.5 per cent in private debt, which could rise to between 2 and 4 per cent over time, depending on the client. Based on its current assets, that could mean its allocation rising closer to 24 billion euros from around nine billion euros.

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Large Dutch funds are beginning to transfer clients’ money to the new pots in 2026, and all Dutch pension funds have until Jan 1, 2028, to complete the transition.

The move comes amid increased volatility after several US retail-focused funds were hit by a surge in redemption requests, which came on the back of concerns around falling returns and the impact of artificial intelligence on software firms.

“Some sub-markets are correcting, and that can indeed provide opportunities going forward,” Kanters said. “For these types of investments, you need to have a very long investment horizon.”

For APG, the focus was on investing where capital was scarce, structures were robust, and underwriting discipline was strong, including in real assets and infrastructure-related financing, he added.

“Ultimately, manager quality, deal structuring and downside protection matter more to us than making thematic sector calls.”

APG’s existing private debt investments cover areas including real asset credit, speciality finance, structured credit, direct lending and non-performing loans. Around 60 per cent is in Europe, against a market average allocation of around 30 per cent.

“The US remains the largest and most established private debt market globally,” Kanters said. “For a long-term investor like us looking to build a larger and diversified portfolio, it is difficult to ignore that depth and breadth.”

Asia also presented attractive returns and high-quality managers, he noted. REUTERS