PGGM CILI Team
PGGM Investment Management
The Asset Management department within PGGM is tasked with the investment of the collective pension assets of PGGM’s pension fund clients, with the vast majority being accounted for by PFZW’s assets. Broadly speaking, the investment categories can be divided into public market and private market asset classes which make up about 75% and 25% of the asset mix respectively. Next to the investment teams primarily responsible for managing these asset classes, the Investment Management organisation contains Risk Management, Tax, Legal & Regulatory and Operational functions, plus a Responsible Investments team responsible for the implementation of PGGM’s ESG policies.
PGGM Private Markets
The CILI team is a front-office investment team within the Private Markets segment. The Private Markets segment focuses on non-listed investments with an equity(-like) return profile. Besides the two mandates managed by the CILI team, there is Private and Listed Real Estate, Private Equity and Infrastructure.
Credit & Insurance Linked Investments
The CILI team is responsible for managing two mandates: the Insurance Linked Investments (“ILI”) and the CRS mandate. PGGM and PFZW have developed a world-leading position in both asset classes over the last fifteen years, and both asset classes bring interesting risk-return characteristics and diversification to the overall portfolio of PFZW.
Through the ILI mandate, PFZW shares natural catastrophe risk with (re-)insurance companies. These risks relate to high-impact events that do not occur regularly, but when they do occur can lead to a large number of insurance claims. (Re-)insurers need to capitalise themselves against the concentration risk of these high-impact events and ILI is a way to provide alternative capital for this purpose. By its nature, the risk is typically remote in the capital structure, so geared towards tail risk. The rationale for investing in ILI is first and foremost because it provides attractive long-term risk-adjusted returns. In addition, while (re-)insurers transfer these risks to mitigate concentration risk that large high-impact events bring, ILI provides excellent diversification for a traditional pension fund’s investment portfolio. After all, where a stock market crash could lead to a poor investment performance for most asset classes, it does not trigger a hurricane or earthquake to occur, and therefore, has no direct impact on the performance of ILI. Please refer to this paper for more information on how and why we invest in this particular asset class.
The CRS mandate is described in more detail in other sections of this website. Although the ILI and CRS mandates have significant differences, most notably on the nature of the underlying risk (natural catastrophe versus credit risk) and the position in the capital structure (tail risk versus first or second loss), the mandates share several characteristics as well. In both strategies, PGGM provides capital to leading financial institutions, to either (re-)insurance companies or banks. Further, in both strategies PGGM has a strong focus on risk sharing and alignment, not merely on risk transfer. PGGM has a philosophy of risk sharing in the underwriting capabilities of its partners and establishing long-term relationships in both mandates. Finally, both asset classes are characterised by a fair amount of structural considerations to be taken into account.
By combining both mandates in one team, we benefit from sharing of insights and cross-fertilisation, amongst others on topics as structuring, modelling, regulatory considerations and databases. Further, some team members are in varying degrees involved in both mandates, enabling more efficient capacity planning and learning opportunities.
Dedicated CRS professionals
Within the CILI team, the majority of the professionals dedicate a significant proportion of their time to the CRS mandate. Carrying out our mandate requires a diverse set of skills and knowledge across various domains such as credit risk, modelling, law and regulation, macroeconomics, research and ESG. This is reflected in diverse backgrounds of the team, ranging from Asset Management, Banking, Risk Modelling, Credit Structuring and (re-)insurance to Law, Engineering, Physics and Quantitative Analytics. With an average work experience of 10 years, the team has a great mix of junior professionals and experienced seniors.
Being a diverse team with over 7 different nationalities and speaking more than 9 distinct languages, the team has a sound understanding of different geopolitical trends, cultures and customs. A clear asset as the CRS mandate covers investments referencing loans all across the globe, requiring knowledge about local risks, business structures, regulation and future developments.
Other PGGM teams
In managing both the CRS and ILI mandates the CILI team is supported by various functions within PGGM:
- The Risk Analysis (“RA”) team, which is situated under the Chief Risk Officer (“CRO”) of PGGM Asset Management, provides a second line of defence function on the due diligence and analysis by the front office CRS deal team. The IRA team reviews and provides an independent report for each investment proposal of the CILI team.
- The Operational Due Diligence (“ODD”) team, which is also part of the Risk department, analyses all material operational aspects of transactions, such as the processes and IT tooling for the selection and replenishment mechanism and identifying, claiming and verifying credit events, as well as the staffing of the relevant functions. This includes the role of the verification agent. The ODD focus is complementary to the review of the IRA team.
- Both the IRA and the ODD team have the ability to escalate a proposal to a higher approval forum, in which the CRO has a veto right.
- The Responsible Investments (“RI”) team provides an advisory role on Environmental, Social and Governance (“ESG”) matters for the team. Each potential CRS transaction and partner is judged on its ESG credentials and must meet minimum standards for a transaction to take place. The assessment of ESG factors is done by the front office CRS deal team, with the RA team again functioning as a second line of assessment. Click here for more detail on the Responsible Investment policy in Credit Risk Sharing.
- Finally, the deal team is supported in each transaction by several other departments within PGGM, such as the Tax & Legal department, Compliance, and various back office functions.
Interested in joining? Please find vacancies here.
For questions please, contact Mascha Canio.