This award highlights the position PGGM has established as a prominent investor in so called risk sharing transactions, ever since we started with this type of investments in 2006. These transactions are characterized by the fact that bank and investor share the risk on loan portfolios. This results into stable and good returns for the capital provider, pension fund PFZW, and at the same time aligns both parties on the need to keep losses on the loan book as small as possible through appropriate risk management.
Over the last ten years PGGM has invested more than five billion euros in these kind of deals and underlying loan portfolios with a total value of 90 billion euros, some of which have expired already. In 2015 the Structured Credit-team headed by Mascha Canio entered into eight contracts, one of them being a risk sharing deal on Spanish SME loans originated by Spanish Banco Santander.
The PGGM risk sharing transactions differ from the more well known ‘true sale securitisations’, where banks bundle loans and sell these to institutional investors. Here the investor takes on 100 percent of the risk.
Mascha Canio is convinced that this characteristic of sharing risks is better fitting with the PFZW policy of responsible investment.
,,The lessons from the financial crisis are clear: the interests of a pension fund being the provider of capital and the interests of the bank need to be aligned. This will lead to a more stable financial system and more stable returns for the beneficiaries of the pension fund. We therefore hope that the European Union will see the added value of this kind of transactions, and that they will include them in new regulation in which the EU strives for ‘Simple, Transparant and Standardized’ securitisations."
She also points to the fact that banks who share risk on their loan portfolios with PGGM, are benefiting from capital relief and therefore are able to provide credit in other areas. This is part of a developing European capital markets union where companies can get access to credit more easily.