Irina Manea, Investment Manager PGGM Private Equity:
I joined PGGM Private Equity in 2010, as one of the first employees in the team and moved up the ranks to become Investment Manager in 2015; over the past 5 years I worked on closing several fund investments and co-investments across Europe, US and Emerging Markets.
Key advantages: being part of a growing team, gave me a lot of responsibility from the beginning and the diversity of work (across fund investments, secondary investments and co-investments globally) enabled a steep learning curve.
The PGGM team now manages a private equity portfolio with a value over EUR 9 billion. The team maintains a high standard investment selection process aiming to create the best portfolio fit. Together with top-tier private equity fund managers we invest globally in a large variety of portfolio companies resulting in a well-diversified portfolio across various sectors, regions and styles which is split between funds (70%), secondary investment (13%) and co-investments (17%). Currently the portfolio is allocated to around 15% venture capital, 40% middle market and 45% large buyout. Investments are diversified in the US, Europe and rest-of-world at respectively 45%, 40% and 15%.
The PGGM private equity team currently consists of 17 full-time employees with backgrounds in private equity, consultancy and banking. The team is divided into investment managers, analysts and portfolio support employees. Within the PGGM organisation there are employees across various disciplines involved in order to realize implementation of deals, from areas such as tax, legal, responsible investments and risk management.
PGGM has a long and established track record investing in private equity. PGGM started investing in private equity in 1983. In 2009 PGGM started to establish an in-house team. In 2010 the PGGM private equity team launched its first in-house vintage fund. Since then the private equity portfolio expanded with an average €1.5 billion of committed capital on an annual basis. This year the team started to deploy its sixth vintage fund of €2 billion. In the coming years the internal activities will increase, as we expect to continue expanding our private equity portfolio with a more concentrated and direct approach.
Henk Huizing, Investment Director PGGM Infrastructure:
Our Infrastructure team currently has the equivalent of 23 full-time staff, who are divided between origination, asset management and portfolio management. Other PGGM employees provide risk analysis, legal and tax services. All activities in origination and asset management are conducted in-house, with the assistance of external legal, tax and technical advisors.
The Infrastructure portfolio has increased from EUR 700 million in 2008 to EUR 4,5 billion today. PGGM manages a well diversified portfolio, the main sectors being social/PPP, transport, transmission, distribution and storage of oil, gas and power, and the generation of renewable energy.
Infrastructure is a growing asset class but overall, the current allocation is still modest, at below 3% of total assets. However, the general expectation is that it will show a strong increase in the coming years. In terms of geographical distribution, 75% of portfolio is in Europe, the rest in US, China and India. Eurozone accounts for 35%; total emerging markets exposure is 15%.
Our biggest success has been is to fully change our investment strategy from using externally managed funds, as we did until 2008, to direct investments; internally originated and managed investments, which we have done from 2009 onwards. During this period we achieved both a strong growth in assets and a substantial increase in performance. our focus is on the lower risk/return profile assets, such as PPPs, regulated, monopolistic assets or long term contracted output. After the strategy change to direct investments, the portfolio return has improved signicantly, due to better asset selection and lower costs (fees).
Our biggest challenge in the coming years will be to satisfy the demands of our existing and new infrastructure investors for an increased allocation to infrastructure, in an increasingly competitive market. This entails acquiring the right projects with a good risk/return profile.
Maarten van der Spek, senior Strategist PGGM Private Real Estate:
The real estate team currently has 22 fte’s, divided over Listed Real Estate and Private Real Estate. The Listed Real Estate (LRE) team consists of 7 fte’s and all their activities are conducted in-house. The Private Real Estate (PRE) team only invests indirectly in real estate in structures like non-listed funds, JV’s, separate accounts and club deals. Due diligence is done internally, with the assistance of internal and external legal and tax advisors and property and fund management is outsourced. Other PGGM employees provide a.o. Risk Analysis, Legal and Tax services.
Our Real Estate portfolio has increased from € 9.9 bln in 2008 to € 19.7 bn today. In the last couple of years emphasize is put on a more direct approach, using JV’s and separate accounts, resulting in an increase of control and reduction of costs. This trend is most likely to continue.
The key role for Real Estate in the wider allocation is diversification and providing a higher and more stable than average cash return. In addition, both LRE and PRE are viewed as real estate. Although we acknowledge that in the short term there are some clear differences between the returns of these two types of real estate, we believe that in the long run the dynamics are very similar. The wrapper (unlisted or listed fund) will not impact the return of the underlying real estate portfolio and academic work has even proven this.
Our biggest achievement has been our move to a more direct approach in PRE, moving from investing in funds to investing in JV’s and separate accounts. As a result we increased our control of our investments, are much better able to employ our capital in suitable strategies and decreased our costs. In addition, for monitoring and management information purposes we implemented our internally developed private real estate management information system.
In the next few years our main challenge will be to satisfy the demands of our existing real estate investors in an increasingly competitive market, i.e. to acquire the right projects with a good risk/return profile.