In credit risk sharing transactions banks transfer part of the credit risk of a portfolio of loans to investors while continuing to hold a share as well. With these kinds of transactions investors get exposure to unique credit risks that is not otherwise available. The benefit for the banks is freed-up capital that can be re-used again, for example for new loans to clients.
PGGM has been growing a credit risk sharing (CRS) portfolio for PFZW (pension fund for Dutch healthcare workers) since late 2006 up to EUR 5 billion as of March 31st 2020 and established itself as one of the most experienced and largest investors in this field. Alecta, as part of their expansion into private market assets, has decided to build a sizeable portfolio on its own book, and desires to do so on the same basis as PGGM has.
PGGM’s track record with an average annual return of slightly above 10% since inception and outspoken focus on high-quality, sensibly structured transactions have characteristics that stand out in the global market of structured credit investors. For Alecta these characteristics hold a lot of value and formed the basis to start working together.
PGGM finds it important to help the market of risk sharing transactions develop further long term on a sound and solid basis. As such PGGM embraces the fact that a large like-minded pension fund wants to invest in the same way. Another benefit is that while continuing to grow the CRS portfolio it allows for further diversification at a faster pace with even more capital to invest. Alecta will purchase 30% and PGGM 70% of each co-investment transaction.
Tony Persson, Alecta’s head of Fixed Income and Strategy adds: “This is probably the first time where two of the major European pensions funds are co-operating so closely in an effort to allocate capital wisely in combination with generating healthy returns while supporting societies in challenging times by financing part of the banks’ credit risk.”
Mascha Canio, PGGM’s head of Structured Credit investment adds: “We hope that in the pension fund industry more such collaborations will follow to the benefit of pension fund members.’’
Alecta manages occupational pension plans for 2.6 million people and 35,000 businesses across Sweden. We were founded in 1917 and we are owned by our customers. Our most important task is to ensure that our customers occupational pension grows, while working to ensure that more people can benefit from the security which an occupational pension provides. On December 31, 2019 Alecta had SEK 963 billion in assets under management.
PGGM is a cooperative Dutch pension fund service provider. Institutional clients are offered: asset management, pension fund management, policy advice and management support. On December 31, 2019 PGGM had EUR 252 billion in assets under management and was administrating pensions of 4.4 million participants. Around 750,000 workers in the Dutch healthcare are connected to PGGM&CO, our members organization. Either alone or together with strategic partners, PGGM develops future solutions by linking together pension, care, housing and work.