A major challenge for Dutch pension fund APG in Asia is that investee companies in the region are not always familiar with some of its internal reporting and valuation requirements or industry valuation benchmarks.
“Investing on behalf of a pension fund, it’s very important for us to get reliable and timely valuation of our investments. This is an important parameter in determining whether the liabilities of defined benefit pension schemes can be met,” says Genio van der Schaft, CFO and COO of APG Asset Management Asia, an arm of the €340 billion ($464 billion) pension manager.
Hence, in situations where valuation protocols are not readily available, APG AM works with a target company’s management, fund managers and financial institutions to implement a valuation framework.
"We work very closely with our portfolio management teams in Hong Kong,” explains van der Schaft. “Within APG’s risk, reporting and valuation framework we aim to add value by enabling investments. This involves us defining a clear risk framework so everybody involved in the process and the transactions understands our minimum requirements.”
In many cases APG teams up directly with the operators and general partners in charge of managing private assets. By laying out its requirements for the management and fund managers of private investment vehicles and projects, van der Schaft’s team is helping to institutionalise these firms and raise them to international standards.
Ultimately, these investee companies should benefit from adopting such an internal control framework, on the grounds that they will be better prepared to raise subsequent financing from other sponsors with similar requirements.
“We look beyond the commercial terms of the investment. As a sizeable and long-term investor, we want to have strong governance rights in every phase of the investment,” says van der Schaft, who has done a lot of due diligence on investments in the 20 years before he moved to Hong Kong from Amsterdam in 2010.
“We also consider alignment of interests with both the general partner, as well as co-investors, of utmost importance,” he adds.
Some 10% of APG AM’s global AUM is invested in Asia, comprising private equity real estate, infrastructure co-investment and emerging market equities. Hong Kong is the firm’s only office in the region, housing 28 staff.
Globally APG’s asset management arm manages 75% of the group’s pension pool internally, with the remaining 25% outsourced to external fund houses. APG AM employs 20 fund administrators to service its unlisted investments globally, of which three service its Asia-based investments. For listed equities, the firm uses three global custodians.