APG asset management, the Netherlands’ largest retirement fund with over $700 billion in assets, has maintained its long-term asset allocation strategy in the face of the Covid-19 pandemic disruption.

Ajay Cherian, managing director global emerging markets equities, fundamental strategies told AsianInvestor that long-term assumptions of returns between different asset classes are driving the firm's allocation process in Asia.

“Events like the pandemic bring forward impacts on shorter term business cycles but do not impact long-term asset allocation,” said Cherian.

Nevertheless, as the world recovers from the pandemic, APG has shifted its equity preferences in Asia.

“APG focuses more and more on countries that are more likely to benefit from the reopening of the markets and broader growth. Hence our preference has shifted from early beneficiaries in North Asia to later beneficiaries in Asean,” he said.

Cherian declined to name which Southeast Asian countries the pension fund favoured for equity, but it was reported earlier this year that it planned to increase its alternative investments in Philippines, Indonesia, Vietnam and India, focusing on infrastructure, renewable energy and natural resources.

CHINA EQUITY

In March, an APG representative told AsianInvestor the fund was looking to raise its allocations to China fixed income assets and would continue to hold its exposure to the extremely volatile stock market.

At the end of 2020, APG had between 7% and 10% of its equity investment portfolio in emerging markets as a whole.

“Within equity, China is part of our emerging market assets,” said Cherian, though he declined to specify the pension fund’s current exposure to the asset classes.

“We do not drive specific exposure on any country within the emerging market pool as this is driven by different factors,” he said. “APG has investments in China through both internal and external strategies as well as a mix of fundamental and quantitative. Our weight in any one country is determined by changes at each of the underlying strategies which is itself driven by different investment process.”

CHINA PRIVATE EQUITY

APG continues to see the long-term growth potential of China in private equity.

Shirley Ma,
APG

Shirley Ma, senior portfolio manager in private equity for Asia Pacific at APG said the pension fund manager has exposure to China through both pan-Asian funds and China focused funds, as well as co-investments alongside its GPs.

APG recently teamed up with Singaporean private equity firm CBC Group in a $1.5 billion venture targeting the Asia Pacific life science real estate segment. The cooperation involved establishing a new vehicle, China Life Science Infrastructure Venture, to manage the investments. The partnership also established an operating platform, CBC Healthcare Infrastructure Platform, to develop and manage new healthcare projects across the region, starting with one million metres2 of facilities in Shanghai.

APG has so far committed $400 million and is taking an 80%  stake in the venture, with CBC, which will have a 20% share, contributing $100 million as they bet that the health and life sciences markets will grow in the region. 

In August, APG also committed $400 million as one of four primary backers of a $4 billion China development fund set up by warehouse giant ESR.

“Despite the recent regulatory headwinds, we continue to believe in the long-term growth prospect of the country [China] driven by its continued urbanisation, growing middle class, as well as increasing demand for high quality business services, enabled by technology and innovations,”  Ma told AsianInvestor.