APG is looking for co-investment partnerships in real estate and private equity, while also continuing to increase its direct infrastructure assets.
APG Asset Management is looking to create strategic partnerships with large asset owners around the world in real estate and private equity.
The asset manager for the €498 billion (A$818 billion) Dutch public pension fund ABP already has a number of strategic partnerships in infrastructure, including with New Zealand Super, Government Pension Investment Fund (GPIF) in Japan and National Pension System (NPS) in South Korea.
APG is happy with the number of partnerships it has in infrastructure and expects to announce one more partnership in that asset class in the near future, Patrick Kanters, Chief Investment Officer Private Investments and Member of the Management Board at APG Asset Management, says in an interview with [i3] Insights.
“At the moment, we are well served with the various partners that we’ve teamed up with, so it’s not that we are now in the further build-up of infrastructure. At the same time, for real estate and private equity, it is still rather new. There we are indeed discussing with potential partners to see if there’s benefits for both sides.”
However, ABP will continue to increase its holdings of directly held infrastructure assets after the fund recently increased the asset allocation to this asset class.
“The allocation to infrastructure was increased recently by ABP. So the target allocation is now 7 per cent, up from 4. Today we are at around 5 to 5.5 per cent, but given the size of ABP, these are large numbers, so there is a lot of firepower,” Kanters says.
APG started investing in infrastructure in 2004 and manages a large part of the assets in-house, including on-the-ground teams based in Asia, the Netherlands and United States. According to APG’s annual report, the fund has €27 billion in combined active infrastructure strategies, although this is across its client base, not just ABP.
At the moment, we are well served with the various partners that we've teamed up with, so it's not that we are now in the further buildup of infrastructure. At the same time, for real estate and private equity, it is still rather new. There, we are indeed discussing with potential partners to see if there's benefits for both sides – Patrick Kanters
“We continue to scale up the platform because it’s highly intensive on the management side, more so because the operations have been insourced and we are primarily focusing on direct investments,” Kanters says.
“The key focus in these investments is very much on renewable energy, digital infrastructure, electricity distribution networks and transportation. Our focus is very much on what ABP wants to contribute to the energy transition worldwide. Those are very lumpy, large deals. That’s typically the kind of transactions that we look into.”
APG’s existing partnerships are all structured around a fund vehicle, but each partner has their own fund.
“It’s a bespoke kind of way that we structure it, with the fund being bespoke to each particular asset owner,” Genio van der Schaft, Chief Operating Officer and Global Lead for Asset Owner Partnering, tells [i3] Insights.
Technically, APG acts as the GP (general partner) of the funds and the fund manager.”
Although APG has been investing in infrastructure since 2004, its first co-investment partnership is of a more recent vintage. APG formed its first long-term partnership with South Korea’s NPS in 2020 after the two funds bought a majority stake in €3 billion Portuguese toll road operator Brisa Group.
In April 2022, APG established its first infrastructure partnership fund, the APG Infrastructure Asset Owner I GP, which was the first GP entity established as part of the Asset Owner Partnering program.
The second fund was established in June 2023, shortly after APG announced a partnership deal with New Zealand Super. In April this year, APG announced a partnership with GPIF to invest in infrastructure in developed overseas markets.
Impact
Although the energy transition is an important theme, it is just one in a broader approach to impact investing. ABP recently announced it was allocating €30 billion to impact investments globally by 2030.
About €10 billion of this will be invested in its domestic market of the Netherlands.
“ABP has a very strong ambition to invest more in the Netherlands and they want to invest more in impact. With these investments, they want to truly have an impact on the participants of the funds,” Kanters says.
“The €10 billion of investments that ABP has set aside for the Netherlands will consist of infrastructure and real estate. In real estate, we will invest in affordable housing, and in infrastructure, we will look at the energy transition. It will also be complemented with smaller-size private equity impact investments.”
APG has committed to invest €400 million in affordable homes in the Netherlands and established the Dutch Social Impact Real Estate Partnership together with real estate investor Bouwinvest, a wholly owned subsidiary of bpfBOUW, one of APG’s clients.
The asset manager also increased the investment in the Dutch housing investor
Vesteda, which enabled the purchase of the Zuiderhof development project in Rotterdam. These homes will mainly be let to people in social professions, such as teachers, police officers and healthcare workers.
On the energy transition side, APG recently formed a consortium with SSE Renewables to bid for an investment in the development of a large-scale, 4GW wind farm in the North Sea, near IJmuiden.
For each individual asset, we were able to actually see whether these assets are classified as so-called stranded assets. And if they're stranded, that doesn't necessarily mean that there's no future for these assets, but it means that they're not compliant with the Paris Climate Accords. Therefore, you need to take into account that more CapEx will be needed to green these assets – Patrick Kanters
In May, APG agreed to invest €250 million in Driveco, a French company that provides infrastructure for charging electric vehicles. This investment will help Driveco achieve its goal of operating more than 60,000 charging points in France and neighbouring countries by 2030.
And it isn’t just private assets that APG invests in when it comes to the energy transition. In 2023, the asset manager invested €50 million in a blue bond in Ørsted, a global player in offshore wind energy.
This blue bond also has a biodiversity angle to it as most of the proceeds will go to projects that foster the preservation and restoration of marine biodiversity.
APG also keeps a close eye on the environmental, social and governance status of existing assets in the portfolio in order to identify any potential stranded assets.
“We now have very advanced measurements of all the underlying assets and to what extent they are compliant with the Paris climate accord pathways,” Kanters says.
“So for each individual asset, we were able to actually see whether these assets are classified as so-called stranded assets. And if they’re stranded, that doesn’t necessarily mean that there’s no future for these assets, but it means that they’re not compliant with the Paris climate accord.
“Therefore, you need to take into account that more capex will be needed to green these assets or that you might have to pay for carbon offsets to make these work.”
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[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.