APG’s view on accelerated change
APG’s CIO Peter Branner explains how the pandemic has accelerated key trends already underway around digitisation, central bank policy and action to combat climate change. It all points to fierce competition for private assets.
When APG bought a minority stake in Brussel airport in March 2019 with partners QIC and Swiss Life, the giant Dutch asset manager had no idea that a pandemic was about to ground flights and silence departure lounges. “With hindsight, we could have waited a little longer,” reflected Peter Branner, CIO of the Nertherland’s giant asset manager APG since 2018 when he moved from Sweden to the Netherlands to take the reins of the country’s largest pension provider.
Of course, Branner who was speaking at FIS Digital 2020, believes flying will return and the European hub will soon spark back into life. Just as traffic will return to another of APG’s recently purchased infrastructure assets, a majority stake in Portuguese toll road Brisa, bought with Korean and Swiss investment partners in 2020. “We have to prolong our growth expectations for GDP in Portugal somewhat,” he says, in reference to the fall off in revenue.
“But people will still drive, maybe not the same cars, but they will drive.”
It leads him to reflect on how climate will become a new focal point in the post-COVID world and how other trends, accelerated by the pandemic, might impact APG’s €459bn portfolio manged on behalf of seven pension funds representing a combined 4.6 million people – in a population of 17 million.
“Many of the trends we saw in the Spring before the pandemic broke out are still there and reinforced,” he says. “It has made my job easier to some extent because we’ve seen the trend; we just need to move faster. It is interesting to see how central banks were important before and are now more so. Digitization has speeded up and China seems to be stronger still. If you look at GDP growth, China is the only region with positive growth.”
APG is already a renowned investor in climate opportunities, but with the pace of investment set to step up, Branner lists opportunities in electrification and the Grid, and wind energy in France and Portugal where APG’s focus will be on buying private assets with other investors.
“This is the most important area of our private portfolio,” he says.
That said, he is mindful about strong price moves, accentuated by the pandemic and general hype around infrastructure assets .
“We can see how infrastructure investments are getting more hype. Its where we’ve seen the strongest price moves and these trends are reinforced by the pandemic.”
It’s a fierce competition that is bound to spike once the pipeline opens up and private asset investors can carry out the due diligence and deep dive analysis that is impossible without travel. “We normally travel to see the factories and highways we invest in. We need to come back to this. I am worried about the pipeline.”
Other trends he believes are here to stay include working from home. Indicative in the fact the asset manager has hired 62 people through the pandemic, all working from home and on a new geographical level playing field whether in the asset manager’s offices in the Netherlands, New York or Hong Kong.
“It is encouraging to see how the workforce is coping with this so well.”
Going forward he says only 60 per cent of APG’s work force will come back to the office “in a permanent shift downwards.”
However, although he believes new trends will shape demand for office space, he doesn’t believe this trend will necessarily see city centres empty out.
“City centres are still expensive versus the outskirts; city centres are always attractive – I don’t expect that to change too much.”