Fund collaboration first step to joint investment

European pension fund service providers PGGM and PKA have agreed on an innovative knowledge exchange that eventually aims to look for joint investment opportunities as well as improving the way the funds conduct risk management and the benchmarking of investments, costs and socially responsible investing.

Martin van Rijn, chief executive officer for Dutch pension fund service provider, PGGM, says that while the knowledge exchange is in its infancy, both organisations aim to be catalysts for greater research and improved investment approaches.

In a statement to Top1000funds.com van Rijn lists the areas of cooperation as:

• Deepening of research and fact finding on risk management
• Creating joint venture investment opportunities and benchmark selection
• Sharing and benchmarking of socially responsible investment (SRI) methodology
• Benchmarking of costs and cost transparency
• Developing of common projects on membership involvement.

The knowledge exchange is the first of its kind for PGGM, but van Rijn says that cooperation with other potential partners is a realistic possibility.

“PGGM is always interested in cooperating with compatible partners,” he says.

“When a pension fund service provider has the same goals, profile, core values and operates in a similar market, we would be interested to explore the possibilities.”

Synergies say it all

Van Rijn explains that the two organisations have a number of synergies, which include a strong consideration of social, environmental and corporate governance (ESG) factors in their investments.

PKA and PGGM are signatories to the UN-backed Principles for Responsible Investment (PRI) and screen investments based on pre-established ethical principles.

When it comes to their investments, the funds also both invest in DONG Energy, a Danish company with interests in offshore oil extraction and renewable energy.

Both organisations invest on behalf of several pension funds with participants in the health and social sector in their respective countries.

PGGM manages, on behalf of six pension funds, around €115 billion ($151.6 billion) in pension assets for 2.5 million people. The Dutch pension fund service provider offers pension management, integrated asset management, management support and policy advice to its institutional customers.

PKA is a joint administration company for five Danish pension funds and has $27.7 billion in assets under management on behalf of 250,000 members of the health care and social sectors. Along with managing investments for the funds, PKA handles administration.

PGGM oversees – like PKA – a hybrid defined contribution/defined benefit scheme.

PKA manages investments according to the particular strategies decided by each of the five pension funds – even though they are similar and their asset allocations alike.

Responsible action

As part of integrating socially responsible investment principles into its investment strategies, PKA uses British ESG research EIRIS as part of all investments and Hermes EOS for the ongoing engagement activities.

Also conducting engagements itself, PGGM has in recent years expanded its SRI team, and since 2001 has used UK asset manager F&C Investments to complement its in-house activities. These include what it describes as “structural, systematic and visible dialogue with the financial markets and the individual companies” the organisation invests in.

As part of its responsible investment program it has also sought collaboration with other investors, including a recent working group on agriculture investment.

In conjunction with this collaborative work, PGGM has published a position paper outlining its approach to investing in agriculture, including an explanation of its investments in agricultural commodities.