Our Investment process

The way we invest capital follows a logical and structures step-by-step process. The first step is an extensive ALM (Asset Liability Model) assessment. In this assessment we take stock of a pension fund’s preferences in terms of the targeted returns and their risk appetite. We also look at the total capital and pension commitments of the pension fund in question. We then use a range of very different scenarios, from positive to negative, as the basis for our calculations. Thinking in terms of scenarios is an essential element of our approach as financial markets are notoriously unpredictable and volatile and we do not have a crystal ball.    

 

Selecting the best possible investment strategy 

We use the answers to these calculations to answer three questions for the pension fund: whether they can link their pensions to inflation; whether they will have to adjust the pension premiums over the coming years, and if so, by how much; and what is the best possible investment strategy for them. We arrive at answers to these questions using APG’s investment principles and experience, and a shared view on the global economy that we formulate together with the pension fund.   

 

Unique investment portfolio for every pension fund 

Next, we put together the best possible responsible investment portfolio, selecting investments from a wide range of asset classes including equities, bonds, real estate, commodities, private equity and infrastructure. In both developed and emerging markets. The basic idea is that broad diversification over market types, asset classes and geographical regions helps improve the risk/reward ratio. The resulting investment portfolio will be different for every pension fund because requirements, preferences, and investment needs are never the same. 

 

Investment returns 
This investment approach has proven to be very successful. Over the past twenty years, we have generated annual investment returns of between 6.8% and 7.3% for our pension funds. And in nine out of the past ten years, we beat the benchmark (the market average).