Returns, responsibility, and real impact: APG's approach to private equity

APG manages one of the world’s largest private equity portfolios, roughly €50 billion invested globally on behalf of Dutch pension funds. Since bringing the program in-house in 2013, the team has focused on a simple ambition: delivering strong returns across market cycles while setting higher standards on responsible investment and cost discipline.

Today, the team operates from offices in New York, Hong Kong, and Amsterdam, maintaining close relationships with approximately 100 fund managers globally. We spoke with APG’s global Co-Heads of Private Equity, Ken Bloomberg and Greg Jania, about how the program has evolved and what it takes to build a portfolio that performs across market cycles.

Scale, selectivity, and fee discipline
APG's private equity program is designed to balance returns with responsible investing. The team selects top-performing fund managers with proven track records that also meet strict ESG criteria. To keep costs down, APG negotiates favorable fee arrangements and actively pursues co-investment opportunities alongside its fund managers which are fee and carry free.

“Our strategy really starts with identifying top-performing global managers that meet APG’s strict responsible investment criteria and fee principles.” Jania explains, “With the size of capital from our pension fund clients, we can be one of the top LPs of our GPs. That scale allows us to negotiate lower fees and set a high bar on ESG requirements, both of which are critical for APG and our clients.”

APG’s scale is a strong differentiator in the market, as is the structure of the private equity team: “Our fund investment team builds long-term relationships with a carefully selected group of GPs based on performance, alignment, and responsible investment standards. These relationships support access to co-investment opportunities that help us keep the cost of our program down,” says Bloomberg. “Co-investing is demanding. Direct deals require speed and rigor. Our dedicated co-investment team is built for exactly that.” 

From ESG integration to impact investing
APG's approach reflects the long-term mandates of its pension fund clients, which require strong financial returns alongside responsible investing over multiple generations. This shapes the program's priorities.

"In our core program, we ask managers to measure portfolio companies' emissions, workplace safety, and employee turnover," Bloomberg notes. "We require transparency on fees, diversity, and ESG incidents. This ensures our clients' capital is improving society while generating returns."

In recent years, APG’s clients have also committed to investing directly in solutions to environmental and social issues. Jania says the 20% allocation to impact funds within the private equity program is one of the most significant changes to the program since it was brought in house: "While our core managers have strong ESG programs, our impact managers are making investments that actively reduce greenhouse gas emissions and fossil fuel use, or improve access to affordable life-transforming medications."

Investing in the nascent impact market isn’t without challenges, but Bloomberg says it has been energizing: "The team is leaning into the work and using their skills to identify the next generation of top private equity funds. We've already closed on several impact funds as well as a number of individual impact transactions and have a growing pipeline of each under evaluation. Importantly, we do not compromise on return expectations as we seek to invest in impact."

Influencing industry standards
APG has taken an active role in improving industry practices. The firm participates in initiatives like the Institutional Limited Partners Association's diversity efforts and the ESG Data Convergence Initiative (EDCI), working to improve transparency and accountability across private equity.

“We also actively partner with peer institutional investors to look out for the interests of limited partners (LPs) interests, including around educating general partners (GPs) on applying those standards and seeing the value-creation opportunities they represent,” Bloomberg further explains. “APG uses its leading role to guide other LPs and to then collectively push our general Partners GPs for data, transparency, and ultimately outcomes that we can be proud of from ESG to returns”. 

The discipline to say no
Maintaining discipline is essential for long-term success. The team must stay alert to ongoing risks and developments that may compromise the integrity of the portfolio.

Jania stresses that rigorous due diligence on reputational risk should not be rushed: "Private equity has developed a mixed reputation due to some bad actors who've made headlines. Our due diligence process can take months or years to decide whether to add new managers, ensuring we avoid investments that may have heightened reputational risk."

Bloomberg says that discipline extends to existing managers as well: "We must be willing to say no to managers that looked good in the past but may not be positioned for future success. Whether due to team changes, strategy drift, excessive growth, or overleveraging. We also maintain a high bar for our co-investments which have been accretive to our program returns and have helped lower the program costs given they are free of fees and carry."

Jania adds that the team is particularly alert to the risks of excessive growth. Managers that grow too large may dilute their expertise or pursue marginal transactions. These are signals that APG watches closely when assessing long-term fit.

Saying yes to long-term value creation
When the team evaluates a manager, they not only look for a strong track record but also take a deep dive on how performance is generated. They want managers that drive good returns through operational improvements rather than financial engineering. "Companies with a history of consistent revenue and profit growth generally command strong multiples at exit," Jania explains.

Bloomberg wants PE managers that are ready to roll up their sleeves to create lasting value: "We look for managers who can offer us transactions that have multiple ways to win. This means not just relying on financial engineering, but rather creating value through buying well, multiple growth and margin improvement initiatives, accretive acquisitions, and thoughtful exits. Multiple expansion is also welcome for companies that have been repositioned and deserve it, rather than just benefitting from an overall market uplift.”

Navigating opportunities and challenges
While the team can choose managers, they cannot control market conditions. Bloomberg and Jania speak to some of the bright spots and acknowledge the headwinds.

Bloomberg sees opportunity in Europe specifically, “European governments are encouraging investment in startups and innovation, the number of impact managers is growing, and more managers now view responsible investing as enhancing returns rather than merely mitigating risk. Our pipeline of core and impact co-investments also remains robust across the globe and that global perspective allows us to invest where there are the best risk adjusted opportunities.”

Challenges remain, however. "Some managers are growing too large to continue delivering alpha," Jania notes. "Increasing competition for deals is driving prices up. The IPO market is improving but remains well below historical trends, which reduces distributions. And we're seeing new entrants like retail investors and sovereign wealth funds competing for access to the best managers."

Both Bloomberg and Jania underscore the long-term nature of APG’s approach, which keeps them calm through challenging cycles.

Proud of the program, proud of the team
This combination of operational discipline, responsible investing, and willingness to evolve continues to position APG's private equity program to deliver across market cycles.