We’re Not ATMs, Pensions Warn Politicians

Dutch pension giants APG and PGGM have set out how European policymakers can get investor support for increased local investment.

Two of Europe’s biggest pension fund managers have called for direct dialogue with regulators and politicians to boost investment in the continent’s infrastructure and reinforce its economic recovery.

Policymakers at the European Commission have been trying to drum up support for the so-called “Juncker Plan”, a project designed to “mobilise investments of at least €315 billion” ($353 billion) for the continent’s “real economy” in the next three years.

PGGM and APG, which collectively manage roughly €625 billion for pension funds in the Netherlands, warned that institutional investors were not obliged to become “subsidising entities” for public spending.

“Whenever governments see the need for large investments, they tend to look to large institutional investors to supply the funds,” wrote Tjerk Kroes, director of group strategy and policy at APG, and Eloy Lindeijer, head of investment management at PGGM, in a newsletter to clients.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

“Whenever governments announce ambitious investment plans, the first reflex of institutional investors like APG and PGGM is to move out of earshot.” —Tjerk Kroes (APG) and Eloy Lindeijer (PGGM)The pair added that institutional investors “have not been created to fill the gaps in government budgets” and would only support the planned European Fund for Strategic Investments “if the actual risk-return profiles of the investment projects are at least as attractive as the best alternative”.

Kroes and Lindeijer pointed out that APG and PGGM already invest more than half of their collective assets within Europe, but would not increase this if it did not benefit their members.

“In other words, we do not feel entitled to take on the role of a subsidising entity, liberally supplying funds that have been entrusted to us by our clients’ participants,” they wrote. “Therefore, whenever governments announce ambitious investment plans, the first reflex of institutional investors like APG and PGGM is to move out of earshot.”

Kroes and Lindeijer said their funds would be open to exchanging non-European assets for European investments if policymakers could make investing in the continent’s markets and economy “genuinely more attractive”.

“With this in mind, APG and PGGM, as large institutional investors, stand ready to cooperate with the European Commission in accomplishing the optimal framework which will enable institutional investors to play their role in investing more in Europe,” they wrote, “on the sole, but non-negotiable, condition that this is done without jeopardising our clients’ ultimate goal, providing adequate pensions to their participants.”

“It is crucial that any policies arising from building a capital markets union take into account the characteristics of pension funds.” —PensionsEuropeLobby group PensionsEurope published a report this week urging policymakers behind the Capital Markets Union (CMU) to promote freedom of investment for long-term investors.

“The success of the CMU will depend on whether it will really facilitate long-term investments by pension funds in the European economy,” the report stated. “It is therefore crucial that any policies arising from building a CMU take into account the characteristics of pension funds.”

UK public pension funds expressed their frustration with the government’s approach to privatizing infrastructure at a National Association of Pension Funds conference last month. Mike Jensen, CIO of the Lancashire County Council pension, said it was “surprisingly difficult” to get UK politicians to engage.

NAPF Chief Executive Joanne Segars—also chair of PensionsEurope—suggested that ministers instead saw public pensions merely “as a useful ATM”.

Related: Why UK Pensions Can’t Buy Infrastructure & How Pensions Could Mend Broken Markets

«