Foreign pension fund investment in UK continues

PGGM announced a £100m investment in Birmingham in a joint venture with L&G

The risk of no UK-EU trade deal post-Brexit has not stopped foreign pension fund investment in UK assets, with the second largest Dutch pension asset manager PGGM for example having increased its investments in real assets in the UK as recently as this month.

PGGM, the €252bn pension giant, announced a £100m (€109m) investment in residential real estate in Birmingham in a joint venture with Legal & General on 15 December.

The announcement came just weeks after PGGM had announced a similar-sized investment in construction company BAM’s public-private partnership arm, which comprises a large portfolio of infrastructure projects in the UK, including the London Silvertown tunnel.

The pension investor, whose investments in the UK total some €8bn, refused to comment on the possible consequences of a no-deal Brexit on the value of its portfolio. PGGM’s largest single private investment in the UK is student accommodation firm UPP, in which it holds a 60% stake.

The UK investments of PGGM’s larger cousin APG totalled €24bn at the end of 2019, slightly more than 5% of its assets under management.

Just because pension funds may not have sold UK assets doesn’t mean they haven’t been preparing for the possible negative consequences of a no-deal Brexit. At least some Dutch pension funds have mostly done this by increasing their sterling hedges.

The ABN Amro pension fund, for example, increased its sterling hedge to 100% a couple of years ago because of Brexit. The fund has only hedged half of its exposure to other developed market currencies.

PGGM’s main client, healthcare fund PFZW, also has a 100% hedge on its sterling exposure, though this is not related to Brexit. The fund traditionally hedges all of its foreign currency risk, apart from its exposure to the dollar and yen.