ZEIST, Netherlands — Dutch pension giant PGGM has become one of the first European pension plans to manage assets according to alpha and beta.
The €77 billion ($96.5 billion) Stichting Pensioenfonds PGGM changed its internal investment process to focus on beta, enhanced beta and alpha strategies across multiple asset classes, said Leo Lueb, chief investment officer. By adopting an investment process based on alpha and beta, PGGM can now more effectively manage its risk budget and focus more resources on finding sustainable investment returns, Mr. Lueb said.
Until now, the plan would have had one manager trying to implement the three approaches in each asset category, he said. The new approach opens a whole universe of investment strategies that the plan could not embrace under the previous arrangement because investments were managed according to traditional asset class definitions, he added.
"Previously the universe was very much limited to the components of our policy portfolio. We have now very significantly broadened the scope of the universe of the strategies," Mr. Lueb said. "This enabled us to keep pace with developments in financial markets where new investment strategies are being created and risks packaged into investible form, very often crossing traditional asset class lines. Such strategies would include carbon trading, securitized reinsurance risks, securitized debt, infrastructure-related investments and innovative alpha strategies."
PGGM is following the 340 billion Danish kroner ($57.2 billion) ATP scheme, Hilleroed, Denmark, which last year restructured its investment process along alpha- and beta-generating strategies.