Two European investors — the 893 billion Swedish kronor ($89 billion) Alecta Pensionsforsakring, Stockholm, and PGGM, the manager of the €238.4 billion ($267 billion) Pensioenfonds Zorg en Welzijn, Zeist, Netherlands — agreed to jointly invest in credit insurance to free up capital and further diversification, according to a joint news release Wednesday.
PGGM will buy 70% of each transaction, while Alecta will purchase 30%, according to a PGGM spokesman. The investors separately will manage the portfolios in-house. The size of the investment size was not disclosed, the spokesman said.
PGGM managed €5 billion in credit insurance portfolio for PFZW as of March 31. Alecta will invest in credit protection for the first time.
"This is probably the first time where two of the major European pensions funds are cooperating so closely in an effort to allocate capital wisely in combination with generating healthy returns, while supporting societies in challenging times by financing part of the banks' credit risk," Tony Persson, head of fixed income and strategy at Alecta said in a news release.
"We hope that in the pension fund industry more such collaborations will follow to the benefit of pension fund members," said Mascha Canio, PGGM's head of structured credit investment, in the release.
Known as synthetic securitization, credit protections are bought by banks for loan portfolios from investors to free up capital. The investors take the risk for a premium and reimburse banks for potential losses up to the maximum amount invested.
PGGM managed €252 billion as of Dec. 31.