Upload
ivie
View
30
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Measuring and Managing Risk, Return and Incentive Compensation at apg. Stefan Lundbergh, Head of Innovation Centre, APG Investments Onno Steenbeek, Head Corporate ALM and Risk Policy, APG. ICPM meeting Toronto, 3 June 2008. Agenda. APG: new kid on the block - PowerPoint PPT Presentation
Citation preview
Measuring and Managing Risk, Return and Incentive Compensation at apg
Stefan Lundbergh, Head of Innovation Centre, APG Investments
Onno Steenbeek, Head Corporate ALM and Risk Policy, APG
ICPM meetingToronto, 3 June 2008
2
Agenda
1. APG: new kid on the block
2. Starting point: financial strategy
3. Risk management
4. New Portfolio structure (LHP-ROP)
5. Innovation
6. Challenges
3
Top 10 assets pension investors
Source: P&I/Watson Wyatt World PF 300, 2007. For APG combined figures for government, education and construction sector pension fund assets.
0
50
100
150
200
250
300
350
400
450
500
Government,Japan
APG,Netherlands
Government,Norway
CaliforniaPublic
Employees
NationalPension, Korea
FederalRetirement
Thrift
GEPF, SouthAfrica
California StateTeachers
New York StateCommon
LocalGovernment,
Japan
1.000
4
2. Starting point for clients: financial strategy
Step 1: pension deal
Step 2: expected cash flows (liabilities)
Step 3: utility function Board of Trustees
Step 4: financial strategy
Step 5: strategic investment plan
Step 6: current asset mix
5
Crucial tool: ALM
Probability underfunding in 12 months < 2,5%
Currentposition
Expectation
6
Most important tools:
a) Conditional indexation
b) Diversification
c) Duration extension
d) New portfolio structure: LHP-ROP
2. Risk management at the fund level
7
2a. Conditional indexation
100% indexation
+ catch-up
ind
exa
tio
n
100%
104,3%
140% funding ratio
0%indexation
Funding ratio1 November: 131,2%Example: 130%
105%
8
2d. LHP - ROPStrategy derived with participants in mind
• Pension Investor ≠ General Asset Manager
• Risk free Dutch linker with 17 years to maturity
• Objective High and stable long-term real returns
• Restrictions Mismatch risk• Horizon Client (15+ years, real)
Regulator (1 year, nominal)
9
Theory – Finance 1.1
LHP (ILB+…)
Best Mix of Stocks, Bonds and other assets (ROP)
Conservative Investor
Bonds
Stocks
Aggressive Investor
Moderate risk averse
investor
Risk
Expectedreturn
10
Simple on the outside, complex inside
ROP
LHP
11
• Idea generators our 450+ professionals• Decision body Innovation Committee• Operational body Innovation Centre• Innovation process stepwise with low entry hurdle• Capital allocation 2 percent of assets• Continuation safe environment, opportunity
12
Innovation Process
13
Example 1: Timberland
14
Example 1: First investment
Global Solidarity Forestry Fund
16
Example 3: Landfills
17
Challenges
• Culture and Attitude
• Competitive remuneration
• Organizational focus on investment RETURN
• ALM as integrated part of pension fund investing
• Augment collective pension solutions
18
Concluding remarks
• Pension Investor ≠ General Asset Manager
• Our approach is based on our situation
• We explore our unique advantages
• Open to innovate with peers and likeminded
Complex + challenging + difficult = interesting
19
Thanks for listening