When you have your eye on a new investment as an investor, of course you want to know what you are getting into. To be able to comprehend non-listed companies as an investor, you usually need to go and visit them. However, due to the pandemic, this is difficult. How does APG deal with those restrictions? PensionPro had a conversation about it with APG’s Chief Investment Officer, Peter Branner.
A lot of information is available about listed companies, in part because there are certain legal requirements. On top of that, a lot of estimations have often been done by share analysts: professionals outside the company, who - if they do their job right - provide an independent assessment about the prospects and the potential of the company or project.
Much less information is often available about non-listed companies. That is why it is very important to go and visit them as an investor. An investment may look very attractive from a distance, but when you walk around in the workplace and speak to its management, you can pick up signals that may change your mind.
Closer to home
Now that a lot of airplanes are grounded, and countries are on lock-down - especially for foreigners – investors need to look for alternative ways to form an opinion. In the interview with PensionPro, Branner explains that APG does this in three ways.
The first way: look closer to home. If you invest in the Netherlands, for example in KPN’s fiberoptics network, you don’t need to catch a plane. Plus, an investment like that contributes to the implementation of an existing ambition of APG’s biggest pension client: invest more in the Netherlands.
The second way for APG to deal with the current travel restrictions is to expand existing investments in specific non-listed companies by taking a bigger interest in an existing company or project. A big part of the information that APG needs to be able to make the investment has already been collected in a previous phase. A project or company therefore does not require another visit. Expanding existing investments was already a trend at APG, even before Covid-19 started to assert itself, Branner explains. The reason is obvious: it brings costs down.
The third way APG uses to still be able to make non-listed investments is so-called due diligence: the entire extensive audit that a serious candidate-buyer does before he makes a definitive decision. Generally speaking, an investigation like that is done in a physical data room in the country where the company is located. Currently, these data rooms are sometimes also made available in digital form, so that travel is no longer required.
All three of these ways of dealing with the Covid restrictions, Branner believes, are trends that will not disappear. To a certain extent, they had already been implementing them, but due to Covid, they have been sped up.
The PensionPro interview also shows that APG is actively taking advantage of the opportunities provided by Covid, as an investor. For example, it got away from providers of cruise ships at an early stage and then got back in the minute the rates were at an all-time low – and the shares had therefore become cheap. APG also bought do-it-yourself store chains, providers of home entertainment and operators of vacation homes. That active approach paid off in 2o2o, but also in the past five years, with an above-average investment return.