“Selling in panic never is the smart thing to do”

Ronald Wuijster on investing in a Corona year

Despite the Corona crisis and the associated correction on the stock market, APG can still look back on an ‘excellent investment year’. Ronald Wuijster, member of the Board of Directors and responsible for Asset Management and HR, explains why. “We really had to work hard as an investor and many discussions have been raised. But we didn't make any changes to our long-term investment approach.”

How did APG perform in the field of asset management in 2020?
“Really good. We managed to achieve great returns for our customers, between 6.5 and 10 percent, and we recovered remarkably well in comparison with 2019. The results in the year 2019 were somewhat detrimental to the five years’ return. When we look back: the absolute return -the income realized from the market- was good in 2020, but a little bit lower in 2019. It is then up to Asset Management to earn additional returns above the market average, which is called excess return. We did not succeed in that goal in 2019, as we were below the market average in that year. However, the excess return in 2020 was really very good again and, as a result, the five years’ excess return also increased.”

More room was made in 2020 for investments in the Netherlands. Why was that? And what was that decision based on?
“APG is looking to emphasize its societal role in the Netherlands and contribute to the economy. That's not done by means of random investments. If you choose to invest in, for example government bonds, your contribution to the Dutch economy is rather limited. Moreover, there is sufficient interest in such investments which means it doesn't result in added value. Asset Management has therefore identified two areas in which we do make a contribution: infrastructure and venture capital. And the latter we invest in start-ups focusing on the energy transition, for instance, like our recent investment in NET2GRID. In addition to the social importance, making investments in the Netherlands of course has to meet the characteristics in the field of return on risk. That means we are certainly not investing in the Netherlands at all costs, but when a serious investment comes up that compares well with other market opportunities, it has a clear advantage.”

2020 has been a turbulent year in many ways. What is the overall conclusion as we look back?
“That we were able to maintain the good investment returns in the past year. And that truly makes me proud. We were startled by the stock market correction in the beginning of 2020: due to COVID-19, we experienced a sudden, sharp fall on the stock market. That fall caused commotion and concerns, sometimes with our customers as well. They witnessed the stock markets drop significantly and wondered whether we shouldn't be more careful. But from experience and good analysis we know it's not wise to slow down at a time like that. If you sell at a low level, triggered by fears of risk, you have to buy again at a high level once the stock market is recovered. That would be a shame. So, we maintained our long-term direction and purchased shares, according to our rebalancing policy, while the valuations decreased. In short, this means the following: when certain investment categories sharply increase or decrease, the allocations per category agreed with the customers is jeopardized. That means you have to purchase or sell: rebalancing. A correct decision.”

So, we escaped that stock market correction by sticking with the long-term direction. But does this mean Corona had no effect whatsoever on the investment strategy?
“Companies globally responded differently to Corona. Some companies benefited, others didn't notice any difference and a third group has really suffered from the crisis. To us, as an investor, it meant we had to work hard in some industries, such as hotels, entertainment and real estate. You may think about refinancing or having to apply special measures. We have had many discussions on these matters and were able to offer some help here and there, but we didn't make any changes to our long-term investment approach. What we take away from this crisis, is the knowledge that a certain event triggers trends that will last for a longer period of time. Think about growth in logistics and working at every location. That's something for us to respond to.”

APG sets high sustainability requirements to companies in which it invests on behalf of the funds. However, the administrator itself appears not to meet those requirements in all instances yet. What will be done about that?
“We set the bar high for others and, as a company, we also want to meet those requirements. But you will also notice that the hairdresser is not always cutting his or her own hair correctly. That obviously should not be the case and we have therefore prepared a plan to improve our own sustainability. We have implemented several programs to work on our mobility, diversity and inclusion, as well as financial self-reliance of participants in our pension fund customers. Our housing will also become more sustainable and we are exploring the new methods of working.”

Next for something entirely different. One of the themes in APG's new annual report: rewards. The total amount of variable rewards within APG increased significantly in 2020. How is that possible?
“That has to do with the number of employees in the domain in which the bonuses are paid. We have abolished the variable renumeration within APG, except for one specific group: employees bearing a very direct investment responsibility. That group consists of the portfolio managers and the team members have increased due our customers’ objectives, mainly in illiquid investments. 2020 has been an excellent investment year and was additionally positive in terms of our five years’ returns. The rewards are especially linked to the performances in the long term. And good investments are beneficial to the customers and the consumers and activate the variable reward system.”

APG usually states that it mainly pays variable remunerations to employees who work in one of APG's foreign offices. Is that still the case?
“We have a group of employees in the Netherlands who are bearing a direct investment responsibility. However, that group only receives 15% of the variable remunerations. 85% of the amount is therefore paid in the Unites States and in Asia where variable remunerations are customary in the rewards structure applicable to those continents.”

The members of the Board of Directors of APG have started to earn more on average, almost 30,000 euro per year. You have started earning even 66,000 euro more. What is the reason for this increase in salaries of the members of the Board of Directors and of you in particular?
“As far as I am concerned: the agreement has been made at the time of my appointment that upon adequate functioning my salary would increase to a pre-agreed level after two years. The Board of Directors has determined last year that my functioning is of a very good level which explains the increase. The other increases relate to, among other things, an increase in the Collective Labor Agreement (CAO), holiday pay of which the payment is lagging behind and some isolated cases, such as the parting of our Chief Executive Officer, Gerard van Olphen.”

And can this be justified now the country is suffering from such an enormous blow caused by the Corona crisis?
“The commitment and productivity of our employees have by no means been affected because of the Corona crisis. The realized performances have exceeded our expectations. In addition, APG did not have a business economic reason to reward differently. APG is not benefiting from Corona but is also not suffering. That applies throughout the organization. Moreover, a decrease in salaries would create uncertainties that would harm the economy. It is with good reason that the government has announced support programs for the industries that are struggling. So, preserving the salaries was the best thing for us to do, also in the interest of our economy.”

The new chairperson of the Board of Directors will not be earning the same salary as her predecessor? What are the underlying considerations for that decision?
“Annette Mosman will be earning slightly less than Gerard van Olphen. We consider the internal proportions when determining salaries -what does the average employee earn in relation to the chairperson-, the benchmark in the market and the societal aspects. Her salary is looking quite alright, a little lower at most, but she is also at the beginning of her term while Gerard had already been in service for a couple of years.”