“We are going to look even more selectively at the companies in which we invest”

Published on: 31 March 2022

Despite the ongoing Covid-19 crisis, 2021 was a year of excellent investment returns. “Good for our funds, good for the participant”, says Ronald Wuijster, member of the Executive Board of APG and responsible for Asset Management. And how does the CEO view 2022? “Investing is always uncertain. It's just a matter of keeping your professional calm.”

​​​​​​​Looking back on 2021, Ronald Wuijster says: “It was a rather crazy year. At least in the context of Corona. When it comes to investments, we can look back on a very good year with excellent returns. Both in absolute and relative terms. The absolute return is obviously mainly used to pay the pensions. Eighty percent of the pension payment is realized by the returns we achieve. But thanks to the good relative returns, we were also able to add additional value. Moreover, we managed to make a number of truly great investments, such as the large investment on behalf of ABP in the accelerated rollout of fiberglass.”

Did those good results not come as a surprise given the ongoing Covid-19 pandemic?“We had a fear for a while in the previous year: will Covid-19 have a major impact on the economy and the companies in which we invest? In 2020 we witnessed that the impact was less than expected, if not absent. Sectors were affected that remained below the investment horizon, such as the SMEs, the somewhat smaller companies. And furthermore, a number of specific sectors were hit, such as the entertainment industry and tourism. But a larger number of sectors, such as tech, service provision, luxury consumer goods and the construction industry actually benefited. This because people transitioned to a different way of working, because the spending patterns changed. The money had to go somewhere as people couldn't go to festivals or on holidays.”

According to Wuijster, the investment markets prospered as a result of both monetary and fiscal measures.
“Monetary speaking, we were already in an environment with very low interest rates and asset purchases by the central banks that were continued for a longer period of time due to COVID-19 as the central banks wanted to prevent the economy from deteriorating. And those measures were reflected in the investments. We saw much needed asset purchases, but some of these were somewhat unfocused. The American government, for example, transferred more than 3,000 dollars to virtually all citizens. Many people really needed that money but there were also plenty of people thinking: Hey, I am going to invest that money. Both monetary and fiscally driven there appeared to be more support for the investment markets. And that's an important incentive for good investment results.”

The inflation rate is meanwhile skyrocketing. What is the effect of those figures on the returns?
“That depends. Inflation is not really a bad thing for a number of investment categories. Shares, commodities have elements incorporated that offer protection against inflation. But it does have an impact on the economy. The big question is whether or not we will end up in a recession. The opinions are mixed in that respect, almost fifty-fifty you might say. The logic is: the purchasing power decreases; the world is a little less global than it was before. That is of course also caused by the war in Ukraine and by Corona, which are both not stimulating a worldwide economy. The overall picture is that the recovery after COVID-19 is fading a bit. People will enjoy it for a while. But some economists expect this to subside. It's possible, I think it's a bit of touch and go.”

What does that insecurity mean to the investments?
Investing always entails a factor of insecurity. I would almost say: it is business as usual. We have a well-diversified, widely spread portfolio. Some investments benefit, others suffer, but on balance you are trying to achieve reasonable returns. And we are doing quite well so far. The returns are obviously less than last year. We have suffered some losses in absolute amounts. But it's really not that bad when you look at it in percentages. It sometimes involves large amounts but it's not very shocking given the events. In  short: keep the professional calm and continue to do your job. What are the things that might change following these developments and are we able to anticipate? So, we could be partly positioning ourselves for the future already.”

But how? Can you give some examples?
“In general terms: you look at the global regional circumstances in the current context. Has Europe not become a bit more vulnerable? What is the role of China in this conflict? Is China benefiting or is it not?  You can also look at certain sectors, like commodities for instance. Those were ignored for a long time because the energy prices declined over a longer period of time. But now you can obviously see these generating returns.”

Europe has become more vulnerable in more ways than one. Investing in weapons suddenly seems to be socially acceptable.
“You could say beforehand that this is not a good investment if sustainability is highly prioritized. At the same time we have always said that the defensive use of weapons is relevant. This has now proven to be true. We have always excluded a certain type of weapons from our investment policy, like cluster weapons and chemical weapons. But it is possible to invest in regular weapons. Some peers are saying that it is sustainable. Those views are currently emerging in Scandinavia. There people say it could be considered a positive social value. I believe that's nonsense. But as a result of the recent developments, the position of certain weapons manufacturers has changed given the countries’ intention to invest.”


A noteworthy news item in 2021 was ABP's announcement to withdraw from producers of fossil fuels. Did that lead to a different view of APG on the engagement policy?“That is a legitimate question. It just seems weird to me that the public opinion is often only targeting Shell. Because ABP didn't announce its withdrawal from just Shell, but from producers of fossil fuels. That involves a lot more companies.”
But that link with the engagement policy is correct, says Wuijster. “The question was: shouldn't you draw conclusions from the fact that all of those discussions are yielding less than actually desired? It has resulted in us looking once again at the consequence management of our policy. ABP believed too little was accomplished in our conversations with companies about fossil fuels in the past years. They said: we don't think there is enough time to reach the climate goals this way. So, we withdraw and refrain from continuing the conversations.
We have supported that decision. We agreed that time was running out. Engagement on the demand side is more effective than engagement on the supply side. The user is able to change quicker and easier than the producer.”

And does this also mean that the full width of the portfolio has to be looked at in a stricter manner?
“Yes, we must be stricter and more rigorous. Even stricter and more rigorous than we are now. We are rethinking the inclusion policy: what companies are to be included? And we also look at the criteria. There are frontrunners, promises and laggards. You don't want to invest in laggards unless they are willing to change. Then these companies become the promises in which you could invest if there's a chance of engagement success. We have done so for a long time, but we have to be more selective. It shouldn't be an excuse to keep investing in something, knowing beforehand that nothing will change. And we also look at the frontrunners again: shouldn't the criteria be stricter? However, we are still scoring very well in terms of our sustainability policy, the professional world especially considers us a leader.”

I am more concerned about non-nuance than about impatience

To what extent is such process guided by societal impatience?
“I am more concerned about non-nuance than about impatience. Mainly when it comes to biodiversity and climate you cannot say we have plenty of time and that society just has to wait. We simply don't have that time. What I do have something of a problem with sometimes is non-nuance. Objectifying an opinion by means of metrics, taxonomies and reasonable analysis is very important to me. The societal debate doesn't always offer room to do so. If one party picks one element and calls it ‘bad, bad, bad’, the room for objective assessment is sometimes lacking. Indicate why something is bad, why an alternative is better. I care a lot about continuing to be able to practice the investment trade in a professional manner. And it sometimes concerns me that this voice is not always heard.”

The costs of the investments are criticized every year. Do you understand that?
“I can imagine that people are looking at the costs. If large amounts are invested, it also entails high costs. But people shouldn't just focus on an absolute number. And the costs should be compared with the - luckily even higher – amounts we realized in terms of net returns. On average between 7 and 8 percent annually in the past twenty years. And that's with the costs deducted. Those are huge amounts in euros as well, compared to which the costs are far outweighed. I understand people are concerned. But are the costs excessive? No, because we outperform the market. We make investment returns in a relatively cheap way. So yes, it involves huge amounts, yes, we handle the costs carefully and yes, we are a relatively low-cost producer.”

APG achieves good returns year in, year out. Nevertheless, the participant hasn't witnessed an indexation in years. It continues to be difficult to explain.
“I can very well understand that call of seeing such high investment results and no change in the payments. And it actually is quite difficult to explain. It is one of the reasons why the pressure became so much greater to build that new system. The link in the new system is way more direct. That is an advantage. The downside of the new system of course is that the consequences are visible immediately should the results be disappointing. People were not indexed in the old system, but at least their entitlements stayed on course.
And another thing to consider in a pension system is that it involves different age groups whose interests are slightly different. Indexation relevant for a certain group - the pensioners - should be balanced against the fact that this money also could have been used to gain returns for people who are still accruing pension. The management of a pension fund always stands for that balanced weighing up of interests. Indexation is only one component, so a one-sided fixation on that element is not desired. But I do understand that people are disappointed when the many years of good investment results - which is sometimes bragged about, justifiably or not - are not reflected in their payments.”

You recently wrote a column about investing in infrastructure. You would like to see more possibilities in this field in the Netherlands for a large pension investor. Can you explain that some more?
It was an appeal to the government to take another look at the objections around public-private collaboration in the field of infrastructure. I wonder if those objections are justified. I believe that, in general, the guidance of investments becomes better in a public-private collaboration. That's because you shift from thinking in budgets to return in the longer term. The statement made by the Netherlands Bureau for Economic Policy Analysis was whether all of that money the government lends free of charge is actually a responsible thing to do. According to economists of the Rabobank, it depends on whether or not it is profitable. That's how I see it as well. If it is considered an investment for future generations, it isn't so wrong. The objection that, as a government, you don't want to give up control of crucial infrastructural projects can be properly safeguarded. There are constructions in place to make that happen. That can be witnessed regularly in countries such as Canada and Australia. There are different ways to ensure a casting vote around the social relevance of the infrastructure, while fully sharing the economic benefits. It is my opinion that this should be done more often. It is not happening enough in the Netherlands.”

Finally. You have signed up for another four years. What is the most important reason for you to do so?
​​​​​​​“Apart from the fact that I am working in one or actually in two very nice teams, I find it an enormous challenge to transfer our clients to the new system. That has to be done in the next four years and I consider that a major responsibility. In addition: being able to invest on a global scale like we do in all asset classes, is just amazing. Moreover, it's extremely relevant socially speaking. It involves people whose pension is depending on our returns. And that's all that matters.”