KENFO could become central manager of public sector assets in Germany

The German nuclear waste management fund KENFO could in future change its role to become a central manager of public and state sector assets, taking on functions including risk management, asset allocation and sustainability reporting.

In addition, other functions could include investment management, including direct investments in private markets, selection and control of external asset managers in liquid markets, as well as all required back office tasks, including finance, legal and compliance, business management, communication, IT and human resources, CEO Anja Mikus told IPE.

The CEO added that as part of the new role of public asset manager envisaged by the government, KENFO will manage the assets of the first pillar of the Generationenkapital Fund in the long term.

The government is preparing the ground for the establishment of a central asset manager during this term, it said in a draft reform of the first pillar, without disclosing any names.

Under the reform proposed by the government, the fund manager would take over the tasks for a limited period, until the end of 2026, with the possibility of extending the contract.

Under current plans, the fund would invest first-pillar assets on capital markets in order to generate profits that would enable the payment of a dividend to the first-pillar manager, Deutsche Rentenversicherung, which would slow down the growth of premiums.

The generation equity fund is expected to reach assets of 200 billion euros by 2036, in order to start paying out 10 billion euros annually to Deutsche Rentenversicherung. It will set aside assets by taking out a loan from the Financial Agency (Bundesfinanzagentur), which manages public debt, according to reports.

The largest share of assets, as much as 80%, of the generational capital fund could be invested in shares, and 20% in alternative investments, including infrastructure and private equity, with a smaller share of bonds.

The equity allocation in a generational equity fund may resemble KENFO’s equity portfolio, which is broadly diversified and includes stocks from developed and emerging markets, large standard stocks, and stocks from mid- and small-cap sectors, according to the fund’s financial statements.

Under private markets, KENFO invests 5% of its assets in real estate, 4.6% in private debt, 12% in infrastructure and 7.5% in private equity, the statement added. It is shifting assets from real estate to its infrastructure portfolio, it added.

According to the IPE findings, 26 asset managers whose services are used by KENFO could also participate in managing the assets of the generational capital fund.

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