EUROPE - NAEV, the pension fund for doctors in North Rhine-Westphalia, has increased its exposure to European property outside Germany with new partner Aberdeen.

Dirk Lepelmeier, managing director at the €10bn scheme, told IPE that a second ALM study by Mercer in May confirmed initial findings by Feri, which has conducted ALM studies for NAEV for the last 10 years.

Based on these studies, the fund identified infrastructure and real estate as two main sources for future returns and decided to boost its real estate exposure from 10% to 12-13%. 

It will also increase its exposure to real estate markets outside Germany, but "never stray far" from bricks and mortar, according to Lepelmeier.

The European real estate portfolio has been split in two FCP funds in Luxembourg that were managed by Warburg-Henderson and Invesco.

NAEV, however, was unhappy with Warburg-Henderson's performance and replaced the manager with Aberdeen, Lepelmeier said.

Aberdeen is to focus primarily on Western Europe, while Invesco will cover Eastern Europe for the pension fund.

"In the larger European cities," Lepelmeier added, "both will keep a lookout for us to give us a better idea of these markets."

Recent additions to the portfolio include office buildings in Prague, London and Paris - all cities in which the fund has invested before.

Similarly, it recently made a follow-up investment with Pramerica in the US.

With respect to infrastructure, Lepelmeier expects the current €300m portfolio to grow to as much as €1bn over the next few years.

Respecting the German market, NAEV's managing director said he was "very cautious" due to the country's demographic situation.

"The population in Germany is shrinking, and people will continue to gather around the large cities," he said.

He added that a bad decision regarding location could be "very bad indeed in 20 years' time in a country that is not growing".
He said he was therefore willing to accept lower returns from German properties in the office and residential sectors as long as the location was right.

Lepelmeier also thinks there is "still some exaggeration ahead" in the domestic market, but that it would not be extreme.

The article initially stated that Henderson was one of NAEV's managers. This has been corrected to Warburg-Henderson.