Germany's NAEV and Danish fund ATP adjust RE allocation

Nordrheinische Arzteversorgung (NAEV), the EUR 8.5 bn German doctors' fund, plans to overhaul its property investments by cutting its direct real estate holdings in Germany. According to IPE Real Estate, the fund's property portfolio is currently split between its direct domestic real estate holdings, valued at EUR 675 mln, and investments in domestic and foreign real estate companies, foreign REITs, property shares and Immobilien-Spezialfonds (ISF), the specialist German vehicle for institutional investors.

Dirk Lepelmeier, NAEV's managing director, told IPE Real Estate that the domestic portfolio will be decreased in a step-by-step process over the next two to three years with most of the remaining assets to be put into a bespoke ISF. The move was prompted by depreciation rules on property under German accounting standards.

'We had planned to create a REIT structure for some of our direct real estate holdings which is mainly residential property,' Lepelmeier said. 'But we were disappointed by the final legislation.’ Under REIT legislation passed in Germany in Spring 2007 residential property built before 2007 cannot be included in the structure. ‘Immobilien-Spezialfonds are replacing direct real estate holdings in the domestic German market and are in turn replaced by listed property, especially when it comes to foreign investments,' Lepelmeier added. 'We will cut our exposure to German real estate but, of course, not fully disinvest from this sector.'

In Denmark, on the other hand, the EUR 59 bn Danish Labour Market Supplementary pension fund, ATP, will increase its property and infrastructure allocation to half of its inflation-protected portfolio. ‘We don't have a benchmark but it's a good hypothesis that we'll double our exposure to inflation-protected assets in coming years from about DKK55 bn (EUR 7 bn) to a little over DKK100 bn. We expect that about half will be invested in the less liquid assets - real estate and infrastructure - while the other half will be in index-linked bonds,’ Henrik Gade Jepsen, chief executive of beta at ATP, told IPE Real Estate. The DKK 30 bn investment scheme will probably be funded by selling short-term assets. 'Traditional assets won't do well if there's a spike in inflation. We want a portfolio that does well in all economic scenarios. We want to be protected in all phases of the business cycle,' Jepsen added.