PGGM sold its interests in AlpInvest in 2011 and since then grew its team from one to 12 professionals. How is the team developing?
The build up is going according to plan. We [now] have 15 people on the team who are purely focused on private equity markets worldwide. Some of the team members are generalists; I expect people to be able to do due diligence on a fund, a co-investment and a secondary. But our team also consists of individuals who have a specific background in those areas.
We are trying to build up a diversified portfolio. Following the sale of PGGM’s interest in Alpinvest, we started to do a few commitments to funds in emerging markets. Last year we started to do commitments to some of the global well-known buyout funds. It’s a mix of buyouts, growth capital and distressed. As PGGM, we have €133 billion in assets under management and approximately 6 percent is invested in private equity.
How do you select the GPs you invest in?
We back about 80 funds and we select funds [based] on their track records. The commitment depends on the size of the fund. We have a worldwide focus and we are a long-term investor, so it’s difficult to say which regions and strategies are specifically attractive. It depends entirely on who the GP is, what their approach is and their investment strategy in that particular market. We remain interested in the mid-market, but there are also a lot of bigger funds which also have a good strategy.
The performance targets depend on the fund and can be different, but we are always looking for funds with a good risk-return balance and our returns have to outperform the public markets. [Although] we are no longer the owner of the management company [of AlpInvest], the majority of our allocation is still with AlpInvest and this is not something that we are looking to change.
How does PGGM feel about co-investments?
We expect to expand co-investments significantly in the coming years. Last year, we co-invested with BC Partners in Suddenlink Communications, an American cable business. Considering our size, we can be a meaningful co-investor for a GP. An important reason for co-investing is saving on management fees. [However] we are not pursuing a direct investment strategy like some of the Canadian pension funds are currently doing.
You used to be a partner at Gilde Buy Out Partners. Can you use that experience in your current role?
The fact that I worked on both the GP and the LP side has been an advantage for me. I have been on both sides of the table, which has provided me with some good [market] insights. But every private equity firm is different and building relationships with GPs is always different. The diversity is enormous.
Last year, PGGM published an ESG best practice guide for the private equity sector. What impact has this guide had so far?
[The fact that we] as a pension fund service provider [provided this document], that’s quite unique. GPs could do more on this front. I think there’s sometimes a difference between what they say and what they do, but I do notice that even the successful GPs that have no problem raising a fund are open to suggestions on the ESG front and that is in my view a very positive development.