On the Record: Ruulke Bagijn of PGGM

PEI: How is PGGM’s private equity expertise developing?

Bagijn: We’re building up in-house and our strategy is to do funds, co-investments, and secondaries. We spent the first year [post-AlpInvest sale] building relationships. We started off in emerging markets, which is in a way awkward, because usually you start close to home and then build out. But in this particular case we had a wish to gain more exposure in emerging markets than AlpInvest had built for us. We’ve made a few commitments, one of which for example is a commitment to the IFC ALAC fund, where we were a founding LP.

We’ve also done two co-investments in emerging markets and it’s only since 2011 that we’ve started to look at Europe, global buyouts and venture capital. AlpInvest [still] does US mid-market for us exclusively and we do Europe exclusively; so we split the world between us in that respect.

Since 2011, we’ve grown the private equity team from 1 to 12 people. It’s headed by Eric-Jan Vink, who joined from Gilde Buyout Partners. It’s our intention to grow the team significantly.

At PEI’s Responsible Investment Forum, AlpInvest Partners’ CEO noted one of the reasons the Carlyle Group was selected as its new parent was because its ESG initiatives were a good fit with those of its previous owners, PGGM and APG.

Yes. APG, PGGM and Carlyle have a collaborative initiative to share ideas and practices that help enhance Carlyle’s integration of environmental, social and governance issues throughout its portfolio of private equity investments.

To us, it’s important that AlpInvest is a stable business because it’s still managing our current exposures. We have around €7 billion in the ground and each year we commit about €1.5 to €2 billion, with new commitments being done progressively in-house. We will continue to work closely together whereby PGGM will further build its in-house expertise and AlpInvest will further build out its client base.

Is ESG more difficult in emerging markets?

It’s not that black and white. Quite often emerging markets managers are quite advanced when it comes to ESG policies, because they were founded with backing from development banks that require a good framework. At the same time, quite a lot of companies that we categorise as high-risk within our ESG framework are in the emerging markets.

PGGM recently published the first-ever ESG best practice guidelines for GPs. Why?

Leading in the field of ESG is something that is really important to PGGM. And writing down what the expectation actually is from GPs has been a very important exercise. What we also aim to do is to promote responsible investment in the investment chain; so from that perspective, we hope to take other LPs with us. I hope that the policy is being read and that it is useful to others.

Cynics say ESG policies simply create more paperwork and ultimately increase costs to LPs.

We don’t see ESG as a bureaucracy. It’s just part of good business. Does it increase costs? Hopefully not. It’s focused on reducing risk and creating value. It is something that enhances the business case and shouldn’t be seen as simply a cost-enhancing burden.