Aegon's new Government Related Investment Fund, which aims to invest more than 50% in impact investments, has received its first third-party investment of EUR 30 million, increasing the fund’s value to more than EUR 300 million.
Aegon Asset Management launched the Government Related Investment Fund (GRIF) in April 2016. "The fund is a good illustration of how Aegon integrates environmental, social, and governance (ESG) factors into its core investment processes," says portfolio manager, Eddo van den Bogaard.
Impact Investments
The fund aims to invest more than 50% in impact investments, which have explicit social and environmental goals, such as social housing, hospitals, renewable energy and development banks, but also meet Aegon Asset Management's risk and return criteria.
The GRIF, for example, recently made a EUR 22 million investment in the Tellenes Windpark in Norway. The investment includes 50 wind turbines, capable of generating 50 million kilowatt hours of energy annually, for use in Google data centres.
Since AAM implemented mandatory ESG training and awareness programs, portfolio managers are increasingly taking ESG factors into consideration in investment analysis and decision-making. AAM also has an impact investment working group to assess possible impact investments in different asset classes.
Increased returns
The GRIF is a fixed-income fund that invests in government-guaranteed private placements and bonds, predominantly in European public entities. Aegon Asset Management returned to this previously well-established investment category several years ago, in order to achieve additional returns for its clients in a low interest environment.
Because of the limited liquidity of these types of investments, a higher spread is achieved than with government bonds. For example, the fund invests in private placements issued by the social housing sector, by municipalities and guaranteed Export Credit Agencies loans.
Average Rating at least AA
The portfolio's average rating is AA. "Due to this high rating the fund has a limited capital charge under the Dutch Financial Assessment Framework regulations (FTK)," explains van den Bogaard. "As a result, the fund provides a suitable alternative to investing in government bonds while targeting significantly higher returns."
Van den Bogaard says he has seen external interest in the fund increase, as exemplified by the recent third party client investment. "More clients are looking towards higher yielding alternative fixed income investments due to low sovereign bond rates. We are also seeing increased demand from the Dutch pension fund market for impact investments."
Learn more about Aegon's Government Related Investment Fund.
