Generational capital - New bond fund to invest in private equity as well as equities
The planned pension support fund "Generation Capital" is expected to heavily invest in stocks and non-traded assets like Private Equity, according to Kenfo CEO Anja Mikus. "As a rule of thumb, one could assume an equity quote of 80 percent", Mikus stated during a press conference on a Wednesday. The "Fund for the Financing of Nuclear Waste Disposal" (Kenfo) is also planned to manage the Generation Capital in the future.
The Berlin Coalition Government intends to invest a two-digit billion amount from the budget annually to support the pension scheme starting in the near future. From mid-2030s onwards, there will be payouts to the pension scheme. In 2025, 12.4 billion Euros are to be invested. The corresponding legislative proposal is not yet passed in the Bundestag. The deposit is made by the "Generation Capital" fund taking a loan from the Federal Finance Agency, which manages the federal debts and can borrow again on the capital market.
Mikus noted that a "Generation Capital" fund could invest more riskily than the Kenfo, which regularly pays out money to finance the search for a nuclear waste disposal site in Germany. "The Generation Capital does not have to make payments for a long time, resulting in a different risk profile", Mikus said.
In terms of composition, the Generation Capital fund could orient itself to the equity allocation of the Kenfo, which invests in around 3,800 stocks worldwide. The pension fund would have to invest the money for the pension in the same stocks that the Kenfo invests in. "The remaining 20 percent could be invested in Private Equity and Infrastructure, the bond share would then be significantly lower than in the Kenfo", Mikus added.
Microsoft and TSMC in the lead
At the end of the previous year, Microsoft, TSMC, ProLogis, and Apple were the largest individual holdings in the Kenfo's portfolio. German companies with significant holdings included Vonovia, Siemens, SAP, Deutsche Telekom, and Munich Re.
The Kenfo manages assets worth around 24 billion Euros and is responsible for funding the disposal of nuclear waste in Germany. Since it regularly makes payments for this purpose, it is heavily invested in bonds to receive regular coupon payments. At the end of the previous year, it was invested 37 percent in government and corporate bonds (including high-yield bonds).
The Kenfo achieved a record return of 11.1 percent in the previous year and reported a profit of 360 million Euros. In the previous year, 637 million Euros were paid out for interim storage of nuclear waste and the search for a final disposal site. Mikus was cautiously optimistic for this year: In the first half of the year, a return of almost five percent had already been achieved.
The Kenfo was founded as the first German state fund in 2017. The operators of the 25 German nuclear power plants had freed themselves from their obligation to finance the interim and final storage of radioactive waste with a payment of around 24 billion Euros. The Kenfo, organized as a foundation, invests the money on the capital markets.
The Generation Capital, planned to manage by Kenfo from mid-2030s, is considering investing a significant portion in equity funds, following Mikus's 80% equity quote suggestion. Additionally, Mikus mentioned that the remaining 20% could be allocated to Private Equity and Infrastructure, reducing the bond share.
