APG signals private market expansion as rules ease

Europe’s largest pension investor, APG, is preparing to increase its allocation to private markets to just over 30% of its total assets, according to Patrick Kanters, chief investment officer for private investments at the firm.

Speaking to Reuters, Kanters highlighted that ongoing volatility in credit markets could present attractive entry points for long-term investors.

APG currently manages approximately 600 billion euros ($702 billion) in assets for clients, including ABP, the Netherlands’ largest pension fund.

At present, around 26% of its portfolio is invested in private markets.

However, this share is expected to rise following regulatory changes in the Netherlands that are reshaping the pension investment landscape.

The shift in strategy comes in response to the Netherlands’ Future Pensions Act, which has been introduced in phases since 2023.

The new framework removes the obligation for pension funds to guarantee fixed retirement payouts, allowing for more flexible investment strategies.

This transition enables funds to take on higher risk by reducing allocations to lower-yielding but highly liquid government bonds.

The updated system also introduces individual pension pots for younger workers, which can potentially deliver higher returns over time due to longer investment horizons.

Large Dutch pension funds have already begun transferring client assets into these new structures, with a deadline of January 1, 2028, set for full implementation.

Portfolio breakdown and growth targets

APG’s existing private market exposure is diversified across several asset classes.

Approximately 10% of its total assets are allocated to real estate, while infrastructure investments currently account for 5-6% and are expected to increase to 10% over time.

Private equity represents around 8% of the portfolio, up from 6% historically, while natural capital assets such as forestry account for less than 1%.

The firm also maintains a relatively small allocation of 1.5% in private debt.

This segment is expected to grow to between 2% and 4%, depending on client preferences.

Based on current asset levels, this would translate into an increase from roughly 9 billion euros to as much as 24 billion euros.

Volatility opens new investment opportunities

APG’s move comes against a backdrop of heightened market volatility, particularly in the United States, where retail-focused funds have faced increased redemption pressures due to concerns over declining returns and the potential impact of artificial intelligence on software companies.

"Some sub-markets are correcting, and that can indeed provide opportunities going forward," Kanters said in an interview this month.

"For these types of investments, you need to have a very long investment horizon."

Focus on discipline and long-term value

Kanters emphasised that APG’s investment strategy prioritises areas where capital is scarce and structures are robust.

The firm is particularly focused on real assets and infrastructure-related financing, where underwriting discipline remains strong.

"Ultimately, manager quality, deal structuring, and downside protection matter more to us than making thematic sector calls," he said.

APG’s private debt portfolio spans multiple segments, including real asset credit, speciality finance, structured credit, direct lending, and non-performing loans.

Around 60% of these investments are based in Europe, compared with a market average of roughly 30%.

Global opportunities across markets

Despite its European focus, APG continues to monitor global opportunities. Kanters noted the importance of the US market, given its scale and maturity.

"The US remains the largest and most established private debt market globally.

For a long-term investor like us looking to build a larger and diversified portfolio, it is difficult to ignore that depth and breadth," he said.

He added that Asia also offers attractive returns and access to high-quality investment managers, making it another key region for future allocation growth.