Europe’s largest pension investor APG plans to increase its allocation to the private equity market.

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Europe's largest pension investment institution, APG, plans to increase its allocation to private market assets from the current 26% to just over 30%, and sees the current turbulence in credit markets as a potential buying opportunity.

According to Reuters, the plan was disclosed by Patrick Kanters, Chief Investment Officer of Private Investments at APG. The immediate driver for this adjustment comes from a systemic change in Dutch pension regulatory rules. The "Future Pensions Act," which has been phased in since 2023, allows pension funds to take on more risk and reduce exposure to low-yield government bonds, creating institutional room for APG to expand its exposure to private markets.

APG manages around €600 billion in assets, with clients including the Netherlands’ largest pension fund ABP. As the allocation ratio increases, the amount of funds APG allocates to private markets will further expand.

Private Credit Becomes Main Driver of Expansion

Patrick Kanters disclosed the current and target allocations: real estate accounts for about 10% of total assets; infrastructure currently accounts for 5% to 6%, with a long-term goal of 10%; private equity currently makes up 8%, higher than the historical level of 6%; natural capital assets (such as forestry) account for less than 1%.

Private credit is the most significant area of this expansion. APG currently allocates only 1.5% to private debt, and Patrick Kanters stated this could rise to between 2% and 4% in the future, depending on client situations. Based on current assets under management, this means APG's private credit allocation could rise from around €9 billion to nearly €24 billion.

Regulatory Easing Opens Space for Allocation

The core change in the "Future Pensions Act" is that Dutch pension funds will no longer have to promise workers fixed pension payouts, giving them greater investment flexibility. The new regulation allows funds to reduce holdings of low-yield but highly liquid government bonds, and shift capital to potentially higher-return private assets.

In terms of demographics, as life expectancy increases and job mobility rises, the new system establishes individual accounts for younger workers, giving their assets the potential to grow more rapidly. Large Dutch pension funds have already begun transitioning funds this year, and the entire industry is required to complete the overall transition by January 1, 2028.

Seeking Buying Opportunities Amid Market Volatility

APG’s expansion plan comes at a time when the overall private market is under pressure. According to Reuters, several funds aimed at U.S. retail investors have recently faced redemption waves, due to concerns over declining returns as well as uncertainties stemming from artificial intelligence’s impact on software firms, with evident increases in market volatility.

Patrick Kanters holds a relatively optimistic view. “Some sub-markets are undergoing adjustment, and this could indeed provide opportunities in the future,” he said in an interview this month. “For these types of investments, you need to have a very long-term investment horizon.”

Patrick Kanters revealed that APG’s investment focus is on areas where capital is scarce, structures are robust, and underwriting discipline is strict, including physical assets and infrastructure-related financing. This strategy indicates that APG prefers to counter-cyclically allocate during periods of volatility, rather than reduce its exposure.

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