APG, one of the world’s largest asset managers, said pension fund clients were shying away from China as investors warned of heightened geopolitical risks.
The Netherlands-based group manages approximately €532 billion in assets in Dutch pension schemes serving approximately 4.8 million members, and is a well-established investor in China with approximately 15 years of experience. Previously opened an office in Hong Kong.
But APG Asset Management chief economist Theis Knaap told the Financial Times that concerns about China are growing among pension fund clients.
“Five years ago, if we said, ‘China is growing fast and opening up,’ the fund would say, ‘Yeah, take our money there.’ No,” Knapp said.
“But it has become very difficult to sell this to our stakeholders. They are very conscious of the risks they carry. I have.”
He added: We own real estate, equity, debt, and have significant investments in China. APG did not disclose the total amount of its China exposure.
Comments from one of Europe’s most powerful investors came as other large institutional pension funds pulled out of China amid growing concerns over tensions with the United States.
Last week, the FT reported that the Quebec Deposit Authority, a global investment group with a total of C$400 billion (about $295 billion), would halt private trading in China and close its Shanghai office.
Singapore’s sovereign wealth fund GIC has slowed its direct investment in China, and the Ontario teachers’ pension plan announced in January that it would suspend future direct investment in China.
APG said it is in discussions with clients about desired regions and asset classes to invest in, including China.
“On the one hand, it seems inconceivable to me that we would withdraw from such a large part of the global economy,” Knapp said. “(But) at the same time, there is certainly a dark cloud gathering around China.”
He added: “We have always seen China as a place where we have to put in some effort.
At the same time, the European market is becoming more attractive to investors. The Euro Stoxx 600 index is up more than 7% so far this year. This is partly due to the region’s success in avoiding the winter energy crisis.
“Five years ago when we looked at the investment opportunity in Europe under negative interest rates, the stock market and very high valuations . I started looking farther away,” he said.
“A lot of money has flowed out of Europe to the US and Asia, but we are also very busy pumping money into alternative and new investment categories.”
But he also added: “The trends of the last five years are coming to an end. We are no longer pulling capital out of Europe, nor are we exploring entirely new asset classes. Traditional asset classes and traditions. Expected returns in key regions are improving.”
Knapp said APG’s pension customers have their own policies on risk and whether they think it’s “better to keep the line open” by continuing to invest in the region.
