Aegon began investigating the potential of microfinance investments in 2014. The Aegon The Netherlands Risk & Capital Committee which approved the mandate concluded that microfinance was a good fit within Aegon’s portfolio, stating that: “In the current low interest rate environment the returns from microfinance are attractive, the risks and durations are acceptable, and there is essentially no correlation with other asset classes Aegon invests in.”
The biggest single challenge, according to Marcel van Zuilen, a portfolio manager at Aegon Asset Management, was reporting requirements. “Solvency II introduced far-reaching ‘look-through’ reporting requirements. Microfinance funds need to report on their investments in a great amount of detail so that the investor can demonstrate to the regulator that it is compliant. If you consider that data needs to come from microfinance institutions in places like Cambodia, Nigeria and some 100 other countries you realize that’s no simple task.”
To truly understand the microfinance investment chain and to select the microfinance funds that can handle Aegon’s demands necessitated the development of a new area of expertise, which according to Harald Walkate, Global Head of Responsible Investment at Aegon Asset Management, can now also be leveraged to service Aegon and external investment clients in a sustainable manner.
A solid track record and diversified investment products
Swiss-based responsAbility looks back on a 13-year track record of successful microfinance investments. Managing a whole series of investment solutions, responsAbility is the world’s largest private investor in the area of microfinance. At the end of 2015, responsAbility-managed investment vehicles had USD 1.9 bn of capital invested in 314 financial institutions across 76 developing and emerging countries. responsAbility has been active in the Dutch market since January 2016. The largest microfinance fund in the world, which is managed by responsAbility, is now available for retail distribution in the Netherlands along with the vehicles dedicated to institutional investors.
Building on its solid experience in the area of microfinance, responsAbility has since expanded its operations to cover other development-related sectors such as energy and agriculture. In the financial year 2015, responsAbility grew its assets under management by 22% to CHF 3 billion. As was the case each year since 2011, this reflects inflows of new assets totalling around USD 500 million – of which 50% stemmed from retail investors, 31% from institutional investors and 19% from public sector investors. In 2015, a total of 12 responsAbility investment vehicles invested almost USD 1 billion in 522 financial institutions, agricultural companies and energy firms – carrying out more than 700 transactions in this context.
Alexandre Coquet, Head of Sales France & Benelux, stated: “We are pleased to welcome Aegon to our funds’ investor base, especially since their decision to invest followed a very thorough evaluation process. To successfully develop and manage development investments, what is needed first and foremost is a sound knowledge of local markets. Around 150 experts working at our 9 offices across 4 continents identify new investment opportunities on an ongoing basis, thus laying the foundations for the continued successful development of our business.”