APG, Europe's largest pension investor, plans to increase its allocation to private market assets from the current 26% to slightly above 30%, viewing the current turbulence in credit markets as a potential buying opportunity.

The plan was disclosed by the institution's Chief Investment Officer for Private Markets, Patrick Kanters. This adjustment is directly driven by systematic changes to Dutch pension regulatory rules. The phased implementation of the Future Pensions Act starting in 2023 allows pension funds to take on higher risk and reduce holdings in low-yielding government bonds, creating regulatory room for APG to expand its private market exposure.

APG manages approximately €600 billion in assets, with clients including the Netherlands' largest pension fund, ABP. As the allocation percentage rises, the volume of capital APG directs into private markets will grow significantly.

Private credit is the primary area for expansion. Patrick Kanters detailed APG's current and target allocations: real estate accounts for roughly 10% of total assets; infrastructure currently stands at 5% to 6%, with a long-term goal of reaching 10%; private equity is currently at 8%, up from a historical level of 6%; and natural capital assets, such as forestry, account for less than 1%.

The increase in private debt allocation is the most pronounced. APG's current allocation to private debt is only 1.5%. Patrick Kanters indicated this could potentially rise to between 2% and 4% in the future, depending on client circumstances. Based on the current asset size, this implies the allocation to private credit could grow from approximately €9 billion to nearly €24 billion.

The core change of the Future Pensions Act is that Dutch pension funds are no longer required to promise fixed pension payouts to workers, thereby granting them greater investment flexibility. The new rules permit funds to decrease holdings in low-yield but highly liquid government bonds and shift capital towards private assets offering potentially higher returns.

Demographically, as life expectancy increases and job mobility grows, the new system establishes individual accounts for younger workers, allowing their assets the potential for faster growth. Major Dutch pension funds have already begun transferring capital this year, with the entire industry required to complete the transition by January 1, 2028.

APG's expansion plan coincides with broader pressure on private markets. Several funds targeting US retail investors have recently faced redemption waves due to concerns over declining returns and uncertainty sparked by the impact of artificial intelligence on software companies, leading to noticeably increased market volatility.

Regarding this, Patrick Kanters maintains a relatively optimistic outlook. "Some sub-markets are undergoing a correction, which could indeed present opportunities in the future," he stated in an interview this month. "For these types of investments, you need a very long-term investment horizon."

Patrick Kanters revealed that APG's investment focus is concentrated on areas with capital scarcity, robust structures, and strict underwriting discipline, including financing related to real assets and infrastructure. This strategy indicates that during periods of market volatility, APG is more inclined to position itself contrarily rather than reduce its exposure.