Pensioenfonds Zorg en Welzijn (PFZW) the €250 billion Dutch healthcare fund, has just published the 800 names that have made it into its reduced equity portfolio. The final list, steadily cut over recent years from a high of 3,500, enables the investor to better lean into its celebrated reputation in sustainable investment which is integrated not just in equities, but across the entire portfolio.

“Reducing the portfolio is the best way to really understand what companies are doing and know what we own,” Professor Dirk Schoenmaker, chair of the investment committee, said in an interview with Top1000funds.com.

BlackRock and Legal & General Investment Management, which managed multi-billion dollar mandates, have lost mandates alongside AQR Capital Management. And Robeco, Man Numeric, Acadian, UBS, Schroders, M&G and Lazard will now manage PFZW’s equity portfolio, alongside the internal team at its asset manager PGGM. 

Schoenmaker, who teaches banking and finance at Erasmus University, is a research fellow at the Centre for European Policy Research and used to work at the Dutch Ministry of Finance and the Bank of England. His experience and expertise was sought by PFZW to help shape its key strategic goals and investment policy which is implemented by its asset manager PGGM.

As part of a multi-year journey, PGGM has changed its investment approach to focus on risk, return and impact. In April, chief fiduciary officer of PGGM, Arjen Pasma, flagged to Top1000funds.com that there would be a change to the manager roster in public equities this year, and other asset classes would be impacted as it rolls out its impact journey to 2030.

Among those strategic goals sits PFZW’s ambition to apply fundamental research to each individual company in the portfolio, digging into financials, strategy, risk and industry trends to go much further than “one or two ESG metrics” to reveal the sustainability of corporate business models.

Rather than being “unpleasantly surprised” by incidents at companies because they were part of an index of thousands, the benchmark is consciously built based on balanced return, risk, and sustainability.

This will also allow PFZW to put more to work in impact where it currently invests around €50 billion in transition themes like climate, healthcare, biodiversity and the circular economy.

It’s an approach that Schoenmaker compares to Warren Buffett’s fundamental approach. “Fundamental investors like Warren Buffet don’t invest if they don’t understand the business model, and at PFZW we can now also really get to know the company and make a conscious decision whether we want to invest or not.”

It also has echoes of another Buffett missive: skilled investors should build concentrated portfolios because, in Buffett’s words, over diversification “makes little sense if you know what you’re doing” and when it comes to sustainability, PFZW and PGGM are global leaders in the field.

The reduced equity portfolio has a 1.5 per cent tracking error and Schoenmaker says it is designed to deliver a return closely aligned with the broader market. “We are not trying to beat our benchmark,” he says. “Impact investment has a neutral effect on ten-year returns. We are not promising higher returns but want to protect the purchasing power of pensions. Impact is about long-term value creation.”

With that said, in real estate he notices that a positive feedback loop has started to emerge.

“Energy-efficient residential and commercial buildings have increased rental and property values. We are starting to get to the exciting bit,” he says. It means that when the PGGM team spots poor energy efficiency in real estate holdings they will invest to improve that part of portfolio in keeping with value investment.

He believes the same thing will happen in infrastructure whereby “making the right decisions around water, electricity and transport” will secure long-term value. “The infrastructure we build today locks in the energy mix for the next twenty years,” he says.

Portfolio construction

One segment of the 800 equity names comprises “sustainability neutral” companies that don’t have a big impact either way, he continues. These companies ensure the portfolio is diversified and balanced across different sectors and strategies, and that the fund doesn’t miss out on market trends – PFZW still has exposure to mega-cap tech stocks that have dominated the US equity market, but the allocation is “a bit smaller.”

Portfolio construction also involves divestment based on PFZW’s exclusion preferences drawn from its 3 million plan beneficiaries over the years.

Tobacco was excluded years ago, but in June last year PFZW sold approximately €600 million in gambling stocks following a member survey indicating concerns. The pension fund has also completed divestment from a total of 310 oil and gas firms because they lacked credible climate strategies. It has sold stakes worth a combined €2.8 billion, retaining only seven frontrunners committed to transitioning to low-carbon energy.

Schoenmaker says the decision was a consequence of “years of collecting information” and engagement with fossil fuel groups to produce verifiable transition plans to limit temperature rises, that ultimately came to nothing.

“It was very disappointing because we walked away from a large group of companies, although if they reform we will be back in. Engagement doesn’t work unless you divest,” he says.

Despite the failure of engagement with fossil fuel groups, he believes that corporates welcome PFZW’s engagement. Mostly because the positive effect of engagement soon appears in their bottom line.

“We try to be an informed investor and always listen before we start asking the questions. Engagement makes us an interesting partner for companies. We see things happening they might have missed, and we can give advice.”

Like his believe that corporate stories become much more compelling when the annual report begins by outlining what a company does, or is trying to achieve, than stats on the share price or dividends.

Still, engagement with private equity GPs to integrate impact, an important component of PFZW’s balanced portfolio and which accounts for around €23 billion, has been slow. “Only some [GPs] have started to move, and most of those are in Europe,” he reflects.

But he notices more pension funds are putting pressure on GPs to do more to integrate impact, and the co-investment pipeline is growing.

“We are actively discussing impact with our GPs but it is a long-term process that requires patience. If we can achieve change regarding impact in private equity, we will have achieved a lot.”

Navigating anti-ESG sentiment

Part of Schoenmaker’s job is to ensure PFZW reflects plan beneficiaries in its investment strategy. It’s an engagement process that reveals the investor practices what it preaches.

PFZW keeps abreast of beneficiary sentiment by regularly surveying participants and the board reports quarterly to an accountability body peopled by employers and retirees. He says participants continue to “applaud” a strategy that combines sustainability with returns despite the Netherlands also experiencing a backlash in ESG sentiment.

He is confident members “truly understand” how impact aligns with long-term value creation. But he also believes anti-ESG sentiment is best viewed through the lens of any other business cycle.

“It is true that people are pessimistic about sustainability and companies and governments have taken back commitments. There was a lot of interest in sustainability, and now that has partly fallen away, but this is the business cycle of sustainability, and we look through it for the long haul.”

Schoenmaker, who returns to his students this week after the summer break, concludes: “I always tell my students it’s not a question of making finance sustainable, it’s about using finance to help solve problems. Finance is not the culprit – it is the means to achieve returns and help create a liveable planet and transition to a new world that will happen in their lifetime.”

After hiring former CalPERS’ investment chief Ben Meng six months ago, Canadian pension giant CPP Investments has added another seasoned pension executive Kevin Bong to its investment team, in a sign that the C$732 billion ($530 billion) behemoth is staffing up to focus on alpha and enhance the total portfolio approach. 

Bong, who previously oversaw AIMCo’s Singapore branch before the Alberta fund shut its local operations, relocated back to Toronto for the managing director and head of portfolio design and construction role at CPP Investments, which began this week. The position sits within the total fund management department and reports to senior managing director and department head Manroop Jhooty.  

CPP has been on a journey to evolve its well-known total portfolio approach. Part of Bong’s role will be researching and testing “emerging factors” that can be incorporated into the fund’s total portfolio approach, alongside traditional macro factors like inflation and growth that can influence risk and returns.  

Geopolitics and climate change are two “emerging factor” examples, with the fund using scenario-based testing to inform adjustments to the portfolio on a tactical – or even strategic – basis, Jhooty said in an interview with Top1000funds.com last year.  

Bong will also take charge of designing short and long-term portfolio targets, systemic risk factor modelling and sustainable investment integration, according to his LinkedIn.  

Prior to AIMCo, where he was chief investment strategist responsible for setting the fund’s overall investment strategy in addition to being Singapore’s local head, Bong spent more than a decade in two separate stretches at GIC where his final role was director at the economics and investment strategy department.  

Total portfolio management and active management will work in tandem to carry CPP over the C$1 trillion mark in 2031 and C$3 trillion by 2050. In an interview with Canadian press in 2023, chief executive John Graham flagged the beginning of “a decade of alpha” – a period when investors will be rewarded for picking the right countries, asset classes and stocks as the investing environment becomes more volatile.  

As CPP looks to capitalise on market inefficiencies, it selected Meng – who is an industry veteran that led some of the world’s biggest and most complex asset owners – to head up the efforts. Before his stint at CalPERS, he was the deputy CIO at China’s massive foreign reserve investor, State Administration of Foreign Exchange (SAFE).  

Meng joined CPP as managing director and head of investment portfolio management this March, looking after strategies in the fund’s active portfolio which accounts for over half of its assets under management.  

It mainly consists of capital markets and factor investing, active equities, credit, private equity, and real assets departments, and some cross-strategy investments that sit under total fund management. It has delivered a 12 per cent net return over the past five years, including performance of absolute return strategies.   

The fund has been finetuning aspects of its thesis on active investment, including cutting back on emerging markets exposures due to improving market efficiency and a narrowing window of opportunities to generate alpha.  

On the way to C$1 trillion, CPP said its focus on active management will be on “orchestrating active capabilities in the most effective ways” and breaking down investment silos, as well as building a one fund culture where ” people’s identity in this organisation is CPP” rather than individual investment teams.  

CPP Investments’ 10-year annualised net return stands at 8.4 per cent.  

The Alameda County Employees’ Retirement Association (ACERA) is preparing a significant overhaul of its $6.6 billion public equity portfolio, shifting towards a more global and actively managed strategy.

The potential restructure would require up to four manager terminations and up to three global equity searches (core, growth, and value styles with 20 per cent allocated to each).

“We’re not getting a lot of bang for our buck – our tracking error is below 1 per cent,” investment officer Stephen Quirk said at an investment committee meeting in July.

The $13.2 billion fund, which provides retirement benefits for public employees in Alameda County, California, has run a largely passive approach since 2018. About 80 per cent of the US equity portfolio is indexed by BlackRock. But in 2024, the US equity portfolio underperformed the Russell 3000 benchmark (22.8 per cent versus 23.8 per cent) thanks to some active, large cap managers underperforming.

The fund’s analysis, in conjunction with investment consultant NEPC, found that many of its current managers have not produced significant positive net excess composite returns since inception, with excess returns ranging from zero to 3.2 per cent. It found only one if its current six managers were high conviction.

The review led to the fund adopting the MSCI ACWI IMI global equity benchmark as its main benchmark, replacing the Russell 3000 for US equities and the MSCI ACWI ex-US IMI benchmark.

“When you implement a global benchmark that’s acknowledging [that] strategically you’re going to recognise the entire [set of global investment] opportunities – that you’re not trying to tilt one way or the other,” Quirk said.

“Then, the benefit of hiring a global manager is you’re outsourcing that decision to them, saying, ‘Hey, we’re not smart enough. We’re paying you active fees. If you guys have a view, you can implement that’.”

The shift recognises the increased globalisation of the economy, markets, and companies, which creates new excess return opportunities for skilled active global managers, according to the fund.

While the new strategy was not made in response to the market turmoil unleashed in April by President Trump’s Liberation Day tariffs, the move aligns with the more bifurcated world that investors are now grappling with.

Active management versus passive

There has been a longstanding trend across the industry towards passive strategies, with institutional investors swayed by lower costs and the difficulty active managers have had in consistently beating benchmarks.

However, ACERA’s research showed a greater dispersion and outperformance in the global equity manager universe than in the US and international large cap equity manager universe, implying an environment more suited to successful active management.

Quirk said its preferred active equity strategy would double tracking error to around 2 per cent, but this would require mitigating underperformance risk by picking the right managers and building a diversified equity portfolio.

“All these analyses shows excess return,” he said of the three different models the fund assessed. “The reality is, when you take on risk, you can underperform by a lot as well.”

ACERA’s preferred option (the only option to take tracking error to around the 2 per cent level) involves lowering the current passive allocation from 64 per cent to 20 per cent. A back test showed it would have delivered a 10 per cent annualised return over the decade ended March 31, 2025 compared to its current equity portfolio return of 8.6 per cent.

The equity portfolio represents a substantial shift, although the fund has yet to finalise the decision.

“I understand the transition might be complicated, but the goal is the end product is simpler, higher conviction, and ultimately greater excess returns,” Quirk said. “That’s the number one goal we’re trying to achieve.”

ACERA’s 50.2 per cent portfolio allocation to global equities is slightly overweight compared to its long-term policy target of 48 per cent. It also has an overweight to absolute return strategies (7.9 per cent versus a target of 6 per cent) and an underweight to private credit (4.3 per cent versus 6.8 per cent).

At its most recent August board meeting, the investment team discussed plans to bring its entire portfolio more closer to those targets by redeeming about $174 million from its most liquid absolute return strategies and reallocating it to Loomis Sayles’ fixed income strategy, which it views as having the most similar risk-return characteristics as ACERA’s private credit program.

Singapore’s Temasek has unveiled its biggest organisational overhaul in more than a decade, splitting its investment portfolio into three entities to “sharpen” investment focus, boost accountability and align performance metrics. 

From April 2026, the S$434 billion ($324 billion) sovereign wealth fund will manage its investments via Temasek Global Investments, Temasek Singapore and Temasek Partnership Solutions, respectively looking after the three portfolio segments: global direct investments (40 per cent of the fund), Singapore-based portfolio companies (40 per cent), and partnerships, funds, and asset management companies (20 per cent).  

Temasek Holdings CEO Dilhan Pillay said the three investment segments have distinct attributes and “there are good reasons” behind the separation.  

“[Since our last restructure 11 years ago] we developed so many other capabilities to support our portfolio strategies, our investment strategies, and that’s really what we’ve been investing in – capabilities for the world that was changing, and the world that will continue to change,” Pillay told reporters last Friday. 

“In that period of change, we too need to change.” 

Temasek’s portfolio composition as at March 31. 2025. Source: Temasek

The nature of investments is the most notable difference: Temasek is typically a minority investor in its global direct investments segment and often leans into the expertise of like-minded partners, but it is a control investor in Singaporean companies and is looking to be more active in board nominations moving forward.

Performance metrics used to evaluate these investments also diverge. Financial return is the performance that matters the most in the global direct investments segment as Temasek is a shorter-term owner of these businesses, but for Singaporean companies the success is also hinged upon portfolio companies’ operating metrics including business transformation, capital structure optimisation and even talent development, Pillay said.  

In turn, different kinds of capabilities are desired in the three segments. It is crucial for the global direct investment team – consisting of 290 professionals – to source and execute the right deals and maintain sector expertise, while the Singaporean investment team needs to have knowledge around company restructuring and capital management.  

In a media release, the fund said the new structure would allow it to “support portfolio strategies for growth and returns, and perform with greater accountability and alignment”.  

Alongside Temasek International, which holds the group’s corporate functions, the four subsidiaries will sit under Temasek Holdings – a Singapore government-linked entity whose financials are subjected to certain audit and accountability requirements, known as the Fifth Schedule entity. All four subsidiaries are chaired by Pillay.  

The overhaul is a part of Temasek’s 10-year strategy, known as T2030, and offered a glimpse into the fund’s forward-looking investment philosophy. To weatherproof its portfolio, the fund is targeting a 60/40 split between the “resilient” and “dynamic” portfolio components.  

The resilient component will deliver a stable, narrower range of outcomes over time and include core Singaporean and global portfolio companies, “compounders” with long-term potential, partnership funds and asset management companies, private credit and core plus infrastructure. It has a 5 per cent target allocation to private credit compared to 2 per cent currently.  

The dynamic component will be companies with high growth prospects, including growth equity, public markets and liquid strategies, and opportunities identified by its innovation and emerging technologies team dedicated to scoping out future-facing solutions.  

Pillay said Temasek has been enhancing its capabilities in public markets during the last 18 months, which is crucial for liquidity and the fund’s triple-A credit ratings, and has already seen an “uplift in the performance”.  

Elsewhere in the portfolio, Temasek is holding a strategic review on how to better synergise between the dozen asset management companies it controls. The main asset management platform for Temasek is Seviora Holdings which has four subsidiaries, including Azalea which securitises its LP interest in private equity funds. Other companies include Aranda, a private credit offshoot carved out of Temasek’s in-house credit team which now manages a S$10 billion portfolio of its funds and direct investments.   

Temasek Global Investments will be led by Chia Song Hwee, who also becomes co-CEO of Temasek International this October. Temasek Singapore will be headed by chief financial officer Png Chin Yee. Rohit Sipahimalani remains chief investment officer of the group.  

Temasek invested S$52 billion and divested S$42 billion in the year to March 2025. The 10-year and 20-year total shareholder return – a compounded and annualised figure which includes dividends paid by Temasek and excludes investments from shareholders – is 5 and 7 per cent respectively in Singapore dollars.

Norway’s $2 trillion sovereign wealth fund, Norges Bank Investment Management, has divested US machinery manufacturer Caterpillar and five Israeli banks from its equity portfolio because of the risk of these firms contributing to human rights violations in the Palestinian territories.

The ethics committee for the world’s largest sovereign investor, which manages the assets of the oil fund, found that Caterpillar’s yellow bulldozers were being used in the “unlawful destruction of Palestinian property” and Caterpillar has “not implemented any measures to pre­vent such use.” NBIM had a $2.4 billion investment in the company at the end of 2024, equivalent to an ownership stake of around 1.2 per cent.

Meanwhile, NBIM has divested Israeli banks First International Bank of Israel Ltd and the holding company FIBI Holdings Ltd, Bank Leumi Le-Israel BM, Mizrahi Tefahot Bank Ltd, and Bank Hapoalim BM because these businesses have provided financial services required for construction activity in the West Bank, which had been “established in violation of international law”.

Last year, the United Nations found that Israeli settlements built on territory seized in 1967 were illegal, a ruling that Israel called “fundamentally wrong” because of its historical and biblical ties to the land.

“Before deciding to exclude a company, Norges Bank shall consider whether other measures, including active ownership, may be better suited. The board’s assessment is that it is not appropriate to use other measures in these cases,” said NBIM in a statement.

Part of an ongoing purge

The latest divestments mark a step up in the oil fund’s response to growing scrutiny of whether it has been helping to finance Israel’s war in Gaza, and come in response to Norway’s Ministry of Finance asking the fund to review its investments in Israeli companies.

A letter from the Ministry of Finance in early August questioned the fund’s individual investments given the deteriorating situation in the West Bank and Gaza.

Earlier in the month, NBIM sold its eleven holdings of Israeli companies outside of its equity benchmark index and severed ties with external Israeli fund managers. It means the fund’s investments in Israel are now limited to companies that are in its equity benchmark index.

However, it won’t invest in all Israeli companies in its reference index. There were 56 Israeli companies in the benchmark index – which consists of around 9,200 global companies – at the end of the first half of the year. NBIM currently invests in 38, with a total investment value of around NOK 19 billion (approximately $1.9 billion).

“These measures were taken in response to extraordinary circumstances. The situation in Gaza is a serious humanitarian crisis. We are invested in companies that operate in a country at war, and conditions in the West Bank and Gaza have recently worsened. In response, we will further strengthen our due diligence,” said Nicolai Tangen, chief executive of Norges Bank Investment Management, speaking in early August. “The measures we are taking will simplify the management of our investments in this market and reduce the number of companies that we and the Council on Ethics monitor.”

The oil fund’s divestment strategy has also lagged Norway’s much smaller NOK 878 billion ($87 billion) Kommunal Landspensjonskasse (KLP), the fund for local government employees and healthcare workers.

In July, KLP stepped up exclusion to include US industrials group Oshkosh Corporation and Germany’s ThyssenKrupp for selling weapons including armoured personnel carriers, warships and submarines to the Israeli military.

Updated expectations

NBIM said that in 2022 and 2024 it updated the expectation document on human rights and strengthened the expectations of companies’ conduct in conflict areas to reduce the risk that they contribute to violations of human rights and international law.

Since 2020, NBIM has contacted over 60 companies about due diligence and risk-reducing measures in war and conflict areas.

“We have had dialogue with over 30 companies with operations connected to the West Bank and Gaza. This is ongoing work that is given high priority,” said the fund.

The investor monitors new companies that enter the investment portfolio on a daily basis, and since 2024 has required that external managers must have prior approval to make investments in Israeli companies that were not already included in the portfolio.

“Not all new companies that were assessed received such approval,” it said.

That includes Bet Shemesh Engines Holdings, the Israeli aerospace and defence company, which was originally assessed as a company with medium risk. The Ethics Council said it should have escalated the risk sooner after media reports uncovered the investment, prompting public outcry.

“Given the information that has now emerged, the company would have been assessed as high risk. With a broadly invested global portfolio, there will always be a risk that information is not captured early enough, or that we make assessments we, in hindsight, would have made differently,” said the fund.

China’s $420 billion National Social Security Fund is scoping out technology-related investment opportunities in domestic equities, particularly the so-called “AI+” theme that has been gathering market and political momentum.  

As a largely domestic investor with 88.5 per cent of its assets invested in China, the fund’s perspective signposts where opportunities are emerging in A-shares. Its push into AI and technology-related stock points to sectors that will benefit from policy support and domestic demand.

“AI+” refers to cases where artificial intelligence is married with traditional industries to enhance profitability, such as “AI + agriculture” where machine learning is used to monitor soil health and pest problems and “AI + manufacturing” where it is used for product quality control on the assembly line.  

It was a prominent theme at this year’s Two Sessions – China’s top political gathering – where Premier Li Qiang highlighted AI-enabled electric vehicles, smartphones, computers and robotics as key technology priorities in 2025. 

“The ‘AI+’ investment opportunities warrant attention, including how leading internet companies are integrating computing power and algorithms into consumer-end applications, how AI can enhance profitability when combined with China’s strength in traditional light industries such as furniture and toy-making, and those companies in the robotics supply chain that have already secured global orders,” according to a new research paper from the National Council for Social Security Fund (NCSSF) – the agency that manages and invests China’s strategic pension reserve – published in Chinese. 

“AI+” is the next iteration of the “internet+” strategy which the central government first backed during the Two Sessions in 2015. It homed in on transforming traditional industries with speedier connection and information exchange, which prompted the rise of e-commerce giants, mobile payment systems, ridesharing platforms, delivery services and travelling apps. 

Aside from traditional industries, the paper – authored by Li Na in the fund’s asset allocation and research department – flagged that Chinese tech giants have the potential to amplify their strengths in AI applications this year, supported by the rapid rise of domestically developed algorithms.  

It is a welcome shift from what the fund observed in 2024 when, aside from a handful of outperforming companies and short-term thematic trades, the AI sector in China’s A-share market offered little broad-based beta opportunities. 

The investor is paying close attention to technology stocks because of the resilience they showed during risk-off periods. Supporting this thesis, the NCSSF’s research examined two case studies of the US and Japan, focusing on periods when their respective 10-year government bond yields fell by 100 basis points from 2 to 1 per cent.  

Broadly, it took 8.5 years (2011-2020) for US Treasury yields to fall from 2 to 1 per cent before recovering an upward trend, and 14.5 years (1997-2010) for Japanese government bonds, the research said.  

It tallied the performance of different asset classes during these two stretches and found one commonality between the US and Japan: the technology sector (S&P 500 Information Technology and TOPIX Precision Instruments) posted strong gains relative to the broader equity markets.  

“Defensive sectors such as utilities and food also performed well. The main divergence appeared in financials: Japanese financial stocks dropped sharply, while US financials advanced,” Li wrote, concluding that during period of falling yield the technology sector still provides ample investment opportunities.  

Aside from China A-shares, Li also recommended looking out for any corrections in US tech companies which could be attractive entry points.  

“In 2024, the US equity market has been characterised by a combination of high returns, low volatility, and elevated valuations. Continuous capital expenditures by technology companies supported earnings growth for leading computing power providers, while AI firms such as Palantir translated enterprise-focused AI applications into tangible performance,” Li wrote. 

“[In 2025], AI-driven applications that lower costs and improve efficiency, as well as services and products with large market potential – such as autonomous taxi services – warrant close attention.” 

The research also recommended increasing allocation in foreign bonds which has become attractive due to the low-interest rate environment in China.  

Since NCSSF was established in 2000, its annualised rate of return was 7.36 per cent as at December 2023. It has 14 departments managing 31.2 per cent of the investment in-house and 68.8 per cent via external mandates.  

It invests in a list of asset classes approved by the State Council of China, including domestic and foreign equity, bonds, bank deposits, investment funds and foreign derivatives.