ABP increases investments in ‘corona’ bonds to €470m

The Dutch pension fund, ABP, for those working in the government and education sectors, has increased its investments in bonds aimed at the fight against the Covid-19 pandemic and its impact.

Since the end of March, it has invested €470m in various 'corona bonds'. This includes improving healthcare and supporting small and medium-sized enterprises in affected countries. A month ago it had invested €288m in such bonds, so has increased its investments over the month by €182m.
ABP recently bought Covid-19 bonds from UNIDEC (€42m), BPI France (€24m) and Instituto de Credito Official, among others. The proceeds will be used, among other things, to scale up healthcare, support small and medium-sized enterprises (SMEs) and a temporary increase in social security expenditure.

Since the outbreak of Covid-19, several agencies have issued bonds to help meet the billions needed for medical aid and to combat the socio-economic consequences of the lockdown.

The Nordic Investment Bank was the first to issue a bond on 31 March, the proceeds of which were specifically intended to combat the Covid-19 pandemic and its impact on companies, employees and vulnerable groups. Other agencies soon followed, such as the Council of Europe Development Bank and the European Investment Bank. Revenue is typically used to expand medical facilities or economic support measures, or a combination of these.

ABP invests mainly in Covid-19 bonds issued by renowned institutions with high creditworthiness, it stated. In terms of risk, bonds with the highest creditworthiness (AAA) are comparable to Dutch government bonds. The interest payment is slightly higher than on comparable bonds, however, investor interest is usually much greater than the issue.

Investments in (semi-) government bonds form the cornerstone of the investment portfolio for pension funds such as ABP. They provide stability and diversification in the portfolio and are easy to trade.

APG Asset Management (ABP’s asset manager) bond specialist, Oscar Jansen, said it is good that institutions issue special corona bonds. 'The impact of the pandemic on society and the economy is huge and a lot of money is needed to fight the crisis. As a socially responsible investor, we want to play an active role in this. "

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