The Dutch pension fund for the healthcare sector, Pensioenfonds Zorg en Welzijn (PFZW), has entered into a €1bn Dutch real estate significant risk transaction (SRT) deal with Rabobank, through its asset manager PGGM.

The deal provides Rabobank with credit protection on the first losses on a €1bn diversified portfolio of commercial real estate financing in the Netherlands. The deal means that PGGM will share the credit risk of a portfolio of diversified loans to Rabobank's core customers.

However, the underlying loans remain on Rabobank's balance sheet, so there is no impact on Rabobank's customers and its relationship with them.

Furthermore, PGGM said that Rabobank's financing of the built environment, whereby the bank is known for its focus on improving the energy efficiency of its real estate financing portfolio, is in line with the sustainability ambition that forms part of PGGM's 3D investment strategy, implemented on behalf of PFZW.

The structure of this SRT transaction complies with the EU criteria for simple, transparent and standardised (STS) securitisations under the securitisation regulations and provides an effective hedge against the credit risk of the underlying portfolio.

PGGM has become a prominent player in the risk transfer space, with €6.7bn invested in credit risk sharing at the end of 2024 – exposure that corresponds to some €80bn worth of loans. It made a 9.9 per cent return on these assets last year and an average annual return of around 12 per cent since 2006.

In July this year, PGGM, also on behalf of PFZW, entered into SRT with UniCredit Bulbank related to the bank’s corporate and small and medium enterprise (SME) loans portfolio, a deal that marked a second partnership between the two following a 2024 transaction.

Indeed, this latest Rabobank deal builds on the long-standing partnership between the bank and PGGM, which has seen a series of similar risk-sharing transactions over the years. The most recent prior transaction was completed in 2024 and covered Rabobank’s large corporate loan portfolio.

PGGM head of credit risk sharing, Barend van Drooge, said: “We are very proud to be expanding our risk-sharing relationship with Rabobank, which has been an important part of our portfolio since 2014.

“We are convinced that Rabobank is committed to supporting the sustainability of the built environment in the Netherlands, which fits in well with PGGM's 3D ambitions of balancing risk, financial return and sustainability in PFZW's investment portfolio.”

Rabobank Real Estate Finance director, Peter de Bruin, said the transaction marks Rabobank's first SRT transaction focused entirely on commercial real estate.

Despite PGGM’s enthusiasm for SRT deals, the European Banking Authority (EBA) recently raised concerns about the growing number of risks involved in SRTs.

The regulator warned about the potential “circles of risks" being created by banks providing funds to investors that are taking on credit risk from other lenders. Pension funds account for 13 per cent of the market, according to the EBA, but they could have indirect exposures to SRTs via other investments.

You can read more on SRT deals in European Pensions’ feature on the topic here.

---