German public pension reserves in Hessen, Baden-Württemberg and the federal government are set to invest up to €6bn in a new index-based corporate bond fund managed by a DWS-led consortium.

The fund, structured as an Alternative Investment Fund (AIF), will invest in euro-denominated corporate bonds aligned with the European standard for climate-neutral financial investments, with the aim of generating returns while supporting the long-term security of pension reserves.

The investors are the Baden-Württemberg State Pension Fund, the Hessen pension reserve special fund known as the Alterssparbuch Hessen, and special assets of the federal government and social security system.

The German central bank, the Bundesbank, will purchase the fund units on behalf of the federal and state portfolios.

The target fund volume planned by the two states and the federal government is between €3bn and €6bn.

The consortium responsible for launching and managing the fund comprises DWS Group, which will oversee the fund’s passive investment strategy, alongside DekaBank Deutsche Girozentrale as custodian and STOXX Ltd. as provider of the sustainable index concept.

Commenting, Hessian Finance Minister Professor Dr R. Alexander Lorz, said: “Around €7bn is invested in the Alterssparbuch Hessen, our state’s pension reserve. By 2027, the state will invest around 10 per cent of these assets in the new corporate bond fund.

“This means we are continuing to consistently pursue a broadly diversified investment approach that helps minimise investment risks and achieve the objectives of security, returns and liquidity as effectively as possible.

“This strengthens the resilience of our reserves against market volatility. Together with Baden-Württemberg and the federal government, we are creating synergies for stable financing.”

Baden-Württemberg Finance Minister, Dr Danyal Bayaz, added that the new fund complements its investment strategy with European corporate bonds and “further diversifies the risks of our pension reserves”.

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