Ärzteversorgung Westfalen-Lippe (ÄVWL), the €15.5bn pension fund for doctors in Germany’s Westphalia-Lippe region, has significantly increased its exposure to directly held bonds while actively overweighting US dollar-denominated assets.

According to its 2024 financial statement, ÄVWL increased its allocation to directly held bonds by nearly €400m year-on-year, bringing the total to approximately €4.43bn.

These investments now account for 29.3% of the fund’s assets under management and delivered a return of 4.9% in 2024, up from 4.1% the previous year.

The performance was driven by falling interest rates, stable inflation expectations and declining risk premiums, which supported price gains across fixed-income markets.

The pension fund noted that improved market conditions in 2024 particularly benefited government and investment-grade corporate bonds.

ÄVWL manages its assets across both liquid and illiquid strategies, primarily through Spezialfonds. It actively increased its allocation to US dollar-denominated securities within its Spezialfonds portfolios, which total €4.3bn in assets.

The fund cited the relative strength of the US dollar last year as a key factor behind the move.

Within a €3.3bn Spezialfonds portfolio focused on equities and bonds, ÄVWL pursued a conservative allocation of approximately 70% in bonds and 30% in equities.

The strategy delivered a return of 9.5% in 2024. Equities were held at a neutral weighting, while the fund expressed a growing interest in corporate bonds and corporate loans.

Despite rising market risks, the scheme has said it would continue its strategy to gradually restructure its fixed-income portfolio. It acknowledged that interest rate developments remain uncertain, with potential upward pressure on yields stemming from the US administration’s aggressive trade policy.

In Europe, the fund anticipates that increasing public spending could significantly affect capital markets and its bond exposures within Spezialfonds.

The pension fund also flagged heightened equity market risks in light of increased volatility following Donald Trump’s re-election as US president. In response, ÄVWL is deploying derivatives to temporarily hedge equity risk in its larger Spezialfonds portfolios.

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Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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