KENFO – Fonds zur Finanzierung der kerntechnischen Entsorgung, located in Berlin, is noteworthy for being Germany’s most substantial sovereign wealth fund. Its establishment in 2017 was in response to the payment of 24 billion euros by nuclear power plant operators to the government. This payment was intended to facilitate the dismantling and disposal of German nuclear reactors, aligning with the nation’s shift away from nuclear energy.
The government’s intentions for Kenfo are evolving, as it seeks to entrust the fund with more extensive responsibilities and a larger pool of funds. Notably, these additional responsibilities involve providing support to the country’s pension system. This approach involves investing a significant amount of money into the fund to create a well-funded foundation for the pension system.
Kenfo’s investment portfolio is diversified, encompassing various types of assets. Over the years, the fund has demonstrated commendable performance, achieving positive returns consistently. However, there was a setback caused by external factors, such as the Russian invasion of Ukraine, which led to a loss and a temporary reduction in capital.
The fund’s success has sparked discussions about its potential role in a broader context. Specifically, there’s a proposal for Kenfo to serve as a central investment institution for the federal government. This would involve unifying various funds, amounting to over 30 billion euros, under a single umbrella organisation. Such a move could leverage Kenfo’s experience and expertise to streamline and optimise the government’s investment efforts.
Kenfo’s oversight is carried out by three key government ministries: the Ministry of Economic Affairs, the Ministry of Environment, and the Ministry of Finance. This arrangement reflects the complex nature of its responsibilities, which encompass nuclear energy transition, waste disposal, and broader financial endeavours.
As discussions about Kenfo’s role continue, its financial performance and potential make it a subject of substantial interest and consideration within the German financial and governmental landscape.
Kenfo predominantly uses external asset managers to invest its funds and focuses on traditional asset classes like equites and fixed income. Even though the creation of a government pension fund is happening long after many of similar efforts in Europe and Northern America, they seem to be falling short of best practices in the industry. Especially, the so called “Canadian Model” has demonstrated how to achieve sustainable superior return through asset class diversification beyond classic “liquid” asset classes and establishment of internal investment capacities to generate economies of scale and reduce cost compared to external managers.