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Sven Schuster, head of corporate management and former head of capital investments at Postbeamtenkrankenkasse (PBeaKK), said the German health insurance fund is moving away from its longstanding overweight to European equities and increasing its exposure to the U.S. equity market.
The shift was made within the framework of PBeaKK’s strategic asset allocation, which defines target allocations and allowable ranges for asset classes but does not prescribe regional equity exposures. That structure gives the investment team discretion over geographic allocations, while keeping the board informed of material changes, Schuster said in an interview with Markets Group.
The decision reflects PBeaKK’s view that highly efficient markets, particularly U.S. large-cap equities, are difficult to outperform consistently through active management or market timing. The fund’s goal is to maintain exposure to what Schuster described as a “textbook world stock market” rather than attempt to identify individual winners or avoid periods of market concentration.
That philosophy underpins PBeaKK’s fully indexed U.S. equity allocation, which tracks the S&P 500 despite the benchmark’s heavy concentration in a small number of mega-cap technology companies. Schuster said the fund recognizes the risks associated with that concentration but does not believe it can reliably improve outcomes by positioning away from the market.
“As of today we ride it,” Schuster said when asked how PBeaKK is approaching concentration risk in U.S. equities.
Reducing exposure to the largest companies, he said, would itself represent an active investment decision and run counter to the fund’s broader belief that investors should avoid trying to outsmart highly liquid markets.
If PBeaKK needed to reduce its U.S. equity exposure, Schuster said it would do so on a pro rata basis rather than by targeting individual holdings. He cited examples of active managers that reduced technology exposure during previous periods of concern about excessive valuations but subsequently underperformed as a reminder of the difficulty of market timing.
PBeaKK’s U.S. equity portfolio is entirely passive, with the external managers responsible for tracking the S&P 500 as closely and cost-effectively as possible. The fund does not apply sector tilts, exclusions or thematic allocations within the portfolio, Schuster said.
That approach differs from PBeaKK’s philosophy in less information-efficient markets, such as emerging market equities, where the fund believes skilled managers may have greater opportunities to add value through security selection.
The fund’s investment team does not actively position around themes such as technology, defense or health care, nor does it maintain carveouts for specific sectors, Schuster said. As a passive investor, PBeaKK remains aligned with the composition of the underlying index.
PBeaKK has held equities exclusively through specialized fund mandates for approximately two decades rather than investing directly. The external portfolio managers overseeing those mandates are responsible for proxy voting on the fund’s behalf, an arrangement that has remained unchanged, Schuster said.
The U.S. equity allocation is implemented through specialized fund mandates in which PBeaKK is the sole investor. The structure allows the fund to access external expertise without building a dedicated internal U.S. equity team, while maintaining oversight through investment guidelines and mandate requirements.
The allocation sits within PBeaKK’s master fund structure, which Schuster described as a fund-of-funds framework established by the investor. While the structure is common among institutional investors, he said its specific implementation is shaped by German regulatory requirements.
On geopolitical risks, including tensions involving Taiwan and technology export restrictions, Schuster said PBeaKK has not introduced additional screening requirements for companies with China- or Taiwan-related supply chain or revenue exposure following the increase in U.S. equity exposure.
Instead, the fund relies on its external managers to comply with applicable regulations and PBeaKK’s exclusion list, which Schuster said is closely aligned with the exclusion framework used by Government Pension Fund Global (GPFG), managed by Norges Bank Investment Management (NBIM). He declined to provide an estimate of PBeaKK’s exposure to companies with China- or Taiwan-related risks.
Schuster acknowledged that U.S. policy uncertainty has increased but said similar challenges exist in other markets, pointing to European regulation, Russia’s war against Ukraine and China’s geopolitical ambitions. Those risks, he said, would have remained even if PBeaKK had maintained its previous European equity overweight.
PBeaKK appointed a specialized portfolio manager two to three years ago to oversee its foreign exchange exposure. The fund’s currency hedge ratio is adjusted over time based on that manager’s market outlook, Schuster said.
Dollar volatility did not influence the timing of PBeaKK’s U.S. equity allocation shift. Schuster said the U.S. dollar continues to provide safe-haven characteristics during periods of market stress, although those benefits have diminished compared with previous years. Over hedging the currency, he added, could remove that protection when it is most valuable.