Germany’s sovereign wealth fund Kenfo plans to increase its allocation to private markets from 25% to 30% over the next two years, with future commitments focused on infrastructure and real estate while adopting a more selective approach to private equity, according to a report by Bloomberg.
Kenfo, which manages more than €28bn and was established to fund Germany’s long-term nuclear waste disposal liabilities, said it continues to see attractive investment opportunities in private infrastructure and real estate despite a more challenging environment for private equity.
According to the fund’s latest annual report, the higher private markets allocation will be achieved primarily by expanding its infrastructure and property portfolios rather than increasing exposure to buyout funds.
Verena Kempe, Kenfo’s head of investment management, said private equity has not delivered the level of performance the fund had anticipated in recent years, prompting a more selective investment strategy. The comments reflect a broader trend among institutional investors, many of whom have become more cautious about private equity amid higher interest rates, slower deal activity and concerns over the impact of artificial intelligence on software-focused portfolio companies.
Alongside changes to its private markets strategy, Kenfo has adjusted its government bond positioning. The fund reduced its US Treasury holdings to around €200m at the end of 2025, down from approximately €600m a year earlier, before rebuilding the position by more than €500m by the end of June.
Chief executive Anja Mikus said US Treasuries remain an important component of the portfolio, citing relatively attractive yields compared with many other developed market government bonds and emphasising that the fund would continue to manage the allocation flexibly.
Since its establishment in 2017, Kenfo’s investment portfolio has generated a cumulative return of 7.9%, equivalent to approximately €8.8 billion, despite recent periods of heightened geopolitical uncertainty.
The allocation shift highlights how large institutional investors are increasingly refining their private markets strategies, favouring infrastructure and real estate for their inflation-linked cash flows and defensive characteristics while becoming more selective in deploying capital to private equity.
