NETHERLANDS - Dutch pension funds should join forces as co-operatives to prevent being forced further into short-term thinking, according to Gerald Santing, former director of the Netherlands Authority of the Financial Markets (AFM).
Santing told IPE he fears the application of various short-term methods - such as the valuation of investments and liabilities against market value, as well as the recovery periods linked to relatively short-terms - will cause a steep reduction in the total number of pension funds.
"I note that, in the past, we had major problems but the very long-term thinking which existed at that time, and could exist because of other valuation methods, prevented a shake-out from occurring," he told IPE.
"Maybe it's about time for a cooperative collaboration between pension funds, not only within a sector - that is the basis for the development of industry pension funds -, but across the sectors," suggested Santing.
He believes such pooling of assets and liabilities among funds does not only decrease risks but would also take away the problems of diversity for the regulator, by giving more flexibility to introduce better regulatory measures, while retaining the individual funds' identity for their participants.
The pooling of funds with various backgrounds will be possible in the short-term with the arrival of the new Dutch pension vehicle API, he claimed.
That said, Santing has warned institutions should start looking now at ways to achieve such cooperative activity.
Only last week, fiduciary management consultant Anton van Nunen reiterated the widespread claims last week suggesting much of funds' funding shortfalls can be attributed to the compound rate. (See IPE story Compound rate big mistake for funds - Van Nunen)
If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com
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