NETHERLANDS - Dutch pension funds who invested in a global tactical asset allocation (GTAA) strategy from Goldman Sachs Asset Management (GSAM) have been shaken by the strategy's recent poor performance, IPE has learned.

All but one of the pension funds IPE spoke to confirmed GSAM's GTAA performance was poor during 2006 and in the first four months of 2007. Since May, the schemes said performance had improved but were unwilling to provide exact details.

Performance figures seen by IPE for GSAM's GTAA strategy confirm the feedback by the Dutch schemes as its strategy had a gross excess return relative to the benchmark of -1.61% for 2006 and -0.68% for the first quarter of 2007, excluding fees.

GSAM declined to comment on its GTAA performance but responding to comments made by pension funds in the Netherlands, GSAM said in a written statement: "We have given clients additional analysis on the current drawdown situation to help put the current climate into perspective."

Along with fiduciary management, GSAM has successfully marketed its GTAA strategy to several big Dutch pension funds in recent years. GSAM won fiduciary management mandates from pension funds such as Vervoer and Campina and insurers such as CZ, Dela and VGZ.

PME, a €21bn industry-wide pension fund for the Dutch engineering industry, insisted it was satisfied with the GSAM's GTAA.

"PME uses a tailor-made GTAA from Goldman Sachs and we are satisfied with the returns for this year and over the long run," said PME spokesman Bram van Els.

In Germany, meanwhile, Dirk Lepelmeier, managing director of the €8bn doctors' fund NAEV, said his scheme's investment in GSAM's GTAA had been hit by underperformance "that came close to the double-digits". NAEV has €85m invested in GSAM's GTAA, €60m of which was allocated in June 2006.

Like the Dutch schemes, Lepelmeier said the product's performance had improved since May.

"And overall, the performance of our investment is still positive - in the single digits. We also don't plan on withdrawing right now, as the timing is not right," he told IPE.

Lars Ericsson, director of marketing for IPM, a Swedish manager specialising in the strategy, also remarked: "Performance can vary, but I think GTAA managers are providing alpha even after fees. I don't think many equity managers can make that claim."

Indeed, GSAM figures reflect that since its inception, its GTAA has produced a gross excess return relative to the benchmark of 1.86%.

On the other hand, performance figures show the strategy's returns have been very volatile. In 2003, the gross excess return was just under 7% before turning negative in 2004 at
-1.7%. In 2005, the return was up again at just under 5% and then, as already mentioned, negative until the end of the first quarter 2007.

Commenting again, GSAM continued: "Generally speaking, we believe that an overlay such as a GTAA strategy can provide an uncorrelated source of excess return. GTAA excess returns typically have a low correlation to both passive uncorrelated and active sources of risk.

"GTAA may also be seen to have certain advantages to clients in terms of flexibility and cost-efficiency and can be useful in many portfolio contexts and can be customised with regard to benchmark and risk profile. GTAA is designed to improve risk-adjusted returns with minimal capital outlay and limited disruption to an existing manager roster," it added.

A spokesman for one Dutch pension fund said it would be pulling its investment out of the GTAA strategy, though it did not blame the performance.

"It has more to do with the fact that GTAA no longer fits our structure," the scheme spokesman told IPE.