The mind behind the blueprint for success

geraldine leegwater

A distinction of winning the coveted IPE Pension Fund Personality of the Year Award is that this is the readers’ choice. By voting for ABN AMRO Pension Fund’s Geraldine Leegwater, they are acknowledging the leadership qualities and dedication she has brought to the €11.5bn Dutch scheme, which she joined in 2004. Now head of investments and communications, Leegwater joined the scheme as chief investment officer with a pedigree second to none. She spent the six previous years as a portfolio manager for global equities and an analyst in eastern European equities at ABN AMRO Asset Management.

Taste of the east
Eastern Europe played a key role in sending Geraldine on her career path. A certified financial analyst, she graduated in economics and Eastern European studies from Rijksuniversiteit Groningen in 1995. Her career began the same year when she won an internship at Eurostat Luxembourg in the department assisting Eastern European countries in setting up national statistics departments.

Such is Leegwater’s dedication to the evolution of Europe’s pensions that she plays a key part at other Dutch pension schemes in addition to her role as ABN AMRO PF’s head of investments. She sits on the visitation committee at the social services pension scheme Pensioenfonds UWV and is helping shape the investment strategy of the pension fund of chemicals group DSM, as a member of its investment committee. Such is the demand for her expertise that she also serves on the investment committee at the Dutch pensions federation, Pensioenfederatie.

Leegwater’s determination to ensure the future security of Europe’s pensions has seen her contribute to two critically acclaimed publications. Firstly, she co-wrote a comprehensive paper on decision- making and solvency-based dynamic asset allocation at ABN AMRO PF, which was published in the Journal of Investment Consulting. Then, this year, she was one of the authors of a specialist online publication, Crisis Plan – The Bigger Plan Behind Pension Funds’ Crisis Plans.

Leegwater’s stature has grown significantly since taking up her position as CIO at ABN AMRO PF in 2004, especially through her contribution to the scheme’s innovative decision-making process to select the best strategic investment policy. This concept has served as a template for a number of other large Dutch schemes in building their own investment decision processes. It formed the basis of ABN AMRO PF’s IPE Best European Pension Fund Award in 2010.

Implemented in 2007, the process reinforces ABN AMRO PF’s reputation as a front-runner in integrated asset and liability management. The scheme had already moved away from an asset-only concept towards a policy focused on managing its complete balance sheet. This resulted in a focused risk-reward policy at the fund. Calculated risks are taken to ensure the fund achieves both short and long-term goals with respect to the ability of the stakeholders to bear risk. The decision-making process is a natural extension of this.

“Under Leegwater’s direction, ABN AMRO PF has become a front- runner in designing, implementing and executing dynamic asset allocation strategies. Since the end of 2007, the scheme has employed a policy whereby the risk taken in the investment portfolio depends on the financial position of the fund. This policy was implemented successfully, with the current coverage ratio exceeding the coverage that would have resulted if the fund implemented a static investment policy by more than 15 percentage points”

Its main characteristics are threefold. Firstly, it encourages schemes to focus on the consequences in terms of risk and reward, both short and long term, for the sponsor, active members, deferred members and pensioners. Secondly, it introduces a more balanced approach to weighing the goals of all stakeholders. Thirdly, following asset/liability modelling, it considers the consequences with respect to all the fund’s stakeholders by estimating the outcomes of a broad range of potential investment policies, such as risk-seeking and risk-averse, the use of derivatives and whether to adopt a dynamic or a static strategy.

With the ALM studies complete, the trustees select the set of consequences that reflects the best trade-off among the interests of all stakeholders. Criteria taken into account include impact on coverage ratio, risks for the sponsor and the ability to index benefits. Only after the trustees have selected the preferred set of consequences can the underlying investment policies be mapped. This enables the board to focus on its objectives rather than the investment policy itself. The process prevents prejudices regarding investment categories or instruments playing a role in the outcome.

Under Leegwater’s direction, ABN AMRO PF has also become a front-runner in designing, implementing and executing dynamic asset allocation strategies. Since the end of 2007, the scheme has employed a policy whereby the risk taken in the investment portfolio depends on the financial position of the fund. This policy was implemented successfully, with the current coverage ratio exceed- ing the coverage that would have resulted if the fund implemented a static investment policy by more than 15 percentage points.

Nothing to hide 
Other notable aspects of Leegwater’s leadership at ABN AMRO PF include a transparent and comprehensive exposure-based reporting culture. This extends to both the annual report and monthly reports to the trustees. The monthly reports contain traditional investment reports as well as higher-level reports that encompass both assets and liabilities. Not only do they convey information based on market values, but also sections based on market exposures. This is important for ABN AMRO PF’s ability to assess risks correctly because using derivatives can cause risks to differ substantially from what is suggested by the market value of assets alone. The annual report contains a balance sheet based on exposures as well as one based on market values.

Leegwater’s initiatives have turned ABN AMRO PF into one of the most efficient European pension funds. Enjoying one of the lowest pension management costs per member in its peer group, the scheme’s costs related to investment portfolio are approximately 10 basis points lower than its peer group median. And its cumulative investment returns continue to figure among the highest of pension funds participating in the European CEM benchmarking universe.

The right choice 
This only scratches the surface of Leegwater’s achievements at ABN AMRO PF. But with her innovative concepts providing the blueprint for effective and successful investment strategies and management for schemes across Europe, it is easy to see why readers chose the hard-working, professional, friendly and dedicated Leegwater as their IPE Pension Fund Personality of the Year 2012.NQothing to hide