Dutch civil service scheme ABP wants APG to exclusively offer fiduciary and asset management services to the fund itself by 2030. According to ABP, the current structure in which APG also serves construction sector scheme Bpf Bouw, the pension fund for housing corporations Woningcorporaties, and its own staff fund, is too complex.
ABP’s decision is motivated by the fund’s new investment strategy that was published last year, and sees it switch to index-based investing.
“In the coming months, APG will work out ABP’s wishes into concrete business models,’ said APG’s chief executive officer Annette Mosman, in a double interview with Harmen van Wijnen, ABP’s president.
APG, which is almost wholly owned by ABP, manages €552bn for the civil service fund and €75bn for the three other pension funds.
ABP decided to take more control over APG because the fund has noticed that regulators “very emphatically place the responsibility with the pension funds themselves,” said Van Wijnen.
He added: “You can outsource everything you do, but at the end of the day the pension fund is responsible.”
For pension administration, APG will continue to work for other pension funds, in order to benefit from economies of scale. APG runs the administrations of the aforementioned four funds, plus the pension funds for cleaners, architects, medical specialists and the sector fund for disabled workers, PWRI.
Undesired complexity
ABP sees, however, no economies of scale In fiduciary or asset management. Moreover, the presence of multiple clients for fiduciary management and asset management leads to “undesired complexity,” according to Van Wijnen.
He said: “Our strategic starting point is to achieve maximum financial returns at the lowest possible cost. This includes as little complexity as possible in the investment chain. Scale works differently in asset management than in pension administration. At €552bn, ABP is already so large that we do not need extra volume from other funds there.”
Van Wijnen cited investing in structures such as mutual funds as an example of complexity.
“We put in up to 95% of the assets in these funds, but were dependent for governance decisions on other funds that also contributed money,” he said.
This issue caused problems when ABP decided to divest from fossil fuels three years ago. Because of the mutual fund structures with other pension funds, this was “a tricky thing to implement”, noted Van Wijnen.
‘A pity for APG’
Asked if Annette Mosman, APG’s CEO, stood behind the decision of its owner: “That’s a difficult question,” she admitted.
“I feel sorry for APG and also for the other three pension funds, with whom we worked very well and achieved good results. For the people who work for these clients, I also find it very annoying. Nevertheless, I understand ABP’s decision. Having multiple clients adds complexity. There is a trade-off between how much benefit that €75bn extra under management brings, versus the desire to achieve more impact and returns with the €552bn of ABP’s assets alone,” Mosman said, noting that the departure of three pension funds for fiduciary management and asset management clearly has an impact on APG’s staff.
Regarding potential redundancies at ABP, she added: “ABP remains our client so we will retain most of our business. It is true that some people will drop out, but this will take shape over a large number of years.”
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra
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