Dutch funds’ asset management costs fall to 0.48%

Total asset management costs including transaction costs for Dutch pension funds slumped by 16% to 0.48%, or €7.2bn in 2023. Administration costs, however, rose by 13% according to a survey by Bell, a consultancy.

Both asset management costs and transaction costs fell, by three and two basis points, respectively, to 0.39% and 0.09%. The fall in asset management costs – which stood at €8.6bn in 2022 – is mainly due to lower performance fees as private equity investments largely underperformed their benchmarks last year.

Performance fee payments were down €900m over the year to €755m.

Source: Bell

As most pension funds in the Netherlands invest passively, the tiniest funds with less than €100m in assets under management have similar cost levels as the larger funds with over €10bn in assets. Moreover, the largest funds have slightly higher costs because they invest more in private assets.

Higher admin costs

The increase in execution costs by €145m is due to several factors. “Both higher advisory costs related to the transition to a [defined contribution] DC pension system, and price increases due to inflation have contributed,” said Johan van Soest, actuary at Bell.

Funds also often cite higher board and governance costs as an explanation. Admin costs per member rose from €110 to €121.

Of the 178 funds surveyed, 93 also published the extra costs they incurred as a result of the transition to the new pension system. In total, these amount to over €90m.

Bell calculated that these costs divided by the number of participants of the funds involved amount to €14 per person. Based on these figures, Bell estimates that the total costs for the pension transition last year amounted to €145m.

Van Soest noted that these extra expenses are of a temporary nature. “This year, they will probably be slightly higher, but then they will fall and a new, more stable level of pension administration costs will emerge,” he said.

This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra