René van Vlerken, the new director of the Amsterdam stock exchange Euronext, is calling on pension funds to invest more in shares of smaller listed companies.
He wants medium-sized and small Dutch companies to have better chances to get a listing and make it easier for them to raise money through the stock market.
Capital from Dutch institutional investors and especially from pension funds is important for this to happen, he noted.
“The reason why we often have little success in the Netherlands with IPOs of smaller companies is that they do not get support from large Dutch capital providers. Foreign investors think like: ‘If [the country’s largest pension fund] ABP doesn’t invest in them, why should I?’,” according to Van Vlerken.
Elsewhere, local institutional investors do play an anchor role as coveted by Van Vlerken.
“In countries like France, Italy or Norway, we have had success with our stock exchanges for high-growth companies. This is entirely based on the contribution made by local investors there. If you want to organise a successful small- and mid-cap market in the Netherlands, we will have to start by relying on domestic institutions,” he said.
He added that Dutch pension funds are already investing in Dutch companies more than in the past, but that they do so mostly through private equity.
“PME and ABP actively participate in making start-ups and scale-ups successful. Then they have to stay on board with those companies throughout the financing cycle,” he added.
Anchor fund
Earlier this year, metal industry sector schemes PME and PMT announced a new €100m investment fund in scale-ups, after repeated calls for more investments in venture capital from the pension sector.
Van Vlerken would like to see something similar for small listed companies, for example in the form of a fund that takes a stake in each new IPO or share issue. This does not necessarily mean that more Dutch pension money should flow to the Amsterdam stock exchange, he noted.
Funds could also shift money from large to small companies, he added.
“If we appeal to six or seven institutional investors, it doesn’t take that much money per party to get this going. Again, it is not like we have 20 IPOs a year here,” according to Van Vlerken.
It could be an obstacle for funds to organise the management of a relatively small investment portfolio, he noted, but a pooled fund could provide a solution for this.
“If we put a good manager on it with a very tight mandate, we can make those institutional investors like PFZW, PME or ABP active in this equity segment. This way, they don’t have to develop an entire investment team themselves,” he explained.
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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