Dutch pension funds with higher investment costs failed to outperform lower-cost peers last year, according to a study conducted by KAS Bank.

KAS said it could find no direct correlation between management costs and absolute returns either.

The bank drew its conclusions from its first cost benchmark survey, based on the quarterly reports of 40 small and medium-sized pension funds, with 1.2m participants in total, provided by regulator De Nederlandsche Bank (DNB).

KAS said its benchmark study compared pension funds of comparable scale on such things as number of participants and liabilities, taking industry-wide schemes (BPFs), company pension funds (OPFs) and occupational pension funds into account.

It also found that the administration costs per participant were significantly higher at company schemes than at industry-wide pension funds.

Asset management costs were 11 basis points higher at OPFs than at BPFs, according to the custodian, which noted that this was 3bps higher than a recent DNB survey into the impact of scale had suggested.

However, at the same time, the benchmark report confirmed that administration costs per participant at small and medium-sized schemes declined when the number of participants rose.

Administration costs at OPFs were 2.7 times higher than at the usually much larger BPFs, KAS said.

The bank concluded that the new pensions vehicle APF, which allows pension funds to co-operate whilst keeping their assets ring-fenced, would be important for cost-cutting.

Actuarial consultant LCP, which looked at data from 2012-13, previously suggested there was no correlation between costs and investment results.

However, it put the results into perspective by noting that the surveyed time frame was short term and did not take pension funds’ long-term investment horizon into account.

Commenting on the findings, Robbin van Cadsand, risk and reporting project manager at KAS, said the custodian intended to extend its next survey back to 2013, 2014 and 2015 to better address pension funds’ long-term investment policies.

He said KAS had assessed 20 schemes with €500m-1bn in assets and a similar number of pension funds with assets of more than €1bn.

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