NETHERLANDS - The VB, the Dutch Association of Industry-wide Pension Funds, says it may have to take the Dutch government to court if it decides to introduce a form of quantitative investment restrictions for Dutch pension funds as part of the findings of the Staatsen Commission.

According to Peter Borgdorff, director of the Vereniging van Bedrijfstakpensioenfondsen, one of the main proposals of the Commission being considered by Dutch Minister of Social Affairs, Mark Rutte, is a proposal to cap investments in asset classes such as private equity and real estate to 20%.

The Hague-based VB says this is a direct affront to the prudent person rule that governs the investment of Dutch plans.

"What is being suggested is that a pension fund cannot have more than 20% in a private equity company, for example, because when they have more than 20% they are considered not as investors but as entrepreneurs."

Borgdorff says he believes the proposed changes are linked to mixed messages from the government about the impact of the EU pensions directive on the activities of Dutch plans.

"This is very strange because when you look at the European Directive, especially Article 18, it states that there should be no quantitative restrictions on investment.

"We think, but we don't quite know, that Rutte wants to escape from Article 7 of the directive, which says that pension funds can't have other activities than pensions.

"We know that there are several companies and organisations that are close to pension funds and mostly owned by pension funds such as Loyalis [linked to ABP) or NIB Capital owned by ABP and PGGM, or the mortgages arm of the railway pension fund, whose activities could be affected by Article 7 of the directive.

"We think that Rutte sees that he can't stop these activities but that under EU law he can't allow them to continue either.

"What he seems to be saying to himself is that he won't allow these activities to take place when they represent more than 20% of a fund's investments, but he also seems to be asking the [pension and insurance_regulator] PVK to decide whether this is allowed."

Borgdorff argues that rather than play with prudent person rules, the Dutch government must decide whether the EU directive affects these different service arms of pension funds or whether it is actually forbidden for all such activities not directly linked to the scheme.

A consultation process on the proposed reforms is currently taking place between the Ministry of Social Affairs and experts on private equity, real estate and the stock market.

Says Borgdorff: "If necessary we will go to court to try and get a good opinion on this. We don't want to do this but we will. When there is a quantitative restriction on your asset allocation then we all have a problem."

The VB says it expects to hear later this week from the government about a public hearing on the Staatsen Commission findings.

"We don't know when this will be and we are still consulting with the Minister. I think that in April we will hear more about this issue."

The Staatsen Commission was set up by the Dutch government in 2001 to monitor and propose legislation regarding the activities of Dutch pension funds.


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