Like most funds in Europe, Dutch pension funds turned in very disappointing results last year. According to figures recently released by the WM Group, Dutch funds produced their lowest figures for six years by averaging returns of just 2.6% last year.
For the industry-wide schemes, the issue of the performance measuring Z-scores has attracted a lot of attention, largely due to the fact that 20% of the schemes fell below the Z-score performance barrier for 2000. Speaking in Rome recently Frans Prins, director of the Dutch association of industry-wide pension funds, said he believed a number of schemes will drop below the overall minimum Z-score level next year. Tests in 2002 will ascertain for the first time whether employers involved in the industry-wide funds are able to drop out of the compulsory scheme. Prins has also recommended that Z- score type benchmarks should be introduced to cover insurance companies and any other body managing Dutch pension fund assets.
While Prins’s attack is stinging enough, the NLG110bn (E50bn) PGGM fund has gone on the record and also openly criticised the Z-score approach. In the worst case scenario, says PGGM, industry-wide funds may be a thing of the past in thirty years. Jan Baars, co-author of a series of articles published in the Dutch press says that one of the major problems comes from finding market-based indices against which to measure performance.
Such is the might of PGGMthat the criticism is a real blow to the measure.
On the investment front, ABP said in July that it was beginning to experiment with socially responsible investing by creating two internally managed SRI portfolios that use research supplied by US group Innovest. The portfolios, one for E100m in European equities and $100m in US equities will be benchmarked against MSCI indices. Frank Russell also registered three new appointments by Dutch pension funds to oversee a total of E120m using their multi-management approach. John Bailie, managing director of Frank Russell’s institutional business says Dutch funds are showing a lot of interes.
Meanwhile and asset manager Robeco has launched a E500m global private equity fund of funds open to Dutch institutions. At the beginning of the year it poached Ad van den Ouweland from PGGM and Harrie Meijers and Mikan van Zanten, both from ABP, to run the project. The new fund will form part of the team at Robeco Alternative Investment and will specialise in hedge funds, structured finance and private equity. Robeco and any one else launching hedge funds and alternative investment products appear to have got their timing about perfect. ABP recently announced a E2bn hedge fund programme and said it was to increase its allocation to real estate. It already invests about 2% of its portfolio in venture capital through NIB Capital Private Equity, its joint venture with fellow pension fund PGGM. NIB itself recently launched a E500m private equity fund of funds .As for the funds themselves, there is evidence of greater co-operation and of more moving into the asset management business. Mn Services, the pension fund manager for the NLG40bn Dutch metalworking, pipe, mechanical, and automotive trades, has formally split its direct relationship with the fund and will begin marketing its pension management services to third party institutions.