Europe’s largest pension fund, the Dutch civil service giant ABP, is planning to shift the accent of its investments to non-listed companies and real estate, says chief investment officer Roderick Munsters.
The main reasons are the increasing short-term thinking within the listed sector, and the growing pressure of corporate governance rules, he indicated during a private meeting of Vesteda, ABP’s former Real Estate Fund.
“While ABP’s focus is on long-term value, the exchanges are in the grip of short-term thinking, many companies are under pressure to continuously exceed the market’s expectation,” Munsters explained. “Therefore, we aren’t happy with the increased gasping atmosphere of quarterly judging-and-punishing.”
According to Munsters, a series of corporate accounting scandals have exacerbated the problem of short-termism due to the resulting new legislation and corporate governance rules. “Especially the American legislation, like the Sarbanes-Oxley Act, threatens to further reinforce short-term thinking. The danger is that ‘Sox’ will stimulate risk-avoiding behaviour,” he said.
Munsters reiterated ABP’s commitment to corporate governance, but said that implementing ABP’s governance policy takes much less time, costs and energy with private equity than with listed companies and funds. “Moreover, shareholders of a non-listed company are almost per definition more involved in the management.
“Board members can’t put the energy they need for applying new legislation, into running a long-term business,” Munsters added.
“We feel much more comfortable with European-style corporate governance, based on mutual trust and loyalty. We choose principles over coercive rules, culture of reliability over complex and choking legislation.”
ABP spokesman Michel Meijs stressed that the change in investment policy is still an ‘idea’ for the three-year investment strategy, which still need to be discussed by ABP’s investment committee. “The board is supposed to take a final decision at the end of this year,” he said.