Citigroup Global Transaction Services is to build an investment platform for Aegon The Netherlands that will enable the Dutch insurance and pensions company to pursue a range of asset strategies across multiple jurisdictions.

Sikko van Katwijk, managing director at Citigroup, said the platform is designed to help investment managers change their strategies. “In the asset management industry there are a number of parties that want to move to more sophisticated investment styles,” he said. “These managers are moving away from long-only investment and stock picking to portable alpha strategies.”

In a portable alpha approach, non-correlated strategies are included within an existing portfolio in order to improve risk-adjusted returns. These inclusions typically would be a hedge fund or some alternative investment strategies that are ported on to a traditional portfolio of equities and fixed income instruments. The concept has gained popularity as poor equity market returns and low interest rates have led to a failure by long-only managers to outperform their benchmarks.

Van Katwijk said among Aegon’s main concerns were operational and transition risk - how to get to this new strategy without affecting performance. The problem with any strategic change is how to get there without incurring huge costs or affecting existing clients, he said.

Erik van Houwelingen, an Aegon board member said Citigroup would help Aegon to come up with a highly innovative product. “The platform’s possibilities are almost infinite and supports Aegon’s strategy to provide our clients with innovative asset management solutions efficiently and effectively, allowing our clients to benefit from the product and scale benefits that can be achieved.”

The platform, which includes back office systems as well as support and expertise from Citigroup, enables each participating Aegon entity to fulfil the different tax, accounting, regulatory requirements and reporting obligations of the various countries and jurisdictions where its investors reside. The platform also offers the capacity to achieve higher investment performance through the ability to invest in a wide range of asset classes and investment styles. It is expected that the platform will be fully operational by the third quarter of 2007.

As part of the agreement, Aegon’s investment management affiliates in the Netherlands will outsource their back and middle office activities to Citigroup. The transaction represents a total of €40bn of assets under custody with Citigroup providing funds administration, performance management, transition management, a range of customised equity-related solutions and post-trade compliance functions in addition to custody, securities lending, and fund accounting. It is anticipated that the migration of current funds will take place in the second quarter of 2007.

Van Katwijk said while pooling had worked well when assets were in the same tax regime, problems arose when they were not. “This platform enables Aegon to mix various client types as well as tax treatments in different ways. The assets of insurance companies, individual pension funds and retail money can be pooled and dealt with by the one platform.”

In the investment management industry, the complexity of administration has often held back firms from becoming more efficient and advanced in the way they apply investment strategies, said van Katwijk. “This platform removes much of the administrative burden.