NETHERLANDS - Current European Commission proposals to introduce a directive governing alternative investments managers would increase pension costs by 6%, as it would limit investment options and the spreading of risk, a large sector of the Dutch pensions market has claimed.
"The present concept directive will lead to an undue reduction of investment opportunities, higher costs and lower returns," suggested a letter signed by the pensions associations VB and OPF, as well as 10 of the Netherlands' largest pension schemes and asset managers.
Together, the institutions have approximately €500bn of assets at over 20% of this is invested in alternative investment funds which would be affected by the AIFM Directive
Within their letter, the signatories said a high-level quantitative assessment of the proposal's impact suggested that limiting the investment universe might result in an annual loss of €1.5bn for Dutch pension funds.
It could lead to a shift from alternative non-UCITS non-EU assets to more traditional asset classes, such as equity and fixed income, and may then lower returns from 8.84% to 6.46% on average, the parties argued.
"Under the current proposals, we cannot do business with non-EU non-UCITS asset managers, unless they voluntarily opt for a licence. But we doubt whether the top-quality managers are interested in getting licensed, and we fear additional costs should they get the required permit," explained Gerben Everts, compliance officer of asset manager APG.
Although the directive is not directly aimed at pension funds, the signing parties have asked the EC to take into account that most of their assets are managed by external managers, which are, however, often owned by pension funds, or operate solely for their benefit.
In the opinion of the institutions, these asset managers and administrators should be excluded from the scope of the current proposals, as there is no material difference between in-house and external activities.
According to Everts, the proposals mean, for example, that APG's organisation as well as each of APG's 14 investment pools must be licensed, while it is already subject to what he considers to be more appropriate regulation.
"This will not only lead to high compliance costs but also to a doubling of regulation, with no benefits in term of lower risk," he commented.
"Pension funds are not subject to the same systemic risks as, for example, a bank, because they cannot collapse, and therefore should not become subject to additional and artificial restrictions as an effect of a one-size-fits-all approach," Everts argued.
The Dutch pension institutions also fear losing the present level-playing field within the EU "because the proposals will have a negatively impact for member states with a capital-funded pension system, such as the Netherlands, the UK and Sweden".
The Dutch pensions sector decided to make its own because it is the most capital-funded and is therefore most likely to be affected by the proposals, claimed APG's compliance officer.
In the opinion of the signatories, the negative impact could be decreased by following existing legislation, as well as applying the "proven terminology and principle-based approach" of the Undertakings in Collective Investments in Transferable Securities (UCITS) and the Markets in Financial Instruments Directive (MiFID).
The Dutch parties suggested that MiFID and its structure could be used to simplify the provisions of valuation, delegation and deposits.
Moreover, the UCITS provisions - "which have been proven to be robust and useful" the letter stated - should be followed to facilitate compliance, according to parties involved.
The signatories of the letter included APG and PGGM, the asset managers of civil service scheme ABP and healthcare scheme PfZW respectively, as well as the €14bn Shell pension fund. Together the signatories represent seven million Dutch workers and pensioners.
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