APG paid some €51.7m in bonuses to its own staff in 2022. This is more than €3m more than in 2021, despite the Dutch pension asset manager making a below-benchmark return of -18%.
APG said in its annual report published just before Easter that the main cause for the increase in bonuses paid out was an increase in payroll. As a result, the number of employees eligible for bonuses on top of their fixed pay had increased.
Out of a total of €51.7m in bonuses, €45.4m were paid to the 276 employees of APG’s three foreign offices (New York, Hong Kong and Singapore). In 2022, 15 employees (2021: 12), all working abroad, received total remuneration of more than €1m, earning more than their boss Ronald Wuijster, the chief executive officer of APG Asset Management who took home €808,221 last year.
Most of the big earners work in the private equity department of APG’s New York office. APG made a loss of -1.2% on its private equity investments in 2022, but staff still pocketed hefty bonuses.
According to an APG spokesman, this is because bonuses are paid on the basis of returns over the previous five years. In 2021, APG reported a 40% return on its private equity investments.
By contrast, APG posted a total return of -18.1% in 2022. The investment result was disappointing not only in absolute but also in relative terms. Compared to the benchmark, a negative excess return of 21 basis points was reported.
APG loses millions on empty office
APG made a provision of €3.4m on its former office in Amsterdam’s Zuidas financial district. The pension asset manager still has an ongoing lease on the property, but cannot find anyone to sublet the office to. APG moved to its new headquarters in the Sloterdijk district last year.
“The lease has become loss-making in 2021 partly due to changed [expected] market conditions, as a result of which it is expected to take longer to sublet the property,” APG said in its annual report.
A provision of €4m was also taken on another office it owns in Heerlen. That office is now worth less than previously assumed due to the downturn in the real estate market.
On Thursday, IPE’s sister publication PropertyNL reported that ABP sold APG’s former head office, also in Heerlen, to European property manager Corum for €45.5m.
The number of APG employees continued to rise to 3,405 last year. Since 2020, APG has added 471 workers, who have been mostly hired to manage the pension transition from defined benefit (DB) to defined contribution (DC) which is scheduled for the period between 2024 and 2027.
With the additional employees, administration costs have also increased, from €81 per participant to €95. IT costs related to the pension reform increased especially, from €6 per member to €16 per member. The cost increase was, however, lower than expected due to APG not being able to fill vacancies due to a tight labour market.
“For example, IT and investment specialists are now harder to find than a few years ago. The scarcity may affect salaries too, although wage increases do not seem exceptionally large,” APG said.
Last year, APG also struggled to find new staff. According to admin director Rob Schormans, APG is still looking to hire 60-80 additional staff.
APG is structurally losing money in its pension administration services, and is plugging the gaps with profits reaped from its asset management activities, its 2022 annual report revealed.
“The competitiveness in the markets for pension administration and asset management are different, and so are the profit margins,” APG noted. The company posted €273m in revenue from pension administration in 2022, but its actual costs were much higher.
For clients ABP and Bpf Bouw alone (with over 3.5 million members together), pension administration costs amounted to more than €330m, based on costs of €95 per member that APG itself calculates.
All in all, APG made a €48.9m profit, on revenues of €962m. That’s less than in 2021, when a €78m profit was achieved.