NETHERLANDS - The €272bn asset manager Algemene Pensioen Groep (APG) has warned that too many short-term supervisory rules following the financial crisis might simply create new problems.

During the presentation of the provider's annual figures for 2010, Angelien Kemna, APG's chief investment officer, said: "An international overreaction could lead to pro-cyclical, rather than anti-cyclical, investment behaviour, which will create new bubbles. The risk is that the medication is worse than the illness."

Kemna said her concerns were shared by large fellow asset managers elsewhere.

According to APG's CIO, stacking rules in particular - through supervisory frameworks such as Solvency II and Basel III, for example - might create more and unpredictable risks.

She claimed that London-based hedge funds already speculated on hedge packages becoming available, when rising long-term interest rates near 4%.

In her opinion, this is an example of an undesired side effect of the interest-related accounting rules for liabilities of the Dutch financial assessment framework (FTK).

"Hedge funds tend to close their accounts early at year-end, further contributing to a rate's rise," Kemna said, adding that this happened at the expense of Dutch pension funds.

APG's CIO further predicted that the hypes and bubbles on the international markets would remain and said she would avoid investments with unclear added value, such as complicated derivatives and high-frequency trading.

APG reported an overall return of 13.3% on its 5,000 investments for its 32 pension fund clients last year, which is twice its average return.

The result included a €424m loss on Greek government bonds, but Kemna pointed out that, in previous years, "we have also gained from these investments".

She also stressed that the contamination risk to Portugal, Ireland and Spain was more important.

However, she made clear that APG was not holding any government bonds of these three countries.

Referring to the sudden and significant rise of longevity risk, Dick Sluimers, APG's executive chairman, called on the Dutch supervisor to consider issuing longevity swaps.

Elsewhere, Social Affairs Minister Henk Kamp announced proposals to decrease the volatility of pension funds' coverage ratios through an adjusted FTK.

In a letter to parliament, he said an ongoing investigation was focusing on replacing the forward curve with another risk-free interest criterion for accounting liabilities.