Hugh Wheelan reports from the Belgian Association of Pension Funds Annual General Meeting, the VKG/CPM seminar and the Cross Border Pensions & Life Assurance in Europe Conference in Brussels
Belgian pension funds should be wary of introducing an annual performance classification of the country’s investment managers, warned Nicholas Obolonsky, secretary to the Dutch OPF (Stichting voor Ondernemingspensioenfondsen) Association of Company Pension Funds, speaking at the Belgian Association of Pension Funds’ (BAPF) annual results presentation last month.
Pointing to the Dutch system, currently grappling with the issue of individuals being able to switch schemes should the asset manager of a pension fund underperform, he said: “There are many issues that fund managers need to think about at the moment, one of which is the effect that increasing euro transitions and moves to-wards integrated portfolios will have on this year’s performance.
“These issues are particularly relevant when you are conscious of ensuring that performance remains strong, especially when individuals can see the figures for each manager next to their name.
“We know that the comparison of a scheme’s results is a question of the parameters involved and we may well have an apples and pears scenario developing if we are not careful.”
The point was backed up by newly appointed head of the BAPF, Karel Stroobants who stressed: “Running a pension fund is not like riding in a horse race, you have to be conscious that you are running the fund as a cost centre and not a profit centre.”
Stroobants moved on to describe what he sees as the next great challenge for the Belgian pension fund and asset management community - adherence to GIPS, the Global Investment Performance Standards.
“We wholeheartedly support this initiative, and I believe that down the line the issue of whether an investment manager is GIPS compliant or not will become vitally important.
“How long that will be I don’t know, and the question I put before you is who will be the first investment manager in Belgium to become GIPS compliant?”
p At a separate function organised by the VKG/CPM pension fund, Keith Ambactsheer, president of KPA Advisory Services in Toronto, and author of several books on pension fund governance told a European pensions audience that they should look within the pension scheme and not always to the outside in pursuit of cost saving and performance enhancement.
On average, for schemes with good communication, structure and proper resources, Ambactsheer said, the cost improvement came out between 50 and 60 basis points.
“One very healthy initiative for pension scheme boards is to implement a system of annual evaluations on whether they are doing a good job or not. This focuses minds on the important aspects of the scheme, such as how is the optimal allocation of responsibility between scheme governors and managers achieved.
“The best response we have come up with for this is having a formal business plan dealing with risk budgets, spending, targets, equity risk premium and asset allocation that the management team presents to the board for discussion.”
Ambactsheer added that outside service providers could then become part of this team process, but only if there was a clear business focus eminating from the fund itself.