NETHERLANDS - The largest Dutch pension funds are becoming more active as equity traders, keeping shares for increasingly shorter periods in their portfolios, a survey has shown.
The €194bn civil service scheme ABP – Europe’s largest pension fund – keeps its €72bn equity portfolio only one year and three months on average, the daily De Volkskrant said, based on a study of the investment behaviour of the 10 largest Dutch schemes.
Healthcare scheme PGGM – with assets under management of €74bn, the second largest pension fund in the Netherlands – replaces it equity every year and five months, it added. Six years ago, both large institutional investors kept their equity for two years on average.
According to the daily, other large pension funds are more loyal shareholders. The asset managers of the schemes of ABN Amro, Heineken and the industry-wide scheme for the metalworking en mechanical engineering Metaal en Techniek, or PMT, keep their equity for at least three years.
Only Philips’ pension fund and the industry-wide scheme for metal and electro-technical engineering industry Metalektro, or PME, have a higher trading turnover than ABP and PGGM.
ABP’s chief investment officer Roderick Munsters admits that the fund has become more active in trading, although he stresses that the average period is a year and nine months. By changing its amount of investment within this period, ABP can keep companies alert, he indicates.
The active approach delivers results, Munster claims, by referring to ABP’s returns, which were above the market’s average. “It made a difference of €700m to us,” he said.
Munsters is however worried about the increased short-term focus of companies and investors. He is pleading in favour of an extra bonus for long-term investors like pension funds.
An external investment adviser of some pension funds, who wish to remain anonymous, was critical on the acceleration of equity trading.
“It has never been proved that this active trading leads to the best returns. However, it generates high transaction costs. Moreover, pension funds can’t keep companies alert if they keep the equity for a short period,” the daily quoted him as saying.