Pension fund clients of the €492bn Dutch asset manager and pensions provider APG paid more for asset management services last year, despite a lower outperformance.

In contrast, costs charged by APG for pension administration decreased by 7.6% to €217m.

The manager’s annual report for 2018 revealed that its asset management fees rose by 4.1% to €467m, whereas the outperfomance had dropped from 116 to 90 basis points above its benchmark.

APG, whose clients include the €431bn civil service scheme ABP and seven other schemes, credited its illiquid investments and factor investment strategies for last year’s additional returns.

The asset manager closed 2018 with a net loss of 1.9% (€9bn) and assets totalling €359bn, chiefly due to declining emerging market equity investments as well as poorly performing commodities.

It said that investment-grade credit, property, hedge funds and private equity had all delivered positive results.

A spokesman for APG put the 2018 loss into perspective by highlighting that the asset manager had achieved combined returns of €129bn for its clients during the past five years.

He added that APG’s management fees were not linked to the returns on investments, and largely comprised fixed percentages and amounts.

Internal management shift

The increase in total cost was in part caused by a shift from external to internal management, the spokesman said. On balance, this was expected to reduce investment costs for clients in the longer term.

Proceeds from asset management fees received by APG increased by almost 9% since 2016. It now manages three-quarters of its assets internally.

Meanwhile, earnings from pensions administration had dropped by 11% in total since 2016, APG said, as clients had negotiated ever-lower fees.

New arrangements implemented last year led to a cost reduction of 6% to €69.40 per participant.

In 2018, the number of participants served by APG’s administration business rose by 114,000 to 4.64m in total, divided across more than 30 pension funds.

Last year, APG established a new business unit – Participant and Employer Services – aimed at assisting its pension fund clients in improving services to participants and sponsors.

The annual report also revealed that APG Asset Management paid €31.4m in bonuses last year. It paid €26.1m to overseas staff, five of whom received more than €1m each.

APG employed 2,985 full-time staff at year-end, down from 3,071 in 2017. At the start of 2019, the company announced that it would axe another 52 jobs at its administration arm.

In 2018, APG ditched three of its subsidiaries, with software firm Inovita joining Keylane and income insurer Loyalis taken over by insurer ASR.

Inadmin, APG’s service provider for defined contribution plans, was bought by IT company RiskCo.