The dams separating the Netherland’s thousand strong pension funds have burst.
A combination of the privatisation of Holland’s social security regime next year, increasing internationalisation of Dutch pension fund investment and the possibility for funds to opt out of industry-wide pension arrangements next year, have focused attention on the future set-up of one of Europe’s most developed yet fragmented markets.
In the most significant recent move, three Dutch schemes – the pension fund for Dutch construction workers, metal workers and electro technicians – announced they were investigating co-operation proposals on asset management and IT.
Together, the funds’ assets represent approximately NLD100bn (E45bn).
Walter Etty, a partner at Utrecht based consultancy Andersson Elfferes Felix, charged with investigating the possible alliance, comments: “I’m reviewing the asset management and ICT side at present, especially for the back office pension administration.”
Etty says he is looking for efficiencies dependent on the relative positions of the schemes. “The parties trust each other but they have completely different ideas over how the other organisations are compared.”
On the asset management side, Etty says anything is possible: “It could be that they go independent. It’s also possible that only two of them will work together or that all three funds are better off separate.
“They want to work together if possible, whilst retaining autonomy on the pension regulation side, which is what employers and trade unions want.” He expects to have a clear view of proceedings by the summer.
Etty says the rationalisation is driven partially by the euro – but also the nationalisation of the Dutch social security system next year: “The strategy of Dutch pension funds will have to change for this. There is also the fact that there is increasing international investment where you need scale to have all the skills, or outsource.”
Following last years failed alliance talks with SPF in July, GUO Fondsenbeheer, the pension fund for agriculture and meat industry workers will merge its three pension funds with the eight schemes of Detam Pensioen Services, the pension scheme for cleaning and retail trades - renaming itself Relan Pensioenen. The combined groups will have in excess of NLG20bn under management.
Margolein Fransen, spokeswoman at Detam, comments: “For now, it is not necessary, but in the future to make sure we stay one of the players in the market we will probably need to attract more funds.
“A lot of Dutch funds are putting money into the investment markets and to be taken seriously, you have to bring a lot of money with you. A lot of the smaller funds don’t have enough to do that.”
Erik van Ballegoijen, director of funds at the Delft-based NLG4bnTNO pension fund of the Dutch policy research group, says they are now talking with up to six pension funds, representing a possible combined asset base of between NLG10-11bn, to share a proposed new building in Rijswijk. The move would also herald co-operation on administration and investment.
“We still need the permission to construct the building, but hope to get this in the next three weeks, then we will name the schemes.”
However, he notes that there are a couple of building companies, a retail clothing operation and an industry pension scheme in the six.
“The basic idea is that we keep our own identity so the front offices will be separate, but we will co-operate in back office and investment.”
What was once a trickle of fund alliance in Holland has become a flow. The sheer number of funds in the market and the increasing professionalism required both in investment and adherence to the Verzekeringskamer regulatory code, demands greater expertise and critical mass.
No-one in the Netherlands appears to be suggesting they will plug the pensions dykes.
It looks as if the creation of larger pensions pools through co-operation could change the entire Dutch funds landscape very quickly. Hugh Wheelan