Consultants view the winners and losers
As the only country in mainland Europe with the most advanced system of funded pensions, the Netherlands is not short of asset managers of its own who are capable of investing these vast funds. But foreign management houses are keen for a slice of the cake too.
Having been faced for many years with a competitive onslaught from foreign asset managers, the domestic players have fought back aggressively, pensions consultants say. “Many of them have internationalised,” says Frans Ballendux of William Mercer.
Locals Achmea Global Investors, ING Investment Management and Schootse Poort between them look after pension fund assets of more than Dfl76bn (E35bn). While foreign asset managers are in demand from pension fund clients, particularly for their expertise in certain specialisations, it is often domestic managers who win the mandates.
“There is a need for local asset managers,” says Dennis Van Ek, investment consultant with Hewitt. “Foreign managers are opening a lot of offices, particularly in Amsterdam... but they are still mainly (used by) the larger pension funds,” he says.
Why are local asset managers often more popular than their counterparts from abroad? One reason lies in the way Dutch pension funds are run, consultants say. Their boards are filled with members who serve on a voluntary basis, doing the job alongside their other occupations.
“The boards only tend to have six meetings a year, and at these meetings investment management is only one of the issues which they have to consider,” says Van Ek. “Anglo-Saxon managers have an unfortunate tendency to confuse these part-time players with investment jargon.”
“Cost is an issue too,” says Willem Jan van Gijzen, senior consultant at Watson Wyatt Brans & Co. “Prices charged by local managers are still somewhat lower than those of foreign managers... and at the end of the day that does play a role.”
And for smaller pension funds, in many cases, language has also been a bar to using a foreign asset manager. For a Dutch pension fund which is really involved in the investment process, it is easier for communication to be in Dutch, and this has quite often been an issue in the choice of asset manager, he says.
Although some foreign asset managers with a Netherlands presence do communicate in the local language, the actual investment process is usually carried out in London or New York where Dutch speakers are thin on the ground.
But whatever the language, how asset managers communicate is now all important, consultants say. “Dutch managers are aiming for more than just performance... Nowadays, they are looking more at the investors’ needs, and trying to explain themselves better. But some are still very technical,” says Van Ek.
While the big global asset management groups are often recognised for their expertise in specialised investment, focusing on particular sectors or styles, at least for small and medium-sized pension funds in the Netherlands, balanced portfolios are still the norm.
“Historically and now there is still a lot of balanced fund management... One of the trends is specialisation, but it is not yet the majority (who do this),” says van Gijzen.
“It is the larger pension funds who are more interested in using specialist managers,” he continues. “However, some larger pension funds tend to do much of their investment management in-house these days. There is a general trend for the larger funds to keeping more assets in-house.”
In turn, this has prompted asset managers to target smaller and medium-sized pension funds. And luckily for the managers, the smaller funds now appear to be outsourcing more. “In general, there is a higher percentage of outsourcing than there was,” says van Gijzen.
But Frans Ballendux of William Mercer says the preference for Dutch asset managers among pension fund clients is rapidly wearing off because of the overall globalisation of the industry. Increasingly, he says, pension fund boards are becoming professional, and this has led to many looking abroad for their fund managers.
Among asset managers in the Netherlands, consultants say ABN Amro is becoming increasingly internationally focused, winning clients outside the country, while ING keeps its focus comparatively local. In terms of peformance, both ABN and Robeco shone in the league tables last year.
Fortis Asset Management, which holds significant pension fund assets, is still struggling with merger activity, according to one consultant.
With interest rates languishing at historically low levels, high-yield bonds are becoming a vital asset class for many pension funds. It is often Anglo-Saxon managers who have more expertise in this area, says Van Ek. For example, the US giant Merrill Lynch has a particularly strong reputation in this investment field.
Ballendux agrees the high-yield part of fixed income management is getting more attention: “Consultants will draw attention to it – you’re left behind if you don’t provide a product in that area.” Rachel Fixsen