Dutch regulator replaces LDI manager on €1.9bn pension scheme
The €1.9bn pension fund of Dutch pensions supervisor De Nederlandsche Bank (DNB) has replaced BlackRock with Dutch risk manager Cardano as manager of its liability-driven investment strategy.
In its annual report, the regulator’s fund said it had sought a specialist manager for its new matching portfolio, after deciding to place its interest rate hedge in a dedicated portfolio. This comprised more than 60% of its entire assets, invested in Dutch and German government bonds, interest rate swaps, and cash.
Willis Towers Watson helped with manager selection, while Russell Investments had assisted with the actual transition.
The DNB scheme said BlackRock was to stay on as fiduciary manager responsible for implementing the fund’s new predominantly passive investment policy.
As the construction of the new portfolio could not be implemented before the end of 2017, it resulted in an additional return of almost 3% as a side effect, leading to an overall gain of 4.3%, the scheme reported.
The fund’s equity allocation returned 9.3%. Pensioenfonds DNB said that it had kept its allocation unchanged at 26% of the portfolio.
However, it raised its property holdings by 3.4 percentage points to 11.4% through investments in listed real estate vehicles, explaining that, from a historical perspective, securities offered the best potential for surplus returns for the mid and long term.
Last year, the scheme’s fixed income investments had delivered an overall result of 0.2%, with emerging market debt in local currencies (7%) and hard currencies (5.6%) the best performing asset classes.
In contrast, euro-denominated core government bonds incurred a 0.9% loss.
The scheme further indicated that it had replaced Bank of New York Mellon with Kas Bank as custodian as of 1 January 2018.
It said that Kas Bank had scored best on familiarity with the Dutch pensions sector and the application of local law, adding that the new custodian had also experience with its fiduciary manager, as well as pensions administrator TKP Pensioen.
Pensioenfonds DNB, which has almost 3,500 active participants and pensioners, reported €350 administration costs per participant. It spent 0.38% on asset management, including transactions. It paid BlackRock €2.6m for its fiduciary services last year.
At year-end, the scheme’s funding stood at 121.6%, which is 7.6 percentage points above the required level.
It decided to grant is pensioners and deferred members indexation of up to 1%, while its active participants received an inflation compensation of more than 1.4%.