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Dutch regulators make further demands on pension fund costs

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De Nederlandsche Bank (DNB) has ordered Dutch pension funds to make further improvements on the reporting of asset management costs, particularly those involving outsourcing by external managers.

Drawing on a 2013 cost survey of more than 240 pension funds, the DNB, together with the communications watchdog (AFM), concluded that schemes needed to understand outsourcing costs fully before they could determined whether or not overall costs were appropriate.

The regulators added that they had called on 21 pension funds to provide in-depth reporting on management and performances fees involving private equity, hedge funds and real estate – and that 15 had had to re-submit improved reports.

The DNB and AFM looked at asset management contracts, information memorandums and annual statements, as well as pension funds’ own self-assessments.

They said they found that asset managers often declined to provide pension funds with requested data.

“Pension funds should therefore ask themselves whether they wish to do business with players that don’t want to provide this information,” they said.

In the regulators’ opinion, schemes should make cost-reporting arrangements with their asset managers in advance, as well as evaluate the service provided by their asset managers on an annual basis.

The DNB and AFM also urged pension funds to report transaction costs in their annual reports.

Although this is still currently optional, they reminded schemes that the new Pensions Act would make the reporting of these costs mandatory.

DNB said Dutch pension funds spent approximately €5bn on asset management in 2013 and attributed a 2-basis-point, year-on-year increase in costs to performance-related fees.

The watchdog also announced a survey into the extent to which pension funds factor integrity risk into their overall risk analysis.

The results of this survey will determine whether additional rules will be necessary, it said.

It added that the results would be presented as best practice.

The regulator said all pension funds must submit a thorough integrity analysis for 2015, illustrating how they had translated their conclusions into policy.

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