Dutch schemes reduce asset management costs to 0.45%

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Dutch pension funds reduced their combined asset management costs from 0.47% to 0.45% during 2016, according to supervisor De Nederlandsche Bank (DNB).

The reduction meant pension schemes paid asset managers roughly €5.6bn during the year.

DNB said that asset management costs at most pension funds ranged from 0.23% to 0.7%, and depended on a pension fund’s scale, its asset allocation and its use of active management.

More than three-quarters of the schemes reported asset management costs of less than 0.5%, while 3% of schemes incurred costs of at least 1%.

Management costs per asset class varied from 0.1% on average for fixed income to 3.3% for alternative investments. However, alternatives costs dropped from from 4.58% in the previous year.

The regulator said that management costs of property fell from 0.74% to 0.68%, and equity costs declined slightly from 0.23% to 0.22%.

Management costs of hedge funds and commodities dropped to 2.61% (previously 2.62%) and to 0.24% (0.26%), respectively.

DNB said that it was important that pension funds had a clear vision of asset management costs, taking into account the added value of an investment, alignment of interest with the asset manager and cost transparency.

It emphasised that asset management costs should play an important role during mandate negotiations with an asset manager. Pension funds should make clear which cost constructions would be acceptable and what the criteria would be.

DNB also emphasised that, in order to prevent conflicts of interests, broad expertise within a pension fund’s organisation was crucial for assessing deviations from agreements.

Gisella van Vollenhoven, DNB’s new director of supervision, said that technological innovation and sustainability would be among DNB’s focus points for 2018.

The watchdog would also pay extra attention to financial and economic criminality, she indicated.

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