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Survey of Dutch schemes finds no link between higher AM costs, returns

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TPRA, a pensions rating agency, has said it found, after surveying more than 230 Dutch pension funds, no correlation between higher asset-management costs (or portfolio scale) and higher returns on investment. 

The Amsterdam-based agency, however, acknowledged that some pension funds with relatively high asset management costs – including those of Mars (1.86%), Hunter Douglas (1.05%) and C&A (0.9%) – had outperformed the market, returning as much as 6.6% over 2015.

By contrast, the pension fund for Dutch communications watchdog AFM, with costs of 0.87%, returned just 0.6%.

The survey showed that asset management costs ranged between 0.14% and 1.86%, and that they had largely remained unchanged year on year.

TPRA said the most significant cost reductions were the product of pension funds simplifying their investment portfolios or switching from active management to passive.

It added that the divestment of alternative holdings, as well as a reduction in the number of mandates tendered, had also played a role.

The survey also found that administration costs per participant increased at 65% of the schemes, by 5.5% on average.

It attributed the increase in these costs chiefly to the introduction of the new financial assessment framework (nFTK) in the Netherlands.

It also cited the cost of planned liquidations, adjustments for re-insured arrangements and the introduction of new administration systems.

The survey highlighted significant differences in how administration costs have developed at Dutch schemes, with costs at some increasing by more than 100%, and at others falling by 50%.

TPRA estimated that costs per participant, adjusting for pension funds’ scale, stood at €117 on average.

It placed AT&T’s pension fund at the top of the scale, with costs of more than €6,000 per participant, whereas Ring A of the multi scheme of Pon limited its costs to €20.

The researchers, however, put the figures into perspective by explaining that the AT&T scheme had the smallest number of participants, while Pon’s plan predominantly implemented “easy to administer” surviving-relative arrangements.

The rating agency placed combined costs for pension funds at 0.69% of assets under management on average, ranging between 0.21% and more than 2%.

It also claimed that pension funds had improved transparency and comparability, paying increasing heed to reporting guidance issued by the Dutch Pensions Federation.

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