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Uncertainty remains on Dutch fiduciary rules after minister’s comments

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Dutch pension fund boards have ultimate responsibility for all investment decisions after the country’s senate passed an amendment to fiduciary management rules, according to social affairs minister Wouter Koolmees.

Koolmees said that pension funds that stick to fiduciary principles and retain proper oversight of outsourced providers didn’t need to change their practices, but other schemes should improve their supervision on outsourced services.

The minister’s comments followed an amendment tabled by Christian Democrat MP Pieter Omtzigt to the rules governing fiduciary providers, enshrining in law that “pension funds can’t outsource the formulation and the supervision of strategic asset management policy”.

Omtzigt explained his amendment, stating that “pension funds must be more in control about what happens with their own money”, adding that the “double role of contracting out supervision on outsourcing to the same asset manager must disappear”. 

However, the amendment caused confusion for some providers as it was unclear whether parliament wanted to fully or partially ban fiduciary management, or whether it simply wanted to highlight that a pension fund’s board was solely responsible for its investment policy.

Several political parties also stated that they were worried about the possible practical consequences of the amendment.

Responding to questions about the amendment, Koolmees said the main difference was that the legislation literally stated that pension funds’ boards always have final responsibility for decisions.

Although the board can involve a fiduciary manager for monitoring and reporting on the implementation of a scheme’s investment policy, the board remained responsible for supervision and adjustments, he explained.

Uncertainty remains

However, the minister’s answer deviated from previous comments given by Omtzigt to IPE’s Dutch sister publication Pensioen Pro. Omtzigt said fiduciary managers could no longer also monitor policy implementation, and that his amendment would limit outsourcing options.

At the time, the MP pointed out that “pension fund trustees had the responsibility to monitor their investments, including derivative construction, as closely as possible, in particular as pensions directive IORP II is coming into force and schemes must have a risk officer”.

“If a pension fund can outsource supervision, the risk officer loses track of the risks that are being taken,” he added.

Omtzigt did not respond to Pensioen Pro’s questions about the minister’s interpretation of his amendment. The Dutch senate, the upper house of parliament, passed the legislation last week.

Asset manager body pulls fiduciary contract template

Meanwhile, Dufas, the Dutch lobbying organisation for asset managers, has removed a model contract for fiduciary services from its website, saying it had become obsolete and citing “lack of clarity caused by the debate”.

Omtzigt had previously said that the model contract was not in line with his amendment. He said he disagreed with the model’s explanation that “the fiduciary manager supervises the operational asset managers as well as management carried out by them”.

Michael van Bemmelen, managing director of US asset manager Ten Oak Capital, has been advocating changes in fiduciary management for years, arguing that the term “fiduciary” did not appear in any legislation.

In his opinion, the principles set by Dufas were still “fundamentally untrue”, even after the industry organisation had made changes following parliamentary questions by Omtzigt in 2014.

“Fiduciary management exists in order to make a profit and not to assist pension funds’ trustees not being able to cope with the task themselves,” Van Bemmelen said.

Van Bemmelen said it was positive that Koolmees had made it clear that a fiduciary manager was only allowed to supply derivatives if their market value was independently verifiable.

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  • Wouter Koolmees

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