Diary of an Investor: A different world
Last month I was over in London for a short business trip to visit some credit managers. Before I headed back to the airport I meet up with Thijs, a good friend of mine. Thijs recently moved from his role as CIO of one of the large industry funds in the Netherlands to a big corporate pension fund in the UK.
Thijs was nearly 10 years in his previous role and as his children are grown up, he was free to move abroad. His wife, Fieke, is a management consultant who works a lot from home, so relocation was not a problem for her either.
We meet in a coffee shop near St Paul’s cathedral. ‘I see we Dutch pension managers are in demand,’ I tell Thijs as we sip our flat whites. Thijs says: ‘It was an interesting process getting to know these guys and it was not an easy decision to make but, so far, I am glad I made the jump over the North Sea.’
‘How are the British to work with?’ I ask. ‘I must say, it is a very good set-up, just around the corner from here. We are about 15 people in the executive office and the CEO is very open to new ideas.’ ‘And how do they feel about having an incomer as their CIO?’ ‘The chairman of trustees is British but he has worked extensively in the Netherlands, so knows our pension fund system.’
I am interested in how Thijs is adapting to the UK regulations. ‘Inflation is a hard target,’ he says, ‘because you have a true defined benefit system with no discretion on indexation. This means we are much more focused on inflation cashflow-matching than nominal benefits.
‘Also, the funding situation is completely different and the regulator is very hands-off, in comparison with our DNB. For instance, we are about 85% funded at the moment, which would be unthinkable at home.’
‘You’d all be out of a job,’ I say, ‘and probably locked up.’
‘The other thing is that recovery periods are so much longer,’ Thijs continues. ‘Ours is 10 years. In the Netherlands people would think you are crazy if you even suggested such a thing.’
‘I’m sure you will use your freedom wisely,’ I say. ‘I know someone who had to liquidate a private equity portfolio in 2011 to meet the DNB’s risk reduction target. The problem for them was that it was their best performing asset at the time and they were a forced seller. Not to mention the waste of due diligence and manager selection time.’
‘Well, their pension system may have its many faults but at least the Brits are pragmatic,’ says Thijs.
‘I’ll tell you one thing, Pieter,’ he says as we leave. ‘London has changed a lot since my days here in the 1980s as an analyst. For a start, the property market has gone crazy. You should see what Fieke and I pay to rent a house that is smaller than the one we had in Delft.’
Pieter Mullen is investment director at Wasserdicht Pension Funds