Diary of an Investor: Can you see the bigger picture?
There are some things we in the investment office of Wasserdicht Pension Funds don’t want to get involved in and one of them is internal group politics. For that we have our trustee board, which is responsible for making the decisions in any case, and our formidable chairman of trustees, Rolf.
Recently Rolf has been mediating an ongoing discussion internally about moving our Dutch pension fund’s domicile to Belgium. There are reasons why that is a positive move, including the supervisory regime. We could also pool our German pension fund assets there as well.
Some people on our works council have been against the idea because they see it as ‘regulatory arbitrage’. This has led to a protracted discussion between Wasserdicht and the works council, with input from the two regulatory authorities. Fortunately, we don’t have much of a role to play at this stage.
It’s not as if we don’t have more important things to worry about; we don’t particularly like having to deal with times of market turbulence. Thanks to the market volatility since the beginning of the year, Geert and I have had our work cut out dealing with all manner of enquiries – from the trustee board, the investment committee, group treasury and, not least, the regulator.
All of them want to have something slightly different, although they all have the same concern – the robustness of our asset portfolio and the development of our liabilities. Fortunately, our custodian is very helpful, as are our external managers, and we have the tools to provide the data and slice and dice it as required.
Unfortunately, the returns for most asset classes have been a cold shower and the coverage ratio has deteriorated by a few percentage points. On the positive side, our sound risk management policy and the attitude of our sponsor means we are still not in the danger zone, unlike some our larger counterparts here in the Netherlands.
One morning in February, Geert is working on a response to a query from the regulator. ‘Data is one thing but the time-consuming and tricky part is how you interpret it,’ he says as we catch up over lunch in the Wasserdicht canteen. ‘I have been poring over data on high-yield spreads and data on emerging market currencies for most of this morning. Put it this way: I am still formulating my position.’
‘The problem is that short-term market volatility does not tell us much about the success or otherwise of our asset strategies,’ I reply, ‘You have to keep things in perspective.’
Rolf, it seems, shares our view. One morning he sends an email in which he says the trustee board is about decide on whether or not to ratify the move of the pension fund to Belgium. ‘We always have to make sure we keep the bigger picture in mind,’ he says.
Pieter Mullen is investment director at Wasserdicht Pension Funds