The leading Dutch fund in the professional sector, now called the Doctors Pension Funds Services, has not just restructured, it has completely rebranded. The new name clearly says what it is – and states it in English.
“Our face is set towards the future,” says chief executive officer Bert Bos. “The use of the name in English, for example, just recognises how we in fact have been referred to outside the Netherlands. All we are doing now is using this domestically.”
With E11.7bn in assets, these are funds that wield considerable investment clout, as evidenced by a recent trip that Bos and the chairman of the board made to the US and London to explain the new persona in Dutch pensions.
“These changes are a milestone in the organisation’s 35-year history,” he says. “The doctors’ fund started as what you might call an ‘investment club’ covering the interests of both the general practitioners and the medical specialists.” From this modest beginning, the profession has built up huge assets, currently ranking sixth among Dutch pensions.
The current changes, Bos regards as an “upgrading” right across the funds’ activities. “This impacted at board level, on the management organisation and our external relations – it is a complete upgrading.” He adds: “‘Transition year 2005’ is also how we refer to what we have been engaged in. This will finish at year-end, when our focus will be to consolidate our activities over the next few years.”
Looking at governance structure, Bos reckons the big change has been that the previous split between the two funds for each side of the profession, GPs and specialists, has been formalised with a new format for the management activities. “We have
created a new company for the management operations, and introduced a supervisory board that has only non-doctors as members.”
The two funds, SPH - the Pension Fund for General Practitioners - and SPMS, the Pension Fund for Medical Specialists, have contractual relationships with the Doctors Pension Funds Services (DPFS), which is the management organisation providing administration and asset management.
The general practitioners’ fund SPH is the larger of the two with E6.4bn in assets, 7,400 active members, 1,500 deferreds or sleepers, and 4,500 pensioners. For the specialists SPMS, membership is 6,600 actives, a similar number of deferrers and slightly more pensioners at 4,950, while assets come to E4.3bn.
“The service level agreements (SLAs) that each fund has with DPFS specifies the level of output agreed. These apply not just to top administrative functions, such as turnaround times for correspondence with members, but also to investment, where we have goals with specifications on outperformance,” says Bos.

Because of the large number of output specifications, the decision was taken to familiarise the organisation by working with these specifications and so implement them during the transition year, rather than to wait till the end of the year.
The organisation that has been created, Bos stresses, is what he refers to as a “total organisation”, meaning that “it is compact, without any key part being outsourced, and therefore it is a self-sufficient operation. This I regard as the strength of our position.”
The owners of the funds are the doctors, but they have delegated responsibility now to the supervisory board made up of non-medical people. It is at the SPH/SPMS board levels that the overall strategy is set down. DPFS, of course, helps the board in defining its strategy. “We have people designated for policy roles, just two at present, one on the investment and one on the pensions side. They help investment and pension committees to organise on particular issues to present proposals to the boards, who take the decisions.”
“The boards will take advice from the advisory committee, who comprise four external experts, Robert van der Meer, Jelle Mensionides, Jan Doets and Katarinus Jepma.”
The tactical and operational functions are at DPF management level, where the organisation is headed by two managing directors, which is a new approach. “This will include such activities as tactical asset allocation.” Here the decisions as to whether it is best to outsource or do an activity internally are taken. “Thereupon it is executed by DPFS.”
Bos says his expectations for DPFS is to produce not just high performance in absolute terms on the investment side for the members, but also what he refers to as a “high level of structural performance” across the organisation, which can come down to such basic issues as having the right mental attitude and “daily drive”.
Until recently, Bos has practised the CEO role and Ton Groeneveld, the former SPF Beheer CIO, is active as CIO in a temporary capacity until the arrival of Jan Willem Baan from TKP/KPN, who has recently been recruited as the new CIO.
The upgrading of the organisational part of DPFS has involved the creation of two teams, to better handle the differing needs of the membership of both funds. So the communication processes of each fund to its members have been developed, in order to both improve the information flows and to enable these to be differentiated where necessary.
This reflects the fact that the funds have differences for example, both to their liabilities and the membership rules. “Now as we become more client focussed, the need for this differentiation has been emphasised,” says Bos.
The overall asset mix of the funds on a combined basis is 40% equities, 50% fixed income, of which 10% are credits. Indirect real estate is 10%. But on the funds’ individual portfolio side, there are now two different asset mixes, he points out. “The mixes are certainly not completely different, as that would not make sense.”
One reason for the difference is that the general practitioners rely completely on the fund for their pension provision, while the specialists, who work in hospitals and elsewhere, may have other sources of retirement pay. “SPMS will be more or less a partial pension solution for them.”
The new structure makes it easier for the funds to establish their own asset liabilities profile. Two separate asset liability studies have been implemented for each fund, mainly because of the new FTK requirements.
“So increasingly, we have two fully fledged clients,” he says. “At present we are very busy with the asset liability studies front to arrive at a new asset mix. This is likely to include commodities, private equity and perhaps hedge funds.” The catchword is diversification to obtain the best returns possible within those selected individual asset classes.

Up until now, both funds work with the same asset managers, but that is not set in stone. He can see the first moves towards different managers occur. “It is likely that at some point, one fund will say ‘yes’ to a particular manager and the other says ‘no’.”
One of the key decisions of the change was to outsource all the asset management. “This has been at the core of the transition process,” says Bos. “This is quite a change for us, as for 35 years we have been handling our asset management internally.”
The portfolio transition activity started at the end of last year and will be finished by Christmas. “Our role at DPFS is changing to one of selecting, organising and monitoring the external managers.” In his view, this format has the advantage of providing a very clear and transparent approach.
The manager selection process is handled internally by DPFS. “We do our own research in the financial markets to create the long list. We do not use investment consultants. Information is collected from those on the long lists through a detailed RFI, and these responses are then studied carefully. The names on the resulting short list get a request to make a proposal.” Two lawyers are involved in this process for drafting the agreements.
Bos points out those managers who do not comply with the RFI requests have no chance of making it through to the short list. “Our approach is pretty rigid and systematic. The last things we discuss in the negotiations are the fees.”
Over the past few months the fund has been very busy with the transition process. There is still a lot of hard work has to be done, involving in all some E9bn, making it one of the biggest transitions this year in the pension market. The process is being handled by JP Morgan. The final list of asset managers on the funds’ roster could come up to 30, he reckons. The full list of managers is being kept confidential for the moment because of the transition.
The investment strategy is a mix of active and passive strategies. This has been optimalised for risk management, but he emphasises that this is regarded as being for the “mid-term”, and while it will not be adjusted tactically, it could be without a strategic review. “We have the ability to do interventions here on the shorter term.”
The TAA operation is based on DPFS’s own research of the financial markets. The investment committee under the CIO, with the strategy people and fund managers, as well as the risk and treasury managers meets monthly on TAA. “Currently it is a mix between a static and dynamic approach, but we want to move to a completely dynamic approach, responding to what happens in the market. But that is the next step for us.”
A core function is that of the risk manager who looks at the ex ante risk perspective right across the funds’ asset range. “He is the process owner of managing these risks. This is regarded as a front office function, but he has to work closely with the back office and the IT systems.”
The funds’ custodian is JP Morgan Chase, which is also used for securities lending and the transition management. “It’s what I call the custody plus approach.” The reporting comes initially from the PAM system, which after that is linked to the custodian. The fund has just agreed with WM to do the performance measurement and analysis independently on a monthly basis. “This is all part of good governance.”
Would DPFS ever look for other pension clients outside these two? Bos says it is not something that is currently contemplated, though it could not be ruled out somewhere down the line. “Our attention has to be fully focused on the needs of our two existing clients.”

A feature of the Doctors Funds has been a team of pension advisers, dedicated to implementing the rules of the pension schemes. These advisers are in contact with the participants on an individual basis, and there is also a separate team of financial advisers. “These financial advisers are literally a unique selling point, as no other pension fund we know of have them, either in the Netherlands or abroad. They act as business consultants to the doctors themselves on financial aspects of running their practises and so on. That’s quite special and is something we want to promote.”
The transition has been working very smoothly, thanks to the support and capabilities of the existing staff in the Utrecht office. “It got off to a very good start and the momentum has kept going as new people joined us.”
In addition to all the external changes within the regulatory environment with the new pension legislation and the nFTK, the funds dedicated to the professions have also been subject to their own new law, which is just completing its parliamentary journey to finalisation and implementation next year.
This new law allows pension funds for professional groups when at least 60% of the members are within a ‘union’. “The funds’ boards have asked us to help them in organising this aspect.” The fund has already something of a support function within the medical profession, as it runs for example a pensioners’ day each year. “This is like a reunion day for doctors, as well as being an occasion for the funds to update these members about the pension funds.”
Part of the organisation’s upgrade was on the technology side implementing the Princeton asset management system for all the investment portfolios. “In the coming months we will build up this PAM system and the risk system, including those for derivatives.” On the pension’s administration side, DPFS is overhauling and upgrading its 12-year-old system including making it web-enabled for members.
‘No unreasonable goals are demanded from the investment side of the DPFS. “The boards want a to achieve an increase in capital of 10% per annum,” says Bos, who expects the e12bn asset level to be hit by the end of the year.
Bos is looking forward to 2006, with the new structure in place, as the first full year of consolidation. But the 12 months of ‘Transition -year 2005’ have seen the most dramatic changes in the 35-year history of the fund. He pays tribute to what the funds’ staff, comprising just 70 full-time people, have managed to achieve in that short period. The philosophy of being a small organisation with highly qualified people has paid off.
“We have made some real progress in the time since we started just at the end of 2004,” he declares. But Bos knows it will not stop there. The story continues pointing towards success.