GLOBAL - Australian and Dutch pension funds believe many alternative asset managers' fee structures are "grossly" excessive, according to Australia's Centre for Investor Education (CIE).

Jamie Nemtsas, director at the CIE, said the 2/20-style fee structure was a "common stress point" for attendees at the recent Superannuation and Pension Funds Summit on Dutch and Australian Cooperation and Alliance.

Government officials, consultants, academics and representatives from a dozen Australian superannuation schemes arrived in the Netherlands last weekend to attend the summit.

High-level figures from the respective pension systems, representing more than AUD$1trn (€730bn) in members funds, set out to increase collaboration and share expertise on a number of topics, including the construction of defined contribution systems.

Nemtsas said the 2% management fee was "widely viewed" at the summit as being grossly excessive.

The Dutch contingent recommended pension funds demand more transparency on fund managers' internal costs - through internal budgets, for example - and suggested that management fees could be structured to cover this pro-rata.

Nemtsas added: "The argument for achieving cost economies of scale from potential cooperation or collaboration was discussed extensively, with many ideas shared on how to achieve such."

Other common concerns raised during the summit included communication with members, risk management, pension scheme design and methods for cooperation.

On risk management, delegates discussed behavioural, structural and operational risks shared by the two industries and mooted the size of an appropriate buffer to capital loss as an important area for future discussion.
On scheme design, one guest speaker highlighted what he considered to be a basic failure in the Australian superannuation fund industry - namely, dealing with the post-retirement phase of members. Delegates at the summit suggested an asset/liability management approach in a DC context would help to address this issue.

According to the CIE, the delegates "conveyed a strong view" that the pooling of resources, risks and investment opportunities would be potentially beneficial to all parties.

"It would therefore seem to us that the appetite is certainly there to engage into further detailed and regular discussion," Nemtsas said.

The CIE said it was creating an online forum in which decision makers will be able to monitor and discuss these sorts of opportunities, as well as facilitate research into further communication, cooperation, collaboration and co-investment.

One organiser said the pension funds participating in the summit were now "digesting" all possible routes from the topics discussed, and that the Australian funds - together with Australian Trade Commission and the Holland Financial Centre - would "think about next steps".
Another organiser said the discussion of cross-border cooperation between Australia and the Netherlands would be "extended" at the International Investing Summit, being held in Berlin this week.