NETHERLANDS – The FTK, the Netherlands’ new financial assessment framework, could lead Dutch institutions to raise their private equity allocations, according to new academic research.
That’s because the new rules may lead to greater portfolio diversification, said the Tilburg University study.
Researcher Sofia Johan surveyed 100 institutions representing 336 companies to evaluate their attitudes to private equity. The 25-page study was backed by Zurich-based private equity firm Adveq.
“T h e institutional investors surveyed deemed the proposed implementation of the new Financieel Toetsingkader in 2006 as the most significant regulatory change,” the study said.
“It is thought that the FTK will have some major consequences for most institutional investors in the Netherlands, especially for pension funds and insurers as many may be forced to revamp their asset and liability management techniques.”
“It is expected that in contrast to current practice, the new regulations will take into account the risk profile of an institution’s entire asset profile in relation to its liabilities.
“This may lead to increased participation in private equity, as increased diversification will be required.”
The study found that the number of institutions investing in the asset class is set to rise to 35% within five years, with the average allocation rising to 4.2% from 3.8% currently.
“With 29% already investing in the asset class, it is clear that Dutch institutors recognise the ability of the asset class to provide superior returns and they are becoming a significant source of capital to the private equity industry,” said Peter Laib, Adveq’s managing director.