Dutch unions take on hedge funds via pension schemes
NETHERLANDS - ‘Union-unfriendly' companies might face Dutch unions using pension funds investment policy as a weapon to force a change of tack, warned union umbrella grouping FNV.
Although it does not reject hedge funds in every case, activist hedge funds are definitively not acceptable, the FNV made clear in a new policy paper on responsible investment, hedge funds and private equity.
"Activist hedge funds usually try, with borrowed capital and through a short-term strategy, to make profits to the detriment of workers," it said.
FNV unions are represented on the boards of almost all industry-wide pension funds and some of the larger company pension funds in the Netherlands. Among the schemes are the €209bn civil service fund ABP and the €81bn healthcare scheme PGGM.
"We fundamentally reject investments in hedge funds which want to take over the company management. That way, the boards of pension funds become (indirectly) responsible for the company policy and as such abandon their role as a shareholder," the FNV says in its policy paper.
"The schemes' boards are not equipped to carry out company policy, and this creates an undesirable entwining of responsibilities," it added.
The FNV's policy paper concluded that the components ‘people' and ‘planet' are still very soft and little transparent in pension funds' reporting on their responsible investing.
The unions' umbrella has a mixed opinion of private equity and hedge funds. "Their investment options have created desired returns and spread of risk, as well as improved the financing of starting companies," it stated.
"However, we have noted that a number of private equity funds seem to develop from mid-term investor to an investor for the (very) short term. As investors, pension funds should be increasingly alert because of the social aspects of this investment strategy."
According to the FNV, the US retailer Wal-Mart is an example of a union-unfriendly company. "But there are also service providers which increasingly try to keep out the unions," it said.
The FNV is the largest unions umbrella group in the Netherlands. It represents 16 unions with 1.2m members.