EUROPE - The concept of fiduciary management remains attractive despite adding an extra layer of costs for pension schemes, according to the Rabobank Pension Fund.

Speaking at the Fiduciary Management conference held in Frankfurt yesterday by IPE Institutional Investment, CIO Bernard Walschots outlined his fund's increasing involvement in the practice.

Walschots described to a range of German institutional investors how the €14bn fund with more than 90,000 members had faced a problem as the number of banks in the co-operative sector that owns Rabobank shrunk from 900 to a couple of hundred due to mergers, thereby reducing the pool of potential trustees available to the fund.

The fund took the step of introducing a board of management in 2005.

"This meant delegating powers to the fiduciary from the trustees," Walschots said, although he added that the board was ultimately responsible from a pensions governance perspective.

"There was no hiding behind the fiduciary managers," he said.

While Walschots conceded the move involved an extra layer of costs, he said the fiduciary management concept remained attractive.

"It gives us access to a pool of experts and is less costly than doing it yourself," he said.

And because the trustees were ultimately responsible, the structure for the Rabobank Pension Fund required a firm grip on fiduciary managers and asset managers.

"There was a need for in-house expertise," he said.

Meanwhile, Roland van den Brink, director of international relations at Mn Services in the Netherlands, told the conference his company would not accept a fiduciary mandate unless it was convinced the board of a given pension fund was ready for it.

Reinhold Hafner, chief executive at RiskLab in Munich, said that if fiduciary management were defined as the management of overall risk and reward, then his company was on the same side as pension trustees, whose longer-term return objectives needed to be based on their risk position.

Referring to the financial crisis, Hafner noted that diversification was good for a range of market conditions.

"But in a crisis, you needed an additional component, and this is to limit downside risk," he said.

David Millar, investment director of multi-asset investing at Standard Life in the UK, described how his company's pension fund moved to risk-based investing.

In the run-up to the demutualisation, he said: "The investment manager played a key part - in effect, the role of a fiduciary manager, in designing and building a liabilities plus absolute return solutions."
 

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