Footballer scheme’s positive return from 100% fixed income
NETHERLANDS - The €560m ‘pension fund' for Dutch professional football players generated positive returns of 1% after allocating all its assets to fixed income investments in mid-2008.
The scheme , designed to bridge the income gap between a player's career and a new normal career in society, extended its fixed income allocation from 85% to its entire asset allocation as from1 July last year.
"As a player's career lasts eight years on average, and the subsequent benefits end after 10 years on average, we need to keep investment risks to a minimum," said Arco van der Veer, operational manager, of the Stichting Contractspelersfonds KNVB (CFK), explaining the unusual investment choice.
Two-thirds of CFK's assets have been placed as deposits with ING and Santander, while the remaining assets have mainly been invested in government bonds ‘under a limited interest hedge', Van der Veer said. Previously the assets had been invested not only in equity, but also in commodities and property.
Currently, CFK has collectively ring-fenced assets of its 2,200 individual participants, who pay 35% of their gross salary on average in contributions.
The scheme is planning to offer participants a choice of investments with varying degrees of risks in 2010,but this will allow for increased security towards the end of a player's career, Van der Veer pointed out.
After the participants have had an opportunity to express their preferences, the asset allocation of the fund will be adjusted accordingly, he said.
Although varying arrangements are in place, the benefits agreed with the individual participants are in general topped-up with the yearly returns on investments, he indicated.
According to Van der Veer, CFK is not regulated at the moment, but in order to increase transparency, it is seeking supervision from the De Nederlandsche Bank (DNB) and the Authority Financial Markets (AFM).
"Since we are neither a true pension fund nor a real life insurer, the regulators are still contemplating which supervisory regime should be made applicable to us."
The Gouda-based CFK was established in 1972, when the salaries of professional football players started to rise significantly, following the international success of Dutch clubs. But after their playing career, many players lacked an ongoing income, as they had not completed formal education.
Participation in the scheme has been made mandatory in principle by the Dutch football governing body KNVB to all active professional players in the Netherlands.
According to Van der Veer, schemes based on the CFK have already been introduced in Spain and Norwa and similar schemes are being considered in several other EU countries.
"However, a main hurdle for many national CFK's remains the local tax regimes," he said.
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