Grand masters of international play
In the European mutual fund landscape, the Dutch fund houses are the grand masters of international investment. For most countries, collective investment is a phenomenon of the late twentieth century, but in the Netherlands, mutual funds existed as far back as 1774. Through these vehicles, the Dutch invested in foreign securities. Looking beyond the domestic borders was a necessity – the home market was, and still is, too small to sustain acceptable corporate growth – so international investment skills became a strong feature of the Dutch investment scene.
This brief history lesson is important because it does much to explain the unique features of the Dutch fund management industry. From these historical roots emerged, in the late 1920s, a number of funds that remain core to most individual and institutional portfolios. Robeco NV is probably the best known of these. Managed by its namesake, this fund was launched in 1933 and with $7.5bn (E7.5bn) in assets under management, it remains the largest equity fund, not only in the Netherlands, but also in Europe. Robeco NV also illustrates an unusual but important feature for foreign investors. Along with 75% of Dutch funds, Robeco NV is structured as a Beleggingsmaatschappij – a public company, which is structured as a closed-end fund, capable of being quoted but which operates as an open-ended company. This unique structure, under which the managers carry an obligation to create or redeem shares at the request of the investor, has enabled Robeco, in particular, to adopt an international distribution focus years ahead of the Ucits Directive by registering the fund on stock exchanges around the world. For some Robeco funds, the International Bond Fund, for example, foreign investment may be as high as 50% – clear evidence that access, at least to the quoted stocks, is very easy for non-Dutch investors. These investors will be a mix of private clients and institutions although the levels of institutional investment are falling. In the international sphere Robeco now meets intense competition – “institutions now have more choice and are looking at more specialised vehicles”, comments Benno Smit who is responsible for client support at Robeco.
From a fiscal perspective, a withholding tax of 25% applies to non-domestic investors. This can be reclaimed but, from a practical point of view, more work is involved for the investor. If similar funds can be found from Luxembourg and Dublin the convenience factor comes into play. The major Dutch players, ABN Amro, ING and Robeco all now have large fund families in Luxembourg to catch some of this business. However, there are instances in which a Dutch domestic fund will offer advantages over a Luxembourg fund because of the range of double taxation treaties agreed by the Netherlands but not available on Luxembourg investment
As international players of such long-standing, one would expect to see some outperformance of the global or internationally focussed funds. They do not disappoint. The table below lists the top 20 Dutch-domiciled funds by five year performance history and compares them with the Standard & Poor’s offshore sector average, which includes all the primary Luxembourg and Dublin funds available to institutions. The table is ranked by the number of points the Dutch fund outperformed or underperformed the equivalent offshore sector average. Global and European focussed funds take 12 out of 20 places.
The leading global equity fund, OHRA Aandelen Fonds, has nearly $400m under management and a five-year performance return of 302% – more than double the global sector average for equivalent offshore funds. The fund also beat the leading offshore global equity fund – which returned 265% over the same time period. In the European sector, ABN Amro’s Trans-Europe fund also offered a return that was double the offshore sector average and with 301% return over five years, it was ahead of all but the top ranking offshore European fund – Egerton Capital Europe (488%).
The fashionable specialist sectors represent slightly more of a challenge to the Dutch managers. There is only one fund offering a five year track record – the Sci-Tech fund – which, despite being ranked the fourth highest performing Dutch fund over five years, significantly underperformed comparable offshore offerings. The table of top 12 technology funds shows a wider universe over one year and offers a number of funds that have outperformed the sector average. However, the range of outperformance is not as dramatic as revealed in the Global and European sectors.
Dutch fund managers have many decades of investment strength and wisdom to draw on but like many senior citizens they have been slower than some to respond to the new demand for sector or themed funds. However, their fund ranges in both Luxembourg and the Netherlands have grown dramatically in the last five years; Robeco now has 60 Dutch-domiciled funds compared with 14 in 1994, ING’s range has doubled to 15 and ABN Amro has increased its domestic offering from 15 to 31. Within these fund families are a full spread of single country and regional funds in addition to the now popular themed funds. Although performance on some of these newer launches has lacked external competition, the traditional funds remain strong and competitive at a global level.
Diana Mackay is managing director of European Fund Industry Services in London