ABP transformed itself in 2008 when it spun off APG to become an independent
pension asset manager that could also manage assets for external pension funds.


Our first major interview with ABP was in 1998, when the organisation had experienced only two years of independence from government post privatisation in 1996. Jean Frijns, CIO until his retirement in 2005, was charting a course of diversification that was to transform the organisation from a guaranteed silo of Dutch government debt into a sophisticated, modern institutional investor.

Our founding editor, Fennell Betson, interviewed Frijns at a time of economic turmoil - namely the Russian and south east Asian debt crises. The euro had yet to be launched and the tech bubble was inflating.

Frijns’ thoughtful and pioneering approach to ABP’s investment portfolio led to many innovations and changes. First was an increase in the equity allocation from approximately 8% before privatisation to 17% at the end of 1996 and over 20% by 1998.
Frijns was followed by Roderick Munsters and subsequently by Angelien Kemna, who has implemented a policy of “controlled simplification” of the portfolio, focusing on non-market cap weighted beta and shying away from complex instruments.

APG is not perfect. Some doubt the ability of such a large organisation to serve external clients as well as its largest customer and majority owner. In light of Canadian pension funds’ singular success with in-house private equity groups, there has been puzzlement over the recent sale to Carlyle of AlpInvest, the private equity investment group which ABP co-owned with the care sector pension fund PFZW.

And Denmark’s smaller ATP has gone further than APG in its risk-based asset allocation framework. So how does Europe’s largest institutional investor score as a long-term pension investor using Keith Ambachtsheer’s five drivers of pension fund excellence (see From Our Perspective and IPE at 15 in this issue)?

In terms of alignment of interest and governance it scores well: the separation of APG from its owner should allow both to focus on their core activity, and APG serves only pension funds. It has documented investment beliefs, and as the largest second pillar pension fund in Europe, no-one can doubt its scale. In terms of compensation, Ambachtsheer’s fifth driver, it is notable that APG hired Kemna in 2009 from the private sector, so it presumably competes on its terms.

ABP was under pressure to offer more individual choice back in the 1990s. Then as now, APG’s biggest threat is a breakdown in the intergenerational solidarity of the Dutch pension system.

 

This article first appeared in the February issue of IPE magazine.