NETHERLANDS – Roland Van den Brink, managing director of investments at the €14bn PME scheme, says schemes should only benchmark against their liabilities.
“Real liabilities should be our only benchmark,” he told a conference organised by asset manager F&C..
And he warned of an “avalanche” as schemes try to deal with historically low interest rates.
“Interest rates – it’s not just a pension fund problem – it’s a worldwide problem,” Van den Brink said. He said everybody is trying to deal with low interest rates and that there was an “avalanche – everybody is doing it”.
“There is a first-mover advantage here. Be prepared for it, that’s what I’m saying.”
Van den Brink also told delegates that he expected the new Dutch financial assessment framework, or FTK, would probably come in 2007 for pension funds – although the timing of the FTK “doesn’t matter too much”. The central bank has said the FTK will be introduced in 2006 for pension funds as planned.
He told delegates he was now focused on risk management and tracking error amid the new rules. “It’s all about risk management,” he said.
“I only have to get that tracking error – that’s the way things are happening now in Holland. It’s a glimpse of what we are doing.”
PME, the fund for metals workers, needs to generate a return of at least 6.3% a year, he said, adding: “We think more and more that we’ve succeeded.”
He saw further asset and country diversification and a focus on constant risk – not on a constant asset mix.
“I’m looking at China because China will be great,” he said. “I believe there are opportunities there.” There were also opportunities in emerging market equities and life insurance contracts.
He pointed out that the number of member firms in the scheme has fallen by 10%, to 1,350, in the last two years.
And he stated that the scheme made “mind boggling” returns totalling 5.53% on its currency hedging in 2002 and 2003 – although it would not be 100% hedged forever.