APG, the Netherland’s largest pension asset manager, will reorganise its asset management division responding to an expected reduction in revenue as its pension fund clients move towards passive investing.

APG announced in its annual report for 2023 that it has to “adjust” its costs for asset management in response to falling revenues. The asset manager’s largest client, ABP, is yet to implement last year’s decision to move to index investing, but APG’s asset management revenues already started falling last year, by 1% to €670m.

A spokesperson for APG said the firm will in response “adapt its organisation to the new preferences of the pension fund clients” and reduce the headcount of its asset management division.

“We will try to find another position for the employees involved, if possible,” the spokesperson added. Last year, APG still maintained it was not planning to cut any jobs in response to ABP’s decision to go passive.

Ronald Wuijster, APG’s chief executive officer for asset management, said costs were a “recurring element” in conversations with pension funds.

“It’s one of the reasons they show increasing interest in index products. We are of course aware that our clients can compare us to other asset managers,” he added.

Operating loss

For the first time ever, APG’s revenues failed to outstrip its costs, which rose by 14% to exceed €1bn, resulting in an operating loss of €2.8m. The main reason for the operating loss was the unexpected news from the country’s tax services that APG could not reclaim VAT on the costs related to the new pension reform.

APG declined to say how much in VAT it had to pay, other than that it was “a substantial amount”.

Because APG received a significantly higher interest rate on cash accounts and term deposits, net profit still amounted to €10.3m last year. In 2022, the firm made a profit of €48.9m. APG called the financial result “disappointing, but largely in line with expectations”.

“We have chosen to accept a lower operating result and compensate this with higher interest income from cash accounts and term deposits,” the spokesperson said. This income amounted to nearly €16m last year, down from €1.7m in 2022. APG’s cash position amounted to some €455m at the end of 2023.

This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra