The Dutch AkzoNobel Pension Fund is converting six factor equity mandates into a single passive mandate, according to its annual report.
The underperformance of value equities against market-cap benchmarks has led to disappointment among Dutch pension investors, including AkzoNobel Pension Fund and the pension funds of Rabobank and Robeco.
AkzoNobel Pension Fund’s developed market equity return was -2.3% in 2020, compared to 6.3% for a market-cap equity strategy. The board called the results of all developed markets equity managers “very disappointing”.
Following a sustained period of underperformance, value equities rebounded from the latter part of last year, outperforming growth equities for the first half of the year.
The six factor mandates will be replaced by one passive equity mandate in which companies with a high ESG score will be overweighted. The transition has already started.
The switch to a single mandate was not only prompted by the poor returns of recent years, as the fund also wants to simplify the investment portfolio and thus reduce asset management costs.
The supervisory board has welcomed the reduction in complexity and is understood to have had doubts about the added value of the large number of asset managers and investment categories.
In 2020, the AkzoNobel pension fund spent 62bps on asset management (including transaction costs). This percentage also includes 6bps for a fiduciary mandate run by Achmea Investment Management.
The fund aims to reduce management costs (excluding transaction costs) to 30bps of average invested capital, and expects to be able to achieve this reduction in the coming years.
Rabobank is working on replacing its factor investor strategy with a passive portfolio following a bespoke global sustainable equity benchmark.