NETHERLANDS – The Dutch central bank, the DNB, says the new FTK framework should not result in a massive move into so-called alpha generating investments by pension funds.
Executive director Henk Brouwer told a conference organised by Goldman Sachs in Amsterdam this week: “Transparency and accountability are the main issues currently being implemented via the FTK, the new financial regulations.”
The FTK, the new financial assessment framework, needed to be implemented to support sustainable yields on investments.
He said this should not lead to massive move into so-called alpha generating assets – that is to say seeking performance above the benchmark.
He added: “The DNB will not be a front-runner in changing its investments into alpha.” This was not because it is not functional but caused by a different way of looking at assets and liabilities.
The comments come as the Dutch pension sector awaits the annual budget, known as Prinsjesdag, on September 20.
In contrast to some concerns in the market, he reiterated that it would not interfere in investment choices related to alpha or other possibilities.
But he indicated that “alpha should not be the holy grail of the pension sector. Yields, risks and liabilities should be combined within one flexible strategy”.
Brouwer rejected claims that the FTK is causing current pension problems. He stated that the FTK is not causing the problems - but only reporting and signalling problems in the sector at present.
He also surprisingly vented some criticism at politicians in The Hague.
He said pension fund investment capital and yields on investments have sometimes been at the mercy of politicians targeting redistribution of capital.
Party politics were currently shaping pension discussions, without taking facts into account. He said the “sustainability of the pension system should not become a party political instrument”.
Brouwer also criticised the current trend away from defined benefits(DB). He pondered that if a fund is not able to continue supporting DB, then what is its real function? It would become more feasible to change to an insurer. He reiterated that the DNB supports a full DB system.