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Dutch industry-wide funds meet Z-score targets

NETHERLANDS- Figures released today show the Netherlands’ 63 industry-wide pension funds have all passed their Z score performance target of –1.28 despite concerns last year that some were likely to fail. The news will come as a relief to many of the schemes as they faced the prospect of losing member companies had they failed to meet the target.

Z scores were introduced in 1998 as a means of gauging how well industry wide funds stuck to pre-specified targets. This year’s results are particularly important as it is the first time members could theoretically opt out of industry-wide schemes.

Figures for 2001 have been added to those dating back to 1998 to form an average and any member of a scheme failing below –1.28 were able to opt out and take their assets elsewhere.

Frans Prins, managing director of the VB, the association for industry wide pension schemes, last year predicted that some of the funds would fail to meet the overall target. The VB said it was happy its members had met the target but would not comment on individual results.

ABP, the e147bn Heerlen-based scheme, returned an annual z score of 0.52 for 2001, taking its average since 1998 to 0.73. PGGM, the country’s second largest fund, had a score of –1.31 last year but an overall average of 0.78 since 1998.

The Chemists’ pension fund was considered one of the funds most likely to fall below the –1.28 thanks to poor scores in 1999 and 2000 but a 2001 figure of around zero brought its average since 1998 to –0.61. Overall the cumulative scores for the country’s industry-wide schemes between 1998 and 2002 ranged between –1.21 and 2.45.

Despite every fund meeting its target, the VB remains critical of some aspects of the Z scores. Says a spokeswoman at the association: “after the events of September 11th, some pension funds would have liked to change their strategy but could not. You have to stick to the benchmark once you have chosen it, whether it is good for the fund and participants or not. We’d like to see a little more flexibility to be able to change strategy.”

The VB says the Z score encourages passive investing and that, as it stands, presents an excessively high statistical risk of unwarranted failure. In February it presented the minister for social affairs and employment with a request that it reassess the measure.

Full details of annual and cumulative scores are available at www.vvb.nl

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