After four years of underperformance of its equity portfolio, the €375m pension fund of the Dutch branch of custodian bank Caceis has decided to move away from impact-driven investing and opt for a lighter-green, sustainable mandate. In addition, scope for active management has been limited.
“The investable universe was too small,” said board member Larissa Gabriëlse.
The sustainability policy, described as “very restrictive” in the recently published annual report of Kas Bank pension fund, turned out to be too strict indeed. This has led the pension fund to decide to expand its portfolio from less than a hundred stocks to more than a thousand, according to Gabriëlse.
The decision by pensioenfonds Kas Bank comes shortly after public transport sector scheme Rail & OV took a similar decision, also following several years of underperformance.
The closed pension fund achieved a return of 8.8% on its return portfolio in 2024, 5 percentage points below the benchmark.
According to the annual report, this is “mainly due to the underperformance of the equity mandate,” as fixed income securities within the return portfolio actually showed an outperformance of 0.6%.
The total portfolio generated a return of 7% last year, compared to 11.8% for the benchmark.
Current market conditions
According to Gabriëlse, the underperformance in equities is due to the fund’s strict ESG policy, in conjunction with the current market conditions. “At the start of the ESG policy [in 2020], we actually achieved a strong outperformance of around 11%,” she said.
The following years, however, showed a different picture. In 2021, the equity portfolio – then still run by the Dutch sustainable asset manager Actiam, which became part of Cardano a year later – recorded an underperformance of 3.2 percentage points. In 2022 this was 7.4 percentage points, and in 2023 it achieved 9 percentage points.
In its 2023 annual report, the Kas Bank pension fund said that it had already started “an evaluation of the equity strategy.” The result of this evaluation is the introduction of a broader equity portfolio with less active management, in order to reduce the tracking error compared to the benchmark, the MSCI World ACWI NTR index.
Future plans
Cardano remains the manager of the portfolio, according to Gabriëlse. This is not as surprising as it may seem, as the pension fund is aiming for liquidation by 2027.
Last year, it had planned to conclude a buyout with an insurer, but it shelved the plans following disappointing offers.
The fund is now looking to merge into a pooled pension scheme (APF). The board has requested quotations from four of these APFs and has now drawn up a shortlist. Gabriëlse declined to give any further details about this.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra.
