Pension funds that buy both investment advice and asset management from a single service provider incur approximately 10% in additional costs relative to schemes purchasing the same services from different players, according to Dutch competition watchdog ACM.
It said that an exploratory survey into possible distortion of competition between asset managers had found that the additional costs applied especially to small and medium-sized pension funds.
The supervisor added that schemes that buy the services from a single player tend to stick longer to such arrangements.
ACM drew its conclusions on data of 135 pension funds spanning the period 2012-2017 as well as on interviews with market players and experts.
The actual survey, conducted by research body SEO Economisch Onderzoek, showed that at the end of 2017, 66 pension funds had opted for both investment advice and asset management from the same provider.
The study involved 31 investment advisers. At 21 of them, all pension fund clients also bought asset management services, according to the regulator.
The watchdog said it couldn’t explain higher costs based on expensive investments, the managers’ performance or achieved surplus returns.
It suggested that purchasing a package of investment advice and asset management could be beneficial for the co-ordination between the adviser and the manager, leading to a tailor-made approach.
“To small and medium-sized schemes, this could outweigh higher asset management costs as a consequence of the bundling of services,” it said.
The watchdog further found that changing asset managers could increase costs by up to 8.3% in the year of the switch.
It suggested that these transfer costs could reduce a scheme’s willingness to change asset managers, and argued that this posed a competition risk at the expense of pension funds and their participants.