The pension fund of Dutch telecoms company KPN has sold its separate allocations to emerging market equities and its so-called long-term investment portfolio, according to KPN’s 2025 annual report.
The year before, the €10bn fund had already sold its stake in a multi-manager small-cap equities fund after several years of underperformance. All of the mandates in question were managed by the KPN scheme’s fiduciary manager, Aegon Asset Management.
“We have abandoned our core-satellite strategy in our investment policy,” said investment manager Jaap van Dam.
Under a core-satellite strategy, smaller sub-portfolios complement a core equity portfolio, typically based on MSCI World-type exposure, with the aim of generating additional returns.
While common in private banking, the approach is less widely used among pension funds because of its greater complexity and governance burden.
Benchmark shortfall
Van Dam cited several reasons for discontinuing the satellite portfolios. In the case of the long-term investment fund, he said it had failed to achieve its return target of benchmark plus 2%. In addition, the portfolio no longer delivered superior ESG scores relative to the core portfolio.
“Over the last years, ESG engagement has become commonplace within the wider equity portfolio,” he said.
Annual reports for the past two years showed the long-term investment fund underperformed its benchmark, including a 4% shortfall in 2024. Since its inception in 2017, cumulative outperformance stood at 0.7%.
At the end of 2024, the investment fund represented 7.5% of KPN’s total investment portfolio. Holdings included ASML, Alphabet, Samsung and Visa.
The scheme will continue investing in these companies through its actively managed global equity portfolio. Van Dam noted that the long-term investment fund “differed significantly” from the global portfolio in terms of composition.
According to Van Dam, the decision to divest the emerging market equities portfolio followed the pension fund’s move last year to align investments with the MSCI All Country World Index (ACWI).
“The overweight on emerging markets has been terminated and, therefore, the separate allocation to emerging markets has been sold,” he said.
The pension fund continues to hold emerging market equities within its global equity portfolio, Van Dam added.
At the end of 2024, the allocation represented 1.5% of total assets.
Governance considerations
Van Dam also said the investment policy’s multiple satellite portfolios imposed additional governance demands on the pension fund.
“You are talking about additional evaluations and the complexity of the implementation, among other things. That can only be justified if there is really a distinctive added value,” he said.
Following the sale of the satellite portfolios and the transfer of mandates into the global equity portfolio, the latter’s share of total assets increased from 21% to 30%.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra.
