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New VB code could hit fund performance - Hewitt

NETHERLANDS – The VB’s new pension fund governance code could hit the overall performance of pension funds, Hewitt Associates says.

The VB, the Association of Industry-wide Pension Funds, unveiled its code on July 4.

Lepoutre, legal consultant at Hewitt, told IPE that the VB’s proposal to introduce a new supervisory council would have a potentially constraining effect on corporate pension funds.

And the supervisory council could mean the end of corporate pension funds, if fully implemented.

Lepoutre, supported by his colleague, actuary Rene den Hertog, stated in a newspaper article that the new proposal could be an additional reason for employers to end their involvement in a corporate pension fund.

At present, they argue, the board of a corporate pension fund is set up in full parity, with half of the ‘power’ with the employer, the rest with the employees.

If a new supervisory council is introduced, this could result in a shift of power, resulting employers’ influence falling to 33% from the previous 50%) – with 33% going to employees and 33% to inactive and pensioners.

Still, while an overall compromise is possible, in reality most times an employer will lose influence and will have to pay more premiums.

Such a new council could result in the end of a corporate pension fund, due to the fact that an employer will choose to become part of an industry-wide pension fund or even go to an insurer for his pension plans.

According to Lepoutre and den Hertog, the VB proposal is more suited for larger corporate pension funds, not smaller ones. This also is the case for smaller industry-wide pension funds.

What was suitable for ABP or PGGM is not always suitable for the smaller ones. Most criticism to the supervisory council proposal is focusing on the so-called workability and feasibility.

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  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

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