NETHERLANDS – The decision by the pension funds of Philips and Akzo Nobel to outsource their asset management and administration marks the start of a trend of placing pension funds at a distance from the sponsoring company, according to Dutch management consultant Compendeon.
“Contracting out of operational activities and implementation of the scheme, is a good way of streamlining processes, costs reduction and risk management”, said Leo Dooper of Compendeon. “But a proper analysis of any specific problem, and an independent judgement, are vital for finding sound solutions”.
The increased dynamics resulting from the introduction of a new financial assessment framework (FTK) and new accounting rules means that Dutch pension funds should reconsider their future, he said.
“The board of a pension_fund should focus primarily on the long-term strategy and on the monitoring of the results,” Dooper said.
“The board should be able to change direction when developing and managing the pension scheme, defining and the executing of asset management policy,” he added. “Managing the communication with the members should be part of it as well”.
Dooper stressed the importance of hiring an independent expert to deal with such issues as defined benefit and defined contribution rather than using the fund’s initial actuarial consultant.
“There should also be a proper separation between asset management, brokerage and custody,” he said.
Compendeon advises against contracting out to a large consultancy that offers all products. “Such a move runs the risk of lower returns because smaller specialists might book better results within their niche,” said Dooper.
“The risk of using a large player is that there is a dangerous mixture of sub-functions within the asset management and incorrect benchmarking. Scaling-up often doesn’t work”.
Meanwhile, Philips’ pension fund has appointed a new director. Jasper Kemme, who will start on June 1. He used to be head of the legal team at Philips Pension Competence Centre.
Kemme takes over from Wim van Winden, who has been appointed new chief financial officer at Philips Electronics Netherlands BV.