Survey says Dutch fund governance needs to improve
NETHERLANDS - Half of Dutch pension fund board members in small schemes spend less than five hours a month on fund business, while there is a lack of specific investment knowledge amongst pensions boards, according to a survey on pension fund governance by Frank Russell and the Amsterdam Vrije Universiteit.
The research compares the amount of time being spent by smaller pension scheme boards to one of the key points of the Myners review of institutional investment in the UK, which noted that pension plan managers are being asked to take crucial investment decisions yet many lack either the resources or the expertise.
As a direct result of this lack of time and experience, the report says the majority of small/mid sized Dutch plans leave investment strategy and policy decisions to their external investment manager.
On top of this, over 40% of all small Dutch funds and 30% of all mid sized funds indicated that they have never changed their managers or are unaware of any changes made.
On the wider lack of specific investment knowledge of pension fund board members, the report points out that the vast majority are also full time employees of the business and that the added pensions responsibility is a substantial burden on their time.
Russell says its aim in initiating this research was to examine how plans of all sizes approach pension fund governance,
The firm says the report is particularly timely given the rising level of public interest in pension funds.
Another revealing element of the research is the gap it reveals between the organisational and governance structures used by large Dutch plans and those employed by small to mid sized plans.
While the largest funds have a well-defined division between the functions of setting fund policy, implementation and control, the majority of small and mid sized plans lack such structures, says the report.
Acknowledging that most mid sized funds in the Netherlands seek to imitate the investment approach of their larger peers in selecting active management, the survey suggests they lack the corresponding governance support structures.
Smaller plans, however, tend to adopt a more passive investment approach.
In addition, the report shows that the majority of small and mid sized plans pay little attention to either internal or external benchmarks, an issue, the report says, they will likely have to address or face possible legislation.
The Dutch pensions and insurance chamber is currently drawing up further guidelines and policies for pension funds to assure better planning and control in the future.
Peter Risseeuw, senior researcher at the Economic and Social Institute of the Vrije Universiteit in Amsterdam commented, “This report gives us a unique insight into how Dutch plans are currently managed and reveals scope for improvement. This report is a first step towards improving the Dutch approach to fund governance and ensuring plan managers have access to the necessary support.”
The report was initiated and sponsored by Frank Russell, whilst the research and compilation was carried out by the Economic and Social Institute of the Vrije Universiteit in Amsterdam.