SPH, the €9.5bn pension fund for general practitioners in the Netherlands, is reducing its number of asset managers, switching to passive investments and renegotiating mandates in an effort to focus fully on cutting costs.
According to its 2015 annual report, it will also divest its “expensive” 5.2% hedge fund allocation.
The scheme said it reduced total costs by almost 15% last year, in particular by lowering its transaction costs.
It said it aimed to cut asset management costs over the long term by trimming its number of managers.
Last year, SPH placed its emerging market equity and small-cap holdings in global passive mandates, while replacing several “expensive” active managers with a single passive manager.
Excepting hedge funds and private equity, it said it had ceased paying all performance fees, adding that it intended to renegotiate mandate costs for emerging market debt and listed property.
Meanwhile, SPH has placed the whole of its equity, government bond and commodities holdings under passive management.
Alex de Waal, the pension fund’s director, said: “We want to have all asset classes managed passively in principle, unless the added value of active management is evident.”
To reduce risks, the pension fund introduced a gradual scale for its equity and commodities investments, ranging from 50%, when funding is more than 130%, to 30%, when funding is less than 105%.
Over the next three years, it aims to lower the risk profile of its non-listed real estate holdings by transferring its entire 10.1% property allocation into PGGM’s Private Real Estate Fund.
Its board has also decided to start investing in local care centres, having already invested €14m in a nursing complex.
The pension fund reported a net return of 1.3%, following losses of 2.7 and 0.3 percentage points, respectively, on its currency and interest hedges.
It lost 3.7% on the 0.1% private equity allocation that remained following its decision in 2011 to divest the portfolio.
SPH said infrastructure holdings generated 16.7% and that it wanted to increase its 2.6% allocation to 5% by 2020.
Hedge funds returned 11.1%.
The pension fund has 16,645 participants and pensioners, who received an indexation of 2.1%.
Its funding stood at 131.6% as at the end of March.