The 2003 IPE Awards European Gold Winner for best European Pension Fund, ABP, is that rarest of beasts – a giant pension fund that is quick on its feet. As the judges for the IPE Awards commented: “Still and despite being the largest and opinion leading European/Dutch pension fund, it acts and moves well in times of change. Risk management, ALM and investment strategies remain innovative, and SRI and alternative investment strategies are being implemented to diversify portfolios. ABP really has adopted a global strategy and structure to their set up for administration, risk management and investment processes.
“ABP maintains a core and strategic provider structure, which allows for optimal information and industry updates and exchange which we consider as crucial in these turbulent times.”
As plaudits for pension funds go, they don’t come much better!
ABP scored highly with the IPE Awards judges because of its clear success in a number of different areas, from investment to pensions management and communication.
Regarding investment returns, the firm has built up an exceptional internal know-how through the reinforcement of relations with universities and strategic partnerships with niche players. The fund’s focus on absolute and relative returns has also been increased with the net result that the scheme’s Z score for return/risk ratio indicates that ABP scores high in this area compared with other Dutch pension funds.
In terms of product range, the fund offers group defined benefit funds alongside sector and individual top-up pension plans. At present, the fund is also in the process of switching from a group DB plan to a hybrid DB/DC product, but which will clearly communicate all benefits and risks (costs and benefits) to all parties involved.
Regarding communication, ABP produces a pension letter providing information to participants about their pension plan and also advising them how possible shortfalls can be made good to avoid disappointment in the long term. Additional, the fund also produces a quarterly report informing the press and participants of the current developments and the financial position of the pension fund. ABP was the first Dutch fund to do this and its example has been followed by other Dutch pension funds.
Furthermore, the scheme benefits from a transparency plan, which aims to anticipate the needs of ABP’s members and other relevant parties.
ABP has also been a pioneer in the area of corporate governance and hopes to increase the awareness of national and international institutional investors where this subject is concerned. ABP is a proponent of an active shareholder role by adopting an active voting policy during shareholder meetings, not only in the Netherlands but also where foreign investments are concerned. The fund is also active in corporate governance networks for national and international pension funds. In the short term, ABP is also due to publish its voting behaviour in order to increase transparency to the outside world.
These endeavours were clearly recognised by one of the IPE Awards judges: “ABP’s answers gave me an impressive picture of this leading fund. A pioneer on pension fund management in regard of corporate governance activities and sustainable investments.”
Finally, for its members, ABP operates a pensions administration system that is oriented to the pension-related life events of each client. A counter staffed by competent personnel has been set up for each of these life events where customers can be served by a single contact who can answer all questions and provide information about products.
ABP, like most pension funds in Europe in the past three years, has had its difficult moments. However, the important thing is to learn from experience and move forward quickly and intelligently.
As one judge neatly puts it, ABP has done just this: “ABP is the intelligent, but quite visibly not infallible European pension fund. It is public knowledge that ABP recently had a run of unsatisfactory financial performance triggering major reworkings in liability and in asset management. Because of its newly gained significant flexibility and, in asset management, its recruiting power and risk control systems, it arguably has the strongest future potential for European excellence.”
For the members of the ABP pension scheme it must be reassuring to know that big is not only beautiful but smart with it!