NETHERLANDS - Rob Radecker, head of beta at PGGM, the asset manager of the €88bn Dutch health care fund PFZW, believes exchange-traded funds (ETFs) have "serious drawbacks" for large pension fund investors.

Unless cost and liquidity issues are readdressed, the giant investor does not see much place for the instruments in its portfolio, according to Radecker.

Speaking today at a pre-summit briefing of an Asset Allocation conference in London, Radecker argued the costs and inflexibility of investments, in particular, has prevented PGGM from doing more with the instruments.

Radecker, whose team manages €67bn over five different asset classes, commented: "ETFs are rather expensive compared to other instruments in our toolbox," arguing they can be up to three times more expensive.

According to the fund manager, a lack of liquidity makes the investment tool inflexible as the liquidity a fund might need is not always available through with ETFs when compared with bonds and equities, suggested Radecker.

"Liquidity is very important, since we need a lot of liquidity because we are constantly selling and buying beta," he explained.

That said, PGGM does use some ETFs, mostly in emerging markets, to rebalance its portfolio, and to 'equitise' cash.

PGGM wants to benefit from economies of scale and their scope, while exploiting "a full opportunity set" but in beta management, market segregation can lead to enormous price variations, he told delegates.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email