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Physiotherapists scheme notes 'debates' with DNB over alternatives

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The Dutch pension fund for physiotherapists has said “constructive debates” are sometimes required to convince the country’s regulator that investments in more innovative asset classes are required.

René van Pommeren, member of the board and the investment committee at the €2.5bn SPF Fysiotherapeuten, said the fund had occasionally been restricted in its asset allocation due to its funding ratio.

However, he told IPE’s How We Run Our Money that the scheme’s fund-of-hedge-funds portfolio was divested, following a review, due to high costs – “one issue we like to keep under control”.

“As part of this review, we decided to change the private equity and hedge fund portfolios in 2013,” he added.

Instead, the fund has now invested 4% of assets in hedge funds and a further 2% in private equity.

He said it had not always been easy to win the support of De Nederlandsche Bank (DNB) for its strategy, despite a current funding ratio of 105%, including its 2% unconditional indexation, being above the statutory minimum.

“We do have constructive debates with the regulator about investments in innovative asset classes, such as private equity and hedge funds,” he said.

Van Pommeren said that, while his fund relied on asset-liability models (ALM) for many aspects of its investment strategy, the approach was not always useful for alternatives, as the modelling relied on past data.

“We also seek qualitative assessments – for example, through portfolio plans, in particular for alternatives where we do not have much reliable historical data,” he said.

The DNB has previously warned the industry about an over-reliance on alternative assets.

In a letter to the industry from mid-2012, the regulator’s head of pension fund supervision Olaf Sleijpen said: “The cost structures of alternative investments are not always in proportion to the added value of the asset class views.

“The DNB has seen that this can lead to diversification benefits being overestimated and management and specific risk characteristics, such as tail and liquidity risks, being underestimated.”

For more on the investment strategy of SPF Fysiotherapeuten, see How We Run Our Money in the current issue of IPE

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