NETHERLANDS - A recent court ruling vindicating Dutch pensions supervisor De Nederlandsche Bank (DNB) for instructing the €23bn metal scheme PME to de-risk its investment policy is based on several incorrect assumptions, PME has claimed.

Responding to Parliament-wide questions to social affairs minister Henk Kamp about PME's investment costs, the scheme argued that the criticised asset management costs of €450m - paid to MN Services over 2007 - were incomparable to a pension fund's basic fee of €12m.

On its website, the pension fund said the €450m was a rough estimate of combined direct and indirect asset management costs over 2007 - not only for PME but also the €37bn metal scheme PMT - and that the total amount has been paid to several asset managers.

It added: "This happened just before the financial crisis, when the then still high returns caused a relative large amount of performance fees."

However, PME noted that its own executive board had described the investment costs as "exorbitant", rather than the DNB, as the court suggested.

According to the metal scheme, its direct asset management costs for 2010 were approximately €102m - "less than the norm of 0.5% of total assets applied by pension funds".

PME further stressed that it would soon provide clarity about the transaction costs, which have largely been hidden in pension funds' net results so far.

It estimated these indirect costs at 0.25-0.5% of invested assets.

In the opinion of the metal scheme, the court has wrongly suggested it lost €519m of its portfolio of loans to life insurers, the so-called VGMI portfolio, in 2008.

"In reality," the fund said, "the value of the portfolio had to be downgraded to the lowest possible level to maximise prudence in our recovery plan during the climax of the crisis. One year later, the value of the investment had almost recovered to its previous level."

PME further underlined that it has improved its governance and increased its countervailing power for implementation, as well as its in-house expertise since 2009.

"In addition, we have improved both the management and the liquidity of our investment portfolio, decreased concentration risk and introduced our own independent valuation models," it said.

PME said it had yet to decide whether it would lodge an appeal against the court verdict.

Recently, a survey by IP Netherlands among 24 pension funds suggested that most of the smaller schemes has management costs of 10-30 basis points.

The two largest pension funds - the €230bn civil service scheme ABP and the €96bn healthcare scheme PFZW - reported investment costs of 50bps and 40bps, respectively.

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