'Sophisticated' Dutch funds lead LDI pack
NETHERLANDS - Dutch pension fund strategies have been described as being the most advanced among their developed country peers, as a study of executives suggests the majority have adopted liability-driven investment (LDI) strategies alongside the broadest range of products.
Fiduciary manager SEI Investments conducted a survey of executives in the US, UK, Hong Kong, Canada and the Netherlands with pension funds worth €15m to €2bn through its Pension Management Research Panel and found over 61% of those surveyed in the Netherlands now employ an LDI approach while a further 22% are considering it over the next 12 months.
It is unclear whether full LDI strategies are being deployed as some investment consultants have in recent months found not all aspects of LDI are being adopted for tactical reasons.
But SEI found the Dutch pensions market is applying a wider range of strategies to their asset management and allocations, described by officials as "reflecting the relative sophistication of Dutch pension fund investors with a broader range of products utilised than anywhere else in the world", according to officials.
More specifically, at least 31% of schemes are invested in hedge funds, commodities and infrastructure, while 62.5% use inflation swaps and at least half (50%) apply global tactical asset allocation strategies, demonstrating, said the firm, "Dutch pension funds are seeking to manage ‘real' as opposed to ‘nominal' liabilities".
Interestingly, the global survey found there is still no consensus on a definition of LDI but the preferred description appeared to be "a portfolio designed to be risk managed with respect to liabilities" as three-quarters said the primary goal is to control year-on-year volatility.
That said, 44% of schemes in the Netherlands said meeting FTK requirements was a primary driver of employing an LDI approach while one third said they had recently made changes to asset allocation policy because of a need to meet FTK regulations.
"The results of this poll clearly demonstrate that The Netherlands is the most sophisticated and progressive pension market in the world," said Bart Heenk, managing director of the Benelux region.
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