Patrick Groenendijk, chief investment officer at Pensioenfonds Vervoer, which has AUM of€6bn

he major change of the last decade has been in the way we monitor and structure the investment process. We have always been completely outsourced and still are, but 10 years ago there was nobody who did a full-time monitoring job."

"In response to pressure from the Dutch regulator, DNB, for more separation of policy and investment implementation and due to disappointing performance of the external manager compared to other Dutch industry-wide pension funds, the board has now decided to set up its own executive office where outsourced investment mandates are monitored. This has helped a lot to increase professionalism. But with hindsight, I don't think we would have done things much differently except to take manager diversification much more seriously and set up the executive office earlier."

"In addition, today we have a much greater awareness of and focus on risk. The performance and annual reports of 10 years ago only talked about returns, especially as 1997 was one of the big years in equity markets. But in early 2000/2001 we learnt that we needed to focus much more on risk management and risk monitoring."

"The introduction of the euro in 1999 had a big impact as it changed capital markets; in addition, new asset classes have been created that were unknown 10 years ago but are now regularly invested in by many Dutch pension plans. These include commodities, hedge funds, global tactical asset allocation, private equity and infrastructure."

"So over the last decade, our portfolio has become less reliant on equity markets and we have diversified into alternatives. Increased awareness of risk has led us to currency hedging and a closer look at the fund's interest rate risk versus liabilities."

"Our recognition that we are more than just an investing firm, and as a pension fund need to look after our liabilities and invest in order to meet those liabilities, has been stimulated by the creation of the new financial assessment framework in the Netherlands, the FTK, which came into force at the beginning of 2007. We think it's a very positive development that the implementation of ALM - which was already well known in theory 10 years ago - has now been taken seriously."

"I think people will operate much more on an integrated asset liability management basis in the next 10 years. It will become much more common not to take the asset-only approach, but to invest with an eye towards liabilities. I also expect diversification to increase because of new alpha sources and emerging new asset classes - people are talking about life settlements and infrastructure has already taken off."

 

Jiri Rusnok, is chairman of the board of ING Penzijni fond as, which has AUM of CZK15bn (€541m)

he biggest milestone in the recent past has been the passage of legislation for voluntary private pensions, which effectively started in 1995. It was the first time specific legislation for nationwide retirement savings schemes was established in central and eastern Europe."

"A new tax release encouraging employers' participation also had a big influence on the Czech pension world. Before it came into force in 2000, employers did not contribute to an employee's pension because contributions were only possible after taxation. Since 2000, contributions have been deductible before taxation. Now both an employer and an employee can pay into an employee's individual account. At the moment the system has 3.5m participants and almost 1m of them receive contributions from their employer so it proved to be quite successful."

"A lot of changes also took place in the first pillar such as an increase of the statutory retirement age - to 63, although there is a growing consensus that it will have to increase to 65 - and the abolition of some occupational preferences."

"As ING PF we have been quite successful in the market's development from the Soviet past to the present because we have been around since the beginning of the process in 1995 and now are a firm part of the market with more than €500m under management and more than 400,000 clients. We built the country-wide private pension system from scratch and today about 50% of all workforce participate."

"But with hindsight, I would have introduced the incentive for employers much more quickly as it only came into force after five years of the new system."

"Of course the private pillar system now needs some modernising, in particular the structure of the pension companies. It would be better to have a split between shareholders and plan holders' property, which is not yet fully integrated in our system."

"But while over the next 10 years the third pillar private pension will need to develop further, the biggest challenge for the future is the creation of a second pillar, which has been introduced in all our neighbouring countries to a World Bank design."

"In my eyes the lack of a second pillar is a major failure because of the ageing of the Czech society. PAYG state pensions will face massive problems in the next 20-40 years although the longevity blow was softened slightly by the increase in statutory retirement age. It is necessary to start a properly designed fully funded pillar for basic retirement needs, which we will hopefully build in the next few years."

"Our portfolio hasn't changed much over the last decade. Czech pension funds have had quite a conservative asset allocation due to a requirement to provide annual guarantees to our clients."

"Under the pressure of these guarantees the structure of the investment has been quite stable. Up to 80% is invested in fixed income, about 10% is in equities and the rest is in cash. We have started to use some foreign instruments more broadly and tried to invest in real estate, but this has only been negligible."

 

Luis Peña, chief executive officer at Fonditel, which has AUM of €5.6bn

he Spanish pension system has undergone a lot of changes over the last 10 years as it is very young - it started in 1989 and was only a tax exemption product in its first year."

"Changes in the mid-1990s largely excluded the second pillar because it was only big companies such as Telefonica, Repsol and the banks that offered such employee benefits while all public companies initially had a DC scheme. In the late 1990s, medium-sized companies also started to look at this system but it was
unpopular with unions and sponsors."

"I believe that the public's attitude will change in the next five years when those who retire realise that their salary has grown faster than their public pension. They will start looking for third pillar private pensions as the second pillar won't have developed much further."

"Developments over the next decade will be at a much faster rate than before. Public sector workers - around 600,000 people - have now had a second pillar pension scheme for two years. And this could be the incentive for private companies to follow suit."

"However, currently people don't use the second pillar because they think they have a guaranteed public pension for the next 20-25 years."

"This ignorance has been caused by a surplus in the social security budget, which has been created by the large number of immigrants working in Spain. The influx is growing, while the number of pensioners remains the same as five years ago."

"But the social security surplus only amounts to €30bn and so I expect the public system to face difficulties in 10-15 years as immigrants can help delay the problem but are no solution as they will also retire and have families here. The second pillar is the best answer to this problem."

"A February 2004 change in asset management regulation was the worst development over the past decade. Previously, we had a very open asset management regulation that allowed us to work with any instruments and assets. But the new rules are very restrictive and have caused problems with, for example, alternative investments that we made in the past but can no longer do."

"The new regulator is currently trying to change this and, although it won't move back to the pre-2004 position, it will harmonise the regulations much more with the capabilities and management of European pension funds."

"The biggest changes at Fonditel have been in asset management. A decade ago we worked in a local market, fixed income investments were in Spanish treasury bonds and equity investments in Spanish companies. The euro was one of the drivers behind the internationalisation of assets. In 1992 Fonditel, the Telefonica employees pension scheme, invested 98% in government bonds and Spanish equity. Today we invest less than 5% in Spanish companies and bonds and 95% is diversified in European, American and Asian markets."