Developing from a pension fund into a fully-fledged commercial tiger does not happen overnight. Mn Services in Rijswijk knows all about it. Until 2001 Mn Services was an integral part of the Pension Fund for Metalworking and Mechanical Engineering.
Four years ago Mn Services ‘broke loose’ from its parent and took its first steps on the commercial marketplace.
The company offers pension administration, investment management and management support to pension fund boards. Today Pieter Kiveron, director of commercial affairs acknowledges that market positioning is still an important issue. “Our pension fund background is to some extent a disadvantage. Although we have an excellent reputation, not many people are aware that we welcome business from any of the 700 pension funds in the Netherlands and from foreign pension funds, for that matter. Prospective clients keep associating us with our main client. So changing our image is one of the challenges we face.
“At the same time, originating from a pension fund is also to our advantage. Our track record for our main client proves that we can successfully handle complex pension schemes,” he says.
With e27.5bn of assets under management Mn Services is one of the larger Dutch investment managers of pension fund capital. Kiveron adds: “Innovation is what sets us apart from our competitors. We add new and innovative products to our product range on a regular basis. For instance hedge funds, inflation hedged products and duration extension solutions. Through effective marketing and communication we want to build the Mn Services brand. Our marketing strategy focuses on our proven track record, the quality of our services and the clients’ freedom of choice.”
Increasing its visibility is also the aim of SPF Beheer, which used to be the Railway Pension Fund until its independence in 1996. The company, which is still owned 100 % by the pension fund, is an expert in pension administration, investment management and employee benefits, carrying out with not only pension administration but also the main part of its investment management is in-house. SPF Beheer, with over e12bn in assets under management, only uses external investment managers in exceptional cases.
Manager of pension administration Ernest Nooij is confident that the company will shed its pension fund image in due course. Targeted promotion is how it wants to achieve its aim. “Our emphasis is on the fact that we feel closer to pension funds than other suppliers. That is why we chose services for colleagues as the motto for our way of doing business. We have in-depth knowledge of the entire pension fund landscape. The fact that we speak the same language and know what pension fund boards are up against, is one of our selling points. Of course insurance products were not as familiar to us as pension schemes. As pension administration experts, it took us some time to get acquainted with this. Now we sometimes develop new insurance products in cooperation with third parties, like Levensloop, a new life course product.”
Do these organisations bite off more than they can chew by taking on pension schemes outside their familiar branches of industry? Toine van der Stee, since 1 September chief executive officer of Blue Sky Group, sees no problem whatsoever. “Our IT systems are very up-to-date and sophisticated. They allow us to administrate all pension schemes you can possibly imagine.”
Blue Sky Group originates from one of the oldest and largest pension funds in the Netherlands, the KLM pension fund and became independent in 1999. As of 2002 the three pension funds for KLM staff each own a third of the Blue Sky Group is shares. The group currently has six clients. “We are used to administrate the very complex and diversified pension schemes in the air line business. Because of this background our systems can cope with anything, including pension schemes of different nature and volume.”
Ernest Nooij of SPF Beheer says that a new system is being implemented at the moment and will be in operation as of 1 January 2006. “We are confident that this system will cope with the pension schemes of all our clients.”
Toine van der Stee says: “In contrast to insurance companies, Blue Sky Group is fully dedicated to pension administration, investment management and management support. Being independent and not having any derived interests motivates prospective clients to do business with us. As far as investment management is concerned: for our KLM clients we achieved a 12% return last year. Our strategic investment choices proved their value, which encourages other clients to entrust us with (part of their) investment management.”
With these organisations, new clients often do not have the same size of scale and of assets under management as their main client. Is there a risk of smaller funds feeling daunted by and having to compete with a gigantic pension fund client? On the contrary, says Pieter Kiveron of Mn Services decisively. There is a mutual interest involved. “Smaller and medium sized funds benefit from the volume and scale of our largest client. Our volume and scale enable us to keep investing in staff and systems. It also works the other way around; our largest client sees its costs reduced due to the increase in our client base.”
Cordares, formerly the Social Funds for the Building Industry, recently underwent a complete identity makeover in order to compete even more successfully in the pension fund arena. This makeover entailed not only a name change, but also a change of business structure. “Pension fund boards want the characteristics of their particular fund to be fully reflected,” explains Joep Schouten, chairman of Cordares. “To make clients feel more at home, we work on setting up specialised business units for company sponsored pension funds, medium sized funds and industry-wide funds. Clients often demand customisation: Cordares wants to cater to these needs, but not at all costs.”
It is crucial to strike a balance between system uniformity on the one hand and customisation on the other. Therefore we are creating three main administration systems, in accordance with our specialised business units. In this way, each pension fund category, be it company sponsored, medium sized or industry wide, can have its separate computerised street, where we implement fund-specific adaptations. Fortunately pension fund managers are increasingly aware that IT systems have to be taken into account when designing their pension schemes. We have offered our services to clients outside the building industry for seven years now. Our approach works, given the fact that we currently work for five clients outside the building industry.
Joep Schouten endorses the point of view of his colleagues on the vital role of communication and market positioning. “Cordares has to make itself known in all our areas of expertise. People know us as the Social Funds for the Building Industry. Expanding this familiarity and putting it in a wider context is one of the key factors for success.”