The Netherlands: Still a popular choice
Fiduciary management is still gaining ground in the Netherlands, and pension funds believe themselves to be in control despite delegating to a one-stop shop service provider, according to the third annual fiduciary management survey of 26 Dutch pension funds of our Dutch sister publication IPN. The funds vary in size from €37.5m to €12bn and with total assets of €38.2bn
Fiduciary management, with its offering of one-stop shop integrated services, is still growing in popularity in the Netherlands - despite mixed results of early fiduciary contracts, and despite misgivings of pension supervisor DNB.
As shown by IPN's third annual fiduciary management survey, one-stop shop solutions are still gaining ground, although the rise of fiduciary management is starting to slow down a bit. This year 57.7% of respondents are employing a fiduciary manager, up from 45.8% in 2009 and a bit over 28.5% the year before.
The percentage of respondents that do not intend to hire a fiduciary manager is still declining: from over 57% in 2008 to 41.7% in 2009, to just 30.8% in 2010.
As the fiduciary concept evolves, partial mandates and modular offerings - as opposed to delegating the entire asset management chain to a single provider - have become more important. This year for the first time we have charted how many pension funds are opting for such a modular soltion or limited fiduciary mandate. At 26.9%, this is a considerable proportion. Even more telling is that pension funds currently considering the fiduciary route are interested only in partial, modular solutions and are not considering full-service fiduciary management at all.
According to the survey, pension funds disagree with supervisor DNB's concerns that they delegate too much of their responsibility to fiduciary managers. DNB has pointed out that trustee boards must retain fiduciary responsibility at all times and has recently expressed concern that trustee boards opting for fiduciary solutions reliquish too much control.
A majority (58%) of respondents, however, maintain that trustee boards remain sufficiently in command when outsourcing to a fiduciary manager. As ways for trustee boards to remain in control, respondents list monitoring by both in-house and external experts and clear division of tasks and responsibilities; some in addition mention limiting fiduciary manager responsibilities to a partial mandate or advisory role.
To remain in control, rather than hiring external expertise, 61.1% of pension funds first and foremost rely on their pension fund's executive office; of these, 44.4% rely solely on in-house executive officers while 16.7% in addition also employ external expertise and/or in-house risk managers.