NETHERLANDS - Anton van Nunen, the creator of fiduciary management, has attacked Dutch pensions regulation for being a key element contributing to the losses suffered by pension fund over the last two years, and described the current system as "idiotic".
Nunen, who has been nominated for the Outstanding Industry Contribution Award at tonight's IPE Awards in Dublin, told IPE that he believes the figures quoted by De Nederlandsche Bank's Kellermann were incorrect and claimed what really hurt Dutch pension funds was the need to follow a regulatory strategy which was bound to suffer during a financial downturn.
"The Dutch regulatory environment has certain good elements because it stresses expertise and governance. But overall it has a devastating effect on Dutch pensions," said Van Nunen.
"Joanne Kellerman said ‘the credit crunch has cost some €225bn, evenly distributed between the interest rate and asset process'. But her distribution is not correct because if interest rates go down and a pension fund has a cover ratio of 105%, it has to reduce risk. Making this move also causes assets and equity prices to go down. This is what happened when they had to sell equity and buy fixed income. So more than 50% of the loss suffered was because of the regulatory system, was worth €150bn."
Van Nunen described the Dutch pensions regulation as "idioitic" as he believes the funding ratio would always be 100% or more when calculated correctly but is unlikely to be ever be correct under current regulations."
"The regulator has prescribed the swap rate be used to calculate the liabilities," said VanNunen. "Yet it is not a reflection of the interest rate use to calculate liabilities. The swap market is not deep enough, and has shown itself to have devastating effects. [The strategy] is also backward-looking. It is a one-year picture of a long-term strategy, and should be replaced by sound, processed theories," he added.
Van Nunen said his discussions with pension funds suggest they feel the regulator has caused huge damage to their market.
"Using the funding ratio means pension funds should have buffers, but the regulation means you have to replenish the buffer, which is exactly the wrong thing to do,' he said. "You should fill the buffer when times are good. But they are prescribing them to do so in bad times. The most devastating thing has been the regulatory environment."
One development which he thinks has made a major difference to pension funds over recent months is the growth and implementation of fiduciary management.
Not only is fiduciary management now a key service in the Netherlands but there are strong signs of it widening beyond European borders.
"The concept has a chance in other countries. I think the UK is moving into fiduciary territory very fast. And it is growing in Germany and Italy. And next week there is a conference on fiduciary management in Tokyo," he added.
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email email@example.com