Top Dutch pension fund takes the shears to hedge funds
Inge van den Doel is under pressure to cut costs on the €41 billion of investments she oversees for PMT and alternative strategies are first in the line for a haircut.
by Atholl Simpson on Nov 05, 2012 at 08:01
The Dutch pension system has particularly stringent regulation when it comes to coverage ratios.
Fall below the 105% mark and the resulting fallout means a pension fund must review its risk policy and find other ways to boost its returns to meet the coverage target.
For Inge van den Doel, head of investments for the Netherlands’ third largest pension fund PMT, that is the predicament she now finds herself in.
With a current coverage ratio of between 85-90%, her hands are tied as she is not allowed to increase the risk in her portfolio.
This situation presents investors with a Catch 22 scenario as upping risk levels is usually the way to boost returns in order to meet any target.
‘Because our coverage ratio is below the regulatory minimum we cannot afford to take on more risk so our whole investment policy is risk-driven,’ she says.
Van den Doel was appointed the pension fund’s head of investment in the summer and since then she says she has made one significant change to the way they operate.
Cost-cutting has helped to boost overall returns and her allocation to hedge funds is the first target.
‘This environment exerts a particular influence on any decisions we take in the alternatives class as this is usually the more expensive market.’
Of the €41 billion in assets she runs, 15% is allocated to alternative strategies with around half of that dedicated to the private equity sector. A significant portion of the remaining assets are in hedge funds.
Another reason to focus on costs also comes from her clients, who are from the Dutch metal workers and engineering sectors.
‘The confidence in the pension fund sector and the financial sector is very low. So there is no understanding when it comes to paying high fees,’ she says.
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