AMSTERDAM - Dutch pension funds are failing to match their assets with their liabilities, according to a survey by The WM Co., Amsterdam.
Despite growing sophistication of Dutch pension funds, they still have a long way to go, the survey suggests. The survey mirrors a similar one the performance measurer had conducted for U.K. pension funds.
In a survey of 82 Dutch pension funds representing 20% of Dutch plans and two-thirds of Dutch pension assets, WM officials found little correlation between plans' maturity profiles and their asset mixes.
Overall, WM officials found Dutch funds are not terribly mature as of the end of 1995. The average Dutch fund had a maturity ratio - defined as the proportion of non-active worker liabilities to total liabilities - of 49.5%, compared with 51.5% for U.K. pension funds.
Extreme maturity levels were rare. Most funds had a maturity ratio between 41% and 70%; none exceeded 80%. Only seven funds had a maturity ratio less than 20%. What's more, no Dutch fund experienced negative cash flow, contrasted with 17% of British funds surveyed.
On an ongoing basis, the mean contribution rate to Dutch funds was 16.1%. The current mean contribution rate was only 11.7%: Thirty pension funds were paying lower current rates than their ongoing rate, suggesting they are well-funded.
Despite the widespread use of customized benchmarks, Dutch funds' investment policies generally failed to match their liabilities.
WM's survey revealed immature funds (those with a maturity ratio of less than 40%) and mature funds (with a maturity ratio of 40% to 60%) had a lower exposure to equities and real estate than did super-mature funds. Larger plans tended to be among the most mature.
Overall, at the end of 1995, Dutch funds had an average exposure to real assets of 32%.
By the end of last year, exposure to stocks alone had reached 32% - up from 22% during the past five years, said Cees Weston, sales and marketing executive for WM. Still, that's a far cry from the average U.K. plan exposure to real assets of 80% at year-end 1995.
"With an average maturity ratio of around 50%, (Dutch) funds are clearly not 'matching' their assets and their liabilities," the survey said.
The survey found only five Dutch funds had real assets (combined equities and real estate) exceeding 50%. Three of those were in the super-mature category.
The super-mature funds also had a higher exposure to real estate, reflecting a historical trend of larger funds to have larger property holdings, the survey observed.