RIJSWICK, Netherlands - Six Dutch pension plans with combined assets of nearly e4 billion ($4.5 billion) are teaming up to share a global custodian, asset managers and administration services.
The six plans are:
* the e1.5 billion Stichting Pensioenfonds TNO, Delft;
* the e772 million Stichting Bedrijfspensioenfonds voor Het Baggerbedrijf, Leidschendam;
* the e726 million Stichting Pensioenfonds HBG, Rijswijk;
* the e550 million Stichting Pensioenfonds Volker Stevin, Rotterdam;
* the e500 million Stichting Pensioenfonds Productschappen, Rijswijk; and
* the e120 million Pensioenfonds Peek & Cloppenburg, Zoetermeer.
The plans are poised to appoint a common global custodian by the end of this year. They also are expected within the next six months to set up an investment committee to advise each plan on its asset management arrangements and be the liaison with external money managers, said Nico Dijkhuizen, managing director of the Productschappen plan.
Next month the plans are to begin sharing an office building in Rijswijk and will begin using a common administration platform.
This cooperation project is one of the first between midsized Dutch pension plans and is expected to pave the way for other plans. Such a move certainly makes sense, as small and midsized pension plans are finding it harder to obtain cost-effective asset management and custodial services, observers say.
Still, coordination among the six plans could be tricky: Each has its own contracts with plan members, insurers and money managers.
Reasons for cooperation
Executives at the pension plans said achieving economies of scale and sharing resources were the chief reasons for their cooperation.
The pension plans will remain separate legal entities, but might decide to pool their assets over the long term, said Mr. Dijkhuizen of the Productschappen plan.
Appointing the global custodian would be the first step toward aligning the investment processes of the six plans. "We need to convince all the pension funds that if we act as one group, we will get the fee that fits the size," he added.
But Mr. Dijkhuizen said it could take at least another year for the pension funds to begin issuing common mandates.
All the assets of the Productschappen plan are actively managed internally, with 40% of the plan invested in eurozone and international equities, 50% in mainly eurozone bonds, and 10% in European and international fixed income. He said the plan might consider using an index strategy, but this would depend on the arrangements with the other pension plans. He also said plan officials will consider outsourcing investment management.
While a decision about the new custodian is expected at year's end,, not all of the plans will appoint the global custodian immediately.
The Volker Stevin plan has its assets insured with ING Groep, The Hague, and will not be using the common custodian, said Jaap de Jong, investment manager. He said the plan had a contract with ING, and it would be two to three years before he could consider using other money managers or custodians.
At this stage, sharing office facilities is the main benefit of joining the other five plans, he added.
The assets of the Peek & Cloppenburg plan also are insured, according to Sheik Sakoar, administrator of the pension plan. He would not give further details.
Cooperation among the six plans will improve the quality and ensure the long-term survival of the plans involved, said Joop Beugelsdijk, general manager for Baggerbedrijf plan, an industrywide pension plan for the dredging industry.
He said plan members and sponsoring companies are demanding more information about their plans. He also is keen that the pension plans jointly source asset managers as well as a global custodian.
"My intention is to have the same asset managers for all the pension plans where it is possible," he said. The directors of the six plans are discussing how to coordinate contact among the six plans and external asset managers.
Mostly managed internally
Some 75% of Baggerbedrijf's plan assets are managed internally in European equities and fixed income. The plan has external money managers ABN AMRO Asset Management, Amsterdam, and Robeco, Rotterdam, to manage U.S., Japanese and Far Eastern equities and corporate bonds. ING has a mandate to manage U.S. equities.
Like the Productschappen plan, all of the assets of the Baggerbedrijf plan are managed actively. The plan intends to put some of the assets into index funds, but will not make any reallocations until it is clear what the money management arrangements will be among the six pension plans in the group, said Mr. Beugelsdijk.
Nearly all the assets of the TNO plan are outsourced to external money managers, according to Henk Bogerd, controller.
He would not give details of the mandates but said the current money managers were ABN AMRO Asset Management, Amsterdam; Fortis Investment Management, Utrecht; AZL Beheer, Heerlen; Schroder PLC, London; ING Investment Management; and Kempen Capital Management, Amsterdam.
Jos van Kleef, director of HBG pension plan, would not comment for this article.