THE HAGUE, Netherlands - When ABP and PGGM originally announced a controversial joint bid for De Nationale Investeringsbank on Christmas Eve 1999, the plan was to turn the Dutch investment bank into a business with three arms: a securities business; a private-equity boutique; and a structured debt money management unit.
"We are moving into uncharted territory for pension funds," Roderick Munsters, chief investment officer for Zeist-based PGGM, said at the time.
But last month, the money management arm was severed. Despite allocations totaling e25 billion ($24.2 billion) in assets by NIB's owners, the e149 billion Stichting Pensioenfonds ABP, Heerlen, and the e50 billion Pensioenfonds PGGM, NIB Capital Asset Management closed.
NIB's decision to throw in the towel on its asset management business after just less than two years has shocked the Netherlands' close-knit money management community.
Sources close to the business said from the beginning, ABP and PGGM had disagreed over strategy for the asset management business.
Sources are also speculating whether pension plans can successfully offer asset management services.
NIB Capital Asset Management was set up to manage specialist finance and credit for both its shareholders and third-party clients. The brightest brains in the Dutch investment firmament were hired to staff it: Jaap Fieret, former chief executive officer at ABN AMRO, Amsterdam, was appointed chief executive officer; Eduard Van Gelderen, a former director of European fixed income at ABP, was made chief investment officer; and Theo Van Der Meer, former head of marketing at Robeco Group NV, was drafted to head the company's marketing efforts. Within a year, 60 staff members were running the business with state-of-the-art technology.
Promising start
It was a promising start; the firm was given e24 billion to manage on behalf of ABP. Significantly, PGGM awarded the firm a much smaller sum, around e1 billion.
But by October 2001, Mr. Fieret had resigned, and by the end of that year performance on the mandates was so poor there were no management fees. Six months later, the staff was told to look for other jobs. Most of the fixed-income team has joined ABP's internal asset management operations. Others have been incorporated into parent company NIB Capital or have found jobs at PGGM.
Mr. Fieret is believed to be completing his Ph.D.; Mr. Van Gelderen is now commercial director at Cardano Risk Management, Rotterdam; and Mr. Van Der Meer is believed to be looking for a new job.
Local money managers and consultants find it baffling that a business that had so much going for it from the beginning could have ended up on the scrap heap. One consultant praised NIBCAM as the most effective way for a pension plan to use its existing facilities to win third-party business.
NIB spokesman Gerard Winternik told Pensions & Investments in late November that NIBCAM was closed because ABP decided to withdraw the firm's mandate and manage its European credit portfolio in-house using its newly launched global fixed-income platform.
That's nonsense, said ABP spokesman Michel Meijs. Mr. Meijs said ABP only took the management of the portfolio in-house after NIB Capital decided to close the asset management business. NIB's decision to close the asset management arm had nothing to do with ABP, he said.
PGGM officials refused to comment for this article.
In a statement published last April, Michael Enthoven, then newly appointed NIB chairman, said NIBCAM would no longer attempt to develop a third-party asset management business and would instead focus on "analysis, structuring and management of European credit portfolios for ABP." The reason given for this was "changing market conditions."
Saskia Welhius, spokeswoman for NIB Capital, said that referred to dwindling demand in the marketplace for the portfolio management services being offered by NIBCAM.
The state of the market was reflected in NIBCAM's operating profit, which had tumbled 65% between December 2000 and June 2001 to e3 million, following a fall in performance fees, according to the 2001 interim report.
At the end of December 2001, NIBCAM reported an operating loss of e4 million because there had been no income from performance-related commissions. By the end of June 2002, NIBCAM showed an operating profit of e2 billion, but by then the writing was on the wall for the asset management business.
Too expensive
The business was too expensive to maintain in the face of limited client demand, added Ms. Welhius.
But observers are not convinced, particularly considering the strong demand among European institutions for fixed-income and credit-investment strategies.
Most consultants agree that a startup money manager needs at least three years to build up a track record in order to win new business. It is likely that senior management such as Messrs. Van Der Meer and Fieret would have been aware of that, having worked at other money managers. And both ABP and PGGM have sponsored higher risk ventures and given them a longer time to operate, said a senior Dutch executive at an international money manager.
But it is widely believed the business was closed after Jean Frijns, head of investments at ABP, and Mr. Munsters, his counterpart at PGGM, disagreed over the strategic direction of the asset management firm.
If it is true that the two gentlemen disagreed - neither of them would comment - it was a costly disagreement. Reports estimate NIB spent e1.5 billion setting up and closing the business.
