Dutch Pension System To Cut Hedge Fund Allocations

Nov 5 2012 | 10:10am ET

The Dutch pension system, seeking to cut costs and boost returns, is preparing to trim its investments in hedge funds.

Inge van den Doel, head of investments for PMT, the country's third-largest pension fund, told Citywire Global the cuts had become necessary for a number of reasons, including the system's strict coverage ratios—when these fall below 105%, the fund must review its risk policy.

Van den Doel said her fund's coverage ratio is now between 85-90%: “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 said.

But van den Doel, whose organization manages the pensions of Dutch metal workers and engineers, also cites high fees as a factor in her decision:

“Hedge funds getting 2 and 20 is not acceptable for us anymore. For example, if one of our metal workers has a €500 pension a month they will not accept that they are investing in hedge fund managers who receive that kind of performance fee.

“We just cannot do that anymore.”

PMT has assets of €41 billion, 15% of which is allocated to alternative strategies. Of the pension fund's alt investments, about €3 billion is in private equity, a sector to which van den Doel said the fund is much more attached than to hedge funds which are “just an investment.”

PMT (Pensioenfonds Metaal en Techniek) is the pension fund for all employees of the country’s metal and engineering industry.


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