NETHERLANDS - Dutch pension plans believe fiduciary management will continue to grow but it remains a controversial strategy, new research shows.
The study by investment consultant Bureau Bosch found scheme boards believe fiduciary management (FM) is still on the rise and is regarded as the "caretaker of plans", but the "control issue" remains important.
The degree to which pension funds should hand over responsibility to the FM provider continues to divide opinion, making it a "controversial" issue, the survey found.
"De Nederlandsche Bank (DNB) ascertains that fiduciary management induces a loss of grip and has the intention to tackle this trend. The majority of the boards do not agree," the report said. "Still one third of these pension funds think that in the concept of fiduciary management too much responsibility is given away to the fiduciary manager: The [pension fund] management is not enough in control."
The report also said it was "quite remarkable" that most funds surveyed believed it was not the FM provider's duty to coordinate the activities of external suppliers such as custodians, administrators, actuaries and accountants. "In other words pension funds want to do the coordination themselves", it said.
It added: "DNB wishes to unlink risk management from fiduciary management. Is it a confusion of tongues? What kind of risk management are we talking about? Is it about tracking errors of sub managers or about the risk management towards liabilities? If it is the latter, than fiduciary management would cease to be what it was meant for, namely a total solution for asset management related to the liabilities of the plan."
The survey, entitled "Pension Funds, Asset Managers, Asset Management", found hedging of interest risk was one of the most important issues facing many Dutch plans, and one which was surrounded by uncertainty.
"Pension plans are not sure which route to choose: to open up the mismatch and profit of an increase of interest rates, or to hedge it while risk is an unrewarded risk," the report said.
It also revealed asset liability modelling had not proven its value during the credit crisis, and was regarded as the least important criteria for schemes, with risk management seen as most important among the criteria.
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