PGGM Makes Play for Smaller Peers With New Fiduciary Arm

(June 17, 2014) — The second largest Dutch pension investor has created a fiduciary arm to enhance its services to its current clients and its offering to smaller peers, aiCIO has learned, as consolidation accelerates among the country’s pension funds.

PGGM Fiduciary Advice “enables our clients to be in control of their investments and exert countervailing power towards their investment managers,” the group said.

PGGM manages more than €167 billion on behalf of PFZW, the pension fund for the healthcare and social work sector in the Netherlands, and the pension funds for general practitioners, architects, security personnel, and house painters.

Last year PGGM announced the merger with A&O Services, which oversaw retirement assets for the house painting and decorating sector. It recently picked up the aiCIO award for innovation thanks to its “Blank Sheet of Paper” concept to governance that clarifies its investment approach along with its interaction with its largest client PFZW.

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There has been a push in the Netherlands to bring smaller pools of assets together and create larger investors, which have scale, to bring in-house better experience and expertise and manage capital in a cost efficient way.

Chris Limbach, one of aiCIO’s Forty Under Forty, heads up the fiduciary arm. “By adding the fiduciary advice to what we had already, we have progressed our proposition to pension funds,” he said. “It should make PGGM a more attractive proposition for pension funds that are looking to partner with another.”

Limbach said PGGM is keen to be part of the consolidating Dutch market. He added that the new service would not be made available as a stand-alone product for funds, but rather as part of the package offered to investors and their trustees joining PGGM’s cooperative network.

“Combining advice, execution, and fiduciary advice allows trustees of pension funds to be in total control,” Limbach said. “Obviously, any fund that wants to join us could be up to speed and compliant with regulations set out by the regulator, the Dutch National Bank.”

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(June 16, 2014) – The paint is still fresh in the newly renovated offices of Voya Financial, the spin-off of ING’s US retirement, money management, and insurance operations mandated by a recession-era bailout.

As of last month’s official rebranding, American institutions invested with ING became clients of Voya Investment Management. But beyond the bright orange logo and new name, CEO Jeffrey Becker recently stressed how little change asset owners will notice in their reborn manager.

“Over the last four-plus years, we have developed a roadmap for the spin-off and systematically stuck to it,” he told aiCIO from a boardroom in Voya’s midtown Manhattan headquarters. “Our personnel has stayed in place; our performance has remained strong. Large institutional investors expect that nothing changes.”

Voya’s life as a discrete entity from ING began in earnest with its initial public offering (IPO) last spring. The stock—trading on the New York Stock Exchange as VOYA—entered the market at $19.50, below its intended range of $21 to $24. Still, as Becker pointed out, the stock outperformed its peers in the year following its initial release.

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The potential misalignment of interests that so often worries investors when a manager goes public is a valid concern, Becker acknowledged. Serving two masters—short-term focused shareholders/analysts and long-range institutional clients—has undermined firms in the past.

“I suspect there are several who have regretted the decision to launch an IPO,” the CEO said. “If you are a small to mid-sized player in the asset management industry, you likely have no business being public.”

With $514 billion in assets under management and advisory as of the end of 2013, no one would classify Voya Financial as “small to mid-sized.” Still, the asset management division represented just 14% of its $1.2 billion pre-tax earnings. Here, according to Becker, being relatively small acts as an advantage.

“Investment management represents a core part of Voya, and we are the fastest growing division,” he said. “But we’re still just 15% or so of the company, which means I don’t have to focus too much on quarterly earnings.” From a business strategy perspective, Becker’s time horizon seemed to sit between those of stock analysts and of his clients.

Whether as ING, Voya, or something in between, the investment management group has remained committed to its overarching style. “We’re a high-quality, low-volatility manager,” he said. “We’re bottom-up, fundamental stock pickers.” Markets have been less consistent in favoring the investment strategy.

“2013 was not a year for us,” Becker acknowledged. Even before accounting for fees, the roaring S&P 500 beat out many of Voya’s hallmark, actively managed equities funds, such as the $465 million core research fund. Likewise, on the fixed-income side, the firm’s half-billion dollar global bond fund trailed Barclays global aggregate index in 2013, as well as three out of the last five years (again, gross of fees).

As public markets have become more amenable to active strategies over the last few months, Becker said he and his team have been “amazed” at the reversal of investor appetite for them. Domestic-oriented stock, bond, and blended strategies have attracted the bulk of Voya Investment Management’s $213 billion in assets—$127 billion without its own insurance general account capital.

Becker, though adamant the firm won’t stray from its roots, has his sights on a few areas for “major growth,” including unconstrained fixed-income products. “Overall, I see a trend towards ‘dis-aggregating the aggregate.’ Bond-type assets play a crucial role in retirement portfolios, and that’s not going change.” The CEO concluded by channeling Mark Twain: “The reports of fixed income’s death have been greatly exaggerated.”