APG Head: Regulations Are Preventing Domestic Management of Dutch Pension Assets

(July 18, 2011)—The chairman of Dutch pension fund manager giant Algemene Pensioen Group (APG) thinks that the Netherlands’ famously stringent regulations are preventing domestic asset managers from managing the country’s pension assets, the Financial Times has reported.

“Dutch pension funds are still heavily reliant on foreign parties for the management of their assets,” Dick Sluimers, the APG chief, told the FT. “As a result two-thirds of the €800 billion ($1.1 billion) of assets under management are now being managed abroad. It is our aim to get part of these assets back to the Netherlands.”

“Because of the strong local regulations Dutch pension providers have to adhere to, their position is weaker than their peers from London and New York.” The result, he said, is “a situation where Dutch parties are meticulously screened while foreign peers co-operate in the same market without these heavy chains.”

Sluimers also fears the impact of impending European Union regulations called Solvency II rules governing capital levels for the insurance sector that may spillover into pension funds.

“The application of Solvency II would have detrimental consequences for the Dutch pension sector and for countries with comparable systems,” he said. “It would radically change the European investment policies of pension schemes if they are to behave like insurers, and result in a [reduction] of about 5% of total assets invested in shares. We are talking three quarters of a trillion Euros that would evaporate from the European stock markets. I don’t think Brussels realizes the backwash.”

Sluimers’ comments illustrate how regulations originating in response to the 2008 financial crisis have sometimes proven to be a double-edged sword. In June, Kevin McNulty, the CEO of the International Securities Lending Association (ISLA), blasted regulators at the European Union for turning short-sellers into a scapegoat and also claimed that hedge funds had begun to shun short-selling in response.

“Hedge funds like to have a level of certainty on their ability to execute and live with a trade for some time,” McNulty said. “Short-selling is good for markets while artificially stopping short-selling is a bad thing.”

Concern over new regulations is widespread throughout the world, particularly in Europe. A survey in June by Pension Fund Barometer found that heightened regulation was the second greatest worry among UK pension fund managers, right after the threat of inflation.