Dutch Doctors Pension Cuts Out Performance Fees

The Dutch pension fund for doctors has moved to scrap performance fees for its fund managers amid a wide-ranging de-risking project.

Johan Reesink, chairman of Stichting Pensioenfonds voor Huisartsen (SPH), said in the pension’s annual report for 2014 that it had already recorded “considerable cost savings”.

Last year, Reesink said SPH had reduced costs through a number of measures, including moving to a predominantly passive investment strategy and reducing equity exposures. He said further savings should be realised through 2015 as the effects of the changes become clear.

The restructure also took aim at transaction costs. SPH expected these expenses to climb slightly in the short term as it implemented changes, but it would produce savings within 18 months.

SPH’s assets have been managed by Dutch public pension investor PGGM since April 2012. Since then, the retirement system and its asset manager have revamped the portfolio to reduce risks and secure its strong funding position. In 2014, SPH said, it cut back its exposure to equities in favour of fixed income.

The €9.5 billion ($10.4 billion) pension posted a 14.7% return in 2014, its best calendar year result in the past five years. In common with all Dutch pension funds, SPH’s funding ratio fell due to falling interest rates, but it remains among the best-funded pensions in the Netherlands at 134.3%.

Last month the Dutch National Bank confirmed a cut in the ultimate forward rate—which is used by the country’s pension funds as a discount rate for liabilities—from 4.2% to 3.3%. This move immediately hit the funding levels of the country’s pensions, pushing some below the required minimum.

SPH earned a finalist spot at this year’s CIO Europe Industry Innovation Awards in London, in the category of portfolio construction.

Related: Dutch Pensions Hit as Regulator Moves Discount Rate