Rallying the Iconoclasts

Art by Nicholas Little

After running one of the Netherlands’ biggest retirement plans, Lars Dijkstra jumped from asset owner to manager at Kempen Capital Management. The former Philips Pensioenfonds CIO is now chair of influential industry think tank, the 300 Club.

CIO: At the most recent 300 Club dinner (thanks for having CIO along, by the way), the overarching theme of the conversation seemed to be “question everything”. Is this an accurate reflection of the 300 Club’s philosophy?

Dijkstra: The 300 Club’s philosophy is to ask ourselves and our colleagues in the industry some uncomfortable questions—there is a lot we can improve on in our industry. We focus on four topics:

One: Overreliance on complex financial models will not deliver the Holy Grail in inefficient markets. The same goes for the mainstream risk models.

Two: Are we using the right cost of capital to discount future cash flows? On the one hand, the risk-free rate is fundamentally distorted by central banks; on the other hand, we probably don’t take environmental, social, and governance risks into account as well as we should.

Three: Alignment of interests. We think this can be substantially improved by minimising the agency issues between asset managers and asset owners. Culture also plays an important role.

Four: Long-term value or short-term profit? Creating value for shareholders does not equate to maximising short-term profits. How can we get the industry to be more long-term oriented, and persuade asset managers to become more long-term engaged shareholders?

CIO: Another recurring theme that evening was the restrictive nature of regulation, particularly when it comes to facilitating investments in infrastructure and other illiquid assets. Will you push for the 300 Club to have more interactions with regulators?

Dijkstra: The questions we usually raise do not point specifically in the direction of any regulators. All agents in the investment value chain should ask themselves uncomfortable questions, and regulators are one of them. As members of the 300 Club, we will also engage with those regulators.

CIO: That said, the membership includes asset owners, managers, consultants, and academics. Is there a place within the club for someone with a regulatory background to bring a different perspective to your discussions?

Dijkstra: It could be a good idea to have someone in our club with a regulatory background. However, we are interested first and foremost in people who dare to ask uncomfortable questions, who want to go out of their comfort zone, and who challenge the status quo.

CIO: Questioning, debating, and challenging is one thing—and it’s something your members do better than most—but actions are quite another. What do you think has been the impact of the 300 Club on the wider investment world so far? What should the club and its members aspire to in the future?

Dijkstra: It is always difficult to measure success when you are with a small group of people talking about such broad topics. You could measure it several ways: How often do peers quote our papers? This has certainly increased over the last few years.

Also, we are being approached ever more often by people who want to become members. And this week we had our third annual press dinner in London. The interest from the press for this event has grown each year. This week we had 15 senior journalists from all the large financial newspapers attending, and had a very open dialogue about the role we both play in the investment system.

CIO: Happy to help. One subject CIO has been writing a great deal about is gender balance within asset management. Sally Bridgeland, the former BP pension CEO, joined the 300 Club last year as its first female member, but there must be more women out there who would fit in well. Is addressing that imbalance a priority for you as chair?

Dijkstra: Gender balance is something that I am working on deliberately within my own firm, Kempen Capital Management, and it certainly is something I want to address in the 300 Club. We are very happy to have Sally Bridgeland on board now.

“Asset management is not about winning a gold medal at the 100-metre sprint, but at the marathon. A strong investment culture is the most critical success factor in my view.” —Lars Dijkstra

CIO: Aside from this, do you have other specific aims for your tenure as chair, for example, expanding the membership or producing more white papers?

Dijkstra: My aim as chairman is to increase the number of white papers we produce, to make them more concise, and to come up with practical ideas and solutions. In terms of our topics, we will spend more time on how to solve ‘short-termism’ and offer ideas on how to improve the alignment of interests. We certainly will increase the number of members in the next 12 months.

CIO: Turning to your career, it’s often said by pension funds that they find it hard to retain their top talent, and your journey from pension fund CIO to asset management CIO seems to back that up. Why did you decide to make that change?

Dijkstra: I worked at the Philips Pensioenfonds for 14 years and have been at Kempen Capital Management for 10 years now. I don’t change jobs easily.

Asset management is not about winning a gold medal at the 100-metre sprint, but at the marathon. A strong investment culture is the most critical success factor in my view. I found a strong investment culture both at Philips and at Kempen, and contributed to further strengthening it in both places. The main reason for me to go to Kempen was the fact that it offered me the opportunity to do the same work but in a more commercial environment.

CIO: What are the big differences between running a pension fund and running an asset management company? Are there elements from your role at Philips that have specifically helped at Kempen?

Dijkstra: In terms of the investment side of the job, there is no difference. The challenges as CIO of a pension fund or an asset manager are, by and large, the same. There are CIOs with both backgrounds in the 300 Club, and we have a very good dialogue about these topics.

What differs is the fact that at Kempen we don’t have any captive clients. Clients can walk away easily when they are not happy, which means we need to be very focused and client-oriented. The fact that I worked for 14 years from a pension fund perspective is very helpful in that respect.

CIO: Finally, you mentioned a desire to expand the club’s membership beyond the 15 it has currently. To the readers of CIO out there who might want to get involved with the 300 Club’s activities, what would you say makes someone an ideal candidate for membership (apart from being exceptionally clever, of course)?

Dijkstra: The ideal candidate is someone who is very senior in the investment industry and, as I said earlier, is not afraid to ask uncomfortable questions, and to challenge the status quo within his or her own organisation. They should also come up with practical ideas and answers, and dare to take career risks.