The Dutch Central Bank (De Nederlandsche Bank, DNB) and the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) have analysed the reported asset management costs of Dutch pension funds. Pension funds have reported that for 2013 their asset management costs (excluding transaction costs) were EUR 5 billion (against EUR 4.5 billion for 2012), which is equal to 0.55 per cent of the investments made (against 0.53 per cent for 2012). This increase in costs is thought to be caused primarily by performance-related fees.
Whilst noting that the quality of reporting in 2014 has significantly improved when compared to 2013 the DNB and the AFM still found areas for improvement which include:
- some pension funds were requested to submit revised reports because their initial reports were not comprehensive. The pension funds had outsourced their asset management activities to parties who subsequently outsourced such activities to another party. As a result, the pension funds were unable to gain an insight into the costs of the underlying activities as the underlying parties were not providing the required data. According to the DNB, pension funds should consider whether they want to be dealing with such parties if they are unwilling to provide insight into their incurred costs;
- performance-related costs are often forgotten by pension funds in their reporting to the DNB, while these costs can be extracted from the annual report of the investment fund concerned;
- many of the costs are either placed under the wrong investment category (or simply under the investment category ‘other’) or they are simply forgotten; and
- even though it is optional for pension funds to include transaction costs in their annual statements, the DNB and the AFM strongly suggest that they do this, particularly because it follows from the Dutch Pension Act that pension funds are required to include information on implementation costs in their annual report.
Please review the report (only available in Dutch) through the following link.