Dutch pension scheme ABP saw its asset management costs increase from 60.9 basis points to 64.5 basis points in 2017.

This includes higher fees to hedge fund managers, despite the pension fund making a loss of 7.5 per cent on its hedge fund investments.

The scheme wrote in its annual report that it spent the most on private equity and hedge funds: 39.3 basis points. The pension scheme had a €18.9bn allocation to private equity in 2017 and paid just over €1bn in management fees. For the management of its €18.5m hedge fund allocation, it paid €505m.

Management costs for private equity and hedge funds increased, despite a sharp fall in returns for both asset classes.

Private equity generated a return of 9.7 per cent (€1.7bn), compared to 14.8 per cent in 2016. Hedge funds returned 7.9% in 2016, but made a loss of 7.5 per cent (€1.5bn) last year.

The investments in these asset classes accounted for 10 per cent of ABP’s total assets, but absorbed 60 per cent of total asset management costs.

Nonetheless, the board of trustees said the high costs for private equity and hedge funds were justified because of their positive contributions to the pension fund’s return and risk profile.

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