Dutch pension funds have increased their investment process in the last few years, but the level of comprehension of pension funds does not yet always match the complexity of the investments, De Nederlandsche Bank concluded in its research into alternative investments.

The Dutch regulator found that many pension funds do not have a detailed strategy on alternative investments, while the additional benefit of alternative investments is not always adequately reasoned and justified.

Some pension funds lack an adequate and predetermined selection process for alternative investments and external providers, DNB said, adding that the performance does not always get evaluated periodically. Moreover, the reports pension funds receive from their providers often give insufficient insight into the performance development and the risks involved.

Lastly, the regulator found that a substantial number of pension funds do not have a clear division of roles, tasks and responsibilities of the different aspects of the investment process for the trustee board, the investment advice commission and the external advisers and providers.

In a statement, DNB said it finds it important that pension funds start working on these issues. Later this year it will give a self-assessment to several pension funds on policy and management of investments in private equity and hedge funds. The overall results will be shared and discussed with the pension sector to encourage the development of good practices.

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