By Ilonka Oudenampsen
The Dutch Pension Federation has further specified the Recommendations Implementation Costs, which were published in November 2011.
The document specifies that the costs of running a pension scheme need to be fully understood by the trustee board and made available to members. It mentions the different costs of pension management and asset management, with recommendations of how these costs can be communicated to stakeholders and members.
The further specifications give pension funds concrete tools for a consistent way of calculating asset management costs and contain definitions of everything that should be qualified as costs.
At the moment only an estimation method, described in the report, can be used for some cost categories, because the trustee board does not yet receive the complete information from the concerning asset manager. This is mainly the case for determining transaction costs of fixed income securities and for costs of underlying managers of private equity and hedge funds, the Pension Federation said. The report describes how to deal with these estimations.
It distinguishes between three cost types: the costs of pension management, the costs of asset management and the transaction costs. Transaction costs are part of asset management, but the Federation believes it is necessary to make this cost type more transparent.
The Pension Federation and trustee boards will actively encourage asset managers to make implicit costs more transparent. The recommendations fall under ‘comply or explain’ whereby the Pension Federation monitors the progress.