23/08/2011
By Ilonka Oudenampsen
Dutch pension scheme PME has lost its legal appeal against Dutch regulator De Nederlandsche Bank (DNB).
The €23 billion scheme for metal workers had gone to court over DNB’s instruction to de-risk its investment policy. In 2009, DNB found PME’s investment policy too risky, and believed the pension fund overestimated its investments, while underestimating the risks. The Rotterdam court has now ruled that DNB’s intervention was justified to protect the pensions of 700,000 members.
Data which was presented to court showed that PME had more than half of its assets invested in exotic investments, such as forestry, life policies and other alternatives.
According to DNB, the metal fund did not have a “sound method to appropriately calculate the value and risks of these investments”, which resulted in the write off of €500 million on one investment. Last year this adjustment almost forced PME to cut members’ pensions.
According to PME, the regulator has created extra unnecessary costs for the fund and does not have the authority to intervene in individual investments.
However, the court agreed with DNB that neither PME nor Mn Services, the fund’s asset manager since 2007, had reliable valuation methods for complex investments, and that PME’s management costs were too high. The court quoted documents showing that PME, together with PMT, another Dutch metal fund, had paid €450 million to asset manager Mn Services in 2008.
In a statement, PME said it has learnt from the situation and has already worked on a recovery plan since 2009. The board of PME has changed since DNB’s intervention, although it believes the amount of €450 million paid to Mn Services was “a very broad estimation, which included transaction costs over 2007, a period where a lot of performance fees had to be paid. Moreover, this broad total estimation did not only cover fees paid to Mn Services and does not give a good image of the asset management costs of PME”.
MN Services declined to comment on this ruling.
PME said it is examining the ruling of the Rotterdam court and will decide soon if it is in the fund’s interest to appeal.
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