Netherlands streets ahead in use of Liability Driven Investment
28 August 2008

Written by Sophie Baker

Sixty-one per cent of Dutch pension funds are currently employing a Liability Driven Investment (LDI) strategy, an increase of 18 per cent on last year’s figures.

Fiduciary manager SEI revealed the results of a Global Quick Poll of the global pension fund space, surveying executives overseeing pensions in the US, UK, Hong Kong, Canada and the Netherlands.

There was also an increase in the percentage of Dutch pension funds considering employing an LDI approach in the next 12 months, up to 22 per cent. 17 per cent also said they were either considering or had already appointed a fiduciary manager. SEI says fiduciary management is now seen as a serious alternative to joining industry-wide funds and to re-insurance.

SEI also says that the results of the poll shows that Dutch pension funds investors are investing in a more sophisticated way than others, with 31 per cent allocated to hedge funds, commodities and infrastructure. This, according to SEI, shows they are seeking to manage ‘Real’ liabilities as opposed to ‘Nominal’ ones.

Globally, the poll showed that 79 per cent of those questioned agreed that the primary aim of an LDI approach is the control year-on-year volatility of funded status.

Bart Heenk, managing director of the Benelux region, commented: “The results of this poll clearly demonstrate that The Netherlands is the most sophisticated and progressive pension market in the world. Pension fund success is no longer strictly defined by managing nominal liabilities and many Dutch pension funds are using sophisticated strategies and products to manage real liabilities.”

Heenk added: “As the survey reveals, outsourcing to a fiduciary manager
to address these issues is becoming increasingly popular and is also evidenced by the number of large pension funds to have selected this route over the last twelve months.”

The summary of the poll is available on request from SEI.