Case Study: A game of skill

Jens van Egmond, board member and member of the investment committee at Netherlands’ Sportfondsen pension fund, talks Covid-19, portfolio strategy and the future of pensions with Francesca Fabrizi

How long have you been involved in the world of pensions?

Around nine years ago I completed my Master of Science on the Economic and Finance of Aging by writing my thesis during an internship at APG. I also got involved in the youth labour unions´ efforts on pensions at around the same time.

What is the current set-up of the Sportfondsen pension fund that you currently work with?

Sportfondsen pension fund has around €300 million in assets under management on behalf of more than 6,000 members who work or have worked to operate swimming pools and other sports facilities in the Netherlands. Sportfondsen pension fund is partially reinsured, with current employees of the company accruing pension in the non-reinsured section. The reinsurance has proven to be of great value given the fall in interest rates and increase in longevity in the past decade. As a result, the funding ratio is among the highest in the Netherlands and was high enough to increase the pension benefits with inflation indexation last year. The fact that the pension fund consists of two parts but is managed as one does deliver some complexities that require attention from the board. It isn´t always straightforward to establish what fairness means if some members have a largely reinsured pension while other members are more exposed to economic risks.

What are your duties in your current role?

The most important duty of the board is to ensure the ongoing management of the investments, member administration and communication such that the agreed pension arrangement is delivered. As a member of the investment committee, my duties gravitate towards the investment side. The investment committee monitors the different investments and interacts with the asset manager and investment consultant on the management of the dynamic interest rate hedge and rebalancing of the portfolio. The committee also takes the lead in drafting the investment policy and the triannual ALM study.

What have you enjoyed in the role to date?

I have mainly enjoyed the breadth of the responsibilities and the interaction with my intelligent fellow board members. It is quite remarkable how complicated the interaction between economic uncertainty, regulation, governance and operational robustness can become. Yet we have been able to establish a degree of control.

How are you managing the current situation we are in?

There are two sides of the story. On the one hand, we feel comfortable that the pension fund is in a relatively good position compared to many other pension funds. However, the uncertainty around the impact of the Covid-19 crisis on the fund, the company and our members is currently our highest priority. We have more frequent calls with the investment committee to oversee the rebalancing of the portfolio in the currently volatile and illiquid markets. There is also a discussion in the Netherlands around potential pension premium holidays to relieve liquidity pressures on companies and that is something we may consider.

What do you anticipate as being the hot topics for pension funds in the coming months?

Although there are many long-term concerns and ambitions for the pensions industry, the focus will be on the economic consequences of the unprecedented crisis we find ourselves in. Personally, I have been concerned with gaps in dependents’ pensions for a while. For example, if a person is between two jobs, it is not always the case that the dependent’s pension would be paid out if the person were to decease. This was already an issue that needed solving to prevent the tragedy of a widow finding out that there is no financial safeguard in place after a loved one passes away. The Covid-19 crisis makes even clearer that, as a society, we cannot allow such a situation to exist. In the UK it turned out that not all medical staff were entitled to death-in-service benefits, while these people were risking their lives to save others. That is simply not acceptable.

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