Dutch pension funds' asset management costs jump 16.9% in 2020

Asset management cost growth of 16.9 per cent outpaced average Dutch pension asset growth of 12.9 per cent in 2020, according to a report from LCP.

The report stated that Dutch pension management costs had increased by 2.7 per cent in 2020, with higher invested capital, performance fees, and transaction costs and changes in the investment mix cited as causes of the increase.

Performance fees must be set off against agreements on returns to be achieved, while higher transaction costs were related to the turmoil in the financial markets in 2020 caused by the Covid-19 pandemic.

The investment return as a percentage of the pension assets amounted to 8.2 per cent after a record year in 2019 (17.6 per cent), while the five-year average return came in at 8.3 per cent.

Total asset management costs as a percentage of pension assets increased from 0.55 per cent to 0.57 per cent, although the report added that more than half (58 per cent) of Dutch pension funds had actually seen a decrease in asset management costs in 2020.

Meanwhile, the report also found that the majority of Dutch pension funds had seen their pension management costs increase during 2020.

Pension management costs decreased at 39 per cent of pension funds but increased at 61 per cent overall, with cost reductions being attributed to changes in consultancy costs and increases being explained by increased management and governance costs, changes in participant numbers and increased consultancy costs, such as for the preparations for the Netherlands' new pension system.

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