ABP Pension Fund pays out nearly 3 billion euros in performance bonuses, ABP, the largest pension fund in the Netherlands, pays out 2.8 billion euros to so-called private equity houses. This is evident from the annual report of the fund, to which one in six Dutch people is affiliated. In conversation with us, Ceo Harmen van Wijnen speaks about a dilemma: these types of investments have brought pension increases closer, but the fees for them are high.
“It’s an awful lot of money,” says Van Wijnen, who has been in charge of ABP since the beginning of this year. In the annual report, the amount is not only substantial but also “difficult to explain” and steps are announced to turn the tide.
ABP invests part of the money it manages for its 3.1 million participants in investments in listed companies. “Not every company can go public, like a start-up for example. While high returns are achieved with it.” These investment flows through the private equity houses, which are richly rewarded for this.
“There is always a certain smell around private equity,” agrees Van Wijnen. Against the 2.8 billion euros in bonuses – ABP speaks of performance rewards – there is a return of 14 billion euros. “That amounts to an extra 4,500 euros per participant.” The costs per participant are about 1,100 euros.
“There is also a higher risk in these types of investments. Putting money in an old sock has no risk, but also yields nothing.” According to Van Wijnen, an increase in pensions came into view earlier thanks to the investments of the private equity houses for ABP. “That’s offset by the high fees.”
External research into high costs
Nevertheless, ABP feels uncomfortable with it. “Isn’t this kind of compensation skyrocketing?”, the chairman of the board asks rhetorically. “We have to critically examine this and therefore start an investigation into the costs we incur for the entire portfolio.
In doing so, an external party examines whether things can and should be done differently.” Van Wijnen calls ABP a social, financial institution.
“Social because pension is part of the working conditions and socially means that we do not want to earn money at all costs. That sometimes clashes with the financial.”
Pension funds are spending more and more money on pension management and at ABP this is increasing even faster than at peers. ABP has to earn money for the participants. “But not at any price,” concludes Van Wijnen.
ABP Pension Fund pays out nearly 3 billion euros in performance bonuses
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