Dutch Pension to Outside Money Managers: Fully Disclose Fees or Face Divestment

One of the Netherlands’ largest pension funds is giving its outside money managers an ultimatum: fully disclose their fees or face divestment.

Dutch fund PGGM, which manages over $200 billion in assets, says it no longer wants to turn a “blind eye” to potentially high fees.

But it also acknowledges that its private equity investments have turned in strong performance of late. As a result, the fund has begun investing directly in PE-type investments.

Reported by the Wall Street Journal:

In a document seen by The Wall Street Journal, Dutch fund PGGM sets out for the first time what it deems to be acceptable compensation for money managers. It is worried that the pensions of its clients—social workers and nurses—are being undermined by high fees.

“The interests of our beneficiaries and the interests of the asset management industry are not always aligned,” Ruulke Bagijn, PGGM’s chief investment officer for private markets, said in an interview. “We are on the side of pension funds and we no longer want to turn a blind eye on difficult subjects like fees and compensation.”

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PGGM will gradually introduce its new rules and will stop investing in funds that don’t disclose all fees by 2020, according to the document. It will also stop investing in funds whose fees are deemed to be “considerably higher than costs.” PGGM expects remuneration to be based mainly on the performance of managers’ funds, and it is monitoring how much of each manager’s own money is invested in their funds.

“Writing what we find acceptable and what we don’t find acceptable is new,” Ms. Bagijn said.

PGGM manages $208 billion in assets.