Anton Kramer: Yesterday's knowledge
This column was originally written in Dutch. This is an English translation.
By Anton Kramer, co-founder of OverRendement
Financial markets were highly volatile earlier this year. The announcement of import tariffs by the United States led to nervousness on the stock market. Share prices fell sharply and volatility increased. Interest rates also rose and the US dollar fell against other currencies, including the euro.
A large number of pension funds published news items about the situation on the financial markets. Although the wording differed, a number of points recurred in almost all reports, such as “the pension funds are monitoring the situation closely” and “funds invest for the long term”.
The reports conveyed the message that participants could rest assured, as the pension fund would monitor the situation closely and take action if necessary. Right? So when has a situation changed to such an extent that intervention is necessary? One fund refers to previous crises: Black Monday in 1987, the financial crisis in 2008, and the coronavirus outbreak in 2020. The suggestion here is that it is better not to change the investment portfolio because the market always recovers. At the same time, everyone is familiar with the disclaimer about historical returns: they offer no guarantees for the future.
In addition, there is a strong tendency to do “something” in times of crisis. In 2024, Dutch pension funds collectively spent nearly €6.4 billion on asset management. That is a lot of money just to monitor the market. It is more comfortable to be able to say that action has been taken. Otherwise, the fund will be accused of doing nothing, even though “everyone could see” that intervention was necessary.
Looking back at past transactions, one quickly realises that all decisions were made with the knowledge available at the time. This implies that the choice is not really up for debate, as if the investment decision was by definition correct given the circumstances at the time. Anyone who thinks about this will have to conclude that this applies to all parties and decisions in the investment chain. Does an evaluation cycle of outsourcing partners still make sense if the assumption is that everyone made the right decisions with the knowledge available at the time?
Under the Wtp, the majority of social partners opt for the solidarity-based contribution scheme. What consequences does this have for investment policy? Lifecycles, you might say. But what will the fund do in those lifecycles? Will the fund sell French government bonds in the next euro crisis? How will the fund respond to the outbreak of a trade war?
In a DB scheme, the important thing is that the pension fund meets its obligations. How the fund does that is of secondary importance to a participant. In the solidarity premium scheme, the pension fund assumes a great deal of responsibility. It is a DC scheme, at the expense and risk of the participant, but without the corresponding scope for action for that same participant. This requires pension funds to make choices that are not only justifiable with the knowledge available at the time, but also with the value that the pension fund has added for the participant.