1. Penformance by by
Jasper Haak
Roel Nass

2. Sounds familiar?
You want to pay low premiums and have high guaranteed pensions, like we used to have?
Room 2, please
Pension Consultancy

3. Industry wide pension funds
Changing landscape
Industry wide pension funds
(compulsory)
Company pension funds
DB schemes
DC schemes

4. DB and DC and everything in between
Guarantees
No guarantees
DB by insurer
CDC DC
“Hard” pension promise
Conditional indexation
Funding is capped
DB ambition
Pure DC
DB ambition
DB by pension fund DA
Conditional indexation
Perceived as hard DB
Cut as ultimate resort
Conditional indexation
Funding is capped
DB ambition
“Soft” pension promise
by definition

5. Balance in pension Balance What? Pension ambition How much? How?
Contribution
How?
Risk appetite

6. But how to make educated decisions?
I don’t see anything...
Look, there waits your pension
Exactly!

7. Penformance = Pension x Performance
Support decision making process in pension scheme design
Product evaluation tool for providers/insurance companies
Governance tool for employers or trustees
Investment test: online tool for understanding and evaluating iDC products
Investment test consists of
Prudency test: quality of life cycle setup
Performance test: quality of investments / investment funds
Professional investment expertise in an iDC setting made accessible

8. Life cycle investments in iDC

9. How to deal with this ICEBERG?
Life cycles
Investment test
Investment funds

10. Evaluating life cycles

11. Evaluating budgets

12. Performance test
Scoring iDC products on five criteria. The consultant together with the client determines the weights of all 5 criteria (distributing 10 points).
1. Investment
Policy
2. Sustainability
Policy
3. Return & risk
4. Costs
5. Reporting

13. 1. Investment Policy
Based on different asset allocation theories the selected asset classes and types of funds are analyzed. The different risks that result from choices in asset allocation are identified.
Asset Allocation - Equity
Developed Markets
Emerging Markets
Country allocation
Sector allocation
Asset allocatie - Bonds
Government Bonds
Corporate Bonds
High Yield Bonds
Emerging Markets Debts
Asset allocatie - Other
Unlisted Real
Estate
Commodities
Hedge funds
Fonds-selectie
Fund Selection
Replication methodology
Risico- beheersings-beleid
Concentration risk
Duration buckets
Liquidity risk
Currency risk
Timing risk

14. Effect of asset allocation
A difference of 33% more contribution to the total amount of pension between Euro Stoxx 50 and MSCI World

15. 2. Sustainability policy
All efforts to implement sustainable investing are analyzed. Both the policies and the actual implementation.
UNPRI
Signed by the iDC manager
Signed by the selected fund managers
Policies –
Sustainability
SRI policy
Exclusion policy
Engagement policy
Implementation –
ESG integration
Positive screening
Exclusion list
Voting / engagement

16. 3. Risk / Return Effects asset allocatie Relative fund returns
All equity and fixed income funds are compared to their benchmarks and to comparable mutual funds. Additionally their effects of specific choices in asset allocation are separately quantified.
Effects asset allocatie
Equity allocation
Fixed Income allocation
Relative fund returns
Equity –
fund vs benchmark
Fixed Income –
Peer group performance
fund vs peer group
Peer group risk adjusted performance

17. Effect of mutual fund selection
A difference of 25% more contribution to the total amount of pension between best and worst performing equity selected funds

18. 4. Costs
All fees that are based on asset under management are compared. Additionally two major other cost factors are analysed.
Product expense ratio (PER)
Assets under management based costs
Standard discounts
Tax
Level of dividend tax reclaimes
Securities lending
Fee split of securities lending proceeds

19. Effect of tax efficient funds
A difference of 2% more contribution to the total amount of pension between dividend tax efficient and ineffectient funds

20. 5. Reporting
Reporting standards of both the iDC product and the underlying funds are evaluated.
Reporting iDC product
Availability of investment policy
Availability of lifecycle and asset allocation data
Availability of fund data
Reporting funds
Availability of legal and commercial reports (annual report, prospectus and factsheet)
Completeness of commercial reports (manager, risk, performance data)