> IN the engine room
Investing your pension: here’s how we do it
How does Bpf Koopvaardij actually work? To find out, we took a look ‘in the engine room’ at the pension fund. Members of the Executive Board talk about their work regarding the fund’s investments.
Sacha van Hoogdalem and Eric Rutgers are on the board of Bpf Koopvaardij. Like the other board members, they each have their own area of responsibility, i.e. their portfolio. Sacha and Eric prepare investment proposals for the board. Eric is on the board on behalf of those who are already receiving a pension. Sacha is an external board member. They are assisted by the fund’s Administrative Office, in particular by Eric van Elburg.
What do you do as the portfolio holders for investment issues?
Eric Rutgers: Perhaps we should start by saying what we don’t do: we don’t invest on behalf of the fund ourselves.
Sacha: That’s the job of our implementing organisation, MN. As the portfolio holders responsible for investment issues, we prepare matters relating to investments. That enables the board to make sound decisions on those issues. That’s 1 side of the story. The other side is that we monitor implementation. MN produces reports on the investments, for example on how they have performed. We examine them and discuss them.
Eric van Elburg: I provide Eric and Sacha with support. I’m in daily contact with MN. I prepare the meeting documents and make sure that everything runs according to the procedures that we’ve agreed on together.
Does MN decide for itself where to invest the money?
Sacha: No, definitely not. That’s determined by Bpf Koopvaardij board; the board decides which categories and sectors we invest in. It’s all set out in our investment policy.
Eric Rutgers: We have a long-term investment portfolio, meaning that we don’t invest on a day-to-day basis but for the long term. That’s highly appropriate for a pension fund, because pensions need to be paid out over the long term – from retirement age until death, and perhaps then to the surviving dependants.
Sacha: The board naturally also takes a close look at the risk profile: how much risk are we prepared to accept? Accepting more risk usually means a higher return, but it also means there’s a greater chance of the result being disappointing. Accepting less risk means a lower return, but it also means there’s a lower risk of your investment losing value. Do we want to invest in equity (shares)? In real estate? In bonds? These are decisions for the long term. The next thing is to select, for example, the shares that you’re going to invest in. You have options here too: do you want to invest actively? In that case, you’ll want to choose the shares yourself, and your portfolio will change from time to time. We don’t believe in selecting shares that will perform well tomorrow. That’s why we invest passively, meaning that we opt for a broadly diversified portfolio, with a good balance between risk and return. But we don’t select the shares ourselves; MN does that for us, within the limits that we set, and we keep track of that. We also compare our returns – our investment performance – with certain benchmarks. A benchmark is a frame of reference within the market, a point of comparison, for example as regards shares. On that basis, we can properly assess how our investments are performing compared to other shares.
“We invest for the long term”
Eric Rutgers
“Pensions must be as stable as possible”
Sacha van Hoogdalem
What does the fund invest in?
Sacha: Our investment policy is guided by our investment beliefs and our policy on socially responsible investment. For example, we invest in countries that are sufficiently democratic and that respect human rights,. and we invest in companies that pursue a socially responsible policy.
What does the fund specifically not invest in?
Sacha: We don’t invest in countries that violate international treaties, and we don’t invest in anti-personnel landmines, cluster munitions, or chemical weapons. We also don’t invest in tobacco, adult entertainment or the fur industry, or in companies that derive more than a certain percentage of their turnover from coal production.
Do you take account of the level of investment risk that members are willing to accept?
Eric Rutgers: Yes, their wishes help to shape our investment policy. That’s why we carry out a risk preference survey at least once every 5 years. It allows our members to indicate how much risk they are prepared to accept.
Sacha: We are also investigating how important socially responsible investing is for our members and what they think of the choices we make.
Eric van Elburg: We therefore urge members to take part in both those surveys. That way, we’ll get as much information as possible. It’s really valuable that they contribute their ideas.
On 1 January, Bpf Koopvaardij switched to the new pension rules. How the pensions increase now depends not only on interest rates but also on the returns from investment. If the figures are lower than expected, will pensions go down as well?
Sacha: It’s true that pension assets fluctuate in line with the economy. However, we find it important that pension benefits don’t fluctuate at all significantly, and that they in any case don’t decrease. We try to prevent that happening in 3 ways. First: the older our members are, the less investment risk we accept on their behalf. As a result, their pension benefits are also less volatile. Second: we spread positive and negative returns over several years. If we have a financial windfall, we don’t use all of it to increase the pensions; we set aside part of it to cover any future setbacks. And we also spread setbacks over several years. The third method involves the solidarity reserve. Should it nevertheless prove necessary to reduce benefits, we try to avoid it by making up the shortages from that reserve. We have had various calculations performed and they show that these 3 methods help to keep pensions more stable. It’s also important to note that we adjust pension benefits no more than once a year.
Eric Rutgers: Young people may feel the effects of economic shifts a bit more keenly, and that’s reflected in their pension assets. For that group, we take on more investment risk. Young people will continue to pay contributions for many years to come, and they still have plenty of good years ahead of them to make up for any bad years.
There’s quite a lot of turmoil in the world at the moment, which naturally also has an impact on the stock markets.
Eric van Elburg: That’s right, and we pay attention to it – we keep a close eye on it. Despite all the turmoil, there’s no need to alter our investments at the moment because they’re spread out far enough. If we do need to adjust them, then we’ll do so in order to protect the pension assets of the members and the fund. ←
Would you like to get in touch with Bpf Koopvaardij?
You can find our contact details at www.koopvaardij.nl/en/member/contact.
“We are mindful of the turmoil in the world”
Eric van Elburg