‘Pension fund managers blunder with complex financial products’

Some of the Netherlands’ pension funds are in a worse financial position than necessary because their managers were not skilled enough to deal with complex financial products, sources in the pensions industry have told the Financieele Dagblad.

The paper counts advisory group Towers Watson and asset manager F&C among its sources and says the findings have been backed up by the central bank and pension association Pensioenfederatie.
The FD claims some pension fund managers were not able to understand the complicated derivatives they used to cover themselves against risks and this has now led to a sharply reduced coverage ratio – the amount of assets the funds have to meet their obligations.
Neither the central bank nor the sources were prepared to say which pension funds had been affected by the lack of skills, the paper said.
Efforts are already being made to improve fund managers’ financial expertise and on Thursday parliament is discussing legislation to achieve this.
Dozens of pension funds may have to cut pay-outs next year if the economy does not improve because their coverage ratios have fallen so much.

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