Dutch civil service pension fund ABP, one of the biggest pension funds in the world, paid €2.8 billion in costs to private equity funds last year, according to its annual report.
The fund, which pays the corporate pensions of one in six people working in the Netherlands, has not put up pensions for years, because its assets have fallen below the recommended levels.
ABP chairman Harmen van Wijnen told news website Nu.nl that the payments represent a dilemma. ‘It is an awful lot of money,’ he said, adding that by using private equity houses, the fund has been able to boost its assets, making it more likely that pensions can be increased.
ABP uses private equity funds to invest in companies which are not listed on the stock exchange and the €2.8 billion generated €14 billion extra in returns, he said. ‘That is around €4,500 per participant, while the cost is €1,100,’ Van Wijnen told the website.
Despite the benefits, Van Wijnen said ABP should have a proper, critical look at the strategy and the costs which the fund has to pay to manage its entire portfolio.
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