Top three considerations for your APF license
Over the last decade the number of Dutch pension funds has shrunk from more than 800 to just over 300, and it’s expected to fall to between 100 and 50 over the next decade.
Longevity, low interest rates, volatile markets and increased governance and regulation have all taken their toll on pension funds. To help the situation, the Dutch Government introduced a new pension fund structure, Algemeen Pensioen Fonds (APF) in January this year.
APFs provide small and medium-sized pension funds with a vehicle or ‘housing’ solution so they can benefit from economies of scale. As a leading provider in asset servicing solutions for pension funds, BNY Mellon takes a look at the top three things you need to consider before applying for your APF license.
1) Data is the Difference. Data can create immediate efficiencies if used properly. The majority of APFs face challenges in integrating data as a direct consequence of: the servicing of multiple underlying schemes; the introduction of complex Alternative Investment Fund (AIF) structures; and pre-APF supplier contracts with multiple custodians and administrators.
So, how can you ensure daily transparency? You need access to online, real-time, relevant and consolidated information to manage your APF, and the data needs to be normalised and visualised through accurate reporting. A fiduciary manager can play a role here but they often lack the systems and experience to facilitate consolidating the data. An APF must move quickly to optimise its data management model.
2) You Need a Watchdog. As a new APF Board member, you must stay on top of and in control of the APF at all times which isn’t easy given your numerous other responsibilities. Again, the fiduciary manager can fulfil this role but their services are often expensive.
One alternative cost-effective solution is to appoint the depositary, introduced as a direct consequence of the Alternative Investment Fund Managers Directive (AIFMD), which can perform the daily checks and balances on your behalf. The depositary will perform the daily monitoring of cash flows, asset holdings and investment policies which is core to their business.
3) The Future is Digital. The information demanded by pensioners is changing rapidly. The demands of millennials for example clearly differ from those of baby boomers. The latter are often happy with an annual hardcopy of their statement which outlines benefits. Who can blame them, as their benefits are defined in most instances, although this is rapidly changing in the current climate.
The younger generation want online and transparent information. It’s crucial that an APF analyses its options and adopts a digital strategy to attract the attention of millennials, and the sooner it does this the better.
Leonique van Houwelingen, regional head of Asset Servicing for Benelux, France and Southern Europe, BNY Mellon