Consolitation pressure continues in Dutch savings market

Pimco’s Henk Jan van Zoelen sees a number of emerging key trends in the Dutch long-term savings market.

Later this autumn the Dutch government is expected to introduce changes in the area of long-term savings, such as changing the discount rate used when calculating matching of assets and liabilities. In turn, this could affect providers such as Pimco, where they are developing liability driven investment solutions for institutional clients.

Henk Jan van Zoelen (pictured), a key figure in the Benelux area for Pimco in his capacity as senior vice-president for a company probably best known for its fixed income expertise, suggests that the changes are being followed closely. And they are not only affecting investments, but also initiating industry trends, van Zoelen says, with pressure on smaller players to join the larger ones.

He says: “There is clearly a move towards asset concentration. It has been going on for a couple of years, but it seems to be accelerating. One of the reasons is increasing regulatory demands on pension funds.”

Coverage rates have rarely strayed out of the news in recent months in local media, with suggestions that the discount rate used by those calculating assets and liabilities may be changed in the upcoming Budget.

Corporate bonds boost

Meanwhile, clients are expressing their demands through a trend towards more corporate bonds, as they look for more yield compared to extremely low government bond yields. “It is becoming much more costly to invest in the lowest-risk asset class, even so costly that investors are pushed out towards more credit and alternative strategies,” van Zoelen says.

All of this is taking place in the context of an ongoing European financial crisis, he adds.

This has had the effect of pushing institutional clients towards a more localised approach for the core part of their portfolios, for example, with more exposure to core eurozone assets, and less to peripheral European government debt. This trend is one way only, van Zoelen says: “We don’t see any pension fund moving into the periphery because yields are high, or other improved prospects.”

Although inflation is historically the key risk for fixed income investors, the context mentioned above has pushed this to the horizon for many Benelux investors, he feels. Instead, those such as boards of pension schemes are struggling with current nominal numbers, such as those involving coverage ratios – including the measure to which liabilities are covered by assets in excess of a regulatory minimum, say, of 105% or more.

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