AMSTERDAM, Dec 16 (Reuters) - Dutch pension funds should change their investment policy to better manage risk after losing 112 billion euros last year during the credit crisis, the Dutch pension supervisor and central bank said on Wednesday.
Dutch pension funds are among the biggest in the world, and managed a total of 693 billion euros at the end of June. They include ABP, the world’s third-largest state pension fund after Japan’s and Norway’s, which is closely eyed by investors.
“Although the causes of the losses vary, they are mostly related to innovative investments and active management. These investment strategies give additional risks,” the Dutch central bank (DNB) said in its quarterly report.
Spearheaded by ABP, which managed 180.5 billion euros at the end of June, Dutch pension funds diversified investments in the past 15 years to include hedge funds, private equity, commodities and other assets besides stocks and bonds.
“In addition to an independent risk management function it is important that funds change their investment policy to match their capacity and willingness to take on risks,” DNB said.
When giving investment mandates, pension funds gave too much freedom to the investment managers, creating additional risks, said DNB, which supervises the Dutch pension sector to make sure it remains solvent in the long term to pay future obligations.
The use of derivatives, participation in securities lending programmes, and lending also contributed to the funds’ losses, DNB said. (Reporting by Gilbert Kreijger; editing by Chris Pizzey)