Asset & Liability Management
Dutch ALM expertise and ALM models are unparalleled in terms of breadth and depth in the international market.
The Netherlands has the longest ALM history and best reputation in Europe, resulting from the fact that the Netherlands is a relatively advanced nation is pension terms, and that the Dutch experts have been active for 25 years in building ALM expertise and models. In addition, the Dutch pension sector has demonstrated over many years a structural willingness to invest heavily in ALM.
Asset and Liability Management (ALM) concerns the independent support of pension managers in determining and managing balanced and efficient pension deals. The pension deal is given shape by means of an integrated pension, contribution and investment policy, for which the determination of investment strategy is crucial. On the one hand, if a one per cent additional return on the pension investments is realised, this will make the pension system 30 per cent cheaper. On the other hand, financial markets are increasingly efficient and, as a result, additional return is inevitably coupled with additional risk. This investment risk must be deliberately counterbalanced by the pension risk that participants and sponsors are willing to accept, and by allowing restricted and temporary under-coverage. Partly due to the ageing population, it becomes ever more difficult in practice to offset these risks. Participants increasingly desire security, and organisations have become averse to pension risk particularly due to international accounting rules. Furthermore, the pension regulations themselves have been tightened up.
ALM models aim to illustrate the structure and uncertainty of the economic world by means of macro-economic scenarios, with the quality of the scenario being decisive in estimating how the pension deal will turn out for each of the stakeholders. This applies first of all to the management of the fund, which has to be informed of their expected situation and risks. For organisations it means that expectations and risks are clearly defined; these must be accounted for in the balance sheets and profit and loss accounts to be in line with international accounting rules. ALM models offer the functionality to execute this consistently, for all the country funds in which the organisations are represented.
The second dimension concerns the identification of efficiency gains in the pension deal – for example, by means of measurements on the pension side – and by adaptations and improvements to investment policy.
In the interest of the end customer, the independent ALM advisors and qualified Fiduciary Managers co-operate closely in the Netherlands. Highly qualified Fiduciary Managers also have the required ALM expertise.