Dutch pensions muscle should be applied at home

The Dutch pensions fund market is the second largest in Europe after the UK and commands around ?1.0 trillion in assets under management, including pensions money held by insurance companies. Some funds, such as ABP and PGGM, are ranked among the largest in the world, but much of this capital is placed with foreign investment managers.

I've always been impressed by the influence Dutch investors have in the global economy, considering the small size of the country. During my visits to countries as foreign minister, I consistently found the Netherlands ranking as one of the top external investors.

In Russia, for example, the Netherlands is second only to Germany as a source of foreign direct investment. But this high international profile is not reflected in the size and sophistication of the domestic asset management industry, which has been too conservative in exploiting new investment opportunities and adopting the latest financial market techniques.

With the strength and resources of its pension funds and other institutional investors, the Netherlands has a formidable asset in the global market for cutting-edge financial services. We risk being bypassed in this market, however, unless we harness these pension resources to the development of a Dutch investment industry able to compete on a global scale.

The recent ABN Amro takeover process clearly demonstrates that we may be losing vital financial skills, which has profound implications for future economic growth and jobs in the Netherlands. We should therefore explore whether we can rally our pension funds to support the development of a world class Dutch investment industy by ring fencing capital for domestic managers.

I've recently taken-up the position of Chairman of the Non-Executive Board of Finles Capital Management in Utrecht, which is one of the very few Dutch hedge fund of funds managers and has a 30-year history of investing from the Netherlands. The global hedge funds industry has been one of the fastest growing financial sectors of recent years and is now a $1.7 trillion market encompassing over 7,000 managers.

Hedge fund managers are key innovators in investment management skills and we need to nurture our domestic talent in this industry, but many of these Dutch start-ups are frustrated by their lack of access to capital, particularly from institutional investors.

By investing more domestically, pension funds would benefit from the high level of financial service and regulatory support in the Netherlands and from operating within a Dutch legal structure they know well. Other advantages could include the direct transfer of knowledge skills locally, the build-up of a more extensive financial education infrastructure, the ready proximity of managers and the same language and business culture.

The Netherlands is a very open and outward looking society and it sometimes seems there is a reverse bias here and investors believe that what is produced abroad by managers is somehow better and more advanced than at home, which contrasts with the position taken in other countries.

It saddens me to see Dutch investment talent leaving to join London-based investment houses. We must turn this trend around to stimulate our domestic investment industry. Pension funds need to play their part in this and of course they have a fiduciary duty to ensure they achieve the best service and investment performance possible for their members, but there are enough potential Dutch partners who can match the financial skills of large foreign investment managers.