Dutch pensions giant PFZW exits hedge funds, citing high pay, society and environment

Another blow for asset class still reeling from CalPERS’ departure

PFZW, the €180bn Dutch pension fund for the health care industry, has announced this morning that it is no longer investing in hedge funds given the high remuneration in the sector and often limited concern for the environment and society which do not meet its new sustainability criteria for its holdings.

In a statement, PFZW says it has abandoned hedge funds – which as recently as 2013 accounted for 2.7% of its assets (and 2% as at the third quarter 2014) – in light of its new investment policy of assessing all holdings for their sustainability, costs and complexity. It says the hedge fund investments were found not to fully meet the criteria.

The Dutch giant was one of country’s first pension funds to invest in hedge funds in 2003 to achieve greater diversification in its investment portfolio. It says now that “lately they have not made a sufficient contribution to this objective”.

Jan Willem van Oostveen, Manager of Financial andInvestment Policy at PFZW, says complexity is another major factor behind the decision to drop hedge funds: “In our new investment policy, we agreed that greater emphasis should be placed on controllability and intelligibility. That’s why a complex investment category like hedge funds, which encompasses such diverse strategies, no longer sits well with PFZW.”

The high costs involved with hedge funds are another reason PFZW has stopped investing in them. “With hedge funds, you’re certain of the high costs, but uncertain about the return,” says van Oostveen.

The target strategic allocation for hedge funds has been added to the allocation for equities.

The move comes amid PFZW’s “White Sheet of Paper” root-and-branch project to examine its investments. And it follows the high-profile decision back in September by fellow leading investor, California’s CalPERS, that it would exit the hedge fund space.