Anton Kramer: Fund is benchmark

November 4, 2025

_{This column was originally written in Dutch. This is an English translation.}

By Anton Kramer, Co-Founder of OverRendement

With the transition to the Wtp, there seems to be a consensus that there will be more room for illiquid investments in pension fund portfolios. This has removed the pressure of daily fluctuations in the funding ratio.

High buffers for illiquid investments are a thing of the past. Younger cohorts actually have a long-term investment goal. Investment categories such as real estate, infrastructure and private equity are expected to fit better into a Wtp portfolio. They offer protection against inflation and provide an extra return as compensation for the illiquidity of the investment. At least, that is the expectation.

At the same time, a number of challenges remain when allocating to illiquid investments. Management costs are often significantly higher compared to managing a portfolio of liquid investments, such as listed shares. In addition, the investments are often less transparent. Interests are not tradable on a daily basis, which means that pricing takes place less frequently. As an investor, you only know for sure what the return will be once the money has been paid out and is in your account.

This raises the question of how these investments will be valued during the transition to the Wtp, when all investments will be distributed among the participants. It is therefore essential to have a good estimate of the value of the portfolio. Will participants be given any insight into this valuation? A good valuation will also be required for value transfers after the transition. Providing liquidity while the underlying value is illiquid presents challenges.

During the management phase, it is important to assess the results of the policy. In practice, we have often found that for illiquid categories, the return on the benchmark is equated with the return on the fund. ‘Fund is benchmark’ is a phrase we read in the annual report of a medium-sized pension fund, which means that the benchmark for the category is equated with the actual return achieved on that category.

If we add up the weight of the categories to which this applies in this specific fund, it appears that the return on 58% of the portfolio is assessed in this way. The other 42% is largely managed passively. As a result, the portfolio is very likely to perform in line with the benchmark. This makes it difficult to monitor the portfolio. It will have a negative effect on participants' confidence if the conclusion is always that a good return has been achieved regardless.

Suppose a fund were to say, with regard to the CO₂ emissions of the portfolio or the costs of implementation, that “the fund is benchmark”. Everyone would immediately say, “I don't care about such a comparison”. However, this seems to be an accepted phenomenon for investment returns.

All Dutch pension funds combined have an enormous amount of data at their disposal, which can be used to properly assess and compare performance. The introduction of more personal pension assets requires transparent and clear communication with participants, including about returns achieved. The ambition must be higher than “fund is benchmark”.