The joint investigation by the five largest Dutch pension funds into co-operation on pensions provision is focusing on costs reduction, said Gerard van Olphen, chief executive of APG, the provider and asset manager for pension funds ABP and BpfBouw.Speaking to IPE, he said that the five players – representing €833bn of assets and 8.7m workers and pensioners – wanted to achieve this goal through increased efficiency and scale as well as by setting standards that could be applied by the entire sector.The investigation – revealed in APG’s annual report for 2019 – would, for example, look into the options of setting standards for collecting pension contributions as well as paying benefits, said Van Olphen, who cited banks and insurers as examples.“The five schemes also want to establish the impact of co-operation on their current exemption from paying VAT,” he added. According to Van Olphen, co-operation could lead to a single organisation for administration being set up. Gerard van Olphen, chief executive of APG“However, if it turns out that joining forces will generate insufficient added value, co-operation doesn’t make sense,” he emphasised.APG’s CEO said that the five pension funds, which also include healthcare pension fund PFZW and the metal sector schemes PMT and PME, expected to assess proposals within a few months.PFZW has PGGM as its provider, while the metal schemes share MN for their pensions administration.New clients welcomeSeparately, Van Olphen further said that APG would like to welcome new pension fund clients, for administration and/or asset management in order to increase scale and reduce costs.“However, they must have sufficient scale, add value and not have complicated pension arrangements,” he said. “And although we can offer any mix of services, new clients can’t pick and choose certain parts of it.”Van Olphen made clear that APG would prioritise taking in pension funds in sectors related to its current clients. He said that almost 10 pension funds had already contacted APG. “Some are seeking a new provider, others want a costs reduction or a change of pension arrangements,” he said That said, APG’s CEO highlighted that, given the current COVID-19 situation, potential clients were very careful and likely to avoid commitments at the moment. Last year, APG sold its income insurance subsidiary Loyalis to insurer ASR in a drive to focus on its core task of pensions.It said it had simplified its pensions administration as a result of 40,000 military staff at ABP switching from final salary arrangements to an average salary plan.Overall returns of 17.3% APG said it returned 17.3% on investment for its eight pension fund clients last year, an underperformance of 151 basis points. It largely attributed this to disappointing results from smart beta and liquid investments. It added that investments had underperformed for the first time in 10 years, and that the benchmark had been exceeded by 56 bps in the past 5 years. APG further said that it had extended its co-operation with Chinese investment management firm E Fund Management by also starting to invest in Chinese credit. It had already taken stakes in A-shares.The annual report also revealed that, in order to increase the impact of engagement with companies on responsible investment, APG had set up an “inclusion board” – comprising its various investment teams – to streamline investment decisions. Staff and variable pay increasesAPG has been recruiting more staff for its asset management operations, with around half of the targeted 100 individuals earmarked for its Hong Kong and New York offices. A spokesperson said that the provider was about halfway through the hiring. Last year, the asset manager employed 835 workers, 191 of whom were located abroad. In its annual report, APG said that to boost its net results it wanted to increase (direct) investments in infrastructure, and extend its co-operation with international partners, including the Guangzhou-based asset manager E Fund Management.Ronald Wuijster, head of asset management, said that the overseas offices provided access to markets with attractive returns. More staff were required because of the planned extension of investments in real estate as well as infrastructure, “more labour intensive asset classes with better perspectives for long term returns”, he said.On the pension fund’s website Wuijster defended the rise of variable pay – from €31.1m to €40.4m – for its asset managers despite last year’s underperformance.He pointed out that the bonus criteria were aimed at performance over a five-year period, and that half of the variable pay was based on “non-financial” achievements, such as individual and team development. The CIO added that the increased number of staff in Hong Kong and New York, “where performance has been above average”, had contributed to the pay rise.