Services
Fiduciary management
Fiduciary management is an increasingly popular way of organizing the management of
sizable investment portfolios. Much of the appeal for the concepts underpinning this idea is
a response to the shortcomings that many investors see in the current approach to managing
institutional portfolios – especially pension funds.
As the 21st century began, there was significant discontent among plan sponsors and other
institutions regarding the prevailing investment management structure: too many people
had a role while no one had overall responsibility. Fiduciary management came into being
in response to such problems. Seeking to reunite expertise and responsibility, fiduciary
management tries to ensure that those who oversee managers and consultants not only have
the expertise to do this job, but also have close enough ties to the plan sponsor to do this job
effectively.
Fiduciary management is a key mechanism for ensuring that an institutional investor is able
to have timely responses to changing market conditions while continuing to be focused
on enduring investment principles. It is an alternative for institutional investors who do
not have their own comprehensive investment department. By making use of a fiduciary
manager they secure the professional expertise and experience of financial managers, which
otherwise would only be at the disposal of the largest institutions. The flow of information is
accordingly so the client is in control all the time.
VNP is a specialist in the field of fiduciary management. Services include:
- Search for and selection of fiduciary managers
- Judgment of the fiduciary manager’s investment proposals
- Implementation of the fiduciary structure, including possible organizational rearrangements
- Monitoring of investments.
Interim management
Van Nunen & Partners gained considerable experience in the field of interim management with institutional investors. Based on good communication with the board, with clear arrangements and mandates, large and smaller interim management assignments have been carried out on behalf of, among others, Interpolis Insurance Company, Van Spaendonck Group, health Insurance company VGZ-IZA, the industry-wide pension fund of the printing industry and the pension fund for practitioners and medical specialists. In this context investment departments were managed which were temporarily understaffed, but support was also provided when new ideas and products were introduced.
Duties included:
- producing detailed investment plans
- search for external managers
- performance measurement
- quantifying of balance sheet and investment risks
- reports on investment returns and the accompanying risks.
ALM
There are two ways in which insurance companies and pension funds can formulate their investment policy. Sometimes the client favours a so-called asset-only approach in which the portfolio’s risk profile and the accompanying return pattern are assessed independently, referring to the institutional investor’s board’s objectives. On the basis of internally developed risk-return-models, supported by models provided by external contacts, comprehensive calculations can be provided on the basis of which well-funded decisions can be taken with respect to investment policy. Investment risk control is the central issue and provisions are made so that the board is in close touch with all the developments which can be of influence on the fund’s financial position constantly. In most cases however, investment decisions are based on extensive asset liability studies. The ALM study formalizes the connection between liabilities and assets and offers the possibility to quantify the clients’ objectives. With that, this kind of study underpins the strategic investment policy. VNP itself does not produce full ALM studies but supports these
- by translating objectives in quantitative terms
- by determining investment beliefs
- by producing excellent, tailor-made management reports.
Van Nunen & Partners has good connections with the most important providers of these studies (such as Ortec, Watson Wyatt, Hewitt Associates, Mercer, Sprenkels & Verschuren, Kleynen, etc.). Actual experience with these providers guarantees that an efficient procedure is followed which duly inoculates investment policy on the underlying liabilities. This cooperation has been tested in assignments for three insurance companies and for numerous pension funds and it has culminated in investment policies excellently serving the boards’ objectives and standing the tests by the regulatory authorities.
Repositioning of investment portfolios
Within the existing risk budget or ALM context, clients can decide to carry out a restricted repositioning of the investment portfolio in order to make use of new insights in investment characteristics, new, new investment opportunities or other possibilities to diversify risks. Van Nunen & Partners can assist in this field in the same way as when portfolio changes are carried out according to the outcome of an ALM study. Again, the different portfolios can be compared , using internally developed models, possibly supplemented by models from third parties. Moreover, eventually we closely cooperate with external asset managers, consultants and custodians in that field. The client can take an objective decision, based on relevant information on risks and returns and chose those alternatives which serve best the institute’s objectives. After this decision has been taken, Van Nunen & Partners can implement it. If so desired, the changed investment process can be controlled and monitored during a longer period, providing the client with periodical, tailor-made reports, enabling him to evaluate the new policy. Experience has been gained with different clients during which portfolios from € 100 million to more than € 1 billion were restructured. In two cases a capital of even € 16 and € 11 billion respectively were restructured.