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Fiduciary Management: Results of an Expert Survey

Meeting Pensions Challenges in Europe

April 2011


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Decisive Insights for forward-looking investment strategies

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Content4 Introduction

5 Key findings

5 The pension landscape in Europe

7 Challenges for the pension fund industry a. Overview b. Survey results

11 Fiduciary management as a solutions-based investment approach

a. The concept b. Survey results for fiduciary

management offerings

15 Summary: Matching challenges and offerings

16 Sample and respondents

17 Appendix: Description of challenges and fiduciary offerings

18 Sources

Imprint

Allianz Global Investors Kapitalanlagegesellschaft mbH Mainzer Landstraße 11–1360329 Frankfurt am Main

Capital Market AnalysisHans-Jörg Naumer (hjn), Olivier Gasquet (og) Dennis Nacken (dn), Stefan Scheurer (st),Richard Wolf (rw),Lars Düser (ld)

Data origin – if not otherwise noted: Thomson Financial Datastream.


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1 There are also other labels, see p. 11.2 See IPE “Fiduciary expands in UK”, Nov, 1 2010. For survey results see SpenceJohnson, Five Future Study, The evolution of Fiduciary Management. October 2009.

Fiduciary Management

Fiduciary Management. Meeting pensions challenges in Europe.

1. Introduction

The pension fund industry has been faced with an increasingly complex investment landscape during the past 10 -15 years. Increased insecurity and capital-market volatility in the wake of two financial crises in the first decade of this century have highlighted the need for improved risk management and governance. Moreover, changes to the regulatory environments and accounting rules present a challenge for the pension fund industry. Pensions management has become markedly more sophisticated.

In response to the increasing challenges, integrated outsourcing solutions for pension fund management have been created. The third-party provider typically assumes responsibility for advice, risk management, portfolio construction, manager selection, monitoring and reporting. This set of services, which is called fiduciary management or integrated solutions1 , has become one of the major themes which drive pension fund management for defined benefit (DB) schemes.

The concept has emerged in the Netherlands, which are a major DB pension market, and is expected to spread to other markets2 . In order to assess this potential trend we conducted a survey to explore the demand for fiduciary management services in other major pension markets in Europe.

The survey encompasses 28 in-depth interviews with senior-level representatives of both corporates and pension plan providers in four European countries (the Netherlands, Switzerland, Germany and the United Kingdom). The survey was a cooperative effort between Allianz Global Investors and SpenceJohnson, a UK based consultancy firm.

Dr. Renate FinkeSenior Economist Allianz Global Investors,International Pensions

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2. Key Findings

•The United Kingdom and the Netherlands are the largest pension markets in Europe, with defined benefit (DB) pension arrangements predominating in them

•While there is a shift towards DC and a tendency to reduce DB liabilities, DB schemes will continue to play a major role in the funded pensions market

•Our survey shows that the most urgent challenges the pension fund industry is facing today are

− Regulatory pressure − Interest rates − Underfunding − Poor returns from investments

•The challenges are different in each country

•The awareness of fiduciary management is high and generally positive

•According to our survey, the key demands on fiduciary services and offerings are as follows:

− Best-in-class managers − Reduction of complexity − Risk management − Dynamic asset allocation

3. The pensions landscape in Europe

Pension funds are among the largest institutional investors in the global financial markets, right next to investment funds and insurance companies. At the end of 2009, pension fund assets in the OECD countries amounted to 11.6 trn EUR, i. e. roughly 30 % of the overall assets invested by institutional investors in the OECD countries3

In Europe, the United Kingdom is the largest pension market (see chart 1). At the end of 2009 pension funds in the UK held assets worth EUR 1.13 trn, followed by the Netherlands (EUR 743 bn), Switzerland (EUR 416 bn) and Germany (EUR 398 bn)4 86.6 % of the total pension-fund assets in western Europe are held in these four countries5.

3 OECD database, calculation based on data from 2008, latest available date for almost all countries. 4 Euro values were calculated on the base of year-end exchange rates.5 For more details about other countries see Allianz Demographic Pulse “Big and getting Bigger”, August 2010.

Chart 1: Pension asset distribution across western Europein 2009 (total: € 3.15 trillion)

UK 36.0 %

Netherlands 23.6 %

Switzerland 13.2 %

Germany 12.6 %

others 14.5 %

Sources: OECD, central banks and national statistical offices; Allianz Global Investors.


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benefit calculation and adjustment rules in this segment in order to cope with the increasing financial burden which stems from the fact that people live longer. Such adjustments became urgently necessary after the first stock-market downturn in this century. In the Netherlands, for example, companies changed the basis for their benefit calculation from final wages to average wages (see chart 2). The number of participants in DB schemes with final-benefit calculation dropped by around 75 % in 2004. By now, almost nobody holds this type of plans any more. In 2010 the predominant arrangement was an average-wage DB plan.

While there is a major shift from defined benefit (DB) to defined contribution (DC) pension plans in many countries6, DB is still the predominant vehicle in numerous countries as well as in the overall market. The OECD reported that around 60 % of all pension assets in OECD countries are held in DB and other plans that offer return or benefit guarantees7.

In Europe in particular, the occupational pension landscape is based on DB. This applies to the major European pension markets, too (the UK and the Netherlands). However, companies have changed their

Chart 2: Structure of the pension-fund market in the NetherlandsNumber of active members in thousands

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Other

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

DCDB, otherDB, average wage*DB, final wage*

Source: De Nederlandse Bank (DNB) 2010; * Basis for benefit calculation

6 For more information on the drivers of the shift see Allianz Global Investors, „Defining the direction of Defined Contribution in Europe: Results of an Expert Survey”, International Pension Papers No 4/2009.7 OECD, Yermo, Juan; Severinson, Clara; The Impact of the Financial Crisis on Defined Benefit Plans and the Need for counter-Cyclical funding Regulations, OECD Working Papers on Finance, Insurance and Private Pensions, No.3, 2010, p.8

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In the UK, companies went even further and started to close DB pension schemes to new members or to future accruals. Within 5 years, the share of members who participated in open schemes decreased from two-thirds in 2006 to only one-third in 2010. (see chart 3).

These measures will help to reduce the pension liabilities of companies, which will, however, still weigh on the balance sheets for a long time to come, as most occupational-pension holders who retire in the next decade or so will still be entitled to defined benefits. Thus, the DB pension fund arrangements will remain a challenge for the pension-fund industry for years or even decades.

The increasing complexity with which pension fund managers are faced has led to new concepts in pension fund management in some countries. These are known as fiduciary management. Only in the Netherlands is a considerable amount of assets already being managed by a fiduciary manager. There, fiduciary managers are estimated to manage around 38 % of total assets, with the share being much lower in other countries.9

4. Challenges for the pension fund industry

a. OverviewBeyond the financing burden resulting from longevity, the financial crises of this decade have deeply changed the pension landscape and the management of pension funds. With interest rates being low, pension funds are faced with two major risks. On the one hand, liabilities are increasing if future pension benefit payments are discounted with bond yields in a mark-to-market valuation. On the other hand, asset growth is low due to low returns. Thus, interest-rate risk has become a major risk factor. Moreover, risk management has to encompass various risk dimensions on both the asset and the liability side of pension

funds. As a consequence, asset-liability-management concepts have entered into pension fund management.

In addition, as governments generally impose funding or solvency rules on defined-benefit pension schemes to ensure that the assets held by the pension fund will be sufficient to meet the stream of future liabilities, liability-driven investment strategies have become a standard tool in pension fund management.

However, during the past financial crisis DB schemes were hit on both sides of the balance sheet. While the market recovery brought relief for DC plans, the funding levels of defined-benefit plans remained very low due to decreasing corporate-bond yields. The chart 4 for the Netherlands shows that funding levels improved slightly in the second half of 2009, but worsened again afterwards. They are still below the required

Source: Pension Protection Fund, UK, Purple Book 2010.

0

10

20

30

40

50

60

70

80

90

100

2006 2007 2008 2009 2010

closed to future accrualsclosed to new membersopen winding up

Chart 3: DB schemes in the United KingdomDistribution of membership

8 See the description of the varying labels, p. 11.9 See. Phillips, Maha Khan; The Future of Fiduciary Management, CFA Magazine, May/June 2010. Such data is difficult to find. Forthcoming survey results should provide a more precise picture..


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levels of around 120 % in nominal terms and even below the minimum level of 105 % at present. Assuming that inflation amounts to an average 2 %, the pension fund assets are not yet sufficient to pay adequate pensions in real terms10.

Data for the UK show similar results. The pension regulator reported that funding levels were volatile between 2006 and March 2010; in fact, they varied between 80 and 109 %11. In Switzerland, 16.6 % of pension funds still underperformed in 2009, although this is a considerable improvement from 2008, when nearly one out of two pension funds was underfunded12.

Governments reacted to the low funding levels by tightening funding rules. This decision put much pressure on the funds. Some funds are still suffering from the former financial-market decline of 2000-02, and

employers in some countries are still making additional contributions to make up for shortfalls created at that time13. Moreover, as funding levels are tracked over shorter periods of time and accounting rules have changed, pension funds are more exposed to short-term market developments and volatility.

b. Survey resultsThe survey shows that pension funds and companies which run pension plans regard the increasingly volatile and insecure financial environment (see above) as the major challenge for the future.

Eight challenges are mentioned most often. ‘Regulatory pressures’ and ‘low interest rates’ top the list, followed by ‘underfunding’, ‘poor returns from investments’, ’meeting the pension promise’, ‘pension governance’ and ‘longevity’. ‘Education’ in the sense of increasing the expertise of the trustee board

10 Dutch Central Bank (DNB), Annual Report 2009. DNB, Overview of Financial Stability in the Netherlands, November 2010, No.12, p.30.11 The Pension Regulator, The Purple Book 2010. The funding level used here is the “s179”, i.e. the funds “that would have to be paid to an insurance company for it to take on the payment of Pension Protection F und levels of compensation”. p.42/43.12 Federal Social Insurance Office of Switzerland, Report on the financial situation of pension funds and life insurance companies, 12/201013 OECD, Pensions at a glance 2009, p.48

60 %

Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10

70 %

80 %

90 %

100 %

110 %

120 %

130 %

140 %

150 %

160 %

Nominal

Real (calculated with 2 % inflation)

Chart 4: Funding levels in the Netherlands

Source: Dutch Central Bank (DNB), Supervisory data on pension funds.

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is also on the list. While this is mainly a challenge in the UK and the Netherlands, it was mentioned by so many participants that it was included in the list. The list of major challenges was extracted from unprompted responses, which were then condensed into 34 challenges14.

The challenges which were mentioned most often in the survey correspond to some extent to the main drivers behind the shift of pension plan arrangements from DB to DC according to an expert survey15 (insufficient funding, reduction of investment and longevity risk, accounting standards). This underlines the importance of the pressing challenges the pension industry is faced with. Many respondents in our survey said that the challenges would remain the same for the next two years.

While there are eight major challenges overall, the results differ quite a bit from country to country due to different regulations and pension plan designs. Chart 5 shows that regulatory pressure is an important challenge in all countries except Switzerland. Swiss respondents are unique, as they regard performance issues (which are key to meeting pension promises) as the main challenge. Dutch respondents, in contrast, are more concerned about challenges that stem from management and governance aspects (education, growth in complexity, governance). UK managers also emphasise

14 See appendix for the list of challenges mentioned in the survey.15 Allianz Global Investors, Defining the direction of Defined Contribution in Europe: Results of an Expert Survey, International pension Papers No 4/2009, p.12.

Chart 5: Pension challengesshare of respondents, unprompted answers

Source: Fiduciary Management Survey, SpenceJohnson / Allianz Global Investors, 2010.

Regulatory pressure

Interest rates/deflation

Underfunding

Poor returns from investments

Education

100 20 30 40 50 60

Meeting the pension promise

Pension governance

Longevity

57

54

43

32

29

25

25

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5. Fiduciary management as a solutions-based investment approach

a. The conceptPension fund management has become increasingly complex. Can financial services providers develop special offerings to support companies in all or some of their pension management tasks? An external provider might take control of the pension fund and take responsibility for advice, risk management, portfolio construction, manager selection, monitoring and reporting.

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Criteria Germany Switzerland Netherlands United Kingdom

Regulatory Pressure

Interst rates/deflation

Underfunding


Education


Pension governance

Longevity

Administrative burden

Harmonising plans

Grwoth in complexity

Future pension design

Market volatility

Risk management challenges

Balancing sponsor / employee needs

Investment performance shortfall

Chart 6: Pension challenges are country-specificshare of respondents, unprompted answers


governance issues and performance goals. In Germany, two other challenges make it to the top list. German respondents feel that a lot of resources are consumed by administrative procedures and that it is a challenge to harmonise plans.

An analysis of the challenges on the basis of other criteria has not provided us with further insight into the different views. Rather, the breakdown by size, maturity and usage of fiduciary management was roughly in line with the overall sample characteristics. The country-specific results were what was most interesting.

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This type of outsourcing of pension fund management to a single third party is often referred to as “fiduciary management”, even though this term is not used in all countries (see box 1).

Dutch pension funds were the first to introduce this new model of pension management at the beginning of this century16. Tight regulation may have been the main driving force behind the development in the Netherlands. Occupational pension schemes need to be administered outside the company17. The financing system must be financially solid and fully funded (prudent-person principle). The risks of a pension fund need to be analysed by an asset-liability-management (ALM) study, which is used as the basis for a strategic investment policy. Furthermore, the pension fund must organise itself in such a way that ‘proper governance’ is secured. The pension fund governance principles consist of directives for the skills of board members, transparency, accountability and internal supervision; external reporting is required as well. These requirements form the basis for the set of services provided under the Dutch model. It is designed along the value chain of pension management. (see chart 7).

Box 1: Various labels for fiduciary management

There are different labels for what is basically the same set of ser-vices. In this paper we mainly use the term “fiduciary management”. However, dependent on the original business focus of the providers other labels may be used in other countries:

•Delegated consulting•Implemented consulting•Delegated CIO •Total investment government solutions•Solvency management •Balance sheet management •Integrated solutions

The idea of fiduciary management started out as a holistic approach: it was to include all services along the pension funds’ investment value chain. However, experiences with this approach as well as differences among pension funds and regulations in different countries have resulted in a revision of the model. Recent trends are towards a more flexible and customised set of services18. Different demands in the countries surveyed underline this trend (see findings below).

16 See Nunen, Anton van, Fiduciary Management, Blueprint for Pension fund Excellence, Wiley finance series, 2008 for the history of pension fund management.17 Association of Company Pension Funds (OPF) The Dutch Pension System http://www.opf.nl/web/English/Dutch%20Pension%20system/Pages/default.aspx.18 Kennedy Liam, How the fiduciary model works in practice, IPE Fiduciary Management, Juni 2008. SpenceJohnson, Five Future Study, The evolution of Fiduciary Management. Oktober 2009. Kennedy, Liam; fiduciary/Delegation: Your faithful friend?, IPE Europe, Juli 2010

Chart 7: Value chain of pension management

ReportingTAA & rebalancing

Risk management

Monitoring

Portfolio construction

Asset liabilitymanagement

Manager &fund selection

Optimal strategy


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The answers focus on only seven offerings19. Efficient access to best-in-class managers (‘Best in class’) tops the list. ‘Reduced complexity’, which means that clients appreciate a close partnership with experts in order to reduce complexity through training and delegation, where appropriate, is another offering that is high on the list and mentioned by all respondents. They are followed by ‘better risk management’, ‘dynamic asset allocation’; ‘strategic investment advice’, ‘manager selection and implementation’ as well as ‘speed of decision making and execution’.

19 See appendix for the list of offerings mentioned in the survey; there were 14 prompted questions to respond to. 70 % of the answers refer to the top offerings.

b. Survey results for fiduciary management offerings

Tracking demand for fiduciary services is very difficult. The approach we chose in our survey was therefore to assess the relative need for fiduciary management offerings. Respondents were given prompted questions for this evaluation. Since is relatively unknown among clients, it was not possible to use the offerings themselves in the prompted questions. Instead, the underlying demand for each offering was derived from clients’ confirmation of certain challenges.

Chart 8: Fiduciary offerings share of respondents


Best in class

Reduced complexity

Risk management

Dynamic asset allocation

Strategic investment advice

Manager selection and implementation

Speed of decision making/execution

68

64

50

46

32

32

32

100 20 30 40 50 7060

Box 2: Definition of fiduciary management in the survey

In our survey we did not use any of the terms used to describe the approach (see box 1) when we explored the potential demand for fiduciary management. Instead, we identified the need for various services described as a set of offerings.

The terms ‘fiduciary management’ or ‘integrated solutions’ were not introduced until a later phase, after the challenges and potential demand for the services had been explored.

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It is interesting to note that two components of the set of fiduciary services, ‘Asset-liability modelling’ (ALM) and ‘tactical asset allocation’ (TAA), do not show up in the top rankings even though respondents from all countries say that related challenges are among their main concerns. Except for two, most of the top challenges focus on asset-liability-matching problems: poor returns, low interest rates, underfunding, meeting the pension promise and longevity. But from the clients’ vantage point, ALM and TAA have fallen out of favour since 2008. If providers want to offer such services directly, they have to rebuild trust and offer clients a solution, not a product.

Just like the challenges, the desired offerings differ from country to country (see chart 9). For example, Swiss and German respondents were less concerned about risk management, while UK respondents did not put ‘best-in-class’ managers at the top of the list. For them, ‘reduced complexity’, ‘risk management’ and ‘dynamic asset allocation’ are the top issues from which demand for fiduciary offerings might be generated. A similar, strong focus can be found in the Netherlands: ‘Best-in-class’ managers, ‘reduced complexity’ and ‘risk management’ are what Dutch respondents focus on.


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Criteria Germany * Switzerland ** Netherlands United Kingdom

Best in class

Reducing complexity

Risk management

Dynamic asset allocation

Strategic investment advice

Manager selection and implementation

Speed of decision making / execution

Chart 9: Country-specific focus on fiduciary offerings top three answers in each country

* Only few answers for the different offerings, focus on two top answers not too strong. ** Offerings may get the same number of answers, so that more than three offerings can be on the list.Source: Fiduciary Management Survey, SpenceJohnson / Allianz Global Investors, 2010.

German pension funds appear less interested in fiduciary offerings than their counterparts from the other countries. Even the top offerings did not get the same attention in Germany as in the other countries. For example, in all other countries most respondents agreed that complexity-related challenges were an issue for them, but

less than half of the German respondents said that this issue troubled them. German respondents show a greater confidence in their ability to continue to meet their challenges than those in other countries. That might be due to the fact that the surveyed German pension funds have already outsourced a lot of services.

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.An analysis of the offerings along other lines than country specifics reveals two groups in which the demand for fiduciary offerings is above-average: small funds and young funds. However, if we add another aspect, namely findings about which companies are positively disposed towards fiduciary management, the focus group for future demand shifts towards medium-sized and younger funds.

6. Summary: Matching challenges and offerings

The analysis of the survey results compares challenges directly with fiduciary offerings. For example, the “best-in-class’ offering directly relates to the challenge expressed as “we must meet our performance and funding targets” or, in short, “investment performance

Box 3: Awareness and perception

In our survey we found that the awareness of fiduciary management is high. Almost 80 % of the respondents had heard of fiduciary management or integrated solutions, even though in some cases they knew it by other names. Awareness was lowest in Switzerland.

Most of them were positively disposed towards the concept. The respondents see benefits for a variety of reasons including risk management, speed in rebalancing, scale and more manager diversification.

The few respondents with a negative perception of fiduciary management emphasise issues that concern ‘losing control’ or ‘letting go’. This result underlines findings from other surveys, according to which pension funds are keen to maintain control and their internal capabilities.20

20 IPE Portfolio Management Functions Survey (June 2008). Bfinance, Pension funds turn to consultants for strategic advice, global survey, 2009.


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Chart 10: Matching challenges and offeringstop answers of either scale


shortfall”. In addition to these direct links, there are other challenges to which the different offerings may relate in a direct or indirect way. Matching the top challenges as given by the top level representatives of pension vehicles in our survey with the top offerings gives an overview of what fiduciary management should focus on from the clients’ vantage point. (see chart 10).

Challenges

Best

in cl

ass

Redu

ced

com

plex

ity

Risk

man

agem

ent

Dyna

mic

as

set a

lloca

tion

Stra

tegi

c in

vest

men

t adv

ice

Man

ager

sele

ctio

n an

d im

plem

enta

tion

TSpe

ed o

f dec

ision

m

akin

g / ex

ecut

ion

Regulatory pressure

Interest rates / deflation

Underfunding


Education


Pension governance

longevity

Offe

rings

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7. Sample and respondents

Respondents had €83bn assets under management and 1.52 million members. Chart 11 gives an overview on different characteristics of the companies involved in the survey.

Chart 11: Respondents

Number of respondents according to plan size

Number of respondents according to maturity of plan

Number of respondents according to usage of fiduciary management

Large → > € 5 bn

Medium → € 1 bn - € 5 bn

Small → < € 1 bn

Mature → Significantly more pensioners than contributing employeesr

Medium→ Similar number of contributing employees as pensioners

Young → Significantly more contributing employees than pensioners

Large 5

Small 9

Medium 14

Medium 8

Mature 9

Young 11

Fiduciary Mangement User 7

Not Fiduciary MangementUser 21



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8. Appendix

Table 1: Challenges faced by European pensions funds

1 Regulatory pressure Regulation is posing a growing challenge for us

2 Interest rates / deflation Low interest rates are a serious risk

3 Underfunding We are struggling to achieve the funding targets

4 Poor returns from investments Our investments are underperforming

5 Meeting the pension promise We must focus on fulfilling our obligation to the scheme members

6 Education We need to increase the expertise of the trustee board

7 Pension governance We need to improve the governance of our scheme

8 Future pension design We need to look towards more sustainable pension designs

9 Longevity The growing longevity risk requires us to adopt new thinking

10 Market volatility We need to cope better with volatile markets

11 Balancing sponsor/employee needs We struggle to balance the needs of the employer and the employee

12 Risk management challenges We need to manage risks better

13 Costs We need to reduce our costs

14 Harmonising plans (pooling) Pooling our funds is a key challenge

15 Growth in complexity We have difficulty dealing with the growing complexity involved in managing pensions

16 Administrative burden Our resources are consumed by administrative processes

17 De-risking We need to reduce risk

18 Investment performance shortfall We must meet our performance and funding targets

19 Resource allocation We must spend more time adding value where it matters

20 Challenges of being small Our size limits our options

21 Meeting ESG/SRI commitments We struggle in meeting our SRI obligations

22 Pressure on trustees We struggle to find new trustees -they worry about personal risk

23 Disability cases We would like to change the way we deal with disabled members

24 Communication We need to communicate with members better

25 Linking assets with liabilities We need to link the investment strategy to our liabilities

26 Investment strategy to meet targets We need to build an investment strategy to meet our funding targets

27 A dynamic investment approach We need a more dynamic investment strategy

28 Lengthy decision making Our decision making process is too lengthy

29 Poor investment transparency We need to understand what we are invested in

30 Managing managers We find manager selection and implementation difficult

31 Liability modelling challenges We have difficulty with asset liability modelling

32 Profusion of data from providers We have problems reconciling the data from our many providers

33 Dealing with many providers We struggle liaising with our many providers

34 Shorter term tactical challenges We want to benefit from shorter term tactical bets

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Table 2: Fiduciary Management Services and benefits

A Best in class Efficient access to best in class managers

Favourable terms being negotiated by the fiduciary manager to achieve cost efficient access to best in class managers.

B Reduced complexity Access to expertise to negate complexity

A close partnership with experts to reduce complexity through education and delegation where appropriate.

C Risk management Better risk management Expert risk management and a close partner who can explain and advise on the appropriate strategies to implement.

D Dynamic asset allocation Dynamic asset allocation (DAA)

A dynamic asset allocation (DAA) strategy which can rotate asset classes or managers quickly to benefit from medium term trends.

E Strategic investment advice Strategic advisory services Expert strategic advice from a party who has a holistic view of the scheme.

F Manager selection and implementation

Manager selection, removal and monitoring

Delegating manager selection and the day to day management of these managers to experts who can leverage scale and negotiate favourable fees.

G Speed of decision making and execution

Delegated investment process Swiftly executed investment decisions by delegating the implementation process within certain strategic parameters.

H Benefits of scale Leverage scale of the investment manager

Economies of scale associated with partnering with a fiduciary manager, namely investment buying power and access to expertise.

I Asset Liability Modelling ALM services ALM services being performed by the implementing party, thus having a more practical focus, linking assets with liabilities.

J Integrated reporting Reporting An integrated report through the fiduciary manager which can be easily understood and acted on.

K Efficient allocation of resources Removing operational burden A reduced operational burden, allowing them to focus on the task which add the most value to the scheme i.e. Strategic decisions and governance

L Single point of contact External CIO or account manager

A single point of contact who works closely with the pension board and has a holistic view of the scheme.

M Tactical asset allocation Tactical asset allocation (TAA) Tactical asset allocation (TAA) strategy in order to benefit from short term market trends and opportunities.

N Transparency See through, transparent investment products

Fully transparent investment products allowing them to fully understand what they are invested in and the risks attached


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9. Sources

•Allianz Demographic Pulse “Big and getting Bigger”, August 2010

•Allianz Global Investors, „Defining the direction of Defined Contribution in Europe: Results of an Expert Survey, International pension Papers No 4/2009

•Association of Company Pension Funds (OPF, Stichting voor Ondernemingspensioenfondsen) The Dutch Pension System http://www.opf.nl/web/English/Dutch%20Pension%20system/Pages/default.aspx.

•Bfinance, Pension funds turn to consultants for strategic advice, global survey, 2009.

•Federal Social Insurance Office of Switzerland, Report on the financial situation of pension funds and life insurance companies, December 2010

•Dutch Central Bank (DNB), Annual Report 2009.

•Dutch Central Bank (DNB), Overview of Financial Stability in the Netherlands, November 2010, No.12

•Dutch Central Bank (DNB), Supervisory data on pension funds.

•IPE “Fiduciary expands in UK”, Nov, 1 2010.

•IPE Portfolio Management Functions Survey, June 2008.

•Kennedy Liam, How the fiduciary model works in practice, IPE Fiduciary Management, June 2008.

•Kennedy, Liam; Fiduciary/Delegation: Your faithful friend?, IPE Europe, July 2010

•Nunen, Anton van, Fiduciary Management, Blueprint for Pension fund Excellence, Wiley finance series, 2008.

•OECD, Pensions at a Glance 2009

•OECD, Yermo, Juan; Severinson, Clara; The impact of the Financial Crisis on Defined Benefit Plans and the Need for counter-Cyclical funding Regulations, OECD Working Papers on finance, Insurance and Private Pensions, No.3, 2010.

•Pension Protection Fund and The Pension Regulator, The purple Book 2010, UK 2010

•Phillips, Maha Khan; The Future of Fiduciary Management, CFA Magazine, May/June 2010

•SpenceJohnson, Five Future Study, The evolution of Fiduciary Management. October 2009.

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This document has been issued and approved by Allianz Global Investors Europe GmbH, a subsidiary of Allianz Global Investors AG (part of the Allianz Group).

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