Alfred Slager

Tilburg University | UVT · CentER Applied Research

This chapter discusses different types of investment management organizations, ranging from fully outsourced to fully insourced. We discuss implementation issues regarding the investment organization that currently dominate an industry‐wide debate among trustees. “Alignment of interests” is such an example of a highly debated issue, because the int...

In this chapter trustees will read how to develop an effective mission and set of goals, partly by learning from other pension funds. We offer guidance on how to translate vision and mission into practical but powerful goals. In turn, these are translated into concrete return objectives and a risk appetite, formulated as a risk appetite statement....

Implementation is the process that puts the pension fund's plans and strategies into action in order to achieve its goals and objectives. This chapter takes a closer look at how the fund's strategic plan should address the essential aspects of implementation that will ultimately determine the success (or failure) of an investment strategy. We discu...

The primary role of the board is defining the goals, organizing the investment process, and monitoring and (re)adjusting choices in order to adapt to any changing circumstances. This chapter reviews the fiduciary responsibilities of the board. We then translate these findings into the strategic design of the investment management organization and i...

This chapter takes a strategic perspective to the investment management process and identifies five investment approaches models that currently dominate the pension fund industry worldwide. Boards may not necessarily be aware of this, but usually they have been given the advice to incorporate one of these main investment approaches. Its adoption in...

This chapter discusses the role of pension funds and the board of trustees. Why do large collective organizations (still) exist in a world where the global financial order and system are transforming at such a breakneck pace and with such profound impact on the structure and configuration of institutions? What part do they play within this context,...

This chapter provides the reader with self‐reflections questions that can be used to perform a self‐assessment. What is the level of practice of your fund? How well are you doing? Did you think of all the steps in a process? The chapter presents useful questions to conduct a self‐assessment and serves as a reminder of important questions that nobod...

In portfolio construction, the actual synthesis of fund objectives and capital market expectations of relevant asset classes takes place, ultimately resulting in the fund's asset allocation. The chapter considers the fact that trustees have a wide range of choices to make at this stage of the design process, including asset allocation and diversifi...

This chapter provides the trustees a practical instrument with which they are able to assess their fund's status in terms of achieving sustainable investment excellence. The chapter equips the trustee with the necessary intelligence and practical tools that will allow the board to transform into a perpetual “learning board".

Suboptimal (inefficient) governance of pension funds comes at a significant cost and is thus one of the biggest concerns for board members and those involved in the actual execution of the investments. In this respect, the monitoring function is one of the least thought‐out components in the investment management process. This chapter discusses dif...

The board is highly dependent on the investment committee. It is therefore imperative that the board has articulated how they (should) work together. We highlight the position of the investment committee in more detail. We discuss how investment committees serve the specific goals and investment process of a particular fund best. Correspondingly, w...

This chapter covers what is required from a board to make decisions. The profession of a trustee is hard work that involves the development of an appropriate strategic agenda fitting the fund's mission, goals and objectives. We analyze what exactly is required for a board to actually make a good investment decision. Whatever the procedure of decisi...

Observed from a distance, most pension funds and their investment processes look alike. What sets them apart from each other, however, are their underlying choices and decisions. These can differ quite fundamentally and completely change the entire structure and fabric of the pension organization. It is imperative that such underlying choices are i...

The day‐to‐day implementation of investments may seem bewildering and complex. However, the key concepts of investment theory are actually not as obscure as one may think. For a trustee to become relatively fluent in investment terminology, it requires them to get comfortable with roughly ten building blocks. From the perspective of the trustee, we...

We take a detailed look at the investment process, translating the mission, vision, goals, and beliefs into actual investment choices and investments. The portfolio management process is an integrated combination of steps that need to be taken in a consistent and coherent manner in order to create and maintain an appropriate portfolio that meets th...

The asset management industry has seen a strong development of factor-based investing. The central idea is that each asset can be seen as a bundle of underlying factor sensitivities. A factor-based investing approach provides better insight into the risk decomposition of the investment portfolio’s assets and potentially leads to better investment d...

Factors represent certain parts in the market, which are more attractive in the long term than other parts. In the case of equities for example, leading academic studies demonstrate that momentum, small cap and low-volatility stocks systematically generate higher risk-adjusted returns. Factors can also be applied in other asset classes such as bond...

In this paper we investigate and evaluate factor investing in the US and Europe for equities and bonds. We show that factor-based portfolios generally produce comparable or better portfolios than market indices. We expand the analysis to other asset classes and factors, work with other optimisation methods and add a basic liability structure. The r...

How do pension fund trustees deal with demographic and economic shocks? We examine this issue by using a vignette study among pension fund trustees in the Netherlands. Trustees show asymmetric reactions to shocks in the level of reserves of pension funds. Pension premiums are upwardly flexible but trustees are reluctant to decrease premiums. Asymme...

Perhaps one of the puzzling aspects of the investment industry is that pension funds and asset managers seem to get along so well. In the past years, the costs and complexity of trustees’ investments has been steadily rising. So have the incomes of asset managers, their advisors and other intermediaries, despite the fact that asset managers have no...

“To pay no attention to costs is probably the biggest dumb mistake investors can make.”1 The words strike home from the mouth of John (“Jack”) Bogle, a veteran in the investment industry, widely known as the founder of one trillion dollar asset management firm Vanguard Group. He estimates that total costs in 2007 amounted to $528 billion in the US...

How do you hold on to your investment style when things are getting ugly for your company in terms of performance? Brandes Investment Partners, managing $42 billion in value-oriented strategies for their clients, has been down this road many times since its founding in 1974.

Having the right investment beliefs is crucial; so is putting them into practice. This chapter provides guidelines for trustees and investment managers for delivering the right results. The essential point throughout the book is that finance is a relatively young discipline in which data are limited, biased, or both; and in which the ratio of noise...

Two decades ago it used to be easy to run an asset allocation strategy for a UK pension fund: buy some bonds and a bit of property, but the largest slice of the pie – approximately 70% – should be in equity.1 However, when risk management became the core of the thinking, exciting changes were bound to happen. In 2001, the pension fund of Boots, the...

“Be like Yale!” Following up on the remarkably strong investment performance of Yale Endowment over the past 20 years, this slogan has become well-known among institutional investors worldwide. While few will publicly acknowledge that they are mimicking Yale Endowment Fund, asset allocation speaks louder than a thousand words. And why not be like Y...

Many investors would not consider swapping oil for equities a good diversification deal. Yet it paid off remarkably well for the Norwegians. Windfall wealth is a once-in-a-lifetime opportunity that ultimately challenges decisionmakers on whether to use it for pet projects now, or save it and increase longterm wealth. The Dutch chose the former in t...

Strangely enough, the extent to which performance is related to investment management attributes or characteristics is a largely unknown empirical question. Much attention is paid to investment management organizations and their products by market regulators, the media, institutional and retail investors, investment consultants and rating agencies...

Al Gore’s words on his departure from politics reveal a clear message: “I am very happy with what I’m doing. I enjoyed my time in public service but that’s over, and I’m really enjoying the business world and having a lot of fun.”1 The former US Vice President does not seem to miss his political career at all. Besides his heavy schedule of speeches...

Not all investment beliefs are born equal. American asset manager Vanguard believes in low cost and index replication. Canadian endowment fund Edmonton Tel considers strategic asset allocation as its main decisionmaking tool, whereas Swiss private bank Pictet uses a bottom-up approach for security selection. Tactical asset allocation is crucial for...

Investors and trustees pronounce, act on or ignore investment beliefs on a daily basis, sometimes at their own peril. To illustrate this, we have collected a few quotations that we have picked up when meeting with trustees and advisors of pension funds for our research. We caught them at a bad time; in October and November 2008, bungee-jumping with...

General opinion has it that theory is boring for practitioners and exciting for academics. However, now and then theory galvanizes practitioners into hot debates. Warren Buffet, known for his outspoken opinions, declared that “I’d be a bum on the street with a tin cup if the markets were always efficient”.1 That is how Warren Buffet views the Effic...

Innovation in investments comes in many guises as an investment belief. Strikingly, for the Dutch civil servants pension fund ABP, this is the faces of pop stars. In its constant search for new investment strategies, ABP bought several music catalogs in 2008 from Universal Music Group, the world’slargest music company. This way ABP became the first...

Unsurprisingly, the style of investing that appeals to the French meets their taste for grand, long-term designs, exemplified by the Parisian Boulevards, the High Speed TGV train or the Channel Tunnel. The latest grand design is on combating ageing, setting up a reserve fund with the challenge of developing a strategic vision on long-term investing...

In the endowment industry, investors closely watch and hope to emulate funds like Yale and Harvard. For the pension industry, the Canadian Ontario Teachers Pension Plan (OTPP) surely fits into the same league. With a clear view of what the plan’s main success drivers were, the fund transformed itself into a leading pension fund worldwide. Leading t...

A direct relationship between the observed investment beliefs held by pension funds and performance measures is tested using an international sample of pension funds. Investment beliefs address strategic choices in the investment philosophy and process that affect the future performance of the fund. Data from over 600 funds between 1992 and 2006 sh...

We ask how pension fund trustees deal with the booms and busts that funds encounter, and to what extent the decisions of pension fund trustees are affected by behavioral biases. We examine these issues by using a vignette-method field experiment among Dutch pension fund trustees. We find that trustees display choices that accord with the phenomenon...

This article investigates the building blocks to successful investment strategies for institutional investors. It presents the results of a worldwide survey of investment beliefs, and finds striking differences in how pension funds and commercial asset managers view capital markets. Asset managers seem to use their investment beliefs to demonstrate...

If Dutch consumers had the opportunity to design pension deals to meet their needs, what sort of pension deals would emerge? What do employers, regulators, and supervisors want to achieve? This paper places the consumer at the centre of the pension system, analyzing trends and determining what this entails for strategic changes in the pension produ...

AlpInvest was created in 1999 as a joint venture between Dutch pension funds ABP and PGGM to create a strong platform for their private equity investments This case study examines the strategic rationale for setting up this private equity joint venture, and evaluates the pros and cons. We identify four criteria to create a successful joint venture...

We investigate the impact of internationalization of banks on their performance. Using a novel data set comprising of the world's 46 largest banks spanning 1980-2004, we find that internationalization decreases performance measures as return-on assets or return-on-sales. That negative effect is magnified when controlling for risk or for response ti...

Het omgaan met beperkte rationaliteit onder pensioendeelnemers stelt pensioenbeleidsmakers voor dilemma’s in het ontwerpen van pensioenproducten alsmede het vormgeven van pensioentoezicht en – beheer. Het vertrouwen onder deelnemers in pensioenfondsen is hoog en de vraag is of pensioenfondsen dit ook weten te behouden. Pensioenbestuurders erkennen...

We investigate the building blocks for institutional investors' successful investment strategies. We focus on organizations which formulate investment beliefs and define clear views on how the capital markets work. We present the results of a world wide survey of investment beliefs. We find striking differences in how asset managers and pension fun...

Increased transparency and a difficult environment for returns increase the importance of well-thought out investment policies for investors, clients, and trustees; a coherent set of investment beliefs provide the basis for a good investment policy. Investment beliefs improve stakeholder governance by reducing possible conflicts of interest, and af...

This paper addresses the implementation of Socially Responsible Investment (SRI) in the investment process. SRI covers a broad range of investment strategies, with different implications for the role of trustees and portfolio managers. We argue that a clear distinction needs to be made between ethical based, investment driven and value-ensuring obj...

This paper addresses the implementation of Socially Responsible Investment (SRI) in the investment process. We argue that a clear distinction needs to be made between (1) ethical based, (2) investment driven and value-ensuring objectives in SRI. This distinction enables trustees and investors to effectively address the SRI strategies in the hierarc...

1. Inleiding Pensioenfondsen gaan de komende jaren een nieuwe groeifase in. De ontwikkelingen in de afgelopen vijf jaren waren misschien dramatisch, maar niets anders dan een voorbereiding voor de echte transformatie: het pensioenfonds wordt een onderneming, en keert zich langzaam maar zeker af van de sociale organisatie die zij de afgelopen decenn...

Although international activities of banks have dramatically increased in the last two decades, the long term results of internationalization were relatively less investigated until recently. This paper uses a novel dataset of the 44 largest banks that were internationally active between 1980 and 2003 to analyze internationalization and profitabili...

This essay investigates the relationship between the internationalization of banks, profitability and shareholder value. We argue that in general internationalization has not contributed to profitability, and shareholders have not gained by investing in banks with more international activities. A database with internationalization measures is const...