Financial Markets Atlas: Asset Owners (EU)

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Level 1 flows of an asset owner: the institutions that own the capital, with a Dutch sectoral pension fund (the fund for the government and education employees, EUR 500,000,000,000 of assets, 3,000,000 participants, run by its own executor as fiduciary manager and pension administrator, the transition to the new Dutch pension contract by January 1, 2028, DNB and AFM supervision, illustrative) as the worked example, grouped by function (liabilities and ALM, investing, funding, liquidity and collateral, operations and custody, control and regulation). Each diagram follows one flow with the fund at the center, the participants, the board and the actuary on one side, the managers, the dealers, the market, the custodian and the regulator on the other; the strip above it is the deal. Columns are the parties, rows the phases; numbered steps are messages, deliveries, payments or reports between them, with the channel or system in the pill. Hover a step for the detail, click it or use the walkthrough to be taken through the diagram step by step. The managers’ side of the same flows is on the buy-side page, the dealers’ side on the sell-side pages, the issuers’ side on the corporate treasury page, the rails on the market infrastructure page; the US flag opens the same cycle for a US life insurer. EUR throughout; all numbers illustrative. New to this? Begin with Start here.

Function

Product

How the diagrams work, the flow common to all 16 diagrams, a map of the flows, which entity books each and what it takes in funding, capital and reporting, and a glossary.

How to read a diagram

Columns are the partiesThe policyholders, the members and the sponsors on the left, the board, the actuary and the parent group, the asset owner in olive at the center (the subject of every diagram), the managers and the desks, the dealers and the banks, the issuers and the market, the custodian and the rails, and DNB and the AFM on the right.

Rows are the phasesTime runs down the page in the flow’s own cycle: the years of a liability, the annual policy, the quarterly allocation, the day of a trade, the settlement, the quarter-end books, the yearly filings. The band label gives the timing.

Arrows are stepsNumbered in order. Solid arrows are messages, deliveries or payments; dashed ones are standing flows like reports and reviews; two-headed ones are exchanged or negotiated. Boxes on the owner’s own lifeline are what it does internally: a valuation, an allocation, a reconciliation.

Pills are the channelAmber for voice and chat, blue for the platforms and portals (Bloomberg, the manager and custodian portals), rose for SWIFT messages, grey for the rails and the filings, teal for market data, lavender for the owner’s own systems (the ALM model, the IBOR, the policy administration). Each pill shows a one-line definition on hover.

The strip is the dealAbove each diagram the worked example strip gives the deal: the liability or the asset, the size, the counterparties, the settlement, the capital and the accounting, the reporting. Hovering a step shows the full detail; clicking it opens the walkthrough.

The grouping is by functionThe area tabs are the owner’s functions (liabilities and ALM, investing, funding, liquidity and collateral, operations and custody, control and regulation) and the product tabs under each are the flows. The facts table lists every flow with the same five columns. The flags open the same cycle for a US life insurer, a Canadian pension fund and a UK life insurer, where the liabilities, the regimes and the markets differ.

A flow can be read two ways: scroll the diagram and hover for detail, or press Walk through the steps above any diagram to follow it one step at a time, with the detail in a card. The arrow keys move forward and back.

The asset owner cycle every diagram is part of

BankAsset managerGroup entitiesThe asset ownerClientMarket infrastructuremessage or transferstanding flowexchanged and matchedoption, when needed1sequence, on the party that actsVoice, chatElectronic platform, APIInfrastructure system (payment, clearing, reporting)Internal systemOtherhover an arrow or a badge for the full detail

Every diagram on this page is one turn of this cycle: the liabilities come in and are valued, the board sets the policy, the owner allocates and decides, the managers and the desks execute through the dealers, the assets settle at the custodian, and the books, the capital and the reporting follow. What the EU version shows is the largest kind of asset owner in Europe at the moment it changes shape: a Dutch fund with a funding ratio under the FTK and an interest rate hedge cleared at the CCPs, run by an executor it owns, moving its accrued rights into the new contract with lifecycle risk by cohort, investing across the world with a currency hedge and a private markets book, and reporting to DNB, the AFM, the participants and the employers.

The flows, 16 of them

Each card opens its diagram. The tabs at the top do the same; the search box finds a flow by name, rule, report or keyword.

Who decides each flow, who executes it, where the assets settle and sit, what capital it takes, who it is reported to

The same five questions for every flow: who decides it, who executes it with the owner, where the assets settle and sit, what capital it takes and how it is accounted, and who it is reported to. The answers are what make an asset owner: liabilities that set the purpose, a board and an actuary that set the frame, managers and dealers that execute, a custodian that holds, and DNB, the AFM and the participants reading the capital and the reports.

Liabilities and ALM

Flow	Decided by	Executed with	Settled and held	Capital and accounting	Reported to
Promise and Funding Ratio	the social partners for the scheme and the contribution; the board for the contribution level, the indexation and the recovery plan; the certifying actuary for the provisions	the executor for the contributions, the participant records, the valuation and the UPO; the employers of the sector; the actuary and the auditor	the contributions by SEPA into the fund’s accounts; the participant records in the executor’s administration; the national pension register	the liabilities on the DNB term structure with the UFR; the required own funds under the FTK’s standard model; the annual accounts at fair value	the monthly funding ratio and the quarterly and annual statements to DNB; the recovery plan; the UPO to the participants; the annual report
Wtp Transition	the social partners for the contract and the transition plan; the board for the implementation plan and the conversion; the accountability body advises	the executor for the administration, the communication and the overlay; the swap dealers and the clearing brokers for the restructuring	the personal pension assets in the executor’s new administration; the restructured swaps cleared at the CCPs; the assets at the custodian	the accrued rights valued at the transition date; the solidarity reserve up to 15% of the pension assets; the end of the FTK’s funding ratio for the fund	the implementation plan to DNB and the communication to the AFM; the individual transition overview to every participant; the annual report
Strategic Allocation	the board on the fund office’s proposal and the executor’s fiduciary advice; the accountability body advises; the participants’ risk preferences set the risk attitude	the executor’s ALM team and trading desks; the dealers for the futures, the swaps and the forwards; the external managers funded or redeemed	the securities on T2S and the ICSDs at the global custodian; the futures and the cleared swaps at Eurex Clearing and LCH; the forwards through CLS	the risk attitude by cohort; the solidarity reserve’s path; under the FTK until the conversion, the required own funds from the allocation	the statement of investment principles and the ABTN to DNB; the own risk assessment; the monthly report to the board; the annual report

Investing

Flow	Decided by	Executed with	Settled and held	Capital and accounting	Reported to
Fiduciary Mandates	the board for the framework and the mandates; the fund office for the challenge; the executor advises and decides within the mandate	the executor’s internal teams; the external managers it selects under IMAs; the global custodian	the segregated accounts in the fund’s name at the global custodian; T2S, the ICSDs and the sub-custodians; the executor’s IBOR	the costs on the executor’s cost-plus basis; the external managers’ fees; the outsourcing kept under the fund’s responsibility	the monthly report to the board; the costs per participant and by asset class in the annual report; the outsourcing notified to DNB; the SFDR statements
Interest Rate Hedging	the board for the hedge ratio policy; the fund office for the buckets; the executor’s overlay desk within the ranges	the swap dealers by RFQ and by phone; the clearing brokers; the repo banks and the money market funds for the cash	the swaps cleared at Eurex Clearing and LCH in individually segregated accounts; the variation margin in cash through T2; the bonds and the cash at the custodian	the hedge’s effect on the funding ratio on the DNB curve; the liquidity buffer for the cash calls; the swaps at fair value in the annual accounts	the monthly hedge report to the board; DNB’s liquidity stress tests; the EMIR reports to the trade repository by the dealer or the broker
Private Markets	the board for the allocation and the pacing; the executor’s private markets teams for the commitments and the direct deals within the mandate	the general partners under LPAs and side letters; the developers and the energy companies in the joint ventures; the appraisers and the auditor	the capital calls and the distributions through the custodian; the fund interests and the direct holdings recorded by the custodian and the administrator	the investments at the latest NAV and the appraisals; the J-curve; the risk factors of the FTK until the conversion	the costs looked through in the annual report; the SFDR disclosures and the taxonomy alignment; DNB on the valuation and the liquidity
Public Markets	the board for the mandates and the stewardship policy; the executor’s teams for the portfolio decisions within the mandates	the equity brokers, the bond dealers and the futures brokers; the proxy adviser and the data providers; the borrowers through the lending agent	T2S, Euroclear and Clearstream, and the sub-custodians into the fund’s accounts at the global custodian; the futures at the exchanges’ CCPs	the portfolios at market value; the transaction costs and the lending revenue measured; the FTK risk factors until the conversion	the quarterly report to the fund; the costs and the transaction costs in the annual report; the engagement policy and the voting record under SRD II; the SFTR reports

Liquidity, Currency and Collateral

Flow	Decided by	Executed with	Settled and held	Capital and accounting	Reported to
Liquidity and Collateral	the board on the risk function’s stress tests: the liquidity policy, the buffer, the waterfall and the limits; the executor runs the desk within them	the clearing brokers and the CCPs for the cleared swaps; the dealers under the CSAs; the repo banks and the triparty agents; the euro money funds	the variation margin in cash through T2; the initial margin in bonds through T2S and the ICSDs; the repo through the triparty agents; the collateral system of the executor	no capital charge on the liquidity itself; the derivatives at fair value in the annual accounts; the buffer’s return below the portfolio’s, the cost of the hedge	the daily liquidity report to the board office; the quarterly DNB reports with the derivatives and the liquidity; the annual report’s risk section
Currency Hedge	the board on the ALM study: the ratios by currency, the bandwidths, the instruments and the limits; the executor’s FX desk plans and executes the rolls	five or six FX banks in competition on FXall and 360T, under ISDAs and CSAs; the FX Global Code	payment versus payment in CLS through the custodian as settlement member; the euro leg through T2; the collateral under the CSAs through the triparty accounts	the forwards at fair value through the result in the annual accounts; the funding ratio shows the currency effect net of the hedge; no hedge accounting needed for a fund at fair value	the EMIR reports to a trade repository; the monthly hedge result to the board office; the quarterly DNB reports; the costs in the annual report
Contributions and Benefits	the board on the contribution and the indexation; the social partners on the scheme; the executor runs the collection, the pension run and the treasury	the employers paying the contributions; the payment banks for the SEPA collections and payments; the custodian for the investment accounts	SEPA credit transfers and B2B direct debits in, a pain.001 batch out; T2 for the sweeps to the custodian; the policy administration system and the bank statements	the contributions and the pensions in the annual accounts’ result; the technical provisions move with the accrual and the payments; no tax on the fund itself	the payroll tax return to the tax office monthly; the annual statement to the retirees; the cash and arrears report to the board office; the annual report

Operations and Administration

Flow	Decided by	Executed with	Settled and held	Capital and accounting	Reported to
Pension Administration	the board on the pension regulations and the service levels; the executor administers under the outsourcing agreement; the participants choose at the life events	the employers delivering the data; the national pension register; the other funds and the insurers for the value transfers; the ombudsman for the disputes	the records in the executor’s policy administration system; the participant and the employer portals; the payments through the monthly pension run	the technical provisions computed from the records by the actuarial function; the administration costs in the annual accounts per participant	the UPO to the participants; the data to the pension register; the service level reports to the board office; the AFM on the communication; DNB on the data quality
Custody Operations	the board on the executor’s advice: the custodian, the custody agreement, the lending and the voting policies; the executor instructs and reconciles	the global custodian and its subcustodians; the CSDs and the ICSDs; the borrowers of the lending program; the issuers, the agents and the proxy advisers	the assets in segregated accounts at the custodian; T2S, Euroclear, Clearstream and the local CSDs; the lending collateral on triparty	the investments at fair value in the annual accounts; the tax reclaims receivable; the lending income net of the agent’s share	the custodian’s ISAE 3402 report and service levels; the voting record on the fund’s site; the engagement report; the annual report
Reporting Chain	the board office owns the reports; the executor produces the investment and the actuarial data; the board signs the annual report	the custodian and the managers for the data; the certifying actuary and the external auditor for the assurance	the executor’s ABOR and policy administration system; DNB’s reporting portal; the fund’s site for the funding ratio	the annual accounts at fair value under the Dutch reporting rules for pension funds; the technical provisions on DNB’s curve; the required own funds from the FTK	the quarterly and annual reports to DNB for DNB, EIOPA and the ECB; the actuarial statement; the audited annual report; the monthly funding ratio

Control and Supervision

Flow	Decided by	Executed with	Settled and held	Capital and accounting	Reported to
DNB Supervision	the board with its key function holders: the appointments, the own risk assessment, the recovery plan; DNB and the AFM decide the measures	DNB as the prudential supervisor; the AFM as the conduct supervisor; the executor as the outsourced provider inside the supervision	the applications, the reports and the notifications through DNB’s portal; the incident reports under DORA; the executor’s assurance reports as evidence	the required own funds under the FTK at a 97.5% confidence; the minimum required own funds; the recovery plan’s projections on DNB’s maximum parameters	the own risk assessment to DNB; the recovery plan and its yearly evaluation; the DORA incident reports and the register; the findings of the examinations
Governance	the board within the social partners’ mandate; the accountability body’s advice and approval; the supervisory board’s oversight	the social partners for the scheme and the contribution; the executor for the work under the fiduciary and the administration agreements	the board’s minutes and the decisions; the pension regulations; the agreements with the executor	the fund as a foundation with no shareholders; the executor as a consolidated subsidiary; the governance costs in the annual report	the annual report with the accountability body’s opinion and the supervisory board’s report; the reports to the social partners; DNB on the governance
Sustainability	the board on the participants’ preferences: the policy, the targets, the exclusions; the executor carries it out in the mandates and the engagement	the executor’s responsible investment team and the external managers; the companies engaged with; the data providers and the proxy advisers	the exclusion lists in the managers’ systems; the votes through the voting platform and the custodian; the ESG data in the executor’s systems	no capital charge; the exclusions’ effect on the tracking error reported; the transition investments within the strategic allocation	the SFDR disclosures on the site and the PAI statement each June 30; the Article 8 report in the annual report; the stewardship report; the AFM’s supervision

Glossary

The terms that come back on every diagram. Every pill in the diagrams also shows its definition on hover.

Liabilities and ALM

Funding ratio: The ratio of a Dutch pension fund’s assets to its liabilities valued on the DNB term structure, reported each month; the measure of the current contract that decides the indexation, the recovery plans and the cuts.

Policy funding ratio: The twelve-month average of the funding ratio, used for the decisions on the indexation, the recovery plans and the cuts so that one month’s market move does not decide them.

DNB term structure: The interest rate curve DNB publishes each month for the valuation of the pension liabilities: the euro swap curve up to the last liquid point and the extrapolation toward the ultimate forward rate beyond it.

UFR: The ultimate forward rate: the long-term forward rate toward which DNB extrapolates the discount curve beyond the last liquid point, so that the long liabilities are not valued on thin swap prices; it raises the discount rate of the long liabilities above the swap curve.

Last liquid point: The maturity up to which the swap market is deemed deep enough to take the curve from it (30 years for the Dutch pension curve since the method phased in from 2021 to 2024); beyond it the curve is extrapolated.

FTK: The financial assessment framework of the Dutch Pensions Act: the valuation of the liabilities on the DNB term structure, the required own funds from the standard model, the recovery plans, the indexation and the cuts; the frame of the current contract until a fund converts.

VEV: The required own funds of a Dutch pension fund under the FTK: the buffer that covers a one-in-forty-year loss over one year from the ten risk factors of the standard model, expressed as a required funding ratio (often 120% to 130%).

MVEV: The minimum required own funds under the FTK (about 104% of the liabilities): a policy funding ratio below it at five consecutive year-ends forces an unconditional cut.

Pension recovery plan: The plan a Dutch fund files with DNB within three months when its policy funding ratio falls below the required own funds, showing recovery within the recovery period on capped expected returns, updated each year; the cuts follow if it fails.

Conditional indexation: The raise of the accrued and the paid pensions with the wages or the prices that a Dutch fund grants only when its funding ratio allows: none below a threshold, partial above it, full when future-proof; the decision is the board’s each year.

Cost-covering premium: The contribution that covers the cost of the year’s accrual, the expenses and the buffer surcharge under the FTK, with the expected return smoothing allowed within the DNB parameters; the floor for the contribution a fund sets.

Average-salary scheme: A defined benefit plan in which each year of service accrues a percentage of that year’s salary, revalued by the conditional indexation; the standard Dutch scheme before the Wtp.

Average contribution system: The Dutch rule under which every participant pays the same contribution percentage and accrues the same pension percentage whatever the age, so the young subsidize the old; the Wtp ends it, with a compensation for the cohorts that lose.

Social partners: The unions and the employers’ organizations of a sector, who agree the pension scheme and the contribution in the collective agreement and decide the transition plan under the Wtp; the fund carries out what they agree.

Certifying actuary: The actuary who reviews and certifies each year a Dutch fund’s technical provisions, required own funds and contribution in the actuarial report, separate from the actuarial key function holder.

UPO: The uniform pension overview: the yearly statement every Dutch fund sends its active participants with the accrued and the expected pension, the scenarios and the indexation, in a standard format.

Pension register: The national pension register (mijnpensioenoverzicht.nl) where every Dutch resident sees the pensions accrued with all the funds and insurers and the state pension in one place.

Wtp: The Future of Pensions Act (Wet toekomst pensioenen), in force since July 1, 2023: the move of the Dutch occupational pensions from defined benefit promises to contribution schemes with personal pension assets, the conversion of the accrued rights and the legal deadline of January 1, 2028.

Solidarity contribution scheme: The collective scheme of the Wtp: a fixed contribution, personal pension assets invested collectively, the returns allocated by cohort as a protection return and an excess return, and a solidarity reserve; the choice of most of the large funds.

Flexible contribution scheme: The individual scheme of the Wtp: the participants’ assets invested by lifecycle with some choice of risk, close to a defined contribution plan, with an optional risk-sharing reserve for the payout phase.

Solidarity reserve: The collective reserve of the solidarity contribution scheme, filled from up to 10% of the excess returns or from the contributions and capped at 15% of the pension assets, used to smooth the pensions in payment and share the shocks between the cohorts.

Protection return: The return allocated to each cohort in the solidarity scheme to protect its expected pension, mostly from the interest rate hedge: the change in the value of the cohort’s expected pension cash flows.

Excess return: The return of the solidarity scheme’s portfolio above the protection returns, allocated to the cohorts by the shares the fund sets by age (more to the young, less to the old).

Invaren: The conversion of the accrued pension rights into the new contract under the Wtp (literally “sailing in”): the rights are valued at the transition date and turned into personal pension assets, with the surplus shared by the method the fund chooses.

Standard method: The Wtp conversion method that sets each participant’s personal pension asset at the value of the accrued rights, with the surplus or the shortfall shared by a formula; the alternative to the value-based ALM method.

VBA method: The value-based ALM method of conversion under the Wtp: each cohort’s rights are valued across the economic scenarios in the old and the new contract, and the assets are allocated so that the value transfers between the cohorts stay balanced.

Balanced weighing of interests: The duty of a Dutch fund’s board to weigh the interests of all the participant groups evenly in every decision; the test the conversion, the compensation and the method must pass.

Transition plan: The social partners’ plan for the Wtp transition: the new contract, the contribution, the compensation and the request to convert the accrued rights, the input to the fund’s implementation plan.

Implementation plan: The fund’s plan for the Wtp transition: the conversion method, the compensation, the solidarity reserve, the data quality, the administration, the communication and the date, submitted to DNB before the conversion.

Accountability body: The body of a Dutch fund representing the employees, the employers and the retirees, to which the board accounts and which advises on the key decisions; under the Wtp it has a reinforced advice on the conversion and can ask the Enterprise Chamber to review it.

Risk preference survey: The survey of the participants’ attitude to risk a Dutch fund must hold at least every five years under the Wtp, from which the board sets the risk attitude by cohort and the investment policy.

Lifecycle: An investment path that reduces the risk of a participant’s pension asset with age, used by the Wtp schemes for the allocation of the excess return and in the flexible scheme for the portfolios.

DNB scenario set: The uniform set of economic scenarios DNB publishes each quarter for the Dutch funds’ feasibility tests, the communication of the expected and the bad-weather outcomes and the measurement of the risk attitude.

Maximum parameters: The caps DNB sets on the expected returns, the inflation and the other assumptions the Dutch funds may use in the contribution, the recovery plans and the outcomes they show the participants.

ABTN: The actuarial and business technical note of a Dutch fund: the description of its financial set-up, the policies, the contribution, the indexation and the risk management, filed with DNB and updated after each change.

Statement of investment principles: The document in which a pension fund sets out its investment policy, the risk measures, the strategic allocation and how it takes the ESG factors into account, required under IORP II and published.

IORP II: The EU directive on institutions for occupational retirement provision (2016, applied from 2019): the governance, the key functions (risk management, actuarial, internal audit), the own risk assessment, the prudent person rule, the remuneration and the information to the members.

Own risk assessment: The assessment of its own risks, governance and capital needs a pension fund must carry out under IORP II at least every three years and after a material change, documented and shared with the supervisor.

Key function holder: The named person in a pension fund responsible for one of the IORP II key functions (risk management, actuarial, internal audit), reporting to the board and, where the board does not act, to the supervisor.

Prudent person rule: The principle of IORP II and the Dutch Pensions Act that the assets be invested in the members’ interest with security, quality, liquidity and profitability, diversified, with the derivatives for risk reduction or efficient management.

Investing

Fiduciary manager: The firm that advises an asset owner on the policy and carries it out: the allocation, the manager selection and monitoring, the overlays and the reporting; in the Netherlands often the executor the fund owns.

Executor: The company that administers a Dutch pension fund’s participants and manages its assets (the uitvoerder), owned by the fund or a commercial provider; a licensed investment firm and fund manager supervised by the AFM.

Fiduciary management agreement: The agreement between a pension fund and its fiduciary manager: the services (advice, execution, manager selection, reporting), the mandate, the service levels, the fee, the right to audit and the exit.

Countervailing power: The capacity DNB expects a pension fund to keep in its own office (the balance sheet management, the risk, the key function holders) to challenge the advice and the work of the executor it outsources to.

Outsourcing: The transfer of a pension fund’s activities to a service provider under DNB’s rules: the fund remains responsible, keeps the expertise to steer and control, has the right to audit, plans the exit and notifies the material outsourcing to DNB.

Cost transparency: The Dutch pension federation’s recommendations under which the funds report the administration costs per participant, the asset management costs and the transaction costs by asset class, the costs inside the funds looked through.

Exclusion list: The list of the companies and the countries an investor will not hold (the controversial weapons, the tobacco, the fossil fuel producers, the sanctioned states), applied by every mandate and published.

SFDR: The EU Sustainable Finance Disclosure Regulation (applied since March 2021): the sustainability risk policies, the principal adverse impact statement and the product disclosures (articles 6, 8 and 9) of the financial market participants, the pension funds included.

PAI statement: The principal adverse impact statement under the SFDR: the yearly report of the negative effects of the investments on the sustainability factors (the emissions, the biodiversity, the social and the governance indicators) with the actions taken.

EU taxonomy: The EU classification of the economic activities that contribute substantially to the environmental objectives, against which the investors report the share of their investments that is aligned.

Receiver swap: An interest rate swap in which the holder receives the fixed rate and pays the floating rate (€STR or EURIBOR); its value rises when the rates fall, the way a pension fund hedges the rise of its liabilities.

Hedge ratio: The share of the liabilities’ interest rate sensitivity a pension fund offsets with its bonds and swaps, often set by maturity bucket and, under a dynamic policy, rising with the funding ratio.

Swaption: An option to enter an interest rate swap at a set rate on a future date; the receiver swaptions protect a pension fund against a fall in rates with the convexity a swap lacks.

Inflation swap: A swap exchanging a fixed rate for the realized inflation (the euro area HICP), used to hedge the indexed part of the liabilities.

Pension fund exemption: The temporary exemption of the EU pension schemes from the EMIR clearing obligation for the interest rate swaps used to reduce their investment risk, granted because of their cash constraints and ended in June 2023.

Active account requirement: EMIR 3.0’s requirement (2024) that firms subject to the clearing obligation keep an active account at an EU CCP for euro and Polish zloty interest rate swaps and euro short-term rate futures, to move clearing from London.

Individually segregated account: A client account at a CCP that holds one client’s positions and margin separately from the clearing member’s and the other clients’, so they can be ported to another member if the first defaults.

Cash VM: The variation margin of the cleared swaps paid in cash each day, the reason a pension fund that hedges with swaps needs a liquidity buffer, repo access and money market funds.

Liquidity waterfall: The order in which a fund raises the cash for its margin calls: the cash, the money market funds, the repo of the government bonds, then the sale of the bonds; tested in DNB’s liquidity stress tests.

Prisma: Eurex Clearing’s margin model: a portfolio value-at-risk on the historical and stressed scenarios with the liquidity and the concentration add-ons, offsetting the listed and the OTC positions.

PAIRS: LCH SwapClear’s initial margin model: an expected shortfall over the historical scenarios with the stressed periods and the liquidity and concentration multipliers.

Dutch State Loan: The bond of the Dutch state (the DSL), issued by the Dutch State Treasury Agency at the auctions through the primary dealers and by the syndications; with the German Bunds, the core of a Dutch fund’s hedge in bonds.

LPA: The limited partnership agreement of a private fund: the commitment, the investment period, the fee and the carried interest, the capital calls and the distributions, the governance, the reporting.

Side letter: The agreement between a general partner and one limited partner that adds or changes the terms of the LPA for it (the fee, the reporting, the ESG commitments, the co-investment rights, the excuse rights).

Co-investment: An investment made directly beside a private fund in one of its deals, with no or a low fee and carry, which lowers the program’s cost and needs a fast decision.

J-curve: The pattern of a private fund’s returns: negative in the early years with the fees and the costs before the investments gain value, positive later as the exits come.

Pacing model: The projection of a private markets program’s commitments, capital calls, distributions and NAV by vintage, used to set the yearly commitments that keep the allocation on target.

Denominator effect: The rise of the private assets’ share of a portfolio when the public markets fall faster than the lagging private valuations, pushing it above its range.

IPEV guidelines: The International Private Equity and Venture Capital Valuation Guidelines, under which the private funds value their holdings at fair value each quarter.

Total return swap: A swap in which one side receives the total return of an asset or an index (the price change and the income) against a floating rate, giving the exposure without holding the asset.

Securities lending: The loan of securities to a borrower (a bank, a short seller) against collateral with a margin and a fee, through a lending agent; reported under the SFTR.

SFTR: The Securities Financing Transactions Regulation: loan-by-loan reporting of repo, securities lending, buy-sellbacks and margin lending to a trade repository, and the reuse and disclosure rules for collateral.

SRD II: The revised Shareholder Rights Directive (2017, applied from 2020): the identification of shareholders through the chain of intermediaries on the issuer’s request, the transmission of information and the facilitation of voting, the related party and remuneration rules; the standards the custodians and the CSDs follow for corporate actions.

Dutch stewardship code: Eumedion’s stewardship code for the institutional investors in the Dutch listed companies: the engagement, the voting, the collaboration and the reporting on them.

Liquidity, Currency and Collateral

Liquidity buffer: The unencumbered highly liquid assets Regulation YY requires a foreign bank’s US operations to hold against stressed outflows: the IHC for 30 days, the branch and agency network for 14 days, both in the US.

Variation margin: The daily cash or collateral payment of the change in a trade’s value, so that exposure never builds up.

Initial margin: Collateral posted at the start of a trade to cover the loss if a party defaults and the position has to be closed out.

Pension scheme clearing exemption: The exemption from the EMIR clearing obligation for the pension scheme arrangements, granted in 2012 because they hold bonds rather than cash, extended several times and ended on June 18, 2023; since then a pension fund’s new standard swaps clear and pay the variation margin in cash.

Direct clearing model: An access model in which a buy-side firm becomes a member of the CCP for its own account with a clearing agent bank providing the default fund and the margin services (such as Eurex’s ISA Direct), used by large pension funds for the repo and the swaps.

Collateral transformation: A trade that turns the assets a fund holds (bonds, equities) into the cash or the collateral a CCP or a counterparty requires, through a repo or a securities loan against cash, at a haircut and a fee.

Repo: Repurchase agreement: selling a security and agreeing to buy it back tomorrow at a slightly higher price, which is a secured loan.

Haircut: The discount applied to collateral: lending USD 100 against USD 102 of bonds is a 2% haircut.

Money market fund: A fund investing in short-term money market instruments under the EU Money Market Funds Regulation: the government constant NAV funds, the low-volatility NAV (LVNAV) funds and the variable NAV funds; the place a pension fund keeps its margin cash for same-day redemption.

Currency hedge ratio: The share of a currency exposure a fund hedges back to its liability currency, set by the board by asset class and currency from the ALM study, with a bandwidth within which the executor rebalances.

FX roll: The renewal of a maturing FX forward by an FX swap: the near leg settles the old forward at the spot rate and the far leg sets the new forward, so the gain or the loss of the past period is paid in cash at the roll.

Forward points: The difference between the forward and the spot rate of a currency pair, set by the interest rate difference between the two currencies; the carry a hedger pays or receives.

FX Global Code: The global code of conduct for the wholesale FX market (2017, updated in 2021 and 2024), covering ethics, governance, execution, information sharing, risk management and settlement; signed by the banks and the large buy-side firms through statements of commitment.

CLS: CLS Bank settles both sides of a currency trade at the same moment (payment versus payment) so neither party pays without receiving.

Pension run: The monthly computation and payment of the pensions by the administrator: the gross amounts, the withholdings, the net payments in one batch to the bank, the payment on the same day each month.

Payroll tax (pensions): The wage tax and the national insurance contributions a Dutch pension fund withholds on the pensions it pays as the paying agent, with the income-related health insurance contribution, filed in a monthly return to the tax office.

SEPA direct debit: The euro direct debit scheme: the creditor collects from the debtor’s account under a mandate, under the core scheme for the consumers or the B2B scheme for the businesses, which has no refund right once paid.

EMIR report: The report of a derivative contract to a registered trade repository under EMIR, the next working day after the trade and at each lifecycle event, with the UTI, the LEIs and the valuation; delegated by the fund to its manager or its bank in practice.

Operations and Administration

Uniform Pension Overview: The UPO: the yearly statement in a legal format every Dutch pension fund sends its participants (every five years to the deferred members), with the accrued and the expected pension, the partner’s pension and the purchasing power scenarios.

Accrual rate: The share of the pensionable salary a participant earns as a yearly pension each year of service in a defined benefit scheme (1.75% a year in an average salary scheme, illustrative), on the salary above the offset for the state pension.

Value transfer: The transfer of the accrued pension value from a former employer’s fund to the new one at the participant’s request, or automatically for the small pensions; computed on the legal factors and suspended by a fund whose funding ratio is below the threshold.

High-low option: The retirement choice of a higher pension in the first years and a lower one afterwards, within the legal ratio between the two.

Partial lump sum: The right to take up to 10% of the old age pension as a lump sum at retirement under the Dutch pension law, postponed several times and now legislated for January 1, 2029.

Partner’s pension: The pension paid to the surviving partner of a participant, on the accrued basis after retirement or on a risk basis on a death in service; exchangeable for a higher old age pension at retirement.

ISAE 3402: The international standard for the assurance reports on the controls of a service organization (the US equivalent is the SOC 1 report): the type II report tests the controls’ operation over a period; the evidence a fund relies on for its outsourced administration and custody.

Subcustodian: The local agent bank through which a global custodian holds and settles the securities in a market where it is not itself a member of the CSD.

Relief at source: The application of the reduced treaty rate of withholding tax at the time of the payment, on the investor’s documented status, instead of the full rate followed by a reclaim.

Tax reclaim: The claim to a foreign tax authority for the refund of the withholding tax deducted above the treaty rate, filed by the custodian with the investor’s residence certificate and documents.

FASTER directive: The EU directive of 2024 on faster and safer relief of excess withholding taxes: a common digital tax residence certificate and the relief at source or a quick refund through certified intermediaries, applicable from 2030.

Securities lending program: A program in which an agent (often the custodian) lends a fund’s securities to borrowers against collateral, within the fund’s limits on the borrowers, the collateral and the share on loan, sharing the fees with the fund.

Agent lender: A custodian or specialist that lends a fund’s securities on its behalf, takes the collateral and shares the fee.

Proxy voting: Voting the shares at the shareholders’ meetings through the chain of intermediaries, on the investor’s voting policy, often with a proxy adviser’s research and a voting platform.

Three-way reconciliation: The daily comparison of the positions and the cash in the investment book of record, the accounting book of record and the custodian’s records, with the breaks investigated and resolved.

Technical provisions: The value of a pension fund’s accrued pension liabilities, computed by the actuary from the participant records with the mortality and the other assumptions, discounted on DNB’s interest rate term structure.

Combined IORP reporting: The single set of quarterly and annual reports a European pension fund files with its national supervisor, serving the supervisor, EIOPA’s regular information requests on the IORPs and the ECB’s pension fund statistics (the ECB’s 2018 regulation).

Control and Supervision

Fit and proper test: DNB’s test of the expertise and the propriety of a candidate board member, supervisory board member or key function holder of a financial institution, before the appointment takes effect.

DORA: The Digital Operational Resilience Act (applied from January 2025): the ICT risk management, incident reporting, resilience testing and third-party risk rules for financial entities, investment firms included, with the oversight of the critical ICT providers.

Required own funds: The buffer above the technical provisions a Dutch pension fund must hold under the FTK, computed from the standard model’s risk factors at a 97.5% one-year confidence (a funding ratio around 125%, illustrative); below it the fund files a recovery plan.

Minimum required own funds: The minimum buffer under the FTK (a funding ratio around 104%); a fund below it at five consecutive year-ends must cut the pensions to return to it.

FTK recovery plan: The plan a Dutch pension fund files with DNB within three months of a funding ratio below the required own funds, showing the recovery within the recovery period (up to ten years) on DNB’s maximum parameters, with the measures if it falls behind; evaluated each year.

Indexation: The yearly raise of the pensions and the accrued rights for inflation or the wage growth, conditional in the Dutch system on the funding ratio and decided by the board each year.

Pension mandate: The commission the social partners give the fund to carry out the scheme they agreed; the board checks that it can be carried out and accepts it before writing the pension regulations.

Governance model (pension fund): The board structure a Dutch pension fund chose under the 2014 governance law: a joint board with internal supervision, an independent board, or a one-tier board with executive and non-executive members.

Supervisory board (pension fund): The internal supervisory body of a Dutch pension fund: it oversees the board’s policy and the general course of the fund, approves the annual report and the board profile, and reports in the annual report; its members are tested by DNB.

Principal adverse impacts: The negative effects of the investment decisions on the sustainability factors, measured by the 14 mandatory indicators of the SFDR’s technical standards (from the greenhouse gas emissions to the exposure to the controversial weapons) and reported each June 30 in the PAI statement.

Article 8: The SFDR category of a financial product that promotes environmental or social characteristics, with the pre-contractual and the periodic disclosures of how it does so; a Dutch pension scheme with a responsible investment policy is typically one.

Stewardship: The engagement with the companies and the managers and the voting at the meetings by which an investor uses its ownership to influence the companies, reported each year under the stewardship codes and SRD II’s engagement policy.

Exclusion policy: The list of the companies or the sectors a fund does not invest in (the controversial weapons, the tobacco, the fossil fuel producers in some funds), applied in all the mandates and reviewed each year.

IMVB covenant: The covenant on international responsible investment signed in 2018 by the Dutch pension funds, the government, the unions and the NGOs, committing the funds to the OECD guidelines and the UN Guiding Principles in their investments through 2022; the final monitoring found five funds met all the commitments.

CSRD: The Corporate Sustainability Reporting Directive: the sustainability reports of the large and the listed companies under the European standards (narrowed by the 2025 and 2026 simplification); it does not apply to the pension funds, which report under the SFDR, but supplies the data they use.

SWIFT message types used in the diagrams

MT300: SWIFT confirmation of an FX trade.

MT305: SWIFT confirmation of an FX option.

MT320: SWIFT confirmation of a fixed-term loan or deposit.

MT950: SWIFT account statement from a correspondent bank.

camt.053: ISO 20022 end-of-day bank account statement, the successor to MT950.

MT535: SWIFT statement of securities holdings from a custodian.

MT541: SWIFT instruction to receive securities against payment.

MT543: SWIFT instruction to deliver securities against payment.

camt.057: ISO 20022 notice to the account holding bank or custodian to expect an incoming payment, the successor of the MT210.

MT900: SWIFT debit confirmation from a bank.

MT304: SWIFT advice of an FX trade from a manager to its custodian, so the custodian can settle it.

MT545: SWIFT confirmation from the custodian that securities were received against payment.

MT547: SWIFT confirmation from the custodian that securities were delivered against payment.

MT548: SWIFT settlement status from the custodian: pending, matched, failed, with the reason.

MT566: SWIFT corporate action confirmation: the cash or securities credited for an event.

MT540-543: SWIFT instructions to receive or deliver securities, with or without payment; used to move collateral.

MT515: SWIFT client confirmation of a securities trade.

MT527: SWIFT triparty collateral instruction.

MT600: SWIFT confirmation of a precious metals trade.

MT604: SWIFT precious metals transfer or allocation instruction.

MT670: SWIFT standing settlement instruction update: how a counterparty notifies its SSIs by authenticated message.

MT340: SWIFT confirmation of a forward rate agreement.

MT564: SWIFT corporate action notification from a custodian or depository: the event, the options and the deadline.

MT502: SWIFT order to buy or sell securities, sent by a client to its broker or manager.

MT509: SWIFT trade status message from a broker or custodian.

MT101: The SWIFT request for transfer a corporate sends its bank, or a bank sends another, to move funds from the customer’s account.

MT700: The SWIFT message by which a bank issues a documentary credit to the advising bank.

MT710: The SWIFT advice of a documentary credit issued by a third bank, sent by the advising bank onward.

MT742: The SWIFT reimbursement claim a paying or negotiating bank sends the reimbursing bank under a documentary credit.

MT754: The SWIFT advice of payment, acceptance or negotiation sent by the paying bank to the issuing bank under a documentary credit.

MT799: The SWIFT free-format message between banks, used for trade finance correspondence and bank-to-bank undertakings.

MT940: The SWIFT customer statement message a bank sends an account holder (or its other bank) with the day’s entries and balances.

MT540: The SWIFT instruction to receive securities free of payment, used for the stock loans and the collateral deliveries.

MT306: The Swift confirmation of the FX options the MT305 cannot describe: average rate (Asian) options and forwards, barriers, digitals and other exotic structures, with their averaging or observation dates.

MT380: The Swift FX order: an investment manager instructs its custodian to buy or sell a currency for a fund; the custodian confirms the execution with an MT381.

MT606: The Swift precious metal debit advice: the account keeper tells the account owner its metal account was debited, with the bar list when the metal moves into allocated bars.

MT607: The Swift precious metal credit advice: the account keeper tells the account owner its metal account was credited, in fine troy ounces.

MT608: The Swift statement of a metal account: the opening and closing balances in ounces and the movements of the period, or the bars held in an allocated account.

Liabilities and ALM›Promise and Funding Ratio

The Pension Promise and the Funding Ratio: Contributions, the DNB Curve, the Buffers, Indexation and the Recovery Plan

The current contract of a Dutch sectoral fund: an average-salary defined benefit with conditional indexation, the contributions from the employers set by the social partners on the cost-covering premium, the liabilities valued each month on the DNB term structure with the ultimate forward rate, the funding ratio and the policy funding ratio, the required own funds of the FTK and the reserve deficit, the actuary’s certification, the recovery plan, the indexation decided each year, the UPO and the pension register.

Worked example, illustrative:the promise average-salary defined benefit; about 1.75% a year above the franchise; conditional indexation; mandatory participationthe balance sheet EUR 500,000,000,000 of assets; EUR 420,000,000,000 of liabilities on the DNB term structurethe ratios funding ratio 119%; policy funding ratio 118%; VEV 125%; MVEV about 104%the decisions the contribution by the social partners and the board; the indexation each autumn; the recovery plan when below the VEVthe information the UPO yearly; the participant portal; the national pension registerthe supervision DNB for the FTK, the recovery plans and the governance; the AFM for the information

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A Dutch pension is a promise measured by a ratio: the assets over the liabilities on a curve the supervisor sets. The ratio decides the indexation, the buffers decide whether a recovery plan is due, and the rules decide which generation absorbs a shortfall.

The FTK: the financial assessment framework of the Pensions Act (2007, revised in 2015) sets the valuation of the liabilities on the DNB term structure, the required own funds from the standard model at a 97.5% confidence over one year, the recovery plans and the cuts; it remains the frame for the funds until they convert, with the transition rules (the lower indexation threshold, the possibility to index before converting) for the funds that will.
The ultimate forward rate: beyond the last liquid point the swap market is thin, so DNB extrapolates the curve toward a long-term forward rate; the method changed after the 2019 parameters committee, raising the last liquid point to 30 years, with the new parameters phased in over four years from January 1, 2021; the UFR lifts the discount rate of the long liabilities above the swap curve, so the hedge in swaps does not match the liabilities’ curve exactly beyond 30 years.
The average contribution system: every participant pays the same percentage and accrues the same percentage of salary whatever the age, so the young pay for more than their accrual costs and the old for less; the new contract ends it, and the compensation for the cohorts that lose by the change is part of every transition plan.
The governance: a sectoral fund has a paritarian or an independent board with the employers’ and the employees’ representatives, an accountability body of the employers, the employees and the retirees, a supervisory board or a visitation committee, and the key functions of IORP II (risk management, actuarial, internal audit) held by named persons reporting to the board and to DNB.

Liabilities and ALM›Wtp Transition

The Transition to the New Contract: the Solidarity Scheme, the Conversion of the Accrued Rights and the Hedge by Cohort

The Wtp transition of a Dutch sectoral fund: the social partners’ choice of the solidarity contribution scheme, the implementation plan with the conversion method and the compensation, the accountability body’s advice, DNB’s and the AFM’s assessments, the communication to the participants, the executor’s new administration, the conversion at the transition date, the investment policy by cohort and the swap overlay restructured.

Worked example, illustrative:the contract the solidarity contribution scheme; a fixed contribution; personal pension assets; a solidarity reservethe conversion the accrued rights converted (invaren); the standard or the value-based ALM method; the compensationthe dates January 1, 2027 for this fund (illustrative); the legal deadline January 1, 2028the governance the transition plan by the social partners; the implementation plan by the board; the accountability body’s advicethe investments a protection portfolio and a return portfolio; the hedge by cohort; the overlay restructuredthe supervision DNB on the plan, the data and the conversion; the AFM on the communication

The transition turns a collective promise into personal assets: the rights are valued once, the surplus is shared by a rule, and the risk is allocated by age from then on. The method, the data and the hedge are where the fund’s choices show.

The two schemes: the solidarity contribution scheme invests the personal pension assets collectively, allocates a protection return (the change in value of each cohort’s expected pension, mostly the interest rate) and an excess return by age, and keeps a solidarity reserve (filled from up to 10% of the excess returns or the contributions) to share the shocks; the flexible scheme lets the participants choose their risk and invests individually, closer to a defined contribution plan with an optional risk-sharing reserve.
The conversion: the Wtp lets the fund convert the accrued rights into the new scheme (invaren) without the individual consent of each participant, under the balanced weighing of interests and with the safeguards (the accountability body’s reinforced advice, DNB’s assessment, the data quality); a fund that does not convert keeps the accrued rights in the old contract and runs two systems, which most funds avoid.
The timing: the Wtp entered into force on July 1, 2023; the first funds converted on January 1, 2025 and a larger group on January 1, 2026; about 30 funds with a third of the sector’s assets had converted by March 31, 2026 (DNB), and the legal deadline for the conversion is January 1, 2028.
The swap market: the conversions shorten the funds’ interest rate hedges because the young cohorts’ protection portfolios hedge less and the long-dated buckets matter less; the expected unwind of the long receiver swaps is the reason the 30 to 50-year euro swap curve steepened ahead of the transition dates and the dealers and the CCPs prepared for the volume around each January 1.

Liabilities and ALM›Strategic Allocation

The ALM Study and the Strategic Allocation: the Risk Preference Survey, the Scenarios, the Hedge and Currency Policies and the Rebalancing

The strategic allocation of a Dutch sectoral fund: the risk preference survey by cohort, the executor’s ALM study on the DNB scenario set with the maximum parameters, the proposal with the hedge and the currency policies, the board’s decision with the accountability body’s advice, the principles and the ABTN filed with DNB, the mandate updated, the rebalancing with futures, swaps and managers, the settlement, the monthly monitoring and the own risk assessment.

Worked example, illustrative:the risk attitude the participants’ risk preference survey by cohort; the bad-weather shortfall each cohort acceptsthe study the DNB uniform scenario set; the maximum parameters; the outcomes by cohortthe allocation 30% developed equity, 10% EM equity, 25% government bonds and swaps, 10% credit, 10% real estate, 10% PE and infrastructure, 5% other, illustrativethe hedges the interest rate hedge by cohort, about 50% overall; the dollar, pound and yen hedged in the bonds and half in the equitythe execution futures first, then the physical moves and the managers; the overlay and the forwards adjustedthe reporting the statement of investment principles and the ABTN to DNB; the own risk assessment; the monthly report

In the new contract the allocation follows the participants’ risk attitude by age instead of a single ratio. The executor builds the study and moves the money; the board decides and stays responsible; DNB sets the scenarios and the caps.

The DNB scenario set: DNB publishes a uniform set of economic scenarios each quarter for the funds’ feasibility tests, the communication of the expected outcomes and, under the Wtp, the measurement of the risk attitude, together with the maximum parameters for the expected returns by asset class; a fund cannot show the participants better outcomes than the caps allow.
The hedge and the currency policies: the interest rate hedge used to be a single ratio of the liabilities’ sensitivity, often dynamic (higher as the funding ratio rose); in the solidarity scheme it becomes the protection portfolio of each cohort, so the overall hedge is the sum of the cohorts’ and falls as the participant base gets younger; the currency hedge covers most of the dollar, pound and yen in the bonds and part of it in the equity, with the forwards rolled monthly through CLS.
The fiduciary model: the fund owns its executor, which advises on the policy, executes it and administers the participants; the board office keeps a small balance sheet management and risk team to set the policy and challenge the executor, the countervailing power DNB expects, and the key function holders of IORP II sit in the fund, not in the executor.
The prudent person rule: IORP II and the Pensions Act require the assets to be invested in the participants’ interest with security, quality, liquidity and profitability, diversified, mostly on regulated markets, with the derivatives used to reduce risk or for efficient portfolio management; the statement of investment principles describes how the fund applies it, the ESG factors included.

Investing›Fiduciary Mandates

The Fund and Its Executor: the Fiduciary Management Agreement, the Mandates, the Managers, the Monitoring and the Costs

The fiduciary model of a Dutch sectoral fund: the fiduciary management agreement with the executor it owns, the board’s investment framework, the mandates by asset class with the ESG built in, the selection of the external managers, the assets at the global custodian, the data flows, the exclusions and the engagement, the monthly report and the fund’s countervailing power, the costs disclosed to the participants, and DNB’s review of the outsourcing.

Worked example, illustrative:the model the executor the fund owns as the single fiduciary manager and administrator; a cost-plus feethe mandates by asset class with guidelines, custom benchmarks, the exclusion list and the tracking error budgetsthe managers about 75% internal at the executor; external specialists for EM, private credit and funds, illustrativethe custody segregated accounts in the fund’s name at the global custodian; T2S, the ICSDs, the sub-custodiansthe costs the costs per participant and the asset management costs by class published; about 0.5% of the assets, illustrativethe oversight the fund’s countervailing power; the key functions; DNB on the outsourcing; the AFM on the executor

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A Dutch fund buys its asset management from a firm it owns, so the questions are about control rather than selection: the board must decide, the office must challenge, and every euro of cost in the chain is reported to the participants.

The executor: the large Dutch sectoral funds outsource the administration and the asset management to an executor (uitvoerder), either a company they own or a commercial provider; the executor is a licensed investment firm and alternative investment fund manager supervised by the AFM and serves the owner fund and sometimes other funds.
Outsourcing under DNB’s rules: the fund remains responsible for what it outsources, keeps the expertise to steer and check it, has the right to audit, plans the exit, and notifies DNB of the material outsourcing; DORA adds the ICT risk management of the outsourcing chain since January 2025.
Cost transparency: the Dutch pension federation’s recommendations, followed by the funds since 2011 and updated since, require the annual report to show the pension administration costs per participant, the asset management costs and the transaction costs by asset class, the performance fees included and the costs inside the funds looked through; the funds compare them with each other each year.
Responsible investment: the mandates carry the exclusion list, the engagement priorities and the climate targets (a reduction of the portfolio’s carbon footprint, the investments in the energy transition), and the fund reports under the SFDR as a financial market participant with the principal adverse impact statement; several large funds sold their fossil fuel producers between 2021 and 2023.

Investing›Interest Rate HedgingInstrument card: Interest Rate Swap

The Swap Overlay: Receiver Swaps by Bucket, the Clearing at Eurex and LCH, the Cash Variation Margin and the Liquidity Waterfall

The interest rate hedge of a Dutch sectoral fund: the hedge ratio by bucket against the liabilities on the DNB curve, the receiver swaps executed with the dealers, the give-up to the clearing brokers and the clearing at Eurex Clearing and LCH under the end of the pension exemption and EMIR 3’s active account, the daily variation margin in cash, the liquidity waterfall through the money funds and the repo, the bilateral swaps under the CSA, the monthly hedge effect and DNB’s liquidity stress tests.

Worked example, illustrative:the hedge a hedge ratio of 60% by bucket, illustrative; Bunds and Dutch State Loans plus EUR 120,000,000,000 of receiver swapsthe trades receive fixed, pay €STR on 20 to 50 years; swaptions; inflation swaps; RFQ on Tradeweb and Bloombergthe clearing Eurex Clearing (the active account) and LCH through the clearing brokers; individually segregated accountsthe margin the variation margin in euro cash daily; the initial margin in bonds; Prisma and PAIRSthe liquidity the cash and money funds, then repo, then bond sales; about EUR 6,000,000,000 called on a 50bp rise, illustrativethe reporting the hedge effect monthly; DNB’s liquidity stress tests; EMIR reporting by the dealer or the broker

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The hedge that protects the funding ratio from the rates turns every rate rise into a cash call the next morning. The fund trades the swaps with dealers, clears them through brokers at two CCPs and keeps the cash ready in a waterfall it tests with DNB.

The pension fund exemption: EMIR exempted the pension schemes from the clearing obligation because they hold bonds rather than cash for the variation margin; the exemption was extended several times and ended in June 2023, so the funds clear their new standard swaps and organized the cash through the money market funds, the repo lines and the sponsored repo models of the CCPs.
EMIR 3 and the active account: the regulation in force since December 2024 requires the EU counterparties above the clearing threshold to hold an active account at an EU CCP and clear a representative share of their euro swaps there from June 2025, so the funds that cleared mostly at LCH in London opened or grew their accounts at Eurex Clearing.
The cash variation margin: a cleared swap’s gains and losses settle in cash each day, while the liabilities it hedges do not move cash; a fund that hedges 60% of a 20-year liability with swaps pays billions in cash when rates rise, and receives it when they fall, so the liquidity buffer, the repo access and the clearing broker’s limits are part of the hedge.
The UFR and the hedge: the liabilities beyond 30 years are discounted on the DNB curve extrapolated toward the UFR, which moves less than the swap rates; a hedge in long swaps therefore over-hedges the funding ratio at the long end, so the funds hedge the buckets beyond 30 years less than their swap sensitivity would suggest.

Investing›Private Markets

Private Markets: the Fund Commitments and the LPA, the Capital Calls, Dutch Housing and Energy, the Co-Investments, the Valuations and the Costs

The private markets of a Dutch sectoral fund: the pacing of the commitments, the selection of the general partners and the limited partnership agreements, the capital calls paid by the custodian and the J-curve, the direct investments in Dutch housing and the energy transition, the co-investments, the quarterly valuations under the IPEV guidelines and the appraisals, the distributions and the secondaries, the costs and the climate targets, the SFDR and the taxonomy reporting.

Worked example, illustrative:the program 20% of the assets: 10% real estate, 10% private equity and infrastructure; EUR 8,000,000,000 of commitments a year, illustrativethe funds a EUR 500,000,000 buyout commitment; the LPA and the side letter; the fee and the carry at scalethe direct mid-rent housing in the Netherlands; offshore wind and solar; co-investments beside the fundsthe cash the capital calls over four to five years; the distributions; the secondaries to rebalancethe valuation the GP statements under IPEV a quarter in arrears; the appraisals; the auditor’s teststhe reporting the costs looked through; the carbon footprint; the SFDR and the taxonomy; DNB on the liquidity

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Private markets are where a pension fund’s horizon pays and where its costs and its lags are largest. The commitments run for a decade, the cash moves on the general partners’ calendar, and the valuations, the fees and the climate data all have to be looked through.

The pacing: a fund that wants 10% in private equity commits more than 10% because the capital is called over years and returned over years; the pacing model projects the calls, the distributions and the NAV by vintage, and a fall in the public markets lifts the private share above its range until the next commitments are slowed or stakes are sold.
The fees: the management fee on the committed and then the invested capital, the carried interest above a hurdle, the fund expenses and the portfolio company fees; the Dutch cost transparency rules require them looked through and reported, so the private markets show as the largest cost line even when they add the most return.
Investing at home: the Dutch funds’ commitments to the mid-rent housing and the energy transition in the Netherlands answer the public debate on the funds’ role in the economy; they are made on market terms within the prudent person rule, through joint ventures and platforms the executor sets up.
The SFDR and the taxonomy: a pension fund is a financial market participant under the SFDR, publishing its sustainability risk policy, the principal adverse impact statement and the product disclosures, and reporting the share of its investments aligned with the EU taxonomy; the private assets supply the data late and in part, the gap the executor fills with estimates it discloses.

Investing›Public MarketsInstrument card: Bond Future

Public Markets: the Executor’s Equity and Credit Teams, the Execution, the Settlement on T2S, the Lending and the Stewardship

The public portfolios of a Dutch sectoral fund run by its executor: the equity and credit teams and the pre-trade checks, the equity orders through the brokers’ algorithms, the bonds by RFQ and in the new issues, the futures and the swaps for the exposure, the settlement on T2S and the ICSDs, the securities lending by the custodian, the votes and the engagement under SRD II and the Dutch stewardship code, the performance and the costs, the supervision of the executor and the fund.

Worked example, illustrative:the portfolios developed equity EUR 150,000,000,000; EM equity EUR 50,000,000,000; credit EUR 50,000,000,000; government bonds EUR 125,000,000,000, illustrativethe execution the EMS and the brokers’ algorithms; RFQ on Tradeweb, MarketAxess and Bloomberg; futures and TRSthe settlement T2S at T+2 (T+1 from October 11, 2027); Euroclear and Clearstream; the sub-custodians; CSDR penaltiesthe lending the custodian as lending agent; the recalls before the votes; SFTRthe stewardship about 5,000 meetings voted; the engagement and the escalation; SRD II and the Dutch stewardship codethe oversight the AFM on the executor; DNB on the fund; the costs and the votes published

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The fund’s public portfolios are run like an asset manager’s, by a manager the fund owns: orders through brokers and platforms, settlement through the European plumbing, lending through the custodian and votes at thousands of meetings, all measured against the costs the fund publishes.

The executor as a MiFID firm: the executor that manages the fund’s assets is an investment firm and an alternative investment fund manager licensed by the AFM, so the best execution, the research rules, the conflicts and the transaction reporting under MiFIR apply to its trading for the fund.
Factor and index strategies: most of the large Dutch funds run their developed equity in-house in index-like or factor-based portfolios with the exclusions and the climate tilts built into custom benchmarks, which keeps the costs low and the voting and engagement in their own hands.
Securities lending: the lending program earns a revenue from the banks and the short sellers that borrow the securities; the fund sets the limits (the share of each holding on loan, the collateral eligible, the borrowers), recalls the shares to vote at the meetings it cares about, and reports the loans under the SFTR through the agent.
Stewardship: SRD II requires the institutional investors to publish an engagement policy and how they voted, and the Dutch stewardship code of Eumedion sets the expectations for the Dutch investors; the large funds vote at thousands of meetings, file or support resolutions, and use the exclusion as the last step of a failed engagement.

Liquidity, Currency and Collateral›Liquidity and CollateralInstrument card: Repo

Liquidity and Collateral for the Derivatives: the Margin Calls, the Buffer and the Waterfall

The cash behind the hedges of a Dutch pension fund: the board’s liquidity policy and the buffer sized to a rate and a currency shock, the variation margin the CCPs call in cash every morning on the cleared swap overlay, the bilateral calls under the CSAs, the waterfall of sources from the cash and the money funds to the repo and the collateral transformation, the payment through T2 by the deadline, the 2022 stress and the UK counterexample, DNB’s expectations and the daily report to the board office.

Worked example, illustrative:the book a swap overlay of EUR 150,000,000,000 of notional cleared at Eurex Clearing and LCH; FX forwards of EUR 120,000,000,000; illustrativethe call about EUR 8,000,000,000 of variation margin for a 50 basis point rise in euro rates, in cash, by the morning deadlinethe sources the cash and the euro money funds, then the bilateral, triparty and cleared repo, then the collateral transformationthe buffer EUR 25,000,000,000 of cash and high-quality bonds sized to a 200 basis point rise and a 15% dollar move over five dayssettlement the variation margin through T2 to the clearing brokers; the initial margin in bonds through T2S and the ICSDs; the CSAs for the bilateraloversight the IORP II risk management; DNB’s liquidity expectations; the daily report to the board office

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A hedge that protects the funding ratio drains cash when it works: the fund pays the margin today for a gain on the liabilities it will never receive in cash. The buffer and the waterfall are what keep a solvent fund from becoming a forced seller.

The end of the exemption: EMIR exempted pension scheme arrangements from the clearing obligation from 2012 because they hold bonds and little cash; the exemption was extended several times and ended on June 18, 2023, so the new standard euro swaps of a Dutch fund clear and margin daily in cash; the old bilateral swaps stay under their CSAs, where a fund could often post bonds.
The waterfall: the policy orders the sources by cost and reliability: the cash and the money funds the same day, the repo with the banks and the cleared repo within the day, the collateral transformation and the bond sales after; each step has its limit, its haircut and its counterparties, and the order changes in a stress when the banks’ balance sheets tighten.
Central bank access: the Eurosystem lends to banks, not to pension funds; the debate after 2022 on a facility for the non-banks in a stress has not produced one, so the funds rely on the repo market, the sponsored and the direct clearing models at the CCPs, and the buffer; EMIR 3 and the CCPs’ work on accepting non-cash variation margin are watched for the same reason.
The executor’s role: the fund owns the policy and the buffer, the executor runs the desk that pays the calls, raises the cash and moves the collateral, under the fiduciary agreement and the outsourcing rules of IORP II; the risk management key function of the fund checks the limits and the stress results independently of the executor.

Liquidity, Currency and Collateral›Currency HedgeInstrument card: FX Forward

The Currency Hedge Program: the Ratios, the Monthly Rolls, CLS and the Cash at the Roll

A Dutch pension fund’s currency hedge: the board’s ratios by currency from the ALM study, the exposures measured with the look-through, the monthly program to the executor’s FX desk, the rolls dealt as FX swaps in competition among the banks, the confirmations, the settlement in CLS through the custodian, the cash paid or received at each roll, the collateral under the CSAs, the EMIR reports and the monthly hedge result in the funding ratio.

Worked example, illustrative:the policy 100% of the dollar, sterling and yen fixed income; 50% of the developed equity and the private markets; emerging currencies unhedged; illustrativethe program EUR 120,000,000,000 of forwards, mostly selling dollars; one and three-month tenors rolled as FX swaps in monthly tranchesexecution RFQ to five or six banks on FXall and 360T; risk transfer for the large tickets; the FX Global Code; TCA against the midsettlement payment versus payment in CLS through the custodian; the euro leg through T2cash and collateral the realized result paid at each roll; daily collateral under the CSAs by agreementreporting the EMIR reports to a trade repository; the monthly hedge result and the carry cost to the board office

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The fund owns dollars and owes euros; the forwards turn the dollars back into euros one month at a time. Each roll settles the past month’s currency move in cash, so the hedge is also a liquidity commitment.

Why hedge, and how much: a euro liability backed by dollar assets carries the dollar’s volatility into the funding ratio; hedging the bonds fully and the equities partly is the common Dutch choice, since the bonds’ currency risk is large relative to their return and the equities’ currency risk partly diversifies; the ALM study sets the ratios against the carry cost and the liquidity the rolls consume.
The carry: hedging dollars into euros costs the interest rate difference between the two currencies, about 1.5% to 2% a year when the dollar rates are well above the euro rates (illustrative); the cost moved with the rate cycle and is one reason some funds lowered their hedge ratios on the equities.
Physically settled forwards and EMIR: the forwards are derivatives for the reporting and the risk mitigation of EMIR; the mandatory variation margin applies to them only between institutions (the banks and the investment firms), so a pension fund exchanges collateral with its banks by agreement in its CSAs, which the banks require to limit their counterparty capital.
The rolls and the fixing: concentrating the rolls on the month-end 4pm fixing exposes a large fund to the fixing’s price; spreading the rolls over the month, dealing by risk transfer and measuring each fill against the mid are the executor’s practice, and the transaction costs are part of the cost disclosure in the annual report.

Liquidity, Currency and Collateral›Contributions and Benefits

The Cash Cycle of the Scheme: Contributions In, Pensions Out, the Net Cash Invested

The monthly cash cycle of a Dutch sectoral pension fund: the employers’ salary data and the contributions invoiced and collected by SEPA, the receipts matched, the pension run for a million retirees with the payroll tax and the health insurance contribution withheld, the pensions paid by SEPA on the same day each month, the payroll tax return, the net cash flow forecast and swept to the investment accounts through T2, and the monthly report on the arrears and the cash.

Worked example, illustrative:the scheme 5,000 employers; 1,000,000 retirees; contributions of about 25% of the pensionable salary, illustrativethe flows EUR 1,500,000,000 of contributions and EUR 1,200,000,000 of net pensions a month, illustrativecollection the employer portal and the invoices; SEPA credit transfers and B2B direct debits; the arrears chasedpayment the monthly pension run; the payroll tax and the health insurance contribution withheld; a pain.001 batch to the payment bankthe net cash EUR 3,000,000,000 a year into the portfolio through T2 and the custodian, the buffer firstreporting the payroll tax return monthly; the annual statement to the retirees; the cash report to the board office

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The portfolio is EUR 500,000,000,000; the monthly cash is a few billion euros each way, collected from employers and paid to retirees through the banks and the tax office. The fund is a payment operation before it is an investor.

The contribution: the board sets the contribution each year on the cost-covering premium under the pension law (the cost of the year’s accrual on the fund’s assumptions, with the loadings for the costs and the solvency), after the social partners’ agreement on the scheme; in the new contract the contribution becomes the fixed starting point and the pension follows from the returns.
The tax on the pensions: the fund withholds the payroll tax and the income-related health insurance contribution as the paying agent, applies the general tax credit if the retiree elects it with this fund, and files the monthly return; the state pension paid separately by the social insurance bank is the first pillar the fund’s pension adds to.
Payments abroad: retirees living in other countries are paid by SEPA in the euro area and through the correspondents elsewhere; the treaty decides where the pension is taxed, the fund applies the exemption from Dutch withholding on the certificate the retiree provides, and the proof of life is collected each year.
The net flow over time: a fund with more contributors than retirees invests its net inflow each month; as the population ages the inflow shrinks and turns into an outflow, and the liquidity planning moves from investing the net cash to selling assets for the pensions; the Dutch sector funds expect that turn within decades rather than years.

Operations and Administration›Pension Administration

Pension Administration: the Records, the UPO, the Register, the Choices at Retirement and the Data for the Transition

The executor’s administration of a Dutch sectoral pension fund: the employers’ monthly data and the participant records with the yearly accrual, the Uniform Pension Overview and the national pension register, the value transfers between the funds, the choices at retirement (the date, the high-low option, the partner’s pension, the partial lump sum planned for 2029), the partner’s pension at death, the data quality program before the conversion to the new contract, the AFM’s communication rules and the cost per participant.

Worked example, illustrative:the population 3,000,000 participants: actives, deferred members and 1,000,000 retirees; 5,000 employers, illustrativethe records the accrual of 1.75% a year above the offset, the partner’s pension, the indexation history; the policy administration systemthe documents the UPO each year, the pension register, the starting letter, the annual statementthe events the value transfers, the retirement choices, the death and the partner’s pension; the 10% lump sum planned for January 1, 2029the transition the data quality program before the conversion; the auditor’s and the actuary’s checks; DNB’s expectationsthe costs about EUR 80 per participant a year, illustrative; the service levels to the board office

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The pension promise lives in the records: a wrong salary in a year of service is a wrong pension for decades. The administration is where the fund meets its participants, and where the transition to the new contract is won or lost.

The UPO and the register: the Uniform Pension Overview is a legal format all the Dutch funds use, so a participant can compare and add up the pensions; the national pension register adds them up for the citizen with the state pension; the new contract changes the UPO to show the personal pension assets and the expected pension in three scenarios.
The partial lump sum: the pension law will let a retiree take up to 10% of the old age pension as a lump sum at retirement; planned first for 2022, then 2023, July 2024, July 2025 and July 2026, it is now legislated for January 1, 2029, since the funds and the administrators asked for the time to inform the participants and to build it beside the transition.
Outsourcing to the executor: the fund outsources the administration to the executor it owns, under the IORP II outsourcing rules: the fund keeps the responsibility, sets the service levels, monitors them and can exit; DNB looks at the fund’s control of the executor rather than at the executor alone, and the executor’s assurance reports (the ISAE 3402 type II) are the evidence.
Data and the transition: the conversion multiplies the cost of a wrong record, since the converted personal pension asset replaces the accrued right; the funds test the data against the employers’ history, correct the errors, document the remaining uncertainty and report it to DNB with the implementation plan before the conversion date.

Operations and Administration›Custody Operations

Custody Operations: the Global Custodian, the Settlement, the Income, the Tax Relief, the Lending and the Votes

The custody of a Dutch pension fund’s assets: the custody agreement with the global custodian, the settlement instructions from the executor, the settlement on T2S, the ICSDs and the subcustodians, the income and the corporate actions, the withholding tax relief at source and the reclaims under the fund’s treaty status, the securities lending program against non-cash collateral, the proxy voting through the chain under SRD II, the daily three-way reconciliation and the custodian’s assurance reports.

Worked example, illustrative:the custody EUR 400,000,000,000 of listed assets with one global custodian; 60 markets through the subcustodians; illustrativesettlement T2S for the euro bonds and the European equities; Euroclear and Clearstream for the Eurobonds; the local agents elsewhereservicing the income, the corporate actions and the elections; the relief at source and the reclaims; FASTER from 2030lending the custodian as the agent lender; non-cash collateral on triparty; the limits and the recall for the votesvoting the meeting notices through the chain under SRD II; the votes cast and published by the stewardship teamcontrol the daily reconciliation of the IBOR, the ABOR and the custodian; the ISAE 3402 report; the yearly review

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The custodian holds the assets, the executor runs them and the fund answers for them. The value lost in custody is quiet: an income paid late, a reclaim never filed, a corporate action missed, a vote not cast.

The treaty status: a Dutch pension fund is exempt from the Dutch corporate tax and qualifies as a resident for the treaties, with the exemption from the US withholding on dividends under the US treaty’s pension fund article and reduced rates elsewhere; the value of the reclaims outstanding at any time is large enough to be tracked as an asset in its own right.
Lending and the votes: lending the shares transfers the vote to the borrower, so the fund recalls the shares before the meetings it cares about and may restrict the lending of the companies it engages with; the lending fees on the large index holdings are small per share and the program earns most on the hard-to-borrow names.
SRD II: the revised Shareholder Rights Directive makes the intermediaries pass the meeting information and the votes along the chain without delay and lets the issuers identify their shareholders; the pension fund as an institutional investor publishes its engagement policy and how it voted.
The three books: the IBOR (what the portfolio holds now, for the managers), the ABOR (the accounting positions and values, for the reporting) and the custodian’s records (what the fund owns in law) must agree every day; the executor runs the first two and reconciles both with the third.

Operations and Administration›Reporting Chain

The Reporting Chain: From the Custodian’s Records to the Funding Ratio, DNB, EIOPA, the ECB and the Annual Report

How a Dutch pension fund reports: the positions, the transactions and the valuations from the custodian and the managers into the executor’s accounting book with the look-through, the technical provisions on DNB’s curve and the monthly funding ratio, the quarterly reports that serve DNB, EIOPA and the ECB at once, the annual statements and the actuarial report, the certifying actuary’s statement, the audit, the annual report by the end of June and DNB’s checks.

Worked example, illustrative:the data the custodian’s records, the managers’ reports, the private funds’ statements a quarter late; the participant recordsthe valuation the ABOR at the month-end with the look-through; the technical provisions on DNB’s curve with the UFRthe monthly figure the funding ratio and the policy funding ratio published on the fund’s sitethe supervisory reports the quarterly templates for DNB, EIOPA and the ECB; the annual statements and the actuarial report within six monthsthe assurance the certifying actuary’s statement; the external audit of the accounts and the DNB statementsthe public the annual report by the end of June with the costs, the returns and the accountability

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The funding ratio the participants read, the statements DNB supervises and the statistics the ECB publishes all come from the same records; the reporting chain is where an error anywhere upstream becomes visible.

One report, three users: the European pension funds report the same data once to their national supervisor, which passes it to EIOPA for its regular information requests on the IORPs and to the ECB for the pension fund statistics under the ECB’s 2018 regulation; the Dutch templates were redesigned around that combined set.
The interest rate term structure: DNB publishes the curve for the liabilities each month, built from the euro swap rates up to the last liquid point and extrapolated to the ultimate forward rate beyond it; the method was revised in four annual steps from 2021, and in the new contract the curve values the transition and the protection portfolios rather than a single liability.
The private assets: their values arrive with a lag, so the month-end funding ratio carries the last known values rolled forward; the annual accounts use the audited year-end statements where available, and the difference between the estimate and the final value is part of the next period’s result.
The costs: the Dutch funds publish the administration cost per participant, the asset management costs as a share of the assets (the management fees, the performance fees, the transaction costs) under the sector’s cost recommendations, among the most complete cost disclosures of any pension system.

Control and Supervision›DNB Supervision

Supervision of the Fund: DNB’s Fit and Proper Tests, the Key Functions, the Own Risk Assessment, DORA and the Recovery Plan

How a Dutch pension fund is supervised: DNB’s fit and proper tests of the board members and the key function holders, the IORP II key functions with their line to DNB, the own risk assessment every three years, DNB’s risk-based supervision with the thematic reviews and the on-site examinations, DORA since January 2025 with the executor as the main ICT provider, the AFM on the communication and the duty of care, and the recovery plan when the funding ratio falls below the required own funds.

Worked example, illustrative:the supervisors DNB for the prudential side (the FTK, IORP II, the Wtp, DORA); the AFM for the conductthe people the fit and proper tests of the board, the supervisory board and the key function holdersthe key functions risk management, internal audit, actuarial; a direct line to DNBthe assessments the own risk assessment every three years and after the transition decision; DNB’s thematic reviews and examinationsDORA since January 17, 2025: the ICT framework, the register of the providers, the incident reports, the testingthe solvency the recovery plan below the required own funds; the cut below the minimum at five year-ends; the transitional relaxations

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The supervisor reads the fund through its people, its functions and its funding ratio; the executor’s work is supervised through the fund that outsourced it. The recovery plan is the point where the supervision becomes the participants’ pensions.

IORP II: the 2016 directive on the institutions for occupational retirement provision, implemented in the Dutch pension law from 2019: the governance (the key functions, the fit and proper requirements, the remuneration policy), the own risk assessment, the outsourcing rules and the information to the members; the prudential rules on the funding stay national (the FTK).
The FTK: the financial assessment framework of the Dutch pension law: the funding ratio on DNB’s term structure, the required own funds from the standard model’s risk factors (the interest rate, the equity, the currency, the credit, the actuarial risks) at a 97.5% one-year confidence, the minimum required own funds, the recovery plan and the rules on the indexation and the cuts; a transitional version applies to the funds converting to the new contract.
DORA for pension funds: the Digital Operational Resilience Act brought the pension funds under the same ICT risk rules as the banks and the insurers from January 17, 2025, with the exemption for the funds of fewer than 15 members and simplified rules below 100 members; for a fund that outsources to an executor, the register of the ICT providers and the contracts’ clauses are the visible changes.
Outsourcing: the fund remains responsible for what it outsources; DNB expects the fund to have the knowledge to steer and to check the executor (the countervailing power), the exit plans, the service level reporting and the right to audit, and examines the fund’s control rather than the executor’s operations alone.

Control and Supervision›Governance

Governance and Accountability: the Social Partners, the Board, the Accountability Body, the Supervisory Board and the Executor

How a Dutch sectoral pension fund is governed: the social partners’ pension agreement and the mandate the board accepts, the board in the governance model of the 2014 law, the decisions prepared by the board office with the key functions’ opinions, the accountability body’s advice and its approval of the conversion to the new contract, the supervisory board, the participants’ voice in the transition, the executor as both a subsidiary and a contractor, and the annual report.

Worked example, illustrative:the mandate the social partners’ pension agreement; the board’s acceptance; the pension regulationsthe board members nominated by the employers, the employees and the retirees, with independent members; tested by DNBthe checks the accountability body’s advice and approval; the supervisory board’s oversight; the key functions’ opinionsthe transition no individual right to object; the accountability body approves the conversion; the risk preference surveysthe executor owned by the fund and contracted by it; the two roles kept apartaccountability the annual report with the accountability body’s opinion and the supervisory board’s report; the reports to the social partners

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The fund belongs to no one: it is a foundation that holds the participants’ pensions under a mandate from the social partners. The governance is the set of bodies that make sure the board uses that mandate for the participants.

The governance models: the 2014 law on strengthening the governance of pension funds let a fund choose a joint board with a supervisory board or a visitation committee, an independent board, or a one-tier board with executive and non-executive members; the large sector funds mostly have a one-tier or a joint board with a supervisory board, and every model has an accountability body or a stakeholder body.
The accountability body: the representatives of the employers, the employees and the retirees advise the board before its main decisions and judge its conduct afterwards in the annual report; the new pension law gave it the approval right on the conversion decision, which made it a decisive body in the transition.
The social partners and the fund: the social partners decide the scheme and the contribution, the fund carries them out; the board can refuse a mandate it cannot carry out, and the transition plan of the social partners and the implementation plan of the fund are the two halves of the conversion.
The executor question: owning the executor gives the fund control of its costs and its people, and creates the double role of shareholder and client; DNB expects the fund to steer and to check the executor as it would an external provider, with the knowledge in its board office to do so.

Control and Supervision›Sustainability

Responsible Investment and the Sustainability Reporting: the Policy, the Engagement, the PAI Statement and the SFDR

A Dutch pension fund’s responsible investment: the participants’ preferences, the board’s policy with the climate targets and the exclusions, the policy carried into the mandates, the engagement and the voting by the executor, the ESG and the climate data, the principal adverse impact indicators and the taxonomy alignment, the SFDR disclosures as an IORP (the PAI statement each June 30, the Article 8 pension scheme), the AFM’s supervision, the stewardship report, and the sector covenant and the CSRD around it.

Worked example, illustrative:the policy the carbon footprint halved by 2030 and net zero by 2050; the exclusions; the engagement themes; illustrativethe mandates the exclusion lists, the carbon budgets, the engagement and the voting instructionsengagement the themes, the escalation through the votes and the resolutions, the exclusion as the last stepthe data the emissions, the 14 mandatory PAI indicators, the taxonomy alignment, the controversiesthe disclosures the SFDR website disclosures; the PAI statement each June 30; the Article 8 scheme; the annual reportthe frame the AFM on the SFDR; the 2018 to 2022 sector covenant; the CSRD feeding the data but not applying to the fund

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A pension fund’s sustainability policy is a board decision about other people’s money, taken in their interest and reported to them; the SFDR made the reporting of it a legal obligation with the same weight as the financial statements.

The SFDR for a pension fund: the IORPs are financial market participants under the Sustainable Finance Disclosure Regulation: the entity disclosures on the site (the sustainability risks, the principal adverse impacts, the remuneration), the product disclosures for the pension scheme (Article 6, 8 or 9) in the pre-contractual information and the annual report; the review of the SFDR announced by the Commission in 2025 may change the categories.
The exclusions of the fossil fuel producers: the largest Dutch funds decided from 2021 to sell their holdings in the oil, gas and coal producers, after years of engagement, and to keep engaging with the users of fossil energy; the decision was the board’s, taken on the climate risk and the participants’ preferences, and is reported each year.
The sector covenant: the 2018 covenant between the pension funds, the government, the unions and the NGOs committed the signatories to the OECD guidelines and the UN Guiding Principles in their investment chains through 2022; the final monitoring found that five funds met all the commitments, and the funds continued on their own policies afterwards.
The CSRD and the fund: the Corporate Sustainability Reporting Directive does not make the pension funds report, since the SFDR already covers them, but the companies’ CSRD reports (as narrowed by the 2025 and 2026 simplification) are the main source of the data the fund’s PAI statement needs.