Netherlands
31 Oct 2018
As the Netherlands holds its own among many financial hubs within Europe, Amsterdam is a leading location for trading venues and, most of all, remains an enviable pension fund stronghold
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“Even though Amsterdam is not as large or recognised as its neighbours Frankfurt or Paris, it remains an important hub for international asset managers and the country’s large pension fund industry,” that’s according to Jeremy Albrecht, head of global client coverage at RBC Investor and Treasury Services, Luxembourg.
He adds: “The country encourages entrepreneurship; it is a mature market with a qualified and skilled workforce able to speak many languages.” But though the Netherlands used to be a strong pillar for asset servicing in Europe, it is the opinion of some, that it has lost a little of this power, as Roel van de Wiel, head of coverage, sales and relationship management, for the Netherlands and Nordic region at Societe Generale Securities Services, states.
He says: “Contrary to many other European countries, large Dutch banks do not provide asset services on a large scale anymore. Dutch institutional investors therefore only have a limited choice of providers they can choose from.”
But having said that, he adds: “The market environment is fierce in terms of competition, but as investor protection has been put to the forefront of the industry through new European regulations, there is no doubt that European institutional investors will appreciate the strong capital protection European asset servicing providers have to offer.”
But, Marvin Vervaart, asset owner segment head at BNY Mellon for Europe, Middle East (EMEA), says there is currently still plenty of room for asset management/servicing opportunities in the Netherlands.
He says: “The Netherlands is very important for asset services, taking into account the huge and still growing assets under management.” But he adds that it doesn’t stop there.
“The Dutch market is often the starting point of new initiatives, for example on the introduction of derivatives 360 services a decade ago, to the recent adoption of environmental, social and governance (ESG) principles in investment processes.”
Another important topic for Netherlands asset management and servicing, is the total expense ratio (TER).
As van de Wiel, discusses: “When it comes to TER and costs for safekeeping and depositary services, institutional investors are increasingly understanding that it’s not necessarily the lowest cost per processed transaction that determines the ‘value for money’ they pay to their asset servicing providers. The true ‘value for money’ for safekeeping and depositary services comes from the level of protection you receive for the fee paid with the ultimate line of defence being the provided capital protection.”
Choosing Amsterdam
Though the competition may be high, as van de Wiel previously mentions, a number of banks have still risen above the competition in the capital of Amsterdam.
Recently, Euronext partnered with ICE Clear Netherlands for access to clearing services for its financial derivatives and commodities markets, with its clearing operations run from Amsterdam.
Evidence of further successes lay in a recent market valuation of Amsterdam-based, Adyen NV, a technology company offering payment processing services worldwide.
Its market valuation has soared since it began trading on Euronext Amsterdam in June 2018. On 20 June this year it was trading at €415.10, giving it a market capitalisation in excess of €12.2 billion.
Pensions and fund services
But there is no question that the Netherlands biggest strength lies within its pension fund industry.
As Vervaart says: “The Netherlands still has one of the best pension regimes worldwide which requires a profound service model with a local approach leveraging global capabilities. They tend to focus on the core of managing their assets and matching liabilities in the case of pension funds.”
And, as Punit Satsangi, managing director and head of Europe, the Middle East and Africa, business development at SS&C Technologies, indicates: “This [pension funds] leadership has, in part, been led by the phenomenal rate of pension fund consolidation in the market.”
Satsangi affirms since the end of 2005, the total number of pension funds has dropped from 800 to 365, and this trend is not showing any sign of slowing, he says. And reports of this number reducing to 100 are regularly reported in the Dutch press, he adds.
Satsangi states this consolidation “has enabled Dutch pension funds to significantly reduce their asset management costs and internal costs for running combined pension funds”. As a result, investing in alternatives is an increasingly popular trend as the search for higher yield investments continues.
Satsangi suggests: “Asset managers in the Dutch market, need to partner with asset servicers that have embraced new technologies which can improve efficiencies, oversight and costs. Early adopters will be able to stay ahead of the competition and continue to provide low-cost products to their pension fund client base.”
Technology
As well as having an enviable pensions industry, right now in the Netherlands, there is a national conscience for environmental, social and governance (ESG) initiatives which spans beyond the boardroom and fintech startups. But in asset management specifically, this is underpinned by a focus on automation and the streamlining of operations to save energy but also to create efficiencies, improve compliance and make cost savings.
Commenting on how this trend is set to continue for the future, Vervaart says: “New technology will continue to shape the agenda, including application programming interface, machine learning and robotics. Fintechs will add value through specialised services and we are likely to see a greater use of regtech to support compliance and risk management.”
He adds: “Asset managers that embrace robotic process automation and artificial intelligence will have a competitive advantage and make themselves attractive to investors.”
Satsangi says within the asset servicing industry specifically, disruptive technologies such as cognitive systems artificial intelligence (AI) and blockchain, “provides asset servicers with enormous potential to create efficiencies, improve the quality of service to their clients, reduce risk and ultimately create cost savings. Furthermore, these technologies will help the asset servicing industry to replace outdated, poorly integrated systems and multiple technology platforms”, he affirms.
A little thing called Brexit
Quite pessimistically, professional services firm PwC recently said disruptions to the level of market access in financial services as a result of Brexit will leave “no ‘winners’”.
PwC’s report, released in March 2018, focused on the impact of the loss of mutual market access in financial services across the EU27 and the UK. It predicted disruptions would be “economically costly” to the UK and remaining EU members, including the Netherlands, incorporating “both gains and losses” economically across Europe.
As Satsangi, states: “There is a risk that the negotiations between the EU27 and the UK could lead to international capital market fragmentation and financial instability, to the disadvantage of both sides.”
PwC’s report further showed that while Frankfurt has emerged as the likely recipient of the largest amount of relocated activity (particularly from US and Japanese banks), a number of other cities have also been predicted to benefit, this included Amsterdam. Furthermore, a later study conducted by Liquidnet, found respondents predicted Frankfurt to emerge as the European beneficiary of Brexit, but interestingly, Amsterdam was predicted to be the main location for trading venues.
But for now, as van de Wiel, states: “Amsterdam, in general, has made its preparations to deal with the challenges and opportunities Brexit may bring.”
But reassuringly, where business across Europe is concerned, Satsangi reassures that SS&C, in particular, “[continues] to review the political landscape as it develops to ensure that we are in a position to help our UK clients that need to promote their products in the EU or, EU-based clients that need to promote their products in the UK”.
He adds: “By supporting our clients in key EU jurisdictions—Dublin, Luxembourg, Netherlands and parts of Scandinavia—we have ensured that our clients are covered in a future environment where the UK is no longer part of the EU.”
He adds: “The country encourages entrepreneurship; it is a mature market with a qualified and skilled workforce able to speak many languages.” But though the Netherlands used to be a strong pillar for asset servicing in Europe, it is the opinion of some, that it has lost a little of this power, as Roel van de Wiel, head of coverage, sales and relationship management, for the Netherlands and Nordic region at Societe Generale Securities Services, states.
He says: “Contrary to many other European countries, large Dutch banks do not provide asset services on a large scale anymore. Dutch institutional investors therefore only have a limited choice of providers they can choose from.”
But having said that, he adds: “The market environment is fierce in terms of competition, but as investor protection has been put to the forefront of the industry through new European regulations, there is no doubt that European institutional investors will appreciate the strong capital protection European asset servicing providers have to offer.”
But, Marvin Vervaart, asset owner segment head at BNY Mellon for Europe, Middle East (EMEA), says there is currently still plenty of room for asset management/servicing opportunities in the Netherlands.
He says: “The Netherlands is very important for asset services, taking into account the huge and still growing assets under management.” But he adds that it doesn’t stop there.
“The Dutch market is often the starting point of new initiatives, for example on the introduction of derivatives 360 services a decade ago, to the recent adoption of environmental, social and governance (ESG) principles in investment processes.”
Another important topic for Netherlands asset management and servicing, is the total expense ratio (TER).
As van de Wiel, discusses: “When it comes to TER and costs for safekeeping and depositary services, institutional investors are increasingly understanding that it’s not necessarily the lowest cost per processed transaction that determines the ‘value for money’ they pay to their asset servicing providers. The true ‘value for money’ for safekeeping and depositary services comes from the level of protection you receive for the fee paid with the ultimate line of defence being the provided capital protection.”
Choosing Amsterdam
Though the competition may be high, as van de Wiel previously mentions, a number of banks have still risen above the competition in the capital of Amsterdam.
Recently, Euronext partnered with ICE Clear Netherlands for access to clearing services for its financial derivatives and commodities markets, with its clearing operations run from Amsterdam.
Evidence of further successes lay in a recent market valuation of Amsterdam-based, Adyen NV, a technology company offering payment processing services worldwide.
Its market valuation has soared since it began trading on Euronext Amsterdam in June 2018. On 20 June this year it was trading at €415.10, giving it a market capitalisation in excess of €12.2 billion.
Pensions and fund services
But there is no question that the Netherlands biggest strength lies within its pension fund industry.
As Vervaart says: “The Netherlands still has one of the best pension regimes worldwide which requires a profound service model with a local approach leveraging global capabilities. They tend to focus on the core of managing their assets and matching liabilities in the case of pension funds.”
And, as Punit Satsangi, managing director and head of Europe, the Middle East and Africa, business development at SS&C Technologies, indicates: “This [pension funds] leadership has, in part, been led by the phenomenal rate of pension fund consolidation in the market.”
Satsangi affirms since the end of 2005, the total number of pension funds has dropped from 800 to 365, and this trend is not showing any sign of slowing, he says. And reports of this number reducing to 100 are regularly reported in the Dutch press, he adds.
Satsangi states this consolidation “has enabled Dutch pension funds to significantly reduce their asset management costs and internal costs for running combined pension funds”. As a result, investing in alternatives is an increasingly popular trend as the search for higher yield investments continues.
Satsangi suggests: “Asset managers in the Dutch market, need to partner with asset servicers that have embraced new technologies which can improve efficiencies, oversight and costs. Early adopters will be able to stay ahead of the competition and continue to provide low-cost products to their pension fund client base.”
Technology
As well as having an enviable pensions industry, right now in the Netherlands, there is a national conscience for environmental, social and governance (ESG) initiatives which spans beyond the boardroom and fintech startups. But in asset management specifically, this is underpinned by a focus on automation and the streamlining of operations to save energy but also to create efficiencies, improve compliance and make cost savings.
Commenting on how this trend is set to continue for the future, Vervaart says: “New technology will continue to shape the agenda, including application programming interface, machine learning and robotics. Fintechs will add value through specialised services and we are likely to see a greater use of regtech to support compliance and risk management.”
He adds: “Asset managers that embrace robotic process automation and artificial intelligence will have a competitive advantage and make themselves attractive to investors.”
Satsangi says within the asset servicing industry specifically, disruptive technologies such as cognitive systems artificial intelligence (AI) and blockchain, “provides asset servicers with enormous potential to create efficiencies, improve the quality of service to their clients, reduce risk and ultimately create cost savings. Furthermore, these technologies will help the asset servicing industry to replace outdated, poorly integrated systems and multiple technology platforms”, he affirms.
A little thing called Brexit
Quite pessimistically, professional services firm PwC recently said disruptions to the level of market access in financial services as a result of Brexit will leave “no ‘winners’”.
PwC’s report, released in March 2018, focused on the impact of the loss of mutual market access in financial services across the EU27 and the UK. It predicted disruptions would be “economically costly” to the UK and remaining EU members, including the Netherlands, incorporating “both gains and losses” economically across Europe.
As Satsangi, states: “There is a risk that the negotiations between the EU27 and the UK could lead to international capital market fragmentation and financial instability, to the disadvantage of both sides.”
PwC’s report further showed that while Frankfurt has emerged as the likely recipient of the largest amount of relocated activity (particularly from US and Japanese banks), a number of other cities have also been predicted to benefit, this included Amsterdam. Furthermore, a later study conducted by Liquidnet, found respondents predicted Frankfurt to emerge as the European beneficiary of Brexit, but interestingly, Amsterdam was predicted to be the main location for trading venues.
But for now, as van de Wiel, states: “Amsterdam, in general, has made its preparations to deal with the challenges and opportunities Brexit may bring.”
But reassuringly, where business across Europe is concerned, Satsangi reassures that SS&C, in particular, “[continues] to review the political landscape as it develops to ensure that we are in a position to help our UK clients that need to promote their products in the EU or, EU-based clients that need to promote their products in the UK”.
He adds: “By supporting our clients in key EU jurisdictions—Dublin, Luxembourg, Netherlands and parts of Scandinavia—we have ensured that our clients are covered in a future environment where the UK is no longer part of the EU.”
NO FEE, NO RISK
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