Governance at ABP and APG: The €440 billion challenge

ABP was Europe’s largest pension fund with assets under management of €440 billion. Although ABP was much admired abroad as an industry frontrunner, at home where it managed nearly one-third of Dutch pension wealth, it was facing a “gigantic trust crisis,” according to some experts. While premiums had risen continually, ABP had not raised pensions in line with inflation in any year since 2008. This meant that recipients had lost out by a cumulative 16%, and further declines in real terms could not be ruled out. In 2007 a new Dutch pension law had overhauled fund governance rules, which led ABP to establish APG Group (and APG Asset Management within it) as a way to outsource the administration of its pension scheme. In 2015 DNB, the central bank of the Netherlands, based on an on-site investigation in 2015 described the relationship between ABP and APG Asset Management as a “warm outsourcing relationship.” In order to realize its own ambition to become the “best-in-class” pension fund and to address DNB’s findings, ABP and APG AM embarked on a joint transformation program in 2016, called Program Redesign. The case describes the progress the two companies had made throughout this transformation journey and illustrates key governance challenges in the context of pension funds and how they organize their investment management activities.