“Balancing Profit and Values: Dela’s Responsible Investment Philosophy,” interview with Frank Eizinga – CIO at Dela

Dela -the funeral insurer and provider- has a unique approach when it comes to investing. Rather than making purely profit-driven decisions, Dela focuses on creating value for its members and making sustainable, responsible choices. In this interview, Frank Eizinga, Chief Investment Officer, shares his insights on how Dela’s social mission influences its investment strategy. From choosing asset managers to finding the balance between return and sustainability, and everything in between, all driven by curiosity. The result is an engaging look at how investing is not just about numbers, but also about values and long-term vision.

“From mechanical engineering to investing: an unexpected path”

Frank Eizinga explains that his professional career began in a different direction than where he eventually ended up. “I studied mechanical engineering, actually something completely different,” he begins. “But during my studies I began to become more and more interested in statistics and in the financial markets. Options attracted me tremendously; I started reading books myself, started trading, and at some point thought: this is something I want to know more about after all. A detour via a CFA, and now here we are.”

This interest in options, a relatively unknown field at the time, led him into the world of investing. He started as a market maker. “That was a huge step, but one that felt right, because I was challenging myself in something I really found interesting.” Frank later worked at Simon Cohen and Petercam, where he worked in asset management, primarily for high net worth individuals, and learned to handle long-term investments in larger portfolios.

He eventually found his niche at Dela in 2011. “I started here as a portfolio manager, responsible for equity and bond mandates. Since 2014, I have had responsibility for the entire portfolio. The great thing about Dela is that it’s not just about making money; we have a social mission.” This social slant of the company immediately appealed to him. Dela’s origins go back to the 1930s, when a group of people from Eindhoven raised money to make dignified funerals possible for people who couldn’t afford them themselves. “That culture has persisted. We are a cooperative, not a listed company, and profits flow back to our members, not to external shareholders. That gives a different feel to the work we do.”

“At Dela, it’s not just about returns.”

What really makes Dela different, he says, is its mission-driven approach. “At Dela it’s not about as much profit for shareholders as possible. The people who have taken out insurance with us are the owners of the company because it’s a cooperative. We work for them, and that brings a different responsibility.” He explains that profits from investments flow directly back to the policy value of members. “The more returns we make, the lower the premiums can ultimately be for our members. That’s our goal.”

Frank emphasizes that this unique model affects the culture within Dela. “Dela employs some 2,500 people, most of whom work in funeral homes and crematoria. We are a small asset management division within a large company that is primarily focused on social impact. This sometimes makes us feel like the odd man out. Our team of ten people -a small group- is more results-driven, though. It has to be: a portfolio of 9 billion means almost a billion the man to be invested.” The fact that Dela is not dependent on outside investors also gives them a certain freedom. “It’s not a listed company, and that gives peace of mind. We can make choices that may not yield immediate returns in the short term, but that contribute to the long-term goals of the company and our members.”

Top-down: 80% of returns are generated from allocation decisions

Dela uses a structured for their investments, following clear guidelines and processes. “Our investment choices always start top-down,” Frank explains. “First you have the allocation; that’s where we determine how much we invest in the main categories like stocks and bonds. The second level goes deeper into that: within those categories, within which regions do we invest, and in which sectors? An example: do we invest in retail, residential or some other sector?” Frank continues: “The last level is the selection itself; what property or stock do we invest in? That last step, that’s very laborious. Because Dela invests globally, much of the selection is outsourced to specialized parties.”

“I can’t be versed in everything myself; that would mean I would need a team of hundreds of people. So we focus on the big picture and outsource the detail selection. Eighty percent of the risk return flows from the allocation decisions.” That other 20 percent is essentially stock picking, and Dela outsources to outside parties who can put a team of specialists on it.

“Our approach to selecting asset managers”

Choosing asset managers -who then pick the individual investments- follows a detailed process. Dela follows a strictly structured investment methodology defined according to the “eight Ps”. Frank begins his story laughing: “It used to be five Ps, but now there are eight. Those eight criteria guide Dela’s portfolio selection and management.”

Parent: “You start with the company itself, the ‘parent.’ What kind of company is it, and what is the culture like? Some companies we exclude right away because their culture doesn’t fit ours.”

Philosophy: “The philosophy has to fit our way of thinking about investing. If in a particular market we believe in a fundamentally bottom-up approach, then a manager who only uses a top-down macro strategy does not fit with us.”

Process: “The process itself is also important. How does the process work in practice? Sometimes a party claims to have a bottom-up approach, but in the end it turns out that they mainly work top-down.”

Portfolio: The next step is to analyze the portfolio. “This is the hard evidence. Sometimes a party says they have a concentrated portfolio, but it turns out they actually have 1,000 names in their portfolio. That’s a red-flag.”

Performance: “We also look at performance, of course, but we pay particular attention to consistency. You can have nice average numbers, but the performance has to fit the process and strategy a party is using. We look very deeply and try to verify the results. A kind of mosaic: does what is reported match the final results. If I can’t verify or retrace the results, I don’t believe it.” Underlying is transparency: “If we don’t have the data to verify it in the first place, then that party is out.”

People: The importance of the team cannot be overemphasized. “It’s ultimately about the people doing the work. Sometimes you see strong teams break up, or important people leave. A track record is tied to a group of individuals. If more than one person leaves, the track record is no longer valid.”

Price: “The price of the service is also a factor, of course. However, it is true that first all the other components have to be right; only then do we see if the price is realistic.” When asked if that initial price is realistic, we get a clear answer: “No, it is often astronomically high. If that first opening fee is really too high then that’s already a red flag, often we don’t go through to the next round with that lot by then. But usually the rates do move quickly in the right direction. We have a pretty good idea of what we should be paying for asset management services. And in the end, it is also our duty to keep our costs as low as possible. The lower the costs, the better the outcome for our members.”

Planet: Finally, sustainability plays a role, which fits with Dela’s long-term vision. “We want to see that a party cares about sustainability and thinks about the long-term impact of their decisions themselves. We have an investment horizon of 42 years. So the long-term sustainability of the portfolio plays a big role. It is one of Dela’s core values.”

“The challenge of ESG: Balancing returns and sustainability”

Dela takes sustainability seriously in its investment policy, but that also brings challenges. Frank explains that it is important to strike a balance between sustainability goals and achieving returns for members. “We invest for the long term and include sustainability, because we not only want to ensure a dignified funeral, but also stay in a livable world.” Still, he indicates that sustainability is sometimes difficult to reconcile with profitability, especially in the short term. “We are still living in a fossil economy today. If you exclude too quickly everything that is not yet sustainable, you miss returns.” Frank points to rising oil prices in 2022, a situation where renewable energy companies were struggling and fossil fuel companies were doing very well. “We want to get rid of fossil energy eventually, of course, but that can’t happen overnight.” Frank adds: “If you are too strict in excluding certain sectors, you miss out on returns. Moreover, the risk factors become different. The more you exclude, the smaller the pond you can fish in. Our portfolio has to maintain some diversification, otherwise the risk becomes too high.” He describes the choice as a tension between making an impact and meeting financial goals. “Of course sustainable investing is important, but you also have to remain realistic. Our members expect an affordable funeral and therewith a good return, but we also want to contribute to a better world for the next generation.”

Engagement versus exclusion: “Together you get further”

Engagement and exclusion are two different approaches investors use when integrating Environmental, Social, and Governance (ESG) criteria into their investment decisions: engagement involves investors actively engaging with companies to drive sustainable change, while exclusion simply excludes companies that do not meet certain ESG standards from the portfolio.

Dela has excluded many companies and countries but also often chooses not to simply divest, but to continue to invest with engagement in mind. “Of course, you can say, ‘We’re selling our shares in sectors that don’t meet our sustainability criteria.’ But then again, if I sell my shares, someone else will just buy them again. The world doesn’t change from that. So engagement is often a better option for us. By remaining a shareholder, we can exert influence. A combination of voting, engagement and exclusion offers the most impact.” Frank continues: “With a team of ten, we don’t have the time to engage with every company. We worked with Columbia Threadneedle to create our voting policy. Columbia Threadneedle votes in accordance with this policy at shareholder meetings, and in this way we try to encourage companies to improve their sustainability policies. Our strengths, joined with those of Columbia Threadneedle, really take us forward.”

“Gambling? Not at Dela”

We ask Frank about asset allocation, which refers to the distribution of investments across different asset classes, such as stocks, bonds and real estate, Infrastructure, Agriculture and Forestry, to optimize risk and return in a portfolio. Frank explains, “At Dela, we have ten percent in government bonds. That’s relatively little compared to other insurers.” Frank adds: “Private equity is a catch-all term. The focus on real assets, is actually also private equity. Sounds perhaps a little less exciting, but it is very interesting.”

Speculative investments such as crypto currencies and venture capital are not in Dela’s portfolio. “We don’t do gambling,” he says firmly. For example, he does not see crypto as an investment, but as speculation. “Crypto is not an investment for us, you could see it as a foreign currency. It has no underlying value and creates no cash flows. A dollar or a euro is vulnerable, but there is still a government behind it that can levy taxes. With crypto, you only have an arrangement between people, and little to save that. That’s just too risky for us.” He adds, “I’m not saying crypto can’t have value in specific situations, such as in countries where the local currency is unreliable. If there is no trust in a currency, alternatives are sought. But for Dela, with our long-term vision and our social purpose, this just doesn’t fit the policy. We want stability and sustainability, not speculation.”

And what about gold? “Gold can add something as diversification, but it costs money to get out of the ground, and storing it isn’t free either. But cash flows? No, it doesn’t provide that.”

Frank also talks briefly about the use of AI. “I personally see AI as an opportunity for example in organizing data. Reading a pdf, that can be useful. But we are still working on really in-depth analyses. You do see that asset managers are already working on this. In practice, however, it is often more complicated than the theory.”

“It’s right that the wild-west stories are a bit more tied up now”

Frank says with a laugh, “Years ago we had wild parties. Parties on a boat, sometimes with a celebrity chef in attendance. Like in those Wall Street movies, but less intense. In movies, there’s a kick to it anyway. But the whole industry is much more subdued now, excesses really can’t happen anymore.” Stories are often over the top, the same says Frank regarding investments: “Losing nothing is also often worth a lot, especially in a crisis. You have to be afraid when everyone gets excited, like before the 2008 crisis. During a crisis, everyone is scared, often it shoots too far. When everyone is scared, it’s time to come back slowly.”

“Sometimes you can save quite a bit by just not investing in anything. Take a government bond, they are not always safe either, although people often think they are. By investing as little as possible in them in the crisis of 2022, we played it safe. After years you do indeed get money back, but what if by then there has been high inflation? Then you have lost the value. ”

“Balance in a team is key”

Earlier, it hinted that the role of the people on the investment team is important. “You want to have a certain ratio within a team. A combination of the risk-takers and people who are more likely to play it safe. Then informed decisions are made. If you have too many risk-takers, then decisions are made that are often too dominant. Conversely, decisions are not made at all.”

“The importance of curiosity and thoroughness”

Frank emphasizes that curiosity is an important trait in the investment world, especially when it comes to making responsible choices. “You should always stay curious. Do your homework and ask questions. It’s important to always want to continue learning and not be too quickly satisfied with what you know.” According to him, it is essential to do in-depth research instead of relying on superficial knowledge. Frank takes the view, “If you are really interested, it will come easier to you. That’s the real lesson.”

This principle is reflected in his approach to the 2008 financial crisis, when he saw the U.S. mortgage market explode. “In 2007, I saw mortgages being given to people with no income or assets – it was absurd. That’s when I started reducing my positions, because I didn’t want to be stuck in something I couldn’t account for.” He emphasizes that as an investor, sometimes you have to have the courage to say: ‘I don’t understand it, so I won’t do it.’ “Not understanding is not a shame. Doing something without understanding it is a shame, though.” A valuable lesson.

His final advice: “Investing is ultimately about returns, and about making the right decisions. Sometimes the best decision is not to do something. And if you don’t trust or understand something, stay away from it.” With a smile, he concludes, “Your work is a big part of your time, so it has to be something you stand behind and that gives you satisfaction. Basically, you have to like it, and be curious to learn how things really are.”