Interview Erik-Jan van Bergen

With Erik-Jan van Bergen CIO SNS Asset Management

What did you study and what has your career been like so far?
I studied Business Econometrics with great pleasure in Tilburg from 1986 to 1991, when the university was still called the Catholic University of Brabant. I still encounter the benefits. After my studies I started working for Nationale Nederlanden, at the Securities and Loans department, in The Hague from 1991 to 2004. Here I had a number of different functions over the years, which always had to do with asset management. Then I started working at Citigroup, a major U.S. bank, in London. This was again in the field of asset management. I stayed there for five years. In 2009 I returned with my family to The Netherlands and started in my current position as Director of Investments at SNS REAAL.

What is asset management exactly?

Asset management is the management of money by investing it. If you do not need your money in daily business for a longer period of time, you need to do something with it. Actually, you are going to store it in order to use it later on again. You can put it in a savings account, which is a very simple form of investing. What is more complicated, is investing your money in bonds, equities, hedge funds and the like.

How has your interest in asset management originated?

I have always liked investing a lot.  I still remember those days that I had to cycle ten kilometers to elementary school.  In winter, when I got home from school, I was always reading the newspaper well on the warm radiator and I saw all those stock price numbers. For me, investing is a kind of game in which you can measure yourself relative to others to see who is ending up as the best and the brightest. I have liked this since childhood already.

What does a typical day look like for you?

On a typical day I go out of bed around half past six, and then I always try to make breakfast for my family. I really enjoy this and I find it very important. At half past seven I get on my bike to Den Bosch Central Station, where I catch a train to Utrecht. While travelling by train, I try to read the Financial Times. That is what I particularly like about my job, that you will find at least three things related to asset management on every page. I arrive in Utrecht around half past eight, and then I always try to have one hour of no meetings, so that I can have a look at what is happening exactly in the markets. Thereafter, I am usually in meetings until five o’clock. In these meetings a lot of things are tuned with clients and other people within the company, such that Asset Management is running smoothly. It is usually quiet again around five o’clock, and with a bit of luck I am back home at seven.

What does SNS REAAL Asset Management look like exactly?

We manage three sorts of money. The first is money received from an insurer, for instance when a small entrepreneur insures his pension with an insurance company. This money is taken together, which we call insurance money. Insurance money should serve as pensions in twenty to forty years from now, and in the meantime we have to invest it in a way that the small entrepreneur can enjoy a carefree retirement later on. The second sort of money is received from investment funds. Bank and insurer customers put money in the funds, which is managed by Asset Management. An example is the Nederlandse Aandelenfonds, which only contains equities that are listed on the AEX. We also manage an American equities fund, containing equities listed in the S&P 500. The horizon with which we invest the money from investment funds is long-term, but we have to take into account that it could be short-term as well.

Third, we have got money from pension funds who outsource a part of their asset management to us. Sometimes we manage their complete investment money, sometimes only part of it. In total, SNS manages about 45 billion euros. SNS is in the top ten in The Netherlands, if you consider the size of assets under management.

How do you earn your profits?

We do this by hiring smart people and making structured investments. We believe that ‘behavioral finance’ theories often work very well. Due to the fact that many other investors exhibit herd behavior, we often manage to recognize systematic behavioral patterns and make use of this in a clever way. This allows us to make an extra return. We do not make purely use of science. All in all, investing is partly science and partly discipline, and the interplay herein is very important.
We also find it very important that you know well what you do not know. For example, we also manage U.S. equity portfolios. We choose not to follow the U.S. market from Utrecht, but to outsource this to a U.S. equity manager who is good at his job.

What was the nationalization process of SNS like?

This was a long process. SNS is one of the Dutch system banks. Eventually, it was decided to nationalize. This was a very difficult process, because a bank is not intended to be state-owned. It is therefore the intention to regain our independence quickly.
The root cause of the problem was that we did an acquisition of Property Finance seven years ago, which went the wrong way. For us it is important that the nationalization has not changed anything for our customers.

In the entire industry banks face the same problem: customer trust must be recovered. Trust comes on foot and leaves on horseback. The most important thing we have to do now is be very humble, repair our mistakes and listen very carefully to what can be improved.  It may take several years before we will have gained back customer trust.

How is the problematic Property Finance managed at present?

Property Finance was apart at the end of 2013, and is now run by a separate management team. All shares, however, are still owned by the Dutch State. It was in the interest of Dutch society to solve this serious problem with as little costs as possible. If you looked at how you could solve Property Finance, was that either by selling it for a very low price, so that the state would have to put a large amount of money in SNS to absorb the loss, or by putting it separately to limit losses. By taking time for this, a better solution can be chosen.

How was the nationalization announced at SNS?

The decision to nationalize was definitively taken at February 1. For our employees the news was a big surprise that was mostly received painfully. Our customers, on the other hand, felt it as a relief in general.

How does Asset Management decide on the asset mix?

We determine the strategic asset mix in consultation with our customers. Simply put, you have to deal with the important questions “What risks could you run?” and “What risks do you want to run?” We discuss the goals regarding rate of return the customer wants to achieve, and whether the risks he or she will have to run in order to achieve them are acceptable for the client. If the risks are perceived as too large, we discuss whether it would be wiser to adjust the investment objectives downwards. Here, investment horizon also plays an important role. Pension funds, for example, often have a very long investment horizon, so that they can invest more in illiquid funds with higher returns. A mutual fund where the customer can get his money back after a few weeks should not pursue illiquid investments. In this way you try to tailor the asset mix to the needs and wants of the client.

What is the effect of asset management on the economy?

The primary function of the capital market is to allocate money to different sectors in the economy. This is similar to the function of a bank that brings different people together through the borrowing and lending of money. Asset management is a part of the capital market, and contributes its weight to the greater part. .

In addition, and more specifically, we at SNS Asset Management find it very important to invest in a sustainable way by not investing in producers of weapons, for example, and investing in companies with a decent staff and environmental policy instead. That is how we help creating a sustainable economy and society.

What are the effects of the crisis on asset management? Are people more conservative in investing now?

The sector as a whole always learns from things that go wrong, and also the asset management industry has learned its lesson. For example, there is more emphasis on diversification, but I also think that more people understand that they do not know everything. Through what we have experienced with Property Finance as a company we have become more risk averse. That does not mean that you run no risk at all anymore. Entrepreneurship is about taking risks responsibly and consciously as long as it serves a purpose; taking good care of your customers, offering a nice job to your employees and providing a reasonable return for the risk.

The bonuses of the bankers will be limited to 20 percent of their annual fixed salary. What do you think about this?

In London bonuses could get up to 500 percent of annual fixed salary. I believe that a rule such as the European legislation of 100 percent in relation to the annual fixed salary is better. It is also clear that the UK and U.S. banks have increased the fixed salaries as to not change the total salary and improve the mix of fixed and variable salary. That also means that employees have to take less extreme risks than in the past to get a salary.

For me it is fine to vary a bit between fixed and variable income and give people who performed extremely well a little more money than their colleagues who have performed less well over the year. Bonuses are not holy, but paying no bonus at all is exaggerated. The Netherlands should not always want to be the genius of the class. In view of our competitive position you have to be careful that differences among countries do not grow too big.

This interview is translated from Dutch to English by the Editorial Board of Asset | Accounting & Finance.