Fook Ley Wong - senior Portfolio Manager/Investor board bureau

An interview with Fook Ley Wong, senior Portfolio Manager/Investor at the board bureau of NN CDC Pensioenfonds and ING CDC Pensioenfonds.

What do you do on a regular workday?
My workdays are never the same, although they do always start in the same way. While the Dutch are still waking up, my colleague Michel Braber and I are already checking Bloomberg, the online market data platform that gives us all the information we need on financial markets, shares, bonds and currencies. What are the latest trends? What happened overnight? How did American stock exchanges close and Asian markets open? Then, we pore over the financial newspapers. We check the business news on listed companies. Michel and I discuss the current situation, the consequences, and whether we should modify our portfolios in any way. After that, the day unfolds and we take things as they come. We monitor bonds, do some research, check up on external asset managers, check our tools and write reports and memos. We often join board meetings and once a month we have a meeting with all of the portfolio holders. At that meeting, a board delegation discusses current investment topics, after which we discuss these topics in depth as a group.

Why do pension funds invest their assets?
The CDC pension funds both have an investment policy with a long-term horizon. Part of the eventual pension benefits is paid from contributions, but the largest part is funded with return on investment. Our aim is to safeguard the pension funds’ nominal pension commitments by investing the funds’ assets and, in the long term, creating enough return on investment to allow pension increases. This means we want to be able to indexate pensions to ensure that they retain their purchasing power. With this in mind, we set up two investment portfolios: a matching portfolio and a return portfolio.

Matching and return portfolios
The matching portfolio accounts for approximately 60% of assets invested. We use it to match our investments with the pension funds’ current and future commitments. The return portfolio, accounting for some 40% of assets invested, serves to enable indexation. Indexation means pensions are increased in line with inflation rates to ensure that pensioners retain their purchasing power. The matching portfolio consists of investment grade bonds, which have relatively low risk profiles. For the return portfolio, we aim for higher returns by investing in shares and real estate, which have higher risk profiles.

How do you determine the asset mix?
The asset mix is determined as part of the strategic investment policy, based on Asset Liability Management (ALM) studies. In response to regulatory changes, adjustments by employers (modified contribution levels) and a current status update, there have been three ALM studies since the incorporation of NN and ING CDC Pensioenfonds. The consequences of all changes are calculated. The results of these calculations don’t necessarily lead to modification of the asset mix, but we do want to be able to substantiate our plans and keep them up to date. The pension fund’s board determines the investment plan every year. It provides Michel and myself with a framework within which we do our work.

How much of the work do you do yourselves, and how much do you outsource?
A large part of the assets is managed in-house, particularly in the matching portfolio. We manage our return portfolio mostly by way of index tracking in developed and emerging markets and listed real estate. We do a lot of the asset management ourselves, amongst others because it's cheaper and easier to control. It also ensures that we stay in touch with the markets, which helps us assess the performance of our external asset managers. So, we outsource only a small part of our asset management. The pension fund’s board is pragmatic and wants the organisation to be lean and mean. If external asset managers are cheaper or if they have more expertise, we farm the work out to them.

What is your main challenge?
We are a growing pension fund with increasing assets. If we can continue to meet our future commitments, we might add new asset classes to our return portfolio in the future. The main challenge is making the right decisions at the right time. My ambition is to compile well-balanced portfolios, with good return on investment at an acceptable level of risk, which can grow with the pension funds.

Can you explain the difference between private and collective investments?
The main advantage of the collective investments of a CDC pension fund is scale. Risks are shared and easier to spread. As a private investor, you don't have access to all asset classes and it’s harder to spread your investments. While you might be able to make the same return on your investments, the costs and risks incurred by private investors are higher.

Are your investments socially responsible?
First of all, we comply with legal exclusion lists. And we work in a very pragmatic way. We always strike a balance between socially responsible investments on the one hand and costs, risks and return on the other. We expect that socially engaged companies which have consideration for our planet and its people are valued and rewarded for their efforts. We’ve adopted a sustainability policy which excludes companies, funds or countries that do not meet our minimum requirements. Investing in sustainable funds or companies is not a goal in itself.

Do you enjoy doing your work?
I’ve been working for pension funds for twenty years already, initially at MN Services, where I learned the ins and outs of the profession. Two and a half years ago, I joined the CDC pension funds. The organisation is relatively small, so you can keep a close eye on what is happening within the pension funds and in the markets. You can see how they interact and you can take a broad as well as an in-depth approach. I have a Master's degree in Economics, and while I was a student I was already investing. My hobby became my work.

How would you characterize yourself?
I’m a pragmatic and down-to-earth type of person. You have to be able to view markets objectively. To see the truth behind promising stories, fantastic ideas and golden opportunities. Making critical analyses and assessments is my main strength. We want to be accountable and create trust in what we do, all in the best interests of the pension funds' participants. By being transparent and providing (mostly online) publications and quarterly reports. The pension funds’ participants are my colleagues, and they can always contact me directly if they have any questions. I love my job and I'm always happy to talk about it!