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Shell pension chief sees three sources of return

IPE.com: Shell pension chief sees three sources of return

“Shell made headlines last week with news it plans to consolidate €50bn of worldwide pension assets in Holland.”

Wednesday 14 Sept 2005

NETHERLANDS – Sijb Bartelma, chief investment officer of Shell Pensioenfonds, has explained why he thinks there are three sources of investment return.

The first is “strategic beta”, derived from exposure to market risk. The second is “strategic alpha” from the deviation from ‘plain vanilla’ asset mixes.

And the third he termed “operational alpha” – from what might be regarded as ‘stock picking’.

There was an unlimited supply of the first, while the third is “scarce” and a “kind of game” he told a meeting organised by the catering scheme Horeca at its new offices near The Hague yesterday.

“Pension funds’ investment strategies should focus on strategic alpha and strategic beta,” he said.

With regard to strategic alpha, Bartelma said there is more ‘reward-for-risk’ available in less explored, less liquid, less accessible markets such as eastern Europe. The lack of liquidity was not a problem “because you don’t need it”.

And he said the regulatory environment should not discourage “entrepreneurial investing” by pension funds. Indeed, it should encourage it. Pension funds are not insurance firms, he argued.

Shell made headlines last week with news it plans to consolidate €50bn of worldwide pension assets in Holland.

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