Pension funds in The Netherlands have kicked off 2026 by switching to a new defined contribution system, swapping the country’s defined benefit system and tying pay-outs to contributions and market returns instead. 

Pension funds with assets accounting for almost a third of the country’s €1.6 trillion ($1.87 trillion)  pension system have made the change. Another $1 trillion is planned to transition next year in time for the January 2028 deadline, in a complex process that has been 10  years in the making and involves navigating regulatory hurdles, IT issues and administrative challenges. 

“The launch of the new scheme is good news for all participants and pensioners. We now have a pension that is more future-proof; can grow more easily in good times, and is still well-protected in bad times,” states Pensioenfonds Zorg en Welzijn (PFZW), the €250 billion Dutch healthcare fund, one of the funds to transfer to the new system. 

Meanwhile, ABP, Europe’s largest pension fund with over €500 billion under management and accounting for around a third of the sector’s total assets under management, says it will transition to the new system in January 2027. 

The reforms will allow Europe’s largest pension funds to buy riskier assets and move away from strategies that have favoured long-term interest-rate hedging and matching assets very closely to liabilities. 

Many Dutch funds have run dynamic asset and liability management strategies where a matching and return portfolio, and an interest-rate hedging strategy, all moved in line with funding ratios. This investment approach, which has been encouraged by strict regulation steering funds to focus on short-term stability and guarantees rather than tilting towards risk-taking and long-term returns, has also thrived in a low-interest-rate world. 

Impact on the bond market

But Europe’s largest pension sector is expected to push into riskier assets and buy less long-dated government bonds just as European governments face record funding needs. 

Government bonds make up a significant portion of Dutch pension funds’ balance sheet. Research from ING Netherlands estimates fixed income accounts for €729 billion of the country’s pension sector; equities account for €439 billion, real estate €154 billion, private equity €95 billion, infrastructure €60 billion and ‘other’ investments €122 billion. 

Many investors welcome the shift from “overdone hedging strategies” that have come at the expense of returns. 

But any push into equities and riskier assets will depend on the risk preference of scheme members. Moreover, only pension funds with young beneficiaries are expected to change their asset mix and beef up their allocation to equities and alternatives and reduce their exposure to fixed income. 

For example, Imke Hollander, senior advisor to the investment committee at PWRI, the €10 billion pension fund for people with disabilities, said the fund is on a de-risking trajectory because it doesn’t have many young participants joining despite it still being an open fund. Moreover, she said the pension fund’s risk appetite is unlikely to extend beyond an existing 50 per cent allocation to equity and real estate anyway. 

In conversation with Top1000funds.com last November, outgoing chief executive officer Ronald Wuijster at APG Asset Management, which manages ABP’s giant portfolio, argued that structural changes are also essential to enable Europe’s pension funds to successfully take more risk in a continent where the capital markets offer thin pickings. 

He listed roadblocks like Europe’s fragmented insolvency legislation, which differs between countries. The absence of a capital markets union also makes it hard for fast-growing companies to access the finance they need to grow and fire up a competitive European economy. European member states’ deeply-held national differences also thwart the prospect of a capital markets union alongside a deep psychology of risk aversion. 

Under the Dutch reforms, pension funds will choose between two different types of DC schemes, either a “solidarity contract” where the fund decides on the investment mix or a “flexible contract” where the member can choose their own investment mix. 

It means the new regulation will trigger a sharp uptick in compulsory communication with beneficiaries, as well as time-consuming board approvals for every change to ensure different stakeholders, including unions and employers, are on board. 

CPP Investments says its internal trials show the power of generative AI has advanced so quickly that traditional workflows across core investment tasks could eventually be eradicated – but only with strict governance and clear operating frameworks. 

The C$777.5 billion ($562 billion) Canadian asset owner ran three head-to-head experiments ranking autonomous agents – which work together like digital workers on complex tasks – against traditional processes:  

  • Accurately reconciling a $522 million portfolio which contained hidden errors. 
  • Conducting performance attribution. 
  • Analysing a forward-looking tariff scenario. 

The strong results suggest that AI can now do more than speed up workflows and processes; it will eventually redefine roles, jobs, and organisations themselves, according to Jon Webster, senior managing director and chief operating officer at CPP Investments. 

“We have 2,100 colleagues who are engaging with the technology practically every day,” Webster tells Top1000funds.com. “As we see the opportunities moving forward, we are well positioned to listen to the team and then say, ‘this is now reaching the point where we could think about applying it in different ways than we have seen before’.” 

A five-gate framework

Webster says the industry is trying to build reliable systems with non-deterministic technology (potentially delivering different outputs from the same inputs), making a nuanced, tailored approach is essential. He advises using a five-gate system which can impose clear discipline and lift results: 

  • Frame: specify the problem and context. 
  • Input: clean and validate the numbers. 
  • Model: develop and/or run an analysis and flag uncertainties. 
  • Validate: cross-check results. 
  • Narrate: it must document every decision. 

“If you are to naively copy off-the-shelf patterns that others are showing you, without engaging very diligently and thoughtfully in your context, with your requirements, with your reliability and consistency needs, that is likely to be the place where mistakes will be made and the results will be disappointing,” he says. 

Process and quality control are crucial 

This governance system and quality control – including verifying sources, normalising identifiers, and tracing every figure – proved crucial in lifting the AI’s performance in the position reconciliation test conducted by CPP. 

It was clear that AI only performed well when the right human inputs, guardrails and oversight were in place. 

While direct prompting caused AI models to disagree and miss critical errors, requiring the AI to rate its confidence in each finding (triggering human review when below a 70 per cent confidence level) meant accuracy was boosted by 45 per cent. Two AI models also cross-checked each other, and humans reviewed uncertain cases.  

The second test – performance and risk attribution – also showed strong results with the right framework. The AI agents performed well given a clear problem, clean data, and explicit methodology. Without such precision, the AI could choose the wrong analytical approach, like using a monthly calculation rather than a daily one. Humans framed the problem and verified the results. 

The third test required AI to model how semiconductor export restrictions would impact a globally diversified portfolio. Without clear human guardrails the AI predicted gains when there should be losses. A more careful combination of AI-human expertise produced a credible prediction of a 1.82 per cent portfolio decline. 

Webster said this tariff scenario was a good example of how AI could help organisations become better investors.  

“I don’t think we will become a better investor by simply doing our existing tariff scenarios better,” Webster says. “But maybe we’re able to run more scenarios, maybe we’re able to look at more edge cases, maybe we’re able to put more inputs into those to think about areas that we couldn’t have thought about before.” 

A redefined future for humans 

CPP Investments is not yet at the point where it will overhaul the structure of the organisation, Webster says, but the value of people in the investment chain will inevitably shift.  

“I think it’s premature to say where value will migrate to. But intuitively, we expect value to migrate into organisational EQ [emotional intelligence]: trusted relationships with others, your standing in the environment,” he says. 

Today, analysts do the research, portfolio managers decide, and risk teams validate. AI is compressing that sequence but may eventually reshape it completely. 

Webster says the future may involve smaller teams organised around outcomes rather than departments with people acting as facilitators (who manage AI workflows), architects (who frame problems), and leaders (who make judgment calls). 

Staff at CPP Investments continue to experiment, using AI tools from several major providers, particularly given the rapid pace of change and lack of existing roadmaps about how to use the technology. 

“Which ones – if indeed we anchor on one in the long term – I think is unclear. They may evolve into different product market fits, and different capabilities may suit different parts of our teams, our investment approach.” 

Large allocators favour established managers in impact investing for their proven track record, but foundations and insurers play a vital role in backing emerging managers and fostering a more mature impact market, according to a new report.  

The study, released today, was jointly conducted by Institutional Limited Partners Association alongside consultancies Tideline and Campbell Lutyens, and includes interviews with more than 40 global LPs. 

Already limited by risk tolerance and minimum mandate sizes, larger institutions tend to be hesitant about working with emerging managers as they require more time and internal resources for due diligence. They may also have to resort to proxies when financial and impact data is not readily available. 

Ben Thornley, managing director of Tideline, which co-authored the report, said that it’s not always fair to expect large institutions to pour money into nascent strategies or managers despite their potential high impact.  

“One of the things that I’ve seen a lot recently in the press is a consternation about impact, in the sense that people want to have their cake and eat it too,” he told Top1000funds.com.  

“My response to that would be that the investors we’re talking about here are not trying to solve the world’s problems. They’re trying to contribute in positive ways and recognise that that may be at a system level, or it may be at the margins, or it may be a focus on a particular part of the market that is itself more mature.” 

The report also found that early-stage funds dominate by number but not by assets under management, indicating the market’s youth. This is where what the Thornley calls “bridging capital” – which includes foundations, insurers, public sector funds and increasingly, high-net-worth individuals – can fill a gap. 

These investors can support earlier stage funds because they have less constrained mandates, until managers develop a track record and mature to a point where they become a viable solution for larger allocators, said Thornley. 

Their presence could also address a thematic imbalance; nearly 25 per cent of the report’s LP respondents exclusively focus on climate in their impact allocation and all respondents have at least some focus on the theme. “We’re seeing in Australia some movement among foundations to consolidate their focus on impact in a way to help build the market,” Thornley said.  

“If we can start to segment a little more and recognise the different roles for different investor types, I think that will enable a more efficient matching of the demand for these kinds of investments with the supply.” 

Some large asset owners have used creative allocation methods access subscale impact fund or strategies. One instance is Temasek’s $500 million commitment to LeapFrog, with the Singaporean sovereign wealth fund set to invest in multiple future funds from the impact private equity firm.  

“It’s a single underwriting effort and diligence effort, but they’re able to deploy much more capital,” Thornley said. 

“That’s a really unique and powerful market-building signal because, of course, it then enabled Leapfrog to have the certainty of that investment as they continue to develop their platforms.” 

Fund of funds structures are another option but a less common one at this stage, Thornley said. 

But there are many other actions large asset owners can take to catalyse the impact’s market institutionalisation, including signalling clear demand to the market.  

For example, Japan’s $1.5 trillion Government Pension Investment Fund (GPIF)’s pivot to impact investing, formalised last May after the government instructed it to consider investing in social and environmental welfare in the domestic society, has sparked more impact integration in managers’ pitch for mandates.  

Dutch pension fund ABP also flagged its goal to invest €30 billion in impact by 2030 with a primary focus on private markets, which Thornley sees as an “activation” to the market. 

“In some sense, it’s clear that for folks who are really talented managers, who have been wanting to do this, can see that there’s a viable path to growing their businesses and ultimately attracting that kind of capital,” he said.  

“They may fund an initiative from a market building organisation, an example of that would be Temasek helping fund the creation of Impact Labs at the Global Impact Investing Network… But it’s certainly not the expectation that every institution can or should be doing that.” 

Other challenges identified by the report include data (with an abundance of information but little uniformity across standards) and infrastructure (a lack of secondaries markets and liquidity) in the impact market.  

Versorgungswerk der Wirtschaftsprüfer (WPV), the industry pension fund for some 17,000 auditors and certified accountants in North Rhine-Westphalia in Germany and one of the country’s largest professional pension institutions, stands out amongst peers for its in-house investment management and the fact that half of its €6 billion ($6.9 billion) portfolio is invested in alternatives.

WPV’s appetite for risk, diversification and efficiency is a direct response to the increasingly challenging climate for Germany’s voluntary, occupational pension schemes which compete for beneficiaries and savings with the country’s mandatory pension insurance system, into which all employees must contribute.

It also underscores the investor’s determination to boost returns and create a sustainable pension fund against the backdrop of demographic changes and declining contributions relative to the number of pensioners in the fund.

“To ensure a sufficient increase in entitlements and pensions in the long term, the return on investment is becoming increasingly important,” Sascha Pinger, managing director at WPV, tells Top1000funds.com in an interview.

WPV established its own regulated advisory and asset management arm in 2023, tasked with in-house management as well as rigorous external alternative fund manager selection and advisory, drilling into managers’ investment processes, risk management systems, and the consistency of their implementation.

“While many pension funds still rely heavily on a traditional ‘buy’ approach when it comes to asset management expertise, WPV has pursued a ‘make’ approach for many years and made an early decision to strategically develop key competencies in-house,” he says.

Having an in-house asset management and advisory business has particularly supported diversification, he continues. WPV can better sidestep concentration risk, protect the overall portfolio against fluctuations and optimise return potential. The internal team also ensure the strategic asset allocation is subject to continuous monitoring and ongoing risk measurement and management.

“For us, it’s not just the formal allocation that’s crucial, but also understanding the underlying risk drivers. We analyse correlations, cash flow profiles, and stress scenarios at the overall portfolio level and ensure that individual components reflect different economic factors. This is how we ensure the portfolio remains stable even in challenging market phases.”

Illiquid investments: real estate focus

Illiquid assets make up around 50 per cent of the total portfolio, comprising real estate, private equity, private debt and infrastructure, where investments include digital and transition infrastructure, and assets benefiting from government support programs. Strategy across alternatives is characterised by diversified investments in indirect vehicles and rigorous manager selection, he says.

“When selecting partners, we pay particular attention to demonstrable track records, local presence, and a strong alignment of interests, for example, through substantial co-investments by the managers.”

Around half of the illiquid allocation (25 per cent of the whole portfolio) is invested in real estate, an allocation that has been battered by working from home and rising interest rates. Higher rates have fundamentally altered valuation methods, hiked financing conditions and hit transaction volumes, he says.

For example, he notices that many projects have become economically unviable. It’s led to a wave of project developer insolvencies, particularly in the office sector, where increased construction costs, falling sales prices, and lower debt-to-equity ratios converge.

“Many ongoing projects have been halted or delayed, and institutional investors must critically review their investments and partnership structures. Financing costs have increased significantly, making many projects economically unviable,” he says.

Alongside deliberately reducing its office sector holdings, WPV is only pursuing value-add strategies “very selectively” and he says real estate investments in the US are also “on hold.”

But Pinger still sees high strategic value in real estate given its long-term stability and inflation protection.  A key to success, he says, is the right management where internal expertise gives an edge. It particularly supports WPV’s direct real estate holdings, enabling the investor to simplify the management of a complex portfolio with diverse assets in a rising regulatory environment.

Strategy is shaped around direct and indirect investments plus active portfolio management targeting development opportunities. The portfolio has a European bias focused on sectors like food-anchored retail properties and residential that give stable cash flows in structurally robust locations.

In another positive, he says the fund is planning to expand its allocation to “established investment markets” in Asia.

In private equity, he notices more exit opportunities for LPs emerging via continuation vehicles which give existing investors a choice to cash out or reinvest in the new vehicle alongside secondary investors.

WPV only “very selectively” invests in private debt. He reflects that the asset class can make a stabilising contribution in certain market phases but at the same time requires rigorous quality and risk assessment.

“Our focus is broad diversification and carefully structured investments,” he says.

In public markets, ongoing themes include steadily building back the fixed income allocation (currently at 33 per cent) in response to higher interest rates.

“In 2022 we began reversing a trend that had been in place since the GFC. Historically low rates led the fund to steadily move away from fixed income into more illiquid assets.”

Higher interest rates have also shifted the team’s emphasis back to duration management, particularly navigating the short-term impact of structural market uncertainties on liquid markets. Things, he explains, like geopolitics, interest rate and inflation volatility, concentration in leading equity indices, and liquidity and spread risk in fixed income.

“We see both opportunities and the need to manage risks from rapid and erratic political decisions that can have a significant short-term impact on liquid markets. In such phases, it is crucial to strategically leverage market disruptions and maintain a clear head.”

Longer-term, the trends he is most focused on include integrating the increasing fragmentation of capital markets, digitalisation, and climate-related risks – a large portion of WPV’s investments meet the EU’s Article 8 standards on sustainability – into the investment process.

“Our goal is to create a robust, transparent, and long-term oriented portfolio that is not dependent on short-term market movements but rather contributes consistently to the overall return of the WPV,” he concludes.

Tim Hodgson, co-founder of WTW’s Thinking Ahead Institute, has left the prolific research network as it seeks closer integration with the broader consultancy.  

He departed after almost three decades of spearheading the research effort at TAI, which was first an internal initiative and then turned into an official offshoot in 2014. It was set up by Hodgson and Roger Urwin as an organisation jointly supported by WTW (then Towers Watson) and paying members. Urwin is also the global head of investment content at WTW and has been with the business for over 30 years. 

A source told Top1000funds.com that future research efforts at TAI will be spread across more of its colleagues at the Nasdaq and NYSE-listed WTW, instead of being conducted by the organisation at arm’s length in the current set-up.  

Head of the TAI and senior director at WTW Marisa Hall rejected the suggestion of any fundamental restructuring and said the move is a result of TAI undertaking more localised projects with asset owners, particularly in the Middle East and North America, which requires it to draw on resources from the broader WTW business. It is understood that there won’t be further departures in the TAI team apart from Hodgson. 

“Effectively, it’s a bit of a hub-and-spoke model where you still have the core Thinking Ahead team, but due to the sheer number of requests that we’re getting… you’ll find that Thinking Ahead is probably just increasing its integration with [WTW] colleagues,” she said.  

“Tim, who we love dearly and still are in contact with, through agreement with the broader business has left WTW as a whole… I think that’s probably a very natural evolution of a relationship with a longtime colleague.” 

Hodgson declined to comment when contacted.  

TAI is one of the earliest proponents of the total portfolio approach (TPA) and has produced application frameworks and TPA case studies among allocators, which helped theorise and promote the complex portfolio construction method. It established TPA as a spectrum and acknowledges that asset owners can have varying degrees of commitment to its philosophy.  

The TPA studies bolster WTW’s investment advisory offering of which the transition from a strategic asset allocation (SAA) method to TPA is a critical part. A 2024 study from TAI found that organisations which adopted TPA added 1.8 per cent alpha per annum over their SAA peers across a 10-year period. 

Hall said TPA has become a “firehose conversation” due to the wide interest from asset owners looking to understand and adopt the approach. She said this is another reason why TAI needs help from its WTW colleagues to fulfil member requests. 

“It’s moved from the work that we’ve done in the total portfolio approach starting 20 years ago… to now we would say that we’re having triple the number of conversations on TPA. Because of that, we’re doing a lot more specialist projects,” she said. 

TAI is a not-for-profit organisation and is more than half funded by WTW, with the rest of its budget coming from membership fees. Hall rejected suggestions of any cost-cutting motives behind TAI’s integration and that members shouldn’t expect any changes in the way they interact with the organisation.  

Members of TAI include 38 asset owners, such as the Abu Dhabi Investment Authority, Australia’s Future Fund, the UK’s Nest and Sweden’s AP7, and 15 asset managers, according to its 2024 integrated report. 

“We’re trying to make more use of the broader resources we have at our disposal based on what clients and members are asking us for,” she said.  

TAI’s other areas of research include sustainability, wealth and governance, as well as asset and organisation-centric papers such as the annual global pension asset study focusing on the biggest pension funds and the global DC peer study outlining different organisation designs.  

TAI currently has a team of nine led by Hall.  

In the latest shift in power from investors to corporate boardrooms under the Trump administration, the ability of US pension funds to use proxy advisors like Institutional Shareholder Services (ISS) and Glass Lewis to advise and vote on corporate decisions on their behalf has come under fresh scrutiny and restriction.

President Trump’s executive order “Protecting American Investors from Foreign-Owned and Politically Motivated Proxy Advisors” ramps up federal scrutiny of proxy advisory firms, and states that returns should be the only priority in advising investors.

Proxy voting is an important tool for investors seeking to influence a company’s governance practices according to their own board-approved governance and sustainability principles. But under the latest edict, investors can no longer wholly rely on the recommendations of their proxy advisors and must do the work themselves in a time-consuming process, particularly for large institutional investors which own shares in many companies and need to vote on thousands of routine matters.

What is the impact?

On one hand, Trump’s executive order may only have a limited impact. The executive order only directs US government agencies to review their existing regulations and guidance pertaining to proxy advisors: it would take months, for example, for the SEC to actually modify its regulations.

“There is little risk of wholesale change before the 2026 proxy season,” argues Peter Kimball, a Washington-based director at Willis Towers Watson.

Still, Kimball warns that February 2025 showed that with respect to engagement and Schedule 13G eligibility, SEC staff guidance can be “changed quickly and without notice,” in a process that “warrants continued monitoring”.

Proxy firms – which have swiftly issued responses on their enduring commitment to continue to operate in the best interests of their clients – are also well down the road when it comes to changing their operations.

From the beginning of 2027, Glass Lewis will move to more customised proxy voting guidelines to better suit clients’ individual priorities rather than a single “house” recommendation. According to a recent webinar on ESG guidelines, it said new thematic voting recommendations will fall into four “perspectives” to reflect the varied viewpoints of its clients.

ISS has also revised its proxy voting guidelines to no longer generally recommend voting for ESG proposals and will instead evaluate these proposals on a case-by-case basis.

Moreover, Kimball notes that virtually all institutional investors have had customised arrangements with their proxy advisors for many years anyway.

Institutions provide the proxy advisor with a set of voting priorities and the proxy advisor delivers not only its benchmark or in-house proxy advisory report, but also a custom report marrying the proxy advisor’s analysis with the institution’s voting priorities, he explains. Alongside custom reports and recommendations, institutions also have their own internal voting teams.

“Even the proxy advisors’ customised recommendations are often not determinants of voting decisions, but rather data points in the institutional investors’ own analysis,” says Kimball.

It’s certainly the case at CalPERS.

Last year, the investment team voted proxies at more than 10,000 shareholder meetings, translating to 95,000 individual votes across 63 countries on issues such as say-on-pay, board independence and diversity using several research providers, including proxy advisory firms ISS and Glass Lewis.

But despite the volume of votes cast, the notion that institutional investors rely solely on proxy firms is misguided. Before casting a vote, the CalPERS internal team do their own research into the companies the pension fund owns in a process that requires “hundreds of hours of work” –  one corporate proxy statement can be 75 to 100 pages long.

And CalPERS often has a different opinion from its advisors, noted CEO Marcie Frost, speaking on the topic at the June 2025 board meeting.

Last year, it voted in alignment with corporate management’s recommendations approximately 74 per cent of the time, while Glass Lewis aligned with management 90 per cent of the time.

“CalPERS doesn’t, nor has it ever, relied solely on these recommendations for our voting decisions. This is a common misconception in the marketplace,” she said.

Other pension funds also show this hands-on approach.  In 2022, the Teacher Retirement System of Texas (TRS) introduced a customised benchmark to give the fund the freedom to vote alongside corporate management on climate policy in accordance with its own views. In 2023, West Virginia Investment Management Board also began its own process of digging into the voting practices of every external manager to analyse votes cast in Virginia’s name; educate trustees and if necessary, vote the proxies itself.

More risk for investors

But the executive order does feed into an ongoing crimping of US investor power.

At the beginning of last year, the SEC changed its long-standing guidance by forcing passive investors to file costly and onerous disclosure forms if they wanted to press companies on ESG issues. The US administration is also exploring ways to curb the voting influence of the big three passive firms BlackRock, Vanguard and State Street, whose index funds typically own 20-30 per cent of most public companies.

Several US states have also advanced or passed laws banning the consideration of ESG factors in investment and proxy-voting decisions. According to a statement from trustees of the five New York City public pension systems, this has led to a growing reluctance to support shareholder proposals, including those focused on long-term risk management.

“Average support for ESG shareholder proposals, (excluding anti-ESG proposals) fell to its lowest level since 2018 despite continued investor awareness of financial risks related to the management of climate and workforce issues,” state the trustees who flag the complexity and cost incurred by investors to undertake their own proxy analysis.

Despite the challenging environment for shareholder engagement, the investor said shareholder proposals continue to serve an important role as an effective catalyst for productive dialogue and positive outcomes, as detailed in the following report.

“Looking ahead, NYCRS remains firmly committed to advancing sustainable and accountable corporate practices through active ownership. The 2025 season highlighted the importance of protecting the integrity of the shareholder proposal process and ensuring that investors can continue to raise material concerns essential to long-term value creation.”