NETHERLANDS - Pension fund HORECA has awarded a mandate to Northern Trust for the passive management of a €200m listed real estate portfolio.

Wouter Jan Naborn, head of investment at the €4.3bn Dutch scheme for hotel and catering workers, said Northern Trust had been selected because of its "innovative approach in a risk-controlled environment".

He added: "If you choose passive management, you want to keep tracking error low, and you don't want to be surprised either on the downside or the upside."

Naborn told IP Real Estate the scheme would maintain its preference for passive management despite a limited pool of potential managers.

"There's more choice if you're looking for an active manager, but I don't have a strong conviction that active management makes a real difference," he said.

Gerard van Leusden, sales director for Benelux at Northern Trust, acknowledged the greater choice among active managers, but said the differences between passive strategies were "still significant".

He said recent discussions with investors suggested a growing appetite for passive investing along scheme-specific guidelines, such as a requirement for higher yields or lower volatility.

"There [has been] an academic debate going on for 10 years about active versus passive management. The truth is probably in the middle. The trend is towards indexing - not standardised but customised indexing," he said.

"The principal trade-off is between risk and liquidity. We don't mimic the benchmark from day one. We take a diligent approach to building a portfolio and manage it. There is value to be added, for example, in predicting changes in the benchmark," he said.

The HORECA pension scheme's 10% allocation to real estate is equally divided between listed and non-listed.

"Unlisted has a liquidity premium but makes it difficult to rebalance the portfolio, or change your allocation within the overall portfolio," said van Leusden. "Listed is closer to equity markets but it solves the liquidity problem."