On 15 March 2012, the District Court of Rotterdam reversed a decision of the Dutch Central Bank ("DNB") to instruct a pension fund to substantially reduce its investment in gold. In this case, Stichting Pensioenfonds Vereenigde Glasfabrieken invested approximately 13% of its funds in gold bullion. According to DNB, an investment of this proportion in one asset class entailed an excessive dependence (concentration risk) and as such violated the prudent person rule.
The pension fund lodged an appeal against DNB's decision to issue the instruction. The District Court concluded in an interlocutory decision - see also the RCE Newsletter January 2012 – that DNB's decision lacked sufficient grounds and gave DNB the opportunity to supplement the grounds. To this effect, DNB supplied the District Court with further substantiation of its decision.
In the District Court's view, however, DNB must consider a pension fund's entire investment portfolio and its specific circumstances. According to the District Court, DNB failed to demonstrate why a 13% investment in gold bullion would not comply with the prudent person rule, whereas a 3% investment, given the composition of the investment portfolio and the fund's specific circumstances, would be acceptable to DNB. The Court inter alia held that, despite the instructions given by the court in the interlocutory judgment, it was still unclear what principles DNB had applied. DNB's decision to issue an instruction to the pension fund was therefore considered by the District Court as inadequately substantiated.