Month: September 2020

  • Regulator warns Dutch pension funds against dragging feet on new FTK

    first_imgDe Nederlandsche Bank (DNB), the Dutch pensions regulator, has warned pension funds that they must speed up preparations for the introduction of the FTK, the country’s new financial assessment framework.Speaking during the recent Euroforum conference in Amsterdam, Olaf Sleijpen, supervisory director for pension funds, said more than half of Dutch schemes, according to DNB figures, doubt they will have a transition plan in place before the end of the year.“This is not good enough, despite the fact the details of the new FTK still need to established,” he said.He also lamented the fact that more than half of schemes said they would not carry out surveys to measure their participants’ risk appetite. According to Sleijpen, the DNB found that the larger Dutch pension funds were best prepared for the introduction of the new FTK.“While 50% of the larger schemes are on track with their preparations, merely 17% of all pension funds have progressed sufficiently,” he said.The supervisory director advised pension funds to focus firstly on the transition to the new FTK, and use next spring to implement the new governance legislation that must come into force on 1 July 2014.Sleijpen further said that the DNB survey showed that approximately 20% of Dutch pension funds were considering liquidation before the new FTK took effect on 1 January 2015.He added that the DNB did not intend to change its application of the ‘prudent person’ approach for pension funds’ investment policies.“The prudent person remains an open standard that primarily must be filled in by the schemes themselves,” he stressed, adding that borderline cases would be assessed on the basis of ‘comply or explain’.last_img read more

  • RICS endorses PPP as ‘most credible’ method for infrastructure investment

    first_img“Whilst it is clear there is a strong appetite for infrastructure investment within the institutional investment community, there is a requirement for more effective liability matching, including better alignment of investor profiles relative to project investment opportunities in order to expedite investment flow.”RICS also called for greater collaboration between existing providers to bring about new and “innovative” funding models, especially in light of the impact of the European Commission’s Solvency II Directive for insurers.The report also examined the success enjoyed in Canada in attracting pension funds to the market.“It was noteworthy that many of the infrastructure investors consulted in the confines of this research advocated the ‘bundling’ of PPP projects in order to entice their appeal to ‘larger’ pension funds,” the report said.“Many of the Canadian pension funds were actively pursuing investment opportunity, but ‘single project’ deals rarely conformed with investment mandates.”Clare Eriksson, director of global research and policy at RICS, said it was “vital” that investment in UK infrastructure increased to allow for the country’s competitiveness to grow.She added: “This research supports PPP as a viable solution to the UK’s current infrastructure investment deficit, and we at RICS call for the government to raise awareness of the opportunities infrastructure presents as an asset class.”,WebsitesWe are not responsible for the content of external sitesLink to ‘Global Infrastructure Challenge’ report by RICS Public private partnerships (PPP) are the “most credible and recognisable” means of attracting capital to infrastructure projects, according to the UK’s Royal Institute of Chartered Surveyors (RICS).A report commissioned by the group also recommended the “bundling” of PPP projects to attract pension fund interest, as this had proven an effective approach in attracting Canadian pension investors to projects.The paper, which examined the infrastructure markets in the US, Canada, Australia, India and the UK, noted that it was key to expand the PPP investor base in the wake of the financial crisis, which saw banks retreat from project finance, but that certain changes needed to be implemented to make the asset class more attractive.“Firstly, there is a pertinent need to improve the transparency of infrastructure markets in order to facilitate performance benchmarking relative to other asset classes,” it said, citing the work of specialist journals and Prequin as allowing for “significant strides” in the area.last_img read more

  • Friday people roundup

    first_imgSP Atos, JP Morgan Asset Management, Praxis GroupSP Atos – Harrie Penders has been appointed chairman of the €1.6bn pension fund of Atos as of 1 December, succeeding Hans Blom, who has been appointed as a member of the executive board of the sponsor. Penders has been active as a board member at pension funds, has advised several schemes and been director of a pension fund.JP Morgan Asset Management – Valerie Nicholson has joined the consultant relationship team at JPMAM’s UK institutional business. She joins from State Street Global Advisors, where she was head of consultants. Before then, she held roles at F&C Asset Management, Citibank, Gartmore and Pictet Asset Management.Praxis Group – Rupert Pleasant has been appointed managing director at Praxis Fiduciaries Switzerland. He has served as executive director at Praxis since January 2012. In addition developing the Swiss market, Pleasant will also work to establish relationships with partners in the UK, the Middle East and Africa.last_img read more

  • IPE Views: The UK’s local government reforms could be revolutionary

    first_imgAs the UK industry awaits the government’s response to LGPS reforms, Taha Lokhandwala wonders what collective investment vehicles could mean for the futureIn the coming weeks, the UK government is expected to launch a consultation on its vision for the future of the Local Government Pension Scheme (LGPS). Local government schemes, unlike the remainder of the public sector, are funded defined benefit (DB) schemes, and, with combined assets of around £148bn (€177bn), and more than 4.5m  members, the schemes together create a formidable force.However, their assets are in no way combined – there are 89 of them in England and Wales alone. This has been a constant source of annoyance for the current coalition government since it came into power. Many of the schemes are heavily underfunded, remaining open to new members and ever-accruing liabilities.As a result, the Department for Communities and Local Government (DCLG), the section of government responsible for the LGPS, opened a call for evidence on the future structure of the schemes, the results of which it will soon publish. What basically is known is that it wants scale, and it wants it big. When local government minister Brandon Lewis announced his vision of the funds, it involved the creation of five super pension schemes based on the merging of funds by geography.However, there has been ever present resistance to merging liabilities, essentially due to the complex demographics of the LGPS. This is why several options remain on the table, including the formation of collective investment vehicles, namely around five, based on either geography, or perhaps even investment strategy.Schemes are as reluctant to merge asset allocation as much as they are liabilities, which is problematic for a general collective investment vehicle, and which is why the latter option should intrigue the industry most.The concept is mildly comparable with that of Sweden’s AP6 private equity fund, which, in a recent review of the AP system, was singled out for praise.Why this could benefit the LGPS is simple. The biggest arguments against the current system are the schemes being a beacon of inefficiency with regards to external costs on asset managers and consultants.Vehicles focused on specific assets, however, still give full control to each individual scheme in terms of allocation and liability management, but remove the inefficiencies of management and manager selection fees.The biggest win from such a system could be infrastructure – long has been the call for UK schemes to combine and invest. The LGPS funds are prime candidates for this given their open and long-dated liabilities, taxpayer-backed covenants and, frankly, their £148bn in assets.Some of the larger schemes, Strathclyde and West Midlands, have also committed to the Pensions Infrastructure Platform. While this fund lacks a tailwind, it does highlight the funds’ commitment to the asset class.Greater Manchester is another example of a local government scheme keen on infrastructure, as it has moved to build housing and communities in its own region, while London schemes have already made similar moves.A combined infrastructure fund from the LGPS could open the door for smaller schemes to push assets towards it, removing cost barriers and political risks, while allowing long-dated assets. Aside from infrastructure, this could translate across other asset classes such as hedge funds, real estate and private equity, while also saving fees on passive equity and fixed income.The benefits for the schemes’ assets could potentially be unlimited, as they could be for the wider communities and economy as a whole, as government ministers tire of calling for insitutions to step-up.Which route the government will take is still unknown. However, should it choose collective asset-specific funds, we could potentially look back at this decision as the day it modernised public sector investing.last_img read more

  • Norwegian oil fund suffers losses on emerging market equities

    first_imgNorway’s Government Pension Fund Global has incurred losses from its Chinese and Japanese equity holdings, contributing to its stock returns trailing bonds and real estate over the first three months of the year.The NOK5.1trn (€617bn) fund’s Chinese equity investments, which returned -6.1%, accounted for more than a quarter of the listed emerging market portfolio at the end of March, and significantly underperformed its average EM equity holdings, with the portfolio returning -0.5% overall.According to the fund’s first-quarter report, Japanese equities also lost 5% “due primarily to weaker demand and a fall in consumer confidence”, with shares in Asia and Oceania overall seeing negative returns.Fixed income outperformed equity during the first quarter of the year, with euro-denominated sovereign debt returning 3.5% compared with 2.4% from Japanese government issuances and 1.8% from US Treasury notes. The fund also increased its EM debt holdings over the course of the quarter, largely divesting holdings in the four main currencies of US dollar, yen, euro and pound sterling in favour of a 1.3 percentage point increase to EM currency.“The biggest increases in holdings were in Brazilian, Turkish and Mexican government bonds, while the biggest decreases were in government bonds issued by the US, Germany and Sweden,” the report noted.While Brazilian sovereign debt was not among the fund’s 10 largest bond holdings at the end of last year, by the end of March it had risen to be the fund’s sixth-largest fixed income holding, behind NOK45bn in Mexican government debt and ahead of NOK38bn in Italian sovereign paper.The fund also suffered losses on its Russian debt, following the political crisis in the Ukraine.“Geopolitical uncertainty led to the weakening of the rouble, and the Central Bank of Russia raised its rates in an effort to stem the decline,” the report noted. “This resulted in a return of -9.7% on the fund’s Russian government bonds in the first quarter.”Asset manager Norges Bank Investment Management also continued to grow its real estate holdings over the course of the first quarter, with property returning 2%.“Measured in local currency, rental income contributed 1.1 percentage points of the return, the net change in the value of properties and debt 1.2 percentage points and transaction costs for property purchases -0.2 percentage points,” the report noted, adding that currency fluctuations led to a 0.1% decline in returns.last_img read more

  • Pioneer Investments chief executive to leave at end of January

    first_imgNeither did they say what Pierri intended to do after leaving Pioneer Investments, and no one was immediately available to comment further.Pierri said he would always think very fondly of his time at Pioneer and wished nothing but the best for the company in the future.Lombardo has worked at Pioneer Investments for 17 years. Banking group UniCredit, based in Milan, has been trying to move Pioneer Investments from its books for some time, in line with the trend for European banks to sell off asset management businesses in the wake of new EU regulation. In September, it was in talks with Banco Santander with a view to merging Pioneer with one of the Spanish bank’s subsidiaries into a large asset management business. Sandro Pierri, the chief executive of Pioneer Investments, is stepping down at the end of January next year and will be replaced by his deputy Giordano Lombardo.Pierri has worked for the investment manager, owned by Italy’s UniCredit, for 11 years, having been at the helm for the last two and a half years.Federico Ghizzoni, chief executive of UniCredit, said: “Pioneer produced excellent investment results and robust net inflows owing to Sandro’s strategic focus and disciplined execution.”Pioneer Investments and UniCredit said in a joint statement that Lombardo, currently deputy chief executive and CIO, would “ensure continuity leadership for Pioneer’s business during this phase”, but did not say whether he would be appointed as permanent chief executive of the subsidiary.last_img read more

  • PFZW drops hedge funds from strategic investment portfolio

    first_imgThe €156bn healthcare scheme PFZW has announced it will no longer invest in hedge funds as a strategic investment category, as the asset class no longer matches its new investment policy. It said it divested its 2.7% hedge fund allocation last year, adding the target strategic allocation for hedge funds to its equities holdings.The decision of the second-largest pension fund in the Netherlands followed a re-assessment of all asset classes for their sustainability, complexity, cost and contribution to PFZW’s objective of index-linking pensions.“The hedge fund investments did not match the criteria fully,” it said. In 2003, PFZW was one of the first Dutch pension funds to invest in hedge funds, chiefly to achieve greater diversification in its investment portfolio.Jan Willem van Oostveen, PFZW’s financial and investment policy manager, said complexity was major factor behind the scheme’s decision to drop hedge funds.“In our new investment policy, we agreed greater emphasis should be placed on controllability and intelligibility,” he said.“That’s why a complex asset class like hedge funds, which encompasses such diverse strategies, no longer sits well with PFZW.”He added that the high management costs of hedge funds also contributed to the pension fund’s decision.“With hedge funds, you can be certain of the high costs but uncertain about the returns,” he said.Van Oostveen further explained that, in PFZW’s opinion, hedge funds are no longer a sustainable fit for the portfolio, “given the high remuneration in the hedge fund sector, as well as the often limited concern of hedge funds for society and the environment”.Last September, Eduard van Gelderen, the new CIO at the €334bn civil service scheme ABP, said the pension fund was not considering divesting its 5% hedge funds allocation, due to the strength of its returns.However, Dutch pension funds’ hedge fund investments have fallen from 3.7% to 2.7% on average between 2009 and 2014, according to IPE sister publication Pensioen Pro.last_img read more

  • Court forces APG to pay former board member golden handshake

    first_imgA court has forced the €424bn asset manager APG to pay former board member Adri van der Wurff an initially agreed severance payment of €1.1m. The court ruling came after APG’s supervisory board (RvC) back-tracked on an agreement from early 2014, in order to moderate the severance payment in Van der Wurff’s employment contract, according to APG spokesman Hans ten Brinke.He said the RvC unilaterally changed its initial decision after the passage of new legislation on remuneration policy at financial companies (Wbfo) in the Netherlands.The Wbfo came into force on 1 January, limiting golden handshakes to a single year’s salary. “Given current circumstances, with, for example, hardly any perspective for indexation following the stricter rules of the new financial assessment framework, the RvC deemed the agreed severance payment no longer reasonable,” APG’s spokesman said. “Therefore, it limited the amount to €506,000, including a compensation for pension rights Van der Wurff would have missed.”In its annual report, APG’s board said the severance payment consisted of more than €250,000 for redundancy and more than €256,000 for pension loss, adding that the sum of these amounts equated to a year’s salary.According to the Wbfo, the cap on a golden handshake applies to all financial enterprises but not to pension funds.APG is the asset manager and provider for the €373bn civil service scheme ABP.Van der Wurff could not be contacted by IPE for comment.However, Dutch broadcaster RTLNieuws, which broke the news, said he had confirmed the facts of the story.Van der Wurff served as executive chairman at Cordares – the provider for BpfBOUW, the industry-wide scheme for the Dutch building sector.Cordares joined APG and was fully integrated into it in 2012.From then, Van der Wurff subsequently served as chief operational officer, chief client officer and board adviser at APG.Both parties agreed his departure was the result of “differing opinions about policy”, as well as personal reasons.In 2007, the severance payment of Joep Schouten, Van der Wurff’s predecessor at Cordares, also raised eyebrows.Schouten, who was 59 at the time, decided to hold on to the financial package – agreed in 1994, at the start of his chairmanship – of a full salary until his official retirement at 65, as well as early retirement benefits, despite having been asked by the RvC to “considerably limit” the financial arrangements.As a result, delegates of the Dutch pensions sector, including union representatives, boycotted Schouten’s departure reception.last_img read more

  • IPE Views: Do we need to re-invent investment management?

    first_imgCarlo Svaluto Moreolo explores a paper published by 300 Club founder Saker Nusseibeh arguing that investment managers need to re-assess the very foundations of their economic thinkingIn a broad sense, investment has always existed, perhaps even before the growing of crops was man’s main preoccupation. The concept of investing is mainly linked to deferred gratification, making it an essential psychological tool for survival.To some, it appears the original science behind investment is fundamentally flawed. The 300 Club, set up to challenge the foundations of the investment industry, is part of that group. In a recent paper, its founder, Saker Nusseibeh, highlights one of these flaws. He argues that investors evaluate the costs and benefits of investments as if they were cut off from the very system that is shaped by the results of their evaluation. This, says Nusseibeh, is simply wrong.In this vein, the industry needs to realise it is part of the financial system and act accordingly. It needs to adopt a more holistic approach to investment because clients bear the brunt of decisions – both as beneficiaries of investment returns and as citizens of the world shaped by those decisions. It is paramount the industry accept that it is part of an integrated system, which it shapes through beliefs and actions. However, I would go further and suggest it is ridiculous for any firm to assess investments using self-styled ‘scientific’ models that consider the firm a price-taker but not a price-setter as well. What use is a company deciding what the fair price of an asset class should be, when the price itself is largely affected by the outcome of its decisions, in a classic example of a feedback loop?The 2008 crisis offered compelling evidence this would be the case. It also showed – and Nusseibeh clearly states this – when “markets” get prices wrong, and destroy the perceived value of assets, losses are transferred to individuals through public debt. To re-start working in an “efficient” manner, markets need to write off worthless assets, and only public institutions can do this because they can absorb the cost of those losses by reducing public services. Yet asset prices are increasingly detached from the real economic value. The post-crisis years show that – financial markets have got very much back on their feet, but the global economy is far from healthy.How long will equities go up, unsupported by an acceleration of global growth, before they crash and once again stifle the “recovery” of the economy? How long can this recovery be delayed as large parts of the population get poorer and a very small part gets richer? If it is true the global asset management industry holds the world’s wealth, then managing it is not going to plan.Originally, stock markets were simply a means to spread entrepreneurial risk. Shareholders were able to take some entrepreneurial risk and share it with the entrepreneurs themselves, which may have been the main owners. But the model of joint ownership has simply broken down. Instead, markets resemble a bloated mass of fictitious money.And this leads to Nusseibeh’s key argument. We know that the social cost of having large firms with absentee owners is very high. And in that sense, it seems the 300 Club, through its paper, is talking the talk. Tying this together, Nusseibeh says economic theory in investments needs improvement. However, he says, while consensus around its flaws grows, a consensus around an alternative method does not.“We need to rethink the purpose of investment from the perspective of the individual savers whose capital we hold in trust, and move away from concentrating solely on nominal financial returns,” he writes. This means being less concerned with meeting nominal liabilities or benchmarks and thinking of long-term outcomes for the asset owners, or members.Nusseibeh’s approach means the very foundations change, starting from the understanding of economics, financial theory and the role of investment. But changing the industry in this way might involve forgoing some profit.So what will it take before someone actually walks the walk? Think of all the investment managers advocating ESG because of the evidence that it makes their clients more money. As a consequence of more ESG investments, they would also make more money.Nusseibeh should be prepared to reject this approach. To improve the functioning of the financial markets, they need to be made more efficient – not in the sense that they price assets more fairly and rapidly but in the sense that they are capable of financing the growth of a more equitable social economy.This entails more patience by investors and shareholders of companies, and requires more regulation as well as an aptitude for trial and error. Which, by definition, may entail less money in the industry’s pocket.last_img read more

  • Returns narrow at Sweden’s Folksam, but business volume grows

    first_imgSwedish insurer Folksam, which has both pensions and non-life business, reported a narrowing of investment returns in the first nine months of the year to 2% from 8% and said it was facing many challenges even though it was financially strong.In its interim report, Folksam said its life and pensions parent company Folksam Liv had seen a 25% increase in premiums in the first nine months of the year, to SEK11bn (€1.18bn) from SEK8.8bn in the same period last year.The total return on investments for the company fell to 2% from 8%.Jens Henriksson, chief executive and head of the Folksam group, said: “Although a lot of things are going well for Folksam and we are economically strong, we are also facing a range of challenges.” He said global economic uncertainty, particularly regarding China and other emerging economies, was contributing to turbulence in the markets, and that it was a challenge for the whole industry to make returns in the prevailing low-interest-rate environment.On top of this, there he said there were many regulatory issues high on the agenda.He described the move on 1 January 2016 to the new Solvency II regulatory regime as “another important crossroads lying just ahead for the occupational pensions sector, which could change the industry fundamentally”.In its interim report, Folksam said it was now awaiting a decision expected on 18 November from the Swedish Parliament on a bill on the implementation of the Solvency II Directive in the insurance sector.Among other things, the bill addressed transitional arrangements for occupational pension providers, it said.Folksam and its subsidiary KPA Pension, the local government pension scheme, supported this element of the bill because it meant providers would then not need to change their basic regulation more than once.Total assets at the parent company grew to SEK162bn at the end of September from SEK156bn at the end of December 2014, and solvency was 157%, up from 155% at the end of December.Meanwhile, at KPA Pension, which is 60% owned by Folksam and 40% owned by the Swedish Association of Local Authorities and Regions (SKL), investment returns dropped to 2.1% over the first nine months of this year from 9.5% for the same period a year earlier.Premium income rose to SEK10.7bn from SEK9.3bn, and assets under management grew to SEK134.6bn from SEK119.8bn.KPA Pension’s solvency was 169%, up from 166% at the end of December.last_img read more