Month: September 2020 Page 1 of 23

European scheme tenders global convertible bond mandate using IPE-Quest

first_imgThe final closing date for responses is 14 July, but further deadlines have yet to be confirmed.The IPE news team is unable to answer any further questions about IPE-Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE-Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected] A European pension fund has tendered a $20m (€17.7m) global convertible bond mandate using IPE-Quest.The unnamed pension fund, based in Germany, Austria or Switzerland, is searching for an asset manager to offer a UCITS long/short global convertible fund, to be managed actively.The pension fund does not stipulate a minimum level of assets under management, nor is there a particular benchmark given in the search details.However, fund managers should state performance to the end of March, net of fees.last_img read more

Norway’s KLP sells Chinese rail company over corruption concerns

first_img“Furthermore, we will naturally consider the new coal criterion adopted for the Norwegian Government Pension Fund Global (GPFG) and evaluate further exclusions in light of this,” she said.The Norwegian Parliament last month voted that the sovereign wealth fund should divest any company drawing more than 30% of revenue from coal activities.KLP also followed the advice of the GPFG’s Council of Ethics, which recommended the exclusion of China Railway Group over concerns of “gross corruption”.Bergan said there was still an “unacceptable risk” the railway company had been involved in corruption, and that no measures had been put in place to prevent any problems – with the divestment occurring after repeated attempts to contact management failed.Turkish industrial conglomerate Sabanci Holdings has been excluded from KLP’s investment universe due to its involvement with tobacco production, while Noble Group was divested due to the risk it was contributing to severe environmental damage.Additionally, Heidelberg Cement and Cemex were divested as they were exploiting natural resources in the West Bank.Bergan said that while settling on the exclusion of the two companies proved more difficult than a similar barring of firms exploiting resources in Western Sahara, she said exploiting resources in an occupied territory could prolong conflict and was reason for divestment. Norwegian pension provider KLP has sold stakes in a further five coal companies and divested the Chinese state railway company over concerns of gross corruption.KLP, which provides pensions to local government employees, said it divested the five coal companies in line with its guidelines that it sell holdings in firms drawing more than half of revenues from coal.The sale of stakes in China Power International Development, Electric Power Development, FirstEnergy Corp, Huadian Power International and Huaneng Power International comes after the provider sold 27 coal company stakes last year.Head of responsible investment Jeanett Bergan said KLP would continue to assess the threshold it set itself for coal divestment and look to include additional parameters as reporting became more granular.last_img read more

UK pensions industry questions government’s motives on LGPS

first_imgThe UK government’s recent decision to begin a second consultation on cost-cutting at local government pension schemes (LGPS) – having failed to respond to a 2014 paper on the same issue – has left the pensions industry bemused. In its first Budget, the new Conservative government announced a consultation to define cost-cutting criteria. Within this, it called on schemes to show how they planned to save on fees, or face enforced pooled investments.The move to allow schemes to form organic partnerships to cut costs could be seen as a stand-down by the central government in light of its May 2014 proposal to shift all assets into two collective investment vehicles (CIVs) and enforce passive investment for listed assets. The Department for Communities and Local Government (DCLG) said the upcoming consultation was to build on its existing proposals, not replace them.However, not all in the industry are convinced the government’s announcement means it is taking a more flexible approach, while others are confused about the status of the previous consultation.The consultation, expected in the autumn, is to cover the 89 LGPS funds in England and Wales, with more than £180bn (€250.4bn) in assets. But any further details remain scarce.John Hattersley, director at the £5.9bn South Yorkshire Pensions Authority, said he was unconvinced the government was demonstrating flexibility.“I know some have interpreted it that way, but others haven’t,” he said. “[The word] ‘consultation’ remains a misnomer. We await the small print with trepidation, not anticipation.”The DCLG argued that it has heard from consultation respondents who “recognised the benefits” of pooling investments and that the government was merely giving fund authorities the opportunity to take the lead in delivering savings.But even Michael Johnson, a fellow at conservative think tank Centre for Policy Studies (CPS) and a long-time advocate for LGPS consolidation, was dubious of the government’s intentions.He said it was using the word ‘pooling’ as a euphemism for consolidation.“This is a PR exercise par excellence,” he said. “The fundamental message to the industry is that the government has not forgotten about [the original consultation].”He said the government’s rhetoric belied a sense of frustration about the lack of progress on LGPS cost-cutting.But others have been more welcoming. Hymans Robertson, the consultancy behind the foundation of evidence in support of the original CIV and passive investment proposals, said allowing flexibility in cost-saving approaches was sensible.John Wright, head of public sector, said: “Mandating an approach from the centre, such as forcing the use of passive, would not produce optimal outcome.”He said schemes were already working together on savings, and that government encouragement to develop these could benefit all schemes.Dave Lyons, however, Aon Hewitt’s principal for public sector investments, said it was difficult to understand the government’s thinking without seeing an official response to the initial consultation.“It certainly seems like political will to drive efficiencies, and there has been a great deal of voluntary collaboration since the first consultation,” he said.“But the question we need answering is whether this is enough for the government and what it is looking for.”Lyons argued that the original consultation had created uncertainty, forcing pension funds that wished to avoid falling foul of changing regulations to defer decision-making. “Effective decision-making in an uncertain environment,” he said. “Some clarity would help a lot funds move forward.”Examples of organic LGPS cost-saving collaboration, alluded to in the Budget statement, could include moves by the Lancashire County Pension Fund (LCPF) and the London Pension Fund Authority (LPFA).The pair are looking to save £32m by merging assets, liability management and administration.London Councils, a representative body for London local governments, is also setting up a CIV with a view to merging mandates.Hugh Grover, chief executive of the CIV, said he hoped the government’s statement was a clear indication of support for its plans.“I did not see anything in the announcement that suggests we should pause what we are doing in London,” he said. “We will be pressing ahead.”last_img read more

Swedish church fund amends strategy as returns fall

first_imgKyrkans Pensionskassa, the pension fund for the Swedish Church, is adapting its strategic portfolio to account for lower return expectations, after first-half results for 2015 fell sharply compared with 2014.In its interim report, the pension fund said its total return for January to June 2015 fell to 2.7% from the 8.7% achieved in the same period last year.For the whole of 2014, the pension fund produced a 19.2% return.The pension fund said it was changing its strategic investment aims because of the low-yield environment. Carl Cederberg, Kyrkans Pensionskassa’s chief executive, said: “The lower yields mean it will probably become much tougher to achieve returns that will adequately match the pension fund’s liabilities.”Because of this, the pension fund hae proactively changed its investment guidelines to minimise its sensitivity to rising market yields, he said.“For this reason we have started to adjust the strategic portfolio for possible lower expected returns,” Cederberg added.He said the pension fund’s financial position had strengthened over the latest six and 12-month periods, as a result of which, the bonus rate had been hiked twice and now stands at 14%.It was an advantage for the pension fund to be in such a strong financial position given current low yields, as it increased the opportunity to take risk and allocate assets in the best way, he said.Kyrkans Pensionskassa’s solvency level rose to 168% at the end of June from 162% at the end of December 2014.Among the pension fund’s four asset classes — equities, fixed income, property and alternative investments — equities generated the highest return in the first half, with 10.7% compared to 10.3% in the same period last year.Fixed income showed the weakest performance, with a 2% loss against an 8.4% profit in the first half of 2014.On the business side, the pension fund’s premium income was up significantly in the first half of this year, rising to SEK560m (€58.4m) from SEK160m in the first half of 2014, and up from SEK185m in the whole of 2014.Total assets grew to SEK14.9bn from SEK14.1bn.last_img read more

ECB action having unintended effects in Netherlands – DNB

first_imgHe acknowledged, however, that the objection applied chiefly to the Netherlands and “maybe a number of other countries”, while the ECB’s monetary policy was aimed at the euro-zone as a whole.Knot said he had explained to ECB board members that the Netherlands was now debating a new pensions system, but he said they were left “unimpressed”, as combined pension assets are twice the country’s GDP. He also ruled out the possibility of granting concessions on the discount rate for liabilities – by raising the ultimate forward rate (UFR), for example.“Any adjustment,” Knot said, “would be shifting effects between the generations of pension funds’ participants. DNB’s only task is to set a realistic rate, taking potential future growth and inflation from which returns and risk-free rates are derived, into account.”Frank Elderson, supervisory director for pension funds at DNB, argued that adjusting the discount rate was the last thing the watchdog should do.“We can’t just add pension assets by magic,” he said.Knot added that the current defined benefit promises were what made the Dutch pension system so susceptible to low interest rates and reiterated his call for a quick switchover to a new system without fixed promises. The European Central Bank’s (ECB) decision to lower interest rates to make more savings available for the economy is having the opposite effect in countries such as the Netherlands that already enjoy high savings levels, according to Klaas Knot, president at Dutch regulator De Nederlandsche Bank (DNB).Knot, speaking at DNB’s annual report presentation, argued that the low-interest-rate environment encouraged people to increase saving for their pension rather than to spend money, as the ECB intended.He also questioned whether the impact of quantitative easing on the economy had been positive, “as the effect of growth decreases the more stimulus is applied, while side-effects might also increase”.Knot argued that, if people save a significant amount for a specific purpose, such as a pension, they tend to save more as the returns on existing capital decline, resulting in uncertainty over the chances of achieving the savings target.last_img read more

PensionsEurope: EIOPA risk-management plan ‘unnecessary, costly’

first_imgThe common risk-management framework recommended by the European Insurance and Occupational Pensions Authority (EIOPA) would be unnecessary and costly for occupational pension funds, according to PensionEurope, the European pensions association. It welcomed the authority’s decision not to pursue solvency requirements for Institutions for Occupational Retirement Provision (IORPs) but said it had “strong concerns” about EIOPA’s proposal for IORPs to be required to carry out a standardised risk assessment to calculate the impact of stresses on a common framework balance sheet.Janwillem Bouma, chair of PensionsEurope, said: “Risk management is essential for IORPs, and they regularly carry out their own stress tests and scenario analyses, such as asset and liability-management studies, as part of their own risk-management processes. “EIOPA proposes an additional framework, which we find unnecessary and costly.” PensionsEurope’s response is in line with other reactions to EIOPA’s proposal, which have been critical of the risk-assessment framework while approving the authority’s stance on solvency rules. Matti Leppälä, chief executive at PensionsEurope, said EIOPA’s decision not to pursue a harmonised solvency framework for IORPs was positive.He reiterated his organisation’s opposition to additional capital requirements, which it sees as detrimental for pension provision. “We also welcome that EIOPA has taken into consideration the diversity of IORP landscape across Europe,” he said. “Requirements have to be proportional, and small and medium-sized IORPs should not be overly burdened with any new risk-management requirements.”PensionsEurope will provide a more in-depth response in a few weeks’ time on further analysis of EIOPA’s proposal.last_img read more

IPE Conference: Markets mispricing risk from future effects of Brexit

first_imgFinancial markets are failing to take realistic account of the future effects of this summer’s referendum vote in the UK to leave the European Union, and, as a result, there are now dangers lurking in the background for investors, conference participants in Berlin heard today.Amin Rajan, chief executive at CREATE-Research, told the 2016 IPE Conference and Awards: “Markets are not pricing in the second, the third, the fourth-round effects of the Brexit vote, and, as a result, there are dangers lurking in the background on a slow fuse.”He cited a 2016 pan-European survey taking in the responses of 167 pension funds, by his firm and Amundi Asset Management. “The first danger is really about the Brexit vote and also about the vote in the presidential election in the United States,” he said. “What we’re really saying is that the rise of nationalism as a result, this is proving to be another headwind for investors in the years to come.”The survey takes a three-year view, and Rajan said it was very difficult to see anything further out than that.“That means Brexit is really a canary in the coal mine, which is presaging the fragmentation of Europe,” he said.The process of Brexit is another risk facing investors that Rajan said would be as provocative and as dangerous as the actual outcome of the divorce, as it was as yet unknown what the process was likely to be.“This could be a long, protracted divorce, and we don’t know how it will end, and when it will end,” Rajan said.“[US president-elect] Donald Trump has promised to tear up every major security and trade deal America has signed since World War II – it’s a frightening prospect.”Rajan said a question being asked now was whether Trump would honour what he promised on the campaign trail, or sober down and behave in a more responsible way.“At this point in time, it’s very difficult to know,” he said.Rajan noted that financial markets, which had dipped every time Hillary Clinton’s ranking fell in opinion polls during the run-up to the election, surged two weeks after the election, apparently giving Trump a “standing ovation”.“Markets seem to believe in everything, and, in my view, they are not really thinking properly,” he said.Populism has added yet another layer of uncertainty for pension investors, he said.last_img read more

London CIV appoints fixed income managers, ‘pauses’ infrastructure

first_imgLondon CIV, the asset pooling vehicle of the capital’s public pension funds, has appointed managers for five new investment sub-funds focused on fixed income.US fixed income giant PIMCO has won a mandate, with two awarded to Ares Management and one each to CQS and MidOcean Partners.The £6.5bn (€7.3bn) pool is also working on a move into alternative investments, although it has “paused” its infrastructure plans, a spokesperson told IPE.The fixed income fund appointments are pending the completion of legal work, operational due diligence and contractual arrangements. The following managers and funds are being lined up:Global Bonds Fund (PIMCO)Liquid Loans Fund (Ares)Private Debt Fund (Ares)Multi-Asset Credit Fund – Long Only (CQS)Multi-Asset Credit Fund – Long/Short (MidOcean)The pooling vehicle is actively working towards launching the long-only multi-asset credit fund in early June because there are already member local authority funds with assets in the CQS strategy, according to a spokesperson.London CIV requires soft commitments to funds before it can submit prospectuses to the regulator and work towards the launch of new funds. Launch dates for the other funds are therefore contingent on soft commitments being confirmed, the spokesperson said.The manager is weighing options for more multi-asset credit products.Infrastructure plans on hold Credit: Lasse Holst HansenCompleting infrastructure fund launches is part of London CIV’s medium-term financial strategyCompleting fixed income and infrastructure fund launches is part of London CIV’s medium-term financial strategy for the period up to 2022-2023, according to council documents. This targets assets under management of around £10bn, more than doubling the proportion of assets invested by the London pension funds to 69%.It has been exploring how to offer its member pension funds access to infrastructure since at least last year, with documents from several London councils having indicated that the London CIV’s priority for infrastructure was to build a global, unlisted, income-focused fund.According to documents from the London Borough of Camden, the pooling vehicle had at one point reportedly been looking to launch a fund in March, but pushed this back to the second quarter of the year to complete the search for managers.However, the London CIV spokesperson today told IPE it had decided to “pause our infrastructure plans” given potential changes in the strategic direction of the pool following a review of its governance.The review was carried out by consultancy Willis Towers Watson, which found that the pooling project would fail if major governance changes were not made.However, “work is underway to expand the current fund offering to include alternative investments,” according to a tender notice. The notice advertised London CIV’s search for an administrator, global custodian and depositary to support the move into alternative assets.in January the pooling vehicle received regulatory permission to operate “unauthorised alternative investment funds”, which paves the way for it to launch funds for investments in illiquid assets.The London CIV received regulatory approval in 2016. It has launched 12 funds so far, including UK and global equity products and multi-asset funds.last_img read more

Dutch confectioners and bakers schemes sweeten collaboration

first_imgJansen suggested that Zoetwaren’s switch to a new actuary had given the schemes a better negotiating position, as outsourcing partners had indicated that they were keen to keep the potential merger partners as clients.She noted, however, that the funding difference between the two schemes posed an obstacle to the merger that remained to be solved. Zoetwaren’s coverage ratio was 112.9% at the end of April, more than 10 percentage points higher than the bakers’ scheme.Zoetwaren’s chair added that increasingly complex legislation, time pressures on trustees, and requirements for continuity of board and accountability body (VO) had all contributed to the need to increase co-operation.Leo van Beekum, chairman of the €3.9bn bakers scheme (Bakkers) confirmed the merger plans, but emphasised that concrete decisions would only be taken after the VO and the supervisory board (RvT) had been consulted.Zoetwaren reported returns on investment of 4.4% for 2017, and said that it had extended its return portfolio by 5 percentage points to 60%, through an increased allocation to high yield bonds (3%) and property (2%).At the same time, it reduced its matching portfolio by an equal amount to 40%, through fully divesting its holdings of inflation-linked bonds, as well as selling part of its credit portfolio.It said it would increase its holdings of residential mortgages at the expense of corporate bonds this year, and announced a strategic shift from Dutch property to European and US real estate during the coming years.Construction company seeks to transfer legacy pensionsElsewhere, the €1bn pension fund of construction firm Ballast Nedam said it was considering placing its accrued pension rights with the €25bn multi-sector scheme PGB.In its annual report it said that other options were to join a general pension fund (APF) or continue as a closed scheme, after the employer announced it would terminate its contract with the pension fund as of 1 January.In 2016, the company scheme outsourced pensions accrual for its basic arrangements to BpfBouw, the €56bn pension fund for the building sector.Michel Lind, director of the Ballast Nedam scheme, explained that the option of also placing the accrued pensions with BpfBouw was not feasible, as its funding ratio of 108.6% at March-end differed too much from BpfBouw’s funding of 116.7%.At the same time, PGB’s coverage ratio stood at 107.7%.The pension fund of Ballast Nedam has 684 active participants, 3,783 deferred members and 2,375 pensioners. The Dutch pension funds for the confectioners and bakers industries plan to increase their co-operation, with a full merger as likely outcome.Leonne Jansen, chair of the €2.5bn scheme for the confectionery sector (Zoetwaren), told IPE’s sister publication Pensioen Pro that both pension funds wanted to sign an agreement confirming their intention to join forces later this year.Both pension funds have already been working together closely in order to save costs, which Zoetwaren said had led to combined savings of €700,000 for pensions administration and €800,000 for asset management, largely through lower fees.In its annual report, Zoetwaren said that the co-operation had been extended to introduce regular joint meetings of both schemes’ boards and investment committees, as well as a joint approach towards their joint provider TKP Pensioen and asset manager NN IP.last_img read more

​IPE Conference: AP4 chief in no rush to add illiquids

first_imgSweden’s AP4 is to take its time to use the new freedom lawmakers granted last week on illiquid investments, according to the fund’s chief executive Niklas Ekvall.During a panel discussion centring on long-termism versus short-termism for pension fund investment at the IPE Conference in Dublin this week, Ekvall said: “We are very happy that the new legislation has been decided by the parliament.”He added: “We don’t feel any rush to invest in illiquid assets given that we have the flexibility to make investments when the right opportunities occur.”A week ago, Sweden’s parliament passed a bill revising the mandate for state pension buffer funds AP1, AP2, AP3 and AP4, increasing their investment flexibility. Credit: Patrick FrostL-R: Liam Kennedy, IPE editorial director; Niklas Ekvall, AP4; Mark Fawcett, NEST; Richard Williams, Railpen; Niina Bergring, Veritas“We are building up the knowledge and the infrastructure to do illiquid investments, but I’m not saying we are going to go to maximum weighting from day one,” he said. “It seems everyone wants illiquid assets and we have some concerns about valuations, but we’re doing a private credit search for infra debt, loans and real estate debt at the moment.”Fawcett said NEST had an advantage in this area among defined contribution (DC) schemes by being able to control its platform.“The UK DC sector is not well structured because for most DC schemes they have a platform that requires steady liquidity,” the CIO said. “It inhibits long-term investing and particularly in long-term illiquid investments, so we’ve looked to other models.”The DC master trust allocated to a hybrid property fund in 2013, which grants access to direct property investments but with exposure to real estate-related equity to enhance liquidity.Fawcett cited the Australian system, in which 40-50% of investments were allocated to illiquid assets despite the system’s DC design.Railpen grows internal expertiseRichard Williams, CIO of industry-wide pension scheme RPMI Railpen, pointed to future growth in private asset volumes for his fund, which he said had hired between 10 and 15 people in the private markets area over the past year or so. Most recently, the scheme last week hired Andrea Ash from Tesco Pension Fund as a private markets investment director.“I think that process is largely complete,” Williams told the conference.The Railpen scheme was unusual for a UK pension fund in being an open defined benefit (DB) scheme, and as a “surprisingly immature” scheme it was encouraged to invest in assets with a long-term horizon and not to be linked to a benchmark, he added.“In general we don’t have as much risk as we would like in private assets, so that will go up,” Williams said. “We have some reservations about valuations, so we have to look at parts of the market where we think we have a competitive advantage – we have to access that in a different way than we did previously.”Meanwhile, Niina Bergring, CIO and deputy chief executive of Finnish pension insurance company Veritas, said her fund’s asset allocation had been slightly defensive compared to those of its competitors this year.“But we can never deviate too far,” she explained. “We’ve had a slightly lower equity exposure which was holding us back, but it is now benefiting us.” Asked about when the pension fund would make use of its new ability to put up to 40% of its SEK367bn (€35.9bn) of assets into illiquid investments given current valuations, Ekvall told the conference that valuations were always an issue.“You need to consider this in the very long term,” he said.Mark Fawcett, CIO of UK auto-enrolment scheme NEST, also said his pension scheme would take its time to make investments in longer-term illiquid assets.#*#*Show Fullscreen*#*#last_img read more

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