The deadline for responses is 30 June. A France-based pension fund is searching for an external asset manager to run a $50m (€37m) global emerging market equity portfolio, according to IPE-Quest.The unnamed pension fund has put out an inquiry through the manager search service, and says the proposed mandate will be for all/large-cap equities within global emerging markets.The investments are to be managed passively, following the MSCI Emerging Markets NR index expressed in euros, according to the search.The successful manager should have assets under management for this type of mandate of at least $500m, and more than $5bn in total assets under management as a firm.
The pension fund of the London Borough of Croydon is switching all its equity assets of around £350m (€442m) to a Legal & General (L&G) global ethical investment fund to avoid exposure to tobacco, nuclear power and arms stocks.The decision to move equities investment to the L&G fund, and out of the four funds the allocation is now invested in, was made by the council’s pension committee last week.Chair of the committee councillor John Wentworth said: “Having a pension fund that invests in tobacco was very much at odds with our responsibility to protect and improve public health in this borough, and there were clearly a number of concerns about the ethics of doing that.“Ensuring the council is a socially responsible investor was a key manifesto pledge for the administration.” Councillor Simon Hall, cabinet member for finance and treasury at the council and vice-chair of the pension committee, said the council would be getting a better investment deal, as ethical funds were performing favourably against other schemes. “Tobacco is not the low-risk, high-profit investment it once was,” he said. “This really is in the best interests of the scheme’s beneficiaries and residents, both ethically and financially.”He said there was a balance to be struck for the committee in fulfilling its fiduciary duties and adhering to its ethical principles, and that the committee members had been satisfied they had achieved this balance.Meanwhile, members of Suffolk County Council yesterday voted overwhelmingly in favour of asking their pension fund to stop investing in tobacco companies.The council voted 49 to 10 in favour of a motion originally proposed by Labour Group leader Sandy Martin and seconded by Tory backbencher Michael Bond to ask the pension fund committee “to replace investments in tobacco with other holdings, which are considered comparable in terms of the balance of risk and return”.The motion began with a resolution by the council to be a signatory to the Local Government Declaration on Tobacco Control, as endorsed by the public health minister Jane Ellison.Martin told IPE the decision was now in the hands of the pension committee.The committee had a duty to act in the best interests of the beneficiaries, he said, but added that this did not simply mean achieving the highest financial returns.“Their best interests might very well be served by not seeing their grandchildren smoke,” Martin said.In a briefing prepared for the council, Martin said there was an estimated £2bn currently invested by UK local authorities in tobacco companies. He cited the London boroughs of Newham and Brent as examples where local authorities had changed their statements of investment principles to limit their exposure to tobacco companies.Brent had cited the risk that tobacco companies may face large liabilities from outstanding court actions as a reason for their exclusion, according to the briefing.However, Martin also noted in the briefing that Norfolk and Herefordshire county councils had tried and failed to divest their pension funds from tobacco stocks.
This would be left to the consultant community, which thoroughly rejected the idea in its consultation responses and said it would affect the use of ABCs in levy calculations.However, the PPF spokesman said the lifeboat fund was happy to accept ABCs and the contribution they make to scheme funding.ABC structures involve sponsors giving schemes legal claim over an asset that provides income streams in return for a reduction in deficit contributions.The use of these structures can potentially reduce the liability burden of a scheme entering the PPF, thus reducing the levy.A PPF spokesman told IPE: “These are complex structures, and the value they have on insolvency may be very different to the value at which they are stated in scheme accounts.“If advisers are confident about the value of these arrangements, they should be able to give assurance to trustees and to the PPF. And if they aren’t, we don’t think the PPF should give credit in levy calculation.“Ultimately, if ABCs prove to be worthless, other levy payers end up paying the price.”Responses from the Association of Consulting Actuaries (ACA), the Society of Pensions Professionals (SPP), Towers Watson and Aon Hewitt all said the extension of liability from trustees to advisers was unnecessary.Towers Watson said a duty of care already existed for trustees, and that extending this to the PPF would not always be possible.Senior consultant Joanne Shepard previously told IPE: “Subject to legal opinion, extending each adviser’s duty of care to the PPF may not always be unachievable – in which case, perfectly good assets would not be recognised for levy purposes.”The ACA said it was not appropriate for advisers to have an uncapped liability to the lifeboat fund, given that there is a cap between advisers and trustees.This was the lifeboat fund’s final consultation before Experian takes over from Dun & Bradstreet for the 2015-16 levy calculation. The UK Pension Protection Fund (PPF) has defended its stance on forcing consultants to legally stand behind valuations of asset-backed contributions (ABC) when used to reduce levy payments.The rebuttal comes after a recent consultation on the PPF levy saw consultants criticise requirements for the extended ‘duty of care’.A spokesman for the lifeboat fund challenged advisers to give clear assurances on the valuation of ABCs if they were “confident about the value”.In the last consultation before the new levy and solvency-risk formulas come into use, the PPF suggested ABCs would require an independent valuation that recognises a legal ‘duty of care’ to the fund.
He also noted that the best solution for pensioners could be placing their pension rights with an insurer, which must guarantee their benefits.Another potential option could be the proposed APF, although Bakker said this would depend on the ultimate shape of the new pensions vehicle.The pension fund’s policy funding – the new criterion for indexation and rights cuts – was 115.1% as of the end of February.The scheme said it expected this figure, based on the 12-month average of current funding, to decrease.In an additional clarification, Bakker cited “ever-expanding” supervisory pressure from regulator De Nederlandsche Bank.“Moreover,” he said, “the new financial assessment framework is likely to raise costs for small pension funds.”Last year, the regulator fined the Consumentenbond scheme €17,500 for twice failing to meet deadlines for the submission of documents. Dutch consumer industry group Consumentenbond has said it is exploring its options on the future of its €70m pension fund, including the possible liquidation of the scheme. Chairman Rob Bakker said “sharply increased” financial and administrative burdens were proving a growing obstacle for maintaining the scheme’s independence, but he also warned that the board’s continuity was “at stake”.He said four of the six current trustees were over 60, and that he himself had decided to step down at the end of the year, after 10 years at the helm.According to Bakker, one of the options for the scheme will be to join a non-mandatory industry-wide pension fund, such as PGB, which does not require an incoming scheme to change its pension arrangements.
The search for yield is driving institutional investors into illiquid assets, but the market may already be overcrowded, delegates at the Swiss Pensions Conference were warned.Guido Bolliger, co-head of quantitative investment solutions at SYZ Asset Management, said liquidity risk was “on the rise” as investors ramped up exposure to less liquid instruments.But he added: “Long-term thinking is a competitive advantage for Pensionskassen in today’s markets, and they can act anti-cyclically”.Nannette Hechler-Fayd’herbe, head of investment strategy at Credit Suisse, said she was concerned about a “herd mentality” among institutional investors triggered by their search for yield. The illiquidity problem is made worse, she argued, by the “convergence” in the returns of various asset classes, particularly equities and alternative assets.Vera Kupper-Staub, vice-president at the Swiss regulator (OAK), said she was concerned about “herding” arising from too many Pensionskassen using the same investment consultant.“This reduces the diversification needed to reduce the risk in portfolios,” she said. Meanwhile, Bolliger argued that, before the financial crisis, there had been a kind of “natural hedge” in balanced portfolios that “no longer exists”.He said pension funds, when shifting investments, should not only consider risk but also “avoid pro-cyclicality”.“It’s not too late to make changes to portfolios,” he said. “The question is whether the changes will happen fast enough.”Speaking with IPE after the conference, Lukas Riesen, a partner at PPCmetrics, said he was concerned Pensionskassen might be “lured” into taking on too much illiquidity, particularly with respect to products that were “made to look liquid”.“What happens,” he asked, “when there is another downturn and everyone wants out at the same time?”However, Christoph Ryter, president at Swiss pension fund association ASIP, said he was convinced Pensionskassen had grown more aware of illiquidity risks in the wake of the crisis.“They have learned from the crisis and know about illiquidity risks and are including them in their long-term investment strategy,” explains Ryter.
Finnish state pension fund Valtion Eläkerahasto (VER) has appointed Mikko Räsänen as its head of fixed income, with the expectation that he will broaden the team’s spectrum of skills.Räsänen takes over from Jukka Järvinen, head of fixed income at the €18.7bn pension fund for 15 years before leaving the job in March.Previously a vice-president at the OP Financial Group in Finland, Räsänen will start his job at VER today.Timo Viherkenttä, chief executive at VER, told IPE: “With his strong experience, Räsänen is expected to broaden further the spectrum of expertise in VER’s fixed income team, which has been making good risk-adjusted returns over the years.” The pension fund’s fixed income allocation currently consists of a broadly diversified portfolio with a relatively high exposure to emerging markets, he said. “In the present low-interest-rate environment, generating good returns with a fixed income portfolio is a particularly challenging task,” Viherkenttä said.During his years at OP Financial Group, Räsänen headed several different teams in portfolio management and product development.The pension fund said the fixed income team, since March, had been led by Sami Lahtinen, who combined the interim role with his job as the head of overlay and hedge funds.Viherkenttä said Räsänen would assume responsibility for VER’s fixed income portfolio, worth approximately €9bn.This equates to an allocation of nearly 50% of the pension fund’s total assets.Viherkenttä is VER’s new chief executive, having taken over the role from Maarit Säynevirta in June.
Deutsche Asset & Wealth Management (Deutsche AWM) – Stefan Kreuzkamp has been appointed CIO and head of investment management and a member of the Global Executive Committee. The appointment follows the transition of Asoka Wöhrmann, CIO, to head of retail banking at Deutsche Bank’s Private & Business Clients division. Kreuzkamp joined Deutsche AWM in 1998, initially working in money markets and later in fixed income fund management. As regional CIO for the EMEA, he oversees equities, fixed income and multi-asset.London Pensions Fund Authority/Lancashire – The £10.5bn (€14.8bn) pooling vehicle set up by the London Pensions Fund Authority (LPFA) and Lancashire has hired former pensions regulator chairman Michael O’Higgins as its inaugural chair. The London and Lancashire Pensions Partnership, agreed by the local authority funds in July, also said David Borrow, the deputy leader of Lancashire County Council, and Skip McMullan, currently a board member for the LPFA, would join the venture’s board.PFA – The director for group communication and public affairs, Morten Jeppesen, has quit suddenly after talks with the group’s chief executive ended in a disagreement. Allan Polack, chief executive at PFA, said he had been in talks with Jeppesen about his future role at the company. “We were not able to agree about that, and so we reached an agreement that means Morten has resigned with immediate effect,” he said. Redington – Lydia Fearn has been appointed to the newly created role of head of DC and Financial Well-being. She joins from Barclays Corporate & Employer Solutions, where she led investment advice to pension scheme trustees and sponsors. Before then, she worked at Lane Clark & Peacock and Aon Hewitt, where she specialised in investment strategy and advice.Sociéte Générale – Roel van de Wiel has joined Société Générale Securities Services as commercial director for the Nordics and the Netherlands. From the office in Amsterdam, he is to head a team tasked with expanding business in the Netherlands and Northern Europe. Van de Wiel has served as business development executive at State Street Bank and Trust Company. Before then, he was senior sales manager at JP Morgan Worldwide Securities Services.Tages Capital – Jamie Kermisch has been appointed chief executive. Kermisch is the former chief executive of Mariana Investment Partners and was previously group managing director at Fauchier Partners, an institutional fund-of-hedge-fund asset manager. Before then, he spent 20 years at several investment banks, including 10 years as a managing director at Morgan Stanley. Schroders – Andrew Lim joins the Multi-Asset Portfolio Solutions team, focusing specifically on liability risk. He joins from Towers Watson, where he worked for seven years as an investment consultant in the Structured Products team. Tara Jameson joins as solutions manager focusing on growth risk management, transferring internally from the UK institutional distribution team. Aegon AM – Sander van der Wel has been appointed head of institutional clients at Aegon Asset Management. He is to advise insurers on asset management solutions and assist them in gearing their investment portfolios to future liabilities. Over the last five years, he has served as director of fixed income sales at Citibank.Cardano – The fiduciary manager, risk manager and investment adviser has appointed Patrick Luthi as CFO. He joins from Goldman Sachs in London, where he was managing director of the Securities Division for 19 years. Most recently, he served as COO of the Global FX DivisionLCP – Murray Blake has been appointed as a consultant to the pension de-risking practice. He joins from Pacific Life Re, where he structured and implemented longevity reinsurance solutions. Before then, he worked as a consultant at Towers Watson and was a member of the longevity research group. ARC Pensions Law – The pensions law firm has appointed Kevin LeGrand as a consultant to work on a client-related project. LeGrand, who is president of the Pensions Management Institute and a former principal and head of pensions policy at Buck Consultants, joins ARC part-time. Mercer, Swiss OAK, ABP, ABN AMRO, Health Foundation, Aberdeen Asset Management, Deutsche Asset & Wealth Management, London Pensions Fund Authority/Lancashire, PFA, Redington, Barclays Corporate & Employer Solutions, Sociéte Générale, Tages Capital, Mariana Investment Partners, Schroders, Towers Watson, Aegon AM, Citibank, Cardano, LCP, Pacific Life Re, ARC Pensions LawMercer – The consultancy has hired the head of risk management at Switzerland’s pension supervisor to lead its local retirement business. André Tapernoux, currently head of the risk management department at the Oberaufsichtskommission Berufliche Vorsorge (OAK), will start his new role at Mercer in February next year. Tapernoux joined OAK, established in 2011, in July 2012. His new role will mark a return to Mercer, where Tapernoux worked as an actuary for nearly nine years, starting in late 2003.ABP – The €353bn Dutch civil service scheme has appointed Geraldine Leegwater to the board, following a nomination by union CMHF. Leegwater is chief executive at the pension fund of ABN AMRO, having served as CIO at the scheme for 10 years. She succeeds René van de Kieft, appointed chief executive at MN, the €110bn asset manager for the large metal schemes PME and PMT. Leegwater, who is also chair of the Pension Federation’s committee for risk advice, is to remain in her job at the ABN AMRO scheme. Her board membership at ABP is part time.The Health Foundation – Aidan Kearney has been appointed CIO by UK independent charity the Health Foundation, replacing Andrew Chapman. Kearney was previously fund-of-funds manager at Aberdeen Asset Management. He left Aberdeen last year after the company bought Scottish Widows Investment Partnership and merged the two ranges of funds-of-funds. Chapman, who had previously been pension investment manager at the John Lewis Partnership, was CIO at the Health Foundation from June 2012.
The Central Bank of Iceland has revealed that the country’s pension funds used only 77% of the latest allowance it gave them to invest abroad, as parliament passed a landmark bill to start lifting the capital controls imposed after the 2008 crisis.The bill amending the Foreign Exchange Act of 1992 centred on liberalising capital controls on individuals and firms and was passed on Tuesday by Iceland’s parliament (Althing) by all 47 members who were present, of the 63 members in total.The legislation means people and companies are now allowed to invest up to ISK30m (€238,000) abroad before the end of this year, at which point the authorisation amount will rise to ISK100m.From the end of this year, they will also be allowed to transfer deposit balances from accounts with domestic banks to accounts with foreign banks. The bill does not change the situation for pension funds, however, which are being permitted through separate action to increase their foreign investment, which was effectively frozen in terms of its absolute size when capital controls were put in place eight years ago.This action has taken the form of tranches of authorisation from the central bank for the funds to invest a certain overall amount – divided between the pension funds according to a varying formula – which have been granted in four stages between mid-2015 up to the latest allowance period, which ended on 30 September.The first three allowances totalled ISK40bn, and the most recent allowance for the period between July and September amounted to another ISK40bn.Figures released by the central bank this week show the pension funds only made use of ISK30.8bn of this, or 77% of the total authorisation.This follows an 87% use of the previous combined amounts, totalling ISK40bn, or ISK34.7bn in absolute terms.The figures suggest the allowances are placing little restriction on the pace at which Icelandic pension funds would like to move assets back into foreign markets – on an average level across pension funds, at least.At the end of June, the pension funds’ foreign assets totalled ISK709bn, according to the central bank’s stability report published yesterday, equating to about 21.3% of total assets.This was 0.8 percentage points lower than the end of last year and down by about 2.1 percentage points since the end of June 2015.The Icelandic króna has appreciated strongly against a basket of currencies in 2016.Pension funds in Iceland report that their ideal allocation to foreign assets is between 30% and 50%, but some are prepared to wait up to 10 years before they achieve this level of diversification to minimise the risk of the investment shift.The central bank said in its stability report that, when the capital controls are liberalised, capital outflows can be expected because of an increase in firms’ foreign direct investment and to firms and individuals’ attempts to diversify risk in their asset portfolios. It added: “A wide interest rate differential with abroad and largely favourable conditions in Iceland – together with sizeable foreign currency inflows due to services trade and the associated appreciation of the króna – reduces the risk of large-scale net outflows.”
PensionDanmark’s latest real estate transactionPensionDanmark has invested in a retail and residential building in Lyngby to the north of the Danish capital Copenhagen.The DKK222bn (€29.8bn) pension fund did not disclose the price of the deal.The deal involved the purchase of 4,200 sqm of space from turnkey contractor KPC, along with long-term leases. Torben Möger Pedersen, chief executive of PensionDanmark, said: “This is a very well-located property with retail areas on the ground floor and a basement car park that PensionDanmark is buying, and there will be homes built on the upper floors.”He said the property would be rented out on long-term irrevocable leases, so the pension fund could look forward to a “solid and stable return for many years for the benefit of our members”.KPC has agreed to sell the property on completion of the development, which is expected to happen in 2019.The property will be leased by retail group Dansk Supermarked Ejendomme with an operator contract with Q-Park for the carpark, while the residential units will be leased to public housing association Lyngby Almene Boligselskab.Bergen pension fund doubles annual returnMeanwhile, Bergen Kommunale Pensjonskasse (BKP) – the pension fund for the south-west Norwegian municipality – released annual figures showing it doubled its investment return last year to 7.2%, from 3.3% in 2015.The pension fund said: “For several years, our asset management has delivered a return far above the risk-free return, and this means we are well equipped to cope with volatile markets in the future.”BKP has a long-term goal of an annual 5.5% return.The pension fund said its strategy had functioned well under prevailing market conditions and that the long-term target was realistic.BKP’s equity capital rose by NOK111m (€12.1m) over the course of 2016 to end the year at NOK1.38bn, and total assets stood at NOK15.30bn.Finnish pension funds add 4.2%In other news, Finnish pensions alliance TELA said earnings-related pension assets in the country grew by €7.6bn last year.This marked a rise of 4.2%, to €188.5bn in total at the end of the year. Peter Halonen, analyst at TELA, said: “Financial markets recovered surprisingly well, especially after the political surprises and other uncertainty factors experienced during the year.”In the last quarter of 2016, the best returns were obtained from the equity market, he said.At the end of the year, €95.2bn of earnings-related pension assets were invested in equities, equating to 50.5% of overall assets – the first time equities had reached more than half of total assets, Halonen said.Fixed income investments accounted for about €77.8bn or 41.2%, while real estate investments made up around €15.4bn or 8.2%, the data showed. “The volume of pension assets indicates that Finland has prepared well for population ageing and rising pension expenditure,” Halonen said.
Dutch pension funds remain vulnerable as their recovery plans rely too much on expectations of high future returns, supervisor De Nederlandsche Bank (DNB) has warned.After assessing the 2017 recovery plans of 181 schemes, it concluded that pension funds’ expectations for surplus returns have turned out to be too optimistic over the past two years.The watchdog found that pension funds had factored in an annual funding rise of 4.4 percentage points on average as a result of extra returns.During the past two years, however, the expected recovery has not materialised, with funding ratios of recovering schemes staying almost unchanged at approximately 100%. Based on the schemes’ recovery plans, the funding level should have been 7.8 percentage points higher.If coverage ratios stay at their end-2016 level, 11 pension funds with 2 million participants will need to apply rights cuts in 2020, according to the regulator. The following year, 45 schemes would have to discount pension rights for 8 million participants.Funding has increased in 2017, however, with coverage ratios standing at 105.4% on average in April.DNB said that as things stand at the moment, no more than two pension funds, with 13,000 participants in total, must cut pension rights this year.In a clarification of the recovery plans’ assessment, Frank Elderson, DNB’s supervisory director for pension funds, acknowledged that pension funds had stayed within the legal limits for their assumptions for returns.“Our message to the pension funds, however, is that they must be transparent about their assumptions to their participants,” he said.In Elderson’s opinion, it would not be useful to reduce the legal parameters for return expectations because of the expected introduction of a new pensions system within a few years.When asked, the supervisory director declined to indicate what would a prudent return assumption would be.In 2014, a dedicated parameter committee advised that expectations for returns from listed equity, triple-A rated government bonds and credit should be no more than 7%, 2.5% and 3%, respectively.It said non-listed real estate and commodities should be expected to return at most 6% and 5%, respectively.DNB is in the process of conducting a second survey about the way pension funds explain the possibility of rights discounts.Last week, Belgian supervisor FSMA said that Belgian pension funds’s assumptions for future returns were too high, and that it would get in touch with these schemes.