first_imgThe German pensions industry has issued a “clear rejection” of any attempt to standardise solvency requirements across European pension funds, according to Joachim Schwind, chairman of the German Hoechst Pensionskasse and board member at German pension fund association Aba.At this week’s Handelsblatt occupational pensions conference in Berlin, he pointed out that the holistic balance sheet (HBS) approach was “really a Solvency II concept with additional regulation for occupational pensions”.As such, he said it was highly complex and increased costs without taking sponsor support into account. Previous attempts to assess the value of a sponsor to IORPs have been branded “inconsistent” and “arbitrary”.  Schwind added that, even though solvency requirements were not part of the revised IORP Directive, the industry would “still have to deal with it” due to the stress tests the European Insurance and Occupational Pensions Authority (EIOPA) has scheduled between 11 May and 10 July this year.However, Jung-Duk Lichtenberger from the European Commission’s Insurance and Pensions Unit said it had “no plans to introduce Solvency II through the back-door” and suggested it was unlikely any commissioner would pick up the topic again in the foreseeable future.“Harmonising solvency requirements is not an issue for us because we are aiming at solving problems of future pension arrangements, not those from past pension promises.” His comments come after EIOPA indicated that past accrual could be excluded from any future HBS reform.Lichtenberger also hinted that EIOPA wanted to ensure pension funds were sufficiently aware of future problems.But Schwind pointed out the HBS was not fit to assess the solvency of pension systems because of their extremely long-term duration of 20 or more years.He argued that even life insurers had problems calculating their solvency requirements when their duration was only 10-15 years on average.Commenting on the IORP II draft, Schwind noted it was “very good for us” that the delegated acts granting the Commission power to regulate without parliamentary scrutiny had been scrapped by the European Council. “This way, occupational pensions will remain more closely embedded in national pension legislation,” said Schwind.He also pointed out the new draft included a clause to review the Directive after six years, not the four years as previously intended. The longer time frame gives Aba and other stakeholders more time to try and prevent HBS from happening, he said.Schwind said the paragraph in the revised directive stating that occupational pension vehicles were instruments “with a social purpose”, and not merely financial service providers, was an example of successful lobbying against over-regulation.last_img read more

first_imgMark Zinkula, LGIM’s chief executive, added that he was delighted the long-term partnership had been agreed.The deal will see one of the UK’s largest asset managers acquire a 100% stake in Aerion, subject to regulatory approval expected later this year.In a joint statement, Aerion said it would be able to draw down assets managed by LGIM in the captive mandate to invest in specific active equity strategies.But it added that drawdowns would primarily be made to fund benefit payments.“Transfers out would be permitted under certain circumstances and subject to satisfying a minimum fee requirement that the scheme is making to LGIM,” the parties noted.Any monies transferred to LGIM would be managed on the same terms agreed for the £13bn captive mandate acquired as part of Aerion.As part of its decision to end in-house management, the pension fund plans to set up an executive office to oversee investment decisions, including the external mandates remaining with managers other than LGIM.Rob Schreuer, outgoing CIO of Philips Pensioenfonds in the Netherlands, was earlier in the summer announced as the chief executive to oversee the new office.In addition to the equity, fixed income and LDI portfolios managed directly by Aerion, the in-house manager has to date worked with third-party providers for the National Grid scheme’s 7% exposure to real estate, 3% stake in private equity and select exposure to Pacific ex Japan equities and emerging market shares in EMEA and Latin America, accounting for less than one-sixth of its overall equity exposure.At the end of June, it had 60% of assets in bonds, 18% equities, 7% undisclosed alternatives, 5% cash and some exposure to private equity and property.Fenchruch Advisory advised the pension scheme on the sale. Aerion Fund Management, the in-house manager for the UK’s National Grid Pension Scheme, has confirmed it is to be sold to Legal & General Investment Management (LGIM) for an undisclosed sum.The sale, first reported by IPE last month, will see LGIM take on responsibility for £13bn (€17.8bn) of the fund’s £17bn in assets, covering its equity, fixed income and liability-driven investments (LDI).Nigel Stapleton, chairman of the trustees at the National Grid fund, admitted that moving away from in-house management of assets had been a “difficult” strategic decision.“However, the increasing maturity of the scheme and evolution to our investment strategy meant it was a carefully considered decision we could not avoid making,” he said.last_img read more

first_img“In this turbulent environment,” it said, “long-term sovereign debt of the most solvent countries acted as a safe haven, which benefited most euro-zone countries, including Spain.”Although Spanish pension plans experienced corrections, they will recover all of the “adjustment” experienced in the second and third quarters if October’s performance continues, according to INVERCO.“The IBEX35 index for Spanish equities,” it said, “shows a return of more than 10% at the date of writing this report, with lower yields for sovereign debt indices over all maturities.”Average annualised returns for Spanish occupational funds were 5.95% for the three years to 30 September 2015, and 4.85% for the five years to that date.At end-September, total assets under management for the occupational pensions sector stood at €34.3bn, slightly lower than at end-June.Total pension assets, including those in individual plans, now amount to €100.8bn, slightly down over the quarter.The number of participants in the occupational system remains the same, at just over 2m.For pension funds as a whole, most assets are invested domestically – 64.8% of portfolios, up by 2.7 percentage points over the past three months.Non-domestic holdings remain at 19.4%.The shift from fixed income to equities has started to reverse, although some of this has been caused by increases in bond values.Fixed income investments make up 59.9% of portfolios, up 3.6 percentage points since end-June.This compares with 20.5% invested in equities, a slight decrease over June.Of this, 8.1% is in Spanish shares, 12.4% in non-domestic shares.The biggest single component of pension fund portfolios – 35.3% – is still invested in Spanish government bonds, with a further 17.6% in Spanish corporate bonds.Cash holdings decreased substantially over the past three months, by more than 2 percentage points to 7%.A separate survey by Mercer confirms third-quarter volatility in Spanish pension fund performance, with poor equity returns prompting a negative average return of 0.9% during September.Returns for the first three quarters of the year were 0.4%, and 1.7% for the 12 months to end-September, compared with 6.4% for the 12 months to end-June 2015, according to preliminary estimates.Mercer’s Pension Investment Performance Service (PIPS) covers a large sample of Spanish pension funds, most of them occupational schemes.The best-performing asset class during September was fixed income, with an average return of 0.3% (0.5% for the year to end-September).The worst performer was EU equities, which made an average loss of 5% in September – following a loss of 9.1% in August – taking the return for the year to date to 0.9%.Non-EU equities fared slightly better in September, with a 3% loss, and a year-to-date return of 0.2%.For the 12 months to end-September, however, non-EU equities were the best performers, returning 6%, compared with 1.9% for fixed income and a 1.1% loss for EU equities. A strong uptick in volatility on international markets damped down Spanish pension fund performance in the third quarter, according to the country’s Investment and Pension Fund Association (INVERCO).Occupational pension funds made average returns of 1.58% for the 12 months to end-September 2015, down from 5.57% for the 12 months to end-June 2015, and 8.58% for the 12 months to end-September 2014.Twelve-month returns for Spanish pension funds as a whole were 0.5% as at 30 September 2015, down from 3.8% for the 12 months to end-June.INVERCO said falls in indices were especially intense in emerging economies, following the uncertainty created over the scale and consequences of the slowdown in the Chinese economy.last_img read more

first_imgThe client requests a minimum track record of at least three years, preferably five, and the deadline for applications is 25 November.In search number QN-2134, an undisclosed occupational pension fund in Switzerland tendered a US small-cap equity mandate worth $300m-450m.Applicants are expected to have at least $2bn in AUM for the asset class and $5bn in overall AUM as a company.Interested parties should state performance, gross of fees, to the end of September, and managers should have a minimum track record of five years, preferably eight.The deadline for applications is 23 November.Lastly, in search number QN-2135, an undisclosed Swiss pension fund tendered a global ex US small-cap equity mandate, also worth worth $300m-450m.Applicants are expected to have at least $2bn in AUM for the asset class and $5bn in overall AUM as a company.Interested parties should state performance, gross of fees, to the end of September, and fund managers should have a minimum track record of five years, preferably eight.  The deadline for applications is 24 November.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 3465 9330 or email [email protected] An undisclosed occupational pension fund based in Switzerland has tended a global, passive small-cap equity mandate using IPE Quest.The size of the mandate will range between $600m (€552m) and $900m, according to search QN-2136.Applicants should have at least $5bn in assets under management (AUM) for the asset class and $20bn in overall AUM as a company.Interested parties should state performance, gross of fees, to the end of September.last_img read more

first_imgEva Halvarsson, AP2’s chief executive, said: “I believe this clearly demonstrates that stakeholders and nomination committees have become better at utilising the full range of competence available – and that the pace of this change-process is accelerating.”At the rate of change seen over the last 12 years, it would now take 25 years for women to fill half of non-executive board seats, and 37 years for the same balance to be achieved on executive boards, she said.“However, with a pace of change similar to the past three years, it will take only 10 years before corporate boards and 23 years before executive managements achieve 50% female representation,” Halvarsson said.Out of the 286 companies in the survey, at 202 companies at least a quarter of non-executive board members were female in this latest survey, up from 170 firms reporting this level of representation in 2015.AP2 said 27 companies in the survey had no female non-executive board members and 80 had no women at all on their executive boards.The proportion of female chairs and chief executives remains at a low level, the pension fund said, though this had risen respectively to 6.3% in 2016 from 5.2 the year before, and to 5.2% from 4.5%.Meanwhile, AP2 also announced it was selling off about SEK550m of equities by divesting 11 coal and eight oil-and-gas production companies.The move was aimed at further reducing its exposure to financial risk in fossil-fuel production, the pension fund said.The capital released from these asset sales has been reinvested across all sectors, it said.Halvarsson said that in assessing the financial impact of climate risks on portfolio companies, AP2’s concern was to find out whether these risks had been factored into their market price. “Both our analysis of fossil-energy companies and our assessment of the energy sector at the close of last year have been conducted in strict adherence to the fund’s stated mission, namely — to take ethical and environmental concerns into account, without abandoning the broad goal of a maximum return on assets,” she said.Back in 2014, the fund divested its holdings in 20 companies following its first risk assessment of fossil-fuel production companies which focused on their potential climate impact, it said.The latest batch of fossil-fuel stocks to be sold off have been divested as a result of AP2’s annual follow-up to this original assessment carried out at the end of December 2015.Apart from the divestments, AP2 said a single oil-and-gas production company had been reinstated to its benchmark index, because the fund’s criteria for divestment no longer applied to this firm.In all, it said it has now divested its holdings in 23 coal and 15 oil-and-gas companies. The boards of Swedish listed companies are becoming ever more female, with this change speeding up in recent years to a point where 44.9% of newly elected non-executive directors are now women, according to research by Sweden’s second AP pensions buffer fund.The news that diversity has improved came as AP2 also announced nearly 20 fossil-fuel divestments from its portfolio.The SEK300bn (€32bn) pension fund’s 2016 Female Representation Index showed the percentage of women on the boards of companies quoted on Nasdaq Stockholm is continuing to rise, and now stands at 30.7%, up from 27.9%  in the previous year.The share of women on executive boards had also risen, reaching 20.9% from 19.5% the year before, it said.last_img read more

first_imgStandard Life, meanwhile, reported a £4.3bn net outflow from its flagship Global Absolute Return Strategies fund during 2016, while overall net inflows for its fund management business fell from £3.3bn in 2015 to £1.1bn.After the transaction, Standard Life shareholders will own roughly 66.7% of the combined company, according to the merger announcement. Standard Life CEO Keith Skeoch and Aberdeen CEO Martin Gilbert will be co-CEOs of the new group, while Sir Gerry Grimstone, currently chairman of Standard Life’s board, will be chairman of the combined entity.Skeoch said the merger would “create a formidable player in the active asset management industry globally”. Gilbert added that the two groups had “highly complimentary capabilities”.Simon Troughton, chairman of Aberdeen and proposed deputy chair of the new firm, said: “The strategic fit is compelling and creates a business with minimal client overlap and which is diversified by revenues, asset class, and distribution channel. The combination will result in a material enhancement to earnings and this, coupled with a strong balance sheet, will facilitate significant investment in the business to support growth, innovation and a progressive dividend policy.”Two of Aberdeen’s largest shareholders, Lloyds Banking Group and Mitsubishi UFJ Trust and Banking Corporation, have voiced support for the merger.Aberdeen has a track record of growing through acquisitions, such as the 2013 purchase of Scottish Widows Investment Partnership from Lloyds. Standard Life is also no stranger to acquisition, having bought Ignis Asset Management in 2014. Standard Life and Aberdeen Asset Management have agreed a merger that would catapult the combined group into the top 20 largest asset managers in the world.The two groups announced the planned transaction over the weekend. The deal is due to complete in the third quarter of 2017.According to IPE’s Top 400 analysis of the world’s largest asset managers, the combined entity – which is yet to confirm its new brand – would have assets under management of roughly €738bn, making it the fourth largest management group in Europe and 17th largest in the world. This is based on data from the end of 2015.However, both firms have recorded outflows since then, with Aberdeen taking a sizeable hit to its emerging market equities business in particular. In its 2016 annual report, Aberdeen reported outflows of nearly £33bn (€38bn) in the 12 months to the end of September. In the fourth quarter of the year it saw another £10.5bn withdrawn from across its fund range.last_img read more

first_img“As more and better ESG data become available, it is concern over increased costs – of data, process and investment talent – that will come to the fore,” said BNP Paribas. “This kind of uncertainty around the business model is giving industry participants pause for thought, and is acting as a brake on more widespread and rapid adoption.”Over half of respondents said a lack of robust data was hindering greater adoption of ESG across their investment portfolios currently, with this being a particular concern for asset owners (64%). However, only 15% expected this to be a significant barrier in two years’ time.Respondents expected a lack of advanced analytical tools and skills to be a bigger challenge by then, according to the survey. Almost a quarter of respondents said this would be a significant future barrier. Analytics, said Jean-Philippe Hecquet, risk and performance analyst at BNP Paribas Securities Services, was about the ability to interpret and extract value from data, and would come to the forefront as the data challenge was overcome.Trevor Allen, product specialist for investment risk and performance at BNP Paribas Securities Services, said: “That is where smart data, artificial intelligence, and ESG specialists will step in.“We expect to see both managers and owners really ramping up their tech and personnel capabilities to address these needs in the coming years.”Among other findings, the survey found that “frontline ESG practitioners”, such as ESG analysts and heads of responsible investment, were typically less confident about their organisations’ overall ESG capabilities than CIOs or CEOs. BNP Paribas noted that the sample of CEOs was small, however, counting 18 respondents.Of the 20% of respondents who said they did not incorporate ESG in their investment decision-making/products, the main reason given was an inability to define ESG.PRI – CFA Institute to tackle ‘important questions’The Principles for Responsible Investment (PRI) is collaborating with the CFA Institute on a global study of ESG investing to “determine how widely ESG issues are used by mainstream investors”.It is the first time that the PRI and the CFA Institute, the association of investment professionals, have worked together.The PRI said that although ESG investing strategies have gained considerable ground over the past decade, for many investors it was not yet standard practice to consider ESG considerations across all asset classes.The organisations said they hoped the collaboration would “determine the depth of the remaining barriers to ESG integration, particularly on the part of investment managers”.Paul Smith, president and CEO of CFA Institute, said:  “We look forward to working with this recognised leader on ESG matters.“Our CFA Institute members and investors around the world are increasingly interested in getting answers to these important questions.”The study will be based on information gleaned from workshops with groups of analysts and portfolio managers working on listed equities and fixed income. They will also be given a survey to complete about ESG integration.More information about the study is available here. Asset managers are concerned about the cost of incorporating environmental, social and governance (ESG) factors, according to a BNP Paribas Securities Services survey.Asked about their views on barriers to deeper integration of ESG across their investment portfolios, 31% of asset managers cited costs as their biggest challenge over the next two years. It was also the single most important future barrier cited by all respondents, according to BNP Paribas.The survey was of 461 respondents, with 233 asset managers and 228 asset owners participating. The largest share of respondents was based in the US.The concern about rising costs was seemingly linked to the need for resources to deal with expected improvements in ESG data.last_img read more

first_imgThe International Accounting Standards Board (IASB) has instructed its staff to carry out more research into its project regarding defined benefit (DB) surplus accounting rules.The controversial proposed amendments to asset-ceiling guidance under IFRIC 14 rules could lead to sponsors recognising huge additional liabilities, according to critics of the IASB’s proposals.IASB members agreed that staff should “perform further work to assess whether [they can] establish a more principles-based approach… for an entity to assess and measure its right to a refund of a surplus”.IASB vice-chair Sue Lloyd said: “It seems that we might be at risk of making a change that might only be relevant to one jurisdiction, where non-substantive changes might mean that that change has very little effect anyway.” The focus of the staff’s research will be paragraph 11 of IFRIC 14, which specifies the circumstances in which an entity has a right to a refund. Staff said they also wanted to assess whether any work to clarify the words in paragraph 11 could be kept narrow in focus.IASB director Petrina Buchanan said the board didn’t propose to change a “very strict differentiation” between a full and gradual settlement of a plan. She said staff expected to bring back papers to the board “probably before the end of the year”.Consultants who spoke to IPE ahead of the meeting said it was possible that the IASB could decide there was little benefit in continuing with the project.It was also possible that DB schemes in the UK would be able to dodge the amendments by renegotiating their scheme rules, they said.The IASB and its interpretations committee launched the IFRIC 14 project in late 2014 to clarify the circumstances in which a DB scheme could recognise a surplus. Critics of the proposals have argued that whether or not an entity recognises a liability can often turn on a narrow legal interpretation of a scheme’s rules.Since then, however, proposed changes to the wording of the board’s 2015 exposure draft have expanded the scope of the changes.Consultants have warned that the changes now capture not only an insurance buyout of a plan but also a buy-in.The board also agreed to proceed separately with proposed amendments to IAS 19. These changes deal with amendments, settlements and curtailments to DB plans.last_img read more

first_imgThe UK’s financial and pension regulators are working together to develop a pensions regulatory strategy for the next five to 10 years, they announced today.In a joint statement, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) indicated they were doing so in light of significant change in pensions in the last five years, such as as a result of the introduction of pension freedoms and auto-enrolment.“As part of our ongoing efforts to ensure the sector works well for consumers and workplace pension savers, we are working together on a pensions strategy which will look at how we will work together, and with stakeholders, in the coming years,” they said.The regulators are planning to engage with stakeholders in the spring to discuss their collective view of the current situation in the pensions sector and their respective regulatory remits. The regulators’ likely key areas of focus in the coming years will also be a topic of discussion with stakeholders.They said their work on developing a strategy will also be informed by the FCA’s research, the TPR’s ongoing work on reviewing the way it works, the outcome of the Work and Pensions Select Committee’s inquiry into the pension freedoms, and the impact of a government review of auto-enrolment.The FCA and TPR have collaborated on joint publications before, such as guidance on defined contribution pension schemes, and they were both heavily involved with the British Steel Pension Scheme, for different reasons.Malcolm McLean, senior consultant at Barnet Waddingham, said the collaboration was welcome as there were “clear areas of overlap and duplication between the two bodies that can sometime create delays and a degree of confusion and uncertainty for stakeholders”.In the longer-term a single regulator for pensions might be better, however, he suggested.last_img read more

first_imgIn a separate letter to Field, Jon Millidge, Royal Mail’s chief risk and governance officer, explained that the company had accepted legal advice that the current CDC legislation – contained in the Pensions Act 2011 – would not be suitable “as a means of introducing an entirely new type of pension scheme into UK legislation”. The UK government plans to table additional primary legislation to enable the introduction of collective defined contribution (CDC) schemes, it said in its response to a report by the parliament’s pensions committee. The UK already has laws enabling CDC schemes, although secondary legislation added to these laws would still be required to make such arrangements possible.However, in his letter to Frank Field, the chair of the Work and Pensions Select Committee, pensions minister Guy Opperman said the government had looked closely at existing legislation and decided that further primary legislation was needed, most likely in the form of a standalone government act. “Royal Mail and their legal advisers agree that new primary legislation would be needed to support their intended scheme,” said Opperman. Royal Mail and the CWU have been lobbying for legislation to enable their risk-sharing arrangementRoyal Mail also agreed, added Millidge, that “given the potential significance of this change for the UK pensions landscape… it is appropriate in terms of public transparency for the key principles behind CDC to have the level of parliamentary scrutiny which primary, rather than secondary, legislation requires”.In February, Royal Mail and the Communication Workers Union (CWU) reached a ground-breaking agreement “in principle” to introduce a CDC scheme. The select committee’s report, published last July, had called on the government to move quickly to enable the creation of the UK’s first CDC pension scheme. Government consultation coming upIn his letter to Field, Opperman also confirmed the government’s plans to launch a formal consultation this autumn on the potential use of CDC schemes.“We will set out our proposed approach to CDCs in our consultation, and will then aim to bring forward the necessary primary legislation as soon as parliamentary time allows,” he said.Opperman said the consultation would consider:Risk-sharing;Appropriate methodologies for calculating cash-equivalent transfer values for CDC members in the accumulation stage;Whether CDC members should be allowed to transfer out in the decumulation stage;Requiring CDCs to publish their rules for calculating and distributing member benefits, and reporting funding position and strategy;A requirement for a specific qualification for CDC trustees and their advisers.The committee said the “extremely positive” response indicated that the government had taken on board almost every one of its recommendations.Opperman explained that the government was focusing on a framework that would fit the needs of Royal Mail and the CWU and would therefore not be seeking to accommodate mutual, multi-employer and standalone schemes, as the committee had suggested.“This is a real win-win situation,” said committee chair Field. “The historic deal struck between Royal Mail and CWU, combined with the government’s ready willingness to make CDC pensions a reality, mean a huge change is coming to the UK pensions landscape, offering a new and different kind of ‘pension choice’.”last_img read more