ABP – The €309bn civil service scheme ABP has appointed Eiko Smid as public affairs officer at its pensions bureau. He will be tasked with lobbying the government and politicians in The Hague. Smid has left The Hague-based public affairs bureau Droge & Van Drimmelen, where he has worked as a senior consultant for the last 10 years.ING IM – ING Investment Management has appointed Moudy El Khodr and Kris Hermie as senior managers of its US High Dividend and Global High Dividend strategies. They will join the company’s Equity Value team in Brussels, and report to Nicolas Simar. Moudy has 16 years of experience in dividend investment at ING IM and Petercam. Hermie also spent 16 years as an investor at both companies.Newton – Julian Lyne has been appointed head of global consultant relations, responsible for institutional consultant relations across the EMEA, North American and Asia-Pacific regions. He joins Newton from F&C Investments, where he was head of global consultant and UK institutional business. Prior to joining F&C in 2008, he was head of global consultant relations at HSBC Investments.Liquidnet – The institutional trading network has appointed Christopher Wall as head of market surveillance in Europe and David Stockwell as market surveillance specialist. Wall joins from Newedge, where he was a senior compliance officer working in the company’s London office. Prior joining Liquidnet, Stockwell was an equities trader at Société Générale and before that at Wood Street Capital and ABN AMRO. Legal & General Investment Management, Principles for Responsible Investment, ATP, ABP, ING Investment Management, Newton, LiquidnetLegal & General Investment Management (LGIM) – IPE understands that Hugh Cutler, head of Europe and the Middle East at LGIM, has left the company after more than five years. In the past, Cutler has served as managing director at Barclays Capital Partners, as well as a consultant at Railpen Investments and Towers Perrin.Principles for Responsible Investment (PRI) – Martin Skancke has been appointed chair of the PRI’s Advisory Council. Based in Norway, he is to succeed Wolfgang Engshuber, who completes his three-year term as council chair. Skancke previously served as director general and head of the asset management department at the Norwegian Ministry of Finance, where he designed and established the Norwegian Government Pension Fund. He spent four years as head of the Domestic Policy department at the office of the prime minister of Norway, acting as chief advisor on economic policy issues, including pension reform. In 2011, he left the Ministry of Finance to establish his own consultancy to help governments in developing countries create their own SWFs.ATP – Anne Broeng has been appointed to the supervisory board of ATP, with effect from 1 April 2014. Broeng has been a director of PFA Pension since 2009, but the company announced in February this year that she had decided to leave to look for new challenges. She worked at PFA Pension for 12 years. Broeng will remain at PFA officially until the end August, according to the terms of her notice period.
Five UK institutional investors challenging the Royal Bank of Scotland (RBS) over a £12bn (€15bn) share issue in 2008 have begun legal proceedings against the bank in a court in London.Pension fund Universities Superannuation Scheme (USS), asset managers Aviva Investors and Legal & General Investment Management (LGIM) and insurers Prudential and Standard Life will commence legal proceedings today in London’s Royal Courts of Justice (RCJ).Today’s case management hearing is a pre-argument meeting of the two parties, with legal cases to be put forward soon after, IPE understands.The legal challenge relates to the institutional investors allegedly being misled at the issue that RBS announced in order to shore up its books after a controversial takeover of Dutch bank ABN AMRO. RBS was bailed out by the UK government only months later.The institutions, represented by legal outfit Quinn Emmanuel, are set to argue that misleading information was provided as the bank asked shareholders to increase stakes in the April 2008 share issue.At the time of issue, RBS was trading at £34.60 per share, which then plummeted to £4.94 by the end of 2008.The bank faced near collapse around six months after the £12bn share issue, only to be bailed out by UK taxpayers, with the government still retaining an 81% stake.The lawsuit is expected to be the tune of £1bn in compensation from the bank.However, when the case was launched in April this year, the exact split among the five claimants was yet to be decided.The case follows on from a group of more than 100 institutional investors making a similar case in April 2013.RBS, USS, Prudential, LGIM and Aviva Investors all declined to comment further on the latest meeting regarding the case.
The manager said the multi-asset fund would invest on a “risk-aware” basis similar to risk-parity strategies seen in the defined benefit (DB) sector.Its core portfolio would be 40% growth, 40% defensive and 20% inflation-protection assets, with further discretionary allocations based on medium-term investment views.The remaining strategy is based on downside risk-management, with a 6% cap on volatility, helping to keep potential losses below 8%.The volatility management strategy is akin to that seen in the insurance sector allowing insurers to hold riskier assets on their balance sheets, Schroders said.In practice, if volatility within the multi-asset fund rises above 6%, it will divest into cash until the level falls below the cap, before fully re-investing into the asset-allocation strategy as volatility subsides to normal levels.Schroders said the fund would also reduce the cap if the fund experienced continued losses, down to a volatility level of 1%, leaving some non-cash assets to avoid cash lock.The cap, and cap-reduction strategy, will allow the manager to protect losses up to a maximum of 8%, but, given the 1% minimum volatility, it cannot guarantee this, Schroders said.Back-testing over some 15 years by the manager found the largest loss figure to be 6.46% using the volatility-cap management strategy, compared with 11.84% if the core portfolio was invested without.John McLaughlin, head of investment solutions at Schroders, said the volatility strategy had never been used for the humble DC investor.He also said no downside management would be free, and that the strategy would sometimes hamper returns.“When it works well is a scenario like we 2008, where the market became intrinsically stressed and volatility spiked before we had the most severe falls,” he said. “Conversely in 2009, when the market rallied again, it would have taken us time to get back into the market because volatility was elevated as the market was rising, and this rule would tell us to leave, so it is not perfectly responsive.“You can also sometimes get a very calm market that suddenly dislocates downwards, and if this happens, we would follow the market down.“But that initial drop would immediately induce volatility, causing the fund to de-risk. You will lose something but not as much if you sat tight.”The fund’s investment strategy will include highly liquid assets to minimise transaction costs, with only around 50% in synthetics to keep the fund below the upcoming 75 basis point charge cap on DC default fund investments.The strategy was launched in reaction to changes announced in 2014 Budget, which removed compulsory annuitisation, with DC savers expected to exert freedom and move towards cash withdrawals and income drawdown. Schroders is to use a volatility-cap approach in its new defined contribution (DC) strategy launched to provide pre-retirement options for investors after compulsory annuitisation ends this April.According to the UK fund manager, its ‘Flexible Retirement Fund’ is designed to cater for DC members approaching retirement who are unsure whether to pursue income drawdown, cash withdrawal or an annuity.DC asset managers are expected to continue launching products around the shift in policy from the UK government, with old default strategies inapplicable for many savers.Schroders said its new multi-asset fund would target returns of inflation plus 2%, while stating a maximum loss value of 8% over any given timeframe.
The UK pensions regulator has said it used the threat of its anti-avoidance powers to secure a better deal for members of a small private sector defined benefit (DB) scheme following the sale of the sponsoring business.The Pensions Regulator (TPR) published a regulatory intervention report on the case of the sale of data management services provider Database Group, which it said would have led to “an insecure future” for the DB scheme of one of its trading companies.This is a closed pension scheme with around 100 members that, as at 31 May 2015, had an estimated buyout funding deficit of £7.7m (€8.6m).In 2015, an offer was made for Database Group on the condition that the company be sold without its DB pension scheme. This formed the basis of an application for clearance submitted to TPR in July 2015.Nicola Parish, executive director for front-line regulation at TPR, said being approached for clearance allowed TPR “to have a seat at discussions and ensure a better outcome for scheme members”.The regulator opened an avoidance investigation because it had concerns about the risk of the offer effectively removing support from the scheme, although it “understood the commercial rationale and wider benefits of the Merkle acquisition”, according to Parish.“This case demonstrates TPR will consider using anti-avoidance powers in respect of a smaller scheme where appropriate,” she said.“It illustrates how the existence of these powers can act as a deterrent against possible avoidance activity.”In other news, the UK government – via the department for business, energy and industrial strategy – has responded to a damning parliamentary report on the collapsed high street retailer BHS, whose two underfunded schemes were transferred to the PPF.In a letter to the chairmen of the committees behind the joint investigation, business minister Margot James said the government was “determined to ensure the Pensions Regulator has the powers it needs to deter and tackle misbehaviour and that these address emerging threats and challenges”.She added: “We are actively considering these issues, and, should we need to bring forward further legislation in light of all the evidence, then we will, of course, do so.”She also said the government “shares your concern” about “the sharp contrast” between the impact of BHS’s collapse on workers and pensioners and payments received by senior executives at BHS and its successor owner Retail Acquisitions, and “apparent weaknesses in the corporate governance of the companies concerned”.Responses to the BHS report from Retail Acquisitions and Taveta Investments, parent of former sponsor Arcadia Group and therefore the ultimate former parent company of BHS, were also released by the work and pensions committee, in addition to a counsel opinion.Lastly, British Airways (BA) has agreed to pay deficit contributions of at least £300m a year into one of its staff pension funds to shrink the scheme’s funding shortfall, which has grown slightly since the previous three-yearly valuation to £2.8bn, according to International Airlines Group (IAG), BA’s owner.The commitment to payments into the scheme is part of an agreement signed between BA and the trustees of the New Airways Pension Scheme regarding the latest valuation as of 31 March 2015.The technical deficit of £2.8bn is wider than the £2.7bn shortfall calculated at the March 2013 valuation.The fixed deficit contributions will be made every year until 2027, according to the deal, which IAG said gave BA the flexibility to make dividend payments.The pact also capped the level of additional contributions the airline makes, based on its cash balance at 31 March in any year, at £150m a year.
Forty asset management groups could be removed from the Financial Reporting Council’s (FRC) Stewardship Code if they fail to improve their compliance statements.The FRC today published a list of signatories to its Stewardship Code and ranked asset managers in three ‘tiers’.Those in the third (bottom) tier may be removed from the list of they fail to improve the quality of their statements, the FRC said.In a statement, the FRC said: “Asset managers who have not achieved at least Tier-2 status after six months will be removed from the list of signatories, as their reporting does not demonstrate commitment to the objectives of the Code. The FRC welcomes contact from signatories, particularly those in Tier 3, to discuss improvements to reporting. “Signatories to the Code have been tiered according to the quality of the reporting in their statements based on the seven principles of the Code and the supporting guidance.”The Stewardship Code is a voluntary set of principles designed to encourage asset managers and other investors to engage with the companies in which they invest and exercise voting rights.Signatories are expected to report regularly on their voting activity.Among the 40 names in Tier 3 are Franklin Templeton, Neuberger Berman and Brewin Dolphin.Nestlé Capital Management – which manages assets for Nestlé’s pension funds – is in the second tier*.The FRC has not made any move to remove any company from the signatories list.The council said it would “periodically” reassess the quality of reporting.Of the nearly 300 firms signed up to the Code – including asset managers, asset owners and consultants – 120 are in the top tier.This is three times the number in the top tier when the FRC began the Code, and it accounts for nearly 90% of assets managed by Investment Association members.Stephen Haddrill, chief executive at the FRC, said: “Constructive engagement between investors and companies is vital for the long-term success of our economy. Investors play a crucial role in encouraging companies to think more about their long-term strategy.“Reporting against the Stewardship Code is not a box-ticking exercise, and signatories were encouraged to provide a clear description of their approach to stewardship, with explanations for non-compliance where appropriate.“We will be looking for continuous improvement from Code signatories, but we are pleased with the response to this exercise, and many signatories have reaffirmed their commitment to quality, transparent reporting and stewardship.”The FRC initially announced plans to rank asset managers and asset owners in December 2015.* Note: The FRC initially reported Nestlé as being in the third tier – it is actually in the second.
In other news, the €1.2bn pension fund for news daily De Telegraaf has appointed NN Investment Partners as fiduciary asset manager, responsible for strategic investment advice and manager selection, via its Altis subsidiary.Until now, the pension fund has carried out its investment policy in-house, with more than 40% of assets – including listed property and credit – placed in external funds.It said it would also outsource liability-driven investment, adding that it aimed to have all of its assets managed externally. Meanwhile, the €1.1bn Pensioenfonds Arcadis has announced that it will outsource the management of its fixed income portfolio, as well as its interest and currency swaps, to Cardano.Until now, its bonds holdings have been managed by Delta Lloyd Asset Management, while the scheme carried out its interest and currency hedge in-house.The pension fund said it was concerned that the management of its derivatives, including central clearing, would become overly complicated following the introduction of the European Market Infrastructure Regulation (EMIR).Lastly, the €4.8bn Dutch pension fund for IT company IBM has said it will place its defined benefit plan with provider TKP, as it no longer wishes to use two different providers.TKP is already the administrator for IBM’s defined contribution arrangements, while its DB plan – covering 11,000 participants – remained with Blue Sky Group.Wouter van Eechoud, the scheme’s director, said the pension fund was hoping to simplify processes and believed that a single provider would improve efficiency and quality.He took pains to emphasise that his scheme had not been dissatisfied with Blue Sky’s service. Levensmiddelen, the €4.8bn pension for the Dutch grocery sector, is planning to drop its administration provider Syntrus Achmea in preference for rival provider AZL.It said Levensmiddelen and AZL would sign a declaration of intent in the near future, preceding “exclusive” negotiations, with the view to securing a final agreement by the first quarter of 2017.The pension fund said it also wanted to outsource board support, as well as advice on actuarial matters and communications, to AZL.Levensmiddelen was one of several Dutch pension funds forced to find a new provider after Syntrus Achmea announced in November that it would stop offering its services to industry-wide schemes.
The Dutch Investment Institution (NLII) said new commitments during a second funding round doubled the assets in its corporate lending fund (BLF) to €960m.It said that the additional assets have been pledged by NN Group, the large metal schemes PMT and PME, insurer ASR, and the European Investment Fund (EIF), most of whom had already participated in the initial funding round.According to the NLII, €195m has already been lent to small and medium-sized companies in the Netherlands since the fund’s inception in 2015.A spokeswoman said that the SME fund was now closed and would focus on issuing €250m of loans annually. She added that no decision has been made yet about setting up a successor corporate lending fund.Commenting on the new commitments, Loek Sibbing, NLII’s chief executive, said that the fund had already enabled a number of Dutch companies to grow.So far, 11 loans of between €10m and €24m have been issued to companies in various sectors of the Dutch economy, including agricultural businesses, food manufacturers and leisure companies, according to the NLII.The €137bn asset manager Robeco is acting as manager for the SME fund. It also conducts analysis of all proposed loans.Erik Hylarides, BLF’s manager at Robeco, said that all parties were “extremely positive” about the new type of financing, adding that the BLF had been able to achieve “attractive returns for investors with excellent prospects”.The NLII said that the participating investors will receive interest on their investments in the BLF at market rates.According to Robeco’s Hylarides, the NLII recently added Deutsche Bank to its panel of co-issuers for loans, which includes Rabobank, ING and ABN Amro.The BLF provides loans of between €5m and €25m, with one bank then issuing a loan on the same terms for at least the same amount. The combined loan to be issued is therefore at least €10m.To qualify for a loan, a company’s net debt and operational results must be between €10m and €100m and between €5m and €50m, respectively.
Austria’s next government should prioritise strengthening its second pillar pension provision, according to Mercer.In a report into the first half performance of Austrian Pensionskassen, the consultancy firm referred to recent reforms in Germany, introducing non-guaranteed, defined contribution pensions for the first time.“In Germany the political parties have realised that a supplementary pension in the form of occupational pension plans is necessary for the future retirement provision of the citizens,” said Michaela Plank, pension expert at Mercer Austria, referring to the newly passed “Betriebsrentenstärkungsgesetz” (BRSG).The Austrian minister for labour and social affairs, Alois Stöger from the Social Democrats, told Austrian radio Ö1 on Monday he would be “generally open to the idea” of integrating provisions for second pillar plans into collective bargaining agreements – the first time a minister has mentioned this possibility. “This could help [small and medium-sized businesses] to set up pension plans,” added Plank.Andreas Zakostelsky, chairman of the Austrian pension fund association FVPK, said he supported integrating auto-enrolment into some of pension plans.“This would particularly help people with lower income to increase their income in retirement and it would be a good leverage for the system,” he said.The FVPK wanted the new government to set a deadline for coming up with a plan to strengthen the second pillar, Zakostelsky added. Austria heads to the polls for a general election on 15 October.“This plan should be negotiated with stakeholders for the pension industry to achieve a comprehensive reform of the whole pension system,” he said.Equity allocations boost returns in H1 2017Austrian pension funds returned 3.2% on average over the first half of 2017 following an active increase in equity allocations, according to FVPK.At the end of June, the average equity allocation stood at 34.7% across all portfolios offered by Austria’s nine main providers. This compared to 25.4% at the same point last year.“For this increase the pension funds cut the exposure to bonds, which is now 58% on average compared to 68.2%,” Zakostelsky told journalists yesterday.He added that he was “surprised” the exposure to real estate had hardly changed at all over the period, standing at 3.6% compared to 3.5% a year ago.In its separate analysis, Mercer Austria found there was a wide range in the performances reported by different portfolios.Defensive portfolios – with equity exposure up to 16% – yielded between 2.63% and 0.98%. The €6.35bn VBV Pensionskasse was the best performer in this category, according to Mercer. The company’s dynamic portfolio also posted the best six-month return among its peers.Dynamic portfolios – with equity exposure above 40% – yielded between 5.51% and 2.27% in the first half of the year.“The considerable difference in the performance is mainly down to differences in volatility and duration,” said Mercer’s Plank.
The chief executive of AP7, one of Sweden’s national pension funds and the default provider in the premium pension system, has called on the government to change its investment rules and allow investment in real estate and infrastructure.In its response to the government’s pension system reform proposals, which were put out for consultation in December, AP7’s chief executive Richard Gröttheim said: “As AP7’s managed capital grows, it becomes increasingly important to review how AP7’s investment rules can be modernised and streamlined, with a view to making a good default option even better.”Increased opportunities to invest in assets suitable for long term pension savings would make it possible to build a more diversified portfolio less dependent on the development of global equities, he said.“Investments in real estate and infrastructure could increase risk diversification and lead to a better pension product,” Gröttheim said. His words echo comments from the pension fund’s chairman Bo Källstrand when he wrote to the cross-party Pensions Group last autumn on behalf of the fund’s board at an earlier stage in the reform process.Under its current investment rules, AP7 is not allowed to invest in illiquid assets, such as infrastructure and real estate.Data from the pension fund’s recently released annual report reveal its assets under management increased by more than 25% in the course of 2017.Assets under management grew to SEK430.7bn (€42.2bn) by the end of 2017 from SEK343bn. Its leveraged equity fund, which makes up the bulk of that, returned 17.7% after 2016’s 16.5%.AP7 attributed the increase in total managed capital mainly to inflows into its funds during the year and positive development in global equity markets.Capital inflows grew to SEK35.2bn in 2017 from SEK23bn in 2016, while capital outflows, mainly in the form of premium pension transfers out, fell to SEK4bn from SEK6.2bn.Under the proposals in the current draft form of the pensions reform, the number of savers with their money in AP7’s Såfa balanced pension product will increase significantly.The 17.7% return on the equity fund, which currently has an official leverage degree of 135%, was 0.3 percentage points lower than the benchmark index, AP7 said in its annual report.Global stock markets rose 12.2% in 2017, it said.
Dutch IT firm and pensions administrator RiskCo is to take over Inadmin, APG’s subsidiary for the administration of defined contribution (DC) schemes.The transaction would be the second large take-over by the Utrecht-based company, which acquired Aon Hewitt’s defined benefit administration in October.Following the addition of Inadmin – scheduled for May – RiskCo will serve 250,000 participants, up from 75,000 at the moment.Cees Krijgsman, chief executive of RiskCo, said his company would generate 80% of its turnover from administration, as it would acquire Inadmin’s administration for DC, investment and insurance, including “attractive portals for participants”. “We are to offer a complete range for pensions administration and we are ready to fulfill our goal of 1m participants with five years,” he added.APG set up Inadmin in 2013 as its DC subsidiary, following the introduction of the Netherlands’ low cost vehicle for DC provision, known as PPI.Inadmin’s client portfolio includes the PPIs of ABN Amro and Willis Towers Watson (LifeSight) as well as the DC pensions of insurer ASR.APG, the provider for the €409bn civil service scheme ABP, said it was selling Inadmin for “strategic reasons”, and wanted to focus on serving industry-wide pension funds.“Thanks to Inadmin, the APG organisation has gained experience with DC pensions,” said a spokesman.However, Inadmin was also making a loss: €2.6m in 2015, according to the latest publicly available figures. However, APG argued that this didn’t play a role in its decision to offload the subsidiary.Krijgsman said that RiskCo could improve the results of the company – to be renamed RiskCo-Inadmin – quickly.“All pensions providers are struggling with IT, but it is our core business, and we have been developing administration systems for years,” he said.He added that RiskCo could fully integrate technical and organisational aspects and improve efficiency as a result.APG and RiskCo – which is 50% owned by large British administration firm PraxisIFM – declined to provide details about the price of the takeover.Krijgsman said his company would replace a number of system components in order to achieve a faster and cheaper adjustment of pension plans and addition of new products.He added that RiskCo would welcome new clients, including ones from abroad: “Through PraxisIFM and Inadmin we have leads to large players who want to offer DC arrangements in Europe through an IORP.”