The CHF1bn (€820m) Pensionskasse for Swiss fashion company Manor has cut its exposure to bonds from 30% to 15% to free up money for higher-yielding investments.Martin Roth, chief executive at the scheme, which has a target return of 3%, told delegates at the 2014 Swiss Pensions Conference in Rüschlikon that the step had been necessary.“I do not think, over the next 10 years, we will see the same returns from bonds as we have over the last 20,” he said.Instead, the pension fund has allocated “very strongly” to alternative investments such as infrastructure, hedge funds and convertibles. On the same panel at the conference, Stefan Köhler, senior portfolio manager at Swiss pharmaceutical company Hoffmann-La Roche, reported that the company’s CHF7bn Pensionskasse was “managing its bond exposure more via the duration”, which is approximately two years lower than that of the average Swiss Pensionskasse.Heinrich Flückiger, a pensions expert at Swisscanto, pointed to a growing trend of lowering duration in bond portfolios in Switzerland, with pension funds aiming to increase duration again once interest rates go up.“However, there is interesting research that, over one year, the downside risk of almost all bonds is much greater than the upside return opportunities,” Flückiger said, adding that some Pensionskassen were therefore opting for equities instead.He said there was an unprecedented level of interest in fundamental indices, with some of his clients shifting half of their passive portfolios into investments based on fundamental or rule-based indices.“Three years ago, nobody was interested in alternative indices,” he said.At La Roche, Köhler also still believes in return from equities and has increased the fund’s equity exposure by 700 basis points to 37%.On the other hand, Stefan Beiner, head of asset management and deputy director at the CHF36bn Publica fund, decided to sell off some equities at the beginning of the year, as he was unsure the asset class could return as much as it did over the previous two years, when Publica increased its exposure to equities.Instead, Publica is considering to go into private debt, infrastructure debt and direct lending, although “not necessarily in Switzerland”.Beiner stressed, however, that the fund was still “at the beginning” of the assessment process of whether these investments would be worth the effort and risk.Last year, the Roche pension fund made two direct investments in Swiss infrastructure using in-house legal expertise, but Köhler pointed out that this was the limit.He said he was “disappointed” by the range of infrastructure products, most of which are structured as private equity investments, with a planned exit after 10 years.“But why should I sell after 10 years only to get back money I immediately want to reinvest?” he asked.”I am not talking about buy and hold, but buy and manage would be nice.”Roche and Manor have joined forces with other Swiss Pensionskassen to pool assets and resources for infrastructure investments.All three panellists argued that the debt situation of Swiss regional and local authorities was too good to really be in need for external infrastructure financing.However, the Swiss government is thinking to establish a so-called Zukunftsfonds, in which venture capital is to be sourced from domestic institutional investors.All three pension fund representatives said they were against any obligation to pay into this fund, with Köhler arguing that venture capital investments only worked when there were follow-up investors after the seed money had gone.“We are no development bank,” he said. “That’s what other investors are for.”
The mandate calls for a minimum track record of three years (preferably five) and a target tracking error of 0%.Respecting the mandate’s benchmark, the investor said it was “open to manager suggestions”. Applicants should state performance, gross of fees, to the end of June.The closing date for applications is 22 October.For any questions regarding this search, please email [email protected] Questions submitted after 17 October will not be answered. Please do not request information about the client or its location, as this will not be replied to. An undisclosed pension fund based in Continental Europe has tendered €100m corporate bond mandate using IPE-Quest.According to search QN1459, the investor is looking to invest in euro-denominated, investment-grade (AAA-BBB) bonds, using a pure passive indexation strategy.Applicants must have at least $250m (€156m) in assets under management (AUM) for the mandate itself and $5bn in AUM as a company.They must also have French-language capabilities.
The €6.5bn pension fund for disabled workers in the Netherlands (PWRI) has confirmed it is exploring a possible merger with three undisclosed pension funds to “secure certainty” for its 210,000 participants.PWRI has been closed to new entrants since 1 January, when new legislation came into force aiming to increase the participation of workers with disabilities.Kees Bethlehem, the scheme’s chairman, declined to provide details about the merger candidates and stressed that continuing as an independent pension fund was also an option.However, Frans Prins, director at PWRI, said last year that, if the pension fund opted for independence, contributions would have to increase to 40% of the pensionable salary by 2050. At the time, he underlined the importance of PWRI as an independent scheme, in order to serve its specific target group.He pointed out that life expectancy for the pension fund’s participants was four years less than the national average and said they therefore required a tailor-made approach.
National Employment Savings Trust, Candriam Investors Group, Hermes Investment Management, Ortec Finance, Mirae Asset Global Investments, Legal & General Investment Management, Ambienta SGR, Indexx Markets, Barnett Waddingham, Aberdeen Asset ManagementNational Employment Savings Trust (NEST) – Chief executive Tim Jones is to stand down at the end of the year after eight years in charge of the auto-enrolment vehicle. Jones was appointed in October 2007 as head of the Personal Accounts Delivery Authority (PADA), the government body charged with delivering NEST – an auto-enrolment master trust. PADA was renamed NEST in the build-up to auto-enrolment. The organisation said it was commencing its recruitment drive for a successor immediately and hoped to have someone in place by the time Jones steps down.Candriam Investors Group – Matthieu David has been appointed head of Italy, responsible for consolidating the asset manager’s presence in the pension fund and institutional mandates sector. He joins from BNP Paribas Investment Partners, where he was the director of external distribution in Italy. Before then, he held the position of senior client relationship manager at Fortis Investments Management Italia and, prior to that, spent more than 10 years with AXA Group in Italy.Hermes Investment Management – Eoin Murray has been appointed head of Hermes Investment Office, responsible for issuing the ‘kitemark’ given to all new investment strategies. He joins from GSA Capital Partners and previously served as CIO at Old Mutual. He has also held senior positions at Callanish Capital Partners LLP and Northern Trust Global Investments. Ortec Finance – Twan Possen has started at Ortec Finance as a senior consultant on pensions and insurance risk management. Previously, he worked at Aegon Asset Management as a senior consultant for investment solutions for three years, after working for a similar period at Ortec Finance as asset-liability specialist for insurers.Mirae Asset Global Investments – Sander van Ouwerkerk has been appointed head of Benelux and Nordic sales. Based in London, he will target a range of institutional, wealth management, fund of fund and private bank clients. Van Ouwerkerk joined Acadian Asset Management in 2011 as vice-president and director of business development. Before then, he worked at Dimensional Fund Advisers, where he was an institutional client manager.Legal & General Investment Management – Omar Saeed has been appointed senior portfolio manager within the global fixed income team. He joins from Zurich-based Swisscanto Asset Management, where he managed high-yield funds and absolute return portfolios. Before then, he held positions at Western Asset Management, F&C Asset Management, Standard & Poor’s and Habib Bank.Ambienta SGR – Nico Helling has been appointed a partner in Germany. He joins from Vorndran Mannheims Capital Advisors, a European mid-market fund, where he was a partner. Before then, he spent 10 years at Montagu Private Equity, where he was responsible for the investment business in Germany, Austria and Switzerland, as well as Poland and Eastern Europe.Indexx Markets – The managed indices provider has appointed Steve Thomas and Simon Brickles as non-executive directors. They join the board with immediate effect. Thomas is professor of finance at Cass Business School, while Brickles was head of AIM at the London Stock Exchange from 1994 until 2003.Barnett Waddingham – Pete Smith has been appointed to the investment consulting team as the company expands in Scotland. Based in Glasgow, he joins from Aon Hewitt’s investment consulting business.Aberdeen Asset Management – Mike Brooks has been appointed co-head of Diversified Growth along with Mike Turner. Brooks joins from Baillie Gifford, where he was the co-founder and an investment manager on the Baillie Gifford Diversified Growth Fund.
Institutions lacking a China strategy should ask themselves when they intend to develop one, Joseph Mariathasan writesI was sitting next to a senior Scottish lawyer and his wife over lunch near Glasgow a couple of years ago, and they were moaning that their 20-year-old son had decided to be a photographer but was now staying at home, doing little to fulfil his aspirations. It was wonderful to see their expressions when I suggested the answer was quite simple: they should buy themselves return tickets to Beijing and their son a single.I was joking, of course, but only half joking. In 1996, when I first went to Beijing, and the foreign community was small enough everyone seemed to know each other, I met quite a few people in their 20s who had done exactly that. Indeed, one person I met last year is now the COO of a major insurance company based in Asia.China still represents a tremendous opportunity. The inclusion of the yuan renminbi in the IMF’s Special Drawing Rights marks another and significant step in China’s path towards full capital account liberalisation. A mature and functional finance industry, including functional capital markets, is a pre-requisite for successful currency and capital account liberalisation. The better financial markets work, the greater the benefits of liberalisation. A freely floated currency requires meaningful price signals to be reflected in a benchmark interest-rate curve, credit spreads and foreign-exchange crosses, both spot and forward, as well as in stocks and traded commodities. Of course, this all assumes mature financial-institution balance sheets, intermediation mechanisms and traded capital markets, with investors and issuers managing their balance sheets though this system.There is still some way to go, but China’s financial Big Bang has already commenced, and its pace is accelerating. There are numerous important new sectors sporting annual growth rates from 20-30% up to 100-500% where there was no business as recently as 3-6 years ago in the absence of a licensing and regulatory framework. The scale of this development is unprecedented. What China has already accomplished in terms of its exports, urbanisation and real estate development will now occur in finance.For the world’s investors and fund managers, China’s Big Bang will provide a cornucopia of opportunities. China’s non-SOE corporates will become the largest credit-issuer base in the world. On a purchasing-power-parity-adjusted basis, the small and medium-sized enterprise (SME) sector is larger than that of Europe or the US but underdeveloped in credit-issuance terms. The ratio of total liabilities to assets in the private SME sector is still only about 31%, and fully half currently carry no debt on their balance sheets.Liberalisation appears self-perpetuating. The success of renminbi (RMB) liberalisation since 2009, combined with achievements in domestic finance liberalisation, together require – and would allow for – the liberalisation of the exchange rate. This can be expected to continue, in fits and starts and at varying speeds. In time, a free-floating RMB and global activities of China’s larger financial institutions will require significant opening of the capital account. The flow of China’s domestic retail savings into overseas assets has barely begun, but it will become a major source of capital, particularly into higher-yielding assets. The US Federal Reserve’s rate rise and the potential for the US dollar to strengthen on the back of further increases will act as added stimulus for those flows.The historical impact of China’s financial Big Bang is often lost in the rhetoric of speculation and hysteria about short-term market moves. Yet these are of little consequence and to be expected in any developing economy. The financial centres of the world are already competing to establish themselves as offshore centres for Chinese finance. It also is another reason why investors and financial institutions should consider looking at China as a separate investment proposition, as opposed to merely a component in a heterogeneous emerging market asset class.The opportunities are vast, the changes are swift, but the experience of many institutions in China is still low or non-existent. As we enter 2016, those institutions that haven’t yet developed a China strategy should certainly start asking themselves when they intend to develop one.Joseph Mariathasan is a contributing editor at IPE
Applicants should manage at least AUD500m in the respective asset class and have a track record of two years, although three would be preferred.Interested parties should state performance, gross of fees, to the end of March.The deadline for applications is 31 May.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 institutional investor based in Australia has tendered two global mandates, each worth AUD60m (€38.6m), using IPE Quest.One is a diversified growth/multi-strategy mandate, the other an absolute-return bond mandate. According to searches QN-2186 and QN-2187, the client is looking for either pooled or segregated accounts.The benchmark is cash plus 5% for the diversified growth/multi-strategy mandate and cash plus 2-3% for the bond mandate, but, in each case, the benchmark will vary “depending on where the product is based”.
PMT and PME, the large industry-wide pension funds for Dutch metal workers, are assessing the possible effects of Brexit on their counterparties in the UK for cash transactions and derivatives transactions such as interest swaps.They are also considering whether to start entering contracts with additional players elsewhere in the European Union.On its website, the €63bn PMT said it was continuously monitoring developments in interest rates, currency movements and the strategic weightings within its investment portfolio. In the run-up to last week’s Brexit referendum, in which the UK voted to exit the EU, the scheme acknowledged it had decided against taking hedging measures, “as the available options would have come at too great an expense had the UK decided to remain”. Both PMT and PME, the €42bn scheme for the electro-technical engineering sector, said they had fully hedged downward risk on the pound, and that they had covered 50% of the interest risk on their liabilities.Meanwhile, SPF, the €3bn pension fund for physiotherapists, said it recently reduced its equity allocation in favour of “safe” government bonds, while the €21.5bn industry-wide scheme PGB said its funding had fallen by 3.5 percentage points in the immediate aftermath of the referendum.It conceded it would be facing a pensions rights cut in 2017 if its financial position failed to improve before year-end.The €7.6bn KLM pension fund for ground staff confirmed it also lost “a couple of percentage points” in funding following the referendum.It noted on its website that the Brexit decision had increased instability and that it expected more financial-market volatility.The Algemeen Pensioenfonds KLM, however, said it saw no reason to adjust its investment portfolio for the time being.This view was echoed by Vliegend Personeel, its €7.9bn sister scheme for cockpit staff, which underlined its “long-term and defensive strategy”.TPN, the €420m Dutch pension fund of energy company Total, pointed out that the initially large movements on the financial markets had not continued, but that political uncertainty remained.It ruled out taking short-term measures but said it would “certainly assess” whether long-term adjustments were needed.
Pension funds and other institutional investors on average now have a broader range of alternative assets than a year ago, according to a study.Alternatives data and analysis firm Preqin revealed in an outlook report that more than a third of institutional investors around the world had exposure to at least four alternative asset classes at the start of 2017 – including property, private equity, private debt, and hedge funds.It marked a significant increase from a year ago when only a quarter of respondents invested in at least four asset classes, Preqin said.In the firm’s survey, 9% of institutions have been shown to be investing in six alternative asset classes and a fifth have exposure to five or more. This compares to the situation 12 months before, when only 13% had exposure to five or more separate markets, Preqin said.Andrew Moylan, head of real estate products at the firm, said: “Preqin’s investor surveys demonstrate the considerable appetite for alternative assets within the investor community at present, with many looking to ramp up their participation within these markets.”Even though the share of investors not involved in alternatives has remained relatively consistent, he said that those investors who were exposed were now broadening that exposure and diversifying into different asset classes within alternatives.In the poll, 93% of investors indicated they felt their real estate performance had met or exceeded performance expectations in 2016, but 37% said they thought their portfolio would perform worse in the coming year.Just 9% said they expected property to perform better.For other asset classes, Preqin found a record level of satisfaction among private equity investors: 84% said they had a positive perception of the sector. In contrast, 43% said they were dissatisfied with the hedge fund industry. Almost a third (31%) planned to decrease their allocation “over the longer term”.
Charlie Finch, partner at consultancy LCP and lead adviser to the RMPP trustees, added: “Insurers were engaged early in the process, which meant the trustee was well prepared and could move quickly to take advantage of an attractive pricing opportunity when it arrived.“This is a good example of a trustee, with sponsor support, acting decisively to remove pension liability risk in the Post Office Limited Section.”The Post Office section of the RMPP closed to future accrual on 31 March last year.Royal Mail plans to introduce a collective defined contribution (CDC) scheme for all its current employees and, with trade unions, is lobbying government to make the legislative changes necessary for such a scheme to operate. The Post Office is a separate organisation and is unaffected by the CDC discussions.Universities and staff seek USS dealThe UK’s Advisory, Conciliation and Arbitration Service (ACAS) is to step in to help resolve the long-running dispute between universities and staff union UCU over the future of the UK’s biggest pension fund. University staff have been on strike since 22 FebruaryLecturers began strike action earlier this month in protest at plans to stop DB accrual in the Universities Superannuation Scheme (USS). The scheme’s Joint Negotiating Committee has opted to stop future DB accrual from April 2019 and switch all staff to a defined contribution scheme. The changes were estimated to cut USS’ deficit by more than half, from £12.6bn to £6.1bn.However, the University and College Union (UCU) pushed for strike action in protest at the changes. It has argued for a “small amount of increased risk” in USS’ assumptions – which it has claimed are too cautious – and changes to accrual rates without removing the DB element.Yesterday both the UCU and Universities UK, which represents employers, agreed to more talks over the scheme’s future. ACAS will oversee the discussions, which will begin on Monday.Universities UK asked the union to stop strike action while the ACAS talks took place, but in a statement yesterday the UCU indicated that lecturers would still walk out today. Further walkouts were scheduled for 5 March for four days and five days from 12 March.Trustees growing more concerned about fraudPension scheme trustees are more aware of potential fraud risks but “too complacent” about prevention, according to consulting firm RSM.The audit and tax specialist surveyed 124 UK trustees and found more than half (52%) saw fraud as a “significant threat” to their members – up from 41% in a similar survey conducted last year.The findings follow political debate about pension savers falling victim to scams as they seek to take advantage of flexibilities around withdrawing retirement funds.RSM said 85% of trustees questioned had included fraud on their schemes’ risk registers. However, one third failed to carry out an annual test of anti-fraud controls.The consultancy also warned that schemes were neglecting some forms of scam, such as “pensioner existence fraud”, whereby somebody continues to take the pension of a deceased member.Ian Bell, head of pensions at RSM, said: “Schemes must do much more to uncover ‘old school’ frauds such as relatives continuing to claim payments after a member’s death or tackling suspicious pensions transfer requests, while at the same time staying alert to new and evolving threats such as cybercrime.”Fiona Frobisher, head of policy at The Pensions Regulator, said it was “encouraging” that fraud and cybercrime were on trustees’ agendas. She added that trustees also needed to ensure “robust internal controls are put in place and are being tested”.Note: This article was updated to clarify the distinction between Royal Mail and the Post Office. The Royal Mail Pension Plan (RMPP) has insured £450m (€510.1m) worth of defined benefit (DB) liabilities with Rothesay Life.The transaction secured benefits accrued after 2012 by 5,700 members of the Post Office section of the RMPP, most of whom have yet to retire.Rothesay Life linked the price of the deal to a portfolio of gilts, the insurer said in a statement, “giving price certainty during execution and ease of premium payment once executed”.Joanna Matthews, independent chair of the RMPP, described the deal as “an important step in improving the security of Post Office workers’ pension benefits”.
Source: FSMA, IPE Assets under management at Belgian pension funds grew by 18% last year, largely as a result of asset transfers from foreign pension scheme providers, according to the Belgian financial services regulator.At the end of 2017, the total balance sheet of Belgian pension funds stood at €35.1bn, up from €29.8bn the year before, according to FSMA.The regulator attributed the “significant” increase mainly to asset transfers from foreign pension funds under EU cross-border pension rules. Announcing its annual statistical overview, it said IORPs exercising cross-border pension activities – by way of managing foreign pension plans – had seen their combined balance sheet grow to €8.9bn.There were 201 pension funds in Belgium at the end of last year, two more than in 2016. Membership grew by 4% to reach just over 1.7m, with almost a quarter of this increase at pension funds with cross-border activity. One of the main aims of the new European pension fund directive, IORP II, is to increase cross-border activity. In the Netherlands, however, there are concerns that pension transfers to its neighbour are at least in part motivated by the appeal of more lenient regulation.FSMA also reported that Belgian pension funds invested around three-quarters of their assets in mutual funds, principally equity and bond funds. They invested 11% of their assets directly in bonds and 9% in equities.In 2017, these investments returned 5.3%, the supervisor said.Belgian pension funds’ coverage ratio fell slightly to 124%, due to low interest rates, it added.#*#*Show Fullscreen*#*#