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Archives for: September 29, 2020

Mandate roundup: IPE-Quest, Ircantec, Unigestion

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first_imgThe closing date for applications is 21 October.In other news, France’s Ircantec has made an undisclosed investment in Unigestion’s Risk Managed European Equities strategy following the pension fund’s decision to increase exposure to low-volatility equities.Following a comprehensive market review, it said it selected Unigestion for its risk-management expertise and ability to manage equity strategies.Caroline Le Meaux, who manages administration and financial management at Ircantec, cited in particular Unigestion’s “combination of a structured and systematic portfolio construction process with exhaustive risk analysis.”If you have any questions regarding the IPE-Quest search, please email [email protected] Questions will not be accepted after 16 October. For full information, please go to http://www.ipe-quest.com/search.htm. An undisclosed industry-wide pension fund based in Europe has tendered a $250m (€197m) European or US all-cap/large-cap equity mandate using IPE-Quest.According to search QN1461, the investor is looking for an asset manager that can replicate the MSCI USA Equal Weight index “as closely as possible”. The investor intends to invest in a segregated mandate, but asset managers that offer only funds may also participate.Interested parties should have at least $1bn in assets under management, stating performance – gross of fees – to the end of June.last_img read more

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Real estate drives 17% return at pension fund for KLM cabin staff

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first_imgMark Burbach, CIO at Blue Sky Group, the asset manager for the KLM schemes, said listed property returned 21.9%.He said the return had come from “a very low point of the market” two years ago, as well as the continuously diminishing costs of capital. He added that listed property in the US had delivered the best results.Burbach said he was very pleased with the 10.3% return on private property, and attributed the result to “a combination of high-quality assets, active management, low leverage and relatively long underlying rental contracts, which provided stability”.He added that the pension fund wanted to increase the strategic allocation to private real estate gradually from approximately 50% to 60% within a year, “as it is expected to generate a more stable cash flow than listed property”. Currently, the scheme’s property portfolio is almost equally divided between private and listed property.However, with a return of 24.4%, private equity was the pension fund’s best returning asset class. Burbach attributed the result chiefly to the value increase of secondary funds, adding that the rise of the US dollar against the euro had also provided a tailwind.The scheme for cabin staff closed out 2014 with a nominal funding of 115.1% – representing a shortfall of its required financial reserves of 6.6% – and a real coverage ratio of 80.8%.KLM’s €7.3bn pension fund for ground staff (Algemeen Pensioenfonds KLM) reported an annual return of 14%, following a fourth quarterly return of 3.5%.With annual and quarterly results of 15.8% and 6.5%, respectively, listed property was also the best performing asset class.Bonds and equity delivered 12.4% and 10.5% over the full year.The scheme added that its 50% hedge of the interest risk on its liabilities contributed 2.3 percentage points to the annual return.However, it noted that it had been unable to benefit from the rise of the US dollar against the euro, as it had largely hedged currency risk.As of the end of December, the ground staff scheme had a nominal funding of 116.3% – 3.1 percentage points short of the required level.The €7.8bn pension fund for pilots (Vliegend Personeel KLM) reported a 2.5% quarterly return, leading to an annual return of 11%.At the end of 2014, the pension fund had a coverage ratio of 126.3%, exceeding the mandatory funding by 7 percentage points. KLM’s three large pension funds in the Netherlands all reported strong results for 2014, with the €2.5bn scheme for cabin staff returning more than 17%.The fourth quarter contributed 4.5 percentage points to the cabin staff scheme’s annual return, with returns of 1.3% for government bonds, 2.5% for equity and 6.8% for property.For the whole of 2014, bonds, equity and real estate returned 10.4%, 10.7% and 16.2%, respectively, the Pensioenfonds KLM Cabinepersoneel said.The 50% hedge of the interest risk on liabilities contributed 6.4 percentage points to the annual performance.last_img read more

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Nordic insurer tenders Asia ex Japan small-cap mandate using IPE Quest

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first_imgAn insurance company from the Nordic region is looking for an asset manager to take on a $100m (€89m) mandate to invest in small-cap equities in Asia excluding Japan.According to a search on IPE Quest, the insurer will only accept strategies offered as a pooled vehicle.The fund must be UCITS-compliant and registered in Luxembourg or Ireland.The preferred benchmark for the US dollar-denominated mandate is the MSCI AC Asia ex Japan Small Cap Net index, with assets being managed actively. Firms responding should have at least $1bn under management in total, and a minimum of $250m for this asset class.Tracking error should be kept between 3% and 10%.Firms responding should state performance to 31 March and supply data gross of fees.They should have a track record of at least three years, though track records of five years are preferable, according to the search.The closing date is 25 May at 5pm GMT, with a shortlist to be selected on 1 June.The deadline for submissions of RFPs has been set at 15 June, with the final selection being made by the board on 15 September.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 direct from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]st.com.last_img read more

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Investors who ignore ESG at risk of breaching fiduciary duty – Al Gore

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first_imgInvestors should consider the impact of a “meaningful” carbon price on investments to better identify risks and opportunities, a paper by Al Gore’s Generation Foundation has urged.The white paper praised companies assessing investments using a shadow carbon price, as there is currently no single framework for the cost of carbon – despite recent moves by China and the US that will see around half of emissions priced by the end of 2016.“The reality, however, is that carbon largely remains an un-priced externality in financial markets today,” the report says.“Although it is impossible to know the exact timing of the prospective tipping point when financial markets will fully internalise carbon risk, it is critical for investors to prepare for its inevitable impact over the next five years.” In ‘Allocating capital for long-term returns’, the foundation, funded by Generation Investment Management, also warns that investors risk breaching their fiduciary duties if they fail to consider environmental, social and governance (ESG) matters during the investment process.The view will be one shared by the Asset Owners Disclosure Project, which recently launched an initiative that could see members sue pension funds where they perceive them to be ignoring environmental risks. Gore, who co-founded Generation IM three years after his unsuccessful US presidential campaign, was adamant sustainability should be taken into account.“The importance of sustainability to business and investing has intensified as financial markets are forced to address challenges posed by the realities of natural resource scarcity, the effects of unabated carbon emissions, rapid urbanisation and widening wealth inequality, to name just a few,” he said. The paper further pointed to the importance of considering sustainability factors, such as human capital management, supply chain concerns and resource management, when assessing the value and success of a company.“Analysing a company’s attitude to these factors can often provide insights into a company’s long-term vision, its strategy for implementing that vision and the probability of its success,” it says.Carbon prices, or a greater number of emissions trading schemes, have long been a demand of various investor groups calling for regulation to mitigate climate change, including the Institutional Investor Group on Climate Change.last_img read more

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Pension fund for Danish teachers returns 2.1% after turbulent year

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first_imgIt said this was particularly the case for foreign shares, including emerging markets equities, high-yield bonds and timber land.The investment portfolio’s rate of return amounted to 1.2%, compared with an expected long-term rate of 5.2%, according to the investment strategy, the pension fund said.Total group assets grew to DKK88.1bn at the end of December 2015 from DKK82.0bn 12 months before, and solvency coverage rose to 316% from 311%.Contributions rose to DKK4.8bn in 2015 from DKK4.5bn the year before.The interest rate paid on pension savings (depotrente) after pensions tax rose to 5.5% from 3.75%.Lærernes said its supervisory board had approved its investment strategy for 2016 to 2020 in December.The new strategic investment portfolio had an expected return of 5.2% before tax and a risk level of around 23%, measured against a confidence level of 99.5%.It explained this meant that, statistically, there was only a 0.5% probability the investment portfolio would suffer an unexpected loss of more than 23% in the course of a year.Lærernes said the new investment strategy meant the pension fund would increase the proportion of its investments in alternative asset classes over the next few years, including property, private equities, forestry and infrastructure.To ensure costs are kept low, it outsourced a large part of its portfolio management to external managers. Lærernes Pension, the Danish pension fund for teachers, reported a 2.1% return on investments last year, down from the 12.6% produced in 2014, with most asset classes performing more weakly than expected, according to the fund’s annual report.In absolute terms, the investment return fell to DKK1.4bn (€188m) in 2015 from DKK7.2bn in 2014.The pension fund said 2015 had been marked by big swings on the financial markets.In the report, the labour-market scheme said: “Lærernes Pension achieved a very high return on its holdings of Danish equities and on its real estate investments. But returns on the majority of other asset classes were more modest and lower than expected.”last_img read more

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Accounting roundup: IASB, IFRS, Lane Clark & Peacock

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first_imgFurther, staff said preparers were often exempted from applying the requirement in paragraph 11 to apply the requirements of the framework.The project to update the board’s conceptual framework has become something of a political hot potato in recent years.Many UK long-term investors have demanded the IASB reintroduce the concept of prudence into the framework.These investors believe a more conservative bias in accounting could serve as a brake on management exuberance. IASB staff also told the 15 November meeting that, in their assessment, the requirements of the updated framework were in many respects identical to the existing framework.The staff analysis was based on feedback received from 29 preparers.Meanwhile, staff at the IASB have analysed performance measures used in the press releases of 25 companies that report under IFRS standards.They found that performance measures fell into three broad categories: those specified in IFRS, those necessary for compliance with IFRS and non-IFRS information.Within the categories of non-IFRS information, some might simply enhance IFRS financial information, while others might be based on information that does not comply with IFRSs requirements.There is growing use of non-standard information in financial reports to communicate with interested parties.A June 2016 feedback statement published by the IFRS Foundation Trustees found that a minority of respondents made unprompted calls for the IASB to address the use of alternative performance measures.The debate comes as the board gears up to issue a discussion paper on ‘Principles of Disclosure’ in the next few months.That discussion paper could include guidance on the use of performance measures.Eventually, the proposals could mean preparers are required to disclose additional sub-totals such as Earnings Before Interest & Tax (EBIT) based on IFRS-compliant information.In a speech earlier this month, IASB chairman Hans Hoogervorst said: “We will be looking at possibilities of defining commonly used subtotals in the income statement, such as operating EBIT.“We might look at creating more disciplined ways for companies to adjust their earnings for infrequently occurring components of income.“We also need to do more work on electronic reporting, as financial information is increasingly being consumed electronically.”In other news, consultants Lane Clark & Peacock have warned that a drafting change to proposed amendments to the committee’s IFRIC 14 asset-ceiling guidance could adversely affect a large number of preparers.The warning came in a recently posted webcast.According to the LCP experts, revised drafting in paragraph 71 of Agenda Paper 3A for the September IFRS IC meeting could force schemes to recognise an additional liability where trustees have the power to mount a buyout.The warning comes as preparers face a perfect storm of low interest rates and lagging yields.LCP has advised preparers to revisit how a DB pension obligation is allocated within a group of companies.It also suggests sponsors revisit key assumptions such as discount rates, as well as less obvious assumptions such as retirement rates that, taken together, can have a material impact on the size of a pension liability.Lastly, the IASB has posted an update to its workplan following the conclusion of the latest agenda consultation project.In relation to pensions, the board confirmed that it would add a limited-scope feasibility study into post-employment benefits that rely on an asset return.The board confirmed it would not look at other aspects of pensions accounting. Staff at the International Accounting Standards Board (IASB) are expecting the board’s new Conceptual Framework to have little impact on preparers reporting under International Financial Reporting Standards (IFRS).The staff told a 15 November board meeting that this was because “few preparers develop accounting policies by reference to the framework”.Staff explained in a meeting handout that most transactions were covered by existing IFRSs.In addition, IAS 8 guides preparers to alternative sources.last_img read more

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UK roundup: Teachers’ pension scheme liabilities grow by £76bn

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first_imgBlackRock handed £1.5bn LDI mandateThe Serco pension scheme has appointed BlackRock to run its liability-driven investment (LDI) strategy.The scheme – which caters for employees of Serco, a service provider for the public sector – previously employed three LDI managers. This approach was reviewed with a view to reaching fully funded status within 10 years, according to a statement from BlackRock released yesterday.Guy Leach, chairman of the Serco Pension and Life Assurance Scheme, said: “The scheme is in a strong position, but we recognised that efficiencies could be made by transitioning our LDI portfolios into one mandate. Having the ability to onboard and transition the funds seamlessly was a key requirement when choosing an investment manager. The team at BlackRock showed real strength and expertise in LDI, and we were confident that they were best placed to handle the transitions of the three existing portfolios and manage the risks that came with this.”Graham Jung, managing director in BlackRock’s UK institutional business, added that the group’s scale and access to markets helped complete the “complex” transition. Meanwhile, accounts for two other unfunded public sector schemes showed a similar significant increase in liabilities.The pension scheme for the UK’s judiciary service recorded a 22% increase in liabilities, also primarily caused by a reduction in the discount rate. It contributed to the scheme’s obligations rising by £682m. Liabilities were £3.8bn at the end of March.The UK Atomic Energy Authority’s pension scheme recorded a 23% rise in its liabilities, from £6.7bn to £8.3bn at the end of March.LGPS pool names two non-execs to board The liabilities of the UK’s Teachers’ Pension Scheme (TPS) ballooned by 27.8% in the 12 months to 31 March 2017, according to the scheme’s annual report and accounts.Liabilities reached £347.2bn (€402.7bn), up from £271.7bn a year earlier. The increase was driven primarily by a reduction in the discount rate, which was cut from 3.6% to 2.8%.TPS is an unfunded scheme, meaning annual benefit payments are paid direct from government contingency funds. It covers more than 2m current and former teachers and other education sector staff.In addition, the scheme has had to set aside £35m to compensate pensioners who were underpaid between April 2011 and April 2015.center_img LGPS Central, one of eight local government pension scheme (LGPS) asset pools, has named two non-executive directors to its board.John Nestor and Eithne McManus join Joanne Segars (chair) and Andrew Warwick-Thompson (CEO) on the leadership team for LGPS Central’s asset management company.The company was set up to consolidate £40bn of assets from nine LGPS funds based in the Midlands.Nestor has worked in asset management for more than 30 years, including in UK chief executive roles at UBS Global Asset Management and Citigroup Asset Management. He has also worked as institutional marketing director at Henderson Global Investors. He is currently chair of Prudential’s corporate pension fund trustee board, and an independent member of the company’s independent governance committee.McManus currently sits on the boards of insurance companies Countrywide Assured and UIA. She was previously a director at Countrywide and worked as chief financial officer and later CEO of City of Westminster Assurance.McManus will chair the audit, risk and compliance committee at LGPS Central, while Nestor will chair the remuneration committee.last_img read more

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Joseph Mariathasan: Fading glories and rising stars

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first_imgWhat lessons can cities like Rome learn from growing areas in China?Parts of Italy such as Rome, by contrast, have suffered from a build-up of garbage as the government grappled with replacing mob-related companies with legitimate ones.Dealing with wastes is an issue for both developed and developing countries, but the long-term solution cannot consist of the developed nations exporting their wastes to the developing – nor, indeed, allowing their industries to be subverted by corruption.As per-capita income in China increases, the lure of holidays to the great sites of Italy increases. At least relative to Hangzhou’s West Lake, many (with the exception of Venice) are still uncrowded.Europe aspires to a future greater than being a tourist theme park for wealthy Asian tourists. For that, perhaps countries like Italy need to take some lessons from what the Italian desk manager is seeing in China. By contrast, the desk manager said China had a long-term plan for development, seen through its focus on infrastructure, on education and on key areas of innovation including artificial intelligence and other technologies. One-yuan note displaying the West Lake in Hangzhou, ChinaHis views are clearly controversial, and perhaps extreme when it comes to the current situation and future prospects for Italy. Yet it is hard not to feel sympathy for his plight.Exploring West Lake also provided another perspective. Taking a tour by taxi on a Sunday – when Shanghainese come to the region for a break – was an exercise in frustration with an average speed in the taxi of perhaps a couple of kilometres an hour.Hangzhou is an ancient city with many areas of great beauty, particularly around West Lake. But today it is a fast-growing city of 9m people, and fast developing as a technology hub with the headquarters of Alibaba based in the city.As a result, the sheer numbers of visitors, particularly on weekends, is way beyond the numbers wandering around the forum in Rome – making a stroll around the lake akin to navigating London’s Oxford Street.Increased tourism in China is just one sign of its rising income. But as the Italian desk manager expounded, China has had to make choices between high growth and pollution.In the past it chose high growth, and that has come at a cost. China now has to grapple with solving environmental pollution issues such as air quality and river pollution.Europe also faced such issues in the past and has resolved many through government clampdowns, such as on coal-fired power stations. Where Europe and China have interacted more controversially recently has been over supposed recycling of Europe’s waste products in China.Concerns have been raised by the World Trade Organisation about China’s ban on imports of “foreign garbage”, and there have even been requests to halt implementation of the ban.As Zhang Ming, China’s head of mission to the EU explained in April, China started importing solid wastes in the 1980s and annual volume surged from 4.5m tons to 45m tons over the past 20 years. However, a large amount of prohibited wastes – or “foreign garbage” – was mixed up in the imports, harming China’s environment and threatening public health.Erik Solheim, head of the United Nations Environmental Programme, approved the ban, declaring: “We should see the Chinese decision as a great service to the Chinese people and a wake-up call to the rest of the world.”center_img Talking to a young Italian desk manager at a tourist hotel by the famous West Lake in Hangzhou in China in April provided a fascinating contrast between the fading glories of old Europe and the rising star of China.He had left a country with 45% unemployment amongst his contemporaries, he said, with an economy dominated by Mafiosi at the highest levels of provincial and state governments (so he claimed).The net result was endemic corruption and an exorbitant tax on middle-class employees who were unable to generate income in the black economy, he explained. He had had to depend on his mother’s income to supplement his own even while he was working as a young adult.  Italy has no plans for the future, he moaned, but instead harks back to a glorious but ancient past.last_img read more

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ABP to increase contribution rate to 24.9% [updated]

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first_imgABP’s headquartersNote: This article originally incorrectly stated that contributions would increase to 25.1%. ABP’s current coverage ratio has also been updated in the final paragraph. In 2017, ABP’s premium funding ratio stood at 69%, but the pension fund could not say what this coverage was in 2018 or what level it was expected to be for 2019.The civil service scheme was the first large pension fund in the Netherlands to set its contribution level for 2019.Consultancy Willis Towers Watson has said that ABP’s increase probably would not be indicative for other pension funds, as the observed slowdown in the rise of longevity was more likely to lead to a modest contribution reduction.In 2014 and 2015, ABP’s premium level dropped as a result of a reduction in tax-facilitated pensions accrual, forced upon the pensions sector by the government.With the latest contribution rise, premiums are approximately back at the 2013 level, albeit with a lower accrual rate.ABP’s current coverage ratio is approximately 102%, short of the minimum required level of 104.3%. It needs to raise its funding above this level by the end of 2020 to prevent benefit cuts. The €409bn Dutch civil service scheme ABP is to raise contributions to 24.9% of salary from next year.The increase is the third consecutive one since 2016, when the premium level stood at 18.8%.ABP said the contribution increase was part of a plan agreed by unions and employers in 2016 to bring the pension fund’s contributions to a structurally higher level, to facilitate more prudent expectations for returns.The three consecutive annual increases were meant to improve ABP’s “premium funding ratio”, which indicates to what extent the amount of pension contributions paid in can be used to finance new pension claims in a given year.last_img read more

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Co-op pension scheme insures more liabilities as PIC deal disclosed

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first_imgThe Co-op sponsors multiple pension schemes. Last year it offloaded liabilities associated with the pension scheme for the Somerfield supermarket chain in a £425m deal with PIC.PIC today also announced it made its first investment in the Spanish solar energy sector, providing debt funding for 21 solar parks owned by Q-Energy in a £190m deal. Separately, yesterday Prudential Financial disclosed that its Prudential Insurance Company of America unit had closed two more longevity reinsurance transactions with UK insurer Rothesay Life, reinsuring a combined $6bn (€5.6bn) of pension liabilities associated with two bulk annuity transactions completed in the second half of last year.2019 was a record year in the UK pension de-risking market. Transactions concluded by Rothesay included the largest full-scheme buy-out ever in the UK, a £4.7bn deal with Telent.Amy Kessler, head of longevity risk transfer for Prudential Financial, said that this year, “smaller transactions will be a growth area to watch, as will the burgeoning risk transfer markets in Canada and the Netherlands”. The Co-operative’s Pace pension scheme has struck a £1bn (€1.2bn) pension insurance buy-in with the Pension Insurance Corporation (PIC), it was announced today.The deal guarantees the pension benefits of around 7,000 members in the £9bn Co-op section of the scheme.Its announcement comes a few weeks after that of a bulk annuity transaction for the same amount with Aviva, also insuring the defined benefit liabilities of around 7,000 members in the scheme.Commenting on the PIC deal, Gary Dewin, director of reward for the Co-op, said: “Our Pace pension scheme is one of the strongest in the UK and highly valued by its members. The purchase of Pace’s second significant insurance contract further protects members by strengthening the scheme’s position.”last_img read more

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