Norway to review active management at Government Pension Fund Global
Their brief includes appraising possible investment opportunities and strategies, with an assessment of the theoretical and empirical rationale for these opportunities, which could improve the trade-off between expected return and risk.The panel will then suggest potential implications for the ministry’s mandate to NBIM.This will include a discussion of benchmarking, relevant risk measures and risk budgets and reporting requirements, and how other funds have implemented comparable strategies.The fund’s strategic benchmark is made up 60% of equities, with the rest in fixed income instruments and real estate.The geographical distribution of the fund’s equity portfolio is largely based on global market weightings, although it is moderately overweight Europe.Government bond investments are allocated according to the size of each country’s economy (GDP weighting).Corporate bond investments are based on market weightings.The ministry said the fund had outperformed its benchmark by an average of 24 basis points per year for the past 10 years, as of 30 June.However, the fund’s actual real rate of return is an average 3.4% per year between 1997 and the second quarter of 2013.This compares with a government estimate of expected real return over the long run of 4%.The ministry said the review to be carried out was simply a follow-up from the decision in 2010 to undertake regular reviews.It added that, in due course, a review would also be performed on the GPFG’s much smaller sister fund, the Government Pension Fund Norway (GPFN), run by asset managers Folketrygdfondet and invested largely in domestic securities.GPFN’s average actual real rate of return between 1998 and 2012 was 4.5% per year. Norway’s Ministry of Finance is to review the active management of its NOK4.76trn (€586bn) Government Pension Fund Global (GPFG) by Norges Bank Investment Management (NBIM), the resulting report being presented to the Storting, Norway’s Parliament, in spring next year.A panel of three experts has been asked to review NBIM’s historical performance, assessing options on how it might improve the fund’s expected return and risk, over and above the current benchmark.The panel will not, however, review the choice of benchmark indices.The panel members are professor Andrew Ang of Columbia Business School, professor Michael Brandt of Duke University and David Denison, former head of the Canada Pension Plan Investment Board.
AEW Europe – Thibault Chauvin has been appointed as managing director of the French asset manager’s debt funds. He joins from Colony Capital, where he was managing director for real estate debt strategies. Before this, he worked at Credit Foncier as head of international real estate finance.Mobius Life – Craig Brown has appointed institutional distribution director, joining from Legal & General Investment Management (LGIM). Brown, who was head of global consultant relations at LGIM, has more than 25 years’ experience and has also worked at HSBC Investments and Deutsche Asset Management.bfinance – Justin Preston has joined the investment advisory firm in its public markets team as a senior associate. Preston joins from Buck Global Investment Advisors, where he was head of manager research and selection. Previously, he was at Abu Dhabi Investment Authority (ADIA) as an investment manager.Nikko Asset Management – The company has made three appointments in its investment team. Roger Bridges, in Sydney, will become global rates and currencies strategist. Andre Severino, in London, is the new head of fixed income for the US and Europe, and John Vail, currently chief global strategist, will lead the global investment committee process and thought leadership effort after relocating to New York from Tokyo.Silverfleet Capital – Jean Châtillon has joined the private equity firm as a principal, based in Paris, as Benjamin Hubner and Jennifer Regehr join as associates based in its Munich office. Châtillon joins from Cobalt Capital, where he invested in mid-market French companies, while Hubner comes across from McKinsey & Company’s Munich operations, where he consulted on various sectors. Regehr was previously at UniCredit Bank, working in leveraged finance.Sackers – Joe Riviere has joined the UK pensions law firm as an associate, joining from rival law firm Eversheds. EFAMA, AXA IM, Investec, AEW Europe, Mobius Life, bfinance, Nikko AM, Sackers, Silverfleet CapitalEuropean Fund and Asset Management Association (EFAMA) – Gabriela Diezhandino has joined the representative group for asset managers as its head of public affairs for insurance, in the organisation’s new public policy department. Diezhandino will be responsible for increasing public and political support for the organisation’s aims and creating a political framework. She joins from Insurance Europe, where she worked in a similar capacity.AXA Investment Managers – The investment firm has made three appointments across its organisation. Francisco Arcilla is to become director or product development at AXA Rosenberg, the manager’s equity house. Eric Lhomond will become global head of alternative credit and external managers group, while Daniel Leon will be head of client solutions development, in its multi-asset business.Investec Asset Management – Mike Hugman has joined the asset manager as a strategist in its global emerging market fixed income team. Hugman was previously an economist at Amiya Capital, a hedge fund.
PensionsEurope has welcomed European Commission plans to retain, not scrap, the revised IORP Directive as part of its 2015 Work Programme.Matti Leppälä, secretary-general of the European pension association, said he would not have been in favour of the Directive’s being withdrawn at this time.He added that he expected the European Parliament to appoint a rapporteur next week to oversee all IORP-related negotiations between the Council and MEPs, and that it would have been unlikely for the legislation to be withdrawn now the Council of the EU had agreed on compromise drafts.“The Council agreement is much better than the EC proposal,” he said. “We hope the outcome after the European Parliament and all other stages will remain good as well.”The European executive is set to publish its legislative agenda on 16 December, but a leaked draft seen by IPE last week did not list the IORP Directive among the 80 proposals to be dropped or amended.Concerns were raised after a November letter by Commission president Jean-Claude Juncker and his deputy Frans Timmermans – handed a brief to cut the regulatory burden imposed by Brussels – highlighted IORP II as “under review”.The Council has since completed its fourth compromise draft of the Directive, and member states last week agreed on a negotiating mandate with MEPs that will see a renewed emphasis on removing the prudential barriers to cross-border pension provision
Ruud Hagendijk is to step down from MN after 10 years as chief executive and 18 years at the company. Hagendijk broke the news himself last week at a Christmas gathering at the MN offices in The Hague.“After 10 years, it is time to hand the baton over to someone else,” Hagendijk said.“We have developed a vision for the role of MN. It will be good for someone other than me to get started.” The chief executive will remain in his position until a successor is found.Since Hagendijk became chief executive in 2005, MN has grown to become the third-largest pension provider in the Netherlands, with €110bn in assets.It manages the PME and PMT metal schemes and that of the Koopvaardij, or merchant navy.The organisation now plans to shed 220 jobs as part of its ‘MN 3.0’ plans.“In recent years, we in the pension sector have constantly been behind the curve in terms of the changing regulations from The Hague and Brussels,” Hagendijk said.“Last year, we looked at how we could regain control. This is where the need for ‘MN 3.0’ arises.”Hagendijk was relatively cautious about the firm’s UK business, which started in 2008.“We had a different strategy at that time, and expectations for a European pension market,” he said, adding that Dutch clients since the financial crisis had required greater attention from their provider.“The change in strategy does not mean we will leave England,” he said.“We have €6bn under management, and we are not going to let it fall out of our hands. We see there is still considerable need for Dutch pension solutions in the UK.”MN has grown considerably in recent years, largely through the growth of its shareholder and client PME, which has consolidated the pension assets of a number of industrial companies that previously ran their own pension funds.MN is not currently seeking new funds, other than through existing clients.Hagendijk, who was MN’s director of operations prior to 2005, added: “‘MN 3.0’ is a programme for change that encompasses personnel, processes, leadership and the shape of the organisation.“We can automate more processes … IT is important, but the people who work here make the difference.”The out-going chief executive does not expect the streamlining of the organisation will lead to many compulsory redundancies.
However, it also made clear that the increase in liabilities triggered by falling interest rates – the criterion for discounting liabilities – exceeded its quarterly return by €525m.As a consequence, the pension fund’s ‘policy funding’ decreased by 1.4 percentage point to 111.2%.“Due to the stricter rules in the new financial assessment framework (nFTK), including its requirement for larger financial buffers, indexation is unlikely for the coming years,” it said.Vervoer’s results come as a number of Dutch schemes lament the low interest rate environment and the effect of the European Central Bank’s quantitative easing (QE) programme.In mid-April, four of the five largest pension funds were forced to re-submit recovery plans after falling interest rates hit their funding ratios.The schemes, which reported quarterly returns of up to 11.8%, attributed their deteriorating position chiefly to QE.This week, Pensioenfonds PostNL, the €7.7bn scheme for Dutch postal services, reported a 9.4% return during the first quarter of 2015, attributing 4.1 percentage points to its interest hedge through swaptions.It made a 13% return on its equity portfolio, due largely to the depreciation of the euro against the US dollar, which boosted the value of its holdings of European equity.PostNL added that holdings in healthcare companies continued to perform well, and that emerging markets generated better results than developing countries.Equity options contributed 1.1 percentage points to its quarterly return on the back of rising equity markets, while fixed income and real estate returned 3.2% and 7.6%, respectively.In contrast, the Pensioenfonds PostNL lost 6.4% on its commodities portfolio due to the effect of the oil price drop on energy and utility companies.At March-end, the scheme’s policy funding was 110.2%.The €4.2bn pension fund for the merchant navy, Koopvaardij, returned 10.6% during the first quarter, with government bonds and interest hedges delivering a combined result of 12.7%.Equities returned 10.3%.Despite the scheme’s quarterly performance, its coverage ratio increased by just 0.3 percentage point to 113.7%.The €1.7bn pension fund of coffee processor Douwe Egberts saw its funding drop 0.7 percentage points to 112.7%, despite a quarterly result of almost 10%. A number of large Dutch pension funds have reported that funding levels remained flat or even dropped over the first quarter due to the impact of plummeting interest rates on returns. Vervoer, the €22.4bn pension fund for the private road transport sector, returned 13.6% over the period, yet falling interest rates largely wiped out the strong performance. It attributed the return largely to the impact of falling interest on its 58% fixed income portfolio, which returned 12.6%, as well as on its derivatives covering the interest risk on its liabilities.Vervoer, which also reported a 20% return on its equity portfolio, said the discount rate for liabilities fell from 2% to 1.38% in Q1.
The UK government’s latest plan to pool the £193bn (€264bn) of assets in local government pensions in England and Wales into six wealth funds shows just how big a task the pension schemes have ahead of them in pooling their assets, Mercer has said.Steve Turner, partner at the consultancy, said: “The chancellor’s statement provides the clearest sign yet of the scale of ambition the LGPS (local government pension scheme) has been tasked to come up with on pooling.”If done in the right way, this could have significant investment and governance benefits to the LGPS and also to wider society, he said.Speaking at last week’s Conservative party conference in Manchester, UK chancellor of the Exchequer George Osborne said the government would work with councils in England and Wales to create six “British wealth funds”. He said this would allow the 89 LGPSs to increase their exposure to domestic infrastructure.At Mercer, Turner cautioned that the overall aim of the schemes should not be forgotten.“We shouldn’t lose sight of the LGPS’s ultimate objective of providing pensions in a cost-effective manner,” he said.Meeting this aim requires, he said, “a holistic approach encompassing credible and transparent funding plans, effective cost management, best-in-class governance, return generation and risk management.”“There is no silver bullet,” he said, adding that continuous effort on all these fronts was needed.Turner said Mercer was working proactively with clients on pooling options that local government pension schemes had.Individual local government authorities first need to work out the best way to organise themselves into effective working collaborative relationships that are big enough, he said. After that, groupings can then look at the potential long-term cost savings of pooling.Turner said they would also need to think about the cost implications of setting up a pooling structure and how that would be governed and monitored.“A number of viable frameworks are being considered, including either setting up a structure from scratch or leveraging an existing framework to support pooling,” he said.Last month, the Department for Communities and Local Government told the LGPS Advisory Board that all of the schemes’ assets would be pooled, with no funds being exempt, and that it hoped firm proposals would be in place by March next year.
PenSam members can compensate for this interplay between state pension and private pensions by paying into an old-age savings scheme (aldersopsparing), he said, but he added that this was not an ideal solution because it made it harder for individuals to get an overview of their pension.The government, in its recently launched 2025 plan, partially tackled the problem of offsetting within the pension system, but its solution will lead to yet another layer of complexity, Fels said.“We would rather they went the other way and simplified the system by putting the same tax deduction in place for all, corresponding to the deduction for top-rate taxpayers,” he said.Fels argued that everyone would then have a clear incentive to save for their pension, regardless of age and income.However, because the government is “unlikely to change its mind” on this, Fels said PenSam had some proposals to change the 2025 plan based on concrete examples from its own customers.It proposed that the new special pension scheme named in the plan – which is called an age-related savings annuity (aldersopsparingslivrente) and will not be offset against social benefits – be made available for people with not just five years or fewer until state pension age but also for those with up to 15 years to go, or even for the whole of one’s working life.The new scheme should also target those with relatively low incomes by reducing the ceiling on annuity contributions to DKK30,000, for example, PenSam said.It said the opportunity to use this scheme should not be conditional on an individual’s receiving no payments from tax-deductible pension schemes because, in practice, this would prevent people from making use of a partial pension. The new chief executive of Danish labour-market pension fund PenSam has spoken out about aspects of the government’s planned changes to the pension system, calling on lawmakers to ensure it is worthwhile for the lower-paid to save for a private pension.Torsten Fels, who took over as the DKK108bn (€14.5bn) pension fund’s chief executive in August from long-standing leader Helen Kobæk, said: “It is important for all parties that the system be simplified but in such a way that it can function on a stable basis for many years.”He cited a number of drawbacks for PenSam members in Denmark’s current system.“Because of their relatively low incomes, their savings are correspondingly small, and, on top of this, so much of their income is offset against their state pension (folkepension) that, in many cases, it hardly pays off for them to save up,” Fels said.
Industriens, PenSam, European Commission, Resaver, Hermes IM, VTB Capital, L&G, Deutsche Bank, IIGCC, AP2, BNP Paribas, Ashburton, UBS, Penfida, BestrusteesIndustriens Pension — Kasper Lykke Meisner has been appointed by Industriens Pension in Denmark to the role of head of investment risk, filling the vacancy left by Sofie Grathe who decided to leave the company in the first quarter of this year. Lykke Meisner comes to Industriens Pension from PenSam, where he was risk manager. He takes up his new job today.European Commission – Andreas Dahlén has left the commission, where he has been a policy officer in the research department and helped set up Resaver, the multi-employer cross-border pension fund for researchers that became operational a few months ago. He was also involved in co-ordinating the implementation of the European Long-Term Investment Funds regulation. Dahlén joined the Commission in 2011.Hermes Investment Management – The asset manager wholly owned by the BT Pension Scheme has hired Orla Murphy as research director, a newly created role. She will be responsible for procuring equity and credit research from brokers and independent research providers. Hermes said Murphy would also be responsible for transaction cost analysis, managing the group’s research budget, and assessing the value of research. Asset managers must disclose how much they pay for research under MiFID II regulations by 3 January 2018 when the Europe-wide regulations come into force.Murphy joins Hermes from VTB Capital, where she held roles including business manager for international equities and cross-asset business manager. She has also held business management and analysis positions at Barclays Wealth and Fidelity Investments.Legal & General – The insurance giant has appointed Pretty Sagoo as head of strategic business within its pension risk transfer arm. She will oversee large scheme pension buy-ins, buyouts, and longevity insurance transactions, L&G said. She joins from Deutsche Bank where she led its insurance and pensions solutions team. Sagoo has also worked for AXA Sun Life and Goldman Sachs. She was also a trustee of the Abbey Life Pension Scheme until November last year.IIGCC – The Institutional Investors Group on Climate Change has appointed Rachel Ward as its head of EU policy. She joins from the UK’s civil service where she worked on EU and international climate change, energy, and transport policy for 10 years. In her new role she will identify and track key policy developments and work to “strengthen [members’] collective voice, engagement and influence”.In addition, IIGCC has appointed Christina Olivecrona and Helena Viñes Fiestas to its board. Olivecrona is a sustainability analyst at AP2, one of Sweden’s buffer funds for its public pension system. Fiestas is head of sustainability research at BNP Paribas Investment Partners.Ashburton Investments – The investment management firm has hired Robert Lea as head of global equity research. He will lead a newly created research team, which will provide analysis for the firm’s equity and multi-asset funds. He joins from UBS, where he was a global equity research sector head and strategist. Ashburton has also appointed Jonathan Aldrich-Blake to the research team – he was previously an investment manager at the firm.Penfida – The UK advisory firm focused on sponsor covenant advice has appointed a former chair of the country’s pensions trade body as a senior adviser. Peter Thompson joins from Bestrustees, an independent trustee firm, and previously worked for Mercer for 25 years. Between 2001 and 2003 Thompson was chair of the National Association of Pension funds (now the Pensions and Lifetime Savings Association), part of an 11-year tenure at the trade body. He has also advised organisations responsible for the UK’s railways and universities on their industry-wide pension provisions.
Large German listed companies spent €13.1bn last year to finance their pension liabilities – almost €3bn more than in 2016.Willis Towers Watson’s analysis of DAX-listed companies found that total pension assets rose to €260bn for the first time, up from €250bn the year before.A combination of top-up payments and a drop in the discount rate used to calculate liabilities meant the aggregate funding level reached 68%.This was higher than preliminary calculations published by the consultancy in January suggested – and it was only topped in 2007 with 71%. Heinke Conrads, head of retirement for Germany and Austria at Willis Towers Watson, said the payments reflected occupational pensions becoming “more and more important as a tool to attract and keep employees”. Lufthansa paid €2bn into its German pension plans last yearIn separate research, Mercer said several companies had made large individual top-up payments to their pension schemes in 2017, including carmaker Daimler (€3.8bn) and airline Lufthansa (€2bn).“Despite the already high funding level further payments are expected this year,” Mercer predicted.Mercer’s analysis also found that German pension plans generated an average return of 5.5%, similar to the return posted in 2016.Carl-Heinrich Kehr, investment expert at Mercer Germany, said emerging market equities and real estate were the main performance drivers for this return.Willis Towers Watson also noted that more companies than in previous years had transferred the assets for their in-house pension plans into segregated financing platforms.
Moody’s Corporation has acquired RiskFirst, a UK fintech company providing risk analysis solutions for asset managers, asset owners and consultants.A day earlier it announced having taken a majority stake in Four Twenty Seven, a California-based company providing data and analysis related to physical climate risks – risks linked to the impact of climate change itself as opposed to efforts to contain it.The acquisitions are for two different parts of Moody’s as a company. The RiskFirst acquisition is for Moody’s Analytics while the deal with Four Twenty Seven is for Moody’s Investors Service, the credit rating and research arm. RiskFirst’s oldest product is the PFaroe platform, which helps manage asset and liability risk in defined benefit (DB) plans, mainly in the US and UK. According to Moody’s it is used by over 3,000 plans with more than $1.4trn (€1.3trn) in assets. “Adding RiskFirst’s platform to Moody’s Analytics’ product offering creates significant opportunities for growth and demonstrates our commitment to extend our reach and capabilities to the buy-side and asset owner community,” said Mark Almeida, president of Moody’s Analytics, in a press release. The terms of the transaction were not disclosed. RiskFirst generated £16.5m (€18.4m) of revenue in 2018. Four Twenty Seven, meanwhile, will be an affiliate of Moody’s Investors Service, continuing to operate under its existing brand. Moody’s said the transaction would strengthen its research on incorporating climate risk into economic modelling and credit ratings, and complemented its recent acquisition of a majority stake in Vigeo Eiris.Emilie Mazzacurati, founder and CEO of Four Twenty Seven, said: “Moody’s global coverage and analytical capabilities, combined with Four Twenty Seven’s comprehensive climate risk data and intelligence, provides an ideal path to continue our work helping market participants integrate potential climate impacts into risk management and investment decisions.”DWS, one of the first asset managers to go public about its work and stance on physical climate risk, worked with Four Twenty Seven to develop its approach.The narrative about investment and climate change has been dominated by the concept of transition risks rather than physical risks, but the latter have begun to grab more attention.According to Schroders, another asset manager that has warned about overlooking physical climate risks, the world is on course for a long-term temperature rise of 3.8°C above pre-industrial levels – far from the target set under the Paris Agreement.National commitments to net-zero greenhouse gas emissions – recently adopted by the UK and France, for example – stood in contrast to sharp growth in energy produced by fossil fuels, it said.