Denmark’s Pensionskassen for Farmakonomer, the pension fund for pharmaceuticals experts, is the latest of the country’s smaller pension funds to reject the idea of merging with a big commercial provider. The fund insisted that increased regulatory demands for provisions — often cited as a reason the pensions sector will have to consolidate — are manageable for smaller pension funds.Susanne Engstrøm, chairman of the pension fund, said: “We agree that a regulatory inspection does put pressure on resources, but not more than can be managed even by small organisations.”She was responding to an invitation earlier this year from Henrik Heideby, the chairman of Denmark’s largest commercial pension fund PFA, calling for smaller pension funds to merge with it, the pension fund said. Engstrøm said members of the pension fund for pharmaceuticals experts received a very high pension in relation to their final salary and were generally very satisfied with it.“Our justification hangs on reasonable results and as long as they can be achieved, there is no reason to merge with one of the big players in the market,” she said.Last month, three other labour-market pension funds came out with a public statement rebuffing suggestions that they should merge with a large provider.Lægernes Pension, the fund for doctors; DIP, the fund for engineers; and the lawyers’ and economists’ pension fund JØP, said the current debate seemed being more about what different pension providers could get out of the consolidation than about what customers would get out of it.“Pensions are, in our opinion, much too important to become the object of a competition between different providers’ ambitions for expansion,” the funds said.They said allowing themselves to be taken over by a commercial company would be “an unusually bad business move for our customers.”The funds said that although regulatory changes meant increased calls on resources, this was a task they could and would handle.“We are focussing on earning money for our customers and members — and that is in fact going really well for all three pension funds, all of which deliver a high return,” they said.Over the last 20 years, the funds said they had outperformed average pension providers by 15%.JØP and DIP announced at the beginning of last year that they were merging their investment operations after the two departments had worked closely together for years.The move would ensure lower costs and improved investment knowledge, the funds said.At the end of 2013, the pension fund for pharmaceuticals experts had assets under management of DKK9.6bn (€1.3bn), while Lærernes Pension had DKK70.2bn, JØP had DKK61.8bn and DIP had DKK33.6bn. PFA, meanwhile, manages assets of DKK417bn.
No indicative minimum amount has yet been set for the two standby bond mandates, the pension fund said.The objective of the Asia-Pacific SRI equities mandates is to outperform the MSCI AC Asia Pacific index over the long term, while the euro-denominated SRI bonds mandates will follow a buy-and-hold investment style to maximise yields at the time of purchase and minimise default risk.The mandates will be for five years initially, and ERAFP will have the option to extend them by three successive periods of one year each, the fund said.Tender documents are available on www.achat.com. France’s ERAFP has launched tenders for three Asia-Pacific SRI equity managers and five euro-denominated SRI bond managers, investing an initial €2.9bn, as it renews maturing mandates and widens its investment universe.The €16bn public service pension scheme said it was launching a restricted call for tenders in two lots, for the award of eight investment management mandates.The initial investment in the Asia-Pacific SRI equities mandates would be around €400m, split between two managers, with the third manager having a standby mandate, ERAFP said.The euro-denominated SRI bonds mandates would have an initial investment of about €2.5bn, divided among three managers with a minimum of €400m per active mandate, it said.
Jonathan Hill has dismissed suggestions the UK’s departure from the European Union will bring about a material change in the Capital Markets Union (CMU) and urged his successor to champion the project, a cornerstone of Jean-Claude Juncker’s presidency.Hill, who resigned as European commissioner for financial stability in the wake of last month’s UK referendum on EU membership, rejected the notion the CMU would shift to focus on introducing a single European financial regulator under the stewardship of Valdis Dombrovskis, commission vice-president responsible for the euro.“I know some people have been wondering whether my leaving will mean a change of direction for CMU,” he said while addressing the European Parliament on 13 July.Hill rejected suggestions his departure would see Dombrovskis introduce a single financial regulator, if for no other reason than member states did not currently support such a reform, or that the UK’s departure would see the CMU project become more “ambitious”. “There is nothing ambitious about driving full-speed into a brick wall of political opposition,” he said.Hill added said that the reason for introducing the CMU had not changed in light of the UK’s decision to leave the EU and that, if anything, the case for reform had been strengthened by the country’s eventual departure.The remarks echo earlier ones, when he said London’s imminent departure from the EU made the CMU’s launch “more urgent”.Hill concluded his speech, likely his last to Parliament ahead of his resignation taking effect on 15 July, on a realistic note: “Building a Capital Markets Union was never going to be easy. I was never under any illusions about that.“But today my message to people would be to stick with it, to keep hammering away at the barriers to free movement of capital for the years ahead.”The Dutch Pensions Federation has lamented Hill’s departure, with its director saying it was likely to be a setback for the pensions industry.On the day of the UK’s referendum, Hill told the PensionsEurope conference he was aware of the industry’s concerns around central clearing, and that the possibility of a permanent exemption would be examined as part of a review of the second European Market Infrastructure Regulation (EMIR II).The UK government has nominated Julian King, an experienced diplomat and former chief of staff to Hill’s predecessor Catherine Ashton, as its next commissioner.
PGGM Investments, Degroof Petercam, KAS Bank, UBS Asset Management, Legal & General, Partnership, Pensions Administration Standards Association, KPMG, Hymans Robertson, MercerPGGM Investments – Frank Roeters van Lennep has been appointed CIO for private markets, succeeding Ruulke Bagijn, who left PGGM in May for a position at AXA Investment Management. Van Lennep has served as PGGM’s head of infrastructure investments since 2014. Before joining PGGM, he was a partner at KPMG Corporate Finance, responsible for debt advisory and infrastructure activities. He has also worked at NIBC and ABP Investment, having begun his career at regulator DNB within banking supervision.Degroof Petercam – The asset manager has appointed Roy Braem as senior sales and account manager on its institutional sales team in the Netherlands. The company said this was part of its plan to become a pan-European player, servicing clients from local offices. Together with Marco van Diesen, Braem is to target existing and new institutional relations. Braem joins from KAS Bank, where he has been working as a client manager and business developer for institutional players. He will operate from the Amsterdam office.UBS Asset Management – Fekko Ebbens has been appointed head of the institutional business for the EMEA region, as of 1 September. Ebbens is currently head of Denmark and the Benelux countries at UBS AM. He started at the manager in 2006. Before then, he worked at Lombard Odier Darier Hentsch and Van Lanschot Bankiers. Legal & General – Frankie Borrell has been appointed business development director at L&G’s pension risk transfer business. He focus will on servicing the small to mid-sized pension scheme market. He joins from Partnership, where he worked in the bulk annuity team, with previous roles at Just Retirement and in KPMG’s corporate pensions teams.Pensions Administration Standards Association – After recent elections, Girish Menezes, Tracy Weller and Gary Evans have all taken places on the board. Menezes and Weller will sit on the board for the first time, whilst Evans has been re-elected for a second term. Menezes is head of pension administration at KPMG and chairman of the Pensions Management Institute, London Group, while Weller is practice leader at Hymans Robertson. Evans is a principal at Mercer with responsibility for client development of pension administration clients.
The UK accounting watchdog, the Financial Reporting Council (FRC), has written to audit committee chairmen and finance directors to highlight a number of priorities for them to consider in the run-up to the annual reporting year-end.Brexit and the ongoing rumblings over the requirements for reporting distributable reserves figure among the issues singled out for special attention by the FRC.In light of the referendum vote for the UK to quit the European Union, the FRC says “companies will need to consider the consequential risks and uncertainties in the political and economic environment and the impacts of those risks and uncertainties on their business”.The FRC has already flagged up Brexit issues and their impact on financial reporting in a 12 July press release addressed to company directors. The 10 October letter to senior management also revisits the vexed issue of distributable reserves and dividend payments.The row was reignited in September when the Local Authority Pension Fund Forum (LAPFF) wrote to FTSE 350 boards and urged them to disregard the FRC’s pronouncements on the topic.Prompting the move was the release of redacted emails between the FRC and officials in the former UK department for Business, Innovation and Skills (BIS). In the 10 October statement, the FRC writes: “Our position remains that we encourage good disclosure and companies paying close attention to their investors’ views whilst noting that the Companies Act 2006 does not require the separate disclosure of a figure for distributable profits or, specifically, multiple figures for distributable profits.”In response, an LAPFF spokesperson told IPE: “No one ever said the distributable reserves would need to one number – any more than suggesting undistributable items should be one number.“The relevant issue is whether the accounts enable a determination of what is distributable or not based on the numbers as stated in the accounts.“The FRC has created a non-question to deny any requirement for a single figure for distributable profits. But that’s a red herring.”Following a request from IPE for the FRC to clarify its position, an FRC spokesperson said: “Our position on this issue is clear – the Companies Act 2006 does not require the separate disclosure of a figure for distributable profits. Ultimately, interpretation of the Act is a matter for the courts.”Meanwhile, the FRC has urged preparers to assess the impact of the low-interest-rate environment.“In particular,” it said, “careful consideration should be given to the valuation of long-term assets and liabilities – for example, the effects of adjusted discount rates on pension scheme liabilities and suppressed returns on pension scheme assets. Companies may need to provide sensitivity analysis to highlight the potential impacts.”The FRC is expected to release its 2015-16 review of corporate reporting shortly.
Dutch asset manager NN Investment Partners and its subsidiary AZL can now begin operating their general pension fund (APF) after the regulator (DNB) handed out its fourth license.The new vehicle can accommodate all types of pension arrangements, including directly insured plans, in four different ring-fenced, multi-client compartments, as well as spheres for individual schemes.According to Arnout Korteweg, executive board member, the APF is speaking with “dozens” of pension funds that have shown an interest in joining.He added that the new vehicle – named De Nationale APF – expected to win its first contracts by the end of this year. On its website, it said the group compartments would be based on the funding level of participating schemes.It will aim for an initial coverage ratio of the “lowest” group, enabling it to grant an indexation of 50%.It said the highest-funded ring should expect full inflation compensation.NN IP is to carry out fiduciary management in the new APF, while AZL will act as pensions administrator.Korteweg said NN IP would charge participating pension funds 0.06% for its services and that external asset managers would directly settle their costs through returns.He added that the cost of pensions provision would be €115 per active participant and include the costs of the APF’s pensions bureau.The APF said it planned to apply an asset allocation split across a 50% return portfolio and similarly sized matching holdings for the lowest-funded compartment and use a 55%/45% ratio for best-funded group.The Dutch regulator has already granted APF licenses to insurer Aegon and its subsidiary TKP Pensioen, Achmea subsidiary Centraal Beheer and insurer ASR.Asset manager PGGM, insurer Delta Lloyd and company Unilever are still awaiting approval.Unilever has said it wants to place its own pension funds only, Progress and Forward, into its APF.
Ostermann will join from British Columbia Investment Management, where most recently she was senior vice president, corporate and investor relations. From 2013 to June 2017 she was senior VP for investment risk, strategy and research at the Canadian asset manager. She has also held senior positions at Manulife and Sun Life Global Investments, and is the vice chair of the board of directors of the Pension Investment Association of Canada.Julian Cripps, managing director at RPMI Railpen, said: “Michelle brings a wealth of international experience to RPMI Railpen and her proven track record of leading teams to deliver best practice across the institutional investment industry will be invaluable as we continue to fulfil our mission to pay members’ pensions securely, affordably and sustainably.”Ostermann is the latest appointee to the UK pension investor’s leadership team. Earlier this year Railpen appointed its first chief investment officer and head of private markets, positions that were filled internally. In February, Philip Willcock replaced Chris Hitchen as CEO. RPMI Railpen, the in-house manager of the industry-wide scheme for UK railway companies, has appointed Michelle Ostermann to the new role of chief fiduciary officer for investments.Ostermann will join the manager in January next year. She will be responsible for determining the £28bn (€32bn) railway pension scheme’s high-level investment strategy and risk appetite, as well as defining the range of internally managed pooled funds.The manager said she would work closely with the investment, funding and covenant teams in proposing tailored solutions for the multi-employer sectionalised schemes.She will also be responsible for the manager’s sustainable ownership strategy and client relationship management.
“Greater use of Big Data and developments in artificial intelligence are likely to see growing use of machine-based decision making by asset managers in security selection, asset allocation and trade execution.”Another issue identified by the FCA was that “significant” harmful side effects could arise from failure or disruption at one or more of the small number of custody banks and administration service providers in the sector.Significant harmful side effects could also result from failure at one or more of the small number of firms relied on for outsourced technology services, according to the FCA.Outsourcing to third party technology providers was growing, which meant that the proportion of assets potentially affected was increasing, the regulator said.“Any increase in levels of outsourcing, which could exacerbate the likelihood of firm or technology failure, may be offset by increased regulatory focus on third party service provision oversight,” it added.The FCA also said barriers to successful cyber-enabled financial crime were falling due to technological advances, which increased “the availability and commoditisation of sophisticated cyber-attack tools”.The general trend linking these issues, the regulator’s report suggested, was “increasing use of automation in financial services and greater outsourcing”.“While these bring benefits to the industry they, and the oversight problems they can cause, also have the potential to threaten stability and resilience across the sector,” said the FCA.The regulator also identified growth in funds investing in less liquid assets as a sector-wide issue.However, it noted that the experience of real estate funds after the UK Brexit referendum in June 2016 showed “material consumer detriment” could be avoided by the use of liquidity management tools.In addition, investments in less liquid assets were increasing at only a slow rate, the FCA said, regulators such as the International Organisation of Securities Commissions had moved to mitigate potential issues from such funds.The FCA’s sector analysis will feed into its business plan for 2019-2020. The Financial Conduct Authority (FCA) has identified “inappropriate technology-led asset management decisions” as one of five issues in the investment management sector that could undermine stability.Writing in its annual “Sector Views” publication, the regulator said such decisions could result in “harmful side effects”.The proportion of assets invested through technology-led decision-making was small but growing, and “[t]he speed of machine reactions could have serious consequences,” it said.“If artificial intelligence using an algorithm were to make an inappropriate asset management decision, any resulting losses could be quickly compounded,” it added.
VBV, Austria’s largest pension provider, adds €11m in value to the domestic economy, according to research – and this figure hits €1.5bn a year including the assets it invests in the country.Austrian economic researcher Gottfried Haber reported the figures as part of a study commissioned by the €10.4bn VBV Group, which runs both Pensionskasse and Vorsorgekasse vehicles.“As shown in our research, the added value Pensionskassen and Vorsorgekassen are creating for… Austria and the labour market is significant,” Haber said.The overall added value was derived from the value that VBV created as an Austrian-based company, the money it invested in Austrian businesses, and the additional retirement income it generated, which allowed for more consumption by pensioners. The academic research also translated the added value into jobs directly and indirectly secured by VBV: Including investments in Austrian companies, the VBV’s activities secured more than 20,000 jobs in the country.Overall, Austrian Pensionskassen currently manage around €22bn in assets. Provident funds, known as Vorsorgekassen, manage €11.5bn in total.Pension income gap estimated at €770Meanwhile, Austria’s second largest pension provider, the €9.4bn Valida Group, surveyed 2,000 employees on their retirement income outlook and found that only 13% of men and 7% of women thought they would be able to “live comfortably” from their state pension income upon retirement.The vast majority believed the money from the first pillar would be too little. All respondents had difficulties estimating the gap between the income and their needs, however.On average the ‘pension gap’ was valued at around €770 per person, per month. People between 30 and 40 had a more pessimistic estimate of over €900 a month.Information on future retirement income from the first pillar is available in Austria upon request but the service is not widely used.Martin Sardelic, chairman of the board at Valida Holding, called on the authorities to help people save in the second pillar.For years, the pension fund industry in Austria has demanded a tax exemption for additional contributions made by employees to their pension plan. At the moment employer contributions are exempt from taxes and social contributions, but employee contributions are not.Reforms in this area have been discussed by the previous government, and might have found its way into a planned tax reform – but the whole government resigned last month.
This week saw the UK’s Conservative party voting for its next leader, with former London mayor Boris Johnson and foreign secretary Jeremy Hunt left vying for the right to succeed Theresa May as prime minister after she quit earlier this month.Whoever wins the backing of the party’s membership (spoiler alert: it will probably be Boris Johnson) faces a difficult task of winning parliamentary backing for the UK’s withdrawal agreement with the EU before the new Brexit deadline of October 31.Data from EY released today indicates that the delays, debates and disagreements regarding Brexit over the past year have taken a toll on investor confidence in the UK, with the country losing some of its appeal as a destination for foreign direct investment (FDI).The consulting and accountancy firm surveyed more than 400 investors and analysed deal flow in 2018. The UK was the number one destination for deals last year, EY reported, with 1,054, ahead of France and Germany. Source: US State DepartmentBoris Johnson, the leading candidate for the next UK prime minister, addresses a press conference in 2016Investors said financial services and the digital economy would be the main drivers of the UK economy in the next few years, with 33% citing the banking, insurance, wealth and asset management sectors, and 26% citing digital companies and services.Ali said policy decisions made in the next few years would be “a major determining factor in whether this is a temporary blip in sentiment or whether investment will trickle away”.“It is critical to the UK’s future economic prosperity that politicians prioritise re-skilling, education and the future immigration system,” he added. “It’s also vital they quickly focus on achieving an orderly exit and clarifying the role of financial services in our future trading relationship with the EU.” 2018 foreign direct investment dealsChart MakerHowever, long-term sentiment towards the UK has declined. Asked how they thought the UK’s attractiveness as an investment destination would evolve over the next three years, 26% of respondents said it would improve, while 42% said it would decline. This compared to 31% who were positive on the UK last year and 36% who were negative, and marked the weakest sentiment of EY’s survey since the 2016 EU membership referendum.To what degree do you think the UK’s attractiveness will evolve over the next three years?Chart MakerOmar Ali, EY’s UK financial services leader, said: “The high level of investment in 2018 reflects the historic optimism of investors at the time. If you cast your mind back to the second half of 2017, mutual market access was still on the table and an orderly and business-friendly transition deal looked like it could still be reached before the 2019 deadline.”