Month: September 2020
Riemen’s comments came in response to professional trustee René van de Kieft, who recently argued in news daily Financieele Dagblad that increasing expertise on schemes’ boards would require a similar increase in remuneration.In Van de Kieft’s opinion, the relatively low reward for trustees made attracting more expertise more difficult.He noted that the Dutch pensions sector was the only industry that paid board members less than their staff and the highest echelons of their providers.Van de Kieft is board member at the €309bn civil service scheme ABP and the €6.3bn pension fund PostNL. Until recently, he also was a trustee for the €34.4bn metal scheme PME.According to Riemen, the legal rules concerning the amount of time board members must spent on their responsibilities are the real problem.The Federation also disagreed with Van de Kieft’s suggestion that a board consisting of only social-partner representatives would be inferior.“The sector can work very well with the choice of board models, and this also goes for the reward of trustees, for which the Federation has issued guidelines,” he said.The recommended standard pay for a full-time board position varies from €100,000 at a small pension fund to €140,000 at a large scheme. However, trustees’ remuneration at the largest providers APG and PGGM varies from €450,000 to €670,000, according to the FD.Meanwhile, ABP has indicated that Van de Kieft, who represents union federation CNV on its board, has not spoken on behalf of ABP.“We want to keep trustees’ remuneration manageble and predictable,” it said.“Therefore, we have opted for a fixed reward [that approximates] the recommendations of the Pensions Federation.” The Dutch Pensions Federation has criticised a proposed remuneration increase for the professional board members of pension funds in the Netherlands. Gerard Riemen, director at the lobbying organisation, said: “A modest reward policy is a great good in the sector.”He said the industry was focusing on the interest of society and that pension funds should not operate as commercial businesses.“We want to radiate this focus within the existing culture, as well as within pension funds’ remuneration policy,” he said.
Forcing pension funds to disclose the main elements of all investment management agreements (IMAs) with asset managers could have unintended consequences that hinder long-term investing, PensionsEurope has warned.The industry association recommended the European Commission’s revised Shareholder Rights Directive require the disclosure of investment beliefs and how these are implemented through a fund’s investment strategy, rather than details of IMAs.In a position paper on the Directive, the association suggested that the requirement to identify all of a listed company’s shareholders should be dropped, limiting it to institutions that hold at least 0.5% of share capital.It said the 0.5% threshold was one already employed in the Netherlands and allowed companies to identify shareholders that owned a “relevant” stake in the firm. PensionsEurope also raised concerns about engagement policies proposed in the draft Directive, saying the requirement to explain voting behaviour would increase administration costs.Returning to the issue of investment management agreements, it said: “We consider it inappropriate to require disclosure of specific contractual arrangements between two parties, especially when, for example, the fund in which the institutional investor has invested is not public.”Additionally, the position paper pointed out that information about an asset manager’s strategy could be commercially sensitive, and argued that it would push pension funds to invest only in vehicles with more easily justifiable fees, rather than ones offering the best fee structure.“Thus, requiring institutional investors to disclose publicly the main elements of the arrangement with the asset manager would in our view not be the right way of achieving long-term investment, instead giving undue prominence to only a narrow element of the strategy, with potential unintended consequences,” it said.However, the association did praise a number of the proposals put forward by the Commission.It said it was “positive” to introduce a vote on remuneration, which, according to the initial proposal, would be binding, and that it would encourage dialogue between shareholders and companies.It also welcomed the greater focus on transparency, and said further protection for minority shareholders – through the related-party transaction requirements that will require a vote on certain deals – was a positive step.The association did raise concerns that the Directive was too prescriptive, echoing concerns previously voiced by the International Corporate Governance Network.,WebsitesWe are not responsible for the content of external sitesPensionsEurope position paper on revised Shareholder Rights Directive
“I think 2015 will be an interesting year, as we will see a real chase for assets,” he said.Speaking in the current issue of IPE, Twyning said PIC largely considered involvement in “relatively straightforward assets” when seeking long-dated cash flows.He said the insurer was interested in projects with low levels of construction risk that were already operational, citing regulated utilities such as energy and water.“One project that includes construction risk but looks particularly attractive is the Thames Tideway Tunnel, which is expected to start looking for funding in 2015,” he said. The 25 km tunnel is needed to expand the capacity of London’s sewage system, built around 150 years ago for a city one-quarter its current size.Its construction will be overseen by a standalone entity working with utility company Thames Water.For more on the challenges of investing in long-term, illiquid assets, see On The Record in the current issue of IPE with PIC, Ärzteversorgung Westfalen-Lippe and SPF Beheer Pension Insurance Corporation (PIC) will consider financing some of the £4.2bn (€5.1bn) cost of a new London sewage system as it struggles with the “mismatch” between demand and supply of infrastructure projects.Allen Twyning, head of debt origination, said the £12bn pension insurer saw the gap between the infrastructure pipelines being “talked up” by governments and the number of transactions as problematic.“Institutions have put together large teams, but they have struggled to deploy cash because the projects have not come to market,” he said. He did not anticipate the market becoming any less crowded.
There is a sub-category of “alternatives” which we describe as ‘same assets, different process’ which can also offer the valuable diversifying characteristics found in traditional equities and bonds. The consistent theme is that, whilst the underlying asset classes are similar, the targeted risk-return profile is more asymmetric than a traditional buy-and-hold (or ‘long-only’) strategy, making them attractive both in their own right but also as a complementary holding alongside traditional solutions.Different Assets, Same ProcessThese assets are typically managed along the lines of a traditional buy-and-hold approach but, because of their underlying characteristics, can perform differently to traditional investments, in addition to providing attractive risk-adjusted returns. One such example would be infrastructure projects which have a specific risk-return profile and are typically more defensive and yield-focused.Given the appeal of these types of underlying assets, it is unsurprising that they attract such high levels of demand from pension funds, sometimes unfortunately to the detriment of their prospective returns.Is there an alternative to alternatives?Rather than simply defining asset classes by their historic popularity (traditional or alternative), in an ideal world, each investor could create its own categorisation based on their specific context – their clearly defined goals, objectives and constraints. The universe of asset classes and investment strategies could then be mapped out against this specific frameworkFor example, is the portfolio required to deliver a steady income stream? This may allow greater scope for some credit asset classes which offer regular and certain cashflows but that may be less liquid and/or more complex in nature, and less scope for more volatile asset classes such as equities. We found this outcome-oriented approach to be incredibly valuable in mitigating the potential for asset classes such as social housing and infrastructure debt to “fall between two stools” when the spreads on offer were highly attractive for the risk taken following the financial crisis, in addition to the matching properties they could provide.Recognising this might not be a feasible starting point for some investors, particularly where the objectives and constraints are difficult to precisely define, we find a useful starting point is to map out both traditional and alternative strategies according to (a) liquidity of the asset or strategy and (b) certainty of cashflows. As this categorisation is based on what characteristics are offered by an asset class, it helps investors to quickly narrow down which asset classes offer the best fit according to their needs, and in which order of priority they should be implemented. .Challenges remainEven with what we believe is a more helpful form of categorisation, the challenges (perceived and real) of asset classes or strategies that may be unfamiliar remain.Important questions to ask include:What does the risk-return profile of the opportunity look like? What role will the investment play in the portfolio? Is the underlying risk premia from which returns are earned both identifiable and persistent?In summary, when considering alternative assets and processes, we disregard categories and labels and look more closely at the underlying characteristics of the strategy. This allows for the selection of assets which should help investors meet their objectives over time.An alternative to ’alternatives’ is needed as the label itself is not very helpful. We believe that assessing assets, both traditional and non-traditional, by the “liquidity” and “certainty” of cashflows is a far better way of understanding their potential fit within a portfolio. These lenses enable clients to make decisions about the outcomes, characteristics and combinations of seemingly unrelated assets.Ultimately, manager due-diligence is essential as we investing in people and their processes rather than purely selecting individual assets.Pete Drewienkiewicz is head of manager research at Redington Pete Drewienkiewicz on the mystery of the ’alternatives’ label, and why investors should simply look at asset classes based on their investment goals and objectivesIn a world of investments dominated by equities and bonds, the category of ’alternatives’ offers great allure to portfolio investors – the promise of attractive returns and, at the same time, potentially both diversification and downside protection is a seductive one. It is a “catch-all” label to help investors quickly categorise the universe of opportunities.However, the label ’alternatives’ also purveys a sense of mystery, additional complexity and high fees which create unnecessarily high hurdles for some assets and strategies that, as a result, are quickly excluded from consideration. Such a broad label can leave investors thinking too myopically about the opportunities available to them. Before considering an alternative to this catch-all label, it’s useful to understand what might be meant by “alternatives”.Same Assets, Different Process
Vanguard – Robyn Laidlaw has been appointed as head of institutional business in Europe for the US asset manager. She moves over from its Australian business where she was head of product and marketing. Laidlaw fills a position left after the untimely passing of Simon Vanstone.AXA Investment Managers – Dani Saurymper and is set to join the French investment manager’s healthcare investment team. Saurymper will manage the Axa Framlington Health Fund and the Axa WF Framlington Health. He joins from Barclays Capital where he was an equity research team for European healthcare. He also spent time at Nomura and Goldman Sachs in pharmaceuticals research.State Street Global Markets – Alex Lawton has joined as a senior managing director and head of securities finance in State Street’s global markets division in EMEA. Lawton joins State Street from Barclays where he was head of equity finance and prime services. He will be responsible for developing the securities finance business across EMEA.Mandatum Life – Peter Lindgren has been appointed as head of international sales for wealth management at the Finnish insurer and wealth manager, focusing on the Nordic region. Lindgren joins from Amundi Asset Management here he was general manager for the Nordics. He has previous experience at Credit Suisse and PIMCO. Towers Watson, SCA, MN, Vanguard, AXA Investment Managers, State Street Global Markets, Mandatum LifeTowers Watson – Frans van der Horst has been appointed as a senior consultant at the consultancy. In his new job, he will focus on improving and extending client relations. Van der Horst has been senior manager global pensions, corporate clients and asset management at insurer Aegon.SCA – Carolien Quint has been appointed secretary to the board of the €400m pension fund for the hygiene products firm. She succeeds Ronald van Eldijk, who has stepped down as of 1 April. SCA was one of the three multi-company schemes in the Netherlands before it decided to split into two independent pension funds, after the employer of one of the schemes in was bought by British company DS Smith.MN – René van de Kieft has been appointed as the new executive chairman of the Dutch pensions manager, replacing Ruud Hagendijk who steps down after ten years. Van de Kieft, who will assume his new role 1 May, is currently board member of the €344bn civil service scheme ABP and the €40bn metal scheme PME as well as chairman of the €8bn postal scheme PostNL. Previously, he was CFO and COO of the €188bn asset manager PGGM and CFO at the parking company Q-Park.
BlackRock – Rupert Harrison is to join as head of macro-strategies for multi-asset funds. Harrison, who will join the asset manager in September, was chief of staff to UK chancellor of the exchequer George Osborne during the last Parliament and is one of the people credited with the overhaul of defined contribution regulation that now allows savers to withdraw their pot from 55 years of age.Russell Investments – Van Luu has joined the manager as head of currency and fixed income. Luu, who will be responsible for devising currency hedging strategies, joins from Norges Bank Investment Management (NBIM). At NBIM, responsible for management of the Government Pension Fund Global, she was a senior analyst for investment policy. Spence Johnson, Hermes EOS, Algebris, PIMCO, BlackRock, Russell Investments, Norges Bank Investment ManagementSpence Johnson – Nils Johnson, co-founder of the research consultancy alongside Magnus Spence, has been named director of retirement following a reorganisation that will see the company split into two business practices. Nigel Birch will head up the second practice as director of institutional. Spence will be managing director of the new business.Hermes Equity Ownership Services – Christine Chow Knowles has been named associate director of engagement, joining from the Hong Kong-based Homage Consulting. She has previously worked as a portfolio manager at Hewitt Bacon & Woodrow. Jaime Gornsztejn was also named associate director of engagement and joins from BNDES, the Brazilian national development bank.Algebris Investments – Simon Peters joins as portfolio manager for public equity strategies. Peters joins from PIMCO, where he was senior vice-president in charge of global and growth strategies, a position he only assumed in summer last year. He has previously worked at Singaporean sovereign wealth fund GIC.
Ireland’s sovereign fund could act as a catalyst for the development of domestic peer-to-peer lending, despite a likely small commitment if it were to proceed.Eugene O’Callaghan, director of the €7.6bn Ireland Strategic Investment Fund (ISIF), told IPE any move into the market “won’t be big, and it won’t have a massive impact”.But he confirmed an allocation was still under consideration after a request for proposals concluded in April.At the time, the fund said it would consider exposure to invoice and supply chain finance, as well as longer-term loans. Ireland’s sovereign fund targets peer-to-peer lending.O’Callaghan noted that peer-to-peer lending had proven successful in other countries.“In the US and the UK, there are good examples of that, and it’s a new market channel, which could profitably and sensibly be catalysed,” he said.“Our money can probably catalyse and accelerate that taking hold as an option, both for savers and borrowers, in Ireland.”ISIF’s interest in peer-to-peer lending stems from its desire to increase the number of ways small and medium-sized enterprises (SMEs) can access funding.Committing €500m to a number of SME lending funds was one of the first steps taken by the former National Pensions Reserve Fund to realign its strategy toward Ireland ahead of its transformation into the ISIF.It has since broadened to offer credit to property developers in a joint venture with KKR and in July unveiled its investment strategy focused on real assets, venture capital and private equity.For more on ISIF’s investment strategy, read IPE’s interview with Eugene O’Callaghan
The UK is set to replace binding investment guidelines for local authority funds with a statement of investment policy, granting schemes greater freedom as they pool assets.Bob Holloway, who heads the Department for Communities and Local Government (DCLG) pensions unit, said he hoped a consultation on investment regulations and pooling among the 89 local government pension schemes (LGPS) in England and Wales would be published in November, allowing the department to draft new regulation by April.In a speech at the Local Government Pension Investment Conference in London, Holloway said the consultation was likely to consider issues raised by the 2012 Kay Review, including the impact of non-financial matters on investment, as well as remove the requirement to review the performance of external investment managers every three months.He told delegates that elements of the current Local Government Pension Scheme Regulations 2009 would be amended as part of the consultation, and singled out the regulation’s schedule 1 – which imposes strict investment limits on the LGPS – as likely to be scrapped, if ministers approved. “There will be no schedule 1,” he said, “and there will be a general provision that allows you to publish yet another statement that will be explaining your investment strategy. It’s your own version of schedule 1.”This, he said, was “localism at work”.The shift comes after years of calls from local authorities for changes to investment regulations.The Greater Manchester Pension Fund – the largest LGPS, with £17.6bn (€23.9bn) in assets – told IPE in April it would like to see the rules amended to mirror those for private sector funds, with similar views previously expressed by the London Pensions Fund Authority and the London Borough of Camden.The consultation would also set out terms of a regulatory backstop for the pooling of LGPS assets, which chancellor of the Exchequer George Osborne recently said would see the creation of “British wealth funds” that could invest in local infrastructure projects.Holloway assured the audience there was no plan to force infrastructure investment.“It is a hope, it is an aspiration you will be far-thinking enough in these sub-funds worth £30bn that you will then have the capacity and the will to invest in infrastructure,” he said. He also praised the recent initiative by funds in the South West to create an asset pool worth around £19bn, and said industry should not get “hung up” on the £30bn pooling target mentioned in recent months by the government.Discussing potential changes to corporate governance regulation, he said the current regulations only required funds to disclose a corporate governance policy if they had one. “We may take that a little bit further and almost have that as a default position – i.e. you should have proactive corporate governance, but, if you don’t, then you explain [why not].“It’s a major comply-or-explain provision rather than ‘What’s your policy?’”He said the Local Authority Pension Fund Forum was “very strongly” backing a shift towards ‘comply or explain’, adding that the department wished to see schemes engaging with corporate governance “to protect their investments”.The civil servant also touched on an announcement made during the ruling Conservative party’s annual conference, where it was suggested new regulation could prevent politically motivated divestment, such as the sale of holdings in Israeli companies.Holloway said the department was “wrestling” with the matter at the moment, as there was “a great deal of complexity” associated with the wording of the regulation. “I don’t know what the outcome will be, and I’m not sure the government [does] either,” he said.
The Universities Superannuation Scheme has grown its private markets team, hiring six new staff, including one from BP UK’s in-house manager.The £49bn (€66.9bn) industry-wide fund said the expansion of the team came at a time when private market investments already accounted for approximately 20% of assets.Anna Barath, Diogo Belo, Fabienne Trevere, Hesham Hussein and Tom Kelly have joined USS Investment Management as analysts.Barath and Belo join from Moody’s, while Barath has also worked for NATO. Trevere and Hussein have worked within the UK banking sector, as M&A analyst for HSBC and corporate banking analyst for RBS, respectively.Kelly worked for family office KGB prior to joining USS and also has experience as an investment banking analyst at Evercore.Lastly, the fund has hired Emma Singh as an associate to help manage its direct portfolio. Singh previously worked for BP Investment Management, the in-house manager for the oil company’s UK pension fund, where she was private equity controller.Mike Powell, head of the private markets group at USS, said he was very pleased to welcome the new hires, which bring the headcount at USS IM to 30, including 11 analysts.“Our direct investment programme continues to expand, consistent with our core investment beliefs,” he said, “not least that utilising our in-house team can deliver superior risk-adjusted returns, and brings additional benefits for our members in terms of alignment of interests and greater governance over our investments.”The private markets team has recently completed a deal that saw the schem acquire Moto Mospitality.The fund also owns a nearly 50% stake in NATS, the body in charge of air traffic control of British airspace.The UK government earlier this week confirmed it would explore the sale of its remaining 49% stake, likely to attract interest from USS. At the end of March, USS had 21.4% in private market assets, including infrastructure, property and inflation-linked debt.It returned 17.9% over the course of the 2014-15 financial year.In July, it announced it entered a £130m direct inflation swap deal with Yorkshire Water, building on its past activities with regulated utilities that saw it in 2013 provide £100m in debt to Affinity Water.Its other infrastructure holdings include a stake in London’s Heathrow Airport and part of the rail line connecting Australian city Brisbane with its airport.
“As key players in capital markets, increasing investment in personal pensions is one of the priorities of the Capital Markets Union. They offer the potential to inject more savings into capital markets and channel additional financing to productive investments.”The Commission said the consultation would help it analyse the case for an EU personal pension framework.It is the latest step taken by the Commission in relation to developing private pensions in the EU, with EIOPA drafted in to provide advice.The Commission noted that its recent consultation built on previous consultations by it and EIOPA “but increases their scope”.In its advice to the Commission, EIOPA favoured a pan-European personal pension product (PEPP) under a so-called 2nd regime, complementing existing private pension products and for voluntary adoption by providers.It stuck by this in its recent, final advice to the Commission.This idea, however, is only one of the options the Commission includes in its consultation, which it said could range from “self-regulatory approaches (cooperation among stakeholders) to more comprehensive EU intervention (harmonising at EU level the national personal pension regimes)”.It floats four possible approaches on that spectrum, one of which is a European personal pension account akin to the Individual Retirement Account (IRA) in the US.Margot Jilet, policy adviser at PensionsEurope, said this looked like a new option the Commission was considering.“They haven’t skewed the consultation toward any one approach,” she told IPE. “That’s in line with what they previously indicated – that they would adopt a broad consultation.”Indeed, the Commission said it aimed to build on EIOPA’s advice and “widen the range of possible options and stakeholders consulted”.The Commission’s consultation on private pensions was expected to be published in early July but is said to have been delayed as a result of the Brexit-spurred resignation of the UK’s commissioner, Jonathan Hill, in charge of the financial stability, financial services and CMU brief.Latvia’s Valdis Dombrovskis has succeeded him.Speaking at the PensionsEurope conference in Brussels on 23 June – the day of the UK referendum – Hill told delegates the Commission would be launching a consultation on personal pensions before the summer break, and that a feasibility study was already underway.He said a public hearing would be held in October; it is now said this could be delayed.The consultation closes on 31 October.,WebsitesWe are not responsible for the content of external sitesLink to European Commission “Public consultation on a potential EU personal pension framework” The European Commission has launched a consultation on a potential EU framework for personal pensions, which builds on previous consultations by it and the European Insurance and Occupational Pensions Authority (EIOPA) but has broader scope.The consultation is public and aimed at identifying potential obstacles to the take-up of third-pillar pension products. It is part of the Commission’s Capital Markets Union (CMU) project, which aims to develop the capital markets in the European Union to boost economic growth, in particular by freeing up financing for small and medium-sized enterprises (SMEs).“The consultation,” it said, “will enable the Commission to assess what can be done at EU level to support a wider choice of personal pensions competing across borders.