“There are also efficiencies in terms of good communications, for instance, and in extracting good terms from investment managers and administrators“And from a supervisory point of view, it is much easier for a regulator to oversee one hundred schemes than 100,000 schemes.”The Authority has previously hinted the future shape of the DC landscape, last year launching a consultation focused on minimum quality standards.It also said that it would like to ensure that trustees could not be barred, by the scheme’s trust deed, from tendering for asset management services – a likely attempt to prevent the launch of master trusts, backed by an asset manager as sole provider.Despite the issue not being mentioned in a recent summary of consultation responses, the Authority still backed the proposal, Kennedy said.“We would prefer a situation where the trustees of a pension scheme have freedom to choose an asset manager, to hire and fire an asset manager – just like they should have the freedom to hire and fire the administrator.”He did not seem surprised that the recent summary of consultation responses had heavily focused on the role of trustees.“I think people were right to recognise that we are putting the trustees, and the responsibility of the trustees and the ability of the trustees at the heart of what we want to achieve.” The Pensions Authority has reiterated its support for consolidation in the Irish defined contribution (DC) market, stressing the benefits of the economies of scale.Brendan Kennedy, formerly chief executive of the Pensions Board and now the pensions regulator at the rebranded Authority, noted that there were “efficiencies in the economies of scale” that could be achieved by reducing the number of DC schemes to around one hundred.Kennedy has previously said that small-scale schemes should be “discouraged” and said that it was “difficult to justify” the continued existence of any more than 100 funds.“Clearly, there are efficiencies in economies of scale,” Kennedy told IPE, noting both the advantages of scale to administration of funds, but also the benefits of fewer schemes to the expertise available to funds.
“We have been discussing the fact that fixed interest rates and fixed income markets are not providing any kind of returns for a long time,” the CIO said.Even though Varma achieved a strong fixed income return last year of 3.7%, Rytsölä predicted still tougher times for the asset class in the rest of 2018. Finnish pension insurer Varma is increasing the proportion of risk-factor-based, multi-asset strategies in its portfolio in response to the current “challenging” investment environment. Risk-factor strategies now make up just under 5% of the company’s €45.4bn portfolio, according to CIO Reima Rytsölä.Speaking to IPE, Rytsölä said: “Last year we already increased our factor-based cross asset strategies a little bit, and that’s something we will carry on doing, probably increasing the proportion a bit more.”As a euro-denominated investor, Helsinki-based Varma was still struggling with the very low euro interest rate environment. Reima Rytsölä, CIO, Varma“It seems that this year will finally be the year when fixed income as an asset class is really struggling a lot, and if equities are not fully valued, they are at least fairly expensive,” he said.“The fundamental economic environment is really strong at the moment, so there’s widespread, balanced global growth, but its hard to say at the moment how much of that growth is already in the price – so the environment is challenging for sure.”Varma’s risk-factor strategies have similar features to smart beta investment, but Rytsölä explained that the pension fund used a “cross-asset” approach.“Also, we have tended to set up these risk-factor strategies so that they play more of a defensive role against the equity market, so we don’t include strategies that have highest equity correlation such as short volatility or FX carry,” he added.A diversification conundrumBesides a reduction in the portfolio’s correlation to equities, Varma has also tailored its risk-factor investments so that they increase the overall diversification of the portfolio.“Classic diversification would come from bonds going up and yields coming down, but that doesn’t seem necessarily to provide any diversification at the moment,” Rytsölä said.While buying volatility would be a good way to diversify or hedge under these market conditions, he said, the drawback of this is the cost.“Timing needs to be precise, otherwise it cuts your returns so much because long-term volatility is expensive,” Rytsölä explained.Asked whether Varma would consider using a risk-factor approach for a more significant portion or even the whole of its overall portfolio, Rytsölä said this would not be easy for several reasons.“One is that we have a unique feature in our solvency system for pension insurance companies in Finland, which makes us dependent on how our peers’ solvency is developing,” he said. “That’s why it doesn’t make sense for us to deviate too much from them, and if we changed our whole portfolio management approach, that would open up the gap between them and us and there’s a risk then that we wouldn’t be compensated for carrying that standard deviation risk.”The Finnish pension insurance sector’s solvency system is unique in this way and not comparable to other pensions solvency regulatory systems elsewhere in Europe. In Finland, if any of the pension insurance companies became insolvent, the remaining companies would have to pick up its liabilities.In keeping with this principle, the return requirement for technical provision is dependent on the solvency of other companies.
Verloskundigen, the €359m Dutch occupational pension fund for midwives, is to cut pension payments for the third consecutive year after reporting a funding ratio of 88.4%.In its recovery plan, the scheme said it was anticipating a reduction of 0.75% at year-end, following cuts of 0.4% and 1.4% in 2016 and 2017, respectively.However, speaking to IPE’s sister publication Pensioen Pro, the scheme’s chair Marlies Bartels put the measure into perspective by explaining that the scheme would discount the cut against its unconditional indexation of 2%.As a result, pension rights would rise by 1.25% on balance, she said. “Despite the rights discounts, we are performing above average in terms of retaining purchasing power,” said Bartels.The net indexation granted by the pension fund has exceeded price inflation during the past five years.In the opinion of Bartels, the scheme’s funding level – which is well below that typically required by schemes to allow inflation-linked payments – should be considered in the context of its fixed 2% indexation.“Without this, our coverage would have stood between 130% and 140%,” she said.In order to speed up recovery to the required minimum funding of approximately 105%, Verloskundigen has decided to reduce annual pensions accrual by 30%.The €327m pension fund for the accountancy sector is the only other scheme in the Netherlands that is known to have applied a cut to payments this year.It said a 30% cut was necessary as part of the transfer of its pension rights to Stap, the general pension fund (APF) established by insurer Aegon and its subsidiary TKP Pensioen.The minimum entry level for the multi-client compartment of the APF equated to a funding of 105%. The coverage ratio of the accountancy scheme stood at 91.7%.
It expected to make another payment to investors later in September and further distributions “in the coming months” as less liquid assets were sold, GAM said.“GAM’s priority is to maximise value for the fund investors throughout the liquidation process, while ensuring equal and fair treatment to all,” the company’s statement said.“Because these funds have a mix of mainly liquid assets and some less liquid assets, GAM is focused on ensuring balance between value maximisation with speed of liquidation.”For investors wishing to remain invested in the strategy, GAM said it would launch a new UCITS fund “in the coming weeks”, while a new Cayman Islands-based fund was also in the pipeline.Investors have been queuing up to take their money out of the fund range after lead manager Tim Haywood was suspended on 31 July. Dealing in the funds was subsequently halted after a large number of investors attempted to pull out of the strategies.An internal investigation had identified problems with Haywood’s risk management and record keeping. No other strategies or funds were affected, GAM said.GAM chief executive Alexander Friedman said: “The suspension and the subsequent decision to liquidate the funds has been a difficult process, but necessary to ensure that we deliver on our principles of acting in the best interests of all fund investors and treating them equally and fairly. This does not take away from the fundamental strength of GAM as a diversified asset manager. “We have spent the past few years restructuring GAM into a more efficient business with a less volatile earnings profile, while continuing to build out high performing, specialist strategies that are relevant for our clients. This has made GAM better positioned to weather a challenging environment, and we believe we will continue to attract clients to our platform and deliver value to our investors in the years to come.” Swiss asset manager GAM is to restructure its absolute return bond funds, liquidating the majority of assets in the CHF7.3bn (€6.3bn) strategy in the wake of a wave of redemption requests.The company said in a statement this morning that it expected to begin meeting withdrawal requests from “early September”.GAM said it expected to realise between 74% and 87% of the assets in its Luxembourg- and Ireland-domiciled UCITS unconstrained and absolute return bond funds.Between 60% and 66% of a Cayman Islands-based fund and its related Cayman and Australian feeder funds would be realised in early September, it added.
A London local authority pension fund has become the latest to adopt an equity protection strategy, covering roughly half its total investment portfolio.The £1.4bn (€1.6bn) London Borough of Tower Hamlets Pension Fund appointed Schroders to run the £700m “risk management solution”, which was completed in September.In a statement, Schroders said the move put Tower Hamlets “in a robust position ahead of the market volatility experienced in October and November”.Steve Turner, partner at Mercer and adviser to the Tower Hamlets scheme, said: “The protection has already demonstrated its value in the recent equity market turmoil seen since early October, by helping insulate the fund from equity market volatility. Key stakeholders can sleep a lot easier with the strategy in place, while still retaining good levels of return upside.” Neville Murton, acting corporate director for resources at the London Borough of Tower Hamlets, said: “This investment strategy provides more certainty around the outcome of the 31 March 2019 formal actuarial valuation and protects against the risk of a significant fall in equities given increased volatility in markets and concerns regarding stretched valuations. “[Tower Hamlets’] funding level has improved materially since the last valuation, so the fund implemented the equity protection strategy from a position of relative strength. The strategy implementation was just in time to lock in high market levels before the recent market fall; therefore the strategy is in a good position to deliver additional savings.”All 88 Local Government Pension Schemes (LGPS) in England and Wales will go through their triennial actuarial valuation process next year, based on asset prices on 31 March 2019.Schroders said the mandate would maintain the pension fund’s exposure to equity market gains while “mitigating downside risk” and minimising trading costs.The asset manager previously set up a £2.6bn equity protection strategy for the South Yorkshire Pensions Authority earlier this year, which Schroders said was one of the largest such strategies adopted by a local authority pension scheme.Worcestershire County Council also made a similar move this year, appointing River & Mercantile Derivatives to run a £1.2bn protection mandate.
It noted that many European institutional investors had helped develop and promote best practices and standards in the past by making their expectations known through public statements by investor coalitions, such as the Green Bond Pledge. Feedback wanted The TEG believes creating the standard will help the green bond market grow further. According to the group, there were several barriers to this, such as concerns about reputational risks from potential adverse publicity about the “greenness” of deals, uncertainty about the type of assets and expenses that can be financed, and the absence of clear economic benefits for issuers. To resolve some of these issues, the TEG proposed that the EU green bond standard should build on the EU’s “taxonomy” of environmentally sustainable economic activities, currently in development.It has also proposed a standardised verification process and an accreditation scheme for external reviewers.The TEG suggested the creation of a temporary grant scheme to offset the additional costs of verification for issuers. It pitched this as an incentive in addition to the proposed disclosure regime for institutional investors.The group is seeking feedback on its recommendations.The TEG is due to present its final report to the Commission in June. The Commission will then decide on the next steps with respect to a potential green bond standard and other potential measures, after further public consultation.Speaking about the TEG’s work at the Climate Bonds Initiative conference in London yesterday, Olivier Guersent, director general in the Commission’s financial services department, highlighted the interim nature of the report, and encouraged delegates to fill out the online survey.Asked whether the standard could be too stringent, he said: “There may be an issue on stringency, with a view to giving higher credibility to the process to allow the green bond market to flourish further.”The online feedback survey is open until 3 April and can be found here.See the February edition of IPE Magazine for a dedicated green finance report The TEG also said that investors were “encouraged to adopt the requirements of the EU green bond standard when designing their green fixed income investment strategies and to communicate their commitment and their expectations actively to green bond issuers as well as to underwriters”. Institutional investors are being called upon to support the implementation of an EU green bond standard.The standard, which should be voluntary, should be created by the European Commission by way of a “recommendation” rather than a mandatory legal framework, according to the technical experts group (TEG) advising the Commission on its sustainable finance action plan.In an interim report on the work of the TEG’s green bond sub-group, it also recommended the Commission establish “an ambitious” disclosure regime under which institutional investors would have to periodically report “EU Green Bond” holdings or explain why they did not provide this information – known as a “comply or explain” regime.Citing the experience of France’s “Article 173” reporting regime, the TEG said mandatory disclosures for institutional investors, even under a flexible approach, could increase the credibility of a standardised EU green bond market and “have a major impact on the demand”.
RobecoSAM – Sustainable investment specialist RobecoSAM has announced that its co-chief executives Daniel Wild and Marius Dorfmeister will leave the Zurich-based firm to take on new roles elsewhere.Wild joined the Robeco subsidiary in 2006 and was responsible for investment management, products and engineering, research, sustainability services and ESG ratings. He will stay on to ensure a smooth transition to a successor. Dorfmeister has been global head of clients since 2017. He will leave no earlier than the end of April, according to RobecoSAM.AMF – Marie Rudberg has been elected as chair of the supervisory board of Swedish pension fund AMF. She took up the position of acting chair after the previous incumbent, Pär Nuder, resigned from the board of the SEK590bn (€56.5bn) fund last month after eight years.Rudberg was appointed to the role by the Swedish Trade Union Confederation and the Confederation of Swedish Enterprise and was voted in at the fund’s annual general meeting on 4 April.Investec Asset Management – James Elliot has been appointed head of multi-asset at the $133.7bn (€118.5bn) asset manager, joining in July. He was previously chief investment officer for JP Morgan Asset Management’s international multi-asset solutions business, where he founded and co-managed a range of global macro strategies.Investec CIO Domenico Ferrini said the appointment “underscores our commitment to delivering market-leading multi-asset investment solutions for our clients” and would help the group “compete meaningfully on a global stage”.HSBC Global Asset Management – Jean-Charles Bertrand and Joe Little have been named global co-chief investment officers for HSBC GAM’s $100bn multi-asset business. Bertrand is head of multi-asset in France while Little is head of investment strategy, roles both men will retain.The asset manager said Little would be based in London and focus mainly on the multi-asset group’s investment process, while Bertrand would be based in Paris and focus on portfolio construction and risk.AFM – Merel van Vroonhoven, chief executive of Dutch financial communications watchdog Autoriteit Financiële Markten has announced her departure as of 1 September, after more than five years at the helm. She said she had decided to become a teacher in special needs education, while remaining active in the governance circuit.“After having worked on executive boards for more than 20 years, I want to make a more concrete contribution to society and being close to the people who need it the most,” explained Van Vroonhoven.BMO Global Asset Management – Jürgen Florack has joined BMO as managing director and head of sales for institutional clients in Germany. He succeeds Claus Heidrich, who is retiring after 18 years in the role.Florack joins from GAM where he was head of institutional sales. He has also held senior sales and distribution roles at JP Morgan, Helaba Invest and UBS.Rogier Van Harten, head of institutional distribution and client management for continental Europe at BMO, said: “Germany is a very important market for us and with its special expertise in sales for institutional investors we will be able to respond even better to the needs of our customers in this segment in the future.”First State Investments – The $143.8bn asset manager has appointed Adrian Hilderly as head of its Irish management company, FSI Ireland. First State announced plans to transfer €4.8bn to Ireland last year as part of its preparations for the UK exiting the European Union. So far it has shifted €2.6bn via a “scheme of arrangement”, the company said in a statement this morning.In the newly created position, Hilderly will be responsible for managing FSI Ireland’s operations, including interaction with regulators and oversight of investment and distribution activities. He was previously head of risk and compliance for Europe, the Middle East and Africa at First State Investments for more than six years. Prior to this he was a joint head of Blackrock’s compliance and advisory team.First State has also named Tim McManus as a senior manager for finance and investment tax, relocating to Dublin from First State’s London office. The asset manager aims to recruit a head of risk, a head of compliance and an investment assurance manager for its Ireland office.Mesirow Financial – The specialist currency manager has hired Mike Emambakhsh as a senior research scientist in its London team, focused on research and model development “with an emphasis on machine learning”. He was previously a research scientist at Cortexica Vision Systems, an artificial intelligence company.Mesirow has also hired Aaron Wham from Russell Investments as a senior portfolio manager to help launch the group’s new office in Seattle. At Russell, Wham was a senior portfolio manager in charge of currency strategies.Omnes Capital – The €3.6bn French private equity and infrastructure manager has made a number of appointments to its teams. Benoît Faguer has joined the private debt team as a director, having spent three years in Aviva Investors’ private debt team. He has also worked for HSBC and WestLB.Elsewhere,Fabien Collangettes and Maximilien Fournier-Sourdille have been appointed as principals within Omnes’ venture capital team. They have both worked for the company since 2017, and have held a number of board roles on small private French companies.Yannic Trueb has been promoted to principal within the renewable energy team after five years at the firm, while Morgane Honikman has joined Omnes’ green building team as a principal, having previously worked for French renewable energy firm GreenYellow for more than four years. LPP, RobecoSAM, AMF, Investec Asset Management, HSBC GAM, AFM, BMO GAM, First State Investments, Mesirow Financial, Omnes Capital Local Pensions Partnership (LPP) – Adrian Taylor has been appointed chief financial officer for the £17bn (€19.7bn) public pension fund collaboration, a role he has held on an interim basis since November. In a statement, LPP said Taylor would become a key member of the senior leadership team.Before joining LPP he was interim finance director for the UK at private bank and asset manager Edmond de Rothschild. Previously he was a partner and finance director at Killik & Co, and CFO at Sarasin & Partners. Michael O’Higgins, chair of LPP, said: “Adrian’s experience, knowledge and values mean he is perfectly suited to leading LPP’s financial management during this pivotal triennial valuation year, while playing a key role in taking the whole business forward over the long-term.”
The chief executive of the Financial Conduct Authority (FCA) has set out his expectation for an “outcomes-based” approach to equivalence of UK and EU financial regulation after the UK leaves the trading bloc.In a speech at the Bloomberg headquarters in London, Andrew Bailey outlined the institution’s vision for the “future of financial conduct regulation”, including with regard to Brexit and a transition period. He said that during this period the regulator would work with ESMA, the EU financial markets regulator, and the other 27 member states on “legislation that is in development”.“Wherever we end up, our markets will remain closely linked and our close cooperation with our EU counterparts in order to meet our objectives will continue after exit,” said Bailey. The head of the finance watchdog highlighted differences between the UK’s legal practices and those that had evolved in many EU states, and indicated that the FCA would have handled certain rules differently had it worked on its own. Andrew Bailey, FCA chief executiveHowever, Bailey said there was agreement on the objectives to be achieved, which would not change with Brexit. The FCA would continue to aim “to improve onshored EU legislation on a ‘same outcome, lower burden’ basis, he said. The exact outcome of this would depend on where the process of equivalence led, he added. He argued that the approach to equivalence of financial regulation between the UK and EU should be outcomes-based, as it was for the EU’s relationship with other countries, rather than rules-based. This should not be controversial, he added, but sometimes it was argued that the UK should be held to a higher standard because of the size of its financial markets and proximity. The issue of equivalence and differences in approach to regulation and legal systems between the UK and the EU was “a big one” and “deserves extensive debate”, but there were some areas where there could be agreement, Bailey indicated.He said there was “a common commitment to outcomes-based approaches” and an expectation that both the UK and the EU would be able to find each other’s regulatory system equivalent on day one “by virtue of having the same legislation and well-established supervisory approaches”.He added that as either side’s rulebooks evolved, “we will both want to ensure predictability around issues such as assessment processes or withdrawal of equivalence in a similar way to, but I hope even deeper, the way that the EU has worked with the US and more recently Singapore.”He suggested that regulators would need to be held to account on taking a genuinely outcomes-based approach to equivalence rather than “talking the language of outcomes but practising the world of rules”.The FCA has never officially taken a view on the merits of the UK’s exit from the bloc.
“We propose to bring forward more of the investments that the climate partnership for the financial sector will initiate to reach the climate goal of reducing Denmark’s CO2 emissions by 70%,” they said, referring to one of the 13 climate partnerships Denmark has set up covering different areas of the economy.The groups, which were formed in November, have recently handed in their reports and recommendations.Making these investments in sustainable renovations, energy investments and the infrastructure of the future would accelerate growth and keep the green transition on track, Mortensen and Polack said, at a time of fear that climate action would take lower priority than before the coronavirus outbreak.Despite the current serious situation, Mortensen and Polack said they were cautious optimists.“We are, because we know how far we as a society can go when we find the balance between the collective and the individual,” they said.“Therefore, we are ready for large investments in Denmark that can benefit the Danish economy, the construction industry and the green transition,” they said, adding that they were convinced that in the long run such investments could both benefit the individual pension saver and make a much-needed contribution to kickstart the Danish economy. Two Danish pension fund chiefs say any investments being proposed for the financial sector to help the country meet its 2030 climate goal should happen sooner than envisaged, given the coronavirus crisis.In their capacity as the chair and deputy chair of lobby group Insurance & Pension Denmark (LD), Laila Mortensen and Allan Polack said the sector was still ready for major investments in the green transition, which had to be focused on despite the pandemic problem.Noting the Danish central bank’s recent prediction the domestic economy would contract by between 3% and 10% this year, the pair – respectively chief executive officers of pension funds Industriens Pension and PFA – said that with some DKK4tn (€536bn) of assets the pensions industry was a key driver for Danish society and the recovery of the economy.“In other words, we have the capital to stimulate investment, and that is what is needed when we have to rebuild the Danish economy after the crisis,” the two leaders said in a commentary published on the association’s website and in financial daily Børsen.
More from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoThe Mackay market has had a tough time.“It’s been a bit of a hangover from the mining and resource sector and tourism not going that strong.”In Brisbane the sluggish growth continued over the month, with a dwelling value increase of just 0.2 per cent, but there was some good news for unit owners in the capital.Despite plenty of fears of a “unit glut” across Brisbane, unit dwelling values grew up 0.6 per cent in Brisbane over the month.“The unit market has actually done better than detached houses,” Mr Kusher said. Although the new unit market had been relatively weak, he said it looked like the growth was coming from established units.Overall he said Brisbane should expect slow and steady growth over the coming months. HOME BUILT BY BRISBANE VISIONARY TO BE SOLD MOVING FORWARD: Brisbane is growing slowly, but it is outperforming Sydney and Melbourne.Melbourne home values dropped by 0.5 per cent over the month and in Sydney the fall was smaller at 0.2 per cent.Although lending restriction are having an impact in Melbourne and Sydney, Mr Kusher said this was less of an issue in Brisbane.“It is probably having an impact in Sydney and Melbourne where the cost of housing is significantly greater than anywhere else and people are borrowing larger amounts,” he said. PARTY LIKE IT’S 1969 IN THIS ‘OLD-WEST’ STYLE CABIN IN THE WOODS Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 7:28Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -7:28 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels576p576p480p480p256p256p228p228pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenPrestige property with Liz Tilley07:29 QUEENSLAND’S MVP: The Sunny Coast is leading the state when it comes to growth in the real estate market.THE Queensland real estate market continues 2018 with sluggish growth, but the Sunshine Coast proved to be the brightest spark in the state.The May CoreLogic Home Values Index results showed that the tourism hotspot to the north of Brisbane was leading the state when it came to growth.Dwelling values in the Sunshine Coast had grown by 5.8 per cent over the last 12 months. RICH SUBURBS SHUN GREEN POWER The Sunshine Coast market was the strongest in the state.The growth was well above Brisbane, which had a dwelling value increase of just 0.9 per cent over the year. CoreLogic’s head of research for Australia Cameron Kusher said regional Queensland had very mixed results at the moment, with some markets booming and some faltering. He pointed to the Mackay-Isaac-Whitsunday area where dwelling values dropped by 10.6 per cent over the same period. “That area was the weakest in the country over the last 12 months,” Mr Kusher said. WESTPAC PREDICTS TOUGH TWO YEARS