Monthly ArchiveSeptember 2020

German institutions willing to increase risk but feel hindered, survey shows

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first_imgIn his welcome speech for his company’s eighth annual risk management conference, Alexander Schindler, board member at Union, said: “We have lived in an age of regulation since 2008, which has killed some return opportunities.”Just over half of the delegates at the conference, when asked in a TED survey, think the 12 months ahead will provide more opportunities than risks.Roughly 5% of respondents classified themselves as “speculative/opportunity orientated” – a box no investor ticked in the 2012 survey.The share of institutions saying they remained “absolutely safety orientated” dropped from 37% to 30%.Thorsten Neumann, managing director at Union, claimed that regulations were “significantly limiting the room for manoeuvring for institutional investors”.All in all, institutions are more pessimistic regarding their own financial situation than in 2012, with none of the respondents believing their situation would “significantly improve” over the next year.In last year’s survey, 7% of respondents ticked this box.In another TED survey at the conference in Mainz, two-thirds of delegates said they did not believe in a recovery of returns after a major interest rate change – which is not expected any time soon.This fear was also mirrored in the Union survey, where many more respondents than in last year’s survey feared they would not generate a minimum return.Union predicted a change in institutional investors’ asset allocation approach, with more looking into scenario-based allocation methods.Both in the survey done together with University Siegen and another TED survey at the conference, almost half of all respondents said this approach would become “very important” or “important” in the near future.Currently, the vast majority of German investors use a return/risk-optimised approach to asset allocation. More than half of German institutional investors surveyed by Union Investment believe that fewer regulatory hurdles would allow them to improve their returns by at least 100 basis points.In Union’s annual risk management survey, only 11% of respondents – compared with 16% in 2012 – said they would be unlikely to improve returns with fewer internal or external restrictions.Approximately 70% of respondents said such restrictions, including regulations, were hindering them, while half said they could outperform their current performance by 100-500bps.This year, Union surveyed 104 German institutional investors, 18% being Pensionskassen or Versorgungswerke, 26% insurers, 13% foundations and 25% banks. The remainder were largely companies and churches.last_img read more

Wednesday people roundup [updated]

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first_imgHermes Fund Managers – Diego Mauro has been appointed as director and senior investment analyst for Asia. He joins from Legg Mason International Equities, where he has been working as a global emerging market analyst, with a particular focus on Asia. Before then, he worked for the Central Bank of Argentina on its fixed income portfolio.Saxo Bank – Matteo Cassina has been appointed to the newly created position of global head of institutional business, based in London. Cassina has served as head of prime access SM at Goldman Sachs and head of total trader at Merrill Lynch. He later served as president of Citadel Execution Services.Skagen Funds – Johan Swahn has joined as a portfolio manager in the Global team. He joins from Stena in Gothenburg, where he has been working since 2008 as an investment manager of Stena Long Term Equity, a global, long-only mandate. Before then, he held sell-side analyst roles at Morgan Stanley, Handelsbanken Capital Markets and UBS Warburg. March Gestión de Fondos – The investment fund manager of Spain’s Banca March has appointed Antonio Lopez Silvestre as equities fund manager responsible for the selection of Spanish and European companies. He joins from Exane BNP Paribas, where he was equity research analyst and head of Spanish mid-caps. Before then, he was head of research at Fortis Bank in Spain.Deutsche Asset & Wealth Management (DeAWM) – Hugo Vere has been appointed director of the real estate investment business. He has held a number of roles including establishing and leading Invista Real Estate’s Asian fund management business based in Hong Kong. During the last year, he has been a consultant to Guidance Investments. He is also an associate member of the Royal Institution of Chartered Surveyors.Santander Asset Management – Adam Harnetty has been appointed head of credit research for European fixed income. Harnetty has more than 25 years’ experience, working at Schroders, Invesco, BNP, Kleinwort Benson and Ernst & Young. Elo Mutual Pension, Mercer, Muse Advisory, Hermes, Saxo Bank, Skagen, March Gestión de Fondos, DeAWM, Santander AMElo Mutual Pension Insurance – Hanna Hiidenpalo has been confirmed as chief investment officer of the new Finnish pensions mutual, formed following the merger of Pension Fennia and LocalTapiola at the beginning of the year. Eeva Grannenfelt, previously Hiidenpalo’s counterpart at Fennia, was named director of corporate lending, alternative investments and macro view at a meeting of Elo’s board of directors in early January. Grannenfelt’s former head of real estate, Timo Stenius, has assumed responsibility for property at Elo and Jonna Ryhänen has retained her role as head of securities, previously held at Tapiola. Hiidenpalo, Grannenfelt, Stenius and Ryhänen will further all sit on the mutual’s executive investment board alongside chief executive Lasse Heiniö.Mercer – The consultancy has announced that its UK board now includes four women following the appointment of Siobhan Martin as UK HR director and Martine Ferland as leader of its retirement business in Europe. They join Fiona Dunsire, UK chief executive, and Jane Barker, chairman at Marsh, a non-executive director and chief executive of Equitas. Mercer’s UK Board is led by Sir Peter Middleton, a former group chairman of Barclays.Muse Advisory – The pensions governance and administration consultancy has appointed Ian McQuade as client director. He joins from Towers Watson, where he was a senior consultant in the benefits practice and part of the UK defined contribution leadership team. Before then, he was head of management consulting at Higham Dunnett Shaw, and operations director at Capita Hartshead.last_img read more

Friday people roundup

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first_imgNAEV, UK National Employment Savings Trust, Société Générale Securities Services, AXA Investment Managers, LCP, UK Pensions Regulator, Carmignac SécuritéNAEV – Hermann Aukamp, CIO and director of real estate at North Rhine Doctors’ Pension Fund (NAEV), will retire on 30 April after more than 33 years at the scheme. His successor will be Jan Schlüter, who has been working with Aukamp in real estate investments for NAEV for several years.UK National Employment Savings Trust (NEST) – Ian Armfield, Carolan Dobson and Karen Silcock have been appointed as Trustee Members to the NEST Corporation. Dobson most recently served as chair of the Bespak Pension Scheme, JP Morgan European Smaller Companies Trust and Aberdeen Smaller Companies High Income Trust. Armfield is a member of the DC master trust assurance working group at the Institute of Chartered Accountants in England and Wales. Until December 2013, Silcock’s public policy roles included chair of the Federation of European Accountants Money Laundering Committee, and previously she was chair of ICAEW Money Laundering sub-committee and an elected member of the ICAEW council from 2007 to 2009.Société Générale Securities Services – Gilles Maréchal has been appointed head of sales for institutional investors in France. Since the end of 2011, Maréchal had been sales development director at Axeltis, a subsidiary of Natixis Global Asset Management. Before then, he was head of client service management at RBC Dexia IS Bank France.  AXA Investment Managers – Robert Price has been appointed to the liability-driven investment team. He joins from KPMG Investment Advisory, where he was an investment consultant. At AXA IM, he will work with the LDI portfolio managers to design and manage a range of liability-risk management solutions.LCP – The UK Pensions Regulator’s head of defined contribution regulation, Darran Burton, has joined LCP on a part-time secondment, which started on 2 April and will run initially for six months. Burton joins LCP’s DC consulting team.Carmignac Sécurité – Keith Ney has been appointed sole portfolio manager of the European bond Fund Carmignac Sécurité, which he has co-managed with Carlos Galvis since 22 January 2013. He joined Carmignac Gestion nine years ago.last_img read more

KLM scheme to divest from Russia

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first_imgThe €7bn KLM pension fund for ground staff said it had divested its entire holdings in Russia during the third quarter, following the deployment of a new risk assessment tool. Besides market risk, the potential escalation of the European Union’s boycott of Russia also posed a too big country risk, it indicated in its quarterly report.The Algemeen Pensioenfonds KLM reported a quarterly result of 1.8%, mainly thanks to positive returns on its 48.3% fixed income portfolio (1.7%) and its 41.3% equity holdings (1.4%). However, it lost 0.4 percentage points on its property investments.It said its year-to-date result was 9.9%, of which 1.4 percentage points was thanks to its hedge of the interest risk on 50% of its liabilities. Despite its positive result, the pension fund’s coverage ratio dropped no less than 6.1 percentage points to 117% during the third quarter, following decreasing interest rates.The official discount rate for liabilities – the three-month average of the market rate plus the ultimate forward rate – dropped from 2.45% to 2.14%, it added.The KLM scheme for ground staff further said that it had invested €175m in Dutch domestic mortages – approximately 7.5% of its fixed income portfolio – during last quarter, and indicated that it was planning to invest another €75m in this asset class, “because of its above average return against a low risk”.The €2.4bn KLM pension fund for cabin staff, or Cabinepersoneel, reported a 2.4% quarterly result, leading to a return of 12.1% during the first nine months of the year.It said its holdings in fixed income, equity and property returned 1.1%, 1.4% and -0.5% respectively in the third quarter.Declining interest rates came at the expense of 6.3 percentage points of its funding, which dropped to 117.4%, equating to a coverage ratio under real terms of 77.7%. The €7.7bn KLM scheme for cockpit staff, or Vliegend Personeel, said it returned 1% and 8.2% during the third quarter and the first nine months, respectively.Its funding dropped 6.5 percentage points to 126.9% during the last quarter.The asset management for the three KLM pension funds is carried out by Blue Sky Group.last_img read more

Dutch Senate approves financial assessment framework for pensions

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first_imgThe Dutch Senate has voted to approve the Netherlands’ new financial assessment framework (FTK) for pension funds.A roll call vote indicated that 40 of the 71 senators present were in favour.The vote came after Jetta Klijnsma, state secretary for pensions, made concessions in response to the Senate’s concerns regarding the low discount rate pension schemes are obliged to use.EIOPA, the European pensions and insurance supervisor, is scheduled to present an ultimate forward rate (UFR) for insurers in February, and many Dutch parties had indicated they would rather wait for this before introducing a new UFR for pension schemes. Klijnsma discussed their concerns with the Dutch regulator (DNB), which is responsible for determining the interest rate curve – including the UFR.The DNB said it would take the Senate’s wishes into account in its decision, according to Klijnsma.She did, however, stress that the final decision regarding the UFR would be the DNB’s alone to make.She also pointed out that it was up to the regulator to decide how the UFR for Dutch pension funds should relate to the UFR for European insurance companies.Various parties in the Senate had requested that the DNB seek the advice of a broad range of national and international experts on the issue.In response to widely shared concerns in the industry that pension funds could be trapped in low-risk strategies without much chance of recovery, schemes with solvency rates above the legally required minimum but below the minimum buffer requirement will be given a one-off chance to adjust their strategies and increase risk levels.From the outset of the debate, however, Klijnsma rejected requests to soften the strict rules governing indexation.“There is no way pension funds will grant indexation with an average solvency rate of 105% and a real funding level of 80%,” she said.According to Klijnsma, the real funding rate of 80% would translate to a shortfall of €200bn.The new financial rules will be reviewed after three years, as the Senate requested.last_img read more

Price of CMBS, infrastructure assets holding back investors – survey

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first_imgMortgage-backed loans and infrastructure debt are overpriced and deterring insurers from investing in both asset classes, a survey of CIOs has found.The strong demand and “muted” supply for infrastructure debt – coupled with an absence of in-house staff to oversee any such deals, was also a factor for insurers failing to live up to their intended asset allocations – according to Goldman Sachs Asset Management (GSAM).The firm’s annual survey of insurers also found that one-third of insurers also believed they were now approaching the end of the credit cycle, with a deteriorating credit quality affecting the market.Respondents were also not terribly positive about the overall quality of investment opportunities. Nearly 75% of insurers from the EMEA felt investment opportunities were getting worse compared with the previous financial year, while only 3% of insurers from the region felt the situation was improving.While the pessimism was most pronounced among EMEA respondents, there was a marked increase among insurers predicting the investment environment would worsen over the coming year.More than 60% of all respondents believe the situation would deteriorate, compared with only 39% in the previous survey.Despite the pessimism among EMEA respondents, Greece was identified as offering the greatest unanticipated impact on financial markets by just 6% of respondents, compared with 36% who viewed China as a risk.The survey found that asset allocation decisions favoured illiquid assets, such as commercial mortgage-backed securities (CMBS), middle-market loans and infrastructure debt.“The commercial mortgage loan market is facing increasing competition from the CMBS market, which has recently pressured yields,” the survey noted.“Infrastructure debt, while attractive for its long duration, faces strong demand and muted supply.“Insurers also noted that the lack of internal systems or personnel has deterred investments in both commercial mortgage loans and infrastructure debt.”The interest in illiquid assets was likely driven by interest in higher-yielding assets.Globally, only 5% viewed liquidity risk as a problem, while 66% were concerned with prevailing low yields.last_img read more

Lithuanian pension funds rebound from dismal third quarter

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first_imgSince the end of 2014, the numbers of second-pillar providers has shrunk from eight to six, and the number of funds from 26 to 21 following DNB’s takeover of two funds earlier run by ERGO, and subsequently INVL Asset Management consolidating and rebranding its MP Pensions Baltic and Finasta funds.Over the year, membership of the second pillar grew by 4.9% to 1.21m and assets by 13.5% to €2.1bn.Of the €252m asset increase, some €137m came from the 2% base contribution, €46.5m from investment activities, €37m from the additional budget contribution (at 1% of average gross annual wages) and €31.5m from the 1% in members’ additional contributions.In 2016-19, assets will get a further boost as the additional budget and members’ contributions both rise to 2%.In the smaller third pillar, returns averaged 4.12% in the fourth quarter and 3.62% for the year, and, as was the case with the second-pillar funds, higher equity levels generated superior returns.The five high-risk funds averaged 4.85% for 2015 and the four medium-risk ones 3.33%, while the conservative funds returned 1.66%.There was a wider performance spread than in the second pillar, with two medium-risk funds and one conservative plan generating negative returns.Membership of the third pillar grew by 18.5% to 47,333, and assets by 7.3% to €61.5m. A strong fourth-quarter performance enabled Lithuania’s pension funds to offset the third quarter’s dismal returns and generate investment growth in 2015.According to data from the Bank of Lithuania (BoL), the sector’s regulator, nominal returns for the voluntary second-pillar funds averaged 3.5% in the fourth quarter and 3.61% for the full year, compared with 7.78% in 2014.All four classes of second-pillar fund produced 12-month positive returns in 2015.The four high-risk funds, with up to 100% invested in equities, generated the best average result, of 6.64%, followed by the seven medium-risk funds (with equity limits of 50-70%) at 3.63%, the four low-risk funds with 25-30% equity investment at 3.08% and the six conservative bond funds at 1.24%.last_img read more

Irish pensions regulator pledges reform package by end of 2016

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first_imgIreland’s Pensions Authority will call for a review of its regulatory powers and the consolidation of the pensions sector when it proposes a reform package to the government later this year.Brendan Kennedy, head of the pension regulator, said the reform package to be submitted to the Department of Social Protection (DSP) would be independent of its work for the Universal Retirement Savings Group (URSG).The government recently tasked the URSG with boosting pension savings rates, potentially through the introduction of auto-enrolment.Speaking with IPE, Kennedy said the reform package – set to be put out to consultation by the middle of 2016, with a final draft submitted by the end of the year – would draw on a number of the ideas contained within the revised IORP Directive. Kennedy, acknowledging that the “shape” of the regulator’s thinking was unlikely to come as a surprise to the industry, highlighted the need to reduce the number of pension funds and increase the focus on governance.“There is likely to be a lot more detail,” he said, “but I suppose those are the two of the most significant issues.”The Authority recently consulted on the need for improved trustee qualifications and last week published the first of three defined contribution (DC) codes of conduct covering broad trustee responsibilities and trustee conflicts of interest.Although Kennedy conceded that the sector’s consolidation was a matter for the government, he repeatedly highlighted the issue, saying it was “central” to the regulator’s future plans.“There are a variety of routes to consolidation, and, given the large number of current schemes, any consolidation is going to be quite tricky because you need a lot of activity by a lot of schemes.”Consolidation could be interpreted in the sense of reducing the current number of DC funds – the most likely vehicle to improve coverage under the system being planned by the URSG – but also reducing the number of DC fund types.Kennedy has previously spoken of a role for multi-employer DC funds in reducing the number of schemes, and said it would be difficult to justify more than 100 DC funds in a country the size of Ireland.The regulator currently oversees an estimated 200,000 trustees, responsible for an estimated 160,000 pension funds.  Speaking last week during the launch of the DC codes of conduct, Mary Hutch, the Authority’s head of policy, also noted the more than 130 types of Personal Retirement Savings Accounts currently in use, with a reduction in the number of vehicles desired by the regulator and Ireland’s tax authority.Hutch added: “A simplified system would also be easier to understand for employers, employees, members and prospective members and greatly reduce – and possibly remove entirely – opportunities for regulatory arbitrage.”Kennedy said he was hopeful the Authority’s submission would be able to draw on a nearly finalised IORP II draft by the end of the year.“It would certainly be good to have answers,” he said. The European Parliament last month finalised its negotiating draft for the Directive, and the European Commission, legislators and the Council of the EU will now agree a final draft during its trialogue negotiations.last_img read more

Dozen Dutch schemes facing rights cuts next year, says DNB

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first_imgPension funds with an actual funding of approximately 90% are unlikely to avoid rights cuts, according to the DNB, as they will not be able to recover to the required level – between 110% and 125%, depending on a scheme’s asset allocation – without cuts over the next ten years.With a policy funding ratio of 95% and a topical funding ratio of 88.9% at the end of March, the €172bn healthcare scheme PFZW is the largest pension fund facing a rights cut.Agrarische en Voedselvoorzieningshandel, the industry-wide scheme for the agricultural workers, and Tandtechniek, the pension fund for dental technicians, reported a policy funding ratio of 92.8% and 87.5%, respectively.Underfunded company schemes on DNB’s list include the pension funds of the automobile association ANWB (94.6%), brewery company Bavaria (93.9%), IT firm CapGemini (94%), charcoal manufacturer Norit (91.9%) and the scheme for employees of pensions provider MN (95%).The pension fund for midwives, with a policy funding ratio of 90%, had already indicated that it might even have to apply rights cuts this year.Many pension funds are preparing their beneficiaries for possible rights cuts.‘Gloomy’ outlookThe industry-wide scheme for the agricultural and food trade said that cuts may be needed next year if interest rates remained low, describing the prospects as “gloomy” in a newsletter for beneficiaries.Decreasing long-term interest rates, combined with declining equity markets, have recently caused day-to-day funding to drop 3 percentage points, reaching an average of 95% in June, according to Mercer.It said that the 30-year swap rate – the main criterion for pension funds’ discounting liabilities – had decreased 16 basis points to this year’s lowest level of 0.94% during the first two weeks of June.The consultancy also noted that the MSCI World Index had fallen 2% during the same period.Dennis van Ek, actuary at Mercer, said that funding would have dropped by up to 4 percentage points at pension funds with a low level of interest rate hedging in June.Schemes with a significant level of interest rate hedging, however, saw their funding decline by approximately 2 percentage points.At May-end, Mercer estimated the average pension fund’s coverage ratio stood at 98%. Aon Hewitt, which uses a slightly different calculation method, said funding was 97% on average at the end of last month.Mercer’s van Ek said that the market expected that, in case of a Brexit, the ECB would step up purchasing government bonds and further decrease short-term interest rates.The actuary added he was not yet able to indicate how much the ECB’s corporate bond purchasing programme had affected the decline of interest rates, but added that the market seemed to not to have fully priced in the effect yet.Last week, the ECB started to buy corporate bonds as part of its monthly €80bn purchasing programme. Twelve Dutch pension funds are likely to cut pension rights next year, based on their current policy funding ratio, according to regulator De Nederlandsche Bank (DNB).DNB said that the number of schemes with a policy funding ratio of 95% or less had doubled during the first quarter of the year. The policy funding ratio is the average of the day-to-day coverage during the past twelve months.The topical funding ratio, the scheme’s actual funding ratio, is usually several percentage points below the policy funding ratio.Separately, Mercer predicted that funding levels were unlikely to improve over the short-term, with recent weeks seeing a renewed decline in funding ratios after modest improvements.last_img read more

Industriens posts 2.7% return aided by strong corporate bond performance

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first_img“This reinforces the importance of diversifying investments and having a robust, long-term investment strategy,” Mortensen said. Corporate bonds, which made up 32.7% of the portfolio at the end of June, were the strongest performing asset class for Industriens Pension in the first half, returning 7.2%, followed by government bonds which returned 4.4% and accounted for 21.5% of investment assets.Equities made losses, with foreign shares ending the half year down 2.0% and Danish shares making a 0.4% loss.Foreign shares make up 28.2% of the portfolio while Danish shares have an 11.0% allocation.Industriens Pension said employment in the industrial sector in Denmark was growing well, and that this had become evident in the fund’s figures in the first half.The number of members paying into the fund via employers rose by 3,000 in the twelve months to the end of June to reach 165,000, while total contributions grew to DKK4.2bn in January to June, up DKK52m from the same period last year.The pension fund’s total investments rose to just over DKK142bn at the end of June from DKK136bn at the same point last year. Denmark’s Industriens Pension made a 2.7% return on investments between January and June before pensions tax, after the result was boosted by strong returns on corporate and government bonds, according to its interim report.In absolute terms, the investment return was DKK3.6bn (€483m) in the period, less than half of the DKK7.4bn the pension fund produced in the first half of 2015, when the percentage return was 5.8%.Laila Mortensen, chief executive of the pension fund for industrial sector workers said: “There has been a lot of turbulence on the financial markets in the first half of the year, which has favoured investments with lower levels of risk.”Equities in particular had a difficult time at the beginning of the year, though this  improved in the second quarter, she said.last_img read more