Shortly after last week’s inaugural meeting, a source close to the OPSG said its first meeting had concluded with a “recognition” that it would need to focus on defined contribution funds and consumer protection during its two-and-a-half-year term.A second source has since elaborated on the OPSG’s deliberations, saying a decision was made to set up sub-groups focused on a number of areas EIOPA will examine in the coming years.Noting EIOPA’s wish to conduct five consultations relating to the holistic balance sheet (HBS) by the summer of next year, the second source told IPE an agreement was reached to launch a sub-group on solvency issues.The source said: “I think it’ll look at all the consultations EIOPA will put forward. The sponsor covenant is the one that is ongoing – there are four others being envisaged.”Noting that the chairmanship was likely to involve a heavy workload, the source added: “It’s open for all the members to join the group, and also for people to say if they want to chair the group.”The regulator’s chairman, Gabriel Bernardino, confirmed earlier this month that it would conduct a number of new consultations on the HBS, aiming to present the results to the incoming European Commission appointed after the 2014 European parliamentary elections.The move comes despite internal markets and services commissioner Michel Barnier announcing that he would no longer publish a draft of the pillar I proposals for the revised IORP Directive, which concerned capital requirements.The source said the OPSG had urged EIOPA to ensure that the four remaining HBS-related consultations would not be “too burdensome” or overlap, noting the amount of work required by the industry to respond to each one.EIOPA also hoped to push ahead with stress testing of occupational pension funds, as announced in March, an undertaking the source said would prove “difficult” – precisely because of the absence of a uniform solvency framework across Europe.“Basically, I guess it would lead to another quantitative impact study,” the source said of the proposals, which would examine the impact of changes in interest rates. The European Insurance and Occupational Pensions Authority’s (EIOPA) pensions stakeholder group is to launch a sub-committee devoted to questions of pension fund solvency, IPE has learned.The new Occupational Pensions Stakeholder Group (OPSG) last week named Benne van Popta as its chair, replacing Chris Verhaegen after one term, while PensionsEurope secretary general Matti Leppälä was elected vice-chair.EIOPA has since confirmed the appointments, and, in a statement issued by the regulator, Van Popta said: “I have been involved in pension reform debates at a national, European and international level, dealing with issues of solvency, governance, disclosure, macro-economic, regulatory and personal pensions.“I am confident my knowledge and experience will contribute greatly to the work of the OPSG and, by extension, EIOPA.”
Infrastructure managers must begin taking seriously environmental matters, the CIO of the UK’s Environment Agency Pension Fund has urged.Mark Mansley said infrastructure was an interesting area for pension funds.“In theory, it’s a really great asset – it’s a long-term, asset-backed, medium to low-risk asset with good income flow and the right sort of duration and right sort of inflation,” he said at the recent RI Europe conference in London.“The fact is, there are all sorts of issues.” He added that while there were a few noteworthy actors in the field of green infrastructure, the “real challenge” remained engaging the industry as a whole on issues of sustainability.“We like to have the dark green assets, but we would like a bit more of a spread at the moment,” he said.Mansley said that, while many mainstream infrastructure managers invest in areas such as clean energy and public transport, many funds would also have exposure to less environmentally friendly areas such as oil pipelines and coal ports.He added that the fund had struggled to get infrastructure managers engaging with sustainability, “even up to the level of a lot of listed asset managers”.Calls for a more holistic approach were echoed by Donald MacDonald, chairman of the Institutional Investors Group on Climate Change, who said areas such as low-carbon investment needed to be taken out of the “SRI silo”.“This is mainstream,” MacDonald argued, saying there was a need to remove the “green label” on such assets.“We need to be looking at our own asset classes, and how carbon is going to impact them,” he said.MacDonald argued during the same panel that there was a need for greater risk-sharing in infrastructure investment, and urged the development of vehicles that would allow the pensions industry to invest in smaller-scale projects.
A Swiss pension fund is looking to appoint a global infrastructure manager, using IPE Quest.The unnamed Swiss fund behind search QN-2174 said it was looking to allocate CHF2m (€1.8m) to a pooled infrastructure fund.The unlisted vehicle should be diversified by sector and country, the investor added.The global core strategy should be actively managed, aiming to outperform LIBOR by 4 percentage points each year. Managers should have a track record of at least one year (preferably five years) for any proposed fund.The pension fund, however, will not be setting a minimum size for current assets under management.Interested parties have until 29 April to register their interest, stating their net-of-fees performance to the end of April. The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]
Aviva Investors – Florian de Chaisemartin has been appointed as a director in the London-based infrastructure debt team. He joins from Legal & General Investment Management, where he was senior investment manager. He has also held infrastructure finance roles with DEPFA Bank and Standard & Poor’s.Schroder Real Estate – Eva Granlund has joined as head of Nordic investment in Stockholm. Granlund was previously at Vasakronan. She has also worked for SEB Merchant Banking and UBS Global Asset Management. KPMG, Lloyds Banking Group, Guinnesss Asset Management, M&G, IFM Investors, Aviva Investors, Legal & General Investment Management, Schroder Real Estate, VasakronanKPMG – Martin Collins has been named director, advising banks and trustees on the management of pension liabilities. Collins previously worked at Lloyds Banking Group as pension asset and liability management director within the lender’s corporate treasury, where he co-ordinated its de-risking strategy. He has previously worked at Banco Santander, Watson Wyatt and Aon.Guinness Asset Management – Sachin Oza and Stephen Williams have joined the manager as senior energy analysts. Both Oza and Williams join from M&G, where Oza spent 10 of his 13 years, focused on resource and energy projects. He has also worked at JP Morgan and Tokyo Mitsubishi. Williams joined M&G six years ago, and has worked at Exxon and Simmons & Co International.IFM Investors – Rich Randall has been promoted to global head of debt investments, after three years as executive director of debt investments. Randall replaces Robin Miller, who will become senior adviser and chair of the company’s investment committee after 17 years at IFM. Prior to joining IFM, Randall worked at RBS and Calyon and Trust Company of the West.
The €3.8bn sector scheme for Dutch bakers (Bakkers) is assessing options for further co-operation with the €2.4bn pension fund for the confectionery industry (Zoetwaren).However, a merger between the two pension funds was not yet under discussion, according to its annual report for 2016.Both pension funds have already co-operatied in several areas to save costs. Last year, Zoetwaren replaced Syntrus Achmea as its administration provider with TKP Pensioen. Bakkers had been a TKP client for some years.Both schemes announced their co-operation, anticipating a possible merger, in 2014. At the time, they cited sharing an actuary, an accountant, a joint pensions bureau as well as communication as possibilities for synergy and cost reduction. However, the difference in funding ratios has proven a barrier to a full merger. At June-end, the bakers’ scheme’s funding stood at 98.9%. The coverage ratio of Zoetwaren was 105.2% at the end of May.Bakkers reported a net overall return of 10%, crediting the outperformance of almost 2 percentage points chiefly to its return from government bonds relative to interest rate swaps, as well as outperformance from commodities and equity.Last year, the scheme had hedged 55% of its interest risk through swaps, Dutch, German and French government bonds, Dutch residential mortgages, and credit in its matching portfolio.It also held 2% in US high yield and equal holdings of emerging market debt (EMD) and liquid assets.With a 10% gain on fixed income, Bakkers fell 2 percentage points short of its benchmark. It attributed the underperformance to disappointing results on high yield and EMD.Equity generated 8.2%, beating its benchmark by 1.7 percentage points. The pension fund made clear it had focused on European stock of profitable large companies with a stable cashflow and low leverage.Real estate returned 2.3%. Bakkers said its portfolio was equally divided across unlisted funds because of their “stable value” and listed funds for continental Europe, “as these are more liquid”.Actively managed commodities delivered an 18.4% return, outperforming by 4.5 percentage points. Direct private equity investments produced 4.6%, relative to a benchmark return of 2%.The pension fund indicated that it would like to use the one-off opportunity of raising its risk profile, once its funding had exceeded the minimum required level of approximately 105%. This would mirror the action taken by Zoetwaren in 2015.Following a fall in the number of active participants, Bakkers saw administration costs increase from €110 to €126 per participant.Its asset management costs increased slightly to 34 basis points, while transaction costs halved to 4 basis points.At year-end, Bakkers had 177,375 participants in total, of whom 33,875 were workers and 21,475 were pensioners.
Sweden’s largest pension fund has provided the anchor investment for an impact fund co-investing in emerging markets loans.Alecta has committed $200m (€164m) to the fund, a spokeswoman for the occupational pension fund told IPE.The fund’s first close, at $250m, was announced today. This was $50m more than the minimum target, according to a statement from NN Investment Partners, which manages the closed-end fund.Three other investors, from the Netherlands and Sweden, had allocated to the fund alongside Alecta. IMAS Foundation, a sister foundation to the INGKA Foundation, which is the indirect owner of IKEA, was named as one of the original investors. Magnus Billing, Alecta CEOMagnus Billing, CEO of the SEK800bn (€77bn) Alecta, said: “To us, this is a good example of how we can fulfil our duty to create the highest value possible for the occupational pensions, as the fund meets both the required rate of return and creates measurable impact aligned with the 2030 Agenda for Sustainable Development Goals.”NN Investment Partners said a second close was expeected later this year “as the proposition is easily scalable to $750m due to FMO’s annual new loan commitments of more than $2bn per year”.FMO Investment Management was set up in 2012 to develop funds and other structures to provide investors with access to the development bank’s “sustainable” emerging market investments.FMO said it directly contributed to three of the 17 UN Sustainable Development Goals (SDGs) and indirectly delivered on additional goals. In the period up to 2025, it would focus on the goals “Decent Work and Economic Growth” (SDG8), “Reduced Inequalities” (SDG10), and “Climate Action” (SDG13).The development bank said these were areas “where we feel we can have the largest impact in the countries where we can make the biggest difference”.The NN-FMO emerging market loans fund will measure its investments’ impact using FMO’s impact measurement model, which the group developed in 2014. Alecta’s Billing has previously said that FMO’s impact model was a “strong feature”.IPE will be publishing an impact investing report in May The fund is a collaboration of NN Investment Partners and FMO Investment Management, the investment arm of FMO, the Dutch development bank. The loans bought by the fund are issued by FMO. The fund enables investors to invest alongside FMO in loans to financial institutions, renewable energy projects and agribusiness companies in emerging and frontier markets.FMO invests with the dual objective of achieving an attractive financial return and “meaningful” development impact, which it primarily measures in terms of jobs supported and avoided greenhouse gas emissions.
The Swedish pension fund for architects and engineers, AI Pension, has agreed to a takeover by Skandia as it struggles to meet increasing regulatory costs.Skandia will acquire AI Pension’s stock of insurance and operations, with the transfer expected to complete in the first half of 2019, pending approval from the Swedish Financial Supervisory Authority.The takeover will leave the AI Pension name and brand in place, but the entire business will be run by Skandia.AI Pension had SEK7.9bn (€756m) in assets under management at the end of June, and ran roughly 22,000 insurance contracts. Skandia, meanwhile, manages over SEK600bn for 2m customers.Maritha Lindberg, AI Pension’s chief executive, said: “With the transfer, AI Pension’s customers will get stabler and safer operation of their insurance products.”The change would give customers new opportunities and products in the long term, she added.On its website, AI Pension said business conditions had changed in recent years, referring to its provision of Sweden’s collectively-agreed ITP white-collar occupational pensions.The scheme said its active membership was set to decrease gradually because it was not permitted to provide insurance to those who have ITP 1 pensions – all those born after 1978.On top of this, insurance premiums from those with ITP 2 pensions – which cover workers born before 1978 – would fall in the near future, the pension fund said.In addition, the implementation of IORP II next year would require the scheme to hire more people AI Pension said.“In total, this means that costs will increase, and will negatively impact customers and members,” it said. The deal with Skandia is designed to avoid this outcome.AI Pension previously attempted a merger in February 2015, when a deal was on the table to combine with the press and media pension fund PP Pension.However, talks failed a month later, with the two parties saying they had run out of time to find solutions for various matters, and that there were unanswered questions about future regulations that had not yet been resolved.Skandia’s move to take over AI Pension’s operations comes shortly after the Swedish financial group decided to sell its Danish pensions business to AP Pension.At the time, Frans Lindelöw, group head of Skandia, said the sale – alongside the earlier sale of its Norwegian banking operations – was part of its strategy to focus on its home market in Sweden.
The UK’s financial regulator is reviewing its rules about open-ended funds holding illiquid assets after shares in a high-profile equity fund were suspended from trading last week.UK boutique manager Woodford Investment Management was forced to halt redemptions from its flagship LF Woodford Equity Income fund on 3 June after a surge in redemption requests from investors. The portfolio – which was worth £4.3bn (€4.8bn) at the end of April – had a significant allocation to small cap, unlisted or illiquid companies, which hampered efforts to meet redemption requests.Among the investors locked in was Kent County Council’s £6.4bn pension fund, which had a £263m investment in the Woodford fund as of 30 April 2019, according to the council – equal to roughly 4% of the pension scheme’s portfolio.Writing in the Financial Times today, Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), said the suspension “raises a challenge as to whether the rules requiring assets to be liquid are working as they should”. Andrew Bailey, chief executive, FCAThe block on redemptions was designed to allow fund manager Neil Woodford to complete a planned restructuring of the portfolio to remove all illiquid assets, the company said.Bailey warned that “simply listing an unquoted company overseas does not in itself make the stock more liquid”. However, he also voiced support for “internationally open markets” and emphasised the importance of balancing liquidity and investor protection with long-term investing and fostering innovation.He highlighted the importance of financial markets being able to support “investment in companies that will contribute to economic growth and create jobs”.Backing start-up companies often meant investing in illiquid assets, not all of which would succeed, he continued.“If we lose sight of this important objective, those involved in financial markets will inevitably face criticism that they are too focused on the short term and are failing to support the economy,” Bailey said.Watch Neil’s update to investors in the Equity Income Fund. “Investors’ money is preserved in the assets the fund holds” https://t.co/Ku2zAJEral pic.twitter.com/4AkcYRJRQa— Woodford (@woodfordfunds) 5 June 2019Moody’s warns on wider impactCredit rating agency Moody’s warned that the suspension of trading in the LF Woodford Equity Income fund could lead to stricter regulations around illiquid asset investments.In a report published this morning, Moody’s said: “Stricter rules and requirements for open-ended funds would in our view negatively affect the business prospects of retail managers who primarily rely on active management. We believe the incident will also spur the pace of money moving into passive investments.”It added that the FCA could require open-ended funds to hold a higher level of liquid assets, or impose “more stringent disclosure requirements”, which could in turn harm the ability of asset managers to market their funds, particularly to retail investors.“Ultimately, the regulator could propose higher capital requirements on asset managers,” Moody’s said. “Regulatory oversight has already increased for asset managers, but the Woodford fund suspension, which directly affects retail and pension investors, will likely lead to further costly requirements for asset managers, adding to pressure on their margins.”Nicky Morgan, chair of the UK parliament’s Treasury Select Committee, last week called for Woodford to waive the fund’s fees while trading was suspended, and said the committee would question the FCA and Bank of England about “this troubling episode”.A nightmare week for a star fund managerNeil Woodford set up Woodford Investment Management in 2014, attracting a huge inflow of assets – primarily from individual UK investors – on the back of a successful career at Invesco Perpetual, the UK arm of US asset manager Invesco.At its peak, the LF Woodford Equity Income fund had in excess of £10bn of assets, but poor performance relative to its FTSE All Share index benchmark and other UK equity funds led to a wave of redemptions in recent months. LF Woodford Equity Income is down 10.8% in 2019Since inception five years ago, the fund is down 3.7% compared to the FTSE All Share’s 33% gain, according to FE Analytics data. This was despite the fund gaining 40% in its first three years of operation.In a statement published last week, Kent County Council – one of the few institutional investors in the fund – explained that the Woodford fund had been under review by its pension fund committee for several months. However, “redemptions and further weak performance” led to the pension fund submitting its own redemption request on 3 June.On the same day, Link Asset Services – the administrator for Woodford’s funds – announced it was suspending trading in the LF Woodford Equity Income fund in order to “protect the investors in the fund by allowing Woodford… time to reposition the element of the fund’s portfolio invested in unquoted and less liquid stocks, in to more liquid investments”.Kent County Council said it did not know whether its redemption request was the trigger for the suspension.“The council is committed to seeking the best outcome and could still seek a managed redemption in order to maximise the benefits for the pension fund,” it stated.Aside from the open-ended fund’s suspension, last week Woodford was sacked as manager of mandates worth £3.5bn for UK wealth manager St James’s Place, and a £330m mandate for financial advice and wealth management network Openwork.The company’s £552.5m LF Woodford Income Focus fund and the £1bn Woodford Patient Capital investment trust both continue to trade as normal. Source: Woodford Investment ManagementNeil Woodford, founder and fund manager, Woodford Investment Management “The FCA has consulted on new rules for funds that invest in property and other illiquid assets to strengthen liquidity management,” Bailey said. “We will take into account the lessons of the Woodford fund when finalising these new rules.”In an effort to improve liquidity in the LF Woodford Equity Income fund, the asset manager has taken a number of measures in recent weeks. These included listing some of its unlisted holdings on the Guernsey stock exchange and swapping other holdings for a stake in the Woodford Patient Capital trust, a listed investment vehicle also management by Woodford Investment Management.
PostNL, the €8.4bn Dutch sector scheme for postal staff, said it had reduced the carbon footprint of its equity holdings by 22% after re-investing €1bn in the 25% best scoring sustainable companies.As a result, its increased and passively managed stake in the so-called best-in-class companies had raised the overall return of the equity portfolio by 1 percentage point, it said in its annual report for 2018.It added that it had also improved its GRESB score for non-listed property by 4.6 percentage points to 80.6%, outperforming the benchmark by 13.6 percentage points. The score is an environmental, social and corporate governance (ESG) performance measure. The pension fund said that its current ESG policy focused on the UN’s Sustainable Development Goals (SDGs) of health and wellbeing, affordable and sustainable energy as well as climate. As a consequence, it had already abandoned investments in tobacco, extended its exclusion policy for thermal coal and decided to increase its stake in green bonds.“If this works out well, we will consider filling in our entire credit allocation with green bonds in a next stage”René van de Kieft, PostNL chairmanRené van de Kieft, PostNL’s chairman, told IPE that the pension fund initially wanted to raise its stake in green bonds to 2% of the total portfolio.“If this works out well, we will consider filling in our entire credit allocation with green bonds in a next stage,” he said, adding that this would amount to an investment of “hundreds of millions”.As at the end of 2018, the scheme had invested 10.6% in total in three credit funds with its asset manager, TKP Investments (TKPI). PostNL has also established a long-term investment portfolio with thematic ESG goals of technology, innovation and sustainability.0.6% loss, custodian negotiations updateThe pension fund posted a loss on investments of 0.6% over 2018, which it largely attributed to falling equity markets.Its 28% worldwide equity portfolio fell by 6.7%, whereas its 8.5% property holdings of predominantly non-listed property gained 7.7%.PostNL’s fixed income allocation (65%) of mostly euro-denominated government bonds and mortgages gained 2.1%.The scheme further indicated that its dynamic hedge of the interest risk on its liabilities, which stood at 55% at 2018-end, had contributed 0.5 percentage point to its overall result.In contrast, it had lost 1.2 percentage point on its 50% currency cover of its equity investments in US dollar, British pound and Japanese yen.Over the past 10 years PostNL’s returns have been 8% on average, it said.PostNL tendered for a new custodian last year, and van de Kieft told IPE that negotiations were at an advanced stage. It currently uses CitiBank for its holdings with TKPI.TKPI also used to be PostNL’s fiduciary manager until the scheme appointed Kempen Capital Management to this role to split asset management and advisory services. In January, PostNL granted an inflation compensation of 0.72%, based on a funding of 116% at year-end. At the end of May, its coverage ratio had dropped to 114.7%.PostNL reported administration costs of €155 per participant and said it spent 0.34% and 0.16% on asset management and transactions, respectively.The pension fund has 18,590 active members, 46,000 deferred participants and 30,815 pensioners.
In January 2018, the panel ruled that two contribution notices for a total of £9.5m be issued against Chappell. He appealed the decision but following a lengthy legal process his referral was struck out by the upper tribunal. The contribution notices against him were subsequently issued in August 2019.Nicola Parish, TPR’s executive director of frontline regulation, said: “We are pleased that the decision to issue two contribution notices to pay money into the BHS pension schemes stands.“This case illustrates how TPR is willing to pursue a case through the courts to seek redress for pension savers. It illustrates the situations our anti-avoidance powers were designed to meet and which allow us to protect the retirement incomes that savers deserve.”The Pension Protection Fund is responsible for obtaining the money from Chappell for the benefit of the pension schemes. Sir Philip Green, whose retail group sold BHS to Chappell in 2015, reached a settlement with TPR in 2017 to pay £363m to the BHS pension schemes. The Pensions Regulator (TPR) has published a determination notice detailing its decision to issue contribution notices for £9.5m (€11m) against Dominic Chappell regarding two pension schemes connected to the collapsed high street chain BHS.The issuing of the two contribution notices marks the end of TPR’s anti-avoidance enforcement against Chappell, which started in 2016. Retail Acquisitions Limited, of which he was a majority shareholder, bought BHS for the nominal sum of £1 in 2015 and the retailer fell into administration a year later.According to the information released by the regulator this week, the Determinations Panel decided that a series of acts were materially detrimental to the pension schemes, which included the acquisition of BHS, management decisions of the company, the appointment of inexperienced board members, the implementation of an inadequate business plan and the way money was extracted and distributed to Chappell, advisers, company directors and family members.