Philip Menco has left as chief executive of De Eendragt Pensioen, the not-for-profit life insurer and provider of collective pensions. Menco – an investment strategist – said he would like to focus on his “passion” of investing again.“Although the ever-increasing reporting demands from the supervisors are justified, they require a disproportionate amount of time and energy from a small organisation such as De Eendragt,” he said.“This comes at the expense of client contacts and product innovation – and of the unique selling points of De Eendragt as a consequence.” During Menco’s 10-year tenure, the number of De Eendragt’s clients increased from 15 to more than 50, including the pension plans of amusement park De Efteling and the Dutch branch of pharmaceutical company Pfizer.During this period, De Eendragt’s assets under management grew from €630m to more than €1.6bn, while the total number of participants increased from 10,000 to 22,000.In early 2006, Menco oversaw De Eendragt’s transformation from a pension fund with 15 separate pension plans – more or less a predecessor of the current pensions vehicle multi-opf – to life insurer.The change was forced by supervisor De Nederlandsche Bank (DNB), which concluded that De Eendragt’s initial construction – resulting from the collapse of paper mill Koninklijke Van Gelder Papier in 1981 – was not legal under the new Pensions Act.In Menco’s opinion, De Eendragt combines the pensions guarantee of an insurer with the social aspects of a pension fund.“Until 2011, we have always been able to grant the deferred members and pensioners a full indexation,” he said. “Since then, the liabilities became too high due to rising life expectancy.”Menco said he was now weighing his options, adding that he would aim to “revitalise” his consultancy Fortunis.At De Eendragt, he has been succeeded by Albert Bakker, a former interim manager and senior programme manager at insurer Achmea.At the same time, André van Vliet has taken over the job of CFO at De Eendragt from Tom Nieuwenhuizen, who is to focus again on the company’s clients.
The current economic recovery could go on for another three years given its sluggishness so far, and equity markets generally “roll over” around 18 months prior.Among the structural changes to the UBS strategy, the move towards providing clients with greater liquidity is key.Of the four risk/return factors used within its tactical asset allocation strategy – equity, term, credit and illiquidity – the manager will shift away from the latter two in favour of the former.Koester said the idea was to keep a pro-risk stance, given market valuations can go further from current levels.However, the manager had invested in the last three years without a safety net.“Given where we are in the cycle, it is worth putting a safety net in,” he said.“People are becoming a little complacent, particularly in credit markets and in high yield, where there remains the risk investors think it is a liquid market in volatile moments, and liquidity is currently mispriced in the market.”While accepting the manager was acting prematurely, Koester said clients were understanding the risks posed by any future downturn, and willing to accept any minor impact on returns in the short term.UBS said it would increase liquidity within its tactical asset allocation fund to ensure it had the right derivative exposure in place, to limit downsize risk, and boost client assets when the eventual run on illiquid assets came.“You can make a lot of money for your clients if you provide liquidity,” Koester said.“In a normal cycle, we are now halfway through the greed phase, so, as a cautious fiduciary, it is time to account for that.” UBS Global Asset Management is shifting the structure of its tactical asset allocation strategy to account for upcoming downside risk.Speaking with IPE, the manager’s head of asset allocation and currency, Andreas Koester, said the firm believed current growth in the market would cyclically begin to wane in approximately 18 months.“Markets have two phases – greed and fear,” he said. “We are currently in greed but moving towards the end of that cycle.”The motivation behind UBS’s view is the expected downturn in valuations within the next two years, which, Koester said, will see liquidity play a key role.
Another main motive for using sustainability criteria is risk management, Union said.One anonymous “decision-maker at a pension fund” in the survey said: “We see sustainability as a risk management issue rather than a marketing tool. We use it to manage our long-term risks, not to win customers.”The survey of 215 German institutional investors, with accumulated assets of around €1.5trn, also found that “concerns about this type of investment are declining significantly”.German institutions mainly use screening (87%) in their SRI investment approach, followed by best-in-class approaches (58%).Active shareholding is only exercised by 36%.Meanwhile, in Switzerland, where active shareholder engagement has just been made mandatory for Pensionskassen by law, 60 institutions, including asset managers such as Swisscanto, have formed the forum Swiss Sustainable Finance (SSF).It aims to “establish Switzerland as the leading centre for sustainable financial services”.Sabine Döbeli, head of sustainability management at bank Vontobel and vice-president at FNG, was named SSF’s managing director.Currently, CHF57bn (€47bn) of assets in Switzerland are invested using sustainability criteria, “a sustainable part for international clients”, SSF said.It added that one-third of the global volumes in micro finance investments was managed in Switzerland. More than half of the German institutional investors surveyed in a sustainability study commissioned by Union Investment are applying sustainability criteria, up from the 48% who reported the same last year.Among investors linked to the church and federations, the share is even higher at 90%.Further, the sentiment index, calculated by professor Henry Schäfer from the university Stuttgart for the German investment house, has risen considerably, from 5.4 points to 13.4 points year-on-year.“A growing number of investors,” said Schäfer, “expect sustainability reporting requirements to increase and therefore firmly believe they can no longer ignore the issue of sustainability.”
Only days after the German government and social partners held ongoing talks on the possible introduction of industry-wide pension funds in the country, unions and employer representatives published statements rejecting the proposal outright. In October last year, the Labour and Social Ministry (BMAS) presented a first draft proposal setting out how sector-wide pension plans – or Tarifpläne – might be introduced in Germany to “help strengthen the construction and dissemination” of occupational pensions.However, various industry stakeholders – particularly the social partners – rejected the proposal, which would have introduced pure defined contribution plans into the pensions system for the first time.An amended proposal presented at the end of January 2015 reinstated minimum guarantees, yet it still failed to win over the social partners. In separate statements, union federation DGB and employer association BDA agreed that, despite the government’s changes, a number of “crucial” problems – such as insolvency protection, or the ring-fencing of existing pension plans to prevent a “race to the bottom” in terms of guarantees – remained.The DGB claimed the proposal would enable companies to shirk their liability responsibilities, while the BDA argued that the ability to transfer guarantee promises should apply to all pension models, not just the new Tarifpläne.The employers’ association went so far as to say that even an amended proposal would fail to address necessary changes to the existing regulatory framework for occupational pensions – regarding tax incentives and bureaucratic simplification, for example – and that it should therefore “be rejected” .For the DGB, the introduction of yet another pensions vehicle into the German system would simply increase complexity, which the unions believe is one of the major factors deterring small and medium-sized enterprises from setting up pension plans.The unions also questioned the vehicle’s ability to increase company participation in the second pillar, as some industries would have to restructure their collective agreements completely to introduce such plans.Further, the DGB argued that the proposal to allow non-member companies to join these pension plans would be detrimental to the “spirit” of tariff unions, whilst warning of “free-loaders”.The association stressed that it would continue a “constructive dialogue” with the government on occupational pensions, but it also added that, like Germany’s employers, it would prefer to “convincingly address” existing problems than “create new ones”.
The average annualised return on the return-seeking pool for the three years to 31 December 2014 was 12.5%, outperforming the benchmark return of 11.9% over the same period.Over the five years to the same date, the return was 9.2% per annum, with 8.7% for the benchmark.The fund’s £287m liability-matching pool returned 18.1% for the year to 31 December 2014, compared with 19.2% for the benchmark.Annualised performance over the three years to that date was also slightly under the benchmark, at 6% compared with 6.1% for the benchmark.As of the end of 2014, the return-seeking pool was 58% global equities, 19% UK equities and 10% property.The CEPB said the pool benefited from its overseas bias during 2014.Global equities returned 10.5%, compared with 10.2% for the benchmark, while the UK equity portion returned 0.7%, compared with a benchmark return of 0.9%.The property allocation also performed well, with a return of 15.9%, although this was lower than the 16.5% benchmark return.At end-2014, the liability-matching pool was split 77% index-linked government bonds and 23% corporate bonds, exactly the same allocations as the year before. Within this pool, UK index-linked Gilts returned 20.3%, with corporate bonds returning 12.4%.Jonathan Spencer, chairman at CEPB, said it was their intention to switch, over a period of time, some return-seeking assets to those matching the scheme’s liabilities, but that the price of bonds had made this difficult.“While we had been able to make small switches, the circumstances were right to make a larger switch late in the year,” he said.“The decision reduced investment risk in the fund and thereby should provide more stability for the employers participating in it.”During 2014, the CEPB made an allocation of £50m – equivalent to 4% of the return-seeking pool’s assets – to local-currency-denominated bonds issued by emerging market countries.It expects to make an allocation of similar size to privately arranged loans to small businesses this year.Also during 2015, the fund looks to extend its commitments to infrastructure, while considering an increase in illiquid asset class investments for the return-seeking pool.The CEPB invests ethically, with its policy and practice shaped by the Church’s Ethical Investment Advisory Group (EIAG).It excludes tobacco, gambling and weapons and is implementing a policy on alcohol.Over the last year, the CEPB has co-filed climate change resolutions at the AGMs of BP and Shell that were subsequently carried.It said that, in 2015, policy recommendations from the EIAG would lead to significant engagement with the fossil fuel sector, as well as exclusions from the most polluting fossil fuel producers. The £1.4bn (€2bn) return-seeking pool of the Church of England Pensions Board (CEPB) portfolio returned 8.5% during 2014, largely because of good equity performance and outperforming its 8.1% benchmark’s return, according to the fund’s latest accounts.For the £1.7bn fund as a whole, the 2014 return was 9.7%.The CEPB runs a number of pension schemes, with more than 35,000 current or future beneficiaries, including clergy and church workers.Benefits for pre-1998 service are provided by the Church Commissioners’ £6.7bn endowment fund.
The Austrian subsidiary of the Generali insurance group will transfer its company pension fund to a multi-employer provider, the €500m Bonus Pensionskasse.Generali (12.5%) and Zurich insurance company (87,5%) are co-owners of the retirement service provider, which is offering a Pensionskasse, a provident fund and the consultancy business Concisa.The merger is not yet official but was announced in the invitation to the Generali Pensionskassen’s AGM.Market participants familiar with the deal have also confirmed the news. Bonus told IPE it could not comment until the deal was closed.The merger could still happen this year together with the much larger integration of the Victoria Volksbanken Pensionskasse (VVPK) into the Bonus Pensionskasse.Bonus had won the bidding for the €660m VVPK, which will more than double its assets once both deals are finalised.With the outsourcing of the Generali pension plan, the number of real company pension funds in Austria has now fallen to five – energy provider EVN, semiconductor manufacturer Infineon, car company Porsche, the social insurance for self-employed people SVA and the Austrian branch of computer giant IBM.In recent years, Unilever, Shell, local energy provider Verbund and Austrian economic chamber WKÖ, among others, have outsourced their pension plans to multi-employer providers, most often citing increased complexity in regulation and asset management.Other smaller Pensionskassen, however, such as the one offered by EVN, remain company-owned but are managed by multi-employer plans – in this case, VBV.Meanwhile, a symposium on pensions was held in the Austrian Parliament earlier this week to inform MPs about current trends in the three pillars of the pension system.Bernd Marin, pensions expert and new director at the Webster University in Vienna, told delegates that Pensionskassen “need to be more attractive” to offer more people the chance for supplementary savings for their retirement.He urged the government to allow employees to make unlimited additional tax-free contributions to pension plans.The current cap is set at €300 annually.He also called for more flexible investment rules for Pensionskassen.Additionally, all bargaining agreements should include an option to join a pension plan, he said, a demand the pension fund association FVPK has made repeatedly.
“We are committed to genuine transparency in investment cost disclosure and wish to make clear we were neither consulted on nor endorse the Investment Association’s recent report on investment costs and performance.“However like many in the industry,” Fawcett concluded, “we are reviewing its contents and will be feeding back detailed comments to the Investment Association in due course, as part of our advice on cost disclosure.”Responding to Fawcett’s letter, a spokeswoman for the IA told IPE it welcomed the advisory board’s input as work on the new disclosure framework progressed. ”More than ever,” she said, “it is vital that savers and those who make investment decisions on their behalf have full confidence in the pensions and investment management industries.”‘Loch Ness’ feesThe IA’s research, conducted by Fitz Partners, was released earlier this month, weeks after the industry body announced Fawcett as the chair of the 12-strong independent board meant to offer advice on a new cost disclosure framework for the sector.The research examined a universe of equity funds, and concluded that average fund transaction costs stood at 0.17% across the sample of funds, which captured cost data from a three-year period starting in 2012.In its accompanying commentary, the IA claimed the findings cast doubt on “hidden-fees hysteria”, and likened the existence of such hidden costs to the Loch Ness monster.Reaction from fee campaigners was swift, with Con Keating, head of research at BrightonRock Group, attacking the IA’s findings.“I have read many hundreds of empirical financial studies and reports, perhaps even thousands,” Keating wrote in a riposte for IPE.com. “This report is by far the worst – so bad that it is offensive, insulting both our common-sense and intelligence.”The founding chairman of the Transparency Task Force was equally scornful, questioning the “churlish” invocation of the mythical beast, and saying hidden fees were a “festering sore on the face of financial services”.The UK’s local government pension schemes are separately drawing up a new framework for fee disclosures, which is hoped will be in place by the autumn. Mark Fawcett, chair of the Investment Association’s (IA) independent advisory board on cost disclosure, has declined to endorse the findings of widely criticised IA report on fees, noting the board was not consulted on its contents prior to publication.In a letter sent to editors of a number of publications, including IPE, Fawcett stressed that, in the board’s view, investment costs mattered to all those managing assets on behalf of long-term savers in the UK.Acting as chair of the board rather than in his capacity as CIO at the £1bn (€1.1bn) National Employment Savings Trust (NEST), Fawcett said that he and other members of the independent review board believed the industry could improve on its current level of fee disclosure.“Members of the Investment Association’s Independent Advisory Board on Cost and Charge Disclosure believe there is scope for improvement in the way the asset management industry discloses transaction costs and in how they talk about the issue with their customers,” the letter said.
US private equity firm HarbourVest Bidco has made an unsolicited bid to acquire SVG Capital, launching a cash offer that values the UK-listed private equity investor at around £1bn (€1.2bn).The offer was announced this morning, 12 September, after Boston-based HarbourVest Bidco acquired 8.5% of the UK firm’s ordinary share capital.In addition, HarbourVest Bidco has obtained commitments of varying degrees of firmness – an “irrevocable undertaking”, as well as “letters of intent” – to accept its bid for SVG Capital.Together with HarbourVest’s own shareholding, these relate to 51.2% of the SVG Capital share capital in issue on 9 September. The board of SVG Capital has urged its shareholders to wait until it publishes its interim results next Tuesday, 20 September, before deciding whether to accept the offer.The share price of SVG Capital was up some 15% this morning, reaching 650.54p at the time of writing – just above the 650 pence per share that HarbourVest Bidco is offering.SVG Capital’s shares closed at 566.5p on Friday. David Atterbury, managing director at HarbourVest, said it believed its offer provided “full, compelling and immediate cash value” to the shareholders of SVG Capital.He added: “While our offer does not currently have the recommendation of the board of SVG Capital, we look forward to a constructive dialogue with them to crystallise the certainty of value, today and in cash, to its shareholders.” SVG Capital has net assets of more than £1bn.HarbourVest has $42bn (€37bn) in assets under management.
The €27bn Pensioenfonds ING plans to raise its inflation hedge from 25% to 35% of its liabilities, in order to guarantee future indexation.In its annual report for 2017, it said its hedge level was 22.9% at year-end, and that the pace of the process to increase this would be dictated by market conditions.The closed scheme uses inflation-linked bonds from Germany, France, Belgium and the US, as well as inflation swaps.The inflation hedge is part of the pension fund’s matching portfolio – 72% of its overall assets – which also comprises government bonds, loans and interest derivatives. It is managed by BlackRock and AXA Investment Managers. The ING scheme’s coverage ratio was 142.8% at the end of 2017, comfortably above the Netherlands’ minimum level for granting inflation-linked benefits.An asset-liability management study of ING’s portfolio, looking into how the scheme could keep its funding level and indexation potential, suggested it should further reduce both inflation and interest rate risk.As a result, the board said it was considering replacing its interest hedge of nominal liabilities – currently 90% – with a coverage linked to real, inflation-linked obligations.The pension fund reported a return on investments of 1% for 2017.As a consequence of rising interest rates, it lost 1.4% on its matching portfolio. Its return holdings delivered 5.6%, however, with equity, credit and emerging market debt, and property generating 8.7%, 1.6% and 2.2%, respectively.The scheme said it had switched its holdings of equity emerging markets from pooled funds to separate mandates with two new managers. It also indicated that it had fully divested its holdings in listed real estate in favour of non-listed property, which now makes up 5.6% of its investment portfolio.The pension fund also continued divesting its remaining 2% holdings in private equity, which generated a 9% profit.The Pensioenfonds ING recorded asset management costs of 0.3%, and spent 0.03% on transactions. Its administration costs were €259 per participant.The scheme has 15,190 active participants, 34,375 deferred members and 20,835 pensioners.
Over the past two years, the leverage from the internal loan has increased to 3x from 2x, ATP said, with derivatives boosting the gearing on top of this.Before tax and expenses, ATP said it made a 3.4% return, or DKK4.1bn, on its investment portfolio between January and June. Christian Hyldahl, CEO, ATPATP’s return on total assets was 2.9%, according to the Danish regulator’s performance measure, designed to allow comparability between pension funds.Private equity was ATP’s biggest contributor, returning DKK1.8bn, followed by infrastructure with a DKK1.5bn gain. Listed international equities made a DKK2.1bn loss in the period.As announced at the end of June, ATP set aside an extra DKK20bn because of a change in its long-term forecast of life expectancy, transferring this amount from the bonus potential to the hedging portfolio.After this update, ATP said its results for the first half were negative by DKK17.7bn.Hyldahl said that despite this major adjustment to longevity provisions, he believed the pension fund would manage to keep up with future changes to expected lifespans.“We make adjustments when we have new data coming in, and normally this is plus or minus one billion kroner – but what we have done just now was a major redesign,” he said.In its interim report, ATP said the standards it used to estimate future pension liabilities are more conservative than both EIOPA’s yield curve and the Danish regulator’s life expectancy model.If both of these external measures had been used, it said its guaranteed pensions would have been DKK67.7bn lower at the end of June – and the bonus potential correspondingly higher. ATP, Denmark’s biggest pension fund, increased the leverage on its return-seeking investment portfolio in the first half of this year, as the fund as a whole took a hit from a major longevity adjustment.In its interim report, the statutory pension scheme reported a rise in total assets to DKK783.8bn (€105bn) at the end of June, from DKK768.6bn at the end of December.Chief executive Christian Hyldahl told IPE that ATP had “increased risk by 10% in the first half” for the fund’s DKK100bn leveraged investment portfolio, which consists of reserves for bonus payments.ATP increases the firepower of its investment portfolio by borrowing from its DKK683.9bn hedging portfolio at an interest rate of 3%, and on top of that by using derivatives.