New German pension pooling vehicle ‘not in high demand’

first_imgSimilarly, Stefan Oecking, partner in the retirement department at Mercer Germany, pointed out: “Companies have looked into this and seen that it is difficult to implement and now they are waiting for someone to make the first step.”Another obstacle to a wider use was also the fact that Germany does not have very advantageous tax regime for foreign asset pooling vehicles, meaning other countries were not introducing privileges for the German Investment KG, he explained.“But these questions may only become sufficiently answered once a pension scheme seeks to implement a multinational asset pooling solution,” noted his colleague Carl-Heinrich Kehr, principal in the investments department at Mercer Germany.Mahnert also pointed out for many German companies, there was little to no benefit in using the vehicle: “When it comes to asset pooling within Europe, a large proportion of pension assets are outside of Germany, so companies have to ask the question why it would make sense to pool foreign assets in Germany.”  Therefore, Oecking and Kehr agree, pooling of pension assets in a German Investment KG is “not anything that is high on companies’ agenda” at the moment. The new asset pooling vehicle, the Investment KG is “not something the market has been eagerly awaiting”, according to Sabine Mahnert, senior consultant at Towers Watson Germany, and may struggle to attract interest.Mahnert told IPE there had not been “that much demand” for the vehicle, legally a limited partnership, just over a year after it has been introduced by the new Kapitalanlagegesetzbuch (KAGB) – the legislation with which Germany implemented the EU’s Alternative Investment Fund Managers Directive (AIFMD).Jörg Ambrosius, senior vice president at State Street Germany, pointed out that the vehicle is “still very young” and it remains to be seen how the market will develop and how the new structure will be accepted.Ambrosius added while similar structures in other countries such as Ireland and Luxembourg were set up as segregated accounts, the German vehicle was structured as a Kapitalverwaltungsgesellschaft (KVG), which involved a paper-heavy registration process with the BaFin.last_img read more

​Jonathan Hill pledges ‘action plan’ on Capital Markets Union by next year

first_imgJonathan Hill has pledged to publish an action plan for the creation of the Capital Markets Union (CMU) by next year and called for the development of new long-term, stable debt instruments.Opening the Finance for Growth conference in Brussels today, his first major policy speech since assuming office last week, the financial services commissioner said the European Long Term Investment Fund (ELTIF) would be one of the immediate means for his new directorate general to bring about greater European long-term investment.Nevertheless, he called on a broad range of stakeholders – including national and European lawmakers, NGOs and the financial industry – to suggest means of creating the CMU when he launches a public consultation in the coming months.“I want to hear ideas on how we can get more cross-border investment but in forms that are stable, in which investors do not run for the exit when the going gets tough,” he said. “In particular, I am interested in ideas for more market finance instruments – but not just in safe short-term debt, but in longer-term, stable debt that encourages long-term investment, and in real risk capital that encourages innovation.”The UK politician, successor to internal markets commissioner Michel Barnier, said bringing about the CMU would be a long-term project and accepted that it could not be created overnight.But he said early actions – including passing the regulation governing the ELTIF by the end of the year and pushing for a single market for high-quality securitisation – would see Commission president Jean-Claude Juncker able to use the measures as part of his proposed €300bn investment programme.He promoted the CMU as a positive step for businesses and savers, able to avail themselves of a greater range of loan and savings products, but he also noted the divergence of national regulation in a number of areas.“The situation at the moment is one of disunity, of fragmentation,” he said.“This is holding back the size and depth of capital markets, making it difficult for investors to diversify.”Hill, a former government minister in the British Conservative Party that under former prime minister Margaret Thatcher was responsible for the 1986 de-regulation of UK financial markets, warned against expecting a “big bonfire of existing regulations” to aid growth.“There can be no going back to the old, pre-crisis ways,” he said.“And equally, if we find wrongdoing in the financial services sector, whether it is manipulating the market or pulling the wool over the eyes of unsuspecting customers, the system should come down on perpetrators like a ton of bricks.”Hill has previously said the CMU should be functional by 2019, and it is one of Juncker’s key policy proposals for his term.In October, Hill identified the “underdeveloped” European pension market as one of the areas holding back the launch of a CMU, but has otherwise offered few details on how the Commission could bring about greater harmonisation of capital markets.Concerns have also been raised that a recent draft of the revised IORP Directive was at odds with the creation of a CMU, as it stripped the Commission and European supervisors of the ability to set technical standards for the pensions industry, thereby potentially undermining its ability to invest for the long term.For more on the Capital Markets Union, see the Letter from Brussels in the current issue of IPElast_img read more

​Unions hail ‘landmark’ pension settlement in Waterford Crystal case

first_imgThe ECJ ruled last year that Ireland was in “serious breach” of its responsibilities for failing to ensure at least half of benefits were guaranteed.Under the previous wind-up order of Irish schemes, amended last year to ensure a more equitable distribution of assets, pensions in payment were granted absolute priority.The benefits of active and deferred members were paid out of the asset pool that remained, with cuts to compensate for any deficit.Jerry Moriarty, chief executive of the Irish Association of Pension Funds, noted that, were January’s High Court hearing in the Waterford Crystal case to proceed, it would result in a ruling on the level of protection that should be offered.The government is expected to argue in favour of the 50% threshold mandated by the ECJ, despite the proposed Waterford settlement offering benefits well above such a level.Meanwhile, employee representatives have in the past pointed toward the 90% certainty offered by the UK Pension Protection Fund as a desirable threshold, while an Irish ruling in July saw pharmaceutical Omega Pharma ordered to contribute to the scheme despite its meeting the minimum funding standard, ensuring benefits were secured.“That’s probably why it’s in the government’s interest to keep it out of the High Court,” Moriarty added.A spokesman for Unite said it had yet to decide whether it would continue with proceedings.Moriarty said that, without a High Court ruling, the matter was unlikely to be resolved, as the next group of beneficiaries offered 50% of benefits could question why their compensation fell below that offered to Waterford Crystal members. Unite regional secretary Jimmy Kelly welcomed the settlement.“Unite and our members have travelled a difficult road since the closure of Waterford Crystal in 2009 – a road that has taken us from the High Court to the European Court of Justice, back to the High Court and finally the Labour Relations Commission,” he said.“The settlement now negotiated by Unite represents a landmark victory – not only for our own members but for the trade union movement.”Minister for social protection Joan Burton said she was “very pleased” to be announcing the settlement, agreed this week by the Irish government.“I hope this will bring security and peace of mind for them in the certain knowledge their pension entitlements are now secure,” she said. The full cost of the settlement will be met from the revenue generated by the 0.6% and 0.15% pensions levy, ending this and next financial year. Unions have hailed as a “landmark” victory the €180m settlement offered by the Irish government to members of the Waterford Crystal pension schemes.If accepted by beneficiaries, the offer could bring to an end a protracted legal dispute that saw social partners sue the Irish state over its failure to protect pension benefits in instances of company insolvency.The settlement will see more than 1,700 deferred members of both Waterford Crystal funds offered €1,200 a year in lump-sum payments per year of service and ensure accrued benefits are paid – with cuts applied on a sliding scale depending on the size of their annual value.Union Unite first supported a 2009 High Court case over the loss of benefits for active and deferred members, a case later referred to the European Court of Justice (ECJ).last_img read more

Danica Pension invests DKK5bn in central Copenhagen development

first_imgDanica Pension is investing DKK5bn (€670m) in a new development in central Copenhagen, buying up postal buildings from logistics firm PostNord to build a district that will include offices, hotels and homes.Peter Mering, investment director at Danica Pension, said: “We are facing an exciting task in being able to develop Copenhagen’s most attractive location.”The property in the deal is in central Copenhagen next to the main train station, and currently houses the Danish headquarters of PostNord along with its mail terminal.Danica Pension said it expected to develop the project in conjunction with BlackRock, which was one of the financial partners it worked with. BlackRock will contribute with its international investor base, as well as its international perspective on development tasks, the company said.Mering said the location of the project and its size meant the pension fund was very ambitious in the vision it had for the new city district.Danica said the plan was to create a new part of the city where both Danish and international businesses could work in a lively, open and attractive environment.It said the project would include a recreational green park similar to High Line Park in Manhattan – a linear park built on an elevated section of a disused New York train line.There will be space for businesses as well as services and residential properties to support the commercial activities, including serviced flats for visiting business people.According to seller PostNord, the real estate property itself is being sold to Danica Pension for DKK925m.The deal is to take effect on 30 June this year, with PostNord sub-leasing the office and logistics space it needs after that date from Danica Pension until 2018.During this period, PostNord plans to move to premises that are better for future operations, the company said.PortNord is being advised on the deal by Catella corporate finance.The deal includes 39,294 sqm of land, on which Danica Pension said it planned new building including 125,000 sqm of space. Construction will take place between 2016 and 2020, according to the plan.Danica Pension said it aimed to invest more in significant development projects within Denmark over the coming years, with real estate investments focusing on attractive locations in the country’s biggest cities.last_img read more

Pension funds for Dutch railways, public transport weigh full merger

first_imgSPF, the €14.6bn pension fund for Dutch railway workers, and SPOV, the €3.5bn scheme for the public transportation sector, are considering a merger.SPF Beheer, their joint pensions provider, recently confirmed that one of those options include the possibility of a full merger.Hennie Zoontjes, spokesman for SPF Beheer, said: “Costs play a role – both schemes are active in the same sector, and their funding ratios are getting closer.“A lot of things still need to be done, but a merger is a logical option.” The pension funds’ investment committees have held joint meetings since last January.SPF has more than 72,000 members, while SPOV has 27,000.SPF reported administration costs of €129 per participant against SPOV’s €187.However, the public transport scheme said its costs would have been closer to €145 had it not factored in one-off expenses for raising its retirement target age.As of the end of June, SPF’s funding stood at 114%, SPOV’s 109%.The railway scheme has adopted a riskier investment policy, with proportionally larger allocations to equity and real estate, and smaller allocations to fixed income.Over the course of 2014, SPF returned 14.3%, while SPOV returned nearly 16% over the same period.Neither SPF nor SPOV was available for comment.last_img read more

UK stewardship survey points to manager opportunities – PLSA

first_imgThe principle of stewardship is also strongly endorsed, with nearly all respondents (98%) either agreeing or strongly agreeing that pension funds have stewardship responsibilities.Luke Hildyard, policy lead on stewardship and corporate governance at the PLSA, said the findings were encouraging but pointed to some survey outcomes “that should prompt contemplation rather than congratulation”.“[I]t’s vital that pension funds ensure they have meaningful policies on stewardship, supported by concrete performance indicators, and regularly monitor the implementation of these policies through dialogue with and scrutiny of their asset managers,” he said.The notion that there is room for progress appears to be shared by the survey respondents, only 5% of which strongly agree that institutional investors, including pension funds and asset managers, have been “active enough” stewards of investee companies – 66% chose the simple ‘agree’ option.The vast majority of respondents are signatories to the UK’s 2010 Stewardship Code (72%), with a further 10% planning to sign up within the next 12 months.Still, only 29% of investment consultants raised stewardship during discussions with respondents, the PLSA’s report highlights, and 37% of respondents regularly discuss stewardship issues at trustee meetings.More than one-third of pension funds taking part in the survey still do not disclose their voting records (37%), while 56% outsource voting rights to their asset managers.One of the biggest changes is the jump in the number of respondents setting out specific stewardship expectations in their mandates for managers, up from 38% two years ago to 68% in this year’s survey.Last year, the figure stood at 51%.The PLSA, meanwhile, said that, as important as increased stewardship may be, improvements in this area have to compete with other challenges facing pension funds resulting from “profound” changes in life expectancy and policy.“Therefore,” it said, “it would be unsurprising if stewardship and ESG were not considered to be top priorities for fund administrators relative to – for example – major deficit challenges; the workload deriving from auto-enrolment; or the massive ‘freedom and choice’ changes to the way consumers access their pension.”The survey findings point to a business opportunity for asset managers, according to the PLSA.These indicate that more work is to be done on improving stewardship but also that asset managers are equipped to add value to investments through engagement with investee companies (as agreed by 93% respondents).“[I]t thus follows,” the survey report continues, “that asset managers could generate a commercial advantage by enhancing the quality of stewardship. The findings on reporting suggest that better integration of stewardship with investment matters would be the most obvious means of doing so.“For some asset managers, this is already – to differing extents – common practice, but it is not yet universal. But, taken together, the findings of this survey demonstrate a clear appetite for investment to turn good stewardship practice into fully integrated excellence.” Stewardship has risen up the agenda for UK pension funds but has to compete for attention with challenges stemming from major policy reform and changes in life expectancy, the UK pension association has said.The comments were made by the Pensions and Lifetime Savings Association (PLSA) in connection with the publication of the 2015 edition of its annual stewardship survey, introduced in 2004.Sixty UK pension funds with £260bn (€360bn) in combined assets under management participated in the survey, 62% of which are private sector funds.Belief in the materiality of environmental, social and governance (ESG) factors for investment returns remains strong, with 93% of respondents backing this view.last_img read more

Swiss pensions industry awaits clarification on ‘low-risk’ strategies

first_imgThe Swiss government will now have to provide the pensions industry with a definition for ‘low-risk’ strategies after the obligation to provide guarantees when introducing individual risk choices in pension plans was dropped.Switzerland’s so-called 1e-plans – which allow further individualisation of investment risk for people earning more than CHF126,000 (€116,500) a year – were introduced in 2006, but many Swiss companies have avoided the vehicle due to its mandatory guarantee. More than a decade later, the guarantee has been dropped, yet the law states that a “low-risk strategy” must be offered from 2017.The government is now working on a decree defining the framework for this strategy. Adrian Jones, director at PwC Switzerland, said: “It’s easy to get confused between risk and return, and this is likely to be part of the challenge with the new law.”He quoted two of the most debated questions: “How do you define ‘risk’? And if something is negative, is that really low risk?”He also cited the challenge of implementing “new strategies such as this in the current environment”.However, he said he was convinced that the change in the law for 1e-plans would make them more attractive to companies in the long-run.Willi Thurnherr, chief executive at Aon Hewitt Switzerland, agreed, saying it would “mainly be companies that will ask providers about 1e-plans”.He said the model could help ease longevity and investment-risk pressures on Swiss companies.“The 1e-plans are very close to the 401k plans in the US – it is a global trend, and the question is to what extent Switzerland can [avoid those pressures],” Thurnherr said.In its survey, PwC argues that 1e-plans can “help companies reduce the risk of underfunding” and offer “potential defined contribution accounting under IFRS and US GAAP”. 
Both consultancies emphasised that, under Swiss law, individual choice can only be offered to people earning  CHF126,000 or more, around 20% of the population at the most.Around 100 companies offer 1e-plans, named after the legal paragraph by which they are regulated, although Thurnherr said many providers had prepared solutions and were simply “waiting for the government’s final decree”.For Jones, one hurdle for implementation has been Switzerland’s “tradition of collective pension plans”, with only limited or no individual choice – but he argued that “this is changing”.Thurnherr said the low-risk strategy was likely to be used as a default for people who did not make an active choice.And while members can switch between strategies, often on a monthly basis, the “admittedly very small data set in Switzerland suggests the vast majority will not change or only change once”, Thurnherr said.last_img read more

‘Inflection point’ approaching for long-term investors, says MSCI

first_imgAsset owners cannot afford to ignore such risks as they “own both outcomes”, Lee and Moscardi said – both long and short term.A favourable deal for a company on corporation tax may be profitable on a six or 12-month basis, but if it results in government-spending shortfalls, then the wider economy suffers later down the line, they argued.In 2017, the MSCI researchers predicted the emergence of two approaches to long-termism: new benchmarks that “explicitly incorporate views of the future”, and a shift towards high-conviction, low-turnover portfolios.“The year ahead has the potential to test institutions and portfolio companies that espouse a long-term orientation,” Lee and Moscardi wrote.“The temptation to time the market in response to (or in anticipation of) events – real or rumoured – could prove too powerful a distraction for many. But for investors committed to the long term, 2017 may be the year to differentiate themselves from the pack and orient towards future decades.”Elsewhere in their report, the pair urged investors to pay more attention to the physical risks of climate change than regulation or politics, citing insurance companies as an example to follow.“The planet does not care about politics,” Lee and Moscardi wrote.“This is a reality the insurance sector has known for years. Large swathes of homeowners in the US, for example, moved to government-subsidised insurance because private insurers would no longer bear the risks of an increase in the intensity of storms or the rise of sea levels on their own.“With the first six months of 2016 marking the warmest half-year on record, 2017 could mark the year that investors protect their portfolios against climate risk like insurers to price physical risk in premiums.”Focusing on water scarcity, the pair explained that similar portfolios could have differing exposures to underlying physical environmental risks.Comparing two exchange-traded funds tracking high-dividend indices, Lee and Moscardi found that, although the companies in each portfolio needed roughly the same amount of water for their operations, one was more exposed to regions with “high water stress”.In addition, holdings in agricultural firms “can alter the risk profile of a fund dramatically”.Lee and Moscardi found one fund with holdings that required “less than 6,000 cubic meters of water per dollar of sales to operate”, but “an additional 42,000 cubic meters of water inputs to generate those sales”.The researchers concluded: “In 2017, institutional investors may begin to build portfolios that aim to protect against physical risks that transcend political regimes. While water scarcity may be a starting point, investors broadly are more likely think like insurers in protecting their assets in the coming years.”The full report is available here here. This year could mark an “inflection point” for long-term investors, according to researchers from MSCI.Investors are likely to be tested by macro events this year, but these tests could prove beneficial to advocates of a long-term approach, wrote Linda-Eling Lee, global head of environmental, social and governance (ESG) research, and Matt Moscardi, head of financial sector research.“Since the global financial crisis, a growing chorus of investors and policymakers has railed against short-termism and advocated taking a long view,” the pair wrote in an outlook report.“With more upcoming elections showing potential signs of populist political shifts, the temptation will be to react and over-react to spasms in the Twittersphere. But what 2016 taught us is that it’s the slow-burning risks that can matter the most.”last_img read more

UK’s LPP searches for diversified credit managers via IPE Quest

first_imgThe investor – a collaboration between the London Pensions Fund Authority and Lancashire County Pension Fund – has not set a minimum for assets under management for the asset class or the manager.However, interested parties should have a track record of at least three years – although a minimum of five years is preferred.Applicants should state performance gross of fees to 30 June, and submit applications by 6 September, 5pm UK time.The search for diversified credit managers comes after LPP launched its third pooled fund, a global infrastructure fund, in July. At the time it said it planned to launch credit, fixed income and total return funds “in the coming months”.The infrastructure fund was slated for a final close in September, with LPP having said it expected to raise more than £1.5bn by then.LPP launched its first joint fund, pooling its two member funds’ global equity allocations, in November 2016, and then launched a private equity pooled fund in April.The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation 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 jayna.vishram@ipe-quest.com. The investment vehicle of the UK’s £12.5bn (€14.5bn) Local Pensions Partnership (LPP) has tendered a diversified credit mandate of up to £300m via IPE Quest.According to search QN-2345, LPP Investments (LPPI) is looking to award a global mandate of £150m-£300m to one or more managers.The desired mandate will incorporate an unconstrained multi-asset credit strategy with a target gross return of cash plus 4%-6% over a full market cycle.Volatility should be restricted and the mandate should offer weekly liquidity, which can be gated.last_img read more

Supervisor EIOPA overstepping mark with PEPP, conference hears

first_imgHe added: “PEPP is the answer to a question nobody asked.”Müllerleile pointed out that the number of truly mobile employees in Europe – the main target audience for the PEPP – was very limited.Klaus Stiefermann, managing director at the German pension fund association aba and board member at PensionsEurope, also warned about the current PEPP proposal that was tabled by the European Commission in June.He said: “PEPP is to be implemented via a regulation and not a directive. A directive would mean member states could adapt it to fit national particularities. With a regulation this is not possible, it has to be implemented directly.”The complexity of the different tax regimes will be one of the major problems for the pan-European product, Stiefermann said. “How can a smaller provider cover all 27 different tax regimes?” he asked.Additionally, he was worried that varying taxation of the PEPP – which is possible under the current draft – would lead to a sort of ‘tourism’, with people retiring to the country with the best PEPP tax regime.Overall, delegates and members of the panel discussion at the summit agreed PEPP was not set out to be a pension product – only a savings product at best.“Many provisions regarding the payout phase have not been fully thought through,” said Georg Thurnes, board member at RFM Retirement Aon Hewitt in Munich.Christian Böhm, managing director of Austrian pension fund APK and board member at PensionsEurope, added that PEPP might distract from true occupational pension solutions: “Employers might say they will only provide an absolute minimum pension plan relying on their employees to save for themselves via a PEPP.” The European Parliament’s Economic and Monetary Affairs committee is due to issue a preliminary decision on the PEPP on 4 June 2018. The pensions industry is growing concerned about the European regulator’s role in the creation of a new retirement savings product.The European Insurance and Occupational Pensions Authority (EIOPA) has been leading the development of a pan-European personal pension product (PEPP).However, attendees at the Institutional Retirement and Investor Summit, organised by Barbara Bertolini in Vienna last week, warned that EIOPA could be exceeding its authority. It would be the first time a supervisory authority in Europe has created a product for retirement saving.“The fact that EIOPA as the top supervisor is involved in designing a product is crossing a threshold that maybe should not be crossed,” said Hansjörg Müllerleile, director of corporate pensions and related benefits at the German Robert Bosch Group.last_img read more