The Norwegian Pension Fund Global’s (NPRG) Council of Ethics is seeking access to databases monitoring the environmental, social and governance (ESG) performance of companies worldwide, allowing it to screen investments held by the NOK4.4trn (€542bn) fund.The Council, which advises on firms that should be excluded from the fund’s investment universe, is tendering for access to a database that monitors company performance and criticism of individual firms.Additionally, service providers should be able to identify companies within the NPRG “where there may be an unacceptable risk the company contributes to or is itself responsible for certain conducts” listed in the fund’s exclusion guidelines.This would include the production of tobacco, or weapons that violate “fundamental humanitarian principles. The tender added: “Applicants are encouraged to apply for all three services collectively, although applications for screening services (exclusively) or database and identification (together) will also be accepted.“Applicants wishing to bid for the database and monitoring services or for the screening services exclusively should state this clearly in their submission.”It added that the database would be used to compile lists of companies the Council would monitor more in-depth, and that it should draw on sources in at least five languages – English, Spanish, French, Chinese and Russian.Additionally, the database should have a “substantial” overlap between the companies monitored and those in which the NPFG invests. The four-year contract will run until the end of 2017, valued at NOK1m per year, and requests to participate should be submitted by 13 November.Ola Mestad, chair of the Council, recently told the EIRIS 30th anniversary conference in London that its job had become easier over the last few years, as it was “easier now to get the facts”.Speaking of the Business & Human Rights Resource Centre, employed to monitor company behaviour in the past, he said: “That is really the place where you can get the allegations and a reply.”He also told the conference that ESG risked becoming superficial as a growing number of companies put in place guidelines “and very often I get the feeling they don’t really follow it”.
The €16bn pension fund of electronics giant Philips has decided to increase its investment risk in order to achieve its target of full indexation. Last year, it returned 0.9% and saw its funding ratio rise from 104% to 108% as a result, according to its 2013 annual report.The Philips scheme operates a liability-matching portfolio – meant to finance 64% of its liabilities, as well as 2% inflation – and a return portfolio for its remaining liabilities, longevity risk and additional inflation.Following the new investment policy, the board wanted to reduce the scheme’s holdings in euro-denominated government bonds within the matching portfolio to 62.5%, triple investments in global government bonds and introduce a similarly sized credit allocation. It also wanted to increase its direct investments in Dutch mortgages by 1% to 7.5%.Within its return portfolio, the scheme intended to decrease its equity and property exposure slightly in favour of commodities, high-yield bonds and emerging market government bonds.The board said it decided to shift emerging market equity and developed market government bonds to a passive style, while keeping credit and mortgages under active management.“The advantages of active management don’t outweigh the disadvantages,” it concluded following an internal survey.The pension fund incurred a 4.3% loss on its matching portfolio but noted that the result still meant a 1% outperformance, mainly thanks to government bonds from Italy, Finland and the Netherlands, in addition to its mortgage investments.It indicated that the result of its matching portfolio included a 0.7% loss on its interest and inflation hedge.The return portfolio generated a 14.3% return, with equity (18.1%) and property (16.4%) the best performing asset classes.High-yield credit delivered 4%.However, the Philips Pensioenfonds lost 13.6% on emerging market bonds.It attributed the outcome to the choice of countries in combination with local currency mandates.It also reported a 13.1% loss on commodities.According to the scheme, the 1.6% outperformance of its return portfolio was due largely to active management of emerging market equities, property and global tactical asset allocation (GTAA).It also made clear that it further reduced its direct property holdings – for example, by selling Symphony office tower in Amsterdam – while increasing its portfolio of indirect non-listed property to €248m, almost 50% of its target.The pension fund reported a 4.4% investment result over the first quarter of 2014, with its matching and return portfolios producing 5.8% and 1.2%, respectively.During this period, its coverage rose from 108% to 113%.However, 3 percentage points of this was due to a one-off contribution of €600m from the employer, following the scheme’s switch to collective defined contribution arrangements with an average-salary target.
Towers Watson is to launch an independently governed master trust as it looks to gain from the growing UK defined contribution (DC) market.Master trusts are multi-employer DC trust-based schemes run by third-party organisations.The consultancy said the offering was aimed at larger employers that prefer the independent governance of trust-based schemes but with a pricing structure similar to contract-based DC schemes offered by insurers.It will provide a fully outsourced solution to DC savings. Towers Watson said it expected DC assets to triple in the next decade.It appointed Fiona Matthews as managing director of the scheme, with the board chaired by independent trustee Donald Brydon.Paul Morris, head of EMEA at Towers Watson, said cost and governance were priorities but that the scheme design was focused on member experience and functionality.In other news, the deficit among defined benefit (DB) schemes within the FTSE 350 has increased by £27bn (€35bn) since the start of 2015 as falling corporate bond yields continue to push up liabilities.The research, conducted by UK consultancy Hymans Robertson, found liabilities had risen by £42bn between 1 January and 19 January, with deficit rises stemmed by a £15bn increase in assets.Real yields since the start of the year have dropped by 25 basis points, the consultancy said, with 15-year iBoxx corporate bonds hitting historical lows on 19 January.Jon Hatchett, head of corporate consulting at Hymans Robertson, said 10-year interest rates on corporate bonds were 3% at the start of last year, and have now almost halved.“Capital market volatility is an inescapable reality,” he added.“Market sentiment about economic conditions can change very quickly. What we see today is a dramatic turnaround from several months ago, when everyone thought interest rates would rise and the gradual unwinding of QE was on the horizon.“The picture at the end of 2014 was ugly, but it keeps getting worse. This will now be of greatest concern to the many companies whose year-end reporting falls on 31 March 2015.”
AXA Investment Managers – Ian Smith and Paul Birchenough have been appointed by AXA Investment Managers (AXA IM) as co-managers of the AXA Framlington Emerging Markets fund. They will work with Julian Thompson, head of the emerging markets team, as part of a core emerging markets portfolio management team. Thompson, previously manager of the AXA Framlington Emerging Markets Fund, will continue to manage the offshore equivalent of the fund and be responsible for segregated emerging market mandates. Alex Khosla is also joining the team as an emerging markets equities analyst, arriving from UBS Investment Bank. Association of the Luxembourg Fund Industry – Denise Voss has been appointed as chairman of the Association of the Luxembourg Fund Industry (ALFI) in a role that will initially run for two years. She is conducting officer of Franklin Templeton Investments and has worked in the financial industry in Luxembourg since 1990. She has worked at ALFI for many years, having been vice-chairman for international affairs at ALFI since 2011 and a member of association’s board of directors since 2007. Voss is also chairman of the European fund and asset management association’s (EFAMA) investor education working group. Mercer – Willi Thurnherr, head of retirement at Mercer in Switzerland, will be leaving the consultancy on 30 September, having been in the position since 2007. Mercer is looking within and outside the firm for a replacement, but in the meantime, Catherine Schoendorff, chief executive at Mercer Switzerland, will head the retirement business on an interim basis. Amundi – Vincent Mortier has been hired by French asset manager Amundi as deputy CIO. Mortimer has been a long-standing senior manager of Société Générale, having most recently been CFO of the global banking and investor solutions division at the bank. He will join Amundi’s executive committee. Macquarie Investment Management – Austin McBride is joining Macquarie Investment Management (MIM) as head of UK wholesale, based in London. He was most recently head of UK wholesale at Ignis Asset Management, and before that worked at Lazard Asset Management, Janus International and Henderson Global Investors. Muzinich & Co – Sander van de Giesen has been hired by corporate debt firm Muzinich & Co as sales and marketing director. It is the firm’s first Netherlands appointment. Van de Giesen was most recently director of business development at bfinance in Amsterdam. Mirae Asset Global Investments Group – Fredric Niamkey is joining Mirae Asset Global Investments Group as head of sales for French-speaking Europe. He comes to the firm from Aberdeen Asset Management, where he headed up the Aberdeen Geneva office, having been senior business development manager there since 2009. Before that, he worked at Credit Suisse Asset Management, UBS Wealth Management and OVB (Suisse). Insight Investment – Joshua Kendall has been appointed by Insight Investment to the newly created role of ESG analyst. He previously worked for MSCI in a similar role, having joined in 2012, and before that, was communications manager for the UNPRI. Kendall joined Insight in May this year, and reports to David Averre, head of credit analysis. Rory Sullivan is also to join Insight, as a strategic adviser on a consultancy basis, giving advice on the integration of ESG issues into Insight’s investment processes, across asset classes. Sullivan was head of responsible investment at Insight until 2009, when he became an independent consultant.Manulife Asset Management – Claude Chene has been appointed by Manulife Asset Management in the new role of global distribution head. He will be based in London and report to Kai Sotorp, president and chief executive of Manulife Asset Management and global head of wealth and asset management for Manulife. Chene will join the firm’s executive committee.KNEIP – Tony Buche has been appointed head of relationship management at KNEIP, based at the regulatory reporting and investor disclosure firm’s headquarters in Luxembourg. He will report to Renaud Oury, chief sales and marketing officer. Before taking on the new job, Buche worked at Société Générale Securities Services in Luxembourg for nearly a decade, heading the custodian services department, and as sales director. SPP, SSgA, Standard & Poor’s, GSAM, AXA Investment Managers, Association of the Luxembourg Fund Industry, Franklin Templeton Investments, Mercer, Macquarie Investment Management, Ignis Asset Management, Amundi, Société Générale, Muzinich & Co, bfinance, Mirae, Aberdeen Asset Management, Insight Investment, MSCI, Manulife Asset Management, KNEIPSPP – Sarah McPhee is to step down as chief executive after seven years at the Swedish pension insurer. McPhee, who joined in 2008 after four years as CIO at AMF Pension, is to be succeeded by the current chief executive of Storebrand Asset Management, Staffan Hansén, in July. Hansén was CIO at Storebrand Life for two years before assuming overall responsibility for its asset management division. Hansén’s promotion will not see McPhee depart SPP immediately. Instead, the American will stay on as a senior adviser before retiring in 2016.State Street Global Advisors – Elliot Hentov has been appointed by State Street Global Advisors (SSgA) as head of policy and research for its official institutions group (OIG). He will be based in London and report to Louis de Montpellier, global head of OIG, which has been in operation for more than 10 years. Hentov comes to SSGA from Standard & Poor’s, where he was a director in the sovereign ratings team. Before that, he worked at the United Nations as a specialist in political and economic issues for the Office of the Special Adviser to the Secretary-General. Goldman Sachs Asset Management – Goldman Sachs Asset Management (GSAM) has named Hugh Lawson as leader of its ESG efforts for its Investment Management Division (IMD) globally. He will collaborate with the company’s portfolio management and client-facing teams across IMD in the development of its ESG strategy, capabilities and product offerings. Lawson will continue to lead GSAM’s Institutional Client Strategy team. He joined Goldman Sachs in 1997 and was named managing director in 2003 and partner in 2012.
At the time, ABP and PFZW warned that they might be forced to implement discounts if their financial positions failed to improve, while PME and PME conceded that the prospects of discounts had increased.Last week, Mercer and Aon Hewitt estimated that Dutch pension funds had lost 3-4 percentage points of coverage on average over the first 10 days of February alone.The schemes attributed the funding drop primarily to falling interest rates, with PFZW and PMT reporting a decrease in coverage of 6% and 6.6%, respectively, last month.The civil service scheme ABP – in contrast to PFZW, PMT and PME, which reported a slight increase in assets – said it lost €2bn in January.“We need to explain the developments thoroughly to our participants,” an ABP spokeswoman said, stressing that the decisive factor in any possible cuts would be the situation at year-end.“Last year also had a bad start, but the coverage improved over the course of the year,” she added.At January-end, PFZW’s official ‘policy’ coverage ratio – the 12-month average of the topical funding, and the main criterion for rights cuts and indexation – stood at 97%.ABP, PME and PME reported policy funding of 98.2%, 98% and 97.2%, respectively.The new financial assessment framework (nFTK) allows pension funds to smooth out any cuts over a 10-year period if their policy funding falls short of the required minimum of 105%.However, schemes must start applying a discount immediately if their topical coverage drops below 90% at year-end, as, at this level, they would be unable to achieve funding of 125% within a 10-year period.Out of the five largest pension funds in the Netherlands, BpfBouw, the €48bn scheme for the building sector, is in the best financial shape.In January, it saw its topical coverage fall from 108.9% to 104.4%. Low interest rates and anaemic equity markets have pushed some of the largest Dutch pension funds to the brink of early rights cuts.As of the end of January, the ‘topical’ coverage ratios at the €355bn civil service scheme ABP, the €165bn healthcare pension fund PFZW and the metal schemes PMT (€61bn) and PME (€40bn) dropped to just over 90%.However, the fact rates fell further and markets continued to struggle over the first half of February has not yet been factored into funding figures.At the end of last month, ABP’s coverage ratio stood at 91.2%, PFZW’s 90%, PMT’s 92.2% and PME’s 91.4%.
The British Steel Pension Scheme (BSPS) must not be granted special treatment to ensure the stability of the scheme, as this could undermine the integrity of the UK’s regulatory system for pensions, the Pensions and Lifetime Savings Association (PLSA) has warned.Responding to a UK government consultation on ways to reduce the deficit of BSPS, the association warned against “bespoke” and “piecemeal” regulatory changes.The PLSA also questioned the impact on the Pension Protection Fund (PPF) were the number of schemes remaining outside the lifeboat fund, but without a sponsoring employer, to increase.Joanne Segars, the PLSA’s chief executive, said the government’s pushing ahead with changes for BSPS, “without also considering amendments for all schemes”, would be “inconceivable”. She added: “While securing the best outcome for members of the British Steel pension scheme is of paramount importance in this instance, it must be balanced against securing the best outcome for all defined benefit pension scheme members.”She warned that the legal changes could have unintended consequences for the integrity of the UK regulatory system.And while she acknowledged that the situation facing BSPS due to Tata Steel’s intention to sell or close its UK business, she argued that the ability to sever ties with a sponsor should not become the default approach.“We urge the government to commit to a long-term review of the current legislative system affecting defined benefit schemes to ensure their sustainability, and [we] call upon the government to work with our Defined Benefit Taskforce and the wider pensions industry to achieve this,” she said. The PLSA launched the taskforce, chaired by Ashok Gupta, in March. In early June the taskforce launched a consultation – a call for evidence – on challenges facing defined benefit (DB) pension provision in the UK. Gupta, a former non-executive director at the Pensions Regulator, is a principal at Towers Perrin and a member of the Financial Reporting Council’s codes and standards committee.Concerns have been raised across the industry over the proposal for BSPS to continue as a standalone entity without Tata Steel, or the entity potentially buying its UK business, as a sponsor.Clive Fortes, a partner at consultancy Hymans Robertson, was among those questioning the approach.“The effect of this proposal is that the BSPS members will continue to receive benefits in excess of those that would be payable under the PPF, with all other scheme sponsors underwriting the non-trivial risk that the BSPS will need to be rescued by the PPF at some stage in future,” he said. Fortes also noted that the scenario outlined would see the benefits of BSPS outperformance enjoyed only by its members, yet a failure of its investment strategy would directly impact all those paying the PPF levy.The PPF raised this concern as well, suggesting BSPS should be barred from entering the lifeboat fund if the link to its sponsor were broken.
We now live in a topsy-turvy world, where risk-free interest rates can be negative, and where Alice in Wonderland would have felt very much at home. It was not the White Rabbit who declared that “Gross National Happiness is more important than Gross National Product”, but Jigme Singye Wangchuck, the king of Bhutan, during the 1970s. US representative Hansen Clarke of Michigan commissioned a report a few years ago seeking to answer the overarching question: How should the US government institute supplemental national accounts that better reflect the welfare of the nation’s people? As the report points out, the US Department of Commerce has described GDP as “the crowning achievement” of 20th century US economic policy. In the eight decades since the introduction of US national income accounts, GDP has become the official barometer of business cycles, an indispensable measure of government performance and a leading benchmark of living standards. It has, in other words, become a de facto headline indicator of economic, political and social progress.Yet GDP was never intended for such a role. Economists dating back to Simon Kuznets, the father of US national accounting systems, have warned that GDP is a specialised tool for measuring market activity rather than national welfare. The by-products of unrestrained growth in the pollution of the air we breath and the food we eat, and the difficulties in finding clean water supplies, are a testament to that. The fastest-growing megacities in emerging markets such as Beijing and Delhi are also the most afflicted by smog. China’s astounding double-digit rates of GDP growth seen in the past are not only very difficult to sustain but also entail sacrifices in the quality of life that are increasingly seen as unacceptable.While GDP growth as currently measured may conceivably slow down in many countries to levels barely above zero, it does not mean human welfare – however it is measured – need do so. While there may be limits to GDP growth, that does not mean the welfare of any nation’s people cannot be continuously improved. Conversely, the era of zero and negative interest rates has led to owners of capital benefiting enormously at the expense of wage earners, whose incomes have not seen real increases despite GDP growth.But, if GDP alone is the measure by which governments define their objectives, it is unsurprising that the negative externalities of misplaced GDP growth in the form of pollution, increased social inequalities, the destruction of the natural environment and so on become issues governments cannot ignore. The challenge is to find an acceptable set of measures of human welfare that can provide guidelines for government policies, irrespective of economic growth. That is not just an issue for the UK but for the whole world.Joseph Mariathasan is a contributing editor at IPE Now is the time for governments to find an acceptable set of measures of human welfare, writes Joseph Mariathasan‘You can only manage what you measure’ is a self-evident axiom. But while gross domestic produce (GDP) may be easily measurable – and therefore held up as something to be managed – what the post-financial-crisis world has revealed is that, even when GDP growth has returned (albeit at low levels), it can hardly be argued that human welfare has increased.The popularity of US presidential candidate Donald Trump among working and middle-class Americans is testimony to their having seen no increase in their own circumstances despite GDP growth. In the UK, the Brexit vote was, again, a protest against the fact large sections of the population have seen no increase in perceived living standards, irrespective of GDP growth figures. For governments and political parties, focusing on GDP growth as a primary measure of success has proved to be misleading and a political failure.As the UK begins an existential debate over its long-term relationship with the European Union and its own future prospects in the wider world, it may be timely to widen the debate on the most appropriate set of metrics to measure society’s success. “GDP measures everything, in short, except that which makes life worthwhile” declared Robert F Kennedy in a famous speech given at the University of Kansas in 1968. “It can tell us everything about America except why we are proud we are Americans,” he added. “If this is true here at home, so it is true elsewhere in world.”
PensionDanmark CIO Claus Stampe told IPE: “With Claus Lyngdal’s decision to move on, we have decided to merge our two teams – private debt and alternative investments – into one. PensionDanmark’s headquarters in Copenhagen“By having one combined team focusing on the alternative space, we expect to harvest synergies in areas such as asset management and compliance.“On top of that it will enable us to have a more flexible approach to where we invest in the capital structure, when we enter into new projects.”In his new role as head of the merged departments, Nielsen will be managing a team of 16 employees, a spokeswoman for the pension fund said.The pension fund last month announced that it would put more money into infrastructure and real estate, with listed assets expected to produce more “moderate” returns in future.In its annual report for 2018, PensionDanmark reported a return of 12.5% from its infrastructure investments and 10.1% from real estate, helping it limit its overall loss to 1.6%.The pension fund has won the Credit & Alternatives award at IPE’s annual conference and awards for two years running. Danish pension fund PensionDanmark has merged its alternatives and private debt departments in a move aimed at bringing efficiency benefits as well as added flexibility in investments.Kim Nielsen has been appointed as the DKK235.9bn (€31.6bn) provider’s new head of alternatives, to lead the merged departments. He is currently the Copenhagen-based fund’s head of private debt, a role he has held since 2016.Nielsen replaces the previous head of alternatives, Claus Lyngdal, who is leaving the company for a similar position at Danske Bank Asset Management, according to the pension fund.The new alternatives department includes asset types such as infrastructure and direct lending.
Neptune’s founder and CEO Robin Geffen – who will focus on portfolio management following the acquisition – added: “It has been an easy decision to agree to sell Neptune to Liontrust. UK-listed investment house Liontrust Asset Management has agreed to buy boutique manager Neptune Investment Management for £40m (€43.7m).In a stock market announcement this morning, Liontrust said Neptune’s 19-strong fund range and team would transfer as part of the deal, growing Liontrust’s asset under management to £17bn.Liontrust chief executive John Ions said: “We have created an environment to give fund management talent with robust and repeatable investment processes the best possible opportunity to deliver good, long-term returns for our clients.“Robin and the rest of the team at Neptune will be able to focus on managing their funds and not be distracted by other day-to-day aspects of running a business.” John Ions, CEO, Liontrust“We have been hugely impressed by the excellent leadership and entrepreneurial attitude of the executive management team at Liontrust, the company’s brand profile and by its sales and marketing capability.“Neptune has great fund performance and an attractive investment proposition and will benefit hugely from the sales and marketing team at Liontrust.”Liontrust has grown substantially in recent years in terms of assets and product range, predominantly through acquiring existing investment teams.CQS teams up with Chinese and Hong Kong firmsLondon-based CQS has entered into an agreement with Chinese financial services company Zhongzhi Enterprise Group and Hong Kong-based DeepBlue Global Investment to develop asset management services in Asia.CQS founder and senior investment officer Sir Michael Hintze said increasing engagement with and knowledge of China and Asia were “critical” to performance, while “international investors want ways to participate in the growth of the Chinese and Asian economies”.CEO Xavier Rolet added: “Our clients are asking us how to best invest in the region. Our cooperation will combine CQS’ long-term track record of investment with the regional expertise of our partners DeepBlue and with the support of ZEG to develop asset management services in Asia.”Zhongzhi Enterprise Group was founded in 1995 and is headquartered in Beijing. It entered financial services in 2001 and now operates asset management, investment and merger and acquisition business arms.DeepBlue provides investment services to family offices and institutions, including managing investment funds and segregated accounts. CQS manages €15.4bn according to IPE’s latest Top 400 Asset Managers report.
It found that real estate allocations amounted to 20%, the highest level in more than 20 years – “concrete gold” continued to appeal, said Complementa.Pension funds’ domestic bias in this asset class remained high compared with their equity and fixed income investments, with 85% of property investments in Switzerland.Foreign currency exposure was at a historical low of 14.6%.As indicated by interim results from the consultancy’s study in May, Swiss pension funds had recovered from the effect of the equity downturn in the final quarter of 2018. Swiss pension funds’ allocation to alternative assets has reached double digits for the first time, according to a study by consultancy Complementa.Investments in insurance-linked securities, private debt and infrastructure were behind the growth in alternatives to 10%, the consultancy reported.Pension funds had turned to these asset classes as substitutes for bonds in response to the low interest rate environment, it said.The consultancy surveyed 437 pension providers with CHF649bn (€589bn) in assets under management in aggregate for what was its 25th annual “risk check-up” study. One in 10 Swiss pension funds are underfunded, according to ComplementaThe full results of Complementa’s study showed that the surveyed pension providers’ investments returned an average 7.9% over the first eight months of the year. Funding levels shot up by 6.4% to 109.1% at the end of August, compared with the beginning of 2019. The discount rate in 2018 was 2.1% as at the end of December.However, with the fall in rates over the past few months, Complementa forecast returns of only 2.1% for the full year of 2019 based on pension funds’ current asset mix, compared with a long-term return requirement of 2.4%.The scope for closing this gap with the help of changes to the asset mix was limited, however, according to the consultancy. It noted that the last quarter of 2018 had led to one in 10 pension funds being underfunded.“Even though many of these recovered in 2019, out of risk considerations they won’t be stepping up their equity allocation,” said Complementa in a statement.Benefit cuts on the agendaThe pension funds have been cutting benefits in response to the low interest rate environment, according to the consultancy.In 2018 the accrual rate applied to active members’ savings was 1.5%, a record low, it said. Although the pension funds might apply a higher rate this year, it would very likely fall below 1.5% in the coming years, Complementa predicted.In addition, the conversion rates applied upon a members’ retirement to determine their annual pension were also falling. This year the rate was 5.63%, 18 basis points lower than last year and 50 basis points lower than in 2015.In other words, a pension fund member retiring in 2019 would on average be receiving 8.2% less than if s/he had retired four years ago.According to the surveyed pension funds’ indications, the average conversion rate would fall to 5.3% by 2024, although the Complementa consultants said they expected a bigger reduction.The minimum legally prescribed conversion rate for savings accrued on the basis of mandatory contributions is 6.8%, but Swiss pension funds with contribution rates above the mandatory level can apply lower conversion rates to the totality of members’ accrued savings.The article was updated to clarify that the forecast 2.4% return requirement is a long-term requirement