​Finland’s Fennia welcomes ‘exceptional’ real estate returns

first_imgEeva Grannenfelt, CIO at Fennia, said: “The grim outlook in the equities market at the start of the summer was followed by an especially good third quarter. The markets further picked up with the US Federal Reserve’s announcement concerning the continuation of its expansive bond-buying programme.”Fennia noted that the best investment returns came from its directly held real estate portfolio, re-valued ahead of the merger.As a result of the valuation, Fennia said its 13.4% overall return was boosted by 0.5 percentage points.However, its €1.1bn in direct property holdings significantly outperformed its property funds, returning 15% compared with 6.5%.Tapiola also saw its direct property outperform fund holdings, although real estate returned only 2.3% in the nine months to September.Despite a worse performance compared with Fennia, Tapiola nonetheless outperformed over the longer term, seeing 6% growth per annum over the last five years compared with 5.9% from Fennia.Over the past decade, Fennia marginally outperformed Tapiola, ahead 0.2 percentage points at 5.4%.The providers are set to merge and be renamed Elo Mutual Pension Insurance at the beginning of the year. Direct real estate returned 15% for Pension Fennia in the nine months to September, outperforming the remainder of the pension insurer’s portfolio, including equities.The strong performance came as LocalTapiola, the €10.3bn rival set to merge with Fennia’s €8bn pension division at the beginning of 2014, only achieved a year-to-date return of 3.5%, significantly behind the 6.3% posted by Fennia.Fennia outperformed Tapiola across all main asset classes, achieving 0.6% growth from fixed income compared with the slight loss of 0.1% seen by Tapiola’s portfolio, accounting for nearly 45% of assets.Despite returns in excess of 21% from its Finnish equity portfolio, Tapiola’s overall equity return came in at 9.17%, behind the 13.3% from Fennia’s stocks and, at 14.7% for its listed equity, nearly 5 percentage points ahead of Tapiola’s equivalent holdings.last_img read more

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Danish roundup: Lønmodtagernes Dyrtidsfond, Danica Pension

first_img“This means that some have kept away because we have high minimum demands, and we have refined the metrics we will use in the rest of the process,” he said.Out of the 150 managers registering their interest, nearly 50 firms asked to be considered for pre-qualification for the global equities and emerging market equities mandates, LD said.A further 20-30 firms are expected to bid for the other two mandates, it said.Given the high level of interest, Wallberg said he expected LD to end up with 15 firms pre-qualified for each of the four mandates, which would then be asked to submit formal bids.“Our plan was to get it settled before the summer, and that still stands,” he said.LD manages cost-of-living allowances granted to public sector employees in the past and receives no current contributions.Meanwhile, Danica Pension reported 2013 returns of between 5.9% and 14.3% for its customers, and said the lower-risk equities strategy it was pursuing left its returns at the lower end of comparison tables.Pension customers with 15 years before retirement received a 7.7% return in 2013, while those with 30 years to retirement got 14.3%, the Danske Bank subsidiary said.The return for customers with five years to go was 5.9%.Peter Lindegaard, investment direct at Danica Pension, said: “The return for 2013 is high in absolute terms, but at the low end in relation to competitors.”When investing on customers’ behalf, Danica chose solid companies with high profits, low levels of debt and solid earnings year after year, he said.“We could well have got a higher return by investing in riskier shares in a year when equity markets have galloped ahead, but that is not part of our long-term strategy,” he said.Lindegaard forecast a more muted development on stock markets in 2014, with bond yields rising as the global economy recovers.“We see a good chance our strategy and our investments will do well, compared with others,” he said.This was because the pension investments were broadly diversified and contained an increasing proportion of alternative investments, which could be expected to do well when the Western economies recovered, he said.“We will invest more in small and medium-sized companies, infrastructure, forestry and agriculture,” Lindegaard said. Denmark’s DKK50bn (€6.7bn) pension fund Lønmodtagernes Dyrtidsfond (LD) said there was strong interest in the four equities mandates it has put out for tender, with 150 different asset managers putting themselves forward.LD’s director of finance Lars Wallberg told news site Finanswatch: “We are very pleased that there is the competition that our members deserve.”The four equities mandates LD put out in November were global equities, emerging markets equities, Danish equities and climate equities.Compared with the last time the pension fund had searched for managers, Wallberg said LD had included more precise requirements for managers in this tender because of the experience it had gained and the nature of the fund’s equity strategy.last_img read more

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La Française, Forum snap up Cushman & Wakefield Investors

first_imgThe new combined platform, taking into account all of the real estate operations of La Française and Forum Partners, will have close to $20bn in assets under management.The team at Cushman & Wakefield Investors, led by chief executive David Rendall and managing director Jens Göttler, will remain in place.It will also continue to manage PURetail, a real estate fund formed in 2009 through a joint venture with Scottish Widows Investment Partnership (SWIP), itself the subject of a recent takeover by Aberdeen Asset Management.The fund, which focuses on urban retail assets in France, Germany and Sweden, will continue as normal and could be marketed to La Française’s investor base, according to managing director Patrick Rivière.Russell Platt, chief executive at Forum Partners, also said there might be opportunities for the new platform to invest in Southern European markets.The decision by Cushman & Wakefield to sell its fund management arm suggests it intends to focus on its core property services business.In a statement, Carlo Sant’Albano, chief executive at Cushman & Wakefield, said: “With a number of high-priority, strategic growth initiatives underway at present, it is not the right time to invest substantially in building out the WCI platform.” La Française and Forum Partners have acquired Cushman & Wakefield Investors, several months after announcing a strategic partnership to develop a direct real estate business in Europe.Cushman & Wakefield Investors, a pan-European fund manager with $1.2bn (€888m) in assets under management, will be renamed La Française Forum Real Estate Partners (LFF Real Estate Partners).The move provides a foothold in core European real estate for La Française, which already manages $9bn in French property, and Forum Partners, which has been managing global opportunistic strategies since 2002 and listed property investments since 2009.La Française, which acquired a €600m stake in Forum Partners last year, will own two-thirds of the new venture, and Forum Partners will own one-third.last_img read more

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Dutch regulator growing too powerful, Pensions Federation warns

first_imgHe said he was particularly worried that, in practice, pension scheme boards would no longer determine such things as the timing of the spreading of financial shocks – and that the DNB would make those decisions instead.Riemen argued that pension schemes could be subject a strict “scaled” planning that would severely curb policymaking freedom.In that event, the industry’s fears would be realised, “as pension fund trustee boards would no longer be allowed to take responsibility”.He added: “The DNB can force pension funds to change their investment strategy. It doesn’t literally say so in the Memorandum of Explanation, but there is a real risk this may happen.” Draft legislation for a new financial assessment framework (nFTK) in the Netherlands has “some positive elements”, but there is a real danger the pensions regulator (DNB) will be given too much power to decide schemes’ investment strategies, the Pensions Federation has warned.Gerard Riemen, director at the Pensions Federation, said he was pleased the draft legislation included such elements as the spreading of financial shocks over time, a 12-month average funding rate and complete pension contracts, in addition to measures to promote contribution-level stability.He said the draft law also showed that Jetta Klijnsma, state secretary of Social Affairs and Labour, had “listened to the industry”, as the proposals included the smoothing of contribution levels by applying expected returns, and allowed schemes to make up indexation shortfalls without submitting to the new rules that will apply to indexation going forward.However, Riemen said he was concerned pension fund trustee boards would have little room to set policy if pension contracts set every detail in stone.last_img read more

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Swiss National Bank acted responsibly on currency peg, Publica says

first_imgThe Swiss National Bank’s (SNB) recent and controversial decision to stop pegging the Swiss Franc to the euro was, overall, “a responsible one”, according to Dieter Stohler, director at Publica, the country’s largest public pension fund.Stohler told IPE that, with the decision – which shocked many in the industry – the SNB had “further strengthened its credibility and independence”.However, he conceded that the timing of the bank’s decision took him by surprise.He said the SNB’s decision would not affect Publica’s CHF38bn (€31bn) in assets directly, as the pension fund has hedged all developed-nation currencies in its portfolio. He said the only impact on the scheme would be indirect, via investments in domestic equities – where, for many, the SNB’s policy will necessitate “painful adjustments over the short and medium term” – but he declined to provide further details.Meanwhile, Christoph Gort, a partner at Swiss asset manager Siglo, has warned of wider repercussions for Pensionskassen and their bond portfolios.He said Swiss government bonds were now “unattractive, overvalued and unsuitable in an ALM context if their yields remain negative”.Over the medium to long term, Siglo said it expected investors to offload Swiss bonds, as the current situation was “neither balanced nor stable”.Separately, at Baring Asset Management, Robert Smith, investment manager of Barings’ German Growth Trust, saw a potential positive in the SNB’s decision for neighbouring countries, pointing out that investing in markets such as Germany and elsewhere had “become a lot cheaper” for Swiss investors.“We may start to see increased capital flows as a result,” he said.Invesco’s chief economist John Greenwood backed Stohler’s views and said, after six months of euro depreciation, the SNB’s policy was a sensible one.“This is not the sort of policy move that can be telegraphed in advance,” he said.“It is not a big change for the world, nor a big event for the euro-zone. The ECB will go ahead with its plans [to announce the purchase of sovereign bonds] irrespective of Swiss action.”However, senior investment consultant at Mercer Switzerland, Dominique Grandchamp, was much less optimistic.He said the perception of the Swiss franc as a “safe-haven” currency would mean volatility would continue.Grandchamp disagreed with Stohler and said the move by the SNB damaged its credibility and thus its ability to intervene.“Unless the exchange rate moves back to the abandoned floor level, the impact could be significant,” he said. “In this scenario, we expect the export-reliant Swiss economy could decelerate and move towards a deflationary, recessionary environment with higher unemployment rates.“The impact on [Swiss pension fund portfolios] is very much determined by the strategic allocation to Swiss and global (unhedged) equities.”last_img read more

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Dutch Pensions Federation calls for preservation of classic DB, DC

first_imgIn its comments, the Pensions Federation also warned of potential “transitional” problems that might be caused by the replacement of the current average-contribution set-up with a method considered fairer for all generations.The Dutch Bureau for Economic Policy Analysis (CPB) recently put the cost of such a transition at approximately €100bn.Meanwhile, the Dutch Pensions Federation called on the government and regulator De Nederlandsche Bank (DNB) to hold talks with the pensions sector to discuss how best to deal with low interest rates.The industry group echoed concerns expressed recently by Marcel Andringa, CIO at the €40bn metal scheme PME.“The low interest rates are a big problem,” the financial daily Het Financieele Dagblad quoted a Federation’s spokesman as saying.The spokesman added that, as a result of the current environment, pension funds’ participants would miss out on indexation, and that new rights cuts could not be ruled out over the long term. The Dutch Pensions Federation has said it is unconvinced that the proposal for defined contribution (DC) pension schemes with personal accounts should replace existing defined benefit (DB) or DC arrangements in the Netherlands. In its contribution to the nationwide debate on the future of the Dutch system, the industry group said it expected the new plan to be incorporated into the Pensions Act, alongside classic DB and DC schemes.The so-called ‘third option’, which has gained momentum of late, is meant to offer companies and industries more leeway in accommodating pension schemes.The Dutch Social and Economic Council (SER), in its submission, sang the benefits of DC arrangements with individual accounts, but with collective risk-sharing, and concluded the option warranted “further investigation”, while Netspar, the influential network for pension researchers and professionals, recently came to a similar conclusion.last_img read more

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IPE Scholarship Fund awards grant to PAYG research

first_imgThe IPE Pensions Scholarship Fund has made a full grant of €5,000 to Humberto Godínez-Olivares, a PhD candidate at The University of Liverpool undertaking research into pay-as-you-go (PAYG) pension systems, with special attention into automatic balancing mechanisms (ABMs) within public pension provision.“An aim of the project is to design an ABM to restore the sustainability of PAYG pension systems based on minimising changes in the main variables, such as the contribution rate, normal retirement age and indexation of pensions,” Godínez-Olivares said. He said the main purpose of the ABMs was to re-establish the financial equilibrium of PAYG pensions by adapting the system to changes in socio-economic and demographic conditions.“The overall objectives,” he added, “are to create a credible institutional framework to increase the likelihood that promises of pension payments will be respected and to minimise the use of the pension system as an electoral tool.” Godínez-Olivares is undertaking the research at the Institute for Financial and Actuarial Mathematics, at The University of Liverpool’s Department of Mathematical Sciences, under the supervision of Carmen Boado-Penas, director of the Actuarial Mathematics Programme at the department.He expects to complete his PhD in 2016.Supporting Godínez-Olivares’ application, Boado-Penas said PAYG pension systems were a topic of debate in most economies, mainly due to population ageing, yet “there are few economists and actuaries with expertise in this area”.She added: “I certainly consider this an excellent subject area in which to carry out research.”       Fennell Betson, founding editor of IPE and chair of the IPE Pensions Scholarship Fund board, said: “The IPE Scholarship Fund is delighted to provide this funding to Humberto. This is the first time we have made an award for research into public pensions.”The fund’s awards are made by a board comprising Chris Verhaegen, member of the Occupational Pensions Stakeholder Group at EIOPA; Peter Melchior, executive director at PKA Pension Fund in Denmark; and Peter Borgdorff, executive director at PFZW in the Netherlands.The fund’s academic adviser is Debbie Harrison, visiting professor at the Pensions Institute, Cass Business School, in London.This is the fourth award made by the fund to a student undertaking pensions research at a European university.Further details are available from Fennell Betson ([email protected]) or at IPE’s Scholarship website.last_img read more

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MEPs water down binding vote on pay in Shareholder Rights Directive

first_imgIn a statement, the European Parliament said MEPs had instead agreed that individual countries would be allowed to decide whether votes should be binding or not, likely to be agreed when the directive is transposed into national law.Other changes proposed by MEPs will see listed companies obliged to publish a breakdown of taxes paid in each country they operate, as well as any public subsidies received.Sergio Cofferati, the Italian MEP who has acted as rapporteur for the Shareholder Rights Directive, praised the overwhelming vote in favour of the law – approved by 556 parliamentarians, with 67 opposed and 80 abstentions.“The approved text contains important instruments to fight tax evasion and tax avoidance, in particular a country-by-country reporting obligation that would ensure multinationals openly declare the taxes they pay in each country they operate in,” he said.Referencing recent disclosures on the tax arrangements of multinationals based in Luxembourg, he added: “We cannot miss this opportunity, in particular after Luxleaks and other scandals.”In a joint statement earlier this week, UK NGO ShareAction and Global Witness expressed disappointment about the shift away from a binding vote on pay.The NGOs also noted the shift away from mandatory disclosure of investor engagement policies with companies, moving to a ‘comply-or-explain’ approach.Cofferati was nevertheless positive about the legislation.“The vote is an important step forward to steer companies and investors towards long-term-oriented decision making and to ensure more transparency in the governance of European companies and engagement of institutional investors and asset managers,” he said. European parliamentarians have watered down proposals for a binding vote on executive pay, ahead of negotiations with EU member states over the Shareholder Rights Directive.In an amendment agreed by the European Parliament on Wednesday, member states will be allowed to decide if shareholder votes on pay should be binding or advisory – going against the grain of the European Commission’s initial proposal endorsed by the Council of the EU in early March.The compromise draft of the directive agreed by member states in March said countries should ensure a vote on pay was binding.The draft added: “A remuneration policy shall continue to apply until a new one is approved by the general meeting.”last_img read more

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Coverage ratios at Dutch pension funds continue to plummet

first_imgEven at the end of January, the €356bn civil service scheme ABP and the €161bn healthcare pension fund PFZW were warning that they might be forced to implement discounts if their financial positions failed to improve.The two large metal schemes PMT and PME issued similar warnings at the time.Under the new financial assessment framework (nFTK), Dutch schemes are allowed to defer rights cuts if funding falls short of the required minimum of 105%.If ‘topical funding’, however, falls to 90% at year-end, they must implement discounts, as they cannot recover to the prescribed funding of 125% within 10 years.Mercer and Aon Hewitt estimated that Dutch schemes’ official ‘policy funding’ – the average of the topical funding over the 12 months previous, and the general criterion for indexation and rights cuts – will have dropped from 104% to 103% since January-end.The drop in funding has been caused by a combination of falling interest rates and falling equity markets.Mercer noted that the 30-year swap rate – the main measure for discounting liabilities – had dropped by 20 basis points to 1.06% in February.“This means,” said Krijgsman, “a 4% increase of liabilities for the average pension fund.”Referring to recent developments in Japan – where the central bank has introduced a negative rate for deposits, triggering a sharp drop in interest rates – Krijgsman suggested a similar situation was possible in the euro-zone.“The interest paid on 10-year government bonds is quickly heading towards 0%,” he said, adding that the interest on German government paper with a remaining duration of 10 years is “merely 0.25%”.He also noted that the MSCI World index had fallen by 8% in February, taking the overall decline to 13% since the start of this year.He warned that pension funds with a relatively low interest hedge, as well as those with a relatively large number of younger participants, were particularly vulnerable to falling rates.Mercer said it had noticed that several pension funds with an interest hedge of more than 50% were already anticipating a rate increase by “cautiously reducing the cover in small steps”. Dutch pension funds’ coverage ratios plummeted by more than 3 percentage points on average over the first 10 days of February alone, according to consultancy estimates. Edward Krijgsman, an investment consultant at Mercer, placed the decline at approximately 3 percentage points, resulting in a funding of 95% on average.Aon Hewitt, using slightly different figures, estimated that ratios had dropped from 97% to 93% since the end of January.Due to falling coverage ratios, Dutch pension funds increasingly face the prospect of early rights cuts.last_img read more

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Pension reserve fund for Luxembourg returns nearly 4%

first_imgIn 2015, the FDC’s investment vehicle realised a return of 3.8%, according to its annual report.This is an outperformance of 0.32% of its benchmark index, an outcome it attributed to tactical allocation, in particular being overweight global equities.It said performance for 2015 started as a continuation of that of 2014, during which the SICAV had its best results since inception.Equities in particular “literally took off” to allow the SICAV, an open-ended collective investment scheme, to post returns far in excess of the 14% generated from its investments in the asset class at the end of the first quarter.This meant the fund surpassed FDC’s strategic equity allocation of 32.5%, necessitating a rebalancing by divesting within its indexed global equities mandate in favour of three global bond sub-funds.For its money market sub-funds, 2015 was “lifeless”, according to the SICAV’s annual report, generating returns of 8 basis points for an outperformance of its benchmark by 16bps.The vehicle’s euro-denominated bond investments returned nearly 1%, and global bonds 1.02%.Its emerging market bond and equity investments finished the year with negative returns of -5.50%, which it placed in the context of the fall in the oil price and other raw materials and slowing economic growth in China.The FDC SICAV had 21 sub-funds as at the end of 2015 – nine equity funds, 10 bond funds and two money market funds.Two new €250m sub-funds were launched this year for unlisted global real estate investments as the pension reserve fund seeks to meet a 3.5% asset allocation target for property outside Luxembourg.As previously reported, Aviva Investors and CBRE Global Investment Partners were chosen as the managers of these mandates. * Société d’Investissement à Capital Variable, a type of alternative investment fund introduced under Luxembourg’s transposition of the Alternative Investment Fund Managers Directive (AIFMD). FIS is the acronym for the French term for specialised investment funds. The investment company running the majority of assets managed by the €15bn Luxembourg pension reserve fund obtained a return of 3.8% last year, according to the vehicle’s 2015 annual report.Created in 2007, the Fonds de Compensation de la Securité Sociale SICAV-FIS* is the investment vehicle for the state pension reserve fund Fonds de compensation (FDC), in turn established in 2004.As at the end of 2015, the investment company had €14.4bn of assets under management (AUM), up from €13.48bn the previous year when this represented some 90% of the pension reserve fund’s AUM.The remainder is managed in-house by FDC.last_img read more

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