Dyfed Pension Fund picks Threadneedle for global mandate [amended]

first_imgDyfed Pension Fund (DPF) has awarded a £150m (€179m) global equity mandate to Threadneedle Investments, following a public tender.The mandate represents just under 9% of DPF’s £1.6bn portfolio.DPF said the mandate reflects a move away from a regionally focused equity portfolio towards a more global approach.It will be funded by reallocating some of DPF’s existing investments in UK and European equities into Threadneedle’s Global Equity Income strategy, managed by Stephen Thornber. Anthony Parnell, treasury and pension investments manager at Carmarthenshire County Council, which administers DPF, said: “Our fund works with only a small number of investment mangers, and this mandate is part of our strategy to take a more global approach to equity investing to deliver the best returns for our members.”Parnell added: “We liked Threadneedle’s global equity income approach and its emphasis on quality companies, and the characteristic of protection in falling markets, which this strategy aims to provide.“We were also impressed by their commitment to a high-quality client service delivery.”The strategy seeks investments in “quality income” companies that deliver a high and sustainable dividend, but also generate growth.Thornber has run the Global Equity Income Strategy since its inception in 2007.DPF’s adviser is independent investment adviser Eric Lambert, with Allenbridge Epic assisting in the search.last_img read more

UK roundup: BT Pension Scheme, Charity Commission, Mercer, Thomas Cook, Barnett Waddingham

first_imgMeanwhile, the Charity Commission has sent a warning to the trustees of pension schemes within charities to ensure they explain how deficits within DB funds are being addressed.The public body recently conducted a review of accounts of charity organistions and found 740 current run deficits.After further investigation, it identified 31 that do not disclose any information of recovery plans.Sam Younger, chief executive at the Charity Commission, said: “Pension deficits can pose a potentially serious risk for charities.“Some charities do not adequately explain how they are dealing with their pension deficit, thereby missing out on an opportunity to demonstrate to their donors and beneficiaries that they are tackling the problem appropriately.”In other news, Mercer’s monthly update on UK FTSE 350 defind benefit (DB) funding showed levels deteriorated over the course of April, despite improvement in investment markets.The consultant’s Pensions Risk Survey showed the deficit in these UK schemes reached £111bn (€135bn), a £15bn increase over the course of 2014, and £9bn in April alone.Asset values increased by £4bn over the month. However, this was outdone by liabilities, which increased by £13bn.This left the total amount of pensions assets in FTSE 350 schemes at £575bn, compared with £686bn in liabilities.Ali Tayyebi, senior partner at Mercer, said: “The driving factor was a significant increase in liability values, which in turn resulted from a small reduction in long-dated corporate bond yields, combined with a small increase in the market’s expectations for long-term inflation.“This is a sobering thought for those inclined to assume financial conditions are bound to get better and might therefore be deferring risk management or deficit correction actions on that basis.”Finally, the Thomas Cook Pension Plan has appointed Barnett Waddingham to provide investment consultancy to its trustees.The £850mDB) scheme picked the consultant after running a competitive tender.Andy Cooper, who chairs the trustee board, said: “We were impressed by the personalised service Barnett Waddingham offered in their tender.“The attention to detail and real effort to truly understand our needs was particularly impressive.” The BT Pension Scheme has seeded a new ESG global equities fund being launched by wholly owned subsidiary Hermes.The fund only includes companies that outperform peers in an ESG rating.The rating, between 1 and 100, is creating by scoring companies on their environmental impact, social issues and governance – the latter using quantitative and qualitative data from Hermes EOS.The pension scheme has provided £40m to seed the fund.last_img read more

​Wednesday people roundup

first_imgPPF, Barclays, RPMI Railpen, Aviva Investors, Willis Towers Watson, BlackRock, Prudential, AustralianSuper, PASA, Pensions Dashboard, HQ Capital, Muzinich & Co, Baring Asset Management, Macquarie Investment Management, Columbia Threadneedle, Spence Johnson, Deloitte, PhaseCapital, AllianceBernstein, River and Mercantile Asset ManagementPension Protection Fund (PPF) – The UK lifeboat scheme has created a new role in connection with its move to increase internal investment management, appointing former Barclays banker Ian Scott as head of investment strategy. Scott has worked for more than 20 years on the sell side, most recently at Barclays, as head of the global equity strategy team. Before that, he was at Lehman Brothers and Nomura.RPMI Railpen – Anna Rule has been appointed to the new role of head of property as the scheme looks to increase its in-house investment capabilities. Rule, a senior director and fund manager at Aviva Investors, will take up the position in the new year. Railpen, which manages the £24bn (€27.9bn) Railways Pension Scheme in the UK, has been shifting towards more in-house investments.Willis Towers Watson – Ashwin Belur and Dhiran Dookhi have been appointed to the Insurance Investment Solutions Group. Belur joins from BlackRock and before then held a variety of senior investment and insurance-related positions at Goldman Sachs, ABN AMRO and Brit Insurance. Dookhi is a Fellow of the Institute and Faculty of Actuaries and joins from Prudential, where he was a risk actuary working on enterprise risk management. AustralianSuper – Australia’s largest super fund has formally established a presence in London, opening an office in King’s Cross. Trish Curry leads the team. AustralianSuper’s head of external relations, Stephen McMahon, told IPE Real Estate the fund was basing staff in London because of AustralianSuper’s increasing involvement in direct investments, “particularly global property and infrastructure deals”.Pensions Administration Standards Association (PASA) – The independent body dedicated to driving up standards in pensions administration has announced that its chairman, Margaret Snowdon OBE, has been appointed by HM Treasury to the senior level Steering Group for the Pensions Dashboard prototype project. Snowdon will be one of two independent members of the Steering Group, representing the pensions industry.HQ Capital – Georg Wunderlin has been appointed chief executive at the alternatives asset manager, while Ernest Boles has taken on the role of vice-chairman of executive management. Marcel Giacometti is to become a senior adviser. Wunderlin, who has been working at HQ Capital and its predecessor companies since 2012, succeeds Boles, who will continue to advise HQ Capital on its operations.Muzinich & Co – Tracy Zhao, who previously worked for Aozora Asia Pacific Finance, has joined as a credit analyst on Muzinich’s Asia investment team. She is based in London. Global high-yield specialist Kashif Riaz has joined from Baring Asset Management, where he covered a range of sectors. Prior to Barings, he was lead credit analyst for the European TMT and utilities sectors at BlackRock. He is also based in London.Macquarie Investment Management – Markus Rottler has been appointed as head of distribution for the German professional buyer market. Prior to joining Macquarie, Rottler spent five years at Columbia Threadneedle, focusing on the professional buyer and institutional client segments. Before then, he spent seven years at Pioneer Investments.Spence Johnson – The data analytics and market intelligence consultancy focused on institutional asset management has hired Thomas Marsh to help grow and serve its US business. He joins from Deloitte and has 23 years of experience in asset management, primarily as a director at Cerulli Associates.PhaseCapital – Michael DePalma has been appointed chief executive at the Boston-based asset manager, joining from AllianceBernstein, where he most recently served as senior vice-president and CIO of quantitative investment strategies and director of fixed income absolute return strategies.River and Mercantile Asset Management – Gary Dowsett has been appointed as a global analyst. He has previoujsly worked at Phillips & Drew (UBS Global Asset Management), Willis Towers Watson, Schroders and Taube Hodson Stonex Partners.last_img read more

IPE Conference: Quarter of all mandates are ‘in the danger zone’

first_imgCarsten Eckert, InsticubeFurther research from the platform revealed what were the most important asset manager selection criteria for the asset owners.“Performance of products” ranked as the most important factor, followed by “clarity and consistency of investment process”, then “understanding goals and needs of clients”.Eckert said the firm’s data from asset owners also showed the extent of the significant growth in passive management that had occurred over the last four years.In 2017, 36% of assets from the investor sample were managed passively, up from 18% in 2014.Eckert said the growth of passive investment reduced the market’s risk-bearing capacity and eroded revenue margins.“Given times of extraordinary volatility, with [active asset management] diminishing; the active risk-taking mandates diminishing in volume – do we have enough capacity in the industry to survive extra volatility, now that we allow the replication, and the passive, algorithm-driven market to grow so fast?” he asked the audience.Insticube gathers information on how assets owners see their asset managers and is jointly owned by IPE and Asset Metrix. European asset owners are dissatisfied with a quarter of all the asset management mandates that are currently being run on their behalf, according to data from pan-European research firm Insticube.Carsten Eckert, managing director of the Munich-based company, told delegates at the IPE Conference in Prague: “25% of the market is looking for – or is considering – proposals for better service.”He was presenting the results of data collected from asset owners across 19 European countries and covering 5,200 mandates.When recently asked whether they would be happy to recommend their asset managers to another colleague in the industry, they plumped for a rating of between one and six – on a scale of 10 – for a quarter of these mandates. Eckert said he considered that scores of between one and seven could be considered diplomatic ways of saying “no”, but in this case he had made the more conservative choice of only counting one to six as implicitly negative responses.“So that’s very interesting – there is another 25% of the market in motion,” he told the conference, describing these mandates as “in the danger zone”.last_img read more

Top five Dutch schemes ride equity rally to boost funding levels

first_imgThe latest figures became evident as industry schemes PFZW, ABP (civil service), PMT, PME (both metal) and BpfBouw (construction) published their annual and quarterly reports. Not only did the funds generally benefit from higher share prices, they also benefited from interest rates rising. Although the interest rate fell slightly in the last quarter of 2017, the discount rate for liabilities rose from 1.3% to 1.5%.Despite the boost to funding levels, only BpfBouw was able to increase its pensions for this year, as its funding level was above the required 110%. The scheme decided to index pensions by 0.59%. The other funds are damping expectations when it comes to indexing or averting cuts.“In all likelihood we will not be able to increase pensions much, if at all, in the coming five years,” ABP chair Corien Wortmann wrote in a press statement.“At the end of 2019 our scheme’s policy funding ratio has to reach at least 104.3%,” PME chairman Eric Uijen said. “We are not there yet. For this reason we cannot rule out pension reductions in 2020.”PFZW also warned of possible cuts if their policy funding ratio remained below 104.2% until the end of 2020.The differences in investment returns appeared to be large, with the lowest return almost half the amount of the reported highest return.With a 4.1% return PMT achieved the lowest result. ABP saw its assets grow by 7.6%. Interest rate and currency hedges have been included in these figures.ABPThe civil service scheme – the largest pension fund in Europe – showed the biggest increase in its policy funding ratio. It rose by almost 10 percentage points to 101.5%, mainly due to the returns on shares and real estate. Its total assets were worth €409bn at the end of 2017.PFZWThe healthcare workers fund booked a return of 5.1%. PFZW suffered losses on its insurance portfolio (-13.3%) due to the severe hurricanes hitting the US last year. The scheme also had to write off millions on structured loans, following an adjustment of the valuation model.BpfBouwBpfBouw’s assets increased by €3bn due to a return of 6.4%. Equities accounted for 10.9% and real estate for 9.9%. BpfBouw invests a relatively large portion of its capital (17%) in real estate. The scheme lost 1.2% on its interest rate hedge. The policy funding ratios of the Dutch pension schemes for metal workers PMT and PME have risen above 100% for the first time in years.Other large pension funds in the Netherlands also reported a boost to their policy funding ratios, mainly due to rising equity markets.The policy funding ratio is the 12-month average funding level upon which Dutch pension funds must base their policy decisions – in particular whether they can grant inflation-linked uplifts. Healthcare sector scheme PFZW was the only one of the Netherlands’ top five with a policy funding ratio below 100%, recording 98.6% at the end of December. Metal industry schemes PME and PMT hit 100% funding in 2017PMEPME recorded a return of 4.7%. The scheme achieved a 15.3% return on shares, and 7.3% on real state. The matching portfolio, which accounts for almost half PME’s assets, lost 2.8% of its value.PMTPMT showed an outcome comparable to that of PME, although this pension fund achieved somewhat lower returns on equity and real estate. On the other hand, the losses on its matching portfolio were as high as PME’s, resulting in a lower return overall (4.1%).last_img read more

European institutional investors expanding ETF usage

first_imgETFs were being introduced to “a long list of portfolio functions, both strategic and tactical,” according to the report. There had been strong take-up of fixed income ETFs, but ETF usage was also spreading into asset classes besides equities and fixed income.There was a pronounced increase in adoption of commodity ETFs, for example, with one-third of the institutions participating in the study using these last year, up from 20% in 2016.“After multiple years of regular use, European institutions have found ETFs to be simple, versatile and cost-effective tools, and they are ramping up their investments at a rapid clip,” said Andrew McCollum, managing director at Greenwich Associates.Since their emergence as a prototype in Canada in 1990, the worldwide market for ETFs, which track anything from global indices to a commodity index, has swelled to more than $5trn (€4.2trn).“While there might be some liquidity problems in the underlying market, the secondary market trades very well” [in times of market stress]Armit Bhambra, head of UK retirement, BlackRock iSharesInvestors – both retail and institutional – have been drawn by the relatively low total expense ratios available, which, according to ETFdb.com, can be as low as 3 basis points a year.“Many of the conversations we have [with our institutional clients] are around costs,” said Armit Bhambra, head of UK retirement, iShares, part of BlackRock, the world’s biggest asset manager.Of the institutional investors interviewed for the survey by Greenwich, BlackRock is employed as an ETF provider by nine out of 10 institutions. The report was written in collaboration with BlackRock iShares.“[Investors] want something that is niche and more granular,” added Bhambra. “ETFs tend to be more niche than indexed mutual funds.”According to Greenwich’s data, approximately 40% of institutions interviewed plans to increase allocation to ETFs over the next 12 months. Globally, annual inflows to ETFs could reach $300bn by 2020, the study found. Yet despite their growing popularity, questions remain over how ETFs would fare in a market downturn. Critics, including Paul Singer, founder of Elliott Management, the US hedge fund, have warned the vehicles remain untested in a more hostile economic environment. “What may have been a clever idea in its infancy has grown into a blob which is destructive to the growth-creating prospects of free-market capitalism,” Singer said last year.However, iShare’s Bhambra said that as the ETF market has become larger it has undergone moments of market stress, not least during the volatility of last year. At those points, “while there might be some liquidity problems in the underlying market, the secondary market trades very well”, he said. European institutional investors are increasingly turning to exchange traded funds (ETFs) as interest in smart beta strategies and multi-asset investment funds rises, a new study has found.Greenwich Associates, the consultancy and research firm, interviewed 125 institutional investors for the study. Corporate pension funds and asset management firms were the most widely represented, followed by insurance companies and public pension funds.The average ETF allocation among the institutions surveyed grew by 2.6 percentage points in 12 months to 10.3% of total assets in 2017.The share of institutions that invested in smart beta ETFs increased 10 percentage points to 31% in two years and the share of European asset managers buying ETFs for use in multi-asset funds increased to around 80% in 2017 from 63% the year before.last_img read more

PensionsEurope calls for further delay to data reporting requirements

first_imgEurope’s top pensions lobby group has called for a 12-month delay to the implementation of EU-wide reporting requirements for pension funds.PensionsEurope also warned that data reporting rules proposed by the European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) placed a “big financial burden” on some pension funds.Many of its members would not be ready to comply by December 2019 when the requirements are due to come into force, PensionsEurope said in response to a consultation on the proposals.“In many countries pension funds would need more time to adapt their reporting systems to the new requirements in order that their implementation costs will not become enormously high, and therefore we propose to postpone the first reporting at least by one year,” the group stated. A delay was particularly important given EIOPA’s decision to require reporting using the “extensible business reporting language” (XBRL) online framework. Although it is in use for Solvency II reporting for insurance companies, PensionsEurope said pension schemes would require “not only new software solutions, but a completely different know-how [for] employees”.“Reporting for EIOPA and ECB is an additional cost factor to the detriment of beneficiaries and sponsoring companies”The group acknowledged several concessions made by the central bank and EIOPA, including estimating quarterly liability calculations themselves and collecting information from national regulators. However, PensionsEurope also reiterated its primary concerns that the reporting requirements would place a major financial burden on pension funds, and urged the ECB and EIOPA to gather as much data as possible from national regulators instead of directly from schemes.It has repeatedly warned EIOPA and the ECB of the cost and administrative burdens data reporting could pose to pension schemes.Some pension funds do not have access to “granular” information on their investments from their asset managers, PensionsEurope added, and should not be forced to pay for “expensive licenses” to access such data.“We would like to stress that statistical reporting and collecting information always contain costs for pension funds, so it should be very carefully considered which information is relevant and needed, and how often they should be reported,” the lobby group stated.“Any extra costs will be [ultimately] paid by the sponsor and/or members and beneficiaries… Increasing regulation and other requirements make occupational pensions more expensive, making it less likely that pension schemes are being set up and contributions paid.”It added that the new requirements would be “additional reports without any chance of simplification or elimination for reporting requirements that already must be fulfilled nationally”.“The reporting for EIOPA and ECB is therefore an additional cost factor, in the low-interest [rate] environment, to the detriment of the beneficiaries and sponsoring companies,” PensionsEurope concluded.PensionsEurope’s full response can be found here.last_img read more

PGGM to start central clearing for repos [updated]

first_imgThe €215bn Dutch asset manager PGGM has confirmed that it will start carrying out part of its repurchase agreement (repos) transactions through central clearing.It said that it had picked Eurex Clearing as central counterparty for its derivatives, providing it with an additional channel for cash as collateral for interest rate swaps.Until now, PGGM – the asset manager and provider for the Dutch healthcare scheme PFZW – dealt directly with banks, but they have become increasingly reluctant regarding such deals due to financial buffers required by the European Markets Infrastructure Regulation (EMIR).PGGM said it was the first pension fund manager to centrally clear its repos transactions. EMIR rules mean pension funds must use central clearing for interest rate swaps, used for hedging interest risks on liabilities. Although pension funds have been temporarily exempted from the obligation, several schemes, including PFZW, have started experimenting with central clearing.However, pension funds must hold much more cash as collateral – known as the variation margin – in case the value of the interest rate swap becomes negative.In order to prevent a fire sale of investments to obtain collateral following a market shock, pension funds prefer to obtain cash through the repo market. The pension fund could, for example, sell government bonds to a counterparty for cash, while agreeing to repurchase the government paper as soon as possible.PGGM said that the deal with Eurex, with its 140 affiliated counterparties, provided it with an alternative way of accessing liquidity. It added that the variation margin obligations for repos would be “many times lower” than for long-duration interest derivatives.The asset manager also pointed out that, because of the short duration of the repos, fluctuations in market values would be limited.Eurex’s partners not only comprise commercial banks, but also the European Central Bank (ECB), government-related credit banks and supranational organisations, including the European Investment Bank.According to Max Verheijen, director of financial markets at risk manager Cardano, central clearing was particularly beneficial to providers who carry out multiple large transactions.“Usually, central clearing is more expensive than a bilateral transaction with a bank,” he said. “In case of a low volume of repo trade, costs don’t outweigh the advantage of better access to cash.”Societe Generale Prime Services is to act as a clearing agent for PGGM.Eurex Clearing serves about 200 clients in 20 countries. It manages a collateral pool of €46bn, clearing monthly trades valued at €23trn.Note: This article was updated on 28 January 2019 to amend references to Eurex’s partners.last_img read more

Irish government approves key auto-enrolment provisions

first_imgThe Irish government has decided on and published key elements of the design of its new auto-enrolment defined contribution (DC) pension savings system scheduled to come onstream by 2022.Most of the elements are based on the proposals that were set out in the government’s “strawman” document published last year.This was followed by a wide-ranging public consultation process that included contributions from experts internationally, as well as economic analysis by Ireland’s Economic and Social Research Institute.  Regina Doherty, minister for employment affairs and social protection, said the decisions that had been taken by the government were underpinned by the principle that the system “first and foremost operates in the best interests of savers”.  She highlighted the ‘pot-follows-member’ design as a key feature of the auto-enrolment system.“This means that an employee’s pension contributions will be collected in the same pension ‘pot’ even when an employee changes employer, or if the employee has multiple employers,” she said. “This is one of the critical lessons that we learned from examining similar systems internationally.”Key provisions include:* Automatic enrolment to apply to all those in employment between 23 and 60 and earning at least €20,000 per annum and not in an equivalent employer’s scheme;* Opt-in for employees under 23 or over 60, or earning under €20,000 p.a.;* Contributions are compulsory for the first six months of membership, followed by a two-month opt-out period and some limited savings suspension periods;* Employers have to make a matching (but tax-deductible) contribution at a specified rate, with a qualifying earnings ceiling of €75,000;* Minimum contributions start at 1.5% of salary, increasing by 1.5 percentage points every three years to a maximum of 6% at the start of Year 10;* The state will set up a Central Processing Authority (CPA) to approve providers and collect and distribute contributions;* Employees to choose their provider (if not, the CPA will do so), achieving a “pot follows member” approach;* Providers must offer a limited number of standard investment choices, including a default;* Providers’ charges for administration and investment capped at 0.5%.The government is sticking to 2022 as the start date for auto-enrolment, in spite of failing to meet most of its interim deadlines by the start of 2019.Timeline questionedJerry Moriarty, chief executive, Irish Association of Pension Funds (IAPF), said: “Experience elsewhere shows auto-enrolment is effective in increasing coverage. The targeted contribution rates go some way towards achieving a reasonable level of adequacy.”However, he added: “It is good that it is moving on, but 2022 still seems ambitious, particularly with some key decisions to be made.”He said one of these decisions is the nature of the state contribution: “Strawman suggested a direct contribution, but it might be done by tax relief.”Another of his reservations was that the operation of the CPA is still “somewhat unclear”.Moriarty said: “Putting the CPA in place is the first key step as they will be approving providers, setting the criteria for providers and will also need the infrastructure to collect contributions. That will be challenging in order to have the first employees enrolled in 2022.”Meanwhile, the exemption from providing auto-enrolment for members of an existing scheme which meets prescribed minimum standards and contribution levels will be key for pension schemes, he warned.Moriarty said: “The issue for existing schemes will be what those prescribed minimum standards will be, and many schemes may need to increase their contribution levels.”Furthermore, he observed: “There is still detail required on who is covered, such as when and how often that is determined. It has the potential to be reasonably complex, particularly with issues like suspensions.”last_img read more

IPE Conference and Awards 2019: Event Buzz

first_img Lars Rohde speaking at the IPE Conference and Awards 2019“Pension consultants think QE is a Faustian bargain, a bargain made with the devil you can never get out of. And that’s because QE has become deeply ingrained in the psyche of investors.”– Amin Rajan, CEO of CREATE-Research. ATP was named European Pension Fund of the Year. The top prize was one of six awards scooped by Denmark’s biggest pension fund.Conference buzz“There is now a lot of activity focused on reducing risks. But the biggest risk is that you will not achieve any returns in the coming decades.”– Jaap van Dam, director of investment strategy at €238bn Dutch asset manager PGGM and chair of the European chapter of the 300 Club.  “It is you [as an asset owner] who has to decide with your advisers what is a Paris-aligned world, because you can only decide Paris-alignment based on a full self-sufficient economy. No individual company or sector can claim Paris-alignment because there are way too many assumptions about the other sectors.”– Andreas Hoepner, professor at University College Dublin and an independent member of the technical expert group advising the European Commission on sustainable finance. “There’s a squeeze between longevity issues – people are not dying according to plan any longer and it’s also a global phenomenon – and on the other hand very low expected returns in the future, so something has to give.”“To put it bluntly, if my pension is invested in long-term illiquid assets, I would prefer my pension company to be run by a younger CEO.”– Lars Rohde, governor of the central bank Danmarks Nationalbank The annual IPE Conference and Awards 2019 took place in Copenhagen, during 3 and 4 December.The conference highlighted and explored the most essential topics and challenges facing Europe’s highly diverse pensions industry, including sustainable finance, risk, reward and liquidity, and other political and economic challenges that the 2020s will bring.Leading industry players discussed solutions in open debates, keynote presentations and specially designed panels during a thought-provoking comprehensive two-day event, which also featured dedicated sponsor-led investor workshops.The evening awards ceremony celebrated various categories, including gold awards (best European pension fund, outstanding contribution, pension fund achievement of the year, and long-term investment strategy), silver, bronze, country/regional, and themed awards.  Jaap van Dam at PGGM“Never in my career at any time has it ever seemed like it wasn’t a particularly difficult and uncertain period”– Chris Brightman, CIO of Research Affiliates “Today’s externalities are predictors of tomorrow’s risk, which is why investors need to know them.”– Pavan Sukhdev, founder and CEO of GIST Advisory; president of WWF international; former special adviser and head of UNEP’s green economy initiative.last_img read more