Fund managers expect anaemic euro-zone growth until 2019 – Towers Watson

first_imgInvestment managers have taken a dim view of the prospects for a euro-zone recovery by the end of the decade, research from consultancy Towers Watson shows.Nearly 60% of respondents to its survey of 128 global managers expect anaemic and volatile growth from the currency bloc over the next five years.This contrasts to the 74% that expected mild growth in the US, and 61% who expected the same in the UK.One-fifth said they anticipated a “boom” in China. The bleak outlook for euro-zone growth combined with further statements from managers that showed 44% still thought recovery from the systemic crises seen in the union suffered from varying degrees of fragility.However, 41% disagreed and said the situation was improving.Managers also shared their top concerns with regard to investment and risk analysis, with a growing majority citing government intervention in financial markets.Some 68% stated this, a growing figure from the 48% who responded similarly to the consultancy’s survey two years ago.Robert Brown, who chairs Towers Watson’s investment committee, said this was no surprise.“The knock-on effects from QE tapering, fiscal spending going into sequestration and the Volker Rule, on emerging markets, and OTC markets, have been significant,” he said.However, similar concerns over global economic imbalances affecting investment strategies are beginning to diminish.Only 34% citied this in 2014’s survey compared with 44% last year.With regard to institutional investment strategies, 43% expected pension funds to become moderately more aggressive.This is a change from previous surveys, where the plurality expected either no change, in 2013, or for schemes to become more conservative, in 2012.Brown said this response from managers, given Towers Watson’s view on markets this year, was surprising.“We rate equities ‘neutral’ as of January 2014, so the ‘buy’ side of this ‘risk-on’ posture that some expect calls for high selectivity, in our view,” he said.Looking at specific investments, the US dominates positive sentiment from investment managers, as one-third suggested the equity markets across the Atlantic offered the most rewarding opportunities.This compares with only 12% for the euro-zone, and a minute 4% for the UK market.However, despite volatility in 2013, 17% are looking to frontier markets.Within real estate, the US once again dominates sentiment, with 43% of managers looking to the country.Some 18% suggest the euro-zone for top returns and 13% for the UK.However, while sentiment for US real estate remained high, managers only expected a modest shift in allocations to alternatives.Almost 60% of those surveyed said they expected an increase of 5-10% in the coming year, while one-fifth expected no change.Overall, the investment managers provided strong views on how they thought institutional investors could improve investment success.More than 30% of respondents cited the continuing importance of active management.A recent survey by State Street concluded that some allocations to smart-beta could come at the expense of active allocations.Towers Watson’s survey also cited asset allocation and the need for adequate risk controls to ensure positive investment performance.last_img read more

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Tromsø goes it alone with launch of NOK2.5bn pension fund

first_imgTromsø regional council in the north of Norway has set up its own local authority pension fund for staff, completing a move sparked by pensions provider DNB’s decision to withdraw from the public sector pensions market.Both administration and asset management have been outsourced to financial services group Storebrand.With 5,000 members and assets under management of NOK2.5bn (€304m), the council said the new Tromsø Municipal Pension Fund, officially established on 1 October, would become one of the biggest independent local authority pension funds in the country.Around 20 local authorities in Norway currently have their own pension funds. Anne Berit Figenschau­, Tromsø councillor for finance, said: “We are establishing our own pension fund because it is economically advantageous for Tromsø Council.”The cost of administration will fall, she said, and with an active personnel policy and focused HSE (heath, safety and environment) work, the local authority will be able to reduce the annual pension contributions.Another advantage of going it alone is that the pension fund board will have a greater influence over the way fund assets are managed, the council said.It said it began working on setting up its own pension fund four years ago.Tromsø had been a customer of DNB Livsforsikring since 1947, but the life insurer is now no longer providing this service.As a result, the council said it then had a choice between doing it itself or finding a new provider.Trond Eliassen, project manager, said there would be no consequences for the staff pension, since it followed tariffs and statutory rights.“There are strict rules for the management of pension funds,” he said.The new Tromsø Municipal Pension Fund will cover all council employees, pensioners and former employees who are members of the main pension scheme. The exceptions are teachers and educators affiliated with the state pension fund, as well as doctors and nurses belonging to KLP’s pension scheme.Administration of the scheme has been outsourced to Storebrand Pension Services, and investment management to Storebrand Asset Management.A seven-person board has been appointed, Tromsø said, but a general manager for the pension fund has yet to be hired.It said Peter Lunde of Storebrand Pension Services would fulfil this role in the meantime.DNB Livsforsiking has said it decided to leave the public service pensions business because of ever-tighter requirements and regulations, as well as intense competition in the market.Storebrand is also leaving direct provision of public service pensions due to the high level of investment in systems and processes that would have been required to continue with the work.Kommunal Landspensjonskasse (KLP), the second-largest provider of public service pensions in Norway after Statens Pensjonskasse (SPK), is taking on much of the business left by DNB and Storebrand.It has said it is taking in 150,000 new members as a result of the corporate exits by the end of 2014.last_img read more

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LGIM launches ‘delegated solutions’ as consultants debate market impact

first_imgLGIM will also track buyout pricing using credit investments and taking regular advice from the bulk annuities business on the direction of pricing levels.Third, the insurer is undercutting rival bulk annuity providers by waiving the cost of transferring assets from an investment manager to an insurer, if LGIM clients insure with L&G.The manager said this could shave around 50 basis points off the cost of a bulk annuity purchase.Aaron Meder, head of LGIM’s Solutions Group, said the delegated solution allowed LGIM to pay more attention to clients’ overall aims.“We have made buyouts simpler and more affordable for UK pensions schemes,” he said.LGIM is one of the UK’s largest managers of DB assets, mainly within LDI and index-tracking equity funds. Meder said the manager losing assets to non-related insurers as schemes bought out was “not a great outcome” for the L&G umbrella group.James Mullins, a partner at consultancy Hymans Robertson, said the funds could prove very popular, given the interest in buyouts from smaller schemes and concern over appropriate asset allocation.However, he warned of there being no perfect solution to tracking and hedging buyout costs while remaining in a competitive insurer market.“Pension schemes would still go out into the market, and the most competitive insurer winning would still remain the case,” he said.“I imagine the other insurers will react to the 50bps [savings], which could be good news for the entire market.”Dominic Grimley, principal consultant at Aon Hewitt, said L&G’s 50bps saving figured raised questions.He said the whole concept would be negated if, as Mullins suggested, rival insurers dropped their fees.However, he suggested other insurers could become less likely to quote on LGIM clients, leading to L&G not pricing competitively.“An extreme viewpoint, but not impossible,” he said. “So the client actually loses out rather than gaining anything on buyout, especially if the case is not attractive in other respects for an alternative annuity provider.”He also warned that some schemes would not want to match buyout pricing tightly for a prolonged period.“Matching pricing will mean other measures – such as accounting and scheme actuary valuation of liabilities – [are possibly not] being matched,” he said.“A managed level of mismatch risk may create that level of volatility that may actually help reach a target.”The corporate bonds in which LGIM invests, he said, would be ideal for L&G’s bulk annuities arm but may not be the best priced asset for other annuity providers.LGIM said the delegated solution would not block schemes from transacting with another insurers.However, schemes would have to account for asset mismatch and transaction costs.Meder also stressed that the manager was not entering the fiduciary management space, as this offering lacked independent advice and manager selection.“We’re offering an approach to implementing partial or fully delegated solutions,” he said. Legal & General (L&G) is to launch a suite of ‘Buyout Aware’ investment funds for UK defined benefit (DB) pension funds in a bid to develop a bridge between its investment and bulk annuity divisions.Looking to maintain Legal & General Investment Management’s (LGIM) share of UK DB assets, and support L&G’s annuities business after this year’s Budget, the “delegated solution” will see it provide buyout-designed investment funds for small and medium-sized schemes.However, consultants warned of negative impacts on the bulk annuity market’s competitiveness should it become popular.The funds offer exposure to liability-driven investments (LDI) and corporate bonds, so assets reach buyout-pricing level.last_img read more

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Dutch firm replaces ‘unsustainable’ scheme with APG’s PPI

first_imgRandstad, a Dutch temporary employment agency, is to close its €989m pension fund for permanent staff in favour of a defined contribution (DC) PPI vehicle run by APG and ABN Amro.The company said it opted for the PPI due to low interest rates and its own “unsustainable” DC arrangements.It also cited the “increasingly individual” matter of pensions accrual.Randstad said accrual would continue in the PPI from 1 July, adding that active participants would be allowed to transfer pension rights to the vehicle. Raimond Schikhof, the pension fund’s director, said participants might also have the option of transferring 50% of their existing pension rights to the PPI.“For some participants, a value transfer could be attractive to achieve a tailor-made investment policy,” he said.The PPI offers not only standard lifecycle investment but also an individual investment mix and the purchase of a fully guaranteed pension.However, Schikhof said he expected most of the scheme’s 16,000 participants would opt for leaving their rights with the old pension fund, despite its modest chances for indexation.At June-end, the scheme’s funding stood at 105.7%.However, this is expected to fall by 5 percentage points, following the recent reduction of the ultimate forward rate, which is used as part of the discount rate for liabilities.Randstad said it expected its contribution, under the new pension arrangements, would fall from €27m to €22m.It said €4m of the difference would benefit workers, as their premium would be reduced from 7.5% to 5%. Schikhof said the remaining €1m would be used for pension provision at the closed scheme for the time being.In its annual report, the pension fund said it would remain a predominantly young scheme, with sufficient scale.It said it expected to maintain its portfolio mix of 55% fixed income holdings and 45% return-seeking investments.The closed pension fund also said it would continue to explore options for a value transfer, including joining the new general pension fund APF.last_img read more

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Pension investors more than double alternatives exposure since crisis

first_imgPension fund exposure to alternative assets has more than doubled over the six years since the financial crisis, standing at $9.7trn (€8.6trn) at the end of 2014.Alternatives is now also the third-largest asset class globally, behind a 44% exposure to equities and a 28% exposure to bonds, across the $27.2trn in assets captured in a joint survey by the Association of the Luxembourg Fund Industry and PwC.The report – ‘Beyond their borders: evolution of foreign investment by pension funds’ – focused largely on the growing global diversification of pension investors, noting that the allocation to non-domestic assets had risen from 25% in 2008 to 31% at the end of last year.Dariush Yazdani, partner at the PwC Luxembourg Market Research Centre, said that, despite challenges, pension funds were facing “a future brimming with opportunities”. In spite of the notable increase in global allocations across the 29 countries captured in the research, European investors only saw their global exposure increase from 32% to 34% – although countries such as the Netherlands had a high non-domestic exposure, standing at 76% of assets.Yazdani added: “The unique ability of pension funds to focus on long-term investments allows them to absorb short-term volatility while bearing market and liquidity risk through diversification – one of the most effective means of achieving diversification is through foreign exposure.”The survey highlighted the growth of alternatives as an asset class, which has risen from $4.4trn in 2008 to $9.7trn in 2014, a 117% increase.While alternatives exposure has grown significantly in absolute terms, the growth in relative terms is less pronounced – only increasing from 21% to 26% of assets in the six years to 2014.A large part of the growth stemmed from US pension investors, where exposure more than doubled to $7trn.UK exposure grew from $363bn to $925bn over the same time.,WebsitesWe are not responsible for the content of external sitesLink to survey by Association of the Luxembourg Fund Industry and PwClast_img read more

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​Keva names new managing director, returns 4.8% in 2015

first_imgFinland’s Keva saw investments return 4.8% in 2015, boosted by strong results in private equity and real estate.The €44.2bn local authority pension provider, which said financial markets resembled a roller coaster last year as it explained why the annual result was down from 8.7%, has also appointed Timo Kietäväistä managing director following the sudden resignation of Jukka Männistö last October.The fund said private equity was the strongest performer, returning 19.2%, followed by an 8.7% return from quoted equity and its equity fund holdings.Property, comprising both its direct holdings and its real estate funds, returned 8%, well ahead of the 0.4% return offered by fixed income, which accounted for 44% of portfolio. Keva’s hedge fund and commodity holdings were the only investments to suffer a loss, returning a combined -1.3%, during what Tapani Hellstén said was a year “full of concerns about the global economic outlook”.“Markets were very restless, even more so than in recent years,” he added.He said that 2016 was already predicted to be an uncertain year, and that it remained to be seen if recent market activity was a short-term correction or the first step in a longer-term trend.Hellstén will step aside as acting managing director in mid-February, when Kietäväistä, currently deputy head of the Association of Finnish Local and Regional Authorities, will take over.Kietäväistä will be the fifth person to lead Keva since 2013 following the resignation Merja Aljus due to questions over her expenses.Pekka Alanen, deputy chief executive at the time, ran the organisation until Männistö’s arrival in mid-2014, who left in October 2015 following a “crisis of confidence” with the board.last_img read more

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Etera investment return falls to 3.7% in 2015, solvency dips

first_imgHe said returns flowed in steadily from a number of sources, and that returns on equity investments, bonds and real estate in particular had been good.Fixed income generated a return of 2% last year, down from 4.8% in 2014, while equities produced 6.6%, down from 10.8% the year before.Real estate investment made 4.2% for Etera in 2015 compared with 5.4% in 2014.Relative allocations between asset classes were little changed between 2015 and 2014, and fixed income investments made up 44.3% of Etera’s total investment at fair value at the end of December.Equities accounted for 29.3%, real estate made up 17% and ‘other’ investments, including hedge funds and commodities, added up to a 9.4% slice.Operating expenses shrank by 4% from the previous year to stand at €42m at the end of December, Etera said, adding that it would transfer €10.2m to client bonuses for 2016, up from €8m the year before.“We have systematically enhanced our operations, which has resulted in a better loading profit and higher client bonuses,” Björkman said.Etera’s domestic investments made up 38% of the overall portfolio at the end of December, down from 42% a year before.Björkman said the pensions insurer focused particularly on real investments and investment loans in its Finnish investment. “This manifested itself as investments in real estate, real estate loans and infrastructure and loan funds,” he said.Even though domestic investment shrank last year, Etera said investing actively in Finland would be one of its areas of focus this year.“We will seek investment targets in Finland regardless of the short-term economic cycle,” Björkman said.Etera’s total investments grew to €5.91bn at the end of 2015 from €5.8bn a year before. Finnish mutual pension insurance company Etera saw its investment return fall last year to 3.7% from 6.3%, as equities and bonds produced slimmer profits but said it improved cost efficiency and increased the amount it was transferring to client bonuses.In its financial statement for 2015, the pension provider reported a fall in solvency levels.Solvency capital ended the year at €751m, down from €861m at the end of 2014, giving a solvency ratio of 14.2%, down from 16.9%, and a solvency position of 1.4 versus 1.6.Stefan Björkman, Etera’s chief executive, said: “Our diversified portfolio reacted less to the stock markets’ extremes than the earnings-related pension sector on average.”last_img read more

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Pensions trade body plots gender and age diversity push

first_imgLesley Williams, chair of the PLSA, told IPE: “Diversity applies to both investment and people. We’re looking to encourage diversity on trustee boards as well as pension executive boards.”Of the PLSA’s “monograph” book, Williams said: “There will be stories to make you smile, and there will be some that prompt some soul-searching. There will be views and experiences from key figures in the industry.”The title of the book is yet to be confirmed, but it is expected to launch in early March.Also in March, the PLSA will host its annual investment conference in Edinburgh where the theme will be “diverse investments, diverse perspectives”. Williams will chair a session on the topic of diversity during the three-day event, and she said the PLSA had encouraged speakers and sponsors to consider the theme when planning their activities and material.A guide for trustees on diversity is also in the pipeline, Williams said.“A lot of work has been done on the issue but no one has ever applied it specifically to trustee boards,” she said. “Just looking at gender, governance boards are on average 83% male.”The PLSA’s work will not just focus on gender balance, but also the age range of trustee boards.Williams said: “Being on a trustee board can be a development opportunity. A younger perspective can be really useful.”“If you have an election process [for new trustees], perhaps you need to look carefully at that, and how you bring people in,” she added. “You do have to go looking for people. You need to invest time.” The UK’s pension fund trade body is to publish a collection of essays next month as the first stage of a wider effort to improve diversity in the industry.The Pensions and Lifetime Savings Association (PLSA) also plans to publish a guide for pension funds and host a “women in leadership” course in the coming months.Separate research published today by Aon Hewitt and Leeds University Business School showed that the average age of trustees was 54, and the majority are aged between 50 and 70 years old. Of 197 trustees surveyed, 81% were male.The research showed the sample group to be “highly educated and financially literate”, Aon Hewitt said.last_img read more

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People moves: Blue Sky investment policy chief exits for PWRI

first_imgPWRI, Blue Sky Group, Nordea Life & Pension, MP Pension, British Columbia IMC, Coal Pension Trustees, Allianz, Fidelity, Schroders, Better Finance, Columbia Threadneedle, Avana InvestPWRI – Imke Hollander, head of investment policy and strategy at Dutch fiduciary manager Blue Sky Group, is to join the €8bn pension fund for disabled workers in sheltered accommodation (PWRI). She will be leaving Blue Sky effective 1 September. At PWRI, she will take over the responsibilities of Berry Spitsbaard as the adviser to the board’s investment committee, covering the full range of strategic advice. Spitsbaard will be more focused on projects and management of pension administration.A spokesperson for PWRI said that Hollander’s appointment would further strengthen the advice to the investment committee and its ability to monitor and hold accountable its fiduciary manager, BMO Global Asset Management. Hollander will report directly to Wim Hoek, who was named PWRI’s new director in March.Nordea Life & Pension – Anders Stensbøl Christiansen, head of equities at Nordea Life & Pension Group, has become acting CIO at Nordea Life & Pension Denmark. It follows Anders Schelde’s move to MP Pension, where he will become CIO of the Danish labour-market pension fund for academic public sector staff from 1 November.  British Columbia IMC – Stefan Dunatov, who left Coal Pension Trustees earlier this year, is to join British Columbia Investment Management Corporation (BCIMC) later this year, IPE understands.Dunatov was CIO at Coal Pension Trustees, overseeing two pension schemes for the coal mining industry. He had led the investment team since 2011, having first joined in 2008 as an investment strategist. He also sits on the investment committee of the £20.9bn (€23.6bn) Wellcome Trust, a charitable foundation, and chairs investment think tank The 300 Club.BCIMC runs C$135.5bn (€93.3bn) on behalf of public sector pension funds in Canada. A spokeswoman for the company declined to comment.Allianz – Rémi Vrignaud has been named as the new CEO of Allianz in Austria. He replaces Wolfram Littich, who has led Allianz’s operations in the country since 2001. Vrignaud joined Allianz in the same year as assistant to the board chairman. He has chaired Allianz’s operations in Romania, and most recently has been managing the office of the CEO in Germany. Subject to regulatory approval, he will take up the position on 25 August.Polar Capital – Gavin Rochussen has joined the UK-based boutique as CEO. He succeeds Tim Woolley, who has moved to a non-executive position. Rochussen was previously group CEO at JO Hambro Capital Management, an equity specialist asset manager. Between 2003 and 2008 he was CEO of wealth management firm Fleming Family & Partners.Fidelity International – The fund management giant has hired Lucette Yvernault to lead a new “portfolio engineering” team within its fixed income business. Yvernault joins from Schroders where she was a global credit portfolio manager. She has also worked for Citigroup Asset Management.The Portfolio Engineering Group has been established to design and manage customised fixed income portfolios for institutional clients, Fidelity said. Charles McKenzie, global CIO for fixed income, said the new group reflected “strong appetite for bespoke systematic strategies, provided at a lower cost”.Better Finance – The European consumer finance lobby group has appointed Aleksandra Maczynska to its Brussels team. She joins from Poland’s consumer and competition regulator, where she was deputy director of its international relations and communication department. She has worked on EU Council working parties in financial services. She has also recently joined the European Commission’s Financial Services User Group.Columbia Threadneedle Investments – The $467bn (€406bn) asset manager has hired Jesco Schwarz as sales director for savings and cooperative banks in Germany. He joins from Frankfurt Trust Investment Gesellschaft, where he was sales manager. The appointment is part of Columbia Threadneedle’s efforts to expand its distribution in Germany and respond to growing demand from banking clients.Avana Invest – The German exchange-traded product provider has named Gerhard Rosenbauer to its board. He joined the firm a year ago from Inprimo Invest. He takes over from Thomas Uhlmann, who resigned from the company on 30 June. The company said Rosenbauer would be responsible for asset management for private and institutional investors, as well as for marketing, sales and corporate communications.last_img read more

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Royal Mail, industry experts set out case for UK CDC

first_imgDavid Pitt-Watson: CDC communication is “absolutely critical”“The communication was critical because everybody thought they were absolutely promised that money, so you do need to be very clear,” Pitt-Watson said.Royal Mail and CWU have agreed to replace the company’s defined benefit (DB) scheme with a CDC offering, subject to legislation being adopted.Jon Millidge, Royal Mail’s group human resources director, said the company and union representatives had already prioritised communication with members as part of major changes to the company’s pension arrangements.Millidge added: “The really key thing about this is about communications… The trustees will be responsible for member communications, for making sure people understand what the targets are, that they’re not promises, what can change, and what they can do about it.”Benefits of CDCRay Ellis, national officer at the CWU, emphasised that the deal struck with Royal Mail would ensure “a level playing field” for all members.Currently, he said, roughly two-thirds of staff were in the company’s DB scheme, which will close at the end of next month. The remaining third were in the traditional defined contribution scheme.“A CDC scheme offers the potential for a similar level of outcome to the existing DB scheme for DB members, but at the same time it’s a substantial increase in the level of expectation for DC members,” Ellis said.“It’s very important that we get back to this level playing field with one scheme for all. It offers the prospect of a wage in retirement and is a proper pension scheme. We do think it’s the way forward.”Hilary Salt, senior actuary at First Actuarial and adviser to CWU during the negotiations with Royal Mail, said CDC plans could solve problems for employers.She said: “Employers are really worrying now that they will get to a stage where a lot of employees reach retirement. The employer can’t make them leave the workforce because of age discrimination, and the employee cant afford to retire. For employers, the idea of managing everybody out of the workforce on capability grounds is an HR nightmare.”An improved pension provision with an income in retirement could address this, Salt indicated.Minimal law changes requiredThe UK passed laws in 2015 enabling CDC schemes, but secondary legislation is still required to make such pension arrangements possible. The Work and Pensions Select Committee’s inquiry was launched late last year to accelerate this move.Sandeep Maudgil, partner at law firm Slaughter and May, said the main changes to current law involved ensuring that CDC schemes would not be treated as DB schemes on company balance sheets due to their pooling of longevity and investment risks.“There might be some changes you’d need to make to avoid imposing [DC] design requirements that you don’t want in CDC,” Maudgil added. “Then you’d have to layer on specific transparency, governance and communications requirements to make sure that, if people are in one of these schemes, they know exactly what it is.”Salt said CDC schemes could be facilitated with “small changes to existing legislation”. Introducing collective defined contribution (CDC) schemes to the UK will require minimal changes to existing rules – but clear communication and strong governance arrangements are key to the concept’s success, experts told politicians today.Parliament’s Work and Pensions Select Committee – an influential group of MPs from the UK’s lower house – heard from Royal Mail, the Communication Workers’ Union (CWU) and a number of industry representatives about how CDC schemes could be set up.David Pitt-Watson, executive fellow at the London Business School and co-founder of Hermes Fund Managers’ stewardship services, told the committee that communication of the new schemes to members was “absolutely critical”.He cited the Netherlands’ CDC model and how Dutch schemes dealt with the financial crisis of 2008-09. As funding levels fell, schemes were forced to cut pensions in payment. The Dutch regulator estimated in 2009 that schemes lost €94bn due to asset price falls.last_img read more

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