The European Commission’s proposals for pension fund communication within the revised IORP II Directive are heading in the wrong direction and carry the risk of “non-directed overkill”, the Dutch Pensions Federation has warned.In a preliminary response to the reviewed Directive, it said the very experienced Dutch pensions sector was now focusing on a “demand-based communication to participants, presented in layers”.The Federation referred to the suggested introduction of an annual Pension Benefit Statement, a two-page document pension fonds must issue on paper or through their websites.Gert Kloosterboer, spokesman for the Pensions Federation, said: “Our experience is that information should be based on a proper analysis of what participants want to know and presented in several layers, with the most basic information on top. “It is not a matter of providing more information but of offering an overview for a quick understanding, as well as enabling people to dig deeper and compare arrangements if they wish.”In its preliminary response, the Federation did not comment on the funding of cross-border services, as Dutch pension funds are “hardly involved in these activities”, Kloosterboer told IPE.The Pensions Federation said it was pleased that more time would be given to define the Directive’s quantitative demands, citing their potentially huge impact on the Dutch sector.It also reiterated its view that pension funds differed fundamentally from banks and insurers and therefore required a different approach.“Contrary to commercial banks and insurers, pension funds’ operations are based on risk-sharing through mandatory and collective participation, and they consider themselves as social institutions active on financial markets,” the lobbying organisation said.
Sally Bridgeland, the former chief executive of the BP Pension Trustees, is joining the UK team of Dutch governance and outsourcing advisers Avida International in October in the role of senior adviser.The firm said Bridgeland, who left the £19bn (€24bn) UK corporate pension fund at the beginning of April, would “support Avida in shaping its services to expand its footprint in the UK pension fund market”.Commenting on why she had decided to take on the role at Avida, Bridgeland said: “I’ve been impressed by the investment governance expertise Avida can bring to bear and look forward to working with them.”She said the UK institutional investment market was set for big changes as it continued to mature. “There is a lot we can learn from how the Dutch have tackled the associated challenges,” she added.Bridgeland joined BP Pension Trustees in 2007 after working at Aon Hewitt and its predecessor Bacon & Woodrow for 20 years.She has non-executive roles at EDHEC, FTSE and the Worshipful Company of Actuaries. After she left the BP scheme, she said that it had been time to move on, and that she was going to talk to people in the pensions industry to see what the options were.Avida’s UK managing director Bart Heenk said the firm was delighted someone of Bridgeland’s calibre was joining the team.He said she would bring a lot of pension governance experience with her, allowing Avida to take on more projects and helping pension funds improve their operational efficiency.
Further, they should have at least $5bn invested in commodity swaps and a minimum of $20bn in assets under management as a whole.The investor also calls for a minimum three-year track record. Interested parties have until 29 September to apply.Performance figures should be stated net of fees and up until 30 June.The IPE.com news team is unable to answer any further questions about IPE-Quest tender notices to protect the interests of clients conducting the search. To obtain information direct from IPE-Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected] A Swiss pension fund with more than CHF20bn (€16.5bn) in assets has tendered a $700m-1.5bn (€580m-1.2bn) enhanced commodity swap mandate using IPE-Quest.According to search QN1452, the pension fund is looking for swaps under the categories F2, CM and MB.The fund said it preferred a passive enhanced management style.Managers should employ the Bloomberg Commodity ex Agriculture Index, or sub indexes, with a maximum tracking error of 0.2%.
The €230m fair-finance fund – the youngest Vorsorgekasse, or ‘provident’ fund, in Austria – has reported a 5.95% return for 2014, outperforming the market average of 3.98%.Markus Zeilinger, founder and chairman at fair-finance, cited the held-to-maturity bond portfolio, as well as the Vorsorgekasse’s own bond fund, as chief contributors to the performance.The bond Spezialfonds was set up in 2013 together with ESPA, a subsidiary of Austrian Erste Bank, which still manages this part of the portfolio.Zeilinger, speaking at an event marking fair-finance’s fifth anniversary, also pointed to “large amounts” of monthly inflows (approximately €4m), which enabled the Vorsorgekasse to shift into longer-duration bonds. He added that only one-quarter of the new mandatory contributions each company must pay to cover severance pay for staff is re-invested in non-held-to-maturity bonds.Currently, the held-to-maturity portfolio comprises one-third of the overall portfolio, while other bond investments make up another half.There are no high-yield bonds, emerging market debt or bonds from Cyprus or Greece in the portfolio.To reduce its dependency on bonds, fair-finance has set up a fund to invest directly in real estate, to which it plans to commit 10% of its portfolio by the end of 2015.“This is all we are allowed under the law, which does not make sense,” Zeilinger added, describing the asset class as a stable, long-term investment.He said the maximum equity allocation would be 30% but added that fair-finance only invested approximately 6% of its assets in listed shares.The real estate investments will mainly be into Viennese multi-tenant assets, so-called Zinshäuser.Another new investment was made in the field of microfinance, which now makes up just under 3% of the portfolio.Zeilinger acknowledged that it was “difficult for a Vorsorgekasse to invest in this asset class”, due to regulatory hurdles.But he said he and his team had identified a bond and certificate based on a fund that complied with both the legal framework and fair-finance’s “strict” sustainability criteria.This year, the three-time winner of IPE’s country award for Austria said it aimed to get its complete portfolio certified under the country’s environmental standard, the Umweltzeichen.Its investments are checked regularly by oekom research, as well as the Austrian ÖGut, which awarded three Vorsorgekassen in the market, including fair-finance, gold certificates last year.
The UK should consider the launch of collective pension provision based around the more individualised approach being debated in the Netherlands, a wide-ranging report on the future shape of the pensions industry has urged.The 600-page report, written by David Blake of the Pensions Institute at the behest of the opposition Labour party, also suggested the National Employment Savings Trust (NEST) be allowed to provide income-drawdown products to all savers in an effort to lower costs.The suggestion was made after recent changes allowed savers to access pension pots from 55, and ended a previous requirement to annuitise.Blake’s report, likely commissioned in 2014 to function as a policy blueprint had the Labour party won the 2015 election, also proposes an overhaul of the UK’s regulatory architecture, merging the Financial Conduct Authority with the Pensions Regulator, while introducing ‘safe haven’ pension providers that could be recommended without risk of later lawsuits over mis-selling. The academic said the Review of Retirement Income (IRRI) report was necessitated by the shift in retirement provision caused by the liberalisation of pension savings, labelled pensions freedoms.The shift away from annuities to pay out income in old age marked a “monumental change” for a market that was previously home to around half of the world’s annuities, Blake said.The report set out to examine how the risks associated with drawing down retirement income – rather than having a guaranteed income stream for life – should be explained to savers.Revisiting defined ambitionBlake touched on the role of collective defined contribution funds – part of the defined ambition agenda introduced by previous pensions minister Steve Webb – and argued that the idea of risk-sharing was still feasible in a world where members had access to savings from age 55, as long as the scheme allowed for individual accrual.The report examined a number of risk-sharing approaches employed across the world, including the use of deferred annuities by Denmark’s ATP, and recommended the introduction of collective individual defined contribution (CIDC).CIDC funds, the report said, would exploit economies of scale and allow risks to be pooled.When asked, Blake said the approach could be modelled on discussions occurring in the Netherlands, where policymakers have sought to avoid a shift towards individual DC funds as used in the UK.Benchmarking decumulation strategiesThe report further recommended that a vehicle akin to the National Employment Savings Trust (NEST) be launched to act as a benchmark for decumulation strategies, able to set standards and cost levels other providers would need to match to remain competitive.The focus on NEST was also in line with Blake’s proposal to see retirement income offered by institutional investors, rather than savers previously auto-enrolled into institutional providers being asked to access the retail market on retirement.“In many respects,” the report said, “scheme drawdown is a natural extension of the default fund used by modern multi-trust, multi-employer schemes for the auto-enrolment accumulation stage.“It is also a natural extension of the trustees’ governance role and fiduciary duties, which, prior to [the introduction of pension freedoms], ended very abruptly when members were steered towards the purchase of [lifetime annuities] at the point of retirement,” it said.One of the report’s key proposals also built on previous work by the Turner Commission, which recommended the introduction of auto-enrolment in 2005.The launch of a Pensions, Care and Savings Commission would provide independent scrutiny of the pensions freedoms, Blake suggested, and help establish what he saw as the absence of a national narrative around retirement savings.The idea was previously proposed by the National Association of Pension Funds, the Association of British Insurers and the Trades Union Congress.
He said this would depend on pension funds’ future choices, such as their pensions target and the desired level of risk.“Smaller financial buffers would create more potential for better investment results, but would also increase risks,” the CEO said. Van Olphen indicated that APG’s preparations for the introduction of a new pensions system included a focus on simplification of pension arrangements.“During the past 40 years, collective labour agreements and transitional measures have created an accumulation of well-meant schemes and exceptions, which have caused complexity, costs and risks,” he said.“Together with our pension fund clients, we are now trying to push back the multitude of arrangements.”APG carries out the pensions administration for nine pension funds in total, including the €403bn civil service scheme ABP.In October, ABP agreed with workers and employers at the Ministry of Defence that it would replace the final salary scheme for defence workers with pension benefits linked to employees’ average salary, from 2019. Pension funds’ returns could suffer if, in a new Dutch pensions system, their financial buffers were not allowed to temporarily turn negative during times of economic stress, Gerard van Olphen, chief executive of the €453bn asset manager APG, has warned.The Dutch government has said that pension funds’ financial buffers must remain positive at all times as part of a new system currently being negotiated. APG’s CEO said this meant schemes would have to implement rights discounts earlier.“The risk would be that pension funds would want to increase their focus on certainty, which would limit their investment options,” he said.In an interview in IPE’s Dutch sister publication Pensioen Pro, Van Olphen said that a new pensions system with less concrete promises and less fixation on schemes’ funding ratios would in principle offer more freedom for investment, as well as potential for improved returns.
“To this end, and taking into account the proportionality principle in particular, the reporting requirements as set out in the initial proposal have been significantly streamlined, especially for smaller pension funds,” it said.There were four main changes to the initial proposal, according to the ECB.These included a postponement of the first reporting deadline, a phasing-in period to align the ECB regime with supervisory reporting requirements from EIOPA, and a clarification of the term “pensions funds managers”. The European Central Bank (ECB) has “streamlined” its proposed regulation on statistical reporting requirements for pension funds in response to feedback.Some pension fund associations had expressed concern about the reporting burden and costs that compliance could entail, in particular given that the European Insurance and Occupational Pensions Authority (EIOPA) was also planning reporting requirements.The final regulation was adopted by the ECB’s governing body late last month, and published on its website last week. The draft regulation was published and put out for consultation in July.In a feedback statement published in connection with the final regulation, the ECB said that, from the outset, it paid attention to the issue of containing costs. ECB headquarters in FrankfurtSource: Source: ECB The ECB said it and EIOPA had cooperated closely and had achieved a “very high” level of convergence between the reporting regimes.“This will allow a single data flow for reporting by the industry, should this be decided at the national level by the respective national central banks and national competent authorities,” said the ECB.This means that, should a national supervisory authority decide, a pension fund would be able to report one set of data to that authority, a spokesman for the ECB confirmed. The authority would then report to the national central bank, which would pass the data to the ECB.Germany’s occupational pension fund association, aba, said the ECB had taken on board several of the requests for change made by German pension associations and PensionsEurope.It said the final regulation was not conclusive about which of Germany’s multiple pension financing vehicles would be subject to the ECB requirements, and that it would be down to the German central bank to make this clear.The new regulation is binding on euro area countries, but non-euro area EU member states are supposed to implement measures that would allow the collection of statistical information needed to fulfil the ECB’s requirements.The purpose of the new reporting and data collection regime, according to the ECB, is to “increase the transparency of pension funds for the benefit of their members, the general public and the economy as a whole”.The new framework would produce enhanced statistics that would “better support the European System of Central Banks in its monetary and financial analyses and its contribution to the stability of the financial system,” it said.
Denmark’s statutory pension fund giant ATP has selected BNY Mellon as its new global custodian, replacing the current mandate holder Northern Trust.The appointment follows a public tender process the pension fund started in December last year.BNY Mellon said it had been appointed by ATP, which runs Denmark’s labour market supplementary pension scheme, to provide custody, trade support and collateral management services for the pension providers’ $100bn (€89bn) of assets.Kenneth Hallum Knudsen, senior vice president of business support at ATP, said: “ATP wants strong and competitive partners, which is why – from several competent bids – we have chosen BNY Mellon as global custodian based on both quality, services and price. “With this new agreement we get a fair financial saving combined with even better solutions and services,” he added.BNY Mellon described the public procurement process as having been “very focussed and detailed”.The contract will start in October, after the end of the ATP’s current custody agreement with US financial services firm Northern Trust — which it selected for the position in 2013 — and will last four years, with a possible renewal of up to two years.ATP said BNY Mellon currently manages $34.5tn under custody and administration with $1.8trn in assets under management, providing investment management services in 35 countries.
Recent research conducted by investment consultancy bfinance shows that rather than a slowdown in manager search activity, the first quarter of the year brought a rise in new mandates launched by the firm’s clients.This was particularly true in private markets, which represented 52% of all searches initiated in the quarter.The data is from a recently completed quarterly report assessing how different diversifying strategies have performed in Q1 2020, alongside equity, fixed income and private markets.Most equity searches in 2019 had a quality or defensive undertone and these styles were strongly rewarded in Q1: a composite of quality-focused active equity managers outperformed the MSCI World by almost 8% and also beat quality-tilted indices, the research showed. Private markets – which include private equity, real estate, infrastructure, private credit and others, accoding to bfinance – represented 43% of all searches initiated in the 12 months to 31 March 2020, and a record 52% of those initiated in Q1.“Indeed, Q1 has not only seen a surge in private markets activity but a surge in search activity overall,” bfinance said. The quarter saw 32% of the year’s new mandates, and the number of searches was up 17% against Q1 2019.“This activity falls into two main categories: investors proceeding with their previous plans across all asset classes despite the COVID-19 turmoil and investors seeking to position themselves appropriately for a new environment, although the latter is still at a very early stage and we have not yet seen activity based on terminations,” the firm said.It added: “Private markets strategies are a logical beneficiary of current conditions, given the historically outstanding results of post-crisis vintages and the lower sensitivity to market timing: the date of the commitment does not determine the date of entry, since – depending on the strategy – it can take months or years for money to be deployed.”Investors await valuation “capitulation” in private markets, with the buyer-seller expectation mismatch likely to take a further one or two quarters to resolve, bfinance disclosed.The study has found that it was a ”rough quarter for investment grade credit managers who struggled to beat their benchmarks due to high credit risk exposure”. Only 32% of European active managers beat the benchmark in March, as did 40% of US active managers.High yield bond managers, on the other hand, benefited from being conservatively positioned relative to their benchmarks, the consultancy found.The research also showed that multi asset strategies continue to dominate new mandates in the liquid alternatives sector, in part due to the trend towards “outcome-oriented” or “sector-agnostic” manager searches.Certain sectors within multi asset showed impressive resilience in Q1, with the global absolute return strategy (GARS) cohort down just 2.1%.Setter Capital survey shows managers expect a 18.5% decrease in fundraisingAdvisory firm Setter Capital has produced a special report that shows that fund managers expect fundraising in 2020 to decrease by 18.5% from the record level raised in 2019.Debt-related fund managers were the most optimistic, as they expect fundraising to increase by 5%, while venture managers felt it would decrease by 29.1%.The firm’s report summarizes the results of a 12-question survey completed by global managers of alternative investment funds conducted in mid-April 2020.“Given the recent market turbulence, we wanted to ascertain the likely effects the coronavirus pandemic will have on private market fund investors and managers,” the firm stated.Setter Capital asked general partners (GPs) the same questions that GPs, limited partners (LPs), and secondary buyers and sellers have asked the advisory firm directly relating to fundraising and capital calls under the current volatile climate.The firm received responses from 72 fund managers, who agreed to share their confidential views.According to the research, 94% of respondents thought “we are heading into a recession”, while only 1% were unsure and 4% thought a recession would be avoided.Results also showed that 69% of respondents expected public markets would retest March lows, sometime in the next six months, and respondents predicted that the public markets at the end of 2020, would be down 12.6% from the start of the year.Respondents on average felt capital calls would not change much in the coming nine months, as they estimated a 0.7% decrease versus the prior nine months.Debt-related fund managers were the exception, as they expected capital calls to increase by 20% on average, the study revealed.Over the next nine months, 35% of all capital calls would expected to be used to support existing portfolio holdings and the balance to make new investments, it showed.While this is the average across all strategies, venture capital (VC) fund managers expected 48.9% of capital calls would be used to support existing holdings, while buyout funds expected that figure to be 28.7%.The study also showed that respondents expect distributions to fall 34.3% over the three quarters, as compared to the preceding nine months.VC fund managers were most bearish, as they estimated distributions would drop by 43.5%, while debt-related fund managers felt they would only drop by 22.5%.Setter Capital also found that fund managers, across the board, expected an increased need to tap the secondary market over the next nine months, as an alternate source of financing and liquidity.To read the digital edition of IPE’s latest magazine click here.
But under the new plan, investment risk in the disbursement phase is to be lower than in the savings phase, and the traditional insurance currently managed by the Swedish Pension Agency (Pensionsmyndigheten) is to constitute the default’s payment option.AP7 said it agreed with proposals that an overall goal should be formulated for the whole of the default alternative, and that the investment rules should be broadened.But given that an overall goal was needed, the pension fund went on to say it was “counterproductive and surprising” that the plan involved breaking the default option into two separate products with two different principals.“This will lead to fragmentation that complicates the holistic approach and long-term view that an effective default solution needs,” AP7 said.“This will lead to fragmentation that complicates the holistic approach and long-term view that an effective default solution needs”AP7On top of this, the fund said, deciding to abandon a functioning product for an alternative where neither the parts nor the whole had been worked through entailed unmotivated risk-taking.“Risk-taking between the savings and the payment phase must be balanced and the total risk-taking needs to be adjusted to the system’s overall goal of clearly exceeding the development of the income index,” AP7 said.Splitting up the different management phases risked leading to sub-optimal decision making with insufficient regard for the whole, it said.“The consequence will then be that future pensions will be lower and that pension savers will be exposed to unnecessary risks through an abrupt transition from the savings phase to the payment phase,” the fund said.Meanwhile, the Swedish Pensions Agency, which currently manages the premium pension system’s funds platform as well as running the traditional insurance payout phase of the default alternative, said in its response to the consultation that it approved of the plan to let AP7 invest in alternatives for the first time – although the proportion of these assets suggested was too high.But it did not agree with having an overall target for the default option in the premium pension system, because in practice, it said, there would be two state default products with different purposes and designs.“We, therefore, propose two different goals that are adapted to the purpose of the saving and disbursement phase, which provides better conditions for control and follow-up,” the authority said.In other feedback, the pensions agency also said it was positive about the idea of transferring default option savers to traditional insurance automatically before disbursement.However, funds which were switched in this way should then be transferrable back to unit-linked insurance, it said.“Otherwise, the proposal entails unreasonable lock-in for pension savers,” the pensions agency said.To read the digital edition of IPE’s latest magazine click here. The largest of Sweden’s national pension funds has warned against a key element of the transformational plan to modernise its role as the default option in the premium pension system.In its response to the consultation on a proposal to reform the default provision in the first pillar system of individual accounts, AP7 said the idea of splitting the product into separate savings and payout phases risked losing sight of the whole – and ultimately reducing pensions.The memorandum “Förvalsalternativet inom premiepensionen” was published in February, and is based on a government-commissioned proposal drawn up by pensions expert Mats Langensjö.As things stand, the SEK670bn (€63.4bn) pension fund’s balanced Såfa pension product – automatically allotted to people making no active provider choice in the defined benefit premium pension – can continue from savings to payout phase.