Mandate roundup: IPE Quest, LV=, BlackRock, Towers Watson

first_imgAny of the listed mutual funds put forward for consideration should not invest more than 50% in mezzanine debt or direct lending, the search specified.Interested parties have until 14 May to submit proposals, stating their gross of fees performance to the end of 2014.In other news, the pension fund for UK insurer LV= has appointed BlackRock to a multi-million-pound liability hedging mandate.The scheme’s trustee appointed BlackRock after a search conducted by consultancy Redington, with the asset manager broadening the number of LDI investments to include swaps, Gilts and repo instruments previously not exploited.The LV= Pension Fund, with liabilities of £1.5bn (€2bn), also implemented a new volatility controlled synthetic equity strategy to reduce its equity risk.Lastly, the £3bn Electricity Supply Pension Scheme, sponsored by the UK Power Networks Group, has appointed Towers Watson as actuarial advisor.The IPE 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 jayna.vishram@ipe-quest.com. A Swiss pension fund is looking to invest $50m (€44m) in a private loan fund, using IPE Quest for its manager search.According to search QN 2047, the unnamed Swiss pension fund has asked Kottman Advisory to assist with the appointment of up to three private debt or syndicated loan funds, splitting investment evenly across North America and Europe and Asia.The funds could be either actively or passively managed and benchmarked against the S&P Leveraged Loan Index or the Credit Suisse Leveraged Loan Index.Asset managers should have at least $200m in assets in similar mandates, but the consultancy did not specify a minimum AUM for the company as a whole.last_img read more

Irish actuaries caution against pension charge cap

first_imgAlthough no firm plans are in place to cap the level of charges, the recently launched Pensions Council has been asked by the government to study the mater of costs.In contrast to the Society of Actuaries, the Association of Pension Lawyers in Ireland threw its weight behind a reformed pension system based around auto-enrolment, with the Small Firms Association (SFA) also warning against a mandatory approach.Patricia Callan, director of SFA said she accepted that the pension system was in need of changes to make sure it was fit to meet the future needs of retirees.“Mandatory pension provision will prove costly to employees, to business and to the Exchequer, without any associated benefits in the long term,” she argued.“As such, the willingness of both employees and employers to accept compulsory pension savings is seriously questionable.”The Irish Association of Pension Funds offered a tacit endorsement of a mandatory system, repeatedly noting the complexities associated with an auto-enrolment approach would fall away under compulsion.The lawyers’ association was also critical of the current and previous governments’ approach to reform, as both had offered support for an auto-enrolment-based system without offering a precise timescale for its introduction.“This is unhelpful as it creates uncertainty regarding existing structures.” Irish actuaries have warned that introducing a pension charge cap could deter providers from entering the market ahead of the launch of a new supplementary pension scheme.In its response to the Universal Retirement Savings Group (URSG), the Society of Actuaries in Ireland said it wholeheartedly supported the launch of a mandatory pension system over one that relied on inertia to attract members, and argued that the establishment of master trusts would be the easiest way to achieve the scale desired by Ireland’s Pensions Authority.The actuarial association added that the Universal Retirement Savings System (URSS) – for which the URSG hopes to submit a proposal by the end of the year as part of government plans to boost pension provision – should be designed to be cost-effective, but must also attract a large enough number of providers to the market to stimulate competition.“If low caps are placed on the maximum level of charges that may be applied, it may not be attractive for providers to enter the market and some other solution may need to be found for potentially uneconomic contracts.”last_img read more

​Finnish foundation law set to strengthen governance

first_imgThe board of directors is now the sole, compulsory management body – previously, a foundation’s articles could allow for other decision-making structures such as independent committees and delegation, but this is no longer possible.  The foundation can, however, decide to have a supervisory board and managing director, if required or allowed by its articles.Other decision-making committees may also be set up, but these may operate only under the board’s control.Key amendments within the law further define the broad concept of a related party, and the concept of permitted and prohibited related-party transactions.The concept of related parties, which lacked clarity under the previous law, is expanded to a very broad range of people and entities with connections to the foundation.Related parties include members of the foundation’s board of directors and supervisory board, their close relatives and spouses, and entities they control.The foundation’s annual report must provide information on grants and benefits issued to related parties, as well as financial transactions with those parties.Foundations, although not required by the new law, are likely to need to monitor this activity, given the broad scope of related parties and transactions.A foundation may now engage in investment and business activities to finance its activities, even if this does not directly contribute to its purpose, as long as its articles allow this.A newly established foundation must draw up an investment plan for its first three years.Setting up a foundation is now easier because the two-stage authorisation procedure has been abandoned, although the minimum basic capital required goes up from €25,000 to €50,000.Liisa Suvikumpu, chief executive at the Council of Finnish Foundations, said: “The new law is a great opportunity for foundations to refresh themselves, think big and be more effective.“It enhances good governance and best practice in foundations because of the greater demand for openness and transparency, and it modernises the governing bodies and responsibilities within foundations.”She said the new law did not mean much change for established foundations following the Council of Finnish Foundations’ good governance rules but made it slightly easier to create new entities.But Suvikumpu warned: “The immense length of the law, from five chapters previously to 15 now, means fewer people can really digest and understand in depth all the details, widening the gap between foundations and the average person.“Foundations will start to seem even more distant, demanding special knowledge before someone enters a position of trust within them.”The new act took effect on 1 December 2015.Foundations have three years to conform with the new regulations and register any required changes in their articles.Finnish foundations are still supervised by the National Board of Patents and Registration. A new law has come into force to strengthen the supervision of Finnish foundations and increase transparency of their activities.The law, which updates the existing 80-year-old statute, clarifies the distinction between activities that are permitted or prohibited for a foundation, establishes an effective framework for developing its administration and operations, and creates a better procedure for internal and external monitoring.A foundation’s purpose must not be to achieve economic benefits for its founder or related parties but to be beneficial for society.Furthermore, the new law is more prescriptive in relation to a foundation’s management.last_img read more

​KLP tweaks coal divestment criteria as it offloads dozen holdings

first_imgKLP will no longer invest in companies that draw more than 30% of their revenue from coal-based activities, lowering the threshold in line with the Norwegian sovereign wealth fund’s policies.The new threshold, down from 50%, came into force this month and was announced as KLP confirmed it had excluded 20 companies from its portfolio.A dozen energy companies were excluded for their coal-based activities, while KLP, which provides pensions to Norwegian local government workers, also excluded Glencore over its oil exploration activities off the cost of the Western Sahara.The 12 energy companies – including Adani Power Adani Power, Duke Energy and Korea Electric Power – were excluded as of this month, KLP said. Its head of responsible investment, Jeanett Bergan, added that KLP had noted the Norwegian parliament’s decision to force the Government Pension Fund Global to sell all stakes in companies drawing more than 30% of revenue from coal-based activities.“KLP follows the GPFG guidelines and has been clear that we will look to the new coal criterion for the GPFG and consider further exclusions consistent with this,” Bergan said of the decision to lower KLP’s threshold to 30%.“We stand better poised to achieve the green shift when investors pull together.”Under the new rules, KLP was able to readmit Hong Kong’s Power Asset Holdings and Turquise Hill Resources of Canada, which have diversified their revenue away from coal-based activities, falling below 30%, according to the most recent accounts.Of its decision to divest Glencore, the provider said its activities in Western Sahara constituted an “unacceptable risk of violating fundamental ethical norms”.It noted that it had in 2013 excluded French oil company Total due to similar activities.Three companies – BAE Systems, Fluor Corporation and Huntington Ingalls Industries – were excluded for their role in producing nuclear weapons.A further four – Genting Berhad, Genting Plantations Berhad, IJM Corporation Berhad and IJM Plantations Berhad – were divested for their connection to palm oil plantations in Indonesia, as the plantations were established through deforestation.last_img read more

FRR suspends equity manager search to work ‘flat-out’ on illiquids

first_imgFonds de Réserve pour les Retraites (FRR), the €36.3bn French pension reserve fund, has put on hold a tender for up to €3bn of passive/quant equity mandates while it focuses on implementing its new €2bn allocation to French illiquid assets.The French government last year granted FRR permission to invest €2bn in illiquids over a two-year period, the aim being to obtain higher returns without the volatility that has characterised equities, and to support the growth of the French economy.The fund has already committed €345m as part of its new €2bn move into illiquids: €200m to the intermediate housing fund (FLI) managed by Société Nationale Immobilière and €145m to the NOVI fund set up by Caisse des Dépots de Consignations, which invests in small companies’ private and listed equity and SME loans.This leaves FRR with some €1.7bn of its illiquids allocation to put to work, and it is the deployment thereof that will be “the main project for 2016”, according to Yves Chevalier, a member of the board at FRR. “There’s a lot of operational set-up required, and we will be working flat-out on this,” he told IPE in Paris last week. “One of the main tasks for this year is to define requests for proposals.“Everyone is trying to capture the illiquidity premium and returns from unlisted assets.”An FRR spokesperson confirmed that a tender announced last year had been suspended to allow FRR to concentrate on implementing its “new mission”, and that the decision was also a function of the resources dedicated to this.The fund has only got to the first stage of candidate selection, according to the spokesperson.The manager search that has been put on hold dates back to last summer and was a tender for constrained passive equity management, split into three lots with up to eight mandates available across the three.The largest lot was for up to €2bn and was for management of standard or optimised indices replicated to take into account certain constraints, notably the exclusion of certain stocks decided by FRR.The second and third lots, each for up to €500m of assets, were for quantitative management targeting outperformance of benchmark euro-zone and developed country equity indices, respectively, with a maximum ex-ante tracking error of 3% per annum in each case.FRR last week announced that it returned 3.08% over the course of 2015, crediting its return-seeking asset portfolio for the result.Earlier this year, it awarded 11 corporate bond mandates for a total of up to €8.5bn.last_img read more

Largest Swedish pension providers call for break from Solvency II

first_imgFour of Sweden’s largest pension providers have urged the Ministry of Finance to regulate the occupational pension sector with a tailor-made framework rather than subject them to Solvency II.In the letter sent by Alecta, AMF, Folksam and Folksam’s local government subsidiary KPA at the beginning of April, the four providers outline why the government should consider a new standalone regulatory framework, based on the current traffic-light system for assessing the financial stability of providers, rather than impose the insurance regulation on the sector from 2019.The framework would formalise the traffic-light system used by regulator Finansinspektionen (FI), which includes stress tests for equity, credit, interest rate, real estate and currency risks, while allowing the providers to maintain their current mark-to-market balance sheets, according to one of the signatories.Signed by Steffan Grefbäck, Jens Henriksson and Mia Liblik, chief executives at Alecta, Folksam and KPA, respectively, as well as AMF deputy chief executive Peder Hasslev, the letter calls on Sweden’s government to agree details of the regulatory framework rather than delegate responsibility for its design to FI. Daniel Burr, Solvency II lead at signatory Folksam, said the letter was an effort by the industry to show it was willing to accept risk-based capital requirements.It comes after plans unveiled in 2014 to allow for a standalone occupational pensions vehicle, with tailor-made capital requirements designed by FI, were resisted by the industry, as it was expected they would only be in force for a limited number of years until IORP II capital requirements were introduced.Discussing the letter, Burr told IPE: “We tried to be helpful and send in this proposal to the government, saying we could accept a risk-based capital requirement.“We proposed they use the present traffic-light system, basically a value-at-risk measure on the balance sheet similar to Solvency II but much simpler, and it’s tailored to Swedish conditions, having been used for 10 years.”Burr noted that, unlike with Solvency II, the traffic-light approach would not need providers to create a new balance sheet, and that they could maintain their current mark-to-market model.He was hopeful the government would consider the initiative.“It’s better to belong to a tailor-made regulation for occupational schemes than apply regulation that should fit everything from insurance to reinsurance and everything in between,” he said.last_img read more

Latin America best placed to meet global 2°C energy target: S&P

first_imgLatin America’s stock market is potentially best placed to meet the COP-21 target of limiting the rise in global temperatures to no more than 2°C, according to S&P Dow Jones Indices (S&P DJI).The S&P Latin America 40 index, which includes 40 leading blue-chip companies in the region, had the second highest carbon footprint, according to S&P DJI’s recently published index scorecard. However, it rated highly for its exposure to companies at the forefront of the transition to renewable energy.The scorecard – which assessed carbon efficiency for the major S&P DJI benchmarks – was published  by S&P DJI and Trucost to provide a barometer for the carbon efficiency of indexes and the direction of travel for each economy’s move to renewable energy, the group said in a statement. “The S&P Latin America 40 is potentially the best positioned index for the low carbon economy,” the company said. “It is already closely aligned with the International Energy Agency’s 2050 global target for energy generation, due to its low exposure to coal power generation and its large hydroelectric power generation share.” The publication of the scorecard comes as more than 200 global institutional investors have called on the heads of state of major world economies to drive investment in low carbon assets and implement climate-related financial reporting frameworks. Overarching these demands was a call for the G7 and G20 leaders to stick with and swiftly implement their commitments to the Paris Agreement on climate change.Richard Mattison, CEO of Trucost, said that many large institutional investors were now incorporating an assessment of carbon risk into their investment processes, with carbon increasingly being considered as an investment factor.Last year, PGGM, the asset manager for the €172bn Dutch healthcare pension fund PFZW, said it would divest the scheme’s stakes in more than 200 mining, steel, and energy companies in a bid to halve its investment portfolio’s carbon footprint.However, many investors have taken a more measured approach towards reducing their environmental impact, preferring to engage with companies rather than divest. A recent report by the Ethical Council for Sweden’s AP funds argued that engaging with companies over environmental and ethical matters was a more sustainable strategy than simply dumping the investments.“The scorecard reflects the market sentiment for transparency and demonstrates the range of metrics that market participants now use to understand carbon risk and opportunities for green growth,” S&P DJI said.The research was based on the S&P Global 1200, which captures approximately 70% of global equity market capitalisation and is formed of seven headline indices.The index with the lowest carbon footprint was the S&P 500 Growth, while the emerging markets index was the most carbon intensive group.last_img read more

Dutch workers lower expectations of required pension, says think tank

first_imgDutch pensions savers have significantly lowered their pension target in the wake of the credit crisis and the financial problems in the pensions sector, a survey by a think tank has suggested.Netspar – the Tilburg-based network for pensions researchers and professionals – said it had found that workers had down-sized the amount they expected to need at retirement by 12% on average, from €1,565 to €1,371 a month.The Netspar researchers also concluded that the expected pensions income, forecasted by pension funds, had decreased even further. Between 2008 and 2014 the expected amount at retirement had dropped 17%, from €1,989 to €1,656, they said.As both the pensions target and expected pension have fallen, the pensions gap – the difference between target and ultimate pension, has only slightly increased. According to the Netspar research, the proportion of workers who are to receive less than their desired pension is now 26%, whereas it would have been 41% without the adjusted target.Marike Knoef, researcher at Leiden University, said that the decrease in the “consumption floor” indicated that pension savers had reacted to the problems in the pensions sector.“People have down-scaled their pension target all along the line, which is good.”Knoef, however, noted that people’s expectations were not entirely aligned with their individual prospects, as also workers whose pensions position had not deteriorated had lowered their pension target.The researchers had not only looked at future income from the state pension, occupational pensions and annuities, but had also considered savings, investments and surplus value of workers’ residential property as these could also be deployed for pension purposes.Knoef said that high earners as well as the self-employed had on average, on a proportional basis, scaled back their pensions target more than workers had. She added that the workers on a higher income had a pensions target that was relatively considerably lower than that of low earners, as the latter’s income lacked sufficient margin for a decrease.In her opinion, it showed that the general assumption that a proper pension equated to 70% of the former salary was not a good principle to base policy on, “as this would be too little for certain individuals but too much for others”.“The pension target should take people’s individual situation into account much more.”In other news, a working group of the Actuarial Society (AG) concluded that a lower retirement age for the state pension would not work for people in physically demanding occupations without extra costs for the taxpayer.In their election manifestor, several political parties had promised to introduce a flexible state pension age for workers in such jobs.The AG argued that the current state pension payments already reflected the minimum subsistence level, and that the benefits discount as a result of early retirement would entitle the target group – usually on low income – to additional social security benefits.The Dutch retirement age for the state pension age is to increase to 67 in 2021, and will further rise with longevity.last_img read more

North Yorkshire eyes insurance-linked bonds amid ‘urgent review’

first_imgThe £3bn (€3.5bn) North Yorkshire Pension Fund (NYPF) has launched a tender for an insurance-linked securities (ILS) mandate in connection with an “urgent” review of its investment portfolio.The local government pension scheme (LGPS) said it was carrying out the review in light of interest rate fluctuations and “performance of some of its fund managers”.“This has proven to be more turbulent as the UK conducts its Brexit negotiations and the Pension Fund Committee wishes to mitigate the risks associated with this at short notice,” it said in a tender notice.The fund would like to introduce some new lower-risk asset classes to its portfolio to remove some of the exposure to these risks, it added. The 2014 Tour de France went through YorkshireSource: Welcome to YorkshireThe pension fund wants to start mitigating risks as soon as possible, and said it needed to be in position to start investing in ILS by June.This was because ILS “can only be accessed twice a year” and the next intake was in June.The pension fund was planning to allocate 3.3%-5% of total assets to the ILS mandate(s), according to the tender, which would be equivalent to around £110m-£165m.The fund indicated it would cut back its equity exposure to fund the shift to ILS.As at 31 March 2017 49% of the pension fund’s assets were invested in equities, plus 8% in diversified growth funds.Its next biggest investments were in UK public sector bonds (14%), and in pooled UK property funds (8.3%). It has a £55,000 allocation to a local private equity fund.North Yorkshire Pension Fund’s investments gained 24.7% in the year to 31 March, 2.9 percentage points above its benchmark. Over five years it has returned 13.6%, 2.2 percentage points above the benchmark.The pension fund is a member of the £43bn Border to Coast Pensions Partnership, which will operate the pooled investments of 12 LGPS funds.In the beginning, investors in ILS were mainly hedge funds. Pension funds increased their participation in the market in recent years, with large Nordic and Dutch pension funds the pioneers.Smaller pension funds, especially in Switzerland, entered the market later, although a Swiss pension fund recently noted that ILS and catastrophe bonds had become quite expensive, especially when hedged in Swiss francs.  Catastrophe bonds, or cat bonds, are a type of ILS. According to offshore law firm Appleby, figures published by the Bermuda Stock Exchange (BSX) and Artemis, an ILS data provider, 2017 was a record year for cat bond issuance ($12.6bn/€12.2bn), with ILS listings on the BSX also reaching a high of almost $26bn.See IPE’s March 2016 and December 2017 magazines for in-depth coverage of insurance-linked securities It also said it wanted to reduce its overall exposure to equities following a recent material improvement in the fund’s solvency level.NYPF said it was considering introducing one or more ILS mandates in this context, noting that the returns from ILS depend on underlying risks that are ”very different from those of traditional assets”.“This facet is unique,” it said. “Allocating to ILS therefore helps in building a more robust overall portfolio with a strong risk/return profile.”last_img read more

IPE Conference: Irish government wants to lead in green finance

first_imgWith the Irish economy having recovered after the financial crisis, its government now wants to “set apart Ireland” in the field of green finance.“We want to establish an expertise and a proven track record in green finance,” the country’s finance minister, Paschal Donohoe, told delegates at the IPE Conference in Dublin yesterday.He added that Ireland “had been making green finance a priority since 2012” and was “fully supporting” the European Commission’s action plan on sustainable finance.Ireland was particularly supportive of “the proposals under the action plan to improve transparency of finance companies with regards to their carbon footprint”. In October, Ireland raised €3bn by issuing a government-backed green bond, making it one of the first governments to issue such debt.In general Donohoe said it was important to better assess the impact companies and their investments have on the society and environment. Source: Fine GaelPaschal DonohoeAt the end of 2017 “nearly 42,000 people” were employed in the financial services sector in Ireland across 100 companies, according to the finance minister.The country’s road to a greener and more sustainable Ireland also included investments in renewable energy, support for local businesses and strengthening of the pension system.“We now have an opportunity to increase quality and quantity of pension savings in Ireland,” Donohoe said. The new “more holistic approach” to pensions will include an auto-enrolment element, as well as new regulations for private sector pension schemes and an overhaul of the state system.Donohoe emphasised that to boost the Irish economy and achieve the country’s goals “public funds alone won’t be sufficient”. “Mobilising private sector finances is essential,” he said.last_img read more