UK roundup: Somerfield Pension Scheme, longevity market, Partnership Assurance

first_imgThe Somerfield Pension Scheme has appointed BNY Mellon to provide custodial services for the £800m (€963.5m) scheme.The appointment of BNY Mellon follows similar contracts with the other schemes of Somerfield’s parent, the Co-Operative Group.BNY Mellon currently services the £7.4bn Co-Operative Group Pension Scheme and the £625m Britannia Pension Scheme.Mike Thorpe, pension finance and risk controller at the Co-Operative, said the success of the existing relationship and BNY Mellon’s strength as a financial institution were key to the appointment. In other news, consultancy Aon Hewitt has suggested the capacity for longevity swaps over the next two years could reach £100bn.It said it based its prediction on availability in the reinsurance market, which is showing signs of maturity after 2013 proved a bumper year for deals.A total of £8.9bn in longevity swaps were completed last year, Aon Hewitt said, with 15-20 providers now operating in the space, compared with only six when the market began in 2009.Matt Willmington, a partner at the consultancy, said capital markets could also offer funding capacity along side the reinsurance industry.However, he said it would be several years for this to materialise due to differing objectives among investors and pension schemes, and their lack of competitive edge over reinsurers.Lastly, an undisclosed pension scheme has transacted a £33m medically underwritten pensioner buy-in with Partnership Assurance.The members of the pension scheme belong to the building and civil engineering industry, leading the scheme to consider the underwritten buy-in as most appropriate.The deal is the largest single underwritten buy-in to date and covers the majority of the scheme’s pensioner liabilities.Andrew Cheeseman of PAN Trustees, who chairs the board, said the medical questionnaire sent to members was well received.The deal also proved significant in allowing the scheme to de-risk while providing security for members, he said.last_img read more

Institutional investors inflating catastrophe bond prices, expert says

first_img“I know one Swiss Pensionskasse that has a 5% exposure, but this is an exception,” he added.Ramseier said he also saw a new, strong trend towards investments in private insurance debt among Pensionskassen – not least because of Solvency II.“There are around 5,000 insurers in Europe, and only around 70 of those are big enough to issue bonds to gather money on the capital market – but many of them will need more capital under Solvency II,” he said, adding that banks were pulling out of this segment.According to him, some insurers will want to replace “expensive equity” with “cheaper debt” capital under the new regulations, which will in turn “create opportunities” for institutional investors.“Many Pensionskassen are now going back into more illiquid investments to collect on the illiquidity premium – while a year ago they were mostly still very cautious,” Ramseier said.Twelve Capital began life as an independent boutique in 2010 when it bought Solvency I bonds by insurers at half the price, betting on their having to be repaid as they did not fit into the new legal framework under Solvency II.Today, the boutique manages $3bn almost exclusively for Pensionskassen and will soon expand from Switzerland to London.From next year, the company will also offer private equity products investing in the insurance sector, as Ramseier expects Solvency II to lead to a “major restructuring” in the European insurance sector.He said Solvency II “creates a European market for ILS”, as all insurers now have the same legal framework regarding capital requirements, while before there had been many small markets within Europe. Catastrophe bonds’ attractiveness is waning, as pension funds from the Netherlands, Nordic region and UK have piled into the market over the last 6-12 months, compressing yields, according to Urs Ramseier, chairman at Swiss boutique Twelve Capital.“With a market size of $20bn (€14.7bn) in cat bonds globally,” he told IPE, “it does not take many large pension funds to affect prices.”Ramseier said the spread compression on insurance-linked securities (ILS) had been “very pronounced” in recent months, as catastrophe bonds witnessed a “massive decline” in yields.Over the past 10-15 years, catastrophe bonds have become more or less part of the “standard asset allocation” for Swiss Pensionskassen, with an average exposure of between 1% and 3%, Ramseier said.last_img read more

Friday people roundup

first_imgPwC – Bradley Phillips has been appointed as an asset management tax director. He will focus on advising investment funds and asset managers on a range of tax issues. He joins from Herbert Smith Freehills, where he was a tax partner mainly focused on M&A and other corporate transactions, tax disputes and investment funds. AXA Investment Managers, Pictet Asset Management, Bouwinvest, PwCAXA Investment Managers – Martin Powis has been appointed business development manager, joining from Ignis Asset Management, where he was head of institutional sales. Before then, he was at Deutsche Asset and Wealth Management as vice-president of institutional, as well as Gartmore Investment as UK business development manager. He has also held roles at Prudential M&G Investment Management, Cazenove Fund Management and State Street Bank.Pictet Asset Management – Frans Annokkee has been appointed senior business development manager, responsible for the institutional market in the Netherlands and based in the Amsterdam office. With this appointment, Pictet AM extends the Dutch office with a “permanent foothold” in the local institutional market. He joins from Syntrus Achmea, where he was business development director. Before then, he mainly worked at Kempen & Co.Bouwinvest – The €6bn Bouwinvest Real Estate Investment Management has appointed Arno van Geet as CFO, as of 1 October. As a member of the executive team, Van Geet will be responsible for financial and risk-management processes, including accounting, reporting, control, audits, business process management, IT and research. Currently, Bouwinvest’s new CFO is financial director at Allianz Netherlands. Previously, he worked at insurer Interpolis and Westland Utrecht Hypotheekbank.last_img read more

Dutch roundup: Recovering coverage, harsher prison sentences

first_imgThe average coverage ratio of Dutch pension funds increased by 3 percentage points in February due to improving equity markets and increasing interest rates, according to consultancies.Aon Hewitt and Mercer, employing slightly different methods, both concluded that funding increased over the period (to 106% and 107%, respectively).Aon Hewitt noted that European equities returned 7% last month following the ECB’s announcement of its government-bond purchasing programme.Both consultancies estimated that Dutch schemes’ global equity allocations returned 6% over the period, while the slight increase in market rates led a marginal loss for fixed income holdings. According to Aon Hewitt, the average Dutch scheme’s investment portfolio returned 2% over the month of February.Since 1 January, Dutch coverage ratios have been calculated using the current interest rate with the application of the ultimate forward rate.In addition, pension funds also must use the 12-month average of their funding rate as a “policy coverage ratio”, which is now the criterion for indexation and rights cuts.According to Aon Hewitt, the policy coverage ratio remained stable at 109% in February.At 110%, schemes can start granting compensation for inflation.Mercer recorded a slight drop in policy funding to 109.2%, according to Edward Krijgsman, team leader for monitoring.However, Krijgsman and Frank Driessen, COO at Aon Hewitt Retirement & Financial Management, both stressed that, if the current funding failed to improve, the policy coverage would fall over the course of the year.In other news, the Amsterdam Court of Justice has sentenced a former chief executive of the Philips Pensioenfonds and a former CFO of the scheme to five-year prison sentences for property fraud.The court verdicts came following an appeal by the Public Prosecutor against initial sentences of four and three years, handed down by the Haarlem magistrates court.Another former director of the Philips pension fund saw his initial prison sentence doubled to two years for taking bribes from a former director of property investor Bouwfonds, who received a seven-year prison sentence.The court estimated that the Philips scheme and Bouwfonds had lost €150m and €100m, respectively, due to the fraud, discovered almost 10 years ago.The Public Prosecutor pointed out that the parties had been able to claim back €141m in total to date.last_img read more

ESG roundup: PRI, ExxonMobil, SEC, ERAFP

first_imgThe latter is how the German occupational pension fund association, aba, recently described the situation concerning responsible investment and ESG in Germany, albeit more as a description of a state of play than a judgement. This reverberates negatively, it added, by limiting the willingness of investment managers and consultants to focus on responsible investment and ESG issues and also affecting the relationship between investors and policymakers.Many of the latter, it said, are sceptical about asset owners’ commitment to responsible investment.The report sets out five barriers to a more proactive approach to responsible investment by asset owners, one of which is “the perception that ESG issues do not add value to investment decision-making”.The solutions flagged by the PRI are for asset owners to build their own internal evidence base and share experiences with their peers.It said asset owners should publish investment beliefs and integrate sustainability factors in the selection and monitoring process for asset consultants, other advisers and investment managers and other advisers.In other news, the US Securities and Exchange Commission (SEC) has reportedly declined a request from ExxonMobil not to hold a vote on a climate-change shareholder resolution backed by institutional investors.Exxon had written to the SEC to ask permission to drop the resolution from its proxy voting materials for the 2016 annual general meeting.In its response, the SEC said that it disagreed with Exxon’s view that the shareholder resolution was “so inherently vague or indefinite” as to be problematic or that Exxon already provided disclosures that “compare favourably” with the guidelines of the resolution.The Church Commissioners for England, which runs the Church of England’s £6.7bn (€8.7bn) endowment fund, was one of the investors that urged the SEC to deny Exxon’s request.Edward Mason, head of responsible investment for the Church Commissioners, said: “We are delighted that shareholders will have the opportunity to confirm that they would like ongoing assurance from ExxonMobil that the company is positioning itself for the transition to a low carbon economy.”Ceres, a US-based sustainability advocacy group, hailed the SEC ruling as “a huge victory for investors seeking more robust carbon disclosure from US energy companies”.“The decision paves the way for an unprecedented collaboration between European and US investors to build strong support for a common-sense approach to planning for the energy transition that is underway,” it added.The SEC also denied a request from Chevron block a similar shareholder resolution, according to Ceres.Meanwhile in France, ERAFP, the €23.5bn additional pension fund for civil servants, has tweaked its shareholder voting policy by making its position on female board membership more demanding.It raised its minimum requirement to 35% from 30% of women on boards.Its 2016 engagement strategy and voting policies will otherwise focus on the same areas as in 2015, such as fighting climate change and aggressive tax optimisation practices. Asset owners are sending “weak and fragmented” signals on responsible investment that undermine its integration in the investment chain and progress towards a sustainable financial system, according to a report from the UN-backed Principles for Responsible Investment (PRI).It said that, although many asset owners have made commitments to responsible investment, most do not implement them effectively.Also, there are inconsistencies in investment practices, while responsible investment commitments are not embedded in investment mandates.Weak implementation of responsible investment sends signals that it “is not a priority for asset owners”, said the PRI.last_img read more

GAM forced to halt dealing for €6.3bn bond funds after redemptions spike [updated]

first_imgThe management boards of the affected funds were “considering all future steps, including fund liquidations, to maximise value and liquidity for clients”, the company said.The affected funds had CHF7.3bn (€6.3bn) in assets under management as of 31 July when trading was stopped.In addition to the absolute return bond funds, Haywood also worked on trade finance portfolios worth CHF2.9bn and other fixed income strategies worth CHF653m. These have not been affected by the investigation.There have been no changes to the investment process and philosophy behind the funds, and no other GAM strategies have been affected, the company said.It added that it had not discovered any “material client detriment” during its investigation but the situation remained “under review”.“GAM is committed to ensuring equal treatment of all investors and protection of their interests,” the statement said. “The company is actively engaging with clients and is focused on resolving the situation as quickly as possible for investors.” Investment directors Jack Flaherty and Alex McKnight were jointly placed in charge of the absolute return bond strategy following Haywood’s suspension.Alexander Friedman, group chief executive at GAM, added that the company was “fully committed to safeguarding the interests of our clients”.Chairman Hugh Scott-Barrett said: “The board of directors acknowledges that recent events have been a setback for the company.“However, we have absolute confidence in the strength of GAM as a diversified asset manager and the ability of its investment teams to deliver returns for clients.“We have a clear strategy and management will continue to execute against it.”Zurich-based GAM ran CHF163.8bn in total as of 30 June, across equities, bonds, multi-asset and hedge funds.[This article was updated to state that GAM had halted dealing in the bond funds rather than trading.] Swiss asset manager GAM has halted dealing in its unconstrained and absolute return bond funds after a spike in redemption requests following the suspension of a fund manager.Clients began pulling their money out of the funds following the suspension of Tim Haywood, head of the strategy’s management team, on 31 July.The company announced his suspension on Tuesday morning after an internal investigation highlighted problems with his risk management and record keeping.In a statement today, GAM said it had halted dealing in and out of nine absolute return and unconstrained bond funds run by Haywood’s team to protect investors. It also stopped charging management fees on the affected portfolios.last_img read more

​SEB joins major Danish pension funds in SDG fundraising round

first_imgThe pensions arm of Sweden’s SEB financial group has backed a government-backed Danish investment fund targeting commercial investment in developing countries.SEB Life & Pension is one of three new investors committing capital to the Danish SDG Investment Fund, which supports the UN’s Sustainable Development Goals (SDGs) through its investment.The other new investors in the final round of fundraising were Secure SDG Fund and Chr. Augustinus Fabrikker, the investment company of the Augustinus Foundation.In June 2018, the fund was launched via a deal between IFU – Denmark’s state investment programme for developing markets – and pension providers PKA, PensionDanmark, PFA, ATP, JØP/DIP and PenSam. The IFU agreed to contribute 40% of the capital with the private investors putting in 60%.Following the latest fundraising, the total commitment hit DKK4.85bn (€650m), compared to DKK4.1bn in June. However, this was slightly below the original target of DKK5bn.Rebecka Elkert, responsible investment specialist at SEB Life & Pension, said: “We see the investment as an important part of our efforts to let sustainable investments permeate our traditional portfolio management.”The fund was an innovative example of public and private capital joining forces to make a difference, and at the same time make commercial investments with solid returns, she said.“IFU has more than 50 years of experience investing in developing countries and lifting people out of poverty,” Elkert said.Torben Huss, CEO of IFU, said: “We are very pleased to welcome three more investors and complete the fundraising for the Danish SDG Investment Fund very close to the original target of DKK5bn.”The Danish SDG Investment Fund will make equity investments in companies in Africa, Asia, Latin America and parts of Europe, mainly in cooperation with Danish businesses.Because the new fund aimed to mobilise capital in developing countries, in total the fund’s investments were expected to be around DKK30bn, IFU said.last_img read more

Half of FTSE 100 companies could buy out DB funds in 10 years: report

first_imgMore than half of the top 100 listed firms in the UK will be able to secure an insurance buyout for their defined benefit (DB) schemes within 10 years, according to a report by consultancy Barnett Waddingham.The firm’s research paper – FTSE 100 dividends vs deficit contributions – showed that 55% of FTSE 100 company DB schemes could secure a buyout by 2029. This figure increased to 70% if companies diverted an extra 6% of profits into these pension schemes, Barnett Waddingham said.If 7% more of current shareholder payouts were put into contributions, then 30% of FTSE 100 schemes would be in a position to conduct a buyout in the next five years, the consultancy reported.Combined post-tax profits of FTSE 100 companies with DB schemes rose from to £134bn (€149bn) in 2018, from £57bn in 2009, it said. However, as profits have risen, payments to shareholders – through dividends or share buybacks – have risen even faster. In contrast, deficit contributions to DB schemes fell by 10% over the same period to £8.3bn per year, Barnett Waddingham said.Putting a bigger share of profits into pension schemes would drastically accelerate the endgame journey, the consultancy said, and allow companies to de-risk much sooner.Stepping up contributions was also the best way to keep potential regulatory action at bay, the group added. The Pensions Regulator (TPR) has been scrutinising the balance between dividends paid to shareholders and contributions to pension funds.Nick Griggs, head of corporate consulting at Barnett Waddingham, said: “Political instability and economic uncertainty is growing, and has the potential to disrupt both pension scheme deficits and companies’ abilities to pay them down.“And following record dividends, and recovering profits, many companies will also be coming under increasing pressure from TPR to adequately fund their DB pension schemes and strike a more even balance between payments to shareholders and those to plug scheme deficits.“Having a robust, coherent plan in place for the DB endgame journey will be the best defence against any intervention from TPR, as it will take comfort from the framework that has been put in place.”Griggs said tackling pension liabilities had been a key challenge for FTSE 100 companies since the financial crisis.“Thankfully, the total pension deficit has been slowly shrinking on the back of recovering asset prices and the contributions paid by companies,” he said. “The DB endgame is increasingly a realistic short-term focus for many companies and the dividend versus deficit contribution balance is a key lever for those nearing the end of their journey.”last_img read more

​Finland’s VER warns on weakening private credit covenants

first_img“The increase in the capital available for investments and intensifying competition affected the covenant policies adopted by fund managers,” it said.VER’s return on private credit funds dropped to 1.7% in 2019 from 12.4% the year before, while direct non-liquid lending produced a 4.9% return – up from 3.8% in 2018.The pension fund only has 2.1% of its overall portfolio invested in the category of “other fixed income investments”, which includes private credit funds and direct non-liquid lending.However, in general fixed income investments had performed better than expected.Timo Viherkenttä, VER’s chief executive officer, said: “The year was excellent, particularly for equity investments, but fixed income investments also proved a pleasant surprise, and VER invested quite heavily in the fixed income market in the emerging economies, which, once again, gave a splendid return.”Listed equities generated a 24.6% return, compared with -7.4% the year before, and liquid fixed income returned 5%, up from -1.9%, the pension fund reported.Central banks had played a key role during the year for market sentiment, VER said, with their assurances, action and continued expansive monetary policy serving to counteract uncertainties over the US-China trade talks and Brexit.The Financial Times yesterday reported that internationally, assets invested in private debt – largely made up of non-bank loans to unlisted companies – grew to a record $812bn (€732bn) last year, and that even industry insiders were warning “the boom in private debt is turning into a frenzy”.VER’s former leader Timo Löyttyniemi has rejoined the fund today as CEO after five years in a different job, replacing Viherkenttä who is now returning to academia. Finland’s State Pension Fund, Valtion Eläkerahasto (VER), has warned in its annual report that the increasing volume of capital now chasing private credit has affected covenant policies adopted by fund managers.The pension fund, which acts as a buffer for government staff pensions, posted a 13.8% return on investments for 2019 – up from 2018’s 3.4% loss. Listed real estate investment trusts (REITs) ending up as the most profitable asset class, producing a 28.1% return as the funds emulated the strong performance of the equity markets, VER said.Commenting on non-liquid fixed income investments, VER said in its annual report: “Non-existing or weaker loan collateral has given rise to concerns about future returns on private credit funds in the coming years.”The Helsinki-based fund said it had expected a correction in non-liquid fixed income markets for some time now, but that interest in private credit investments had continued to grow.last_img read more

Prices slashed on two Gold Coast mega mansions

first_imgThe modern mansion at 87 Admiralty Drive, Paradise Waters has had more than $1.5 million cut from its price. This Southport mansion reflects the coastal lifestyle. It looks like a palace inside.The five-bedroom, four-bathroom home features a wine cellar, library, pool and alfresco area with built-in barbecue.The vendors told the Bulletin earlier this year they went to great lengths to recreate the classic Hamptons architecture.“We wanted absolutely traditional Hamptons, we even imported the shingle roof from America,” said vendor Greg Matthews.“It was really my wife’s choice, she just loves the overall architectural style.”Kollosche Prestige Agents are marketing both the properties. It’s the epitome of luxury living with modern features and quality fixtures.More from news02:37International architect Desmond Brooks selling luxury beach villa16 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days agoIt is now listed with an $8.95 million price tag.The five-bedroom, six bathroom house, which was designed by renowned architect Bayden Goddard, has an infinity edge pool, CBUS home automation system, commercial lift, gym, media room, wine cellar and 12m pontoon.Owners Barry and Pamela Quaill described it as their “dream home”.“I don’t think I would change too much if I was building another house,” said Mr Quaill, a retired businessman.“We wanted the house to be timeless and we didn’t want the architecture to date. “We obviously also wanted to take advantage of the north-facing block.”At Southport, the price of a Hamptons-inspired estate has dropped by more than $500,000.The Yacht St property, which also overlooks main river, was listed in March with a $9.5 million asking price.It is now listed under another agency with a price of $8.95 million. The price of this Hamptons-inspired mansion at 1a Yacht St, Southport has been slashed by more than $500,000.FANCY a luxury mansion but can’t quite afford the hefty price tag that comes with it?Now is your chance to pounce as two of the Gold Coast’s finest properties have had their prices slashed.A waterfront mega mansion at Paradise Waters has had more than $1.5 million cut from its asking price after two months on the market.The sprawling Admiralty Drive residence overlooking the Nerang River was listed in June for $10.5 million. It’s gorgeous from every angle. It was designed by renowned architect Bayden Goddard.last_img read more