Belgian’s pension minister hopes to lure a greater number of cross-border pension funds to the country, pledging to work with the Finance Ministry to ensure an “attractive” framework for schemes is in place.Giving the keynote address on the second day of the IPE Conference & Awards in Barcelona, Daniel Bacquelaine outlined a number of recent reforms he said would ensure the future sustainability of the Belgian pension system.He also highlighted the role Belgium could play as host nation to cross-border pension funds, which can set up in the country using its organisation for financing pensions (OFP).Bacquelaine noted agreements in place to avoid double taxation as one of the reasons Belgium was attractive for cross-border activities, of which 11 are currently in place. This number is well behind the 50 located in Ireland and the UK, and only a fraction of the 75 known to the European Insurance and Occupational Pensions Authority (EIOPA)But Bacquelaine pledged that the government would work on attracting new funds to base themselves in Belgium.“The government will ensure Belgium keeps on being an attractive place for the pan-European pension fund,” he said.“I am intent on taking measures, together with my colleague the finance minister, to remove administrative obstacles.”Moves to Belgium have proven controversial.The Dutch scheme for Bristol-Myers was the latest in a string of funds to see a cross-border transfer blocked by its works council, representing the interests of employees.Concerns over less stringent regulatory structures in Belgium have also led to concerns of regulatory arbitrage.The French regulator allegedly advised pension fund UMR not to move its assets to an OFP, a step that was in 2013 investigated by the European Commission.
“This measure is the biggest blow against the fledgling second-pillar system in its eight-year history,” he told IPE.“We at APAPR made great efforts before the end of 2015 to prevent this and try to convince the government to respect existing legislation, but several populist measures have had more success in making it on the final national budget adopted for 2016.”According to Romania’s Financial Supervisory Authority (ASF), the second pillar had 6.5m members and net assets of RON24.3bn (€5.5bn) as of the end of November 2015, while contributions over the 12-month period totalled RON5.2bn.In related news, the ASF has slashed fees for voluntary third-pillar operations by 50%, cutting the annual asset management fee to 0.01% of net assets, the up-front monthly contribution to 0.25%, and the depositary levy to 5%.These took effect at the start of 2016.The third pillar is considerably smaller than the second, with 378,370 members and net assets of RON.2bn as of the end of November 2015.The fee reductions, however, have also left the industry underwhelmed.Bobocea noted that it fails to compensate for the 2012 decision by the ASF’s predecessor, the Private Pension Supervision Commission (CSSPP), to raise second-pillar fees, as of 2013, by 60%.“That will also have a negligible effect on the financial situation of the industry,” he said.“The APAPR requested a reversal of an exaggerated 60% hike in second-pillar fees in 2012, which still remains a huge burden on the industry.“Basically, the regulator only ‘gave back’ 10% of the requested cut in fees and kept 90%, which is totally unreasonable and unfair.” Romania’s mandatory second-pillar pension funds received scant compensation this year after the government’s 2016 Budget raised the contribution rate by 0.1 percentage point to 5.1% of gross wages, not the 6% earlier stipulated in law.The 6% rate is now set to kick on in 2017.Previous reports suggested the 2016 contribution rate would be frozen at 5%, a measure the Romanian Pension Funds’ Association (APAPR) estimated would cost future pensioners €200m.According to Mihai Bobocea, adviser to the APAPR board, the impact of the so-called “increase” will be negligible.
Finland’s State Pension Fund (VER) achieved a 4.9% return on its investments in 2015, according to preliminary figures, down from 7.8% the year before.The fund said private equity had produced the highest return of all asset categories over 2015, while the return from fixed-income investment was barely positive at 0.2%.Timo Viherkenttä, VER’s chief executive, said: “All the asset classes invested in by VER in 2015 yielded a profit despite the highly volatile markets.”At the end of last year, the market value of assets stood at €17.9bn, up from €17.6bn at the end of 2014. The increase comes despite VER being required to contribute a further €500m to the 2015 Finnish government budget under a one-year exceptional law, coming in addition to its payments to cover state pension expenditure.Viherkenttä said returns had been good in particular from private equity, infrastructure, real estate and private credit funds.“Any return exceeding five percent underpins the financial base of the state’s pension system,” he said.The full-year return is markedly higher than the nine-month return VER reported in October of just 1.1%.The pension fund said that given the slightly negative rate of inflation, its investment return for 2015 had been 5.1% in real terms.Private equity funds alone generated 18.6% last year.Of the large asset classes, listed equities produced 10.3% and liquid fixed income instruments returned 0.2%, it said.VER’s asset allocation shifted towards equities and away from fixed income during the year, with the latter accounting for 49% of investments at the end of December compared with 50.4% a year earlier, while equities made up 43.1% of the asset mix — up from 39.5%.The category of “other investments” slimmed to 7.5% from 10.1%, data showed.
May further suggested corporate board composition should be changed to include not only consumer representatives but also members representing employees – an established practice in parts of Continental Europe, including Germany and the Scandinavian nations. Representatives of the pensions and responsible investment community all gave a cautious welcome to the ideas outlined by May, set to be sworn in as prime minister on 13 June.Fergus Moffatt, head of public policy at UKSIF, noted that the UK currently had a binding vote on remuneration every three years, but he welcomed the potential for more regular binding votes.“It will be crucial to see what the policy is – and to see it fleshed out in more detail, to be put to public consultation with investors, business and civil society,” he said. May also criticised “transient shareholders”, alluding to the role of asset managers in approving mergers and acquisitions, and stressed that shareholders were not the only ones affected by such transactions.Jonathan Hoare, director of policy at ShareAction, said the organisation was “heartened” by the outgoing home secretary’s comments.“There’s a theme running through the speech of long-termism, of custodianship, of stewardship of assets and institutions important to wider society,” he said.Hoare further held out hope the new UK Cabinet would reform fiduciary duty, a matter championed by the organisation even before the UK Law Commission published proposals for change in 2014.Reform proposals were rejected by the Department for Work and Pensions last year.Luke Hildyard, policy lead for stewardship and corporate governance at the Pensions and Lifetime Savings Association (PLSA) joined Moffatt and Hoare in stressing it would be important to await the detail of any proposals, and noted a campaign speech should not be equated with a firm policy proposal, or even a pledge during a general election campaign.“The key point to emphasise is that the devil will be in the detail once her words are turned into something more concrete,” he said.Hildyard nonetheless said May’s speech appeared reasonable and welcomed her attention to the matter of executive pay, which he said had long been a concern of PLSA members. The UK’s responsible investment community has welcomed comments by the country’s incoming prime minister, Theresa May, indicating she would introduce a number of sweeping corporate governance reforms, including a more regular binding vote on pay.May, confirmed as the next prime minister after her competitor to succeed David Cameron withdrew from the race on 11 July, pledged during her first, and now last, major campaign speech that she would tackle “corporate irresponsibility”.In addition to pledging to make votes on remuneration packages binding, May also argued in favour of greater corporate transparency, saying companies should publish pay ratios. The Local Authority Pension Fund Forum and UK unions have long called for the ratio between the pay of management and average workers to be disclosed, and France’s civil service pension fund ERAFP has opposed any pay packages where executive remuneration exceeds 50 times median pay.
The global equities portfolio returned 2.8% between January and June.The Danish equities portfolio, however, made a loss of 2.5%, 1.5 percentage points below the comparison index.Shares, which were overweight compared with the benchmark at the start of the year, were reduced to a neutral weighting in the second quarter, while Gilt-edged bonds were overweight in the period, LD said.Meanwhile, Danish lawyers and economists’ pension fund JØP and engineers’ pension fund DIP – which now have joint investment and administration activities – reported half-year investment returns of 2.6% and 1.3%, respectively.In the same period last year, the funds reported returns of 3.1% and 4.9%.Torben Visholm, chief executive at both schemes, said: “After a limping start to the year, equities came on well, and since both bonds and alternative investments such as property, for example, benefited well from the continued fall in interest rates, 2016 looks at this point a little better than expected.”In other news, labour-market pension provider PenSam posted a 4.7% overall return for the first half and said the fall in interest rates during the period had boosted returns on guaranteed pension products in particular.The return is up from the 3.7% return PenSam Liv reported for a typical pension customer in the same period last year.Reporting interim results, the pension fund said: “The return was achieved in a difficult market, where there continues to be great uncertainty, not least on the equities markets.”PenSam said interest rates had fallen to new record lows, partly because of the Brexit vote.“The fall in interest rates contributed positively to returns on pension products with yield guarantees,” it said.Elsewhere, Lærernes Pension – the Danish pension fund for teachers – reported a 5.2% investment return for the January-to-June period and said that, by the end of August, the year-to-date return had increased to around 9%.The first-half return compares with the 3.7% posted for the first half of 2015.Morten Malle, the pension fund’s CIO, told IPE the main contributors to the result had been the fund’s exposure to emerging markets, low-volatility strategies and the fall in interest rates. Denmark’s Lønmodtagernes Dyrtidsfond (LD) made a 2% total return on investments in its main LD Vælger product in the first six months of this year and has increased its investment in Gilt-edged bonds in the period.The result fed through into a 1.5% attributable return before pensions tax in the half year, down from the 4.6% return reported on the same basis in the first half of 2015, according to the pension fund’s interim report.Singling out its US investment manager for global equities MFS for praise, LD said the manager had delivered results significantly better than the general market since 2011.“This has happened with an investment strategy focusing on defensive shares, less sensitive to changes in market mood,” the pension fund said.
The Danish pension fund for pharmaconomists (Pensionskassen for Farmakonomer) has awarded the contract for its pensions administration to PKA, which runs three social and healthcare sector pension funds.Henrik Klitmøller Rasmussen, chairman of the DKK10.4bn (€1.4bn) pharmaconomists’ pension fund, said: “We had many high-quality offers, but we think the best offer overall came from PKA.“We have gained a solid platform with a high level of expertise and service, with a low level of costs.”Peter Damgaard Jensen, chief executive of PKA, which has DKK250bn of assets under management, said: “The more members PKA has, the more robust it is, and the greater the possibility we have of being able to give both current and future members advantages in the form of high returns, low costs and pension increases.” In January, the pension fund for pharmaconomists said it had started looking for another pension fund to partner with, after outsourcing all its investment to BlackRock in 2016.The scheme’s switch to PKA will take effect from the start of 2018. It said its 7,800 members would see a significant reduction in their annual administration costs from that point. Klitmøller Rasmussen said costs would be well below half their current level once the transition costs had been paid. These transition costs would be paid off in one to two years, he said.In the last few years, many independent labour-market pension funds in Denmark have merged with each other or with commercial pension providers, after coming under pressure because of increasingly onerous regulatory demands as well as the competitive pressure to lower costs.The pension fund for pharmaconomists is the smallest independently run pension fund in Denmark. Under the PKA deal, the pension fund said it would continue as an independent organisation with its own supervisory board, actuary and with the annual general meeting remaining as the highest authority. Pharmaconomists – a term specific to Denmark – are specially qualified experts in the field of pharmaceuticals.PKA has been actively seeking new members and contracts to run private sector pension schemes since last autumn, when it announced it had developed a new pension product.In January, PKA won a contract to provide pensions for the Danish Chiropodists’ Association’s (Danske Fodterapeuter) 1,800 members.
In addition, Ashburton will retain oversight of all client relations, distribution and services while the US asset manager will provide advisory services on security and fund selection, as well as support the implementation of asset allocation decisions. “This strategic partnership with Ashburton Investments reflects the depth of both of our firms’ ambitions in offering clients world-class investment portfolios which truly reflect their needs,” said James Bateman, CIO at Fidelity Multi Asset.Managers’ digital strategies ‘fragmented’Some asset management staff are concerned their firms are lagging behind in adopting new technologies, according to a survey by consultancy Alpha FMC.A poll of senior technology staff from 15 global asset management companies found that nearly a quarter (23%) thought their companies’ “digital maturity” was fragmented and developing too slowly.More than two thirds (69%) of respondents said old technology was a “primary obstacle” to developing a digital strategy, while 62% felt there was a need for “a widespread change in company culture and mindset”.On average, fund management companies spent £15m (€17.2m) a year on digital development – although the spread between the highest and lowest spenders was broad, Alpha FMC said.The majority of managers surveyed said they had not invested in fintech, and just 15% said they were actively integrating specific technologies such as artificial intelligence. However, Alpha FMC said its research suggested a shift in the next few years towards technologies such as machine learning and blockchain.Kevin O’Shaughnessy, head of digital at Alpha FMC, said: “The asset management industry is at a key juncture, facing a mix of technological, regulatory and client behavioural shifts. Digital transformation is seen as essential to future success.“Firms know the commercial benefits to be derived from digital investment, covering both the ability to acquire and retain clients but also the impact of improved client satisfaction, both of which lead to increased assets and revenue. How to remain ahead of the curve is now a board-level agenda item for many firms.” Link partners with software company for private equityInvestment fund administrator Link Asset Services has struck a deal with software provider AltaReturn for the latter to provide fund accounting and reporting services for private equity managers.Link was recently appointed to two Local Government Pension Scheme asset pools – ACCESS and the Wales Pension Partnership – to administer more than £56bn worth of combined assets. The deal with AltaReturn would offer private equity investors “streamlined processing, greater scalability and increased transparency”, Link said in a press release.Norma O’Sullivan, managing director of Link Asset Services in Jersey, said the partnership would “help [general partners] significantly improve the level of reporting and transparency – key requirements of existing and potential investors”.Note: This article has been updated to amend the roles of Ashburton and Fidelity following an error in the press release. Ashburton Investments has teamed up with Fidelity International to beef up its range of international multi-asset funds and services.Under the terms of the agreement, Ashburton – the fund management arm of the South African FirstRand Group – will be able to tap into the expertise of the multi-asset team at Fidelity, which as a group manages more than $320bn (€260bn) of assets globally.Boshoff Grobler, CEO of Ashburton Investments, said: “Fidelity’s market-leading research capability and specialist knowledge in global asset allocation and security selection significantly strengthens our proposition.”Ashburton will maintain responsibility for global macro views and tactical asset allocation. Strategic asset allocation will be driven jointly by both firms.
UK-based fiduciary managers and investment consultants are now legally obliged to provide clearer information about fees and costs charged to pension funds, after last year’s Competition and Markets Authority (CMA) ruling was made law yesterday.The CMA concluded a 15-month investigation into the markets for investment consulting and fiduciary management in December, recommending that fiduciary providers should provide “more information on their fees and performance” to enable trustees to make a more informed choice.John Wotton, chair of the CMA’s investigation, said: “Our investigation found that many trustees lack the information needed to assess and compare investment consultants and fiduciary managers, meaning they may not be getting the best value for their members’ money.”In addition, the new rules require pension scheme trustees outsourcing 20% or more of assets to a fiduciary manager to conduct a competitive tender for the mandate, including at least three providers. Schemes that have already employed a fiduciary manager without a tender must do so within the next five years. Investment consultants that also provide fiduciary services must separate advice material from marketing, using wording provided by the CMA in its rules . John Wotton, CMAOn fees, the CMA’s order stated that fiduciary managers must issue fee statements to clients “in good time, on a regular basis and at least annually”, setting out cost data “in a comprehensible form” so trustees could understand and act on the information.All those affected by the new rules have six months to comply, or the CMA could take them to court.Celene Lee, senior investment consultant at pensions consultancy Buck, said: “The more rigorous selection process for appointing a fiduciary manager as outlined by the CMA today will not only help to solve this problem on competitiveness, but is likely to lead to trustees questioning what an appropriate exit strategy might look like and have full understanding of it before fully engaging with a fiduciary manager.”Patrick McCoy, head of advisory at XPS Pensions Group, added: “Some investment advisers may not be very incentivised to explain the new CMA requirements clearly to their clients and so it is the responsibility of the industry to ensure trustees are aware of the requirements for them to run a competitive tender process and look for someone who can help them, conflict free.”Richard Dowell, co-head of clients at Cardano, said the legal text was “of vital importance to help raise standards in the industry and improve the pension outcomes for thousands of trustees and scheme member beneficiaries”.
This would rank the general pension fund as the third biggest in the Netherlands, after Aegon’s APF Stap (€5.8bn) and Het Nederlandse Pensioenfonds, owned by insurer ASR (€3.5bn).The Sligro scheme is transfer to a separate section of Centraal Beheer, the third scheme to do so after the Dutch pension funds of Royal Bank of Scotland and brewer Bavaria.Centraal Beheer APF also operates four different defined benefit sections as well as a defined contribution compartment.In 2016, the Sligro Pensioenfonds said it would remain independent. However, its annual report for 2018 indicated that it had changed its mind after its administration costs rose from €197 to €217 per member, as a consequence of higher costs for board support and increasing regulatory pressures.The scheme also cited the limited availability of new trustees and expiring contracts with the scheme’s asset manager BMO and its administrator AZL.The annual report also revealed that the Sligro scheme had decided against joining the €1.3bn sector scheme for the wholesale food sector (Bpf Foodservice), citing “pension-technical and organisational reasons”. Sligro and its pension fund declined to provide further details.Earlier this year, Centraal Beheer APF attracted the €60m company scheme Scildon as well as the employers Yarden and Afval Terminal Moerdijk (ATM). Yarden and ATM were clients of the Delta Lloyd APF, which was liquidated following the takeover of its parent company by NN Group.Other Dutch pension funds planning to join an APF – a consolidation model rapidly gaining traction in the Netherlands – include automotive organisation ANWB and synthetics firm Invista Netherlands, as well as Ortec and former pension fund Jan Huysman Wz. The latter two are clients of Volo, run by PGGM. The pensions provider plans to shut down its APF. The €370m pension fund of Dutch food wholesaler Sligro is to join the general pension fund (APF) Centraal Beheer.Centraal Beheer, a subsidiary of Achmea, said that accrued pension rights and future accrual would be transferred to the consolidation vehicle as of 1 October.Pensioenfonds Sligro has almost 11,000 participants in total, 4,600 of whom are active members and 800 of whom are pensioners.With the addition of the Sligro scheme, Centraal Beheer’s APF will grow to €1.9bn of assets under management and 45,000 participants, according to a spokesman for Achmea.
Nuveen has secured $150m (€129m) in commitments for a first close of a private equity strategy aiming to help foster inclusive growth and resource efficiency, with one-third coming from Danish pensions provider Velliv.The asset manager is targeting a $400m offering for the Global Impact Strategy, which targets direct private equity investments in growth stage companies in developed and emerging markets that Nuveen considers “are at an inflection where [it] can help them scale”.For the inclusive growth theme Nuveen will primarily pursue investments in the emerging markets, while the developed markets will be the primary focus for investments enabling “disruptive businesses that create efficiency and reduced waste”.Velliv has invested via Nuveen for several years, and CIO Anders Stensbøl Christiansen said the provider was “delighted to further strengthen our relationship”. “Now more than ever, there is a compelling case for impact investing, and we believe this strategy provides us with an appealing market opportunity to achieve competitive returns, whilst ensuring we are also achieving measurable impact goals,” he added.According to Nuveen, the strategy will support six of the UN Sustainable Development Goals (SDGs), with “a combined focus on both investment performance and advancement on issues relating to the SDGs […] an important motivation or investors”.David Haddad, co-head of private markets impact investing at Nuveen, said: “We are seeing attractive investment opportunities at a time of tremendous dislocation in the economy, allowing us to collaborate with businesses focused on creating scalable and commercially viable products that are focused on solutions for people and planet.”Nuveen’s parent company TIAA also committed to the global impact strategy first closing; no further participating investors were identified by name.Velliv was not able to respond to questions from IPE. The provider has moved to mutual status from being a subsidiary of the bank Nordea, and in December, when this transition was complete, it said: “Being 100%-customer-owned and as an integral part of the Danish business community, Velliv will focus on social responsibility to a higher degree.”Earlier this year it launched a pension saving product pitching a strong focus on the investments’ social and environmental footprint. An upcoming fully digital pension product targeting small firms and the self-employed will feature sustainable investment profile choices.To read the digital edition of IPE’s latest magazine click here.