L&G said it believes infrastructure investment is an attractive asset class because it provides an excellent match for its long-term liabilities.Furthermore, matching annuities with UK infrastructure increases the returns on its funds, helping L&G to continue to offer competitive annuity pricing, it said.Finally, investment in UK infrastructure projects drives UK economic growth, creating roads, schools and hospitals, which benefit the UK population.The acquisition of care homes for the elderly is L&G’s first investment in the sector.The homes are let to Methodist Homes (MH), a care home provider.L&G has lowered the current rents by providing MH with long-term stable financing, with leases that have annual rent reviews linked to the retail prices index, creating stability and certainty.Paul Stanworth, managing director at Legal & General Capital, said: “Legal & General is committed to investing in the fabric of the UK. There is a chronic shortage of housing in the UK, and we want to help to address this problem.“We have already invested over £750m in student accommodation, have part acquired CALA Homes and plan to move into homes to rent.“A better infrastructure also includes better healthcare, and the new Royal Liverpool will help improve quality of life in the city and contribute to economic growth in the north west.”L&G said the successful outcome of the Solvency II negotiations now allows it to increase the pace and scale of its investment programme in UK infrastructure.L&G now has £3bn invested in UK infrastructure projects, and is one of the six UK insurers committed to investing £25bn in the UK over the next five years. Legal & General (L&G) has made two major infrastructure investments totalling £159m (€192m) to add to its annuity portfolio.It is investing £89m over 32 years as part of a consortium to build the new Royal Liverpool University Hospital for £335m.And it has just completed the acquisition of 13 care homes from Prestbury Investments for £70m.These latest moves support L&G’s stated intention of playing a greater role in housing and infrastructure investment in the UK, providing long-term capital to the energy, education, transport, housing and health sectors.
It also said any UK challenge to the FTT could not yet be heard as enough detail over the tax’s implementation did not exist.The UK is expected challenge the tax again once the EU11 moves forward with its plans, arguing the tax’s implementation will indirectly affect the UK financial sector.PensionsEurope said, even with an exemption for pension fund investments, the tax would increase the cost for the institutions.It said all financial transactions of all institutions would be hit by additional costs, regardless of their social function or role in the financial crisis, or the nature of their investment.Matti Leppälä, chief executive of the lobby group, said: “The consequent increase of costs will ultimately be borne by the pension beneficiaries in terms of higher contributions or reduced benefits.“There is no cause to ask European pension beneficiaries to pay for the crisis. They did not cause it but rather they have suffered from it.”Leppälä stressed that asset managers would also eventually pass on the tax to pension funds, even if the funds were exempt.“As institutional investors, we are customers in the financial markets, and we therefore fear that, as it is the case with other taxes, the final customer will end up paying for it,” he said. The organisation called on the EU11 to dismiss the tax, or at least ensure exemption for pension funds.“Pension funds did not require any support in terms of funding from public finances during the crisis,” he said.“They actually contributed to water down the crisis by keeping their long-term liabilities in the financial markets.”However, Algirdas Šemeta, the European commissioner responsible for taxation, yesterday praised the EU11 for pushing forward with the tax and laying down an implementation roadmap.“The participating member states need to continue to invest wholeheartedly in this file to make it law within the timeframe foreseen,” he said.“If they make a common FTT a reality, that is a major achievement, even if they proceed more tentatively than was envisaged.“But now this has to happen, and happen quickly.” The financial transaction tax (FTT), the controversial proposal being taken forward by 11 European countries, has been criticised for its effect on financial institutions regardless of their “social function”.PensionsEurope, the lobby group, said the tax in its current form would affect pension funds badly, even if they were exempt.Eleven EU countries (EU11) are currently pushing forward with the tax despite opposition from the Netherlands and the UK, with the latter legally challenging the Commission and Council’s decision to allow the countries ‘enhanced cooperation’ status.However, the European Court of Justice (ECJ) dismissed the case on the basis the enhanced cooperation was legally sound.
Henrik Bastman, AXA Real Estate head of asset management in the Nordic Region, said the region’s ”robust economic fundamentals have proved their resilience in recent years”.ERAFP also uses CBRE Global Investors, LaSalle Investment and AEW Europe as managers, as well as Amundi and La Française Real Estate as standby managers. ERAFP, the pension fund for French civil servants, has bought a Stockholm office property for SEK 546m (€60.4m).AXA Real Estate Investment Managers bought the prime Blåfjäll 1 building in Kista on behalf of ERAFP. The purchase is the fund’s first to be made outside France.The €17bn pension fund mandated AXA in July last year to source investments for its first venture into European real estate. ERAFP could invest up to €350m of capital over the next three years in the sector.AXA Real Estate was specifically asked to source and manage a portfolio of unlisted property assets, with a focus on the office and retail sectors. Blåfjäll 1 is currently fully-let following renovation to Ericsson, which has its headquarters next door.
Denmark’s PFA Pension has sold an office property in York in the UK for £43.5m (€54.4m) to Standard Life Investments on behalf of one of its segregated clients.The purchase price for King’s Pool – a 142,221ft2 office complex – reflects a net initial yield on the property for Standard Life investments of 5.9%, according to UK property firm Strutt & Parker, which advised PFA Pension.Simon Bland, head of national markets at Strutt & Parker, said: “With the investment market so strong for long-let, well-secured assets benefiting from fixed rental increases, PFA Pension decided the timing was now opportune to sell King’s Pool, which was their last remaining direct UK investment holding.”PFA Pension – Denmark’s largest commercial pensions provider, with DKK417bn (€56bn) in group assets – had owned King’s Pool since 1994, Strutt & Parker said. The office property is let to several government departments on a long lease running until March 2028.It is located close to York Minster, as well as the city’s retail and leisure amenities, the property firm said.Next to the property is a 10-acre development site, called Hungate, which has outline planning consent for 720 residential buildings and more than 200,000ft2 of commercial space, it said.Standard Life Investments said the purchase reflected its strategy to invest in well-positioned, grade-A office space with the potential to deliver strong long-term returns.Standard Life Investments was represented by CBRE in the deal.
Cambridge Associates, Momentum Global Investment Management, Mercer, Capital Cranfield, Schroders, MFS Investment ManagementCambridge Associates – Alex Koriath has been hired by Cambridge Associates as head of the firm’s UK pension practice starting from this month. He was previously part of KPMG’s investment advisory team in London, where he held the roles of director and head of fiduciary management advisory services and manager research. Before that, Koriath was an investment consultant at Hewitt Associates. Momentum Global Investment Management – Richard Cooper has been hired by Momentum Global Investment Management and take up the newly created role of head of corporate solutions and consulting at the end of August. Cooper is leaving Mercer, where he is senior partner, after working at the consultancy for 20 years. Mercer – Jane Barker has been appointed as chair of Mercer’s UK board. She has been an executive board member at Mercer since 2010 and is the current chairman at sister company Marsh – another unit of Marsh & McLennan Companies. Barker is replacing Sir Peter Middleton, who will retire at the end of July. Barker is chief executive of Equitas Limited, having held the position for the last seven years. She had been the firm’s finance director since 1995. Capital Cranfield – Neil McPherson has been hired by independent pension trustee firm Capital Cranfield to become its managing director starting in August. Since 2010, he has been a senior adviser to Copthall Partners, and he is currently the council director for the Conference Board’s European Pension Council – a pan-European group of multinational corporate pension funds.Schroders – James Luke and Dravasp Jhabvala have been hired by Schroders, joining the firm’s commodities team. Luke, previously co-head of metals research at JP Morgan, will take on the role of commodity fund manager/metals analyst, and Jhabvala – who specialised in developing investment strategies for commodities at Palaedino Group – will be commodity quantitative analyst at Schroders. MFS Investment Management (MFS) – James Gavin is joining MFS Investment Management as head of wholesale for the UK, Ireland and Channel Islands. He is based in London and will report to Lina Medeiros, president of MFS International. Gavin was previously director of asset management with Commerzbank.
Sally Bridgeland, former chief executive of BP Pension Trustees, has become the 14th member of the 300 Club of top investment professionals from different countries – the first woman to do so.The 300 Club, set up nearly three years ago, aims to raise awareness about the potential impact of current market thinking and behaviours.Bridgeland said: “The demands of maturing pensions funds will change considerably over the next decade, and individual savers need an investment environment they can trust for the longer term.” The 300 Club was right to challenge current thinking, she said. “I hope to contribute to the debate they have started,” she added. Bridgeland was chief executive of BP Pension Trustees for seven years until she left the £19bn (€23.8bn) UK corporate pension fund at the beginning of April.She recently took on the role of senior adviser to governance consultancy Avida International. Bridgeland is the founder of the charity Executive Shift and a fellow of the Institute of Actuaries, as well as a member of the FTSE Policy Group. Before joining BP Pension Trustees, she worked at consultancy Aon Hewitt for 20 years.The 300 Club is chaired by Lars Dijkstra, CIO at Kempen Capital Management.The club’s name refers to the legendary 300 Spartans who held off the far larger Persian army at the Battle of Thermopylae in 480 BC, and is meant to symbolise a small group achieving something against the odds.Meanwhile, new research shows that, even though pension deficit contributions made by the firms in the FTSE 350 are at their lowest for five years, they still amount to nearly 40% of their Total pensions bill.The research done by consultancy Barnett Waddingham showed that the total IAS19 deficit reported by FTSE 350 companies in 2013 was £55.6bn, down £7.6bn from the aggregate shortfall from the year before.Deficit contributions paid last year were £8.5bn, down more than 20% from 2012.Nick Griggs, head of corporate consulting at Barnett Waddingham, said: “The fact 37p of every pound spent by companies on pensions is paid towards clearing pension deficits is striking and illustrates just how much companies are still having to pay to reduce funding shortfalls.”However, Griggs said the overall picture for defined benefit funding in 2013 had improved somewhat, with deficit contributions apparently putting less of a strain on company finances.“With TPR’s (the Pensions Regulator) new funding code of practice promising to be less restrictive on corporates going forward, directors should be optimistic about the future,” he said.The study showed the effects of auto-enrolment coming through for the 350 largest listed UK companies, with defined contribution costs increasing by an average of 16% compared with 2012.In other news, Aon Hewitt said changes that have been proposed to pensions accounting standards could take more than £25bn from the balance sheets of companies in the FTSE 350, and £1bn from their annual profits.As things stand, about 25% of the top 350 listed UK companies have an accounting surplus relating to their pension scheme, which is recognised on their balance sheet.Proposed changes to the IFRIC14 guidance, which supports international accounting standard IAS19, mean surpluses will no longer be recognised unless there is a realistic expectation the company will eventually be able to access it.Simon Robinson, principal consultant at Aon Hewitt, said: “We expect most companies with schemes that already have a surplus will not be able to recognise it under the new proposal – which would reduce the balance sheets of the FTSE 350 by £8bn.”But the proposal also affects companies making ongoing deficit contributions that are expected to have an accounting surplus in future, he said. “These contributions,” he added, “would now need to be recognised as liabilities on corporate balance sheets, which would amount to a further £20bn hit for FTSE 350 companies.”Finally, funding among UK defined benefit (DB) schemes has fallen by 1 percentage point over the last month, according to the Pension Protection Fund’s (PPF) 7800 Index.According to the index, funding fell to 90.5% at the end of July, with the aggregate deficit increasing by £23.7bn to £122.7bn over the same period.“The position has worsened from the previous year, when a deficit of £88.3bn was recorded at the end of July 2013,” the PPF added.The funding decline was despite assets increasing by 0.5% in value month-on-month and an overall increase of 4.2% in asset value since July last year.However, this contrasted with a 6.7% increase in liabilities, from £1.21trn to £1.29trn at the end of last month.
The Abu Dhabi Investment Authority (ADIA), Singapore’s GIC, the Canada Pension Plan Investment Board (CPPIB) and Caisse de dépôt et placement du Québec are investing in a UK mobile phone operator.The four investors have joined Brazilian investment bank BTG Pactual in the £3.1bn ($4.78bn) purchase of a 33% stake in the UK’s combined Three and O2 networks.The funds are investing alongside Hong Kong holding company Hutchison Whampoa (HWL), which owns Three and is paying Telefonica £9.25bn for O2 in a deal backed by £6bn in bank finance.GIC and the CPPIB will each invest £1.1bn. The ADIA is investing through its wholly owned Limpart Holdings subsidiary, while Québec’s La Caisse is investing through Ivanhoé Cambridge.The latter said the deal gave it a 12% stake.Mark Jenkins, CPPIB’s senior managing director and global head of private investments, said: “This is an exceptional opportunity to acquire a meaningful stake in what will become a leading mobile operator in the UK, giving us immediate scale in an important sector.“We expect this investment will generate attractive, long-term, risk-adjusted returns.”CPPIB said the deal would close next year, pending EU regulatory approval.
Pension funds will be the subject to a climate disclosure framework being drawn up by a group convened by the Financial Stability Board (FSB).The Task Force on Climate-Related Financial Disclosures (TCFD), chaired by US businessman Michael Bloomberg, also said it would look to enhance the disclosure framework for unlisted asset classes, including real estate and infrastructure.Initially convened to design a consistent disclosure framework for listed companies to benefit institutional investors, the TCFD has now said it will also look at “effective” reporting by the financial sector.Publishing its first report since being announced at the UN Climate Change Conference in Paris last year, the TCFD noted the “growing demand for decision-useful climate-related information” by financial market participants, which it said had led to a proliferation of different disclosure frameworks. However, the report added that the information resulting from the numerous frameworks was often inconsistent and incomparable, acting as a “major” obstacle to considering climate-related risks as part of the investment process.“Evidence suggests the lack of consistent information hinders investors from considering climate-related issues in their asset valuation and allocation processes,” it said, citing a paper published by consultancy Mercer last year.Outlining areas on which its final report, due by December, would focus, the TCFD said it would examine the role of larger institutional investors, and included pension funds in its list, which also named insurers and asset managers.It said the comprehensive list of stakeholders would ensure all parts of the credit and investment chain were covered.The report also said it would look at opportunities to improve the climate-related disclosure for real estate and infrastructure but also debt and other non-equity asset classes.Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change (IIGCC), welcomed the phase 1 report.“In the light of the Paris Agreement, investors need better disclosure on how companies are adapting to this new policy framework, as well as the physical impacts of climate change,” she said.“We strongly support the focus on more standardised disclosures and forward-looking quantitative and qualitative information.“This will help investors better assess and address carbon risk in their portfolios.”The focus on climate-related disclosures by infrastructure projects is also likely to be welcomed by the EDHEC Infrastructure Institute-Singapore, which is developing an investible benchmark for the asset class.During the recent EDHECInfra conference in London, several participants cited the need for further research on climate-related disclosures and said EDHEC research chairs would examine the social and environmental outcomes of infrastructure projects.,WebsitesWe are not responsible for the content of external sitesLink to ‘Phase 1’ report published by TCFD
The UK’s Pensions and Lifetime Savings Association (PLSA) has established a master trust committee to promote and defend the master trust model of pension provision to government and regulators.The announcement of the committee’s creation comes shortly before a pensions bill is expected to be laid before Parliament, with the government having indicated that it will introduce stricter regulation of master trusts, something for which the UK pensions regulator has been arguing. Opening the PLSA’s annual conference in Liverpool today, Lesley Williams, chair of the association, said that, although master trusts have been around for decades, there are “new breeds” taking on millions of new auto-enrolment savers, and that master trusts had become a bigger part of the pension market than many would have imagined.Regulation will have to adapt to cope with the risks and benefits of master trusts, she said, noting that the pension providers would help shape the agenda of the 2017 review of auto-enrolment. Chris Hitchen, chief executive at RPMI Railpen, will chair the Master Trust Committee, while Emma Douglas, head of defined contribution at Legal & General Investment Management (LGIM), was voted vice-chair by the other members of the new committee.Comprising 13* senior executives in total, the committee will set the PLSA’s strategic direction on master trust policy, promote and support the development of the master trust market, and help savers in master trusts achieve a better income in retirement.Joanne Segars, chief executive of the PLSA, said a “top priority” for the association was to represent the entire workplace pension “community”.“Master trusts are a major force in today’s pensions landscape, counting many millions of the newly enrolled pension savers as their members,” she said.“As they grow in scale and in number, they face a growing number of complex issues – many of them unique to master trusts.“Our new Master Trust Committee will ensure there is a dedicated voice for master trusts to government and regulators.”She said the committee would advocate for master trusts “as a model of strongly governed and value-for-money schemes” and help to develop a strategic and pro-active policy framework. Hitchen said master trusts had played a key role in the success of auto-enrolment, especially among smaller businesses.“With the government’s plan to regulate master trusts within the Pensions Bill, the PLSA’s Master Trust Committee will relay the message that master trusts embrace high standards and wants to ensure the regulation and legislation governing master trusts continues to benefit savers,” he said.The Committee will meet four times a year and may on occasion hold a joint meeting with the PLSA’s defined contribution council and/or defined benefit council. Walk the talkIn other news, the PLSA is to carry out a comprehensive review of the organisation’s governance to ensure it supports the PLSA’s work on behalf of its members and all stakeholders, operates effectively and attracts the right people.Announcing the review at the association’s annual conference in Liverpool today, Williams said: “We have to make sure we walk the talk of 21st-century governance.”Last year, the association announced it was reinventing itself to capture changes in the way people save for retirement.Williams said “great progress” had been made but that “there is more to do”.The review will start immediately and run until October 2017.The board will consult with members on any potential proposals in the New Year. *The other members of the master trust committee are Ken Anderson, head of DC solutions at Xafinity; Helen Dean, chief executive of NEST; Tony Filbin, chair of BlueSky; Jamie Fiveash, chair, PLSA DC MES Forum; Patrick Heath-Lay, CEO of The People’s Pension; Bruce Kirton, CEO of Welplan; Fiona Matthews, CEO of Lifesight; Elspeth McKinnon, CEO, Cheviot Trust; Gary Smith, chair, Atlas; Michael Ramsey, CEO of The Pensions Trust; and Andy Waring, CEO of Ensign.
The timing of the reclassification of UK local government pension schemes (LGPS) as retail investors under new MiFID rules poses “a significant challenge” to the asset-pooling project underway in the sector, according to the LGPS scheme advisory board for England and Wales.It is planning to call on the regulator to exempt the emerging LGPS asset pools from a MiFID rule it sees as preventing local authority pension funds from accessing “the full range” of assets offered by a pool.The Financial Conduct Authority (FCA) is carrying out a third consultation on implementation of the revised Markets in Financial Instruments Directive (MiFID II), with a deadline of 4 January 2017 for comments.The revised EU directive comes into effect on 3 January 2018. The new rules are controversial within the local authority pension fund sector because they reclassify administering authorities as retail investors.Under the original directive, asset managers were allowed to treat local authorities as professional investors automatically.The Local Government Association warned about such a move more than year ago.The advisory board for the LGPS Scheme is due to reiterate many of these concerns but also address the negative implications for pooling in feedback to the FCA’s consultation, a draft of which it approved at a meeting earlier this week.This describes the reclassification of local authorities as retail clients as “unnecessary” and says that “properly considered investment strategies will be placed at serious risk”.It singles out infrastructure, saying the reclassification is “inconsistent” with the government’s desire for more investment from local authority pension funds in this area.This has been a big driver behind the government’s instruction for the LGPS to form asset pools, a project they have been working on fervently for the past year.The scheme advisory board’s draft consultation response challenges the feasibility of local authorities being able to “opt up”, as the move has been described, to “elected professional status”, and the effectiveness of that route.It is due to argue that asset pools “could provide an alternative to elected professional status, with assistance from [the] FCA”.By “assistance” from the FCA, the scheme advisory board appears to mean the regulator exempting asset pools “in their own right” from a rule prohibiting retail clients from being sold “non-mainstream pooled investments”.These exemptions – of which there are 13, including elected professional client status – “could provide a means of local authorities accessing the full range of assets offered by the pool”, according to the advisory board.Where they operate collective investment schemes, an exemption for asset pools would allow pension funds to participate in the full range of assets being offered without having to go through the process of upgrading to professional status, the board argues.It says the opting-up process would still be necessary where pools did not operate collective investment schemes or where local pension funds continued to invest outside these.Several of the pools have decided to set up authorised contractual schemes (ACS), a tax-transparent type of collective investment vehicle, although many of the pools’ submissions to the government have indicated that illiquid assets would remain outside the pools for the time being.