AP7 eyes diversification with EM, small cap equities

first_imgSweden’s default premium pension fund AP7 plans to add emerging markets and small cap investments into its giant equities portfolio to increase diversification.In an interview with IPE, Ingrid Albinsson, CIO of the SEK370bn (€39.2bn) pension fund, said: “What will try to do going forward is to get some more diversification into the equities portfolio. “We haven’t decided exactly how and when, but we will try to get more emerging markets and we will try to get bit more small cap exposure into the portfolio.”Unlike the other large AP national pension funds in the Swedish system, AP7 is not a buffer fund to back up the state pension. It instead runs the default option within the Premium Pension System (PPM). The PPM is the part of the state pension that allows individuals freedom to choose their own investment providers and funds.  “Because we have a lot of large caps and medium-sized stocks in the portfolio, we think we would be able to get some diversification by adding small caps as well, but at the end of the day, you always have to look to see whether the practice is as the same as the theory,” Albinsson said.The pension fund’s inhouse investment team will look into the reality of implementing this diversification strategy.AP7 is also to consider the use of risk factors, Albinsson said: “It is something that could diversify the portfolio more [but] we haven’t decided exactly when and how we will do this.”The CIO added: “The aim of the diversification exercise is to create a more efficient portfolio, which will create more value for the risk we take.“When the pension product was first created, there was a lot of simplification, but in the meantime, markets have changed, techniques have changed — and we have changed. It is possible now to develop our product by diversifying our portfolio and getting more efficiency.”The organisation’s overall investments have remained largely unchanged over the past few years in terms of their asset allocation.AP7 runs two funds which act as building blocks for its Såfa default premium pension product — an SEK257bn equities fund and an SEK112bn bond fund.Proposals to reform the PPM currently under consideration in Sweden could result in AP7’s assets under management more than doubling in a few years’ time.Under the new plan, the consultation for which closed this month, individual PPM savers would be required to re-evaluate their fund choice every seven years, with their savings being transferred to AP7 if they fail to express a choice.If the ideas become law, the resulting extra business will serve to make AP7 more efficient, Albinsson said: “Economies of scale really do matter in the financial sector. It’s a clear advantage if you really have size.”At the moment AP7 has a staff of 25, based in the Swedish capital, Stockholm. Albinsson said the company would “probably” look to hire more staff if its asset base was to double in size.However, the balance of in-house and outsourced asset management was unlikely to change, she said. Some 30% of AP7’s assets are managed in-house, and 70% outside.“We think it’s appropriate for us to have that, because we have a lot of beta in the portfolio, so that is best outsourced in order to get the economies of scale,” Albinsson said.AP7 was an early institutional mover in sustainable investment, and has used the twin tools of engagement as well as stock exclusions for longer than most of its investor peers. It was working on bringing in ‘green mandates’, Albinsson said, as the pension fund continued with its plan to move into the clean tech area which it started a few years ago.“At the same time, we’re not in a hurry to do this, because to get value out of this kind of investment, it takes time. We have been having a very active discussion, with targets of increasing our exposure especially in climate investments, but for us its more of a gradual increase,” Albinsson said.last_img read more

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Largest Dutch schemes fail to generate quarterly returns

first_imgNone of the five largest Dutch pension funds generated positive returns during the second quarter of this year.The best performer on a relative basis was the €389bn civil service scheme ABP, with a return of 0%. In the first six months of 2017 the fund gained 1.9%.However, all schemes saw their funding rise by approximately 2 percentage points, as a consequence of reduced liabilities in the wake of rising interest rates.Despite the steadily improving funding, almost all pension funds remained cautious. Corien Wortmann-Kool, ABP’s chair, reiterated that indexation was unlikely during the next five years and said that the chance of rights cuts remained as long as coverage was short of 104.2% by 2020.ABP closed the second quarter with a funding level of 96.3%.The scheme’s fixed income holdings produced a 0.7% loss, with long government bonds and emerging market debt (EMD) contributing 0.8% and -3.8%, respectively. EMD was among ABP’s best-performing allocations last year.It said developed markets equity lost 2%, while emerging markets equity generated a 0.2% profit. Private equity and infrastructure yielded positive results of 0.6% and 1.9%, respectively.On commodities, however, ABP lost 10.6%, due to falling oil prices. It also reported negative results on hedge funds (-5.8%) and property (-1%).The scheme’s combined interest and inflation hedge came at the expense of 0.3 percentage point of its overall return. In contrast, its currency hedge contributed 1.8 percentage point.PFZW hit by debt and commodity lossesThe €186bn healthcare scheme PFZW posted a quarterly loss of 0.8%, meaning it lost 0.3% over the first half of the year. Its funding, nevertheless, rose by 1.9 percentage points to 94.2%.The scheme reported positive results from private equity (0.8%), infrastructure (0.5%), government bonds (0.1%), inflation-linked bonds (3.6%) and residential mortgages (0.5%).In contrast, equity (-2.4%), property (-2.7%), credit and high yield (-2.3%), local currency-denominated EMD (-3%) and commodities (-9.7%) all ended up in the red.PFZW’s interest rate and currency hedges contributed 0.9 percentage points to its overall quarterly result.PMT, PME register second quarter lossesPMT, the €67bn sector scheme for metalworking and mechanical engineering, said its funding had improved to 96.6%, despite a 0.6% quarterly loss on investments.The coverage of PME, the pension fund for the metal and electro-technical engineering industry, rose to 95.9%.Despite positive results on equity (0.9%) and property (2.3%), PME also incurred a 0.6% loss and saw its assets drop by €400m to €45bn.BpfBouw, the €54bn scheme for the building sector, said almost all its asset classes had performed negatively.The only exception was its property allocation, which returned 1%, in particular due to the scheme’s investments in Dutch residential property and hotels as well as its holdings in the Asia Pacific region.With a funding of more than 110%, BpfBouw remains in the best financial shape of the five largest schemes.last_img read more

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ESG roundup: Is there a right time for corporate disclosure?

first_imgThe experiment was run twice, once with positive CSR information signalling potential future growth, and then with information giving a potential negative signal about potential future risks.According to the article’s authors, the results suggested that CSR information released at a different time to that for financial data could lead to “asymmetric anchoring” by investors.The researchers found that investors receiving positive CSR information in this way did not react to it, indicating a strong anchor to the evaluations based solely on financial data. When CSR and financial information were disclosed simultaneously investors seemed to include the positive CSR information into their valuations and generate higher firm valuations than investors who received the information sequentially.However, when the CSR information was negative investors responded to it much in the same way whether or not its disclosure was “temporally disconnected” from the financial information.“They almost fully overcome any anchoring effect from initial valuations based on financial information only,” according to the researchers.“Investors’ asymmetric anchoring is induced by differences in cognitive effort invested in CSR information processing, which depends on whether CSR information signals future profits or losses,” they said.Bassen’s co-authors were Markus Arnold, from the Institute of Accounting at the University of Bern in Switzerland, and Ralf Frank of the German Association of Investment Professionals (DVFA). The DVFA provided the access to the investment professionals participating in the experiments, hence the German skew.The article can be found here.Impax to buy US SRI Pioneer PaxImpax Asset Management is to acquire Pax World Management LLC, one of the world’s first socially responsible investors, in a $52.5m (€43.9m) deal.Together, the asset managers would have £10.3bn (€11.7bn) of assets under management.The acquisition made strategic sense because both Impax and Pax were “pioneering firms focused on the transition to a more sustainable economy”, according to a statement.In addition, the companies said there was growing interest among asset owners around the world “in allocating capital to high-growth sustainable investment opportunities, in investment products that take a broad view of risk, including environmental, social and governance (ESG) factors, and/or that demonstrate positive, non-financial impact”.Pax was founded in 1971, when it introduced what it says was the first publicly available mutual fund in the US to use social as well as financial criteria in the investment decision-making process.Under the terms of the agreement, Impax will acquire 100% of Pax with an initial valuation of $52.2m, plus additional contingent payments of up to $37.5m in 2021, depending on Pax’s performance.ESG integration expectation surpriseLess than half of investment consultants and investors responding to a CAMRADATA survey said they expected asset managers to have ESG considerations integrated in their investment process. Last year’s survey found half of respondents expecting ESG integration at asset managers.Many investors have proclaimed their commitment to ESG investing and in recent years there has been a strong move in this direction, with companies signing up to measures such as the UN’s Principles for Responsible Investment.Sean Thompson, managing director at CAMRADATA, told IPE: “We were surprised that investors were suggesting that it wasn’t as important to them to have ESG integrated, or at least their asset managers to have ESG integrated in the investment process.“Overall it was an interesting one. While there were some undecided as well, it wasn’t clear-cut that people were saying ‘it’s very important’.”He suggested the result may simply be down to this year’s cross-section of respondents.There were 118 respondents to this year’s survey, of which 58% were asset managers and 42% were investment consultants and institutional investors. Most of the asset manager respondents managed money for pension schemes and insurance companies, while three-quarters of the 25 consultant respondents provided services to pension schemes only.The majority of asset managers in the survey said they have ESG integrated in their investment process. The survey can be found here.Beware green bonds’ exposure Green bonds are more exposed to environmentally-related credit risks, the Bank of International Settlements (BIS) has noted in its latest quarterly review.“While the management of environmental risks extends far beyond green bonds, it is important to avoid the misperception that green bonds are insulated from such risks,” it said. “In fact, among all rated bonds, those with a green label are more likely to be in sectors that are exposed to such risks.”The central bank organisation said that within a universe of corporate debt rated by Moody’s, 13.2% was issued by institutions in industries with moderate or greater exposure to environmental credit risk, and around 2.9% by institutions in industries classified as either immediate or emerging elevated risk.Looking at the industry composition of green bonds alone, however, 22.4% were issued in sectors with moderate or greater exposure to environmental credit risk, and nearly 14% by institutions in industries classified as either immediate or emerging elevated risk.The percentage of green bonds in high risk sectors was four times as much as that for overall rated debt, it said. The timing of a company’s disclosure of environmental, social and governance (ESG) information can make a difference to how that information is valued by professional investors, according to a new academic paper.The researchers concluded that corporate social responsibility (CSR) information “is not always treated entirely rationally by capital market participants”.Alexander Bassen, professor of capital markets and management at the University of Hamburg, Germany, was one of the authors of the paper. He told IPE the researchers chose the term CSR rather than ESG to address the corporate perspective. In academic literature, CSR is often understood as representing the perspective of corporates, while ESG represents the investor. The experiments involved presenting European – mostly German – professional mainstream investors either with CSR information alongside a company’s financial disclosure, similar to an integrated report, or with CSR disclosure in a standalone report “temporally disconnected” from the firm’s financial disclosure.last_img read more

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LGPS roundup: Northern Trust lands key contract for £43bn pool

first_img“Through their long-term partnership with the LGPS and extensive expertise in [authorised contractual scheme] structures, Northern Trust’s understanding of our needs and the culture we want to build make them a natural partner for Border to Coast.”Northern Trust already provides depositary services to Northern Ireland’s LGPS fund and the London CIV, the pooling vehicle for the capital’s 32 borough pension funds.James Wright, head of the company’s institutional investor group for the UK and Middle East, added: “We are committed and excited to support Border to Coast through its establishment and ongoing growth.“Our tax transparent fund experience, alongside our dedicated UK pension team and proven technology ensures we are well placed to support Border to Coast’s unique requirements.”Chris Hitchen, chair of Border to Coast’s board, said the pool was building “an excellent team” and “a highly capable investing institution”.All eight LGPS pools are expected to be ready to manage assets from the start of April this year, in line with central government’s plans.Brunel publishes first report and accountsThe Brunel Pension Partnership drew down more than £5m from its 10 LGPS shareholders in December to help it meet the April deadline, according to its first full annual report and accounts.In the 12 months to the end of September 2017, the pension funds contributed £3m to operating costs “to set up the office, hire the staff and submit the FCA application”.Coupled with December’s payment of a combined £5.4m, each of the founding funds has paid roughly £840,000 towards Brunel’s establishment.The pool said it aimed to make fee savings of £27.8m by 2025 through the pooling of assets and management of costs. Northern Trust will be the administrator and depositary for the £43bn (€48.3bn) Border to Coast Pensions Partnership, one of eight Local Government Pension Scheme (LGPS) asset pools.Border to Coast annouced the contract today following a “robust and in-depth public procurement process”.It added that the two companies would work to establish an operating model for the pool. Border to Coast was set up to facilitate the pooling of pension scheme assets for the counties of Bedfordshire, Cumbria, Durham, East Riding, Lincolnshire, Northumberland, North Yorkshire, Surrey, South Yorkshire, Teesside, Tyne and Wear and Warwickshire.Fiona Miller, chief operating officer of Border to Coast, said: “I am excited to start the next stage of the journey for Border to Coast, working alongside Northern Trust as we build out the infrastructure which will support our organisation both now and into the future.last_img read more

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UK seeks to ease pension funds’ access to impact investments

first_imgCaroline Escott, policy lead on investment and defined benefit at the pension fund trade body the PLSA, welcomed the government’s report.“It’s encouraging the government is focused on supporting trustees in considering the broader environmental and social impacts of their investments,” she said.Karen Shackleton, senior adviser at MJ Hudson Allenbridge and founder of Pensions for Purpose, was also positive about the government’s response.“The general message is one of positive encouragement as far as impact investment is concerned,” she said.A refrain from pension trustees when asked about impact investments, she noted, was that they could not consider them because of their fiduciary responsibilities to the members of the scheme to deliver the best possible risk-adjusted returns. The government’s report indicated that the government was willing to clarify the regulation around this point, she said, which was a positive step forward. Giving reluctant trustees “a nudge in the right direction” and empowering those who were already supportive of impact investing could be as influential as regulatory change, Shackleton said.However, some questioned whether the proposed changes to pensions regulation outlined by the government in the report would achieve its stated aims. The UK government has said it wants to make it easier for pension funds to make impact investments.Responding to recommendations from an advisory group on impact investing, the government said it was considering changes to regulation that would make it easier for pension funds to invest “with an environmental and social impact”.It said it was also considering further actions “to help build capacity and increase transparency around social impact investment by pension schemes”.“The proposed regulatory changes should help provide clarity to trustees and give institutional investors confidence to begin or increase the allocation of capital to investment opportunities such as social impact investment,” the government said. Stuart O’Brien, partner at Sackers“The thrust of the report to encourage more impact investment from pension funds is to be welcomed but I slightly question whether the proposed legislative changes for pension schemes are really on point,” said Stuart O’Brien, partner at law firm Sackers.The government said it would consult on changes to pensions regulation in order to:• allow for consideration of broader financial risks and opportunities, including those related to ESG issues;• strengthen pension schemes’ ability to consider member concerns about investments; and• clarify how pension schemes should engage with the firms in which they invest.“The first and third of these are really just a re-hash of proposals that have their roots in the Law Commission’s first report on fiduciary duties back in June 2014,” said O’Brien.“And while these will undoubtedly help trustees take financially relevant ESG factors into account as part of their general investment decision making, I’m not sure that they will necessarily be a game changer in terms of impact investment.”A study by MJ Hudson Allenbridge last year found that, for 82% of UK corporate pension schemes, a lack of hard data on the risk and return characteristics of social impact investments was a barrier to entry in the market.  IPE understands that Elizabeth Corley, vice-chair of Allianz Global Investors, and leader of the government’s new taskforce on impact investment, issued a call to action to delegates at a government conference on Tuesday. This included encouraging schemes to share data on impact investment to gather evidence of its success and widening the debate to include those who did not have the same view on impact investment. The UK pensions industry is keenly anticipating a consultation from the Department for Work and Pensions on changes to the investment regulations for occupational pension schemes. The government said this would be published “shortly”.last_img read more

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Auto-enrolment success masks inadequate savings rates, industry warns

first_imgHelen Morrissey, pension specialist at Royal London, said: “If this disparity is not addressed, we risk a lost generation of people who missed out on final salary pensions but are simply not putting enough into their new-style pension.“Automatic enrolment was a great start, but this is simply the end of the beginning. Rather than government and industry pat itself on the back for a job well done, the drive to increase contributions to realistic levels needs to move forward in earnest.”Employers sponsoring final salary DB schemes contributed 19.2% of salary on average, with members paying 6.4%, the ONS’ data showed. DB schemes based on career average salary benefits recorded higher member contributions (7.9%) and lower employer payments (17.7%).Members of DC schemes paid 2.7% of salary on average, while employers contributed just 2.4%. Before auto-enrolment was introduced, average DC contributions totalled 11% of salary on average, according to consultancy firm Buck.Membership of open DB and DC schemes since 2018 (millions)Chart Maker‘Raise contributions to boost outcomes’Minimum contributions for auto-enrolment schemes rose to 8% (5% from the member, 3% from the employer) from 6 April this year. DC experts advocated further increases to at least 12% of salary, however.Michael Ambery, senior DC consultant at Hymans Robertson, said that, despite this latest increase, “many people will be massively under-saving for a comfortable retirement”.Planned changes to auto-enrolment rules – including reducing the minimum age and salary thresholds to bring more people into the system – would help, Ambery said, but more work was required.“At 12% [of salary] we would begin to see a contribution that will have a meaningful impact for employees’ retirement savings,” he said. “At that level we can see far greater certainty of them reaching a target income that they can live on in retirement.”Malcolm McLean, senior consultant at Barnett Waddingham, highlighted that some industry commentators had warned of contributions falling towards the legal minimum when auto-enrolment was first introduced.“This can probably be best addressed by an increase in the minimum contribution levels to say 12%, instead of 8%, at a relatively early stage in the future,” he said.Buck’s head of DC wealth Mark Pemberthy added: “While it is great that more people are saving for their future, most employees are still not saving enough to provide the standard of living they want or expect in retirement and this is storing up future problems for employees and employers alike.”He cited Buck research that found that 44% of employers were concerned about the long-term consequences if employees could not afford to retire. “However, they need to go further than the government’s minimum requirements if they want to help employees secure a comfortable retirement,” Pemberthy said. Auto-enrolment has increased the number of pension savers in the UK but most are paying too little into their pots, according to industry experts.Data from the Office for National Statistics (ONS) released today revealed that total UK pension scheme membership hit 45.6m in 2018, an increase of nearly 11% year on year.Those saving into private sector defined contribution (DC) schemes had an average annual contribution level of 5.1% of salary, incorporating both employer and employee payments, the ONS reported. Defined benefit (DB) scheme members received contributions totalling more than 25% on average.Weighted average contribution rates to private sector occupational schemesChart Makerlast_img read more

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UK pension fund figures sign climate impact pledge

first_img“But to see the roomful of pension scheme CIOs, trustees and managers spontaneously agreeing to take radical, decisive action now was incredible. I cannot remember being a part of a discussion like it.” Senior figures at large UK pension schemes have signed a climate change “charter”, seeking to address a sense among trustees that not enough is being done to fight climate change.Signatories pledged to recommend to their boards that every investment be scrutinised for its impact on the climate and to insist that their asset managers engage with companies about having a clear plan to move to a low-carbon future. The charter was created at a recent event held by pensions industry forum Mallowstreet, and committed individuals to action, rather than pension funds or trustee boards.Co-founder of Mallowstreet Dawid Konotey-Ahulu, who hosted the event at which the charter was created, said: “We had a chance to halt climate change 30 years ago, but we missed the opportunity, and now we are out of time. “I think the time has come for asset owners to focus on this as a core part of their investment decision making”Paul TrickettAccording to Mallowstreet, the charter has so far been signed by three senior individuals working for UK pension funds: Paul Trickett, who chairs the trustee board for Santander UK’s £11.5bn (€13.3bn) scheme, as well as working as a trustee for the Railways Pension Scheme and the Mineworkers’ Pension Scheme; Mark Tennant, chairman of the £8bn Centrica Common Investment Fund; and Rosie Lacey, group pensions manager of the £970m De La Rue Pension Scheme.Tennant said: “The problem we have with climate change is that everyone talks about it and everyone is deeply concerned, but very little is being done.”“We hold assets for future generations,” he added. “For them climate change matters. The younger generation requires us to look at the carbon footprint and the social impact of the investments we make on their behalf.”Trickett said: “I think the time has come for asset owners to focus on this as a core part of their investment decision making. I don’t know exactly how urgent it is, but I would prefer not to wait any longer.“The industry is focused on achieving its obligations to members. Establishing climate change as an issue to be considered as part of that is going to take time but if asset owners press for this it will happen more quickly.”The charter, which can be signed here, reads as follows:We, the undersigned, agree with the UK government that there is a climate emergency. We also know that current actions and responses are insufficient to avoid catastrophic damage to our planet. This climate emergency will have a material financial impact on every pension fund and all our futures.As chairs, investment committee members, pension managers and trustees, we pledge to recommend to our boards and investment committees:To ask “What is the impact on the climate?” for each and every investment that is made.To demand that the carbon impact of every investment is measured and reported on by our managers. We will work actively and collaboratively to develop complete carbon measurement standards.To insist that each of our investment managers actively engage with corporate boards underlying our investments so that every company develops and discloses both a complete measure of their carbon impact as well as a clear business plan to transition to a low carbon future. To review, and ultimately will recommend the termination of, any investment manager that fails to support and actively engage in stewarding the transition to a low-carbon future.last_img read more

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Compenswiss tenders real estate mandate worth €50-100m via IPE Quest

first_imgCompenswiss, the manager of Switzerland’s social security funds, has turned to IPE Quest to search for a core European real estate fund.According to search QN-2555, Compenswiss is looking to award a €50m-100m mandate as part of a bid to diversify its global real estate portfolio.It wants to invest in in high-grade real estate across Europe via an open-ended pooled fund with a multi-sector/country strategy.The fund should have maximum leverage of 50%. Compenswiss said it was not interested in listed REITs. A third IPE Quest from a Swiss pension investor is for an FX hedging mandate of around CHF1.5bn (€1.33bn).According to QN-2556, the successful applicant would be responsible for implementing a passive foreign exchange overlay on exposure to currencies other than the US dollar, euro and sterling. The list currently comprises the Australian, Canadian, Danish, Hong Kong, Israeli, Japanese, Norwegian, New Zealand, Swedish and Singapore currencies, and should be hedged to Swiss francs.The unnamed pension fund hedged the main currencies in-house, it said, and the winner of the mandate was expected to use the same infrastructure. The deadline for applications is 9 August at 5pm UK time.Nordic insurer seeks China A-sharesFinally, according to QN-2557, an unnamed Nordic insurer wants to allocate to China A-shares via a UCITS-compliant pooled vehicle domiciled in Luxembourg or Ireland. It specified that a segregated mandate was not of interest.The mandate is for a unit-linked platform, so there is no size for the initial investment.The benchmark will be MSCI China A index. A tracking error of at least 3% is expected, but no more than 10%.Applicants should have at least $3bn in assets under management as a firm and $20m for the asset class. The deadline to apply is 1 August at 5pm UK time.The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email jayna.vishram@ipe-quest.com. Interested parties should apply by 22 July at 5pm UK time.Large Swiss scheme targets global real estateA “large” but otherwise unidentified Swiss pension fund is looking to allocate CHF200m (€89m), with potential for further growth, to global real estate equity via unlisted funds.Search QN-2554 stated that the style should be core or core-plus. The pension fund wants a veto right on individual investments. Applicants should have at least $7bn (€6bn) in assets under management as a firm, and $3bn in the asset class. The deadline is 7 August at 5pm UK time.€1.3bn FX-hedging contract up for grabslast_img read more

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‘Link investment policies to scheme demographics’, says trustee

first_img“Ideally, the return holdings should be approximately 55%,” he said. “But, as the pension fund is in a recovery process, the current financial assessment rules [FTK] only allow for limited shifts within the same risk budget.” Credit: Scott RobinsonThe Banden & Wielen pension fund should be able to take more risk, according trustee Paul de GeusIn 2015 when the FTK was introduced, Wheels & Tyres refrained from using an option granted to underfunded schemes of a one-off increase to their risk budget. This meant the pensions fund’s required funding level was 116% rather than 120% or 125% for other sector schemes.However, in the new pensions system currently being debated by the Dutch government and social partners, in which all schemes must aim for a funding of 100%, this relative advantage seems to disappear.At the end of March, funding of Wheels & Tyres stood at 95.2%, but a new, lower ultimate forward rate – used in the calculation of the discount rate for liabilities – could easily reduce this coverage by 10%, said De Geus.He acknowledged that the pension fund would be unlikely to avoid rights cuts under the current FTK. However, in his opinion, recovery terms should also take into account the duration of a pension fund.The trustee said that, when changing investment policy, a scheme’s entire investment cycle should be reassessed, including the risk appetite of its participants and the social partners. Pensions reform in the Netherlands should avoid trapping underfunded schemes with rules preventing them from taking sufficient investment risk to enable recovery, a professional pension fund trustee has argued.Speaking to Dutch pensions publication Pensioen Pro, Paul de Geus, board member at the sector schemes Wheels & Tyres (Banden & Wielen) and Furniture (Meubel), argued that investment policies should be linked to the age of a pension fund’s participants.De Geus, who is also a trustee at the Dutch scheme of technology group Xerox, noted that Wheels & Tyres and Xerox used a similar asset mix – including a return-seeking portfolio of 45% – despite the duration of their liabilities being 26 and 16 years, respectively.In his opinion, Xerox’s asset mix was correct, but Wheels & Tyres – with its younger demographic and longer investment horizon – should be allowed to take more investment risk.center_img Paul de GeusThe new pensions agreement targets an investment policy in line with age composition and risk preference of scheme participants – essentially a form of lifecycle investing.“That would be good, as this would theoretically result in the correct degree of risk taking,” said De Geus. “However, additional rules with extra limitations for underfunded schemes would trap them.”In the opinion of the trustee, lifecycle investment could be introduced by investing in separate funds for different asset classes, and by creating funds for different age cohorts.last_img read more

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Italy roundup: Fon.Te ups equities allocations in raft of changes

first_imgMeanwhile the equity portion of the balanced sub-fund’s reference index is being increased to 25% from 20%. Included within this equity portion is a strategic exposure of 2.5% to Italian small caps.The balanced sub-fund is also being re-named, and will be called the development sub-fund. It will belong to Fon.Te’s “mixed bonds” management category — where funds have equity allocations of 30% or less.Fon-Te’s dynamic sub-fund, which has the highest equity exposure of all the pension fund’s four compartments, will retain its 60/40 equity/bond weighting, the fund announced.The guaranteed sub-fund is changing its name to the conservative sub-fund, but its strategic asset allocation will remain unchanged.All changes are to take place from 1 November, the pension fund said.Laborfonds offers two mandatesItalian pension fund Laborfonds has launched a tender in search of two external managers to take on mandates within its balanced and dynamic sub-funds.The Trentino-Alto Adige/Südtirol regional pension fund, which has €3bn of assets, announced it intends to appoint a single manager for a €940m mandate within the balanced investment line, which had total assets of €2.3bn at the end of August.The mandate on offer is for active management against a benchmark consisting of 60% equities and 40% bonds.The fund is also offering a mandate involving all assets in the dynamic sub-fund, which amounted to €121m at the end of August.This mandate will also be for active management with a 60/40 equity/bond benchmark.Both contracts are for five years, and the deadline for receipt of tenders is 30 October. Italian pension fund Fon.Te, which covers employees in the trade, tourism and service sectors, is increasing the equity exposure of its growth and balanced sub-funds, it has announced.It also said it was changing the name of its guaranteed sub-fund.As part of a periodic review, the €3.8bn pension fund said it has opted to raise the equities proportion of the benchmark of its growth sub-fund — which falls within the pension fund’s balanced category — to 40% from 35%, with the remaining 60% being in bonds.In the announcement, Fon.Te said: “This change is aimed at increasing the expected level of return, at the same time leading to an increase in market risk associated with share issues and therefore the expected volatility of the managed portfolio.”last_img read more

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