The Church of England investment fund saw returns of 15.9% over the course of 2013, backed predominantly by UK equities and property, outperforming its own benchmark by 6 percentage points.Now at £6.1bn (€7.5bn), the fund, which pays the pensions of clergy and church staff in the fund before 1997, also made charitable contributions worth just over £200m, slightly reducing the fund’s overall return to 11%.The fund said its risk assets performed well over the year, with disappointing returns from UK Gilts, as well as US Treasuries and high yield.Given the focused nature of where the returns came from, the fund also highlighted private equity, multi-asset fixed income and low-volatility equity as asset strategies to be expanded in 2014. Over 2013, it increased its allocation to listed equities to 43%, up slightly, but still significantly below the 60% allocation in 2007.A shift towards equities paid off for the fund, as UK allocations returned 28.3%, where an overweight exposure to small caps made a significant contribution.Its global and private equity allocations returned 21.9% and 13.4%, respectively, while it generated a 16.6% return from its defensive equity portfolio, made up of long and short low-volatility mandates.The year also saw the church make a £60m allocation, as part of a consortium, to purchase 300 bank branches from The Royal Bank of Scotland (RBS).The Church became the largest investor in the new bank, holding 10% of the initial investment.However, its fixed income investments did not perform as well, as US high-yield returned 3.3% back.The Church said, due to the poor relative performance of the liquid fixed income strategies, it would adjust the balance of the portfolio to protect it against volatile rate changes.Multi-asset absolute-return allocations, worth around £600m, returned 9.2% over the year, as the fund acknowledged it would look for additional managers to improve diversification.The fund added to its private credit strategy with an allocation in 2013, as the investments returned 21.5%.Property investments returned close to 17%, with returns of 20.6% and 16.9% from residential and commercial property.The indirect property portfolio returned a much lower 9.1%. However, the fund said it increased its allocations within the UK and US markets to fund care homes and residential properties.Infrastructure was a new asset class for the fund during the year, as it made a $50m (€40.5m) investment, and its timberland and forestry allocations returned 9.5%.Andrew Brown, secretary to the Church Commissioners, said the investment return through the year was very pleasing.“It is from these investments the Commissioners are able to provide the financial support to the Church,” he added.“It is particularly pleasing to note the fund has exceeded our target and performed better than its comparator group over all of the periods measured.”The Church suffered an embarrassment in 2013 through its holding of a payday lender, something it campaigns against.It admitted it had yet to divest from the pooled fund that holds equity in the lender, which it said could take “considerable time”, and that it was reviewing its use of pooled fund strategies.
Month: September 2020
Sackers – Joanna Smith, Naomi Brown and Emma Martin have all been promoted by the UK law firm. Smith and Brown are now associate directors, while Martin is a senior associate as of next month. Smith specialises in funding agreements and scheme mergers and also advises on defined contribution (DC) trust deeds for new funds set up under auto-enrolment. Brown has worked on a number of cases relating to the Pension Protection Fund and company insolvencies, while Martin was recently seconded to the Pensions Regulator, where she focused on DC matters.Schroders – Clara Yan has been named director of insurance asset liability management. Prior to joining Schroders, Yan spent six years at the investment banking branch of UBS and has also worked at Legal & General. She is qualified as an actuary in Australia and the UK. Irwin Mitchell, Principal Global Investors, PwC, Sackers, SchrodersIrwin Mitchell – Penny Cogher has joined the law firm as partner. She joins from Charles Russell Speechly, and has experience advising on compliance, risk management and buy-ins and buyouts. Cogher will be based in London.Principal Global Investors – Nicolas Woodcock and Sebastien Poulin have joined the fixed income team. Woodcock joins from Friends Life Investment and before then spent five years at Fidelity International as a credit analyst. Poulin joined from Newton Investment Management, where he was a high-yield analyst, and has also worked at Standard & Poor’s and BNP Paribas.PwC – Alison Fleming, Ros Williams, Debbie Cane and Julia Yates have all been promoted. Fleming has been named equity partner, with a focus on financial services, but will continue to lead the consultancy’s Scottish pensions team. Williams, Cane and Yates have all been promoted to director. Williams will continue to work with corporate pension clients in the Midlands, Yates will lead the office’s pensions credit team and Cane will continue working within the asset-backed contributions pension advisory team.
“As such,” the client added, “the preferred strategy maximises the Sharpe ratio with significantly less volatility than the overall market, rather than minimising absolute volatility.”The mandate must also incorporate the pension fund’s blacklist of companies in violation of certain ESG principles.The client said assets under management were likely to increase “significantly” in the coming years due to fund growth.While there are no tracking-error guidelines, the client does calls for a minimum track record of three years and at least $1bn in assets under management.Applicants must also have a track record in managing global equity low-volatility strategiesInterested parties should state performance, gross of fees, to the end of 2015.The deadline for applications is 5 February.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected] An undisclosed European pension fund has tendered a $700m (€642m) low-volatility global equity mandate using IPE Quest.According to search QN-2151, the active mandate could possibly be split between two managers.The client said its primary aim was to achieve well-diversified global equity exposure to developed markets with significantly less volatility than the MSCI World index.A secondary aim is to have an alpha-generating, systematic quant process.
Apart from its equity holdings, only Keva’s hedge funds saw losses, returning -2.9%.Private equity and real estate holdings both returned less than 1%, with property achieving the second-best performance of 0.7%.Keva’s best-performing asset class was fixed income, which at the end of March accounted for more than 46% of its €44bn in assets.Stefan Björkman, managing director at the €5.7bn Etera, said investment income was “stable” throughout the first quarter.Unlike Keva, Etera said property was its best-performing asset class, returning 2% over the quarter, compared with 0.5% from its fixed income portfolio.Equity losses were lower, with a return of -1%, while alternatives also lost a comparable -1.2%.However, Keva’s Huotari struck a note of caution when discussing future returns.“The underlying problem appears to be that none of the central [bank] operators seems to offer an intelligible way out of the current situation,” he said.“In the coming years, we might have an even bumpier ride ahead than we expected.” Finnish pension investors have suffered low returns as a result of “very unsettled” capital markets, according to Keva.The local government pension provider saw losses of 0.8% over the first three months of 2016, partly down to a 4.4% loss from its equity holdings, while pensions mutual Etera managed to return 0.1% over the same period.Tapani Hellstén, Keva’s acting managing director, said investment performance was in line with the fund’s expectations, although his CIO Ari Huotari said first-quarter returns were “meagre”.“The capital markets have been very unsettled, and we have performed reasonably well in investment operations in the middle of the storm,” Hellstén added.
The Financial Stability Board (FSB) has launched a consultation on policy recommendations designed to tackle “structural vulnerabilities” from asset management activities that could pose risks to financial stability.The consultation closes in September, with the FSB intending to finalise the recommendations by the end of the year.The International Organization of Securities Commissions (IOSCO) will be responsible for making many of them operational.The policy recommendations will pave the way for the FSB, together with IOSCO, to resume its work on developing methodologies for identifying global, systemically important financial institutions other than banks and insurers. It suspended this work in July last year.The FSB has made 14 recommendations to address what it sees as four main ways in which asset managers are structurally vulnerable.The vulnerabilities are:Liquidity mismatch between fund investments and redemption terms and conditions for fund unitsLeverage within investment fundsOperational risk and challenges in transferring investment mandates in a stressed conditionSecurities lending activities of asset managers and fundsCommenting on the recommendations, Mark Carney, chair of the FSB, noted that sources of credit and investment had diversified as a result of the growth in market-based finance.“Given its increased importance, a resilient asset-management sector is vital to finance strong, sustainable and balanced growth,” he said.“These policy recommendations are designed to ensure that, across the FSB membership, asset managers can continue to fulfil these roles to the benefit of all.”The FSB considers two of the four structural vulnerabilities to be key, namely liquidity mismatch and leverage.It said the recommendations to tackle the former focus on open-ended funds, while those for leverage are meant to apply to all types of funds that may use leverage.The policy proposals addressing operational risk focus on asset managers that are “large, complex and/or provide critical services”, and those for securities-lending activities focus on asset managers’ “agent lender activities” – i.e. when they lend securities of which an entity is not a beneficial owner.The FSB said its work on structural vulnerabilities from asset management activities would inform a revised methodology for deciding whether asset managers should be deemed global systemically important institutions.It added: “The focus, in the case of asset management, will be on any residual entity-based sources of systemic risk from distress or disorderly failure that cannot be effectively addressed by market-wide, activities-based policies.”The FSB also hinted that pension funds could yet be considered systemically important, although its policy recommendations did not address their role directly. Data gapsConcurrent with the FSB’s publishing its policy recommendations, IOSCO issued a statement setting out its plans to plug what it considers to be “data gaps” in the asset management industry.“In recent years, a number of initiatives have led to the augmentation of the data collected with a particular focus on the hedge funds industry,” said the umbrella organisation for securities regulators.“However, IOSCO considers more needs to be done to enhance the data collected and its use.“A key priority is to encourage IOSCO members to collect data with a view to better identify systemic risk.”IOSCO believes gathering data on three key areas should be prioritised: open-ended regulated Collective Investment Schemes (CIS), separately managed accounts and alternative funds.,WebsitesWe are not responsible for the content of external sitesLink to FSB Consultation Document on Policy Recommendations for Asset Management Structural Vulnerabilities
“We are fully confident the team and his temporary replacement, Christophe Girondel, will be able to maintain and expand Nordea’s solid position within asset management.”Girondel, a French national, has been in his current role as head of institutional and wholesale distribution since 2014 and has been working at Nordea for 12 years.Kjærsgaard Nielsen said the company wished Hyldahl the best of luck with his future challenges at ATP.“Christian Hyldahl has been a major driver behind the good results performance of Nordea Asset Management, and we are grateful for his efforts at Nordea over the past 27 years,” he said. Nordea has already put a man in place at the helm of its asset management subsidiary to fill the gap left after its chief executive surprised many last week with his decision to take the top job at Danish pensions giant ATP.Christophe Girondel, head of institutional and wholesale distribution at Nordea Asset Management, is now working as acting head of the subsidiary after chief executive Christian Hyldahl and ATP announced Hyldahl as the chosen replacement for outgoing chief executive Carsten Stendevad.Hyldahl is to start work as chief executive of ATP in January.Martin Kjærsgaard Nielsen, head of press at Nordea in Denmark, said: “We are obviously sad to lose such a prominent person, but Christian Hyldahl leaves a well-oiled and strong asset management franchise at Nordea.
Bosch Pensionsfonds – whose proposal for a new pension income structure led to a change in German law – was another big winner.Bosch took home no fewer than five awards, including those for Germany (bAV), Innovation and Active Management.Fellow German scheme Ärzteversorgung Westfalen-Lippe (AVWL) also took home three awards, winning the categories for Germany (Versorgungswerk), Infrastructure and Fixed Income.The Church Commissioners for England won three awards as well, including Climate Related Risk Management, with a nearly perfect score of 19.75 points out of a possible 20.Competition this year was particularly strong, with a record number of entries across all categories.For the first time in the history of the awards, a single category was won by three contenders, with Swedish buffer fund AP4 and the UK’s British Steel and Merchant Navy Officers pension funds sharing the Gold Award for Best Long-term Investment Strategy.The full list of the winnersGold Awards Long-Term Investment Strategy: AP4, British Steel Pension Fund and Merchant Navy Officers Pension FundPension Fund Achievement of the Year: Fiona MillerOutstanding Industry Contribution: Bernhard WiesnerBest European Pension Fund: NEST (National Employment Savings Trust) The National Employment Savings Trust (NEST) was the big winner at IPE’s annual Awards & Conference in Berlin, taking home the coveted gold award for Best European Pension Fund.The UK defined contribution pension fund – launched just five years ago – also won the Best Small Pension Fund award.#*#*Show Fullscreen*#*# Mark Fawcett of NEST receives his Gold Award for Best European Pension Fund from Laurent Bertiau of AmundiFiona Miller won the Pension Fund Achievement of the Year award for her commitment to the recent pooling concept among the UK’s local authority pensions, while Bernhard Wiesner took home the final Gold Award for Outstanding Industry Contribution for his pioneering efforts at the Bosch scheme in Germany and Europe. Themed Awards Climate Related Risk Management: Church Commissioners for EnglandDC & Hybrid Strategies: Bosch PensionsfondsDiversification: Santander UK Group Pension Scheme Common FundEmerging Markets: Royal County of Berkshire Pension FundESG: Church Commissioners for EnglandInfrastructure: Ärzteversorgung Westfalen-LippeIn-house Investment Team: British Steel Pension FundInnovation: Bosch PensionsfondsPortfolio Construction: PMTReal Estate: Church Commissioners for EnglandRisk Management: Trafalgar House Pension TrustSmart Beta: FRRSpecialist Investment Managers: FRR Bronze Awards Alternatives: SEB Life & PensionEquities: SEB Life & PensionFixed Income: Ärzteversorgung Westfalen-Lippe Silver Awards Active Management: Bosch PensionsfondsPassive Management: KB First Pension Company JSC SkopjeBest Corporate Pension Fund: Bosch PensionsfondsBest Multi-employer/Professional Pension Fund: Almenni Pension FundBest Public Pension Fund: ABPBest Small Pension Fund: NEST (National Employment Savings Trust)Best Sovereign Reserve Fund: Pension Reserve Fund of the Republic of Srpska Country Awards winnersBest Pension Fund in Austria (Pensionskasse): APK PensionskasseBest Pension Fund in Austria (Vorsorgekasse): fair-finance VorsorgekasseBest Pension Fund in Belgium: AmonisBest Pension Fund in Central & Eastern Europe: Swedbank Pension Plan DinamikaBest Pension Fund in Denmark: Industriens PensionBest Pension Fund in Finland: Elo Mutual Pension Insurance CompanyBest Pension Fund in France: CRPNPAC Caisse de Retraite du Personnel Navigant Professionnel de l’Aéronautique CivileBest Pension Fund in Germany (bAV): Bosch PensionsfondsBest Pension Fund in Germany (Versorgungswerk): Ärzteversorgung Westfalen-LippeBest Pension Fund in Ireland: RetireSmart (ESB Defined Contribution Pension Scheme)Best Pension Fund in Italy: Solidarietà Veneto Fondo PensioneBest Pension Fund in The Netherlands: Stichting Pensioenfonds INGBest Pension Fund in Portugal: Fundo Pensões Santander TottaBest Pension Fund in Small Countries: Almenni Pension Fund and Frjálsi Pension FundBest Pension Fund in Spain (corporate scheme): Pensions Caixa 30 FPBest Pension Fund in Spain (multi-employer scheme): Caja Ingenieros Multigestión PPBest Pension Fund in Sweden: SPKBest Pension Fund in Switzerland: CPEG (Caisse de Prévoyance de l’Etat de Genève)Best Pension Fund in the UK: ICI Pension Fund
First introduced in the Netherlands in 2004, the CDC underwent an “extreme stress test” during the financial crisis of 2008-09, offering “valuable learning opportunities” for UK legislators and regulators, Bennett and Van Meerten wrote. However, the credit crunch also brought up issues of “intergenerational fairness”, the authors warned.Within a CDC plan, the employer contribution was fixed either as a percentage or a specific amount, which has led “to the conclusion that the younger employee’s employer contribution is supporting the older employee’s target benefits”, wrote Bennett and Van Meerten. Yet the smoothing effect, achieved by the pooling of assets as well as mortality and longevity risks, could lead to higher annual benefits for scheme members, said Bennett.“The CDC scheme is between the two extremes [of DB and defined contribution plans],” he said. “Yes the income could go down, but the volatility should also be damped down – and it should be more stable.”Under the terms of existing Dutch schemes, members bear responsibility for any underfunding risks, rather than the employer. Unlike the UK, the Netherlands has no Pension Protection Fund that could step in to provide compensation in the event of company insolvency.A lukewarm receptionIn a written submission to the UK parliament’s Work and Pensions Select Committee, which conducted a recent consultation on the CDC concept, independent consultant John Ralfe claimed that the structure seemed “to require successive generations of new members, each able to pay the previous generation, if necessary – suspiciously like a Ponzi scheme”.In its submission, Willis Towers Watson offered qualified support for CDC but added: “We would not advocate one which compelled employers to replace defined contribution [DC], DB or risk-sharing designs with CDC, nor one which led to accrued DB benefits being converted to CDC target benefits without members’ consent.”However, the mooted scheme has received support.“If there were a CDC, then the employees would have more income security after retirement and employers would not have to take on open-ended risk,” said Alwin Oerlemans, chief strategy officer at APG.Yet concerns remain about further complicating an already-complex UK pensions system.“Existing legislation gives you enough tools and flexibility, so why people are looking to add another system is something that has me scratching my head,” said Ralph Frank, head of Cardano’s DC business.“In DC, it is the member that bears the risk of shortfall. In DB, it is the employer – and with CDC it supposedly sits somewhere in between.“For me, it’s like being pregnant: either you are or you aren’t. It needs to be clear who bears what part of the ultimate risk.” UK defined benefit (DB) scheme members could see higher and more stable pensions if the country learned from the Dutch approach to collective defined contribution (CDC) plans, according to the Pensions Institute.In a discussion paper comparing the legislative and regulatory framework for the Netherlands’ DB and CDC schemes with the UK’s DB plans, the paper’s authors Philip Bennett and Hans van Meerten suggested the Dutch experience could “usefully inform the thinking on the legal and regulatory framework for a UK CDC scheme”.The UK government announced in March this year that it was looking at how to implement CDC, following moves by the Royal Mail in partnership with the Communication Workers Union to launch such a plan.However, the government department responsible for pensions indicated this week that it was not seeking to legislate for CDC.
Swedish pensions and insurance group Folksam has invested SEK2.8bn (€269m) in the first sustainable development bond targeting global food loss and waste.The bond was issued by the International Bank for Reconstruction and Development (IBRD), part of the World Bank Group.Michael Kjeller, head of asset management and sustainability at Folksam, said the investment was focused on the UN Sustainable Development Goal 12, “responsible consumption and production”.He added that over the past two years, Folksam had invested more than SEK10bn in bonds issued by the World Bank. The bank said the most recent bond had been issued to raise awareness of the importance of combating food loss and waste.In a disclaimer, it said the proceeds of the issuance were not committed or earmarked for any particular projects.However, as an example of related action taken by the group, the World Bank cited the IBRD’s financing of grain storage in Mexico to reduce post-harvest losses while increasing the competitiveness of small grain producers.World Bank vice president for sustainable development Laura Truck said: “Halving global food waste per capita and reducing food loss along the entire supply chain by 2030 are essential to manage scarce resources and improve nutrition, as well as tackle climate change.”Folksam said it put heavy emphasis on sustainable investment, and was also among three Swedish pension funds to have invested in a five-year “blue bond” issued by the Nordic Investment Bank (NIB) in January. The other pension fund investors were AMF and AP3.
Danish pension and insurance providers ploughed nearly three times as many resources into unlisted assets in 2018 and 2019 as they did into listed equities, according to the latest central bank statistics, which quantify the continuing investment trend.The central bank – Danmarks Nationalbank – also revealed that unlisted equities had given pension providers higher profits than quoted stocks, with the more liquid securities returning 18.7% between January 2018 and December 2019, while unlisted shares had generated 20.4%.The bank said: “Unlisted investments now account for close to one fifth of I&P (insurance and pensions) companies’ total investments.”Insurance and pension companies – the assets of which are mostly pensions savings since Danish pension funds are largely incorporated as life insurers – invested DKK37bn (€4.9bn) into listed equities in the two-year period 2018/19, and DKK101bn in unlisted assets, the bank reported. Over recent years, it said in the statistics release, low bond yields and low expected returns on other assets had prompted insurers and pension funds to continue investing more in unlisted assets such as wind farms, infrastructure, forestry, unlisted enterprises, private equity funds, properties and alternative types of debt.The bank said its newly-developed statistics provided a comprehensive overview of this development for the first time.In the last two years, I&P companies’ investments in unlisted assets increased to DKK803bn in December 2019 from DKK606bn, said Danmarks Nationalbank.“This increase was fairly evenly distributed between new investments and fair value appreciations,” it said, adding that unlisted investments now accounted for almost a fifth of the sector’s total investments.The new statistics consist of data reported since early 2018 by the 45 largest insurance companies and pension funds in Denmark.The central bank said in December that it was ramping up its publication of data on the insurance and pension sector, as the industry became a more and more important part of the Nordic country’s economy.