A European corporate pension fund is looking for a manager to run a $10m (€7.3m) global insurance-linked securities portfolio, according to a new entry on manager search facility IPE-Quest.The unnamed pension fund has stipulated the mandate should be run with a defensive style and using an active process, benchmarked against the Eurekahedge ILS Advisers and the Swiss Re Global CAT Bond indices.Managers should have at least $500m in assets under management in the targeted asset class, and a minimum of $10bn under management overall.The deadline for responses is 11 August. The IPE.com 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 direct from IPE-Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]
Nordic investors, including PKA, Ilmarinen and ATP, have praised the cost benefits and additional control over investment risk gained by shunning hedge funds in favour of strategies that emulate the asset class.Staffan Sevón of the €34bn Ilmarinen said that while the pensions mutual did have some exposure, it preferred to allocate to an absolute return portfolio viewed as an “internal” hedge fund. The mutual’s head of tactical asset allocation told the November issue of IPE there were significant benefits in managing the exposure in-house.“As well as the cost benefits, we can be more dynamic, and there are no gating problems,” he added. “Also, we know all exposures in real time, which means we can co-ordinate our internal hedge fund-type investments with the overall portfolio, avoiding duplication or counter-transactions.”Søren Grooss, portfolio manager at Denmark’s PKA, said the fund bypassed hedge funds, instead pursuing strategies that employ similar instruments such as leverage and derivatives.“This choice is partly to do with cost-efficiencies, but, the fact is, we believe we can do the things hedge funds are doing,” he said.“We are comfortable with those strategies, so there is no reason to pay a firm to package them.”ATP’s CIO Henrik Gade Jepsen echoed the concern over hedge fund costs, noting many had strategies in place that were essentially risk-factor investments that could be run more cost-efficiently in a different structure.He also cited the importance of keeping risk-factor investing in-house.“I would never embark on this strategy by outsourcing everything because you would be outsourcing a big chunk of your total risk,” he said.“And there are so many issues you need to make sure you understand.”Christer Franzén, CIO at the SEK18bn (€2bn) Ericsson pension fund, also warned fellow pension investors of the downside of investing in hedge funds.“I do not believe we should all expect to get positive alpha returns if we all invest in hedge funds,” he said.“By definition, there will be winners and losers, and there is a chance the size and knowledge of the investor may play a role in that.”For more on hedge funds and alternative strategies, see On The Record in the current IPE
CERN Pension Fund is investing €4m in Keensight IV, a European growth private equity fund, as part of its drive to increase the private equity allocation within its CHF4bn (€3.3bn) portfolio.At present, around CHF123.3m, or 3.05% of the portfolio, is invested in private equity, but the plan is to invest CHF70m a year for the next few years, to bring the allocation up to 5%.Carlo Farina, head of external selection at CERN Pension Fund, said: “We started to push private equity to another level about 18 months ago from its then peripheral position.“We wanted to target multinational companies rather than small local companies, and also to mitigate the J-curve of our portfolio across all investments.” As a whole, the fund’s target return is inflation plus 3%.The private equity portfolio has delivered 13.62% for the year to 18 November. From investing in private equity on a piecemeal basis, the fund has moved towards a more systematic approach using a gatekeeper, StepStone, with a detailed tactical plan.Keensight IV, which had raised €250m by final close and was heavily oversubscribed, will target rapidly growing companies across Europe with revenues between €15m and €150m.Individual stakes will range from €10m to €30m, and include both minority and majority shareholder positions.Keensight Capital specialises in the internet and media, information technology, healthcare and services sectors.Its most recent exits included the sale of its stakes in Octo telematics, which provides telematics services for the automotive market, and in FircoSoft, a provider of software solutions for filtering banking transactions.Keensight also supported LDR Medical, which manufactures spinal implant devices, in its successful flotation on the Nasdaq.The three exits generated a multiple of five times the initial amount invested.Farina said: “We decided to invest in the fund mainly because the team has a good overall track record – for example, at end-2013, Keensight III posted a gross internal rate of return of 29%.“Furthermore, Keensight has achieved 28 successful exits despite the difficult macro conditions in Europe and with a conservative use of leverage – historically, no more than 3 x EBITDA (earnings before interest, tax, depreciation and amortisation).”In its private equity portfolio, CERN now owns eight primary investments, four secondaries and one co-investment, all through funds.It mostly avoids venture capital because of the relatively high investment risk but has successfully invested in small and large buyouts, distressed assets and co-investments, mainly in North America and Europe, but avoiding emerging markets.Farina said: “The macro-economic situation in Europe makes investing difficult, and I don’t see that the region will return to pre-crisis levels of growth any time soon.“To produce a consistent return, you need to find niche companies with some global exposure.”But he said there were opportunities in secondary investments sold on by banks.“Some banks have been forced to sell private equity holdings by regulations in their countries,” he said.“Other banks are selling because they overpaid for investments – particularly in infrastructure such as toll roads – got their fingers burnt, and are now getting rid of them at huge discounts.”
Pension Protection Fund Ombudsman, ING Pension Fund, F&C Investments, GoldenTree Asset Management, Landmark Partners, LawDeb Pension Trustees, Towers Watson, Queensland Investment CorporationPension Protection Fund (PPF) and Pensions Ombudsman – Anthony Arter has been appointed the new UK ombudsman after receiving endoresment from the parliamentary committee for work and pensions. The cross-party bench of MPs questioned Arter on 11 February before approving the appointment. Arter was the preferred candidate put forward by the Department for Work and Pensions. He retired as senior partner from law firm Eversheds in April 2014, but remained a consultant. He was also an independent trustee, having advised the pension schemes for British Airways and the Railways Pension Scheme (RPMI). He replaces Tony King who will step down later this year.ING Pension Fund – Corné van Nijhuis, chief executive of the €25bn scheme, has departed after only eight months in the role. He was hired in April last year to succeed Daan Heijting, who joined Timeos.F&C Investments — Justin Welby, the Archbishop of Canterbury, is to act as president of F&C Investments’ new Responsible Investment Advisory Council, which will advise the firm on ethical and sustainability criteria for its Responsible Fund products. The five other members of the new council are Howard Pearce, Rosey Hurst, Annemieke Wijn, Ylva Lindberg and Martin Smith. Pearce is chair of the council, as announced last October, and was previously head of pension fund management for the Environment Agency Pension Fund. Hurst was a founder member of responsible supply chain initiative Sedex. Wijn, meanwhile, is on the board of non-governmental organisation the Rainforest Alliance. Lindberg was a member of the Council on Ethics for the Norwegian Government Pension Fund Global for five years, and Smith is currently part of F&C’s executive management committee and head of product management. GoldenTree Asset Management — Dean Merritt has joined GoldenTree Asset Management as partner, leading European restructurings and turnarounds. He comes to the firm from Talbot Hughes McKillop where he was a partner. Merritt will work closely with Ted Lodge, global head of restructurings and turnarounds, the firm said.Landmark Partners — James Clarke has been hired by Landmark Partners as director of investor relations, to be based at the firm’s New York City office. He will report to Geoffrey Mullen, managing director of investor relations and business development. Clarke will be mainly in charge of the eastern region of the US and ongoing business development of the firm, Landmark Partners said. He was previously managing director of business development at Golden Tree Asset Management, and before that senior vice president at Paulson and Co. LawDeb Pension Trustees — Vicky Paramour is joining the LawDeb Pension Trustees team. She was previously at EY for four years, where her role included advising companies on funding negotiations. Before that she was senior consultant at Towers Watson.Towers Watson — Sharmila Nebhrajani and Russell Picot are joining the board of Towers Watson’s master trust LifeSight, as the first two trustees on the board. The board is chaired by Donald Brydon. Nebhrajani is currently chair of the Human Tissue Authority, as well as being non-executive director and chair of the risk and audit committee of the Pension Protection Fund. She previously worked for a decade at the BBC as chief operating officer and finance director of the corporation’s Future Media & Technology division. Picot is group chief accounting officer for HSBC, having previously been a trustee of the HSBC UK Pension Scheme, where he chaired the audit & risk committee. Brydon is chair of Royal Mail and Sage and was previously chair and chief executive of AXA Investment Managers.Queensland Investment Corporation (QIC) – Paul Costello has been announced as independent chairman for QIC’s global infrastructure investment committee. Costello was the inaugural CEO of Australia’s Future Fund and the first CEO of the New Zealand Superannuation Fund. He joined the investment manager in late 2014. The committee includes members of QIC’s global infrastructure team, founders Ross Israel and Matina Papathanasiou, two partners on a rotating basis, and fellow independent Peter Forbes.
The treatment of company staff has long been on the radar for investors. But Joseph Mariathasan says that animal welfare is just as important Should issues of animal welfare matter to investors? In the extreme case, the answer is a pretty clear yes. Jeremy Coller pointed out at the launch of the 2014 Business Benchmark on Farm Animal Welfare (BBFAW) last week, that as a result of Blackfish, a critical documentary on the treatment by Seaworld of a killer whale, attendance at the Seaworld amusement park fell by 30% and their share price fell by a third and has yet to recover. In contrast, he says, restaurant chain Chipotle saw a 23% increase in revenues in the second half of 2012 after it sold itself on sourcing its meat from farmers who treat their livestock humanely without the use of industrialised factory farming.Clearly extreme cases can impact companies both for the better as well as for the worse. But apart from the purely moral arguments, which can often be controversial, there are also issues pertaining to human health. The widespread overuse of antibiotics in animals as a disease prevention measure has been an effective cost reduction strategy for the farming industry. But it creates the spectre of antibiotic resistant strains of pathogens that are potentially harmful to the human population being incubated within the food producing animal industry.As the BBFAW report argues, such a prophylactic use of antibiotics, which accounts for nearly half of all the antibiotics produced worldwide, is used to compensate for an inherently low-welfare environment in intensive farming where animal immune systems are compromised and sickness is more likely. It is another example of an activity where economic externalities have not been priced in, so the user of antibiotics benefits by an amount which can be dwarfed by the amount that society as a whole, loses. Proponents of better treatment of farm animals have the objective of raising standards of care throughout the industry and that is a difficult issue to get the attention of the investor community. The underlying rationale for the creation of the BBFAW is clear – what you can’t measure, can’t be managed, whether important or not.In that respect, the BBFAW reports are an invaluable first step to analysing the issues. They assess company approaches to farm animal welfare purely on the basis of published information in three core areas: Firstly a management’s commitment and policy regarding animal welfare that includes specific policies on issues such as close confinement and long distance transport; secondly governance and management covering areas such as farm animal welfare-related objectives, supply chain management and performance reporting and, thirdly, leadership and innovation including research and development and customer engagement.There are 80 companies within the analysis in the three sectors of food retailers and wholesalers, restaurants and bars and food producers. But as the report acknowledges, the practice and reporting of farm animal welfare remains relatively underdeveloped. 85% of the companies acknowledged farm animal welfare as an issue, but only 64% have formalised their commitment in overarching policies or equivalent documents, whilst only 33 out of the 80 companies publish farm animal welfare-related objectives and targets.Benchmarks are useful in not only providing a measurement, but also in encouraging improvement. Positioning relative to a peer group is always of critical interest, whether to an individual or to a company. In that respect, the BBFAW reports themselves provide a catalyst for improving behaviour.The dilemma for its proponents though, is that fund managers who can influence companies, are themselves only going to be interested in doing so when it comes to ESG issues if they are under pressure from their own institutional clients. But few pension funds would see farm animal welfare as an issue of concern. For that to change there would need to be a greater interest from their own trustees and beneficiaries.Joseph Mariathasan is a contributing editor at IPE,WebsitesWe are not responsible for the content of external sitesLink to 2014 BBFAW report
Rabobank Pensioenfonds, Achmea, Storebrand Asset Management, JLT Employee Benefits, BNP Paribas, Impax Asset Management, Craigmore Sustainables, Dorsey & Whitney, NVP, UBS Global Asset ManagementRabobank Pensioenfonds – The €22bn Dutch pension fund has appointed Bernard Walschots as chief executive to succeed Jos Dirks, who has retired after nine years at the helm. Thijs Berenst, manager of the central treasury of Rabobank Netherlands, has been appointed as Walschots’s successor. Walschots, after having worked as Rabobank’s global head of financial markets research in London, had been CIO at the Rabobank scheme since 2007.Achmea – Frans van der Ent has been appointed executive chairman of the Pension & Life division of insurer Achmea, as of 15 September. He is to succeed Bianca Tetteroo, who recently joined Achmea’s executive board. Van der Ent has worked at Achmea since 2007 and served as director of income protection since 2013. He was previously chief executive of Achmea’s Romanian subsidiary for six years, until the business was sold to insurer Aegon. Achmea is the parent company of the largest insurance group in the Netherlands. Storebrand – Jan Erik Saugestad has been appointed by the Storebrand Group to the position of executive vice-president of asset management, as well as chief executive of the subsidiary Storebrand Asset Management. He succeeds Staffan Hansén, who will become executive vice-president for the customer area of Sweden, replacing Sarah McPhee, who is leaving executive management at the company before retiring in early 2016. Saugestad is currently CIO at Storebrand Asset Management and has been the acting executive vice-president for the asset management unit since July 1. JLT Employee Benefits – Kieran Harkin has been promoted to head of local government pension scheme (LGPS) investment consulting. He is already a director of the company, and previously worked at KPMG and HSBC Actuaries and Consultants, before joining JLT EB as senior consultant in 2013. At the consultancy, he manages relationships with several LGPS clients, including the Clwyd Pension Fund, Merseyside Pension Fund and Lancashire Pension Fund.BNP Paribas – Wouter Weijand has announced his departure from BNP Paribas Investment Partners. At the same time, the company announced that it would transfer its Amsterdam-registered dividend fund to its equity teams in London and Paris. Weijand started the Global High Income Fund in 2003, and had been working for BNP and its legal predecessors, Fortis Investments and ABN Amro AM, for 26 years. He declined to comment on the exact reasons for leaving. Gaetan Obert has been named head of the European team. He has been manager of a similar dividend fund at BNP. Impax Asset Management – Scott Thompson has been hired by Impax Asset Management as sales director. He will be responsible for the UK, Continental Europe and Asia, reporting to chief executive Ian Simm. Thompson comes to Impax from Craigmore Sustainables. Before then, he worked for ETF Securities. Dorsey & Whitney – Private equity lawyer Fabrizio Carpanini is joining international law firm Dorsey & Whitney as a partner in its corporate group in London at the beginning of November. He will lead the Dorsey London and European private equity practice. He joins from London-based law firm Olswang, where he worked for more than 15 years, most recently as partner and head of the corporate group. NVP – The Dutch industry association of private equity holdings companies has appointed Annemarie Jorritsma as chair. Jorritsma has served as deputy prime minister, and has been minister for several departments, for the liberal party VVD in the Netherlands. She was sworn in as a senator last June. Jorritsma succeeds Philip Houben, who served as chairman since 2010.UBS Global Asset Management – Jesús Silva Gallardo has been hired by UBS Global Asset Management as head of Iberia in its real estate business (GRE). He will be based in Madrid. Silva Gallardo has worked at UBS since 2007 and was most recently responsible for the asset management of GRE’s property investments on the Iberian Peninsula. Before joining UBS, he worked for Rodamco. He is taking over from Peter Röhrenbach, who will be taking on the new role of head of satellite countries-Europe, which includes Iberia, France, the Benelux region and the Nordics. Röhrenbach will stay in Madrid, and Silva Gallardo will continue to report to him.
The Danish pension fund for pharmaconomists (Pensionskassen for Farmakonomer) has decided to outsource all of its asset management to US manager BlackRock in a deal it says will make it easier to be a small pension fund in Denmark.The DKK10bn (€1.34bn) pension fund said BlackRock’s ability to help it meet increased regulatory reporting demands had been almost as important in sealing the deal as its ability to generate returns and keep costs down.Pharmaconomists are professionals in Denmark who are qualified experts in pharmaceuticals.Peter Bache Vognbjerg, chief executive of the 7,600-member pension fund, said: “Cooperation with BlackRock serves several purposes.” First of all, the pension fund believes BlackRock will be able to provide a stable high yield for its members and reduce costs.“Nearly as important, however, is BlackRock’s ability to help us continue to meet the increased reporting requirements laid upon us by the authorities,” Bache Vognbjerg said, adding that this had also been an important factor in the fund’s choice of asset manager.He said that, as a small scheme, the pension fund for pharmaconomists had to meet the same regulatory requirements demanded of big pension providers.“This is the reason why we have chosen to ally with one of the best in the business in both asset and risk management, in order to continue to be able to meet these requirements,” he said.Peter Beske Nielsen, head of BlackRock’s business in the Nordic countries, said the asset manager was grateful for the trust the pension fund was putting in it.“Outsourcing all or parts of asset management and risk management is more common in countries like Holland, but we are also experiencing growing interest from Danish pension funds and insurance companies,” he said.Denmark’s independent labour-market pension funds have come under pressure in recent years to merge with larger commercial pension providers, particularly because of more onerous reporting and reserve level demands from regulators.The then-chairman of the pharmaconomists’ pension fund Susanne Engstrøm said in April last year that the fund would not merge with a big commercial provider, in reaction to an invitation from PFA for smaller pension funds to merge with it.She said this was not more than could be managed even by small organisations, even though a regulatory inspection did put pressure on resources.
Russia’s non-state pension funds (NPFs) delivered a weighted average nominal return of 10.6% to date on savings in the compulsory system, and 10.9% on reserves in the first nine months of 2016, according to the Bank of Russia (CBR), the sector’s regulator.Inflation for the period totalled 5.4%.The results are a marked improvement on the previous year, when the funds returned 9.3% against an inflation rate of 7.1%.The return of the extended portfolio of state-owned Vnesheconombank (VEB), which manages 96.1% of the assets of workers insured outside the privately run system, fell from 12.1% to 11.18%, a result beaten by 24 of the NPFs. The investment returns contributed to the increase in pensions savings managed by the NPFs, which grew by 24.3% year on year in rouble terms to RUB2,100bn (€29bn), as did an 11.8% growth in NPF membership, to 29.87m.The membership growth came from workers switching from having their assets managed by VEB to the NPFs.In terms of asset allocation, corporate bonds accounted for an increasing share of the NPF portfolio, rising from 40.9% in 2015 to 48.6% in 2016.The share of equities also grew, from 11.6% to 13.8%, boosted partly by a legislative change in June that allowed NPFs to invest directly into privatisation IPOs.Meanwhile, the share of Russian Federation central government bonds fell from 6.1% to 5%, and that in regional, municipal, city and other federation bonds from 4.3% to 2.4%.Over recent years, the CBR has been lowering the maximum limit in deposits – to 40% in 2016 – to free up investment in the real economy, with proposals to lower this to 5-10% eventually.As a result, the NPF portfolio share fell from 23.6% to 15.8%.The share in mortgage securities, another focus of CBR regulation because of past abuses, declined from 5.7% to 4%.Another trend over the reporting period was the sharp decline in the number of NPFs, from 110 to 81, of which only the 43 funds registered with the Deposit Insurance Agency’s guarantee scheme can continue to operate in the compulsory system.The shrinkage is due to the CBR’s annulment of NPF licences for various violations, and more recently by the growing trend of financial group owners merging their NPFs.As a result of Russia’s budget and state pension deficits, the moratorium on contributions to the NPFs, which started in 2014, looks set to continue for the coming three years, alongside question marks over the future of the compulsory system.Previously, 6% of the 22% of the employer-funded social tax on wages went to the privately run system or VEB, the remainder to the first pillar.The biggest debate is over a proposal by the CBR and finance ministry to replace it with a quasi-voluntary system that would see employees paying a share of up to 6% eventually into what the co-authors describe as a “modernised” pensions system, with employees able to opt out by filing for five-year pensions contributions breaks.
Source: EDHEC-Risk InstituteThe survey found that improving performance and managing risk were the most important motivation for adopting smart beta strategies.The vast majority of respondents (94%) planned to increase their investment in smart beta products over the next three years.Respondents also said they would like more customised solutions to be developed, as well as offerings in fixed income and alternative asset classes.The full survey report can be found here.LGIM leads European smart beta IPE’s latest Top 400 Asset Managers report showed that Legal & General Investment Management was the leading manager of smart beta portfolios on behalf of European institutional clients is, with over €30bn of assets.Robeco, BlackRock, and Insight Investment Management followed in the ranking of the largest European institutional smart beta managers, IPE’s proprietary research showed. The data was correct to the end of 2016.In terms of exchange-traded funds, BlackRock was by far the largest manager with €253bn of assets managed for European institutions. Deutsche Asset Management was next, with more than €50bn, while Germany’s Assenagon Asset Management and France’s Amundi were in distant third and fourth place respectively. Investors are struggling to get important information about smart beta strategies, according to a survey by EDHEC-Risk Institute.The research found there was an “important” gap between the information investors required to assess smart beta products and the ease of access to this information.The survey – of 211 European investment professionals – found that a lack of transparency was the second most important hurdle to increasing smart beta investments for respondents, after “methodological issues” with smart beta strategies.“The fact that information that is regarded as important is not considered to be easily available clearly calls into question the information provision practices of smart beta providers,” said the EDHEC-Risk Institute. “In fact, the only area in which no pronounced gap exists between the importance and the ease of accessibility scores is for performance numbers. “Performance and risk information is judged to be moderately easily available and moderately important.”Asked about the information they consider most important to assess smart beta, respondents said information about liquidity and capacity, index construction methodology, and transaction costs were important.They were also asked how easy it was to obtain this information. The biggest gap between importance and accessibility of information was in relation to data-mining risk. This scored 3.59 in terms of importance (on a scale of 1 to 5, with 5 being “crucial”) and 2.06 in terms of ease of access (with 0 being difficult to obtain).The second biggest gap between the importance of information and its ease of access was in relation to liquidity and capacity. Respondents deemed this the most important piece of information, with a score of 4, but scored it with 2.80 for ease of access.
The level of interest in the project appeared “quite reasonable”, according to Filip Hemeryck, cross border pension fund manager and senior consulting actuary at Aon Hewitt in Belgium, which advises Resaver.He said this was based on the number of downloads of the pre-qualification questionnaire, and taking into account that Resaver only carried out limited publicity of the tender.The Belgium-based organisation is primarily targeting mobile individuals who work for a European education or research organisation but do not have an employment contract. This means they cannot join the pension fund it has set up for researchers in different European countries, or most occupational retirement schemes in general.Resaver envisages the targeted private pension products also being available to employees with an employment contract, however.Resaver’s pan-European pension fund came into operation in early 2017.The Resaver consortium launched its private pensions initiative in anticipation of it taking time before EU regulation on a Pan-European Personal Pension Product (PEPP) would be launched.It said its initiative “can be considered as a first step up towards a Pan-European Personal Pension Product helping researchers to ensure easy access to a (private) pensions wherever they go”.The European Commission laid out its proposal for a regulation on a PEPP in June and it is due to be considered by the European Parliament in the first half of this year.The Resaver consortium said it would take several years before the PEPP regulation was fully implemented across the European Economic Area.Its expectation is that the products provided by any successful applicants would be the existing local market pension products.The organisation is aiming to partner with one provider in each of 31 countries covered by the tender. Its role would be strictly limited to facilitating the access to the products through the existing Resaver portal; the personal pension product would be contracted directly between the individual and the selected provider.Resaver expects providers would apply a competitive fee to individual researchers opting for a given product, and that they pay the consortium a fixed annual fee, per country, to cover the its administration costs.Resaver is supported by the European Commission under its Horizon 2020 programme. The organisation behind the Resaver cross-border pension scheme for academic researchers is seeking to facilitate access to personal pension products for such workers.Its initiative is in the first place aimed at freelance researchers.Resaver Consortium is looking for insurance companies and other financial institutions willing to offer third pillar products to individuals working for organisations that are members of the organisation.The original deadline – to fill in a pre-qualification questionnaire – was 26 December but a few days before that date it was extended to the end of January.