Fund assets rose by £427m during 2012-13 to end the financial year at £4.6bn.The authority said that, despite challenging market conditions, both the active and pensioner sub-funds – which will soon be merged – saw strong growth in the year.The active sub-fund returned 12.6%, and the pensioner sub-fund produced 9.6%, the LPFA said, adding that both had outperformed their set benchmarks over one and three years.It also said fund costs had continued to fall during the year, both as a percentage of net assets and in absolute terms per fund member.“Fund management costs as a percentile of assets under management also have been reduced, and it is our intention to reduce those further,” it said.Susan Martin, interim chief executive at the LPFA, said the authority was always looking for improvements.“In particular, as we move into a highly evolutionary period for the LGPS, we will continue to focus on closing the funding gap, in particular through the active management of liabilities,” she said. The London Pensions Fund Authority (LPFA) has produced a 12.4% net return on investments in the year to the end of March 2013, after removing an interest rate hedge produced £178m (€210m) for the public sector scheme.The net return on investments of 12.3% in the 12-month period compares with 4.2% reported for the previous year.The gross return on investments rose to 12.9% from 5%.“The performance was positively impacted by a strategic decision, informed by an environment of continuing interest rate stability, to remove an interest rate hedge, which harvested a benefit of £178m,” the LPFA said.
As far back as November 2013, Klijnsma warned that the time schedule for the FTK had been “tight”.Despite the latest delay, the state secretary said she saw no reason to postpone the introduction of the new FTK if Parliament managed to conclude its assessment of the legislation before the summer break began on 4 July.“In that event, the pensions industry would still have enough time to prepare, so the new legislation could go into effect on the intended date of 1 January 2015,” she wrote.The pensions industry, however, has taken a dim view of this suggestion. A spokesman for the Dutch Pensions Federation said: “From the moment the proposal is introduced to the House of Representatives, the pensions sector will need a year,” he said.“The state secretary can’t ask us to implement the necessary changes in half a year.”He said he expected the government to “seriously address” Dutch pension funds’ concerns during upcoming consultations between the Federation and the Ministry of Social Affairs.Last December, Gerard Riemen, director at the Federation, called for the introduction of the new FTK to be pushed back by half a year. Meanwhile, civil service scheme ABP described the notion of implementing the legislation in half a year as “unrealistic”.A spokesman at the €293bn fund said such a short time frame would put Dutch schemes under too much pressure.Christian-Democrat MP Pieter Omtzigt said he expected clarification from the state secretary regarding the precise schedule for the legislation. The publication of the new financial assessment framework (FTK) in the Netherlands has been delayed yet again and is now not expected to arrive before Parliament before March.In a letter to Parliament, Jetta Klijnsma, state secretary at the Ministry for Social Affairs, said her department needed more time “to figure out the details” of the long-awaited legislation.Klijnsma had previously promised to submit her proposed framework by the end of January at the latest.For many in the industry, the latest delay comes as little surprise.
Danish labour-market pension fund PensionDanmark reported a dip in investment returns in the first half of this year, as losses on domestic bonds showed through.The pension fund, whose total assets grew to DKK181bn (€24.2bn) by the end of June from DKK165bn at the same point last year, said in its interim report that contributions had risen as a result of rising employment among the businesses whose pension schemes it ran.Torben Möger Pedersen, PensionDanmark’s chief executive, said: “Recent developments on the equity markets show that there are still big imbalances in the global economy, and that we are probably looking at a long period of lower and very volatile returns on shares and bonds.”It was against this background that the pension fund was focusing on putting together a portfolio that could do well even when there were big fluctuations in these markets, he said. “For this reason we have continued to expand our investments in stable alternatives, such as infrastructure and property, which now account for 20% of the portfolio,” Möger Pedersen said.The return on investments was DKK7.87bn before tax in the first half 2015, down from DKK9.92bn in the first half of 2014, according to interim results.In percentage terms, returns on pension savings for the six-month period ranged from 2.7% for members aged 65 and 6.1% for those aged 40.This compares with 6.6% and 6.5% respectively in the same period last year.PensionDanmark said returns for the age-related investment pools reflected the fact that younger members had a greater proportion of their savings in equities and so had benefited from the fact shares had produced a better return than other investments in the period.The pension fund’s investments in quoted shares had generated a 10% return, which was in line with the general development on international stock markets.On the other hand, bonds had been marked by the increase in yields in the first half, which had led to price falls on the Danish bond market.PensionDanmark’s holdings of Danish government bonds and mortgage bonds made a loss of 1.6% in the period, while investments in corporate and emerging markets bonds produced between 1.8% and 2.2%, it said.Regular contributions grew to DKK5.28bn in January to June 2015 from DKK4.98bn in the same period last year, PensionDanmark said.
European pension funds have welcomed the US Federal Reserve’s decision to raise US interest rates from their near-zero levels, saying the hike and the muted market reaction to it boded well for any return to normal rates in Europe.As widely anticipated, the Federal Reserve yesterday followed through with a well-flagged interest rate rise, increasing the target for the Fed funds rate by 25 basis points to 0.25%-0.5%.It is the first time short-term interest rates have been hiked in the US in almost 10 years.Inger Huus Pedersen, head of fixed income and ESG at Denmark’s PKA, said the market had not reacted very strongly to the new, which she said was reasonable given that “whether the short term rate is 0% or 0.25% doesn’t change many people’s business model fundamentals”. She welcomed the increase.“The low-interest-rate environment is a drag on our future returns, and, although there is no hike in sight from the European Central Bank, it is nevertheless a good signal,” she told IPE.“We were a bit surprised not to see it earlier, but it’s better late than never.”The Federal Reserve’s move will have no direct near-term implications for the Danish pension fund’s fixed income investment strategy, according to Huus Pedersen, but longer-standing monetary policy divergence could occur.“In the longer term, if rates stay very low in Europe, and you can achieve higher returns in the US, then we would probably be more likely to look more at US assets,” she said.In Finland, Timo Viherkenttä, chief executive at VER, the State Pension Fund, its said the Federal Reserve had pulled off a difficult task.“The Fed was in an uncomfortable situation where the market would probably have reacted negatively both to a more dovish and to a more hawkish measure,” he said.“Although market impact shouldn’t be the main priority for Fed, they seemed to hit the bull’s eye in this respect.“In all, the combination of the actual decision and its communication was obviously well thought of and balanced.”Tom Mergaerts, chief executive at Amonis, the largest pension fund for healthcare workers in Belgium, said he was encouraged by the equity market’s muted reaction to the rate rise and the implications thereof for an eventual return to normal rates in Europe.“Normally, although not always, interest rate increases are combined with a selloff in equities,” he said. “Clearly, this is not the case this time, at least not yet, and it is a big achievement.”It is an important and positive sign Europe can return to “normal” interest rates “without going through a trough or crash”, he added.He attributed the steady market reaction to the advance warning the Federal Reserve had been giving for some time and contrasted it with what happened in 2013, when rumours first surfaced that the central bank would begin to taper quantitative easing.“Back then, just the rumours the Fed was considering tapering triggered a huge sell-off in the markets,” Mergaerts said. “This week, they raised interest rates, and there was no effect in the markets.”In the Netherlands, Mercer said the Fed’s decision would not necessarily affect the long-term interest rates relevant for Dutch pension funds’ liabilities.Drawing on the development of interest rates since 2000, Dennis van Ek, an actuary at the consultancy, pointed out that long-term rates, such as the 30-year swap rate, did not always respond to adjustments of short-term rates by central banks.“Even if long-term rates in Europe rise as a consequence of the Fed’s decision, the European Central Bank is likely to take additional measures to keep rates low over here because of its inflation target of 2%, as the ECB has already indicated,” he said.His assessment was echoed by Sander van Ginkel, chief economist at the €110bn MN, the fiduciary manager for the large metal schemes PME and PMT.He said “some” upward pressure on interest rates in Europe would come no sooner than the second half of 2018.He added that MN had already factored the Fed’s increase into its base-case investment scenario, and that the fiduciary manager saw no need for portfolio adjustments at the moment.Van Ginkel said markets had responded positively to the Fed’s decision, with equity markets improving and volatility indices, such as the VIX, declining.He said he expected the Fed to have increased interest rates to approximately 3% by the end of 2017, but he warned of the risk of volatility somewhere along the way “if the markets, which currently expect a slower increase, start catching up”.Mercer’s Van Ek noted that some investments and investment funds – such as funds for US property and mortgages, as well as hedge funds – could be affected by a higher interest burden, “as this will have an impact on companies’ ability of paying back”.According to the actuary, liquidity problems have recently emerged at some high-yield funds and hedge funds.“Pensions funds with a stake in these investments should monitor developments closely,” he said.
ABP, the Dutch civil service pension fund, is adding to its existing investments in start-up companies in the country by investing €300m via INKEF Capital, which it jointly founded six years ago.Corien Wortmann-Kool, chair at ABP, said: “For ABP, it is important investments in the Netherlands provide jobs and economic development, alongside generating returns for our participants.”She said INKEF had proven it was able to find the right start-ups in which to invest pensions money successfully.ABP said INKEF had now become the biggest investor in Dutch start-ups, having invested a total of €500m in the sector. The pension fund teamed up with Canada’s Ontario Municipal Employees Retirement System (OMERS) back in 2010 to launch INKEF Capital, planned as a 15-year programme to invest in start-up businesses in Canada and the Netherlands.The pension funds said at the time that the initiative – whose acronym derives from Investing in the Knowledge Economy of the Future — differed from most other start-up investment projects because of its longer-term investment horizon and active mentoring approach.OMERS has not made active investments via INKEF in recent years.In 2015, INKEF Capital invested in internet florist start-up Bloomon, ABP said.It is currently investing in 16 companies, including Bloomon, sleep apnoea treatment NightBalance and 3D printing market Shapeways.ABP, together with its pensions administrator APG, is one of the few Dutch pension investors putting money into start-ups. Other large investors, such as PGGM, MN and Syntrus Achmea, have little enthusiasm for the sector, Pensioen Pro, IPE’s sister publication in the Netherlands, reported in April.These investors are reluctant to invest because of high costs, poor returns over the long term and the small size of the market, Pensioen Pro reported.However, INKEF says it is noting interest from other pension funds.
Geoff Driver, council leader, added: “At a time when Lancashire County Council is facing a very challenging financial situation, it is more important than ever for the people of Lancashire that we secure the best possible return from the council’s investment activities, which is why we have created this new position of director of investments.”The LPP tie-up was officially given the green light by UK regulators in 2015, before the country’s government officially announced its intention for local authority pension schemes to pool their assets.The partnership has already launched pooled funds for infrastructure, private equity and global listed equity. It has stated its intention to launch credit, fixed income, and total return funds in the near future. Mike Jensen, co-chief investment officer at the Local Pensions Partnership (LPP), is to exit his role and transfer to Lancashire County Council, one of the LPP’s founders.Jensen was a key instigator of the LPP, a partnership between the Lancashire Pension Fund – where he was CIO – and the London Pension Fund Authority (LPFA). He has been co-CIO alongside LPFA’s Chris Rule.Jensen will be Lancashire County Council’s director of investments and will continue to work with LPP as an adviser, the partnership said in a statement. In his new role he will be responsible for leading Lancashire’s treasury management team.“It has been a pleasure to have been so closely involved in the launch and growth of LPP,” Jensen said. “We have made enormous progress in a relatively short time, and I know that the team we have built will enable the LPP to go from strength to strength in the future.”
Donny Hay, director at IC Select, added that the results were surprising because investment was one of the most difficult areas for trustees to get right but also one of the most important for trustees and sponsors. “If you don’t get the investment strategy right you end up paying a lot more in deficit recovery contributions, which sponsors don’t like, and if it goes wrong for members and you end up in the PPF members get a lot less than they’re entitled to when they retire,” he said.Publication of IC Select’s survey results comes as the UK’s competition watchdog is carrying out an investigation of the investment consultancy sector. The results of the review are due to be published in July but in a series of working papers the Competition Markets Authority (CMA) has been setting out provisional findings about various aspects of its inquiry.Tendering is one of the indicators the CMA is using to gauge pension schemes’ engagement with investment consultancy and fiduciary management – other indicators are using a third-party evaluator or having a professional trustee. In its most recent paper the authority said it was finding that engaged schemes were able to secure investment consultant and fiduciary management services more cheaply than those schemes who were disengaged.Other emerging findings from the CMA include that there is evidence of poor competition in the sector, that trustees may struggle to assess the value for money of their incumbent consultant or fiduciary manager, and that trustees may be being steered to use fiduciary management services run by their investment consultants.IC Select launched a performance measurement standard, backed by 14 providers, in April to help pension schemes compare the skills of fiduciary managers. The number of UK pension schemes retendering for investment consulting services has sharply declined over the past decade, according to a survey by an independent selection specialist.IC Select survey of 1,000 schemes found that about 2.7% last year reviewed their investment consulting services by way of a retender. This is slightly above the two previous years but far below levels in 2008, when the figure was 18.6%, according to the Edinburgh-based firm. In 2015 the share was 1.6% and in 2016 2.5%.There was also a steady decline in the number of schemes changing their investment consultant, according to IC Select. In 2017 1.5% of schemes had switched consultant, while in 2008 11% had done so. IC Select said the changes stripped out scheme mergers and entries into the Pension Protection Fund (PPF), the UK’s pension lifeboat fund.Peter Dorward, managing director of IC Select, said: “It is surprising the level of tender activity over the last three years has been so low. “This follows the spread of de-risking plans, which has added to the complexity of investment affairs and, potentially, ties schemes more closely to incumbent advisers.”
Norges Bank Investment Management and five other major sovereign wealth funds have joined forces to produce a framework on climate change.The aim of the framework, according to a statement, is to promote the integration of climate change analysis into the management of large, long-term and diversified asset pools.It is also intended to help identify climate-related risk and opportunities in the funds’ investments and “enhance their investment decision-making frameworks to better inform their priorities as investors and participants in financial markets”.This could include integrating climate change considerations into allocation decisions, manager selection and valuation, according to the framework. Representatives of the SWF working group at the Elysée Palace in ParisAnother principle is that sovereign wealth funds should encourage companies to provide climate-related data based on standardised methodologies and in a consistent format – for example, following the recommendations of the Task Force on Climate-related Financial Disclosures.The framework, which is voluntary, is the output of a working group comprising six sovereign wealth funds with over $3trn (€2.5trn) in assets between them: Abu Dhabi Investment Authority, Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment Management, Saudi Arabia’s Public Investment Fund, and the Qatar Investment Authority.The group was formed last year on the occasion of the One Planet summit in Paris, with French president Emmanuel Macron described as championing the initiative. The framework was presented on Friday at the Elysée Palace, Macron’s official residence, following an event convened by Macron and the prime minister of Norway, Erna Solberg. In a statement, the six sovereign wealth funds said: “By using the framework, SWFs can reinforce their long-term value creation, improve their risk-return profile, and increase long-term portfolio resilience by factoring and integrating climate issues into their decision-making.“The One Planet SWF Group hopes that other long-term institutional investors will be able to make use of this framework in the execution of their mandates and investment objectives.” Another purpose is “to foster a shared understanding of key principles, methodologies and indicators related to climate change”.Three main principles underpin the framework, which is voluntary: “alignment”, “ownership”, and “integration”.Under the ownership principle, the framework states that sovereign wealth funds expect company boards “to understand the consequences of their business practices for climate emissions and to set clear priorities for the company to address climate change issues”.The framework does not contain a commitment to engage with companies, instead stating that “SWFs may wish to engage with companies as a shareholder” to understand different aspects of the companies’ position with respect to climate change.#*#*Show Fullscreen*#*#
Schroders is set to land an £80bn (€90.7bn) mandate from Scottish Widows, part of Lloyds Banking Group, it announced today.The FTSE 100-listed investment house has agreed a strategic partnership with Lloyds, including a new £13bn wealth management joint venture due to start operations in the second half of next year.The remaining £67bn relates to insurance assets for Scottish Widows, invested across equities, fixed income, multi-asset and private assets. The assets are currently run by Standard Life Aberdeen (SLA), which has disputed the decision to reallocate the management contracts.The contract between Schroders and Lloyds was for “at least five years”, the two firms said in a joint statement, to begin when the dispute with SLA has been settled or when the current contract expires in 2022. The joint venture will initially manage roughly £13bn on behalf of “affluent” UK customers. Subject to regulatory approval, Lloyds will own 50.1% of the new company and Schroders the remaining 49.9%. Lloyds will also take a stake of up to 19.9% in the holding company for Schorders’ wealth management business, Cazenove Capital. Lloyds will also transfer £400m to Cazenove.In the statement, the companies said the joint venture would “aim to become a top three UK financial planning business within five years”.The mandate is likely to result in Schroders overtaking SLA to become the third-biggest UK-based manager, based on data from IPE’s Top 400 Asset Managers survey. The award follows Lloyds’ decision to hand BlackRock a £30bn contract for passive investments earlier this month.The huge contracts have been up for tender since February, when Scottish Widows launched a review of its asset management arrangements and terminated its partnership agreements with SLA.Scottish Widows and Lloyds have argued that long-term contracts signed with Aberdeen Asset Management in 2014 to run the money could be terminated if it turned into a material competitor.Aberdeen merged last year with insurance company Standard Life, which Lloyds argued was a material competitor. However, in May SLA disagreed and said Lloyds and Scottish Widows did not have the right to terminate the arrangements. SLA sold the bulk of its insurance business to Phoenix at the end of August 2018.The parties remain at odds over the issue, but Lloyds earlier this month it said it was confident of its right to end the contracts, and expected the arbitration process to conclude early next year, at which point the contracts would be placed with BlackRock and Schroders.
The proposal – which includes pensions for central as well as local government staff – derives from an agreement reached on 3 March last year between the Ministry of Labour and Social Affairs and workers’ and employers’ organisations. Credit: Thomas Haugersveen“No reform so far implemented in Norway will mean more for the Norwegian economy, the sustainability of the welfare society and the individual employee, as the pension reform”Erna Solberg, Norwegian prime minister The long-awaited new pension scheme for Norway’s public sector employees has now been published as a draft law in the next stage of a legal process the prime minister described as historically crucial for the country.Prime minister Erna Solberg said: “No reform so far implemented in Norway will mean more for the Norwegian economy, the sustainability of the welfare society and the individual employee, as the pension reform.”The new pension scheme, due to take effect at the beginning of next year, was needed in order to secure a good level of public pension in the future as people were living longer, she added.“With these changes, it will be worthwhile for public employees to stay longer in work and it will be easier to switch jobs from public to private sector without losing pensions,” she said. The Norwegian parliament is expected to approve the new pension rules before its summer break.Anniken Hauglie, minister of labour and social affairs, said the next stage of the reform process was to adapt the pension rules for people with special age limits. The government has already agreed a process with the negotiating parties for this, scheduled to run up to 1 November 2019.The Norwegian Public Service Pension Fund (SPK) – Norway’s main provider of public occupational pensions including covers central government staff – welcomed the proposal.Finn Melbø, chief executive of SPK, said: “SPK is very pleased that the proposal for new reform has now come. We are already well on the way to preparing the changes in our systems.”At KLP, the country’s main provider of municipal pensions, Marianne Sevaldsen, group director in the life insurance division, said the firm was working on adjusting its systems and putting high levels of resources into offering guidance on pensions.“There will be complicated transitional arrangements for a period, but for the young people who start in the public sector in the years to come, the calculation of retirement pensions will be easier,” she said.She added that the KLP was confident that its systems would be ready when the changes took effect at the turn of the year.Meanwhile, Anders Skjævestad, chief executive of DNB Liv, said the bill was interesting for his business because it wanted to offer municipal service pensions again, several years after it withdrew from the market.He said KLP had a “monopoly” on public sector provision, partly due to municipalities not seeing themselves as obliged to regularly put their service pension contracts out to tender.“DNB has therefore asked the authorities to consider measures to stimulate new players and competition in this market in connection with the introduction of new public service pensions,” Skjævestad said.The bill contained no guidelines related to the competition in the market, he said, with the ministry instead content to assume that the municipalities themselves would choose their pension provider within the framework of the main tariff agreement and the procurement regulations.“It will therefore now be up to the parties in the tariff settlement to decide on tender practices,” Skjævestad said.