Armenians protest introduction of mandatory private pensions

September 29, 2020 0 Comments

first_imgProtesters have argued that people should be able to decide what happens to their salaries, and that any supplementary pension payment should be voluntary.Some news sources reported that the protesters have also filed a petition with the Constitutional Court.So far, the government has made no comment on the protests or the petition. Thousands of Armenians have taken to the streets to protest the mandatory funding of the second-pillar pension system, introduced at the beginning of this year.According to reports from French news agency AFP, approximately 6,000 protesters marched in the Armenian capital of Yerevan over the weekend to protest against the government’s controversial decision. Since 1 January, all Armenians born after 1974 have had to transfer 5% of their salaries to newly created pension funds managed by the local subsidiaries of France’s Amundi and Germany’s Talanx Asset Management.According to the AFP, Naira Zohrabyan, secretary of opposition party Prosperous Armenia, described the law as a “racket”, allowing the government to “get its hands into people’s pockets”.last_img read more

ATP, PensionDanmark, Danica invest DKK1bn in SME loan fund

September 29, 2020 0 Comments

first_imgDanske Bank’s managing director Thomas Borgen described the fund as a completely new loan product that combined the bank’s, as well as the pension industry’s, skills and capital strength, and one that was also commercially interesting for the parties behind it.“Denmark is dependent on positive development among small and medium-sized companies,” he said, adding that the pension funds and the bank wanted to contribute to increasing growth and resilience in Danish business.The new fund will target businesses with more than DKK50m in annual turnover in need of loans of DKK10m-plus, the parties said.It will be run by Capital Four, with the capital administration company also providing independent credit evaluation.The fund was expected to be in place and ready for launch at the end of the summer, the parties said.Other pension funds will be invited to take part in the fund.Danish pension funds have pledged to the country’s government to promote lending to SMEs, with this promise made part of the deal in 2012 under which the alternative yield curve used to calculate pension fund liabilities would be extended.The alternative yield curve eased problems the funds were having first with yield differential between Danish and German government bonds, and then with very low interest rates.In December, Danica Pension announced it was investing DKK1bn in the GRO Fund, which would offer subordinated capital and equity for expansion to SMEs.PFA, the country’s largest commercial pension provider, increased its investment in SMEs in Denmark in April last year by raising its stake in private equity firm Kirk & Thoresen Invest. Three of Denmark’s biggest pension funds are linking up with the country’s largest bank to put DKK1bn (€134m) into a new fund to invest in domestic small and medium-sized enterprises (SMEs) by offering much-needed subordinate loan capital.ATP, PensionDanmark and Danica Pension, together with Danske Bank – Danica’s parent – are setting up the new fund, with the three pension funds furnishing it with initial capital of at least DKK1bn.Danish SMEs will be able to apply for the funds in the form of subordinate loan capital, the parties announced.ATP’s chief executive Carsten Stendevad said: “The fund is the expression of a new and exciting form of cooperation in the Danish financial sector.” last_img read more

Strong first-quarter returns boost assets to €45bn at Finland’s Keva

September 29, 2020 0 Comments

first_imgStrong equity markets helped Finland’s Keva return 7.5% over the course of the first quarter, as assets rose above €45bn for the first time.Keva, the local authority pension provider, said its equity portfolio returned nearly 16%, with CIO Ari Huotaro describing the market development as “very lucrative”.Jukka Männistön, the fund’s chief executive, also struck a positive note on the first three months of the year, calling results “exceptionally good”.On back of the 15.8% return from equities, which accounted for 40.1% of Keva’s portfolio, assets under management rose by €3.1bn to €45.2bn. Fixed income holdings, which accounted for just over 41% of all assets, saw significantly lower returns of 2.7%, while direct property and real estate funds returned 1.4%.Outside of real estate, alternative assets outperformed bond holdings, with private equity returning 4.8% and hedge funds 3%.Keva’s returns were broadly in line with those of other Finnish pension investors, with many previously enjoying strong equity returns on the back of the European Central Bank’s quantitative easing programme.However, Keva’s results are so far the best of the larger pension providers and mutuals, with only Ilmarinen coming close to its results with a return of 7.1%, largely down to a strong equity performance close to 18%.last_img read more

IPE Views: DC trustee boards should think professional

September 29, 2020 0 Comments

first_imgFirst, a professional trustee will help manage conflicts of interest. Trustees are compelled to act independently and be able to negotiate with the scheme sponsor on behalf of the members. There are major challenges in demonstrating this independence to their fellow employees and the Pensions Regulator (TPR). These hurdles – combined with the Companies Act 2006, which requires directors to avoid conflict of interest within their company – make it very difficult for senior management members to act as lay trustees to their scheme, underlining the need for a professional.Another key factor is the knowledge and understanding that professionals bring to a trustee board. Significant time and resources are now needed to comply with Trustee Knowledge and Understanding (TKU) requirements introduced by TPR. This will only become more onerous under the forthcoming EU legislation for IORP II. This can represent a significant challenge for lay trustees who also have the ‘day job’ of running their business. While the appointment of a competent and experienced professional trustee will not exempt other trustees from the TKU requirements, it will make it easier for them to comply.The day-to-day responsibilities of running a business can result in lay trustees delaying key decisions required in respect of their company pension scheme. The appointment of a professional trustee will, therefore, put a far greater focus on the level of pro-activity needed in terms of scheme management and decision making, particularly with regard to investment decisions in response to market movements.The reduction in management time spent in the running of the scheme increases availability of senior staff. Lay trustees would normally hold senior roles within an employer business – it would not be unusual to find finance directors, company secretaries, chief executives and MDs forming part of a trustee board. It is difficult to put a value on the time of these individuals. However, the sponsoring business is highly unlikely to benefit greatly from any increased capacity from such senior individuals.There are, of course, costs involved in appointing a professional trustee. As with the appointment of any company adviser, whether this outlay delivers value for money will be dependent on the quality of the individual. However, if you get this right, this cost can be mitigated, if not eliminated, as an experienced professional trustee should be more effective at managing other required scheme provider costs.A professional trustee can change the focus of the scheme from being adviser-led to trustee-led. The understanding of the key issues and regulatory requirements will also come to the fore, enabling negotiations to be settled more quickly and efficiently, all of which can save on adviser fees and deliver other opportunity cost savings to a company.Another concern of appointing a professional is that the company may feel it is losing control and important historical scheme knowledge by reducing or, in some cases, eliminating its representation on the trustee board.  This can, however, be addressed through regular communication, backed up with the accurate and current management information combined with a properly planned and executed handover.These and other concerns highlighted above are manageable and significantly outweighed by the benefits a professional trustee can deliver. These benefits extend not only to the pension scheme but, by freeing up the burden on lay trustee directors and allowing them to put greater focus on day-to-day business management, they can also help enhance a company’s overall success.Chris Roberts is trustee representative at Dalriada Trustees A professional trustee can change the focus of a pension fund from being adviser-led to trustee-led, says Dalriada’s Chris RobertsAmong the raft of pension changes introduced in April in the UK was the requirement that multi-employer defined contribution (DC) schemes, which include ‘master trusts’, must comply with new governance standards. These schemes now require at least three trustees to be serving on their boards, with a majority of these individuals being unaffiliated with any company (including the chair) that provides advisory, administrative, investment or other services to the scheme.This is a sensible piece of legislation that should help ensure greater levels of governance across pensions scheme boards, and, for those DC schemes that do not currently benefit from the input of a professional trustee (PT), it provides the ideal platform to re-evaluate that situation.You would fully well expect me, being part of an independent trustee firm, to campaign in their favour, but the arguments go far beyond commercial interests and are much more focused on the benefits and efficiencies that can be accrued by having on-going access to professional advice. last_img read more

External reviewers to assess Bulgaria’s pension fund assets

September 29, 2020 0 Comments

first_imgThe FSC has asked the reviewers to pay special attention to investments with ownerships connected to the funds and their managing companies, an issue of long-standing concern for Bulgarian legislators and the European Commission.The FSC is seeking opinions on pension fund governance, including internal control mechanisms and legal compliance.Risk evaluation forms a major part of the reviewers’ scope.The FSC wants the reviewers to assess the pension funds’ risks as defined by the current legal framework, identify risks not currently captured by legislation and highlight potential systemic risks to the rest of the financial sector and the real economy.The reviews, set to start this April and finish at the end of June, with 31 March as the reference date, will cover the country’s 18 universal and professional second-pillar funds, and the nine voluntary third-pillar funds.The funds themselves will pay for the exercise.Rodina, Bulgaria’s only voluntary occupational fund, has been excluded from the process.Bulgaria’s pensions sector has faced a turbulent period, with weakened 2015 returns and the parliament voting to convert the mandatory second pillar into a voluntary one in July 2015.The annual weighted average return for the universal pension funds fell from 6.13% in 2014 to 1.47%, and that of the professional funds from 5.89% to 1.78%, while the voluntary funds’ return declined from 6.64% to 1.68%. The Bulgaria Financial Services Commission (FSC), the pension regulator, is calling for independent external reviewers to assess the assets of the country’s second and third-pillar pension funds.The reviews will be overseen by a steering committee that includes representatives from the FSC, finance ministry, Bulgarian National Bank, European Commission and the European Insurance and Occupational Pensions Authority (EIOPA).According to the FSC, the main objectives of the reviews include verifying the presence of pension fund assets at custodian banks and performing a valuation of the assets in accordance with current Bulgarian legislation.The reviewers have also been asked to assess the appropriateness of the valuation principles, a contentious issue for the Bulgarian Association of Supplementary Pension Security Companies (BASPSC), which considers the FSC’s time-weighted return methodology simplistic.last_img read more

IASB mulls targeted project to tackle IAS 19 treatment of hybrid plans

September 29, 2020 0 Comments

first_imgThe International Accounting Standards Board (IASB) has tentatively signalled plans to launch a research project to investigate the chances of developing a fix for the ‘accounting mismatch’ problem produced by so-called hybrid pension plans.This effort will fall far short of a wholesale reconsideration of its employee benefits standard, International Accounting Standard, IAS 19.Instead, IASB members said they would prefer to put their efforts into developing an accounting model to address plans where the benefit promise varies with the level of returns on specified assets.Eric Steedman from consultants Willis Towers Watson welcomed the move. “This workstream makes no pretence of being a complete fix to problems the IASB first took up 12 years ago but has potential to mitigate one of the most troubling inconsistencies that can arise,” he said. Aon Hewitt consultant actuary Simon Robinson added: “Previous attempts such as IFRIC D9 have failed because they highlight that a fundamental review of IAS 19 would be required.“My initial take on this announcement is that it makes a certain amount of sense to make it quite a narrow scope change in this area. It seems like a pragmatic way to deal with a very specific issue.“I would guess it is aimed at countries like Switzerland rather than the UK, and might well just clarify that the typical Swiss approach used currently is a reasonable interpretation of the standard.”A total of nine board members supported the proposal to mount a limited scope research effort into pensions.A poll of board members showed no support for a broader look at pensions accounting issues.Staff will now approach the IASB’s IFRS Advisory Council for comments ahead of finalising their work plan.If the project goes ahead, the work could start in 2017, staff said.The staff recommended against any further research on other aspects of accounting for post-employment benefits.The decision comes in the wake of the board’s formal agenda consultation exercise.Driving the demand for action among constituents is the concern that numbers produced under IAS 19 are unreliable.Staff explained that actuaries have been qualifying their IAS 19 valuation reports on the basis that they believe the resultant values are grossly misleading.For example, the South African Institute of Chartered Accountants argued that IAS 19 produces bigger deficits than economically exist.IOSCO is concerned “recent developments in employee benefit promises do not fit well within the existing accounting requirements”.Board members, however, were muted in their support for the move.Mary Tokar said: “We should do nothing rather than pursue the alternative you identified. We have tried several times to have a surgical approach on only hybrid plans. We have not succeeded. We should just cut our losses.“As soon as we start talking about the accounting mismatch between [the] obligation and [the] discount rate, we’ll get people who are not in hybrid plans saying, ‘Well, we have an accounting mismatch, too’.”Her colleague Stephen Cooper added: “It would be completely unacceptable for us to do nothing on this. This has been a problem for so many years. [For] the jurisdictions it does affect, this really annoys them. It is a problem with IAS 19.“It is illogical to compound at one rate and discount at a different rate, and you get a stupid answer. I don’t think we can defend IAS 19 and say it is the right answer.”Cooper added: “I didn’t like this capped-return model when it was first suggested because it ignores the time value of the options. I accept it solves one problem, which is to get the cashflows consistent with the discount rate.“And it solves the problem of the liability’s being overstated at the moment as a result of that incorrect discount rate.”Separately, it emerged that staff have no plan to carry out a post-implementation review of the 2011 changes to IAS 19.Meanwhile, as to the board’s likely work on discount efforts, IASB director Peter Clark said: “A further question is whether we would do either a general project or … any targeted project.“Our general assumption is the board is unlikely to want to take on standard-setting projects at this stage solely on discount rates.”last_img read more

ERAFP awards unlisted infrastructure, private equity mandates

September 29, 2020 0 Comments

first_imgIt is a mandate to invest in unlisted, vital, public infrastructure assets that are or will be built mainly in EU countries.The risk approach should be moderate, with Ardian tasked with building a mixed greenfield and brownfield portfolio mainly through primary investments in new infrastructure funds or secondary investments in existing funds and, to a lesser degree, through direct investments and/or co-investments in contractors.The private equity mandate also aims to diversify ERAFP’s investments, in this case by contributing to the financing of the French and European economies.The mandate is for the creation of a dedicated fund that will invest primary in unlisted European mid-market companies through growth capital or buyout transactions.It may also invest via mezzanine and unitranche financing but to a lesser degree.The investments are to be made mainly through primary or secondary funds.The fund will target investments in companies with a registered office in France, Germany, the Benelux countries, the UK, Finland, Sweden and/or Denmark.Italy, Spain, Portugal or other OECD countries also come into question but to a lesser degree.Both mandates are for an initial 10 years. French civil service pension fund ERAFP has awarded a €150m infrastructure mandate and a €200m private equity mandate as part of a move to take up new investment freedoms granted by the government in late 2014.The mandates were put out to tender early last year.The infrastructure mandate was awarded to Ardian France and the private equity mandate to Access Capital Partners.The €26bn pension fund placed the infrastructure mandate in the context of its aim to diversify by using “some of its long-term savings to develop sustainable assets that drive economic development and the energy transition and are useful to future generations”.last_img read more

Asset management roundup: Gresham House buys ‘new energy’ infrastructure manager

September 29, 2020 0 Comments

first_imgGresham House, a specialist asset manager partially backed by a UK local government pension scheme, is buying a “new energy” infrastructure manager.The AIM-listed firm has agreed to buy Hazel Capital for its real assets division. The deal is expected to complete later this year.Gresham House said it had agreed to provide growth capital through a secured £4.6m (€5.4m) loan to Hazel Capital.Hazel Capital, founded in 2007 by Ben Guest, advises around £100m of assets primarily through venture capital trusts (VCTs) and enterprise investment schemes (EISs). The firm has developed or acquired around 300 megawatts of capacity in the UK solar market across 28 projects.Tony Dalwood, chief executive of Gresham House, said: “We see a substantial growth opportunity in renewables and new energy infrastructure-related assets. Hazel Capital’s success in generating market-leading returns through its VCT and EIS platform within the growth areas of infrastructure related asset management, fits well with our strategy to develop our range of alternative and illiquid investment solutions for long-term investors.”The Royal County of Berkshire Pension Fund recently announced it was acquiring a 20% stake in Gresham House, backing a new alternative investment platform aimed at UK public pension funds. Pacific Asset Management joins forces with emerging markets managerPacific Asset Management is moving into the institutional and wholesale markets by becoming a partner in North of South Capital, a boutique emerging markets equities manager.By taking a stake in North of South, Pacific Asset Management was “expanding beyond that business towards the institutional and wholesale markets”, the statement added.North of South Capital was founded in 2004 and based in London. Pacific Asset Management has helped establish several notable UK asset management companies, including Liontrust, River & Mercantile, and Thames River Capital – now part of BMO Global Asset Management after a series of mergers and acquisitions.Campaign group rejects trade body cost disclosure proposal The UK regulator should not adopt any cost disclosure code proposed by the country’s asset management trade body, the Transparency Task Force (TTF) has said.In an official response to the industry body’s proposal that echoes previous comments expressed by its founder, the TTF said that, as a trade body, the Investment Association (IA) was “fundamentally conflicted” and should not be producing regulation. It rejected the idea of the Financial Conduct Authority (FCA) officially adopting the code. Instead, it should be the regulator that “leads the development of a regulatory framework that mandates for comprehensive cost disclosure, with full industry consultation”.The FCA has said it would not be bound by industry proposals.The campaign group said the IA’s proposed code “falls short of the mark” in several ways. For example, it argued that the code was not sufficiently comprehensive, was voluntary, and used terms to describe costs that did not have legally-binding definitions. The TTF also argued that the IA’s Independent Advisory Board – which fed into the establishment of the disclosure code – failed to perform adequately. The TTF’s founder Andy Agathangelou is a member of the advisory board, which is chaired by Mark Fawcett, chief investment officer at NEST. Earlier this week, the UK’s local government pension scheme announced the launch of a cost transparency code for asset managers that was based on the templates introduced by the IA.last_img read more

Performance fee funds ‘can be cheaper’: research

September 29, 2020 0 Comments

first_imgThe research found that, on average, the management fees for the two share classes differed in price by 26 basis points, as providers sought to compensate for those that did not offer a performance fee.For those that did offer a performance fee, Fitz Partners reported that these shares were on average 19 basis points cheaper when comparing overall costs using the ongoing charges figure (OCF).The company said the research suggested the “historical expensive model” of fund fees might be changing.Hugues Gillibert, CEO of Fitz Partners, said: “It is interesting to note that, when you have the choice between ‘twin’ share classes, you might actually get a discount when choosing to invest into the share class carrying a performance fee.“We were glad to see a significant reduction in management fees to compensate for the presence of a performance fee, but we did not expect this discount to remain after adding the cost of the performance fee to the funds’ OCFs.”Fund managers offered “twin” share classes when there was direct demand for both fee models from clients, Fitz said.However, Fitz’s research found that performance fee funds were usually more expensive when it widened the sample to include all institutional equity funds.“When considering all equity… share classes (not ‘twins’), Fitz Partners estimates that management fees remain the same whether they are charging performance fees or not, but administration fees for funds carrying a performance fee are higher by an average of 8 basis points,” the company said. “Finally, when taking performance fees into account, share classes paying a performance fee are on average 43 basis points more expensive overall.” Funds that charge a performance fee can be cheaper overall than those that do not, according to research.Fitz Partners, a specialist in analysing asset management costs, found that at asset managers offering investors a choice of share classes – one with a performance fee and one without – on average the performance fee share was cheaper.“It has previously been challenging to find substantial differences between levels of management fees charged on funds carrying a performance fee and those that don’t,” Fitz said.The firm compared institutional share classes for 43 products. Each product had “twin” shares, i.e. one with a performance fee and one without.last_img read more

Large asset managers fail think tank’s climate engagement test

September 29, 2020 0 Comments

first_imgThe think tank said its study was the first study to analyse the nature of asset managers’ engagement with companies with regard to climate change, “highlighting the fact that the global leaders’ shareholdings and relationships give them huge leverage to drive corporate action to support the Paris Agreement”.O’Neill said previous research had either looked at asset managers’ portfolios or their voting behaviour.“I’ve never seen anyone take an eclectic look at the sum of the engagement activities of the asset managers,” he told IPE.2020 Stewardship Code as benchmarkThe organisation used the UK’s new Stewardship Code – which takes effect from January next year – to benchmark the quality of asset managers’ engagement.The engagement score that InfluenceMap assigned to asset managers has many components. The think tank defines engagement as referring to all investor actions undertaken to influence the management strategy of investee companies, including: questions at AGMs and other company meetings, comments in the media or public fora, and filing of shareholder resolutions and voting.A spokeswoman for BlackRock said the firm “put a priority on engaging with a company on addressing climate-related issues” and engaged with 370 companies globally on the topic of climate risk in the past two years. She also noted that BlackRock had the largest stewardship team in the world.O’Neill said leadership was shown by organisations such as Legal & General because they had “sophisticated frameworks and enforcement mechanisms to transition the behaviour of companies towards Paris alignment”.“BlackRock appears to engage with a large number of companies, pushing them on disclosure and climate risk management,” he said. “This is reflected in our online scoring of BlackRock, which was shared with them.”The BlackRock spokeswoman also pointed to the firm’s activities away from company engagement, saying it offered product choices to investors that wanted to avoid specific sectors, and invested heavily in research demonstrating the relationship between sustainability issues, risk and long-term value creation.Asset owners nextInfluenceMap said the methodology applied by its ‘FinanceMap’ team was developed in consultation with leading global asset managers, with O’Neill naming Hermes Investment Management, LGIM and Sarasin as having provided input.He also said the think tank “iterated” its approach with the wider market, having approached all of the asset managers it ended up identifying in its report and obtaining “a high level of feedback”. “We would have adapted the methodology if we thought we got something wrong,” said O’Neill.O’Neill also told IPE that InfluenceMap had input from individuals at asset owners such as the Church of England Pensions Board (CEPB) and Sweden’s AP7.AP7 brought the perspective of a universal owner, which was at the heart of InfluenceMap’s work, said O’Neill.In its report, the think tank said it recognised asset owners’ important and growing role in shaping portfolios and driving the corporate engagement process and would probably expand its finance project to cover asset owners.The Principles for Responsible Investment recently said institutional investors were not making the most of the powerful tool of stewardship, and has launched a programme to promote more positive investor action.InfluenceMap’s report can be found here. Large asset managers are “collectively failing” to do enough to drive corporate action in support of international climate goals, according to a think tank.According to UK-based InfluenceMap, of the world’s 15 largest asset managers only Allianz, Legal & General Investment Management (LGIM) and UBS Asset Management “strongly and consistently” engage with investee companies about aligning their business models to meet the Paris Agreement goals.Some other European managers, like AXA, were not far behind in performance on climate engagement, the think tank wrote, while US firms such as BlackRock and Vanguard “call on companies to consider climate risks but do not drive behaviour change around climate models or policy lobbying”.Thomas O’Neill, research director of InfluenceMap, said: “If global asset managers wish to support the Paris Agreement and remain invested in the automotive, power and fossil fuel industries then they must engage robustly with companies in these sectors to accelerate their switch to low carbon technologies and ensure their policy lobbying supports climate targets.”last_img read more