However, he reiterated that the Directive would not cover solvency rules. He said he wanted to be “very clear” on the point that the Directive would deal only with the governance and transparency of pension funds. “Along with trying to solve cross-border issues,” he added, “our aim is to create a framework in which pension funds can grow – especially in member states where they hardly exist today.”Barnier said EU member states that already had a developed pension fund sector with a high standard of transparency “should not be greatly impacted by this proposal”.Speaking with IPE, Wiedner confirmed rumours that the current draft had not passed the Impact Assessment Board (IAB), an advisory body to the Commission.He declined to provide details on which parts had been criticised, pointing out that the IAB only had an advisory role and no right to veto.“We will see which of the comments we are going to take into account – in the end, it is still a political decision,” he said.Wiedner said the European Commission was still discussing “the right scope” for the new Directive, which he said needed to be revised for a number of reasons, including the ongoing shift from defined benefit to defined contribution.Further, it “has not worked to facilitate cross-border pensions”, as “there are barriers linked to the current Directive”.As an example, Wiedner mentioned the requirement stipulating that schemes must be fully funded at all times when going cross border.Wiedner reassured industry representatives in the room that the Commission’s idea was “not to copy what we have in Solvency II – we know that IORPs are different”.He added: “We are looking at raising the standards we have in the current Directive, adjusting them to the current situation.”On another panel, Ralf Jacob, head of unit for Social Protection at the Commission, said his directorate general wanted the Portability Directive adopted before the elections to the European Parliament in May.“Afterwards,” he said, “there will be 3-4 years of transition.” Klaus Wiedner, head of the unit that oversees insurance and pensions at the European Commission’s Internal Market and Services division, has confirmed that the next draft on the revised IORP Directive might be postponed to January and will not be voted on by the current Parliament.Speaking on a panel at this year’s EIOPA conference in Frankfurt, he said: “There is still the plan that there will be an initiative published at the end of this year or the beginning of next year.”He said it was “basically impossible” to push through a revised Directive under the current legislature, and that the new Parliament would “deal with it” after the election.EU commissioner Michel Barnier, in his closing speech at the conference, made no mention of any timeframe for the revised IORP Directive.
Author Archives: admin
Fiduciary managers currently manage than 80% of Dutch pension fund assets, with the majority of mandates (68.9%) being ‘full service’ and another 14.6% partial or ‘modular’ fiduciary mandates, according to a survey conducted by IPE sister publication IPNederland.The sixth annual IPNederland Fiduciary Management Survey canvassed more than 50 trustees and pension fund managers representing 46 corporate, occupational and industry-wide pension funds with assets ranging from €123m to €145bn, and with total assets worth €278.4bn.According to the survey, just 16% of pension fund assets in the Netherlands is not currently covered by any sort of fiduciary management arrangement.Further, just 0.5% of assets under management (AUM) is currently ‘in the market’ for fiduciary management, with 0.17% of assets available for full service mandates and 0.31% for partial mandates. IPN said these figures suggested the Dutch fiduciary market had matured.IPN’s survey, in addition to an analysis in terms of AUM, also showed how the Dutch fiduciary market has evolved in terms of the number of pension funds taking a fiduciary approach.In 2013, 43.5% of funds surveyed said they were employing a full-service fiduciary manager, an increase of more than 5 percentage points from the previous year (over 38%).The percentage of schemes using partial fiduciary mandates remained largely unchanged at 17.4% (2012: 17.6%).Overall, the percentage of schemes using fiduciary management increased from 56% in 2012 to slightly less than 61% in 2013.The number of schemes that do not use a fiduciary manager at present or have no plans to do so in future has also risen, from more than 32.3% in 2012 to 34.8% in 2013.The percentage of schemes that intend to hire a fiduciary manager in future has, by contrast, fallen sharply, from 11.7% in 2012 to just 4.4% in 2013 – another indication the market has developed fully, IPN said.
And he said the discount rate had been changed without explanation.In a statement, the CEPB said: “John Ralfe’s claim that there is a big hole in the clergy pension scheme is simply inaccurate.“At the last valuation of the scheme, on 31 December 2012, the funding deficit was 25%, and we are on target to be fully funded over the next decade.“Had the valuation been carried out at the end of 2013, we might have expected the funding deficit to be closer to 15%.”The CEPB said it had made the assumptions for the valuation based on its assessment of the strength of the responsible bodies’ financial covenant, the fall in yields on fixed interest Gilts, market expectations for future RPI inflation and up-to-date mortality expectations.“The discount rate is in line with advice from an independent actuary and with the requirements of the pensions regulator,” it added.The Church of England Clergy Pensions Scheme is a funded defined benefit (DB) scheme set up to provide retirement benefits for clergy and church workers relating to service from 1998 onwards.Pensions relating to pre-1998 service are paid out of the Church Commissioners’ £5.5bn endowment fund.According to press reports, Ralfe also dubbed the pension scheme the “riskiest in the country in terms of asset-type” because of its high allocation to equities (93%).However, the scheme’s accounts show that, at 31 December 2012, 78% of its £1.1bn return-seeking pool was invested in equities, while all its £200m liability-matching pool was invested in bonds.The CEPB said: “Our return-seeking funds have returned 20.8% over the three years to the end of 2012, and, provisionally, 27.7% over the three years to 2013, improving the funding position of the scheme.”The CEPB added: “Ralfe also fails to take into account that, unlike most other defined benefit schemes, this scheme is still quite immature, and is still open to new members, giving it a healthy contribution inflow.“A bond-heavy investment policy is not normally seen as either necessary or desirable for relatively immature schemes, and would make them unnecessarily expensive.”It also said that, although Ralfe had raised similar issues in the past, he had declined numerous offers by the CEPB to meet to discuss them. The Church of England Pensions Board (CEPB) has issued a riposte to charges by activist investor John Ralfe that its funded pension scheme for clergy was seriously understated, branding his claim as “simply inaccurate”.Ralfe had written to Justin Welby, the Archbishop of Canterbury and head of the Church, asking him to commission a report into the £1.1bn (€1.3bn) scheme’s funding.He warned that the scheme’s real deficit was £391m, a third higher than the £293m shown in the scheme accounts.Ralfe based this assertion on the fact the scheme had raised the discount rate used to value its liabilities by 0.5% – using the previous rate would have resulted in the higher deficit figure.
As a consequence, the asset manager will cease all active, alpha-orientated investment management for its MENA mandates, as well as the Luxembourg-based mutual fund, in light of it fiduciary responsibilities towards its clients, he said.Hanuska further made clear that the Dubai team managed a €314m equity portfolio.According to the spokesman, the decision to cease MENA equity investment is in line with the overall strategy to continue with only fully fledged local asset management operations where ING also has a strong insurance presence.He stressed that the change would not affect any of ING IM’s global emerging market equity capabilities, “which we will continue to manage from our other offices as before”.He added that the company would continue to serve its clients with its global product offering out of Dubai. Dutch asset manager ING Investment Management is planning to reposition its Dubai office into a sales and client-servicing division after its equity team for the Middle East and North Africa (MENA) region resigned to join Lazard Asset Management.Farah Foustok, former chief executive and CIO at ING Investment Management Middle East, will serve as a managing director and senior executive officer at Lazard’s new Dubai office.Fadi Al Said, former head of investments and a portfolio manager at the same operation, will lead a five-person investment team that will manage MENA and frontier market equity strategies for local and global clients.ING IM said its decision to end equity investment in the region followed a review of the company’s local strategy, according to spokesman Karl Hanuska.
ERAFP, the French mandatory pension scheme for civil servants, has tendered two mandates for ESG rating agencies to assess the pension fund’s investments against its socially responsible investment (SRI) policy.The call for tender is a renewal of existing mandates.The €23.5bn fund is looking to hire two “extra-financial rating agencies to assess the social responsibility of ERAFP’s investments in various asset classes”.One mandate is in relation to equity and corporate bond investments made on behalf of ERAFP, which the selected rating agency would need to assess against their compliance with the pension fund’s SRI guidelines. A second mandate is for the same type of assessment but for investments mainly in sovereign, supranational and sub-sovereign bonds (SSA).The contracts will be for four years, with a possible extension of two years.Vigeo and Oekom Research – ratings agencies from France and Germany, respectively – have been responsible for this work since October 2010, when ERAFP last awarded the relevant mandates.Vigeo was selected for the equity and corporate bond assessment, while Oekom was chosen as a partner with respect to ERAFP’s SSA bond investments.Vigeo merged with EIRIS, a UK ESG agency, late last year.In other news, AFG, the French asset management association, has published a practical guide for asset managers to measure and report on their investments’ carbon footprint.In the guide (French only), the association notes that, although not all asset managers measure the carbon footprint of fund portfolios, this practice is set to spread given growing interest from clients and improvements in methodology.It also “strongly advises” asset managers to state clearly the limits of any figures reported given the wide range of calculation methods.
DNB said it would also look into the decision-making process and whether the pension funds still had a clear view on downside risk after any adjustments.The supervisor indicated that three pension funds had decided not to change their risk profile after consultations with DNB. Five schemes would be allowed to raise their investment risk after their funding had improved to more than 105%, it added.Pension funds that increase their investment risk must raise their financial buffers at the same time. DNB said the required asset level had increased by 3% on average.The one-off option to raise the risk profile is part of the new financial assessment framework (nFTK), which was introduced in 2015.During the past two years, 45 pension funds in total – including the schemes of coffee producer Douwe Egberts, BpfBouw, and UWV – have used this option.Pension funds with a coverage of less than 105% are not allowed to increase their risk level, while schemes with a funding of more than 125% do not face limits in principle. More than 50 underfunded Dutch pension funds have indicated that they want to raise their risk profile this year in a bid to improve returns, according to supervisor De Nederlandsche Bank (DNB).It said 159 schemes were eligible for a one-off increase of their investment risk. These schemes had a coverage ratio of between the required minimum of 105% and the prescribed level for financial reserves of approximately 125%.DNB made clear that the 53 pension funds that took up the opportunity had predominantly opted for a reduction of their interest rate hedge, sometimes combined with an increase in equity allocations.The watchdog said it assessed the schemes’ requests against criteria such as a “balanced approach towards their participants” as well as the impact of the adjustment on different generations.
Major European asset owners are among the backers of a $1.42bn (€1.15bn) green bond fund – believed to be the largest such fund launch to date. Swedish pension funds Alecta, AP3 and AP4 along with France’s ERAFP are among a number of European pension funds to have invested in the emerging markets fund launched by Amundi and the World Bank’s International Finance Corporation (IFC).The Amundi Planet Emerging Green One (EGO) aims to increase the capacity of emerging market banks to fund “climate-smart” investments. The IFC is a cornerstone investor in EGO with a commitment of $256m.Alongside the Swedish and French investors, capital also came from Austria’s APK Pensionkasse and APK Vorsorgekasse, MP Pension, and insurance companies Crédit Agricole and LocalTapiola, Amundi said. Philippe Le Houérou, chief executive of the IFC, said: “The global market for green bonds has expanded rapidly in recent years, totaling more than $155bn in 2017, but few banks in developing countries have issued such bonds.“IFC and Amundi expect this new fund to encourage more local financial institutions to issue green bonds, by increasing global demand and building local markets.”The fund is to run until 2025 and is listed on the Luxembourg Stock Exchange.Amundi said the fund was the first of its kind to take a holistic approach by investing in emerging market green bonds, while also helping to create a robust green bond market with capacity-building activities.As well as its investment, the IFC will run a technical assistance programme including the provision of training for bankers.Besides the IFC, other development finance entities including the European Bank for Reconstruction and Development, the European Investment Bank and France’s Proparco are also among investors in the fund.Gregory Clemente, CEO of Proparco, described EGO as “an exemplary initiative”.“Proparco is proud to be the largest contributor in Amundi Planet EGO mezzanine tranche as this investment plays a key role in catalysing investments from institutional investors with a lower knowledge of emerging and developing countries, thereby creating the biggest climate finance fund operating in these markets,” he said.
Peter Daniels, Barnett WaddinghamThe “FM Evaluate” team at Barnett Waddingham – previously known as “Fiduciary Management Oversight” – provides advice to UK schemes on selecting and appointing fiduciary managers as well as ongoing monitoring of performance and other activities.Daniels, who has worked for the consultancy since 2007, has been appointed head of FM Evaluate after working on the development of Barnett Waddingham’s fiduciary management evaluation services for five years alongside David Clare, whom Daniels is succeeding.Clare said: “The requirements resulting from the CMA’s order shine a spotlight on the value which independent, professional expertise can add for pension scheme trustees. I am looking forward to continue to work with Peter and the FM Evaluate team to help our clients navigate through this new phase of much improved industry standards.”This article was updated on 16 July to amend the second paragraph’s reference to when new fiduciary management rules will apply. The UK pension fund for energy company Schneider Electric has awarded a £400m (€445m) fiduciary management mandate to Aon.The contract was awarded following a formal tender process in accordance with new rules introduced for UK defined benefit pension funds last month. From January next year, all schemes outsourcing 20% or more of assets to a fiduciary manager will be required to conduct a competitive tender for the mandate, including at least three providers.Rodney Turtle, chair of the Schneider Pension Plan’s trustee board, said: “Trustees are faced with new and challenging investment options and economic environments that continue to add to the governance burden associated with managing and overseeing the scheme’s assets.“After a careful review, the trustees… concluded that the investment selection and management would be better managed using fiduciary management.” Turtle added that the Aon offering allowed the scheme to access “a significantly wider range of investment options combined with the speed and agility to be able to respond quickly to changes in market conditions”.Sonia Gogna, head of large client solutions at Aon, said the new arrangement had allowed the trustee board to achieve “greater diversification and investment sophistication” as well as “refocus their governance spend more strategically”.Schneider Electric’s UK business also sponsors the Invensys pension fund, following its acquisition of Invensys in 2013. Schneider’s UK pension funds had a combined €6bn of assets at the end of 2018, according its French parent company’s latest annual report.The Schneider Pension Plan was 78.8% funded as of 31 December 2017, according to the UK entity’s latest annual report and accounts.Barnett Waddingham rebrands fiduciary advice teamSeparately, UK consultancy Barnett Waddingham has rebranded its specialist fiduciary management advice arm and appointed Peter Daniels as its new head.
Swedish national pension fund AP2 has put “special measures” in place to monitor the external asset managers it uses for Chinese investments, because of the high risk of human rights abuses in China.The Gothenburg-based fund disclosed the approach in its first report about its work on human rights issues.The SEK334bn (€30.9bn) pension fund — one of five backing Sweden’s state pension — said it has three mandates in Chinese domestic equities under external management.“There are sustainability challenges associated with investments in China as transparency of companies and markets in China is not deemed to be as good as in more well-developed markets. The fund also considers China to be a high-risk country in terms of human rights issues,” AP2 said in the report. Because of this, the pension fund maintained “close and active collaboration” with its external asset managers in China, it said, to make sure sustainability issues, including human rights, were integrated in investment decisions.This mainly took the form of a dialogue with managers, it said, adding that in 2017 and 2018, these talks focused mainly on human rights issues.“The work of these asset managers is regularly monitored on a quarterly basis, both in the form of a written report from the asset manager and through dialogue, where specific portfolio companies and the risks they or their sector may incur are discussed,” AP2 said.External managers also undergo an annual assessment, it said, which includes their sustainability performance, and a poor result may mean the end of the fund’s collaboration with that manager.AP2 said it was one of the first investors in the world to publish a report on its work with human rights, which was based on the United Nations’ Reporting Framework. “We hope [the report] will not only explain how we are working with human rights, but also contribute to a broader dialogue on human rights issues in the finance industry” Eva Halvarsson, AP2 chief executiveEva Halvarsson, AP2 chief executive, said the fund had already decided to support the UN Guiding Principles Reporting Framework in 2016.“We hope [the report] will not only explain how we are working with human rights, but also contribute to a broader dialogue on human rights issues in the finance industry,” she said.She added that AP2 was actively engaged in integrating sustainability issues, including human rights issues, as part of its asset management activities. Halvarsson noted that the report described how indices AP2 has developed in-house included a method for identifying companies involved in human rights controversies, which then allowed them to be taken out of the index.In 2018, AP2 had a 2.0% strategic asset allocation to China A-shares, and a 1.0% allocation to Chinese government bonds.
“The handling of the pandemic in Sweden has been based more on guidelines and personal responsibility and not rule-based general closure,” it said.The short-term effect of this had, it said, been a relatively high level of infection spread, but on the other hand less of a negative effect on economic activity.“As a result of the relatively strong Swedish economy, the currency has strengthened, which has had a negative impact on the association’s value development of investments in other currencies,” Kåpan said.But most of the pension fund’s investments were currency hedged, it said, which had limited the negative effect.Kåpan said that in general, values of its investments had not been squeezed as much as might have been expected – given the major effect the pandemic had on growth during the first half.“The massive stimuli have of course had a positive effect, but many companies have also been able to adapt their operations,” it commented.Kåpan’s total assets dipped to SEK104.5bn (€10.1bn) at the end of June from SEK105.1bn at the end of last year, with its solvency also declining to 164% from 175% at the end of 2019, the new figures showed.The negative first-half investment return compares to the pension fund’s positive result of 8.4% this time last year and 13.4% for the 2019 full year.According to foreign exchange data from Reuters, the Swedish krona has strengthened against the US dollar, the euro and sterling since the beginning of this year, despite the unit’s sharp temporary drop in the second week of March. Sweden’s Kåpan has revealed its foreign currency investments took a hit during the first half of this year due to the strengthening of the Swedish krona – which was itself a knock-on effect of the Nordic country’s outlier approach to handling the COVID-19 pandemic.However, in its interim report, the fund – which manages pensions for government employees – said that other investments had not been impacted as much as might have been expected.Kåpan reported an overall negative return on its investments of 1.4% for January to June this year.In the report, it said the Swedish economy looked set to emerge from the first half of the year with a slightly less negative impact on the economy compared with many other countries.