GLOBAL – Campagne, NAPF, Aberdeen, Aon Hewitt, BNP Paribas, Conning Asset Management, Ethos, Mercer, Neuberger Berman, Standard Life InvestmentsCampagne – The €377m pension fund Campagne has appointed Eddy Koning as board member and chairman as of 1 October. He succeeds Cor Vonk, who chaired the scheme for the past 11 years. Koning was director of Campagne’s pensions desk until 1 September, when he was succeeded by Aart-Jan Baaijens.National Association of Pension Funds – Frank Johnson and Jonathan Hunt have joined the UK association’s defined benefit council. Johnson currently serves as managing director of investments at pension manager RPMI, and Hunt is director of corporate finance and investment at the London Borough of Westminster’s local authority fund. The defined contribution council has also selected three members, appointing Anne Hunt, Andy Cheseldine and Carol Young. Hunt is currently pensions manager at bakery Warburtons, Cheseldine a partner at LCP and Young serves as head of pensions at brewer Heineken’s UK subsidiary. All five positions were contested with a ballot following applications from 36 NAPF members.Aberdeen Asset Management – Álvaro Antón Luna and Ana Guzmán Quintana join the company’s newly launched Madrid office, responsible for business development. Senior business development manager Luna joins from Aon Accuracy, having worked at Aberdeen in the past. Quintana joins from Dekabank. Aon Hewitt – Stuart Mckinnon is to join the company’s global investment practice as principal consultant, leaving LCP after five years. Prior to working at LCP, he worked at Close Wealth Management and, in his nearly two decades in the industry, also spent time at Threadneedle Investment Management at its fixed income and risk management desks.BNP Paribas Securities Services – Florence Fontan has been named head of the asset manager client segment with overall responsibility for strategy, business development and products. Fontan has been the firm’s head of public affairs since 2007 and joined in 1998 after a decade at Arthur Andersen. She will be succeeded as head of public affairs by Laurence Caron-Habib, a member of the public affairs team since 2007.Conning Asset Management – Neil Holmes has been appointed head of business development for the UK and Benelux, based in the London office. Holmes previously worked at Crédit Agricole Corporate and Investment Bank and has worked at Fortis Bank and Barclays Capital.Ethos – Kasper Müller, current president of the Swiss foundation jointly owned by domestic pension funds, has declined to seek re-election at the 2015 annual general meeting. Müller, who has been with Ethos since its foundation in 1997, has been its president since 2007. Director Dominique Biedermann has been proposed as Müller’s replacement and will resign from his current role in 2015 to assume the post.Mercer – Richard Dell has been named global head of the consultancy’s equity boutique, responsible for its equity research team. Having joined Mercer five years ago, Dell was until recently a senior researcher covering global equities and emerging markets. He has previously worked at Fidelity Worldwide Investments and Merrill Lynch Investment Managers.Neuberger Berman – Mark Østergaard has been named head of institutional sales for Scandinavia, based in London. Joining from Gottex Fund Management, where he was director of Nordic institutional clients, he has also worked at London & Capital, SparNord and HSH Gudme.Standard Life Investments – Amanda Young has been named head of sustainable and responsible investment. She is currently a board member at UKSIF, has previously worked as the SRI officer at Newton Investment Management and started her career at Rabobank International.
Liechtenstein is planning to create a new public pension fund to tackle chronic underfunding, and ruled out taking legal action against those responsible for a sizeable funding gap at the original scheme, a government spokesman has said.Earlier this spring, a Swisscanto report identified several major problems with the Liechtenstein state pension fund, the PVS.Over the summer, the government commissioned legal experts to determine who was responsible for the CHF300m (€250m) funding gap at the CHF600m pension plan covering all public employees.The government spokesman told IPE the final report confirmed that board members, as well as the authorities, had been responsible for the dire financial situation at the PVS. But he said the government concluded there was not enough evidence to file individual lawsuits.“Therefore,” he said, “no charges will be brought forward.”Meanwhile, Liechtenstein’s Parliament has approved the creation of a new state pension fund, which is to take the form of an independent foundation.The new fund should be up and running by 1 July 2014.“It can be set up as a collective scheme, which would allow municipalities or state-owned companies to join,” the spokesman said.The “PVS neu” will be set up as a defined contribution scheme, unlike the previous defined benefit plan.The state is to account for most of the funding gap at the old pension plan by making a CHF206m contribution, increasing the funding level up to 90%.It will also grant an interest-free loan covering the final CHF101m, which is to be repaid during years with good returns.The government said employees would contribute around CHF200m to the fund’s buffers by cuts in benefits.Retirees will also have to transfer parts of their benefits into these buffers.However, a regional politician – Nikolaus Frick, who sits on a municipal council – has launched a campaign against the new fund, putting forward a separate proposal for a new fund that, according to him, will save more money.The government deemed his first proposal unconstitutional, but Parliament is to consider a second plan during its November session.If one of the politician’s proposals passes muster, the government will have to hold a referendum on these alternative pension fund solutions.
Webb said the new rules would come into effect for schemes staging after April 2015, but he added that the government would “flesh out the details” for those already staged.The Liberal Democrat MP said it would be irrational to focus on value for money for those that have staged to the detriment of those that have not.He also rebuffed claims from the government opposition that the decision to delay was a U-turn on policy.Labour spokesman for pensions, Gregg McClymont, recently said government ministers seemed to be in “full-scale retreat” on the charges debate after failing to act sooner.The government had been expected to impose a cap on the charge DC providers can place on auto-enrolment schemes by April this year.At the CBI conference, Webb said: “The principle of regulated quality is absolute. We have got to tackle charges, but do it at a rational schedule.”He further stressed that what the government would set out in 2015 would be a “complete package” of DC reforms.Neil Carberry, director for employment and skills at the CBI, welcomed the delay.He said the members of the lobby attempting to stage this year had voiced concerns over the lack of clarity in government policy. The UK pensions minister has confirmed that the charge cap on defined contribution (DC) auto-enrolment schemes will come into force a year later than expected.Speaking at the Confederation of British Industry (CBI) annual pensions conference, pensions minister Steve Webb said the recent consultation had forced the government decision.“There are number of aspects of DC scheme quality, and we consulted on a range of them,” Webb said. “In the consultation, there was a view that changing the rules at 12 weeks’ notice didn’t quite stack up. I think that is a fair comment. That’s why the changes we will make will be in 2015.”The consultation focused on aspects of auto-enrolment DC schemes including governance, transparency and a cap on charges.
Sweden’s buffer funds should be required to consider the impact of their holdings on global biodiversity, a Swedish pressure group has said.According to the Fair Trade Centre, a local non-governmental group, AP 1-4 and AP7 should also use shareholder resolutions more regularly and improve their active ownership policies.In its report, ‘Pushing the planet to retirement’, it also urged them to consider getting involved with international standards on a range of environmental matters, while conceding that they were already signatories to a UN-backed responsible investment undertaking on palm oil.“The AP funds have demonstrated that their work with portfolio monitoring, engagement, exclusions and voting is not adequately guided by long-term strategies aimed at reducing the most important impacts on biodiversity and ecosystems,” the report said. It further alleged that the funds were “lagging behind” their peers in integrating environmental, social and governance (ESG) concerns, despite repeated admissions that the Ethical Council was active and sought to engage with firms on matters that had yet to be widely supported by other institutions.However, the NGO nevertheless argued that the lack of strategies on biodiversity was “symptomatic of the funds’ overall poor management of environmental and social impacts”.It said the absence of ambition was down to the asset owner – in the case of the first four buffer funds, the Swedish government – in drafting guidelines on the matter, and expressed a hope the imminent reform of the AP fund system would allow for changes to be made.Responding to the allegations in the report, AP2 – speaking on behalf of the four main buffer funds – said it was “well aware” that biodiversity was an important issue to question companies on and important for society at large.It added: “Many of the Ethical Council’s corporate dialogues included questions about biodiversity and ecosystem services.”,WebsitesWe are not responsible for the content of external sitesLink to ‘Pushing the planet towards retirement’ report
“The Danish krone has become substantially weakened relative to foreign currencies,” he said.“It strengthens the Danish companies’ competitiveness, and it gives an advantage to companies that have a large proportion of their earnings in foreign currency when they have to convert it into Danish kroner.”Meanwhile, Swedish pension fund AMF reported a rise in returns to 12.7% for 2014 from 9.3% the year before, on the back of falling bond yields and rising equities prices.But contributions into the scheme for traditional pension products fell during the year, the fund said, explaining that this drop was in line with its strategy of focusing on core business.Contributions into traditional with-profit plans fell 8% to SEK14.6bn (€1.6bn) in 2014 from SEK15.9bn in 2013, the fund said on publishing its annual report.This fall was mainly due, it said, to lower premium flows through intermediaries as a result of the fact it had stopped doing commission-based business.Johan Sidenmark, managing director, said: “AMF began 2014 with strategic work focusing on reducing complexity and lower costs.“As the first company in the industry, we are conducting extensive work to aggregate insurance with the same or better conditions in order to simplify things for our customers and enable further fee reductions.”Overall profit at the AMF group fell to SEK19.7bn in 2014 from SEK47.6bn, the fund said, explaining that changes to the discount rate used to re-evaluate liabilities meant SEK29.7bn had been taken away from this figure last year, while the rate had added SEK13.6bn to the figure the year before.Total assets under management grew to SEK508bn at the end of December from SEK450bn a year before.Administration costs were trimmed to 0.13% by the end of 2014 from 0.16% a year before.In other news, Industriens Pension saw a high level of transfers out of its scheme into other schemes during 2014, according to the Danish labour-market pension fund’s annual report.Overall, membership numbers fell in 2014 as a result of an extraordinarily large number of passive members having transferred their savings to other pension providers, Industriens Pension said.Total membership dropped to 396,403 from 404,631.The number of passive scheme members fell to 154,126 in 2014 from 167,669 at the end of 2013.A spokesman for Industriens said the high volume of transfers out during the year was due to a tax anomaly that had forced members wishing to transfer their savings to wait until they had been compensated for double taxation on part of the total.He said the annual transfers out had corresponded to an equal number of transfers into the Industriens scheme from other providers.In the report, the scheme said the number of scheme members actively paying in had risen by 12%, or 3,040 members. This growth followed a period of falling membership numbers, it said.“The increase should be seen in the context of the favourable development in employment within the industry,” it said. Denmark’s largest commercial pension provider PFA Pension has said its Danish equities investments have returned 18% since the beginning of this year, or DKK2.8bn (€375m) in absolute terms.It said it expects Danish equities to generate double-digit returns this year as the weaker krone helps exporters’ profitability.Jesper Langmack, director at PFA’s investment arm PFA Asset Management, said: “We have seen some excellent results from a range of the biggest Danish companies.”He said the pension fund expected this full year to be one in which there was once more double-digit growth in Danish stocks.
It also expressed a preference for shareholder engagement over divestment, noting that dialogue should be “the first call to action and the most constructive form of communicating concerns”, an ethos that would potentially pave the way for a re-admittance of the tobacco stocks following a two-year study.According to a paper by its consultants Wilshire Associates, its exposure to stocks would account for around $1bn of its $156bn global equity portfolio.The same study also estimates that CalPERS has lost at most $3bn from its divestment decision, and that its continued divestment would lead to a portfolio discrepancy of $172m during one out of every 20 years.Despite the returns foregone, and seeing engagement as preferential to selling stakes, the fund’s revised investment policy still allows for divestment of individual firms, even where it clearly views such sales as problematic.It notes, for example, that, in some instances, the fund’s fiduciary duty might allow a ban on acquiring any greater stake in a firm but not its complete sale.Divesting certain industries or companies has shifted back into the limelight in recent months, as pension and other institutional investors push ahead with bans on high-carbon companies, such as utilities and certain mining firms.Risk versus returnsCalPERS is likely to view the sale of coal holdings as a more cut-and-dried situation, and the fund is indeed among numerous investors to have sold out of thermal coal over the last year after the Californian government passed a law banning coal holdings for CalPERS and the California State Teachers’ Retirement System.However, the sale of coal holdings can easily be viewed as reducing risk, without sacrificing returns, two areas highlighted by CalPERS in its policy on divestment.As Danish provider PKA shows, its decision to sell stakes in select coal companies saved it from exposure to a 70% decline in their share price.The provider is expanding its engagement progamme with companies drawing revenues from coal and says it will divest those that fail to put in place a policy that reduces reliance on the asset.The tobacco industry – unlike the coal industry, faced with a global consensus to lower carbon emissions that casts doubt on long-term profitability – still enjoys profits despite attempts by governments the world over to reduce smoking. If CalPERS continues to shun the sector, it is likely to continue to forego returns needed to pay pensions.But CalPERS is by far not the only fund to divest tobacco. The Dutch pension manager PGGM, which largely manages money for healthcare sector fund PFZW, no longer invests in the industry, citing companies’ reluctance to engage on concerns around child labour and marketing targeted at young people but also the “problematic” relationship smoking enjoys with its membership in the healthcare sector.Norway’s Government Pension Fund Global has also excluded some of the largest tobacco manufacturers, including Philip Morris, since 2009.Local government pension schemes (LGPS) in the UK were advised in 2014 that they could divest tobacco on the grounds of its health impact. But they faced a problem similar to the one facing CalPERS, loath to deny their membership returns, even where local authorities were now directly responsible for healthcare.“The [LGPS] administering authority’s power of investment must be exercised for investment purposes and not for any wider purposes,” an opinion by Nigel Giffin QC, prepared for the then-shadow LGPS Advisory Board concluded. “Investment decisions must therefore be directed towards achieving a wide variety of suitable investments, and to what is best for the financial position of the fund (balancing risk and return in the normal way).”Unlike exclusions based on the grounds of carbon footprint, the exclusion of tobacco companies is a trickier issue when examined through the prism of profit. But investors should question whether any companies – if excluded solely for health reasons, for producing unhealthy goods – should be admitted, and perhaps consider, for example, a health-based sin-stock exclusion. That or companies must be called out for other ethical breaches, such as the concerns around employment cited by PGGM for its exclusion.Alternatively, funds must canvass their members for their opinions on tobacco and see whether they wish to exclude it, regardless of the potential cost. One of the world’s largest pension investors might soon reverse a long-standing decision to divest tobacco. Should it re-engage with the industry, simply in a pursuit of profit, asks Jonathan WilliamsOne of the world’s largest pension funds, the California Public Employees’ Retirement System (CalPERS), may soon reverse a 15-year-old decision to divest tobacco after research showed it had foregone $3bn (€2.6bn) in returns.The $293bn fund’s investment committee on 19 April signed off on a two-year study into the re-admission of 22 tobacco stocks, allowing it to canvass its stakeholders over the change in strategy.In papers prepared for the committee, CalPERS admitted that the question of whether to invest or divest various sectors, including tobacco, had become a “difficult and complex issue”.
Shell’s €26bn pension fund in the Netherlands, addressing concerns over low bond-market transaction liquidity and a sudden change in market sentiment, last year cut its equity allocation by 10 percentage points to 26%.In its 2015 annual report, the scheme’s chairman, Garmt Louw, said he was worried about central banks’ “experimental” policies, as well as China’s economic slowdown.The pension fund, after lowering its risk profile, saw its required funding level drop from 128% to 124%.Its coverage ratio stood at 123% at the end of last year. The pension fund said it temporarily reinvested the assets in short-term government bonds, which are to be replaced with fixed income instruments with a longer duration at a later stage.In the meantime, it has increased exposure to a “more offensive” sustainable growth strategy within its equity portfolio, by 5% to 35%.It said the strategy focused on investments in larger companies expected to grow consistently over the long term.Last year, equity investments generated 7.2%, with Europe and the Pacific Rim delivering the best results.The pension fund cited its strategic allocation to low-volatility equity, “combined with a defensive, stable, dividend income strategy”.The scheme reported a net return of 4.4%.Indirect real estate, returning nearly 13%, was the best-performing asset class.Fixed income holdings, due to depreciating local currencies in emerging markets, returned 0.9%.The pension fund said falling oil prices had dampened returns on its high-yield credit portfolio, and that it had re-allocated part of its credit holdings to “disintermediation assets”, responding to banks’ withdrawal from traditional roles such as mortgages lending.According to the 2015 annual report, it increased its allocation to residential mortgages by €250m.The scheme’s private equity holdings returned 4.9%, short of the benchmark’s 16.5% return over the same period.The board attributed this underperformance to the “large difference” between its actual portfolio and the available benchmark due to “a ‘vintage year’ effect”.Hedge fund holdings returned 0.9%, an outperformance of 0.6 percentage points.The Shell pension fund granted a conditional indexation of 0.2% last year, as well as an additional 0.1% on 1 February 2016.
The UK government has foreshadowed keenly awaited investment regulations for local government pension schemes (LGPS), with guidance published today giving insight into aspects such as asset allocation, environmental, social and governance (ESG) considerations, and the power of the government to intervene.The investment regulations will be introduced later this year, under which local authorities will have to publish investment strategy statements (Regulation 7) by 1 April 2017.This is distinct from the Statement of Investment Principles (SIP), which is more of an overarching statement of intent. The statements are key to granting LGPS more investment freedoms as part of a shift to a prudential framework with less central prescription, one of the main aims of the upcoming investment regulations. The guidance spells out what the investment strategy statement must include, namely, in the government’s words:a) A requirement to invest money in a wide variety of investments;b) The authority’s assessment of the suitability of particular investments and types of investments;c) The authority’s approach to risk, including the ways in which risks are to be measured and managed;d) The authority’s approach to pooling investments, including the use of collective investment vehicles and shared services;e) The authority’s policy on how social, environmental or corporate governance considerations are taken into account in the selection, non-selection, retention or realisation of investments; andf) The authority’s policy on the exercise of rights (including voting rights) attaching to investments.According to the guidance, the statement must also set out the maximum percentage of the total value of all investments of pension fund money that will be invested in particular investments or classes of investment.Guidance is also provided about the component parts of regulation 7 – for example, telling local authorities that they “must take proper advice” and assess the suitability of investments.The guidance goes into some detail on how ESG considerations should be taken into account, noting that “the law is generally clear” that schemes should consider ESG or any other factors where they are financially material.It adds a reference to the relevance of such factors depending on the time horizon of a scheme’s liabilities.The guidance also tells local authorities that the government has “made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the government”.“Social investments” by LGPS, meanwhile, appear to have the government’s blessing, with the guidance noting that such investments – which deliver a social impact as well as a financial return – will also be compatible with the prudent investment approach as long as administering authorities “have good reason to think scheme members share the concern for social impact, and there is no risk of significant financial detriment to the fund”. Government interventionThe guidance also explains how the government’s power of intervention to direct investments will be regulated.It states that the relevant regulation, regulation 8, “will include a number of safeguards, including full consultation with the relevant authority, to ensure that the proposed power is used appropriately, proportionately and only where justified by the evidence”.Assuming these criteria have been met, the secretary of state – currently Sajid Javid, the business secretary before new prime minister Theresa May reshuffled the Cabinet – can use “the power of Direction” in the following ways:a) To require an administering authority to make changes to its investment strategy in a given timescale;b) To require an administering authority to invest assets as specified in the Direction;c) To transfer the investment functions of an administering authority to the Secretary of State or a person nominated by the Secretary of State; andd) To require an administering authority to comply with any instructions from either the Secretary of State or the appointed person in circumstances when the investment function has been transferred.The regulations provide for the Department for Communities and Local Government (DCLG) to intervene if the secretary of state is “satisfied that an administering authority is failing to act in accordance with this guidance”.Whether the definition of ‘failure’ has been further defined remains unclear.
The Principles for Responsible Investment (PRI) has created the position of COO, appointing Peter de Graaf to the role.A Dutch national, de Graaf joins from London-based management consultancy Carnstone Partners LLP, where he spent the last seven years as a senior partner.This included leading the firm’s work on capital-market projects with clients and partners such as the Pension Protection Fund (PPF), Risk Metrics/MSCI and WHEB Asset Management. De Graaf will be based in London and report directly to Fiona Reynolds, PRI’s managing director. He starts on 1 December.Before Carnstone, De Graaf was managing director and a member of the board at environmental data provider Trucost.He worked there for nearly two years, and before that spent five years at FTSE, first as managing director for the EMEA and then as managing director for public affairs.As COO at the PRI, de Graaf will have overall operational responsibility for company-wide key projects and for implementing the strategic plan and annual business plans across the PRI, ensuring ongoing oversight and reporting against these plans.He will also be the chief programme officer, which will include implementing new programmatic strategic initiatives.He will work with the managing director and directors to implement the operational and “cross-organisational” aspects of a new 10-year Blueprint for Responsible Investment.Fiona Reynolds said: “The PRI has grown enormously in recent years, which means that, to meet the ongoing needs of our members, and develop new capabilities in the future, we now need a very senior individual who can coordinate projects and deliverables across the whole of the PRI.”
Carsten Stendevad, who resigned as CEO of Danish pension fund ATP in August, is to join US hedge fund giant Bridgewater Associates.Stendevad will work with the Connecticut-based firm for a year as part of a new “senior fellowship program”, Bridgewater founder Ray Dalio said in a letter to clients, which was also posted on LinkedIn.Dalio said the programme would “bring highly distinguished individuals into Bridgewater for a year to explore what our culture is like and lend their expertise and insights to our organization”.“We expect a limited number of such special people to join this program in the future,” he added. Stendevad left ATP last year after three years at the helm, citing family reasons. The DKK859bn (€115.6bn) pension fund named Christian Hyldahl as his successor in October.ATP uses a similar “all-weather” investment strategy to that employed by Dalio since he founded the hedge fund group in 1975. The model was in part inspired by Bridgewater, and the two organisations have worked together for more than a decade discussing multi-asset issues.ATP’s new CIO, Kasper Ahrndt Lorenzen, told IPE last year that the Danish pension’s multi-factor method was also indebted to the thinking of another US investment manager, AQR, and the academic field of “financial economics” more generally.In his letter, Ray Dalio also announced a shake-up of the group’s senior management, involving him stepping down as co-CEO of Bridgewater to focus on his role as co-chief investment officer.Dalio said his co-CEO role was always intended to be temporary, to aid the transition of Greg Jensen out of his chief executive position. Jensen is now co-CIO at the firm. Dalio’s own transition would be complete as of 15 April, he said.Jon Rubinstein, also co-CEO, is to leave after less than a year as part of the changes. Dalio said the pair “mutually agree that he is not a cultural fit for Bridgewater”. Rubinstein – a former Apple executive credited with helping create the iPod – will transition to an advisory role, Dalio said.Bridgewater president David McCormick is to become a co-CEO alongside Eileen Murray, who has been co-CEO since 2011.“Any organization run by a 60+ year old that says that it isn’t in transition is either naïve or disingenuous,” Dalio said. The hedge fund group – which now runs more than $160bn (€151.4bn) – is famous for its policy of “radical transparency”, based on Dalio’s founding principles. Bridgewater employees must be “extremely open, air disagreements, test each other’s logic, and view discovering mistakes and weaknesses as a good thing that leads to improvement and innovation”, according to its website.