In the defensively invested portfolios with an equity allocation below 16%, the largest pension fund VBV had the best performance.The spread between the best and the worst performers per category was greatest in the dynamically managed (highest risk) portfolios, at almost 400 basis points.Overall, the 16 Austrian Pensionskassen returned 5.14% on average for 2013.Mercer’s figures confirmed those released earlier by the Austrian pension fund association FVPK. Owing to the very fragmented portfolios of Austrian multi-employer Pensionskassen, which have to offer each company with more than 1,000 employees its own risk/return portfolio, the overall average performance only has limited representative value, Mercer said.Instead, the consultancy looked at only the 26 risk/return portfolios – out of more than 100 in total – that are open to new entrants and found that those returned 5.2% on average, which is above the market average.As for severance pay funds, or Vorsorgekassen, Mercer also noted a wide spread in returns, with the average return at 2.8%.All Vorsorgekassen had an equity allocation well below the 16% threshold. The worst-performing Vorsorgekasse, which was not named by Mercer, returned only 0.78% over the period, while Bonus performed best at 4.06%.In total, the 10 Vorsorgekassen are now managing €6.2bn in assets. Austrian multi-employer pension funds returned 5.3% in 2013, while company pension funds managed a 3.91% return, according to estimates from Mercer.The consultancy said the “decisive lever” for multi-employer schemes’ outperformance was their equity allocations, which stood at 28.23% on average in company pension funds and 36.71% in multi-employer funds.Looking at the various risk portfolios Austrian Pensionskassen can offer under the new pension fund law – with not all pension funds offering every risk level – Mercer found Allianz was the best performer overall.The Allianz Pensionskasse outperformed the other five multi-employer funds in all categories – conservative, balanced, active and dynamic – but one.
The €4.9bn pension fund PNO Media said that it would stop investing in infrastructure and microfinance, following an assessment of returns versus risks and costs.Although its 2% infrastructure holdings returned 13.2% last year, its 1% microfinance portfolio yielded no more than 1.9%, under-performing the benchmark by 4.1 percentage points, it said in its annual report for 2014.The media scheme posted an overall result of 15.9%, which was boosted by 4.5 percentage points due to its interest hedge.However, the fund said it had lost out even higher returns, as it had reduced its hedging level from 40% to 25% in the belief that interest rates would rise in the mid-term. As a consequence of the adjustment, its funding based on market rates fell from 105.3% to 100.1% during the year. Its new and official policy funding level – the average coverage of the previous 12 months – stood at 101.4%, it said.Last year, the scheme’s board adjusted its strategic asset allocation by reducing the target weighting of credit (-2%), emerging market equity (-1%) and private equity (-1%) in favour of government bonds (+1%), residential mortgages (+1%) and US equity (+2%), while keeping its strategic interest hedge at 40%.PNO Media’s 50.8% fixed income portfolio returned 15.6%, with European AAA government paper generating more than 29%.Residential mortgages and European credit yielded 8.2% and 7.8% respectively, it said.Equity holdings, accounting for over a third of assets, delivered returns of 14.5%, with US stocks producing a 29.5% return. That said, the scheme indicated that it could not fully benefit from the performance of US equity and the rise of the dollar against the euro, as it had hedged 75% of the currency risk.Also mainly thanks to well-performing US markets, the pension fund’s property investments – chiefly in the residential and retail sector, through non-listed funds – returned 5.8%.PNO Media further said that it had decided to increase its investment volume for private equity, as the pay out of maturing projects started exceeding investments. The asset class returned 14.1%The scheme has been investing in private equity in co-operation with SPF Beheer, the asset manager of the €14bn railways scheme SPF, since 2001.The media pension fund made clear that it was looking into the options to widening its scope of pension plans, to encourage small companies with many young staff to join the industry-wide scheme.“We see growth potential in initially charging young workers a lower contribution than our standard average premium, which still would entitle them to a full rights accrual, because of their longer investment horizon,” explained Jeroen van der Put, director of investments at PNO Media.The scheme also said that it had renewed its contract with its provider MPD for an indefinite period, under the condition that MPD would keep on working exclusively for PNO Media. Meanwhile, it has housed its pensions bureau with the provider.“An exclusive relationship will enable the board to keep its focus amidst all changes in legislation and governance,” Van der Put said.PNO Media has 15,235 active participants, 32,655 deferred members and 9,045 pensioners affiliated with 449 employers.
The Ontario Pension Board (OPB) and the Canada Pension Plan Investment Board (CPPIB) have been granted Renminbi Qualified Foreign Institutional Investor (RQFII) status, becoming the first pension funds to gain access to China’s capital markets under the more flexible of the country’s two main licences for foreign institutional investors, according to Z-Ben Advisors in Shanghai. The licences were approved by the China Securities Regulatory Commission (CSRC) in December and announced on Thursday, according to Charles Salvador, director of investment solutions at Z-Ben Advisors.A spokesperson at CPPIB confirmed that it had been awarded the licence but declined to comment further. Like the Qualified Foreign Institutional Investor (QFII) platform, RQFII is a programme under which investors can invest directly in China’s capital markets, but it is much less restrictive. Under QFII, investors have to allocate at least half of their quota to equities (A-shares), but there is no such restriction under the RQFII licence. It also provides easier access to the Chinese interbank bond market.Overall, the RQFII allows for more flexible asset allocation, which is one of the main draws of the licence for pension funds, Salvador told IPE.Further benefits of the RQFII licence include that investors can use offshore renminbi or other major currencies to fund their quota, whereas QFII is a US dollar-based programme.The latter aspect may be more relevant for asset owners in the Asia-Pacific region but could still be an attraction for some global institutional investors, said Salvador.He said the approval of the licences for the Canadian pension funds signals a change in the approach that pension funds will take to investing in Asia.“If they’re looking to gain direct exposure to A-shares, then they’ll have to think twice about going through the QFII platform,” he said.“They’ll have to think about RQFII, and then they also have the option of the Connect platform.“The options have never been more plentiful in the history of foreign investors in China.”Connect is a platform that links the Hong Kong and Shanghai stock exchanges, giving investors a chance to invest in eligible Shanghai-listed – a quota system applies.The $272.9bn (€249bn) Canadian Pension Plan is already active in China. In December, for example, CPPIB invested RMB3.2bn (€460m) in Postal Savings Bank of China, one of the largest retail banks in the country.The RQFII programme has so far typically been used by asset managers, banks, securities companies, insurance companies and hedge funds, Z-Ben Advisors notes.GIC, Singapore’s sovereign wealth fund, received an RQFII licence early last year, but IPE understands that there are questions about whether this was granted to it in an asset management capacity.The announcement of the RQFII licences for the Canadian funds comes after a torrid start to the new calendar year for Chinese markets, with stocks down amid high volatility and the renminbi depreciating, although several portfolio managers and other commentators have downplayed the sell-off and said fears are overblown.OPB could not be reached for comment by the time of publication.
Major Danish and Dutch pension investors have become members of a restructured initiative focused on encouraging long-termism in business and investment, with the chief executive of €200bn Dutch asset manager PGGM announced as one of the organisation’s board members.Launched as an initiative in 2013, Focusing Capital on the Long Term yesterday (28 September) announced that it has established itself as an independent entity, renamed as FCLT Global.The not-for-profit organisation is dedicated to “developing practical tools and approaches that encourage long-term behaviours in business and investment decision-making”.Its newly announced board members include executives of some of the world’s largest institutional investors, including Else Bos, chief executive at PGGM, and Chow-Kiat Lim, deputy group president and group CIO at Singaporean sovereign wealth fund GIC. The Canada Pension Plan Investment Board (CPPIB) and the Washington State Investment Board are also represented.The board was due to have its first meeting in New York City yesterday.CPPIB and McKinsey & Company formed the initiative in 2013, with BlackRock, the Dow Chemical Company and Tata Sons joining them as founders.Larry Fink, chairman and chief executive BlackRock, will serve as strategic adviser to the organisation.Denmark’s €107bn statutory pension fund ATP and APG and PGGM – the asset managers of the €372bn Dutch civil service pension fund ABP and €179bn healthcare pension fund PFZW, respectively – are among the European members of FCLT Global. Focusing Capital on the Long Term, when still in the form of an initiative, was behind the launch of a long-term equity index by S&P, which was supported by ATP and PGGM and other large institutional investors.
The Nortel UK pension scheme and other parties involved in the international insolvency of Nortel Networks have finally agreed how to share out the $7bn (€6.3bn) of the group’s remaining assets, according to PwC.The firm, which has been financial adviser to the scheme during the process involving court cases in countries including the US and Canada, said the exact amount being returned to Nortel’s UK pensioners was not yet known.This is because of, inter alia, ongoing non-litigation in Canada and Europe, it said.Jonathon Land, head of PwC’s pensions credit advisory practice and adviser to Nortel’s trustees, said: “This case will impact how pension scheme creditors are treated for years to come.” He said it was becoming more common for groups to operate across geographical and legal boundaries and that pension scheme creditors had to make sure they really understood where their legal support came from.The UK pension scheme is one of the largest creditors in the Nortel group insolvency. “An agreement is very welcome and brings nearer the day when distributions might be made to creditors, including the Trustee of Nortel’s UK pension scheme,” Land said.He said the trustee directors had acted with great professional integrity seeking to achieve the best possible deal for their members. PwC said it was an unprecedented result when, in May 2015, judges in the US and Canada issued a “ground-breaking” decision to allocate the residual assets on a pro rata basis, as had been argued by the Nortel UK pension scheme. The Canadian court denied leave to appeal the allocation decision and, despite an appeal process commencing in the US, negotiations continued, and an agreement was reached. The appeal, lodged by Nortel Networks bond holders challenging the decision to give the UK pension fund an equal claim on the assets, was thrown out by US and Canadian courts in July 2015.The deal is subject to creditor approval in the US and Canada and to Court sanction in the US, Canada and various other jurisdictions, including the UK.Nortel Networks became insolvent in January 2009, with its European, US and Canadian entities making simultaneous insolvency filings in London, Delaware and Toronto. In July 2015, two courts in the US and Canada threw out an appeal by Nortel Networks bond holders against a decision to provide the UK pension fund with equal claim on assets, after the US creditors were accused of misleading the case.At the time, Nortel’s UK group company was the sponsoring employer of a large defined benefit pension scheme with more than 40,000 members, and a buyout deficit of more than £2bn (€2.2bn).
The €1.4bn Nedlloyd Pensioenfonds (NPF) is seeking collaborations with similar-sized schemes in order to drive down costs and further improve its services.NPF, the Dutch pension fund of shipping firm Maersk, wants to continue independently, at least for the time being, said director Frans Dooren.He said NPF had already conducted “exploratory” discussions at board or pension provision level with six pension funds.“We could, for example, jointly look for members of a supervisory board, which is also to become mandatory for company pension funds with assets of more than €1bn,” the director said. Currently, NPF uses a ‘visitation’ committee, which assesses the scheme annually.Other areas for potential collaboration included investment, board support, and actuarial or legal services, the pension fund said.Dooren stressed that NPF was in no hurry to strike deals and therefore didn’t aim at a merger with another scheme or participation in a general pension fund (APF). This is despite the Dutch regulator’s ongoing drive for consolidation among pension funds.“We could easily continue independently for five or 10 years,” he said.The large proportion of pensioners, combined with the scheme’s current funding ratio of 119%, would ensure sufficient solvency following a drop in liabilities, Dooren pointed out.Nedlloyd kicked off the search for collaborators last year, organising a roundtable meeting about co-operation with trustees of 15 pension funds. The meeting was jointly organised with asset manager Robeco, which implements NPF’s innovative individual pension arrangements.Two years ago, the Nedlloyd scheme won wide recognition within the sector for the introduction of a new defined contribution plan, which enables participants to switch from individual DC to the scheme’s collective pension plan at any age. With the new scheme, NPF was ahead of the legal arrangements which allow retiring participants to continue investing part of their pension assets.
The overhaul of the Polish pension fund system, initially earmarked for January 2018, looks set for a six-month delay.Finance and economic development minister Mateusz Morawiecki, the co-author of the proposed changes, told the Polish Press Agency (PAP) today that he envisaged the new system coming into force at the start of next July.Morawiecki cited the complexities of the reform, as well as the need for the State Social Insurance Institution (ZUS) to be ready for the changeover. The changes still require the agreement of other ministries.Under the proposed system, the second-pillar pension funds (OFEs) would be dissolved, with 75% of the assets moving into newly created third-pillar individual pension insurance accounts (IKZEs) and the remainder into the ZUS-administered Demographic Reserve Fund (DRF). In April Morawiecki announced that the relevant legislation would be published in June. Failure to meet this deadline led to local press speculation that both ZUS and the family, labour and social ministry wanted all OFE assets to transfer to the DRF.Morawiecki told PAP that the differences in opinion were over technicalities, with the final legislation unlikely to differ much from his original plans.He added that the DRF’s 25% share, while allocated to each individual’s pension account, should be deployed in the country’s economic development, preferably in the form of public-private partnerships rather than public investments.The OFE’s assets totalled PLN174.7bn (€41.5bn) as of end-June, with equities accounting for more than 85% of the investment portfolio, according to the Polish Financial Supervision Authority.The high equity share was responsible for the 23% year-on-year growth in Polish zloty terms, offsetting the effect of the “slider” – which incrementally moves each member’s assets to the ZUS when they are within 10 years of retirement.While the slider is set to disappear under the proposed reform, in the short term its impact is expected to intensify.Last year the legislature reversed the previous government’s gradual raising of the retirement age, enacted in 2012, from 60 years for women and 65 for men to 67 years. The lower retirement ages take effect at the start of October.
The panel discusses currency and technology at the IPE Conference in Prague Although the concept of blockchain is promising, the introduction of the technology is still a long way off as many issues still need solving, according to currency experts.Speaking at the IPE Conference in Prague, Martijn Vos, managing director of pensions and insurance at Ortec Finance, said he “strongly believed” in the technology.However, it couldn’t take off until legislation had been put in place before, for example, governance and data gathering could be set up, he argued.He emphasised that blockchain’s introduction would be a global issue and a matter for central banks’ policy. In Vos’ opinion, however, currency trading could be one of the first sectors to benefit from blockchain technology, “as its very liquid market would make it easy to record transactions”. The same went for liquid equity trading, he said.Tibor Gergely, director of FX eCommerce at UniCredit, argued that the technology was ready to enable quick cross-border payments.In his opinion, the problem was more about which system to adopt, given the multitude of providers. “This needs a critical mass,” he said.Guy Coughlan, chief risk officer at the UK’s Universities Superannuation Scheme, echoed Vos’s view that the jury was still out concerning how the technology would work in practice and how legislation would develop.“The real challenge is to convince the financial community to use it, and that the benefits outweigh the risks,” he said, adding that trust, transparency and accountability were crucial.He noted that he hadn’t noticed significant progress from other new technologies, such as artificial intelligence and robotics, as tools to solve other problems such as engaging with pension savers.Benjamin Anderegg, head of foreign exchange and gold at the Swiss National Bank, also said that blockchain technology was “very appealing”, but that legislation and proper governance rules would be crucial if it became really important.He described the introduction of the technology as “a big step” but one that would not be taken soon.Responding to questions about the rise of bitcoin, Anderegg made clear that the Swiss central bank wasn’t worried “as it doesn’t seem to have an impact on price stability”.Vos indicated that gauging the impact of the cryptocurrency was complicated “as its drivers were difficult to identify”.
“He joins at an exciting time for the company as our assets under management grow and will make a great contribution to developing the pool alongside our partner funds.” Mike Weston, former head of the Pensions Infrastructure Platform, has been appointed chief executive of LGPS Central, the asset pooling vehicle for nine Midlands-based local authority pension funds. Weston will start his new role on 7 March. He replaces Andrew Warwick-Thompson, whose decision to step down from LGPS Central was announced in September.Weston stepped down as CEO of the Pensions Infrastructure Platform last month after more than four years in charge. Joanne Segars, chair of LGPS Central, said: “I am delighted that Mike is joining the company as CEO. He brings a wealth of understanding of investment management, occupational pension schemes and the LGPS. Mike Weston, incoming CEO of LGPS CentralWeston said: “Pooling provides an important route to deliver investment efficiencies and opportunities to partner funds. Much progress has already been made, but there is more to do.” Before joining the Pensions Infrastructure Platform in 2015, Weston spent five years as investment chief of the Daily Mail & General Trust’s pension fund. LGPS Central also announced that John Burns had been promoted to the role of deputy CEO. He will carry out this role in addition to that of chief operations and financial officer. The pension funds behind LGPS Central have £45bn (€51bn) in assets under management between them.The manager recently launched its first pooled private equity vehicle, which raised money from five of its pension fund clients.
The government has decided not to earmark the lump sum for specific purposes, such as paying off a mortgage – as Koolmees put forward as an option in February.A compulsory spending objective was complex to implement and would lead to “a lot of regulatory pressure”, the minister said. Moreover, experiences in other countries showed that “scheme members use the freedom to withdraw an amount at once sensibly”. Dutch citizens that retire with pensions in the second or third pillar will soon be able to withdraw 10% of their accrued funds in a lump sum upon their date of retirement.Social affairs minister Wouter Koolmees proposed the rule change in a letter to the Netherlands’ House of Commons. The letter provided expanded on an intention recorded in the coalition agreement, and is a follow-up from the ‘10-point letter’ in which Koolmees set out his pension reform plans to the parliament in February.The way to spend this money would be entirely open, the minister stated. However, withdrawals from pension schemes that have solvency issues – a funding ratio below 100% – was still to be addressed.The minister confirmed the maximum withdrawal amount of 10% of an individual’s pension entitlement, stating that a withdrawal would only be possible on the date of retirement. He also decided that the pension value that remained in the pot would have to be above the commutation limit – currently €484.09. Wouter Koolmees, the Dutch government’s social affairs ministerFurther readingDutch pensions agreement dodges the real issuesSocial partners have agreed compromises relating to the state pension age and early retirement, but many crucial aspects are yet to be confirmed and could still derail efforts to reform the systemThe method of calculating the amount that could be withdrawn by members was still to be decided. Koolmees said he would discuss this with the industry and the pensions regulator, De Nederlandsche Bank.An important consideration was how the rule would apply to pension funds with a funding ratio below 100%. Choosing a nominal redemption value could impact the financial position of the pension scheme negatively, according to Koolmees. However, the minster added, this effect would be minimal.Dutch pensions publication Pension Pro reported last year that there were few practical objections to introducing lump sums. Actuary Marc Heemskerk of consultancy firm Mercer said at the time: “If 20% of the total pension assets under management would be withdrawn, the effect is negligible.”The withdrawal of a lump sum was also mentioned in the recent pension agreement. Trade union VCP, however, published a press statement last week raising questions about taking out a lump sum.VCP policy officer Klaartje de Boer acknowledged that the union supported the entire pension agreement, including the lump sum aspect.“We didn’t get our way on everything in the pension agreement, and this was one part,” he said. “This is inevitable: it is giving and taking, so you win some, you lose some. This means that you sometimes have to settle, as has happened here. We don’t consider a one-off payment to be a good thing, because we believe there are risks attached to it if there is no clear objective.”Koolmees wants to submit a bill to parliament before the summer of 2020. Before parliament will see his proposal, an internet consultation will take place – however, it is unclear when this will open.