PKA’s individual investment in the wind farm will be DKK2.2bn, while Industriens Pension is investing DKK940m.Peter Damgaard Jensen, PKA’s chief executive, said: “PKA will continue investing in such projects, since they are in line with the wish for a sustainable return and our members’ demand to make a positive impact on the climate.” He said Gode Wind 2 was the fourth offshore wind farm in which PKA had invested.Industriens Pension’s chief executive Laila Mortensen said that, by investing in the project, the pension fund would secure a long-term stable return on investment for its members.Lægernes Pensionskasse said the investment fit well with its existing portfolio.Construction of the installation is expected to start next year, with full commissioning of the wind farm – and neighbouring wind farm Gode Wind 1 – expected in 2016.DONG Energy is to operate and maintain the wind farm as well as provide a route to market for the power it produces, according to the agreement.Gode Wind 2 will have an output capacity of 252 MW and be able to supply carbon-free power equivalent to the annual electricity consumption of more than 260,000 households, DONG Energy said.It will be built in the German part of the North Sea, about 45km off the north-western coast of Germany. PKA is leading a consortium of four Danish labour market pension funds to buy half an offshore wind farm project for DKK4.5bn (€603m).The consortium, which includes industrial-sector pension fund Industriens Pension, teachers’ fund Lærernes Pension and doctors’ fund Lægernes Pension, will acquire a 50% stake of the Gode Wind 2 German offshore wind farm project from Danish energy company DONG Energy, according to an agreement signed yesterday.The total sales price will be paid to DONG Energy between 2014 and 2016.When the deal is complete, PKA will hold 24.75% of the project, Industriens Pension 10.5% and Lærernes Pension 8.75%, with 6% belonging to Lægernes Pensionskasse.
This occurred just before the DNB announced the introduction of a fixed discount rate for insurers.The regulator confirmed in December 2014 that it fined Delta Lloyd €1.2m and ordered it to sack CFO Emiel Roozen.Although Delta Lloyd appealed on both accounts, a Rotterdam court last week upheld the fine – reduced to €1m for “procedural reasons”.The regulator also seized €21.6m, the alleged proceeds of the insurer’s “dishonest” business.Frijns said Roozen – in spite of the court’s ruling that the regulator should re-think its order to sack him – had resigned “with immediate effect”, citing the importance for Delta Lloyd and its stakeholders to close the case “as quickly as possible”.“I also accept the consequences [of this ruling],” he added, “as the court has made such a different assessment of the facts than the supervisory board.”Frijns, a former CIO at €356bn Dutch civil service pension fund ABP, is to step down on 1 October.According to the NRC, Delta Lloyd executive chairman Niek Hoek also resigned earlier this year due to pressure from the regulator.Local media, including broadcaster RTL and the FD, claimed the regulator’s pending reassessment of Hoek’s suitability as chief executive, due to the alleged misuse of foreknowledge, triggered his departure from Delta Lloyd. Jean Frijns is to step down as chairman of the supervisory board at Delta Lloyd after the Dutch regulator (DNB) concluded the insurer made a number of “speculative” derivatives transactions. According to the regulator, Delta Lloyd drew on confidential DNB information to make speculative transactions that were “carried out without following internal procedures” and “did not fit within the insurer’s risk-management procedures”.A Delta Lloyd court order has prevented the regulator from releasing further details about the fine.Dutch news daily NRC, however, alleges that, in 2012, the insurer offloaded derivatives worth hundreds of millions of euros against interest rates changes.
The minister, leader of the Labour Party, did not provide any date for reform implementation, saying it would depend on a number of factors, including the “presence of a favourable economic environment”.But she insisted the case for reform was solid.Burton has previously said the launch of the new supplementary system would depend on a number of economic indicators, likely to include unemployment falling to a level deemed acceptable in a country that only recently saw the near-collapse and bailout of its baking system.Nor did the speech shed any light on when the URSG would reveal its findings, despite the Department of Social Protection’s previously saying the proposal would be published by the end of 2015.Burton has previously told the Irish Parliament the group has so far convened five times, inviting around 35 stakeholder groups to offer feedback on its proposals.She also said the group had spoken to experts from Australia, New Zealand and the UK – all countries that have introduced either mandatory or soft-mandatory pension systems. Publishing the proposal by the end of the year would allow its being debated prior to the next general election, taking place no later than April 2016, at a time when Burton cannot guarantee her party’s return to power.The URSG has so far conducted informal consultations with stakeholder groups, being advised by the Irish Association of Pension Funds that, due to the “political reality”, an auto-enrolment system might be easier to deliver than one mandating pension saving.The system has previously been referred to by a number of names by the minister – including Shamrock Saver, Celtic Saver and MySaver – but more recently it was christened the Universal Retirement Savings Scheme by the URSG. The reform of Ireland’s second-pillar pension system will not happen without a favourable economic environment, according to the country’s deputy prime minister.Joan Burton said there was broad agreement that the current level of “substandard” pension provision needed to be addressed but accepted that the reform’s authors should also be aware of its impact on labour costs.Speaking at an event hosted by IBEC, Ireland’s employer association, the minister for social protection said she accepted the need for “clear communication” of any path towards reform and the launch of a universal pension system.She noted the Universal Retirement Savings Group (URSG), convened by government earlier this year to draw up a reform proposal, was now considering the new system’s design and timeframe for introduction.
Xander den Uyl, trustee at Europe’s largest pension fund ABP, has been named chairman of the newly formed asset owner advisory board of the Principles for Responsible Investment (PRI).Alongside den Uyl, European representatives on the board include Anders Thorendal, CIO of the Church of Sweden’s pension fund; Faith Ward, chief responsible investment and risk officer at the UK’s Environment Agency Pension Fund; and Mark Walker, CIO of Univest, the asset manager for Unilever’s pension funds.Canvassing support for his election to the board, den Uyl said one of the PRI’s key challenges would be to “remain relevant for an increasingly wide range of investors, investment styles and cultures”.He is a former vice-president of ABP, the €345bn Dutch fund for civil servants, and oversaw the development of a responsible investment policy adopted in 2007. The 16-strong board currently has 14 members, with two vacancies remaining for asset owners from emerging markets.Full list of current board membersChris Ailman, CIO, California State Teachers’ Retirement System (US)Sharon Alpert, chief executive, Nathan Cummings Foundation (US)Jagdeep Singh Bachher and Amy Myers Jaffe, office of the CIO, University of California (US)Yvonne Bakkum, director investment management, FMO (The Netherlands)James Davis, CIO, OPTrust (Canada)Marie Giguère, executive committee member, Caisse de dépôt et placement du Québec (Canada)Hiromichi Mizuno, CIO, Government Pension Investment Fund (Japan)Jay Ralph, chairman, Allianz Asset Management (Germany)Ian Silk, chief executive, AustralianSuper (Australia)Daniel Simard, chief executive, Bâtirente (Canada)Anders Thorendal, CIO, Church of Sweden (Sweden)Xander den Uyl (chair), trustee, ABP (The Netherlands)Mark Walker, CIO, Univest (The Netherlands)Faith Ward, chief responsible investment and risk officer, Environment Agency Pension Fund (UK)It will spend its time advising the PRI on its asset owner insight work, which covers the appointment of managers, investment policy and strategy, as well as the role of responsible investment within passive strategies.The creation of the advisory board sees the UN-backed initiative fulfil its pledge to increase asset owner representation, a sensitive matter for an organisation where the approximately 300 asset owner signatories risk being overshadowed by 1,156 asset manager and other professional service partners.In its business plan for 2015-18, the PRI pledged to increase asset owner representation and participation, including setting itself recruitment targets for asset owners by region.The board’s launch comes after the organisation hinted it would hold to account signatories failing to comply with its principles.
Macquarie Investment Management – Anna Bretschneider has been appointed head of Swiss distribution. Before joining Macquarie, Bretschneider spent 14 years at MFS Investment Management, where she built client relationships in Switzerland, Austria and Luxembourg. She began her career in 2000 at Generali Group.NN Investment Partners – The company formerly known as ING Investment Management has appointed Jared Lou to the emerging debt team as a portfolio manager. Lou previously worked with the emerging market debt team at GMO based in Boston, where he was a sovereign analyst.HSBC Global Asset Management – Dan Rudd has been appointed head of wholesale UK. Rudd is head of MENA Wholesale at HSBC GAM, and will relocate to the UK in April to take up this new position. The company hired him in 2005 as head of global life. He joined from Deutsche Asset Management.La Française – Shawna Yang has been appointed as investor relations director for Asia at La Française’s new office in Seoul. She joins from Cushman & Wakefield Korea, where she was head of the capital markets division. MN, PMT, PGGM, Société Générale Securities Services, Caceis, Candriam Investors Group, Pictet Asset Management, Macquarie Investment Management, MFS Investment Management, NN Investment Partners, HSBC Global Asset Management, La Française, Cushman & WakefieldMN – Michaël Kortbeek and Johan van der Ende have been appointed as members of the supervisory board (RvC). Kortbeek has been a board member at €60bn metal scheme PMT – MN’s largest client and shareholder – for the past 12 years. Van der Ende has been CIO and a member of the executive committee at the €182bn asset manager and pensions provider PGGM. Before then, he held a number of executive jobs at ING Group. Van der Ende has also been an adviser, supervisor or board member at CBRE Global Investment Partners, Altera Vastgoed, Q-Park and the Amsterdam School of Real Estate. The appointments came as a consequence of Peter Kok’s resignation from the RvC at year-end, as well as the extension of the board.Société Générale Securities Services – Olivier Aprile has been appointed head of institutional sales for asset managers and institutional investors in France. He joins from Caceis, where he was head of sales. Before then, he served as head of institutional clients at Caisse des Dépôts et Consignations.Candriam Investors Group – Fawzy Salarbux has been appointed head of consultant relations. He joins from Pictet Asset Management in London, where he was head of global consultant relations. Before then, he worked as an investment consultant at Mercer and Aon Hewitt in London.
But other commentators are less optimistic on the clearance by Brussels of the supplementary rules. One large pension fund investor reports that it would not be surprised to see the Commission publish the RTSs as late as October. Another source comes up with a similar timing, “bearing in mind past experience”. Such is sensitivity in the field that both authorities prefer not to be identified.On top of an October estimate, even if further delay of 3-6 months were required for clearance by the Parliament and Council prior to publication in the Official Journal, there does still appear to be time for compliance procedures to be effected. Michael Lewis, MiFID expert at law firm Pinsent Masons, puts the time needed for IT sections to build, implement and test their compliance systems to be in the order of nine months. The work would include coverage of transaction reporting, which would have to be done electronically, he tells IPE.But is there any need to worry about the time factor? “Hard to say,” says Lewis. “It depends on what comes out of ESMA and how substantial the delegated acts are. It is very difficult to crystal ball at this stage.” He does find the present one-year implementation delay to be much welcome in the investor sector.While many of the 28 RTS articles will not require IT system development, Lewis notes that fund managers could well face having to build IT systems to cope with so-called “appropriateness”. He foresees the possibility of an expansion of scope from what exists under MiFID I. He expects that smaller pension funds will have to buy in the necessary IT development for consultancies. It remains to be seen whether such costs could be absorbed internally or passed on to the pension beneficiaries.In the meantime, the issue of derivatives trade transparency, which first arose last year, has been highlighted by PensionsEurope. The institution states that, under current MiFID rules, as drafted by ESMA, pension funds could be discouraged, by the expense, from hedging inflation or interest-rate risk against long-dated liabilities. The liquidity definition for many derivatives sub-classes is of fewer than 10 trades taking place during a one-day period, it adds. It comments that ESMA mis-designated illiquid derivatives sub-classes as liquid. The trades-per-day threshold for determining the liquidity of derivatives sub-classes should be set cautiously. PensionsEurope’s Ursula Bordas questions whether the authority has made a mistake in this matter, which she judges to be not less important than the compliance-timing matter.Taking a similar line on clearing venue calibration of liquidity, Roger Cogan, head of European public policy at the International Swaps and Derivatives Association, says: “We remain concerned that 10 trades per day – one trade per hour – is a very low bar for designating derivatives as liquid for the purpose of applying trade transparency requirements.” At the time of writing, the Commission declined to comment on the matter but has been under pressure from the US authorities to come into line with them on derivatives clearance. Estimates for the publication of the ‘delegated acts’ rules for MiFID II remain unclear, Jeremy Woolfe writesEstimates for when the European Commission will publish the ‘delegated acts’ rules for the Markets in Financial Instruments Directive (MiFID II) remain unclear. Indications are that there will be an adequate interval for the IT-compliance exercise by portfolio managers to meet the new implementation date of 3 January 2018.The most optimistic report on the streets of Brussels has it that the European Commission will have completed its work on MiFID’s Regulatory Technical Standards (RTS) before the summer holiday. This would leave a generous margin of time for fund managers to deliver their compliance work on time. Unsurprisingly, when challenged on this timing, the Commission avoids fixing on a firm date.However, it does state: “We are working to finalise the rest of the level II package in the coming months. We will adopt and send RTS for scrutiny [by the Parliament and Council] as soon as they are ready (rather than sending them together).” Cautious to the last, the Commission also covers itself by adding: “At this stage, there is no legal deadline by which the Paris-based European Securities and Markets Authority (ESMA) has to propose amended drafts”.
He said he did not believe changing managers in such circumstances would necessarily come at the expense of returns.“If it is the case, however, it would be a good idea for pension funds to give participants the option of choosing principle over returns.”Burggraaff said the “bonus issue” was part of a broader message from participants – “who seem to demand that pension funds deal with their money in a decent way, which includes sustainability and less risk-taking”.Mercer, which interviewed a “representative group” of 823 participants, found that sustainable investment was particularly important to over 66s.Participants between the ages of 30 and 65 also prioritised clarity about their future net pension income.The latter group said it would also like pension funds to take less risk when investing their assets, preferring lower, but more stable, returns.The survey suggested workers of less than 30 years prioritised the option of choosing their pensions provider.Younger employees also rated highly pension funds’ ability to provide insight on participants’ personal financial situation, as well as freedom of choice in the benefit phase, Mercer said.The consultancy found that participants’ faith in their pension funds hardly improved over the past year, with respondents rating their schemes at an average 5.9 points out of 10, and one-third categorising their schemes as ‘inadequate’. In addition, 26% of participants said faith in their pension funds had fallen, while 7% said the opposite. Pension funds wishing to win back their participants’ trust must denounce bonuses at asset managers and the companies in which the schemes have invested, Mercer Netherlands has said.Dutch pension-fund participants, when asked in a Mercer survey what schemes should do to restore confidence in the industry, said they should reject bonuses more emphatically.Tim Burggraaf, a partner at Mercer, said participants expected pension funds to make a real effort to drive down bonuses.“Pension funds can do this by using their clout or, as a last resort, leaving their managers,” he said.
Some private debt funds have become riskier as managers chase yield to meet investor demand, according to consultant bfinance.Yields on senior direct lending funds – the most popular form of private debt among institutional investors – have been compressed in recent years following a surge of demand, bfinance said in a new report on the asset class, published today.The consultancy firm said: “We are frequently asked: ‘Is now a good time to invest?’ While the answer may still be ‘yes’, a deep understanding of what’s under the bonnet will be key to successful implementation.”Although private debt funds raised less money in 2016 than the previous year according to Preqin data, unused capital hit a record high of more than $220bn (€206bn). bfinance said it worked on private debt mandates worth more than $1.25bn last year, more than double the volume of 2015. Roughly three quarters of this was corporate lending.“We expect significant performance dispersion between upper and lower quartile managers in this more competitive environment,” the consultant said.Analysis by bfinance showed most European private debt fund managers still expected returns of around 8% from senior funds. However, the consultancy claimed, “portfolios with large proportions of traditional senior secured loans cannot drive such expectations”.“Core senior debt in Europe now produces returns of 5-6% with average cash yields at around or slightly below 4%,” bfinance said. “This signifies noticeable spread compression since 2012.”As a result, the consultancy said investors should “focus on the nature of the senior debt” in funds they are considering, as well as the proportion invested in subordinated (higher risk) debt. Some managers had raised their limits for investment in riskier debt above 20% in senior funds.In addition to falling yields, bfinance warned of managers using more leverage than in previous years, and of covenants being eroded – known as “cov-lite”.Cov-lite structures “may, in theory, hold the potential for increased credit risk”, bfinance said. The lender – and therefore the asset owner – has less visibility on the borrower, for example.However, bfinance said some funds had introduced other forms of oversight to mitigate the loss of traditional covenant protections, such as a seat on the board of the borrowing company.On costs, the consultancy reported there was “considerable flexibility” for fee negotiation around the industry norm of a 1% management charge with a 15% carry for senior funds.“Hurdle rates, catch-ups, and administrative charges prove critical to overall leakage and should be handled with care,” bfinance added.The trade off between risk and reward in private debt was still “highly attractive in relative terms”, bfinance said, but it was also “somewhat less favourable than it was four years ago”.
This year was the first time that the organisation included asset managers in its assessment. The top firms were “well ahead of their asset owner clients in their approach to managing the financial impact of climate change on investment portfolios”, the AODP said.“However, asset owners are ahead in leading the way on climate risk, with 7% in the Leaders group versus 4% of asset managers,” it said.Asset manager subsidiaries of asset owners were the most progressive, accounting for nine of the top 10 asset managers, and in some cases surpassing their parents in the rankings, the AODP noted.The AODP scored asset owners and managers on three key capabilities – governance and strategy, portfolio carbon risk management, and metrics and targets – and graded them from AAA (“Leaders”) to D, with an X category for “Laggards” when no evidence of action was provided.There were far fewer asset managers in the latter category (6%) than asset owners (40%).The only asset manager to earn a AAA rating was APG, the €443bn asset manager and provider for the large Dutch civil service pension scheme ABP. Finnish pension insurer Ilmarinen shot up the ranking, climbing 214 places to claim a top 10 spot as a result of new policies, such as linking manager incentives to sustainability goals.Other selected findings from the study included:Almost twice as many asset owners as last year incorporated climate change into their policy frameworks;Only 6% of asset owners assess the risk of stranded assets;In the US, 63% of asset owners were ignoring climate change;25% of asset owners were investing in low-carbon assets such as green bonds and low carbon indices, a 58% increase from last year; 34% of asset managers invest in low-carbon assets, but only $95bn is quantified;73 asset owners (15%) incorporated climate risk factors into their asset manager selection process, a 30% increase on last year;20% of asset owners were embedding climate change risk management into asset manager agreements, up from 12% in 2016. TOP 10 ASSET MANAGERS (Rated AAA to B) 1APG Asset Management AAA441,630Netherlands RankAsset Owner2017 Rating2016 Rating2016 RankingAUM US$mCountry 17United Nations Joint Staff Pension Fund AAAAA2053,802US TOP ASSET OWNERS (AAA-RATED) 6Allianz Global Investors BB532,785Germany 4First State SuperAAAAAA1241,560Australia 10Elo AAACC7822,291Finland 4M&G Investments BBB338,488UK 9Deutsche Asset Management B796,409Germany 7KLPAAAAA1959,653Norway 9Ilmarinen AAAD22238,947Finland 8AP4AAAAAA336,780Sweden 5ABPAAAAAA4410,779Netherlands 2Legal & General IMAA1,140,418UK 16AP7AAABBB3233,530Sweden 2The Environment Agency Pension Fund (EAPF)AAAAAA13,928UK 15New Zealand Superannuation Fund AAAD10921,453New Zealand There is far greater recognition of climate-related financial risk among asset managers than asset owners, but leadership on climate change still mainly comes from the latter group, according to a report from the Asset Owners Disclosure Project (AODP).Publishing its fifth annual benchmark study on how investors address climate risk, the non-profit organisation said that a clear majority of the world’s biggest investors were taking action on climate change and rapidly scaling up action to protect their portfolios.It said that 60% of the world’s 500 biggest asset owners recognised the financial risks of climate change and opportunities in the transition to a low carbon economy and are taking action. This marked an increase of 18% from the AODP’s 2016 results.The world’s 50 biggest asset managers were “taking climate risk even more seriously”, according to the AODP. 1Local Government Super (LGS)AAAAAA27,422Australia 12Church Commissioners for EnglandAAAAAA10=10,334UK 6PFZWAAAAA18207,936Netherlands 3Aviva Investors BBB457,295UK 13PKAAAAAAA635,608Denmark RankAsset Manager2017 RatingAUM US$mCountry 5SchrodersBBB487,127UK 11Fonds de Réserve pour les Retraites (FRR)AAAAA1639,527France 10HSBC Global Asset Management B413,413UK 7Natixis Global Asset Management BB871,066France 3New York State Common Retirement Fund (NYSCRF)AAAAAA5178,600US 14Etablissement de retraite additionnelle de la Fonction Publique (ERAFP)AAAA10=28,036France 8AXA Investment Managers BB752,103France
Instead, the working group suggested that the current pension fund be converted into a closed fund covering pensioners and members who belonged to the fund before January 2012. A separate, open fund should be created for those who joined the fund after January 2012. The new fund would be fully capitalised, without a guarantee from the state.When PKWAL switched from defined benefit to a defined contribution scheme in January 2012, a guarantee was granted by PKWAL, which a legal opinion has deemed made the state of Valais and its affiliated institutions responsible for plugging the pension fund’s financing gap.“In light of PKWAL’s difficult financial situation, the working group is convinced of the need for a far-reaching and sustained reform of occupational pensions for the insured,” the Wallis state council said in a statement.“The working group is seeking a new paradigm in order to draw a final line under the financing problems of PKWAL and to be able to look to the future.”The proposal to create two pension funds was intended as a strategic measure to solve PKWAL’s problems in the long-term, without prejudice to the interest rate paid on members’ accrued savings capital, the working group said.The cantonal government has commissioned the working group to analyse the financial, technical and organisational aspects of its proposal in-depth. A final report is expected for the end of the year, based on which the government will make its decisions.The government said it would leave an adequate amount of time between the announcement and entry into force of the measures it decides.PKWAL’s management board has decided not to take any measures to reduce the conversion rates, which are applied to members’ assets to calculate their pension, before 1 January 2019. A Swiss public pension fund could be split in two under a proposal to “draw a line” under its financing problems.The CHF4.1bn (€3.8bn) Pensionskasse des Staates Wallis (PKWAL), the fund for the Swiss canton of Valais, has a deficit of more than CHF1bn and is faced with gloomy cash flow and return prospects.The proposal to split the fund was developed by a working group that was launched by the cantonal government last year to come up with ideas for restoring the pension fund’s long-term financial equilibrium.The working group said the pension fund was in an extremely complex and risk-laden situation. Changes at the financing level would provide some reprieve, it said, but would fail to return it to financial health and secure its long-term future.