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UK pension fund invests in Scottish roads through listed project bonds

first_imgThe Telent pension fund has become the first UK scheme to enter an infrastructure debt platform using listed project bonds, as it looks to develop Scotland’s road system.Using the Allianz GI infrastructure debt platform, the pension fund is one of the investors in a £175m (€212m) investment into major Scottish roads.The German investment manager has committed to the purchase of listed project bonds, which will be issued by Scot Roads Partnership Finance.The bond purchase will finance the planned design and construction of roads, which will form part of the motorway improvement project for the centre of Scotland. A £175m debt funding will be combined with further funding from the European Investment Bank to finance the project.Allianz GI said the deal was the first UK listed project bond arrangement that also featured a deferred settlement mechanism, which should mitigate negative carry.It also said the investment by Stanhope Pension Trust, the trustee for the Telent pension scheme, was the first of its kind by an institutional investor.Adrian Jones, part of Allianz GI’s infrastructure debt team, said he expected more institutionals to invest in similar deals, now that such a milestone had been reached.“UK pension trustee Stanhope Pension Trust is one of an increasing number of third-party investors electing to invest via Allianz GI to gain access to this asset class,” he added.The news of the investment comes after a survey, conducted by analytics firm Preqin, found 84% of current infrastructure investors were looking to either maintain, or increase, their allocations to the asset class.The majority of the 430 investors polled by the firm said they anticipated making a minimum of three allocations to infrastructure funds this year, looking to invest around $100m.Fellow UK scheme Strathclyde, the largest local authority fund, also saw a ramp-up in its infrastructure investment, as it joined a consortium looking to purchase Glasgow Airport.The fund is also a seed investor in the National Association of Pension Funds and Pension Protection Fund’s infrastructure project, the Pensions Infrastructure Platform.last_img read more

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New IORP draft sees member states claw back powers from EIOPA

first_imgEU member states are clawing back powers from the European Insurance and Occupational Pensions Authority (EIOPA), according to a revised draft of the IORP Directive that would see responsibility for the proposed risk assessment framework resting with national regulators.The compromise text also sees an attempt to remove Poland’s private pensions pillar completely from the scope of the Directive, and potentially grants members the powers to veto a cross-border move.A prior draft drawn up by the Italian government, which currently holds the rotating presidency of the Council of the EU, offered further details on the proposed risk-evaluation for pensions (REP), an area that, under the new version, would be the responsibility of individual member states.According to the newly revised version of Article 29, individual member states’ regulators would be granted the powers to specify the format, structure and sequence of any REP. The initial IORP II draft published in March granted the European Commission the power to lay down detail of the REP in a delegated act, a clause amended in last month’s initial compromise text to say EIOPA would publish relevant regulations.The new wording amounts to member states stripping EIOPA of the ability to set technical standards for the sector, reclaiming powers previously delegated to the European supervisor.Attempts to shift drafting responsibility for the REP to national regulators will be welcomed by many in the industry.There were previously calls for the framework to be drafted fully before the revised Directive could be passed by the European Parliament, as delegated acts are not subject to parliamentary scrutiny.Changes to the REP also see “new and emerging risks” reinserted, phrasing removed in the prior draft that would require IORPs to take account of climate-change risks and, potentially, stranded assets, such as coal that can no longer be extracted.Other notable changes affect the procedures for a cross-border transfer of pension assets, potentially granting members the ability to veto any such move.Under a rewritten clause that previously only saw the transfer of assets subject to approval by the “representatives of the members and beneficiaries”, the move would now be subject to “prior approval by […] the members and beneficiaries concerned”.The new version of the Directive also sees an attempt to remove the Polish open pension funds (OFEs) and other Central and Eastern European (CEE) private pillars completely from its scope.According to the amendment, funds acting “as part of the mandatory social security schemes” should be excluded.Poland and other second-pillar funds in CEE states are funded by the state diverting part of the first-pillar contributions to the private institutions.last_img read more

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AEIP: Dutch pension funds could ask Brussels for first-pillar status [updated]

first_imgThe first-pillar rules chiefly aim to guarantee the mobility of workers by coordinating the existing national social security systems.In Briganti’s opinion, Dutch pension funds’ “capital-funded character” would not exclude them from being considered as first-pillar schemes, as Danish, Swedish and many Eastern European pension funds also have capital-funded first pillars.He also argued that the fact Dutch schemes provide pensions that are agreed by social partners was no reason to not classify them as first pillar at the European levels, for the aforementioned reason that those agreements, which are the basis of the pension schemes, are then extended by a government intervention.The AEIP director said first-pillar pensions, being a strict national competence, were not subject to European legislation such as the IORP or insurance Directives, nor to the supervision of EIOPA.However, he said the absence of European supervision of funded first-pillar schemes, in particular in Central and Eastern Europe, still represented a concern for the European authorities.Briganti raised the question that, if the Dutch pension funds were to move more than €1trn to the first pillar as well, this might raise the European supervisory authorities’ concerns even further.Furthermore, he warned that first-pillar pensions were a “state matter”.As such, the government would have much more influence in potentially setting rules on contribution and benefits.“It would put pressure on the role of the social partners,” he added, referring to Hungary and Poland, where the governments have even emptied capital-funded pension funds.Briganti pointed out that Dutch pension funds – and possibly their providers as well – if excluded from the scope of the IORP Directive, would no longer be allowed to operate in the European pensions market if Dutch schemes were classified as first pillar.“That would be a missed opportunity for the Netherlands with its a large and strongly developed pensions system,” he said.In the opinion of Hans van Meerten, pensions expert at law firm Clifford Chance, a transition to the first pillar would be undesirable.“It would mean the loss of the fundamental European right that workers and employers are the owners of the pension assets,” he said.“Moreover, the European Court has already established in the 1990s that Dutch pension funds are private institutions.” Dutch pension funds might in principle ask the European Commission to be treated as first-pillar schemes if they want to be exempt from new pensions legislation, according to Francesco Briganti, director of the European Association of Paritarian Institutions (AEIP). Responding to questions from the audience at the recent World Pension Summit, Briganti said the Commission would, in principle, accept such a request, and that such a permission should not pose issues for Brussels.  In fact, “the mandatory collective labour agreements (CAOs) and pensions for an entire sector have been decided by a government act”, he said.Briganti, who gave a presentation on the classification of pension pillars, pointed out that European rules for the first pillar were limited, and that funding requirements were absent.last_img read more

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Benelux investor tenders large-cap equity mandate using IPE Quest

first_imgAn undisclosed pension fund based in the Benelux region has tendered a €100m all/large-cap equity mandate using IPE Quest.According to QN-2125, the client is looking for a portfolio managed with a “truly long-term” investment horizon, where “conviction is expressed in a limited number of holdings analysed through fundamental research”.The investor expects “extremely low” turnover and a focus on absolute returns as a result.A sustainability research element is also favourable. Given the long-term nature of the mandate, a benchmark should be used for reference only; in that case, the MSCI Europe Index would be most suitable.The client prefers asset managers with a minimum track record of at least three years.Interested parties should state performance, net of fees, to the end of September.The deadline for applications is 3 November.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]last_img read more

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Lithuanian regulator to limit risk options in second-pillar pensions

first_imgThe Lithuanian regulator is preparing changes to second-pillar pension legislation that will limit people’s options to change risk profiles within their life-cycle choices.Currently, the 21 pension funds in the country’s second pillar can offer four pre-defined risk categories with 100%, 70%, 30% or 0% equity exposure.All participants have free choice, and people beyond the age of 55 are advised to choose the fund with the least risk.However, Darius Kuzmickas, general manager at Danske Capital in Lithuania, the country’s smallest pension fund, noted that “22% of second-pillar participants save in funds with risk that does not correspond with their age”. In times of higher market volatility, 5-7% of participants are changing their risk profile, he added in his presentation at Fleming’s CEE Pension Conference in Prague.“The regulator thinks people should not be allowed to switch risk profiles this easily and argues this is threatening the system,” Kuzmickas said.The regulator has now prepared a paper for legal changes that would introduce a “default investment strategy” based on a target-date life-cycle model, where separate funds for each retirement year must be set up where equity exposure is cut each year.This means the current multi-fund approach – by which each provider offers various funds with different risk profiles from which people can choose – would have to be overhauled.Kuzmickas fears the overhaul, apart from increasing costs, will shake people’s trust in the system.He pointed out that, in 2013, when people were first given a choice to make their own contributions to the funds, approximately half of participants did put their own money into the second pillar, which is otherwise financed from the state’s social security fund.“If the regulator’s plan is approved, it will mean the risk in people’s portfolios is adjusted automatically, and this will not help people to learn about their pension investments or make decisions,” Kuzmickas said.Although he acknowledged that introducing a default investment strategy to the life-cycle model could improve the second pillar, he thinks it could be done within the framework of the existing funds.According to his calculations, multi-fund and target-date approaches in a life-cycle model almost yield the same results for pensioners.“Further research and a transparent cost/benefit risk analysis are needed before any changes are made,” he said.last_img read more

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​Swedish roundup: AP6, AMF Pension, Kåpan Pensioner

first_imgThe Sixth Swedish National Pension Fund (AP6) has followed its investment in technology fund Northzone VII with a €25m commitment to its successor fund.Northzone VIII closed after reaching its target of €300m in an oversubscribed round of fundraising.Other participants include AP3, SEB Pension and Denmark’s Industriens Pension, all existing Northzone investors. As with its predecessors, Northzone VIII will focus on early-stage investments in Europe. Northzone now has around €1bn under management in its eight venture capital funds and was an early backer of Spotify, Trustpilot and iZettle.During the past year, it exited from Tobii, the Swedish developer of eye-tracking technology, via a successful initial public offering.It also sold its stake in Russian online classifieds company Avito to Naspers, the South African media group, in one of the largest venture-backed technology merger and acquisition deals in Europe.Investment in venture capital is part of AP6’s strategy of building a well-diversified portfolio over time.Karl Falk, head of fund investment at AP6, said: “By committing capital to Northzone VIII, AP6 maintains its exposure to the Nordic venture market by investing in funds.“AP6 has made a thorough assessment of Northzone, standard procedure ahead of every decision before committing capital to a fund. The findings have convinced us the team behind Northzone VIII has the ability to deliver value creation and a return that will meet the demands of AP6.”AP6’s portfolio was worth SEK26.4bn (€2.75bn) at end-2015, with buyouts making up around 87% and venture capital around 13%.Over 2015, AP6 made a 15.3% return on the venture capital segment – 18.5% from funds and 10.8% from direct investments.The overall return for the year was 12.2%.Meanwhile, Swedish pensions provider AMF Pension has reported a total return of 1.1% for the first half of 2016, reversing a 0.7% loss for the first quarter.This compares with a 4.1% return for January to June 2015 but demonstrates the value of AMF’s strategic risk diversification, according to Peder Hasslev, vice-president and CIO of the pension provider.“The past six months have been characterised by political and economic uncertainty, turmoil on the stock market and the continued fall in interest rates,” said Hasslev.“Our investments in infrastructure and real estate have delivered good returns, and interest rates and foreign equities also contributed positively to the result.”During the six-month period, AMF’s real estate and infrastructure investments grew to SEK68bn, or 12.8% of its SEK533bn portfolio, laying the foundation for stable returns in the current low-interest-rate environment, said the pension provider.The first-half results take AMF’s average annual returns for five and 10 years to 30 June 2016 to 7.4% and 6.7%, respectively.Its solvency level fell to 178%, from 199% on 31 March.AMF said this was largely caused by the strengthening of its guarantees last May.Lastly, Kåpan Pensioner, the Swedish pension fund for government employees, made an investment return of 2.1% for the first half of 2016, compared with 3.2% for the same period the previous year.Fixed income – 51% of the SEK74.8bn portfolio at the end of June – made a 3.4% return.However, real estate delivered the best return – 4.8% – while alternatives as a whole produced 3.1%.The asset class, including real estate, made up 15% of the portfolio at the end of June.By contrast with other asset classes, equities (34% of the portfolio) returned -1.1%.Kåpan Pensioner’s solvency during the first six months weakened slightly, with its solvency ratio falling to 146%.last_img read more

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Luxembourg government moves on second pillar pension reform

first_imgThe Luxembourg cabinet has endorsed a long-awaited pension reforms bill that aims to expand second pillar access to the self-employed.The draft law was approved during a cabinet meeting on Friday, but has yet to be officially published.A government advisor told IPE that the draft bill will shortly be passed by the parliament, which will publish the law in the course of this month, possibly next week. The main element of the proposal involves reforming the legal framework for occupational pensions to make these available for the self-employed and those in “liberal professions”, such as lawyers or notaries. According to a statement from the cabinet, insurance companies, pension fund managers or professional associations could set up such second pillar schemes. They would have the same fiscal treatment as company schemes.Chrystelle Veeckmans, president of the association of Luxembourg pension funds (ALFP) and partner at KPMG Luxembourg, said that the reform bill had been expected for years.She told IPE that the extension of the complementary pension to self-employed persons was a good thing, but not much more could be said as the ALFP has not been not consulted and the text is not yet available.The current Luxembourg government put reform of the second pillar pensions framework on its legislative agenda when it took power in 2013.In addition to expanding second pillar pensions access, the forthcoming bill also provides for the transposition of the EU Portability Directive, which sets out certain minimum standards for the protection of mobile workers’ pension rights.The statement from the Luxembourg cabinet noted that the directive aims to prevent constraints on the free movement of employees within the EU.The directive was adopted in April 2014 and has to be incorporated into Member States’ national law by 21 May 2018.The Luxembourg government has fixed a date of 1 January 2018 for its second pillar pensions reform law to enter into force.last_img read more

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Kempen launches structured credit fund

first_imgKempen Capital Management has introduced a structured credit pooled fund that enables investors to “easily and cost effectively” access the structured credit market.In a statement, it said that its Diversified Structured Credit Pool (DSCP) comprised long-only structured credit funds selected by Kempen and managed by “best-in-class specialists” Golden Tree, LibreMax, and One William Street – all US-based managers.The DSCP is to target senior secured credit, student loans, and residential and commercial mortgages, Kempen said. The emphasis would be on collateralised loan obligations (CLOs) with an investment grade rating of BBB or above, although the group said there would be a mix of investment grade and sub-investment grade bonds.According to Kempen, the DSCP has a net target return of between 4% and 6% in US dollars and unhedged. It indicated that the asset managers would receive a fixed fee of 0.6%, while Kempen would charge 0.35%.The asset manager added that the interest rate duration was expected to be two to three years, and that at least 80% of the fund would be allocated to the US with the remainder targeting Europe.Kempen has been investing in structured credit managers since 2009, as part of its flagship fund-of-hedge-funds Kempen Orange Investment Partnership.Remko van der Erf, Kempen’s co-head of hedge fund solutions, said that risk exposure and liquidity of the DSCP were between funds for investment grade credit and funds focusing on direct loans and infrastructure.“Whereas investors in direct loans are stuck to their investment for years, investors in the DSCP can divest on a quarterly basis,” he said.Van der Erf said that structured credit was one of the largest fixed income credit markets globally, but that it had been overlooked by many investors “because of its complexity, lower liquidity, and unfavourable capital charges for insurers and banks”.“While it is a more complex asset class, it provides higher spreads than similarly rated corporate bonds as well as protection against rising rates and exposure to the consumer market,” he said. “By working with the right partner who can assist navigating the market, investors can access a niche alternative to high yield.”The structured credit pool will be available to professional investors in the UK, the Netherlands, Belgium, Denmark, Germany, Finland, France, Italy, Luxembourg, Spain, and Sweden.last_img read more

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UK election: Rising interest rates could help cut DB liabilities

first_img“In general, rising gilt yields reduce long-term liabilities,” Nusseibeh told IPE. “The question is how much have schemes locked in against rate rises? If you have, then you could be in a bad place.”Commentators have speculated that the Conservative Party may have to make concessions on public spending in order to gain support from the UK parliament, in particular the DUP. Gregg McClymont, head of retirement savings at Aberdeen Asset Management and a former Labour Party pensions spokesman, suggested the unexpected gains made by Labour were part of an anti-austerity vote from some parts of the electorate.Bill Street, head of investment for EMEA at State Street Global Advisors, said: “As the market prices in campaign promises of fiscal stimulus and a softer-Brexit, we believe that gilt yields could be on course for a sustained upward move over the medium term.”David Page, senior economist at AXA Investment Managers, said gilts “could remain vulnerable to any shift in government policy if it loosens fiscal policy in response to this election”.Paul Flood, multi-asset portfolio manager at Newton Investment Management, pointed to inflation-linked investments such as renewable energy assets as also benefiting from the uncertainty.These would outperform government bonds, he argued, which were “likely to come under pressure as lower economic growth leads to higher government borrowing against a more inflationary pressures from a weaker currency”.Any shift downwards in liabilities for UK schemes will come as welcome news to trustees and sponsors.According to the Pension Protection Fund’s 7800 index of DB schemes, there was an aggregate shortfall of £246bn (€280bn) across all private sector schemes at the end of April.More recent data from the end of May has put this shortfall at £183bn (according to JLT Employee Benefits), or as much as £510bn (PwC). Uncertainty following the UK election could have a longer-term positive effect on UK pension scheme liabilities if it forces interest rates higher, according to the CEO of Hermes Investment Management.The Conservative Party, which lost 13 seats despite being expected to win comfortably, is planning a coalition with Northern Ireland’s Democratic Unionist Party (DUP).But Saker Nusseibeh, who leads the asset manager wholly owned by the BT Pension Scheme, said concessions on public spending could lead to higher inflation and higher interest rates – the latter of which will push down defined benefit (DB) scheme liabilities.The yield on 10-year government bonds fell below 1% around 5am UK time this morning as the election result became clear. It had risen to 1.03% by mid-afternoon. This is nearly double the record-low yield of 0.52% reached in August.last_img read more

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UK social impact investing ‘requires flexibility on LGPS pooling’

first_imgThis call indirectly challenged a stance recently expressed by a government official on the pooling of local government pension scheme (LGPS) assets, according to Dalwood. Last month Teresa Clay, head of local government pensions at the UK’s Department for Communities and Local Government, said that individual LGPS funds should look to move all assets, regardless of liquidity, into their chosen asset pool as soon as they could. Local infrastructure projects could suffer if comprehensive asset pooling is forced, suggests Gresham House CEO Doing so could undermine government efforts to increase social impact investing, Dalwood suggested.If all of a local authority pension schemes’ assets had to be put into a large pooled fund with no option for holding a portion of assets outside, projects such as local infrastructure and social housing would struggle even more to get funding, he said.The scale of larger funds meant managers could not justify investing in smaller ticket items under £100m (€112m), sometimes under £200m, Dalwood argued.“Even if a pooled fund did commit to investing in small scale projects, a local authority would have no assurance that the pooled funds, and therefore a percentage of their own pension pots, would invest in local projects to benefit their constituents,” added Dalwood.Gresham House is backed by the Royal County of Berkshire Pension Fund, which bought a 20% stake in the boutique manager to help it establish a UK-focused investment fund.Like a number of other LGPS funds, Berkshire has investments in illiquid assets. In Berkshire’s case these accounted for the vast majority of its assets – 66%, according to its latest annual report – as at September last year.The pension fund said it considered that liquid assets, such as equities and bonds, would achieve the most instant benefits from pooling.It would be uneconomical, Berkshire said, to “to pool existing investments in private funds (private debt, private equity and Infrastructure) or real estate funds largely due to the costs of transfer and the inequality created by sharing future returns.”However, when future investments in these types of funds were considered Berkshire would “take into account suitable investment opportunities made available by its pooling partners”.Berkshire yesterday confirmed it was joining the Local Pensions Partnership (LPP), and would pool its assets to those already managed by LPP. LPP would also manage Berkshire’s pension administration, liability management and employer risk services. A government desire for UK local authority pension funds to promptly move all assets into larger pools is at odds with a separate call for more social impact investment, according to the CEO of specialist asset manager Gresham House.Tony Dalwood said there was a strong case to be made for individual schemes having the opportunity to hold assets outside of their chosen asset pool while they push ahead on collaboration.A government-commissioned report published this week set out recommendations for “growing a culture of social impact investing”.Produced by an independent advisory body led by Elizabeth Corley, vice-chair of Allianz Global Investors, the report allocated roles to various actors in the private and public sectors. The government, according to the report, should increase its participation in co-investments in social impact models and work with the financial services industry to identify investment approaches that could be used to deploy capital to tackle entrenched social and economic problems.last_img read more

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