Month: September 2020

  • Austrian finance minister warns of pension fund ‘oligopoly’

    first_imgFurther consolidation in Austria’s second-pillar pension system could lead to an “oligopoly”, finance minister Hans Jörg Schelling has warned.Speaking at the 25th anniversary celebration of Austrian Pensionskassen, he argued that competition was vital in the second pillar and “must be allowed”.“There must be no further consolidation that might hinder competition,” he told IPE.Since the law that established Pensionskassen came into effect in July 1990, many company pension plans in Austria have been outsourced to multi-employer funds. A year ago, figures released by supervisory authority FMA showed that the three largest Austrian Pensionskassen accounted for 73% of the market.Overall, the number of company and multi-employer pension funds has now come down to 14, with the Victoria Volksbanken Pensionskasse currently still on the market.A decision on that sale is expected in the coming weeks.Schelling also called on the pensions industry to “offer more attractive products” but added that he was aware Pensionskassen were “restricted by a tight regulatory framework” set by the FMA and European regulators.Speaking with IPE, the minister said “people needed to have trust in the system” and might need “more flexibility” regarding products.Schelling called for a “combined product” as a hybrid between a Pensionskasse and an insurance-based “Betriebliche Kollektivversicherung”, offered in the second pillar by various Austrian insurers.He said he was convinced that only a combination of solutions would help increase participation in the second pillar and indirectly waived the industry’s demand for tax incentives such as the full introduction of the EET-model in Austria.“Currently, there is no room for tax incentives, but, over the next 25 years, the topic will certainly come up again,” he told IPE.last_img read more

  • Fiona Reynolds: Looking at ESG is practical not political

    first_imgDespite this momentum, my post-holiday glow quickly disappeared after reading the IPE article ‘Keep politics out of pensions’ by Daniel Ben-Ami. It seems to suggest the state of retirement incomes in the UK, particularly low balances, is due to the fact pension funds and asset managers spend too much time on ESG issues. At a more fundamental level, Ben-Ami posits that consideration of ESG issues, climate change and other external factors are in some way a drag on economic growth and hence the returns generated for beneficiaries.First, to suggest the state of UK retirement savings has anything to do with ESG considerations is clearly wrong.  For that, you need to look at policy, design and regulation. Over the last decade, we have seen a slow move away from defined benefit to defined contribution (DC) funds, and a move to provide pensions for all employees, not just the luckiest by dint of employment. We need to remember that auto-enrolment for workplace pensions only commenced in the UK in 2012 at a rate of 2%, and the system is still in transition, with an increase to 8% only coming about in 2018. There are no mandated rules for matching additional contributions, and there are no mandated portability rules. Anyone who knows anything about retirement incomes knows the average worker in a DC fund needs to make contributions of 12-15% of salary on average across his working life to be able to retire with a comfortable pension.In addition, in the UK, we see the problems of investment management fees for retirement products being too high, excessive intermediation, too many funds and too much complexity. However, a national pension system has to start somewhere, and, no doubt, some of these issues will be addressed as it matures. The establishment of NEST was a good starting point.The wider question, however, needs to be addressed. To suggest a young 25 year old joining a pension fund today doesn’t need her fund to address the long-term material risks arising from issues like climate change, environmental sustainability, resource depletion or supply-change risks is a failure to understand what will drive value creation to 2050 or 2060 when our young worker may be retiring. A quick glance at the corporate philosophy of Unilever may provide a glimpse of how a UK-listed global corporation with a diverse footprint is balancing the risks and opportunities posed by these externalities to help ensure its licence to operate, and that shareholder value remains strong in the decades to come.There are many studies – most notably from Arabesque Asset Management/Oxford University, Mercer, Harvard University and others – which present hard data to show that consideration of ESG factors actually leads to investment outperformance, which is why investors are taking keen notice. At the end of the day, these are investment issues – they are not political issues except to the extent politicians often fail to address long-term risks in markets simply because they are often focussed on short-term issues that will help their re-election.Pension funds, however, are here for the long term, investing on behalf of a multi-generational group of stakeholders trying to match liabilities over a rolling lifetime of member horizons. Many pension funds in the UK are leading the way when it comes to responsible investment – to help, not hinder, their returns.Finally, anyone who doubts the benefits of looking at ESG considerations needs look no further than Volkswagen, a once-respected company that has lost market share, reputation and shareholder value, a stark example that all investors should heed.Fiona Reynolds is managing director at Principles for Responsible Investment Fiona Reynolds, managing director at Principles for Responsible Investment, responds to recent ‘Keep politics out of pensions’ article by Daniel Ben-AmiReturning to London from a few weeks’ holiday on the beach in Australia, I was reflecting on the state of responsible investment globally and feeling that, although there is work to do, there have been some changes in perception and a renewed recognition of the value of taking a long-term view on value creation, sustainability and risk management.In December, at COP21 in Paris, we witnessed the first concrete global agreement on climate change, with more than 180 country-based climate plans submitted to the UNFCCC. What set these climate talks apart was the significant role investors played throughout the summit and the importance of institutional capital as an integral component to countries implementing the investment inherent in their emissions plans. And it is not just in the climate sector where change has been occurring. In the US, where the acceptance and implementation of responsible investment has traditionally lagged behind Europe, the Department of Labour last October came out with some clarifying statements that ESG considerations in investment decision making is consistent with fiduciary duty. This decision dovetails with a growing body of research, which demonstrates that a sustainability-focused investment agenda can lead to market outperformance.last_img read more

  • Asset management roundup: Eaton Vance, Willis Towers Watson

    first_imgLeveraged credit specialist Eaton Vance has launched a multi-asset credit fund that will invest in global sub-investment-grade credit.The fund is an Irish-domiciled qualifying investor alternative investment fund that complies with the Alternative Investment Fund Managers Directive.It will target higher-yielding credit assets, including global high-yield bonds and floating-rate loans, while up to 40% of its assets may be allocated to “opportunistic and risk-reducing fixed income asset classes”, according to the $318.7bn (€281.2bn) asset manager.The fund is available to investors in the UK and Ireland, and is due to be registered in other jurisdictions, too. In other news, Willis Towers Watson (WTW) has launched an equity fund for institutional investors that follows five other pooled funds, including a diversified multi-asset fund.The fund comprises the top 10-15 stock picks from eight top-rated investment managers, with risk managed at the portfolio level.The other four pooled funds followed by the fund are two liquid alternative funds and an alternative credit fund.Together, the six pooled funds have assets under management of around $5bn (€4.4bn).David Shapiro, portfolio manager of WTW’s Global Equity Focus Fund, said the consultancy “would assert that this high active share fund, offered at such a competitive price, is a world first”.last_img read more

  • Brussels puts Poland on watch over sweeping pension reforms

    first_imgThe spokesman further told IPE: “The Commission is following the intention announced by the Polish government to reform the funded pension system and will analyse in detail its possible impact on the sustainability and adequacy of pensions in the next European Semester.”The European Commission has long placed an emphasis on the “adequate, safe and sustainable” nature of member states’ pension systems; the phrase featured repeatedly in its White Paper on Pensions published in 2012.Poland’s reform is but the latest in a number of changes to the second-pillar system, coming after the previous government introduced a ‘slider’ rule, whereby OFE assets were gradually transferred to the Social Security Fund (ZUS) 10 years ahead of retirement.The government also in 2014 legislated the transfer of all OFEs’ domestic sovereign debt holdings, equivalent to 51% of OFE assets, to ZUS and then cancelled the debt to lower Poland’s debt-to-GDP ratio. The DG EMPL statement echoes one issued in the wake of the Hungarian government’s decision in 2010 to close its second-pillar pension system and transfer assets to the national treasury.At the time, a spokeswoman for then-economic affairs commissioner Olli Rehn said the Commission was “concerned” by the move and questioned how it would impact the sustainability of the pension system.Unlike Hungary’s reform, which amounted to wholesale nationalisation of the pensions savings, three-quarters of Poland’s OFE assets are to be transferred to individual retirement accounts (IKE), albeit to be split equally between savers without regard for their previous account balance.The PLN103bn (€25bn) transfer to IKEs will consist of the second-pillar’s domestic equity holdings, while the remaining PLN35bn to be moved to FUS will include assets other than equities, thus avoiding any charges of nationalisation.The final element of Poland’s proposed reform will see the launch of a new occupational savings system, Workers’ Capital Plans (PPKs), towards which employers and employees would each contribute 2%. The European Commission has put Poland on watch over its sweeping pension reforms, which will see part of the assets currently within its funded pillar transferred to the state’s Demographic Reserve Fund (FUS).Reacting to development minister and deputy premier Mateusz Morawiecki’s pledge to close all existing open pension funds (OFEs) and transfer assets within the individual accounts to ZUS and the country’s third-pillar pension system, a spokesman for the Commission’s Directorate-General for Employment and Social Affairs (DG EMPL) noted the organisation of a country’s pension system was a matter for each member state.However, the spokesman went on to stress previous advice to Poland to ensure the “sustainability and adequacy” of its pension system.The recommendations were contained within the 2016 country report conducted as part of the European Semester, an annual audit of the fiscal impact of member state policy.last_img read more

  • Amundi set to win contest for Pioneer Investments

    first_imgEurope’s largest asset manager, Amundi, appeared poised to sign a deal with Italy’s biggest bank, UniCredit, to buy its asset management subsidiary Pioneer Investments, according to a joint statement from the two businesses today.UniCredit, which reported total group assets of €874.5bn at the end of September, and Amundi said in a statement: “UniCredit and Amundi today announced that they have entered into exclusive negotiations in relation to the possible sale of the Pioneer Investments business to Amundi.”Last month, UniCredit confirmed it had offers on the table from different parties wanting to buy Pioneer Investments and that it was in negotiations with potential buyers.Italy’s postal service Poste Italiane was one of the parties bidding for Pioneer, having formed a group with Italian bank Cassa Depositi e Prestiti (CDP) and Italian independent asset manager ANIMA to do so. Offers for Pioneer have been reported in the media at around €3.6bn.UniCredit is holding a “capital markets day” in London on 13 December, at which it has said it will unveil the outcome of the strategic review it is now undertaking.The group-wide review is focusing on how to reinforce and make the best of UniCredit’s capital position, the bank has said, as well as improving profitability and making sure its operations are continuously transformed while at the same time keeping the flexibility necessary to “seize value-creating opportunities.”UniCredit, like many other Italian banks, is attempting to strengthen its capital base.Despite the announcement suggesting a deal may be close, UniCredit’s share price fell by more than 4% in Monday’s trading, in line with those of other Italian banks, after Italy’s prime minister Matteo Renzi’s reform plans were rejected in a referendum.Amundi has its headquarters in Paris and manages more than €1trn of assets.last_img read more

  • LPP pools £1.3bn credit assets for London and Lancashire schemes

    first_imgThe launch of the credit fund – officially called LPPI Credit Investments LP – follows similar launches by LPP of private equity, infrastructure and global listed equity vehicles, all within the last 12 months.LPP said it planned to launch fixed income and total return funds in the near future.The partnership has £12.8bn of assets under management from its two founder pension funds. A third local authority fund, the £2bn Royal County of Berkshire Pension Fund, has provisionally agreed to join LPP but has yet to invest significantly in the pooled funds launched so far.In a draft version of Berkshire’s annual report for 2016-17, the fund said it would be “uneconomic” to pool asset classes such as private equity and infrastructure due to transfer costs and “the inequality created by sharing future returns”. It said it would consider future investment opportunities as they become available.“[The pension fund has judged that initially liquid assets will achieve the most instant benefits from pooling,” Berkshire said. However, its only liquid assets were developed market, emerging market and frontier market equities, as of the end of March 2017. The Local Pensions Partnership (LPP) has launched a £1.3bn (€1.5bn) credit fund, the fourth such asset-pooling vehicle it has set up in the past 12 months.LPP – the collaboration between the London Pensions Fund Authority and Lancashire County Pension Fund – announced the launch this morning. The fund will pool the credit assets of the two founding pension schemes.The credit fund is a limited partnership structure and will be managed by LPP Investments, LPP’s in-house asset manager. In a statement, LPP said the fund would have a “long-term, buy-and-hold investment approach with a focus on reduced volatility and capital preservation”.Susan Martin, LPP’s chief executive, said the fund was “another example of how collaboration can benefit our shareholder funds by delivering not only sustainable long-term investment outcomes, but also cost savings through manager consolidation and an enhanced internal investment capability”.last_img read more

  • US Business Roundtable: A victory for the good guys?

    first_imgCapitalism needs rejuvenating if we want to be able to tackle the problems of the world today. That means re-examining what may have been seen as fundamental beliefs.Yesterday’s statement of corporate purpose issued by the US Business Roundtable – a grouping of the CEOs of a large proportion of the leading companies in the US – may prove to be a key stepping-stone. The new Statement on the Purpose of a Corporation explicitly states: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”The CEOs recognise a duty to shareholders by committing to “generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate”. But they end the statement with the words: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”Stakeholders vs shareholders Source: The Aspen InstituteJP Morgan Chase CEO Jamie Dimon speaks at an Aspen Institute event in 2018The Business Roundtable is made up of 188 CEOs from some of the biggest companies in the US. Its board of directors includes JP Morgan Chase’s Jamie Dimon, General Motors’ Mary Barra, IBM’s Virginia Rometty, Walmart’s Doug McMillon and S&P Global’s Douglas Peterson.Founded in 1972, the organisation played a key role in the development of free trade agreements between the US, Canada and Mexico.In a press release announcing the new Statement on the Purpose of a Corporation, Dimon said: “The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernised principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”center_img Nobel prize-winning economist Milton FriedmanNobel Laureate Milton Friedman promoted the idea of the supremacy of shareholder value maximisation over all other objectives. In a 1970 article in the New York Times, he argued that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”. Academics and business leaders have been promoting Friedman’s view as a cornerstone of capitalism for decades.The Business Roundtable went so far as to formally proclaim this philosophy this in a statement of corporate purpose in 1997, stating: “The paramount duty of management and of boards of directors is to the corporation’s stockholders. The interests of other stakeholders are relevant as a derivative of the duty to stockholders.” For proponents of ESG investing, this stance is an anathema. Friedman argued that companies should not “make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment”.The support of the Business Roundtable for Friedman’s philosophy has been a critical element of the argument that shareholder value maximisation should override obligations to other “stakeholders” – which, of course, means everyone else impacted directly or indirectly by a company’s activities. There are three strands to the debate around stakeholders’ and shareholders’ interests, and advocates of ESG need to follow all three.(1) Legal frameworksAs economists such as Friedman and Harry Markowitz would argue, the objective of maximising shareholder value is subject to the constraint that it has to be within the law. As companies have to act within the law, it is up to politicians to set the framework and rules by which companies can operate. As such, lobbying for policy changes that fall under ESG plays a key role.(2) SentimentThis is arguably the primary driver for incorporating ESG criteria: individuals – and, increasingly, the institutions they work for – believe it is the right thing to do. Or, more cynically, they believe that unless they join the bandwagon of “virtue signalling” their ESG credentials, they will lose out. While cynicism plays a part, the end results can still be positive.(3) Academic evidenceEconomics is not a science with immutable laws. It is the study of human behaviour, particularly the behaviour of crowds. Human behaviour is not governed by pure self-interest, but also includes ideas such as altruism, and posterity – concerns over timescales way beyond any individual lifetime.Friedman’s philosophy has led to a damaging road for economic theory. It needs to go back to basics. As Adam Smith argued: “Markets are sustained not merely by incentives of gain or loss, but by laws, institutions, norms and identities, and without those things they cannot be adequately understood.” If the new stance of the US Business Council – supporting the interests of all stakeholders – means anything at all, beyond representing a change of sentiment, it should be reflected eventually in the legal framework governing corporate activities and academic theory. Economists take note!The Business Roundtablelast_img read more

  • PRI hits 500th asset owner signatory ‘milestone’ with Colombian fund

    first_imgAccording to Saa’s update investment manager signatories now represent more than 70% of the signatory base, although he said the organisation remained asset-owner led.By assets under management, the largest PRI asset owner signatories are based in Japan, France, Germany and Austria. By number of signatories, the largest asset owner  bases are the Nordics, the US and the UK/Ireland.The PRI’s largest asset owners are based in the Nordics, the US, and the UK and Ireland.This year is the first year that asset owner and investment manager signatories could be delisted under a new accountability model that the PRI has introduced.The PRI has more than 2,700 signatories in total, including service providers. Protección SA, a corporate pension fund based in Colombia, recently became the 500th asset owner signatory to the Principles for Responsible Investment (PRI).According to the PRI’s website, at least six asset owners have become paid-up signatories since then: Canada Post Corporation Pension Plan, Hampshire Pension Fund, Öffentliche Sachversicherung Braunschweig, Öffentliche Lebensversicherung Braunschweig, Royal London, and Université Laval.In a blog post on the PRI’s website, Lorenzo Saa, chief signatory relations officer at the organisation, said hitting the 500 mark was “a hugely significant milestone” that came on the back of an annual growth rate of well over 20%.“Asset owners sit at the top of the investment chain, so there is now a powerful collective force committing to further mainstream responsible investment and lead PRI signatories’ $90trn (€82trn) in assets under management towards more sustainable returns,” he said.last_img read more

  • UN pension fund launches digital identity pilot project

    first_imgIt added that the proof of concept aimed to “overcome the limitations of the existing manual process and prevent new risks from happening, which could hamper the flow of entitlements”. The United Nations Joint Staff Pension Fund (UNJSPF) is gearing up to test the use of biometrics and other modern technologies to certify pensioners’ benefit entitlement after more than 70 years of a manual, paper-based process.The move to launch a pilot project follows a successful “proof of concept” prototype that used biometrics, blockchain, geo-location, and mobile apps, according to a statement from the $60.8bn (€54.9bn) defined benefit pension fund.The prototype was created and tested in collaboration with the International Computing Centre, an information technology and communications provider within the UN system.According to the UNJSPF, the proof-of-concept experience “confirmed the value of digital identity and blockchain technologies to automate the certificate of entitlement process with secure mechanisms that create traceable, immutable, and independently auditable evidence”. Source: UN Photo/Evan SchneiderEvery year the pension fund has to verify more than 70,000 beneficiaries located in more than 190 countries, confirming they are still alive.For the last 70 years, this confirmation has required every beneficiary to return a signed paper-based form – a certificate of entitlement – which is currently sent by regular post.The pension fund also has to confirm beneficiaries’ residence if they are paid under a “local track” system, which converts the value of US residency-based benefits to a local currency and local cost of living.According to the UNJSPF, the biometrics were used for personal identification and confirming a beneficiary was still alive, while geo-location was used to confirm a beneficiary’s residence.Following the success of the proof-of-concept prototype, the pension fund is taking steps to start a pilot project with a view, if successful, to implement the solution for all new retirees.New pensioners of select UN entities or member organisations will be given the opportunity, on a voluntary basis, to use and test the new approach.In 2018, the UNJSPF had nearly 130,00 active participants and more than 78,000 beneficiaries, who were paid $2.67bn in benefits.last_img read more

  • It’s not the usual hamptons-style home you’d find on the Gold Coast – it has a modern twist

    first_img55 T E Peters Drive, Broadbeach Waters. 55 T E Peters Drive, Broadbeach Waters. 55 T E Peters Drive, Broadbeach Waters. 55 T E Peters Drive, Broadbeach Waters.WHEN Niki and Luis Aguado bought their property at Broadbeach Waters in January 2016, it was either to knock it down or put it through a massive renovation. They decided on the knock down with the only part of the original property they retained the swimming pool — which also got a renovation. The couple then set about creating a five-bedroom home with Hamptons’ influences.“It is a bit of a modern Hamptons, it is not a real traditional Hamptons, we took a lot of aspects from Hamptons and just modernised it a bit,’’ Mrs Aguado said. Mrs Aguado said the block was so good they weren’t constrained in what they wanted to build on the site. 55 T E Peters Drive, Broadbeach Waters.center_img 55 T E Peters Drive, Broadbeach Waters.There is also a window splashback in the kitchen.This area flows through to an open plan living and dining room, which then leads through to an outdoor dining area.This covered space has a fully-equipped outdoor kitchen, which overlooks the renovated 8m by 3.5m infinity pool and sunken spa.Beyond that is a pontoon and a boat ramp, and a 17m sandy beach-frontage, flanked by tropical palms. Back inside the house, the other upstairs bedrooms have ensuites while downstairs, the fourth and fifth bedrooms share a bathroom. There is keyless entry to the home, ducted airconditioning and security cameras as well as remote security gates. 55 T E Peters Drive, Broadbeach Waters.Her favourite part of the home is the main living area which leads out to a large alfresco area.More from news02:37International architect Desmond Brooks selling luxury beach villa15 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“(This) goes down to a grassed area as well, so it is just good for hanging out during the day and also a good entertaining area,’’ she said. Mrs Aguado said the home also had three lounge areas.“The main lounge and living room, media or formal lounge and then upstairs parents’ or children’s retreat lounge.“I think it is a perfect family home, we have built it so that you can have the family upstairs and guest rooms downstairs.’’In the main bedroom is a walk-in wardrobe and ensuite with a dual shower, rain shower and freestanding bathtub.The house sits on a 719sq m block and has Gold Coast skyline views.Inside the main foyer of the five-bedroom, 4.5 bathroom home are 5.5 metre high ceilings.There are multiple living areas throughout the home while the spacious kitchen has waterfall edge stone benches, dual ovens, integrated appliances and a large butler’s pantry. 55 T E Peters Drive, Broadbeach Waters.last_img read more