Fondenergia, the Italian pension fund for the energy sector, has re-appointed Société Générale Securities Services (SGSS) for depository banking services.The French bank’s securities services arm will provide the fund with asset protection and performance and reporting.The €1.2bn and 40,000-member scheme is continuing its relationship with SGSS and will use the bank’s depository services for fund motoring and help with ensuring trustees meet compliance requirements.Meanwhile, SEI has given a £166m (€200m) UK equity mandate to Four Capital Partners. The mandate will transfer with fund manager Philip Hardy, who ran the equity portfolio at Polar Capital Holdings, before moving to Four Capital.SEI, as part of its strategic portfolios, invested with Hardy in 2011 for his UK equity performance.Four Capital now joins Jupiter, Invesco, Lindsell Train and Los Angeles Capital Management within the UK equity allocation.Lufthansa German Airlines Group has extended its relationship with State Street Corporation for an additional five years.The firm currently provides the German corporate pension scheme with custody, fund accounting, risk analysis and securities lending services.Added to this is collateral management, FX execution and transition management.State Street’s UK operation was recently fined £23m (€27.9m) by the Financial Conduct Authority for deliberately overcharging six institutions for transition management services in 2011.Lastly, the Nuffield Health Pension and Life Assurance Scheme, along with the Headlam Group Pension Plan, are two of four schemes to sign up to P-Solve’s delegated service for defined contribution (DC) schemes.With assets reaching £70m, the delegated investment service for DC schemes is an extension to its defined benefit (DB) fiduciary management business.Headlam began using P-Solve in 2011 for DB fiduciary management, before extending the contract to cover DC.
Sharon Bowles, former chairman of the European Parliament’s influential Economic and Monetary Affairs Committee (ECON) has joined London Stock Exchange Group (LSEG) as a non-executive director.The former UK Liberal Democrat MEP, who stepped down this year after two terms, was appointed chair of ECON in 2009, having been a member of it since 2005.Chris Gibson-Smith, chairman of LSEG, said he warmly welcomed the former politician.“Sharon brings extensive knowledge of European political and regulatory trends impacting our business. Her experience and insight will be of great value to the Group, as we operate in an increasingly complex and evolving regulatory environment,” he said. Bowles is a patent attorney and prior to entering the European Parliament spent over 20 years as partner at Bowles Horton.In her time on ECON, she scrutinised the appointments of Gabriel Bernardino as chairman of the European Insurance and Occupational Pensions Authority (EIOPA) and was instrumental in pushing for conditions being attached to the funding for the International Financial Reporting Standards council.
The Royal Mail Pension Plan (RMPP) has hired River and Mercantile (R&M) to manage a £700m (€966m) ‘structured equity’ and options mandate to implement a “more efficient and risk-focused” strategy.The pension scheme for the UK’s postal provider had £3.8bn in assets as of the end of March 2014, with a significant focus on liability-driven investment (LDI).R&M becomes the pension fund’s second-largest manager behind BlackRock, which managed £2.2bn in LDI solutions.R&M’s structured equity solution uses a selection of options and fixed income products to create synthetic exposure to equity markets, with volatility management in place for downside protection. The pension scheme had more than 9% of its assets in global unconstrained and emerging equities and close to 12% in corporate bonds, but the majority of its allocation (53.8%) is in index-linked bonds, as per its LDI mandate.The pension scheme has a history of strong derivatives usage in both its return-seeking and liability-matching strategies.In 2013, the scheme had 24.5% of its assets in swaps for economic exposure but later extended this to 56.7% in swaps and total returns swaps and 21.8% in repos.The bespoke strategy for RMPP, R&M said, was designed in conjunction with the pension scheme and based on time-frame and return objectives set by the scheme rather than manager discretion.R&M described the fee structure as being at the “passive end of the scale”.Ian McKnight, CIO at RMPP, said the strategy was part of the scheme’s “risk-mitigation investment strategy”.“We are constantly seeking new ways to drive and manage returns on behalf of our members in the most efficient and risk-focused manner possible,” he said.James Barham, global head of distribution at R&M, highlighted the significance of the appointment, which adds to its nearly £10bn in derivatives assets under management in both structured equity and LDI.The pension scheme returned 3.4% over the year to March 2014, with a 6.3% from the return-seeking assets portfolio.RMPP transferred a significant amount of its liabilities to the UK government prior to the privatisation and listing of its sponsor, Royal Mail.The scheme was left fully funded after a £2.7bn IAS 19 deficit was wiped out, with the government assuming responsibility and recently announced a £1.2bn increase to this surplus.The government also assumed a large section of its assets – most notably real estate, most of which was later sold to the Santander UK Group Pension Plan.R&M was formed after the merger of equity house River & Mercantile Asset Management and derivatives manager and investment consultancy P-Solve in 2014.
BlueBay Asset Management – Christophe Vulliez is joining BlueBay Asset Management in its direct lending team as head of France, while Vincent Vitores has been appointed as head of Spain, also for direct lending. Vulliez comes from Ardian Private Debt, where he was managing director in Paris, having worked at AXA Investment Managers as a structured finance portfolio manager before that. Vitores joins from GE Capital, where he was most recently executive director in debt and equity special situations. Before that, he worked at Monitor Company, BNP Paribas and 3i. Davy Asset Management – Doug Gordon has been hired as head of European distribution, coming to the Davy Group asset management arm from Threadneedle Investments, where he spent nine years as sales director. Before that, he was investment sales manager at Morley Fund Management (now Aviva Investors) for five years. He will be based in Dublin in his new job. City Noble – Steve Dainty has been appointed by City Noble as an associate to advise Local Government Pension Schemes (LGPS) on strategy and on governance issues and active investment strategies in particular. Dainty is a CIPFA accountant and has been group accountant for several local government departments including Central Services, Capital and Exchequer, and Highways. In 2010, he was head of pensions for Local Government Shared Services.Towers Watson – Stuart Reid is joining Towers Watson as business development and sales lead for the company’s defined contribution master trust LifeSight. He joins from Aon, where he has been a director in its benefits consultancy business since 2013. Before that, he worked in business development at Standard Life, Bluefin and Capita. Jupiter Fund Management – Stephen Pearson is being promoted within Jupiter to CIO. He joined the asset manager in 2001 as a European equities fund manager and was appointed deputy CIO in July 2012. He was then promoted to head of investments a year later. Pearson replaces John Chatfeild-Roberts, who has chosen to concentrate on the Jupiter Merlin multi-manager portfolios. Chatfeild-Roberts will remain a director of Jupiter Fund Management, with Pearson taking on his position as CIO on Jupiter’s executive committee. Financial Reporting Council – David Cannon, Helen Jones and Sean Collins have been appointed to the conduct committee of the Financial Reporting Council (FRC), effective 1 September. Cannon will also join the council’s monitoring committee. The FRC said Cannon and Collins each had 40 years of experience working in professional services, and Jones had considerable knowledge of assurance and risk management. SYZ Asset Management – Hartwig Kos has been hired by Swiss banking group SYZ as co-head of multi-asset and vice-CIO of SYZ Asset Management. He will be based in London and lead manager of the OYSTER Multi-Asset Diversified fund. Legal & General Investment Management – Chad Rakvin has been appointed to succeed Ali Toutounchi as global head of index funds. LGIM is also hiring Eve Finn to the new role of head of portfolio solutions. Rakvin has been head of US index funds at LGIM America (LGIMA) in Chicago since 2013, and in his new UK-based role he will lead LGIM’s London, Chicago and Hong Kong index teams. Toutounchi is retiring, as planned, but will keep links with LGIM after his retirement, working in a strategic and advisory capacity. Finn has worked at LGIM since 2009, where she is currently head of portfolio construction, LDI funds. Before joining LGIM, she worked in the Global Pensions Strategy Group at Deutsche Bank. The Investment Association – Seven new board members have been appointed: Maxime Carmignac of Carmignac Gestion; Michael Cohen of Capital International; Paul Feeney of Old Mutual Wealth; Alex Hoctor-Duncan of BlackRock Investment Management (UK); Kim McFarland of Investec Asset Management; Joanna Munro of HSBC Global Asset Management and Mike O’Shea of Premier Asset Management. Four existing members have been re-appointed: Andrew Formica of Henderson Group; Peter Harrison of Schroders; Andrew Laing of Aberdeen Asset Management and Mark Zinkula of Legal & General Investment Management. Five directors are retiring from the association’s board: Peter Chambers, James Charrington, Robert Higginbotham, Keith Skeoch and Robert Talbut. Since the last AGM, two directors – Will Nott and Tom Rampulla – have retired. comPlan – Urs Schaffner is to become the new head of comPlan, the Swiss pension fund that covers staff and pensioners of telecommunications company Swisscom. He was previously head of the pension fund of engineering company Sulzer. He will replace the current manager of comPlan, André-Pierre Schmidt. Schaffner has been elected by the pension fund board and will take up the role on 1 October. Robeco, Orix Corporation, Hermes Investment Management, Duemme SGR, Invesco Asset Management, Schroders France, BlueBay Asset Management, Ardian Private Debt, GE Capital, Davy Asset Management, Threadneedle Investments, City Noble, Towers Watson, Aon, Jupiter, FRC, SYZ Asset Management, LGIM, Investment Association, comPlanRobeco – Roderick Munsters, chief executive at Robeco, has announced his departure after six years at the helm and two years since Japan’s Orix Corporation acquired the €273bn Dutch asset manager from Rabobank. According to Dutch financial news daily Het Financieele Dagblad (FD), Orix believes Munsters lacks the international experience needed to realise the company’s expansion plans.Hermes Investment Management – Angelo Natale has been hired by Hermes Investment Management and will take on the newly created role of director of business development for Italy. He will be based in London and report to Paul Voûte, head of European business development. Natale joins from Duemme SGR, the asset management arm of Gruppo Banca Esperia, where he was senior director of business development. Before that, he was group investor relations officer at Kairos Investment Management. Invesco Asset Management – Mustapha Bouheraoua has been appointed as head of institutional sales for France, reporting to Colin Fitzgerald, head of institutional business EMEA. Bouheraoua will be based in Paris. He joins from Schroders France, where he was head of institutional business for France and North Africa. He worked at several other institutional asset management companies before that, including Allianz Global Investors.
Industriens Pension, the Danish labour-market fund for the industrial sector, plans to treble direct investment in property and infrastructure over the next 2-3 years, pumping an extra DKK7bn (€938m) into these asset classes.The pension fund, which has DKK134bn in investment assets overall and around 400,000 members, said it now had almost DKK29bn, or 21% of assets, in alternatives.Jan Østergaard, investment director at Industriens, said: “We expect to treble direct investments in property and infrastructure in the next few years.”He said the time frame for this increase was 2-3 years. At the moment, direct investments in property total around DKK2bn, and direct infrastructure investments come to about DKK1.5bn.“At a time when interest rates are on the floor, and there is uncertainty on the financial markets, these types of investments provide stability, which is absolutely critical when you are dealing with pension savings,” Østergaard said.“In the course of the next few years, we expect to increase Danish property investment to around DKK5bn.”Industriens said its alternative investments included real estate, private equity, infrastructure funds, wind turbines and investments via public/private partnerships (PPPs), along with other assets.Østergaard said there were some attractive investment opportunities within alternatives, and that, because of this, the pension fund had been building up its skills within the investment department in this sector.“It has become an important supplement to traditional equities and bonds and is key to our ability to generate some solid returns for our members,” he said.The current record-low level of interest rates has been a major factor in putting alternatives firmly on the agenda for pension funds, Industriens said.Because interest rates have been low for so long, it added, it has become necessary to invest in other assets that have some of the same characteristics bonds traditionally had – low levels of risk and a stable return.Østergaard said the pension fund saw investment in projects that benefit Danes directly positively, such as PPP projects to build hospitals.The fund cited its investment alongside other institutional investors in hospitals in Næstved and Slagelse.At the end of August, four Danish pension funds invested DKK520m in a hospital building project in Slagelse in west Zealand.Back in 2013, Industriens provided DKK110m of financing via a PPP to build a new radiotherapy wing at Næstved Hospital.“But of course,” Østergaard said, “that has to be combined with our earning a proper return, and being involved with good partners, as was the case with Region Sjælland (the municipality of Zealand), where the two hospitals are located.”
Karner said his goal was that the pension foundation be able to work with the sharpest asset managers without sacrificing cost effectiveness.Apoteket AB:s Pensionstiftelse manages around SEK10bn (€1bn) in assets.Karner has been CIO of the Nobel Foundation – the private institution that manages the finances and administration of the Nobel Prizes – since 2012.Before that, he was CIO of the asset management division at Sweden’s Länsförsäkringar.Earlier on in his career, he worked at Alecta – back when it was called SPP – and at Handelsbanken Markets before that.Viveka Ekberg, chairman of the Apoteket pension foundation’s supervisory board, said the board was very pleased they were able to appoint Karner.“His broad background in quantitative analysis and risk management and his long experience in managing institutional portfolios will be very useful for Apoteket’s pension foundation,” she said. Gustav Karner, CIO at Sweden’s Nobel Foundation, is changing job, having been appointed chief executive of the pension foundation belonging to Swedish state-owned pharmaceuticals retailer Apoteket.Apoteket, which reports to the Ministry of Finance, had a monopoly on the sale of drugs to the public until 2009.Karner said: “It will be very exciting and fun to develop the successful investment management of Apoteket’s pension foundation (Apoteket AB:s Pensionstiftelse).“I envisage modern asset management with a robust portfolio, which will be able to deal with the volatile markets of the future.”
Commonly used carbon metrics may not help institutional investors reduce global carbon emissions, a UK ESG investment manager has argued.Metrics such as carbon emissions and carbon intensity, when applied to sectors such as utilities, might reduce the capital available for the development of cleaner energy, Ecofin said.In a research paper produced in association with Carbon Analytics, Ecofin’s head of research Deirdre Cooper said that a focus on these carbon metrics “intrinsically incorporates significant sector bias and could lead unwittingly to underinvestment in the highly carbon-intensive power generation sector at a time when increased investment in clean generation and electrification of transportation is most necessary”.This is “completely at odds with the underlying decarbonisation philosophy,” she continued. Carbon emissions and carbon intensity are valuable indicators of a portfolio’s attributes, but produce “simplistic” decarbonisation strategies, Cooper argued.Speaking to IPE, she said that pension fund trustees wanting to decarbonise their portfolios needed to know what their goals are – be it achieving an impact or seeking protection from ‘stranded asset’ risk – and make sure that the decarbonisation methodology they were considering meets those aims.“If it isn’t you probably shouldn’t be doing it,” she said. “The key point is ‘please don’t take the easy option’.”She acknowledged there was an appreciation in the investment industry that existing decarbonisation tools were not perfect, but said that despite efforts to develop better methodologies many products were still based on these imperfect tools.In the research paper, Ecofin said it was “a concern” that applying typical carbon footprint metrics to a portfolio “would imply significant divestment from utilities”, as this would not contribute towards emission reductions even though the portfolio’s carbon intensity would be lower.Instead, when looking at the power generation sector, investors should compare the generation mix and carbon emissions per unit of electricity produced by each investee company to that of the grid in which they sit, argued the investment manager.Applying this methodology would allow investors to divert capital to cleaner power generators and can drive engagement with companies “to maximise the impact on decarbonisation”, according to Ecofin.
According to the FD, funding of the pension funds had remained almost stable at 102% on average, as liabilities had risen approximately 9%.As a consequence, many pension funds are still in danger of having to apply benefit cuts in 2020 or 2021.Earlier this year, supervisor De Nederlandsche Bank (DNB) warned that returns on investment had failed to boost schemes’ funding.Almost all pension funds have based their recovery plans on expected returns – rather than on a rights discount or a contribution rise – to improve their coverage to the required financial buffers of approximately 125% within 10 years.“Although this is fully legal, pension funds take a risk with this approach,” warned Frank Elderson, DNB’s director of pension fund supervision.The FD highlighted the €19.3bn pension fund for the retail industry (Detailhandel), which returned 12% on average in the past five years, but saw its funding drop from 116.2% to 106.7% in the past two years.Coverage of the €1.4bn scheme for private security (Particuliere Beveiliging) dropped from 100.9% to 99.8% in 2016, despite the pension fund returning 14.8%.The newspaper also found that funding of the €187bn healthcare scheme PFZW had dropped 0.3 percentage points to 95.3%, even though its investment portfolio had generated a 12% profit. The large metal schemes PMT and PME showed a similar outcome.The coverage ratio of the €389bn civil service scheme ABP dropped 0.5 percentage points to 96.7%, despite a positive investment result of 9.5%.The FD said that the €108m sector scheme for the wholesale sector (Nederlandse Groothandel) and the €2.2bn corporate pension fund Atos Origin had delivered the poorest performance last year, returning 5.9% each.It added that, contrary to 2015, not a single scheme had reported a negative result.The newspaper’s annual survey also showed that returns of Dutch pension funds had been 8% on average during the past five years.However, the annual results varied widely, it said. In 2015, the average return was 0.8%, whereas a year earlier the average return was 21.2%. Despite returns of 10.2% on average in 2016, funding of Dutch pension funds has barely improved, according to a survey by financial daily newspaper Het Financieele Dagblad (FD).The newspaper, which examined the results of the 100 largest schemes, concluded that the yields of the pension funds struggled to keep up with increasing liabilities in the wake of falling interest rates.This even applied to pension funds with the best investment results, such as the €1.5bn scheme of Holland Casino, which returned 16.3% including the return from its derivatives.Despite the result, the pension fund’s coverage ratio only improved by 3.7 percentage points to 103.3% during last year.
There were sharp shifts in asset manager sentiment towards equities last month, according to IPE’s most recent Expectations Indicator.Every month IPE polls asset managers on their six to 12-month views on regional equities, global bonds, and currency pairs.The August Expectations Indicator survey, conducted between 18 June and 16 July, showed a notable deterioration in opinion about the outlook for euro-zone stocks, with the proportion of managers expecting prices to increase dropping from 73% to 62%. The shift was from positive to neutral, with few managers expecting prices to fall (6%).Commenting on the results, Peter Laurelli, vice-president, global head of research at eVestment, said: “European equities have led the pack in terms of positive sentiment since the beginning of the year, but those positive expectations have now fallen by 30%.” There was a corresponding increase in the share of managers in the “predicting stability” camp, which grew from 29% to 44%.Most managers were still bullish on Japanese equities but the proportion fell to 56% in the August Indicator from 65% for July. Most of those changing their minds switched to a neutral view. “Tariffs and the end of quantitative easing does not seem to be a good combination for sentiment,” said Laurelli about the shifts across the three regions. Positive sentiment towards equities in Japan and Asia continued to decline, the Expectations Indicator showed.The proportion of managers expecting Asian equity prices to rise has fallen every month since April and last month it reached 44%, down from 59% the previous month. Expectations about bond price moves shifted the most with respect to dollar bonds and yen-denominated bonds.There was a five percentage point increase in the share of managers with a bullish outlook on dollar bonds, although the biggest shift was in the proportion of those expecting prices to fall; down by eight percentage points.This was significant, according to Laurelli’s reading of the results.“[T]his was not a shift from neutral to positive, but across the board from negative to positive,” he said.There was a shift from negative to neutral sentiment among managers with respect to yen-denominated bond prices. Last month 64% of managers indicated they were in the neutral camp, up from 57% the previous month.The results were based on a poll of 86 managers.Click here for the August 2018 Expectations Indicator,Supporting documents Click link to download and view these files IPE Expectations Indicator August 2018PDF, Size 1.73 mb
“By engaging on this topic in a more rigorous and structured way and by elevating these issues to boards, we believe we can help improve the overall governance quality of listed companies over the long term,” wrote Taraporevala. “As such, you should expect to discuss this issue with our asset stewardship team during their engagements over the next year.”SSGA is a major passive investor. In his letter, Taraporevala noted that the manager engaged with companies because, in its index-based strategies, it did not have the option to sell a company’s shares when it disagreed with management over issues affecting long-term value.Campaign group calls out BlackRock Larry Fink, CEO, BlackRockThe letter from SSGA came shortly after a group of NGOs and investors wrote to Larry Fink, the CEO of BlackRock, urging his company to support more shareholder resolutions on climate change-related matters.Although BlackRock voted for some shareholder resolutions focused on climate disclosure and 2°C scenario stress tests, the letter stated, the asset manager “consistently votes against shareholder climate proposals and has a worse track record than other large global asset managers in this regard”.For reasons including “the ongoing failure of most climate risk vulnerable companies to develop and implement business strategies compliant with the Paris goals”, BlackRock should be more prepared to use its voting rights to vote against management, the letter said.The signatories said BlackRock should vote in favour of shareholder proposals asking companies to move towards aligning their capital expenditure and business strategy with the Paris climate agreement’s goals.Two such resolutions are due to come up at the annual general meetings of banking group Wells Fargo and US transportation company JB Hunt this year.Swiss pension fund-backed Ethos, Trillium Asset Management, and Boston Common Asset Management signed the letter, along with nine NGOs including ShareAction and ClientEarth.The letter was sent in anticipation of Fink’s yearly letter to companies. Last year the CEO used the letter to urge companies to think about their wider impact and purpose. The world’s third largest asset manager has written to more than 1,000 listed companies to tell them that corporate culture is top of its stewardship teams’ engagement agenda this year.Corporate culture, although difficult to measure and manage, affected a company’s ability to execute its long-term strategy, said Cyrus Taraporevala, president and CEO of €2.3trn State Street Global Advisors (SSGA).This would be increasingly important “at a time of unprecedented business disruptions,” he said.Companies and investors needed to address the issue of whether corporate culture was a good fit for a company’s strategy.