Switzerland’s largest pension fund, Publica, has said Bill Gross’s recent departure from PIMCO has not undermined its faith in the asset manager.The CHF36bn (€28.3bn) fund said its 2011 award of a US corporate bond mandate did not rely on any single person “but rather on processes, systems, compliance and risk culture”.Publica added that it thought PIMCO was “a top address for bonds” and would “most likely” remain one.Industry figures in the Netherlands echoed Publica’s thoughts, with €377bn asset manager APG arguing that the effects of Gross’s departure were “being exaggerated”. Ben Kramer, chief executive at F&C Netherlands, dismissed the notion that the possible exit of clients from PIMCO would lead to major allocation shifts in the market and said he considered Gross’s decision a “matter between worker and employer”.“We will continue our own strategy, taking the changing landscape into account,” he added.Gross managed well over $200bn (€157.6bn) in PIMCO’s Total Return Bond fund, but on Friday announced he would be moving to Janus Capital Management.The company quickly appointed Daniel Ivascyn to replace Gross.However, Murat Ünal, chief executive at German consultancy Funds@Work, said the size of the firm’s flagship vehicle had made boosting returns difficult.He said it was “hard to outperform the market if a company has become the market itself” and noted that PIMCO recently “moved away from its core by going into other asset classes, increasing complexity”.Ünal also pointed out that the increase in size and assets since Allianz became PIMCO’s major shareholder had seen the company’s image change by “going from a boutique-like company to a substantial player”.He believes that, from Gross’s perspective, there is most likely “no better point in time” for him to leave PIMCO than now, when markets have enough liquidity to “play along”, apart from any possible contractual reasons (such as lockup periods) that might have prevented him from leaving earlier.
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MercerRussell InvestmentsRussell Investments The Lancashire County Pension Fund (LCPF) has made 53 appointments to its investment consultancy framework as the local government pension scheme (LGPS) gears up for its new partnership.The £5.3bn (€7.4bn) scheme for public sector workers in Northwest England is in the process of creating an “asset-liability partnership” with the £4.8bn London Pensions Fund Authority (LPFA), resulting in the need for investment advisory services.As it begins to shift assets into the collective fund with the LPFA, it has hired consultants to a framework agreement covering public equities, credit, infrastructure, real estate, private equity, governance, risk management and macroeconomic analysis.It hired Allenbridgeepic Investment Advisers, Aon Hewitt, bfinance, CBRE Global Investment Partners, Hymans Robertson, Institutional Investment Advisers, JLT Benefit Solutions, Mercer, Redington, Russell Investments, PwC and Stepstone Group across 53 different arrangements. (see table) JLT Benefits SolutionsPwCRedington Stepstone Group Russell Investments Launching the tender in December, Lancashire County Council said it would review various aspects of the fund’s investments and conduct mini-competition exercises as and when required, appointing the most “economically attractive” consultant.This is the second framework agreement LCPF has set up to manage its “partnership” with LPFA, after announcing the winners for a transition management model last month.The pension fund will use BlackRock Advisors, Citigroup, Goldman Sachs, Legal & General Investment Management, Macquarie Capital, Nomura, Northern Trust and Russell Implementation Services, using a similar mini-competition model when required.The LCPF and LPFA announced the new partnership last year with the view to pooling investments, cutting costs and improving governance. Both funds have internal asset management capabilities that will now merge, alongside liability management strategies and administration.The partnership came as the UK government considered responses to a consultation on whether to create collective investment vehicles (CIVs) for the 89 LGPS funds in England and Wales, potentially forcing all funds to invest only in passive listed assets.Both the LCPF and LPFA suggested increased fund collaboration on governance and liability management was more appropriate than a mandatory shift to passive investing, and a focus solely on investment fees.A government response has been delayed and is now expected after May’s general election, due to friction within government departments.Some LGPS funds with internal asset management capabilities are considering legal action against the UK central government should it force schemes to invest via CIVs. Russell InvestmentsJLT Benefit SolutionsMercerMercer RedingtonStepstone GroupStepstone Group Aon HewittAltius AssociatesAon HewittAon Hewitt MercerInstitutional Investment AdvisersJLT Benefit SolutionsJLT Benefit Solutions Altius AssociatesAon HewittJLT Benefit SolutionsJLT Benefit Solutions Allenbridgeepic Investment AdvisersAllenbridgeepic Investment AdvisersAon HewittAon Hewitt LCPF investment consultancy frameworkPrivate EquityGovernanceRisk ManagementMacroeconomic Analysis Aon HewittHymans RobertsonMercerMercer bfinanceAon Hewittbfinancebfinance Stepstone Group JLT Benefit SolutionsbfinanceInstitutional Investment AdvisersCBRE Global Investment Partners Mercer Allenbridgeepic Investment AdvisersAllenbridgeepic Investment AdvisersAllenbridgeepic Investment AdvisersAllenbridgeepic Investment Advisers bfinanceMercerPwC LCPF investment consultancy frameworkPublic EquityCreditInfrastructureReal Estate
The three largest asset managers in the Netherlands – APG, PGGM and MN – have drastically amended their variable pay arrangements following ongoing criticism and public debate about executive pay.Performance-related pay for directors and managers has been largely abolished and replaced by a salary increase, the Dutch financial daily Het Financieele Dagblad (FD) has reported, while most of the variable pay for asset management staff has been reduced.The €424bn APG, the asset manager for the civil service scheme ABP, changed its remuneration arrangements at the start of 2015. PGGM and MN decreased their performamce-related payments last year.The reduction of variable pay was triggered by new legislation that limited the bonus for decision makers in the financial sector to 20% of the salary. Although the restrictions did not apply to asset managers, the organisations went a step further, with PGGM stopping performance-based payments for 460 the 630 staff that were entitled to variable remuneration, the research found.To compensate for the reduction in performance-based pay, salaries were increased by 50% of bonus levels, while variable pay for asset management staff was capped at 20% of the salary.“We have cut bonus levels because of the discussion [occurring] in society,” the FD quoted a spokesman for PGGM as saying.The fact that that asset manager regularly addressed companies for their high remuneration also played a role, he said. “We feel obliged to set the right example.”However, PGGM still allowed for performance-related pay of up to 80% of salary for a “limited number of its own asset managers with specific investment expertise, who didn’t accept less”.It also paid considerable performance-related fees to external investors, although it is trying to reduce these expenses, the spokesman said.FD said that APG had compensated for the end of performance-related pay – until 2015 a maximum of 10% of the salary – by increasing the fixed salary by 5%.However, some “key staff” were still entitled to a variable pay of no more than 20%, FD said citing an APG spokesman, who added that approximately 20 employees received variable pay of up to 60%.The €110bn MN, the asset manager for the two large metal schemes PMT and PME, indicated that, when offered the choice, the full board of directors and all management staff had favoured a salary rise of 50% over the continued use of bonus payments.Since then, no more than 57 of asset management staff were entitled to variable remuneration, which had resulted in a bonus of 12% on average last year, according to the FD.It cited an MN spokesman who pointed out that MN had not stopped performance-related pay altogether, as it would be difficult to attract the right staff otherwise.According to the FD, the board members of the pension providers had refrained from receiving bonuses earlier.In other news, PGGM presented its new remuneration guidelines for portfolio companies “as a guidance for corporate pay practices and outcomes”.Its central recommendation was that fixed salaries were a fair exchange for executing a job in a reasonable and responsible matter, according to Catherine Jackson, senior adviser on responsible investment.Under the new guidelines, variable pay was only granted if employees and management at least met PGGM’s expectations for financial returns, and if companies´ decisions did not result in a negative impact on society and the environment.The guidelines are to be implemented gradually over the coming years.“We will also increasingly raise the issue with peers and colleagues, in order to continue to evolve our collective thinking on the important topic,” said Jackson.
The NPFs will be expected to measure and assess the separate risks at least once a month and perform quarterly stress tests, as well as extraordinary stress tests in the case of significant changes in either asset structure or market-driven risk levels.The stress testing scenarios of market risks have to cover a period of at least three years from the start of the test, and include adverse changes such as rises in interest rates, unemployment or inflation, and decreases in stock prices, the rouble, the price of oil and the credit rating (or default) of issuers of securities held by the funds.The risk managers themselves will have to have had a minimum four years’ experience of risk management or investment-strategy development in a financial market industry such as pensions, insurance, banking or securities.To avoid conflicts of interest, the managers should not be involved in trading transactions of either pensions savings or reserves (the assets used for financing the NPFs’ retired customers).Furthermore, they should not be part of any remuneration scheme run by an NPF that would encourage them to take risks.According to the document’s time-table, following approval of the ordinance, the NPFs will have to set up a risk-identification system within six months and a risk-management system within 12 months, with the first stress test performed within 18 months.The CBR envisages that successful compliance by the NPFs would enable them to broaden their investment horizons.“As NPFs start assessing risks from investing and prove their competence in this area,” it said, “the regulator is likely to ease the requirements for admissible assets.”In the absence of significant international financing following the Ukraine crisis, alongside substantial capital outflows, the NPFs are being increasingly viewed as a source of investment funding for the national economy.In February, president Vladimir Putin noted that the NPFs could participate in the privatisations planned this year to offset a budget deficit induced by collapsing low oil prices.Meanwhile, the Ministry of Economic Development is working on a proposal to allow the NPFs to invest a small share of their assets into venture capital and private equity funds, although this may be deemed a risk too far for the central bank and the funds themselves.Separately, the CBR is working on its proposals for further reforms of the pension system.Specifically, according to Russian press reports, CBR governor Elvira Nabiullina wants the NPFs – rather than the state-owned Vnesheconombank, as is now the case – to become the default option for those workers undecided where to channel their second-pillar contributions. Bank of Russia (CBR), the country’s pension fund regulator, has published a draft ordinance detailing the risk analysis and stress testing it wants non-state pension funds (NPFs) to perform.According to the document, each fund will be expected to establish a management system capturing market, credit, operational and liquidity risks.The systems must ensure the funds’ investments solely serve the interests of current and future pensioners.This process includes regular reviews of target asset structures that reflect the optimal risk/reward ratio, assessments of the asset management companies used by the funds, and best execution of transactions.
Source: BMF/WilkeHartwig Löger, Austrian finance ministerIn a speech in Vienna recently he stressed individual responsibility was needed to improve retirement provision, which for him included occupational pensions.“Private retirement saving will make more sense to people once they see in their workplace that this is a topic that needs to be thought about,” he said. The problem of a shrinking old-age dependency ratio is widely recognised in Austria, but the country still almost solely depends on a first pillar in which young people’s contributions are used to pay pensions.“We have an issue here but there is still a lot of ignorance on the subject among many politicians”, said Löger. “We need a clear, significant reform.”The conservative politician used to be on the management board of insurance company Uniqa before taking office in October last year on a Conservative Party ticket.A major adjustment for Austrian Pensionskassen might be the new longevity tables the domestic actuarial society has promised for July.No details of the new trends in demographic development have been made public yet. In line with the IORP II Directive the amendments to the PKG in Austria also increase requirements for “own risk assessments” and internal control in Pensionskassen.A consultation on the Austrian government’s proposal for implementing the Directive ends on 25 May.As noted by UK law firm Sackers, IORP II builds on the requirement for pension funds to invest in accordance with the “prudent person” rule and places considerable emphasis on improving governance and transparency in pension schemes. The new European Union legislation is set to come into effect on 1 January 2019.At the FMA experts are confident the Austrian Pensionskassen are prepared for the new world of more self-controlled risk taking.“A lot of the risk management requirements in the IORP II directive are already part of the Austrian pension fund legislation,” Helmut Ettl, chairman of the board at the FMA, told IPE after the supervisor’s annual press conference.The government is behind schedule when it comes to implementing another EU law, the Portability directive. It has yet to publish a proposal for incorporating this into national law. “We are already behind and are far from overfulfilling minimum standards in these areas,” said Thomas Wondrak, founder of consultancy konsequent wondrak. Finance minister urges ‘clear, significant reform’ Austrian finance minister Hartwig Löger, a member of the conservative party, has said he wants to include tax incentives for second pillar pensions in the tax reform scheduled for early 2019. This would be with his party’s coalition partner, the far-right FPÖ. Austrian Pensionskassen may no longer be subject to regulatory quantitative investment caps as a result of the country’s implementation of the IORP II Directive.The government’s proposal for amendments to PKG, the law governing Austrian pension funds, includes a complete shift to self-defined quantitative investment limits.Pensionskassen would have to set their own investment caps for all asset classes and file them with the Austrian regulator FMA.Their submission to the regulator would also have to specify measures for cases in which these limits were exceeded and other risk management features.
UK regional newspaper publisher Johnston Press could carve off its defined benefit (DB) pension plan from its main business as part of a debt restructuring deal, according to the company.In response to press reports yesterday, Johnston Press confirmed in a stock exchange announcement that it was in discussions with its pension scheme trustees and the Pensions Regulator (TPR) regarding a regulated apportionment arrangement (RAA).If agreed by the regulator, it would mean the scheme could transfer into the Pension Protection Fund (PPF) if it is not sufficiently funded.According to the Daily Telegraph, the firm has entered into talks about ceding control of the business to GoldenTree Asset Management, a US hedge fund. GoldenTree, according to the Telegraph, is the primary owner of a £220m loan due for repayment on 1 June 2019. In a statement issued late yesterday, Johnston Press said: “The company confirms that an RAA is one of a number of potential strategic options for restructuring or refinancing of the bond being considered by the company and its advisers and in respect of which the company expects to discuss with relevant parties in due course.”GoldenTree declined to comment when approached by IPE yesterday.According to Johnston Press’ annual report for 2017, its £561.4m (€640.8m) DB scheme had a funding shortfall of £47.2m at the end of December.Johnston Press stated in the report: “The current size of the business cannot support this level of debt and pension commitments over the longer term.”TPR said it was aware of the situation regarding Johnston Press. “[We] are in contact with the company and trustees to understand any impact on the pension scheme,” a spokesperson said. “We will not comment further unless it becomes appropriate to do so.”A spokesperson for the PPF said: “We can’t comment on the circumstances of this company. In the event of an insolvency event at a company with an eligible pension scheme, members can be reassured that we are there to protect them.”Last year, Tata Steel UK struck an RAA deal with the British Steel Pension Scheme, but such deals are relatively rare in the UK, said Faith Dickson, a partner at law firm Sackers.Sackers advised on an RAA in 2016 involving the pension scheme of Halcrow Group when it was part of CH2M Hill, a global engineering company.“TPR and PPF are very keen to limit the number of them that they will agree in any year,” Dickson said. From a scheme member’s perspective there was no upside to the agreement, as they were in place for the company’s benefit, she added.“Under the statutory agreement, the trustees [of the scheme] have to be of the view that the employer will become insolvent within 12 months – or that it is inevitable in the short term,” Dickson said.As part of an RAA, a company’s pension scheme is separated from the business and then falls under the auspices of the PPF, which caps benefit payments for members yet to retire. An RAA is usually struck when a company falls into difficulty, but there remain valid reasons for not seeking insolvency.For a company to be able to strike such a deal, it must first come to an agreement with both the PPF and TPR.
Justin Wray, EIOPA deputy head of policy (far right), and other panellists discussed sustainable financeInsurers and pension funds should use their stewardship role to engage with investee companies to incentivise them “to take concrete steps towards a lower carbon footprint”.“This will ensure that the necessary transition to a low carbon economy is done in a gradual and stable way, avoiding financial stability incidents and the emergence of pockets of stranded assets,” Bernardino said.During a panel discussion, Justin Wray, deputy head of the policy department at EIOPA, said that insurers and pension funds, “helped by regulation and supervision, need to shine a torch in every corner of their business”.It was “particularly important” that pension funds and insurers not only considered the impact of sustainability on their investments but also the impact of their investments on sustainability, he said.Wray also suggested it was important that any reorientation of investment by insurers and pension funds was a result of a long-term approach rather than because of any short-term regulatory moves. Including ESG risks and factors in risk management systems is “responsible business practice” rather than a consequence of “a political or regulatory imposition”, Europe’s pension and insurance regulator has said.Addressing the European Insurance and Occupational Pensions Authority’s (EIOPA) annual conference in Frankfurt yesterday, chairman Gabriel Bernardino said insurers and pension funds should consider physical and transition risks linked to climate change because their business models are based on liabilities and assets with long-term time horizons.This was also why more and more pension funds and insurers were taking important investment and underwriting decisions in line with their assessment of ESG risks and factors, he said.Bernardino also urged pension funds and insurers to be “part of the solution” to the climate change problem, suggesting they had a role to play with respect to fighting climate change as well as helping society adapt to its effects. He cited both the recent report from the Intergovernmental Panel on Climate Change – which set out that rapid, far-reaching and unprecedented changes were needed to limit global warming to 1.5°C above pre-industrial levels – as well as the impact of climate change itself, which meant that “communities, businesses, cities and countries are facing new types and higher levels of risk”.
Source: StorebrandOdd Arild Grefstad, CEO, StorebrandCorporate leaders from across the Nordic region have met with political leaders to discuss a collaborative approach to addressing sustainability challenges.The group Nordic CEOs for a Sustainable Future, formed in 2018, met the prime ministers of the five Nordic countries on Tuesday. The chief executives of Storebrand, Swedbank, Íslandsbanki, Equinor, Nokia and other companies presented their idea at the Nordic Council of Ministers’ meeting in Reykjavik.They planned to meet the United Nations’ Sustainable Development Goals (SDGs) through greater public-private sector co-operation and a transition to purpose-driven business practices, according to Storebrand.“The global capital markets are one of the most powerful tools we have in the fight against climate change,” said Odd Arild Grefstad, chief executive of the Storebrand Group. The head of Sweden’s largest pension fund has called for the country’s corporate governance code to enshrine healthy corporate cultures and strong values.The Swedish Corporate Governance Board is due to present amendments to the Swedish Code of Corporate Governance next month, and Magnus Billing, chief executive of the SEK934bn (€87bn) pension fund Alecta, said it should draw inspiration from recent reforms to the UK’s code by the Financial Reporting Council (FRC).“I hope the proposal the Swedish Corporate Governance Board now intends to present will take this opportunity and be inspired by the FRC and develop the Swedish code to support and promote strong corporate cultures,” he said. “Corporate cultures that build long-term sustainable values and do not destroy them in an instant.”Following the corporate governance changes, the board will publish a new recommendation on remuneration and, after consultation, expects to issue new rules to come into effect on 1 January 2020. The body has already said that the proposed revised code was not expected to involve any major changes, apart from on remuneration issues. Magnus Billing, CEO, AlectaIn an article on Alecta’s website, Billing emphasised the importance of companies having a healthy organisational culture, citing management consultant Peter Drucker: “Culture eats strategy for breakfast.”“In these times of regular corporate scandals both in the Nordic countries and globally, the quote feels more relevant than ever,” Billing said. He cited emissions testing and money laundering scandals, which have affected major European companies including Volkswagen and Swedbank and “destroyed enormous shareholder values”.“A prerequisite for restoring the demolished values is first and foremost the restoration of confidence in the organisation and its ability to create long-term sustainable values,” the CEO said. “There are not enough clear goals and well-designed strategies and business plans for this to happen.”“In order to be successful in the longer term, a company must build and maintain good relationships with a large number of stakeholders”Magnus BillingBilling cited the revision last year of the UK corporate governance code, which included an emphasis on corporate culture as a key part of the governance of a company.The FRC’s reasoning was based on the idea that companies operated in a larger social context, and had to relate to this in order to create long-term sustainable shareholder value.“In order to be successful in the longer term, the company’s board of directors and its management must build and maintain good relationships with a large number of stakeholders, such as customers, authorities, employees, owners and others,” said Billing.Nordic leaders meet over SDGs
It is calling for a new regulatory regime that would create a statutory obligation for pension schemes to support their members in respect of decumulation decisions, with minimum standards to apply to three specific elements: member engagement and communications; providing or signposting to decumulation products; and scheme/governance processes relating to the design and/or selection and ongoing delivery of the aforementioned elements.One of the aims of setting out such minimum requirements is to enable the development of products that help manage risks for savers as DC savings grow and dependence on DC-derived incomes increase.As well as protecting savers, the PLSA’s proposal is also intended to address the risks that schemes face when supporting members in their at-retirement decisions.For example, schemes fear legal action if they provide more comprehensive support but savers then feel trustees have not acted in their best interests or have not delivered the best outcome.Lizzy Holliday, head of DC, master trusts and lifetime saving at the PLSA, said: “Pension schemes want to support savers more effectively than at present by improving the help they get when they are thinking about drawing their pension and setting a path that protects them from poor outcomes. But many are looking for the support of a clear framework.“Our proposals seek to provide support to savers to make better decisions and give clarity to schemes about their obligations towards savers at this stage of their retirement savings journey. We look forward to hearing the views of everyone with an interest in ensuring more people achieve a better income in retirement.”According to the PLSA, research it has conducted shows that nearly three-quarters (71%) of savers in DC funds want support when deciding how to access their pension, including some wanting to be guided by their pension scheme to a ready-made retirement income option.The association’s consultation comes as the Work and Pensions Select Committee, a group of members of parliament, announced the launch of a three-part inquiry into the impact of the pension freedoms. The first part will focus on pension scams, but future work will examine accessing pensions savings and saving for later life. The PLSA’s consultation, or “call for evidence”, is open until Friday, 4 September. The supporting report can be found here. Looking for IPE’s latest magazine? Read the digital edition here. The UK’s pension fund association has proposed that a new regulatory regime be established that would require pension schemes to support their members when making decisions about how to access their defined contribution (DC) savings.The Pensions and Lifetime Savings Association (PLSA) is seeking industry views on its proposal with a view to launching a formal recommendation aimed at government on the occasion of its annual conference in October.The background to the association’s proposal is the 2015 pension freedoms reform, which gave savers greater choice about how to access their retirement savings, and the PLSA’s assessment that evidence shows “the confusing range of options is potentially leading to poor decision-making and poorer retirements”.The proposal that the PLSA put forward today aims to protect people who don’t engage with or fully understand the financial choices they face when they move towards semi- or full retirement.
1/31 Nelson St, South Townsville The kitchen also has a clear window splashback, stone bench tops, walk-in pantry and all the latest high-end appliances.A hallway with a raw cement wall leads though to the bedrooms and bathrooms while the large master bedroom also has an ensuite. 1/31 Nelson St will be open for inspection on Sunday from 11.30am to 12pm and Tuesday from 12pm to 1pm. For more information call Tracey Stack and Emma Nancarrow from M Property Townsville on 0418 773 987. 1/31 Nelson St, South TownsvilleConstruction on the house started in January before it was finished about three weeks ago.Ms Ellis said she designed the home around the huge mango tree which takes pride of place in the backyard.More from news01:21Buyer demand explodes in Townsville’s 2019 flood-affected suburbs12 Sep 202001:21‘Giant surge’ in new home sales lifts Townsville property market10 Sep 2020“I wanted the entertaining and the living areas facing the mango tree because that’s where the breeze comes in and you get the shade from the tree as well,” she said.“I was thinking the house would suit young professionals and that’s why it has more of an industrial feel hence the pendant and rock concrete wall. 1/31 Nelson St, South TownsvilleA BRAND new home with industrial chic style has hit the market in South Townsville aimed at appealing to young professionals searching for a trendy base to call home.The house is the brainchild of designer Pam Ellis and was built by Ellis Developments.It has four bedrooms, two bathrooms, double lock up garage and is on a 466sq m block. 1/31 Nelson St, South Townsville“I wanted a point of difference and that obviously means the buyer has to be unique as well.”Upon entering the home, stairs lead to the elevated dining area where a statement pendant light draws the eye upwards to the soaring ceilings and high windows.