“The investment chain is sometimes too complicated, and we will look critically at, for example, fund of funds structures, mainly for cost reasons,” he said.Borgdorff declined to provide further details about the planned portfolio changes, citing market sensitivity, but he did say PFZW aimed to have the changes in place by 2020.On the issue of supervision, Borgdorff said his pension fund preferred to show good behaviour voluntarily, rather than be forced to a change through regulation.His sentiment was echoed by Guy Jubb, global head of governance and stewardship at Standard Life Investors UK, who said: “Asset managers are no longer operating under the radar.”In his opinion, stewardship must be at the heart of the relationship between asset manager and asset owner.“I want all my clients to ask what we have done on their behalf,” he said.Lucy Tusa, senior consult at Mercer UK, added: “The ICGN Principles on Institutional Investors’ Responsibilities should be the gold standard for investors.”She said she had noticed little change in the expectactions of institutional investors but that their interest in stewardship had increased.However, Tusa also said she was worried about the fact changes had mainly come from regulators.She agreed with Borgdorff that there were too many intermediaries in the investment chain. The €140bn pension fund PFZW has said lessons learned from the financial crisis have led it to revamp its investment portfolio along the lines of sustainability, manageability and comprehensibility.Speaking at the International Corporate Governance Network’s (ICGN) annual conference, Peter Borgdorff, the scheme’s director, said the pension fund’s “attitude” had changed as the result of an extensive evaluation of “what went wrong in 2008”, when PFZW’s assets fell by 20%.“We are now aware we are here for our people, not for ourselves or the asset management industry,” he said during a panel discussion.He said PFZW would review its reasons for having invested in 22 asset classes, adding that the healthcare scheme would no longer invest in asset classes it did not fully understand.
Swiss interior minister Alain Berset has published the final draft of the Altersvorsorge 2020 reform package without any major changes, despite widespread criticism of the plan within the local pensions industry.The reform plan covers the first and second-pillar pension system, including, among other things, an increase in the retirement age for women, a cut in the minimum conversion rate to 6% and a change in the calculation of contributions to the second pillar by scrapping the so-called Koordinationsabzug – the discount used to reduce contributions to Pensionskassen based on how much is already paid into the first pillar.But Swiss pension fund association ASIP warned that the failure to streamline the reform plans and “stress test them for their political suitability” might result in a no-vote against the draft.Left-of-centre political parties have criticised the increase in the pension age for women and the cut in the conversion rate, while conservative parties have called for faster, simpler reform. In a statement, Hans Peter Konrad, director at ASIP, called on Parliament not to reject the reform completely but rather take it into consideration.Parliament can then decide whether to deal with it as a whole or debate certain themes individually.Konrad argued that the reforms were “urgently necessary” and said the longer they were put off “the quicker and more painfully they will have to be implemented”.After the draft has been through Parliament, the Swiss people will have to decide on certain issues like the increase in the VAT to help fund the first-pillar fund AHV.ASIP said it hoped separate referendums would be held for various issues, so as not to include controversial proposals that do not need voters’ permission, such as the change in pensions for widows.Under Berset’s reform plan, only widows and widowers with children will be entitled to their deceased partners’ AHV pension from now on.In 2010, a cutting of the conversion rate failed, as a majority of voters opposed the measure.
Interested parties should state performance, net of fees, to the end of September and have a track record of at least three years (preferably five).The deadline for applications is 30 October.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] A pension fund based in Germany has tendered a €20m smart-beta equity mandate using IPE Quest.According to search QN-2125, interested parties should have at least €250m in assets under management in the asset class.The mandate is to cover Europe excluding the UK and adopt the MSCI Europe Multi-Factor or similar index as a benchmark, observing a maximum tracking record of 10%.The pension fund said it was creating a long-list of managers, and that a manager might therefore not be appointed.
The average coverage ratio for the largest pension funds in the Netherlands now stands at about 80% in real terms, according to recent statistics compiled by the financial regulator (DNB). BpfBouw, the €54bn scheme for the Dutch building sector, is the exception among the five largest schemes, with a real funding of 90%.The coverage ratio relative to inflation at the €372bn civil service scheme ABP stands at 80.6%, while the ratio at the €179bn healthcare fund PFZW is slightly worse at 78%.Real funding at the large metal schemes PMT and PME was estimated at 79.5% and 79.3%, respectively. The Dutch regulator has started publishing real-funding figures for the first time, as well as statistics on the costs pension funds incur for administration, asset management and transactions.It said this was part of its aim to improve transparency with respect to its supervisory work and increase information regarding pension funds’ financial positions.Last year, the regulator began publishing data on schemes’ premiums, indexation and official ‘policy funding’ – the 12-month average of actual funding, and the criterion for rights cuts and indexation.Of the approximately 250 pension funds in the Netherlands, 19 boast a real funding of more than 100%.With real funding of about 166%, SPMS, the €10bn occupational scheme for medical consultants, is in the best position.The pension funds HAL, Forward (Unilever) and Provisum (C&A) also enjoy relatively high real coverage, of 156%, 134.5% and 127.3%, respectively.With a funding in real terms of 71.7%, the pension funds for dental technicians, Tandtechniek, and Hoop Terneuzen are at the lowest end of the scale.The five largest pension funds reported asset management costs of between 0.61% (ABP) and 0.32% (PME), with the Alliance (Nestlé) and Mars schemes incurring the highest costs, of 1.14% and 1.5%, respectively.Positive exceptions are the pension funds of Ford Netherlands and GPs in training, which both spent 0.13% on asset management.Transaction costs at the five largest schemes ranged between 0.06% (ABP) and 0.10% (PMT and BpfBouw).Several pension funds, including Nielsen AC, Norit and Cosun, have kept the cost of their deals limited to 0.01%, according to DNB.The €67m Pensioenfonds Calpam, which received the Pensioen Pro award for best pension fund in the Netherlands last year, paid 0.02% for transactions and 0.17% for asset management.Despite administration costs of €1,383 per participant, its real funding came in at 133%.Meanwhile, in other news, Jetta Klijnsma, state secretary for Social Affairs, said she would assess the possible effect of a longer recovery period on pension funds’ financial positions.The new financial assessment framework (nFTK) allows for a recovery term of 10 years.During a debate in Parliament, Klijnsma said she would look into whether this option could offer respite to pension funds facing rights cuts.
Russia is the source of the biggest political risk facing investors at the moment, with president Vladimir Putin “repeatedly” having the potential to create volatility, according to Björn Wahlroos, chairman of Sampo Group, Nordea Bank and UPM-Kymmene in Finland.Speaking at the IPE conference and awards in Berlin, he warned about the danger ahead from the European Central Bank’s tapering its bond purchases but said that, arguably, the biggest challenge facing investors was “the return of political risk”.This, all of a sudden, is “back with a vengeance”, said Wahlroos.He spoke of three aspects of political risk: China, the rise of populism and Russia. The biggest short-term political risk facing investors is from Russia, he said.“Russia is a huge problem,” he said. “Russia is a huge problem for a very simple reason, and the simple reason is that Vladimir Putin cannot leave.”He said his estimated net worth was “way too much” for Putin to be able to “quietly walk away”.He said we do not know what would happen with Russia because “I’m pretty sure Putin will go to very great length to provide his people with what they think is glory, and, as long as he does that, he will repeatedly have the potential to create volatility in financial markets”.He said there was no need to be “dramatic” about this but that investors needed to recognise the risk.In terms of what this set of political and other risks meant for being a “good” long-term investor, he said “the key is to be boring”.“Boring is absolutely the best thing we have going for us,” he said. “Please be boring – boring is the best asset we have.”He also encouraged investors to “try to be a bit analytical”.“The world does lend itself to analysis,” he said, adding that it “will still pay off”.Lastly, he said “getting a feel for risk” is key to being a good asset manager, as risk-measures no longer work that well anymore because tail-risk has become so dominant.
Luke Hildyard, stewardship and corporate governance policy lead at the Pensions and Lifetime Savings Association (PLSA), said the requirement to report and explain the gap between CEO pay and the average workforce was to be welcomed, but that the PLSA would have liked to see stronger requirements placed on companies with respect to their CEO pay policies.84% of UK pension funds are concerned about the pay gap in listed companies, with 86% believing that executive pay in listed companies is too highThe PLSA had recommended that the government require advisory votes on pay reports to achieve a supermajority of, for example, 75%, rather than a simple majority of 50%, to make it harder for companies to pass pay proposals despite “serious reservations from their most engaged shareholders”.According to the PLSA, 84% of UK pension funds are concerned about the pay gap in listed companies, with 86% believing that executive pay in listed companies is too high.The government has also taken up a proposal from the UK’s asset management trade body for it to set up and maintain a public register of companies that have faced significant shareholder opposition (more than 20%) to executive pay awards.In the register, the Investment Association would record what those companies say they are doing in response to the concerns.The public register is said to be the first of its kind.Some investors, however, played down the need for reform.Mike Fox, head of sustainable investments at Royal London Asset Management, said: “The current system does seems to be working: shareholders have become more proactive, the vast majority of companies have responded appropriately and this is the key reason why chief executive pay has fallen by almost 20% this year.”The government had introduced welcome flexibility for companies to increase diversity and representation in the board boardroom, he added, but a requirement to report the pay ratio between bosses and workers would not be “meaningful”.“It will show large discrepancies between sectors depending on the nature of the workforce and the results could easily be manipulated,” he said. “[A]ny new measures that are introduced need to add value to what is already in place.”Beefing up s172The government has developed nine main reform proposals across three aspects of corporate governance: executive pay; the employee, customer and supplier “voice”; and corporate governance in large private businesses. The proposals follow a consultation launched in November.Directors of a UK company are already legally obliged to have regard to the interests of employees, customers and wider stakeholders through section 172 of the Companies Act. However, the government said many respondents felt this legal requirement “could be made to work more effectively through improved reporting, [Corporate Governance] Code changes, raising awareness and more guidance”.It said it therefore intended to introduce secondary legislation to require public and private companies of significant size to explain how their directors comply with section 172.Introducing the reform proposals, prime minister Theresa May said that “some directors seem to have lost sight of their broader legal and ethical responsibilities”.The UK Corporate Governance Code, which is looked after by the Financial Reporting Council (FRC), could also be changed to incorporate a new principle establishing the importance of strengthening the voice of employees and other non-shareholder interests at board level as an important component of running a sustainable business”.The government said it plans to invite the FRC to consult on the development of such a new principle, and on a Code provision that would require companies to adopt, or explain why they hadn’t, one of three employee engagement mechanisms:a designated non-executive director,a formal employee advisory council, ora director from the workforce.The government has also set its sights on corporate governance of privately-held UK businesses, in line with the thinking set out in its consultation paper.It wants to see the FRC work with trade bodies to develop a voluntary set of corporate governance principles for large private companies, and to introduce a corporate governance reporting requirement for private companies of a significant size. The UK government wants listed companies to annually report the ratio of CEO pay to the average pay of their UK workforce, according to a package of corporate governance reform measures unveiled today.Companies would also have to explain any changes to that ratio from year-to-year.The government also plans to bolster the requirement for company directors to consider a wide group of stakeholders’ interests when making decisions for shareholders’ benefit.However, the UK’s pensions trade body gave the reforms a muted welcome.
Storebrand, one of Norway’s largest pension providers, has agreed to buy asset manager Skagen.Once complete, the transaction will make Storebrand Norway’s largest provider by assets under management, according to IPE data. In a statement, Storebrand said it planned to pay Skagen’s current owners a total of NOK1.6bn (€169m), paid through a combination of Storebrand shares and cash, with the possibility of further gains subject to Skagen’s performance.Skagen – also a Norwegian firm but with branches across Europe – will operate as a separate company within the Storebrand group. Investment processes and philosophy would not change, the asset manager said. “In the current dynamic environment for the asset management industry, Skagen is delighted to be acquired by such a strong and well-resourced parent company,” the asset manager’s statement said. “The transaction will deliver real synergies and maximise the long-term potential of Skagen, allowing the company to develop in the best interests of its clients.”Storebrand CEO Odd Arild Grefstad said the acquisition was “an important building block” in the group’s growth strategy, while the group’s asset management CEO, Jan Erik Saugestad, highlighted the potential for growth in institutional provision.“Skagen is a contrarian and independent asset manager, held in high esteem by their clients,” Saugestad said. “We believe in their active investment philosophy, and will protect this along with their strong brand.”Øyvind Schanke, CEO of Skagen, added that his firm would have “greater ability to invest and innovate” due to its new owner’s resources.According to IPE’s annual Top 400 Asset Managers survey, Storebrand managed €63.5bn at the end of 2016. Skagen ran roughly €9bn.Storebrand said the acquisition would more than quadruple its share of the Norwegian private fund savings market from 4% to 17%.The deal is subject to regulatory approval in Norway and Sweden and is expected to complete before the end of this year.
Three unions have withdrawn their representatives from the accountability body (VO) of the Dutch sector scheme for dental technicians at the urgent request of the pension fund’s board.The board of Tandtechniek had ruled out further co-operation with the VO, which represents the scheme’s membership, as the accountability body was considering an appeal against a verdict from the Netherlands’ corporate court.The board feared that this could further delay the ailing pension fund’s plan to join the €197bn healthcare scheme, scheduled for 1 October.Last month the corporate court rejected the VO’s request for an investigation into alleged mismanagement by Tandtechniek’s board. The VO also asked to replace the board by an administrator. The court ruled that the body’s responsibilities weren’t as extended as it thought. Henk van der Meer, employee chair of Tandtechniek, said: “We don’t have time for such an appeal procedure, and we aren’t actually interested in it either. This will demand energy which we [would] rather spend on the collective value transfer.”Following a meeting with the accountability body, the board did not believe the VO would change tack either, Van der Meer added.He said that Wolter Jagt, employer representative in the VO, had already stepped down of his own accord as he didn’t agree with the decision to appeal the court’s ruling. The Tandtechniek scheme faces more cuts when it joins PFZW in October‘Give members more say’Responding to the developments, Arie Slottje – now also a former VO member – suggested that the board had obstructed the regular judicial process, as its request to the unions had effectively blocked the VO’s appeal option.In his opinion, the court hadn’t really addressed the questions posed by the VO, instead ruling that that the VO could not do anything whereas the board could do as it pleased.“The participants who pay can’t decide or ask anything, but are subject to risks and losses,” he said.Slottje referred to the low funding of Tandtechniek, which stood at 92.7% of liabilities at year-end, following several rounds of rights cuts during the past few years.Joining PFZW, which has a coverage ratio of 98.6%, would make additional cuts inevitable.Citing Tandtechniek’s annual report over 2016, Slottje said that participants had already lost at least 20% of their pension rights. “The chances to make up for this are virtually zero,” he said.Slottje, who took his PhD on decision-making processes at company pension funds, argued that participants themselves should get an increased say at the expense of the unions, “as unions represent no more than 18% of the Dutch working population”.
De Nederlandsche BankOther sector schemes with a low interest rate cover were Schilders (25%), PGB (26.5%), PNO Media (21.6%), PWRI (26.7%), and BPL (29.4%).Some pension funds apply a dynamic interest rate hedging policy, aimed at reducing the interest cover when interest rates drop.Sector schemes with an interest cover of more than 55% include Recreatie (59.2%), Foodservice (57.5%), Particuliere Beveiliging (60.4%), Koopvaardij (63.1%), and Detailhandel (64.3%).With a cover of 121.4% the €4.8bn Dutch pension fund of IBM has the highest interest hedge, the DNB figures revealed.Usually sector schemes have a lower interest cover than company pension funds. An explanation for this is that sponsors want to exclude the interest risk as, contrary to equity risk for example, they deem it as a risk without a reward.Pension funds of financial institutions tend to have an interest hedge of more than 60%.According to DNB, seven company pension funds in the Netherlands have an interest rate hedge of 100% or higher. This means their euro-denominated investments are more susceptible to interest rate changes than their liabilities, according to consultancies WTW and Mercer.Earlier this month, the €3.6bn pension fund for KLM cabin staff increased its interest hedge from 31.2% to 47.5%, citing interest rates falling to “unprecedented levels”. The decision marked the end of its dynamic hedging policy of quarterly reductions of the hedge since the end of 2018. At the end of September, the pension fund’s funding ratio stood at 99%. Schemes with higher interest rate protection – usually through bonds and interest swaps – have been less hit by an interest rate fall than pension funds with a lower hedge. Highest level of hedging at IBMAt 22% and 32.5%, respectively, the interest rate hedges of the €459bn civil service scheme ABP and the €238bn healthcare scheme PFZW were at the lower end of the scale. The degree to which Dutch industry-wide pension funds have hedged the interest rate risk of their liabilities varies widely, according to pensions supervisor De Nederlandsche Bank (DNB). Based on second quarter figures, the interest cover of the more than 50 sector funds ranged from 15.1% at the €1.4bn scheme for the hydraulic engineering sector (Waterbouw) to 67.7% at the €1.5bn scheme for the wood trade (Houthandel), the regulator found.The interest rate hedge at the industry-wide schemes was 43.2% on average, it said.Because of the ongoing drop in interest rates, pension funds’ interest rate hedge significantly affected their coverage ratio.
Benefits to NMC, meanwhile, were said to include the ability to “leverage DWS’s investment strength and capabilities, global presence and deep relationships with institutional investors around the world”.“Joining forces with DWS will enable Northwestern Mutual Capital to provide private equity-related solutions to an expanded institutional investor base while continuing to support Northwestern Mutual’s appetite for these assets,” added Jeff Lueken, senior vice president, Northwestern Mutual.As at the end of 2019, NMC was responsible for managing portfolios with total assets under management of $55bn (€48bn), including $13bn of private equity and related investments.Looking for IPE’s latest magazine? Read the digital edition here. DWS is forming a partnership with Northwestern Mutual Capital (NMC), the private markets division of US insurer Northwestern Mutual.DWS said NMC had been investing in private markets for more than 40 years, and that the partnership, which is to identify and develop private market opportunities, “represents a strong addition to DWS’s private asset offering to institutional investors”.The partnership is to see NMC grow third-party assets and further diversify in collaboration with DWS’s global private equity team. NMC has a team of 35 investment professionals.“The close relationship between NMC and DWS, combined with demand for differentiated alternative strategies from DWS’s global institutional client base, make this partnership a clear and logical next step for our business,” said Mark McDonald, global head of private equity at DWS.