APG has become the first Dutch institutional investor to operate as an intermediated participant on BondMatch, the regulated multilateral trading facility.Launched in 2011, BondMatch allows professional investors to trade euro-denominated corporate, financial and covered bonds through a transparent order book, which accepts only firm orders.It includes more than 2,000 securities from more than 500 different European issuers.Around 20% of these bonds are listed on one of Euronext’s regulated bond markets, mainly in the Netherlands and France. There are 280 bonds issued by Dutch entities available on BondMatch.In 2014, BondMatch continued to innovate and offer new functions to platform users, including recent developments such as its ‘request for auction’ service for large orders that concentrates liquidity at two defined points in the trading day, and, via Bloomberg, automated daily alerts that keep investors up to date in real time with trading opportunities on the BondMatch order book.APG has chosen KBL European Private Bankers (KBL epb) to serve as its market-member intermediary for order execution.APG’s intermediated participant status allows it to view the central order book; transfer its asset flows to KBL epb, a direct market-member of BondMatch; be represented anonymously in pre and post-trade data; and receive daily statistics on its orders and executed trades.APG will also support BondMatch’s development and help encourage greater participation among European users of the system.Thijs Aaten, managing director of treasury and trading at APG, said: “The current regulatory environment, where trading and finding liquidity in fixed income instruments is increasingly difficult, makes us look for innovative alternatives.“The BondMatch platform is such an alternative because it offers a new market infrastructure that allows trading with a broad set of investors.”Aaten added: “We attach a very high value to the concept of best execution, so, for all our trades, we want to be able to choose the platform most suitable for that trade.“Typically, bonds are traded on an over-the-counter basis through banks. BondMatch provides us with a good alternative through an order book similar to an exchange, so it complements the range of platforms we now have for trading bonds.”
The £8bn (€10bn) Tesco Pension Scheme has completed the purchase of a shopping centre in the town of Lincoln for £46m.Located in the heart of Lincoln, in the east of England, the centre was purchased from asset manager Capital & Regional as part of the scheme’s growing real estate portfolio.The manager recently invested in redeveloping the shopping centre before handing over the reins to the Tesco scheme, itself a large supermarket chain.The pension fund allocates roughly 10% of its assets to real estate and manages the UK portfolio of assets in-house. In an interview with IPE in September, CIO Steven Daniels said the fund liked retail exposure in its real estate holdings, as they offered long-term lease agreements, highly rated tenants and inflation-linked rental income.He said the index-linkage allowed the fund to match pension increases and avoid the use of derivative-based hedging instruments.In 2013, the pension fund supported a new office development in Cambridge, investing £32m in construction costs and pre-letting 90% of the office space.In other news, the Makro Staff Pension Scheme has completed a £185m insurance buy-in arrangement with Rothesay Life.The deal, adding to 2014’s already booming insurance bulk annuity market, covered a significant majority of the scheme’s liabilities.Makro, originally a Dutch chain of warehouse stores for a range of goods, sold its UK business to rival outlet Brooker Group in 2012.At the end of 2011, it closed the defined benefit scheme to new members and future accrual, with the view to insuring remaining participants.As a general rule, insurance buy-ins are arranged to cover pensioner members and act as an asset held by the scheme, while the insurance company makes regular payments covering pensions.Consultancy LCP advised on the transaction while Pinsent Mason provided legal advice.Emma Watkins, partner at LCP, said covering both pensioner members deferred members added additional complexities to the deal.“[The deal showed the] determination on the part of the trustee and the company to get to this position,” she said.“It also shows how well-prepared trustees and sponsors who respond quickly when opportunities arise can take advantage of favourable market conditions and competitive pricing.”LCP recently predicted the UK bulk annuity market would regularly exceed £10bn in deals each year, as the funding positions of UK schemes improves.
Belgian banks and asset managers Petercam and Bank Degroof have confirmed plans to merge operations and expand Petercam’s asset management operations in the Netherlands.Once approved, the merger will create a €47bn asset manager and the largest independent financial services provider in Belgium, the two privately owned companies said.In 2012, Petercam had roughly 40 mandates for Dutch institutional investors of between €10m and €15m, according to IP Nederland, predecessor of IPE sister publication PensioenPro.The mandates focused on specialised strategies, such as European equity and agricultural equity. As of the end of 2013, Petercam had €8.6bn in institutional assets under management (AUM), while Degroof has €4.3bn in institutional AUM.It does not, however, have a presence or institutional clients in the Netherlands.A spokesman for the bank said the newly merged company would seek to expand in the Dutch pensions market.“We have a European target,” he added.The merger could be completed in the second half of this year, pending regulatory approval, the parties said.In other news, the €225m pension fund of Dutch investment bank NIBC has switched to a collective defined contribution plan.It added that the employer had provided an extra contribution of €12.5m to compensate for the “disadvantages” of the new arrangements, as well as to end its obligation to meet future funding shortfalls.NIBC had partial final salary arrangements in place for its 500 employees.
Some of the UK’s largest asset managers have come in for criticism after a report alleged the industry often sided with company management when voting on controversial shareholder resolutions.ShareAction, a responsible investment charity, also said regulators in the UK should be more forceful ensuring compliance with the country’s Stewardship Code among signatories, as several of the asset managers surveyed failed to disclose their voting record.The charity’s report examined the voting records of AGMs from 2014 where more than 30% of shareholders voted against management, with the votes largely concerned with board appointments and remuneration.It argued that there was often a disconnect between the voting behaviour of asset managers and its stance outlined in public voting policies. ShareAction chief executive Catherine Howarth criticised that many firms were failing to take their stewardship responsibilities seriously.“While the detail of any one vote may not be indicative of an approach, there does seem to be a pattern for some managers across the votes we looked at with significant shareholder dissent. “We expect investors will be asking tough questions of their asset managers, particularly those who appear to be simply backing management most of the time, based on this report.”It praised Aviva Investors, F&C Investments, Newton Investment Management, Royal London Asset Management and Standard Life Investments as the five most transparent companies of the 33 surveyed.Aviva Investors was also one of four praised for most consistently opposing management – alongside Goldman Sachs Asset Management, Threadneedle Asset Management and AllianceBernstein.Aberdeen Asset Management, BlackRock, HSBC Global Asset Management, Schroders Investment Management, Hermes Investment Management and M&G Investment Management were the asset managers identified as most likely to side with management.Saker Nusseibeh, chief executive at Hermes IM, said his company’s approach to engagement was about achieving “beneficial change”, as opposed to mounting a campaign or “box tick”.“We take a graduated approach and base our decisions on annual report disclosures, discussions with the company and independent analysis,” he said.“At larger companies or those where clients have a significant stake, we seek to have dialogue ahead of voting against or abstaining on any resolution. We vote accordingly and as part of a constructive discussion with the company’s board.”ShareAction’s report also urged a more consistent approach in disclosing the rationale behind a vote, noting that some asset managers took the time to explain why they voted with or against management, while others only explain a vote against a company.It also said a large number of asset managers declined to disclose voting rationale publicly, as it hindered engagement efforts – an argument the charity dismissed as “unconvincing”.“[Twenty four] of the 33 managers included in this study did not disclose any information on their voting rationales, and the level of disclosure of the remaining nine varied significantly,” ShareAction said.“There is room for significant improvement in the disclosure of voting rationales by asset managers, and this is critical to achieving real accountability by an industry that invests other people’s money.”The report also suggested that the Financial Reporting Council, the regulator behind the Stewardship Code, and the Financial Conduct Authority be more proactive in enforcing the Code’s principles – for example, in instances where signatories failed to publish voting records.“It is clear current regulation is not leading to the level of disclosure that is desirable in the market,” it said. “We suggest the Stewardship Code needs to be revisited in light of these failings and that some mechanism is needed to prevent managers claiming to comply with the Code when they do not.”,WebsitesWe are not responsible for the content of external sitesLink to ShareAction report
The £6.8bn (€9.2bn) Merseyside Pension Fund is searching to replace the day-to-day manager for its near £400m property portfolio.The local government pension scheme (LGPS) appointed CBRE to run its portfolio in 2009 but is now tendering for a new manager, on another six to ten-year contract.The property manager will run the day-to-day operations for its portfolio that includes shopping centres in the South East of England, a business park and a building in London’s Mayfair district.Merseyside is also tendering for a property adviser which it said will liaise with the scheme and the manager to ensure all valuations and stakeholders have up-to-date information on the portfolio. The pension fund’s property holdings rose 18% in value over the year to April 2015 becoming the biggest contributor of growth to the portfolio’s 12.6% return – which itself was 2 percentage points above benchmark.
Professor Sir David Eastwood, chair of the USS trustee board, expressed his gratitude to McDonnell for his service and welcomed Palmer to the board.“[He] has had a long career in the higher education sector, he is an experienced pension scheme trustee and understands the importance of USS as part of a good-quality employee benefits offer,” he said.Palmer’s appointment coincides with the first part of USS’s move to a hybrid scheme, which comprises a career-average DB section and a DC section.It used to be a final salary defined benefit scheme, with the reform thereof proceeding after trade unions backed a negotiated settlement with employers, and members in January last year voted on the changes.USS introduced its “career revalued benefit” (CRB) section on 1 April, known as the USS Retirement Income Builder.From 1 October, it will roll out a new defined contribution section, which it has called the USS Investment Builder. This section is for contributions paid on pensionable salary above £55,000, the threshold for the CRB pension. The UK’s £49bn (€62bn) Universities Superannuation Scheme (USS) has inaugurated its hybrid structure with the launch of its career revalued benefits section, a move it announced in connection with a trustee appointment.Professor Stuart Palmer, chair of council at Cardiff University, has joined the USS trustee board, effective from 1 April 2016.He was appointed to the board by Universities UK and replaces David McDonnell, who stepped down at the end of his term on 31 March.McDonnell had been a member of the trustee board since 2007, serving on several committees.
About €25bn is currently under fiduciary management.Last year, ASR took over pensions insurer De Eendragt to strengthen its position in the pensions market.It said it also started contracting out its pensions administration to reduce costs, and that it had reinsured €200m of its pensions portfolio with Legal & General to reduce its balance risk.Last year, ASR attracted €160m of buyouts from pension funds with defined benefit plans, down from €377m over the year the previous year.It added that it received €60m of premiums for defined contribution arrangements and products.ASR operates a low-cost DC vehicle PPI together with online bank Brand New Day, which had 1,569 clients with 21,125 participants in total at year-end.The Utrecht-based insurer reduced its holding in its Dutch Core Residential Fund to 80% after six external investors took a stake, and its holding in the Dutch Prime Retail Fund to 40% after two externals investors followed suit. The new collective defined contribution schemes of ING and NN, as well as insurer De Goudse, have invested in its Core Residential Fund.ASR – the sixth-largest insurer in the Netherlands, claiming a market share of more than 7% – sold part of its loss-making property development activities to Meijer Realty Partners.Last year, its solvency rose from 285% to 305%, and it reported returns on equity of 13.9%.ASR is the continuation of Fortis Insurance Netherlands and has been owned by the Dutch government since it nationalised Fortis Group in 2008.The insurer is preparing for an IPO later this year. Insurance company ASR has plans to offer fiduciary asset management services to other institutional investors in the Netherlands, including its new general APF pension fund.According to its 2015 annual report, ASR is aiming to build on expertise gained from property management and the recently acquired asset manager BNG, a Bank Nederlandse Gemeenten subsidiary focusing on local councils.To date, ASR’s asset management has focused almost exclusively on its insurance activities.ASR has €38bn in assets under management, with €6bn in investment funds for clients, €3bn in mandates for reinsured pension contracts and €4bn in property funds.
The BFS said that the decline in the number of Pensionskassen running DB plans went hand-in-hand with a decline in the number of scheme members.Private law pension providers had more than 172,000 plan members in 2005, and just under 22,000 in 2015, according to its statistics.They have also been switching to “Beitragsprimat” – a form of hybrid scheme – according to the BFS.The number of individuals in public pension funds with DB schemes has almost halved over the 10 year period since 2005, according to the statistics. In 2005 they counted almost 220,000 members, and in 2015 this was down to just over 121,000.The number of “mixed” pension funds – those offering both DB and DC plans as they transition to the latter – also fell in the period from 2005 to 2015, according to the statistics.Separately, the BFS looked at underfunding and net returns in comparison with 2014.It said that the level of underfunding, at CHF31bn (€28.6bn), was “stable” (up 6.8%). The majority of that (CHF28.1bn) was at public pension providers (up 0.8%), and the remainder at private institutions (up 152.2%).As at the end of 2015 total occupational pension scheme assets in Switzerland were CHF788bn, up 1.4% compared with the previous year.The net return from invested assets came crashing down, according to the BFS statistics. This was CHF5.8bn in 2015, down 88.7%, and “thereby reflected the uncertain economic situation” that year. There were some 230 fewer pension funds with defined benefit schemes in Switzerland in 2015 than 10 years earlier, according to official statistics released today.The figures from the country’s federal statistics bureau (BFS) showed that the number of pension funds with defined benefit (DB) plans (Leistungsprimat) fell from 289 to 58 between 2005 to 2015.Of the 58 remaining, 15 were public pension funds.Whereas one in five individuals were in DB schemes in 2005, in 2015 this ratio was down to 1 in 15, according to the statistics.
Hanna Hiidenpalo, the company’s CIO, told IPE that besides increasing the diversification of its investments globally, Elo had also added allocation to strong-performing equity investments throughout the year.“A successful foreign exchange strategy had a positive impact on Elo’s overall profit, alongside equities,” she said.At the same time as making these changes, Elo reduced its hedge fund investments in 2017. Hanna Hiidenpalo, CIO, EloReporting preliminary full-year results, Elo said that its investments in emerging markets had generated the best returns out of all asset classes, with direct equity investments in emerging markets having been particularly successful. This sector beat market returns by more than 20 percentage points, with a total return of almost 50%.Hiidenpalo said one of the main investment risks was in the fact that market valuations were high in many areas. Other risks were that of a sudden or unanticipated change in central banks’ policies or the inflation outlook, and the state of the economic cycle, she said.In the next 12 months, Hiidenpalo said the pensions provider would concentrate particularly on assets managed by its own team.“We have a strong focus on our in-house investments in various asset classes,” she said.Elo also planned to increase its direct investments, the CIO said: “I would say this is one of our main themes especially in equity, fixed income and credit.”In addition to this, she said the pensions provider could increase its infrastructure investments, depending on what deals came up.“We have been active in infrastructure for many years and if we find interesting investment opportunities we have a mandate to increase these investments but on a narrow focus,” she said. “We tend to analyse the energy sector perhaps more than other sectors.” Finnish pensions insurance company Elo reported an overall return of 7.4% on investments in 2017, led by a 17% gain on listed equities.The 2017 investment return marked an up from 2016’s 5.6%. Total investments grew to €23.1bn in value at the end of December 2017, from €21.5bn at the same point a year earlier. Satu Huber, Elo’s chief executive, said: “The return on investments for 2017 was the best in Elo’s history. Global economic growth was a positive surprise and inflation remained moderate.”
Rising interest rates also contributed to reducing the scheme’s liabilities and improving its coverage ratio, which had increased to 108% at April-end.Ruud Degenhardt, PGB’s chairman, said the board was “very cautiously” considering granting members partial inflation compensation. He estimated that indexation in arrears had increased to at least 10%.The chair said that PGB’s dynamic balanced management – introduced in 2015 to generate additional returns for indexation – had again delivered surplus results, amounting to €256m in 2017.Under the dynamic balanced management sytem, the scheme’s investment risks move up and down with the scheme’s funding, while its interest rate hedge – more than 45% at year-end – follows the interest rate level.The pension fund said it also followed market trends and used valuations and momentum in its strategy.Last year, PGB was named best pension fund in the Netherlands, at the IPE Conference & Awards in Prague, due to its balanced management approach.The pension fund’s positive result was entirely due to its return portfolio, which generated 12.8%, with equity delivering 11.1%.With a return of 20.4%, emerging markets equity produced the best results. Property, infrastructure and private equity yielded 8.5%, 5.1% and 8.7%, respectively.In contrast, PGB lost 0.2% on its matching portfolio, which still was an outperformance of 1% relative to its benchmark.Euro-denominated government bonds lost 3.6%, whereas euro-denominated credit and mortgages gained 1.2% and 4.4%, respectively.PGB’s board indicated that it considered the update of the Dutch pensions system as a strategic risk to its pension products, its IT structure as well as its pensions provision.“A new system should resemble our current operations as closely as possible in order to reduce the risks,” said Degenhardt. “That’s what our clients also want.”He said that the multi-sector scheme had already started preparing for the effects of new pensions legislation through scenario analyses. The €26bn Dutch multi-sector scheme PGB has divested its holdings of inflation-linked bonds, as the allocation hadn’t met expectations due to limited inflation. In its annual report for 2017, PGB said it had reinvested the 5.2% allocation in other securities, including its equity portfolio, which increased from 40% to 43%.Last year, the inflation-linked bond (ILB) portfolio returned 1.6%.PGB reported an overall result of 6.7% and said that almost all asset classes had outperformed their respective benchmarks.