EIOPA rolls up sleeves on new HBS proposal for IORP II

first_img“EIOPA stands ready to undertake all the necessary work in order to ensure safe, sustainable and adequate pensions for European citizens.”He said EIOPA was now working to improve definitions and methodologies for assessing the HBS approach and would run further assessments in the coming months.“My aim,” he said, “is to present the next Commission with further tested technical proposals for a European, risk-based prudential regime that appropriately reflects the specific reality of pension funds.”At a closed-door event in Brussels in July, Bernardino announced that the HBS approach within the revised IORP Directive was not “a dead-end street”, in spite of the European Commission’s decision earlier this year to postpone pillar one for the same directive.The HBS approach is, according to him, a way to capture “the wide variety of occupational pension systems in the different member states in a single, European prudential regime”.“The holistic balance sheet allows pension funds to recognise the value of all security and benefit-adjustment mechanisms available to them,” he said at the time.“All in all, the holistic balance sheet is able to provide a comprehensive and comparable view of how far occupational pension promises are supported by financial assets, sponsor support and pension protection schemes, and how far benefit adjustments are expected to occur.”In May, Michel Barnier, the current commissioner for internal market, said the Commission would postpone the implementation of pillar one, which focuses on capital requirements, arguing that solvency rules should be an “improvement for the pensions sector, rather than a punishment”.Barnier said he considered the quantitative rules to be a job for his successor. The European Insurance and Occupational Pensions Authority (EIOPA) is working to improve methodologies for assessing the holistic balance sheet (HBS) approach within the IORP II Directive, with the view to presenting further tested technical proposals to the new European Commission next year.  EIOPA’s chair, Gabriel Bernardino, speaking at the hearing of the chairmen of the three European Supervisory Authorities, said the first quantitative impact study – which aimed to assess the HBS approach – had revealed large differences in the protection of members and beneficiaries across Europe.He also pointed out that pension funds disposed of “vulnerabilities” in different areas.“Some are very dependent on future payments by the sponsor, and, in others, substantial benefit reductions are expected,” he said.last_img read more

Atos to fund Dutch pension scheme through share purchase

first_imgAfter approval at the company’s ordinary general meeting on 27 December, the second tranche of share purchases was approved.The requirement to fund its Dutch subsidiary pension fund came after an agreement was reached on 18 December 2013.The software company, headquartered northwest of Paris, said it sourced an investment service provider to manage the purchase of its own shares over the next few months, beginning today.Atos said it would purchase its own shares in four separate periods, each spanning 20 days and accounting for one-quarter of the total buy-back.The firm will buy its shares using the average price in each separate 20-day period.At the end of each period, the shares purchased from the open market will automatically be transferred to the Dutch pension fund, Atos confirmed. French IT company Atos has announced the launch of a share buy-back programme from the open market to provide funds for its subsidiary pension scheme in the Netherlands.The company, listed in Paris but operating globally under a variety of brands, said the move would raise around €115m in shares for the Atos Dutch Employee Pension Fund.This finance is in addition to €43m in cash provided from Paris to the scheme in 2013.The announcement is a continuation of its share buy-back policy, after it revealed in November 2013 that a second tranche would eventually take place.last_img read more

De Eendragt makes radical portfolio shift in bid to raise solvency level

first_imgDe Eendragt, the €1.5bn Dutch pensions insurer, has shifted its entire investment portfolio into fixed income to lift its solvency to the required level. To improve its risk profile, the insurer offloaded all stakes in equities, non-listed property and alternative investments, according to its 2013 annual report.The company – which provides defined benefit, defined contribution (DC) and collective DC plans for companies of the former paper mill Van Gelder – saw its financial position deteriorate following the adjustment of the European Central Bank’s AAA curve as a result of the downgrading of France.As a consequence, De Eendragt had to write off €38m worth of assets, it said. In addition, a new and improved internal model for liabilities had a negative impact on De Eendragt’s assets, which also suffered from stricter Solvency II requirements.As a result of these developments, the pensions insurer was unable – for the second time in a row – to grant indexation to deferred participants or pensioners.The insurer also revealed in its annual report that it failed to attract any new clients last year.De Eendragt argued, however, that its proposition was still attractive, pointing out that most expiring contracts had been renewed over the period.The board said it decided to carry on as an independent company after an extensive strategic study into the possibility of cooperating with other players in the pensions industry failed to reach a satisfactory conclusion.It also said its new executive board had been tasked with prioritising the development of a strategy for the long term, after Philip Menco, its director since 2004, departed last May.De Eengragt lost 5% overall last year, citing the effect of rising interest rates on its fixed income holdings in particular.Its ‘maximum diversification strategy’ for emerging market equities returned 31%, while its ‘minimum variance’ approach for the same segment returned 4%.De Eendragt’s 30% non-listed property holdings – the “cornerstone” of the investment portfolio since 2007 due to the attractive risk/return ratio over the mid term – generated 1.6%.The insurer attributed the result in part to a further decrease in the value of its assets after appointing a new surveyor.In its annual report, De Eendragt confirmed it divested its stake in a long/short commodities fund – after a 7% loss – due to disappointing long-term performance.It also terminated its Global Tactical Asset Allocation strategy earlier this year after it produced a net return of 1.2%.According to the insurer, its long-term trends-based investment in a CTA hedge fund returned 9%, while its stake in a short-term strategy delivered a slightly positive result.De Eendragt did not respond to IPE’s repeated requests for additional information.last_img read more

Swiss railway fund signals plan for flexible pension on hold

first_imgA change of such a technical matter would help to avoid cross-financing between generations, those in favour of the change argue.The PK SBB is now continuing the debate on lowering the discount rate for active members to 2.5%.An additional measure might be to introduce so-called generation tables, which would pool the longevity risk for age-specific cohorts rather than sharing it across the fund’s entire membership according to year of birth.“We expect those two measures to be introduced and a decision to be made by the end of the year,” Hübscher pointed out.He also noted that “the introduction of three measures” would have been too much in a one-off move, hence the decision to postpone the introduction of the flexible pension model.A local transport union welcomed the decision, releasing a statement titled “The wobbly pension is off the table”. It viewed the end of the plan as a victory for its negotiations with SBB as it had argued that flexible pensions would “shift all the risk towards scheme members”.However, supporters of the measure note it would return some fairness between generations into a system where pensions cannot be cut while active members have to bear the burden of recoveries.However, other pension funds are also sceptical when it comes to flexible pensions.Francoise Bruderer, managing director of the CHF15bn PK Post, warned the introduction of flexible pensions was “misleading” at the current pension payout level.She explained people will always expect the higher payout if you tell them their pension is going to be between 90 and 100.“It is much more honest to communicate directly that the conversion rate has to be cut because of the demographic development and the uncertain situation on the financial market,” she pointed out.Bruderer added this was the “difficult, but right way”. The CHF15.6bn (€12.7bn) pension scheme of the Swiss federal railway has decided against introducing a variable pension payout model.The pension fund was one of very few in Switzerland contemplating the controversial move towards a fixed basic pension, with bonuses to be paid out in times with good returns.Markus Hübscher, managing director at the Pensionskasse SBB (PK SBB), confirmed to IPE that “for the moment” the pension fund will not be introducing flexible pensions.He added the “main reason” for the decision was that the pension fund wanted to wait for the outcome of the political debate around the new reform package ’Altersvorsorge 2020’ which, among other matters, includes proposals to lower the legal minimum conversion rate.last_img read more

Scottish LGPS should award ‘degree of priority’ to infrastructure

first_imgScotland’s local authority funds should prioritise investments in regional infrastructure projects, including housing, according to a committee of Scottish parliamentarians.In a sign that local government pension schemes (LGPS) are coming under pressure to invest in infrastructure in all parts of the UK, the Scottish Parliament’s local government and regeneration committee said it was urging schemes to consider increasing exposure to the asset class if they had not already done so.It argued that a number of pension funds had been able to “reconcile” the risk associated with infrastructure investments – locally and nationally – with positive social or economic impact, as the assets were “less volatile” than other investments.“We, therefore, advocate those [LGPS] in Scotland, which haven’t yet considered these types of investment, to challenge themselves to do likewise and give a degree of priority to investing members’ funds more locally and building in elements of public good,” it said.  As an example of such a project, MSPs cited the Greater Manchester Pension Fund’s decision to contribute towards the construction of social housing on local authority land.Lothian Pension Fund, responsible for the retirement assets of local authority workers in Edinburgh, has previously questioned exposure to social housing over the associated reputational risks. The committee came out against the UK government’s proposals to force LGPS assets across England and Wales into as many as six asset pools, which UK chancellor of the Exchequer has previously argued would see increased exposure to infrastructure.In the report, MSPs said they agreed infrastructure investment was “vital” for a successful economy but that the committee was “less attracted” to the formal pooling arrangements.It added that informal collaboration seemed the favoured method “because there was a willingness to work together for a shared vision and benefit”.The report also encouraged funds to seek out collaborative efforts to reduce costs.It said proactive collaboration was of “particular importance” in light of the potential for the Scottish government to follow London’s example in scrapping investment regulations in place for the LGPS.MSPs also argued that the Scottish LGPS Scheme Advisory Board should offer a forum to “form working collaborations” for those interested in jointly investing in infrastructure.last_img read more

PKA crystallises PE gains on one of ‘best investments ever made’

first_imgPKA, the pensions administrator that runs three Danish pension funds, has sold electrical components company KK Group to Scandinavian investment firm Solix, crystallising private equity investment profits from what it says may have been one of the three best investments it has ever made.A PKA spokesman said the pensions provider could not disclose the price it was paid for its controlling interest in the company.However, the firm said it made more than DKK1bn (€134m) in terms of ongoing dividends, as well as the sale of the investment in the KK Group, which it first bought in 1983.Michael Nellemann Pedersen, investment director at PKA, said: “We have made an outstanding return, and there is no doubt that KK is a top candidate to join PKA’s top three best investments over time.” PKA got the original sum it invested in the business back more than 100 times, he said.“Of course, there have been many challenges on the way, but we are proud that PKA – together with the company’s managers and staff, as well as Maj Invest – have transformed KK from a local electronics business to a leading global and innovative business for sustainable-energy products,” he said.Nellemann Pedersen said now the time had come for others to continue KK’s development.Solix is buying the KK Group from PKA, investment fund Maj Invest – which has been a co-owner since 2010 – and KK Group’s chief executive Tommy Jespersen, as well as its finance director Johnny Haahr.Jespersen and Haahr have been running the company since 2004.The KK Group is one of the world’s main suppliers of electrical components for the wind-power industry, with the company’s products involved in equipment producing more than 60% of total off-shore wind power capacity.PKA manages total assets of DKK250bn on behalf of three labour-market pension funds in the social and healthcare sectors.last_img read more

Alternative credit can bridge between return and matching assets: NN IP

first_imgAlternative credit and real assets could act as a bridge between the traditional return and liabilities portfolios as demand for matching asset changes, asset manager NN IP has argued.Ageing populations and low interest rates have driven down interest rates, altering the way investors balance growth and matching assets, NN IP said.Bart Oldenkamp, the firm’s managing director for integrated client solutions, highlighted mortgages, credit, property, infrastructure, and renewable energy as offering attractive returns combined with a low volatility and a low correlation with other asset classes.In a presentation during the annual congress of the Dutch Pensions Federation, Oldenkamp said individual pensions accrual – part of a proposed new pensions system in the Netherlands – could trigger the need for different matching requirements. He added that alternative credit and real assets could also increase the potential for responsible investment relative to a traditional asset class, such as government bonds.Using an example of a infrastructure loan for a motorway, Richard Sanders, investment strategist at NN IP, said the loan could act as an alternative for interest swaps because of the stable rental income a government would pay over several decades. His example generated annual interest of 2.7%, which is 150 basis points higher than interest rate swaps and 60 above BBB credit, at the time of financing.Sanders added that such a loan also contributed to diversification and had an environmental element: “The secondary route replaced by the motorway could become cleaner and safer. This effect is measurable.”However, the investment strategist emphasised that the investment could not be used as collateral for derivatives because of its illiquid character.“As the secondary market is limited, it is sensible to keep the investment until the end of its duration,” Sanders saidOldenkamp added that an infrastructure loan was a more complex product than liquid alternatives such as credit and government bonds.“It is not entirely risk-free and requires more expertise as well as attention for reporting and monitoring,” he said.last_img read more

ABP takes majority stake in Dutch telecom towers operator

first_imgIn a joint statement, Corien Wortmann-Kool, ABP’s chair, said that the telecom sector was attractive to ABP “as it offered potential for strong growth and added to diversification within its infrastructure portfolio”.She added that the investment would contribute to managing and developing crucial infrastructure for mobile connection, in particular in the rural areas in the Netherlands.Earlier this year, ABP acquired a portfolio of 48 infrastructure assets for €700m from the Dutch Infrastructure Fund. Assets included the DUO government building in Groningen, the Montaigne school in The Hague, hospitals as well as part of the A15, the main access road to Rotterdam’s ports. Dutch civil service pension fund ABP has acquired a 75% stake in the Open Tower Company (OTC), which operates more than 800 telecom towers in the Netherlands.The OTC was previously owned by Rabobank and Novec, a subsidiary of power grid operator Tennet. Novec will keep its 25% stake, according to the four players.A spokesman for Rabo Bouwfonds Communication Infrastructure (CIF) said that the seller and buyer had decided not to provide financial details of the transaction.CIF and Novec set up OTC in 2009 in order to establish a telecom tower network for mobile communication in the Netherlands.last_img read more

PensionDanmark adds first female directors to leadership team

first_imgMarianne Fussing Ørsted, PensionDanmark Danish labour-market pension fund PensionDanmark has made its first female appointments to its executive board.Ulrikke Ekelund and Marianne Fussing Ørsted have been promoted to the now seven-strong leadership team, the fund announced today.Torben Möger Pedersen, PensionDanmark’s chief executive, said the pair were skilled leaders who made a difference for the fund and its members.“I am pleased that with the appointments of Marianne and Ulrikke, PensionDanmark has gained its first two women directors,” he added. Ulrikke Ekelund, PensionDanmarkFussing Ørsted was previously deputy director at PensionDanmark, having been hired at the beginning of 2009 as assistant to the executive board. She was also in charge of the management secretariat, HR and internal services as well as public affairs and corporate sustainabity.She came to the pension from a role as political staff member for Liberal Party (Venstre) politician Peter Christensen in the Danish parliament.Ekelund, meanwhile, started at the fund two years ago and is head of press and communications.Before coming to PensionDanmark she was chief economist at BRFkredit. She is also a former economist within the Danish Ministry for the Economy and at the Danish central bank.center_img The board now consists of seven directors including Möger Pedersen.last_img read more

Luxembourg reserve fund names green bond, impact managers

first_imgFDC also awarded a €750m global equities “sustainable approach” mandate, which was secured by Robeco with AQR Capital Management as the standby manager.The first investments under the new mandates are planned for the first quarter of next year, according to FDC.The mandates are the outcome of FDC’s revised investment strategy of 2017, which included a decision to “intensify and expand the consideration of sustainable and socially responsible investment criteria”.The fund has adopted a policy of requiring asset managers applying to run an actively managed mandate to provide evidence that they implement a sustainable or socially responsible approach in their investment strategy and decision-making processes. This could be by way of positive or negative screening, thematic investments, engagement, or other means.The “sustainable approach” wording for the mandate awarded to Robeco captures this revised approach to manager selection. Investment managers’ approach to sustainability is understood to have counted for 10% of the overall selection decision. Luxembourg’s €18bn pension reserve fund has announced the winners of a tender for its first mandates dedicated to seeking a positive social or environmental impact.The Fonds de Compensation (FDC) awarded a €200m mandate for “sustainable impact” global equities to BNP Paribas Asset Management in Paris, while Allianz Global Investors’ branch in the French capital won a €100m euro-denominated green bonds mandate.FDC said the equity impact mandate was exclusively for investments in listed companies “that intend to generate” a financial return as well as a “social or environmental impact”. The investments must cover at least five of the 17 Sustainable Development Goals.Mirova and NN Investment Partners are on standby for the respective mandates.last_img read more