According to the Swiss daily Tages-Anzeiger, the BVK pension fund is one of the Pensionskassen contemplating legal action.But the BVK told IPE it was “not commenting on the topic at the moment” and therefore “not confirming” the newspaper article. Asip director Hanspeter Konrad said: “Pensionskassen are demanding the disclosure and payback of retrocessions, but they are frequently seeing resistance from financial institutions involved.”He said banks very often argued that commissions they received only had to be disclosed and/or paid back when the bank was mandated as an asset manager.However, according to Asip, the ruling also applies to custody and other mandates.In various memos to its members, the association frequently stressed that Pensionskassen should push financial service providers for greater disclosure on commissions and fees. Further, Asip said it was unclear which period of limitation had to be applied – either five or 10 years. A number of Swiss pension funds are planning to sue banks over the commissions they receive from fund providers and other service providers, according to Asip, the Swiss pension fund association.As part of new structural reform implemented in the country’s second-pillar pension system, schemes are obliged to be much more active with respect to transparency on fees and commissions.Pensionskassen are now claiming that some banks have failed to disclose all of the commissions, or ‘retrocessions’, they are receiving.The Swiss pension fund association said it could not name any of the banks involved but confirmed to IPE that “various Pensionskassen are looking into starting lawsuits”.
Towers Watson has predicted UK pension funds will look increasingly to de-risk by offering members cash in lieu of inflation-linked increases.The consultancy said 23% of respondents to a UK pension strategy survey said they hoped to undertake a pension increase exchange (PIE) exercise over the next three years, while one-third said they would use a retirement transfer option (RTO) for members yet to retire.Both exercises allow for the transfer of risk away from a defined benefit (DB) fund, with members who agree to a PIE forsaking future inflationary benefit increases in favour of an immediate, one-off increase in benefits.Fiona Matthews, head of implemented settlement solutions at Towers Watson, said an industry-led Code of Practice for such incentive exercises had addressed previous concerns that members did not “fully understand all the factors around PIEs”. “The Code of Good Practice for Incentive Exercises has addressed these concerns with the provision of financial advice to pensioners if the company offer is less valuable than the increases foregone,” she added.“Thus, members’ desires for flexibility can be met at the same time as providing the scheme and the company with the benefit of a reduction in the liabilities.”Matthews also welcomed a greater level of involvement from trustees in agreeing such incentive exercises, noting that a collaborative approach was “more likely to meet joint objectives besides giving members’ choice”.The consultancy also said the potential use of RTOs, allowing for the transfer of the equivalent cash sum DB benefit to a defined contribution (DC) fund, would be taken up by 30% of survey respondents within the next three years.In other news, the Pension Protection Fund (PPF) has estimated that the aggregate deficit among UK DB funds had fallen to just above £60bn (€73bn) at the end of last month, resulting in an average funding ratio of nearly 95%.According to the PPF 7800 Index, the universe’s liabilities increased marginally – by 0.2% – over the course of February, while assets increased by 1.6% over the same period.The average funding ratio, which at the end of February stood at 94.9%, was a marked improvement over the same period in 2013 – the change both a result of a £67bn drop in aggregate liabilities and a nearly £46bn increase in assets under management.
“There are exciting prospects, and to get that you need to have volume in order to make a sensible entry into the European commercial real estate loans market.“In this way, the joint venture will make something possible that we couldn’t do alone,” he said.Working together with the other pension funds would lead to lower costs and secure a better return for each partner in the fund for the benefit of their customers, Hallarth said.AP Pension said its portion of the overall investment would be DKK750m.The pension provider said it was gradually going down alternative routes in order to create reasonable investment returns for its customers. Most recently it had invested in the agricultural sector trough the launch of a DKK600m fund, and now another opportunity had presented itself, it said.Entering the European property investment had now become attractive, AP Pension said, because the financial crisis seemed to be over and there were clear signs that European growth was returning.“Cooperation between the five pension funds makes it possible to go in the European real estate market with a loan amount large enough to match the best private lending opportunities offered by Europe’s banks,” it said.AXA Real Estate last year agreed a joint venture targeting a similar geographical area with the Norwegian Government Pension Fund Global, marketing the sovereign fund’s first invetsment in real estate loans. Five Danish pension funds are joining forces to invest DKK3.6bn (€480m) in commercial real estate loans in western Europe in conjunction with AXA Real Estate.Commercial labour-market pension provider AP Pension said it and fellow labour-market pension funds Sampension, TDC Pension, the pension fund for lawyers and economists (JØP) and the Danish engineers’ pension fund DIP would invest DKK3.6bn over the next two years.The investment would be made in a newly established investment fund, it said, set up in conjunction with AXA Real Estate, which it said was the largest manager of property loans in Europe.Erik Hallarth, head of investments at AP Pension, said that he was pleased with the new cooperation between the funds.
“Finland, for example, hasn’t come back like Sweden has, while Denmark is still dealing with legacy issues and not through its workout stage yet.”Palmgren, who co-founded Genesta in 2003, has returned to the firm to manage fundraising after six years at Catella.Genesta, he added, is looking beyond the Nordics for institutional investors for the latest fund and will begin sourcing investments alongside capital raising, using advisory firm Capra Global Partners.Genesta’s first fund, Genesta Nordic Baltic Real Estate, launched in 2007 and also targeted commercial value-add properties.The fund attracted investment from 12 European institutional investors and was fully invested in Finland, Sweden, Norway and Lithuania. Genesta is raising capital for a second pan-Nordic fund targeting non-core commercial real estate in major cities.The Stockholm-based fund manager is looking to secure between €250m and €300m from institutional investors for what would be its second fund.The closed-end, seven-year vehicle will be leveraged at 50% and target an IRR of 13-14%.Anders Palmgren, Genesta senior director for fund raising, said: “The core to value-add spread is at a record high, and, up until now, investors have been more focused on core. But what we’ve found is that the four Nordic countries’ cycles provide diversification.
Several French institutional investors, including public sector fund ERAFP, are investing €515m in a new residential fund run by Caisse des Dépôts.CNP Assurances, BNP Paribas Cardif, Aviva France and EDF Invest were among the investors in the first closing of the fonds de logement intermédiaire (FLI) vehicle.Malakoff Médéric and French construction assurer Société Mutuelle Assurances Bâtiment et Travaux Publics (SMABTP) have also invested in the fund.The fund is being run through Caisse des Dépôts’ Société Nationale Immobilière (SNI) subsidiary and will invest in the Paris region and major French cities where there is a housing supply deficit for middle-class tenants. SNI said the fund’s creation was a “major step” to revive France’s construction sector and bring institutional investors back to the residential market.NLI said fundraising for the vehicle would continue through the second half of this year.The vehicle was launched following a change in taxation in January this year for institutional investment in France’s residential sector.The fund will benefit from a reduced rate of VAT, as well as exemption from property tax for 20 years.The €17bn Etablissement de Retraite Additionnelle de la Fonction Publique (ERAFP) was advised by AEW Europe, hired in 2013 to manage a socially responsible investment strategy, which could include French housing.Earlier this year, ERAFP made its début foreign investment, buying a Stockholm office in May through AXA Real Estate that it had mandated in July last year to source investments.
A spokesman for AllianzGI said: “Phil already has significant experience of developing relationships with clients in the institutional space and a deep knowledge of our products and services.”Wiggins joined AllianzGI in October 2012. Allianz Global Investors (AllianzGI) has appointed Phil Dawes as the asset manager’s new head of UK institutional, filling the gap left by Andy Wiggins, who stopped working at the firm in July.It said the appointment would enlarge Dawes’s existing role at the company, as he will carry on in his position as head of consultant relations for the pan-European region.Dawes joined the company in May 2001 and helped oversee the launch of AllianzGI’s UK infrastructure debt fund in July this year.He also served as director of that fund.
“We’d either look at that transaction for a potential junior debt or equity role, if there’s an absence of that, or we’ll move on and look at a different transaction or sector,” he said.According to Murphy, currently, there is more likely to be an equity gap facing transactions, allowing ISIF to use its flexible mandate and act as an equity house.“Having that flexibility can allow us to look up and down that structure, and it may be we play a different role on that transaction than maybe we would have initially envisaged,” he said.“But it’s still a very useful role and, even more importantly, an enabling role in transactions taking place that might have otherwise struggled.”He also stressed that it was important the ISIF not end up acting as financier to projects no other lender had shown an interest in, as it was still important for the fund to keep the required commercial return in mind.Murphy previously said the fund would consider investing in social housing projects, although these would likely be deemed of low economic impact.Speaking at a conference in November, he said the fund would grade projects for offering low or high economic impact as part of its mandate to stimulate growth in Ireland.For more from Donal Murphy on the ISIF’s approach to funding and how it assesses the economic impact of projects, see the Pensions In Ireland section in the current issue of IPE A resurgent banking sector has seen the Ireland Strategic Investment Fund (ISIF) reassess its role as debtor to Irish companies, with rising competition from lenders leading the sovereign wealth fund to consider other roles.Donal Murphy, the €7.1bn fund’s head of infrastructure and credit finance, told IPE the funding gap that existed after the financial crisis was often no longer there, replaced by a “wall of liquidity coming from bank debt back into Ireland”.“There are plenty of scenarios where there is a very competitive bank market with a large number of banks seeking roles on individual transactions and individual deals,” he said.Murphy explained that situations where there were sometimes up to a dozen banks competing for term sheets would not see ISIF join a queue to bid.
Unusual European Central Bank (ECB) monetary policies helped decrease financial fragmentation and boost asset classes across the currency union, according to a study.The annual report from the ECB shows that financial integration among euro-zone countries has reached levels not seen before the currency bloc’s sovereign debt crisis, with non-traditional policies lending a helping hand.While the report looks specifically at the situation in 2014, the ECB said its monetary policies, which have expanded to include quantitative easing, would enhance financial integration further in future.The annual study, ‘Financial Integration in Europe’, says the price-based indicators of financial integration developed by the Bank reverted to levels seen before 2008 but are still below a peak seen in 2007. This translates into financial integration across a range of asset classes including bond and banking markets but not equity.“Apart from equity markets, where the most recent developments have shown some volatility, financial integration in money, bond and banking markets consistently shows a sustained increase,” the ECB said.“The overall improvement in financial integration is expected to continue also as a consequence of the monetary policy actions taken by the ECB to restore the bank intermediation channel, as well as of the effective implementation of the Banking Union.“At the same time, it will be important to monitor closely the process of increasing financial integration also in light of the past experience before the financial crisis.”In 2014, the ECB introduced Target Longer-term Refinancing Options (TLTROs), brought deposit facility rates to negative 20 basis points and announced the purchase of asset-backed securities and covered bonds in the euro-zone.In improving bond market financial integration, the ECB said its actions had underpinned confidence in markets, which combined well with a general decrease in confidence disparity across the currency members.“The monetary policy stance was still accommodative overall,” the Bank said.“This contributed to a search for yield in higher-risk assets and drove the sovereign spreads of several countries lower and may have contributed to a reduced fragmentation of the European sovereign debt market.”In money markets, the ECB said its policies also helped increase integration, citing a decline in the level of excess liquidity.The introduction of the negative 20 basis point deposit rate for banks, forward guidance, TLTROs and the original asset-purchase programme helped keep money market rates contained, the Bank said.The ECB’s decisions over the course of 2014 have dismayed many European pension funds, with rate cuts affecting cash holdings, and asset-purchase programmes squeezing yields on sovereign bonds – affecting liability measurements.Dutch pension funds recently lamented the ECB quantitative easing programme as several fell below required funding levels despite strong asset returns.,WebsitesWe are not responsible for the content of external sitesLink to European Central Bank report
The combination of volatile stock markets and falling interest rates is having a dramatic impact on the coverage ratio of Dutch pension funds. During August, the average funding has already dropped 5 percentage points to 101%, according to pensions adviser Mercer.Dennis van Ek, actuary at the consultancy, described such a rapid decline over such a short period as “extreme”.Aon Hewitt, which uses a slightly different accounting method to calculate its average funding rato, even claimed a larger funding drop. According to Mike Pernot of Aon Hewitt, the average coverage ratio had already fallen 5 percentage points by last Friday, and the declining stock markets since have added at least a further 2 percentage points.At July-end, the consultancy concluded that funding stood at 104% on average, which would imply that the current coverage would be no more than 97% on average.The minimum required funding of Dutch pension funds is 105%.Van Ek of Mercer said that on Monday the MSCI World Index and the MSCI Europe Index had fallen 14% on average since the start of August.Equity holdings of Dutch pension funds are roughly equally divided across Europe and the rest of the world.The pensions adviser further said that the 30-year swap rates – the relevant rate for discounting liabilities – had dropped from 1.50% to 1.44% in August.He added that many pension funds were making inquiries about developments. Schemes with a liability-driven investment (LDI) policy in particular, were asking for advice on the level required for their interest hedge, Van Ek said.According to Mercer, the average funding of pension funds has dropped 8 percentage points since mid-July.Mercer bases its funding calculations from the most recent reports by De Nederlandsche Bank, examining the asset allocation of funds and their level of interest rate hedging – currently approximately 40% – and uses a currency hedge of 50%.Aon Hewitt assumes an asset allocation of 30% equity, 50% fixed income and 20% alternatives. It uses an interest hedge of 50%, but does not calculate the potential impact of hedging currecy exposure.Its model is also based on a hypothetical pension fund where one-third of the total number of participant is retired.
The return portfolio is to be increased to 50% of total assets, partly by raising the allocation to developed-market equities from 25% to 30%.The DEPF is also thinking to increase exposure to indirect property and emerging market equities from 5% to 7.5%, while ramping up holdings in emerging market debt, from 2.5% to 5%.The scheme will divest its 2.5% commodity allocation entirely.The DEPF expects to maintain its new investment strategy for at least the next three years.As part of the portfolio reshuffle, it adjusted the allocation of the €50m financial reserve aimed at indexation for its 2,225 active participants, which had been fully invested in credit.It replaced one-quarter of the portfolio, which generated 9.7% in 2014, with develop-market equities.The scheme also introduced a dynamic interest-risk hedging policy – in increments of 35%, 50%, 65% and 80% – with the level of cover following interest rates.It will reduce the interest hedge from 50% to 35% this year as a consequence of the new policy.Last year, the Douwe Egberts scheme reported an 18.8% return.It warned that it may be unable to grant indexation on 1 January, as its official policy funding ratio was 110.9% as of the end of September.Under the new financial assessment framework (nFTK), pension funds are prohibited from paying inflation compensation if their policy coverage is less than 110%. The €1.7bn Dutch pension fund of coffee producer Douwe Egberts (DEPF) is planning to increase its return portfolio to increase the potential of generating long-term returns. The adjustment will come at the expense of its 60% matching portfolio, which the scheme will cut to 50% of total assets.The DEPF said it would reduce holdings in long-term government bonds and interest swaps from 31% to 25%, while lowering its credit allocation from 24% to 20%.It will maintain its residential mortgage exposure at 5%, however.