It found that the Norwegian Government Pension Fund Global – the largest European asset owner, with NOK5.5trn (€556bn) at the end of June – accounted for 11% of assets held by the 1,000 largest pension funds.Dutch civil service scheme ABP, with €309bn in assets at the end of March, came a distant second with 6% of assets, followed by Dutch healthcare scheme PFZW with 3%.Denmark’s ATP came fourth with around 2% of assets, followed by Sweden’s Alecta in fifth.According to Michael Yusko, senior director at Standard & Poor’s (S&P) Capital IQ, the tables provides a “snapshot” of an industry that is “dynamic and […] perpetually changing”.Fennell Betson, founding editor at IPE, said the Top 1000 survey was unique in that it attempted to “estimate the wider ‘occupational pensions sector’ by collecting data for book reserve and life and pension insurers”.He added: “The IPE study, based on figures compiled by S&P’s Capital IQ Money Market Directories, covers just 1,000 funds – albeit the largest in Europe.“There are thousands of funds not included. Therefore, the real total figure for Europe’s pensions assets may be as elusive as ever.”To order a copy of the IPE Top 1000 Pension Funds or request the data in a digital or Excel format, contact Emma Morgan-Jones at [email protected] European pension assets increased to €5.5trn last year, up by almost €300bn, according to IPE’s Top 1000 Pension Funds survey.Data compiled by S&P Capital IQ found that a 5.5% increase recorded in European assets under management lagged behind the global increase in assets for institutional investors.Over the course of 2013, assets among the Top 100 global institutional investors increased by €1.64trn to €21.14trn, up by 8.4% year on year.The survey – a composite of data collected by the European Central Bank, the European Insurance and Occupational markets Authority, industry body PensionsEurope and the OECD – also listed the largest institutional investors in individual European countries.
Multi-asset strategy10% Diversified alternatives10% Greenwich’s local authority pension fund is tendering a £100m (€139m) absolute return mandate, bringing to £700m the value of tenders recently conducted by the scheme.In the tender, for a multi-asset pooled fund, Greeenwich said it was looking for a manager to outperform the three-month sterling LIBOR rate by a significant margin, defined as 3-5%.The local authority pension scheme (LGPS) said it would expect the pooled solution to grant it exposure to asset classes including equities, bonds, currencies, commodities and property but added that it would not consider hedge-fund-of-fund solutions.Asset managers have until 23 February to register their interest with the council’s procurement department. Emerging markets active10% Greenwich strategic allocation Greenwich strategic allocation Asset ClassTarget Smart beta10% UK equities 5% cap weighted15% Bonds20% UK Aggregate Bond Fund10% Multi-asset credit10% Overseas Equities35% Property10% Global equity passive15% The tender comes as the scheme implements its new strategic asset allocation. The new allocation calls for a 10% exposure to multi-asset strategies, standing alongside a 10% exposure to diversified alternatives, for which it launched the manager search in November.It has also tendered £400m worth of equity mandates and, more recently, a £100m emerging market equity mandate.
Global law firm Jones Day has set up an internal working group to address legal issues arising from upcoming defaults in emerging market corporate debt securities held by institutional investors.Jones Day has been engaged by an unnamed large global bank with significant exposure to Indian corporate debt, according to Ferdinand Mason, a partner at the firm.The bank asked the firm to analyse the legal landscape and “look for ways to avoid the Indian jurisdiction if necessary” when recouping potential losses from corporate defaults.The law firm warns that a wave of defaults in emerging market corporate debt is likely to hit investors in the asset class. This is signalled by the high leverage multiples seen within emerging market corporates, particularly in Asia.“We’re looking at anything between $15trn (€13.5trn) and $18trn of emerging market corporate debt, half of which is held by local banks and the other half by bondholders, primarily based in the US and UK,” Mason said.“If you look at M&A activity at the moment, you have Chinese companies buying mega US, UK or EU corporates with leverage levels several times higher than their targets. The debt levels are just incredible, and it’s all funded by the Chinese banks.”Mason explained that some emerging countries were engaging in what could be seen as state aid, by allowing local state-owned banks to roll over maturities of corporate debt.If that is the case, such countries could be in violation of trading treaties with Western economies.“That debt is vulnerable. It could be nullified, or it could be void, becoming a disaster at the end of the road for the ultimate investors, all the way up to the bondholders,” Mason said.“When the credit of local banks becomes vulnerable, the first thing governments will do is take care of its banks. There will be less concern about issuing vehicles outside its jurisdictions.”The firm is advising institutional investor clients to “get ready now”.“It’s time now to start getting compliance teams and risk management groups together to understand the issue and have a road map to make sure everybody understands what the best angle is in terms of enforcement,” Mason said. According to Jones Day, many issuers of hard currency emerging market corporate debt have structured vehicles based in jurisdictions outside their countries of origin, such as Luxembourg, the Cayman Islands or the British Virgin Islands.That is where legal advisers may be able to negotiate terms to recoup assets in cases of defaults.“The world of distressed debt in 2016,” says Mason, “has become very multi-jurisdictional.”
Jan Rasmussen, director of business development, told IPE: “The first phase of this process is to discuss how we can address the challenge that different pension funds offer different conditions for these workers.”In Denmark, ‘pædagog’ or education practitioner, is the professional name for specifically trained staff in nurseries, kindergartens, after-school clubs and day and residential institutions.Other pension funds covering education practitioners are those run by, for example, PKA, PenSam and Lærernes Pension, the pension fund for teachers, Rasmussen said.In the last five years, PBU estimates that nearly one-third of its working members transferred to another pension fund based on their new workplace, or transferred into PBU. It said changing fund and scheme could be confusing and costly for members.Asked whether the talks could end up with a decision to merge pension funds in some way, Rasmussen said: “One cannot exclude the possibility these talks will end up in the decision to have one set-up for all education practitioners, but, presently, we don’t have specific plans, and that would eventually be years from now.” PBU’s 108,000 members were covered by a homogeneous market-rate product, he said, while other pension funds that had members with the same qualification provided a with-profits (gennemsnitsrente) pension product.Rasmussen said this type of process to reduce the differences between labour-market pension scheme types was a common challenge within the Danish pension sector.“But this is especially the case in our sector, where there is high mobility between different pension funds,” he said.Ultimately, Rasmussen said, PBU’s aim in the task it is undertaking is to make conditions better for its members.Neither PKA nor Lærernes Pension were immediately able to comment on the matter. Denmark’s DKK55bn (€7.4bn) pension fund for education practitioners, PBU, is aiming to start talks with other pension funds and stakeholders that it says could lead to all people in the profession having the same pension, rather than the diverse provision that exists now.As things stand, education practitioners in Denmark may be part of collective agreements where their pension is provided by PBU (Pædagogernes Pensionskasse), or belong to agreements using another pension fund for their pension.This means individuals may find themselves having to switch pension provider when they change jobs within the same profession.PBU said it had now started a process aimed at solving this problem.
Nils Bolmstrand “He has the competencies and experience within the asset management business, and he has strong leadership and personal skills.”Ahead of appointing a permanent replacement for Bolmstrand at Nordea Life & Pensions, the subsidiary’s head of its Swedish Life & Pensions organisation Johan Nystedt has been appointed as its acting head.Nystedt will keep his position at the Swedish business while he is in the temporary role, Nordea said.Since Hyldahl left Nordea at the end of October, Christophe Girondel – the firm’s head of institutional and wholesale distribution – has been acting head of the subsidiary.Nordea Asset Management is the largest asset manager in the Nordic countries, and number 43 in IPE’s 2016 ranking of European institutional managers. Nordic banking group Nordea has found a replacement for Christian Hyldahl, the former head of Nordea Asset Management, who left in October to become the next chief executive of Danish pensions giant ATP, by shifting the head of its life and pensions subsidiary Nils Bolmstrand into the vacant post.Bolmstrand, who has previously had managerial jobs at Nordea Asset Management before starting his current job as head of Nordea Life & Pensions, will take up his new position as head of the asset management unit on 1 January 2017.Snorre Storset, head of Nordea Wealth Management – one of Nordea’s four business units, which encompasses the life and pensions and asset management subsidiaries – said: “Nils Bolmstrand is the right person to maintain the very strong momentum and development of Nordea Asset Management.
He said: “Sterling is almost at the end of a nine-year cycle. Normally we would expect it to bounce back, but given Brexit we don’t expect that bounce back because there are no triggers for it.”Sterling has fallen by roughly 10% against the euro since the EU membership referendum on 23 June last year. It has declined 15.5% against the US dollar.Bhaduri said JLT had decided to move to an underweight position in UK equities, preferring a more diversified global equity exposure. This thinking was driven more by the outlook for inflation than by specific concerns about Brexit, however.“The FTSE has been doing very well,” Bhaduri said. “We believe that, in the medium term, because of the pick up in inflation consumer demand is going to get affected. That’s overall going to be a drag on earnings and might be one headwind for the UK.”Hartman added: “This [Brexit] is a pretty big thing for the UK, but you need to put it in the context of pension fund portfolios being very global.”He said the end of the scheduled two-year negotiation period was not necessarily a cliff-edge for investors.“For the most part, in global equity or fixed income indexes the UK is a very small part, so investors can look through that,” Hartman said. “Private equity is the same. Real estate is more domestic, but we’ve had commitments from Asia to keep investing. Some Chinese investors are buying big offices in London.”Overall, however, the message was to keep Brexit on the agenda, but without making big asset allocation shifts.Hartman emphasised that “there are lots of questions and no answers”.“The only thing we know for certain is we have triggered Article 50,” he said. UK pension funds and asset managers are considering increasing their currency hedging as the country braces itself for EU exit talks to begin.While much of the investment-related commentary around the start of the talks has been about taking a ‘wait and see’ tone, consultants told IPE some clients and fund managers were beginning to prepare for a volatile period ahead.Lennox Hartman, global head of fixed income research at Aon Hewitt, said: “We’ve seen an uptick in interest in currency hedging. Some managers are offering – or thinking about offering – currency-hedged products, and we’ve been speaking to currency overlay managers about how they can fit into portfolios.”While UK-listed equities have been helped in recent months by the effect of sterling’s decline in value, Aniket Bhaduri, senior investment consultant at JLT, warned that the Brexit talks meant investors could not rely on traditional cyclical expectations.
EDHEC-Risk Institute – Three pension fund executives have joined the institute’s international advisory board: Jayne Atkinson, chief investment officer of Unilever UK Pension Fund, Takashi Yamashita, director, investment strategy at Japan’s Government Pension Investment Fund, and Brnic Van Wyk, head of asset/liability management in the investments division of Australian superannuation fund, QSuper. Stéphane Monier, head of private client investments at Lombard Odier, and Lisa Shalett, head of investment and portfolio solutions at Morgan Stanley Wealth Management, also joined the 37-strong advisory board. It is chaired by Mark Fawcett, CIO of the trustee body running the UK master trust NEST.AP7 – Pontus von Essen has joined the Swedish buffer fund as senior portfolio manager. He was previously deputy chief investment officer at Ericsson Pensionsstiftelse, the Swedish pension foundation for Ericsson employees, where he had co-responsibility for the its asset allocation and manager selection in all asset classes. He took on that role in March 2014, having previously been a portfolio manager and head of equities at the foundation. Von Essen joined AP7 this month. Pensions Management Institute (PMI) – Lesley Carline and Lorraine Harper are taking over from Gerry DeGaute and Robert Branagh, respectively, as vice-presidents of the UK professional body. Carline is a director at KGC Associates and Harper is a director and head of governance services at JLT Benefit Solutions. Branagh was recently appointed president of PMI, succeeding Kevin LeGrand.Russell Investments – The Seattle-headquartered asset manager has chosen Michelle Seitz as its new CEO, to replace Len Brennan. She joins after 16 years at the helm of William Blair Investment Management. Before taking on the leadership role she was head of the firm’s private wealth management business. Brennan will serve as chairman of Russell Invesments until the end of 2017, when he will become a strategic advisor to the firm.OneFamily – The UK customer-owned financial services company has appointed Denise Saber as a funding consultant to help it build its lifetime mortgage business with institutional investors. Before joining OneFamily, she was head of institutional business development at First State Investments and partner and head of distribution at Craigmore Farming Partnership, where she helped establish the firm’s first private equity farming fund. She has also been head of European business development at Insight Investment.Amundi Asset Management – Thierry de Vergnes has been hired as head of debt fund management within the asset manager’s dedicated platform for real and alternative assets. He previously worked at Lyxor Asset Management, where he created the debt fund management business. He spent nine years at Société Générale, of which Lyxor is a subsidiary. From 1985 until 2003 he worked at Indosuez Bank.Aviva Investors – Peik Wardi has been named as head of Nordics for institutional client solutions. He joins from Aktia Asset Management, where he was head of institutional sales, working with pension schemes, insurance companies, corporates, universities and foundations. Before that he worked at Kaupthing Bank and State Street Global Advisors.KAS BANK – Glenn Brown is now senior relationship manager at the securities services provider, where he will be responsible for building long-term relationships with KAS BANK’s UK pension fund clients. He was previously at Northern Trust for 18 years, where for the past two years he was working as client relationship manager for its institutional investor group.BMO Global Asset Management – Rogier van Harten has been appointed to the newly created role of head of institutional distribution and client management for continental Europe, excluding Germany. He joined on 1 September, and is based in the Netherlands. He was previously at BNP Paribas Asset Management, where he was head of institutional clients for the Netherlands, and then for continental Europe, excluding France, Belgium and Italy.Muzinich & Co – The corporate debt specialist has created the role of head of institutional business, to which it has appointed Simon Males, effective this winter. He will be joining from Legal & General Investment Management, where he was head of global fixed income distribution. Before that he was managing director, institutional client relations at Pramerica Fixed Income and before that spent five years as head of institutional business at Pictet Asset Management. Deutsche Asset Management – Niki van Delft has been hired as sales manager for passive investments, Benelux. Van Delft will report to Arjen Jonk, who was recently named head of passive investments for the Benelux region. He joined from Columbia Threadneedle Investments and has also worked at BlackRock.HSBC Global Asset Management – Simon Davies has been hired as sales director for UK pensions. Davies joins from Standard Life, where he was corporate relationship director. Before that he held senior positions in corporate pensions at KPMG, and at Aon Hewitt, where he was head of defined contribution pensions. FCA, Pensions Quality Mark, Arkadiko, AP7, Ericsson Pensionsstiftelse, EDHEC-Risk Institute, PMI, Russell Investments, William Blair, OneFamily, First State Investments, Amundi, Lyxor, Aviva, Aktia, KAS Bank, BMO GAM, Muzinich & Co, LGIM, Deutsche, HSBC(This article has been updated with the FCA and Arkadiko appointments)Financial Conduct Authority (FCA) – Former shadow minister of state for pensions Gregg McClymont has been appointed deputy co-chairman of the UK regulator’s working group on costs and charges disclosure in the asset management sector. Jeff Houston, head of pensions at the Local Government Association, is the other deputy co-chairman. Chris Sier, a veteran campaigner for cost transparency, was named head of the group last month. McClymont, who is head of retirement at Aberdeen Standard Investment, has also been appointed to the Pensions Quality Mark (PQM), the UK pension trade body’s standard for recognising high quality defined contribution pension schemes. At PQM, McClymont will replace Adrian Boulding. Arkadiko – Colin Melvin, the former global head of stewardship at Hermes Investment Management, has founded a consultancy, Arkadiko, to help investors improve the quality of their stakeholder relationships, “thereby strenthening their business models”. It aims to help rectify failures of the financial system by helping investors adopt longer-term behaviour. Melvin is managing director at the firm. He left Hermes in December 2016.
The option of a real-terms pensions contract was reportedly also being discussed by the Social and Economic Council (SER), the Dutch government’s main advisory body made up of employers and workers.The real-terms feature was reportedly brought in to the discussions as the unions kept their objections to individual pensions accrual, favouring collective accrual instead.The individual pensions accrual was to be dropped, according to De Telegraaf, as the deliberations within the SER didn’t show “much added value ultimately”.The government’s plan for a quick increase to the retirement age was also strongly opposed by the trade unions.According to the draft pensions agreement, the government’s agreed increase to the state pension (AOW) age – due to rise to 67 in 2021 – is to be postponed to 2025.Subsequently, the AOW age will rise by six months, rather than 12, for each additional year’s improvement in life expectancy.The draft accord also provided for mandatory pensions saving for self-employed, albeit with an opt-out, De Telegraaf reported.The next stageAccording to Tuur Elzinga, the FNV’s pensions negotiator, there had been no agreement “as several texts and proposals are in circulation and nothing has been signed yet”.Although Elzinga declined to reveal details about the concept, other sources confirmed or recognised the content of De Telegraaf’s story.One source told IPE’s sister title Pensioen Pro that the three main unions were discussing the issue with VNO-NCW and that they preferred to complete the final agreement through the SER.Were this accord to become the position of the social partners, it would present a dilemma for social affairs minister Wouter Koolmees.Postponing the state pension age increase would cost the government billions, while the preferred individual pensions accrual – which formed part of the coalition agreement – would be off the table.Recently, the government resolutely rejected a request from the social partners in the building industry for a state pension entitlement after a working career of 45 years.The other aim of the coalition government – to abolish the system of average pensions accrual – could still be honoured according to the draft, albeit under certain conditions. Individual pensions accrual will not form the backbone of a new pensions system in the Netherlands, according to Dutch newspaper De Telegraaf.Citing a “draft agreement” between employer organisation VNO-NCW and trade union FNV, the newspaper said that the players had opted for a collective pension arrangement.The concept offered fewer guarantees but with more scope for indexation, resembling a pensions contract under real terms rather than nominal ones.However, the FNV has emphasised that there was no definite deal yet.
Governments should consider action to foster more private-sector investment in support of the UN’s Sustainable Development Goals (SDGs), according to Europe’s largest investor.Norges Bank Investment Management (NBIM), which runs the NOK8.6tn (€879bn) Government Pension Fund Global (GPFG) in Oslo, wrote in a paper: “Achieving the SDGs, in both developed and developing countries, could contribute to the long-term return of the fund through increased economic resilience.”In an Asset Manager Perspectives discussion paper, NBIM said people often assumed that, in order to meet the financing needs of the SDGs, the huge level of savings around the world could be matched with sustainable investment opportunities.However, it argued that if such projects offered an attractive risk-related return, then capital would naturally flow to them already. NBIM went on to paint a more complex picture. “An important hurdle to investing in SDG-supportive projects is that the costs of unsustainable business practices are frequently not borne by the producers, but by society, or other businesses at large,” the manager said.“Sustainable investments may also create additional costs in the short run, while the benefits may only accrue in the long run.”It argued that governments could introduce market-based mechanisms to incentivise companies and individuals to internalise the costs of the pollution and environmental damage they caused.NBIM also said that a longer investment horizon could also help match initial costs with revenues further into the future. “Recent research indicates that some of the currently employed long-run discount rates for climate change abatement investments may be too high, depressing the attractiveness of such investments,” it said.Governments could also make co-investments and cooperate more closely with the private sector, it suggested, and consider aligning financial incentives with the SDGs through public policies and regulatory frameworks.NBIM said that, apart from providing long-term capital and promoting value creation at companies, it invested in 38 developing markets, and in firms selling or developing products or services for a more environmentally-friendly economy. It also actively excludes companies with “unsustainable business practices that may impede progress towards the SDGs”.
Increased market awareness of climate change impacts could add as much as 3% to investor returns in “less than a year”, according to a report from Mercer.In a follow-up to its acclaimed 2015 climate change report, the consultancy said new short-term stress-test analyses – requested by its investor clients – had demonstrated how “longer-term return impacts could manifest as shorter-term climate-related market repricing events”.If markets priced in global temperatures rising by 2⁰C above pre-industrial levels – the scenario central to the 2015 Paris Agreement on climate change – this could result in a positive repricing of as much as 3% in less than 12 months, Mercer’s analysis found.However, if markets priced in a temperature rise of 4°C, the consultancy said the repricing could be negative by as much as 3%. “Testing an increased probability of a 2°C scenario or a 4°C scenario with greater market awareness, even for the modelled diversified portfolios, results in +3% to -3% return impacts in less than a year,” said Mercer.According to the consultancy, it was important to overlay such analysis with an opinion on the likelihood of such developments.The consultancy said that, for a variety of reasons, it did not believe markets were fully pricing in climate change, but that it viewed increasing climate awareness in market pricing to be more likely than decreasing awareness.This, it added, supported the idea of a premium that could be harnessed from a transition to a low-carbon economy.“Although a 2⁰C scenario definitely still presents transition risk – especially for portfolios aligned to a 3⁰C or 4⁰C [scenario] – opportunistic investors can target investment in the many mitigation and adaptation solutions required for a transformative transition,” said Mercer.In two sample portfolios used by Mercer, the sustainability-themed version was almost 0.2% a year better off between now and 2030.2⁰C scenario ‘most beneficial’ for investorsMercer said its updated climate scenario investment modelling strengthened the case for investors working to keep average warming to below 2°C.In the report – dubbed ’Investing in a Time of Climate Change – the Sequel’ – the consultancy modelled three climate change scenarios: 2°C, 3°C and 4°C average global temperature increases over pre-industrial levels. These were each modelled over three timeframes: to 2030, 2050, and 2100.Mercer said the results of its analysis emphasised why a scenario in which average warming was kept to below 2°C was “most beneficial” for long-term investors.The current trajectory, according to Climate Action Tracker, is for warming of 3.3°C above pre-industrial levels. A separate climate change monitoring tool operated by asset manager Schroders reported that the predicted temperature rise was 3.9°C as of the end of 2018.Mercer said its findings “strengthen the argument for investor action on climate change and suggest greater attention is required on how investors will actively support the transition to a 2°C scenario”.Investing for a 2°C world was “both an imperative and an opportunity,” the consultancy said. For nearly all asset classes, regions and timeframes, a 2°C scenario lead to enhanced projected returns compared with higher forecast temperatures.Mercer added that there were “many notable investment opportunities enabled in a low-carbon transition”.Testing the scenariosThe consultancy applied its modelling to two sample asset allocations: a diversified growth allocation, and a similar portfolio with explicit allocations to sustainability-themed investments in multiple asset classes.“In the two sample portfolios, there is a return opportunity to 2030 of between 0.1% and 0.3% [per year] in a 2°C scenario, compared to -0.07% [a year] in a 4⁰C scenario,” said Mercer. “To 2100, a 4⁰C scenario leaves each portfolio down more than 0.1% [a year] compared to a 2⁰C scenario.”Helga Birgden, global business leader for responsible investment at Mercer, added: “The modelling shows that greater inclusion of sustainable assets into portfolios can enhance returns. The evidence is compelling and reinforces the findings made in Mercer’s 2015 climate change report, supporting greater urgency for action to achieve a well-below 2°C scenario.”The report can be downloaded here.