“The ELTI association is a genuine European project,” he added. “Following the EIB capital increase, it is yet another way to multiply our mutual leverage effect in federating the financial strength of our institutions for growth and employment through long-term investment.”The general assembly also saw the association’s first action plan for 2014-20 agreed, with its goal to foster “sustainable, resource efficient, socially inclusive and innovative” growth and employment.Alongside Hoyer, Anton Kovacev and Franco Bassanini were named vice-presidents.Kovacev is chairman of the board at the Croatian Bank for Reconstruction and Development (HBOR) and Bassanini president of Italy’s CFP. Werner Hoyer (pictured), current president of the European Investment Bank (EIB), has been named head of the European Association of Long Term Investors (ELTI) following the association’s inaugural general assembly.The ELTI, launched in June, said it aimed to promote long-term investment across the Continent and encourage academic research on the subject.Its 17 founding members, including the EIB, include central banks of some European Union member states, as well as development banks, such as Germany’s KFW and the Industrial Development Bank of Turkey (TSKB).Hoyer said he was “honoured and happy” to act as a link between the work for EU banks and those supporting EU policy.
The German Versorgungswerk for doctors in Westfalen-Lippe, ÄVWL, in 2013 outperformed its minimum return target, aided by an infrastructure portfolio which offers loans to airlines for the acquisition of planes.The €10.5bn fund, joint winner of the country award at the 2013 IPE Awards, reported a net return of 4.4% last year, above the 4% discount rate applied to its future pension payments.Andreas Kretschmer, managing director at the ÄVWL, told the current issue of IPE: “Our main aim is not to achieve the highest return possible per year but to achieve stable returns over the long run.”One important building block for its strategy is infrastructure which according to the ÄVWL was “generating stable cashflows above the discount rate and with it a constant basis of returns”, something that could not be said for “most simply structured fixed-income securities and corporate bonds” in the current environment. One “focus” for the infrastructure portfolio was asset-backed loans for the construction of airplanes, the ÄVWL said in a newsletter to its members this week.The fund had announced in its 2012 annual report that it would look into such loans for ships and planes – the 2013 report has yet to be published.Such investments fit into the ÄVWL’s “three-pillar strategy”, which it continues to emply according to Kretschmer – with the strategy focused on bonds, real estate and mortgage-backed or similarly asset-backed loans.The fund is managing all the bonds in-house, some of them directly and some in a self-managed Spezialfonds.As for real estate, which includes project developments, the ÄVWL said it was investing in this asset class both directly as well as via fund-structures.Kretschmer said the ÄVWL was able to take on the real estate development risk because it had been building up a sufficient risk buffer and had the necessary understanding in-house.In total, the risk buffers put aside make up roughly 16% of overall assets under management at the Versorgungswerk.This buffer, as well as the long-term nature of the investment strategy, allow the ÄVWL to predict “despite very unfavourable conditions for re-investment” with what it regards as a “large degree of certainty” that the discount rate of 4% would remain unchanged and that it will be achieved annually until at least 2018.For details on the funds asset allocation and return expectations see Pensions In Germany in the current issue of IPE.
Ireland’s largest private and public sector bodies saw their pension scheme deficits swell to more than €8.5bn at the end of August from €4bn at the end of December, according to an analysis carried out by consultancy LCP.Even though global equity markets put on more than 12% in the eight-month period, the defined benefit (DB) schemes were hit by falling bond yields, the study showed.The report, which takes in data from the DB schemes of 16 of the biggest Irish quoted companies by market cap and 13 semi-state/state-controlled companies found the average funding level to increased to 85% in 2013 from 81% in 2012.But only one of the companies analysed – public broadcaster RTE – reported that it had enough assets to meet its accounting liabilities at the end of 2013. Conor Daly, partner at LCP, said: “It is clear from the 2014 report that defined pension schemes remain under considerable pressure.”He predicted the big fall in bond yields during 2014 would have a devastating impact on many companies’ 2014 balance sheets.“Having seen many difficult benefit reductions and funding plans being implemented over the last 24 months, with pain being taken on all sides, it would seem defined benefit pension schemes cannot catch a break,” he said.LCP said Irish pension schemes were still holding higher-than-average equity allocations when compared with other jurisdictions. In Ireland, the average holding in equities is 50%; for FTSE 100 companies in the UK, it is 33%.Of schemes in the survey, the highest equity allocation was held by Ryanair ,with 77% in 2013, up from 74% the year before, while C&G Group had the lowest at 25%.According to LCP, the government’s pensions levy wiped €2.3bn from Irish pension schemes since it was introduced.Daly said the consultancy welcomed the government’s announcement in the 2015 Budget that the pensions levy would stop after next year.“The pensions levy has acted as a considerable disincentive to members and employers to contribute to pension schemes,” he said.
The €20bn French civil service pension scheme ERAFP is set to overhaul its strategy after the government reduced restrictions placed on non-bond investments.The French government will look to legislate for the increase of the allowance of non-bond investments from 25% of assets to 40%.Expected to take effect at the start of 2015 based on the decree being published this month, ERAFP said the change would be done strategically over the next five years, depending on bond market valuations.The scheme, set up in 2005 to supplement French public sector pensions, is currently cash positive and expects to receive around €2bn in annual additional investible contributions for 10 years. However, the current 25% cap placed on all assets outside of bonds and real estate meant much of this had been and would be directed into sovereign debt and European credit.At the end of 2013, the two asset classes accounted for 51% and 15% of assets, respectively.Philippe Desfossés, head of the fund, described the announcement as a “dramatic change”.“We have been asking for this change for six years,” he told IPE.“Liquidity is not a constraint, and we should [take advantage] of this and invest in illiquid assets and extract the illiquidity premium. Twenty-five percent was a limit that was too low for us.”Desfossés said equities were an obvious asset class for the fund to expand immediately into, as it made more sense for long-term investors given the return spread over bonds.The fund will also use its additional freedom to hedge further against inflation and contribute to the growth of the euro-zone and French economies.ERAFP’s equity allocation is now expected to grow from the current 23.5% level, increasing European stocks and some exposure to non-European OECD countries over the next three years.The fund also has 1.5% in a multi-asset mandate with Amundi, which Desfossés said exposed the fund to private equity and Japanese equities.The reduced restrictions could see its multi-asset exposure increase to around 4% by 2020.Desfossés said the real estate portfolio, currently around 2%, would ideally be between 8% and 10%.Whether ERAFP reaches the 40% cap by 2020 depends on the interest rate environment and the valuation of the bond markets.“We are working on the implementation plan, but it depends on the situation in the bond markets,” Desfossés said.“Should they remain at the current price level, we will invest in other assets, and if interest rates remain level, we would have to speed up the rate at which we shift into equities and real estate.“The valuation of the bond market is tantamount to the biggest over-valuation ever seen in this asset class.“Who in their right mind would buy government and euro-zone bonds at 0.7% [yield]?”ERAFP’s allocations to French real estate will be in addition to its contribution to a Caisse des Dépôts residential property fund.It will invest in Paris and other major French cities where there is a housing supply shortage for middle-class tenants.
Unilever Netherlands is planning to close Progress, its €6bn defined benefit scheme, and replace it with a collective defined contribution (CDC) pension fund as of 1 January.The decision comes as a consequence of a collective labour agreement (CAO) between the employer and unions, which included a new pension plan for the company’s 3,000 Dutch staff. Frans van de Veen of union CNV Vakmensen said: “The advantage of the new scheme (Progress II) for Unilever is that its pension liabilities are to become stable. And for the workers, it is good to have clarity about their pensions arrangements.”The accrual rate under the new pension plan is to drop slightly to the tax-facilitated percentage of 1.875. At the same time, Unilever is to improve the arrangement by lowering the franchise – the part of the salary exempt from pensions accrual – by €1,000 to €12,642.Unlike with many other CDC schemes, the contribution has not been fixed for five years.“The premium is to be established annually and will, in part, be dependent on the level of interest rates,” said Van de Veen.Because Unilever will not have to meet any funding shortfall, Van de Veen said he expected the future contribution would be quite stable.Progress II is to start with a €30m contribution from the employer to increase the potential for indexation.According Van de Veen, only a “very bleak scenario” would threaten the granting of indexation.Under the new CAO, the premium for Unilever’s staff will be increased by 0.5 percentage points to 3%, but the increase will be offset by a salary increase of 5.65%.With a nominal funding of 138% and a real coverage of 104% as of the end of October, Progress is one of the best performing pension funds in the Netherlands.
Dutch pensions provider AZL is to appoint Maarten van der Tuin as chief executive officer, as of 1 February.He is to succeed Arther van der Wal, who has become director of pensions at insurer Nationale Nederlanden, AZL’s parent company since ING was forced by the European Commission to separate into insurance and banking businesses after receiving government support during the financial crisis.Van der Tuin is currently director of pensions and a board member at MN, the €90bn asset manager and pensions provider for the large Dutch metal schemes PMT and PME.AZL’s new chief executive has been working at MN since 2008, when he left insurer Amersfoortse Verzekeringen, where he was deputy director of pensions. Michel van Elk, supervisory chair at AZL, described Van der Tuin as an “experienced leader”, citing his professional expertise and familiarity with pensions provision.Van der Tuin said his move to AZL was a “logical continuation” of his career in pensions.AZL is provider for 64 pension funds, with 1m participants in total.It has offices in Heerlen and Utrecht.
Mercer – Catrina Holme has been appointed as a non-executive director of the UK board. Holme has been a non-executive board director and remuneration committee member at the Land Registry since 2012. Initially a private equity lawyer, she has been involved in the venture capital industry, serving in executive, non-executive and investment roles, since 1992. Separately, Rich Tuff has been appointed UK head of retirement administration. He began working at Mercer in 2010 as a senior client relationship manager.AMP Capital – John Angell has been appointed head of distribution for the UK and Europe. He will be based at AMP’s London office, working with institutional investors throughout the UK and Europe. He will also have responsibility for the sales of AMP’s global listed infrastructure and global REITs capabilities.Kirstein A/S – Andreas Weilby has been appointed head of department for search and selection. He will be responsible for Kirstein’s monitoring and selection of Danish and international asset managers, peer group analyses and assessments of investment strategies. Weilby was until the summer of 2014 associated with Financial Market Research as a consultant for asset managers with institutional activity in Europe.GES – The engagement services company has reorganised its management team. Chief executive and co-founder Magnus Furugård will assume the role of group chairman, while Hanna Roberts, currently GES’s engagement director, succeeds him. Josiane Fanguinovény, head of corporate governance, will be appointed engagement director and a new member of the management team.The Pensions Trust – Peter Vickers has been appointed regional development manager for South East England. Vickers joined in February from Capita, following 18 years in the financial industry. He specialises in supporting advisers and employers with both DB and DC schemes.Investec Asset Management – Jeff Boswell and Garland Hansmann have joined the global multi-asset team. Both join from Intermediate Capital Group, where Boswell was head of high yield and Hansmann head of portfolio management. SKAGEN Global – Tomas Johansson has been appointed a portfolio manager, starting on 1 August. He joins from the Swedish arm of Cevian Capital, an activist fund manager.Catella – Robert Fonovich has been appointed head of Catella’s Swedish corporate finance operations. He joins from PwC, where he was Sweden and sector manager for the Corporate Finance Real Estate business unit. Aon Hewitt, Towers Watson, AQR Institute of Asset Management, London Business School, Mercer, AMP Capital, Kirstein A/S, GES, The Pensions Trust, Investec Asset Management, SKAGEN Global, CatellaAon Hewitt – Mike Rogers has been appointed as a partner and head of large clients in the company’s delegated consulting services team. He joins from Towers Watson’s fiduciary investment team, where he developed the consultancy’s whole fund delegated proposition. Prior to focusing on the fiduciary business, he worked in the investment strategy team giving advice to clients on flight planning, risk analysis, portfolio construction, hedge implementation and design, as well as options strategies. His appointment follows the recent recruitment of Adrian Mitchell, who joined the delegated consulting team in March from the John Lewis Partnership Pensions Trust.AQR Institute of Asset Management – The London Business School and AQR have named the members of the advisory council for the AQR Institute of Asset Management, launched in January. They include:Robert Jenkins (chair), London Business SchoolHareb Al Darmaki, executive director, Abu Dhabi Investment AuthorityGregor Andrade, principal, AQR Capital ManagementElizabeth Corley, chief executive, Allianz Global InvestorsEduard van Gelderen, chief executive, APG Asset ManagementSacha Ghai, director, McKinsey & CompanyChris Hitchen, chief executive, Railways Pension Trustee CompanyHenrik Gade Jepsen, CIO, ATPDavid Kabiller CFA, founding principal, AQR Capital ManagementAnne Richards, CIO and executive director, Aberdeen Asset ManagementScott Richardson, managing director, AQR Capital ManagementPaul Tucker, former deputy governor of the Bank of England and senior fellow, Mossavar-Rahmani Center for Business and Government, Harvard Kennedy SchoolKaren Yerburgh, managing partner, Genesis
ERI Scientific Beta is to stop charging clients a fixed fee for use of its smart beta indices in a move the provider hopes will reshape the market.Noël Amenc, chief executive at ERI Scientific Beta, argued there was no business risk associated with its decision to move away from a flat fee to a single performance-based charge from the beginning of June.But he said he did expect a pushback from the industry.Amenc predicted that rivals would seek to discredit the approach, by claiming ERI’s indices would achieve greater outperformance by taking on greater investment risk, or call on regulators to “block” its new fee structure. “We are basing this pricing scheme on a [reference] index that has a lower volatility than the cap-weighted [index],” he said, stressing the not-for-profit entity owned by the EDHEC Business School would not be changing the methodology behind the reference portfolio.“Yes, we are putting pressure [on the market],” Amenc added, although he did not anticipate an immediate change in charges levied by other providers.“If we maintain the ideas, and if we survive, in five years’ time, pricing will change.”Amenc, also associate dean of the EDHEC Business School, said ERI Scientific Beta did not perceive the move as a business risk but rather a risk to its revenue – a lesser priority due to its not-for-profit status.The provider’s indices have attracted $10bn (€8.9bn) in assets under replication over the last three years. ESMA criticismAmenc also criticised the level of regulation imposed on indices by the European Securities and Markets Authority (ESMA) as “completely inadequate”.Emphasising that he was speaking in a personal capacity rather than his role as head of ERI, Amenc said: “It’s not the fault of ESMA – ESMA pushed for transparency. I consider ESMA as a nice [regulatory] body, but, in fact, it doesn’t have the power – the enforcement power is with the [European] Parliament.”He said his dissatisfaction had led to his resignation from ESMA’s securities and markets stakeholder group.
Immigrants from Iran, one of the seven Islamic countries on Trump’s excluded list, founded – or account for many leadership positions at – leading US tech giants including Twitter, Dropbox, Oracle, Expedia, eBay, and Tinder.India’s famed institutes of technology (IITs) have long provided a steady source of the highest calibre graduates for America’s high tech industries. Examples include Vinod Khosla, an IIT Delhi graduate who is the co-founder of Sun Microsystems, which amongst other achievements invented the Java programming language.As Ananya Bhattacharya writes, during the 1980s and 1990s, the trajectory of an IIT graduate was fairly predictable: Get a B-Tech degree from one of India’s premier schools, make a beeline for one of the top universities in the US, and settle down abroad with a high-paying job.Google CEO Sundar Pichai is a good example of that, as are many of the partners at Goldman Sachs and other US financial firms. Pichai went from IIT-Kharagpur in West Bengal, to study material sciences and engineering at Stanford University, secured an MBA from the University of Pennsylvania’s Wharton School, and ended up in Silicon Valley.But a survey of nearly 20,000 alumni from IIT-Bombay reveal that the number of students going to the US has dropped dramatically since 2000. Some 41% of respondents who graduated prior to 2000 settled abroad, while only 15.8% who graduated post-2000 have done so.Clearly, a key reason for this has been the increasing attractions of India itself as its economy flourishes. But what also comes through from the survey is a declining interest in the US. As Bhattacharya points out, while four out of five graduates living in foreign countries reside in America, the US has become less of a magnet for more recent graduates. Among the post-2000 IIT-Bombay graduates, Europe has become a more popular destination, alongside the Middle East, and east and south-east Asia.Trump may not be the cause of the overall trend of declining interest in the US from India’s IIT graduates, but his actions are clearly exacerbating the trend. While that may be a loss to America, it may be gain to Europe generally and a post-Brexit Britain more specifically.While Europe faces populist parties with strong anti-immigrant platforms and similar problems, the UK’s post-Brexit strategy needs to embrace the potential benefits of immigration, albeit within a well thought-out strategy. Whether the UK can provide the environment that will attract the best and brightest in the world alongside a Trump-led isolationist America may well determine the future long-term success of a post-Brexit Britain. The murder last week of an Indian IT specialist in Kansas, in what appears to be a hate crime, has sent shock waves through India. Indian parents are going to be more reluctant to send their children to the US for further education.President Trump’s clampdown on immigrants may end up creating a climate of hostility that would ultimately backfire on America’s long term economic prospects.The great strength of the US has always been that it has managed to attract the best and brightest from across the world to its shores. Silicon Valley would not be where it is today without Chinese and Indian immigrants. Immigrants have founded half the start-ups in recent years. But the rate of start-ups has declined significantly, primarily as a result of immigration policies in the US. Trump’s isolationist stance is likely to exacerbate this trend significantly.Whether Donald Trump wins or loses his legal battle on immigration, the chilling effect on potential new highly qualified immigrants will not be to America’s benefit, although it may be to Europe’s.
Denmark’s largest pension fund has tempted one of the country’s top pensions regulation officials to jump ship and join its management ranks.Jan Parner, currently one of four deputy director generals at the Danish FSA (Finanstilysynet), will start work at the statutory pension fund ATP on 1 January next year, in the role of senior vice president and head of the actuarial office.Parner will also take the role of chief actuary at ATP as soon as formalities are in place, the DKK758bn (€102bn) pension fund said.Ulla Schjødt-Hansen, vice president at ATP, has been acting chief actuary at the pension fund since August 2015, when its chief risk officer and chief actuary Chresten Dengsøe quit to become chief executive of the doctors’ pension fund, Lægernes Pension. Jan Parner, ATP’s new head of actuarial services“So ATP is very happy that someone with the capability of Jan Parner will carry out the important role of head of actuarial services for ATP in future, where he will contribute to ATP’s strategic development and will have specific responsibility for determining our provisions for members’ lifelong and guaranteed pensions.”Parner will report to Smith Hansen once in his new job.At the FSA, Parner is one of four deputies working under the leadership of the director general Jesper Berg.Parner is responsible for computer services, IT security, life assurance, pension funds, general insurance and reinsurance at the national financial regulator.He said it had been a privilege and great pleasure to work at the FSA.“But after nine years, I am now becoming a part of ATP, which stands as a beacon of professionalism in the pensions and investment industry — and having the opportunity to contribute to the further strategic development of ATP and to become chief actuary,” he said. “I could not say no to that.”Before joining the FSA in 2008, Parner worked at the insurer Codan. Mads Smith Hansen, ATP’s chief risk officer and member of the fund’s eight-strong group management team, said: “The FSA plays an important role, enjoys great respect and is known both for its professionalism and skill, and that is also the case for Jan Parner.