The BVV already has several regional banks among its members, including Bayern LB, West LB and HSH Nordbank.Among the other members of the Pensionskasse are 95% of all German private banks, as well as other financial service providers.Meanwhile, the BVV confirmed to IPE that new global real estate mandates set up last year are “in the starting phase”.A spokeswoman at the scheme said: “The first investments were made in the Asia Pacific region, as well as Europe, with a total volume of €200m.”Further investments are currently under consideration, she said. German regional bank Norddeutsche Landesbank Girozentrale (Nord LB) has outsourced pensions provision for new employees joining after 1 January 2014 to the BVV, the Pensionskasse for the financial sector.In a statement, Helmut Aden, a board member at the €24.7bn BVV, said: “Increasing requirements mean more and more companies will take the step to outsource their company pension schemes to competent external partners in order to be able to focus on their core business.”Since the onset of the financial crisis, a number of German regional banks – known as Landesbanken – have sold parts of their companies, including real estate portfolios, to narrow their scope of business.Nord LB has a balance sheet total of €205bn and currently employs around 7,500 people, with offices in Germany, the UK, Singapore and the US.
Gustaf Hagerud, the third AP fund’s vice-president and head of asset management, has left and relocated to London after six years with the state buffer fund.Hagerud is set to manage a global equity and bond fund in the UK, as well as become partner in his new firm.AP3 confirmed his departure in a statement posted on the fund’s website.He leaves AP3 amid doubts over the future of the fund as the Swedish government accepted recommendations to reduce the number of funds from five to three. The five funds, AP 1 through 4 and AP6, have been under review since 2011, with the final findings recommending the closure of two funds to increase cost efficiencies.AP3, alongside fellow funds 1, 2 and 4, all invest in a range of real assets and listed equities and bonds, whereas AP6 focuses entirely on private equity.In the final report, it was suggested the three remaining funds closely coordinate their investments in the unlisted space, either through collaboration or by investment in unlisted ventures to be “concentrated” into one fund.It is also expected one of the Gothenburg-based funds, AP2 or AP6, will survive given the report’s stance on retaining one fund in Sweden’s second city.AP6 won praise in the report for its innovative investment approach and its speciality in private equity investing.Given this, it is likely one of the Stockholm-based funds – AP1, AP3 or AP4 – will close, with the assets of the two closed funds distributed among the remaining three.AP4 had performed the best on a 10-year average return basis.In August, Hagerud’s former chief executive, Kerstin Hessius, strongly criticised the report’s recommendations, suggesting the closure of two of the funds could have a negative impact on both current and future pensions in Sweden.Between the buffer funds, they have contributed SEK90bn (€9.8bn) to Sweden’s mandatory pay-as-you-go pension system, Hessius said.The review to decide which two funds are closed is ongoing, although a response will depend on the outcome of Sunday’s general election, with polls showing the opposition Social Democrats Party in the lead.
Pension investors remain unconvinced about their supposed role in providing financing to small companies, with none of the respondents to a new survey viewing it as a solution to their investment problems.Repondents said they viewed their level exposure to small firms as right at present, with under a third indicating they wished to increase their holdings.Asked which channels small and medium-sized enterprises (SMEs) would view as most important in 15 years time to access financing, half said that the firms would continue to avail themselves of bank loans, the method predominant at present.Two respondents to IPE’s latest Focus Group survey, covering investors with €68bn in assets, said that direct lending from institutions would be the most important and none believed that securitised lending would play a part. None of the respondents viewed SME lending as key to solving their investment problems, while 46% said they accepted it could play a part in addressing problems.The remainder of respondents rejected out of hand any part played by direct SME lending, with one UK fund stating that investments must remain focused on return, rather than assisting business growth.A second added that funds should not be regarded as banks.However, a Portuguese investor did not reject the idea out of hand, simply noting that many such investments were not rated and therefore required research expertise to invest in such loan books.For more on the Focus Group, see the current issue of IPE
The European Commission should ease the regulatory burden on boutique asset managers and tackle any remaining protectionist measures acting as barriers to a single market, a think tank has urged.A joint report by the New City Initiative (NCI) and Open Europe said laws including the Alternative Investment Fund Managers Directive (AIFMD) and the revised Markets in Financial Instruments Directive (MiFID) were imposing an “onerous” regulatory burden that was hindering growth in the sector.It added that the UK government had previously said the benefits of AIFMD and UCITS rules would only be felt by those in the industry that availed themselves of EU-wide passports to sell products overseas.Dominic Johnson, chairman of the NCI and chief executive at Somerset Capital Management, also noted that, even in the case where managers wished to be active cross-border, they faced hurdles. He cited member state regulators drawing out compliance procedures or other member state-specific rules acting as barriers even when an EU passport has been acquired.“You’d expect you’d be able to hitch up your wagon filled with prospectuses and drive around Europe trying to sell your wares,” he said.“Lots of countries, they either don’t know how to apply the rules, don’t understand what the rules are – or there is still deliberate protectionism to stop financial services companies going from country to country.”Johnson compared the European situation with that of the US Securities and Exchange Commission.He acknowledged that registering and compliance did involve costs, but he argued that, once initial hurdles were overcome, asset managers had access to the entirety of the country’s market.He also questioned the lack of distinction between retail and institutional clients in much of the recently enacted European regulation – arguing that only one of the two groups justified the amount of regulation.“If I were trying to sell my product to Slovenian pensioners, then I fully understand there needs to be a high degree of regulation, possibly even over-regulation,” he said.“But if you’re trying to do institutional work across Europe, it’s completely ridiculous that you have to comply with so many of these regulations.”Asked whether certain countries – such as the UK and Ireland, where pension trustees are often non-professionals – did not still warrant such protection, he said: “The difference between an institution and a non-institution is that the institution is a sophisticated investor. You have to say, just because you’re a badly run institution, that doesn’t excuse you.”The report by the NCI – backed by asset managers worth £400bn (€546bn) – said that, while the industry was susceptible to crises, they were “different and possibly more easily [managed]” than those that could face the banking sector.“While there were examples of different types of asset managers getting into trouble during the recent financial crisis,” the report says, “these seem to be largely isolated incidents rather than systemic flaws.”In an effort to allow for the growth of boutique managers, the report recommended that the AIFMD exemption be increased to €500m, up from its current €100m.It also criticised the idea of a financial transaction tax, being discussed by a minority of EU member states, as “hugely harmful” and called for it to be dropped.
UK supermarket Tesco has confirmed the closure of its defined benefit (DB) pension fund for staff and the creation of a 7%-matching defined contribution (DC) replacement by November.The £8.1bn (€11bn) Tesco Pension Scheme was one of a handful of open DB schemes among the UK’s largest employers, with the company opting to use the career-average salary deal to comply with auto-enrolment.The company, however, after running into financial difficulty, told investors in January it would consult on the closure of the scheme to future accrual.Tesco said it would now offer a matching DC scheme, with employee contributions of between 4% and 7% matched by the supermarket. It will also seed DC saving pots with one week’s earnings for staff, or a minimum of £100.The supermarket, which once accounted for close to one-third of all grocery spending in the UK, will now also offer life assurance of five times an employees salary, after originally proposing four.Consultation began in June after the scheme’s triennial review revealed a nearly 200% increase in the scheme’s deficit.With trustees of the scheme, Tesco approved a new £270m annual deficit-reduction payment, which came as the company faces investigations in the US and the UK over its accounting.The valuation showed the deficit rising from £934m in 2011 to £2.8bn in 2014, with its financial statements showing a £3.9bn deficit on an IAS 19 basis.At the time, Tesco cited the impact of an 80-basis-point fall in corporate bond yields.A Tesco spokesperson said the supermarket was committed to offering retirement benefits for its staff and that it had listened to the concerns from staff and trade unions.The Union of Shop, Distribution and Allied Workers (USDAW) said it worked to gain a number of concessions when it began negotiating with Tesco earlier this year.Joanne McGuinness and Pauline Foulkes, of the USDAW’s national offices, said the union had worked hard to ensure the scheme remained competitive for staff in the sector.“It’s always very disappointing to see a final salary scheme close,” they said.“USDAW believes occupational pensions are an essential part of any employment package and provide essential income in retirement for employees. We expect more information and detail to be available in October.”
Deutsche Bank has split its asset and private wealth businesses fewer than three years after unveiling its new “super-brand” after abortive talks to sell part of the business.In a statement, the bank said a number of its divisions would be reorganised in line with its new Strategy 2020.Deutsche Asset & Wealth Management (Deutsche AWM), formed after Guggenheim Partners backed out of buying real estate business RREEF in 2012, will be split into the private wealth management business, part of the private and business clients division.The re-branded Deutsche Asset Management is set to become a standalone business division, with an exclusive focus on institutional clients. Paul Achleitner, chairman of the company’s supervisory board, said the changes were some of the most fundamental in the company’s history.“This also requires tough decisions,” he added. “I would like to stress all parties involved have tried to achieve the best possible outcomes for Deutsche Bank, having set aside personal interests.“For this, and for their contributions in the past years, we would like to thank those executives leaving the company.”The reorganisation will see the four new divisions each represented at board level, with Quintin Price, formerly head of alpha strategies at BlackRock, joining to take on board responsibility for the new asset management division.Michele Faissola, who has headed DAWM since its creation, will leave the company “after a transition period”, according to a statement.
The €1.5bn Pensioenfonds Gasunie has announced that it expects to grant its workers an indexation of 1.5% this year.It warned, however, that maintaining this level of indexation over the coming years looked unlikely. The scheme’s active participants, based on the collective labour agreement, are entitled to an indexation based on the salary index, equating to approximately 2%. The pension fund, however, argues that the indexation reserve of €22.3m – set up by participating employers in 2013, with the introduction of new pension arrangements – is too small to achieve full inflation compensation. It said it will focus instead on the consumer index, although it warned that granting indexation on this basis in future would be “very difficult”.The board said deferred participants and pensioners would be ineligible for inflation compensation, as the pension fund’s funding of 105.5% at year-end was insufficient.In other news, the Dutch pension fund of energy giant Chevron, which transferred its accrued assets to insurer ASR at the end of 2014, has negotiated full indexation in arrears of up to 6.34%, drawn on its coverage ratio of 127%.ASR also agreed to increase the regular indexation of 80% “slightly”, according to the Chevron scheme’s website.The pension fund, which is now in liquidation, had assets of €370m and offered final salary arrangements.At ASR, pensions accrual follows the consumer index.Meanwhile, the €3bn pension fund of technical research institute TNO is to increase pension rights by 0.05% for all of its participants, based on a funding of 111.7% at year-end.The TNO scheme follows the consumer index, which does not take taxes or levies into account.Lastly, the new collective defined contribution schemes of ING Bank and NN Group are to grant an indexation of 0.19% and 0.20%, respectively, based on the consumer index.Earlier, the Pensioenfonds ING said participants and pensioners at ING Bank and NN Group would receive indexation of 1.25% and 0.5%, respectively, drawn on salary developments.It had already granted all deferred participants and pensioners at ING Bank and NN Group, who are subject to the consumer index, an indexation of 0.44%.
The MEP said the “whole question” of whether cross-border pension funds should be fully funded at all times remained unresolved, as did the cross-border transfer of pension assets.“The whole question of depositories,” he added, “is an issue yet to be determined” – in spite of member states’ urging, since 2014, that the appointment of a depository should be decided at the national level based on the “nature, scale and complexity” of pension funds.“But my central point is,” Hayes said, “with a fair wind and political support and determination, I hope we can conclude by the end of the Dutch presidency.”He said it was his and the Parliament’s “firm view” that, when it came to authorising cross-border IORPs, there should only be a single point of regulatory authorisation.Thomas Mann, fellow MEP and a member of the Employment and Social Affairs Committee, previously spoke of the “pretty big row” brewing during trialogue negotiations over the designation of pension funds as financial service providers. Pension-tracking serviceHayes also threw his support behind the creation of a pension-tracking system, which the European Commission has agreed to support with a €2.5m grant covering the majority of the estimated €3.3m start-up costs associated with the venture.He said the pilot of the venture was a “no-brainer” and that there was a necessity for tracking systems, including in his native Ireland.His support for a European tracking service is in line with that of his own political party. Fine Gael said in its manifesto for February’s Irish general election that it would support the launch of such a venture to help attract home Irish émigrés. European institutions have yet to agree a final stance on key measures proposed in the revised IORP Directive, according to Brian Hayes, with disagreements remaining on matters of cross-border funding and the use of depositories.The Irish MEP – who, as IORP II rapporteur, is representing the European Parliament in closed-door trialogue negotiations with the European Commission and EU member states – said the ongoing discussions were “very intensive”.While speaking at the launch of the business plan for a European pension-tracing service by the TTYPE Consortium, Hayes said he was hopeful IORP II discussions would conclude before the end of the Dutch presidency of the Council of the EU at the end of June.“We have made progress in a number of key areas, but it’s fair to say quite a number of outstanding issues remain,” he said.
In all, 35 asset managers participated in the tender process, in which Cometa said it conducted an in-depth analysis of the profiles of the proposed financial offers and then met the candidates.The mandates were for the asset management of three of Cometa’s investment compartments: monetary-plus, income and growth.Management of the income compartment – the largest of the three, involving around €4.9bn of assets and is designed to produce a return in line with the TFR (trattamento di fine rapporto, or severence pay) – was awarded to Allianz GI, BlackRock, Candriam, Credit Suisse and SSGA.These mandates are for active multi-asset investment on a total-return basis, Cometa said.Assets in the monetary-plus compartment, worth around €2.8bn, are to be managed by Allianz GI, Eurizon Capital and Groupama, by investing in bonds with controlled risk.Meanwhile, investment of the €575m growth compartment has been split between BlackRock and Candriam, which will be running active multi-asset funds with controlled risk.Roberto Santarelli, deputy president of the Cometa pension fund, said: “In the context of reductions in the level of first-pillar pensions coverage, it is the job of complementary pension funds to respond in an effective way to the needs of the workers.”He said it was precisely for this reason, and because of the fundamental role of complementary pension funds, that Cometa had asked the new managers to adopt a more active investment approach to get attractive yields, even in current market conditions.It also sought an approach based on careful risk management in all investment phases, which Santarelli said was always a fundamental consideration for Cometa.“In awarding the mandates, as well as the experience and expertise of the companies in managing financial and pensions portfolios, we also evaluated the attention paid to the issues of accountability and sustainability of investments,” he said.He said this was because the pension fund considered it the duty of an institutional investor such as Cometa to promote responsible investment culture, mindful of the impact financial choices could have on social, environmental and governance levels.After having renewed the investment management of assets in the safety (Sicurezza) compartment last year, and now having assigned the management of assets in the remaining compartments, Santarelli said Cometa would now be busy completing the new asset allocation of the fund.It will launch the alternative investment implementation phase within the income compartment, also aimed at supporting the country’s economy, with a view to diversifying and hunting for yield, while always respecting the risk limits put in place for the compartment, Santarelli said. Italy’s largest complementary pension fund Cometa announced it has picked seven major asset managers to run more than €8.3bn in assets via 10 five-year mandates.Winners of the contracts – part of a tender launched at the beginning of April as the €9.6bn pension fund sought to complete its shift towards active management – include Allianz Global Investors, Candriam Investors Group and BlackRock Investment Management.Other managers to be given mandates in the large tender are Credit Suisse, Eurizon Capital, Groupama Asset Management and State Street Global Advisors (SSGA).The Milan-based pension fund, which covers workers in the metal and mechanical engineering sectors, has emphasised in the tender process the importance of the assets being managed along responsible investment lines.
The case has been filed in the High Court of Justice.Sean Upson, partner at Stewarts Law, who is leading the case, said: “Tesco will need to set out its position in its defence, and we expect it to do so before the end of the year. “At that point, it will become clear how much of the claim is disputed, and what the next steps in the legal process will be.”In the other news, Legal & General (L&G) has sealed a £1.1bn (€1.3bn) buyout deal with the Vickers Group Pension Scheme, the biggest single pension risk transfer completed in 2016.The Vickers pension – part of the Rolls-Royce Group – used a price-lock mechanism to secure a price before completing the transaction, which covers more than 11,000 pensioners.Joel Griffin, head of pensions at Rolls-Royce, said: “This is a great testimony to the work of the trustees, their advisers and the company, which have worked collaboratively over many years to ensure this scheme is well funded with a prudent investment strategy. This has ultimately enabled us to deliver this excellent outcome for former Vickers employees.”Griffin previously helped car manufacturer TRW Automotive complete a multi-faceted de-risking exercise in 2014. The £2.5bn deal covered UK, US, and Canadian pensioners, and was also backed by L&G. He joined Rolls-Royce 18 months ago.In a statement announcing the deal, L&G said the transaction had been further helped by the group’s close relationship with Rolls-Royce.L&G Investment Management runs more than £12bn for various Rolls-Royce Group pension schemes.Phill Beach, head of core pension risk transfer at L&G, described the deal as “a significant transaction that demonstrates that, with strong company backing and a trustee that manages risk well, the objective of buyout is fully achievable, even when markets appear volatile.”Lastly, MJ Hudson has acquired Allenbridge, a consultant to several UK corporate and local government pensions.Allenbridge advises 18 LGPS clients with £36bn in assets under management, according to its website.These include Devon, Dorset, Lancashire and Worcestershire pension funds.Odi Lahav, chief executive at Allenbridge, said: “We are delighted to join MJ Hudson, a firm we’ve known for several years.“MJ Hudson shares our core values and our vision for Allenbridge, and we’re confident merging our distinctive and complementary organisations will provide even better service for our clients.”In a separate acquisition, MJ Hudson has also bought Tower Gate Capital, a provider of back-office services for asset managers.MJ Hudson is a “specialist law and asset management services firm”.Its chief executive, Matthew Hudson, said of the acquisitions: “Our goal is to build the pre-eminent advisory and infrastructure business in alternative assets.” A large number of institutional investors are suing Tesco, the UK’s largest supermarket, for losses of around £150m (€173m) incurred because of accounting irregularities, which resulted in overstated earnings.The overstatements were announced by the company in autumn 2014, prompting a £2bn plunge in its market capitalisation.Alecta, BT Pension Scheme Trustees and Stichting Shell Pensioenfonds are among more than 100 institutional investors suing Tesco, according to newly published court papers.The papers revealed that other claimants include Unipension Invest, the Church Commissioners for England and BAE Systems 2000 Pension Plan Trustees, besides a range of North American pension plans such as the Ontario Municipal Employees Retirement System (OMERS) and investment companies including Allianz Global Investors and Russell Investment Management.