The UK Financial Conduct Authority (FCA) has said it will consider including the asset management industry in its forthcoming wholesale sector competition review, but for now will focus on the investment and corporate banking industries.The financial services regulator concluded its sector review which it began last year looking at aspects of competition within the financial sector.It held two round-table discussions over competition within the asset management industry and analysed whether the bundling of ancillary services was beneficial to investors.It will now consider initiating a market review later this year, alongside its review into the banking sector. The National Association of Pension Funds (NAPF) welcomed the conclusion and said it raised questions about the investment banking sector including the cross-selling and cross-subsidy of services.Will Pomroy, policy lead on corporate governance, said: “In its original submission to the FCA the NAPF raised concerns about aspects of the asset management market.“It is crucial that pension funds, as clients of the asset management industry, are able to have trust in the industry and be able to assess whether they are extracting value for money from their agents in the interests of their members – future pensioners.”In other news, Natixis Global Asset Management (NGAM), the multi-affiliate manager, has entered exclusive talks over the purchase of DNCA, a European investment firm.DNCA has around €14.6bn in assets under management, mainly in European equities and covertible and euro-zone bonds.It will join NGAM’s 20-plus other affiliates if negotiations with DNCA’s owners, TA Associates and Banda Leonardo, are successful.The structure will see DNCA’s management retain an equity stake alongside NGAM but would gradually transition stakes to the majority stakeholder from 2016 onwards.NGAM also announced a 17% increase in assets under management (AUM), taking its total to €735.5bn, after record €28.5bn net inflows.Elsewhere, Man Group has entered a conditional agreement to purchase the investment management business of NewSmith, an equity house.Man, which has $72.3bn (€64bn) in AUM hopes to complete the purchase by the second quarter of 2015, with NewSmith’s investment strategies incorporated into subsidiary Man GLG, a hedge fund.NewSmith has around $1.2bn in AUM and is 60% owned by its founders and 40% by Japanese investment manager, SuMi Trust.
In tandem with investing in bonds issued by unlisted companies, Solidarieta Veneto decided two years ago to invest 5% – around €30m – of its two long-term sub-funds, mixed income and dynamic, in private equity investments.Paolo Stefan, director at Solidarieta Veneto, told IPE: “We started investing in private markets to improve the balance of our asset allocation via investments that reduce volatility and risk through diversification, leading to value creation in the medium and long term.”It selected APE III with the help of an external adviser after a search through all Italian closed-end funds investing in unlisted companies.Stefan added: “APE III contains elements that fit well with the investment philosophy we are looking for – a medium-sized private equity fund; investments in small and medium-sized projects, with growth expectations even at international level achieving the goal of optimising the financial structure of businesses; and a limited use of leverage.”APE III has raised €50m to acquire stakes as lead or qualified minority investor in small and medium-sized businesses in the Italian industrial sector, with a turnover €15m-50m.Investments will normally be €3m-8m.The fund has already invested in Technical Plast, which designs and manufactures precision moulds and high-tech engineering plastics components.Solidarieta Veneto is expecting a return from APE III greater than a comparable investment in listed shares over the same period.As at 30 June, the pension fund’s overall return for the year to date was 2.68%. Solidarieta Veneto Fondo Pensione, the €914.3m pension fund for blue-collar workers in the Veneto region of Italy, has committed €7m to the Assietta Private Equity III fund (APE III).It is the second private equity investment by the pension fund, following last February’s €7m investment in Fondo Sviluppo, a local private equity fund managed by FVS sgr.However, the stake is Solidarieta Veneto’s first investment in a private equity fund managed by an independent private equity firm.Fondo Sviluppo is backed by two local government investment funds, Veneto Sviluppo and Friulia.
Second-pillar membership over the year grew by 4.2% to 6.56m, and net assets by 29.1% in Romania leu terms to RON24.7bn (€5.5bn).The contribution rate, which remained unchanged at 5% of gross wages, rose to 5.1% in 2016.Investment remained primarily domestic.There were minor shifts in asset allocation, with the share of government bonds falling by 2.1 percentage points to 65.9%.Investment in municipal, supranational and corporate bonds also declined.Meanwhile, the share of listed equities grew by 0.2 percentage points to 19.2%, that of cash and deposits by 1.1 percentage points 6.5%, and that of mutual funds by 0.5 percentage points to 3.7%.Bobocea told IPE asset picking rather than asset allocation could explain why the funds avoided year-end negative returns.The 10 voluntary third-pillar funds told a similar story, with the annual return falling from 7.45% to 2.54%.Membership grew by 10.4% to 382,318 and assets by 20.4% to RON1.3bn.The investment profile was similar to that of the second pillar – government bonds accounted for 64.9% of the total, other bonds 8.5%, listed equities 19.3% and cash and deposits 4.5%. Romania’s mandatory second-pillar pension funds, as elsewhere in the region, generated lower returns in 2015, although all seven funds managed to produce positive results.According to the Romanian Pension Funds’ Association (APAPR), the annual average weighted returns of the second-pillar funds fell to 3.68%, from 8.71% a year earlier.Mihai Bobocea, adviser to the APAPR board, attributed the fall to a “historically low interest-rate environment and stagnating stock exchange quotations”.In 2015, the turnover of listed companies on the Bucharest Stock Exchange declined by 23% year on year in local currency terms, and there was a dearth of IPOs compared with 2014.
The £15bn (€17.5bn) British Steel Pension Scheme (BSPS) insists it will not pose a significant risk to the Pension Protection Fund if it is allowed to continue without sponsor support, as it renewed its call for an overhaul of its indexation.Allan Johnston, the scheme’s chair of trustees, said he submitted “compelling” evidence to the government and the Pensions Regulator (TPR) that BSPS would be able to continue paying benefits indefinitely if a proposed change to indexation were legislated.Both the government and BSPS have been looking at ways to reduce the scheme’s deficit after Tata Steel announced plans to sell its UK business.A consultation considering changes to the fund’s indexation rate was launched in May, and the scheme itself has said it would implement a cashflow-orientated investment strategy if the link to Tata were severed. Johnston said the fund had seen its deficit, when measured on an ongoing basis, drop to around £300m in the year to March 2016, and had weathered the turmoil in the wake of the UK’s vote to leave the European Union.“Our investment strategy has meant that the scheme’s funding position has not been affected by recent falls in Gilt yields in the same way as many other UK pension schemes, and we remain confident of the scheme’s ability to provide modified benefits as proposed on a self-sufficient basis,” he said. A statement from the trustee board added that a shift to a cashflow-orientated strategy would stand it in good stead in future.“Even allowing for the recent falls in interest rates, the scheme would still have a very significant financial buffer available to protect against residual risks,” it said.“Those risks would be much lower than the risks being run by most other pension schemes in the UK, and lower than those of the PPF itself.“This means that, even if these risks were to materialise, the net result for the PPF should still be better than if BSPS went into the PPF now, and, if the risks do not materialise, the buffer could be used to reinstate future pension/benefit increases.”However, the PPF has argued in favour of barring BSPS from joining the lifeboat fund if it is allowed to sever ties to its sponsor, saying the approach amounted to a “one-way bet” against those paying the PPF levy.According to the PPF’s own estimates, the entry of BSPS into the lifeboat scheme without changes to indexation would only see its surplus decrease from its current 115% to 108%.
France’s pension reserve fund, Fonds de Réserve pour les Retraites (FRR), has launched a tender for 1-2 external providers to carry out a climate change-focused environmental footprint analysis of its investment portfolios.The €37.2bn fund is looking to hire up to two providers for a contract of two years, extendible by one year, worth €135,000 in total.The job in question is to identify the risks from climate change FRR is exposed to via the assets held in its portfolios.The reserve fund said the exercise should allow it to identify which assets had a high carbon footprint and which were a source of physical climate change and/or energy transition risks – all of this being in the context of “respecting the international goal to limit global warming”. FRR is mainly after an analysis for its portfolios of developed and emerging market listed equities, developed market bonds and government bonds but said it may also request similar analysis with regard to its private equity and private debt holdings.The deadline for applications is 30 January.FRR first calculated the environmental footprint, including its carbon footprint, of its portfolio in 2007. The fund recently announced it would no longer invest in certain coal companies for climate change reasons. In other news, the closed defined benefit pension fund of Unilever Netherlands, Progress, has licensed two new ESG indices from STOXX, Deutsche Boerse Group’s index business, for use as benchmarks.The pension fund has selected the Europe and North America versions from the index provider’s Regional Industry Neutral ESG Indices family.These exclude from the underlying universe – the Stoxx Global 1800 Index – any companies that ESG research and analysis provider Sustainalytics considers to be in breach of the UN Global Compact Principles, as well as companies identified as being involved with controversial weapons such as anti-personnel land mines, cluster weapons, or chemical, biological and nuclear weapons.The indices are also tilted toward companies that are scored higher against a set of selected environmental, social and governance (ESG) criteria.In a statement, Michael Kaal, chief risk officer at the Unilever Dutch pension funds, said: “We are conscious of our social responsibility as an institutional investor and seek to act accordingly.“This means Progress in its investment policy reflects the norms and values of society, and thus takes into account in its investment decisions relevant environmental, social and corporate governance considerations, according to international standards.”Speaking to IPE in the autumn last year, Kaal said ESG criteria had become a key component of the pension fund’s investment strategy, as it believes “ESG-compliant companies will perform better than non-ESG ones in the long term from a risk/return perspective”.
A hallmark of the TCFD’s disclosure framework is the recommendation that organisations provide climate-related financial disclosures in their main annual financial filings, and that companies determine materiality for climate-related issues consistent with how they determine the materiality of other information included in their filings.One of the changes made since the interim report, however, was to provide flexibility allowing companies to provide additional governance and risk management disclosures outside of financial filings if they wish. These should be independent of an assessment of materiality.European institutional investors welcomed the recommendations and urged the disclosure framework to be widely used.Commenting shortly after they were published, Peter Damgaard Jensen, CEO of Danish pension fund manager PKA and chair of the Institutional Investors Group on Climate Change (IIGCC), said: “Greater climate related financial disclosure in line with the TCFD’s four widely adoptable recommendations is crucial to secure more complete, meaningful, reliable, and consistent data across all companies and sectors.“Given their importance at the top of the investment supply chain, large asset owners and asset managers also recognise they have an important role to play in driving the swift and widespread adoption of this framework.”Philippe Désfosses, CEO of French pension scheme ERAFP and vice chair of IIGCC, said: “The more companies report effectively on climate related risks and opportunities, the easier it becomes for investors to allocate the substantial amounts of capital required to implement the Paris Agreement and to work on their own climate risk disclosure. There should be no resistance to the widespread adoption of the TCFD’s recommendations given how – in most G20 countries – companies already have legal obligations to disclose material risks in their routine financial filings, including those that related to climate change.”Investors putting their name to a statement of support for the final TCFD report included several Dutch pension investors, such as the civil service pension scheme ABP and its manager APG, and major North American pension funds such as the California Public Employees’ Retirement System. Also signed by other financial institutions and non-financial corporates such as AkzoNobel and Veolia, the statement pledged commitment to support the TCFD’s recommendations and described the disclosures as “an important step forward in enabling market forces to drive efficient allocation of capital and support a smooth transition to a low-carbon economy”.FSB chair and Bank of England governor Mark Carney will present the task force’s final report at the next G20 Summit, in Hamburg in July.Some have called for the G20 to mandate regulatory disclosure of climate-change-related financial risks.Philippe Zaouati, CEO of Mirova, the responsible investment subsidiary of Natixis Global Asset Management, told IPE that the European Commission’s High Level Expert Group on sustainable finance will recommend integrating the TCFD’s disclosure recommendations in EU regulation when it presents its interim report in just over a week.Article 173 – a provision in France’s energy transition law that strengthened mandatory carbon disclosure requirements for companies and introduced carbon reporting for institutional investors – could be a model of how the task force recommendations should be implemented in EU regulation, said Zaouati.The French law was introduced on a ‘comply or explain’ basis, and implementation is flexible. Financial institutions responsible for assets of around $25trn (€22trn), including major pension investors, have thrown their weight behind the final recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).Released today, the recommendations constitute a voluntary framework for companies – and investors – to report climate-related information in their financial filings.They follow interim recommendations published for consultation in December, with some changes and clarifications – although they centre on the same four thematic areas of governance, strategy, risk management, and metrics and targets.“These areas reflect the type of information investors expressed that they need to make better, more informed decisions,” according to the TCFD.
Aon, Dimensional Fund Advisors, Gabler, Hymans Robertson, LPP, PKH, Schroders, StapiStapi – Ingi Björnsson, chief executive of Icelandic pension fund Stapi, has requested to leave the fund. He will continue working at Stapi until a new chief executive has been appointed, or until an agreement has been made with the pension fund’s board. Stapi said it had begun the process of finding a replacement for Björnsson. PKH – Johann Despriée has been appointed as chief risk officer/chief compliance officer at PKH, the Norwegian pension fund for health enterprises in the Oslo metropolitan area. He comes to the pension fund from Lillevold & Partners where he was a partner and chief executive, and was also PKH’s actuary. Despriée has also worked as actuary for the Norsk Hydro pension fund.Local Pensions Partnership (LPP) – The £12.5bn (€14.5bn) pension services provider has appointed Alan Schofield to its board as a non-executive director, representing Lancashire County Council. Schofield is deputy chair of the council’s pension fund committee, and was closely involved in the work that led to the establishment of the LPP in April 2016. He is one of two shareholder non-executive directors on the LPP board and will serve as a member of the remuneration and nomination committee. Lancashire County Pension Fund was one of LPP’s two local government pension scheme founders. Gabler – Olav Rune Øverland, chief executive of Norwegian consultancy Gabler, has decided to leave the firm after working there for 17 years. Gabler’s CFO Aksel Bjerkvik has been appointed by the board as chief executive until a permanent replacement for Øverland is in place. The departing chief executive said he had reached a point where he wanted to hand over responsibility to a new leader and reflect on his own future. Chairman of Gabler, Johan Solbu Braaten, said Øverlund had generated both results for the firm and shareholder value. Dimensional Fund Advisors – Gerard O’Reilly will become co-chief executive officer alongside Dave Butler as of the last week of September. Eduardo Repetto, who has been serving as co-CEO and co-chief investment officer, will be leaving the Texas-based investment manager that month. He will have been at Dimensional for 17 years. O’Reilly is currently co-CIO and has been with Dimensional since 2004. He will continue as CIO and join the parent company’s board of directors. Aon – Lucy Barron has joined the company’s investment consulting team as a partner, coming from AXA IM, where she was head of solutions management. In that role she led the team responsible for working with clients to structure, implement and manage liability driven investment (LDI) solutions. Before this, Barron held client-facing LDI roles with Legal & General and Insight Investment.Schroders – The asset manager has appointed Stephen Bowles to the newly created position of head of delegated sales, for defined contribution and defined benefit schemes. He will have responsibility for the distribution of the firm’s growing fiduciary management services. In connection with Bowles’ appointment, Tim Horne has been promoted to head of UK defined contribution. Horne joined Schroders in 2011 from what was then Towers Watson. Hymans Robertson – The actuarial and advisory consultancy has appointed Richard Purcell to the role of technical and innovation lead within its life and financial services practice. In this role, he will be driving product innovation services for life insurers. He joins from Vitality, and previously held risk and valuation roles at Pensions Corporation and Willis Towers Watson. Purcell is also editor of The Actuary, the magazine of the Institute & Faculty of Actuaries.
UK pension scheme trustees are split on whether defined contribution (DC) schemes can be as sophisticated as defined benefit (DB) schemes on investment.In a poll of 100 trustees, consultancy Hymans Robertson found that 44% of respondents believed DC investment was as sophisticated as DB, but this was closely followed by 42% saying they were less advanced than their DB counterparts.The consultancy highlighted that half of trustees who said DC lacked the sophistication of DB strategies agreed it would take at least 10 years for DC to catch up – and that 40% went as far as to agree that this would never happen.Raj Shah, head of DC investment at Hymans Robertson, said: “It’s difficult to ignore how much the DC investment landscape has evolved in the three years since pension freedoms were introduced, and the results of our research make it clear that DC strategies fall behind DB in terms of sophistication.” However, he said there was light at the end of the tunnel as DC evolution was showing no signs of slowing down.“As long as the scale of assets in DC continues to grow and access to alternative asset classes widens, then sophistication in DC investment will improve,” Shah said.The poll, conducted by the firm Opinium on behalf of Hymans Robertson, also found that trustees of larger schemes were generally more optimistic about the ability of DC investment to catch up.Some 43% of trustees managing schemes with assets of less than £100m said they believed that DC would never be as sophisticated as DB, whereas at schemes with assets of over £100m, trustees said they felt this could happen in the next five years.
The Irish government has failed to deliver on 80% of the deadlines it set out in its pensions roadmap for reform, according to Peter Fahy, the chair of the Irish Association of Pension Funds (IAPF).Speaking at the IAPF’s annual dinner in Dublin last week, Fahy said the government had missed 19 of the 24 target deadlines for actions in 2018, while of the 11 tasks outlined for the first quarter of 2019, only one had been accomplished.The pensions roadmap, a five-year plan for reform covering both state and private provision, was launched a year ago and includes plans for auto-enrolment, improvements to the sustainability of defined benefit (DB) schemes, and a “total contributions” approach to the state pension.While a “strawman” proposal for Ireland’s auto-enrolment regime was published in August, many other aspects of the reforms have yet to be developed. Despite the delays, Regina Doherty, minister for employment affairs and social protection, has insisted auto-enrolment remains on track for implementation from 2022. Peter Fahy, chair, IAPFFahy said: “There has been widespread support for the government’s roadmap, but pension funds are increasingly concerned that the majority of target deadlines set by the Department of Employment Affairs and Social Protection appear to have been missed.“There has been very little communication between the government and key sector stakeholders on aspects of the roadmap, and general confidence across the sector in the various projects and activities set out in the report is low.”The IAPF said it would lobby for “real progress” on key actions that were overdue, including publication of the final design for the auto-enrolment system, pension tax harmonisation, and additional protections for the funding of DB schemes. Regina Doherty, minister for employment affairs and social protectionThe 2018 missed deadlines include:Setting a formal benchmark of 34% of average earnings for state pension contributory payments;Reviewing the cost of funded supplementary pensions to help inform decisions relating to financial incentives for retirement savings, and underpin the development of the auto-enrolment system;Advancing the Social Welfare, Pensions and Civil Registration Bill 2017 to give effect to new rules around DB scheme funding;Arranging for further consultations with industry representatives to identify other funding standard reform options;Beginning a communication campaign targeting employers and employees, outlining the financial incentives available to those who may wish to continue working beyond retirement age.Tasks outlined for the first quarter of 2019 but not yet carried out include finalising the design of the auto-enrolment system, proposing a personal fitness and probity benchmark for trustees, and preparing a new set of professional standards for trustees’ knowledge and experience.The IAPF said that some of the Q1 2019 targets were probably stalled because they were linked to IORP II requirements. The deadline for transposing this legislation has also been missed.
Analysts are forecasting big things for Brisbane’s housing market. Photo: Jodie Richter.That’s a phenomenal improvement for a city that saw just 0.3 per cent growth in home values in the past 12 months, according to property researcher CoreLogic.The sunshine state is finally starting to see a boost in interstate migration — particularly from New South Wales — with prospective buyers lured by its comparative affordability.The latest Australian Bureau of Statistics figures show Brisbane had the highest internal migration rate of any Australian city during 2016-17, with 10,500 Sydneysiders and more than 6400 Melburnians making the move here. 10 PRICIEST SUBURBS TO RENT IN QLD BIS expects Brisbane house prices to grow around the level of inflation (2—3 per cent per annum) to 2019/20, before stronger growth of six per cent is forecast in 2020/21. “Some green shoots look like they are starting to emerge in the Brisbane market,” BIS senior manager Angie Zigomanis said.“However, any upturn is likely to be delayed until economic conditions pick up and excess stock is further absorbed.” Brisbane house price growth is set to lead the nation in three years, according to BIS Oxford Economics. Picture: Richard Walker.‘PATCHY’, ‘flat’, ‘tepid’ — these are just some of the less than flattering buzz words used to describe Brisbane’s housing market in recent years.How does ‘hot’ sound instead?While the powerhouse property markets of Sydney and Melbourne have been basking in the glory of unsustainable house price growth, the Queensland capital has been waiting calmly in the shadows for its time to shine.And that time has come. GET THE LATEST REAL ESTATE NEWS DIRECT TO YOUR INBOX HERE Analysts are forecasting big things for Brisbane’s residential property market, thanks to a slowdown in construction coupled with a boost in interstate migration and economic growth. In its latest report, industry forecaster BIS Oxford Economics predicts Brisbane will experience the highest house price growth of all capital cities over the next three years — jumping 13 per cent, or $70,000, to a median of $620,000. A house for sale in the Brisbane suburb of Stafford. Image: AAP/Glenn Hunt.More from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoSome areas are set to perform better than others, with the latest CoreLogic-Moody’s Analytics report forecasting a rise in home values in Brisbane’s inner and west markets and a modest decline in the southern suburbs of Carindale, Holland Park and Sunnybank, where values have already run hard — up 40 per cent since mid 2012. MILLIONS CHANGE HANDS DURING HUGE AUCTION WEEK CoreLogic found Brisbane’s middle valued suburbs recorded the strongest growth in the 12 months to March this year, while local prestige real estate agents say 2017/18 has been one of their strongest years ever when it comes to the top end of the market.They’ve noticed more properties selling above $4 million, as Sydney and Melbourne buyers recognise they can get a lot more bang for their buck in Brisbane. This home in the Brisbane suburb of Ascot just sold for $4.25m.BIS Oxford Economic’s analysis follows reports last week where ANZ, Macquarie Securities and UBS issued favourable assessments of the Brisbane residential market, while the global ratings agency Moody’s Analytics declared the worst was over for Brisbane home values.ANZ sent east coast homeowners into a panic last week when it predicted Sydney and Melbourne house prices would likely slump 10 per cent, but it had no such bad news for Brisbane. WHAT QUEENSLANDERS WANT IN A HOME ANZ senior economist Daniel Gradwell said Brisbane’s improving economy and population growth would keep it “insulated” from the impending property correction in its neighbouring cities.“We’re seeing demand is picking up now because Brisbane and the rest of Queensland’s population growth is really improving and confidence is pretty strong and that’s likely to accelerate,” Mr Gradwell said.In good new for property investors, rental vacancy rates are also declining, marking a significant turnaround in Brisbane’s rental market.“We believe that a rise in interstate migration is lifting population growth rates in Brisbane plus the peak in unit completions is creating this turnaround,” SQM Research managing director Louis Christopher said.Both the Gold Coast and Sunshine Coast have experienced significantly stronger house price growth than Brisbane since 2012, according to BIS Oxford Economics.That price growth is expected to slow due to rising supply, but BIS still expects house prices to increase another 6 per cent in both markets by 2021.It appears the downturn has finally stabilised in the wake of the mining boom in Townsville, with the median house price on track to rise by 9 per cent over the next three years thanks to an improving unemployment rate and rising tourism arrivals.The Cairns market looks to be running out of steam after steady price growth to 2017, with price growth set to remain flat in the near term.