The co-founder of Forum Partners said Australia was “probably as far advanced as anyone” in addressing the problem.The Australian model of Super funds is largely DC and active in both the real estate and infrastructure market.Platt said there were ways of tackling the problems that stemmed from requirements to revalue property holdings on a daily basis, and also that the use of real estate securities could offer ways of allowing for limited liquidity required by some DC investors.“The Australians have come to a very common-sense view,” he added. “Even if we have to allow for daily liquidity and portfolio changes among our underlying superannuants, not everyone is going to move from one side of the ship to the other at the same time.”He said many investors would instead take on a limited amount of implied liquidity and either create an internal trading market or invest instead in real estate securities.“That kind of approach, certainly from the largest players in the industry, is what we will see adopted more broadly,” he said.“Australians view real estate securities not as an add-on or the icing on the cake, which is typical of perhaps Americans and Western Europeans, where REITs aren’t as entrenched. Rather they view it as the foundation of a real estate portfolio.“The world is probably going to move more in that direction, and in that sense, again, Europe is playing catch-up.“Finding ways to crack this, there is not going to be any single solution, but a series of product innovations. It’s probably the most exciting edge of the real estate industry, as far as I’m concerned, finding ways to deliver liquid alternatives.”Property holdings by DC fund are not unheard of outside of the UK, and the National Employment Savings Trust has considered the use of REITs as a way of providing it access to the real estate market – both domestically and globally. The property industry is only just beginning to consider how defined contribution (DC) funds could invest in real estate, but must find ways to deliver liquid alternatives, according to the chief executive of Forum Partners.Russell Platt said the innovation needed to allow for such investments would be exciting, but that Europe was “playing catch-up” compared with the more advanced Australian superannuation market.Speaking at a La Française Asset Management event – less than a year after Forum and the French manager agreed a strategic partnership that saw La Française acquire a 24.9% stake – Platt identified the shift from defined benefit pension funds to DC as one of the biggest challenges facing his industry.“People now are just beginning to turn their attention to it, and it’s not easy – particularly if you want to provide lower-volatility direct real estate and equity assets into a defined contribution plan,” he said.
The ECJ will now consider PMT’s case against Swedish tax authorities after the Dutch scheme lost an appeal in a lower Swedish court.The Solicitor General of the European Court, however, has argued that the different tax treatment is justifiable. He said that, although the free movement of capital within the EU means a foreign shareholder must be treated equally to a local one, if a non-resident pension fund’s position is incomparable with that of a local scheme, a different treatment is allowed.He also pointed out that Sweden levies tax on a scheme’s total assets against projected returns to avoid affecting investment decisions through tax policy, as well as to keep tax revenues independent from the broader economy. PMT, the €60bn pension fund for the Dutch metal industry, has taken Sweden’s Inland Revenue to the European Court of Justice (ECJ) to demand equal tax treatment with Swedish pension funds.The Dutch scheme was forced to pay a 15% dividend tax on the €50m of Swedish equities it owned between 2002 and 2006 – a levy for which Swedish pension funds are exempt.PMT argues that national governments, as a matter of principle, should adjust their tax laws to create a level playing field between local pension funds and foreign schemes and demands a full refund. The scheme cited success in “similar cases” in Spain and Poland, where it managed to claw back more than €1.5m in paid taxes.
The pension fund said it would aim for financial reserves of 20% in Belgium, as opposed to 25%.It pointed out that the reduced buffer would match its current asset mix of 60% fixed income and 40% equity, and that the 25% reserve had been drawn on the asset allocation of 2006, when equity exposure stood at 70%.According to ExxonMobil, however, Belgium will provide more certainty for the scheme, as rights cuts would be ruled out and additional payments by the sponsor would become mandatory.It added that, at the Belgian scheme, “Dutch” assets would remain separate and unaffected if one of the sponsors went bust.As another motive for the planned move, ExxonMobil cited its desire to avoid the imposition of a supervisory board (RvT), which will become compulsory for company schemes in the Netherlands from next year.It said the requirement to have independent experts on the RvT was at odds with its desire to have a pension fund exclusively “run by and operating for” ExxonMobil.It also claimed that governance at the Belgian OFP would be “as similar as possible” to that in the Netherlands.Under the new set-up, it said, the IORP’s board would comprise five company representatives, while a “pensions council” of equally represented workers, employers and pensioners would have the right to a binding advice on the discount rate for liabilities, financial buffers and applied longevity tables.It said the right of say of its Dutch works council (OR) would be extended to adjustments to the pension fund’s regulation, as well as the cancellation of the pensions-provision contract.ExxonMobil also cited increased efficiency and lower costs as expected benefits from the relocation, referring to “ever-increasing” regulation and requirements for trustee expertise in the Netherlands.The pension fund, known as Protector, said it expected a decision about a collective value transfer to the Belgian OFP to be made after a general meeting for its 5,000 participants and pensioners, scheduled for June. Oil company ExxonMobil has said increasing financial-buffer requirements in the Netherlands fail to recognise the company’s “unique” funding agreement with its €2.5bn Dutch pension fund.The company cited this as one of several reasons why it wishes to relocate the scheme to Belgium.Under the agreement, ExxonMobil is to plug any funding gap if the scheme’s coverage ratio falls below 125%.If funding exceeds 125%, the scheme is to return the surplus back to the company.
KLM, the Dutch airline, is seeking to terminate its obligation to plug any funding shortfalls at its €8.2bn pension fund for pilots (Pensioenfonds Vliegend Personeel KLM).The airline cites the stricter buffer requirements within the new financial assessment framework (nFTK), which, in the KLM scheme’s case, requires a funding ratio of more than 122% to award full inflation compensation. Falling interest rates, however, lowered the pension fund’s coverage ratio from 122% at the end of 2015 to just 112.5% in June.The company said it feared it would have to pay an additional contribution worth hundreds of millions of euros to be able to grant indexation next year. To avoid this, KLM said it would terminate the pension-provision contract with the pension fund on 1 December, with financial news daily Het Financieele Dagblad (FD) quoting a KLM spokesman as saying: “The mandatory supplementary payment poses too much risk to the company, so we therefore want to conclude a new contract.”The pilots union VNV, in a letter to members, described KLM’s plan as an “attack” on pensions provision.The airline, however, said it had proposed an alternative whereby changes would have been made solely to the indexation guarantee.The Pensioenfonds Vliegend Personeel KLM is one of the few pension funds in the Netherlands were indexation is not in arrears.Last year, the airline announced that it wanted its three largest pension funds to switch to collective defined contribution arrangements.In its 2015 annual report, it described the current defined benefit plans – with more than €19bn in combined assets under management – as “untenable” and a burden on the company’s balance sheet.
The Bank of England has cut interest rates by 0.25 basis points and re-launched its quantitative easing (QE) programme in a move set to cause further pain for the underfunded UK pension sector.While markets were widely expecting the UK central bank to cut interest rates to 0.25% after initial data showed the economy slowing in the wake of the decision to leave the European Union, the monetary policy committee’s decision to expand QE by £70bn (€81.9bn) – split between £10bn in corporate bonds and £60bn in Gilts – surprised many.In his letter to UK chancellor Philip Hammond, bank governor Mark Carney argued that the purchase of corporate bonds was required to lower borrowing costs, and that the Gilt purchase, which will see the overall QE programme grow to £435bn, would boost the prices of other assets.Dan Mikulskis, managing director at consultancy Redington, noted the bank’s announcement had seen long-dated Gilt yields decline by 10 basis points, in addition to a longer-term decline of 1% over the last 12 months. “Many pension schemes undertaking actuarial valuations at the June or September quarter ends are likely to show stressed positions – with higher deficits despite reasonable asset growth,” he said.Mikulskis also predicted sponsors would need to increase contributions to address expanding deficits, or the Pensions Regulator would be required to extend funding plans to allow schemes more time to close the gap.His calls for greater leniency were echoed by the Pensions and Lifetime Savings Association.Antony Barker, director of pensions at the Santander UK Group Pension Scheme, also warned about the impact of QE on deficits and questioned whether the asset purchase programme would always translate to banks increasing lending.Discussing the drop in Gilt yields, Barker told IPE: “This potentially feeds through, at least for banks, into bigger IAS 19 deficits, against which capital has to be held, and if capital is being held for pension risk, it can’t be used to support lending.”He added that each £100m used by banks to underpin pension deficits equated to £3bn-4bn of loans they were no longer able to offer.“Hence, £10bn of QE could be very quickly offset, given the collective liabilities of bank pension schemes,” he said. JP Morgan Asset Management (JPMAM) also questioned the overall impact of the QE programme and asked what the renewed purchase of Gilts by the BoE would do to the bond market’s depth.The manager’s head of pension advisory and solutions, Sorca Kelly-Scholte, noted that pension funds’ ability to access Gilts for hedging purposes was important where exposure could not be hedged through derivatives but would be curtailed by the bank’s £60bn purchase.“As UK pension funds become cashflow negative, they will increasingly need physical assets rather than leverage to service those cashflows,” she added.Kelly-Scholte speculated that the decision by the new UK government to abandon former chancellor George Osborne’s 2020 surplus target would potentially allow increased Gilt issuance, although there were no guarantees they would be of the long-dated and inflation-linked nature desired by the pensions industry. Barker also advocated greater Gilt issuance, suggesting they should be issued in place of QE, while the proceeds should be directed towards infrastructure – including new nuclear power capacity for the UK and other projects.
The measures would also give asset managers the ability to improve their management fee disclosure, as well as to decide on whether to use the AMF’s fund classification, which has now been made optional.Other measures would allow management firms to use a wider range of liquidity management tools to manage their investment strategies in the best way, and make use of new pre-marketing possibilities, the organisations said.The AMF and the AFG also said FROG would institute an annual meeting to make sure the initiative continued developing.They named Jean-Louis Laurens as ambassador for the French asset management industry to promote the sector’s strengths within professional bodies and to major international investors.Laurens has been managing partner and chairman of the management committee of Rothschild & Cie Gestion since 2009, and headed up Robeco’s French subsidiaries from from 2005 to 2009. A newly established working group set up to make France’s asset management industry more attractive to foreign investors has outlined a series of steps to reach the goal.France’s Autorité des Marchés Financiers (AMF) and the French asset management association – the Association Française de la Gestion Financière (AFG) – set up the working group earlier this year, calling it FROG as an acronym for “French Routes and Opportunities Garden”.FROG has now produced a report on the outcome of its deliberations including seven concrete measures.These seven steps will help the industry to compete on an international level by letting investors choose fund subscription and redemption solutions from a comprehensive catalogue, and giving them access to SICAVs (open-ended investment companies) that have opted to comply with a governance charter, the AMF and the AFG said.
The Communication Workers’ Union (CWU) has voiced its objection to a review by BT of its giant pension scheme.The union said it was “resolute in its determination to defend members’ pensions” and said it could ballot for strike action if the company decided to close the £43.1bn (€48.2bn) BT Pension Scheme (BTPS) completely.BT announced the review in May, but workers were formally told of its scope last week, according to the CWU. The communications company, formerly owned by the UK government, said in May it was considering several options to close a £13.9bn shortfall, including a contingent assets deal with the scheme’s trustees.Union representatives “left the company in no doubt as to their anger and dismay” at the review, the CWU said in a statement on its website. It demanded that the review also take into account a better deal for members of the company’s defined contribution (DC) scheme. The defined benefit scheme was closed to new members in 2001. One representative said closing it to future accrual was a “red line”, while deputy general secretary Andy Kerr described it as “wholly unacceptable”.Kerr said: “While this review is clearly unwelcome and unsettling for BTPS members, it’s incumbent on the CWU to enter constructive discussions with the company, because ultimately it’s crucial we ensure the long-term sustainability of our members’ pensions… The company has been left in no doubt that the CWU is serious about using industrial action, if necessary, to keep the BTPS open for current members – and, encouragingly, BT has stressed it is seeking to establish an agreed way forward.”The BT Pension Scheme’s estimated total liability of £60bn – correct as of June 30 2016 – is almost double the company’s current market capitalisation.The scheme had a shortfall of £13.9bn at the end of June 2016, up by nearly 40% due to a sharp rise in liabilities in the preceding 12 months.The CWU is also involved in a dispute with Royal Mail over changes to its pension scheme.NOW: Pensions withdraws from regulator’s master trust list over admin issueDC master trust provider NOW: Pensions has withdrawn itself from the Pensions Regulator’s (TPR) “assurance list” of auto-enrolment providers.The company – which is backed by Danish pensions giant ATP – said in a statement yesterday that it was attempting to “resolve historic issues processing contributions for a small percentage of clients”.TPR said it had been reviewing NOW: Pensions’ position on the list “due to concerns about the governance and administration of the scheme, including delays processing some contributions and communicating with a portion of members”.“There is no suggestion that the assets of members are at risk as a result of the scheme coming off the list, or that employers whose workplace pensions are in place with NOW: Pensions are not complying with their automatic enrolment duties,” the regulator said.The issue related to NOW: Pensions changing its third-party administrator, the master trust provider said in a statement. It appointed JLT Employee Benefits as its administrator in 2014.Delays had taken “longer than it should” to resolve due to complexities and poor quality data in some cases, NOW: Pensions said.“We should have been more proactive in our communications with affected clients and members regarding these issues and apologise wholeheartedly to those we have let down,” said Morten Nilsson, the company’s CEO. “In this instance, we have fallen short of the standard of service we aim to provide.”Nilsson added that he was “confident” of completing the work and returning to TPR’s list.TPR maintains a list of master trust providers that have passed an audit of governance standards and controls and are deemed to comply with the regulator’s DC code. Following NOW: Pensions’ withdrawal, the list has 22 firms.The People’s Pension passes 3m membersThe People’s Pension – one of the providers still on TPR’s assurance list – has just signed up its three millionth member.The company is the UK’s largest private sector master trust, with £2.3bn in assets. It began its auto-enrolment provision in October 2012 and has signed up more than 65,000 employers, mainly small companies.The National Employment Savings Trust – arguably the most prominent of the master trust providers – had 4.5m members and £1.7bn in assets at the end of March, according to its latest annual report.Patrick Heath-Lay, chief executive of The People’s Pension parent company B&CE, said: “To reach the milestone of 3m members in a little under six years is a fantastic achievement. Thanks to the hard work and dedication of all the team at The People’s Pension, we are proud to have contributed to the success of auto-enrolment and helped ensure that millions of workers are now saving towards their retirement.”
Several institutional asset managers may have broken competition law, according to the UK’s financial regulator.The Financial Conduct Authority (FCA) believes Artemis Investment Management, Hargreave Hale, Newton Investment Management, and River & Mercantile Asset Management may have broken competition law in relation to Initial Public Offerings (IPOs) and a placing.In a “statement of objections” released this morning, the regulator alleged that the firms shared information by disclosing the price they intended to pay, or accepting such information, or both, in relation to one or more of two IPOs and one placing, shortly before the share prices were set.“The sharing generally occurred on a bilateral basis and allowed firms to know the other’s plans during the IPO or placing process when they should have been competing for shares,” said the FCA. It has issued a “statement of objections” to the four asset managers. This gives the firms notice that the FCA thinks they have infringed competition law and gives them the opportunity to respond by making written and oral representations.The statement of objections has not been made public.It is the first case the FCA has brought using its competition enforcement powers.Its main allegations against the firms are that separately:in 2015, Newton and Hargreave Hale and River & Mercantile Asset Management disclosed and/or accepted information about the price they intended to pay for shares in relation to one IPO and a placing;in 2014 Artemis and Newton shared information about the price they intended or were willing to pay for shares in relation to another IPO.Newton Investment Management was ranked 45th in IPE’s 2017 ranking of asset managers of European institutional assets, with €43.7bn under management.Artemis’ website said it managed €31bn of assets as at 31 October.In Newton and River and Mercantile’s cases, the statement of objections is also addressed to the their ultimate parent companies. A spokeswoman for Newton said: “Newton is not in a position to comment on any actions with regard to the FCA’s ongoing investigation, except to note that Newton has been cooperating fully with the FCA and will continue to do so until this matter reaches its conclusion.“The FCA’s investigation is focused on a very small number of Newton’s UK equity-focused strategies which can invest in small and mid-cap UK equities. Specifically, it relates to activity surrounding two initial public offerings and a placement in 2014 and 2015.“There has to date been no loss to any clients/investors as a result of the activity, and we do not anticipate any loss in the future.“We take compliance matters seriously and are committed to ensuring that our business is managed with the highest commitment to legal and ethical standards.”A spokesman for Artemis said: “We note the FCA’s provisional findings. We will continue to cooperate with the FCA as its investigation proceeds.”In a statement, Hargreave Hale’s parent company Canaccord Genuity Wealth Management said: “The statement from the FCA relates to a competition law matter which names Hargreave Hale, amongst other firms. This matter relates to the Hargreave Hale fund management business prior to its acquisition by Canaccord Genuity Wealth Management and was disclosed to us during our due diligence process.“Hargreave Hale has fully cooperated with the FCA and will be making further representations to the FCA for its review and consideration, with respect to the two transactions in question. We note that the findings are provisional and may not necessarily lead to an infringement decision.”In a notice to the stock exchange in London, River & Mercantile Group said it was “cooperating fully with the FCA’s ongoing investigation in relation to the matter”.The group added: “The statement of objections is a statement of the FCA’s provisional findings only and all parties will now have the opportunity to respond to the statement before the FCA decides if there has been an infringement. The group will review the [statement] and respond in due course.”In its preliminary results statement, the group said the FCA’s allegations did not affect any clients, or the net asset value of funds or segregated mandates.This article has been updated to include statements from affected asset managers.
However, IPE’s research also shows that, last year, active managers gained some ground versus passive managers. As of 2017, passively managed assets grew three times faster than actively managed.This suggested that, while investors kept allocating to passive products or strategies, in 2017 the pace of growth of passive investments slowed down as investors re-allocated to active.Active investment still vastly outsizes passive investment at both global and European levels.At the end of 2017, 69% of assets managed by the sample of 79 European institutional managers was run on an active basis, while 68% of assets managed by global firms was run passively. The ratio was stable compared with the previous year.The winners and losers 9AmundiFrance1,426,1071,082,700 CompanyCountryTotal AUM 2018Total AUM 2017 14Natixis Investment ManagersFrance/US830,847831,501 1BlackRockUS/UK5,315,4094,884,550 21Affiliated Managers GroupUS696,554689,000 10Prudential FinancialUS1,160,5831,201,082 2Vanguard Asset ManagementUS/UK4,090,0103,727,455 The growth figures are based on a like-for-like sample of 79 European institutional managers directly comparable across the period, managing €3trn of active assets and €963bn of passive assets, according to this year’s survey.For global managers, IPE used a sample of 93 managers with €14trn of active assets and €5trn of passive assets.#*#*Show Fullscreen*#*# 4Fidelity InvestmentsUS2,003,2702,129,650 3State Street Global AdvisorsUS/UK2,316,5332,340,323 5BNY Mellon Investment Management US/UK1,585,9201,518,420 7J.P. Morgan Asset ManagementUS/UK1,471,2261,479,125 8PIMCOUS/Ger/UK1,462,4461,406,350 16NuveenUS/UK810,047838,437 31/12/17 (€m)31/12/16 (€m) 22UBS Asset ManagementSwitzerland/UK663,562612,754 17Northern Trust Asset ManagementUS/UK800,644- 18InvescoUS/UK780,714771,233 13Wellington Management InternationalUS899,647928,380 15T. Rowe PriceUS/UK825,368768,711 24Sumitomo Mitsui Trust BankJapan656,450659,180 Click here to download the complete Top 400 table (To buy the Top 400 data, email Emma Morgan-Jones) 20DWS – Deutsche Asset ManagementGermany701,736705,867 19AXA Investment ManagersFrance745,912699,628 11Legal & General Investment ManagementUK1,107,6661,047,470 The top five biggest managers remained unchanged compared to last year’s survey: BlackRock comfortably retained its status as the world’s biggest asset manager with €5.3trn. Vanguard was second with €4.1trn.Amundi entered the top 10, running €1.4trn, while Goldman Sachs Asset Management’s year-on-year decline in assets under management – €1.07trn in 2018, versus €1.12trn last year – saw it fall from 10th position to 12th.The newly merged Aberdeen Standard Investments debuted this year as the 25th biggest asset manager in the Top 400 survey, with €648.5bn. Janus Henderson Investors, another recently merged entity, made its first appearance at 62, with €308.8bn under management.The full report is available with the June edition of IPE.Top 400 Asset Managers 2018 (Top 25) 6Capital GroupUS1,504,3591,401,780 12Goldman Sachs Asset Management InternationalUS/UK1,073,7691,116,606 The growth of passive investment continues to outpace that of active investment at both global and European levels, according to IPE’s latest Top 400 Asset Managers survey.Passively managed assets of global and European institutional managers grew nearly twice as much as actively managed assets between 2013 and 2018, the latest iteration of the annual survey found. IPE’s data shows the compound annual growth rate (CAGR) for European institutional passive investments was 14.6% for the period, while actively managed assets grew by 7.8% per year.Globally, passively managed assets grew almost 18% a year between 2014 and 2018, while actively managed assets grew by 9.2%. 23Insight InvestmentUK658,905612,719 25Aberdeen Standard InvestmentsUK648,519-
It was not clear whether the Urenco scheme could keep existing pensions and future pensions accrual with the same provider, as the employers hadn’t announced where accrual would be placed.A complicating factor was that ETC was exempt from mandatory membership of PME, the €47bn pension fund for the metal and electro-technical engineering industry.Were the company to place its pensions accrual elsewhere, it would have to apply for a new dispensation.The pension fund said it had considered joining a general pension fund but instead it opted for the €25.5bn PGB as its new provider, after consulting its employers, unions, and independent accountability board.Spun’s funding ratio was 117.1% at the end of September, comparing favourably to PGB’s, which stood at 109.3%.Spun said the collective value transfer to PGB was still subject to approval from DNB, but it expected to complete the transaction by 1 April next year. Spun, the pension fund of Dutch uranium enrichment firm Urenco, is to transfer its €502m of assets to the large multi-sector scheme PGB and wind up its operations next year.The scheme, which also manages the pension arrangements for ETC, a designer of uranium enrichment facilities, said the high and increasing cost of pensions provision was the main reason for its decision to cease its operations.Last year, Spun’s cost of pensions administration rose to €860 per member. PGB’s administration cost was €175 per member, according to data from regulator De Nederlandsche Bank (DNB).The pension fund has approximately 500 active members, a number that has been steadily decreasing in the past few years. Source: olafpictures