Strathclyde slashes equities in shift to ‘enhanced yield’ strategies

first_imgLong-term enhanced yield allocations would increase by 2.5 percentage points, also to 15%, with credit up to 5% from 3%.Over the next three years, the fund is recommended to shave another 10 percentage points off equity, splitting this evenly between the short and long-term enhanced yield strategies – taking allocations to 20% each.The two remaining alternative strategies see further reductions in equity holdings following the same pattern.#*#*Show Fullscreen*#*# The Strathclyde Pension Fund may radically reduce its equity holdings for a more diversified portfolio with allocations to short and long-term “enhanced yield” strategies.The UK’s largest local government pension scheme (LGPS) at £14.9bn (€19bn) currently holds over 70% of its assets in equities, with Glasgow City Council’s pensions committee now considering a range of alternative strategies to improve downside risk, produce a more efficient strategy and improve confidence in reaching the funding target.Trustees to the scheme are considering four alternative strategies, all of which see a dramatic reduction in equities in favour of credit and a range of options including absolute return, high-yield and hedge funds.The first alternative strategy, which the fund could implement immediately, would see equities fall by ten percentage points to 62.5% with short-term enhanced yield allocations doubling to 15%. Source: Strathclyde Pension Fund / Glasgow City CouncilStrathclyde Pension Fund asset allocationAt the scheme’s meeting in March, the board concluded equity exposure needed to reduce to diversify strategy.“Implementation should begin at an early date and should be progressed as quickly as opportunities, market conditions and other practicalities allow,” Lynn Brown, the fund’s deputy chief executive and executive director of financial services, told the committee in documents prepared for a recent meeting.“Processes to facilitate implementation should be considered with a strategy for ongoing risk management thereafter should be developed,” she added.Both alternative strategies would see the fund dramatically increase exposures to hedge funds, absolute return strategies, real estate debt, direct lending, non-sterling and emerging market bonds, property, social housing, infrastructure debt and equity and farmland.If accepted, these asset classes could count for 40% of the fund by 2018.The board also threw support behind Strathclyde’s £100m New Opportunities Portfolio (NOP) suggesting cap restrictions should be raised.The NOP is Strathcylde’s portfolio focusing small amounts in infrastructure, finance and alternatives.In December the fund added commitments to social infrastructure, credit for property developers and renewable energy.The board said it was too early to judge investment performance but the NOP was a success for governance and diversification – suggesting the implementation model used could be mirrored in Strathclyde’s new asset allocation shift.“The NOP itself could either continue to expand as a separate strand of investment strategy or simply be allocated across the new asset categories,” the fund said.It was also recommended the 3% allocation cap be lifted to 5% to allow headroom, given it has investment commitments of £300m, with £150m spare capacity.The fund achieved an 8.8% investment return over 2014, above its 8% benchmark.last_img read more

London CIV hires four managers for £6bn worth of mandates

first_imgThe authorisation sees the London CIV recognised as an alternative investment fund manager (AIFM), in line with the European Directive by the same name.Assets are held within an Authorised Contractual Scheme, the UK’s tax-transparent fund.Grover said a large part of the £6bn expected to be in London CIV sub-funds by the end of the financial year would be passively managed equities, overseen by Legal & General Investment Management (LGIM) and BlackRock.LGIM and BlackRock will each manage three sub-funds, he said.Baillie Gifford will be in charge of a second actively managed global equity sub-fund, as well as a standalone diversified growth fund.Grover added that the London CIV now employed six people and would hire a seventh soon.The new staff includes Julian Pendock as investment oversight director, and Brian Lee as COO.Pendock joins from the London council of Brent, where he was the council fund’s investment and pensions manager, a role he assumed after five years at Senhouse Capital, latterly as its CIO.He has also worked at JP Morgan Chase and Bedlam Asset Management.Bob Kerslake, former permanent secretary at the Department for Communities and Local Government (DCLG), will chair the London CIV’s board.Kerslake retired from the DCLG in February this year and, until September 2014, was head of the UK’s civil service.Prior to that, he was chief executive of Sheffield City Council, and chief executive of the Homes & Communities Agency, the public body in charge of affordable housing in England.Chris Bilsland and Eric MacKay have also joined the board, appointed as non-executive directors.Until 2013, Bisland was chamberlain of the City of London, the council’s financial director.MacKay is currently head of legal, risk and compliance at asset manager TT International, and was previously F&C’s chief risk officer. The London collective investment vehicle (CIV) for the capital’s local authority funds has named its first four managers, to be in charge of £6bn (€8.5bn) in equity mandates.Allianz Global Investors will be in charge of the first sub-fund to be launched by the London CIV.The active global equity fund has attracted more than £500m from three of the participating local government pension schemes, chief executive Hugh Grover said.Grover added that a further eight sub-funds were expected to be launched by the end of the financial year, possible after the Financial Conduct Authority (FCA) authorised the vehicle.last_img read more

Wednesday people roundup

first_imgSpence Johnson – Will Mayne has been promoted to director. He studied Economics at the University of Cambridge and management at the Judge Business School before running a team of analysts at Informa. Since joining Spence Johnson, he has worked on a wide variety of strategic projects across European institutional.Newton Investment Management – Julian Lyne has been appointed global head of distribution. He was previously head of business development and global consultant relationships at Newton. He joined the company in the summer of 2014 from F&C Investments, where he was head of institutional business.BNY Mellon – Richard Gill has been appointed head of BNY’s Markets business in the EMEA region. Gill has worked at BNY Mellon for more than 20, years and his previous roles include co-head of FX Trading and chief FX Dealer. Meanwhile, Ileana Sodani is to lead the Asset Servicing Relationship Development business in the EMEA. She formerly held the position of chief relationship officer of Pershing’s EMEA business.bfinance – Peter Hobbs is joining as managing director of private markets. Hobbs recently left MSCI, where he was head of real estate research. Hobbs was previously head of global research at Deutsche Bank’s real estate investment management business RREEF, before joining MSCI in 2010.UBS Asset Management – Asher Garnett has joined as director of UK business development for the global real estate business of UBS. Garnett joins from BlackRock, where he spent the past five years. Prior to this, he spent four years on CMBS at Bank of America. Pension Protection Fund, West Midlands Pension Fund, Financial Conduct Authority, Redington, Willis Towers Watson, Spence Johnson, Newton Investment Management, BNY Mellon, bfinance, UBS Asset ManagementPension Protection Fund – Leanne Clements has joined the UK’s PPF as responsible investment manager. Clements was most recently responsible investment officer at West Midlands Pension Fund. She held a similar position at the London Pensions Fund Authority and has also worked at Pensions and Investment Research Consultants (PIRC), a proxy voting and engagement firm. Ebba Schmidt, who was the responsible investment manager at the PPF and implemented its responsible investment strategy, died last year.Financial Conduct Authority (FCA) – Acting chief executive Tracey McDermott is to leave the FCA on 1 July. In January, she decided in early December 2015 to withdraw from the process to appoint the permanent chief executive but would continue as acting CEO until a permanent replacement was in post. Andrew Bailey was appointed as the new chief executive on 26 January and is due to take up the position this summer.Redington – Jinesh Patel has been appointed vice-president of the DC & Financial Well-being Consulting Practice. He joins from Willis Towers Watson, where he provided defined contribution consultancy advice. Before then, he worked at HSBC.last_img read more

‘Unprecedented’ consolidation of UK DC could see providers gain £1.5bn

first_img“The schemes involved are not simply going to be smaller master trusts set up to handle auto enrolment that will not meet upcoming capital adequacy requirements,” he said, “but will include many smaller employer-run DC schemes that will be looking to use the economies of scale and higher quality governance and administration available via a master trust in the face of rising compliance costs.”Smart Pension is not the only provider hoping to absorb smaller-scale DC providers, and IPE understands at least one other master trust in the market is including mergers with existing DC schemes within its business plan as a means of growing its asset under management, in addition to attracting new inflows.TPR is fully aware of the problems associated size of the UK master trust market, and its executive director for regulatory policy, Andrew Warwick-Thompson, has previously questioned how it should best prevent further growth in the number of providers in the market.Nigel Waterson, the chair of trustees at master trust Now Pensions, has previously suggested TPR act as a “marriage broker” in bringing about consolidation in the market, which, as of April, had seen the launch of 100 master trusts, of which over 70 were active.The regulator has championed the idea of consolidation since then, proposing it should be able to merge schemes it deems “sub-standard”. The consolidation of the UK master trust market will see £1.5bn (€1.7bn) in assets shift between pension schemes, according to estimates by one provider.Master trust Smart Pension predicted that the consolidation would occur among over 6,200 schemes with fewer than 100 members, which manage assets of £1.3bn according to figures from the Pensions Regulator (TPR).It added that a further £400m could also shift as around 20 established master trusts struggle to cope with new capital requirements the UK government has pledged to impose on multi-employer defined contribution (DC) schemes in an effort to avoid the cost of disorderly wind-ups being met by savers.Peter Walker, COO of Smart Pension, said the pensions market was set to see “unprecedented” movement within the market over the next two years as funds consolidate.last_img read more

IPE 360: The political concerns you should have on your radar

first_imgPanellists at last week’s IPE 360 conference in London highlighted a range of political concerns for investors – not all of which were necessarily on the radar yet.Vincent Reinhart, chief economist at Standish Mellon Asset Management, warned of the potential for “policy mistakes” in China in the near future.“Its desire to project a military force as powerful as their GDP on the global scale could lead to them interfering more than the US,” he said.Roughly 60% of global GDP was generated in emerging markets, Reinhart said, and half of that emanated from China. “Global GDP has actually been less volatile over the last few years because much of it is being increased in a region that delivers growth at 6.5% year-on-year,” Reinhart said.But he urged investors to “consider the tail risk in China”.With emerging markets getting wealthier but global GDP growth shrinking, some parts of society were being left out in the developed world – leading to the rise of populism.Reinhart said: “These global economic readjustments create resentment and there is no growth to appease the anger, which in turn leads to voter resentment against trade, migration, etc, and to more geopolitical risk.”Turning to the US, where the effect of populism has been arguably most prevalent, Reinhart said his biggest concern was “thinking about the day when three Republican senators say they want to run for president. This would mean there is no majority government anymore and it would be an incentive for [president Donald] Trump to use executive action wherever he can.”BrexitFor Anthony Arnull, Barber Professor of Jurisprudence at Birmingham Law School, the greatest political worries were related to Brexit – in particular the difficulties facing the UK government when seeking to strike new trade deals after it leaves the EU.Apart from the “chaotic lack of preparation” both leading up to the Brexit vote as well as to the negotiations with the EU, Arnull highlighted that the UK government’s plan to “peel off” some members from the bloc was “not looking very realistic”.“The EU does not welcome the UK’s departure but it is now in a post-referendum phase, adjusted to the idea that UK is leaving,” Arnull said. “It might even think the EU will develop faster without the UK, and this is a difficult dynamic for the UK to deal with.”More uncertainty over trade was added by Donald Trump, he said. Trump has promised both German chancellor Angela Merkel and UK prime minister Theresa May that their respective markets would be “first on the list” for a trade deal. “Now the UK does not know where it is on this list,” Arnull said.Finally, Ian McKnight, CIO at the Royal Mail Pension Plan in the UK, highlighted Italy’s forthcoming election as a potential flashpoint.Discussing potential triggers for an equity market selloff, McKnight said: “There could be something with the Italian election coming up next year. A lot of Italian MPs – as I understand it – will be against the EU. That’s potentially a catastrophic event.”Italy’s next election must be held no later than 20 May next year.See the July/August edition of IPE for a Special Report on Italy’s pension system.last_img read more

Equity performance squeezes Spanish pension fund returns in Q1

first_imgAt the end of March, total assets under management for Spain’s occupational pension funds stood at €35.3bn, a 1% reduction over the year.Figures from Mercer’s Pension Investment Performance Service (PIPS) backed up INVERCO’s findings, showing that Spanish pension funds lost 1.4% over the first three months of 2018. The PIPS survey covered a large sample of pension funds, most of them occupational schemes.According to the survey, equities as a whole incurred losses, with euro-zone equities down 2.9% and non-euro-zone holdings losing 3.3%.Non-euro-zone fixed income lost 3%, but euro-denominated debt delivered a 0.3% gain over the quarter. Non-eurozone assets as a whole were hit by the strengthening euro, Mercer said.The survey also showed that alternatives made a median loss of 0.4% while real estate was down by 0.1% over the quarter.In terms of asset allocation, domestic assets continued their gradual decline to 53.2% of portfolios at the end of March, according to INVERCO. Non-domestic assets continued to rise, from 29.6% at end-December 2017 to 31.3% three months later.Over the same period, average allocations to fixed income decreased slightly to 47%, while equities weightings rose to 34.6% on average.Spanish government bonds still made up the biggest single component of pension portfolios at 23.9%, with a further 13.8% in domestic corporate bonds.Xavier Bellavista, principal at Mercer, said: “The equity allocation is generally similar to what it was at end-2017, but it is remarkable that it has reached its highest since the period before the financial crisis in 2008.”According to Bellavista, Spanish pension funds maintain a percentage allocation in equity assets similar to those of pension funds in other European countries, but weightings are significantly different for bonds and alternatives.He said that within the fixed income allocation there had been a shift from domestic towards non-domestic assets.Bellavista added that Spanish funds were “still at the discussion stage” when it came to allocating more to alternatives. Poor first-quarter equity performance in 2018 has squeezed average returns from Spain’s occupational pension funds to 0.5% for the 12 months to end-March 2018, according to the country’s Investment and Pension Fund Association (INVERCO).This compared with a 3.2% return for the calendar year 2017, and a 5.6% return for the 12 months to end-March 2017.INVERCO said that equity markets had experienced pronounced corrections in the first three months of this year, prompting losses on pension fund portfolios with bigger equity exposures.This caused the average annualised returns for Spanish occupational funds to drop to 0.8% for the three years to 31 March 2018, and 4% over five years.last_img read more

Netherlands should offer additional saving in state pension, say experts

first_imgThey were not keen on a proposal put forward by the Social and Economic Council (SER) – which represents employers and trade unions – which was recently leaked as a “concept agreement” between companies and workers.Unions subsequently denied that the leaked document was the final version of a proposal for a new pensions contract.“People pay a monthly contribution but don’t know at all what they’ll get at the end of the day,” Verhoef told De Telegraaf.The experts acknowledged that money paid for additional AOW benefits could ultimately generate a lower pension than premiums paid into a pension fund.However, Verhoef emphasised that people valued certainty, “which pension funds and insurers don’t offer”. He added that trust in Dutch pension funds had “crumbled” after years of low or no inflation-linked payments and the looming threat of benefit reductions in some cases.Westerbrink added that workers in countries such as France and Germany already had the option to save for a higher state pension.“It is about time that social affairs minister Wouter Koolmees looks further than just pension funds,” he said. Dutch workers should be offered the option to save for a more generous state pension to avoid dependency on pension funds, according to Dutch experts.Writing in Dutch daily newspaper De Telegraaf, pensions law professor Hans van Meerten, Charles Verhoef, chair of self-employed workers’ lobby group Zelfstandigen Bouw, and consultant John Westerbrink argued that this would be an affordable way for additional pension saving without individuals being forced to take on more investment risk.“People who save a certain amount every month could know exactly how much their benefits would be in 30 years’ time,” they explained.In the authors’ view, purchasing additional benefits through the Netherlands’ state pension system – known as AOW – must be offered as an alternative to accruing a pension with a pension fund.last_img read more

Amundi and EIB partner to develop European green credit market

first_imgAmundi and the European Investment Bank (EIB) have joined forces for an initiative that aims to foster the development of a European green debt market beyond investment grade green bonds.The Green Credit Continuum programme, as it has been called, will involve the creation of a fund investing in high-yield corporate green bonds, green private debt and green securitised credit.A scientific committee composed of climate finance experts will be formed to define and promote guidelines for the three markets, and a network will be put in place to source deals and projects.The guidelines are to be “in line with international best practice and legislation derived from the European Commission action plan on financing sustainable growth”, according to a joint statement. The goal is to create several funds based on this model. The EIB is to make an initial commitment of up to €60m, with the aim being for €1bn to be raised within three years. “Over the last few years the European green financing market has mainly developed by way of green bond issuances from sovereign, quasi-sovereign and large corporate issuers,” said Amundi and the EIB in the statement.   “To finance additional efforts to promote European energy and ecological transition goals, new market instruments are needed that enable smaller companies and green projects to access market financing, as well as offer higher yields to investors.”EIB vice-president Ambroise Fayolle said the partnership would “help promote sustainable finance in Europe by including new issuers in the green finance market, making them even more aware of environmental issues and environmentally friendly investments”.Amundi’s agreement with the EIB follows its joint venture with the International Finance Corporation, the private sector arm of the World Bank Group, to develop green finance in emerging markets. The initiative includes a green bond fund in which several major European pension funds are invested.last_img read more

​KLP wins Norway’s first municipal pensions tender in seven years

first_imgNorwegian municipal pensions giant KLP has hailed its success in winning the first tender for an insured pension product from a local authority in seven years, saying the win shows it has delivered good services at a competitive price.However, financial services provider Storebrand – which has just re-entered the market – declared itself encouraged by this first tender process despite losing, because it demonstrated the firm was fully competitive and had delivered the best financial offer.Nye Øygarden Kommune (New Øygarden Municipality), a new local authority covering the archipelago to the west of Bergen formed from the merger of the Øygarden, Fjell and Sund administrations, awarded a four-year contract to KLP after a competitive tender process.The pension scheme holds total assets of NOK1.54bn (€152m) and an annual premium of NOK115m, according to 2017 figures. Marianne Sevaldsen, executive vice president for KLP’s Life DivisionBut Marianne Sevaldsen, executive vice president for KLP’s Life Division, told IPE: “The contract with Nye Øygarden is for four years as they requested in their call for public pension tender, and their decision to award the contract to KLP says nothing about a reconsideration after two years.”When it came to the financial proposition, she said the evaluation of the process with the municipality was that KLP was cheaper than Storebrand on administration costs, which she said was the part of the price the companies themselves had influence over.“Storebrand was a bit cheaper on estimating the premium for early retirement (AFP) in the ages 65 to 67. But, this is a liquidity question where the premium is based on different assumptions about the future,” Sevaldsen said.Storebrand has said it expects around 20 pension tender processes to be launched by municipalities next year.DNB Liv has also announced its intention to re-enter the municipal pensions market, but a spokesman for the firm said it had not participated in the Nye Øygarden tender.While Storebrand is gearing up to provide both the old and the new schemes, DNB Liv intends to bid only to provide the new public sector pension. Norway’s municipal pensions market has been shaken up by the far-reaching municipal reform on the one hand, which has seen many authorities merging, and agreement over a new hybrid public sector pension scheme on the other, which is due to start in January, running alongside the old defined benefit scheme.The new environment is expected to prompt more competitive pensions procurement from the municipalities, fostering increased competition between providers in a sector that has become a virtual monopoly for KLP in the last few years.Sverre Thornes, chief executive officer of KLP, said of the win: “It shows that we have spent our time well and delivered good services at a competitive price.”He said in the firm’s interim results announcement last week that parliament’s approval of changes to the pension scheme for public employees contributed to increased complexity also for KLP’s customers and members.“KLP is, therefore, investing heavily in solutions that will guide both employers and their employees, as well as lay the foundation for further streamlining their own operations,” he said.Although this was the first tender from a municipality for a full insured pensions product, there has already been recent competition in the market in the sense that several municipalities and other public entities have decided to leave KLP and establish their own pension fund.Different perspectivesJon Hippe, head of Storebrand’s new public sector department within its business market division, told IPE: “We are encouraged by this first process, in the sense that it showed we are fully competitive and delivered the best economic offer.”Hippe also said the minority on the Nye Øygarden joint committee at the time of the decision had made it clear that Storebrand had the best economic offer, and that it wanted a new tender offer in two years’ time.After recent elections, this minority is now the majority, Hippe said, adding: “So there is reason to believe this will in fact happen.”last_img read more

Adulting is easy when you live in a full size treehouse

first_img109 Camelot Close, Daintree, has a network of stone sculptures spread through the property including this Easter Island style head near the guesthouse.HUMP day might be tough but “adulting” is easy when you live in a full size Queensland treehouse in one of the world’s oldest rainforests — with fairies, mermaids and warriors in the garden.The Rainforest Hideaway sits in the Daintree rainforest at Cape Tribulation in Far North Queensland, offering not just a home but a source of income too.Agent Mark Whitham of Raine & Horne Port Douglas Mossman described it as a “superb rainforest hideaway”. What a charming barbecue spot. Big property changes starting July 1 Inside absurd $250 million mansion Tide has turned for Brisbane apartments For starters, the property has its own “self contained jungle treehouse” for adults.“Pictures tell a thousand words and you will see just how amazing this treehouse is,” was his take. “A generous sized jungle hut is also available for guests with large open living area can and has its own timber deck looking out into superb rainforest. All guest rooms have basic cooking facilities, jungle hut and bungalow have a gas BBQ.” Beautiful spot to contemplate nature.The five bedroom, four bathroom, four car space property is located at 109 Camelot Close, Daintree, in Far North Queensland. FOLLOW SOPHIE FOSTER ON FACEBOOK Great spot for winter by that fireplace.“All tracks eventually lead to the beautiful rainforest creek via the grand staircase. There is even an extremely creative and inviting 9 hole mini golf course,” was how the agent listed the property.The entire business is solar powered so guests can live off-grid, Mr Whitham said. There are sculptures all along the network of trails around the property.“In all my years of real estate I have not seen another property which has so much on offer. The incredible warm feel of this magnificent place is overwhelming … It truly is a fantastic offering and a great lifestyle business.” More from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoThe treehouse is full size and fully functional.The property includes “a network of trails dotted with incredible sculptures” that link all the buildings throughout the property including sculptures of Easter Island heads, mermaids, fairies in the garden, bench seats that blend into the earth — a veritable walkers’ wonderland. Fairies in the garden.Mr Whitham said the owners “serious about selling”.“In a nutshell the current owners have enjoyed 17 years creating and living this advantaged lifestyle business. Property is priced for land and improvements only and the holiday let income stream is an added bonus. Full training will be provided to the next lucky owners.”last_img read more