Norges Bank Investment Management (NBIM) has increased its exposure to real estate as it targets office and retail properties in established markets.In its 2013 results presentation today, the bank said investments for its real estate portfolio accounted for 1% of its fund at the end of 2013, up from 0.7% a year earlier.The mandate to invest in real estate was broadened from 1 January 2013 to include countries outside Europe – with the US first stop.A first property investment in the US was made at the start of last year via the $600m (€438m) acquisition of a 49.9% stake in a five-asset portfolio in Boston, New York and Washington. A further $684m was spent on a 45% stake in a New York office building in the fourth quarter, coinciding with the $238m purchase of a 47.5% stake in a Boston office building.The US now accounts for 18.7% of the bank’s real estate portfolio.The UK and France account for 27% and 22.5%,, respectively of investments made by NBIM.The investor has typically taken half stakes in the real estate it has acquired in both Europe and more recently the US.Last year, it paid €388m for 50% of two buildings in Germany.A 50% stake in a portfolio of 195 European logistics properties was bought for €1bn at the start of 2013.NBIM’s real estate investments returned 11.8% last year.Measured in local currency, rental income contributed 4.6% of the return, while changes to the value of properties and debt and currency fluctuations both contributed 3.8%.However, transaction costs for real estate purchases resulted in a 0.4% hit.Investment in property is, it added, being gradually increased to as much as 5% of the value of the overall fund.
Yesterday, it was announced that F&C Asset Management, one of the oldest names in the City of London, was set to lose just under one-fifth of its assets under management – due to the defection of a single client.Friends Life, the UK’s largest insurance group, had placed £14.5bn (€17.3bn) worth of assets with F&C in equity, multi-asset and fixed income mandates. However, under what it referred to as a “governance review”, it is now thinking to shift £2.3bn of fixed income investments to its own investment arm. For F&C, the bigger sting in the tail is what Friends Life plans to do with its equity mandates.Schroders, one of the UK’s largest asset managers – and one that has been growing in recent years – picked up £12.2bn worth of Friends Life assets, at F&C’s expense, in a single swoop, with the FTSE 100 manager’s superior performance over the previous years cited as the reason.The story has become something of a Dickensian tale of two asset managers. Even a cursory search online makes plain the significant difficulties F&C has faced in recent years. F&C stands to lose 17% of its assets under management thanks to Friends Life’s decision, but the insurer already pulled a further £6.2bn from the manager in 2012. Combined with this, F&C’s overall assets have also suffered, down by 14% over 2013 to just £85bn by last December. Even back in 2011, the firm was stung by large outflows, losing £7.2bn in assets as investors began to withdraw funds, while a Portuguese pension scheme BCP terminated its mandate.Perhaps not surprisingly, all of this led to Bank of Montreal’s £700m bid for F&C earlier this year. The deal was expected to be completed in May, after an activist shareholder, who took control in early 2011, failed to turn the business around. While it is yet unknown exactly what impact this most recent outflow will have on the outcome of that deal, it is worth noting that Friends Life says the possible change in ownership had no bearing on its decision.For Schroders, things are definitely on the up. The manager recently broke into the FTSE 100 and has seen positive flows across several parts of its business. Well established among retail investors, its pension scheme institutional business also has some history on it side. What is most impressive is its insurance asset management arm – and, at just seven years old, the insurance business now has a £12.2bn single mandate to its name.It is safe to say the champagne glasses will be clinking at Schroders HQ. What they’re drinking at F&C, or Bank of Montreal, is anyone’s guess.
On both sides of the Atlantic, the issue of conflicts of interest has often been cited as a main concern for pension fund trustees when considering, or ruling out, the use of a fiduciary manager.Despite this, in Europe, the growth of fiduciary management has been substantial, as it reaches maturity in the Netherlands and sees year-on-year growth in the UK.In the UK, the market is dominated by consultancies converting investment-consultancy clients into fiduciary management clients, in arrangements similar to those highlighted by congressman Miller.While the overall AUM in fiduciary contracts grew in the UK, most mandates still fell to traditional investment consultancies.A recent study by consultancy KPMG often found these mandates were awarded without an open tender, although this practice has begun to subside. According to KPMG, the UK fiduciary management market is worth approximately £58bn (€71.5bn), as at 30 June 2013, with around 345 mandates.However, 75% of mandates were awarded to implemented consultancies over specialist fiduciary management providers and investment managers, the latter only accounting for 3% of mandates.Further, nearly half of pension funds with fiduciary mandates make no effort to review manager performance independently.Data from IPE sister publication IP Nederland found that around 80% of pension fund assets in the Netherlands were managed in fiduciary contracts. However, the Dutch market is more accustomed to employing specialist providers compared with the UK.It is the style of fiduciary management most prevalent in the UK to which the US politician has raised concern for his own market.The Wall Street Journal recounts a similar 75% figure of pension consultants acting as both investment managers and advisers for clients, according to filings with the Securities and Exchange Commission (SEC).Also, an SEC investigation in 2005 found that consultants had accepted payments from investment managers as they advised pension fund clients on which managers to select for mandates. A senior US politician has written to the federal government calling for a fresh investigation into pension fund consultants that also manage investments, particularly regarding conflicts of interest.In a letter seen by US broadsheet The Wall Street Journal, senior Rep. George Miller (Democrat, California) wrote to US secretary of state for Labour, Thomas Perez, requesting that he investigate possible conflicts of interest in consultancies that manage investments in addition to providing investment advice.In the letter, Miller claimed the growing trend of US pension funds – with $18.8bn (€13.4bn) in assets, according to Towers Watson – using consultancies to manage assets created significant and inappropriate conflicts.He called on the Labor Department to look into the practice as the government body works to create new governing rules on the role of advisers.
APPR’s network, he added, gives it “a pivotal role” in traffic flows in Western Europe and France for trade and tourism.Macquarie, in a joint venture with French developer Eiffage, bought a 13.7% stake in mid-2010 in a €854m deal.Macquarie’s Atlas Roads, European Infrastructure and European Infrastructure Fund II became shareholders in APPR.According to APPR’s annual report for 2013, the firm’s revenues rose to €2.4bn, resulting in profits of €442m.With a network of 2,264 km of operating motorway, APPR is Europe’s fourth largest toll road operator.The network includes the Paris-Lyon route (A5, A6 and A39), the Burgundy-Northern Europe route (A31, A36), Alpine motorways in the Rhône-Alpes region (A40, A41, A42, A43, A48, A49 and A51 Nord) and motorways in central France (A77 and A71).PGGM said it had invested significant amounts in other European road assets in the Netherlands, Germany, Spain, Portugal and Ireland through partnerships with Royal BAM and Globalvia.In June last year, PGGM and BAM PPP jointly acquired 50% of concessional rights for the management and maintenance of a 52 km stretch of motorway in Germany. PGGM has bought a minority interest in a French toll road operator from Macquarie’s European infrastructure fund.The stake, in Autoroutes Paris-Rhin-Rhône (APRR), gives the Dutch asset manager exposure to France ahead of an economic recovery.Henk Huizing, head of infrastructure at PGGM, said: “We expect APRR to benefit from France’s economic recovery in coming years.“This asset provides a robust inflation-linked yield profile, which is an excellent match with our clients’ pension liabilities.”
Standard Life Investments – Tom Dorner joins as an investment director in the European equities team. He joins from Citigroup, where he was director of the European insurance sector. Before then, he held posts at Oriel Securities, Lehman Brothers and Barclays Capital. In addition, Jonathan Fearon has joined to manage the SLI European Equity Growth fund along with the European Equity component of the Global Advantage fund. He joins from Ignis Asset Management, where he managed two European equity funds.Nomura Asset Management UK – Richard Hodges and Ben Bugg have been appointed to the fixed income team. Hodges joins from Legal & General Investment Management, where he held the role of head of high-alpha fixed income. Bugg was previously an assistant fund manager at LGIM in its high-alpha fixed income team, working across a range of strategies.IC Select – The fiduciary manager and investment consultant assessment company has appointed Peter Dorward as managing director. He joins from Scottish Widows Investment Partnership, where he was head of the institutional business.Nikko Asset Management – John Howland-Jackson, based in London, has joined as vice-chairman of Nikko Asset Management Europe and senior adviser for the Middle East, Africa and Asia region. He joins from ING Bank, where he was a senior managing director.NOW: Pensions – Louise Fulford has been appointed head of administration. She will be responsible for the delivery of administration services to NOW: Pensions’ member base. She joins from JLT, where she held roles as senior client relationship manager and head of administration.Kames Capital – Craig Bonthron has been appointed investment manager of the global equity team. He joins from Scottish Widows Investment Partnership, where he was investment director of global equities and the joint fund manager of the Swip Global Sustainability Equity and Global Islamic Equity funds.Pioneer Investments – Simone Ragazzi has been appointed as a small-cap European equity analyst. Based in Milan, he joins from MainFirst Bank, where his sector coverage included European Luxury Goods and some Italian Consumer Small Caps. Franklin Templeton Investments, Wells Capital Management, Investec Asset Management, Standard Life Investments, Nomura Asset Management UK, IC Select, Nikko Asset Management, NOW: Pensions, Kames Capital, Pioneer InvestmentsFranklin Templeton Investments – Clive Paine and Steven Gardner have been appointed director and associate director, respectively. In his new role, Paine will have responsibility for building relationships across the UK institutional market and focus on new business generation. He joins from Lyxor Asset Management, where he was head of institutional sales for the UK. Before then, he worked at HSBC Alternative Investments. Gardner joins from TopQ Software, where he was business development director responsible for sales and client relations. Before then, he held a senior client service role at Baring Asset Management.Wells Capital Management – Robert McHenry has been appointed as a product specialist for the liability-driven investment (LDI) team at Wells Capital Management, part of Wells Fargo Asset Management. Prior to joining Wells Capital in 2014, he was an LDI product manager at Columbia Management in Boston, and a fixed income product manager at Insight Investment in London. McHenry has extensive experience in global fixed income portfolio management, and served as head of global fixed income at Hartford Investment Management. He was also a senior investment director at Lombard Odier in London.Investec Asset Management – Aymeric François has been appointed sales director at Investec’s newly opened office in Germany. He joins from Goldman Sachs’ third-party business, where he covered private banks, funds of funds and family offices in Germany as an executive director for seven years. Before then, he worked as a derivatives analyst.
A French pension fund is seeking a manager for a €60m fixed income mandate, using IPE Quest.The pension fund behind search QN2091 said it aimed to invest €60m in global, developed-market, inflation-linked bonds.It said the core, actively managed strategy would be benchmarked against the Barclays Global Inflation-Linked Bond index, with a maximum tracking error of 5%.The fund said it would prefer for the assets to be held in a UCITS fund, fully hedged into euros, with no less than a 10% exposure to non-investment-grade assets. Applicants should have at least €500m in assets in similar mandates, and €1bn in assets under management across the company.Asset managers should also have at least a five-year track record.Applicants have until 5 August to submit proposals, stating performance net of fees to the end of June.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]
The Universities Superannuation Scheme (USS) has sold a £640m (€868m) private equity (PE) portfolio as it prepares a shift towards greater direct investment.The portfolio, sold to Ardian, comprises the pension scheme’s stakes in 13 PE funds, but USS said in a statement that the sale of any one managers’ fund would not preclude it from working with them in the future.Geoffrey Geiger, head of private equity at the fund’s wholly owned asset manager USS Investment Management, said the sale on the secondary market was an effective way to adapt its portfolio as it shifted towards a greater number of direct PE investments.“Within our private markets team direct investment experience extends across multiple asset classes, sectors and geographies,” Geiger added. “At the same time,” he said, “we recognise the value of investing in funds managed by [general partners] who share USS’s values and we will continue our active allocation strategy.”The statement by USS added that it would continue to commit to a “concentrated group of GPs with whom [we] will work in partnership”, citing the opportunity for co-investments alongside direct investments.The industry-wide fund, the largest in the UK with £48bn in assets, last year hired a number of new staff for its private markets team, currently responsible for around one-fifth of fund assets and comprising property, infrastructure, private debt, inflation-linked debt and equity, special situations and private equity.It hired Emma Singh, a former private equity controller at UK in-house pension manager BP Investment Management, to help manage the fund’s new direct investment strategy.The private markets team in October last year wholly acquired Moto Mospitality, a UK motorway services firm, only to later sell a 40% stake in the firm to CVC Capital.It returned 17.9% over the course of the 2014-15 financial year.
Source: The Pensions AuthorityWhile the data was only correct to last year, and much of it was more than 12 months old according the Pensions Authority, the overall picture was a positive one.The Irish DB sector has been in the spotlight in recent months as politicians have sought to improve regulatory protections for savers to stop sponsors walking away from schemes and leaving them underfunded.Politicians are set to debate reforms later this year. Across 628 pension funds that submitted an annual actuarial data return (AADR), the regulator reported an 11% decline in the number of DB schemes with active members still accruing benefits, from 503 to 447.On aggregate, Ireland’s DB system was 104.6% funded, with €60.8bn of assets and €58.1bn of liabilities, according to data submitted to the regulator by 31 March.There were 163 schemes not meeting with the country’s funding standard, The Pensions Authority said.While the “vast majority” had proposals in place to meet the funding standards, the regulator said there were three schemes with no funding proposal. These ran the risk of regulatory action, the authority said, which could include an enforced wind-up or benefit cuts.Liability analysis showed that pensioners accounted for 58.5% of total liabilities, despite only making up 16.2% of DB scheme membership. Actively contributing members accounted for 17.7% of the total, the regulator reported.Aggregate asset allocation data showed a shift away from equities and government bonds towards alternative assets such as property, absolute return funds, and hedge funds.Allocation to equities fell to 32.5%, the regulator said, compared to 35.8% in 2015 and 41.7% in a year earlier.Asset allocation of Irish DB funds, 2015-16 Roughly three-quarters of Ireland’s defined benefit (DB) schemes meet the minimum funding level, according to data collected by The Pensions Authority.The 74% of schemes meeting the standard marked an improvement on last year’s figure of 70%, the Irish regulator reported.However, larger schemes were less likely to meet the requirement, the authority said. Of the top 50 biggest DB schemes, 28 of them (56%) met the funding standard.Irish pensions law requires DB schemes to hold sufficient assets to meet transfer values for all members along with the estimated costs of winding up.
As part of the proposal, the union federation SGB/USS, the union Travail.Suisse, and the employer association SAV/UPS called on the government to aim for the new legal framework to come into effect by 2021 or 2022 at the latest.Swiss pension experts have long called for a cut to the minimum conversion rate that has to be applied to calculate pension payments from assets accrued in the mandatory part of the second pillar.It is widely agreed that the current 6.8% level is too high, which has resulted in cross-financing of pensions from active members’ assets.Those pension funds representing employers paying more than the mandatory minimum contribution have already taken drastic steps to lower the conversion rate, with some cutting it to below 5%.Having “diligently negotiated” a compromise that was “to the point and holds weight”, the unions and employer representatives were confident that it would “find a majority” in parliament.Other changes put forwardOther proposed legal amendments included a top-up payment on second pillar pensions for the next 15 generations of new retirees from the time the revised law – known as BVG/LPP – took effect.This was meant to ensure that any sudden cut in the conversion rate did not cause some generations to suffer greater losses.Money for this measure was to come from a minor top-up to first-pillar contributions made by employers.The proposal also included a slight reduction in the legal minimum contribution for employees to the second pillar, particularly for employees over 45, making it “cheaper” for an employer to keep older employees. Thumbs up from ASIPThe Swiss pension fund association ASIP welcomed the agreement as it showed that employer representatives and unions “were aware of the urgency” of reforming the BVG/LPP.However, it said in a press release that it would “assess the proposed measures without prejudice” over the coming months.One measure that would “have to be tested for its practicability” was the additional top-up payments for second-pillar pension retirees coming from first-pillar contributions. ASIP said it wanted to assess the proposal’s effects on the pension funds that have to implement it.The pension fund association called on the government to “quickly” start the consultation phase on revising the BVG/LPP law.Further reading In need of a reformist zeal The Swiss pension system needs reform but consent is needed in a federal referendum. Have politicians learnt from campaigning during the rejected Altervorsorge 2020 proposals? Goodbye AV2020 A no vote in the referendum on pensions seemed like a ‘what if’ thought experiment right up until the ballot. But on the last Sunday in September 2017, the Swiss voted against reforms to the first and second pillar in the Altersvorsorge 2020 legislative package Two major Swiss unions have agreed with the association for employer representatives on a reform package for the law governing second pillar pensions.One of the most long-awaited and urgent steps is the immediate reduction of the minimum conversion rate in the second pillar from 6.8% to 6%. This rate is used to calculate annual pension payouts.However, the cut – along with other proposals – will have to be put into legal form by the government, enter a consultation phase and then pass parliament. It is not yet clear whether there will be a public referendum on the proposal.Previous major votes in 2010 and 2017 on cutting the conversion rate as part of wider reforms did not achieve the necessary majority from the public.
Dutch pensions manager APG will be hiring 50 new employees for its illiquid investments division over the next two years, according to Peter Branner, CIO of APG Asset Management.The department currently employs around two hundred people in Amsterdam, Hong Kong and New York.“Our customers such as Dutch civil service scheme ABP and the industry-wide pension fund for construction workers BPF Bouw would like to invest even more in illiquid categories like real estate, infrastructure and private equity,” said Branner in an interview with Dutch pension publication PensioenPro.“If you want to invest more in the public markets, you can do that with the same number of investors who just buy more shares or bonds,” he added. “The situation is different for illiquid investments; you cannot simply put an extra billion in direct real estate, for example. To be able to do this, you have to find suitable properties and close deals – which requires extra people.” “People want to work here because we have a lot of knowledge and because we are leaders in the field of responsible investing”Peter Branner, CIO of APG Asset Management Branner acknowledged that salaries for this type of investor job are high, but said that although APG was a big player, in the investment industry it was just of many parties and therefore did not “call the shots” on pay.“It’s a competitive global market in which we operate,” he said.APG invests more than €514bn on behalf of its clients, of which more than a fifth in illiquid categories. An important driver of plans for more investment in these areas is the low interest rate environment.“It is necessary to invest more in illiquid categories as the yield on government bonds is virtually nil,” said Branner. “You can’t just make up for that by investing in shares. Moreover, the outlook for equity is not that bright either.”Further readingStrategically Speaking: APGBranner spoke to IPE’s Liam Kennedy about career mission, looking for yield, tech and more The CIO, who joined APG in September last year from Sweden’s SEB, does not expect to have any trouble attracting talented young investors to work in Hong Kong, Amsterdam or New York. “People want to work here because we have a lot of knowledge and because we are leaders in the field of responsible investing,” he said. “We can grow and attract people. That is different in other parts of the financial industry. Banks regularly announce large redundancy rounds.”