Aberdeen Asset Management – John Dickie has been promoted to co-head of US private equity alongside Scott Reed, while Whit Matthews joins the same team as senior investment manager. Dickie joined Aberdeen in 2015 as a senior investment manager. Whit joins from SL Capital Partners, where he served as a North America-based investment director.Kames Capital – Jack Holmes has been appointed as an investment manager, joining from Standard Life Investments, where he was an analyst on the European high-yield team. His appointment follows that of David Ennett, who recently joined Kames as head of high yield, and the return of Phil Milburn to the business.Amundi – Pierre Schereck has been appointed head of relations with Social Security Bodies, a new role within Amundi’s Institutional Clients division. Schereck, who had been head of Employee Savings and Retirement Schemes at Amundi, was succeeded by Xavier Collot. Morningstar, European Parliament, London Stock Exchange Group, Aberdeen Asset Management, SL Capital Partners, Kames Capital, Standard Life Investments, AmundiMorningstar – Kunal Kapoor has been promoted to chief executive, succeeding founder Joe Mansueto, who will now become executive chairman. Kapoor, who will start in his new role on 1 January 2017, has served as Morningstar’s president. Kapoor originally joined Morningstar as a data analyst in 1997 and has been president of the company since October 2015. To limit the number of inside directors, Don Phillips has voluntarily opted to step down from the board.European Parliament – The Conference of Presidents has appointed Guy Verhofstadt as Parliament’s point man for Brexit negotiations. As counterpart of Michel Barnier, negotiator for the European Commission, Verhofstadt will “keep the Conference of Presidents fully informed of developments and help prepare the European Parliament position in the negotiations”.London Stock Exchange Group – Waqas Samad has been appointed to the newly created role of chief executive of fixed income and multi-asset benchmarks for the Information Services division. He joins from Barclays, where he ran the index and analytics business as chief executive of Barclays Risk Analytics & Index Solutions.
Elwin joins USS from JP Morgan Cazenove, where he accumulated more than 19 years’ experience in equity research, valuation and accounting.He was most recently deputy head of European research.“Extracting him from there was quite a coup, really,” said Fernando.She said Elwin’s role was to help the investment team “get better at the investment process”.The idea is that this will boost returns at the £49.8bn (€63.4bn) scheme, which invests around £20bn in equities.“The thinking,” Fernando told IPE, “is that, over the long term, we’ve added significant value for the scheme and our members by being an active manager. We think it’s about 70 basis points per annum over 10 years, which adds up to about £800m of additional returns to our members, which is pretty significant.“But we can see that we were systematically leaving returns on the table.”Fernando said there was too much focus in the industry in general on the outcome of investment decisions rather than the process leading to the decisions.In a statement, she said: “The head of research will help each team member achieve the very best outcomes they can by facilitating objective discussions on what aspects of their process consistently add value, analysing what we could do or have done differently to improve our outcomes and ensuring we systematically implement each step in our process to the best of our ability.”The hypothesis, she told IPE, is that, “if we have a good process and we execute it consistently, we’re much more likely to get good investment outcomes out of it, which will be incrementally positive to the returns to our members”.The focus on an enhanced investment process and the associated creation of the head of research role are steps the scheme felt it could take as a long-term investor with substantial in-house expertise, according to Fernando.“The market is like a treadmill, and that ability to stop and reflect just doesn’t exist unless you make it happen,” she said.“I and the heads of portfolios were trying to do this, but we just weren’t creating enough space to do it properly, so we agreed that it would be helpful having someone whose sole job was to focus on that […].“Because we’re longer-term investors, we should be able to carve out a bit of time that takes us off that treadmill of quarterly results.”Upping convictionThe creation of the head of research role is part of new approach to equity investment at USS, under which it will run a more concentrated, fundamental, research-driven portfolio.It carried out analysis at the end of 2015 that showed it would have added around 1% to its returns by only owning its largest overweight positions and skipping out on smaller overweight positions.Fernando said: “Recycling that capital from low conviction back into high-conviction [positions] would have added probably another £100-odd million to member returns. At the end of the day, we’re here to make money for our members.”The new focus on high-conviction equity investing will come via an organisational structure for fundamental, research-driven portfolios; the other part of USS’s equity allocation is in internally managed factor portfolios.The fundamental, research-driven portfolios are split into a global emerging market portfolio and a global developed market portfolio, which has been the main target of the change in organisational structure and investment philosophy, according to Fernando.“Within that global developed-market portfolio, we now have a single decision-maker for the [geographic] sleeves, whereas before some of the portfolios were run more in a committee-type format,” she said.“The team supporting those portfolios and those decision-makers have each been allocated areas of responsibility so you make sure people are incentivised to do the best they can within their area, and they know exactly what is expected of them.”The new investment approach was discussed with the equity team in late 2015 and “really came into place in earnest late February, early March”, she added.Fernando said a timetable had been agreed with the board that gave its investment manager until December 2017 “to get us from the legacy state to the new state”.The aim is that, by then, the global developed market portfolio will comprise around 120 stocks, whittled down from the 300-odd holdings in the legacy portfolio.In a statement, Elwin said: “This is an exciting new role and really quite unique in the industry.“It’s not just about validating recommendations but rather helping the portfolio managers and analysts develop a sophisticated understanding of the many different steps in the investment process and really make their investments work hard for the UK’s academic community.”USS’s former deputy head of equities recently joined West Midlands Pension Fund, and Fernando said the scheme’s investment manager would not be directly replacing him. The UK’s largest pension fund, the Universities Superannuation Scheme (USS), has created the role of head of research with the aim of improving its in-house equity investment process as part of a shift towards a more concentrated, “high-conviction” portfolio.Peter Elwin has been appointed to the role, having started on 31 October.His position spans the equities and responsible investment teams.If his appointment proves successful, the role could be extended to take in public credit and private markets, according to Elizabeth Fernando, head of equities at USS.
BT, the UK communications giant, is considering a contingent assets deal with its £50bn (€57.3bn) pension scheme as it tries to rein in a growing deficit.In its annual report for 2016-17, BT said it was considering “a number of options” for addressing the scheme’s £7.6bn shortfall as it prepares for its triennial actuarial valuation.“These options include considering whether there are alternative approaches to only making cash payments, including arrangements that would give the BT Pension Scheme [BTPS] a prior claim over certain BT assets,” the annual report said.The report gave no further details, but according to Richard Farr, director at Lincoln Pensions, an employer covenant specialist, there were a variety of options open to both parties if BT wanted an alternative to cash contributions. However, some options were less appealing than others, he said.“The UK network is BT’s biggest asset, but why would the trustees want security over that if that’s what causes a future problem?” Farr said.Instead, the trustees might prefer a guarantee secured by assets not correlated to the UK business, such as subsidiary companies in other countries.“The key question is what value and flexibility can BT obtain from the negotiations and how will the stock market price the impact on BT’s ability to manage its business effectively,” Farr added.Holding assets directly linked to the employer can also reduce a scheme’s annual payments to the Pension Protection Fund, depending on the type of asset and strength of the guarantee.Contingent assets deals are often linked to property, but some employers have found more novel ways of guaranteeing pension scheme funding.In 2013, the Dairy Crest Group Pension Fund struck a deal with its sponsor, Dairy Crest, giving it “a floating charge over maturing cheese inventories with a maximum realisable value of £60 million”.Three years earlier, drinks giant Diageo agreed a joint investment deal with its pension fund to invest in whisky.BTPS’s only direct investment link to its sponsoring employer – according to the annual report – was a £10m allocation to index-linked bonds issued by BT. The annual report did not give any detail about this investment.Any contingency asset deal would have to be signed off by the Pensions Regulator (TPR). Responding to the mooted BT arrangement, Charles Cowling, director at consultancy firm JLT Employee Benefits, highlighted a recent shift in focus by TPR that could see it scrutinise funding arrangements to ensure an adequate balance between deficit contributions and dividend payments.BT is one of the highest-yielding companies in the FTSE 100, according to Morningstar. In the last three financial years, the company paid out £3.4bn to shareholders while contributing £2bn to the scheme in deficit reduction payments, on top of its regular contributions.BTPS achieved a 21% investment return in the 12 months to 31 March, the sponsor reported. However, this strong performance was effectively wiped out by a falling discount rate, which meant the scheme’s deficit still climbed by £2.4bn.“The return reflects strong asset performance across all asset classes, in particular equities and government bonds which increased by 16% and 23% respectively,” BT said.
The asset management sector faces “fundamental” challenges in the near future, despite the industry’s outlook stabilising, according to Moody’s.The credit rating agency revised its outlook for the industry from ‘negative’ to ‘stable’ on a 12-18 month basis. In a report published this week, it said that most providers were adapting to shifts in investor sentiment.Managers have been blending elements of active and passive management into smart beta and multi-asset products, and broadening the use and coverage of exchange-traded funds (ETFs).In addition, providers had managed to avoid extensive fee compression by introducing new charging structures. However, Neal Epstein, a vice president at Moody’s, cautioned that there were still actively managed products “susceptible to passive substitution”, while managers also still faced strong competition on cost.Mutual funds were starting to be seen as outdated and expensive structures by investors, Moody’s reported, citing a decline in the number of mutual funds available to US investors. Last year saw the lowest number of new fund launches in 10 years (439), while the 602 funds that disappeared through mergers or closed altogether was the highest level since 2009.#*#*Show Fullscreen*#*# Source: Moody’s/ICIMoody’s also cited the effects of MiFID II, which comes into effect on 3 January 2018. The agency said the regulation was “likely to draw investors to use lower-cost funds”.The rating agency indicated that current market conditions – an equity bull market and declining bond yields – had supported asset managers’ revenues and helped to finance mergers, acquisitions and expansions.While global economic growth was “expected to remain strong”, Moody’s said, providers should be wary of the impact on their businesses when the situation began to change.
The UK’s Pension Protection Fund (PPF) could have to scrap its compensation limit if the European Court of Justice (ECJ) rules in line with a legal opinion published this week.In an assessment delivered to the ECJ, Advocate General Juliane Kokott said “every individual employee… is entitled to compensation of at least 50% of the total value of his accrued rights or entitlements to old-age benefits in the event of the insolvency of his employer”.Kokott was advising on the case of Grenville Hampshire versus the board of the PPF. If the ECJ were to rule along the lines of her assessment then the PPF could be forced to drop its current annual limit of £35,000 (€39,890) in compensation.Hampshire launched his case after his expected annual pension was slashed by 67% following the insolvency of Turner & Newall, formerly a manufacturing business, and the transfer of the plan to the PPF. European Court of Justice in LuxembourgThe UK’s lifeboat scheme pays 100% of a member’s pension up to the annual cap if they are beyond retirement age.However, benefits accrued prior to April 1997 are not indexed, and post-April 1997 benefits can only increase by 2.5% a year maximum. If a member has not retired, they will receive roughly 90% of their pension, up to the annual cap.The European directive at the centre of the Grenville Hampshire case dates from 2008 and states: “Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes.”Anna Rogers, senior partner at ARC Pensions Law in the UK, said the PPF was likely to still impose a cap – albeit a higher one. The ECJ was likely to agree with Kokott’s assessment, she said, “and improve the rights of executives with big pensions that are currently subject to swingeing cutbacks”. Rogers continued: “The Advocate General has said that it isn’t fair that the PPF compensation caps ‘establish a kind of general suspicion in respect of senior executives who have not yet attained the pension age… a general presumption of the existence of abuse is unlawful’.”A spokesperson for the PPF said the body was watching the outcome of the Hampshire case “with close interest”.“Members are currently receiving benefits from the Turner & Newall scheme at the levels set out in the Pensions Act,” the spokesperson said. “They can be reassured that this is the minimum that they will continue to receive.”European impactsEuropean governments and state-funded compensation bodies would also be monitoring the eventual ruling – expected within three to four months’ time – very carefully, said Hans van Meerten, a professor of international pensions law at the University of Utrecht.He pointed out that Kokott had specifically mentioned in her assessment that any ruling would affect any further challenges “against a body such as the Pension Protection Fund”. “‘Such as’ means that this can be invoked against every body in the member states, which makes it very interesting for the other [EU countries] such as the Netherlands, which does not have a PPF,” he said. “It is not just a question for the UK.”The assessment comes as the UK prepares to leave the EU in March 2019. However, most experts expect any ruling by the ECJ to be rolled up within a possible ‘Withdrawal Bill’ and then enshrined into UK law.“How this will work after Brexit, no one knows,” added Van Meerten, “but if this was judged when UK was still part of the EU, then I would say yes, it would still hold.” However, while a move by the ECJ to follow Kokott’s assessment would have implications for state bodies across Europe, Stephen Schofield, senior partner at law firm Pinsent Masons, said the actual impact on the PPF might be limited. “There would be only a relatively small amount of people affected,” he said.Any costs implications for the PPF were likely to be soaked up by recalibrating the existing levy the PPF charges to UK defined benefit schemes, Schofield added.“All things being equal, it will impact the levy but any impact will be relatively small and no doubt they will collect it over a number of years, rather than in one lump sum,” Schofield said.UK compensation versus EU law
At the time, Alberto Oliveti, president of ENPAM, said that the pension fund wanted to act as a focus for shareholder coalitions on environmental, social and corporate governance issues with other large pension funds that own shares in the same companies. Oliveti said: “We are not only interested in the dividends; we want to vote in a conscious and informed manner and gather consensus around our proposals from those with the same objectives of sustainable growth over the years.”Currently worth around €500m, with a target size of €1bn, the “portafoglio strategico Italia” includes holdings in energy companies Enel Green Power and Eni, and Banca d’Italia.In April this year, the portfolio acquired a 1.03% stake in Banco BPM, the group created 18 months ago by the merger of Banco Popolare and Banca Popolare di Milano.An ENPAM spokesman said: “After two investments in the energy sector, a further acquisition in the financial sector serves both to rebalance the overall portfolio risk, and to position ENPAM in the third-largest Italian banking group, which invests in the real economy of the country.” Italy’s biggest private sector pension fund made a net return of 4.1% on its investment portfolio in 2017, according to its annual report.ENPAM, which caters for Italy’s general practitioners, reported that its portfolio was worth €20.9bn at the end of 2017.Real estate holdings formed more than a quarter (26%) of the portfolio. During 2017 year, direct real estate made a 4.1% net return, while indirectly-held properties returned 3.9% net.ENPAM has for some time had an explicit strategy of investing in the local economy, and last year launched a portfolio with a strategic bias towards Italian assets. Its aim is to build a portfolio of small direct holdings in seven to 10 Italian companies.
Earlier this week, the UN Principles for Responsible Investment (PRI) informed its signatories that it would require them to report on climate change risks from next year.The PRI’s 2,250 signatories together represent more than $83trn (€73trn) of assets, and include many of the world’s biggest asset owners and asset managers — and its influence is still growing.Insticube, an institutional data service powered by IPE, recently surveyed European asset owners on their attitudes to and work around environmental, social and corporate governance (ESG) issues.It found that, of 338 investors polled, 121 had signed up to the PRI. Additionally, 241 said they had established an ESG policy. Fiona Reynolds, PRIAnnouncing the tough new policy earlier this week, Fiona Reynolds, chief executive officer of the PRI, said: “It is increasingly important for investors to incorporate emerging mega-risks such as climate change into their view of the future.”The PRI’s signatories could — and should — face a much tougher task to convince the organisation and other stakeholders of hiw seriously they take the standards they have pledged to uphold. Asset owners with, or planning to introduce, an ESG policyChart MakerThe PRI’s recent action suggests that it wants to push signatories to treat it seriously, and not just as a box-ticking exercise. Insticube’s research indicates that there is some way to go on this aspect, however. When asked whether failing to support the PRI was sufficient grounds to sack a fund manager, just 82 out of 338 institutions agreed – less than 25%. Is a failure to support the PRI sufficient grounds to dismiss an asset manager?Chart Maker
PDN, one of the Netherlands’ biggest corporate pension schemes, plans to continue independently for at least three years.The €6.8bn pension fund of Dutch chemicals giant DSM said in its 2018 annual report that it was no longer actively pursuing a growth strategy.The scheme said a thorough evaluation of its operations had shown that, in combination with its in-house pension provision, it was optimally prepared to address developments and uncertainties in the pensions sector.Following the assessment, it had decided to retain to its board of equal representation, but had extended its composition with the appointment of external experts. PDN is the pension scheme for chemicals company DSMPDN’s return-seeking holdings lost 5.2%. The scheme said the 6.9% loss from equity holdings was in particular due to disappointing performance from its portfolios of European and Pacific assets.It attributed the 4.1% loss from its listed property holdings to a slowdown in the rise of rental income and rising interest rates in the US, volatility in the UK, Italy and France, as well as a weakening housing market in Asia.By contrast, non-listed real estate generated 10.9% due to rising values of Dutch residential property, it said. The pension fund’s infrastructure investments returned 6.7%.Bridgewater leads multi-asset lossesPDN said its investment in Bridgewater Associates’ All Weather Fund was among the allocations that incurred a 6.2% loss for its “portfolio of strategies”. However, it noted that the scheme’s expected returns were still 6.9% since its introduction in 1996.The scheme also lost 2.1% on its currency hedge, following the appreciation of the dollar, the yen and the Swiss franc relative to the euro.It has sold swap contracts and shortened the duration of its government bond portfolio in order to keep its dynamic interest rate hedge at 35%.The annual report also showed that PDN had gained €400,000 from lending securities worth €109m.The pension fund was again unable to grant any inflation compensation while indexation in arrears increased to 14.3% for its active members and 15.4% for deferred participants and pensioners. PDN’s funding stood at 107.4% at the end of May.Asset management and transaction costs totalled 35 bps and 7 bps, respectively. PDN spent €233 per participant on administration. The company scheme incurred an overall loss of 1.8%, an underperformance of 0.2 percentage points.It said its liability-matching portfolio – 56% of its total assets – returned 0.6%, largely due to government bonds, which gained 1.2%. Its holdings of residential mortgages produced a gain of 2.6%. Inflation-linked bonds and investment grade credit lost 0.7% and 1.2%, respectively.
Three charities have publicised a request for proposals from asset managers to run a £32m (€37m) investment mandate with maximum positive social and environmental impact.In a press release, the charities – Blagrave Trust, Friends Provident Foundation, and Joffe Charitable Trust – said their key instruction to managers was to “’impress us’ on environmental and social impact” and that they would be asking short-listed candidates to present their proposal to an auditorium of mission-led investors. The press release referred to an ‘ESG investing Olympics’.Colin Baines, investment engagement manager at Friends Provident Foundation, said: “We wish to send a market signal that asset owners are demanding higher standards of impact and ESG investment. Asset managers will recognise that the standards expected by mission-led investors like us today often become the market norms of tomorrow.”Growing demand from asset owners to have a purpose beyond financial return with their investments was being reflected in a growth in funds labelled as impact, sustainable, responsible, green or ESG, he added, but “the quality of these funds varies greatly with marketing claims not always aligned with investment practice”. The charities said the request for proposals was being advertised publicly as part of their decision to take a more transparent approach to asset manager selection in a bid to “bring investment management ‘out of the shadows’”.The charities said they planned to feature short-listed managers as best-in-sector in a report to signal to the market what emerging best practice and asset owner expectations look like.They indicated being agnostic as to the asset class, impact theme, and type of manager, with proposals being sought from “boutique impact funds intentionally seeking out start-ups with solutions to large ESG funds moving markets and transnational companies via their stewardship”.Alex Jacobs, director of the Joffe Charitable Trust, said: “We will be looking for intentional social and environmental impact, high standards of ESG integration covering exclusion, engagement and its escalation, voting record, and in-house expertise, plus impact reporting.“We know there will be trade-offs between different approaches, and we look forward to seeing which perform well.”Guiding principles included that the investment strategy be scalable to test the hypothesis that other impact-oriented pools of capital could come on board. Some short-term liquidity would be required, with an option for substantial – specified as more than 50% – liquidity within 12 years.Asset managers have to submit applications by 7 February, which should include an explanation about how important impact or ESG investment is to their business and they hoped to shape the broader investment market.
Dan at The Star Gold Coast in Broadbeach. Picture: Jerad WilliamsSEA FM breakfast radio star Dan Anstey and his partner Clare Dufty have splashed $850,000 on a property in Mermaid Beach.More from news02:37International architect Desmond Brooks selling luxury beach villa16 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days agoThe four-bedroom property features a pool and undercover entertaining area.Anstey posted a photo on Instagram in front of the sold sign with the caption “officially old”.He joins a few other media personalities in the area including Channel 9’s Eva Milic.It comes a week after the Bulletin reported on his co-host Heather Maltman snapping up a unit in Labrador.