‘Turbulent’ markets hit first-quarter returns at Sweden’s Alecta

first_imgJust over half of the portfolio (52%) was invested in fixed income at 31 March, with 40% in equities and 8% in property.Magnus Billing, chief executive at Alecta, said: “Returns for both Alecta Optimal Pension and defined benefit insurance were negatively affected by sharply falling share prices.“Nevertheless, Alecta is well equipped for the more challenging profit environment of the future because of its stable finances.“Our low management costs have helped our success in offering good pensions, and our cost efficiency continued to improve, compared with the corresponding period last year.”In the five years to the end of March, Alecta Optimal Pension’s average annual return was 9.1% per year, 3.8 percentage points more per year than the benchmark index for the same period.For the DB product, the average annual return has been 7.2% over the same five years.However, Alecta’s solvency ratio fell by 11 percentage points to 160% over the first quarter of 2016, but this is still strong, said the company. Swedish occupational pension provider Alecta returned -2.4% on its defined contribution (DC) product, Alecta Optimal Pension, for the first quarter, compared with 11.1% for the same period in 2015.While the company refers to the “turbulent” period in stock markets from January to March, it said the return was slightly better than that of the benchmark index, the Morningstar SEK Aggressive Balanced Fund.At 31 March, the DC product had 61.3% in equities, 30.1% in fixed income and 8.5% in property.However, the defined benefit (DB) portfolio fared better, returning 0.9%, although this was also a large fall from the 7.8% return for the same period last year.last_img read more

​‘Innovative’ funding attracts Danish pension providers to green projects

first_imgThrough the DCIF, PensionDanmark said it had invested in a solar power project in the Maldives, which now supports a desalination plant with renewable energy, and a large wind farm in Kenya.In its contribution to the report, PensionDanmark says: “Investing in solar power in the Maldives and wind power in Kenya will contribute to reducing the countries’ dependence on the import of fossil fuel.”It said its allocation was only possible due to the use of so-called blended finance models, combining private capital with public aid for developing countries in areas where investments will have a substantial impact.Norway’s KLP has been similarly active in the area of blended finance, funding the development of several renewable energy assets in Kenya and Rwanda.,WebsitesWe are not responsible for the content of external sitesLink to white paper by State Of Green The Danish government has credited the use of “new and innovative” approaches to project funding as the reason the country’s pensions sector has been able to support green projects in emerging markets.Troels Lund Poulsen, Danish minister for business and growth, said pension funds had shown “remarkable dedication and innovative skills” when deciding on how to fund infrastructure projects across the globe.He praised new approaches to funding projects pursued jointly by the Danish government and institutional investors in a report outlining several successfully funded projects.The paper, ‘Financing the Green Transition’, highlights the work of EKF, Denmark’s export credit agency, and the Danish Climate Investment Fund (DCIF), both of which have attracted backing from pension providers including PensionDanmark.last_img read more

Truell targets listing to capture business from UK LGPS pools

first_imgEdi TruellTruell is “a great fan of Brexit”.“If properly negotiated and structured it should be an enormous opportunity for Britain and the British economy,” he said.The Truell family has the vast majority of its assets in what is becoming DCAG.With around £300m (€334m) of assets under management, the investment company holds a diverse portfolio, including exposure to companies involved in big data, infrastructure and healthcare.As DCAG, it plans to concentrate on private equity to begin with and then include other asset classes such as real assets. About Edmund ‘Edi’ TruellA financier, Truell has held myriad positions in the financial services industry. He is known in the UK pension fund world as the co-founder of the Pension Insurance Corporation, the defined benefit insurer, and his subsequent position as chair of the London Pension Fund Authority (LPFA) from January 2013.He was instrumental in pushing forward the collaboration between LPFA and Lancashire Country Pension Fund that led to what is now the Local Pension Partnership. He resigned in August 2015 to set up an advisory board for the partnership and to work as an unpaid adviser on pensions and investments to then London mayor Boris Johnson.The idea was for Truell to drive forward collaboration between public sector pension funds for investment in infrastructure and housing in London and across the rest of country, with Johnson eyeing the creation of a “Citizens’ Wealth Fund”. More broadly the intention was that Truell would advance the cause of pension consolidation across the LGPS and UK public sector pension funds more generally. Within the LGPS, this consolidation is now happening in the form of the creation of six new asset pools in addition to the already operational LPP and London CIV. Disruptive Capital, the private equity business and family office of Edi Truell, is going public in a bid to attract investment from the country’s emerging local authority asset pools and other “sophisticated” investors.It intends to list on Switzerland’s SIX stock exchange as Disruptive Capital AG (DCAG), with ambitions to develop into a larger private asset manager.“DCAG, backed by highly successful families, aims to develop into a ‘one-stop solution’ for sophisticated investors, including pension funds,” it said in a statement.“Significant co-investment opportunities are offered on a deal-by-deal basis to its investors to give them the ability to tailor their own asset allocation around that of DCAG.” Speaking to IPE, Truell – the self-proclaimed architect of the consolidation of UK public sector funds – said one of the motivations for listing was to facilitate investors exchanging their current portfolios, “plus or minus more cash”, for listed shares in DCAG.The new asset pools being formed by local government pension schemes (LGPS) in the UK were inheriting “a whole ragbag of stuff” from their member pension funds, and it was these historical portfolios that they could swap for shares in a single listed vehicle, according to Truell.He said the government was pushing pension funds to use listed vehicles rather than more complicated partnerships and other such investment structures, because it made governance easier from the perspective of the pension funds.Another motivation for listing Disruptive Capital, according to Truell, was to make it easier to raise capital quickly so that the company could act as cornerstone investor for some of the large transactions it had underway.Asked why Disruptive chose Switzerland for a listing, Truell said it was one of few stable markets around and that moving family assets back to the UK did not appeal on account of “the political risk of Jeremy Corbyn and his nice friends”.“It doesn’t seem like a sensible place for a long-term vehicle to be,” he said. “We prefer to have our assets in Switzerland rather than subjected to political vagaries.”last_img read more

Dutch Chevron scheme takes insurer to court over pension rights

first_imgAccording to the scheme, ASR claimed that the offered purchase price could only be changed as a result of later adjustments of the pension fund’s membership.The scheme said that the final purchase price must be established using the method stipulated in the contract.“We have discussed the matter several times, but have failed to reach an agreement ultimately,” said Cees van Klink, the pension fund’s chairman.He emphasised that it was about different opinions and not about a high-running conflict: “We are not fighting in the street.”Van Klink said that the outcome of the court case would not negatively affect existing pension rights. A positive verdict in favour of the scheme would lead to higher indexation, according to the chairman. He added that the remaining balance following the liquidation of the pension fund would also be used to improve indexation.Van Klink indicated that the dispute had delayed the liquidation of the scheme, which was scheduled for last year.However, as the pension fund had already ceased its activities, the delay would not cause many additional costs, he said.The pension fund was among the last schemes in the Netherlands with traditional final salary arrangements.Asked for comment, ASR said it did not recognise the pension fund’s reflection of the disagreement, but refrained from further comments “as the case was a matter [for] the court”.The insurer emphasised that it would keep on carrying out the pension plan as well as its service provision to the participants as normal. The Dutch pension fund of energy giant Chevron (SCP) has taken insurer ASR to court in a disagreement about the exact amount of pension liabilities it transferred to the insurer in 2015.According to the Pensioenfonds Chevron, the problem centred on how the purchase price for pension rights was established. It said that “several millions” of euros were at stake.At the time of the transfer, the scheme’s pension assets amounted to €370m. Its funding level was 127% in 2015, meaning the pension fund could negotiate a fixed level of indexation with ASR, as well as full indexation in arrears of 6.34%.The unconditional indexation amounts to at least 80% of the European consumer index HICPxT.last_img read more

Kingfisher insures £200m in deal with PIC

first_imgJohn Baines, partner at Aon, which advised the trustees, said: “The trustees were able to secure a valuable price lock to immunise the scheme from market movements over a potentially volatile year-end period.”The buy-in was the scheme’s second following a medically underwritten buy-in backed by Legal & General and completed in 2016.UK schemes were increasingly interested in insuring liabilities in stages rather than all at once, according to PIC’s head of business development Mitul Magudia.“With pension schemes moving increasingly into fixed income assets that better match their liabilities, we would expect this trend to continue,” he said. “This is the route that the Kingfisher trustees have taken and we are very pleased to have been able to help them continue their de-risking programme.”This strategy was also advocated by the ICI Pension Fund, which has insured nearly three-quarters of its £10bn liabilities in a series of transactions.Kingfisher is a FTSE 100-listed company that owns chains including B&Q, Castorama, Brico Dépôt and Screwfix.Since the start of last year PIC has insured more than £2.2bn worth of liabilities through buy-in or buyout deals. Among the largest of these were a £725m buy-in with the Former Registered Dock Workers Pension Fund, a £600m buy-in with plumbing company Wolseley, and a £350m buy-in with two schemes sponsored by energy company SSE. The pension scheme of building supplies group Kingfisher has agreed a £200m (€229m) buy-in with Pension Insurance Corporation (PIC).The £4bn pension fund has now insured more than 10% of its liabilities.Clive Gilchrist, chairman of the Kingfisher trustee board, described the deal as “another important step for the Kingfisher Pension Scheme on its journey towards its target of self-sufficiency”.He added: “The annuity provides a further improvement to the financial security of the scheme for all members.”last_img read more

Opinion: Far more than a trade war

first_imgMany observers are too fixated on the minutiae of trade tariffs to see the bigger picture. They fetishise trade, treating it as having its own intrinsic power rather than thinking more broadly about unfolding developments.What the world is witnessing is not a trade war but the start of a battle for global dominance. The rise of China, from a rural backwater in the late 1970s to arguably the world’s largest economy, is destabilising international relations. This is a structural reality rather than the result of a conscious plan for world domination by the Chinese leadership.The US understandably feels threatened by this development. For decades its position as the world’s leading power was beyond dispute. Now it is being called into question.Many pre-eminent international organisations were created on the premise of US dominance, including the International Monetary Fund (IMF), the United Nations and the World Bank. Now they are increasingly looking unfit for purpose.Early signs of this were already apparent a few years ago when China established the Asian Infrastructure Investment Bank. Beijing had grown fed up with what it regarded as the West’s attempts to thwart it playing a leadership role at the World Bank commensurate with its economic weight. It has become almost universally accepted that the US and China are in the midst of a trade war – the term has long ceased to be written with inverted commas around it.Yet there are good reasons to question whether it is an accurate description of the growing rivalry between the two global powers. The process unfolding before our eyes is arguably something far more serious.It is blindingly obvious that there are tensions between the US and China over trade, but there is a subtle – though crucial – difference between that observation and declaring the existence of a trade war. Donald Trump and Xi Jinping meet at the G20 gathering in Osaka, Japan, June 2019There are some who have put US-China rivalries into a broader context. Graham Allison, a Harvard professor, has received a lot of attention for what he has called Thucydides’s trap. This refers to the classic work by an Ancient Greek historian on how the fear instilled in the powerful city state of Sparta by the rise of Athens led to the Peloponnesian War.Allison goes on to argue that, in 12 of the 16 cases of a rival power facing an incumbent over the past 500 years, the outcome was a war between the two. However, there is hope this time around because in four of his examples it was possible to avert military conflict.Yet the implications of this insight go much further than generally realised. To understand the significance of recent developments, three key points should be borne in mind:This is not a trade war. If anything, the battle over trade, and indeed over currency now too, should be seen as only a small part of intensifying international rivalries.Donald Trump is not the main driver of the current US-China conflict. It is true that the current US president adds his own impulsive and idiosyncratic edge to the rivalry, but it is notable also that Trump has solid backing from Republicans and Democrats in relation to the conflict with China. It is one of the few things on which they agree. The entire US elite feels deeply threatened by China’s rise.Europe too is becoming embroiled in great power conflict. The rise of China destabilises the relations between all the international powers. It is striking that the EU’s share of global output has fallen from about 30% in 1980 to about 15% today, according to IMF figures. Europe’s struggle to maintain its position in the world is already leading not only to greater tensions with China but more conflict with the US.No doubt alliances will shift in unpredictable ways, but international relations cannot continue to operate within the framework created after the second world war.I will examine growing US-European tensions in more detail in the September issue of IPE.last_img read more

German corporate pension liabilities swell by a fifth in 2019

first_imgPension scheme funding levels for companies covered by the report – those included in the DAX and MDAX stock market indices – fell by around a fifth since the beginning of 2019, according to WTW’s modelling.For DAX company pension plans, funding levels fell to 62.3% at the end of September from 67% at the end of December 2018 while funding of plans at the slightly smaller MDAX firms dipped to 58.3% from 63.1%, the consultancy’s figures showed.However, this decline was much smaller than could have been expected given the significant increase in pension liabilities in the nine-month period, WTW said.This showed the companies were working intensively on their investment strategies specifically for their pensions assets, it said.According to the firm’s own calculation of the average discount rate for DAX companies, this rate sank to just 0.94% at the end of September, from 1.91% at the of December 2018.WTW’s figures showed the decline of the discount rate seen in the first nine months of this year was the biggest in percentage point terms since at least 2014, and comes in a period when 10 and 30-year bonds have turned negative.Examining the outlook for the background conditions that determine interest rates, the consultancy said in its report: “All in all, low eurozone interest rates are expected to persist for several years yet.” The pension liabilities of Germany’s largest companies have expanded by almost a fifth since the beginning of this year, because of further pressure on discount rates, consultancy Willis Towers Watson reported.But despite the development, funding ratios have remained relatively stable because corporates have made investment returns on their pensions assets of around 10%, the firm said in its report on German pensions finance for the third quarter of 2019.Heinke Conrads, leader of the firm’s German and Austrian retirement business, said: “The companies have had a strong headwind this year for their pension schemes from the development of interest rates, but also a strong tailwind through the positive development on capital markets.“Overall, it is clear that they have chosen their capital investment strategies well and were able to manage their pension schemes well,” she said.last_img read more

​Grandhood eyes UK market after Danish deal ups scalability

first_imgJon Lieberkind and Mathias Bredkjær, co-CEOs and founders of Grandhood“With the Velliv offering our customers can save unlimited with tax deduction in the ‘Livrente’ savings product,” he said.The Velliv collaboration will also allow Grandhood’s customers to choose their own risk profile and a pure ESG pension savings plan, he said.Rather than trying to offer a complete investment service as they had to start with, Lieberkind and Bredkjær said their firm would now concentrate on its strengths as a digital customer interface, while seeking established pensions investment and insurance companies to link up with in other national markets.They said the firm had not yet decided which country to tackle next, but that the UK did seem appealing for a number of reasons.Auto enrolment had made it compulsory for employers to include staff in a pension scheme unless workers opted out, the pair said, adding that the existence of the new system meant there was less need to educate the market about pensions.“Furthermore, we see room for competition with only Smart Pension trying to make a difference in the UK market for workplace pension solutions,” Lieberkind said.Other markets such as Holland, France and Spain could also be interesting as potential expansion locations, he said.“We are mainly looking for countries with strong private sector savings,” Bredkjær said.Looking for IPE’s latest magazine? Read the digital edition here. “In Denmark you need to hold a life insurance licence in order to be allowed to distribute lifetime annuity savings plans (Livrenter) and life insurance products. Banks are not allowed to deliver these products,” said the firm’s other co-CEO and founder Mathias Bredkjær.“If you want to be relevant and able to compete in the Danish workplace pension market, you need the complete financial product suite that only life insurance companies can offer,” said Lieberkind.With Velliv, he said, Grandhood could now enable customers to gather their legacy pension pots into the product, because it would be able to offer a combination of pure defined contribution (DC) and hybrid defined benefit products, whereas in the Saxo Bank setup it had only been able to offer a pure DC savings product with limited tax deductibility. Danish financial technology firm Grandhood said the deal cut last week with Velliv has turned its product into one that is more scalable and better suited to its international plans, in which the UK could be a prime target.Grandhood – formed in 2017 as a user-friendly digital pension product for entrepreneurs and small and medium-sized enterprises (SMEs) – has now linked up with the long-established and recently-mutualised pension Danish provider to launch a new joint pension product in the fourth quarter of this year.Jon Lieberkind, co-chief executive officer and founder of Grandhood, told IPE: “We want to be the preferred pension partner for freelancers and SMEs globally, but our version 1.0 was not as scalable a solution as the 2.0 version we have now after the Velliv deal.”Up to now, Grandhood has been a licensed asset manager with a partnership with Denmark’s Saxo Bank, but with Velliv, it will become a life-insurance broker with a life-insurance company as its partner.last_img read more

ESG roundup: PRI enters ‘landmark’ collaboration on ESG reporting

first_img“Our signatories continue to tell us that being able to access comparable and meaningful sustainability data is a roadblock to progress when it comes to responsible investment,” said Fiona Reynolds, CEO of PRI.“Working with WBCSD will enable PRI to enhance several channels over which investors have influence – capital allocation and investors’ engagement with companies.“By collaborating we can further develop the tools and data needed for future decision-making and create the incentives and collective action at a scale that can significantly influence the capital costs of companies.”Peter Bakker, president and CEO of WBCSD, said the two organisations were working to “redesign corporate and investor engagement”.“We see this work as integral for aligning the financial system with the transformations needed to address the major social and environmental issues – like climate change and inequality,” he added.The PRI now has more than 3,000 signatories who collectively represent over $100trn (€83trn) in assets under management. The WBCSD has 200 member companies with a combined revenue of more than $8.5trn and 19 million employees across 70 countries.Big increase in number of ESG belief settersThe number of European pension schemes that have explicitly created and formalised ESG beliefs has increased significantly, according to a survey carried out by Mercer.Last year 19% of pension plans had done so, compared with 55% this year.Another large ESG-related change picked up by Mercer’s survey is in the share of European pension funds’ awareness of, and desire for, action on climate change-related investment risk.Last year 54% of those surveyed now actively considered the impact of such risks in their investment allocations, compared with 14% in 2019. Also, in 2020 89% of surveyed plans said they would consider ESG risks in 2020, compared with 55% in 2019.Regulation continues to drive pension funds’ consideration of ESG risks, cited by 85% of those surveyed as a key driver. However, there was a large jump in those considering ESG risks due to recognised financial materiality – 51% versus 29% last year – and according to Mercer there was also a large number of pension plans increasing their focus on ESG risks because sponsor companies were seeking alignment with new or existing corporate responsibility strategies.Mercer said it viewed such “less enforced” reasons for considering ESG factors to be extremely positive.“To enable long-term mindset changes, and real positive changes in any space, the change must happen because internal participants realise the value for themselves – rather than being told or forced to act by regulation,” it said in its survey report.The survey was of 927 institutional investor clients of Mercer across 12 countries, reflecting total assets of around €1.1trn. UK-based participants were the largest survey group, representing 44% on an asset-weighted basis.Jo Holden, European director of strategic research at Mercer, said: “It is encouraging to see such a strong increase in ESG risk awareness, including the potential impact of climate change, on the part of institutional investors.“Investor portfolios can often be improved from an ESG perspective with only relatively minor steps, for example there are quick wins to be made by switching out a relatively small proportion of investments. We encourage schemes to consider developing a climate transition schedule for their portfolios and adopting responsible investment indices.” LAPFF: Rio Tinto bonus cuts for cave blast ‘a proper first step’ The chair of the Local Authority Pension Fund Forum (LAPFF) has welcomed the reduction of bonuses for the CEO and other senior executives of Rio Tinto as “ a proper and appropriate first step” in responding to the destruction of the Juukan Gorge caves in May.The Australian mining company announced the measure on Monday when it released its review into the destruction of the caves.“The Forum will continue to liaise with both Rio Tinto and community representatives to monitor how the company’s response develops based on the review findings and the on-going parliamentary inquiry into the cave destruction,” said councillor Doug McMurdo, chair of the LAPFF.“I would hope to see a proportionate response from Rio Tinto based on the full set of evidence that emerges.”According to media reports, AustralianSuper, Austrlian’s largest pension fund, has said the “proposed penalties fall significantly short of appropriate accountability for those responsible”.The Australian Council of Superannuation Investors said the review “does not deliver any meaningful accountability”.In its statement, LAPFF said it in particular welcomed the review’s acknowledgement that the destruction of the caves should never have happened and that the company needed to rectify some corporate governance failings and operational processes that led to the loss of the cultural heritage site.On the day of the review’s release, Simon Thompson, chairman of Rio Tinto, said: “While the review provides a clear framework for change, it is important to emphasise that this is the start of a process, not the end.“We will implement important new measures and governance to ensure we do not repeat what happened at Juukan Gorge and we will continue our work to rebuild trust with the Puutu Kunti Kurrama and Pinikura people.” The Principles for Responsible Investment (PRI) and the World Business Council for Sustainable Development (WBCSD) have joined forces to “strengthen the connections between risk, returns, and sustainable development” through better corporate and investor communication.In a statement, the two organisations said their “landmark” collaboration would facilitate direct conversations between investors and business about what decision-useful sustainability-related information is, and how and where that information can be used.They said the collaboration was designed to complement existing regulatory and standard-setter work toward a globally harmonised system for ESG reporting by focussing on investor needs and strategic corporate communications.Corporate and investor dialogue was an area underserved to date, they said.last_img read more

Gold Coast hillside home has panoramic views that stretch as far as the eye can see

first_imgDon’t let the view distract you while cooking. Take a dip in the treetops.SWEEPING views of the Gold Coast that stretch as far as the eye can see characterise a hillside home at Reedy Creek.It has been cleverly designed to capture the views over the treetops to the city skyline and ocean from almost every room in the house.Floor-to-ceiling sliding glass doors line the open kitchen, dining and living area, framing the breathtaking panoramic vista. It’s like taking a bath in a tropical retreat.The kitchen has a butler’s pantry while a large study that could double as a family room has a built-in wraparound desk.The house also has USB power points, electric blinds, zoned and ducted airconditioning and a Back to Base security system.Mr Robertson, who lived in the property with his wife Tanya and their children, said his favourite part of the house was the outdoor area.“I love the outdoor area with the swimming pool, alfresco area and the courtyard in the middle,” he said.“I can look out at the whole Gold Coast when I’m swimming in the pool.”The family are selling the property as they are undertaking another project at Palm Beach that they will move into.It will go under the hammer on February 20. Even the central courtyard gets to enjoy the sweeping views. Owner Brian Robertson designed and built the four-bedroom, two bathroom Kirkwood Place residence in 2015 through his construction company Robertson Homes.“I wanted that Palm Springs style and I just wanted to make it really open,” he said.It has a minimalist design with a white palette and honed concrete flooring, which accentuates standout features such as the pool area and central courtyard. It’s in a pretty spectacular spot at Reedy Creek.More from news02:37International architect Desmond Brooks selling luxury beach villa12 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days agoThey open onto a covered patio and deck where an infinity edge solar-heated pool appears to linger on the horizon.If that’s not enough to impress you, the courtyard with built-in bar at the heart of the home certainly will.The green oasis is also surrounded by floor-to-ceiling sliding glass doors, which allows a clear view straight through the centre of the house to the coastline.MORE NEWS: Mega mansion fetches millions in a month MORE NEWS: Why I live on the Gold Coast The infinity edge pool looks like its lingering on the horizon. The main living areas are surrounded by floor-to-ceiling glass doors to make the most of the views.last_img read more