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  • US consultant Meketa Investment Group opens London office

    first_imgMeketa Investment Group, the Boston-based investment consulting and advisory firm, has opened its first overseas office in London as a base for its European business, Meketa Investments London.The presence is initially planned as a hub for European manager research on behalf of Meketa’s US clients.The firm consults on more than $270bn (€198bn) in assets for more than 90 institutional investors, including public pension plans such as CalPERS, CalSTRS and the Arizona State Retirement System, private pension plans and Taft-Hartley plans.Managing principal Stephan McCourt, based in San Diego, will set up the office over the next 6-12 months. He will soon be joined by three members of Meketa’s US-based research staff, Tim Atkinson for public markets, Christy Gahr for private markets and Edmund Walsh for asset allocation and economic research.However, McCourt also told IPE he plans over this summer to hire a regulatory consulting firm to guide Meketa through an FCA-registration that will open the door to providing consulting services to UK and European clients, with a view to completing the process by the spring of 2015.“Coincident with that, we will be hiring at least one senior local investment professional to head up that effort,” said McCourt, who joined Meketa in 1994, set up its private equity capability and opened its first West Coast office, in San Diego, in 2003.In the US, Meketa’s clients tend to be large institutions, although it does work with funds with assets of less than $100m.For funds with less then $5bn, it typically serves as the sole adviser across all asset classes, while advising in both a discretionary and non-discretionary capacity in specific areas – especially private equity, infrastructure and real estate – for larger funds with internal investment offices.CalSTRS initially mandated Meketa to advise on private equity co-investments and infrastructure opportunities, but recently hired the firm to act as one of two general consultants to the board.McCourt acknowledges that pension funds across Europe use consultants in very different ways.From larger Continental European funds, he anticipates more opportunities to amplify the due diligence and manager research resources of internal investment offices, whereas the UK is seen as a potential source of full-service advisory work, too.“We certainly have the resources and depth to compete shoulder-to-shoulder with the big groups here, but if nothing else, our business model is highly adaptable, so we will accommodate whatever demand we find in the market,” he said.“In the US, we already compete with Mercer and Hewitt EnnisKnupp – but the US is a very competitive market, characterised by a lot of mid-sized firms like ourselves.”There are no immediate plans to open more European offices.“Our next likely opening will be in Asia,” McCourt told IPE.“My sense is that other offices across Europe would depend on the client appetite we find for our services – in the initial stages, London is a phenomenal hub for the research side of what we plan to do here in Europe.”last_img read more

  • EIOPA’s ‘grandfathering’ could see pension schemes exempt from HBS

    first_img“Arguably, if the benefits are fixed under the rules, and the contributions don’t vary, this could be interpreted to include future benefits as well,” he said.While the use of ‘contract’ to describe an agreement is not common in Haines’s native UK, the Dutch system uses the terminology, with social partners agreeing binding contribution rates for workers paying into individual schemes.Haines argued that if funds would still be impacted by the HBS, it is right they continue to argue against its introduction.“If not, then is it right for the industry to spend a lot of time, effort and money engaging on this?” he asked.Haines, who heads up the consultancy’s Nordic retirement business, also welcomed the acknowledgement within EIOPA’s consultation that if funds could account for future asset return when discounting liabilities, it would encourage investment in long-term assets.“Large employers I speak to across Europe say ‘Yes, we want to be encouraged to invest in long-term assets, and we want an economically efficient approach’,” he said.He added that the ability to account for investment returns, rather than employing a risk-free rate, would have a lot of support.“But it all comes down to, at the end of the day, what is EIOPA’s preferred option,” he said. While EIOPA had tabled six potential HBS approaches as part of the consultation, it was unclear which it preferred, how it would advise the European Commission or whether the College of Commissioners had its own preferred approach, he noted.The current HBS consultation, which runs until next January, has previously been welcomed for its “pragmatic” approach. Benefits currently accruing in Europe’s pension schemes could end up being completely exempt from the proposed holistic balance sheet (HBS) if the European Insurance and Occupational Pensions Authority (EIOPA) wishes to avoid burdening funds with additional costs.The supervisor’s recent discussion paper on the HBS says it may be appropriate to “consider the possibility of grandfathering”, so that the new guidelines do not affect accrued rights.The paper adds that current pension “contracts”, which it says could cover benefits and contributions that are fixed for the whole term of the contract, could be exempt due to the cost burden associated from any new framework.Aon Hewitt partner Colin Haines said a ‘grandfathering’ clause could offer defined benefit (DB) schemes a reprieve.last_img read more

  • UK roundup: Merseyside Pension Fund, Research Machines scheme, PIC

    first_imgThe Merseyside Pension Fund returned 6.2% over the course of its most recent financial year, outperforming its benchmark by two percentage points but falling short of peer average.The now £6.1bn (€7.3bn) local government pension scheme (LGPS) services public sector workers in Liverpool and Wirral councils, in the north west of England.Despite the positive performance over the 12 months to March 2014, the fund’s latest triennial valuation revealed a funding level of 76%.Its investment performance fell below the 6.4% LGPS average, but chair of pensions committee, Pat Glasman, said the scheme operated at significantly lower risk. “Measured on a risk-adjusted basis, the fund demonstrates a lower volatility over three years than the average LGPS, which means that it can boast a better return profile than three quarters of the schemes,” she said.The fund’s near 10% allocation to European equities and 7% to property led the returns both performing well over 15%.UK equities account for around a quarter of the scheme and returned 10%.The fund has just over 15% allocated to alternatives with its second largest asset class returning 5%.Japanese, emerging market, and Pacific-basin ex Japan equities all performed negatively, bringing down the funds performance.Together, the three asset classes account for some 15% of the schemes assets.Recently, the pension fund announced it was re-appointing Swiss asset manager Unigestion to manage part of its top-performing European equities assets.In other news, the Research Machines PLC 1988 Pension Scheme has agreed a £31m buy-in with bulk annuity specialist insurer Pension Insurance Corporation (PIC).The scheme for IT resource firm, RM, transferred £26m of fixed income assets over to PIC with the remaining premium covered by an escrow account set up between the sponsor and scheme for de-risking.RM said £3.3m remains in the account for further bulk annuity exercises in the future.It covers all 165 members currently drawing a pension, reducing the scheme’s longevity and inflation risk.The buy-in represents around 9% of the scheme’s membership and 13% of liabilities.Due to current market conditions, schemes holding UK Gilts to cover pensioner members can conduct an insurance buy-in for little to no cost.The bulk annuity market is currently booming, making this announcement the third this week after the Unilever and Panasonic schemes announced buy-in and buyouts.last_img read more

  • Asset managers’ sustainable investments triple since 2010 – survey

    first_imgGlobal assets under management linked with companies that are signatories to the PRI (Principles for Responsible Investment) have almost tripled to $62trn (€55.3trn) in April 2016 from $21trn in 2010, according to Moody’s Investors Service (MIS).Demand for sustainable investing has been driven by investor expectations and regulations, and the use of these strategies will continue to grow, MIS said in its in-depth analysis of the sector.For instance, in France – where companies offering employee savings plans must include a responsible investment option – these products now represent 30% of company-sponsored savings plans, up from 4% in 2006.MIS added that, while large institutional investors such as pension funds, endowments and foundations are driving rising demand, high net worth and retail investors are nonetheless playing an increasing role. Retail SRI funds in Europe have nearly doubled over the past five years, from €75bn to €136bn.Marina Cremonese, a vice-president at Moody’s, said: “Integrating ESG criteria into investment decisions should limit risks within portfolios and contribute to lower volatility and better performance in the long run.“The effectiveness of these strategies, however, will have to manifest themselves through the cycle, as well as across teams and strategies.” But generating long-term value for investors means asset managers could preserve higher active management fees by integrating ESG criteria into their product suites, MIS said, adding: “There is investor demand for more transparent strategies and products, as well as tailored products that meet specific client needs.”Several asset managers – including BlackRock, Amundi and Standard Life Investments – have proved that being early movers provides an edge, according to the analysis.And it observed that, as the shift away from active management and towards lower-cost, passive management continues, asset managers specialising in active strategies are trying to gain a competitive edge through the introduction of ESG criteria in mutual funds and investment solutions.But, besides the commercial advantages of providing ESG products, there are likely to be increasing regulatory pressures, the analysis warned.MIS’s research follows the approval of the EU’s ratification of the Paris Agreement last week (4 October), which now takes effect on 4 November.“It is a significant achievement,” MIS said, “and it is very likely new regulations and disclosure requirements will emerge for companies as a result.”It added that the Financial Stability Board task force on climate-related financial disclosures is also expected to develop voluntary, consistent, climate-related financial-risk disclosures to be used by companies in providing information to investors and other stakeholders.Meanwhile, asset managers have to overcome several hurdles to make sustainable investing strategies work.These include an insufficient supply of investible products – such as green bonds – uncertain performance expectations, evolving disclosure regimes, limited ESG data and education.“Finding consistent, high-quality ESG data is a challenge, given a lack of universally accepted ESG definitions and standard reporting guidelines,” said MIS.“Asset managers also have to integrate the information into their investment process, must ensure such strategies are generating competitive returns, and need to communicate the process and results to investors clearly.”last_img read more

  • Dutch pension funds should ‘under-promise and over-deliver’

    first_imgThe Netherlands’ pensions sector could improve trust among members by promising less and delivering a better result, according to Kick van der Pol, the exiting chairman of the Dutch Pensions Federation.During the industry organisation’s annual conference yesterday, he suggested that pension funds should aim to generate a surplus in eight out of 10 years.“Now we could be facing rights cuts in 2021 as a result the financial crisis in 2008, which is impossible to explain to participants,” he argued.Van der Pol – who will be replaced as chair of the federation by Shaktie Rambaran Mishre in December – supported a similar plea by Martin van Rijn, former chief executive of the €215bn asset manager PGGM. In a presentation about the parallels between care and pensions in gaining and keeping trust, Van Rijn – who also served as minister for health, welfare and sport until October last year – advised the sector to focus on the concept of “under-promise and over-deliver”.He argued that pension funds should put themselves into the position of the individual members, for example by understanding that the expectations of low and high earners regarding their pensions can differ significantly.Van Rijn also warned against providing too much transparency about risks “as this would increase uncertainty among participants, in particular if they lack the ability to act themselves”.The former PGGM CEO added that pension funds’ expectations about the effects of increased freedom of choice in their pension arrangements shouldn’t be too high.“Participants often can’t gauge the impact of their decisions, which could trigger new problems later,” he said.Discount ratesDuring the conference, Wouter Koolmees, minister for social affairs, reiterated that he would not raise the discount rate for pension liabilities because that “an articifical increase would come at the expense of confidence in the pensions system”.He said he was surprised that directors of pension funds had pushed for an increase, highlighting that he also supported inflation compensation “but in a responsible way”.Koolmees referred to a recent letter to financial newspaper NRC Handelsblad, in which the five largest schemes had called for a new pensions contract with “soft” pension rights, combined with a higher discount rate, to prevent benefit cuts in the next few years.Both the minister and Klaas Knot, president of regulator De Nederlandsche Bank, told pension funds they must stick to the risk-free interest rate for discounting liabilities, even if planned reforms introduce a pensions contract providing for soft rights.Speaking to IPE on the discount rate issue, Toine van der Stee, chief executive of the €22bn asset manager Blue Sky Group, emphasised the importance of a stable rate. In his opinion, the stakeholders should opt for a single rate and stick to it.“The discussions about the discount rate raise the impression in society that we are messing with the pensions outcome, which is bad for public trust in the system,” he said.last_img read more

  • EC expert group seeks feedback on green taxonomy

    first_imgThe European Commission’s sustainable finance expert group has launched a consultation on the preliminary results of its work on an EU-wide system for determining whether an economic activity is environmentally sustainable.The taxonomy, as it is dubbed, is the focus of one of the regulations the Commission has proposed to implement its sustainable finance action plan.The technical expert group (TEG) on sustainable finance, which is helping the Commission with the taxonomy and other matters, today issued calls for feedback on two aspects of the taxonomy. It invited feedback on the first group of economic activities it proposed be deemed as contributing substantially to climate change mitigation. It has also invited views from future users of the taxonomy – member states and financial market participants – on its usability in practice.In addition, technical experts have been invited to register for workshops to provide technical input on the development of criteria to assess climate change adaptation activities and “doing no harm” across all the Commission’s environmental objectives.Announcing the call for feedback today, the Commission said the ultimate aim was “to develop a system that provides businesses and investors with clarity on which activities are considered sustainable so they take more informed decisions”.Usability questionsPotential users of the taxonomy are being invited to respond to five questions, including if the proposed approach was “sufficiently clear and usable for investment purposes” and if not, what changes respondents would propose.The TEG survey also asks financial market respondents specifically whether the proposed structure and format of the taxonomy would enable them to comply with potential future disclosure obligations.The TEG’s consultation document stated that the taxonomy was not a mandatory list of activities in which to invest, but linked to disclosure requirements.The Commission has proposed that financial market participants, when marketing financial products as environmentally sustainable investments, be required to report how and to what extent the taxonomy criteria have been used to determine their sustainability. Nathan Fabian, chief responsible investment officer at the Principles for Responsible Investment and rapporteur for the TEG’s taxonomy section, said: “The taxonomy would be a major step forward for sustainable investing as it is first time that standards on climate mitigation, adaptation and other environmental objectives would be incorporated into financial disclosure obligations.“There is a global need for clarity on what economic activities are sustainable”Nathan Fabian, chief responsible investment officer, PRI “There is a global need for clarity on what economic activities are sustainable. As the biggest effort globally, the EU taxonomy can influence global capital flows to sustainable assets and companies.”PensionsEurope, Europe’s occupational pension fund association, has described the taxonomy as “a useful tool”, for example as the basis for discussions with investment managers or providing information to members and beneficiaries. At a recent event in Brussels, an official from the Commission addressed concerns expressed by PensionsEurope that the taxonomy could lead to pressure on pension funds to invest or divest from certain sectors or companies.The deadline for feedback is 22 February. Only feedback provided through its dedicated surveys would be taken into account, the TEG said. Interest in participating in the workshops needed to be registered by 4 January.The surveys can be accessed here.last_img read more

  • Building supplies scheme seeking new provider

    first_imgThe €333m Dutch Pensioenfonds Rockwool is considering its options for switching to new provider, after the employer and the unions indicated that they wanted to make a change this year.In a newsletter, the scheme – which serves current and former employees of building supplies company Rockwool – said the social partners’ involvement had accelerated its exploration of options, a process that had already started at the request of regulator De Nederlandsche Bank (DNB).The scheme’s supervisory board andt accountability body had also both urged the main board to come up with a vision for its future.The pension fund and the social partners are considering transferring future accrual to a new provider, and moving existing pension rights and legacy benefits to another party. In both scenarios, the sponsor would terminate its contract with the pension fund.The Pensioenfonds Rockwool said it was exploring the possibilities of joining another pension fund for future accrual and placing its other pension rights with an insurer or a general pension fund (APF).It added that it was also considering the option of moving its pensions to a provider in Belgium.However, the Rockwool scheme said its choices would be limited because of its low funding position of 100.4% at November-end.The social partners and the pension fund said they wanted to involve members in their search for a solution through a survey.The Pensioenfonds Rockwool has almost 1,200 active participants and reported administration costs of €366 per participant for 2017.During 2017, asset management costs rose from 33 to 69 basis points, which the scheme in part attributed to a switch from NN IP to Northern Trust, changing its actively managed equity mandate into a passively managed one. NN IP, however, stayed on as fiduciary manager for the pension fund.The Rockwool scheme has a 30% allocation to equity, with the remainder of its portfolio invested in fixed income.last_img read more

  • Engineering scheme introduces real assets portfolio, targeting €2.5bn

    first_imgIn addition, PME has increased its stake in residential mortgages by €425m to 5.5%, as well as raising its allocation to Dutch residential property by €86m, with an additional €142m in the pipeline.The metal scheme committed €550m to private equity during 2018, €100m short of the scheme’s planned increase, which it said was due to “valuations of the asset class”.It also halted an intended expansion of its 17% allocation to investment grade credit as the spread over government bonds was too narrow.PME’s investment portfolio lost 0.9% in 2018, largely because of losses incurred from equity investments (down 6.9%) and alternatives (down 0.9%).Its 4.7% real estate holdings – of predominantly Dutch residential property and low-risk European real estate – returned 12%, while fixed income gained 1.7%.PME exceeds carbon reduction targetMeanwhile, PME said it had made good progress towards its environmental, social and governance (ESG) goals and had already exceeded its 25% carbon reduction target relative to 2015, by 3 percentage points.At the end of 2018, 8.8% of its investments contributed to the UN’s Sustainable Development Goals (SDGs), PME reported. It wants to hit 10% of investments by 2021.The scheme added that €972m of its assets contributed to the energy transition and access to affordable housing in the Netherlands. It has set aside an additional €250m for this purpose.Last year, PME introduced a best in class strategy, aimed at divesting the worst-performing companies with regards to climate change. It has fully excluded firms solely involved in coal.Along with its €77bn sister scheme PMT, PME has been engaging MN to achieve “sustainable pensions provision” by steering the provider’s strategy. MN is asset manager for both schemes.PME said it still considered joining PMT as an “attractive scenario”, but emphasised that a merger would not be on the cards soon.The scheme – also known as “Metalectro” – reported a reduction of administration costs by €12, to €120 per participant. Asset management costs rose by two basis points to 37bps due to higher management fees for its 2.2% private equity allocation, which had returned almost 12%.CutsLike PMT, PME is also facing rights cuts next year if its funding ratio hasn’t improved to at least 104.3% at the end of 2019. Its funding stood at 100.6% at the end of March.In its annual report, the pension fund said it estimated that there was a 27% chance of cuts of 5-10% of pension rights and benefits. PME, the Dutch industry-wide pension fund for metalworking and electro-technical engineering, has introduced a dedicated allocation to real assets and will invest 5% of its portfolio.In its annual report for 2018, it said the new asset class would replace its current alternatives portfolio, which comprised a 1.6% combined stake in forestry and infrastructure.Based on its current portfolio size of €50bn, the real assets portfolio could reach €2.5bn.The scheme – one of the largest in the Netherlands – said it also planned to reallocate away from equities and add to its illiquid holdings. It currently has 33.8% of its investment portfolio in equities, and 22.5% in illiquid assets.last_img read more

  • Dutch metal schemes to apply benefit cuts quickly

    first_imgRecently, the Netherlands Bureau for Economic Policy Analysis factored in a 10-year smoothing period for pension funds to enact reductions. Under Dutch pension rules, funds must cut benefits if they have been underfunded for a consecutive period of five years. The ailing Dutch metal sector pension funds PME and PMT intend to apply reductions to pension benefits much quicker than the 10 years allowed by the country’s financial assessment framework (FTK).At a meeting with pensioners of PME, the €50bn scheme for the metalworking and electro-technical engineering industry, Marcel Andringa, executive board member, said that the full impact of the cuts would be spread out over the next two years.Based on its current funding level, the cuts at PME could amount to 7% in total.During discussions about cuts over the past few months, the assumption had been that pension funds would use the maximum allowed period to smooth the pain of benefits reductions. Marcel Andringa, PMEAccording to Andringa, however, the cost of smoothing cuts over a long period would become too high, and would lead to a larger discount.“And annually informing participants about reductions during a 10-year period is no good for anybody,” he added.It is not yet clear how by much PME and PMT must cut pension payments, as the exact percentage will be subject to the schemes’ coverage ratio at the end of this year.Andringa said PME would implement a three-stage discount if it had to make cuts of 10%. If it had to make cuts of more than 12%, the measure would be spread out over four years, he added.If a discount of 4% was needed, PME wanted to apply a one-off reduction next year.PMT, the €77bn pension fund for the metal and mechanical engineering sector, did not provide a plan for discounts but, according to a spokesperson, its intentions were similar to PME’s.Both metal sector schemes are served by the €135bn asset manager and pensions provider MN.last_img read more

  • Union Investment: German investors support carbon price increase

    first_imgCredit institutions (24%), asset management firms (21%), insurance companies (18%), foundations and churches (16%), pension funds (12%) and large companies (9%) are listed among the investors surveyed.“We are now also registering strongly growing demand from private investors for sustainable investments, that were for a long time primarily a topic for institutional investors in Germany, ” Henrik Pontzen, head of ESG at Union Investment, told IPE.In total, institutional investors deployed more than half (56%) of their assets based on environmental, social, ethical and governance criteria. Church organisations and charitable foundations stood out for following ESG policies (75%), but insurance companies also recorded high scores, with 66%.The research showed that investors tended to opt mainly for exclusion criteria as a method for selecting sustainable investments (92%), but three quarters (74%) of the respondents opposed excluding companies that have plans to transition into a sustainable business even though they had not completed the process yet.Negative screening processes were picked by 72% of investors, followed by positive screening (58%), while the best-in-class approach was selected by 55% of respondents.Although 57% of participants considered engaging with investee companies effective, only one third (34%) took active part in a dialogue with the firms.Institutional investors said they expect either a strong or a very strong market growth for sustainable investments (83%) in the next 12 months, compared to 69% of those surveyed the previous year.They believed the energy sector (95%) and the transport and mobility sectors (93%) held particularly great potential for sustainable investments, the research showed.The regulatory framework was a driver to continue intensifying involvement in sustainable investing for 70% of the respondents, it disclosed.Union Investment welcomed the goal set by the government to make Germany a leader in sustainable finance.“A look at the relative share of sustainable investments in Germany shows that we have got an enormous catch-up potential in a European comparison,” Pontzen said.For the majority of the respondents (70%), particularly asset management firms, insurance and large companies, sustainable investments could have an impact on the global climate.So far, large investors that included sustainability criteria in their decision-making process were satisfied or extremely satisfied with sustainable investments.According to the survey, investment returns on sustainable assets showed similar or even better performance than that of conventional portfolios for almost 71% of investors.To read the digital edition of IPE’s latest magazine click here. German investors are in support of an increase in the carbon price per tonne to €62, according to the 2020 sustainable asset management survey of institutional investors conducted by Union Investment.The German government plans to price CO2 emissions at €25 per tonne.According to the study, based on a survey of 166 institutional investors in Germany with combined assets worth €6.8trn, 72% said €25 is inadequate, and 92% thought capital markets had not yet priced in climate risks to an appropriate degree.The study found that sustainable investment is on the rise in Germany, with 80% of institutional investors that now weigh sustainability criteria during the investment process – an 8% increase compared to the previous year and the highest value since the start of Union Investment’s annual investor survey in 2009.last_img read more