The remaining asset growth came from investment activities, with the funds profiting from higher stock market prices and lower interest rates.All but one of the 28 funds generated positive returns, an average 4.28% for the year.The highest average return, of 9.38%, came from the riskiest funds that invest between 70% and 100% in equities.Medium (30-70%) equity exposure funds generated 4.61% and low (up to 30%) equity exposure returned 3.37%, while the conservative bond funds produced only 0.58%.In 2014, the asset inflow dynamics will change.On the one hand, the base rate contribution of the 65% of members who elected to remain in the old system falls to 2%.On the other hand, the remainder have chosen to pay an extra 1%, matched by a state subsidy of 1% of the gross average national wage.Furthermore, with the economy entering its fifth year of growth, the Finance Ministry is forecasting gross average wages to grow by 5.1% in 2014, and the number of employed by 0.7%.In the much smaller third-pillar system, net assets of the 10 available funds grew by LTL21.7m to LTL130.1m, and membership by around 5,500 to 34,200.Returns averaged 6.42%, ranging from 3.21% for the bond funds and 3.45% for the balanced ones to 9.03% for equity structures. Lithuania’s voluntary second-pillar pension funds achieved exceptional growth in 2013, according to the Bank of Lithuania, the country’s pensions regulator.Net assets grew by some LTL625m (€181m) over the year to LTL5.4bn, and membership by 65,300 to 1.12m.Around LTL474m of the asset increase was due to higher contributions, largely because the contribution rate increased by 1 percentage point to 2.5% of gross wages.Furthermore, employment increased last year while wages grew in real terms for the first time since 2008.
MPK, the CHF20bn (€16.3bn) pension fund for Swiss retailer Migros, reported an 8.4% annual return for 2013, well above the 6.2% average for Swiss schemes as calculated by pension fund association Asip.Christoph Ryter, managing director at MPK, told IPE: “Swiss equities – and especially small and mid-cap equities – boosted our performance last year.”Over the last three years, the pension fund has introduced a core-satellite investment strategy, including small and mid-cap equities, among other things, as a satellite.The asset class returned 32.2% in 2013, boosting the overall 20.7% contribution from total equities, which made up just over 30% of the portfolio. Additionally, MPK further diversified its portfolio to increase exposure to corporate bonds, which “helped last year”, Ryter said.The fixed income portfolio returned 0.7%, mainly thanks to satellite exposure to high yield and convertible bonds, which returned 6%.For 2014, the pension fund has no plans to make any major shifts in strategy, Ryter said.However, because the fund is “becoming more cautious” in its assessment of future liabilities, it has lowered the discount rate, or technischer Zins, to 2.5% for all liabilities for employees and pensioners from 3.25% and 2.75%, respectively.This slowed the increase in the MPK’s funding level, which now stands at 116.9% (from 115.8% in 2012) but which could have been 122.8% if the technical parameters had not been changed.MPK remains an exception in the Swiss Pensionskassen landscape, as it is still running a defined benefit scheme open to new members.Other Swiss pension funds have taken similar steps in recent years, adjusting their technical parameters to ensure the long-term sustainability of payments.
The London Pension Fund Authority (LPFA) has seen an actuarial funding valuation boost of 10 percentage points on the back of strong investment returns and falling membership.The fund saw its 2013 triennial valuation funding level reach 91%, up from 81%, with most of the improvement coming from its equity, and in particular global equity, as annual returns hit 13.5%.The £4.8bn (€5.8bn) multi-employer defined benefit (DB) fund, formed out of the Greater London Pension Fund, also acts as a third-party administrator for local authority schemes.It said it made headway with its strong focus on liability management, running several data exercises to improve its modeling of life expectancy, scratching £8m off its liabilities in stopping overpayments. Chief executive Susan Martin said: “As a public sector fund, our membership is subject to change, and we have to understand and anticipate that, and adapt our asset-liability model accordingly.”Although the fund saw its actuarial funding reach 91%, its own more conservative measure using swaps +0% leaves funding at 61%.Martin said this would require the fund’s taking a more innovative approach to bridging the funding gap, particularly with its own measure of liabilities.Over the triennial period, the LPFA built up an in-house investment team to focus on direct investments.Martin said the LPFA was also going to continue expanding its illiquid portfolio via infrastructure pooling.The fund was initially one of the founding members of the Pension Infrastructure Platform (PIP), a flagship project from the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF).However, the LPFA, along with two other large UK schemes, pulled out of the pooled infrastructure project after its cost and return projections became unviable.As a result, Martin said it was now looking towards co-investments with other schemes in the Local Government Pension Scheme (LGPS).“We are doing things ourselves, but we are also talking to other LGPS colleagues about a number of co-investments, and that’s the way we see the future,” she said.The fund’s current split in investment portfolio has around 55% of assets in liquid investments, and 30% in illiquid, which it uses to provide inflation cover, while returning around 15%.It also used several hedging products to maintain its exposure to interest rate and inflation risks.“We used to have an interest-rate hedge, which we removed in February last year, and realised a profit margin of £78m,” Martin said.“Outside of the triennial period, we have put in 25.5% of funds covered by interest-rate hedges.”Last year, the LPFA also merged its two funds into one.It has previously separated its active employers from its employers with closed DB schemes, under the assumption it would aid deficit reduction.However, Martin said, by combining the funds, it would further enable the LPFA to meet its future liabilities and close the funding gap, with further investment flexibility.
Bouwinvest REIM posted an overall return of 8.8%, including currency effects due mainly to the appreciation of the US dollar against the euro.It said committed investment currently stood at €1.1bn, with more than €600m in its Dutch portfolio and more than €500m in its fund for listed and non-listed international investments.Over the course of 2014, its international portfolio increased to €2.4bn, returning 12.5%, excluding currency effects.Investments in North America performed best, with returns of 17.3% and 23% on non-listed and listed real estate, respectively.Property in Europe and Asia-Pacific returned 9.8% and 9%.The company’s €565m Office Fund delivered 0.1%, despite a direct return of 5.7%, while its occupancy rate dropped slightly to 89.9%.It reported a 1.8% profit for its €670m Retail Fund and said the occupancy rate rose to 94.4%.Bouwinvest said the fund benefited from a “substantial” increase in Amsterdam retail assets’ value, and that it had invested €57m in the sector last year and was planning to upgrade several existing assets.The €141m Hotel Fund, returning 6.5%, was the best-performing Dutch fund.The Hotel Fund is exclusively managed for BpfBouw, for reasons of diversification.The same goes for the new Healthcare Fund, which is expecting returns of approximately 7%, according to Van Hal.He said the care sector had “enormous” growth potential as a consequence of ageing populations increasing demand for sheltered accommodation and quality care.Currently, the Healthcare Fund is developing two projects worth €25m in total and preparing four new projects worth as much as €25m each.BpfBouw has issued a €300m mandate for the care fund.In its annual report, Bouwinvest said it lost 16.7% on holdings in building plots for 5,000 residential properties following “significant” write-offs.It also confirmed that it had €700m worth of future deals in the pipeline. Bouwinvest – the real estate investment-management division of BpfBouw, the €53bn pension fund for the Dutch building sector – has made a “breakthrough” in its efforts to attract external investors. In its 2014 annual report, it confirmed that four more pension funds had committed a combined €122.5m to its €2.7bn Residential Fund, which focuses on high-end non-regulated rental housing.Last year, Rabobank’s €20bn scheme invested €50m in the Residential Fund, which reported a 3.9% return on direct investments and a 1.2% return on indirect. Dick van Hal, director at Bouwinvest, which also received an AIFMD licence last year, said: “We are now reaping the benefits of our strategy of moving away from development activities and opening up investment to external players.”
“These are some of the most important tasks Chresten Dengsøe will face at the top as the new chief executive,” Nielsen said.She said Dengsøe had a profile that combined strong skills in pensions, risk management, leadership and investment.As well as being chief executive of Lægernes Pensionskasse and Lægernes Pensionsbank, he would also be responsible for the unit Lægernes Pensionsinvestering, she said.ATP, meanwhile, said Ulla Schjødt-Hansen, vice president, had been named as acting chief actuary. Its chief executive Carsten Stendevad thanked Dengsøe for his contribution to the statutory pension fund and congratulated his on the new challenges.An ATP spokesman said the pension fund would now start a structured process to identify suitable candidates to replace Dengsøe.In other news, Danish labour-market pension fund PensionDanmark returned between 4.2% and 6.9% in the first quarter of this year on the back of rising equities prices, and saw regular contributions climb by 8%.In absolute terms, the pension fund made a return of DKK9.8bn (€1.3bn) between January and March, up from DKK4.2bn in the same period last year, according to the first quarter data.This fed through into a 4.2% return on the savings of 65-year-old members and 6.9% for 40-year-olds, up from 3.0% and 2.6% respectively in the first quarter of 2014.Regular contributions rose 8% to DKK2.57bn from DKK2.37bn, and the increase confirmed that employment at companies that have pension schemes with PensionDanmark was starting to grow strongly, the fund said.Torben Möger Pedersen, chief executive of PensionDanmark, said: “We are very pleased with result in the first quarter, when, we, like other investors, benefited well from rising share prices.”But the pension fund continued to see significant swings on financial markets, and was therefore continuing to build up its portfolio of stable alternatives, he said. ATP’s chief risk officer and chief actuary Chresten Dengsøe is leaving ATP to take the helm at Lægernes Pensionskasse, the Danish pension fund for doctors.Dengsøe will take over as chief executive on 1 August from Niels Lihn Jørgensen, who is retiring after 25 years as the head of the pension fund.Linda Nielsen, chairman of Lægernes Pensionskasse, said: “Lægernes Pensionskasse has developed from a traditional pension fund to a all-round business with solid skills in the pensions and banking sphere.”At the same time, doctors’ needs had changed and there were now more demands placed upon pension funds than before, she said.
The bank has already attracted private capital to its ventures, setting up a standalone fund management entity that launched an offshore wind-farm fund.The fund was seeded with assets owned by the bank and has attracted commitments from UK pension funds, including Strathclyde Pension Fund, and the Abu Dhabi Investment Authority.Javid said a majority stake in the bank would be sold “in the lifetime of this Parliament”, giving the government until the next expected election in 2020 to achieve its goal.He added: “Now I’m sure some people will say this shows that government is reneging on its environmental commitments – that we are throwing, somehow, our much-vaunted green credentials into a coal fire furnace.“But such cynics could not be more wrong. The bank will still be green, it will still be profitable, it will still be a market-leader in financing environmentally sound infrastructure.”Lord Robert Smith, chairman of the bank, argued that, while government support – in the shape of £3.8bn (€5.3bn) in capital, of which £2bn has been deployed to date – was vital to the GIB’s initial success, it would be unable to build on its success as long as the state held a “significant” stake in the organisation.Smith said he was unsure how the privatisation would proceed, and that it could either involve the immediate sale of a 51% stake or a more gradual reduction.Shaun Kingsbury, GIB’s chief executive, said the bank’s board would be advised by UBS, and that the Department for Business, Innovation and Skills would be advised by Bank of America Merrill Lynch on details of the privatisation.He also said questions on whether the government would leave the currently outstanding £1.8bn in capital with the bank after privatisaton had yet to be finalised.Asked about the potential for the bank to access the green bond market, Kinsbury said the market was “burgeoning”, and that, after privatisation, GIB would consider taking on responsible levels of debt including from those interested in green bonds.“One of the challenges of the green bond market is [that] it’s not really easy today to compare how green the bonds are,” he said.Kingsbury added: “Could we play a role in defining how green a green bond is and getting a rated system [for it]? We could, and that’s one of the areas we’ll be working on over the next year.” The UK government is to begin a “staged privatisation” of the Green Investment Bank (GIB), aiming to sell a majority stake in the bank by 2020.Sajid Javid, secretary of state for business, innovation and skills, said reducing the government’s stake would grant the institution the “room and resources” to grow.A privatisation would allow GIB, currently subject to European Union state aid rules, to invest in a greater number of green infrastructure sectors.At present, it is limited to five areas – including offshore wind, community-scale renewables and energy efficiency projects.
The BAE Systems Group Pension Scheme has appointed Hymans Robertson as actuarial adviser across its seven schemes.Combined, the schemes cover £21bn (€28.7bn) in assets, and the company, a former government-owned defence manufacture, has more than 200,000 members.Hymans, the incumbent adviser on three of the seven schemes, beat off competition for the scheme-wide tender from five other firms.The consultancy will appoint a scheme actuary to each individual scheme, as well as a client-relationship actuary to oversee the relationship with the defence manufacturer. Hymans will be responsible for advising on the schemes’ strategic approach to risk management, as well as providing a common platform to interlink with investment solutions.It also provides investment consulting to one of the seven schemes.Nigel Tinsley, pensions director at BAE Systems Group Pensions, said the one-firm approach was essential for good governance across the seven schemes.In other news, the UK statistics office has published figures showing that, since the introduction of auto-enrolment, total contributions have increased but median contribution rates have fallen.The annual amount saved in 2014 across public and private sector workplace pensions was £80.3bn, an increase from £2.6bn in 2013, according to new data released by the Office for National Statistics (ONS).The contributions were split between 30% contributions from the employer and 60% from employee, with 10% provided through government tax relief.However, the ONS said there was a “marked decline” in the amount saved per saver in 2014 in the private sector – a likely consequence of an increase in the number of savers contributing at auto-enrolment minimum levels, which are not set to rise above 2% before October 2017.Malcolm McLean, senior consultant at Barnett Waddingham, said the minimum levels were likely to increase as the phasing-in of auto-enrolment was completed.However, he said the “inadequate” levels of savings were likely to remain.“This problem,” he said, “needs to be addressed by the use of some system of auto-escalation of contributions or other means as soon as possible.”
Norway’s sovereign wealth fund has removed Alstom from its observation list, where it had been for four years, saying there was “less risk” of corruption at the French company.Norges Bank Investment Management (NBIM), which runs the NOK7.1trn (€742bn) Government Pension Fund Global, first placed Alstom under observation in December 2011, due to the risk of “gross corruption”.This move was based on a recommendation from its Council on Ethics, which now believes the risk of corruption at Alstom has been reduced and is “probably” in line with that at comparable companies.“This,” the council said, “is based on an assessment of the company’s internal anti-corruption systems and the fact the company’s systems will be the subject of on-going reporting by the company and its external lawyers to the US Department of Justice as a result of a settlement agreement in the US.” The recommendation also took into account the sale of large parts of the company.On 2 November, Alstom closed the sale of its energy businesses to General Electric and is now focused on rail transport.
The disclosures should be made in “mainstream” financial reports and subject to the associated quality assurance.Giving a flavour of some of the feedback the taskforce collected during the first phase of its work, Picot said investors had expressed “a lot of interest” in scenario analysis – “this concept of getting companies to describe their thinking about what the 2-degree pathway might mean for their business model”.He also said the taskforce discussed “at length” what short and long-term means, in a nod to the topic of the preceding keynote speech by Sarah Williamson of FCLT Global.Picot said the taskforce would be making recommendations for disclosure structured around four main thematic areas – governance, strategy, risk management, and metrics and targets.They will be supported by recommendations about specific disclosures that organisations can include in financial filings. The taskforce will be recommending the publication of a 2-degree scenario and “appropriate” greenhouse gas emissions; he said the disclosures the taskforce would be recommending were “really quite comprehensive”.There will also be supplementary sector-specific guidance for organisations in the financial sector – asset owners, asset managers, banks and insurance companies – and certain companies in the non-financial sector. Picot and his panellists discussed the merits or otherwise of disclosures being voluntary, with Picot saying he thought it was sensible to “allow the marketplace to experiment first” before hard-coding requirements. Olivier Rousseau, chief executive at France’s Fonds de reserves pour les retraites (FRR), defended compulsory disclosure on the basis of the positive way in which Article 173 of the French environmental and energy transition law had bedded itself in.This requires institutional investors to report on their exposure and approach to carbon risk but without prescribing how this is done and leaving it to investors to decide.Rousseau said the law had been well received across the world and that it was “a good start”, but he urged the government – France’s, as well as other countries’ – to do more.“Don’t stop there – put a price on carbon, guys,” he said.Thomas Kusterer, CFO of energy supply company Energie Baden-Württemberg (EnBW) in Germany, said a voluntary approach made sense in the short term but that, ultimately, disclosures such as that being proposed by the FSB taskforce needed to be made mandatory.Kusterer is a member of the TCFD, as a representative of a “data preparer”.He had earlier on the panel said that company reporting on carbon risk and other climate change-related environmental impact risks needed to improve.Kusterer said the transition risk associated with climate change was “impacting business models as we speak”.He said more companies needed to focus on transition risk, as well as other impacts of climate change, such as that on agricultural companies.“We are not disclosing these kinds of risks appropriately for investors to make a really informed decision and to ensure the right capital allocation can be made by investors,” he said. The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) is poised to announce recommendations for “quite comprehensive” disclosures next week, according to an adviser to the group.The TCFD will be launching the consultation on its recommendations – for voluntary reporting of climate-related information by companies and investors – next Wednesday, 14 December.Addressing delegates at IPE’s annual conference in Berlin on Friday, Russell Picot, special adviser to the taskforce, stressed that the taskforce’s aim was “not to create the 401st detailed greenhouse gas emissions framework”.“We’re not trying to arbitrate between those 400 frameworks,” he said. “What we’re trying to achieve is to significantly improve the narrative and quantitative climate-risk disclosures that need to be made right across the investment chain.”
Global dividends hit an all-time quarterly high in the second quarter of this year, with Belgium, the Netherlands and Switzerland all posting new records, according to Janus Henderson.The asset manager raised its forecast for 2017 to a record $1.208trn (€1.06trn), up by $50bn since its preliminary forecast in January, as a result of the strong quarterly growth. Global dividends totalled $447.5bn in the second quarter on the back of a 5.4% year-on-year increase.Dividends grew in every region of the world except the UK, due to the currency devaluation in the middle of last year after the Brexit referendum. Underlying growth – which accounts for changes in exchange rates, one-off special dividends and other factors – was 7.2%, the fastest rise since 2015, according to the asset manager’s annual Global Dividend Index.In the UK, underlying growth was 6.1%, despite a headline decline of 3.5% in dollar terms. Janus Henderson said the second quarter should be the last quarter to be impacted by sterling’s devaluation, which masked increases in dividends paid by UK companies.#*#*Show Fullscreen*#*# Source: Janus Henderson Investors#*#*Show Fullscreen*#*# Source: Janus Henderson InvestorsEurope dominated the second quarter as most of the region’s listed companies make a single annual payment rather than quarterly, Janus Henderson said.European firms paid out $149.5bn in dividends, two-fifths of the global total, with 86% of the companies raising or maintaining their dividends year-on-year.The largest increases were in smaller countries, such as Austria, Portugal, Belgium and Finland. In Belgium, for example, dividends were up 19.1% on an underlying basis to $5.9bn, after banking group KBC made its second consecutive semi-annual payment. It cancelled its dividend this time last year.US payouts reached a new record of $111.6bn, up by 9.8%, and 5.9% on an underlying growth basis.At $31.6bn, there was also a new record in Japan, where the second quarter is “crucial” as payments account for roughly half of the year’s total payout, Janus Henderson said. More than three quarters of Japanese companies raised their dividends in yen terms.Dividends also reached a new record in South Korea, while Indonesia, Brazil, Russia, and Mexico were among the best performers in emerging markets.Alex Crooke, head of global equity income at Janus Henderson said: “The global economy is very supportive for company profits and dividends at present, and helped drive record payouts in many countries around the world.”The improvement reflects a normalisation in dividend growth, following two years during which it has been rather subdued. The first half of 2017 has been stronger than we expected, and the second half is looking promising too.” According to Mercer’s 2017 European asset allocation survey, European pension plans had on average a 30% strategic allocation to equities, two-thirds of which was to foreign equity and one-third to domestic equity. On the whole, they were expecting to continue reducing allocations to equities.