The fund said this strategy had been a large component in the outperformance for 2013.Another factor was the emphasis on active management.The fund outperformed the benchmark index by 0.5 percentage points before expenses, although last year the outperformance had been 1%.AP4 has now outperformed its benchmark index for a tenth consecutive six-month interim period, which means it has delivered a better return than passive management.The return for 2013 takes the annual nominal total return after expenses over the past 10 years to 7.2%, or 5.9% adjusted for inflation.This comfortably overshoots the board’s real return requirement of 4.5% on average, and has also outperformed the income index.Meanwhile, management expenses remain low, with a total expense ratio of 0.11%, slightly above last year’s 0.10%.Foreign exchange exposure has slightly increased over last year, reaching 28.6% as at 31 December 2013. Fjärde AP-fondens, the Fourth Swedish National Pension Fund (AP4), has announced record earnings of more than SEK37bn (€4.1bn) for calendar year 2013, a total return of 16.4% after expenses.This compares with a total return of 11.2% for 2012.The fund is now worth SEK260bn.AP4’s brief is the achieve the best possible return over time, and its board considers this is best approached by holding a large proportion of publicly quoted equities, both Swedish and non-Swedish.
Danish statutory pension fund ATP is shortening the length of its return guarantees on pension contributions to 15 years from the lifelong guaranteed returns it pays now, to increase its investment flexibility and therefore the potential pensions it pays out. The pension fund, which manages the labour-market supplementary pension – first-pillar provision that runs alongside the basic state pension – said its supervisory board decided the guaranteed return on contributions would now be set for 15 years at a time, starting January 2015. ATP’s chief executive Carsten Stendevad said: “The purpose of the current adjustment is to better safeguard the purchasing power of pensions, while taking the lower liquidity in the financial markets into account.”While current guarantees set a return for as long as 80 years, under the new system, each year’s contribution will be guaranteed a certain return for 15 years, based on prevailing interest rates. When this 15-year period comes to an end, that year’s contribution will be guaranteed a return for another 15 years, again set at the latest market interest rate, and so on until retirement.ATP said this meant that, from the scheme member’s point of view, the guarantee will only increase, and never decrease.This is because the initial 15-year guarantee assumes a zero rate of return following that 15-year period, whereas in reality that portion of the pension will then grow at the rate set under a subsequent guarantee. Under this new method, ATP members technically have a very low level of guaranteed lifelong pension income at the beginning, but are given a prognosis of the amount their eventual pension is expected to be as a result of subsequent 15-year return guarantees. By promising scheme members a rate of return on their contributions that is only fixed for 15 years at a time, ATP reasons it will be able to get higher returns with lower costs because it will have a wider variety of financial instruments to choose from to hedge those promises than is the case now.This is because liquidity at the long-end of the yield curve is much lower than it is around the 15-year mark. “Giving a guarantee for 80 years forces us to the longest end of the curve where liquidity has been falling,” Stendevad said.“Here, it gets us to the point of the curve where it’s more liquid.”Apart from this, interest-rate derivatives – used for hedging – have become more expensive at longer maturities of 40 years, for example, and are expected to become still more costly in the future, according to ATP.Stendevad said the most important aspect of the change was that it helped scheme members because it was more reflective of the actual level of interest rates over the years, while for ATP as an investor, the move provided more investment flexibility.Ultimately, ATP took the step to decrease the interest-rate sensitivity for young members, he said.At the moment, 20-year-old scheme members, for example, are highly dependent on the initial return guarantees they are given.ATP’s pension model differs fundamentally from the UK model in that pension contributions are annuitised from the start – the scheme promises an income rather than a pot of savings that will later be used to buy an annuity.ATP said it would still hedge the new guarantees fully, but that the interest-rate sensitivity of these guarantees would be considerably lower than that of the current guarantees.The change should be seen in the context of the new discount yield curve ATP implemented last autumn to value its existing pension liabilities, the pension fund said.It said this had reduced the interest-rate sensitivity of existing guarantees by 25%.ATP also stressed that all existing guarantees would remain unchanged, and that the change would apply only to new contribution payments, affecting members born in 1964 or later.
The UK’s £22.6bn (€30.9bn) Pension Protection Fund (PPF) has begun building its in-house management team, hiring a senior member of the Aviva Staff Pension Scheme as its inaugural head of liability driven investment (LDI).Trevor Welsh will join in October, leaving the Aviva fund after three years as its head of UK sovereign and LDI.Welsh’s position as head of LDI at the lifeboat fund will likely see him oversee its new hybrid asset portfolio, aimed as a liability matching portfolio and set to grow to £3bn, or 12.5% of assets, by 2017. As part of the portfolio’s growth, the PPF this week appointed Pramerica Investment Management to a £400m direct lending mandate that would see the manager offer inflation-linked loans to firms. Before joining the insurer’s pension fund in 2012, Welsh spent 17 years at Aviva Investors, and a further 14 years at UBS, where he was the Swiss bank’s head of fixed income futures.He will report to the PPF’s CIO Barry Kenneth, who said the hire would allow the fund to exert greater influence over asset allocation as it began bringing investments in-house.“Taking in-house part of our LDI is a key step in updating our investment model and crucial in helping us meet our funding target and future aspirations,” Kenneth said.He added: “Trevor’s expertise in LDI will be invaluable to our development and I very much look forward to working together.”For his part, Welsh said joining the PPF as it began to insource investments was “hugely exciting”.Kenneth previously told IPE that control, rather than management cost, was the driving factor behind its decision to bring management of some of its portfolio in-house.“We know our framework better than anyone else, so, by definition, we should be able to manage it, knowing everything else within the fund, and do so in a more controlled fashion,” he said at the time.During his time at the £14bn Aviva pension fund, Welsh would have helped broker a £5bn longevity swap, at the time the largest ever completed.For more from Barry Kenneth on the PPF’s investment strategy, see the upcoming September issue of IPE
As part of the reform, which follows the new flexible drawdown of savings within defined contribution (DC) pots, up to 5m people will be able to sell their annuity on to a third-party provider regulated by the Financial Conduct Authority (FCA), or sell it back to the initial provider, creating a market worth as much as £13.3bn (€18.4bn) a year.The government noted calls from the industry that sales back to the initial provider should only be indirect, or after a competitive price had been agreed.But it did not directly agree that an intermediary bidding platform should be launched to facilitate such an anonymous process.Pinsent Masons senior associate Rob Lawrence said the government should give “strong consideration” to launching such a platform.“This would enable the individual to obtain a number of ‘bids’ for his annuity without having to approach a number of providers separately,” he said, noting that it would also help mitigate the risk of individuals receiving poor value for money.The importance of having access to suitable advice, which the government hopes to address by extending the remit of Pensions Wise – the agency set up to offer advice to pensioners about the drawdown of their DC pot.Ben Roe, partner at Aon Hewitt, said the FCA would have a “big role” in ensuring the market worked correctly.“If it is difficult for individuals to obtain the advice they need, then there is a real risk the market will not develop, and all the effort involved in getting this new initiative off the ground could be wasted,” he said. Others, such as Hymans Robertson partner Douglas Anderson, warned that the administration of a secondary market would be “incredibly complex”.Anderson also welcomed the fact providers would be able to buy back their own policies.“This will definitely make it easier to establish a more competitive market, as the original providers may be able to offer better terms due to the expense and capital savings of cancelling the original policy,” he said. He also suggested that the FCA could learn from how current bulk annuity deals used simplified underwriting procedures to inform the proposed online tool allowing annuitants to assess the value of their policy. The UK’s rollout of a secondary market for annuities should be accompanied by the launch of a bidding platform, allowing for a more transparent sales process.The call for a bidding platform came as the UK Treasury confirmed a new secondary market would be in place from April 2017 rather than 2016 as initially planned, and that it would amend tax rates so that annuitants would only incur tax in line with their marginal rate.Pensions minister Ros Altmann stressed that, for the majority of annuitants, keeping the policy would still be the right decision.“But some were forced to buy annuities in the past that may not have been suitable for them,” Altmann said, “and I am delighted this reform will allow more people greater choice and the opportunity of a more flexible income stream.”
VBDO – Angélique Laskewitz has succeeded Giuseppe van der Helm as chief executive at the Dutch Association of Investors for Sustainable Development. Since 2011, Laskewitz has been an independent consultant for sustainability management. Before then, she held several positions for change management, human resources and governance at banks and insurers, and has also run her own advice bureau, ALMC, since 2002.Amundi AM – Marjolein van Dongen has been appointed business development manager. She will be tasked with improving Amundi’s position in the distribution market in the Netherlands. Van Dongen has worked at private bank Van Lanschot for the last 10 years. She is to succeed Ernst Osinga.Quoniam Asset Management – Ulrich Koal, head of international sales and client service and branch manager of Quoniam’s UK office, is to leave the company after 10 years. He is succeeded by Barbara Wokurka, with whom Koal has worked since 2007.UniCredit – Tom Currie and Florian Sommer have been promoted to co-heads of the International Financial Sponsor Solutions team in London. They succeed David Vials, who assumes the new role of UniCredit’s head of Corporate Coverage UK. NN IP, Mercer Benelux, GMO, Delta Lloyd AM, MN, Pensionskasse Swiss Re, VBDO, Amundi AM, Quoniam Asset Management, UniCreditNN IP – Jeroen Wilbrink has been named senior client adviser on the Integrated Client Solutions Team. He is to advise Dutch pension funds on asset management, investment strategies and risk management. Wilbrink has been head of investment solutions at Mercer Benelux since 2012 and held positions at several large investment banks and asset managers over the last 20 years. Separately, Jared Lou was appointed to the emerging-market debt team, focusing on hard currency strategies for Latin America. Lou has served as a country analyst in the EMD team at US asset manager GMO since 2012.Delta Lloyd AM – Arnoud Diemers has been appointed investment manager at Delta Lloyd Asset Management, responsible for equities, fixed income sovereigns and trading. Diemers succeeds Sandor Steverink, who is to leave the company on 1 June. Diemers is head of domestic equities and commodities at the €114bn asset manager MN. He has also worked at Theodoor Gilissen, ING IM and ABN AMRO.Pensionskasse Swiss Re – Brigitte Schmid, managing director at the CHF3.5bn (€3.2bn) pension fund of Swiss Reinsurance, is leaving at the end of May to go into early retirement after 17 years at the Pensionskasse. Schmid will be replaced by Monika Maeder, most recently managing director at the pension fund of Panalpina Welttransport, a supply chain and logistics company. Following Maeder’s resignation, the Panalpina pension fund board of trustees decided to outsource the pension fund management and, following a tender process, selected Avadis Vorsorge to act as the fund’s general manager, as of 1 April.
Redington – Dan Mikulskis has been appointed to the newly created role of head of defined benefit pensions. Mikulskis, who joined Redington in June 2012, previously co-managed the asset and liability modelling team, along with Steven Yang Yu, who will now become the sole head of the team.300 Club – Mark Walker, global CIO and managing director at Univest Company, Unilever’s internal pension investment organisation, has joined the 300 Club. Prior to joining Unilever, he was a partner at Mercer and head of the London investment consulting unit.DIAM International – The UK subsidiary of Asian asset manager DIAM has appointed Frederic de Merode as director of business development in the EMEA team. Based in London, he joins from Aviva Investors, where he was director of global client solutions and global financial institutions. Before then, he was a senior consultant at Elston Consulting.LawDeb Pension Trustees – Mike Jaffe has joined the trustee director team. He joins from Henderson Equity Partners. Before joining Henderson in 2007, he worked in the fixed interest division of UBS Investment Bank. Kames Capital – Graeme Sharpe has been appointed as a product specialist within the multi-asset team. He joins from Hymans Robertson, where he spent five years as an associate investment consultant.Financial Reporting Council – John Hitchins has been appointed deputy chair of the Financial Reporting Review Panel. Hitchins was a partner with PwC for 26 years until he retired in 2014. Newton Investment Management, PIMCO, Neuberger Berman, Amundi, Redington, 300 Club, Unilever, DIAM International, Aviva Investors, LawDeb Pension Trustees, Henderson Equity Partners, Financial Reporting CouncilNewton Investment Management – Matt Pumo has been appointed head of UK consultant relations. He joins from Neuberger Berman, where he was responsible for developing investment consultant relations in the UK and Europe. He has also previously held roles at Gartmore Investment Management and Liontrust Asset Management.PIMCO – IPE understands that the California-based investment manager is laying off 68 members of staff, although it could not confirm whether this decision would affect employees in Europe.Amundi – Nesreen Srouji has been appointed chief executive for the Middle East region. Before joining Amundi in May, she was head of investors and public sector at Standard Chartered, covering sovereign wealth funds and other institutional clients across the MENA region. She joined Standard Chartered in 2006 to set up its MENA private equity business.
Amin Obeidi has been named as German head of pensions at Nokia’s German subsidiary, according to outgoing head Thomas Friese.Retiring after nearly 10 years as global head of pension and insurance at Nokia-Siemens Network (NSN), since renamed Nokia, Friese will remain as chairman of the €1bn NSN Pension Trust, a contractual trust arrangement (CTA) used to fund the sponsor’s liabilities.As part of mergers and restructurings over the last years, Nokia as named Obeidi as head of pensions for Germany, Jean Grisi as global head of pensions and Xavier Langlois Destaintot as head of pensions Europe.Obeidi is currently senior asset manager, pensions, and has been working alongside Friese at the NSN Pension Trust for a number of years, helping run its €1bn in assets which comprise the former pension fund for Nokia-Siemens Networks and retirement income for Nokia’s German staff. A chartered alternative investment analyst, Obeidi previously managed asset-backed securities funds for institutional and retail clients, and holds a banking and finance degree.NSN has allocated around 20% of assets to alternatives, and Friese previously identified the area as one into which the CTA should continue to invest.Prior to assuming responsibility for pensions in 2007, Friese was head of project financing at Siemens Financial Services, where he worked for 16 years.He told IPE he was looking forward to his partial retirement, while continuing his involvement with NSN by chairing its board. He added that he hoped to use his experience in other roles, but it remained to be seen how the situation developed.“If I don’t end up on any other boards, then I can just sail around on my yacht,” he joked.Friese recalled the establishment of the CTA in 2007, and said it was among the best-performing of such vehicles in the German market, achieving an annualised return of 6.8% since inception.
The ACCESS pool has also indicated that it intends to rent the regulated operator to manage its assets.Other options for LPP to grow its assets under management towards the £25bn threshold, according to O’Higgins, are to sign up other public sector funded pension schemes or private sector funds.Some private sector schemes have expressed an interest in working with LPP, he said.LPP is keen to emphasise that it is not just an asset pool but a “pensions services organisation” that can offer investment management and other services to third-party pension schemes.O’Higgins noted that LPP was further advanced than the other LGPS collaborations, as the pooling of assets will start at the end of this month.“We’re up and running,” he said, adding that the partnership was focused on “moving forward” rather than worried about meeting the £25bn target.LPP obtained approval from the Financial Conduct Authority for its investment management company in April, a process said to have taken around two years. Some private sector pension schemes have expressed an interest in potentially working with the Local Pensions Partnership (LPP), the company that will run the pooled assets of the London Pensions Fund Authority, Lancashire County Pension Fund and Berkshire Pension Fund.The partnership does not yet meet the £25bn (€28bn) target the UK government set for the asset pools it has instructed UK local government pension schemes (LGPS) to form, but Michael O’Higgins, chair of the LPP, told IPE he was confident about the partnership’s future, and that there were several options for it to grow its asset base.With Berkshire, the LPP asset pool would stand at around £13bn.O’Higgins said the partnership was likely to bid to run investment management for the Welsh LGPS pool that has decided to outsource this function.
It concluded: “The [IMF] mission recommends that the authorities resolve as soon as possible the uncertainties over the approach to regulation to be taken following the end of the transitional period in 2019, and that whatever regime they choose for after 2019, they ensure the same level of protection to occupational pensions as to life insurance.”The recommendations evoke previous and persistent calls from the European insurance industry that pension providers be put on the same footing as them by introducing capital requirements in the most recent revision of the IORP Directive.Swedish occupational pension providers have previously asked their government to continue its Solvency II exemption beyond 2019 by designing a bespoke framework for the sector.Earlier this year, the country’s four largest pension providers said the tailor-made approach could potentially formalise the traffic-light system employed by Sweden’s regulator, Finansinspektionen, which includes stress testing for equity, credit, interest rate, real estate and currency risks.At the time, Daniel Burr, Solvency II lead at signatory Folksam, said the proposals to the government were meant to signal the industry’s willingness to accept risk-based capital requirements, while simplifying the model used under Solvency II.,WebsitesWe are not responsible for the content of external sitesLink to IMF’s Financial System Stability Assessment Sweden must change its approach to pension regulation and place insurers offering occupational pensions on equal footing with traditional life insurers, the IMF has urged.The current two-track approach – whereby the life insurance sector was regulated according to Solvency II, but occupational pension provision was exempt from the European Directive – needs to be resolved, the organisation said.The recommendations were contained within the IMF’s latest Financial System Stability Assessment for Sweden, which noted that the transposition of Solvency II had led to higher overall standards of regulation but was not being fully applied.“Solvency II has brought improvements in regulatory reporting and group supervision, as well as higher overall solvency coverage,” the organisation said, while noting the requirements only fully applied to around 44% of the insurance market, which manages assets in excess of the country’s GDP.
Denmark’s PKA, which runs three labour-market pension funds in the social and healthcare sectors, says it has made an investment return of nearly DKK1bn (€134m) on the sale of its stake in the Butendiek German offshore windfarm.The DKK250m pensions administrator said it sold the 22.5% stake in the windfarm, located near the Danish-German border, 32km from the island of Sylt, which it bought in 2013 when the project was at the planning stage.It sold the stake to a consortium led by Japan’s ITOCHU group. Peter Damgaard Jensen, PKA’s chief executive, said: “Normally, we would remain in this kind of infrastructure investment for the entire duration, typically 25 years. But we had the opportunity to make a solid profit for our members, and we grabbed it.” He said it had also been important for PKA, which has invested in five offshore windfarms including Butendiek, to establish that this type of alternative investment gives PKA’s 275,000 members a good return.Without disclosing the amount received for the stake, PKA said the deal had given it a return of almost DKK1bn.“Altogether, PKA has more than doubled the sum invested in just three years, and the investment in Butendiek has therefore achieved an annual return of around 25% for PKA’s members,” the firm said.In February 2013, PKA said it was investing DKK750m in the project.Damgaard Jensen said the high return crystallised from the deal meant it would continue to pursue its strategy of investing in alternatives.“And that could very well be a new offshore windfarm, where we can combine a good return with making a positive difference for the climate,” he said.The sale is subject to approval from competition authorities, PKA said.PKA invested in Butendiek in 2013 alongside Industriens Pension – which took the same size of stake as PKA – Siemens Financial Services, Marguerite Infrastructure Fund and WPD.The total equity and bank financing of the facility was around DKK10bn, it said.PKA has said it aims to invest around 10% of its total assets in projects that reduce the use of fossil fuels by 2020.