Month: September 2020

  • CIO at APG warns of dwindling benefits of diversification

    first_imgIt has also improved access to all asset classes.“Ten years ago,” he said, “investors were reluctant to invest in emerging market debt, but nowadays, this is a normal practice.”But he also warned that the new-found ease with which investors could shift assets worldwide had also increased herd behaviour.“There is an incredible amount of money looking for returns, and the current is always in the direction of the same investment opportunities,” he said. Van Gelderen said he was not particularly surprised by the increase in correlation among the various asset classes.“At the end of the day, all returns are based on economic growth, and this applies to all investments,” he said.In his opinion, increasing investments in non-listed assets such as infrastructure will fail to deliver the diversification pension funds desire, “as these investments are also GDP-driven”.However, he said there was no reason for APG to shy from less liquid investments.“For us, as a large investor, these investments carry the benefit that we can participate immediately,” he said. “Further, we are required to share profits with fewer players.”Van Gelderen made clear that the “new reality” of increasing correlation and dwindling diversification would not lead to direct changes in APG’s investment policy. Correlation within various asset classes has increased markedly in recent years and thereby reduced the risk-smoothing benefits of diversification, according to Eduard van Gelderen, CIO at €390bn asset manager APG.Speaking at Beleggersberaad 2014, the PensioenPro conference for investors, Van Gelderen said diversification was the “only investment belief APG needed to adjust”, following changes in the financial markets.“For a long period,” he added, “diversification was the only ‘free lunch’ in the financial sector, and one of our seven investment beliefs.”Van Gelderen attributed the increase in correlation to improvements in technology, which has made transferring assets from one asset class to another much easier.last_img read more

  • China’s economy will be ‘biggest but not strongest’

    first_imgInvestors must be careful not to equate China’s future status as the world’s largest economy with its being the world’s strongest, Anders Fogh Rasmussen has told the IPE Conference & Awards.In a wide-ranging speech, the former NATO secretary general covered the conflicts in the Middle East, saying it was difficult to see a resolution to the problems in the region.He also addressed China, the US economy and Russia, saying the former Soviet country was a “weak nation” suffering from a lack of economic reform and an over-reliance on oil and gas.Rasmussen said China would place economic security – and its ability to trade – above all else, despite recently outlining a new approach to military engagement that placed a greater emphasis on an “offensive” military. “I do not underestimate this Chinese assertiveness,” Rasmussen said, speaking at the conference in Barcelona.“However, I still think the bottom line is that, on balance, China will prefer peaceful, constructive cooperation with the US instead of confrontation.”He said China desperately needed international stability, and that the survival of “machine China” was dependant continued growth, which, in turn, required stability.Rasmussen noted that the Chinese economy would gradually grow to become the largest in the world, accounting for approximately 40% of global GDP by 2014 – but he warned that such dominance was not the only measure by which to assess the economy.“To be the biggest is not equivalent to being strongest,” he said.He said the US would remain relevant as both an a centre of economic growth and global power for decades to come – partially down to the fact its two neighbours are peaceful, and its borders run along two oceans.“Surrounded by peaceful neighbours and fish,” he said, “you can focus on exercising global leadership because you don’t have to deal with regional borders.”Touching on the EU during questions from the audience, Rasmussen, who was prime minister of Denmark for eight years until 2009, also called for a more outward-looking union.“It is very close to my heart to see Europe develop to take on a stronger role on the international stage,” Rasmussen said.He explained that a range of issues – from the refugee crisis, the UK potentially leaving the EU to the ongoing euro-zone crisis – were conspiring to bring about a more introspective union.He also questioned whether Greece would ever be able to repay debt accrued by successive governments.“The fact is, the Greeks will never be able to repay their debt,” he said. “You will have to write off some debt [and], the only choice is between doing it by default or by design.”He backed a number of reforms, including to free movement within the EU, supporting the UK’s stance that there should not be immediate access to social welfare systems for those immigrating from another member state.“We need profound reform to our pension and retirement schemes,” he added, citing a need for higher retirement ages, including these in a list of “fundamental” reforms European states need to complete if they wish to become influential on the international stage.last_img read more

  • MEPs reignite war of words over prudent accounting standards

    first_imgMembers of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) have launched a stinging attack on the International Financial Reporting Standards (IFRS) and the London-based International Accounting Standards Board (IASB).A neutrally worded draft of the now explosive report emerged in January.It hinted that the Parliament had softened the tone of its rhetoric against IFRSs.But a series of draft amendments to that report, obtained by IPE, reveal that the Parliament is on a collision course with the more IFRS-friendly European Commission. Following publication of the January draft, German Green MEP Sven Giegold, a noted IFRS sceptic at the parliament, issued a public call for comments.In response to that request, the Local Authority Pension Fund Forum (LAPFF) slammed both the IASB’s accounting rules and the Foundation’s governance.IPE has also obtained a copy of the LAPFF submission to the MEPs, in which LAPFF chairman Cllr Kieran Quinn argues: “There should be no risk or perception that accounting standard setting is a collusive activity between auditors and management.”But, he continued, “the governance and funding structure of the International Accounting Standards Board makes that a serious possibility”.He adds: “The draft report overstates the benefits of IFRS. In evidence to the UK Parliament Treasury Committee on 15 December 2015, the Bank of England confirmed the removal of expected losses (prudence) from the accounting standards caused the assumptions on which the Basle Regime was based to fail.”The move reignites a row between the London-based accounting rulemaker and politicians in Europe that has been on the backburner since 2014.In March 2014, members of the European Parliament warned the IFRS Foundation that it must address investor concerns about prudence in accounting.They also said the Foundation must clean up its corporate governance act after evidence of misdeeds ranging from perjury to waste of public funds emerged.The IASB and its Delaware-based parent, the IFRS Foundation, are responsible for the accounting rulebook that listed companies, including banks, must follow across the European Union.Back in 2014, MEPs voted to stump up €43m of public money over six years to fund the activities of the London-based IASB, the Public Interest Oversight Board, and the EU’s own accounting adviser, the European Financial Reporting Advisory Group.Release of the funds was conditional on the Foundation’s meeting the demands of an increasingly militant Parliament.At the heart of the current furore is the IASB’s new financial instruments standard IFRS 9.Although it contains a more forward-looking assessment of bank loan losses than its predecessor, many investors argue that it is defective and could mask a brewing crisis.In September 2015, the LAPFF wrote to the European Commission arguing that EFRAG’s endorsement on IFRS 9 to the Commission was defective.Since 2008, the LAPFF has lobbied IFRS sceptic politicians in Europe such as Gielgold and UK Conservative MEP Syed Kamall.Kemall has long questioned whether it is “right for the EU to outsource standard-setting to what is in effect a private sector body, funded by taxpayers’ money.”Among the proposed amendments to the ECON report is one that slams the IASB’s proposed treatment of prudence.It reads: “The IASB’s interpretation of ‘prudence’ only means ‘prudent treatment of discretion’.”The MEPs go on to demand that the notion of ‘reliability’ accompany prudence.Long-term investors such as the LAPFF and a wider investor coalition claim that prudence or caution in accounting is an important safeguard against fantasy accounting profits.Meanwhile, away from the accounting framework, the Parliament also lined up to attack the IFRS Foundation over waste of public funds.In a further set of amendments, the MEPs call on the Commission “to urge the IFRS Foundation to base its financing entirely on fees or public sources and to eliminate excessive remuneration to Board members”.According to the amendment, the IASB chairman, Hans Hoogervorst, received a total of £554,000 for the role of IASB chair; the IASB vice-chairman Ian Mackintosh a total of £488,500; and other full-time IASB members an average of £455,700.As a result of the Delaware-incorporated foundation’s charitable status for US tax purposes, the IFRS Foundation is required to file tax information in a Form 990.IPE has established that this information was supplied to the European Parliament in both 2014 and more recently.The MEPs have also called for the IASB to be “transformed into a public standard-setting mechanism under the aegis of an international treaty”.last_img read more

  • UK IGCs and pension providers launch ‘value for money’ research project

    first_imgEleven independent governance committees (IGCs) and their UK workplace pension providers are launching a research initiative to develop a common understanding of what members consider to be “value for money”.The programme is being co-ordinated by UK law firm Sackers.Under rules introduced last year by the UK’s Financial Conduct Authority (FCA), IGCs – new bodies set up within contract-based pension funds to protect member interests – have to make an objective assessment as to whether pension scheme members are receiving value for money from their workplace personal pension arrangements, and to report on their findings.Announcing the initiative, Sackers said that after producing their first annual reports this year, the IGCs “want to build on the work carried out last year to investigate further how their members approach the topic of value for money”. The organisations participating in the research programme are: Aegon, Aviva, Fidelity International, Legal & General, Old Mutual Wealth, Prudential, Royal London, Scottish Widows, Standard Life, Virgin Money and Zurich.NMG Consulting won the mandate to conduct the research programme.The findings of the research are intended to help IGCs in their preparation for their second round of annual reports.Jacqui Reid, associate director at Sackers, is co-ordinating the research programme on behalf of the participants.She said that although there is agreement about importance of value for money “pinning down the components of it and how you measure them has proved harder”.“Many of us agree that, although fair charges are important, there is much more to achieving good member outcomes than price,” she said. “IGCs are here to act in the interests of their members.  It is therefore vital to enable them to carry out their role effectively that they understand what members themselves, and not just the pensions industry, value.”A review into the effectiveness of IGCs is scheduled to take place in 2017.last_img read more

  • Denmark’s private pension overhaul criticised by industry

    first_imgThe Danish government’s new political programme for pensions and retirement has received a less-than-enthusiastic reaction from the pensions industry, with criticism that the plan should do more to remove disincentives to save.In the proposal – entitled “More years on the labour market” – the centre-right led coalition government outlined measures designed to increase the advantages of saving for private pensions and reduce the number of people who save little or nothing into a pension.The government proposed increasing the amount that can be saved into an old-age pension plan (alderspension) in the last five years before state pension age to DKK50,000 (€6,720). However, it said it would reduce the maximum amount that can be saved annually into this type of plan for all other age groups.The Danish pensions sector has long lobbied the government to solve the “interplay” problem within the pension system. This discourages saving, industry commentators have said, because under some circumstances extra contributions made into pensions are offset by reductions in state benefits. Finance minister Kristian Jensen said in the introduction to the proposal: “Over time, we have expanded the pension system, so it has become one of the world’s best and most solid. However, we have also arranged ourselves so that it does not pay for some people to save for a pension because of the offsetting of state benefits.”This, Jensen said, was “unreasonable” and “untenable”.The proposal would make it easier to make pension savings without the offsetting problem, he said, by increasing the old-age pension contribution limit at the stage of life where the interplay problem was at its worst. It would also make it possible to save into a type of pension that did not reduce state benefits.In addition, Jensen said the government would allocate DKK2.5bn [€336m] towards “making it worthwhile for all age groups to save up for a pension”. This will be implemented in the autumn of 2017 as part of discussions on tax initiatives.Peter Damgaard Jensen, chief executive of pensions administrator PKA, which runs three social and healthcare-sector pension funds, said it was positive that the government was recognising that the interplay problem was real for many Danes, including PKA’s members.“But we would like to have seen a longer period for saving up than five years before state pension age, without the offsetting,” he said. “We would also like to have seen an overall solution that was simpler for our members to understand.”Jannik Andersen, head of human capital at Aon Denmark, told IPE his firm was so far not impressed by the government’s retirement plan, which only contained minor adjustments rather than any big changes.But he said he waited with interest to see what concrete suggestions the government would announce this autumn regarding the promised DKK2.5bn woth of funding.The new DKK50,000 annual limit could serve as a carrot for extra pension savings for people with lower income, Andersen said, due to this pension type’s lack of interaction with social services, but he added that in practice the effect was uncertain.“It sounds like a good idea, but very few with low income can put this much money extra aside for pension purposes,” he said.Because of the high level of tax in Denmark, DKK50,000 after tax was almost DKK100,000 before tax, he pointed out.The government proposal has not yet been adopted by the government and will now be debated among the country’s many elected political parties.last_img read more

  • C&A scheme reduces equities to protect financial position

    first_imgThe C&A scheme also decided to divest its 8.1% allocation to hedge funds in order to save costs. It had already saved €600,000 on asset management costs last year after switching 50% of its equity portfolio to passive management.It added that it would assess options for reducing costs further, in relation to services provided by its asset manager Anthos Fund & Asset Management.The pension fund reported a 16bps reduction in combined asset management and transaction costs to 0.59% in 2018. The cost of pensions provision amounted to €283 per participant.2018 loss due to equity and creditProvisum posted an overall loss of 1.3%, largely due to overweighting equity and high yield credit. This was combined with an underweighting of property and hedge funds, its best-performing asset classes, which gained 2% and 6.7%, respectively.Direct real estate delivered 4.8%, the scheme said, while indirect property produced 17.2% – 9.3 percentage points of which was due to increased valuations.The C&A scheme said it wanted to switch the emphasis of its 10% strategic property allocation from direct to indirect holdings.It had already sold 50% of its direct property while on the waiting list for participation in indirect real estate funds run by CBRE and Bouwinvest, it said.Long-duration German, Dutch and French bonds – held by Provisum for liability-matching purposes – generated 5.9%.The pension fund incurred losses of 4.7% on equity and 1.9% on both investment grade and high yield credit.It said it lost 1.8% on its strategic 75% hedge of major currencies, largely due to the appreciation of the US dollar relative to the euro. Provisum, the Dutch pension fund of retailer C&A, has cut its equity allocation by 5% in favour of fixed income holdings in order to protect its financial position.In its annual report for 2018, the €1.4bn pension fund said it had also raised its interest rate hedge by 10 percentage points to 60% of liabilities, in an effort to protect its ability to grant inflation-linked uplifts and keep contributions low. Its funding level was 132.5% at the end of December.The relatively high funding ratio had enabled Provisum to grant its participants a full inflation-linked compensation of 2.1% in January, and to keep indexation payments in owed to members at zero. It was also able to increase its coverage ratio by 5 percentage points through a different way of discounting liabilities, which included valuing its guaranteed annual indexation at 2% rather than at 3%.last_img read more

  • Investors warn EC over timeline for sustainable disclosure rules

    first_imgThe associations suggested that the new requirements in the regulation become applicable at least one year after official publication of the so-called Level 2 measures, which aim to clarify the understanding of the new requirements and how to comply with the regulation.  According to the signatories, under the current timeline the European supervisory authorities (ESAs) would be drafting most of the Level 2 measures over the course of the roughly 12 months they had to do so.After that, the Commission would still need to adopt the authorities’ proposals while the EU Council and the European Parliament were entitled to a scrutiny period.All told, according to the signatories, it was likely that the final regulatory technical standards (RTS) would not be published before the current application date of the regulation.“In the meantime,” they wrote, “as the Commission may potentially change draft RTS, the industry cannot fully rely on the draft Level 2 texts.”The timeline was even more questionable, they added, in relation to Level 2 measures about a requirement for disclosure on adverse sustainability impacts. These measures had to be developed within just over two years of the regulation’s official publication.The Commission respondsIn a written comment, a European Commission official told IPE:“Although the new rules were already agreed in March, they have not yet been published in the Official Journal due to the European Parliament recess. We expect them to be published in October, and to start applying in early 2021. This delay has already given financial entities time to adapt to the new requirements as the clock will only start ticking as of the publication in the Official Journal.“The rules will introduce stronger transparency obligations on how financial companies integrate environmental, social and governance (ESG) factors in their investment decisions. They also introduce harmonised rules on how financial market participants should inform investors about the impact of investments on the environment and the society. This is in line with the EU’s commitment to implementing the Paris agreement and leading the global fight against climate change.“The three European Supervisory Authorities have already engaged in preparatory work in order to be able to deliver draft technical standards in 2020.“We hope that this up-front planning can resolve the timing issues the European associations are concerned about.”Current timeline  Source: Letter to EC, 19 September; edited by IPENo IORP II delegated actThe regulation is one of three that make up the legislative part of the European Commission’s sustainable finance action plan. It introduces disclosure obligations for various financial market participants in relation to the integration of sustainability risks and consideration of adverse sustainability impacts in investment decision-making.In March the European Parliament and EU member states reached a political agreement on the regulation. The text of the provisional agreement was only added later, revealing that a controversial provision for delegated acts under IORP II had been scrapped – PensionsEurope and the German occupational pension association aba had argued against the provision.The final text of the disclosure regulation has not yet been officially published but could enter the Official Journal next month, according to an Association for Financial Markets in Europe document published in June. The regulation applies from 15 months after then.IPE contacted the European Commission for a comment but had not heard back at the time of publication.*The associations behind the letter to the European Commission were:Association for Financial Markets in Europe (AFME)Alternative Investment Management Association (AIMA)Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE)European Association of Cooperative Banks (EACB)European Banking Federation (EBF)European Fund and Asset Management Association (EFAMA)Insurance EuropePensionsEurope PensionsEurope and other financial industry associations have written to the European Commission to express concerns about the application timeline for new EU disclosure rules for sustainable investments and sustainability risks.The eight* signatories argued that the regulation was likely to become applicable before important supporting measures were adopted, “thus creating significant compliance challenges and liability risks for market players, as well as confusion for investors”.The associations urged the Commission “to take immediate action to ensure that the industry is provided with realistic time for implementation”.An official at the Commission told IPE that the European Parliament’s summer recess had delayed publication of the rules, which had in turn “already given financial entities time to adapt to the new requirements”. (See below for the Commission’s full statement.)last_img read more

  • Swiss pension funds see boost in funding ratio following market turmoil

    first_imgThe report also showed that pension funds allocated 35.1% of their assets to fixed income, 30.8% to equities, 20.2% to real estate, and 9.6% to alternative investments.Private equity made up the largest share of the alternative investments portion with 22%, followed by hedge funds with 18%, private debt 14%, infrastructures 14%, commodities 13%, insurance linked securities 10% and other alternative investments at 9%.The share of alternative investments in larger pension funds stood at 9.9%, and 4.7% in smaller funds.According to Complementa, the proportion of foreign investments is larger for bigger pension funds with 50.3%, while smaller pension schemes show a “home bias” approach with a foreign allocation worth 36.3%.RatesThe interest rate on pension capital rose significantly to 2.4% in 2019, the highest level since the financial crisis in 2008.Volatile equity markets will decide whether the interest rate on pension capital will remain high this year too, it said.The Umwandlungssatz (UWS), the conversion rate used to calculate pension payouts from accrued assets upon retirement, dropped from 5.63% in 2019 to 5.57% this year. Pension funds plan to apply a conversion rate of 5.32% in 2025.The actuarial correct value for the conversion rate is 4.68%, significantly lower than the value of 6% discussed as part of the reform of the second pillar.According to Complementa’s report, for pension funds, a conversion rate of 5% is largely acceptable, while 4.5% is still acceptable for half of respondents. Respondents believe that the conversion rate should not drop below 4%.Complementa’s research is based on data collected from 443 pension funds with assets worth CHF725bn (€665.7bn). The number active of pension funds in Switzerland has been decreasing steadily from 2,935 schemes in 2004 to 1,562 in 2018.To read the digital edition of IPE’s latest magazine click here. Swiss pension funds have seen their funding ratios increase to 106.8% at the end of August through positive return of 0.3%, according to Complementa’s latest Risk Check-up 2020 report.The recent turmoil in equity markets led to a slump in funding ratios of 8.1%, which have recovered by August by 6.8 percentage points, but compared to the prior year remain down by 1.3 percentage points.According to Complementa, pension schemes have to generate 2.2% in returns by the end of the year in order to keep funding ratios at constant levels.Riskier investments benefited the most from April figures following the downturn in February and March.last_img read more

  • Record sale for Wynnum as suburb warms up

    first_img >>>FOLLOW THE COURIER-MAIL REAL ESTATE TEAM ON FACEBOOK<<< The property at 41 Brindisi Place, Wynnum, is on a 2000sq m blockMore from newsCrowd expected as mega estate goes under the hammer7 Aug 2020Hard work, resourcefulness and $17k bring old Ipswich home back to life20 Apr 2020A three minute drive south, and 60 groups viewed 5 Petersen St, in the two weeks it was on the market with Cape Cod Residential presenting multiple offers to the sellers. The house was finally sold for $1,335,000 to a buyer from Brisbane. Real Estate Institute of Queensland figures show house sales in Wynnum jumped 2.2 per cent in the June quarter and the median house price has increased 25.9 per cent in five years to $638,750. Wynnum’s most expensive house of 2018 so far is 41 Brindisi Place, which sold for $1,757,500.THREE minutes and a car is all you need to find a house to suit your budget in Wynnum.In the past month, three homes separated by a three minute drive and more than $1 million have sold in this bayside suburb suiting buyers from all walks of life.Sotheby’s International Realty sold a six-bedroom mansion on 2045sq m at 41 Brindisi Place for $1,757,500 at auction on the weekend. The sale was the highest house price in Wynnum this year. Another three minute drive and Raine and Horne Wynnum/Manly sold 103 Henry Street for $550,000. This five bedroom house at 5 Petersen St, Wynnum sold for $1,335,000. The three bedroom house at 103 Henry Street, Wynnum.Cape Cod Residential’s Anne-Maree Russell said feedback from buyers indicated that not all price brackets were well serviced by properties in the Wynnum area at the moment.“We have a property that we’ve just sold at 56 Kingsley Tce,’’ Ms Russell said.“It was in a price bracket down from the 5 Petersen property and the people coming through were saying there wasn’t much on the market.“Now is the time (to sell) whatever price bracket you’re in. And even though it’s Spring and notoriously there is a lot of stock going to come on the market, there are a lot of buyers out there.”last_img read more

  • House sells for $400,000 more than the suburban median

    first_img <<>> “It was highly sought after and there was no criticism with the layout but for a lot of people it was out of their price range,” Ms Coutts said.The 20-year-old architect-designed house had three living areas and a pool house.More from newsFor under $10m you can buy a luxurious home with a two-lane bowling alley5 Apr 2017Military and railway history come together on bush block24 Apr 2019The view from the house toward the pool house.CoreLogic property analysis showed the 796sq m property had previously been sold in 2015 for $932,500.Ms Coutts said VIP events for houses were well attended but the unit and townhouse market was ‘fairly quiet’.“We had four properties that went under contract over the weekend, it’s still good,” she said.“We are certainly expecting an influx of new properties coming on to the market in January and February.”The median house price in McDowall is $680,250, an increase of 5.5 per cent in 12 months while unit prices have gone up 0.7 per cent, CoreLogic data shows. The house at 14 Harlow Place, McDowall, that sold for $1.08mTHE teenagers are moving out of 14 Harlow Place, McDowall and a young family is moving in after the property sold for $1.08 million.Madeleine Hicks Real Estate agent Allie Coutts sold the five bedroom two storey house in 39 days.center_img SEE WHAT IS FOR SALE IN MCDOWALL THIS WEEKlast_img read more