Other key findings include:Future entitlements will generally be lower, and not all countries have built in special protection for low earners. People who do not have full contribution careers will struggle to achieve adequate retirement incomes in public schemes, and even more so in private pension schemes, which commonly do not redistribute income to poorer retirees.It is essential people continue paying in contributions to build future pension entitlements and ensure coverage. However, increasing pension age alone will not suffice to ensure people stay effectively on the labour market. A holistic approach to ageing is needed.Because of stigma, lack of information on entitlement and other factors, not all elderly people who need last-resort benefits claim them. There is thus a certain degree of hidden old-age poverty.Public services are retirement-income enhancers. This is especially true of healthcare and long-term care services. Services benefit the poorest retirees much more than they do richer elderly households. Public support is set to play an increasingly important role in preventing old-age poverty among people requiring health and long-term care services. Inequality among the retired could increase in future years, fuelled by the retrenchment of public pensions, trends towards working longer and more reliance on private pensions, according to the latest edition of Pensions at a Glance from the Organisation for Economic Co-operation and Development (OECD).The report warned: “Population ageing means that, in many OECD countries, pension expenditures will tend to increase. Recent reforms have aimed at maintaining or restoring financial sustainability of pension systems by reducing future pension spending.“The social sustainability of pension systems and the adequacy of retirement incomes may thus become a major challenge for policymakers.”The annual report, a comprehensive examination of pension systems in OECD and selected non-OECD countries, looks at recent trends in retirement and working at older ages, evolving life expectancy, design of pension systems, pension entitlements, and private pensions, before providing a series of country profiles.
Patrick Kanters, APG’s managing director for global property and infrastructure, said: “Relatively few companies have the expertise and contacts required to anticipate the best investments options in this sector.”APG’s decision to invest in hydro power has come as a surprise to some in the industry, particularly in light of the scheme’s recent decision not to invest in offshore wind farms in The Netherlands.But hydro power, unlike offshore wind power, is largely free of subsidies and other government support.Indeed, one risk that has pushed many institutionals away from sustainable energy projects to date has been the possibility that those subsidies will soon end.Water power is also more efficient than wind power. Hydro-electric plants have an energy-efficiency ratio of up to 95%, considerably more than wind turbines (50%) or solar power (20%).Kanters said APG was putting a lot of effort into finding infrastructure investments with sustainable characteristics.“Hydro power is the most efficient of the traditional energy sources and complies with all our risk/return requirements, visible cash flows and a strong sustainability profile,” he said.APG will also start investing in power lines in Latin America – mainly in Brasil and Chile – through a strategic alliance with Spanish energy firm Elecnor, which focuses on developing and operating power plants.As part of its agreement, APG is to take a 49% stake, equating to €237m, in Celeo Redes, a full subsidiary of Elecnor’s concession subsidiary Celeo.Both partners are committed to a joint investment of €372m over the next five years, Elecnor said.Harmen Geers, spokesman for APG, said: “We are very pleased that, in Elecnor, we have found a reliable and expert partner for infrastructure investment in Latin America.“Elecnor has been operating in the region for a long period and has already 8,000 kilometers of power line under management.”Elecnor said the deal, pending regulatory approval, would increase power transmission through the combination of its expertise and market knowledge and APG’s scale and expertise on finance and asset management.Currently, APG – the asset manager for the large civil service scheme ABP – has an infrastructure portfolio worth €5.5bn.According to Geers, APG wants to increase its infrastructure holdings to at least €9bn in the coming years, depending on its ability to find and acquire the right investments. The €369bn asset manager APG is planning to invest €500m in hydro-electric projects in a venture with alternative investment manager Aquila Capital. APG is to participate with €250m in an investment vehicle – to be established by Aquila – for the purchase and development of hydro-electric plants.The required capital is to be completed through bank loans.Aquila Capital will be responsible for operational and portfolio management.
Danish equities have performed strongly relative to other European markets over the last three years, with the OMX Copenhagen index having doubled from around 300 in September 2011 to about 600 now.By comparison, in the same period, the UK’s FTSE All Share index has risen to around 3,600 from about 2,700, and Germany’s DAX index has grown to around 9,300 from 5,200.In other news, Danish labour-market pensions provider Sampension posted a 10.9% return in the January-to-June period for its traditional with-profits pensions, including interest-rate hedging, up from 3.8% the same time a year ago.Unit-link pensions made returns of between 4.6% and 6.9% in the same period, it said. This compares with an average of 3.8% reported for these pensions in the first six months of 2013.Sampension said it had brought costs down further to DKK201 (€26.90) per member from DKK212 in the first six months of 2013.Contributions slipped to DKK3.9bn (€523m) in the period from DKK4.0bn in the year-earlier period.Total assets under management rose to DKK220bn from DKK201bn.In other news, the Danish pension fund for teachers, Lærernes Pension, produced a 7.7% first half return — up from the 0.5% return posted in the same period last year — with Danish equities outperforming the market by generating a 19.2% profit.“The result is partly due to the rising prices of many of the higher-risk investments and partly down to the fall in interest rates in the first half of the year,” Lærernes said, reporting some interim results.The best performing asset class was Danish shares, it said, followed by its long-dated government bonds — most of which are German — which produced 13.3%.Contributions reached DKK2.22bn in the six-month period, bringing the pension fund back on track after the teachers’ lockout which took place in Denmark last spring and led to a marked fall in pension contributions, the fund said.In the first six months of 2013, contributions were just DKK1.93bn. Denmark’s Industriens Pension has posted a first-half return of 6.6% before pension returns tax, up from the 2.5% loss it reported for the same period last year, as domestic shares returned 20%.Bonds also contributed positively to the result in the first half, the labour-market pension fund said, with corporate bonds producing 5.8% and government and mortgage bonds generating 4.6%.Laila Mortensen, chief executive of Industriens Pension said 2014 had been a good year so far, and that the fund was relatively positive about the rest of the year.“Growth prospects still look good, but the unrest in Russia and Ukraine and in many other parts of the world can of course create uncertainty on equities markets,” she said.
The firm based this on the fact that 23 days tracking error between US and UK equities was 3.5%.However, it pointed out that this average of 23 days — the period of appointing a transition manager — was only a proportion of the actual time taken to organise a change of investments.Steve Webster, State Street’s head of portfolio solutions sales, EMEA, said: “At the moment as an industry we only see a small part of these risks at the end of these change periods.”While 23 days was the average, in one in six cases, the delay was between three to six months, according to the study.The firm said evidence also suggested the protracted delay in terminating an active manager for poor performance may carry higher risks given current performance statistics.Some 80% of actively managed European equity portfolios and 85% of US large cap equities had underperformed their benchmark in 2014, it said, citing Le Temps and Lipper data respectively.“As soon as that decision’s been changed, the mandate has been changed […] investors should act at that point in time and not leave these changes to a later point,” said Webster.“What if a pension fund was to make those changes and then there was a market shock? That would then be a risk against an un-mandated portfolio,” he said. Pension funds and other asset owners could be running big risks because of delays when implementing changes to their asset allocation, according to a study by State Street.The financial services company said it took these investors an average of 23 days between their first enquiry to a third party to change an investment and the actual implementation.The study analysed 6,000 transition “events” over nine years to come up with the data, and termed the problem “event shortfall” — to include portfolio shortfall as well as implementation shortfall.This delay in putting the desired new investment in place — sacking an active manager for poor performance or changing investment strategy for asset/liability reasons, for example — meant that with markets as volatile as they are now, these investors could be risking 3.5% of returns.
Directorate-General for Financial Stability, Financial Services and Capital Markets Union, Catella, IPM Informed Portfolio Management, Brummer Group, Asset Risk Consultants, IAM Advisory, International Corporate Governance Network, Goal Group DG FISMA – Jonathan Faull, the most senior European Commission civil servant in charge of financial regulation, is to leave the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) at the beginning of September. Part of a wide-ranging reshuffle of directors-general within the Commission, Faull is to head up a new department overseeing issues relating to the UK’s referendum on its European Union membership. Olivier Guersent, currently Faull’s deputy at DG FISMA, is to succeed him when the changes take effect from 1 September.Catella – Stefan Nydahl has been appointed managing director of Catella subsidiary IPM Informed Portfolio Management. From 1 September, Nydahl will take over from Lars Ericsson, who will take on the role of vice-president for distribution. Nydahl joins from Brummer Group, where he was president and CIO at Archipel Asset Management. He has also worked at Nektar Asset Management, AMF Pension and Quantal Asset Management. Asset Risk Consultants – Grant Wilson has been appointed CIO at the investment consultancy. Joining from IAM Advisory, he will start in his new role on 1 September. Over a career spanning more than 30 years, Wilson has worked at Martin Currie Investment Management and Gartmore Investment Trust Management.Legal & General Mastertrust – Mike Craston has been appointed as a trustee. He was formerly managing director of the global institutional business and chief executive at Legal & General Investment Management America. The L&G Master Trust was launched in 2011 and now has more than £1.4bn (€2bn) in assets under management.Goal Group – Noah Wortman, chief operations officer for the Americas at Goal Group, has been appointed to the International Corporate Governance Network (ICGN) shareholder responsibilities committee. ICGN is an investor-led organisation of governance professionals based in more than 50 countries. Goal Group is a provider of withholding tax reclamation and securities class-action recovery services.
The UK Pensions Regulator (TPR) spent a total of £26.2m (€37m) in 2014-15 on the implementation of auto-enrolment, its annual accounts have shown.TPR is funded through taxes and a levy on defined benefit (DB) and defined contribution (DC) schemes.Over its last financial year, it reported a net expenditure of £60.1m – offset by £34m in contributions from the levy and £25.6m directly from the government – used for auto-enrolment activities.The regulator said last year’s planned work was shifted because of the announcement from the UK government in March 2014 about changes to the DC space. Work to increase observance of TPR’s six principles for well-run DC schemes, covering 31 quality features, was halted, as the regulator expected “significant structural changes” to the legal framework for schemes as a result of central government actions.Last week, the regulator warned of further action against DC schemes wilfully ignoring its quality features after a survey showed low take-up among smaller schemes.In other news, confectionery Nestlé is looking to close its UK career-average DB scheme to future accrual, angering trade unions.The company said it would enter the statutory 60-day consultation period with its proposal to shift all members to the DC scheme opened in 2010.Nestlé said the risks of providing a DB scheme had necessitated the shift to an “attractive DC scheme”.Its proposal is to close the DB scheme to new entrants by 2016 and future accrual for all by 2017.However, trade unions GMB and Unite said Nestlé was acting in bad faith and refused to rule out strike action.Elsewhere, the £12.9bn Greater Manchester Pension Fund (GMPF) has helped launch a £40m private capital loan fund, to be run by Enterprise Ventures.The fund will provide loans of up to £1m to help small and medium-sized enterprises (SMEs) across the UK, regardless of sector.Enterprise Ventures is a provider of venture capital and loans to small business in England and Wales, and currently has around £200m in assets under management.The £40m fund has also received backing from Santander, the UK arm of Spain’s Banco Santander.Enterprise said the loans would be made available to help SMEs make acquisitions, purchase assets and improve operations.
“Many publicly owned companies are paying members of these trade associations, which seems at odds with their public calls for a strong international policy framework to combat climate change,” ShareAction said.There was a need for greater transparency on the alignment of companies’ climate positions with those of the trade associations they supported, the group said. “Greater disclosure will allow investors to determine whether the lobbying being undertaken on behalf of companies is in the best interests of the company and its investors,” it said.On Friday, oil company Shell announced it would not renew its membership of the American Legislative Exchange Council (ALEC) – a trade association known for taking climate-sceptic positions. Shell said it was leaving ALEC because of the association’s stance on climate change.In June, Swedish pensions buffer fund AP2 and the pension funds for the London borough of Enfield and staff of UK union UNISON were among 19 institutional investors urging Shell in a letter to leave several US and European industry groups argued to be hampering the move to a low-carbon economy.,WebsitesWe are not responsible for the content of external sitesLink to ShareAction briefing note Investors are being put at risk by FTSE 100 companies’ continued support of climate-sceptic lobby groups, contrary to an often public endorsement of climate action. UK NGO ShareAction said that trade associations were largely used to lobbty on matters of climate policy, but argued that the largely undisclosed lobbying could put companies and investors at risk, it said.“Investors therefore need to take a strong stance on pushing for transparency and action,” it said in a briefing note analysing the risks of membership of “obstructive” EU trade associations to companies and their investors.The group said its recommendations were based on research by the Policy Studies Institute (PSI) at the University of Westminster, which it said had recently highlighted how several major EU trade associations have actively lobbied against climate change mitigation.
Acadian Asset Management – The London-based subsidiary of the Boston-based manager has appointed Mark Webster as a portfolio manager. He joins from CCLA Investment Management, where he served as investment director. Before then, he was managing director and European head of active equity quantitative strategies at State Street Global Advisors.Psigma Investment Management – Richard Hyder and David Robertson have been appointed investment directors, both joining from Turcan Connell, where Hyder was head of charity investment and Robertson senior investment manager.BESTrustees – Harold Lewis, a solicitor with 15 years’ experience advising as a pensions lawyer, has been elected to the board. Until 2011, he had been a partner at Eversheds for more than 25 years. He was head of Eversheds London Pensions Group for six years. He joined BESTrustees in May 2011. APG, Allianz Global Investors, AXA Investment Managers, Baring Asset Management, Legg Mason Global Asset Management, Acadian Asset Management, CCLA Investment Management, Psigma Investment Management, Turcan Connell, BESTrusteesAPG – The pension fund’s supervisory board said it has recently made “intensive efforts” to find a suitable successor for Dick Sluimers in consultation with all stakeholders. It said the selection process was “largely complete” and that it was waiting for final approval. To bridge the brief period until the appointment is made, the board has approached chief finance and risk officer Angelien Kemna, who is willing to serve as acting chairman of the board of directors. Sluimers announced his 2016 resignation as chief executive at the Dutch pension fund for civil servants last year.Allianz Global Investors – Irshaad Ahmad has been appointed head of institutional Europe. He joins from AXA Investment Managers, where he has been head of the UK and Nordics and chief executive for the UK since 2011. He started his career with Mercer Consulting in Toronto in 1987. Having held several positions at Mercer through to 2004, he then moved to Russell Investment, relocating to London in 2010.Baring Asset Management – Mike Evans has been appointed head of marketing and communications. He joins from Legg Mason Global Asset Management, where he was head of international intermediary marketing. Before then, he held various marketing positions at BNY Mellon and Schroders.
The principles have five signatories: Glass, Lewis & Co., ISS, Manifest, PIRC and Proxinvest.IVOX was part of the founding group, but was acquired by Glass Lewis in June.Positives identified by ESMA’s review include that the majority of the industry has signed up to the principles, although broader participation would help the principles become accepted as the industry standard, according to ESMA.As for the principles themselves, they “generally” meet the supervisory body’s expectations, and signatories’ compliance statements fulfil ESMA’s minimum expectations.“[W]hile it is still early to draw any definitive conclusion,” the supervisor said, “on the basis of the input it has collected from responses to its call for evidence and roundtable, ESMA concludes that the BPP have to date had a certain amount of impact on the market, especially in terms of enhanced clarity for different stakeholders on how proxy advisers operate.”Change is perceived as lagging, however, in the governance of the principles and the way in which signatories operate their business with respect to managing potential conflicts of interest and taking local conditions into account, ESMA reported.The independence of advice was one of the main issues raised by Norway’s sovereign wealth fund in its response to ESMA’s consultation, with its asset manager saying the principles fell short of delivering on concerns about conflicts of interest.The governance of the best practice principles, meanwhile, “constitutes the main area for improvement” found in ESMA’s review, the supervisor said, noting that governance is “fundamental in ensuring the BPP are fully effective and that stakeholders have confidence in the role of the BPP”. The best practice principles group (BPPG) should have a clearer and more robust structure, which could be created by appointing a chairperson or having a broader membership, according to ESMA.A clearer structure for monitoring the BPP would also be welcome, it said.Sarah Wilson, chief executive at Manifest, made a range of comments to IPE about the ESMA report and its broader context.These included noting that ESMA’s initial report recommending a code of conduct involved “an element of proxy advisers being political footballs, kicked around by various constituencies”.Also, the creators of the best practice principles wanted to take into account a wider range of views than just ESMA’s, and to ensure a global rather than European approach.With respect to ESMA’s recent progress report more specifically, Wilson said it was overall to be welcomed and that the supervisory body’s work had been helpful.She gave as an example a tabular overview in the annex to the report that shows whether the various BPP have been “broadly”, “fully”, or “partly fulfilled”, and also said ESMA’s report would inform the review the BPPG will be carrying out after the 2016 proxy season.The BPPG is “grateful” to ESMA and is not complacent or resting on its laurels, said Wilson.There was some “nit-picking” in the report, however, she said, and she defended the industry group’s approach to managing conflicts of interest and considering local market conditions.Many clients do not consider that certain local market standards – of corporate governance, for example – represent best practice, and this will be reflected in the advice proxy agencies give. Wilson flagged as notable a statement in the report that “ESMA acknowledges there seems to be a mismatch between many issuers’ expectations regarding the changes in terms of engagement and dialogue on voting policies they would like to see as a result of the BPP and actual changes”.This, she said, was “possibly one of the strongest statements ESMA has made I can remember about who is meant to be responsible to whom for what”.“All the providers are strongly of the belief that fund managers and asset owners cannot outsource their governance responsibilities to data vendors and that, ultimately, the relationship between companies and shareholders is not affected by our involvement as service providers,” she added.The point is also made by ESMA in its concluding remarks.“While enhanced clarity regarding the business operations of proxy advisers can facilitate confidence across the industry’s stakeholders and a smoother interaction between them, it is equally important to reiterate the ultimate responsibility for voting decisions lies with investors,” it said.A specialist working in the proxy advisory industry said ESMA’s early review of the proxy advisory business was “certainly useful” and acknowledged that a broader sign-up to the principles would be positive.However, “ESMA should rather do its best to question the broader issue of the market’s conflicts of interests instead of creating entry barriers against new contrarian voices in this herd-like market,” he said.He suggested a simple way of thinking about the issue of conflicts of interest.“Generally, in a balanced world refusing conflicts of interests, the logic of normal agency relationship would do the job for proxy advisers,” he said.“The investor client is pleased with the job, he pays you. If the job is lousy, he will drop you. Period. But we all know the financial market is heavily concentrated and conflicted.” The concentration that characterises the proxy advisory industry came up as a concern during ESMA’s review, but its potential impact on competition ultimately falls outside ESMA’s remit, the report states.,WebsitesWe are not responsible for the content of external sitesLink to ESMA’s follow-up report: “Follow-up on the development of the Best Practice Principles for Providers of Shareholder Voting Research and Analysis” The proxy advisory industry’s code of conduct has made more clear for different stakeholders how companies in the sector operate, but more work needs to be done to improve the governance of the best practice principles, the European Securities and Markets Authority (ESMA) has said in a progress report on their implementation.Published on Friday, the report reviewed the implementation of the ‘Best Practice Principles for Shareholder Voting Research and Analysis’ (BPP) that a group of proxy advisers published in March 2014 after the supervisor ruled out regulation of the industry.ESMA will communicate the report to the European Commission.Its review of the BPP is based only on the 2015 proxy season, the first following the adoption of the principles, and incorporates feedback received from stakeholders in response to a public “call for evidence”.
Agirc, Lombard Odier Investment Managers, Zürcher Kantonalbank, Capital Group, MainFirst Asset ManagementAgirc – Frédéric Agenet has been elected president of the board of France’s mandatory supplementary pension system for executives as employer representative. Agenet is director of social relations and human resources for France at Airbus and president of Humanis, one of the largest groups managing Agirc schemes and the Arrco counterparts, and holds several other positions at French pension schemes. The Agirc presidency alternates between an employer and employee representative every two years. Jean-Paul Bouchet was elected vice-president of Agirc as the employee representative. He is secretary general of trade union CFDT Cadres, and was president of Agirc from 2014. Lombard Odier Investment Managers – Thomas Breitenmoser has been appointed head of sales in Zurich to drive the manager’s presence in German-speaking Switzerland. He joins from Zürcher Kantonalbank, where he was head of asset management sales. He held this role following the integration of Swisscanto Asset Management, where he was head of institutional distribution for nearly three years. Before then, Breitenmoser worked for JP Morgan Asset Management for more than 10 years.Capital Group – Thiemo Volkholz has been appointed as business development director for financial intermediaries for Germany. He joins from MainFirst Asset Management, where he was responsible for the wholesale strategy across Germany, Austria and Luxembourg, as well as promoting it into new regions such as Scandinavia, the UK and France. Before then, he was a client manager at JP Morgan.