Total assets held in Finland’s earnings-related pension schemes shrank by around 1.7% in the first three months of this year, as pension payments outweighed contributions and weak equity markets took their toll on investments.Finnish pensions alliance TELA released figures showing assets at employee pension funds fell by €3.1bn in the first quarter of the year to end March at €177.8bn.TELA said there were three reasons for this contraction – weak investment returns, particularly for quoted shares; the fact pension payments exceeded contributions collected in the system; and a change in the way data is now collected, which it says is in some respects more accurate than the old method.Peter Halonen, analyst at TELA, said: “The investment environment in international financial markets has been a challenging one with uncertain market conditions, due to, for example, slowing economic growth in China and a fall in commodities prices.” Investments performed poorly in the first quarter, particularly for quoted shares, he said.Pension schemes de-risked by selling riskier investments between January and March.Halonen said the amount of pensions paid out was increasing for the schemes, and therefore investment income was needed on a permanent basis to finance part of pension contributions.He said this would have to increase over the next few decades.Also, the change in the way statistics are reported resulted in data collection being more specific, which had the effect of slightly decreasing the level of assets reported, TELA said.The survey showed that Finnish earnings-related pension providers were increasing the proportion of assets they invested in non-euro areas.Assets invested outside the euro area increased to 51.3% at the end of March, from 50.1% at the end of December 2015.Investment in Finland rose to 27.6% at the end of March from 27%, and investment in the rest of the euro-zone fell to 21.1% from 23%.The share of investment in non-euro countries, as well as the domestic proportion of investment, has been increasing in the last few years, TELA’s analysis shows.“Pension funds have been directing investment outside the euro area to spread risk more efficiently,” Halonen said.Earlier this month, the Finnish Financial Supervisory Authority (FIN-FSA) reported that the solvency ratio of the country’s employee pension sector was at a solid level.In a stress test, companies providing employee pensions were shown to be below the solvency limit, it said, but their technical reserves remained covered in the stress scenario.Anneli Tuominen, FIN-FSA director general, said: “Risk levels have risen in the pension sector, as shown by the results of the stress test.”These circumstances further highlighted the importance of solid risk management by the companies, she said.The regulator said the solvency ratio in the employee pension sector fell to 26.3% at the end of March from 28.6% at the end of December but was still on a solid level.The decline was due to weak investment returns and the relatively high return payable on pension liabilities, it said.In the first quarter, it said, the sector had on average made an investment loss of 1%, with equities losing an average of 3.3% and fixed income investments generating 0.1%.
Poland’s voluntary second-pillar pension funds (OFEs) returned a weighted average 12-month return of -1.13% as of the end of September, according to the Polish Financial Supervision Authority (KNF), compared with -5.92% a year earlier and -6.63% this March.Unlike last March and September 2015, when all the 12 OFEs reported negative returns, five funds this time produced positive results, with Pocztylion, at 1.07%, generating the highest, and Generali, at -3.17%, the lowest.While the 12-month returns benefited from an upturn in the performance of the Warsaw Stock Exchange (WSE) since July, the three-year returns were less impressive, shrinking to an average 0.13% from 6.34% in March and 12.72% last year as a result of earlier losses.The OFE returns also compare poorly with increases in both the state pension paid by the first-pillar Polish Social Insurance Institution (ZUS) and the ZUS sub-accounts nominally holding assets earlier transferred from OFE accounts. The former, indexed to inflation and wage growth, rose by 5.3% last year, while the latter, based on positive average GDP growth, grew by 4.3%.As reported previously, since the 2014 reforms, the OFEs have become essentially equity funds dependent largely on the WSE’s performance.As of the end of September, Polish listed equities accounted for 75.3% of aggregate portfolios, followed some way behind by bank deposits (7.7%), foreign equities (6.9%) and domestic listed bonds (5.1%).Net assets fell by 1.7% year on year to PLN142.8bn (€33bn).The shrinkage was due not only to investment losses but the ‘slider’ mechanism, introduced in 2014, which incrementally transfers the savings of those with less than 10 years left to retirement to an individual’s ZUS sub-account.In the first nine months of 2016, the slider removed PLN2.6bn of assets, against the ZUS transfers of PLN2.2bn into the OFEs of the 15% or so of members still continuing to contribute to the second-pillar system.Membership declined by 0.7% to 16.46m.During the last four-month transfer window, which ended in July, some 88,000 workers chose start or restart contributing, against less than 67,000 who chose to stop.Any renewed interest in the OFEs, notably from new entrants to the labour market, was cut short in early July when Mateusz Morawiecki, development minister and deputy premier, announced an overhaul of the system that would transfer 75% of current second-pillar assets into private third-pillar accounts, and the remainder into the demographic reserve covering first-pillar shortfalls.This has yet to be presented as a draft bill to parliament but will have to be enacted by the end of the year in line with the current legislation’s three-yearly review of the country’s pension system.One potential obstacle is Poland’s Constitutional Tribunal, which earlier ruled that OFE assets are public, not private, monies.Morawiecki, whose earlier Responsible Development Plan is based partly on private capital financing, is likely to carry the rest of the government with him; in late September, following a government reshuffle, he additionally took over the position of finance minister.
Schiendl said loan funds that were added to the portfolio three years ago had been “the right choice”.“We included these at a time when the best managers were still available,” he added.VBV also expanded its in-house team over the last few years to strengthen its own credit research, Schiendl said.Apart from adding loan funds, VBV also further decreased its exposure to government bonds, especially from European periphery countries. It maintained its exposure to corporate bonds “so we could profit from the ECB’s purchasing programme”, Schiendl said.Another source of returns last year were emerging markets, which according to the CIO were “long believed to be dead”. “We even went into emerging market high yield and corporate debt,” he said.Over both two-year and five-year periods VBV outperformed the market average.Talking to IPE, Gernot Heschl, CEO at VBV Pensionskasse, said the pension fund was the main driver behind the idea of creating a long-term account in which both time as well as money can be stored. The idea of this so-called “Langzeitkonten” (literally, “long-term accounts”) was presented by the Austrian pension fund association last summer. The equity downturn in the wake of the UK’s vote to leave the EU hurt the €6.3bn Austrian pension fund VBV.For 2016 it returned 3.4%, below the market average of 4.17%. “It was the Brexit, we simply got this one wrong,” Günther Schiendl, board member and CIO at VBV, told IPE.However, a hedging strategy put in place before the US elections, along with the pension fund’s fixed income strategy, helped to recover some of the losses.
The UK’s Court of Appeal has ruled that the country’s government can direct local authority pension funds to invest in the wider public interest. Lawyers said the verdict opened the door to greater influence from politicians on impact investing and environmental, social and governance issues within the £261bn (€297bn) Local Government Pension Scheme (LGPS) system.“This is politicisation of pension funds when they should really be about financial returns for members,” said John Hanratty, head of pensions in the north of England for law firm CMS.“The judgement did not need to go this far to find for the government on the specific issues in question,” added Judith Donnelly, a partner at law firm Squire Patton Boggs. “Future governments may now go even further in terms of guidance on how funds invest.” Credit: Anthony MajanlahtiThe Royal Courts of Justice in LondonIn London’s High Court last year the guidance was found to be faulty because it was explicit regarding some non-financial matters that could be material to pension funds, such as the UK’s foreign and defence policy, but not others.This week’s legal decision not only reversed that decision but introduced “wider considerations of public interest” in formulating guidelines to LGPS funds, according to the ruling.CMS’ Hanratty said that, in warning off local authorities from using pension fund money for their political causes, the government had now been given an opportunity to do exactly the same.“If an administering authority does not bear uppermost in mind members’ financial interests, then it can be sued,” he said. “I think this is preferable to seeking a judicial review, which is the route to take if government guidance is found wanting.”Colin Meech, national officer at public-sector union Unison, said that if the LGPS had to invest on these principles it would likely lead to cost increases and a weakening of the funds’ positions, “as a constant eye would need to be kept on the ever changing views of [foreign secretary] Boris Johnson”.“The LGPS funds are for one thing only: the payment of our members’ benefits,” Meech added. “They must not become a policy arm of this government.”Hugh Lanning, chair of Palestine Solidarity Campaign, which led the legal case, said the group was “incredibly disappointed” by the decision but added that it would consider an appeal. The ruling relates to guidance issued by central government three years ago, stating that LGPS funds could not divest or boycott companies or countries unless these actions followed national policy.
Cumming said: “We are delighted to attract such high-calibre, experienced individuals with strong performance track records to Aviva Investors, and look forward to them joining the team in the coming months.”The appointments — along with more hires planned for this year — would complete the creation of “strong, integrated teams” in the firm’s key areas of global, emerging markets, Europe, US and UK equities, he said.Commenting on today’s announcement, a spokesman for Aberdeen Standard Investments said: “Inevitably when you integrate two investment teams there will be some departures.” “We’re grateful for their hard work over the years and are pleased that they have now found new roles in Edinburgh,” he added.Aviva Investors’ Edinburgh office opens at the end of July. Following the merger, Aberdeen Standard Investments said Stephen Docherty had been appointed head of global equities and Devan Kaloo as head of EM equities.Before the two firms merged, Aberdeen AM had the most assets under management in emerging markets, Asia Pacific and global equities of the two managers, while SLI had more assets under management in developed markets, the spokesman pointed out.Other new hires from SLI for Aviva Investors are Jaime Ramos Martin, and Ross Mathison, who will join as global equities portfolio managers, reporting to Zverev.Jonathan Taub and Will Malcom — also from SLI — are coming to Aviva Investors as global emerging markets portfolio managers, reporting to Way.In addition, Aviva Investors is hiring Stephanie Niven as a global equities portfolio manager, from Tesco Pension Investment.She will be based in London while the other eight will work in Aviva Investors’ Edinburgh office, which opens at the end of July. Aviva Investors has hired nine new people for its equities business — eight of which are coming from rival Standard Life Investments (SLI), which became part of newly-formed Aberdeen Standard Investments last year. The recruitment spree follows Aviva’s hiring of David Cumming at the turn of this year as CIO for equities, with Cumming leaving the top equities role at SLI after 20 years with the firm.The highest profile hires in this latest round are Mikhail Zverev and Alistair Way — previously head of global equities and head of emerging market equities at SLI — who are joining Aviva Investors as head of global equities and head of global emerging market equities, respectively.Both men will report to Cumming, as will Henry Flockhart and Adam McInally, who are coming to Aviva Investors as UK equity portfolio managers.
The Church of England has ruled out buying the loan book of failed UK payday loan company Wonga in order to protect borrowers.Wonga – which made short-term loans at high interest rates, becoming the UK’s biggest payday lender – went into administration last month, following thousands of compensation claims from customers and tougher government rules for the sector. Its assets include a loan book worth around £400m (€450m).Church leaders met charitable foundations and other investors this week to discuss a potential buyout.In a statement issued on 21 September, Church Commissioners for England – which runs the church’s investment portfolio – said it would not participate, “having concluded that they are not as well placed as others to take this forward”. Source: Church of England The Archbishop of Canterbury, Justin Welby“I will be continuing to examine ways to make affordable credit, debt advice and support more widely available and convening interested parties… If we make the economy fairer for all, we will also make it stronger. When prosperity and justice go hand in hand, every part of society benefits.”Earlier this month, UK politician Frank Field wrote to the archbishop asking him to consider leading a consortium of investors to buy Wonga’s loan book, in order to protect customers from exploitation by debt recovery companies.Field – who is also chair of parliament’s Work and Pensions Select Committee – expressed concern that the company’s administrators, Grant Thornton, could sell the loans at “knockdown prices” to debt recovery companies, which might then charge high commercial rates to existing borrowers.A Church of England spokesman said earlier this week: “We are reflecting on what may or may not be possible in the months ahead following Wonga’s collapse.”A spokesperson for Grant Thornton said: “The administrators are more than willing to consider all such interest in accordance with their statutory obligations, while working closely with the Financial Conduct Authority to conduct an orderly wind down of the business and supporting customers where possible during this period.”IPE reported earlier this week that it was more likely that the church would attempt to convene parties around the table to explore a range of possible solutions, rather than taking a direct financial investment.Its own endowment fund is currently worth £8.3bn.In 2013, a press investigation discovered that the fund’s portfolio included a £75,000 investment in Wonga, albeit held indirectly. The revelation was particularly embarrassing for the Commissioners as it followed a public vow by the archbishop to “compete [Wonga] out of existence”. The holding was later sold. Later in 2013, the Church Commissioners – in partnership with other investors – bid to buy more than 300 UK bank branches from RBS for £600m, although RBS later pulled out of the deal.The new bank was to be called Williams & Glyn’s – the branch network’s previous name – and was intended to act as a “challenger” bank to the major players, with a focus on ethical standards and servicing the needs of retail and small and medium-sized enterprise customers.This story was updated on 21 September following a statement from Church Commissioners. The Archbishop of Canterbury, Justin Welby – the Church of England’s spiritual leader – said: “I fully support and respect the decision of the Church Commissioners not to participate in a potential buyout. They have given this option close attention and I thank them for their time, advice and consideration.
Denmark’s statutory pensions giant ATP has invested in a new seven-year green bond issue from Nordic Investment Bank (NIB), as the fund’s total exposure to the environmental debt increased to 3.9% of its overall bond investments.The DKK886bn (€118bn) labour-market supplementary pension fund did not disclose how much it had put in the issue, which carries a coupon of 0% and had a re-offer yield of 0.114%.Lars Dreier Kristensen, senior portfolio manager at ATP, said: “NIB environmental bonds combined the strong credit strengths of NIB and the certainty that the funding is used to support sustainable environmentally-friendly projects in the Nordic and Baltic regions.”NIB said there had been more than €2.9bn of orders for the bond when it was sold last week, meaning the deal was covered almost six times. Pension funds and asset managers made up 36% of investors in the issue, followed by central banks and official institutions with 35% and other banks with 28%, according to NIB figures.It said the bond proceeds would be used to finance selected projects judged to benefit the environment and contribute to climate change mitigation in the eight countries which own the NIB – Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden.Separately, ATP confirmed that the green bond allocation within its overall bond investments had grown over the last year and was now 3.9% or DKK25bn, with the entire holding having been built up since 2017.At the end of 2019, ATP’s total bond assets stood at DKK630bn.Jan Ritter, head of hedging and treasury at ATP, said in an interview with Danish financial daily Børsen that the impact of the coronavirus pandemic on green bonds had been no milder or more severe than it was on other asset types.“The ability to manage and trade the bonds is relatively intact,” he said. The market situation for green bonds had deteriorated in March, but eased up in early April, Ritter said.Lead managers for NIB’s green bond issue were Bank of America subsidiary BofA Securities, France’s Crédit Agricole Corporate and Investment Bank and Nordic Bank Nordea.
The €30bn ABN Amro pension fund said it has postponed its annual decision about the level of inflation compensation until July, because of current market volatility caused by COVID-19.Usually, the scheme establishes every April how much indexation it will grant, based on the consumer index of the previous year. In 2019 inflation was 1.8%.Given its funding level of 130% at year-end, the pension fund would have been allowed to grant a full inflation compensation. Its required funding level is 125%.However, the board noted that the scheme’s indexation rules allow for a deviation if the circumstances require this. At the end of April, its funding level remained at 130%, leaving the pension fund in a much better position than many of the large industry-wide schemes.According to statistics by supervisor De Nederlandsche Bank, the ABN Amro Pensioenfonds has hedged more than 100% of the interest risk on its liabilities.It annual pensions contribution amounts to 37% of the pensionable salary.FedEx likely to plug funding gap of Dutch schemeEmployer TNT/FedEx is expected to fill a €11m shortfall in its Dutch pension fund TNT at the end of the second quarter, if the scheme’s funding level doesn’t significantly improve by then.Its €750m pension fund said it expected the sponsor to plug the funding gap as its coverage ratio was no more than 92.4% at the end of March.The additional payment is a consequence of the contract for pensions provision between US owner FedEx and its Dutch scheme, which makes filling in a shortfall compulsary if the scheme’s coverage ratio is below 104% at the end of each quarter.The last time the employer had to fork out an additional contribution was in 2016.The expected additional payment would amount to approximately one-third of the sponsor’s annual contribution for the scheme’s 2,200 active participants.The US sponsor had been trying to get rid of its Dutch pension fund – the scheme of former Dutch delivery firm TNT Express, taken over by FedEx in 2015 – for two years, but negotiations with the unions have been on hold since the start of the COVID-19 crisis. FedEx Dutch employees accrue their pension with Vervoer, the €31bn sector scheme for private road transport and inland shippingFedEx Dutch employees accrue their pension with Vervoer, the €31bn sector scheme for private road transport and inland shipping.However, the unions oppose transferring TNT’s participants to Vervoer. They argue that the latter’s pension arrangements are less attractive, and lack, for example, an employer’s obligation to plug a funding gap.Vervoer’s coverage ratio stood at 90.7% at the end of March.In early March, the unions ceased negotiations for a new collective labour agreement (CAO), because they wanted to consult their rank and file before continuing.They explained that the negotiations were complicated, as they would not only cover new pension arrangements but also other labour conditions.Because of the COVID-19 pandemic, the unions haven’t been able to consult their members during information meetings yet.Delivery firm FedEx is the second employer that has to fill in a shortfall in its Dutch pension fund, following declining funding levels as a consequence of the virus crisis.Earlier, ExxonMobil paid its Belgium-based Dutch scheme €250m to make up for its funding shortfall.To read the digital edition of IPE’s latest magazine click here.
Room with a view.Agent for the sale Carmen Briggs from Harcourts Solutions said that Ferny Hills homes tended to be much smaller, except for Lanita Rd and a few other streets.“It is still only minutes from the suburbs but it feels like you are in the middle of nowhere,” Ms Briggs said. Open plan living.More from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoThe home was sold to a young family from Mitchelton that wanted to live in a spot that was not far from the centre of Brisbane but had a lot of extra space. Living with nature.The home is on a 1.84ha allotment and includes a 90,000-litre rainwater tank, solar power system, pool and a fireplace.It was built in 1983 and had been with the same family for 18 years before they decided to sell. The suburb borders Samford, where acreage properties are common.The median house sales price in Ferny Hills is currently $537,900, according to CoreLogic. 247 Lanita Road Ferny HillsWITH an acreage allotment in a suburb where 700sq m blocks are the norm, the home at 247 Lanita Rd in Ferny Hills is a little bit different.When it went under the hammer, the rural lifestyle home got the biggest sale price for the week across the northwest when it sold for $1.2 million.
L to R, Claire and Eric Bassingthwaighte, Helen and Don Bray, Jan and Bruce Wakefield and Jim Christie are neighbours who have owned their homes in the same street for more than 50 years. Image: AAP/Steve Pohlner.His wife, Helen, recalls Mains Road being little more than a dirt road and can hardly believe it is now a busy, six lane thoroughfare.Both say they have never had any desire to move.“Sometimes we tossed the idea around, but where would we go?” Mr Bray said. THE MASTER SUITE BIGGER THAN YOUR HOME While the group is ageing and may gradually continue getting smaller, the memories of years of friendship through major life changes will remain.“We haven’t lived in each other’s pockets, but we always knew we were there for each other,” Mrs Bassingthwaighte said.“We always have a big get-together each Christmas. This will be the first year we won’t be there.” More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours agoEric and Claire Bassingthwaighte have just sold this house in Sunnybank after 54 years.Sunnybank, just 12km from Brisbane’s CBD, is now a bustling hub, serviced by three train stations, shopping centres, restaurants, schools and a hospital.The suburb is in high demand among home buyers, with a median house price of $825,000, according to CoreLogic — that’s 54 per cent higher than it was just five years ago.The Brays never imagined the area would experience the growth it has.Mr Bray remembers how dark the street was when he and his wife moved there and the excitement of getting a street light for the first time.“When we had the first street light put in, all the neighbours were out looking at it,” he said. UNDER HALF A MILLION HOMES SOLD L to R, Claire and Eric Bassingthwaighte, Helen and Don Bray, Jan and Bruce Wakefield and Jim Christie have all lived in the same Sunnybank street for more than 50 years. Image: AAP/Steve Pohlner.WHEN Eric and Claire Bassingthwaighte built their “forever home” in Sunnybank 54 years ago, they really weren’t kidding.Now in their 80s, the couple have spent their entire married life in the house they built in 1965 for about 5500 pounds — around $146,000 today — when the suburb was little more than farmland.And they weren’t the only ones.That same year, Don and Helen Bray built a house next door in Tarrawonga Street and have lived there ever since.Jan and Bruce Wakefield moved into their house on the other side of the Bassingthwaightes’ the following year in 1966 and also still call it home.And Jim Christie and his family moved in next to the Wakefields the same year and, believe it or not, he’s still there. GET THE LATEST REAL ESTATE NEWS DIRECT TO YOUR INBOX HERE The neighbours became such good friends, they never wanted to leave.It’s a rare situation when you consider the average Sunnybank resident moves house every 14 years, according to CoreLogic.But it’s the beginning of the end of an era.After five decades, the time has finally come for the Bassingthwaightes to move on.“It’s very emotional,” Mrs Bassingthwaighte said.“We’ve done the right thing though, we’re elderly now.”The Bassingthwaightes have just sold their three-bedroom family home for $710,000 and are in the process of downsizing to a unit.“When we bought, it was a custard apple farm area,” Mrs Bassingthwaighte said.“We’ve watched a lot of development, a lot of demolition, over the years. It’s been amazing to watch.”