Assets in the second pillar reached €70bn by the end of 2012, compared with €24bn in the third pillar.Over 2013, however, Belgian second-pillar pension funds saw a return of 6.7%, a drop on 2012’s 12% growth.The asset allocation in the schemes drew comparisons with the rest of Europe, with 47% in bonds and 36% in equities.Funds allocated around 7% to real estate and 4% to cash, and kept 5% in alternatives such as infrastructure and private equity.Despite overall growth in second-pillar assets and the number of pension funds, assets held in insurance companies still outshone those in funds, according to the assocation.Insurance companies account for more than three-quarters of second-pillar assets, while pension funds account for 54% of the membership.Male pensions coverage took a significant jump in 2008 with the launch of pension funds for the construction and metal industries.However, until 2012, female membership remained relatively low, until the launch of schemes for the non-profit of federal sectors.The association hailed the results as success, highlighting the importance of the second-pillar pensions regime in the country.According to the BAPI, second-pillar growth was essential, since changes to the state pension, in the 1990s, eroded the replacement income Belgians were likely to recieve.It said the growing coverage was a truly democratic approach, reaching all levels of the Belgian working population. The number of members in Belgian second-pillar pension funds has exceeded that of the third pillar for the first time, highlighting the growing significance of occupational schemes.The figures, released by the Belgian Association of Pension Institutions (BAPI), showed second-pillar funds now covered 2.8m people, compared to 2.7m in the third pillar.The representative body’s research on the second-pillar market showed there was now 43 industry pension schemes set up for workers, alongside other corporate schemes and insurance companies.Since 2004, after the Belgian government legislated for the formation of industry schemes that created compulsory membership for those workers, second-pillar pensions membership has doubled, covering 75% of employees.
The €2.6bn pension fund of Dutch technical research institute TNO has appointed Kempen Capital Management as fiduciary manager for its portfolio of international non-listed property. In addition, Kempen will act as its strategic adviser, selecting new investments for the €102m portfolio.Hans de Ruiter, CIO at the TNO scheme, said: “During an extensive selection among local and international players, Kempen’s service provision has come out as best.”Robert-Jan Tel, director of non-listed real estate at Kempen, noted significant demand from institutional investors for independent expertise in the asset class. Last June, the €3bn industry-wide pension fund for the grocery sector (Levensmiddelen) appointed Kempen to monitor its non-listed property holdings of approximately €200m.Levensmiddelen had already appointed Kempen as its fiduciary manager in 2011.At the time, Jan Kat, chairman of the scheme’s investment committee, said: “Kempen understands the position of Dutch pensions funds very well, and also has property expertise.”Kempen does not manage a non-listed real estate portfolio and, in its opinion, can therefore provide independent advice.The Amsterdam-based asset manager recently introduced integral strategic advice for pension funds’ entire property holdings, across sectors and regions, as well as the selection of funds and managers.Its proposition also included extensive monitoring of all non-listed property investments, with a quarterly “active dialogue” with the managers and a monitoring report for the client.Kempen said it would also act as a go-between for the fund manager and carry out legal actions as well as investment administration.According to the asset manager, the new service will give more control to pension funds’ boards and offer a countervailing power against portfolio managers.Currently, Kempen Capital Management monitors €850m of property investments for eight Dutch pension funds.
The true mortality rates for UK people born between 1919 and 1929 are understated in official figures produced by the Office for National Statistics (ONS) due to the impact of uneven birth rates, academics say.A joint study from the Pensions Institute — part of Cass Business School, City University London – and Heriot-Watt University, Durham University Business School and Prudential Financial, found that anomalies in mortality rates can often be linked to uneven patterns of birth.The study showed these uneven birth patterns can lead to errors of more than 9% in the estimated size of some England and Wales birth cohorts.David Blake, director of the Pensions Institute, said: “Mortality rates are determined by the number of people who die at a given age divided by the population who remain alive at that age. “We have accurate data on the number who die each year, but the exposed population has to be estimated and it is usually estimated at mid-year,” he said.The researchers found that an uneven pattern of births within a given calendar year was a major cause of error in the estimated mid-year population, Blake said.An analysis of mortality data produced by the ONS showed a “puzzling” pattern of mortality improvements among people who were now aged over 90, going back to 1992, the institute said.It found this was due to a combination of effects.In 1919, births were much lower at the mid-point of the year — when they are measured — than they were on average that year, and then in 2001, a change in the method used to derive mid-year population estimates led to the number of people born in 1919 being overstated, it said.In its conclusions, the Pensions Institute called for a “fundamental review of all official mortality data and how users interpret these data.”Andrew Cairns of Heriot-Watt University said the study was a “reminder that real-world datasets are rarely as accurate as we would like them to be.”
A statement about the initiative describes it as “an urgent call to protect the Arctic from future oil exploration activities and align national climate-change pledges with the future of the region, which hosts significant hydrocarbon resources”.It says the investors are seeking “an unlimited moratorium on oil and gas activity in the Arctic high seas” and sets out a sub-set of demands that amount to a tightening of the operating environment for oil and gas companies active in, or targeting, the Arctic high seas – “the ultimate Arctic frontier that does not pertain to any single national sovereignty”.The sub-set of demands includes a call for companies to disclose publicly the licenses they hold in the region and how their plans to use these licences “fit with their broader climate-change mitigation commitments”.The initiative was announced yesterday, 3 November, seemingly to coincide with a high-level international event on climate finance being held in Casablanca today, which is also the day the December 2015 UN-brokered Paris Agreement on climate change enters into effect.Philippe Zaouati, chief executive at Mirova, said: “On the eve of Climate Finance Day in Casablanca, we would like to involve both companies and policymakers so as to take the Arctic issue to the next level and seek greater protection for the region.”Today’s entry into force of the Paris Agreement, which commits signatories to take action to keep global warming to within 2 degrees Celsius above pre-industrial levels, has generated a flurry of comments and announcements from a range of organisations and companies.The corporate group Oil and Gas Climate Initiative (OGCI), for example, today announced an intention to invest $1bn (€900m) over the next 10 years “to develop and accelerate the commercial deployment of innovative low-emissions technologies”.And in a tweet, the Institutional Investors Group on Climate Change said: “On 4 Nov, institutional investors will celebrate both hope & opportunity as the #ParisAgreement enters into force!” *Actiam, AXA Group, Bank J. Safra-Sarasin, BNP Paribas Investment Partners, Boston Common, Church of Sweden, Danske Capital, EdenTree, ERAFP, Friends Fiduciary Corporation, Ircantec, Mirova, Natixis Asset Management, Nei Investments, Pax, Préfon, Skandia, Trillium and Zevin French pension investors and asset managers are at the forefront of a call for an indefinite moratorium on oil and gas activity in the Arctic high seas from a international group of institutional investors.Nineteen investors* with more than €5trn in combined assets under management are backing the initiative, led by French pension investors ERAFP, Ircantec and Préfon, as well as Natixis Asset Management and its responsible investment arm Mirova.The call is aimed at oil and gas companies that have been involved in oil exploration in the Arctic, as well as members of inter-governmental forum the Arctic Council (Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the US).It will also be sent to Council permanent participants (organisations representing Arctic indigenous peoples) and observers (open to non-Arctic states and inter-governmental and non-governmental organisations).
German financial services companies transferred a record volume of pension liabilities from their balance sheet to BVV, the pension fund for the sector, in 2016.In total BVV collected more than €100m in one-off payments from employers running book reserve pension schemes, known as Direktzusagen. Through this model, companies make annual pension payments directly from their balance sheets rather than holding assets and liabilities in a segregated entity.The €26bn industry pension fund said this confirmed the trend for companies to outsource pension liabilities to external providers rather than keep them on their balance sheet.The transfer of liabilities happens by way of companies making one-off payments to BVV, which then takes on the pension obligations. According to a spokesman for BVV, in previous years payments made to the scheme were:“The banking industry in particular has been in a period of upheaval over the past 10 years or so and in a way is doing a bit of soul-searching”· 2011 – €5m· 2012 – €2.9m· 2013 – €26.8m· 2014 – €40m· 2015 – €5.9mMirko Buchwald, head of pensions management and products at BVV, told IPE that the record volume in 2016 was not due to any single event or development that happened during the year. Instead he said it was the reflection of a time-lag: companies, having been preoccupied with the repercussions of the financial crisis for several years, were now concentrating on core competencies and optimising their pension system as part of this.The low-yield environment, operational considerations, and strategic aspects were combining to prompt more and more companies to question the value of running Direktzusage schemes, said Buchwald.“The banking industry in particular has been in a period of upheaval over the past 10 years or so and in a way is doing a bit of soul-searching,” he said. “Things like pension provision are being closely examined as part of that.”The move to outsource pension provision was part of a wider trend towards collective industry-wide pension funds, which the government’s second pillar pension reform is likely to reinforce, added Buchwald. BVV expects companies to continue to shift away from book reserve schemes, he said.He said it was too early to say whether employers and unions in the finance industry would decide to set up one of the new defined contribution schemes, due to be introduced by the new pension legislation (Betriebsrentenstärkungsgesetz).
An additional contribution of €21m paid by employer Euronext in 2013 could not prevent the pension fund from implementing a 3% rights cut.Mercurius is currently in liquidation. Its pension plan is implemented by Delta Lloyd.According to the FD, among the plaintiffs is former claims lawyer Jeroen Wendelgelst and Rob Sandelowsky, Euronext’s former director of retail and institutional investors.It also reported that the claim was supported by the Association of Euronext Pensioners, which estimated the total damage at up to €50m in a case brought against Euronext in 2013.Although Euronext lost the case, it lodged an appeal. By suing the pension fund and its former chair, the plaintiffs aim to get compensation through their respective liability insurance policies.According to the plaintiffs, the pension fund had at best hedged 20% of its interest rate risk while it was underfunded.The FD said that the plaintiffs had discovered that Mercurius had “knowingly” ignored advice from consultancy Mercer.It added that the plaintiffs suggested that the chairman might have tolerated the failing policy as he was – between 1988 and 2002 – director at Bank Insinger de Beaufort, of which Mercurius was a client.The daily cited Wendelgelst and Sandelowsky as claiming that the bank could not provide interest derivatives and that therefore, the pension fund left the interest risk largely un-hedged.De Beaufort was also trustee at Euronext between 2005 and 2013.The FD quoted Mercurius’s lawyer Erik Lutjes as saying that the plaintiffs’ case was a “non-starter”.De Beaufort and Bank Insinger de Beaufort declined to comment. Three former staff of exchange Euronext are suing their pension fund and its former chairman for damages to their pension rights because of mismanagement, Dutch news daily Het Financieele Dagblad (FD) reports.In the case, which is unprecedented, the plaintiffs claimed that the pension fund Mercurius and its former chairman Rijnhard de Beaufort were negligent in hedging risks.Mercurius was also the pension fund for communication watchdog Authority Financial Markets, Euroclear Netherlands, LCH Clearnet Amsterdam, Atos Euronext Netherlands, and the Dutch Securities Institute.Under De Beaufort’s chairmanship, from 1986 to 2012, the scheme’s funding dropped to 83%, the FD reported.
The €3.2bn pension fund for the furnishing sector (Wonen) plans to transfer its pensions administration from Syntrus Achmea Pensioenbeheer to TKP Pensioen.If the statement of intent is approved by its accountability body, Wonen will become the last of the 22 industry-wide pension funds to leave Syntrus Achmea since the administrator announced in November that its IT system could not cope with large sector schemes.Pieter Verhoog, chairman of Wonen, said his pension fund had opted for TKP because of its competitive offer, as well as the fact it already serviced the €19.4bn sector scheme for the retail (Detailhandel).“TKP has ample experience with many participants coming and going,” he said. Verhoog also praised TKP’s pension planner service for scheme participants. Wonen’s chairman also said that long-running discussions between employers and unions to merge pensions and collective labour agreements for the furnishing and retail sectors had also played a role in choosing TKP.Since 2014, two efforts to merge the two pension funds have failed because a funding difference could not be bridged.At June-end, the coverage ratio of Wonen was 102%, while funding of Detailhandel stood at 109%.Verhoog said that there were no new plans for a merger, but he added that this could change if new legislation enabled mandatory sector schemes to merge with ring-fenced assets. This could could happen as soon as next year.At year-end, Wonen had 29,000 active participants, 14,000 pensioners and 96,000 deferred members.Its pension assets will remain with Achmea Investment Management, after it extended the contract at the start of 2016.Last April, Wonen transferred its board support from Syntrus Achmea to Rosmalen-based provider ABB voor Pensioenfondsen.Wonen is the second industry-wide scheme that moved to TKP Pensioen. The €1.4bn pension fund for private security (Particuliere Beveiliging) took the same step in October.
Dutch financial supervisors DNB and AFM have said they will not force pension funds to conduct derivatives transactions through central clearing if an expected extension of the current European exemption for pension funds comes too late.Both regulators followed the advice of European watchdog ESMA, which recommended that local supervisors should be flexible in case the European Union failed to extend the current exemption – which runs until 16 August for large pension funds.Yesterday, the UK’s Financial Conduct Authority said it would not require pension funds or their counterparties to start putting processes in place to clear derivatives in line with the European rules of EMIR.Although the general expectation is that the extension will be granted, the European Parliament, the European Commission as well its member states are still discussing details. In theory, large pension funds with more than €8bn of non-cleared derivatives must temporarily transact through central counterparties if there is no deal as of 17 August.Pension funds have been exempt from mandatory central clearing since 2012, and are still allowed to clear bilaterally with the bank with which the contract has been concluded.Last week, industry organisation PensionsEurope asked European regulators for guarantees that they would not enforce central clearing if an extension deal had not been reached in time.The Dutch Pensions Federation described the regulators’ position as a “proper solution of a temporary problem”.The problems don’t apply for smaller pension funds, which have been exempt from central clearing until the summer of 2019.
Portfolio management experts debated ideas around contemporary asset management practices at a pensions conference in Copenhagen, with one CIO arguing against the contention that the current investment environment was any more uncertain than earlier phases.In the panel discussion at the IPE Conference and Awards, moderator Joseph Mariathasan put forward an audience question on the claim that we are increasingly living in a world of radical uncertainty where many problems cannot be modelled by statistics.Chris Brightman, chief investment officer of Research Affiliates, said: “I reject the idea that we’re any more uncertain now than ever.”In his first job, Brightman recalled his boss counselling him to reject the temptation to start monthly commentaries by saying that now was a particularly difficult time to make a forecast or make an investment decision. “Never in my career at any time has it ever seemed like it wasn’t a particularly difficult and uncertain period,” he said.Fiona Frick, chief executive officer of Unigestion, said her firm had an answer to this.“What we’ve said is that we don’t want to forecast,” she said.“In the end we don’t know where the economy will be in one year or two years and I think central banks don’t know that either. So for a multi-asset portfolio what we try to do is to ‘nowcast’,” she said.However, even this, she said, was quite complex because commentators disagreed on exactly where the economy was in the cycle.“What we try is to define exactly where we are today in the macrocycle and twist our ideas towards these views, because one of the flaws of Markowitz is that in order to believe in this diversification you have a very long timeframe,” she said.The starting point for the discussion had been a video interview between Harry Markowitz, the winner of the 1990 Nobel Prize for Economics for his influential Modern Portfolio Theory, conducted by Mariathasan and Yves Choueifaty, president and CIO of TOBAM.Frick said what her firm had done – and what a lot of academics were working on – was harnessing the power of nowcasting, and understanding that different market environments and macroeconomic environments corresponded differently to risk factors that performed better or worse.“I think that is a very interesting area of development,” she said.Responding to the question of whether passive or active investment methods were better for public pension funds, Choueifaty took issue with the idea of comparing in retrospect whether an actively-managed pension fund would have outperformed had it instead allocated to a passive strategy.“I think it is a comparison you cannot do, because if you are asking this active manager to modify the past – and this would have had an impact also on the prices,” he said.Bright agreed, saying he had once heard Norges Bank compared favourably at a symposium to US pension fund CalPERS, for having made the retrospectively successful move of rebalancing its portfolio in 2008, whereas CalPERS was said to have chosen not to rebalance at that point.“You can’t compare CalPERS, which has a huge amount of liabilities and is making pension payments and outflows all the time and has no ability to get any money into the portfolio, to the Norges Bank portfolio that is buying future equities all the time,” he concluded.
A major international financial stability report shows that shadow banking slowed in 2018, and reveals pension funds as the fastest-growing extenders of credit in that year.In its Global Monitoring Report on Non-Bank Financial Intermediation 2019 published today, the Financial Stability Board (FSB) said non-bank financial intermediation (NBFI) – previously called shadow banking – grew by just 1.7% to $50.9trn (€45.9trn) in 2018, according to the board’s narrow measure.The measure includes non-bank financial institutions doing credit business seen as possibly posing bank-like financial stability risks.The FSB’s annual monitoring exercise is designed to assess global trends and risks from NBFI, and part of its efforts to boost the sector’s resilience. The 1.7% growth is significantly slower than the sector’s 2012-17 average annual growth rate of 8.5%, according to the report, which says NBFI now makes up 13.6% of total global financial assets.In addition, the FSB reported that collective investment vehicles with features that make them susceptible to runs – a group whose assets make 72% of the narrow measure – grew by 0.4% in 2018, much slower than the group’s average annual growth rate over the previous five years of 11%.Klaas Knot, chair of the FSB Standing Committee on Assessment of Vulnerabilities, said: “Non-banks play an increasingly important role in the global financial system.”He said the FSB’s monitoring report provided a significant resource for authorities to assess trends and risks from NBFI.“Such information is essential for a forward-looking, system-wide oversight framework,” he said.The detailed and comprehensive set of international data has been produced at a time when macroprudential authorities such as the International Monetary Fund, the European Central Bank and the Bank of England, have been arguing that asset management activities are becoming systemically more risky.The report also makes clear that lending activities by pension funds are now growing faster than those of banks and any other category of credit supplier.In 2018, pension fund credit assets increased by 7.1% – significantly faster than the 3.9% growth rate seen in 2017, according to the FSB’s report.“This growth was primarily driven by the US, but credit assets in India (33.3%), Hong Kong (15.5%) and Korea (12.6%) also grew at a high rate,” the board reported.By comparison, banks’ credit and lending increased by 5% in 2018, while that of insurance companies rose by 1.5% and OFIs (other financial institutions) saw their lending rise by 5.7%.However, banks still hold the vast majority of total credit assets, including deposits, with $114.5trn of the total $185.9tn, and among the four categories, pension funds are the category with the smallest amount at $8.8trn at the end of 2018.The FSB’s global report covers data from 29 jurisdictions representing more than 80% of global GDP.