ABP settles last remaining mortgage-backed securities lawsuits

first_imgThe €293bn Dutch civil service scheme ABP has reached a settlement with Credit Suisse and Morgan Stanley over the alleged mis-selling of residential mortgage-backed securities (RMBS).ABP had argued that both banks knowingly provided the pension fund with false and misleading information.According to its initial filing, it claimed it purchased RMBS in 2006-07 – “based on material misrepresentation and omissions” – that were far riskier than had been represented.The settlements mean ABP has now wrapped up all pending legal cases against banks stemming from disputed mortgage-backed securities. To date, it has settled with Deutsche Bank, JPMorgan Chase and mortgage provider Countrywide in similar cases, as well as Goldman Sachs, which with it reached an agreement in April. At the time, Henk Brouwer, chairman at ABP, said: “We are pleased to see these cases being concluded satisfactorily one by one.“We have full confidence all will be completed in due course, as evidence that all parties involved are looking to the future, leaving past grievances and practices behind them.”The pension fund declined to put a figure on the Goldman Sachs settlement, but a spokesman stressed that it had been “good by all standards”.Respecting the Credit Suisse and Morgan Stanley cases, ABP said it was “satisfied” with the outcome of the settlements but declined to specify the amounts involved, explaining that this had been one of the conditions agreed with the banks.last_img read more

Read more →

ABP ignores own rules on nuclear investments, argues pressure group

first_imgIt argued that as the Netherlands was a signsignatory of the NPT, it had legalised the possession of nuclear weapons by the five permanent members of the Security Council, the United States, Russia, the UK, France and China.The scheme added that as a result, firms that manufacture nuclear weapons or parts of it, are not excluded from its investment universe.ABP has investments in Rolls-Royce, Babcock Marine and BAE Systems, which are jointly developing British nuclear submarines.Responding to the accusation from the pressure group, ABP said that the Indian company did not supply products that were specifically designed for nuclear systems.“Therefore, the definition of direct involvement in the manufacturing of nuclear systems doesn’t apply, which excludes Larsen & Toubro from the exclusion list for violation of the NPT,” it said.It added that the pension fund was closely monitoring companies like Larsen & Toubro.The campaign group further noted that ABP had increased its investments in nuclear arms-related companies by 35% – totaling €1.1bn last year.“Even if these investments match ABP’s policy, we don’t agree with them,” commented a spokeswoman for the pressure group.The spokeswoman added that the group’s concerns were shared by a majority of the Dutch population, referring to the results of a survey among 8.500 members by television programme EenVandaag, of whom 64% indicated they opposed ABP’s investments in companies that manufacture nuclear arms, or any part of the arms.José Meijer, vice chairman of the pension fund, said that if the government adjusted its policy, ABP would be willing to reconsider its rules.Last year, ABP divested from Japanese power company Tepco, as it deemed the firm’s conduct during and after the nuclear disaster in Fukushima to be at odds with its norms.ABP said that, as a rule, it did not invest in anti-personnel mines, cluster weapons or chemical and biological weapons, as far as they contravene the NPT.This also goes for government bonds of countries liable to a UN arms embargo. A Dutch lobby group campaigning against arms trade has suggested that the €309bn civil service scheme ABP has ignored its own rules by investing in a nuclear arms-related company.Lobby group Campagne tegen Wapenhandel specifically highlighted a €9m holding in the Indian firm Larsen & Toubro, which is involved in the development of nuclear submarines for India.According to the group, the investment contravenes ABP’s policy to exclude investments violating the 1968 Treaty on the Non-Proliferation of Nuclear Weapons (NPT).ABP said on its website that it complied with national legislation and its obligations based on international treaties.last_img read more

Read more →

DNB warns of ‘impure decision-making’ due to conflicts of interest

first_imgMost pension funds’ boards pay insufficient attention to potential conflicts of interest of policy makers, pensions regulator De Nederlandsche Bank (DNB) has suggested.It indicated it was not satisfied with the outcome of a sector-wide survey, during which it checked whether schemes had conducted a risk analysis or had formulated a policy on conflicts of interest.DNB concluded that a large number of pension funds had not conducted an analysis, and had at best a policy that was not based on such a risk assessment.Additionally, it found that many schemes did not declare and register the main functions and jobs on the site of board members and other decision makers, and did not have a view on their private interests either. However, almost all pension funds had rules in place for how to deal with gifts, according to DNB.In its opinion, merely a handful of pension funds fully managed the risks posed by conflicts of interest.The watchdog commented that conflicts of interest could lead to “impure decision-making, which could harm pension funds”. Therefore, trustees must actively fight conflicts of interest, it said.DNB added that, during discussions with trustees, it had noted that the subject is charged, and that the sector needed clear examples as to what constituted a conflict of interest.As a consequence, the supervisor announced that it would draw up a number of good practices.last_img read more

Read more →

Hill calls for US collaboration to avoid ‘devastating’ clearing house collapse

first_img“So Europe and the US need to cooperate at an early stage and decide together how the risks of a failing CCP could be tackled safely.”Hill said during his confirmation hearings that one of his goals would be to tackle the ‘too big to fail’ risk of CCPs, pledging that a resolution framework would be published in 2015.Pension investors are currently exempt from central clearing as demanded by the European Market Infrastructure Regulation (EMIR) and were recently offered a further two-year exemption by the European Commission, as the executive decided there were still too many hurdles facing the sector to be able to clear trades.The commissioner also sought to assuage fears that closer cooperation, as part of the Transatlantic Trade and Investment Partnership (TTIP), would undermine the overhaul of financial regulation implemented by the US with the Dodd-Frank Act.“But we do think it makes sense to do what we can to make our rules compatible,” Hill said, “so that global businesses can operate more easily, and so that we have a larger and more efficient market, which should allow businesses to finance the rest of the economy more easily, thereby helping create jobs and boost growth.”Hill’s intervention came days before the general court ruling found in favour of a complaint by the UK and Sweden that argued it was discriminatory to require CCPs clearing euro-denominated trades to be based in a euro-zone member state. The court said the European Central Bank (ECB) had no right to limit the locations as part of the 2011 Eurosystem Oversight Policy Framework, despite its concerns “malfunctioning” CCPs outside of the euro-zone could destabilise the single currency. Ruling T-496/11 further found that, under the founding statues governing the ECB’s activities, it only had the ability to adopt regulations on CCPs, “rather than granting it an autonomous regulatory competence in respect of all clearing systems”.As a result, the court annulled the ECB’s framework in regards to CCPs.,WebsitesWe are not responsible for the content of external sitesLink to General Court ruling on ECB regulation of CCPs The European Commission must work collaboratively with the US to draw up a resolution framework for central clearing counterparties (CCPs), Jonathan Hill has urged.The commissioner for financial stability’s recommendation came days before the General Court of the European Union, part of the European Court of Justice, ruled that CCPs clearing euro-denominated trades did not need to be based in a country that was part of the single currency. Speaking at a conference in New York, Hill noted that an estimated $570trn (€509trn) in risk being cleared was “centralised in a handful of global CCPs”.“If one of these were to fail, the consequences could be devastating, and would be felt worldwide,” he said.last_img read more

Read more →

Discount-rate changes wreak havoc on Dutch schemes’ coverage ratios

first_imgFurther, in July, the pensions regulator (DNB) replaced the prescribed – and fixed – UFR of 4.2% with a progressive one, initially set at 3.3%.The rate, according to consultants, has since dropped to 3.2%.Frank Driessen, chief commercial officer for retirement and financial management at Aon Hewitt, said: “Because pension funds are only allowed to grant indexation if funding is at least 110%, inflation compensation seems far away.”He said the combined effect of UFR changes and the hiking of the prescribed financial buffers was likely to lead to more defensive investment policies at Dutch schemes, with less focus on generating surplus returns.Mercer estimated that adjustments to the discount rate’s calculation method had lead to a 6.5-percentage-point decrease in funding. Last year’s average 1.1% return on investments and 2% decrease in liabilities, in the wake of rising interest rates, failed to offset this “considerable” loss, according to Mercer actuary Dennis van Ek.He said rising interest rates and improved equity markets had, on balance, prevented a further funding drop over the course of 2015.“Had both remained unchanged, funding would have been close to 101% on average now,” he said, adding that such a drop was still possible if markets failed to improve further and 30-year swap rates remained at their current level of 1.6%.Mercer concluded that pension funds had lost up to 3% on their fixed income holdings last year, but that equity returned 6% on average.Commodities and hedge funds lost 16% and 4% on average, respectively, it said.Aon Hewitt cited a 7% return on equity and said property investments generated 8% last year, adding that the remaining asset classes produced a 1% loss on average. According to the consultant, pension funds’ coverage dropped 1 percentage point in December.It said the portfolio return was -3%, following losses on fixed income, equity and property of 2%, 4% and 1%, respectively.The rise in interest rates, which lead to a 2% drop in liabilities last month, partly offset the poor returns. The average coverage ratio for Dutch pension funds fell by 4 percentage points to 104% last year, due chiefly to changes in the way liability discount rates are calculated, consultancies say. Had the rates been left as they were, Dutch coverage ratios over 2015 would actually have increased by 2 percentage points, according to Mercer. Since the introduction of the new financial assessment framework (nFTK) at the beginning of last year, Dutch schemes have had to switch from using a funding representing the three-month average of their actual coverage to the actual funding, with the new rate also including an ultimate forward rate (UFR).Aon Hewitt said this adjustment had had a negative effect on pension funds’ coverage ratios.last_img read more

Read more →

Joseph Mariathasan: Can the private sector provide salvation for Greece?

first_imgWhy is the private sector in Greece still so underdeveloped? Yannos Hadjiioannou, a partner at London-based private equity and advisory firm Archipelago Investment Partners, argues that the Greek private sector has a share of the responsibility. In the good years prior to and following Greece’s accession to the single currency, a number of companies raised huge amounts of cash by floating on the stock market. A substantial part of that never got reinvested back in the economy. It showed a lack of discipline, he argues, resulting from the fact most of the enterprises are family businesses that were never that outwardly focused and had never reached out further than the Balkans.The contrast between the private sector in Greece and Germany’s mittelstand, the hugely successful SMEs that have provided the backbone to Germany’s economic success, is striking. Another telling comparison, says Hadjiioannou, and a great business case study is the SME space in Italy’s north, which has gone through various transformations from embroidery to car parts, retaining the strong links and support between them. Perhaps the EU should focus less on austerity for Greece and more on how the frameworks that support the mittelstand in Germany and the SME space in Italy can be encouraged in Greece.A key element for Germany is the decentralised banking system, with entities such as sparkassen (mutual savings banks) and volksbanken (cooperative banks), whose key asset is being near to local mittelstand clients. In contrast, the private sector in Greece is faced with a small number of major Greek banks with balance sheets destroyed by non-performing loans, which would need to be written off and the banks recapitalised before any new lending could hope to occur.Apart from agriculture, its strengths are clearly in tourism and shipping, but its educated workforce does open up opportunities even in leading edge technologies. For example, Greece has set up an incubator, Corallia, for high-tech startups specialising in microelectronics, biotechnology, telecommunication networks and space, which has attracted interest from venture capitalists in Europe and the US. Where the clearest opportunities may lie, though, are in exploiting its great strengths much further.Perhaps more tragically, the future of any country lies in its youth, and with a youth unemployment rate hovering around 50%, the danger for Greece is that its most valuable exports may be its educated young people. That may be acceptable for a US state, where depopulating Montana or even Puerto Rico as people seek work in California is nothing to worry about. But, for small countries within the EU, losing their most productive young workers to emigration is not a pleasant prospect. That is why developing a vibrant private sector should be a priority for Greece. If the EU can help to achieve that, it would be proof, indeed, that it is a community and not just a trading block. The UK never required that from the EU, but that is another story.Joseph Mariathasan is a contributing editor at IPE Developing the private sector should be a priority if Greece wishes to retain its young educated citizens, write Joseph MariathasanThe UK may be on a path towards Brexit, but the rest of the European Union (EU) has yet to resolve the underlying tensions that still threaten to tear it apart. Is the EU a community of states or just a trade organisation structured to stimulate demand in favour of the stronger economies? That existential question can provoke much discussion, but the relationship between the EU and Greece in the years ahead may provide the real answer. Whilst 52% of those voting in the UK referendum decided on leaving, it looks unlikely that a majority in Greece would vote to do so, despite the burdens of being stuck inside the euro-zone.Greece in many ways is very different from the rest of the EU, not least because, having been under the Ottoman Empire for 400 years, it missed out on the beginnings of the industrial revolution that swept through Western Europe. It still has a lot of catching up to do, particularly in the creation of a private sector that generates wealth and employment, which is why its relationship with the rest of the EU is so crucial.Remaining within the EU is an existential issue for Greece, even if remaining within the euro-zone may not be. The majority of the Greek population appears to be committed to remaining within the EU, but, as the Syriza government’s relations with the EU become more fractious with each debt-repayment crisis and greater austerity, the future looks increasingly gloomy.last_img read more

Read more →

Fixed income lifts Spanish pension fund returns over first half

first_img“The 10-year German bund ended June with a negative yield, while Spanish 10-year government bonds finished with a 1.25% yield, very close to the historic low of March 2015.“In this way, pension plans with exposure to long-term fixed income achieved very positive returns over the year.”Average annualised returns for Spanish occupational funds were 5.03% for the three years to 30 June 2016, and 4.77% for the five years to that date.As of the end of June, total assets under management for the occupational pensions sector stood at €34.9bn, a decrease of 2.2% over the past year.The number of participants remains stable, at just over 2m.Total pension assets, including those in individual plans, amount to €103bn.The biggest single component of pension fund portfolios – 31.8% – is still invested in Spanish government bonds, with a further 17.9% in Spanish corporate bonds.Since December 2015, there has been a slight dip – 1.5% – in government bonds, with a 2% rise in corporate bonds.Fixed income investments outside Spain make up 8.2% of portfolios, giving a total of 57.9% for fixed income as a whole.Equity allocations are slowly increasing, making up 23.1% of portfolios as of the end of June (8.4% domestic, 14.7% non-domestic) compared with 22.6% at end-2015, and 21.4% at the end of June 2015.Meanwhile, the slight shift to non-domestic assets over the past year has consolidated, with 22.9% of portfolios now invested outside Spain at the end of June 2016, compared with 19.4% a year previously.Xavier Bellavista, principal at Mercer, said: “The reduction in the level of risk has been happening in the past few months, anticipating the uncertainties we expected for 2016, such as interest rate decisions and Brexit.“When these events happened, we did not see many short-term reactions, as most occupational pension funds had reduced their risk levels.“However, they are following the situation to see if they need to further adjust or reduce their level of risk.”Mercer’s Pension Investment Performance Service (PIPS) shows non-EU fixed income was the best-performing asset class over the six months to the end of June 2016, returning 5%.EU fixed income, which Bellavista considers to have been regarded as a safe haven by investors, returned 2.4%.The PIPS survey covers a large sample of Spanish pension funds, most of them occupational schemes.Non-EU equities returned -1.4% over the period, while EU equities were the worst performers, with -9.4%.Alternatives, however, returned 1.7% over the first six months of 2016.Turning to the next 12 months, Bellavista said: “We expect funds to continue working on diversification, especially looking for alternatives to fixed income assets.“We don’t expect a significant change in the main asset class exposure but an increase in the underlying asset classes – for example, absolute return fixed income, private debt, convertibles and high yield.” Strong fixed income performance over last June, caused by the UK’s vote for Brexit, helped Spain’s occupational pension funds pull back their returns to -0.49% for the 12 months to the end of June, according to the country’s Investment and Pension Fund Association (INVERCO).The pension funds had made -3.33% for the 12 months to the end of March 2016, the negative returns created by market instability in the first few months of the year.However, INVERCO said the uncertainty caused by the results of the UK’s June referendum disrupted financial markets that month, with global markets in most countries, especially in Europe, experiencing sharp corrections.“The strong increase in risk aversion prompted a shift by investors towards safe haven assets,” INVERCO said.last_img read more

Read more →

OECD: Number of pension funds halve in Denmark, Netherlands and UK

first_imgThe fall in pension fund numbers may have been the result of mergers, closures or acquisitions, it said.“Mergers between pension funds may result in economies of scale and potentially help pension funds to become more competitive,” it added.On the other hand, some pension scheme closures may have resulted from difficulties in delivering the terms of contracts or meeting funding requirements in case of defined benefit (DB) plans, the OECD said.“The 2008 financial crisis and falling interest rates caused the funding position of DB plans to deteriorate,” it said, adding that difficulties in meeting funding requirements may have forced underperforming funds to wind up. The amount of assets invested per pension fund, however, increased between 2005 and 2015 in almost all countries for which data were available.Related to the fact that pension systems are consolidating, particularly in Europe, the OECD outlined the findings of an analysis into whether there were a link between the number of pension funds in a pension system and the real net returns produced overall.“Countries with a declining number of pension funds may experience higher net returns if underperforming funds exit the market,” it said.But alternatively, it said, a low number of pension funds could lead to a situation of oligopoly, with a potentially lower level of competition than in countries with more funds. Results showed that countries with 30-149 pension funds had experienced higher real net returns than countries that had more pension funds between 2005 and 2015.In the year 2015 alone, however, there was no relationship between the number of pension funds and the real net rates of return, the OECD said. The number of pension funds has fallen markedly in many OECD countries over the last 10 years, and the Netherlands, Denmark and the UK have witnessed the largest shrinkage in percentage terms, according to a report from the organisation.In its 2016 Pension Markets in Focus report, the OECD said the number of pension funds had decreased in 15 OECD countries and nine non-OECD countries in 2015 compared with 2005, with 14 of those 15 OECD countries being European.The report said: “The biggest change, compared with 2005, occurred in the Netherlands (-60.1%), Denmark (-60.0%) and the United Kingdom (-52.3%).”In terms of the total number of pension funds to disappear, the largest decrease was in the UK.last_img read more

Read more →

Wednesday people roundup

first_imgTwo other non-executive board appointments were announced: Joining the RPMI board is Richard Jones, who is a director of RPMI’s parent, the Railways Pension Trustee Company Limited (RPTCL). Joining the board of RPMI Railpen is John Chilman, who is group pensions director at FirstGroup plc and chair of RPTCL.Allianz Global Investors – Arne Tölsner has been appointed head of institutional for Germany and Austria, with responsibility for leading sales and client account management for institutional clients in these countries and occupational pension providers. Tölsner has been at Allianz GI since 2001, having most recently been global head of product specialists. He started in his new role at the beginning of January. Hermes Investment Management – The £28.6 billion manager has appointed Douglas Anderson as head of consultant relations. Based in London, Douglas will report into Mark Miller, head of UK, Middle East, and North Africa institutional, and will be responsible for the development and maintenance of relationships with UK and European based consultants. Douglas joined Hermes from Lazard Asset Management, where was head of consultant relations. Before Lazard he worked at Capital International, Bacon & Woodrow (now Aon Hewitt) and Hymans Robertson.Columbia Threadneedle – Ulrik Holm Oxfeldt joined the asset manager as head of Nordics on 1 February 2017. He will lead Columbia Threadneedle’s sales and client relationships in Denmark, Sweden, Finland and Norway. Holm Oxfeldt has previously worked in business development and senior client-facing positions at PFA Asset Management, SEB, Nordea and ABN AMRO. Quaero Capital – Amancio Perez has been appointed head of Iberian business development, a new role aimed at growing the fund manager’s presence in Spain, Portugal, and Andorra. The company also plans to hire a representative for Latin America. Perez was previously a senior sales manager at Pictet & Cie.Insight Investment – The investment manager has expanded its emerging market debt team team with the appointment of Darren Louis as portfolio manager. Louis reports directly to Colm McDonagh, head of emerging markets. He joins from Morgan Stanley, having previously also worked for Deutsche Bank and UBS.  MSCI – Peter Zangari has been named global head of research and product development and the data provider. He joined from Goldman Sachs in 2011, initially taking the role of head of equity analytics. Jorge Mina will succeed Zangari as head of analytics.Remy Briand, head of environmental, social, and governance (ESG) and real estate, has given up his research responsibilities to focus on product development. Briand was the “architect of the ESG product line”, MSCI said. Kempen Capital Management – The €46bn asset manager has hired Richard Jacobs, Sven Smeets, Edzard Potgieser, and Bram Bikker from Swiss fiduciary group Altis Investment Management. They join from Altis’ 16-strong leadership team.Jacobs and Smeets were managing directors at Altis. Potgieser was senior portfolio manager for alternative investments. Bikker was head of equity and fixed income, responsible for beta and factor investment strategies. Altis runs €45bn in assets and is part of Dutch NN Group. The appointments follow in particular Kempen’s increased focus on fiduciary management. The company said it also wanted to create private markets solutions as well as to further innovate on external manager selection.RPMI Railpen – The UK’s £25bn (€29bn) Railways Pension Scheme has appointed Julian Cripps as managing director of investment business, a new role from which he will lead RPMI Railpen, the scheme’s in-house investment manager. Cripps has been chief operating officer for investments at RPMI since 2015, but “now takes a wider role in leading the business in its vision to be a world-class asset owner”, RPMI said in a statement.RPMI Railpen’s three investment directors – Ciarán Barr, Paul Bishop, and Richard Williams – now report to Cripps, who in turn reports to Chris Hitchen, CEO of RPMI. Cripps has also been appointed to the RPMI board as an executive director of the company. RPMI oversees administration and operations of the pension scheme.last_img read more

Read more →

France’s Ircantec slashes govvie target in strategy overhaul

first_imgIrcantec, the €9.8bn French public sector pension scheme, has decided a new strategic asset allocation that places much less weight on nominal government bonds. It has cut its sovereign bond weighting from 30% to 10% as part of the changes.The new allocation includes:Equities: 40%Inflation-linked debt: 20%Sovereign bonds: 10%Credit: 20%Real assets: 10% The real asset category includes real estate, private equity, private debt, and infrastructure.Caroline Le Meaux, head of delegated management at Caisse des Dépots et Consignations, Ircantec’s fiduciary manager, told IPE the scheme had been working on the new strategy for at least a year, having diversified its bond and equities portfolios.“The bond portfolio used to be euro-centric but is now more global. Equities also used to be euro-centric but are now more global,” she said.The decision to increase exposure to equities and real assets and broaden its bond exposure was a response to the low yield environment, according to Le Meaux.Ircantec’s current allocation to equities is already 36%, and it is also already at its target for credit.CDC is looking for an overlay manager for Ircantec in connection with the new asset allocation, and launched a request for proposal a week ago. The mandate is for risk management of the entire portfolio, and will be “embedded” in a €1.2bn global sovereign debt fund, according to Le Meaux.“Because overall the risk profile is increasing, Ircantec needs a tool to manage the risk,” she said.The new strategic allocation is for four years, but can be changed during that period.Ircantec’s previous strategic asset allocation had a 29% allocation to equities and 5% allocation to real assets, with everything else in bonds.There was a 45% allocation to nominal bonds, with around 30% of that being for sovereign bonds.last_img read more

Read more →