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UK fiduciary management survey shows increase in full delegation

first_imgFull delegation of UK pension fund investment management continues to grow strongly, showing a 20% increase over last year, according to KPMG’s 2013 survey of the UK fiduciary management (FM) market.The survey covers the period from 30 June 2012 to 30 June 2013.KPMG said asset under management (AUM) growth was slightly lower than in the previous year, which was consistent with its expectation that FM would continue to grow over the medium term, though at a more normal growth rate.Assets run by fiduciary managers on a fully delegated basis currently stand at £29bn (€34.7bn), about 2.6% of the UK market, run across 211 UK pension scheme mandates. Alongside this there remains a large partial delegation FM market covering an additional £30bn of AUM across 135 mandates.The survey of 11 core providers also showed that 91% of full delegation mandates have AUM of less than £250m, compared with 88% in 2012, highlighting an increasing interest in fiduciary management from smaller UK schemes.Implemented consultants continue to hold most of both the mandates (75%) and market AUM (69%), but their market share has fallen from previous years.A review of the overseas presence of UK FM providers found that the global experience was significantly different, with asset managers and specialist providers having materially more overseas AUM than implemented consultants.For schemes engaged in FM, the use of independent advice to monitor and challenge a fiduciary manager has increased significantly – 53% of mandates now operate with independent advice, compared with only 30% in 2012.Calum Brunton Smith, head of fiduciary manager research at KPMG Investment Advisory, said: “We think it’s best practice to have an independent adviser.“The number of schemes using independent advice is growing because they have greater awareness of the market.“And the market has become increasingly competitive, so trustees are not considering just one provider.”But Brunton Smith said there was still an important gap in terms of FM transparency.“There is a compelling argument for some clients for using fiduciary managers, as they can provide increased efficiency and expertise in negotiating volatile investment markets.“But we don’t have the proof to say this has added value to the fund.“You would never appoint an asset manager without knowing their track record, but trustees are actually in this position when selecting a fiduciary manager.”He suggested possible indicators fiduciary managers might publish, for a basket of clients, could include how growth assets had performed compared with their value when the mandate started, and changes in funding levels.Brunton Smith also said it was still difficult for trustees to ascertain what the fee scale was.The survey also showed that specialist FM providers account for the largest relative market share increase (34%) when compared with other FM models.Patrick Disney, managing director at SEI Institutional Group for the EMEA region, said: “The survey reflects a clear recognition among pension schemes of the benefits of partnering with a specialist provider that can promise an exclusive focus on delivering customised FM solutions.”SEI has secured 11 new FM mandates during the survey period.Meanwhile, KPMG is planning a survey of pension fund trustees engaged in FM, to be published next spring.last_img read more

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ABN Amro switches to CDC in €700m deal

first_imgDutch bank ABN Amro has struck an agreement with unions to transform its current €13.6bn defined benefit pension plan into a collective defined contribution (CDC) arrangement, as part of its new collective labour agreement (CAO). The change will take effect as soon as the unions have received their members’ approval and will affect both existing and new pension rights. Rabobank opted for a similar route for its pension arrangements, whereas banc-assurer ING chose to set up two new pension funds. Under the terms of the new CAO, ABN Amro will no longer have to address any funding shortfalls in the scheme. As compensation, the employer agreed to contribute €500m in a one-off payment.In addition, the pension fund would receive €200m in order to pay for the planned indexation in arrears without having to put pressure on its coverage ratio, which was 122% at February-end. The CAO negotiations have taken more time the initially expected. More than a year ago, ABN Amro consulted the unions about its plans for a new pension scheme.The new arrangements were scheduled to come into force on 1 January 2014, affecting the pension fund’s almost 85,000 participants in total.last_img read more

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ABP expects to divest more than 1,500 holdings with new SRI policy

first_imgIt plans to increase its investments in renewable energy alone by five times to more than €5bn.It will also earmark €500m for investment in local education-related infrastructure and property and allocate a similar amount to communications infrastructure.ABP estimated that its overall holdings would drop from approximately 5,000 to 3,500 as a result of its new policy.It said it would also increase engagement with those companies in which it remained invested.The reduction in the overall number of holdings is expected to result in a €30bn shift within the scheme’s investment portfolio.This money is to be re-invested in similar companies that do meet ABP’s SRI requirementsBut Wortmann-Kool took pains to emphasise that ABP did not expect its new policy would come at the expense of returns, arguing that it could even improve results.The pension fund, however, will not follow a sustainability benchmark, “as this would make portfolio changes predictable and therefore have a negative impact on returns”. Wortmann-Kool said ABP’s new policy stood to increase its “clout” in engaging with companies.“Partly due to pressure from us,” she said, “Shell has refrained from drilling in Alaska, and we want more of that.”As part of its new global engagement policy, ABP said will increase its focus on labour safety in the textile industry and shipping, on human rights in the ICT and energy sectors and on child labour in the cocoa industry.ABP decided to revise its SRI policy after it found, through a series of surveys, that the changes enjoyed the support of most of its 3m participants.The pension fund said it would engage with its stakeholders regularly to develop its SRI approach further.Responding to the policy change, pressure group ABP Fossil Free – in part made of ABP participants and claiming the support of 17 social organisations with more than 1m supporters – said the pension fund should divest from fossil fuels.It noted that ABP’s current stake in fossil fuels was more than €30bn, compared with €1bn in renewable energy.Chris Roorda, co-founder of the campaign, said ABP’s fossil fuel holdings were not only destroying the climate but “jeopardising” pensions, as “a majority of fossil fuels can’t be burnt to avoid catastrophic climate change”. ABP will ask every company in its investment portfolio to “re-apply” as part of the €356bn civil service pension fund’s new socially responsible investment (SRI) policy.Outlining ABP’s new approach, chairman Corien Wortmann-Kool said the scheme would ask companies to detail how responsibly they operated and how much attention they paid to sustainability.ABP aims to reduce its entire portfolio’s ‘carbon footprint’ by 25% by the year 2020.The pension fund is to double investments in such things as renewable energy, clean technology and commodity recycling to more than €58bn over the next five years.last_img read more

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UK roundup: Institute for Fiscal Studies, Aegon UK, PIC

first_imgAuto-enrolment has been most successful with respect to younger employees, aged 22-29, and relatively low earners, according to the IFS.It has also had a positive impact in terms of boosting membership of workplace pensions among those not directly targeted by the policy.Kate Smith, head of pensions at Aegon UK, said there were “some really positive signs auto-enrolment is working” but that contribution rates remained a concern, as even the total of 8% of earnings that the minimum contribution will rise to by April 2019 is “unlikely to be enough for an adequate income for retirement”.The auto-enrolment policy also fails to capture workers in increasingly common “non-standard working arrangments”, she said, so care needs to be taken to incentivise these workers to save for retirement. In other news, Pension Insurance Corporation has priced an issuance of £250m of subordinated debt with an annual coupon of 8% and a maturity of 10 years.It will use the proceeds to meet expected demand from UK defined benefit pension funds for wholesale insurance annuity products.CFO Rob Sewell said: “We have had a very successful second half and expect continued significant interest from pension funds for bulk annuities. “We have taken advantage of a window of market opportunity to bolster our considerable financial resources to be able to meet that increased demand.” Research published by the Institute for Fiscal Studies (IFS) has found that the automatic-enrolment of employees into workplace pension schemes increased pension saving by £2.5bn (€2.9bn) per year to April 2015 as a result of a large increase in pension membership.The IFS said auto-enrolment increased pension participation among those eligible by 37 percentage points, so that, by April 2015, 88% of these private sector employees were members of a workplace pension scheme.Before the advent of auto-enrolment, the figure was around half, and membership had been falling, according to the research institution.  The research was based on data from April 2011 to April 2015.last_img read more

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High-deficit pension sponsors ‘could outperform’ in 2017

first_imgCompanies with high pension deficits could see their stock prices outperform if bond yields continue to rise, a strategist has predicted.Ankit Gheedia, European equity and derivative strategist at BNP Paribas, argued in a strategy note that a basket of 40 European companies with the highest pension deficits relative to their market capitalisation would outperform European equity indices if liabilities fell this year.“Since August, credit yields have risen sharply amid the global bond market sell-off,” Gheedia said.“Higher yields should be a relief for pan-European companies struggling with pension deficits as a result of low interest rates, and we expect a reversal in the pension liability trend as yields climb back up to pre-Brexit levels.” Companies in BNP Paribas’s ‘Pension Deficit Basket’ had an average pension shortfall of 37% of market capitalisation.The basket included a significant exposure to industrial, material and consumer discretionary companies.Gheedia reported that the stocks were valued at “near three-year low levels”.A number of reports in recent years have sought to highlight the danger to shareholders posed by sponsors’ obligations to large pension funds.For example, a 2014 study by Pension Insurance Corporation and Llewellyn Consulting found that, for every £100 (€117) increase in a FTSE 100 company’s reported pension deficit, its market capitalisation declined by £160.The study said: “The implication is that reported pension liabilities are regarded by markets as being systematically undervalued; that markets give larger weight to pension liabilities than to pension assets; and/or that a higher level of liabilities is viewed as representing a higher risk.” UK 10-year government bond yields have risen from an all-time low of 0.518% in mid-August to 1.335% on 4 January.BNP Paribas strategists have predicted a continued rise towards 2.15%, which Gheedia said should push corporate bond yields higher.“This could drive a substantial reduction in the pension deficit reported by companies during the latest earning season,” he said.#*#*Show Fullscreen*#*#last_img read more

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Testing the Brexit downside: MSCI’s best and worst-case scenarios

first_img“Markets would price in new perceptions in a short period of time,” he added.The “rough” Brexit scenario imagines the UK failing to conclude new agreements and custom rules with its major trading partners before the end of the two-year period for exiting the EU once Article 50 is triggered. Scotland voting to leave the UK also “fits into this scenario”, said MSCI.Other assumptions include the pound weakening 16% against the dollar and the euro, and sharp falls in equity markets in the UK and the EU.If such a scenario were to materialise, a globally diversified multi-asset class portfolio could lose as much as 7.8%, according to MSCI. A risk-parity portfolio with enhanced exposure to global bonds might mitigate the impact, losing 5.8%. Global equity portfolios were expected to lose as much as 11% on average.If the UK were to successfully conclude trade deals with the EU, but with fewer benefits than before, portfolio losses would be lower, MSCI said.In such a “smooth” Brexit scenario, the data provider said a globally diversified multi-asset class portfolio would lose “as much as 1.6% of its value”, while a risk-parity portfolio would lose 1.1%.The third scenario envisaged the UK being perceived as “an island of safety” due in part to bilateral trade relations with the US and China, while anti-EU parties were propelled to power across Europe. Assumptions include sterling gaining 16% against the dollar, UK equities gaining while European stocks fall, and investors pricing in a higher risk of defaults in Europe.If this were to occur, the same portfolio as tested for the other scenarios could gain as much as 3.5%, while a risk-parity portfolio could lose 3%, according to MSCI. Institutional portfolios could lose nearly 8% of their value under a ‘hard’ Brexit scenario, according to analysis carried out by MSCI.On the flip side, a positive outcome in the UK’s favour would add 3.5%, the data firm’s risk tools indicated.MSCI examined three scenarios that it described as “rough Brexit”, “smooth Brexit”, and a Brexit that benefits the UK.Thomas Verbraken, vice president of risk and regulation research at MSCI, said that each scenario imagined a series of shocks, which MSCI applied to a globally diversified portfolio (60% equity, 40% fixed income).last_img read more

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Pension costs taking a chunk out of UK plc profits: report

first_imgSource: Barnett WaddinghamOne of the only factors acting to reduce liabilities was mortality, Barnett Waddingham said. According to work by the UK’s Continuous Mortality Investigation released earlier this year, longevity has not improved overall for the country’s population since 2011.Barnett Waddingham estimated that, if this data had been used in financial statements last year, it would have reduced the aggregate deficit by roughly £10bn.Despite the gloomy outlook, Nick Griggs, partner at Barnett Waddingham, said: “It is also worth bearing in mind that if equity returns continue at the levels seen in the last few years, long-term interest rates rise more than expected and longevity increases do not provide any nasty surprises, the pension deficit problem could solve itself.“We must remember that the deficit is essentially the difference between two much bigger numbers and a few gentle economic triggers could completely change the picture. This is why many companies are not rushing to clear deficits quickly with additional cash contributions.”Barnett Waddingham’s report also found that the aggregate deficit increased as a proportion of total market capitalisation in 2016, despite the equity market’s strong performance. Source: Barnett WaddinghamIn separate research also published today, JLT Employee Benefits found that the UK’s 100 largest listed companies had combined DB liabilities of £681bn at the end of last year, an increase of £95bn in 12 months.Of those companies, 16 had liabilities in excess of £10bn, while 10 had liabilities bigger than their market capitalisation.JLT’s research showed that measures such as closing to new and existing members had made little difference to DB obligations. Provisions fell by 12% in 2016, the company said. The aggregate shortfall across FTSE350 defined benefit (DB) pension schemes was equal to 70% of 2016 pre-tax profits at the end of last year, according to Barnett Waddingham.In the consultancy and actuarial firm’s latest annual Impact of Pension Schemes on UK Business report, Barnett Waddingham said the aggregate DB deficit across the UK’s 350 largest companies rose by £12bn (€12.9bn) to £62bn. This compared to the companies’ combined £88.9bn in pre-tax profits generated last year.Changes in actuarial assumptions such as discount rates had led to the aggregate deficit remaining broadly unchanged since 2009, Barnett Waddingham reported, despite £70bn being paid into schemes in that period (see chart, below).“Based on the substantial amount of deficit contributions paid by FTSE350 companies since 2009, an aggregate surplus was expected to have materialised by this point,” Barnett Waddingham said in its report. “However, the sharp fall in corporate bond yields since 2009 (and the corresponding drop in IAS19 discount rates) has put paid to these expectations.”center_img Discount rates used in 2016 were on average 3% a year lower than those used in 2009, the firm said, increasing the cost of meeting liabilities by more than 70%.Cumulative actuarial losses amounted to £63bn between 2009 and 2016, the company said.last_img read more

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Largest Dutch union demands retirement age freeze in new system

first_imgThe Netherlands’ largest union has demanded a freeze in the state retirement age and pension provision for self-employed workers in return for its support for system reforms.In an interview in Dutch daily newspaper De Volkskrant, Tuur Elzinga, the FNV union’s trustee tasked with the pensions dossier, said that the union had linked the state pension (AOW) to the proposed new second pillar rules “as these subjects are intertwined for our members”.“They look at the combined financial result, and a decent pension doesn’t make much sense if people don’t have the time to enjoy it,” he said.In the opinion of the FNV, the Dutch government’s decision to raise the state pension age to 67 in 2021 was unrealistic. “People can’t keep up with it,” Elzinga said. “In particular for low-paid workers in hard manual jobs, the longevity-linked AOW age is turning out to be disastrous.“These workers have started their career early and have to work longer, while they tend to live shorter [lives] than higher educated people.”“We are already preparing for an offensive.”Tuur Elzinga, FNVThe FNV trustee added that the current proposals for a new pensions system lacked pension provisions for the approximately 1m self-employed – also known as ‘zzp’ers’ – and flexible workers, most of whom save little or nothing for retirement.“In order to prevent ‘individual pension dramas’, to counter unfair competition between employed workers and self-employed, as well as to keep support for the pensions system, something must be done,” the paper quoted Elzinga as sayingHe indicated that negotiations about the position of zzp’ers in the new social agreement between unions and employers hadn’t produced any results yet.According to Elzinga, “nobody” understood why, despite the economic prosperity of recent years, it was still impossible to link pension benefits inflation.In the coalition agreement between the four parties forming the Netherlands’ new government, the parties said that they expected an agreement on pensions to be reached early next year.However, Elzinga said he didn’t expect social affairs minister Wouter Koolmees would force through arrangements without the FNV’s support.“Given the coalition’s tiny majority in parliament, the government will not succeed without broad support from society,” he said.Were Koolmees to introduce a new pensions contract anyway, the FNV would block a transition if it thought such a setup wasn’t an improvement, Elzinga said.“We are already preparing for an offensive,” he said.last_img read more

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The castle that needs a royal touch

first_imgThis suburban castle is located at 2 Lunar Place, Bridgeman DownsThe six bedroom residence has soaring ceilings, imported materials and ornate features, a grand staircase and a palatial floorplan. Hello down there loyal subjects.Inside you are greeted by soaring 20ft ceilings and a stunning two metre imported crystal chandelier encased by a circular butterfly staircase and exquisite Traveston tiles. One thinks this must be the throne roomIn the lobby a double staircase with carved cherry wood balustrades is illuminated by an impressive crystal chandelier. From here you can look out over Westeros, umm, I mean the Sunshine Coast hinterland.The Duke and Duchess of Sussex touched down in Australia this morning ahead of the Invictus Games, and while house hunting may not be on their itinerary, we are sure the king of this castle would be happy to give Harry and Meghan the royal tour. Blingy!There are seven kingsize bedrooms, a Porte Cochre entrance with circular driveway, a pool, sauna, outdoor kitchen, all within the poolside cabana area and billiards room.Finally, if the couple are more in favour of an escape to the country, Mountain Lake Manor at Clear Mountain could be the bee’s knees. And here it is from the backSplit over four levels, there is also enough parking for 12 vehicles. And in Southport, an “inner city country manor” can be located at 2 Charlton Street. Weddings cost a bomb so Ridgewood Castle, and its apartment price tag, might be just what the newlyweds are looking for.Also on the market is The Abbey, a 14 bedroom property being marketed as ‘Australia’s cheapest castle’. A dry moat surrounds this castleIT is no Kensington Palace but this gothic castle is just crying out for the royal touch. And it comes with its own moat. center_img Sure its nice but the Duke and Duchess of Sussex have to share Kensington Palace with his brother and sister-in-law, cousins, and other notables. (Photo by Jack Taylor/Getty Images)The Ridgewood castle sits on 3.4 hectares and has its own entrance bridge, soaring archways and even turrets.And it won’t cost the crown jewels. Coooooeeeee!And after a hard day serving your subjects, there is a poolside summerhouse with sauna, spa and outdoor annex adjoining the tennis court, a freestanding golf room, a bar and billiards game room, and a step up bath befitting a regal rump.At Bridgeman Downs, there is 2 Lunar Place — a suburban castle that could be Brisbane’s Buckingham Palace. Ridgewood Palace is on the market for offers over $850,000 making it a greater starter castle for the young royals.It is on the market for offers over $850,000, leaving plenty of gold bullion in reserve for a royal reno. All offers over $2.2 million will be presented to the owners of The Abbey in Warwick — a bargains hen you consider the amount being spent to renovate Buckingham Palace.The three storey sandstone masterpiece has 50 rooms including a chapel, a grand dining room and function rooms.It was designed by the same architect behind the Breakfast Creek Hotel, has stained glass from the Munich Royal Bavarian Art Institute for Stained Glass, who also made glass for the Vatican, a statue designed by Frederic Auguste Bartholdi, who designed the Statue of Liberty, and Wunderlich pressed metal ceilings.More from newsParks and wildlife the new lust-haves post coronavirus16 hours agoNoosa’s best beachfront penthouse is about to hit the market16 hours agoThe royal suite is pretty sweet!One could call this home for an offer over $2.2 million.In Gilston, a grand manor on riverfront acreage is on the market at 392 Gilston Road.With the feel of a Spanish castle, the manor is set on five acres and has solid limestone walls, soaring ceilings and expansive living areas.The dining room is more like a banquet hall or culinary cathedral, with its atrium ceiling, water fountain and chandelier. That chandelier probably cost more than your car, seriously!Each room exhibits an individual decor theme using ornate ceiling and wall treatments, decorative panelling and exquisite wallpapers by Designers Guild and Ralph Lauren. Antique mirrors, imported high-gloss tiles and Perrin Rowe tapware are just some of the regal touches. Jaw hits floor …There are seven individually designed bedrooms including a master suite with a raised bed platform, crystal chandelier and an extensive ensuite. That ensuite includes a spa bath, double shower, toilet, bidet and floor to ceiling marble tiles. Outside there is a resort style saltwater infinity edge pool and entertaining pavilion, horse paddocks, a dam, underground water tanks and a designated area for a tennis court.last_img read more

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Ironman Matt Poole on why he calls the Gold Coast home

first_imgIronman Matt Poole loves living on the Gold Coast.NUTRI-GRAIN Ironman Series champion Matt Poole shares his dream home and why he loves living on the Gold Coast. DREAM QUEENSLAND HOME I love the ocean and warm weather, it’s a huge part of my lifestyle.If I was to leave Australia one of my favourite areas to travel is Newport Beach in California. I would love a mega house on the beach there at Newport, perfect for summer parties and always plenty of night-life and action. CURRENT HOME The first home I bought was in Mooloolaba on the Sunshine Coast, it cost $550,000. I had moved to the Sunshine Coast to further my ironman career and compete for Mooloolaba Surf Life Saving Club. This was the best place for me to be for training, plus I loved all the local restaurants and cafes close by. My current house is in Broadbeach Waters on the Gold Coast. After seven years on the Sunshine Coast I moved to the Gold Coast to compete for Kurrawa Surf Life Saving Club. Broadbeach Waters was central to me for all my training facilities and I love the area with Pacific Fair, Star Casino and plenty of great restaurants all close by. More from newsParks and wildlife the new lust-haves post coronavirus15 hours agoNoosa’s best beachfront penthouse is about to hit the market15 hours agoMatt Poole at Kurrawa Surf Club. Photo: Richard Gosling. I really love the Gold Coast and can’t see myself moving anytime soon. My dream home would have to be something on beachfront with a really nice clean and modern feel to it.Some of my favourite areas are Broadbeach, Burleigh and Palm beach. FANTASY HOME FIRST HOMElast_img read more

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