The three large KLM pension funds have reported returns of between 4.3% and 5.5% over the second quarter, but saw their funding only rise marginally due to the effect of falling interest rates on the schemes’ liabilities. With a return of 5.5%, the €2.3bn scheme for cabin staff (Cabinepersoneel) was the best performing pension fund.Its year-to-date return on investments is 9.5%.Its 40.7% fixed income income allocation generated 4.2%, while its 43.6% equity and 9.7% property portfolios delivered 4.8% and 5.1%, respectively. The scheme’s quarterly profit included a 1.4% result on its interest hedge of 50% of its liabilities.However, it lost 0.1% on its equity hedge.The funding of the Pensioenfonds KLM Cabinepersoneel improved by 0.1 percentage points to 123.7%.The €6.9bn pension fund for ground staff (Algemeen Pensioenfonds KLM) reported a 4.7% return, and a year-to-date return of 8%.Its fixed income, equity and property holdings produced quarterly returns of 4.4%, 4.6% and 5%, respectively.At the end of June, the coverage ratio increased to 123.1%.KLM’s €7.6bn pension fund for cockpit staff (Vliegend Personeel) said it returned 4.3% between April and June, while its funding rose 0.1 percentage points to 133.4%.The assets of the large KLM pension funds are managed by Blue Sky Group.In other news, the cockpit staff scheme indicated that its efforts to set up net pension arrangements for the salary part exceeding €100,000 were hampered by a lack of clarity on new legislation.Despite new and stricter tax rules for tax-facilitated pensions accrual taking effect on 1 January 2015, it is likely that a plan for net pensions will not be operational in time, warned Steven Verhagen, chairman of the association of Dutch commercial pilots (VNV).He said the situation for pilots is complicated by the number of part-time jobs in the sector.As a consequence, the accrual limit must be proportionally implemented for the time spent on the job, he said.He said the VNV’s first priority was the adjustment of the current tax-friendly pension accrual for the KLM pilots from 1.95% to the new limit of 1.875% for the salary of up to €100,000.According to Verhagen, the pension fund preferred to have its entire pension arrangements carried out by Blue Sky Group, rather than a “much more expensive” insurer.
Amundi, one of Europe’s largest asset managers, has announced an expansion into Southeast Asia by opening a subsidiary in Thailand.The Bangkok office builds on the manager’s presence in Asia, where it already has operations in Hong Kong, Japan and Singapore.Amundi said it had become the first non-domestic manager to receive the appropriate mutual fund license in Thailand.The French asset manager said its new base in Bangkok would help realise its ambitions for the South Asian market, which are focused on third-party distribution and partnering with sovereign agencies, pension funds and government institutions. The Thai subsidiary will be headed up by Prapatpong Weeramon.Pascal Blanque, head of institutional clients and CIO at Amundi, said the Bangkok office was a milestone in the company’s Asian expansion plans.In other news, emerging market investment house Gemcorp has been launched officially as it announced inflows of $500m (€392m) from European institutional investors.Headquartered in London, the company said it would focus on financials services, natural resources, infrastructure and sovereign sectors.Gemcorp, founded by former Goldman Sachs partner and VTB Capital chief executive Atanas Bostandjiev, said it would originate deals focusing mainly on emerging markets, as well as providing investment advice to clients.Bostandjiev said the firm saw a significant gap in providing solutions to institutional investors for emerging market exposure.
Following the 2010 pension reform during the presidency of Nicolas Sarkozy, drawdowns to close the deficit in the social security systems were brought forward to 2011 from its initial target of 2020.The fund, after making 14 annual payments of €2.1bn by 2024, was expected to be closed.As a result of the reform, the fund switched to a largely liability-driven investment strategy and halted all further investments in illiquid assets.Notwithstanding the switch in focus, the fund has been able to return 6.1% per annum since the 2011, managing a return of 8.75% last year. The new, €2bn strategy has seen the fund invest €200m in the intermediate housing fund (FLI) managed by Société Nationale Immobilière, and commit €145m to the NOVI private equity fund – the latest in a suite of three funds set up by Caisse des Dépôts et Consignations to offer loans and equity to small companies in France.The board member also said a “large portion” of the infrastructure exposure would come from green projects.Rousseau said final details of the new investment strategy, such as FRR’s appetite for taking on construction risk when investing in infrastructure, were likely to be finalised at a board meeting in early December.Unlike in 2010, when the reserve fund was on the cusp of awarding several property mandates, Rousseau said FRR would not be building up any internal capacity to oversee the investments, citing the two-year window granted to deploy the €2bn.He also defended the limits of FRR’s new mandate, saying it was “a good second best” that the fund was able to build up a portfolio of French illiquid assets, if not acquire holdings outside the country as part of the drive.“Of course we would love to have broader perimeter, and to be able to invest across Europe, and across the world,” Rousseau said, “but it is already very good that we got the approval to go beyond what seemed to be an insurmountable border – the year 2024.” Fonds de Réserve pour les Retraites (FRR) is to invest €2bn in French illiquid assets, including infrastructure and real estate, after gaining permission to invest beyond 2024.Olivier Rousseau, a member of the €37.2bn French pension reserve fund’s executive board, told IPE FRR had last year begun “intensifying” its battle to once again invest in illiquid assets in light of the “horrible” low interest rates.He said that, after sending a letter to the ministries for finance, the economy and social affairs late last year, FRR was granted approval invest €2bn in French assets boosting economic growth over two years, allowing it to increase its private equity exposure to 3% of assets, and invest in property and infrastructure.The new strategy sees a change in emphasis for FRR.
They said the boards of both funds had decided to go ahead with this plan to merge following preliminary discussions, which began in May.The two occupational pension funds said they would now work to confirm that actuarial assumptions exceeded their asset valuations and carry out due diligence work at both the funds.The planned merger needs the approval of the funds, Sameinaði and Stafir said, adding that some other aspects and details of the plans would be available once this work had been completed.Back in May, the funds started exploratory talks with trade unions on the idea of merging.They said at the time they had addressed the matter informally but that this was the first time they had formally looked into the idea.As things stand, Sameinaði is the fifth-largest pension fund in Iceland, based on net pension assets, while Stafir is number nine in the national ranking.Together, the resulting joint pension fund would be country’s fourth-largest pension fund, with around ISK310bn (€2.3bn), which equates to about 10% of net assets of all Icelandic pension funds.The Sameinaði pension fund is the result of the merger of several pension funds covering different industrial sectors and had pension assets of ISK171bn at the end of 2015.Meanwhile, the Stafir pension fund, which covers workers in the electrical, catering and tourist sectors, had assets of around ISK141bn at the end of 2015, including those of its private pensions activities.The Sameinaði pension fund was in the news earlier this year, when its chief executive resigned after becoming caught up in the Panama Papers scandal. Iceland’s Sameinaði and Stafir pension funds have made board decisions to merge in a move that would see the formation of the country’s fourth-largest pension fund in terms of assets under management.The pension funds said in joint statement: “The boards of the Sameinaði pension fund and the Stafir pension fund have agreed to start formal plans for a merger, with the aim of jointly putting the proposal to the vote at extraordinary general meetings in the autumn.”They said their boards believed the merger would create a stronger organisation, with increased expertise and more robust asset and risk management.“Merging will also contribute to a reduction of operating costs and improved services for the benefit of members,” the funds said in the joint statement.
AP7 owns A shares, and its holding in Facebook is worth around SEK2bn (€209m), making it one of the largest shareholders in the company.However, according to US law firm Kessler Topaz, Zuckerberg controls Facebook through his 76% ownership of Class B shares, which each hold 10 votes, while A shares carry one.Zuckerberg has said the share reclassification was aimed at allowing him and his wife Priscilla to carry out their plan to give 99% of their Facebook shares away to “advance human potential and promote equality” while keeping the company “founder-led”.AP7 is the default pension provider in Sweden’s Premium Pension System (PPM).Kessler Topaz, representing AP7 in the case, said that, by issuing stockholders two of the new shares for each share of Class A or Class B common stock, Zuckerberg will be able to sell or dispose of millions of shares of Class C stock while continuing to maintain control over the company. “Class A common stockholders further suffer economic harm because the non-voting Class C shares being foisted upon them will likely trade at a discount to the Class A voting shares, thus diminishing the value of their Facebook holdings,” the firm said. The Delaware court appointed AP7 and Kessler Topaz to co-lead the class action litigation along with Amalgamated Bank and the law firm of Grant & Eisenhofer on 16 May, the firm said.The defendants have agreed not to issue the Class C stock until the court rules on AP7’s case, it said, adding that a trial is likely to be set for January 2017. Gröttheim said there had been similar cases where companies had suggested reclassifying shares, involving Google and sportswear firm Under Armour, but that these had both gone to settlement.Meanwhile, the Swedish Pensions Agency (Pensionsmyndigheten) has announced it is acting to put in place better protection for consumers in its Premium Pension System.The government agency said it developed a revised cooperation agreement for the many pensions investment providers whose funds are available to Swedes as an alternative to the default provider, national pension fund AP7.Mats Oberg, director of the Swedish Pensions Agency’s fund unit, said: “The new agreement means even stronger consumer protection for the investor and underlines the obvious, in that rogue players should not have anything to do with premium pension fund activity.”Even though there was already consumer protection in place in the current agreement, the agency said there had been far too many cases where people felt cheated by providers and their telemarketers.Consumers had often been told outright lies on the phone, the agency said, with sales callers claiming to belong to the agency itself, or telling them the default AP7 fund option was to be closed.“Marketing and sales of mutual funds within the premium pension should be done in a fair and transparent manner,” Öberg said.The new cooperation agreement should not pose any problems for serious management companies, he said. Sweden’s seventh national pension fund AP7 is suing Facebook over its resolution to issue a new class of shares as part of the internet giant’s plan to allow chairman and co-founder Mark Zuckerberg to retain control over the company while selling much of his own company stock.AP7 said it launched a legal case against Facebook in the Delaware Court of Chancery in May after the US company announced the plan to issue a new “C” class of shares, adding to the “A” and “B” shares already in issue.Richard Gröttheim, chief executive at AP7, told IPE: “The reason for the case is that we think, by suggesting the reclassification of shares – and the board has, indeed, now decided to do this – and by issuing the free shares, which will be less valuable because they don’t have voting rights, we will be less well off as a shareholder.”Under the plan, announced in April and voted through in June, Facebook will issue new C shares and distribute two of the new shares to shareholders as a dividend for each class A or B share they own.
Henderson Global Investors and Janus Capital are to merge, creating a $320bn-plus (€285bn) asset manager focused on active fund management.The new group will be called Janus Henderson Global Investors.The merger is expected to be completed in the second quarter of 2017, subject to regulatory and shareholder approval.Announcing the merger plan today, Henderson said it was an “exciting development” for the two companies “and for the future of high-quality, active fund management”. It added: “We believe that greater scale provides a number of important benefits for our clients.” The US and UK-based companies will merge by way of an all-stock “merger of equals”, with the combined group calculated as having a market capitalisation of around $6bn.The board is due to be led by Henderson chairman Richard Gillingwater, with Janus’s Glenn Schafer becoming deputy chair.The chief executives at Henderson and Janus – Andrew Formica and Dick Weil, respectively – will jointly lead the new group as co-chief executives, with the support of a new executive committee.Weil said the merger would be “transformational” for both managers.“Janus brings a strong platform in the US and Japanese markets, complemented by Henderson’s strength in the UK and European markets,” he said. “The complementary nature of the two firms will facilitate a smooth integration and create an organisation with an expanded client-facing team and product suite, greater financial strength and enhanced talent – benefiting clients, shareholders and employees.”The executive committee of the new group will include Enrique Chang, head of investments at Janus, as global CIO of the combined group, and Phil Wagstaff, global head of distribution at Henderson, as the new global head of distribution.Japanese insurer Dai-ichi, the largest shareholder of Janus, has given its support for the merger.After the merger, it will hold around 9% of the combined group, with intentions to increase its ownership interest to at least 15%.On a pro forma basis, the assets under management of the combined group will be approximately 54% Americas, 31% EMEA and 15% pan-Asia.
The pension fund of Hoogovens, part of Tata Steel, posted a net return of 8% in 2016.Real estate generated 5.6%, an underperformance of 2.3 percentage points, making it the only asset class falling short of its benchmark.Equity – a combination of passive and active management – returned 9.3%, an outperformance of 0.4 percentage points, with its internally managed portfolio outperforming by 3.8 percentage points.Its fixed income holdings delivered 4.7%. This allocation consisted primarily of euro-denominated government bonds, covered bonds, and residential mortgages, which are primarily deployed as an interest rate hedge. Hoogovens said it had introduced a new benchmark for the physical components of its fixed income portfolio based on Iboxx indices.Jelle Beenen, the scheme’s CIO, explained that the pension fund wanted to improve its ability to compare the risk premium for government bonds and covered bonds with the markets.Credit yielded 12.9%, with all high-yield managers producing a “significant” outperformance, according to the pension fund.Hoogovens said it planned to invest in direct loan portfolios focused on European smaller companies. In addition, it issued two mandates for American bank loans.The Pensioenfonds Hoogovens saw its asset management costs drop to 0.26% and its transaction costs remain stable at 0.08%.It attributed the relatively low management costs in part to its internal asset management, and the fact that 50% of its equity holdings were passively managed. In addition, the scheme had limited stakes in complicated or illiquid investments.Based on its funding of 106.5% of year-end, the board indicated that it may achieve a 50% indexation within five years. However, it also noted that the chances of ever granting a full inflation compensation in arrears – currently more than 13.5% – would be slim.At April-end, the pension fund’s coverage ratio had increased to 112.1%. The €8.1bn Hoogovens pension fund has largely implemented a new strategic investment plan introduced last year, increasing its stakes in equity, credit, and property at the expense of traditional fixed income.In its annual report for 2016, the steelworks scheme said it had raised its equity allocation from 35% to 40%, while ramping up its credit holdings from 6% to 10%, based on an increased risk appetite among its members.The fund said it was still in the process of increasing its combined property and infrastructure portfolio from 7% to 10%, with the process taking longer because of the asset class’ illiquid nature.The annual report showed that the scheme was seeking a risk profile between those of fixed income and equity for its real estate allocation, and aimed for stable returns from direct property. It also said it was considering branching out into international property.
The Financial Reporting Council (FRC) has won significant support from investors for its proposal to force companies to engage with shareholders if more than 20% vote against a company resolution.The FRC wants companies to explain what action they plan to take to “understand the reasons behind the result”.The proposed new measure forms part of the FRC’s reboot of the UK Corporate Governance Code.However, stakeholders also called for a tougher stance on issues affecting pension scheme members and employees. Liz Murrall, director of stewardship and reporting at the Investment Association, which represents asset managers in the UK, supported the 20% trigger.“We believe that 20% is the appropriate level and welcome the requirement for companies to respond publicly within six months of the AGM outlining the actions they have taken in response to the shareholder vote,” she said.Royal London Asset Management (RLAM) added its support but urged the FRC to include abstentions in the 20% trigger.RLAM said it used abstentions “as an initial flag of discontent” and contacted companies in its actively managed portfolios to explain why it had abstained on a vote.At present, the trigger is set at more than 50% shareholder opposition to a measure.Typically, if a company loses a resolution at an AGM, it will simply retable it and hold a second ballot including majority shareholdings. The effect is invariably to reverse the earlier defeat, as happened at Sports Direct in 2016 .The issue has been brought into sharp focus recently, with a number of high-profile shareholder rebellions over executive pay packages.The UK Corporate Governance Code sets the standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and dealings with shareholders. Companies must confirm that they have complied with the Code’s provisions or explain why not.The FRC’s consultation, launched in December 2017, followed the UK government’s proposals on corporate governance reform.The UK parliament’s Business, Energy and Industrial Strategy Committee issued its own report on corporate governance in April last year, prompted by growing public disquiet over perceived corporate greed in the wake of scandals such as the collapse of BHS .The committee’s report demanded action on corporate governance, executive pay and boardroom diversity concerns. It also found that there was a “worrying lack of trust of business among the public”.Regulator calls for explicit pension fund recognition in governance codeMeanwhile, the Pensions Regulator (TPR) urged the FRC to link the requirements in section 172 of the Companies Act 2006 (s172) to the Corporate Governance Code.S172 requires company directors to promote the long-term success of the company for the benefit of shareholders while having regard to other stakeholders such as pension scheme members.TPR said boards should explain how they have taken the interests of pension scheme members and beneficiaries into account.The Corporate Governance Code and the FRC’s Strategic Reporting Guidance currently make no mention of pension scheme members, beneficiaries or trustees as company stakeholders.The Pensions Regulator also urged the FRC to apply the same reporting requirement to privately owned companies. It said there were 490 large privately-owned companies sponsoring defined benefit schemes in the UK.The FRC’s chief executive Stephen Haddrill told parliament in November 2016: “Frankly, we have not given sufficient thought or appreciation to the company’s wider responsibilities beyond the shareholder. We do need to focus on that stakeholder issue. Section 172 has been there, but it has not borne on thinking in companies and it needs to.”The FRC wants companies to apply the updated code for accounting periods beginning on or after 1 January 2019.
In the outlier categories with the highest equity quota of over 40% – the “dynamic” category – and the lowest of under 16% (“defensive”), the largest Austrian pension fund, the VBV, was the best performer over all periods but one. The Bonus Pensionskasse performed better in the “defensive” category over 10 years.The best performing funds in the “active” category (with an equity quota between 32% and 40%) returned more than 4% a year over all three time periods.This was “more than satisfactory”, according to Michaela Plank, expert for retirement solutions at Mercer Austria, particularly as the 10-year period included the 2008 market crash.“With good risk management such market crashes can balance themselves out over time,” she added.The analysis of the 10-year period showed quite similar results for all risk-categories regardless of equity quota.There was a spread of just 25 basis points between the average return of “defensive” portfolios (3.24% a year) and that of “dynamic” portfolios (3.49% a year). In other time periods the differences in returns were much greater with spreads of 160bps over three years and 285bps over five years.Mercer noted such long-term analysis “takes into account the long-term character of occupational pension provision”. The €5.5bn Austrian multi-employer pension fund APK was the best performer in the mid-risk segment of the Austrian life-cycle model over three, five and 10 years, according to analysis by Mercer.Mercer Austria tracked the performance of all five of the country’s multi-employer Pensionskassen over the three time periods.The Pensionskassen offer funds in five different risk levels within the Austrian life-cycle model, ranging from “defensive” to “conservative”, “balanced”, “active” and “dynamic” – all defined by their equity exposures.For the “conservative” segment (with an equity quota between 16% and 24%) APK came first over the three-year, five-year and 10-year periods.
ABP presented its plan to members last year in a theatre in a former glue factory in DelftIn August and September, the pension fund will inform 540,000 participants by email that their pension pot is online.The 430,000 members who haven’t provided ABP with their email address will receive a letter with the same message in October and November.ABP said the introduction of the pensions pot had been delayed, as it wanted to calculate the exact amounts and also wanted to formulate the answers to frequently asked questions based on participants’ actual responses.The personal pensions pot doesn’t apply to the 40,000 military service personnel with ABP, who still have final salary arrangements. It also indicates how the current system of average pensions accrual affects future benefits for younger and older members, with pension assets set aside for younger members less than their paid-in premiums.Last March, ABP tested the concept of the personal pensions pot on 20,000 participants. It indicated that sufficient numbers of members had responded and that they were satisfied with the set-up. Dutch civil service scheme ABP plans to roll out its online “personal pension pot” to all its active participants in average salary arrangements by the end of this year.The statement is designed to show its members how much has been set aside for them individually, and how much their pension assets are expected to grow until their retirement date.The pensions pot also shows how much the employer and the member have contributed to the accrued pension.The statement also makes clear which part of the pension rights has come from the scheme’s returns on investments.