The €205bn asset manager Robeco is to set up a London sales office focusing on the institutional market, key accounts and consultant relations within the next four years.Meanwhile, it will keep its Rotterdam-based head office and move to new premises in 2016, according to its new growth strategy plan for 2014-18.A spokeswoman at Robeco said she could not be more specific on when the London office would become operational.The company said it aimed to increase its assets under management organically to more than €300bn, and that it would also look for acquisition opportunities, in particular in Japan, in cooperation with Orix Corporation, which acquired a 90% stake in the company last year. The pure-play asset manager said it expected to grow in Europe through its quantitative capabilities and by offering pensions solutions and sustainability integration.It added that it wanted to enter the German and Swiss markets with multi-asset pension solutions.“Client demand is shifting from products to solutions,” Robeco said.Robeco and Orix are also looking to grow in the US and Asia, where both players have already established a strong presence.According to Roderick Munsters, Robeco’s chief executive, approximately 50% of its AUM originated in the US.However, in a clarification of the growth strategy, he stressed that the Netherlands would remain a key market.The strategy plan also indicated that Robeco was considering setting up a Singapore office, focusing on sovereign wealth funds and key accounts.Currently, the asset manager has regional offices in Seoul, Shanghai, Hong Kong, Tokyo and Sydney.Robeco said its Asian investment capabilities would continue to focus on Asia Pacific equities, but that it also hoped to expand into Asian fixed income.Orix and Robeco said they were assessing their options for simplifying Robeco’s corporate structure through a new holding company, to better execute its international growth strategy.At present, 47% of Robeco’s AUM comes from institutional investors.In 2010, Munsters said he wanted to increase this to 60% within five years by setting up a new subsidiary, Robeco Investment Solutions.At the time, Robeco’s chief executive made clear he aimed to increase institutional business by adding products and services for responsible investment, inflation-linked products and food and agri funds.
A growing number of FTSE companies are shifting the design in their defined contribution (DC) default investment funds towards more active management, a study has shown.Research from Towers Watson, into the DC offerings of some of the UK’s largest firms, found more schemes including diversified growth funds (DGF) while reducing passive investments.Over the last five years, the proportion of FTSE 100 schemes using a DGF in their default fund rose from around 10% to 70%.Of the 54% of trust-based schemes, the average allocation to purely passive investments fell by 22 percentage points to 40% over the last year. Over the same period, purely active allocations rose 5 percentage points to 17% with mixed allocations jumping to account for 43%, up from 26%.In DC contract schemes, a similar shift occurred with passive investments falling from an average allocation of 88% to 64% over the year, however, still accounting for the majority.Towers Watson said the mixed portfolios typically included an actively managed DGF.“Increased use of active management need not reflect increased ‘stock picking’,” the report said, “instead, an active manager may be overseeing how funds are distributed between asset classes and active management may be used in alternative asset classes.”Nico Aspinall, head of DC investment at Towers Watson, added: “The way you combine the assets makes the funds active, even if the underlying assets are passive.”“Some DGFs may have building blocks which are very cheap, but they add this small layer of additional fees, which is asset allocation.”Aspinall also said there was growing interest from DC schemes over smart beta investment strategies, but this has since been put on hold after the Budget, which may require and overhaul of investment strategies.The government recently announced a change in policy regarding the purchase of annuities, which means investment strategies linked to annuity matching may require a re-design.The research said almost all default funds currently shifted investment strategy away from growth assets to less-risky assets on the retirement approach, allowing for a better match with annuities.Of the two variations to achieve this, lifestyle strategies and target-date funds (TDF), the former is the most popular, with only 3% of FTSE 100 firms using a TDF.The average switching period for lifestyle strategies, as in the length of time pre-retirement investments begin to de-risk, has also increased over time.Towers Watson said in 2004, majority of FTSE 100 schemes did this in five years or fewer before retirement.However, the 2014 survey showed that three-quarters of companies now do this over ten years or more.There had also been a recent increase in DC funds designing investment objectives according to providing a target level of income in retirement, based upon annuity rates.However, 90% of FTSE 350 firms did not follow this and had investment objectives based on returns, with majority of both trust and contract schemes looking to track, or outperform, a benchmark.Some 13% of trust schemes and 15% of contract had objectives linked to meeting an absolute return target, an objective closely related to the use of DGFs.Only 10% of trust schemes and 6% of contract schemes had objectives based on providing a target level of income.
Pension funds and other institutional investors need to be braver, given the environment of low interest rates, and consider strategies used by hedge funds, the 2014 IPE Conference has heard.Speaking at the IPE Conference & Awards in Vienna, Günther Schiendl, CIO at Austria’s VBV Pensionskasse, told a panel session on trends in investment and asset allocation: “We need to be more brave – we need to dare to invest in things that are untested.”His said his pension fund in particular needed to be more dynamic, investing for the long term to deliver returns of 6% year after year.“The point is, we need to deliver absolute returns,” he said. “My former boss was saying that, in that sense, we are a kind of hedge fund – and he was right.” A poll conducted among conference participants during the discussion showed that 46.51% of respondents had regularly been forced to reject an investment opportunity they liked due to regulatory, resource or operational constraints.A further 37.2% said they had once or twice had to say no to a potential investment for these reasons.Endre Pedersen, senior managing director at Manulife Asset Management, told the panel at the conference in Vienna he favoured Asian fixed income for generating stronger long-term returns in the current environment.“You need to take on a different type of risk,” he said.Meanwhile, Rick Lacaille, CIO at State Street Global Advisors, said the simple answer to the low-yield problem was equities.“In cashflow terms, we are not advocates of the second stagnation hypotheses,” he said, adding that SSgA expected global growth of between 3.5% and 3.8% next year.“People are understandably concerned when they see equity markets at record highs, but then they see profits at record highs,” Lacaille said.In Asia, he said, earnings are below trend, and this means there is an opportunity for share prices in the region to catch up.“From our perspective, the global story – the growth story – remains compelling,” he said.Paul Watters, senior director and head of corporate research at Standard & Poor’s, said pension funds would find it hard to meet their target returns in long-only strategies using conventional assets, but that what was important was to hit risk-adjusted returns.He said this meant there was a lot of interest in alternatives.“All the surveys, all the academic literature you read on that, it seems fairly clear there’s going to be continued growth in that, and asset allocation is 25% from institutional investors,” he said.The panellists discussed the investment opportunities that were emerging in fixed income as a result of the bank disintermediation process.Benoît Durteste, managing director at Intermediate Capital Group, said: “An underlying theme is there is a significant premium for investing directly.“If you can get a combination of an asset class where you are getting this premium for investing directly, and you are in an area that is experiencing significant growth, then you have a winning formula. “You are getting this combination that makes it quite attractive, which is why a number of pension funds are investing heavily in that segment.”Schiendl said that, over the years, pension funds had learned how the banks made their money, and the institutions could now do this themselves, creating a “fair and well-structured food chain”.He also said more generally that it was imperative for pension funds’ portfolios to be geographically diversified now.“It makes sense to have a global diversification and not a Europe-only diversification,” he said.
The launch of the Capital Markets Union (CMU) should be seen as an opportunity to amend regulation that hinders long-term investment, the European Commission has been told.Matti Leppälä, secretary general at PensionsEurope, said pension funds wished to invest more in long-term assets but that schemes faced obstacles that could only be solved if the Commission and national governments “stepped up dialogue” with the industry. “Under the right conditions, their capital can make a huge contribution to the future growth of the EU real economy,” he said. “As long-term investors, they can also contribute to financial stability.“However, this will only happen if EU policies work well with and for pensions.” In the association’s consultation response, it noted that trust in markets was required for pension funds to be long-term investors. “Governments should never disappoint this trust by raiding pension funds or forcing pension funds to invest (or divest) in certain projects [and] regions,” it said.It also stressed that stability of policy would be important if governments wished to attract commitments from pension funds. “The European Commission should introduce measurements to reduce political risks,” it said. “Safeguarding of legal certainty is of great importance, in particular for long-term cross-border investments.”The suggestion echoes a proposal put forward by the Institutional Investors Group on Climate Change, which proposed a measure of EU guarantees against retroactive changes to policy that would impact projects.In a separate position paper on the CMU, PensionsEurope also stressed the problems the diverse pension sector would face in solving any obstacles to long-term investment, urging an exchange of ideas and best practice among member states to incentivise investments.It addressed the potentially detrimental impact of a financial transaction tax (FTT), currently being discussed by a minority of the EU’s 28 member states.“We should avoid extra costs on pensioners – with a potential FTT, for example,” it said. “Regulation should not unduly lock capital in the pension funds, which could be put to more productive use.”The position paper also argued greater standardisation of market data was needed to remove any barriers that may be in place, an idea that was already taken up by the Commission when it last year proposed credit information on infrastructure loans be made available.The pension association’s comments on the CMU come as the Commission’s green paper consultation comes to a close.Jonathan Hill, the commissioner for financial stability, has previously praised the CMU as a “classic” single market project that would look to unlock the abundant liquidity within the market.,WebsitesWe are not responsible for the content of external sitesPensionsEurope position paper on the CMU
The regulator is looking for insight into risk profiles, benchmarks and investment products and seeks to gather information about valuations on capital markets, as well as the impact pension funds aim for.It said the positive effects of ESG could help renew participants’ faith in the pensions system and that pension funds could support the transition to a sustainable economy.The regulator will initially take stock of recent industry developments and subsequently assess pension funds’ annual reports to ascertain how integrated ESG is in their investment process.It added that it would also look at motives, challenges and obstacles for sustainable investments, such as low market volumes and legal barriers. Pensions regulator De Nederlandsche Bank (DNB) has launched a survey of Dutch pension funds’ ESG policies.Conclusions from the survey’s results will be incorporated into the regulator’s practice for assessing financial and reputational risk, as well as for measuring schemes’ adherence to international agreements seeking to make investing more sustainable.DNB said the survey would help it to identify best practice and that it would share its findings with the rest of the Dutch pensions industry.Dagmar van Ravenswaay Claasen, head of DNB’s expert centre, and Patrick Corveleijn, project leader, said they had noticed that society is increasingly demanding sustainable behaviour from not only government and companies but also pension funds, which have “a great impact with their combined assets of more than €1.2trn”.
Peter Deutsch, chairman at Bonus, said he was pleased the transaction had been given regulatory approval.He added that the company’s share of the multi-employer pension market had increased from 2.5% to 6.7% as a result and that it now counted among the four largest Vorsorgekassen in Austria, claiming a 10% market share. Bonus revealed in November that Generali Group, a shareholder in Bonus, would transfer its company pension plan to the multi-employer provider, a decision that has also received regulatory approval.KPMG and law firm Schönherr advised Immigon on the sale of its stakes in the Pensionskasse and Vorsorgekasse.Co-owner Ergo insurance group also sold its stakes in the VVPK and VVVK to Bonus.The deal follows the sale of Victoria-Volksbanken’s KAG business, Volksbank Invest Kapitalanlagegesellschaft, to Germany’s Union Investment earlier this summer.The KAG’s sale to Union was approved by the FMA earlier this year. Bonus’s acquisition of Austria’s Victoria-Volksbanken Pensionskasse (VVPK) and its Vorsorgekasse (VVVK) has passed its final regulatory hurdle.In the wake of banking group Victoria-Volksbanken’s insolvency, Immigon, Austria’s bad bank, sought to offload the company’s non-core business.The Bonus Pensionskasse, one of the smallest players in the Austrian pension fund industry, eventually won the bidding contest for both the bank’s pension and its provident fund. With the purchase now approved by the Austrian financial supervisory authority (FMA), Bonus Pensionskasse will more than double its assets under management, while Bonus Vorsorgekasse will see assets increase by 50%.
An undisclosed German corporate investor is searching for a manager to act as back-up manager for a €100m bond mandate, using the IPE Quest service.According to search number QN-2190, the investor is looking for companies that can run a mandate to invest in euro bonds overall, with maturities of 10 years or more.The style is stipulated as “active alpha-seeking”, and the benchmark to be used is the iBoxx EUR Overall 10+.The search makes clear the exercise is not being carried out for an immediate investment need, however. According to details of the search, the client — which is looking for segregated accounts — is just on the hunt for a potential back-up manager for this asset class.“It means the investment might not be carried out immediately after this search is finalised,” the search says.Companies responding to the search should have at least €1bn in assets under management (AUM) for this asset class, and €10bn in AUM overall.Minimum and maximum expected tracking error for the mandate are 0.5% and 1.5%, respectively.Applicants must have track records of at least three years, though a minimum of five is preferred.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]
Pension schemes could be exempt from a diversification requirement relating to the use of sovereign bonds as collateral for non-centrally cleared derivatives, after the European Commission said the obligation should be scrapped.The change concerns a provision in draft regulatory technical standards (RTS) on “risk-mitigation techniques for over-the-counter (OTC) derivatives not cleared by a central counterparty” under the European Markets Infrastructure Regulation (EMIR).Under the existing provision, which the Commission wants to amend, pension funds posting more than €1bn in collateral with a single counterparty cannot have more than half of that collateral in government bonds from a single country or issuer.The Commission, writing to European regulators last week, said it was necessary to change this provision. “This amendment is based on new evidence received following the submission of the draft RTS by the ESAs [European Supervisory Authorities], which the Commission believes should be taken into account to ensure the proportionate application of those requirements,” it said.More specifically, it said: “Given the fact the application of such concentration limits to certain pension scheme arrangements would require them to enter into foreign currency transactions introducing the costs and risks of foreign currency mismatches, it would be disproportionate to apply the concentration limits in the same manner as other counterparties.”The Commission proposes removing the limit “in line with the co-legislators’ intention to avoid excessive burden on the retirement income of future pensioners as reflected in Recital 26 of EMIR”.The sovereign-issuer concentration provision was one of the derivative rules some of Europe’s largest pension managers raised concerns about in a letter to the Commission earlier this year.APG, the €417bn Dutch asset manager, was one of the key signatories.An APG spokesperson told IPE the pension fund was pleased with the amendments to the draft RTS.“APG has expressed worries multiple times that the concentration limits would cause enormous operational complexity and are more likely to increase, rather than decrease, liquidity risk,” said the spokesperson.“APG has argued for removing the limits, especially for government bonds.”Insight Investment also put its name to the letter to the Commission, and Vanaja Indra, market and regulatory reform director at the investment manager, said the Commission’s decision was “a positive development, particularly for large pension schemes that might otherwise have been forced to take unnecessary foreign exchange risk”.She added: “It recognises the concern that pension funds have liabilities denominated in local currencies and therefore should be allowed to post domestic government bonds denominated in the local currency as collateral for OTC derivatives.”The dis-application of the rule will be reviewed in three years.Sebastian Reger, a partner at law firm Sackers, said the rule change relating to the diversification for pensions schemes was positive but, in practice, would not mean much for UK schemes.“It’s good, but it’s not revolutionary,” he told IPE.“The previous draft provisions already weren’t that bad for most UK schemes, which also typically aren’t big enough for the diversification requirement to be an issue.”The Commission endorsed the draft RTS, including the scrapping of the aforementioned requirement for pension schemes, on 28 July.The ESAs, which adopted the technical standards in March, have six weeks to respond to the Commission’s amendments.
It also reserved the right to increase the programme in terms of its size and/or duration, and changed some of the “parameters” of the programme – as of January, the minimum remaining maturity for eligible bonds will be cut from two years to one, and the ECB can buy assets yielding below the deposit rate, which is currently -0.4%.Draghi was keen to stress that the ECB’s decision did not constitute tapering – “there is no question about tapering,” he said in a Q&A after the press conference – but many market participants think otherwise.Mitul Patel, head of interest rates at Henderson Global Investors, said the announcement was initially interpreted as a hawkish surprise, and that the decision led to “significant volatility in markets”.PIMCO’s view is that the ECB is tapering, according to Andrew Bosomworth, head of portfolio management in Germany for the firm.“The ECB chose to purchase an additional €540bn of assets, which exceeds the €480bn stock implied by a six-month extension at €80bn per month (what the markets were expecting),” he said. “However, it will do so at a lower monthly run rate – and, at face value, that is tapering.”But the decision by the central bank is “more nuanced than that”, he added, citing its reference to intending to “increase the programme in terms of size and/or duration” if conditions deteriorate and the open-ended nature of the decision.He said PIMCO sees the ECB’s decision to “slow down” as reinforcing its cautious stance about investing in euro-zone countries with high debt burdens and low potential economic growth.Chris Iggo, CIO of fixed income at AXA Investment Managers, said “there is a sniff of tapering in the air” and that “this should prevent bond yields from re-visiting the lows of earlier this year”.BlackRock, according to Marilyn Watson, the asset manager’s head of global fundamental fixed income strategy, believes yesterday’s ECB meeting was “pivotal” for European bond investors, and that the plan to reduce the run-rate of purchases was “effectively tapering”.“However, the ECB also noted that the size or duration of purchases would be increased if inflationary or financial conditions become ‘less favourable’,” she added.Adrian Hilton, fund manager at Columbia Threadneedle Investments, described the ECB’s decision as amounting to “a ‘soft’ taper at most”.He took this view “because the ECB retains its commitment to a presence in the bond market until a sustained path towards the inflation target is attained”.“And they added asymmetric flexibility to increase – but not reduce – the purchase pace if necessary,” he said.He said Columbia Threadneedle’s view was that there was still some value in German government bonds but that the asset manager was “much more cautious on the periphery, whose bonds have relied on the monthly purchases to keep spreads to bunds under control”.For Bank of America Merrill Lynch (BAML) credit strategists, the ECB is clearly tapering.“The ECB hawks were victorious,” they said.They said it was unclear how the lower monthly purchase amounts would be split across the various asset classes – the ECB is buying public sector bonds and corporate bonds under separate programmes – but that it expected a €2bn smaller monthly average of buying under the corporate sector purchase programme (CSPP) from April next year.But this is “not what the high-grade market needs”, they said.They expect spreads to widen by around 20 basis points next year because of a shortfall of demand in connection with the ECB’s backing off.The “losers”, according to BAML strategists, will be those corporates that have benefited the most from the CSPP – “10-15 year eligible bonds, especially the Spanish names; 7-10 year eligible UK corporates; and 15+ year eligible French corporates”.They said the best-performing issuers since March 2016 had been Glencore, Repsol, OMV, RWE, Vonovia, Volkswagen, EDF, RTE, ENI and Orange. The European Central Bank (ECB) yesterday announced that it is extending its asset purchase programme (APP) beyond March 2017 but at a reduced monthly purchase rate.According to Mario Draghi, the ECB president, this does not represent tapering, but many in the market took the opposing view, seeing pressure ahead in the peripheral bond market and high-grade credit.The ECB has been buying bonds under the APP at a rate of €80bn a month since March this year, when it expanded its quantitative easing (QE) programme to include a wider range of corporate bonds.Yesterday, the ECB announced it is extending its stimulus beyond March 2017 but that the monthly purchase amount from April until the end of 2017 will be €20bn lower.
France’s €36.3bn pension reserve fund, Fonds de Réserve pour les Retraites (FRR), has awarded up to €5bn in mandates for ESG-strengthened passive equities management.The pension fund last week announced that it had selected Amundi Asset Management, Candriam Luxembourg, and Robeco Institutional Asset Management.The mandates were tendered in September 2015 to renew existing contracts for passive equity management, with FRR wanting managers to more strongly reflect the development of its responsible investment strategy and topical environmental, social, and governance (ESG) issues.The mandates effectively cover FRR’s entire passive equity portfolio, the bulk of which is in smart beta indices. The asset managers are charged with running the pension funds’ index-tracking investments through ESG processes. This means continuing with the implementation of FRR’s decarbonisation strategy and other aspects of its responsible investment policy, but also applying new policies, such as excluding tobacco and certain coal assets.FRR had already been implementing a low carbon approach for its passive equity holdings, having committed to an MSCI Europe low-carbon index strategy developed with Amundi.Anne-Marie Jourdan, head of communications and legal affairs at FRR, told IPE that its previous passive equity management mandates were for investments tracking “optimised” indices, but these did not systematically involve ESG processes.“These mandates have a proper ESG stamp – they have to implement decarbonisation, exclusion, or other ESG policies,” she said. “We’re really asking the managers to pay attention to all ESG aspects.“The mandates were coming up for renewal and even though our index investments were already decarbonised we wanted to strengthen the ESG dimension even more.”At the end of December 2015, just shy of 41% of FRR’s equity investments were passively managed.Elsewhere in France, ERAFP, the €26bn pension fund for civil servants, has chosen five climate change research providers and consultancies for mandates it put out to tender in October 2016.The pension fund has hired Trucost, I Care & Consult, Grizzly Responsible Investment, and Beyond Ratings to measure ERAFP’s equity and bond portfolios’ exposure to “climate change-related risks and opportunities”. Carbone 4 has been engaged to provide “assistance with the design of a methodology to measure, analyse, and evaluate exposure to climate change related challenges in the real estate, infrastructure and private equity portfolios”.The companies’ work will help ERAFP to “continue to better understand the environmental issues of its portfolio and define its carbon strategy”, the pension fund said.In Italy, the newly consolidated defined contribution (DC) pension scheme for employees of the Intesa Sanpaolo banking group is seeking 13 managers for asset management mandates worth roughly €3.4bn.The scheme is the result of a recent merger of several smaller schemes for employees of the group’s subsidiaries. In September last year, the scheme’s board decided to divide it into five funds, known as “comparti”. There are two fixed income funds, each with different time horizons, two balanced funds with different risk profiles, and an equity fund.The scheme is seeking to award a total of 24 mandates. Managers have until midday on 17 February to respond. Further information on the mandates, including benchmarks and various requirements, can be found on www.mefop.it.Meanwhile, Fondo Byblos, Italy’s DC pension scheme for the paper and publishing industries, is seeking requests for proposals (RFPs) from managers of private debt funds.The scheme, which had €721m of assets at the end of 2015, plans to invest €30m in the asset class. Byblos is seeking one or more AIFMD-compliant funds of at least €150m to invest in corporate private debt, infrastructure debt and real estate debt. Funds investing in distressed debt and non-performing loans will not be considered.The €30m private debt allocation will be placed within the “bilanciato” (balanced) fund, which is the largest of Byblos three-fund structure. The two other funds within Byblos are “garantito” (guaranteed) and “dinamico” (dynamic).Interested managers have until midday on 28 February to submit RFPs. Further information on how to submit proposals is available on www.fondobyblos.it.In the Netherlands, animal feed company Nutreco has outsourced the future pension accrual for 750 employees to Nationale-Nederlanden.The contract involves an insured defined benefit (DB) plan as well as defined contribution arrangements any contributions above Nutreco’s DB ceiling.Nutreco said the switch was in line with pension arrangements of parent company SHV, which had already placed pensions accrual with Nationale-Nederlanden. Nutreco’s pension scheme was implemented by Aegon after the firm liquidated its original pension fund in 2011.The company stressed that the new contract involved future accrual and that no assets would be transferred. Nutreco has 1,600 employees in total, most of whom are participants in industry-wide pension funds.SPT, the €153m pension fund of Dutch panelling manufacturer Trespa, appointed BMO Global Asset Management – formerly F&C – as its fund manager.BMO replaced Delta Lloyd, as new legislation prevented the pension fund from extending its contract, SPT said. The asset manager’s relationship with SPT began in 2002.However, SPT is to keep its stake in Delta Lloyd’s Institutional Global Equity fund, “as the fund represented the correct implementation of the scheme’s investment strategy”.SPT had already announced that it would outsource its administration and annual reporting to consultancy Aon Hewitt. SPT has approximately 1,000 participants and pensioners in total.