Oldenkamp’s departure from Cardano prompts Naus move from ING

first_imgOldenkamp will step down at the end of September and has indicated to IPE that he will take some time out while searching for another position.He said he decided to leave Cardano some time ago but would only begin investigating other roles once he parted ways with his current employer and took some time off.Under Oldenkamp’s guidance, the Dutch manager has grown its business in the Netherlands and also entered the UK’s fiduciary management and investment advisory market.Cardano’s announcement of Oldenkamp’s replacement is still subject to approval from the Dutch Financial Markets Authority. Bart Oldenkamp, chief executive at Cardano Risk Management in the Netherlands, is to stand down at the beginning of October as he seeks a new challenge.Oldenkamp, who has been at the helm of the fiduciary manager since 2007, is to be replaced by ING Bank’s director of market risk Harold Naus (pictured).Naus has been at the Dutch bank for 17 years in a variety of risk-management positions and is a member of the leadership council. Prior to this, he worked for BNG Bank.last_img read more

Falling discount rates hurting Swiss schemes’ funding – Towers Watson

first_imgTowers Watson, as part an annual report on the Swiss pension fund association’s members, had calculated a 10% median return for 2014.Discount rates dropped, along with corporate bonds, yielding 100-125bps less in Q4.Bond yields were further strained by the Swiss National Bank’s announcement that it would introduce a negative base rate.Adam Casey, senior consultant at Towers Watson in Zurich, said: “This directly affected the yields of Swiss bonds.”At Publica, Switzerland’s largest public pension fund, director Dieter Stohler pointed to another effect resulting from the SNB’s policy.“On the international currency markets, the forward discounts for Swiss francs have widened slightly, increasing costs for FX-hedging,” he said. He told IPE he did not think Swiss institutions would start introducing negative rates on savings any time soon, adding that the SNB would have to continue to make the Swiss franc “less attractive” as long as it wanted to continue to uphold the minimum exchange rate of 1.20CHF per euro. A decrease in Swiss discount rates last year caused funding levels for the country’s pension funds to fall by 640 basis points, according to Towers Watson’s latest ‘Swiss Pension Finance Watch’.Every quarter, the consultancy puts together an index based on the ratio of assets to liabilities in Swiss Pensionskassen, which dropped to 96.5% as of the end of December 2014 from 102.9% as of the end of 2013 – which had been a record high since the financial crisis.Over the course of last year, the index dropped to around 100% in Q1 and slightly recovered in Q2 but then dropped back to 99.5% at the end of September.Peter Zanella, head of retirement solutions at Towers Watson in Zurich, said the increase in liabilities triggered by continually falling discount rates had been offset by strong returns, albeit “only to a certain extent”.last_img read more

Second-quarter woes wipe out Q1 returns at five largest Dutch schemes

first_imgBpfBouw, the €48bn pension fund for the building sector, said the amended UFR had come at the expense of 3.1 percentage points of funding improvement.Its coverage now stands at 111.4%.ABP reported a second-quarter loss of 4.3%, almost halving its year-to-date result.Equity lost 2.9%, while fixed income lost 4.6%.It also lost 2.3% on its combined hedge of interest and inflation risk.For ABP, private equity (3.6%), commodities (3.5%) and infrastructure (1.2%) were the only asset classes to produce a positive return over the period.PFZW, the €166bn healthcare scheme, reported a 3.2% loss on equity and an 8.7% loss on government bond holdings.Overall, the scheme lost 6.6% on investments over the second quarter.Inflation-linked bonds, credit and high-yield/emerging market debt returned -4.2%, -3.1% and -3.4%.Rising oil prices pushed up returns on commodities to 6.6%, while private equity and infrastructure also produced positive returns of 2.8% and 1.9%.After factoring in the new UFR, PFZW’s funding now stands at 100%.The €60bn metal scheme PMT posted a quarterly loss of 8.3%, due largely to a 12.9% loss on its 55% fixed income portfolio.Its equity and property holdings also generated losses of 2.1% and 2.9%.The scheme’s current funding stands at 100.2%.Although BpfBouw incurred the largest quarterly loss (-9.9%), with a funding of 111.4%, it is still in the best financial position of the five largest schemes.Over the second quarter, it lost 9% on its 65% interest hedge and reported losses on equity (-3.2%), fixed income -4.4%) and property (-1.4%).PME, the €40bn scheme for the metal and electro-technical engineering industry, reported a quarterly return of -7.2%, including a 3.1% loss on its 50% interest cover. It lost 6.4% on its 56% fixed income portfolio.Equity and alternatives lost 1.6% and 3.3%.With a return of 2.3%, real estate was PME’s only asset class to produce a positive return.The scheme said its funding stood at 99.8%. The five largest pension funds in the Netherlands saw first-quarter returns largely wiped out over the second quarter, due to rising interest rates and market volatility.Over the period, the drop in liabilities far exceeded investment losses, resulting in a significant strengthening of coverage ratios.However, the recently announced reduction of the ultimate forward rate (UFR) – included in the discount rate for liabilities – undid a sizeable part of funding increase.Funding at the €356bn civil service scheme ABP rose by 5.6 percentage points to 102%, rather than by 7.5% to 103.9%, due to the effect of the UFR change.last_img read more

Royal Bank of Scotland brings forward £4bn deficit reduction payment

first_imgUnder the current recovery plan, agreed to resolve a £5.6bn actuarial deficit after the 2013 triennial valuation, RBS will make annual payments of £650m in 2014-16 and then an index-linked payment of £450m from 2017-23, in addition to annual contributions of £270m to cover staff contributions and scheme running costs.The bank said it expected to report an actuarial deficit of £3.3bn in its main scheme, which closed to new members in 2006 and claims all but 10,000 of the company’s 230,000 DB members.The fund’s trustees have, since 2008, been gradually implementing a de-risking strategy, reducing equity exposure and using interest rate and inflation hedging overlays to largely hedge its rate and inflation exposure. Royal Bank of Scotland (RBS) is to bring forward a £4bn (€5.3bn) payment to its pension fund to settle the defined benefit (DB) scheme’s deficit.Following discussions between the UK lender and pension trustees, the £30bn fund’s triennial valuation has been brought forward by up to six months, while the £4.2bn payment will be made on 31 March, the previous date for the triennial valuation.The one-off £4.2bn payment sees no new money for the scheme but rather consolidates into a lump sum the deficit and other payments previously scheduled for the years until 2023.As a result of the payment, announced in a trading statement, RBS said it expected its common equity tier 1 (CET1) ratio to fall by approximately 0.7%.last_img read more

SEC charges former State Street employee for fraud

first_imgA former State Street employee stands accused by the Securities and Exchange Commission (SEC) of engaging in a $20m (€17.6m) fraud of transition management customers, including Ireland’s sovereign wealth fund.Ross McLellan, former global head of State Street’s portfolio solutions group, is alleged to have overseen activity that saw the firm’s clients charged “hidden mark-ups” on certain transactions.Along with two other unnamed employees within State Street – one a senior EMEA managing director based in the Netherlands at the time, the other the UK-based head of the EMEA transition management desk – McLellan misrepresented the company’s charges, producing false trading statements and post-trade reporting, the SEC alleges.“When McLellan and the State Street Co-Schemers were ultimately confronted by a customer that had detected some of the hidden mark-ups,” argues the US regulator’s court filing, presented to the district court of Massachusetts, “McLellan aided and abetted others at State Street who made materially false and misleading statements to that customer to conceal the scheme to take hidden mark-ups.” The SEC alleges that the activity resulted in $20m in additional revenue for State Street – $9.7m of which came from two unnamed Middle Eastern sovereign wealth funds.The filing also details the $3.7m in additional charges billed to the National Pensions Reserve Fund (NPRF), the Irish sovereign wealth fund before it was restructured into the Ireland Strategic Investment Fund.State Street returned the additional charges to the NPRF in 2012 and was eventually dropped as a provider by the sovereign fund after the UK’s Financial Conduct Authority fined State Street’s local transition management business £23m (€27.9m).Other affected clients at the time are believed to include the pension fund for workers of the UK’s Royal Mail, referred to in the SEC filing as a “British Postal company”, a second Irish client, and a €1.6bn transition in the Netherlands for two unnamed pension funds.The SEC’s filing comes weeks after McLellan was charged with fraud by the US Department of Justice in April.,WebsitesWe are not responsible for the content of external sitesLink to SEC filing against Ross McLellanlast_img read more

EFAMA study backs life-cycle model for PEPP default option

first_imgA study commissioned by the European Fund and Asset Management Association (EFAMA) has recommended adopting life-cycle investment strategies as a default option for the pan-European personal pension product (PEPP).EFAMA said the study – carried out by the SDA Bocconi School of Management in Milan, Italy – concluded that the use of life-cycle strategies as the default investment option for the PEPP would be “economically desirable” for consumers.They would benefit from superior returns and comparatively low risk compared with bonds over a long-term investment horizon, the association reported.It said the study showed that life-cycle strategies ensured that “99.9% of the savers end up with an accumulated pension wealth greater than the inflation-adjusted capital invested, under both a 40- and 20-year accumulation period”. The study also illustrated the advantages of life-cycle investment solutions in terms of risk management and performance enhancement, according to Efama.One of the main debates surrounding the PEPP is whether it should offer a default option with a financial guarantee or whether the default option could rely on a life-cycle approach to protect savings.Opponents of the guarantee option have argued that it was expensive and lowered returns, and would undermine the potential success of the PEPP.“Our study, which belongs to [the emerging household finance] area of research, aims at contributing to the current debate on the type of default option that should offered by a pan-European personal pension product,” said Claudio Tebaldi, professor at the SDA Bocconi School of Management and one of the authors of the study.William Nott, EFAMA president, added: “The Bocconi study confirms that life-cycle investment strategies are a powerful tool for delivering high real rates of return and managing risks, not just investment risk but also inflation risk. We strongly believe that these strategies should qualify as a default option for the PEPP.” The European Commission’s proposal for a PEPP did not explicitly refer to a guarantee, instead saying that a default investment option needed to ensure “capital protection”.The European Parliament’s Economic and Monetary Affairs Committee is currently debating the PEPP. Dutch MEP Sophie in ‘t Veld, who is leading the review, has said the regulation should specify the risk-mitigation techniques, including the definition of ‘capital protection’ for a default option.The Bocconi study can be found here.last_img read more

UK audit inquiry reignites ‘illegal dividends’ dispute

first_imgShe asked: “That is a clear admission, isn’t it, that the two regimes – the capital maintenance requirement regime and the IFRS standards – are different?” Nick AndersonIts author, Nick Anderson, a member of the International Accounting Standards Board, wrote: “it is important to remember that IFRS standards, if only because of their international nature, cannot reflect in detail specific requirements of the multitude of different capital maintenance regimes among the more than 140 jurisdictions that now require the use of our standards.”He concluded that, although it was beyond the standard setter’s remit to determine the validity of distributions, “there is no impediment to… providing additional disclosures about dividend policies and dividend payments, including any disclosures needed to meet jurisdiction requirements”. Michael Izza, chief executive, ICAEWThe BEIS committee’s inquiry also put the spotlight on the status of guidance published by the ICAEW.At last week’s hearing, Sandbach told Izza: “My concern is that your guidance doesn’t take into account the obligations as stated by the law.“What we are told in the evidence we have been given is that… parliament passes the law and the courts interpret it; it is not the ICAEW that does it.”She added that the evidence parliament had heard from accountants and lawyers was that “the IFRS standards cannot be relied on to ensure compliance with the law”.Pension funds’ long-running battle with FRCThe UK’s Local Authority Pension Fund Forum (LAPFF), which represents a number of local government pension schemes, has been challenging the audit regulator, the Financial Reporting Council (FRC), on capital maintenance rules since 2013. Following years of back-and-forth between lawyers – representing the LAPFF and other investors on one side and the FRC and the accounting sector on the other – in November 2018 the UK parliament’s BEIS committee stepped in with an inquiry about the future of audit regulation.This was followed by the announcement of a probe into the market for audit services by the Competition and Markets Authority, while the government also appointed the former chair of the London Stock Exchange Group, Donald Brydon, to head up a separate inquiry into audit standards.LAPFF acting chair Paul Doughty told IPE: “It’s good to see how intensively the sessions are looking at the issues.“The evidence supports what George Bompas [the LAPFF’s lawyer] has said: the law is the law and the standards are inconsistent with the law. The impact of these discrepancies can’t be exaggerated.”Further readingLAPFF urges FTSE 350 firms to disregard ‘defective’ accounting advice In September 2016, the public sector pension body called for company boards to disregard advice from the FRCAccounting briefing: Just ignore the FRC Stephen Bouvier digs into documents revealed under the UK’s Freedom of Information ActIFRS Foundation steps inIn a separate development, the IFRS Foundation has published an opinion piece addressing in part the issue of capital maintenance and distributions.center_img A number of UK companies could have paid out illegal dividends for more than a decade, a parliamentary inquiry heard earlier this month.Giving oral evidence to the Business, Energy and Industrial Strategy (BEIS) Select Committee on 5 February, the chief executive of the Institute of Chartered Accountants of England and Wales (ICAEW) said there were “inconsistencies” between international reporting standards and UK law on “capital maintenance”, which governs how companies can report distributable reserves.If confirmed, Michael Izza’s statement would mean that an unknown number of UK group entities could have paid out illegal dividends since 2005, when the EU first adopted International Financial Reporting Standards (IFRS).Izza was responding to questions from Antoinette Sandbach, a Conservative party MP and member of the BEIS committee.last_img read more

European Parliament gives green light to PEPP framework

first_imgEuropean lawmakers have approved a legal framework for the introduction of pan-European personal pensions (PEPPs).The European Parliament today announced it had voted in favour of a rulebook for the PEPP, which is designed to be a portable pension saving product available in all EU member states.Sophie in ’t Veld, the Dutch MEP who led the Parliament’s work on the PEPP rules, said: “We have delivered what we promised: a truly pan-European product that would be simple, safe and good for consumers.”She emphasised that it was not designed to replace other pension provision, but instead “further contribute to a social Europe that cares for people”. Sophie in ’t VeldPEPPs will be overseen by the European Insurance and Occupational Pensions Authority (EIOPA) and include a “clear set of information” for each user, the Parliament said.In addition, investors will be required to take financial advice before accessing PEPPs “to make sure savers know what they are buying and what they may expect”.The “basic option” PEPP will have a cost cap of 1%, with investors given options for the investment risk level they want and the ability to switch providers, with switching costs also capped.The rules must now be signed off by the European Council before they can be rolled out across the EU.The Parliament urged the Council to support preferential tax treatment for PEPPs, as tax would play a “crucial” role in the success of the model.ReactionGabriel Bernardino, chairman of EIOPA said: “This regulation is an important first step towards giving European citizens an alternative sustainable product to help closing the retirement savings gap. EIOPA, together with the national competent authorities, will ensure timely implementation and consistent application across the European Union.”The European Commission has previously forecast that the PEPP could help increase assets in personal pension products to €2.1trn across the EU by 2030, citing an EY study.However, others were more cautious in their predictions. Nicolas Jeanmart, head of personal insurance, general insurance and macroeconomics of Insurance Europe, the industry lobby group, warned that it was “too early to predict whether consumers will be interested” in the PEPP concept.“A decisive factor will undoubtedly be the Level II technical measures where many key product features will be decided,” he said. “That is why the work of EIOPA throughout the coming year will be crucial in addressing the remaining open questions, and we stand ready to contribute.” Matti Leppälä, secretary general of trade body PensionsEurope, said: “Saving for a pension in a good quality product leads to good outcomes and PEPPs can be a valuable tool to complement the pension income of many EU citizens. The EU-label on PEPPs will benefit both consumers, guaranteeing strong protection, and providers, introducing a framework for personal pensions that allows them to provide PEPPs across the EU. “PEPP is an important step on the road to addressing pension gaps and demographic challenges, and a relevant milestone in completing the Capital Markets Union. Further technical measures complementing the PEPP regulation have to be appropriately designed to allow all different PEPP providers to build on their own strengths and business models. Only then will PEPP support pension savings and long-term investments across the EU.”Tanguy van de Werve, director general of asset management trade body EFAMA, called the Parliament’s agreement “an important landmark”.“Today the path has been paved for the development of personal pension products with a European label,” he said. “The PEPP will soon become a reality for European consumers: it will promote competition, widen consumers’ choice and encourage individuals to save more for retirement, which is one of the biggest societal challenges the EU will be facing in the coming years and decades.”last_img read more

Joseph Mariathasan: China’s city cluster plan – a lesson for Europe?

first_imgHow should cities develop? Historically, the process has often been haphazard, driven by factors such as trade and population flows. As cities grow larger, the interactions between cities located close to each other start to become more important.Countries across Europe have seen this effect in regional groupings: for example, the four largest cities in the Netherlands (Amsterdam, Rotterdam, The Hague and Utrecht) form the Randstad, while the Rhine-Ruhr region in Germany consists of 11 cities with populations of more than 200,000.In China, the phenomenon of the ‘clustering’ of cities to form regional powerhouses is being taken to a whole new dimension, driven by two forces that European countries do not possess: a huge population and a highly centralised administration.Gary Smith, managing director at the Barings Investment Institute, has produced a fascinating paper outlining the goals and impact of China’s ambitious plans to set up 19 city clusters – expected to be home to 800m people – by 2030. Shanghai has a population of 26m people – and could have as many as 34m by 2035, according to StatistaThere are many reasons that could account for this. Suppliers located closer together can offer a more diverse and less expensive range of products, while common infrastructure and transportation framework costs can be shared. The larger and more diverse labour pool also helps firms and workers find a better match for one another, and innovations are shared more easily and diffused more quickly. Clusters of smaller cities may also be able to support a university or large factory that a single city may not be large enough to support.AgglomerationThere is, however, a competing force that Smith also describes: the “agglomeration shadow effects”, whereby competition between cities limits growth. In China, it appears that “borrowed size” benefits have been more powerful than “shadow effects” in China’s cluster cities, he says.The three leading clusters are Beijing-Tianjin-Hebei, the Yangtze river delta cluster around Shanghai, and the Greater Bay Area encompassing Hong Kong, Shenzen, Macau and Guangzhou. The size of the populations is staggering. The numbers are larger than the populations of most European countries, with 130m in the Beijing cluster, 152m in the Yangtze river delta, and 65m in the Greater Bay area.As Smith points out, many other nations have urban regions of comparable scale to those in China, but they do not have governance coordination that is as centralised as in China. That has been key to China’s implementation of a successful national industrial policy, and the building out of extensive public infrastructure projects.By contrast, European countries struggle to implement long-term infrastructure projects and, arguably, any long-term developmental plans. If concentrations of urban activity produce synergies that drive growth, can concentrations of cities deliver bigger benefits? “The answer is an unequivocal ‘sometimes’,” says Smith.Rudiger Ahrend – head of the urban programme at the OECD’s directorate for public governance and territorial development – estimates that doubling a city’s population should boost productivity by 2-5%.center_img Source: Alex NeedhamA ‘maglev’ train coming out of Pudong International Airport, ShanghaiThe flip side to this is that there is also the significant potential in China for waste, with “white elephant” projects proliferating, driven by political reasons rather than economics. The maglev train from Pudong airport is a joy to travel in, but it is difficult to see how it could be profitable when it appears to be only half full and drops passengers off only in the outskirts of Shanghai.Barings’ Smith cites an OECD study that describes the Chengdu-Chongqing cluster in the centre of China as “forced”, with two largely independent cities separated by 300km of largely unoccupied and hilly land.Smith also focuses on the 55km link connecting Hong Kong to Macau and Zhuhai on the mainland, incorporating two artificial islands and a 7.7km tunnel that is hardly used – although Smith admits that traffic numbers will increase as regulations are eased. However, political objectives may have trumped any economic considerations in its construction.As Smith argues, it is difficult to see which other countries have the appetite and the administrative tools to replicate the policies that China has put in place. As a result, the Chinese experiment in creating mega-city clusters might turn out to be unique. But it may still have lessons for Europe and the US as a casebook study of the competing forces of synergies and agglomeration shadow effects when it comes to generating economic growth in regions.last_img read more

Netherlands roundup: NIBC eyes alternatives for scheme

first_imgThe pension fund, with 570 active participants, is also struggling with relatively high costs for pensions provision, which amounted to €783 per participant last year.It stated that filling in board vacancies with the company’s staff was also posing a problem.At the end of October, the coverage ratio of NIBC’s pension fund stood at 99.9%, which is lower than most Dutch pension funds of banks and financial institutions.LCP: Dutch schemes return 4.9% in third quarterDutch pension funds have achieved a return on investments of 4.9% on average during the third quarter, with smaller schemes usually performing better, according to consultancy LCP.The firm, which based its estimate on quarterly data of individual pension funds published by supervisor De Nederlandsche Bank (DNB), said its figures reflected a weighted average.The unweighted average stood at 6.1%, implying that larger schemes had usually generated a lower result, it said.LCP’s figures included pension funds’ results of the interest risk on liabilities. Large pension funds usually have a lower interest cover.The consultancy noted that, despite positive returns during the first three quarters, pension funds’ coverage ratio had continued to decline, with the weighted average decreasing to 103.4% at the end of September.It attributed the funding drop in particular to decreasing interest rates, which reached their lowest point in August.LCP added that the weighted cumulative return for the first three quarters was 16%.At the end of September, funding for most Dutch schemes ranged from 105-110%, with 39 pension funds short of 100%.The consultancy also said the coverage ratio of pension funds with relatively small securities holdings and a high interest hedge was least affected.Most Dutch pension funds have invested approximately 50% of their assets in securities and have covered 50% of their interest risk. Dutch merchant bank NIBC is looking to place its €323m pension fund with a consolidation vehicle (APF) or joining an industry-wide scheme in the next few months.In a newsletter to its participants, the pension fund said change was needed in order to improve the scheme’s prospects for the medium term.It indicated that a committee, comprising representatives of the employer, the pension fund as well as its participants, had already concluded that the current model for pensions provision was not up to the challenges the scheme is facing.It said continuing low interest rates, additional legal requirements and the development of a new pensions system triggered the plan.last_img read more