Based in Geneva, Economou will develop the Lombard Odier Pension Fund investment model to run for external pension clients and sovereign wealth funds.He spent five years at the head of CERN’s fund, developing a risk-based approach for its investments, which became known as the CERN Model.Prior to this, he was assistant treasurer of ITT Corporation and managed pension fund assets and liabilities based in New York.Economou will report to Jan Straatman, LOIM’s CIO.On Economou’s appointment, Straatman said: “Théodore’s depth of experience running pension funds and his outstanding knowledge of their investment needs in building portfolios will be extremely valuable to our clients.” Former CERN Pension Fund chief executive Théodore Economou is set to lead Lombard Odier Investment Managers’ (LOIM) multi-asset and fiduciary management business.Economou announced he was stepping down from the CERN fund in July 2014 but said he expected to stay chief executive until his tenure finished in August this year and assist with the search for his successor.However, he will now join the Swiss private bank’s asset management arm from February, serving as CIO of its multi-asset business, which manages around $5.2bn (€4.5bn) in assets.While still at CERN, he was announced as an adviser to the Lombard Odier Pension Fund to help develop its risk-based investment strategy, which it initiated in 2009.
Low interest rates have pushed Germany’s corporate pension plans to historic funding lows, despite returns remaining stable year-on-year. The funding levels of schemes operated by listed German companies have fallen to similarly low levels as during the last trough in 2012 because of ever shrinking discount rates.Over the last year, the Rechnungszins – the discount rate applied to pension obligations – has dropped by 155 basis points to 2.1%, while three years ago it still stood close to 5%.Companies listed in the German DAX index, many of which still have DB plans in place, saw their liabilities soar by 29.1% from €303bn to almost €392bn, Towers Watson noted as it released the result of its latest German Pension Finance Watch report. Thomas Jasper, head of retirement solutions at Towers Watson Germany, placed the blame for the increase the with the European Central Bank (ECB)..“The reason for the existing pressure on pension liabilities can be put into two words: Mario Draghi,” he said.The retirement expert stressed the ECB’s “ultra-loose monetary policy” indirectly led to higher costs for occupational pensions which in turn was “directly and considerably straining the company’s equity”.Funding levels at the DAX companies deteriorated by 108 basis points last year, reaching 54.5% at year-end 2014.But Jasper stressed while the low interest rate policy placed a burden on companies, it was not ”endangering occupational pensions” as payouts from these plans were often not due for years or even several decades.Further, returns from assets in these pension plans amounted to 10.2% for the full year which together with additional contributions from employers meant a 7.7% increase in plan assets for DAX-listed companies to €213.5bn.According to Towers Watson it was to be expected that companies made “further unscheduled payments” to their pension plans which would mean assets actually exceed the figure projected by the consultancy based on earlier statistics.Jasper explained that over the medium to long-term increasing interest rates could be expected and added there were “additional safety mechanisms” in place at the pension plans to safeguard pension payouts.There are no pure DC plans in the German second pillar as all companies have to guarantee at least a minimum pension.Read more on how the German government is attempting to ease the fundning burden by reforming the occupational pensions sector
Hill added that the Commission was looking to identify “factors negatively affecting long-term investment and growth”, with the cross-border taxation of pension investments identified as one area in need of reform.The Commission said it would promote best practice and develop a code of conduct on withholding taxes across the single market and examine, in 2017, any discriminatory taxes hampering cross-border investment by pension funds.It warned member states it would launch infringement procedures against countries in breach of EU law.Reaction from the European pensions and asset management industry groups was guarded but positive.PensionsEurope chair Joanne Segars said the organisation welcomed the comprehensive approach on financing future economic growth but added that the Action Plan had the “potential” to remove cross-border investment barriers.Matti Leppälä, director general of the organisation, added: “The publication of the Action Plan means the EU can now take concrete steps to overcome the remaining obstacles and improve investment opportunities for pension funds and other institutional investors.“PensionsEurope stands ready to contribute.”The European Fund and Asset Management Association welcomed the idea of a pan-European personal pension to bring about a “truly” single market. “The current market fragmentation,” it added, “makes economies of scale impossible to achieve and limits the choice of pension products and pension providers.”The Association of Chartered Certified Accountants also greeted the plan favourably but warned against hasty design or poor implementation.Representing the retail investor sector, including pension interests, Better Finance also qualified its welcome with the caution that the initiative must “involve and attract EU citizens as individual investors”. The European Commission has vowed to review “discriminatory” EU member state tax policies as it detailed plans to boost cross-border investment by the pensions sector.Publishing its Action Plan on the Capital Markets Union (CMU), the Commission released proposals aimed at growing the European securitisation market, which it estimated could boost investment in Europe by €100bn if it once again reached pre-crisis levels.It also launched a consultation on covered bonds and accepted proposals by the European Insurance and Occupational Pensions Authority that certain infrastructure investments should qualify as a standalone asset class under Solvency II.Jonathan Hill, commissioner for financial stability, said the CMU was about “creating the right conditions for more funding to flow from Europe’s savers to Europe’s businesses”.
The IMF said it wanted regulators to have more say in setting their own budgets, and warned against limiting trustees’ pay.The fund also proposed direct supervision of “third parties”, but it did not specify which players it meant.Extended supervision should target governance as well as the qualifications of staff at group level of companies that carried out outsourced tasks, the IMF added.In the opinion of the IMF, pension funds’ recovery plans based on assumptions for future returns, such as 7% for equity, were very optimistic.It also noted that many pension funds used the legal option of charging contributions less than the amount needed to cover costs. The IMF further questioned the effect of DNB’s feasibility check for pension funds, arguing that its 60-year horizon was too long. Dutch supervisor De Nederlandsche Bank (DNB) should take a stricter stance on pension funds taking too much risk, according to the International Monetary Fund (IMF).In its five-year financial system stability assessment, it argued that DNB and communication watchdog Authority Financial Markets (AFM) should be allowed to introduce more technical regulation.In an explicit recommendation, it said that the prudent person principle should be elaborated through regulation, to provide the supervisor with more options to intervene if pension funds take excessive risks.In 2011, DNB told the pension fund of glass manufacturer Vereenigde Glasfabrieken to offload most of its 15% gold allocation, which led to a five-year legal battle between the scheme and the supervisor.
Böhm warned of applying “superficial key figures” to identify sustainable companies without taking a closer look at the underlying operational business, for example.Speaking at the Institutional Autumn Summit, organised by Barbara Bertolini in Vienna, Böhm called on politicians to improve sustainability through good environmental, social and corporate governance legislation.The Commission is pursuing several sustainable finance measures as part of its efforts to deliver on climate change commitments.One of them is the development of a “taxonomy” to define what types of economic activity should be considered environmentally sustainable. EU regulators ESMA and EIOPA have separately been charged with delivering technical advice in relation to potential rules requiring sustainability risks to be integrated in investment decision-making. Christian Wolf, head of asset management at BVV, the €28bn pension fund for the German banking sector, was also critical of the EU’s approach.“What we do not need is legislation overtaking itself,” he said.Wolf pointed out that pension funds had to implement IORP II, the new EU pension fund directive, by mid-January 2019. Schemes had until 2023 before a full assessment of implementation could be carried out. However, the Commission’s proposals on sustainable finance brought additional pressure and less time, according to Wolf.“What pension funds need is long-term reliability of a regulatory framework and time to implement existing legislation,” he said.Local laws and delegated actsThe Commission has sought to amend the IORP II directive to allow for so-called ‘delegated acts’ legislation. The German pensions association, aba, has rejected this and questioned the Commission’s understanding of aspects of IORP II.Markus Zeilinger, founder and CEO of the Austrian €380m Fair-Finance provident fund, argued that some existing Austrian laws actually hindered sustainable investments.“Sustainability is not part of the regulatory framework and some of the investment decisions we are making could be questioned by the supervisor,” he said.And while he welcomed some of the EU’s proposals, he predicted that implementation would be flawed: “I am afraid of the Trojan horse that only brings additional costs and a need for more resources.”He called on the EU to create more transparency and access to databases for investors to make informed decisions.Defending the Commission’s efforts, Martin Koch, policy officer in its financial services department, told delegates that the EU was “only trying to create a system of reference” with the planned taxonomy.“We do not want to tell anyone what is supposed to be green and what is not,” he said.The taxonomy has been described as intended to be an “enabling tool” for investors. Koch added that creating more transparency in sustainability reporting and ratings, as well as checking existing regulatory frameworks for impediments to sustainable investing, were also high on the Commission’s list of priorities.Volker Weber, chairman of the board at the sustainable finance lobby group Forum Nachhaltige Geldanlagen, was sceptical about the taxonomy framework.“You have to judge products according to their own benchmarks and promises to check for greenwashing,” he said. Weber also called on the EU to better coordinate its efforts between the different sectors so as to avoid different regulatory frameworks clashing.In general, the panel said the Commission’s efforts pointed “in the right direction”, but all industry representatives were wary of how various EU bodies and authorities might implement the proposals or translate them into additional regulations. German and Austrian retirement providers are concerned that the European Commission’s (EC) efforts to promote sustainability in the capital markets will end in additional regulation and costs for pension funds, delegates at a conference in Vienna heard yesterday.Discussing the Commission’s proposals for sustainable finance, industry representatives warned of efforts that “might mean well but turn out not so good”.“What is happening at the moment is an attempt to shift some of this responsibility to institutional investors who will get the blame if a goal is not achieved,” said Christian Böhm, managing director of the Austrian €4.4bn APK pension fund. “When ESMA and EIOPA tell us what should be considered sustainable, I begin to shake with fear,” he added.
A proposal that will see Switzerland’s first pillar pension fund receive an additional CHF2bn (€1.8bn) in annual contributions was passed in a referendum yesterday.The funding plan for AHV/AVS pensions, which was linked to a proposal for corporate tax reform, was supported by around two-thirds of the voting public, according to media reports.The outcome means increased contributions to the first pillar pension plan for employers, employees and the federal government. The extra CHF2bn are due from 2020. Switzerland’s federal social security office has calculated that the AHV/AVS fund will run out of assets by the end of 2030 if no measures to address the funding imbalance are adopted before then. Compenswiss, the CHF34.3bn (€30bn) manager of the AHV/AVS and other statutory social security plans, has been selling assets to address its cashflow problem. Last month it said the first pillar pension plan lost CHF2.2bn in 2018, CHF1bn of which was down to a cashflow shortfall and CHF1.2bn down to investment results.The Swiss employers’ association, UPS, said the result of yesterday’s referendum “does not change the fact that the cabinet and parliament must get down to a genuine reform of the AHV without wasting time”.“Precious time” to put the first pillar on a sustainable footing had been lost with Sunday’s vote, the association added.SGB, Switzerland’s trade union confederation, meanwhile, said the Yes vote “created room and time for reform of the state pension plan in the interest of the entire population,” and that the emphasis needed to be on contributions.It reiterated its opposition to an increase of the general pension age and the pension age for women.The trade union has argued that consequences of the baby boom for the pension system are a temporary phenomenon that can be handled with additional financing. It is calling for state pensions to be expanded with the addition of an extra month’s pension.
Exxon shareholders staged a significant rebellion yesterday at the company’s annual general meeting registering 40.8% support for a proposal to separate the positions of chair and CEO.In addition, 29.8% backed calls for a board matrix to include each director’s gender and ethnicity, as well as their skills and other attributes relating to the company’s business, long-term strategy and risks.The proposal on an independent chair was filed by the Kestrel Foundation and presented by the Church Commissioners for England, which backed both proposals along with the New York State Common Retirement Fund (NYSCRF).The two asset owners had previously filed a resolution asking Exxon to disclose emissions reduction targets, but this was barred by US regulator the Securities and Exchange Commission at Exxon’s request. The Church Commissioners, acting as part of the engagement initiative Climate Action 100+, were joined by Scott Stringer, New York City comptroller, and four of New York City’s five pension funds, who filed the second proposal. ExxonMobil shareholders voiced their dissatisfaction with the board at its AGM yesterdayHowever, Edward Mason, head of responsible investment for the Church Commissioners, who presented both proposals, underlined the connection between governance and action on climate change.Mason said: “This has been a very difficult AGM for Exxon and a warning shot to management. The result of Exxon refusing to put our shareholder proposal to the vote is that investors have simply expressed their frustration at Exxon’s governance on other ballot items.”He added: “Today’s increased support for the separation of chair and chief executive, in the face of board opposition, is a measure of investors’ profound dissatisfaction.“We now expect the company immediately to institute the intensive, meaningful engagement on climate strategy with Climate Action 100+ investors that it has delayed for too long.”
Sweden’s AP3 is searching for two new members of its internal investment management team – a credit manager and an equities manager – as it revamps the organisation in a bid to simplify operations.A spokeswoman for AP3 told IPE the new managers were being hired because the pension fund needed additional skills within these areas as part of organisational structural changes from 1 May. One of the two positions was a replacement, she said.The SEK394bn (€36.3bn) state pension buffer fund implemented a new portfolio structure around the end of last year, following the arrival of new CIO Pablo Bernengo in November.As part of this move, the fund also decided to change its asset management organisation, according to its 2019 annual report. AP3 said in the report that the goal of the portfolio structure and organisational review was to “simplify and clarify asset management operations” given today’s more complex environment with increased regulatory requirements.The investment categories in AP3’s new portfolio structure consist of equities, fixed income, alternative investments, other strategies and currencies, according to the report.The management mandate of AP3 and the other three main pension buffer funds – AP1, AP2 and AP4 – has been undergoing significant changes in the last two years, with the second of two batches of legislative measures set to come into force on 1 May.These latest changes aim to increase the funds’ ability to invest in illiquid assets and increase cost efficiency.The new equity manager now being sought by AP3 is to be part of the fund’s newly-formed equity group, which is responsible for the listed equity portfolio and currently consists of seven people, according to the job description on the pension fund’s website.The role focuses on global equities, particularly those from North America.The new credit manager, meanwhile, is to work within AP3’s new fixed income and currency group, which manages the fund’s fixed income, currency portfolio and internal alpha mandate, and currently has five members.This new recruit is to focus mainly on corporate bonds, according to the pension fund’s job description.To read the digital edition of IPE’s latest magazine click here.
Morningstar is to acquire environmental, social and governance (ESG) research and ratings firm Sustainalytics in full, having today announced an agreement to buy the remaining 60% of shares it did not already own.Morningstar acquired a 40% ownership stake in Dutch-domiciled Sustainalytics in 2017.Announcing the new deal today, Morningstar said it would make a €55m cash payment at closing of the transaction, subject to certain potential adjustments, and additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues.Based on the upfront consideration, Morningstar estimated the enterprise value of Sustainalytics to be €170m. With the acquisition of the remaining shares, Morningstar said it planned to continue to invest in Sustainalytics’ existing business while also further integrating ESG data and insights across its research and solutions for all segments.“Modern investors in public and private markets are demanding ESG data, research, ratings, and solutions in order to make informed, meaningful investing decisions,” said Morningstar Chief Executive Officer Kunal Kapoor.“By coming together, Morningstar and Sustainalytics will fast track our ability to put independent, sustainable investing analytics at every level – from a single security through to a portfolio view – in the hands of all investors.”Sustainalytics CEO Michael Jantzi, said: “This new ownership structure will amplify our ability to bring meaningful ESG insights, products, and services to the global investment community and to companies around the world.”Sustainalytics offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries.The transaction is expected to be completed in the third quarter of this year.To read the digital edition of IPE’s latest magazine click here.
18 Nursery Place, WakerleyWakerley has a vendor discounting rate of 0 per cent for houses, which is the best for sellers across any Brisbane suburb.A vendor discount rate is the difference between the advertised price on a property and what it actually sells for. A higher vendor discount means sellers are getting rid of their homes at much lower prices than advertised.Wakerley agent Todd Gerhardt from Re/Max Advantage Manly said sellers in the area had been able to get what they wanted for a while, even if there was a median time on the market of 57 days.“Most of my clients are fully aware that it might take six weeks to sell,” Mr Gerhardt said. He put the low to zero vendor discounting down to the demographics of the area.With a median house price of $770,000, it was a suburb that a lot of families upgraded to, rather than a suburb of first homeowners looking for the best bargain.“And when people are upgrading they are careful about their decisions, it takes them a few weeks to suss it out,” he said.David Smulders is selling his Wakerley home and was confident that he would not have to lower his expectations for a price. “If anything, sometimes they go a bit above market price,” Mr Smulders said.The suburbs with the lowest vendor discount rates seem to have little in common. Highly valued inner Brisbane suburbs such as Wooloowin and Dutton Park have low vendor discounting, but so do affordable outer suburbs such as Glenlogan and Holmview. Some of the highest vendor discounts were in wealthy inner Brisbane neighbourhoods including Highgate Hill and Ascot.“My opinion is that we have more micro markets,” said REIQ Northern Suburbs chair Martin Millard. He said a vendor discount rate could change in a matter of weeks and that by the time new figures were published the market might have already changed.More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours ago David Smulders is selling his home at 41 Margaret Cres, WakerleyIf you are selling a family home in the bayside suburb of Wakerley, you might never have to learn the subtle art of negotiation.Data from CoreLogic shows that people selling up in the area are more or less getting the prices they want when it comes to contract time. 7 Ashburton Place, WakerleyPropertyology managing director Simon Pressley said the rate was not a silver bullet to finding the perfect bargain or investment, but it was a useful number for buyers to look at. “It gives them a feel of buyer activity in the area before they start making offers on properties,” Mr Pressley said. “If you’ve got significant discounting, that should give you confidence that there are plenty of properties and you won’t be up against a lot of competition.”*** Suburbs with the lowest vendor discounting Wakerley 0% Wooloowin -0.7% Wishart -0.9% Mackenzie – -1.6% Murrarie -1.7% Kalinga -2.1% Gumdale -2.1% Riverhills -2.2% Aspley -2.2% Seventeen Mile Rocks -2.3% (Source: CoreLogic)