ENPAM, Italy’s first-pillar fund for medical consultants, has approved a new statute that streamlines its government structure and includes tighter legal requirements for board members.With the approval of the new rules, the fund’s directors also agreed to cut their pay by 20%. The changes to ENPAM’s internal regulation were announced last week along with the approval of its annual accounts, which show that the defined benefit fund recorded an 8.35% return in 2013.Total assets have now reached €15bn, making ENPAM one of the largest pension providers in the country in terms of AUM (the largest among first-pillar casse di previdenza and second-pillar industry funds). The new charter states that, in addition to convicts, those who have pleaded guilty for a number of crimes are not eligible for election as board members.Under the new rules, board members are reduced from 27 to a maximum of 17.The fund’s executive committee, a body that held power over certain decisions but was deemed ‘redundant’, is abolished. ENPAM said the changes would bring a significant reduction in costs, adding to the board’s decision to cut their remuneration. The charter addresses specific investment management issues, making the prudent person principle more explicit and setting new procedures for investments.It also outlines clearly what types of assets ENPAM can invest in, giving the board less discretion in terms of asset allocation.An ENPAM spokesperson said the wording of the new document implied that ALM effectively became a part of the fund’s statutory objectives. As well as forbidding convicts to be elected as board members, the new statute establishes a ‘code of transparency’ that makes access to information regarding the funds’ investment easier. ENPAM’s chairman Alberto Oliveti said in a statement: “With the changes to the statute, we have completed all the reforms we had planned for the 2010-15 mandate of the board. This makes us proud.“In 2011, we began reforming the investment management model, making it safer. In 2012, we reformed the provision of benefits, securing our sustainability for 20 years. Today, we are giving our members a pension fund where they can feel they have even stronger representation.”Members’ representation is heightened in the new regime, as they will be able to vote more representatives to the fund’s national assembly.More representatives, however, will not mean higher costs, as the budget set for the remuneration of representatives is kept at the same level in the new charter.A minimum of 20% of the elected representatives will have to be women. The fund embarked on a phase of transformation that began in 2011, after being involved in a controversy that resulted in the resignation of its former chairman, Eolo Parodi.He is currently being tried for charges relating to ‘toxic’ investments with a number of former ENPAM advisers. According to a statement by the fund, ENPAM’s finances are now in good health, with current assets covering pension obligations for 12 years, higher than the minimum funding requirement of five years’ coverage.At the end of last year, the surplus generated by investments amounted to €1.53bn after expenses and taxes.Oliveti added: “We can now begin thinking about actions directed at relieving the pressure on new generations. Once the new actuarial budgets are ready, if we have available resources, we could use them to reduce the burden borne by young members.”The work undertaken in recent years to strengthen ENPAM’s governance involved a major effort to scale back on risky assets.Under the threat of large losses from risky investments such as CDOs and structured notes acquired in pre-crisis years, the scheme began monitoring the drawdown risk of that portfolio more closely.ENPAM said that now the risk of significant losses from those past investments was no longer contemplated. The fund recently launched an international search for a new investment adviser, setting a deadline for awarding a mandate at the end of this year.
The €1.5bn pension fund of coffee processor Douwe Egberts (DEPF) is planning invest 5% of its assets in Dutch residential mortgages at the expense of its allocation to euro-denominated government bonds. According to its website, it expects to achieve better returns against “very limited additional risk, as most of these mortgages have been issued under government guarantee”.However, at the same time, it pointed out that it would not expand the new allocation due to illiquidity.Currently, the pension fund has a 32.5% allocation to the government bonds of France, Germany, the Netherlands, Belgium and Austria. But the pension fund said it did not expect the currently low returns on euro-denominated government paper to improve any time soon.It said it would invest in the Dutch Mortgage Fund of Aegon Asset Management.It also confirmed it would keep its interest swaps, to cover 50% of the interest risk on its liabilities.The pension fund’s decision reflects a wider trend of Dutch pension funds replacing government bond holdings in part with mortgages.Last month, the €55bn metal scheme PMT invested €1bn in mortgages through the Dutch Mortgage Funding Company (DMFCO), which offers direct investments under the label Munt Hypotheken.At the same time, the €17bn pension fund PGB and the €6.8bn scheme of steelworks Hoogovens invested €500m each through DMFCO.Recently, Jeroen van Hessen, managing partner at DMFCO, said it expected to issue €3bn in mortgages over the next 18 months.Aegon and Syntrus Achmea, which runs the Particuliere Hypothekenfonds, have estimated that their funds will hold €6bn in combined mortgage investments by the end of this year.Dutch pension funds are still waiting for further developments on the Nederlandse Hypotheek-instelling (NHI), a new institution that is to issue government-backed mortgage bonds.However, the start of the NHI has already been delayed by several months, following an EU investigation into possible state support.The NHI aimed to issue €25bn in mortgage bonds over the next five years.
Two €30m equity mandates – one for developed markets and a second for emerging markets – are being put out to tender by a consultant in the Netherlands on behalf of a charity, according to IPE Quest.The first search is for all or larger-cap equities within global developed markets, using a core style and passive process.The preferred benchmark is the MSCI World.Firms should have a track record of at least two years, though a five-year record is preferable, according to the search. The closing date for responses is 22 April at 5pm UK time.A shortlist will be drawn up on 27 April, with the deadline for submissions of RFPs on 7 May.The second mandate is for all or large-cap equities within emerging markets, using the MSCI EM as the preferred benchmark.For this mandate, asset managers should have a track record for the asset class of at least three years, with five years’ experience preferred.The deadline for responses to the emerging market search is 23 April at 5pm UK time.The shortlist for this mandate will be selected on 26 April, with RFPs to be submitted by 6 May.The consultant said the charity was looking to incorporate ESG factors into its equity exposure, excluding names rather than taking a best-in-class approach.As passive investors, the consultant said there was no problem with tracking error caused by exclusions.For both mandates, managers should have at least €1bn in assets under management in the relevant asset class and €10bn or more in assets overall.The charity’s board is set to make its final choice for both mandates on 27 May, according to the search.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 direct from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]
Swedish pensions buffer fund AP1 has already chosen to do this, and was part of a 23 March filing in the US District Court Southern District of New York.The pension fund is listed as a plaintiff alongside six public-sector New York pension funds.A spokesman for AP1 said: “We have decided to take this route since we expect to get more money back that way.”The fund had listened to counsel from its legal advisors, he said.Taking advice on any potential legal case is essential before opting for a particular course of action, says David Seidel, chief executive and chief general counsel of the Institutional Investors Tort Recovery Association (iiTRA) in the UK, which manages the interests of pension funds and other big investors in securities class action cases.“Like any case, the issues are complex and you have to know what you’re getting into before you make a decision on how to proceed,” he says.“It doesn’t matter if it’s Petrobras or another case in US or UK — they all require advice,” Seidel says.Key factors for a pension fund to consider before deciding whether to run its own legal action of join the class action include assessing how big their individual claim is, says Robin Ellison, consultant at law firm Pinsent Masons and professor of pensions law and economics at Cass Business School.Other issues are what the strength of the fund’s legal advice is, whether they have the internal management resources to manage the case, and whether the trustees are prepared to lose money on the case, he says.“Wherever you are running an action is hard work, even if the lawyers are doing it for you,” says Ellison.In the US, he says, investors have little to lose by joining or following a class action suit.“It’s a no-brainer because the law firm in the US runs a no-win, no-fee case,” he says, adding that the only downside is the 30 cents in the dollar the investor might lose on any damages they receive.“If you think you’ve got a good case and you are owed a gigantic sum of money, you might think it’s worth running a separate action in which you pay fees of 10 cents in the dollar,” he says.When a class action such as the suit against Petrobras is launched in the US, it is not even necessary for aggrieved investors to actively join the class action — they can simply sit on the sidelines and wait for the outcome.Because if successful, the court or its administrator then sends out the message to other investors, who are then free to put in their claims as well as those involved directly in the class action, says Seidel.Even running a separate case is much lower risk in the US than it would be in the UK, for example, Ellison says.“The big thing in America is that if you lose, you don’t pay the other side’s costs,” he says.Seidel says pension funds need to assess not only their exposure to the company they are considering suing, but the extent to which that relates to the legal issue at hand.“It depends how many shares they own that are relevant, and the estimated recognised loss, before they can decide whether to join the class action,” says Seidel.He also notes that, even though the US has been curbing the rights of non-Americans to sue through US courts, in the Petrobras case, European pension funds are able to use US courts to sue the Brazilian company — in the class action or separately — only because some of its shares trade as American Depository Receipts (ADRs) on the New York Stock Exchange.In general, non-American plaintiffs cannot now sue non-American companies in the US, he says.Seidel says the Petrobras case is likely to take years to reach a conclusion.“The allegations are quite significant, and even if it were to go to settlement on average it’s going to take around four years,” he says. Rachel Fixsen looks at the steps institutions can take to reclaim losses after investing in PetrobasPension funds exposed to troubled Brazilian oil giant Petróleo Brasileiro (Petrobras), who have lost money on their investments as a result of alleged wide-scale corruption at the company, will have to weigh their options carefully before deciding which legal route to take, experts say.A class action has already been launched in the US against Petrobras and related parties, with UK pension fund Universities Superannuation Scheme (USS) acting as the lead plaintiff.While other investors who believe they have suffered losses from Petrobras’ misdeeds can join the class action, they also have the option of taking separate legal action against the semi-state owned enterprise.
LHV Pension Funds Estonia (LHV) and Swedbank Estonia Pension Funds (SEPF) have invested in Karma Ventures, the €40m European early-stage venture capital firm.Karma Ventures, based in Estonia and domiciled in Luxembourg, focuses on European Series A investment opportunities.It will invest in companies using unique technologies to develop IT products and services with a large addressable market, and that have already demonstrated the ability to attract customer interest before a full product rollout.It is managed by Margus Uudam, Tommi Uhari and Kristjan Laanemaa. Uudam and Laanemaa previously worked together managing Ambient Sound Investments’s global venture capital portfolio.Ambient Sound was created to manage the stake in telecoms start-up Skype held by its four founding engineers, and subsequently to invest the proceeds of its sale.Two of the founding engineers of Skype are exclusive advisers to the new fund.The key investors in Karma Ventures are Ambient Sound Investments and the Baltic Innovation Fund, an initiative created between the three Baltic republics and the European Investment Fund (EIF).Several pension funds and family offices are also investors.LHV – the second-largest pension fund manager in Estonia – has committed €5m to the fund, out of assets under management of €550m.It has an average 20-30% invested in Baltic countries in its fixed income portfolios and up to 50% of assets in funds with exposure to stock markets and alternative assets. LHV currently holds multiple positions in private equity funds, invested in the Baltics and Balkans.Kristo Oidermaa, portfolio manager at LHV Asset Management, told IPE: “The EIF has recently helped to set up new managers in the Baltics, and we have become a key investor in some of those funds.“Over the past decade, a large number of IT companies and start-ups have emerged from the Baltics and found recognition on the international stage. This has created a knowledgeable community of specialists here.“Karma Ventures offers a perfect way to invest into this trend, as its team includes people who have helped to establish, manage and also exit some of those success stories.” Meanwhile, Karma is the first venture capital investment for SEPF.Kristjan Tamla, chief executive at Swedbank Investment Funds in Estonia, told IPE: “We decided to commit to the fund mainly because of the very coherent and professional investment proposal the team put forward.“Although it is a first-time team, the key people possess a wide and strong experience in venture capital investments. Each person in the team has their own clear role and a different angle in adding value.”He said the commitments from experienced private equity/venture capital investors like the EIF and the European Bank for Reconstruction and Development also helped in building SEPF’s confidence.Tamla said that, in a small country like Estonia, private equity/venture capital investments were not considered to be an asset-allocation decision.“Because quality investment managers are scarce, it is more an instrument-selection decision,” he said.“We are always happy to discuss good private equity/venture capital business proposals from the region. Since Karma is our first venture capital investment, it will definitely be a steep learning curve for us throughout the – hopefully successful – lifetime of the fund.”Karma Ventures expects to close a second funding by the end of 2016.
Finland’s Etera reported a 1.3% investment return for the first half of this year, down from 3.7% in the same period in 2015, and said Britian’s vote to leave the Europen Union had had no real impact on its investments over the period.In its interim report, the mutual pensions insurance company said the market value of investments dipped to €5.90bn at the end of June 2016, down from €5.94bn at the end of June 2015.Stefan Björkman, Etera’s chief executive, said: “Brexit did not rattle Etera’s investment portfolio or solvency.”He said the firm’s investment strategy had proved successful. “The market movement caused by Brexit has not had any greater impact on our investment portfolio than normal day-to-day fluctuations,” he said.Investment returns continued to develop positively in July, after the reporting period ended, he said, with Etera’s January-to-July return on investments at 2.4%.Fixed-income investments returned 2.0% in the first half, down from 2.4%, while equities produced a slim return of 0.2%, down from 7.8% in the same period last year.Real estate investments produced 2.8%, up from 2.0%, and other investments — a category which includes hedge funds and commodities — made a 0.2% loss, down from a 1.3% profit.Etera said it was continuing to actively seek investments within Finland, and that domestic investments made up 37% of its total investments at the end of June.In Etera’s full-year 2015 data, the share of domestic investments was 38%.It said Finnish investments made in the first quarter of this year included the acquisition of a share of forest owner Finsilva, based in central Finland, and a share of the cleantech company BMH Technologies, in which it had jointly invested alongside Finnish Industry Investment, government-owned investment company.Etera’s solvency capital decreased to €715m at the end of June from €751m at the end of December, falling to 13.5% of technical provisions from 14.2%.However, compared to March 2016, the solvency ratio had risen slightly.
France’s €25bn civil service pension scheme has revised its socially responsible investment (SRI) charter to “more forcefully” take into account “changes in the extra-financial environment”, such as climate change and the fight against tax evasion.The pension fund’s board of directors first approved an SRI charter in March 2006.Announcing the revision today, ERAFP said that, since then, its investments had diversified and that its SRI approach had expanded – via the adoption of shareholder-engagement guidelines, for example.It said “conditions have also changed since 2005”, with some issues having become “even more urgent”. “The spirit of the charter remains unchanged but has been supplemented by mention of ERAFP’s role as an active shareholder through a policy of shareholder engagement based on formally defined guidelines, more forceful follow-up of controversies and measurement of the effective impact of the ESG criteria,” it said.The latter aspect – impact measurement – is about being able to measure the “effective impact over time of the ESG selection criteria in the context of the ‘best in class’ approach, shareholder engagement and progressive reduction of the carbon footprint of ERAFP’s investment portfolio,” according to ERAFP.It also said the diversification of its investments meant it felt the charter’s principles needed to be articulated “at operational level according of the specific characteristics of the various asset classes and regions”.An extract of the board’s October 2016 decision to revise the charter states that “breaches of or complicity in breaches of recognised international standards by issuers” should “cease”.It adds that the board of directors “stresses its desire to encourage the organisation in which it invests to implement a constantly improved management of their impact on society and the environment”.“In particular,” it says, “it is in this sense that, in the event of failure of these attempts to influence, that exclusions may be decided.”
Wouter KoolmeesThe minister said that he was looking forward to the SER’s final advice, adding that he really valued its recommendations, because broad public support was vital.The four coalition partners have indicated that they favoured new arrangements comprising individual pensions accrual combined with collective risk-sharing, including a financial buffer, while keeping mandatory participation.The government also said that it wanted to replace the current average pensions accrual with an age-related degressive one, to prevent young workers subsidising their older colleagues.The FNV, the largest union, however, has insisted that workers should be properly compensated for the abolishment of the average accrual.It also wants the envisaged buffer fund to be able to turn negative temporarily during times of economic headwind, in order to keep up the principle of solidarity between participants. This is contrary to the wishes of the government and the supervisor DNB.That said, Willem Noordman, the FNV’s head of pensions, has suggested to IPE’s sister publication Pensioen Pro that the buffer principle could also be achieved through alternative means.Speaking in the corridors of the congress, he argued that the impact of declining investment markets on pensions could be evened out over several years “through cancelling figures out against each other”.In his opinion, pension funds could also deploy their investments “in clever ways” to spread the returns over time.However, neither Noordman nor Gerard Riemen, director of the Pensions Federation, could explain how these alternative mechanisms were supposed to work exactly.“Many people are looking into the issue now,” said Noordman.Dutch insurers would prefer to see no financial buffers at all.During the congress, Aegon’s pensions director Maarten van Edixhoven, speaking on behalf of insurers’ association VvV, described a buffer as “not transparent” and “a black box”. Wouter Koolmees, the new Dutch minister for social affairs, has urged employers and workers to have agreed a framework for a new pensions system by early next year.Speaking on a congress in The Hague – organised by pensions thinktank Netspar, the Pensions Federation and the insurers’ association – he said that the time of “sellotape and plasters” had passed, and that the pensions system had to be “fundamentally strengthened and renewed”.However, the minister declined to say whether the government would enforce its own plans if the various players failed to reach an accord. Employers and employees have been discussing a new pensions contract for several years in the Social and Economic Council (SER).Koolmees made it clear that an agreement about the main features of a new pensions system was crucial to enable the government to prepare necessary legislation. The coalition accord stipulates that the implementation of a new pensions system is to start in 2020. However, several players – including the Pensions Federation, the chairman of the dedicated SER committee and the unions – have already indicated that it would be very difficult to meet this schedule.
A Swiss pension fund wants to allocate $30m (€24.4m) to a China A-shares manager, according to a search on IPE Quest.Discovery search DS-2424 says the investor wants an all-cap or large-cap focused fund.The manager should have at least a two-year track record in the asset class. The strategy should be active and invested via a pooled fund.The deadline for pitches is 4 April at 5pm UK time. A-shares – which are listed in mainland China rather than Hong Kong or Singapore – have been growing in popularity in recent years, culminating in index provider MSCI’s decision to add them to its benchmarks.MSCI launched 12 China A-shares indices last week.The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation 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]
However, some experts have warned that the increase could prompt a spike in the number of people opting out of their pension scheme.Vince Smith-Hughes, retirement expert at Prudential, said: “Many young people say they do not have the spare cash to save and there is a danger that the increase in contributions leads to more people opting out.“It’s important to remember that responsibility for saving for retirement has shifted from government to individuals over recent times and the best approach is to save as much as you can as early as you can.”Catherine Doyle, head of defined contribution pensions at Newton Investment Management, called for the government to review the balance between employer and employee contributions.She added: “The stark fact remains that, while the industry acknowledges that significant progress has been made, the elephant in the room remains that individuals are still woefully unequipped to fund an increasingly lengthy retirement period.“While contribution rates are hugely influential in building up a decent-sized pot, so is having an investment strategy that delivers solid, long-term returns. As pot sizes grow, attention may well turn to what is under the bonnet of default strategies, particularly in the context of increasingly volatile equity markets and the need to maintain opt-out rates at low levels.”Data from the Office for National Statistics (ONS), released yesterday, showed that overall membership of workplace pensions had grown from 67% to 73%.However, nearly half of those contributing to a private sector pension paid in less than 2% of salary, the ONS found.Frances O’Grady, general secretary of the Trades Union Congress, welcomed the improved coverage but argued that employers were “putting in the bare minimum”.However, a separate survey from Royal London found that nearly four out of five firms said they considered pension provision an important benefit to offer new and existing employees.Employers in Royal London’s survey also said they would be prepared to facilitate automatic increases to contributions whenever basic pay rose. Two-thirds (66%) backed this, while 62% said they would match any such increase. Millions of UK workers will see their pension contributions increase from next week as part of the latest stage of the country’s auto-enrolment programme.From 6 April, the minimum contribution for staff automatically enrolled into a workplace pension scheme will rise from 2% to 5%. This is made up of 3% from the employee and 2% from the employer.Employees can pay less if their employer’s contribution brings the total payment into the scheme to 5% of salary.Minimum contributions will increase again from 6 April 2019, to 5% for employees and 3% for employers.