IPE Views: Lessons learned on the UK Invensys Pension Scheme

first_imgRobin Claessens, former chief executive and CIO of the UK’s Invensys Pension Scheme, talks about the lessons he learned overhauling its management structuresI joined Invensys Pension Scheme (IPS) at the end of 2008 and accepted the mandate as their chief executive and CIO (CIO for two years only).As part of a 10-year transformational plan initiated in 2000, the board of IPS changed the business management model of the scheme in 2008.The initial mandate was to set up an executive office, mirroring a corporate management model, to run what effectively is a large enterprise through a small executive team, as the scheme had £4bn (€5bn) of assets and 90,000 members. The scheme was not just supposed to become a performing business, it was supposed to embody a joint strategy between all stakeholders, integrating funding, investment strategy and corporate sponsor covenant risks.During that journey, we experienced a number of events – some professional and technical, some more subjective and others personal. I have endeavoured to translate these events into a number of concise lessons, which I think apt to share with you.1) A UK DB pension scheme is a proper and independent business – it should be managed as suchI used to hear, and sadly still hear, that UK corporate DB pension schemes are considered as a weight, a cost centre, a liability – that the only way to ‘fix’ them is by paying contributions and minimising costs rather than managing them as a proper business. Pension schemes are long-term investors and therefore have the time to be successful businesses.A first step to implement a successful business management model is to focus on the pillars of the scheme – its governance. But how do you ensure you are focussing on the right aspects of the scheme’s governance? One suggestion is to answer the following question: “what is there to stay?”The decision-makers: Hire experienced and expert scheme-, industry- and role-specific trustee directors. That is crucial because they are the ultimate decision-maker, unlike in the corporate world (more on that later)Risk management: Build your governance and executive structure adopting a holistic and integrated pension fund risk approach – be open and seek input from all stakeholders, your team members, your advisers and your portfolio managers when doing soHigh-impact/high value-add activities: Hire in-house expertise/experience in the high-impact/high value-add activities of the schemeComplementary advice: Complement your in-house skills by investing in strategic, tactical and execution advice of quality, especially when you have a small executive team2) Doing it in-house and cheaper doesn’t always create valueBecause you can do it more cheaply in-house doesn’t mean you are better at it and certainly doesn’t mean you are able to create more value. A scheme’s absolute cost is still too often viewed as a key metric when considering pension strategy. Weigh the impact of growing your in-house capabilities on the executive team’s job.I have seen, and still see, too many chief executives and CIOs who spend more time on HR and organisational matters than strategic asset allocation, for example. Too great a size and complexity of the organisation can kill competitive advantages and flexibility.Short-termism creeps in despite being a (very) long-term investor by natureHerd mentality – for example, the asset manager performance-review process is simplified to the extreme by blindly following simple benchmarks because the decision-making process within the organisation is too complex3) Portfolio managers should become your trusted advisersRemember, they manage significant sums of money on your behalf. Should you, therefore, only call them from time to time? Creating an ongoing and trusted relationship with asset managers proved to be extremely valuable to IPS’s ALM activities, investment and risk management, and trustee and executive education.The continuous and trusted aspects of the relationship were achieved through very regular communication – at least every other week, and, at times, every other day with the key managers (the LDI manager in IPS’s case). That frequency, depth and intensity of communication had the effect of keeping them on their toes. This continuous dialogue (not nagging!) creates constructive pressure.4) Raise your hand when the going gets toughFinally, leadership is premised on the exercise of good judgement. Good judgement is best achieved when balanced between professional, personal and emotional circumstances is achieved. When the balance breaks, and you feel your good judgement capability might be impaired, raise your hand, inform the chairman, the board and your mentor of what you are going through. Forewarning allows for planning. The chairman and board will ensure you and the team are backed up. Robin Claessens is managing director of investment consulting at Redington. This piece is an excerpt from ‘Pensions, management and leadership: 14 Lessons from Invensys pension scheme’s former CEO/CIO’last_img read more

Wednesday people roundup

first_imgBank J Safra Sarasin – Serge Ledermann has been appointed head of asset management for Switzerland and a member of the executive committee. He joins from Retraites Populaires, where he was deputy chief executive. During a long career with Lombard, Odier Darier Hentsch, he was a partner, in charge of asset management. He also played a key role as founding partner of the asset management business of UBP.Hermes EOS – Bruce Duguid has been appointed to the engagement team. He joins from the UK Green Investment Bank, where he was head of sustainability and green impact. Before then, he was head of investment engagement at the Carbon Trust.Baring Asset Management – Jean-Louis Scandella has been appointed co-manager on a number of mandates including the Global Emerging Markets fund, with William Palmer and Isabelle Irish. He joined Barings in May 2014 from French equity boutique Comgest.F&C Investments – Julio Obeso joins as a senior analyst, while Nicholas Sauer, an F&C employee since 2011, has relocated from the Amsterdam office to join the London-based emerging market debt team as a product specialist. Obeso joins from H2O Asset Management, a global macro and fixed income fund in London.SAIL Capital Partners – The US private equity company has expanded into the EMEA region with the establishment of a London office and the appointment of Eric Warner as managing director. Prior to joining SAIL, Warner was co-chief executive and head of investor relations at Altius Associates.Sacker & Partners – Sackers has seconded associate Emma Martin to the legal team at The Pensions Regulator. She will be specialising in defined contribution pensions. She joined Sackers in 2010.Global Impact Investing Network – Amit Bouri has been appointed chief executive. Co-founder of the GIIN, he succeeds Luther Ragin, who stepped down at the end of 2014. Nordea Asset Management, PFA, Amundi, Allianz Global Investors, Kames Capital, Bank J Safra Sarasin, Hermes EOS, Baring Asset Management, F&C Investments, SAIL Capital Partners, Sacker & Partners, Global Impact Investing NetworkNordea Asset Management – Christian Hyldahl has been appointed head of Nordea Asset Management, part of the Nordic and Baltic banking group. Hyldahl will take over from the current head of the division, Allan Polack, who is leaving the group to take up the role of chief executive of PFA in April. Hyldahl has been head of investments at Nordea Asset Management for the last four years, and before that was co-head of markets within the division. He has worked at Nordea since 1990.Amundi – Andy Wiggins has been appointed head of the UK and Ireland institutional business. He joins from Allianz Global Investors, where he held the role of head of UK institutional business development. Before then, he was head of UK institutional clients at Threadneedle Investments, and director of client relations at AllianceBernstein. Separately, Jeannine Daniel has been appointed head of equity strategies and senior analyst at Amundi Alternative Investments. Before joining Amundi, she worked for more than four years as a senior analyst at Kedge Capital Services. Before then, she was assistant vice-president and senior research analyst at Ivy Asset Management.Kames Capital – Peter Ball has been appointed director of institutional business, as well as head of business development at Kames parent Aegon Asset Management. Ball initially began working with Kames in March last year as a consultant. He joined from JLT Employee Benefits, where he was responsible for the investment management and investment consulting businesses. Before then, he led the UK institutional business at JP Morgan Asset Management for 10 years.last_img read more

LGPS investment regulations should mirror private sector, says GMPF

first_img“A similar approach would be an appropriate basis on which to design new LGPS investment regulations.”However, Morris – despite his call for a more relaxed framework for LGPS investments – acknowledged the GMPF had not been constrained by the requirements, and praised the relaxation for investment in alternatives in 2013.He said the 30% cap, raised from 10%, gave the fund a lot more scope to invest in alternatives, particularly infrastructure.“In the past, there was not a great deal of headroom for an upward increase in strategic allocation to private equity and infrastructure investments through limited partnerships,” Morris said. “There are [still] a number of potential investments that might be appropriate for an LGPS fund but are not permitted under the regulations because of the way they are drafted.“However, an alternative approach can generally be found.”GMPF recently unveiled a £500m infrastructure and alternatives vehicle together with the London Pension Fund Authority (LPFA), allowing both schemes to scale up.The fund is currently £260m below its target allocation to alternatives and will now contribute £250m to the new vehicle.Morris also said the requirement for LGPS funds to obtain “proper advice” remained a crucial component, and ensured prudent investment decision-making.He said the GMPF’s structure and size meant it was well placed to provide cost-effective advice to its own board and other schemes.“GMPF has the particular advantage of scale, which allows us to build up significant internal expertise that can provide cost-effective advice both to our scheme, and potentially other funds in the LGPS,” he said.To read this month’s On The Record with the GMPF in the UK, Migros-Pensionskasse in Switzerland and SEB Pension in Denmark, click here Investment regulations and limits for UK local government pension schemes (LGPS) should be more akin to those in the private sector, according to the Greater Manchester Pension Fund (GMPF).The £13.2bn (€18.1bn) pension fund provides pensions for around 286,000 current and former public sector workers in Northwest England, the largest LGPS in England and Wales.Speaking in IPE magazine’s On The Record for April, Peter Morris, director of pensions at the scheme, said the current set of investment regulations for LGPS could be too prescriptive.“By comparison, private sector pension scheme investment regulations are set up on the basis of a prudential framework,” Morris said.last_img read more

Commission urged to include climate risk assessment in IORP II

first_imgPension funds should be forced to assess the risk of carbon emissions and climate change to their portfolio, with a new report backed by France’s Caisse des Dépôts calling on the European Commission to include provisions in the revised IORP Directive.The wide-ranging report, commissioned by the Directorate-General for Climate Action, highlighted the absence of large-scale projects, the less favourable risk/return profile and high transaction costs as holding back growth of climate-friendly investments.Backed by CDC Climat, the subsidiary of Caisse devoted to climate investments, the Climate Bonds Initiative and the United Nations Environment Programme Finance Initiative, it also called for a number of changes to pension regulation to incentivise investment.It suggested that disclosure requirements for pension investors should be “strengthened” to include climate performance metrics and carbon risk assessments, while climate concerns should also inform the stewardship of assets. “Here, it is worth noting the normative power the EU has globally, which implies that uptake of risk tools in the EU would be expected to influence developments elsewhere, particularly in emerging markets,” the report said.However, it concluded that integrating carbon and climate-related risks into regular portfolio stress tests would be a matter for the long term, as it would require the methodologies to be developed.The report nevertheless suggested the IORP Directive be used as a way of requiring pension investors to consider such risks, in line with the Commission’s initial proposals that the risk-evaluation for pensions (REP) consider climate risk.The REP was later amended during negotiations between member states, removing any direct reference to climate change.The report also looked at how the further development of green bonds could help with climate-friendly financing, such as enhancing the creditworthiness of the issuances through the Commission’s European Fund for Strategic Investments (EFSI).It also proposed that, as part of the Capital Markets Union’s focus on securitisation, green asset-backed securities be prioritised.Climate Bonds Initiative chief executive Sean Kidney said each area of the report would offer suggestions relevant to the CMU and the EFSI, placing them “squarely on the mainstream financial policy agenda”.“The shorter-term policy options for the EU proposed in the report are all about making climate-friendly assets more attractive for institutional investors,” he added.,WebsitesWe are not responsible for the content of external sitesLink to ‘Shifting Private Finance towards Climate-Friendly Investments’ reportlast_img read more

Germany’s HDI quits insurance-linked pension vehicles

first_imgIn its insurance-linked HDI Pensionsfonds, the company is managing €43m, and in its Pensionskasse it has €1.4bn.Both products will “fulfil the contracts signed with clients” but be closed for new entries.HDI told IPE it was aiming at “market leadership” in outsourcing and financing pension liabilities, adding that it expected demand for such solutions to increase, particularly among small and medium-sized enterprises.It has also started the online portal HDI bAVnet together with service provider xbAV for the online administration and management of company pension plans.Speaking at the recent aba conference in Cologne, Vjaceslavs Geveilers, senior actuarial services manager at PwC in Munich, said insurers had been increasingly introducing alternative guarantees for the last 2-3 years, and that he had recognised a trend towards lower guarantees in products. He acknowledged that most new products still focused on accrual rather than the payout phase, but he said he expected this would have to change, “not least because of biometric trends”.Clemens Frey, a partner at PwC, said a lot of new products in Germany were “more complex”, which meant insurers had to adjust their actuarial models, risk assessment and internal control mechanisms.He also predicted the regulator’s oversight of new products would be “more intense” in future. Meanwhile, the German government has proposed amendments to Pensionsfonds that could make payouts more attractive but also more volatile.A first discussion in the parliamentary commission for labour and social affairs on Monday showed general support for the amendment. No new contracts will be signed from next year for insurance-based Pensionsfonds or Pensionskasse at German life insurer HDI Leben.In a statement, the company said there were vehicles in the occupational pensions segment that were “neither profitable for HDI Leben nor its clients or for which there is almost no demand in the market”.As examples, it cited insurance-based Pensionsfonds and Pensionskasse, also insurance-based.HDI Leben said it would continue to offer occupational pensions and aim to increase business in the unit-linked Pensionsfonds it has provided together with its owner Talanx since 2012-13 via the €395m PB Pensionsfonds.last_img read more

UK roundup: Suffolk LGPS, BMW UK, Cameron Hume, Pemberton

first_imgSuffolk Pension Fund (SPF), the pension provider for 55,600 local government employees in the East Anglian county of Suffolk, has reported a 0.7% return for the year to 31 March on its £2.2bn (€2.8bn) portfolio, compared with 14.6% for the previous year. However, SPF said its most recent return was 0.5% higher than the average achieved by other local authority funds.SPF’s annualised return is now 7% for the three years, and 7.3% for the five years, to the same date.SPF invests exclusively in pooled funds. At 31 March, 50.5% of the portfolio was invested in equities (17.5% in the UK and 33% overseas), with 19.9% in fixed income (primarily global bonds).Property made up 11%, while 17.3% was in other alternatives, primarily absolute return (9.5%), private equity (3%) and infrastructure (2.4%).An interim valuation showed that the funding level at March was 78.5% and the actuarial deficit at that date £592m. In other news, BMW Group is proposing to close its two UK defined benefit (DB) pension schemes to future accrual from 1 June 2017 and to have staff join the company’s defined contribution (DC) scheme instead.The closure of the DB scheme would affect some 5,000 staff across all the company’s UK operations.BMW has launched a consultation on its proposal.Trade union Unite has said it will fight the plans “tooth-and-claw”.A spokeswoman for BMW said the cost and risk associated with DB schemes were making them increasingly unsustainable and unaffordable for members and companies like BMW. “BMW Group has always prided itself in providing excellent pensions for its staff and wants to act now to protect future pension provision for all its staff and to help protect the cost competitiveness of the UK as a manufacturing base,” she said.BMW’s DC scheme was launched in early 2014 and has more than 2,000 members.Meanwhile, Edinburgh-based investment management company Cameron Hume has teamed up with firms in Australia and Sweden as part of a plan to expand to the institutional business in new areas.The Scottish firm has signed distribution agreements with AFM Investment Partners in Melbourne, and Nordicus Capital, which covers the Nordic region from Stockholm.The partner companies will be responsible for identifying opportunities for Cameron Hume to work with institutional clients, including pension funds, sovereign wealth funds and insurance companies.Cameron Hume specialises in fixed income investments for large, sophisticated institutional clients, managing $600m (€535m) on behalf of Sanlam, a South African insurer.Lastly, Pemberton has launched a UK mid-market direct lending strategy, aiming to raise £500m for a sterling-denominated fund that will invest in dynamic mid-sized UK businesses.The asset management group said the new fund was anchored by two leading institutional investors, naming Legal & General Capital (LGC) as one, and will allow investors with long-term capital to take advantage of the financing gap created by banks’ withdrawal from new corporate lending. It expects a first close before the end of the year.John Doyle, head of origination UK at Pemberton, said its origination team had sourced more than 100 opportunities in the past 12 months “and, importantly, the UK’s decision to leave the European Union has not impacted this appetite”.The UK mid-market debt fund is Pemberton’s second, coming on top of one with a pan-European focus.last_img read more

SEB seeks China equities manager via IPE Quest

first_imgSwedish financial services group SEB is on the hunt for a China equities manager.SEB’s manager research team has a mandate of $100m-$150m (€86m-€128m) to allocate to China A-shares and H-shares.It is seeking an active manager with a “fundamentally driven, bottom-up” process, according to search QN-2342.The long-only, all-cap mandate will be benchmarked against the MSCI China index, with a minimum tracking error of 2% and maximum of 8%. Managers must have at least two years’ track record, although five years is preferred. They should state performance gross of fees to 30 June.Applicants must have at least $500m under management in the asset class, SEB said.Interested parties should apply by 5pm UK time on 18 August.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 jayna.vishram@ipe-quest.com.last_img read more

Swiss public split over pension reform as referendum looms

first_imgMeanwhile, Swiss pension funds have been trying to convince their members to vote ‘yes’ in the referendum to help ease their burden with the minimum conversion rate, which the funds have said is too high in relation to country’s ultra-low interest rate.“A ‘no’ vote would be like playing with fire”AsipMost pension funds have backed the campaign by pension fund association Asip in favour of the reform. However, some have gone public with their own requests for support.One of them is the CHF22bn (€19.3bn) Migros Pensionskasse (MPK), the pension fund for the Migros supermarket chain, one of the country’s largest employers.MPK’s managing director Christoph Ryter, former head of Asip, told Swiss media the reform was “only a small step in the right direction”.“But it is a necessary evolutionary adjustment,” he said.Similarly, the CHF1.2bn Stiftung Abendrot said the reform was “a step in the right direction”, especially for re-establishing fairness in the second pillar.“On average, today’s pensioners are getting paid out more than the actual return on their contributions,” the multi-employer pension fund noted in a press release.This “leads to a redistribution at the expense of active employees”, it added.Like Migros, other major Swiss employers have supported a ‘yes’ vote, including pharmaeuticals company Roche and insurers AXA and Winterthur.However, most employer associations and representatives from the economic sector have opposed the reform proposals, mainly because of the planned VAT increase.One criticism of the reform package has been that it contained a range of proposals that few people would want to support as a whole.However, the pension fund association Asip has renewed a request for people to accept the reform package as a whole to ensure elements such as the lower conversion rate are implemented.“A ‘no’ vote would be like playing with fire,” Asip warned. The Swiss electorate is evenly split between supporting and opposing the pension reform package Altersvorsorge 2020 (AV2020), according to several polls published in Swiss media over the past week.Two seperate polls taken earlier this month indicated support for two measures by a narrow margin, with just over 50% in favour or “more likely to vote yes”.A referendum on the reform is scheduled for 24 September, when the public will be asked two questions. The first is whether to increase VAT to finance the first-pillar AHV fund. The second is on the reform package including, among other things, a lower conversion rate, later retirement for women and a one-off pension increase for the first pillar.If one of the two proposals in the referendum is rejected, the other fails as well as the law connects them.last_img read more

UK’s NEST to back shareholder climate resolution at Total

first_img“But there’s always more a company can be doing,” she said. “This shareholder resolution calls for what we believe are vital next steps for Total – a more ambitious Scope 3 target that goes beyond regions where governments have already committed to net zero emissions, and providing more information on how it’ll help customers achieve these reductions.”NEST is a member of Climate Action 100+, the investor engagement collaboration that worked with Total on its net-zero ambition. According to a spokesman, as at 22 May the master trust had £10.5bn (€11.5bn) in assets under managment, of which around £12m was invested in Total.Total’s AGM is next Friday, 29 May.Looking for IPE’s latest magazine? Read the digital edition here. UK defined contribution provider NEST will be voting for the climate shareholder resolution on the agenda at oil and gas major Total’s annual general meeting next week, it emerged today.The company recently became the latest European oil and gas major to announce a net-zero emissions “ambition”, but those behind the shareholder resolution want it to go further, a perspective echoed by NEST.In a statement first provided to Bloomberg, Katharina Lindmeier, responsible investment manager at NEST, said: “It’s crucial that organisations like Total are taking serious and tangible steps towards delivering on the Paris Agreement goals.”She said Total’s recently stated net-zero ambition “shows progress and as a long-term investor in the company, we’re committed to working with them on this key topic”.last_img read more

Palm Beach property ready to move in and enjoy

first_img10 Swordfish Court, Palm Beach.THIS Palm Beach property is ready to move into and enjoy.It should come as no surprise that vendor Frances Bardetta’s favourite feature of her home is its spectacular waterfront vista and freshwater pool. Mrs Bardetta and her husband Anthony bought the property in December and say the wildlife often seen in the canal made the home truly special. Style at every turn.Other features include a solar system, new ducted airconditioning system, floating timber floorboards and a built-in sound system. “Of all of the homes we’ve had I really couldn’t fault this home,” Mrs Bardetta said.“Everything is free flowing, it really is a beautiful home.”Agent Daniel Alexander said the home offered a luxurious lifestyle.“This rare five-star prestige waterfront property oozes style and will provide the perfect Palm Beach lifestyle,” he said.The property is within walking distance to shops, cafes, restaurants, public transport and schools. Relax by the pool.“The view across the water and up to Tallebudgera Valley mountains is just gorgeous,” she said.“It’s beautiful sitting out there and watching the fish and the black swans that come by. We even see dolphins.”The property offers a luxurious freshwater pool overlooking the canal, which Mrs Bardetta said was also a highlight.“There are no chemicals so you feel like you have had a skin treatment when you get out of the pool,” she said. What a bathroom. Stylish and functional- what more could you want?It has a lovely big kitchen and a beautiful butler’s pantry — you can make a mess in there and close the door when your guests arrive.” The outdoor terrace features polished concrete floors with glass balustrade to maximise the water views.Back inside and there are three bedrooms to the front of the house while the main bedroom is to the east of the house.The main bathroom was designed with an art-deco style and includes a freestanding bath with floor to ceiling subway tiles. DETAILS Agent: Daniel Alexander and Aleisha Rees, LJ Hooker Palm Beach Features: Freshwater pool, butler’s pantry, freestanding bath, video intercom system Price: Offers over $1.399 million Area: 607sq m Skin treatment anyone? The freshwater pool is a highlight of this property.The four-bedroom house features of high-end finishes and plenty of style throughout.As soon as you step inside the waterfront vista sparks your attention.The open-plan design means the living, dining and kitchen flow out to the outdoor terrace and pool.The kitchen stands out with modern appliances, Caesarstone bench tops, bespoke cabinetry with soft-close draws, a built-in wine fridge and huge butler’s pantry. More from news02:37International architect Desmond Brooks selling luxury beach villa17 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“It’s a tremendous entertainer’s home,” Mrs Bardetta said.last_img read more

Older Posts »