The US Federal Railroad Administration has allowed Amtrak and Burlington Northern Santa Fe to test a Talgo 200 Pendular trainset at higher speeds on curves between Portland, Oregon, and Blaine, Washington, just south of the Canadian border. During the three weeks of trials, which began on August 5, the train exceeded the current 76mm standard of cant deficiency by 102mm. One of two leased Talgos now operating in the region was used; it was temporarily replaced on the Seattle – Portland run by Superliner rolling stock.The test programme was conducted under a long list of conditions and restrictions, including a requirement that the normal operating speed limit of 127 km/h was not exceeded. Amtrak believes it may soon receive FRA approval to operate Talgos in revenue service at higher speeds round curves in the Pacific Northwest, reducing travel time on the Cascadia corridor between between Portland and Seattle by 30min. o
300 Club – Pascal Blanqué, global chief investment officer at Amundi, has become a member of the 300 Club, a group of top investment professionals who collectively aim to challenge mainstream investment practice by speaking out publicly. Blanqué is the 17th member of the club, after Jan Straatman, global CIO at Lombard Odier Investment Managers joined last month.Aviva Investors – Christian Taphoorn has been named senior client relationship manager for Belgium, the Netherlands and Luxembourg (Benelux). He is responsible for client relations with institutional and wholesale clients, and reports to Catrinus van Willigen, Aviva’s managing director for Benelux. Taphoorn joins from BlackRock, where he has held a similar position since 2012. Earlier, he worked for PingProperties, developer of Dutch real estate funds, and commercial property investor DTZ Zadelhoff.Confluence — Katie Kiss has been appointed director of performance analytics at financial reporting data firm Confluence, to work in its London office. She was previously global solution manager for performance at SS&C Technologies, and before that, UK head of performance at UBS Global Asset Management. Kiss will report directly to Philippe Grégoire, managing director of performance analytics at the company.Danica Pension — Lars Ellehave-Andersen has been hired by Danica Pension, and will be spending his first year at the group as interim head of Danica Pension in Norway. On August 1, 2016, he will start work as the new commercial director of the Danica group in Denmark, becoming a member of its board. Ellehave-Andersen recently left pension provider PFA, having been its chief commercial officer. Lombard Odier Investment Managers — Gregor Gawron is joining Lombard Odier Investment Managers (LOIM) to head up its new catastrophe (CAT) bond and insurance-linked strategies (ILS) team. He was most recently at Dynapartners in Zurich. LOIM is also hiring Simon Vuille and Marc Brogli to complete the three-person team. Vuille joins LOIM after working at a single family office, while Brogli, like Gawron, was working at Dynapartners. The new ILS team will be based in LOIM’s Zurich office, reporting to Jan Straatman, LOIM’s CIO.Nordea Asset Management — Mark Lovett is joining Nordea Asset Management as its equity CIO, to be based in Copenhagen. He will take over from Christian Hyldahl, head of Nordea Asset Management, who has been covering the equities role during the recruitment process. Lovett comes to the Nordea group subsidiary from Ignis Asset Management in the UK, where he was head of equities and deputy chief investment officer. Before that, he was co-CIO for European equities at Allianz Global Investors, and a member of the European management group responsible for the firm’s equity platform.Royal London Asset Management – Steve Webb has joined as director of policy and external communications. Webb was most recently the UK’s pensions minister, but also worked at the Institute for Fiscal Studies at as a professor of social policy at Bath University.
Particularly, respondents to the OECD’s consultation questioned wording that pension funds should be treated “as a separate person” under taxation laws.The Association of Global Custodians stressed that the ‘separate person’ rule would see a number of pension providers – such as UK contract-based arrangements offered by insurance companies, or German contractual trust arrangements, used by companies to pre-fund book reserve pension obligations – no longer qualify as pension funds, leading to an “inappropriate” outcome.It added: “The approaches used by different states to accord ‘pension fund’ status to vehicles established in those states differ enough that a blanket requirement that an arrangement constitute a ‘separate person’ for tax purposes will likely inappropriately exclude certain pension fund arrangements.”The coalition of 15 pension funds shared the concerns, noting the inclusion of ‘separate’ would introduce a new concept into tax law that would be difficult for some pension funds to disprove in certain OECD member states.The coalition further urged the OECD not to define pension funds as entities “operated exclusively to administer or provide retirement or similar benefits”, warning that some providers may provide services “complementary or related” to providing retirement benefits.“Such activities often serve a social and public purpose, but not all OECD member states may capture these activities under the phrases ‘providing retirement benefits’ or ‘similar benefits’,” the coalition’s response said.ATP, Denmark’s statutory pension fund, also took issue with the inclusion of “exclusively”, noting that it had in the past been asked by the Danish government to manage other benefits, such as survivor benefits. It added: “To be certain that the word ‘exclusively’ is not interpreted in too narrow a way and thereby exclude persons or entities with other or multiple pension and savings activities from the definition of a recognised pension fund, we suggest rephrasing the wording to ‘exclusively or almost exclusively’ in the necessary places in the articles or in the commentaries of the OECD Model Tax Convention.”The coalition endorsed the proposed use of “exclusively or almost exclusively”, noting the use of the phrase within Dutch law.It noted that a Dutch exemption from corporation tax was only extended to pension funds that “exclusively or almost exclusively provide benefits for […] disability or old age, based on a pension scheme”.*The global pension fund coalition includes Alberta Investment Management, Arbeitsgemeinschaft kommunale und kirchliche Altersversorgung, APG, British Columbia Investment Management, Caisse de dépôt et placement du Québec, the Canada Pension Plan Investment Board, the New Zealand Superannuation Fund, OMERS, OPTrust, the Ontario Teachers’ Pension Plan, PensionDanmark, PGGM, the PSP Investment Board, QIC and the Universities Superannuation Scheme Pension investors worth $1.5trn (€1.4trn) have called on the OECD to ensure a new tax framework does not result in a two-tier tax system for those managing retirement income.Pension and sovereign investors – including APG, PensionDanmark, PGGM, the Universities Superannuation Scheme and the Canada Pension Plan Investment Board – asked the OECD to proceed with caution when drafting its proposed model tax convention, drawn up by the think tank as part of its work with G20 nations around base erosion profit shifting.The new convention aims to remove inconsistencies hampering pension funds’ ability to establish their country of residence due to the numerous bilateral tax agreements struck between nations, allowing investors to more easily reclaim tax.The global pension fund coalition, comprising 15 pension managers and sovereign investors*, said it was important the convention’s definition of pension funds capture the “diverse range” of pension providers.
Nearly a third of investors have shifted to passive management or smart beta in the last three years according to a new poll of global institutional investors, with 31% of opting for passive and 20% respectively for smart beta.However, most investors believe active will outperform passive over the next 12 months.Bfinance’s latest asset owner surcey, which covers 485 investors worldwide managing nearly $8trn (€6.8trn), also found that 66% of respondents had added a new asset class to their portfolio over the past three years and a further 9% planned to do so imminently.According to the survey, which monitored trends over the past three years, the most popular new assets to include were private debt, infrastructure, real estate, emerging market equity and alternative risk premia. David Vafai, chief executive of bfinance, said: “At the heart of this report is a fundamental tension. There is a gulf between the returns that many investors require and the widespread expectations for what a traditional portfolio may be expected to deliver through the coming decades.”“With investors making substantial changes to improve long-term risk-adjusted returns, the job of the investor CIO is getting harder and successful delivery is becoming increasingly reliant on the quality of implementation decisions,” he said.Some 49% of investors in the poll increased their allocations to private markets in the last three years, although nearly half of investors are currently underweight versus their allocation target for this asset class, and only 12% are overweight.Obstacles to investing further included the extended time taken to make appropriate commitments, slower-than-expected capital calls, and lack of appropriate opportunities, the consultancy said.Peter Hobbs, managing director, private markets, at bfinance, said: “Higher allocations to private markets proved to be one of the key investor trends in the aftermath of the financial crisis. It is interesting to see data from the survey confirming that the trend, far from settling down, has continued strongly through the last three years.”But Hobbs said that implementation was far from straightforward.“While allocations might have continued to rise, investors are finding it increasingly difficult to deploy those allocations successfully,” he said.”With many investors looking to private markets for return enhancement and diversification, it is increasingly critical to look beyond the asset allocation models and get the implementation right,” said Hobbs.Meanwhile, despite greater use of alternative investments, investors appeared in the survey to have reduced overall costs and the total fees paid to external managers.Only 27% of investors said their overall costs had increased as a percentage of assets, while 41% said they had decreased.Meanwhile, 51% of investors are paying less in total external asset management fees versus 17% who have seen fee spend increase. Unexpectedly, investors that have increased allocations to private markets are among the most successful in reducing costs, along with European and Australian asset owners.Belt-tightening tactics used by investors include fee renegotiation (56%), consolidating mandates with fewer managers (40%) and conducting fee benchmarking studies using external consultants (33%), according to bfinance.ESG considerations were growing in prominence, according to the survey, with 39% of respondents saying it was “high priority” for their institution, and 43% implementing a new ESG policy either in the last three years or this coming year.In terms of manager selection, 41% of investors said ESG considerations would play a “major” role in future
On Monday, State Street Global Advisors (SSGA) unveiled its Fearless Girl statue in London, outside the London Stock Exchange.The statue, created by sculptor Kristen Visbal, was transferred from Wall Street in New York City, where it has been situated facing Manhattan’s iconic ‘Charging Bull’ since March 2017.In a press release announcing Fearless Girl’s relocation, SSGA claimed that 445 companies had “responded to the call to action” by adding or committing to add a female director.SSGA’s deputy CIO Lori Heinel said: “Studies have shown that companies with greater gender diversity at the senior leadership levels generate better returns than their peers. That drives our conviction to continue our engagement and voting efforts as we look to make further progress on this important topic.” Further readingDutch pension funds ‘falling short’ on board diversity Pension funds in the Netherlands are improving their compliance with the country’s code of conduct but still falling short on improving gender and age diversity, according to the code’s dedicated monitoring committee. However, data from the $2.5trn (€2.2trn) asset manager indicates that there is still a great deal of work to be done to improve female representation on corporate boards.In 2018, SSGA identified 1,265 companies globally that did not have a single female board member, up from 1,228 in 2017.Companies without a female board memberChart MakerSSGA said that, from next year, it would vote against “the entire slate of board members” on nomination committees if a company does not have at least one woman on its board, and has failed to engage with the manager’s diversity project for three straight years.Number of companies adding a female directorChart Maker
Henrik Olejasz Larsen, CIO at Sampension said: “The first quarter of 2019 has been the best quarter in stock markets for 10 years and the best first quarter for more than 20 years. This means that almost two years of normal share returns can be booked in just three months.” Danish pension funds Sampension and Danica have reported strong investment returns in the first quarter of 2019 – in contrast to losses posted for last year.The DKK290bn (€38.8bn) provider Sampension revealed that market-rate pension products recorded a 7.4% gain in Q1 for a 45-year-old with a medium-risk fund, and 10.1% for the youngest scheme members with high-risk investment profiles.Sampension reported losses of 3.3% for moderate-risk profiles and 4.9% for high-risk profiles in 2018, with both examples being for scheme members with 20 years to retirement.The two independent pension funds Sampension manages, which provide conditionally-guaranteed average-rate pensions – AP and PJD – gained 5.4% and 5.5%, respectively, for their customers. This was more than double the funds’ returns for the whole of 2018, the provider said. Henrik Olejasz Larsen, SampensionMeanwhile, the DKK566bn Danica Pension – a subsidiary of Danske Bank – said its customers’ savings in the market-rate product Danica Balance had gained between 4.7% and 12.7% so far this year, depending on customer profile. This contrasted with the fund’s full-year investment loss of 5.3% in 2018.Anders Svennesen, CIO at Danica, predicted further global economic growth over the coming months following the US Federal Reserve’s decision not to raise interest rates as quickly as previously expected for fear of hindering the global economic recovery.He added: “At the same time, there have been signs of progress in the negotiations between the US and China. And finally, the big drop in prices, as we saw last year, seems to be an overreaction to the reasonable prospects for economic growth.“We therefore expect continued positive economic growth and that we will soon see an end to the commercial war between the US and China.”Olejasz Larsen, however, said falling interest rates meant an increased risk of declining stock prices in the near future. In anticipation of a market fall, Sampension has reduced its exposure to the stock market after the strong first quarter returns.
“In the context of our best-in-class approach we have eliminated all tobacco assets and therefore we are happy to sign this pledge, taking the opportunity of the first anniversary of the initiative.”In a press release, Galzy added that ERAFP’s portfolios were tobacco-free because of the “rigorous implementation” of two criteria the pension fund applied to assess the societal consequences of tobacco production and the cost for public health. These were “value added of the product or service” and “protection and respect of the customer’s or consumer’s rights”.Bronwyn King, Australian radiation oncologist and CEO of Tobacco Free Portfolios, said: “Global public health improves dramatically with the participation by the finance sector in the withdrawal of credit and investment from tobacco companies.“As governments continue to roll out the UN Tobacco Control Treaty, the finance sector’s participation is accelerating achievement of the Sustainable Development Goals to reduce the death toll from tobacco related illness, which has increased to 8m deaths a year.”Other tobacco divestment or exclusion-related moves or announcements this year include those by Denmark’s DKK115bn (€15.4bn) AP Pension and NEST, one of the UK’s largest auto-enrolment providers.One of the reasons AP Pension gave for its decision to cut tobacco producers from its portfolio was that tobacco stocks had shown signs of price decline, partly because of pension companies’ exclusions. At the same time, it said, implementation of the UN’s Sustainable Development Goals was expected to lead to increased tobacco regulation and fewer smokers worldwide. ERAFP, France’s pension fund for civil servants, no longer holds investments in the tobacco industry, it announced today.With the divestment process complete, the €29.6bn pension fund has added its signature to the Tobacco-Free Finance Pledge, an initiative of not-for-profit organisation Tobacco Free Portfolios.Laurent Galzy, chief executive of ERAFP since November last year, told IPE the pension fund had already stopped making new investments in tobacco some time ago and had been selling existing holdings gradually since then. “To be very transparent, for the very last step there was one holding left in the portfolio and I decided to divest it to be completely in line with our principles, but all this was started earlier,” he said.
A planned inflation measure change by the UK’s statistics authority could improve or knock funding positions of defined benefit (DB) pension schemes by as much as 10%, according to consultancy LCP.In a new report, Phil Cuddeford, partner and head of corporate consulting at LCP, said the reform by the Office for National Statistics (ONS) would introduce big risks and opportunities.“With a potential change to the funding position of +/-10%, the change will be huge good news for some and huge bad news for others,” he said.“Regardless of the impact for each scheme, sponsors who engage now will be best-insulated from future shock,” he said. LCP said it urged all sponsors to consider the issue of the Retail Prices Index (RPI) change carefully, but particularly if they were involved in any significant pensions action.This could include buying or selling index-linked gilts or similar swaps, buy-ins and buy-outs, changing the index used for pension increases, transfer value or pension increase exchange (PIE) exercises, and “long-term journey planning”, it said.On 4 September, the Chancellor of the Exchequer announced his intention to consult on whether to bring the methods in CPIH (Consumer Prices Index including owner occupiers’ housing costs) into RPI between 2025 and 2030, effectively aligning the measures, according to the ONS.The chair of the UK statistics office David Norgrove had written to the previous chancellor on 4 March recommending the publication of the RPI be stopped at a point in future.According to LCP, the CPIH measure is expected to be around 1% a year less than the current RPI. “This means that DB scheme members with RPI-linked increases will expect to get lower pensions from 2030 than they otherwise would have had,” the firm said.“While a net financial gain is expected if the scheme increases are mainly RPI-linked and this is only partially hedged, schemes are likely to suffer a net financial loss if they are mainly CPI-linked and RPI instruments are in place to hedge this,” it said.Actuarial valuations, company accounting, and long-term funding targets would all be affected by the change, it said, adding that buy-in and buy-out insurers and consolidators may eventually charge less to take on RPI-linked benefits.“Year-end accounting assumptions for RPI and CPI must be set consistently to avoid unwanted volatility, and sponsors with upcoming year-ends need to address this now,” the firm said.
Finland’s largest pension insurance company, Ilmarinen, announced it has invested €500m in passive ESG emerging markets (EM) equities via a new exchange-traded fund (ETF) it co-developed with French asset manager Amundi.The €50.5bn pension provider said the new Amundi MSCI Emerging ESG Leaders Select UCITS ETF would invest in over 450 large and medium-sized companies operating in 26 emerging markets, with stocks selected based on their environment, social and governance (ESG) performance in relation to their peers.Juha Venäläinen, senior portfolio manager at Ilmarinen, said: “Emerging market exposure is a key component of our portfolio and we are delighted to offer our beneficiaries exposure to responsible investment opportunities in this space.”He said Ilmarinen was an active owner and sought to partner with asset managers who shared that mission. Amundi said its ETF took a “do no harm” approach, excluding companies involved in controversial activities such as tobacco, alcohol, gambling, nuclear power, weapons and others.Niina Arkko, responsible investment analyst at Ilmarinen, said: “We have co-developed a number of ESG ETF products with different providers, because we consider it important that there is a variety of options to choose from.”Ilmarinen’s sustainable ETFs tracked an index family that gave it broad access to both developed and emerging markets, she said, adding that this latest listed ESG index fund was the fifth the pensions firm has co-developed with another firm.The new Amundi ETF was listed on Germany’s all-electronic trading system Xetra in Frankfurt am Main on 30 June.Over the last year, both Ilmarinen and its closest rival in Finland’s earnings-related pension system, Varma, have been involved in developing ETFs with ESG tilts which they have then invested in.In December, Varma invested €500m in an ETF it co-developed with Legal & General Investment Management (LGIM) and index investment company Foxberry, with the passive investment vehicle holding US equities and taking their sustainability into account.Looking for IPE’s latest magazine? Read the digital edition here.
Barron said that at Aon, there is a growing number of clients setting a long-term target of buyout – full transfer of liabilities to the insurer – and while the market has been somewhat affected by the wider economic scene this year, it is still operating at healthy levels. Aon’s paper To buy-in or not to buy-in?, which will be published tomorrow, looks at the key investment issues and decisions involved in a pension scheme moving to buy-in.Whilst there were around £40bn (€43.8bn) of transactions in 2019 with a few individual deals approaching £5bn, the bulk annuity market has generally been worth around £10–£20bn in recent years, it disclosed. Source: Aon Survey of ProvidersFor many schemes it will be appropriate to approach the market in a phased manner over a number of years rather than risk there being insufficient capacity from insurers, the firm said.Spreading buy-ins over a number of years also offers liquidity benefits when compared to a buyout. The premium for each individual buy-in will be smaller than that for a buyout.This may allow for the scheme to hold a lower portion of liquid assets at any given time and benefit from the often-higher returns offered by illiquid assets.As pension funds mature, they become cashflow negative, especially if deficit contributions have ceased or reduced. A buy-in is the ultimate cashflow matching asset, the paper said.It is the only asset that will exactly match cashflows from a timing, pension increase and longevity perspective, it added.Aon’s paper ‘To buy-in or not to buy-in?’ is available here.Looking for IPE’s latest magazine? Read the digital edition here. Lucy Barron, partner at Aon, said that buy-ins, which offer the opportunity for pension schemes to transfer a portion of their liability risk to an insurance company for a fixed cost, “have become an increasingly established part of the UK pensions scene”.In addition to the interest rate and inflation hedging, which are also offered by liability-driven investment (LDI) solutions, a buy-in also hedges against longevity risk.Buy-ins are illiquid and capital intensive and are often most effective for schemes that only need a low investment portfolio return, according to the consultancy.“Nevertheless, there are all sorts of a variables that can affect a scheme’s suitability and readiness to buy-in – everything from the level of investment return, to the state of scheme data and the relative liquidity of its investments,” Barron said.
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