Beating 31 other applicants, the fund appointed Apollo Management International, Ares Management, Babson Capital and GSO Capital to the framework.According to the LPFA’s most recent annual report, none of the companies ran any money for the fund in 2013-14.It is understood the LPFA has yet to settle on which of the four managers to seed with capital but expects to complete the appointment by the end of March. The strategy will aim to invest in a range of high-yield debt, including distressed debt, trade finance, real estate debt, leveraged senior loans and mezzanine debt.Additionally, the LPFA said the managers would be allowed to initiate a direct lending programme but also be required, for a portion of the mandate, to remain liquid enough so that it could be liquidated within a three-month timeframe.In its Statement of Investment Principles, the LPFA said it regarded illiquid investments as holdings that could not be easily converted into cash within three years “without making LPFA a forced seller”.The holdings would form part of the fund’s 30% benchmark allocation to illiquid assets, with a further 55% in liquid assets and the remaining 15% in total return holdings.A recent report showed record interest in high-yield issuances, with law firm White & Case reporting European leveraged loan allocations of €116bn in 2014.A number of UK and European investors have also pursued direct lending investments.Recently, ATP, PensionDanmark and Danica committed DKK1bn (€134m) to an SME loan fund.The UK’s Pension Protection Fund (PPF) last year said it was similarly considering a £150m allocation to direct lending.For more on why local authorities have decided to push ahead with national framework agreements, read IPE’s interview with the Norfolk Pension Fund The London Pensions Fund Authority (LPFA) has appointed four alternative credit managers to a framework agreement ahead of a £150m (€206m) push into the asset class.The £4.8bn fund launched the framework tender last summer, with the process allowing all of the UK’s other local government pension schemes (LGPS) to consider the managers without launching a standalone tender.It is the latest national framework agreement designed for the LGPS following a recent agreement covering legal advice and ones for custodian and investment consultancy services overseen by the Norfolk Pension Fund. The LPFA said its initial commitment to alternative credit would be worth up to £150m, with the strategies aiming to return 10-15%, with only minimal leveraging of the segregated account.
“Flow of investment will not reach the most productive place, and transaction will not necessarily occur where the best service is provided.”Demarigny’s comments came in a report detailing 25 steps towards greater integration of capital markets.The report recommended that Solvency II capital requirements be re-drafted to favour greater exposure to illiquid asset classes directly impacting economic growth.He warned against the FTT resulting in the “artificial” fragmentation of capital markets.“Unless members states are able to create a financial transaction tax that would not delocalise investments and transactions, one can only echo the preference for a tax applicable in the 28 member states,” he said. The report was published by the Finance Ministry days after a number of industry associations warned that the FTT could hinder the CMU’s launch.The FTT is unlikely to be adopted by all member states in the near future, as the UK government has challenged the legitimacy of the enhanced cooperation procedure that has allowed the 11 member states to work on a joint proposal.The UK lost its court case but remains opposed to any tax.At the time, Sajid Javid, a junior Treasury minister when the challenge was mounted, argued that an FTT would be “detrimental to growth throughout Europe”.Javid was recently promoted to secretary of state in charge of the Department for Business, Innovation and Skills. The French government has been advised that the proposed financial transaction tax (FTT) could distort competition across the European single market and risks undermining the launch of the capital markets union (CMU).In a report commissioned for the French Economy and Finance Ministry, Fabrice Demarigny, a partner at Mazars, warned that establishing the CMU required members to “carefully reconsider” some current initiatives, including the controversial tax backed by 11 member states, including France.Demarigny, a former secretary general of the Committee of European Securities Regulators (replaced by the European Securities and Markets Authority in 2011) told minister of finance Michel Sapin the attempt by the minority of member states to launch an FTT directly contradicted the goal of greater integration through the CMU.“It will significantly distort competition within the European financial system and disrupt proper allocation of capital,” he said.
The interesting question is this: what does it take to be able to really emulate Silicon Valley as an innovation hub? Nils thinks there are five key factors that lie behind the global hubs, which include cities such as Beijing and Tokyo, both of which lie above any European city bar London.The first ingredient is that the hub has to be based in a large city. There needs to be a critical mass of people and exceptional talent available to make things happen.Second, there needs to be a culture that encourages creativity and risk taking. The Top 10 hubs worldwide all have that – as Moscow certainly has, which is, perhaps, to be expected, given recent political events.Third, Nils argues there needs to be some type of heavy government spending on research and infrastructure. This was certainly the case for Silicon Valley itself, where the US government supported such areas as IT, defence and space research. That is still continuing in new areas such as renewable energy. Support is critical, as venture capital cannot finance basic research but only comes in when applications are ready to be commercialised, so it is very important to have basic research support and a talent pool already there.Fourth, Nils sees the requirement for top-rated universities locally that can produce good ideas and act as a source of talent. It is not surprising Paris is doing so well given the huge concentration of top universities there.In the UK, the London-Cambridge corridor is well positioned to become Europe’s answer to Silicon Valley in the life sciences. Recent developments include AstraZeneca’s global HQ moving to Cambridge, and a £700m (€984m) investment in the Francis Crick Institute at Kings Cross. Overall, there are 37 world-class life sciences research institutes in the London-Stansted-Cambridge region and 1,400 life science businesses, accounting for 43,200 jobs and 19.6% of all UK employment in this sector, according to the London Stansted Cambridge Consortium. Last, Nils sees the need for a favourable political and regulatory tech environment, without hurdles preventing the creation of companies.Creating the right environment for venture capital investments in new, fast-growing companies may possibly be more useful for Europe’s long-term future than anything else politicians can do. This may be as true for the periphery as it is for the core European countries.Whilst Athens, for example, is never going to be in a position to compete with the likes of London, Berlin and Paris, developing the private sector in Greece through such initiatives as Corallia will ultimately be key to the long-term prosperity of the country and its position as an integral member of the EU.In the race to emulate Silicon Valley’s success, the UK is winning by a large margin. If venture capital does succeed in Europe, then I may move to Cambridge.Joseph Mariathasan is a contributing editor at IPE Creating the right environment for venture capital may be more useful for Europe’s long-term future than anything politicians could do, writes Joseph MariathasanIn Europe, since the collapse of the dotcom bubble, “venture capital” has almost become a dirty word. But the future is now looking more hopeful, and one reason for this may actually be that expectations are much lower than they were in the euphoric years of the dotcom boom. At one point back then, as Nils Rode at Adveq informed me, there were as many companies being created in Europe as in the US. Unfortunately, most of them failed to survive, leaving a very bad taste in the mouths of investors.Europe’s Top 10 centres of company creation are dominated by London, followed next by Paris and then by fast-rising Berlin. France has a very concentrated economy centred around Paris. In the UK, the equivalent would be the golden triangle of London, Oxford and Cambridge, and if the Oxbridge university towns were included, the UK dominance would become even more pronounced. Berlin, Rode tells me, has become something of a miracle in the way it has been transformed into an innovation hub, soon likely to overtake Paris. Beneath the Top 3 lies Moscow and then Barcelona, showing that the ideas behind innovation are spread across Europe. But it is not just the Top 10 that may make a difference to Europe. Greece has also set up an incubator, Corallia, for high-tech startups specialising in microelectronics, biotechnology, telecommunication networks and space, which has attracted interest from venture capitalists in Europe and the US.
The chairperson of the commission and its namesake, Knut Anton Mork, backs this position.In a statement, he said a lower interest-rate level should not have any impact on the equity share.“The choice of equity share is a trade-off between expected return and risk,” he said.“The trade-off needs to reflect the risk of loss of wealth, the level of overall risk in the nation’s total wealth and the fiscal policy role of the Fund.”The commission statement goes on to note that long-term, near risk-free real interest rates have declined since the last time the GPFG’s equity share was assessed, a decade ago.It is basing its recommendation on the premise that the expected excess return from investing in equities is largely unchanged since then.Against this background, it said, it believes the expected real rate of return on the GPFG is now considerably less than 4%.“With the current equity share, the Commission is assuming an expected, annual real rate of return on the Fund of 2.3% over the next 30 years,” it said.Setting out its recommendation for the fund to increase its equity exposure, the majority camp said it considered the associated increased risk to be acceptable, “provided that there is political will and ability to adapt economic policy to the accompanying increase in risk, in both the short and long run”.It also said experience and political understanding of the management of the fund had increased over time, that operational risk was low, and that petroleum wealth was now better diversified than it was 10 years ago.In recommending the equity share be lowered, the minority view emphasised the importance of the predictability of budget contributions from the GPFG and said fiscal policy “needs to adapt to th[e] fact” of a lower equity share translating into a lower expected return for the fund as a whole.If the Norwegian government does decide to change the sovereign wealth fund’s equity share, it should pay attention to issues such as the composition of the fixed income benchmark index, deviations from market weights and financial risk from climate change and the risk of a permanent decline in oil and gas revenues, according to the commission. Next stepsResponding to the report from the Mork Commission, Norway’s finance minister Siv Jensen said: “The choice of equity portion is of major importance for expected risk and return in the GPFG.“The investment strategy of the GPFG has been developed over time, on the basis of thorough analyses and accumulated experience.“This paves the way for sound long-term management of the fund capital, thus enabling the petroleum wealth to benefit both current and future generations.”The Norwegian government will consult on the Mork Commission’s report, whose recommendations will inform the follow-up to another Commission, the Thøgersen-Commission.In the spring of next year, the government will report to Parliament on an assessment of the Thøgersen-Commission’s recommendations; this will be in the form of a report to Parliament on long-term perspectives for the Norwegian economy.The Thøgersen-Commission advised the government on how the fiscal policy guidelines applicable to the GPFG should be practised in coming years. Norway’s sovereign wealth fund, the Government Pension Fund Global (GPFG), should increase its equity allocation to 70%, according to the majority view of a government-appointed commission.The Mork Commission, appointed in January to review the fund’s exposure to listed stocks and consider different equity shares, delivered its report to the Norwegian Ministry of Finance today.The majority view in the nine-strong commission is that the GPFG’s equity share should be increased to 70% from 60%.A minority believes the equity share should be reduced, to 50%.
Stapi, NIBC, Dimensional, IIGCC, FRC, IPFA, Lazard, Gildi, VanEck, DNCA, Investcorp, IVS, Pemberton, The People’s Pension, Invest-NL, Het Nederlandse PensioenfondsStapi Pension Fund – Brynjar Þór Hreinsson has been appointed as the new CIO of Iceland’s Stapi Pension Fund. He is taking over from Arne Vagn Olsen, who has now left, having been in the role since 2012. The pension fund has also appointed Ottó Hólm Reynisson as risk director. He previously worked in the risk management department at Íslandsbanki. He is replacing Jóna Finndís Jónsdóttir, who has been risk manager since 2012, and is now moving to new position as head of legal affairs.Vagn Olsen has joined LV, the pension fund for the commerce sector, as chief investment officer. Dimensional – The €476bn asset manager has appointed ABP trustee Erik van Houwelingen as head of European sales for its UK business, Dimensional Fund Advisors. He has been working with the group as a consultant for the past year, and will take up his new role in September, Dimensional said.As a result, Van Houwelingen will step down from ABP’s trustee board, where he has been chair of the investment committee since 2012. He is also leaving his role as chairman of Achmea Investment Management’s supervisory board. He is also a former CEO of Aegon Asset Management.NIBC – Angelien Kemna has been nominated as a member of the supervisory board (RvC) of Dutch investment bank NIBC. She is to become chair of the company’s risk policy and compliance committee.Kemna has been chief investment officer as well chief finance and risk officer at the €480bn asset manager APG. She has also held several supervisory and advisory roles. Currently, she is on the RvC of AXA Group and Railpen Investment Board, the asset manager of UK industry-wide pension fund for railways.Institutional Investors Group on Climate Change (IIGCC) – The board of IIGCC has four new members following recent elections: Sasja Beslik, head of group sustainable finance at Nordea Group; Tatiana Bosteels, director of responsibility and head of responsible property investment at Hermes Investment Management; Gerald Cartigny, CIO at MN; and Adam Matthews, director of ethics and engagement at the Church of England Pensions Board.IIGCC chair Peter Damgaard Jensen, CEO of Danish pension fund manager PKA, said: “IIGCC’s growing network across Europe will benefit immensely from their experience as we continue to engage with policymakers, companies and fellow investors in support of a prosperous low carbon future.”Financial Reporting Council (FRC) – The UK audit watchdog has announced that Mike Suffield will be its acting executive director of audit and actuarial regulation, following confirmation that Melanie Hind is stepping down to take up a family opportunity overseas.Suffield joined the FRC in July 2016 as director of audit quality, having previously been a director at the National Audit Office. He will take up his new role at the beginning of August.Hind joined the FRC in June 2012, initially as executive director for codes and standards before assuming her current role in April 2016. She led the reform of the UK’s generally accepted accounting principles (GAAP) and the development of the country’s corporate governance code, the FRC said. Icelandic Pension Funds Association (IPFA) — Guðrún Hafsteinsdóttir has been appointed as the new chair of the IPFA, replacing the industry body’s long-standing chairman Þorbjörn Guðmundsson, who resigned at the latest annual meeting. Hafsteinsdóttir is chair of the Federation of Icelandic Industries and chair of the board of trustees of the Pension Fund of Commerce.Lazard Asset Management – Bill Smith has retired from his role as UK CEO of Lazard. Jeremy Taylor, previously managing director and global co-director of research, took over from Smith on 30 June and has assumed responsibility for the asset manager’s operations in the UK, the Middle East and parts of Europe. Taylor joined Lazard in 2003 from UBS.Gildi — Kolbeinn Gunnarsson, chairman of the Icelandic trade union Hlíf, has been appointed as the new chairman of the supervisory board at Gildi pension fund. He is replacing Harpa Ólafsdóttir, who has stepped down after resigning as head of the Employment Committee of Trade Unions. Ólafsdóttir is changing jobs, having been recently appointed as head of the Department of Equal Opportunities at the City of Reykjavik council.At the same time, Ingibjörg Ólafsdóttir, chief executive of the trade union Efling, has been appointed as a new member of Gildi’s supervisory board.VanEck – The exchange-traded fund (ETF) provider has appointed Martijn Rozemuller as its European head. He was previously managing director of Dutch ETF provider Think ETFs, which was acquired by Van Eck at the beginning of the year. The transaction is now complete and the Think ETFs brand will remain in use “for the time being”, VanEck said.Rozemuller will form a European board of operations for VanEck as it expands its presence in the region, alongside co-founder of Think ETFs Gijs Koning. The company currently runs roughly $45bn and is one of the US’ biggest ETF providers. The Think ETFs acquisition added an Amsterdam office and brought its European assets to $2.6bn.DNCA Finance – The French investment group – an affiliate of Natixis Investment Managers – has created a responsible investment department led by Léa Dunand-Chatellet. It follows the company signing up to the UN Principles for Responsible Investment last year. She will be responsible for hiring a team ahead of planned fund launches later this year.Dunand-Chatellet was previously equity CIO at Mirova, overseeing 10 managers and €3.5bn. She has also worked at Sycomore Asset Management, where she set up several socially responsible investing funds, and at Oddo Securities.Investcorp – The alternative investments specialist has appointed Dominic Courtman as director of its European credit management business. He is also a portfolio manager. Based in London, Courtman will oversee closed-end credit funds and separately managed accounts. He joins from Rothschild & Co where he worked for 13 years as a credit portfolio manager.Separately, Investcorp has also announced that Ann-Kristin Achleitner has joined its international advisory board. She is a business economist and professor of entrepreneurial finance studies at the Technical University of Munich in Germany. She also sits on the supervisory boards of several large German companies.Achleitner has received several awards for research and teaching, including the Officer’s Cross of the Order of Merit of the Federal Republic of Germany in 2014.IVS – The institute of actuarial experts for pensions, a branch of the German actuarial association (DAV), has reshuffled its leadership. Friedemann Lucius, member of the executive board of consultancy firm Heubeck, has taken over as chair from Horst-Günther Zimmermann, who stepped down from the board after six years. Stefan Oecking, partner at Mercer, replaces Lucius as deputy chairman. Pemberton – Antoine Josserand has been appointed head of business development at Pemberton, a credit asset manager backed by Legal & General. In the newly created position he is responsible for Pemberton’s institutional business worldwide. He was previously head of international fund distribution for Europe, the Middle East and Africa at Citigroup, and has also worked Pioneer and AXA Investment Managers.The People’s Pension – The UK’s second largest defined contribution master trust has named Chris Fagan as a trustee. He is an associate director at consultant Muse Advisory, and previously worked in Willis Towers Watson’s investment advisory and fiduciary management teams, as well as being a trustee of the consulting giant’s pension fund.Invest-NL – The Dutch government has appointed Wouter Bos as chief executive of its financing institution Invest-NL, effective from October. The new organisation – to be officially established next year – is to support and co-finance companies, projects and start-ups with social impact and an uncertain risk-return ratio and long duration, such as energy transition, sustainability and mobility.Bos is a former treasury secretary and and deputy prime minister under former leader Jan Peter Balkenende between 2007 and 2010. After his political career, he became a partner at KPMG. Since 2013, he has been CEO of the VU Medisch Centrum in Amsterdam.Het Nederlandse Pensioenfonds – Gijs Flameling has started as policy adviser and compartment director at Het Nederlandse Pensioenfonds, the general pension fund (APF) set up by insurer ASR. In his new role, he is supporting the APF’s stakeholders body.Prior to this, Flameling was senior policy advisor at the €1.1bn Arcadis Pensioenfonds, which is currently in liquidation. On 1 July, the scheme joined the general pension fund in an individual compartment.
PME’s policy funding level had already dropped to 101.6% at November-end, when its €72bn sister scheme PMT reported a coverage of 102.5%.Both metal schemes have been underfunded since 2015. In order to avoid benefit cuts, their policy funding levels must improve to at least 104.3% by the end of 2019 when their five-year recovery plans expire.Meanwhile, at the end of November, the policy funding level of the €206bn healthcare scheme PFZW stood at 101.6%. The coverage ratio of the €406bn civil service pension fund ABP dropped to 104.4% at the same point.Funding of both schemes must be at least 104.3% at the end of 2020 in order to avoid having to cut accrued benefits and payments to pensioners.In November, the policy funding level of BpfBouw, the €58bn pension fund for the construction industry, stood at the relatively safe level of 118.7%.Market and interest rate developmentsMercer said that developed market equities lost 8.2% in December, for Dutch investors operating a 50% hedge of the main currencies. Investments without a currency hedge lost 8.4%. Emerging market equities incurred a 3.5% loss.According to Aon Hewitt, equity markets fell 5% over the course of last year.Equity index performance, Q3 2018Chart MakerIn addition, interest rates continued to slide. Following a drop of 4bps in November, the 30-year euro swap rate – the main criterion for discounting liabilities – fell by 9bps to 1.37% in December, according to Mercer.The consultancy attributed the development to lower inflation expectations, as well as a flight to AAA-rated government bonds.Aon Hewitt estimated that the interest rate fall in November had increased Dutch pension funds’ aggregate liabilities by 1.7%.Mercer reported that only bonds posted gains in December, with euro-denominated government bonds and credit generating 0.9% and 0.3%, respectively.Listed property and commodities lost 6.3% and 7.8%, respectively, it said.According to Aon Hewitt, pension funds’ investment portfolios lost 2.3% on average in December.Mortality data offers small reprieveThe consultancies said the only substantial windfall for Dutch pension funds last year was the switch to new mortality tables, which meant a funding improvement of approximately 1 percentage point on average.Based on Mercer’s funding figures, the financial position of Dutch schemes was little changed over the course of last year: at 2017-end, the average policy funding stood at 107% on average. Relative to the introduction of the new financial assessment framework (nFTK) in 2015, when policy funding was 110% on average, pension funds’ financial health has actually deteriorated.Frank Driessen, Aon’s head of pensions, highlighted that the pensions sector did not have additional time for adjustments necessary to implement a new pension agreement. However, he also said that past experience had shown that politics would not allow new cuts to pension payments.“Under specific conditions, sudden adjustments have turned out to be possible,” he said, adding that “even the tiniest cuts would have an enormous impact on the image of pensions”.UK schemes hit by asset price volatilityMeanwhile, in the UK, JLT Employee Benefits has estimated that December’s volatile market conditions caused the combined shortfall of UK defined benefit pension schemes to increase by £59bn (€65.1bn), more than doubling the aggregate deficit in the space of a month.Across all private sector DB funds the aggregate funding level fell to 93%, from 97% at the end of November and 99% at the end of July – the highest level recorded by JLT during 2018.Over the course of last year, the overall funding level of UK schemes improved slightly from 92% to 93%, as the aggregate deficit improved from a shortfall of £150bn at the end of 2017 to £107bn as of 31 December 2018, JLT said. A number of Dutch pension funds – including four of the largest – have fallen further into the danger zone as a result of falling equity markets and declining interest rates in December, with potential benefit cuts looming on the horizon.Following market declines in early October and December, discounts to pension payments and accrued benefits have become a more real prospect. Consultancy Mercer said that schemes’ coverage ratio had fallen 4 percentage points to 104% on average in December.Mercer added that the “policy funding” level – the 12-month average of the coverage ratio, and the main criterion for cuts and indexation decisions under the Netherlands’ financial assessment framework – had fallen by 1 percentage point to stand at 108% at December-end.During a presentation of its third-quarter figures, the €47bn metal scheme PME indicated that it was already worried about the potential for further recovery of its funding position, which required rising interest rates, according to Eric Uijen, chairman of the executive board.
HowdenL&GBuy-in£0.2bn HSBCPrudential (US)Longevity swap£7bn British American TobaccoPICABuy-in£3.4bn H1 2019 buy-ins/buyouts – market share (%)Chart MakerCharlie Finch, partner at LCP, said: “FTSE 100 transactions are continuing at a rapid pace. In the past week alone we have seen giant longevity hedging transactions announced by British American Tobacco and HSBC, taking the number of FTSE 100 transactions to six so far this year.“Our team has had its busiest year to date, completing a record of £10bn deals so far in 2019 as large blue-chip companies increasingly seek specialist support to de-risk their schemes.“Insurer pricing has held up well and we continue to expect 2019 full year buy-in and buyout volumes to exceed £30bn as large transactions compete for market capacity in the second half of the year.” Despite the size of the deals completed this year – and the fact that most insurance companies were reporting full pipelines of new business – consultancy group Aon said schemes were still able to access “strong pricing opportunities” for de-risking transactions, regardless of size.In a report into first-half activity, Aon stated: “While the large deals may catch the eye, there are still opportunities for smaller schemes to attract competitive pricing.“For sub-£30m transactions, insurers and schemes are tailoring their approach to make these deals as efficient and manageable as possible. In many cases we are seeing smaller schemes achieve comparable yields to the largest transactions.”Buy-in/buyout volumes in H1 2019Chart MakerLaura Mason, CEO of L&G’s institutional retirement business, said in her company’s first-half results statement that the bulk annuity market “continues to show promising growth”.“These transactions allow us to reinvest these pension funds into the UK economy in areas such as affordable housing, renewable energy and transport,” she added, “benefiting our cities, future generations and the wider economy.”UK pension risk transfer deals in 2019 PearsonL&GBuy-in£0.5bn QinetiQScottish WidowsBuy-in£0.7bn Marks & SpencerPIC, Phoenix LifeBuy-in£1.4bn PGLPhoenix LifeBuy-in£1.1bn CommerzbankPICBuyout£1.2bn Company/scheme Insurer(s) Type Size Legal & General (L&G) and Pension Insurance Corporation (PIC) dominated the UK’s pension de-risking market in the first half of the year as transactions hit a record £17.6bn (€19.1bn).Multi-billion pound deals involving the defined benefit funds for Rolls-Royce and Marks & Spencer also meant the 12-month period to the end of June 2019 was the busiest ever recorded with £34bn worth of transactions, according to consultancy LCP. L&G led the way with £6.3bn of new business, according data compiled by LCP. This included the £4.6bn Rolls-Royce buy-in, announced in June.PIC completed £6bn worth of de-risking deals in the first six months of the year, including a £930m buy-in for Commerzbank’s UK pension scheme. Rolls-RoyceL&GBuy-in£4.6bn Source: LCP; IPE reports
The decline was biggest in Latin America, where the change was from 29% in 2017 to 12% in this year’s survey. In Europe, only 9% of the respondents said they did not believe in sustainable investment, versus 15% in 2017.Speaking to journalists this morning, Jessica Ground, global head of stewardship at Schroders, said: “It’s either becoming a lot more difficult to say you don’t believe in sustainable investing or people have become a lot more convinced.”But sustainable investing was still challenging for investors. In this year’s survey 76% stated it was at least “somewhat” so. The proportion of institutional investors who do not believe in sustainable investment has fallen by almost half since 2017, but performance concerns are still a challenge, according to a new Schroders survey.The listed asset manager has been carrying out an institutional investor study every year since 2017 to analyse their attitudes towards topics such as investment objectives, risks and sustainable investments.In the 2019 edition, which surveyed 650 asset owners from around the world with $25.4trn (€22.9bn) in assets under management, 11% of respondents stated ‘I do not believe in sustainable investments’.In 2017, the proportion was 20%. “Everybody is finding this incredibly difficult”Jessica Ground, global head of stewardship at SchrodersThis is the same proportion as in the 2017 survey, although with a different split. In the 2019 survey 16% of respondents said they found investing sustainably was “very challenging”, down from 22% in 2017, and 60% said they found it “somewhat challenging”, up from 55% in 2017.“It’s rarer and rarer on my travels that you don’t meet a big asset owner that isn’t doing a project or thinks they need to get a grip on sustainability, but they’re all very much struggling,” said Ground. “Everybody is finding this incredibly difficult.”The biggest barrier to more sustainable investments, according to the survey, was performance concerns, with 48% of respondents identifying it as a challenge. Nearly exactly the same proportion (49%) said data or evidence that shows investing sustainably delivers better returns would help them allocate more to sustainable investments.More transparency from companies with regard to financial and non-financial reporting, and better benchmarks addressing environmental, social and/or corporate governance matters were the next most important factors – 36% of respondents said the former would help them make more sustainable investments and 34% said the latter would be helpful.The pool of respondents to the survey included pension funds, insurance companies, sovereign wealth funds and endowments. The research was carried out via a survey during May.
An insurance company based in the Netherlands and a Swiss institutional investor have tendered a mandate each via IPE Quest.According to search QN-2576, the Dutch investor has tendered a US small-cap equity mandate.It is planning to invest more than $100m (€89m), using a core bottom up fundamental investment strategy.It will use the Russell 2000 or S&P 600 as a benchmark, with a minimum 2% tracking error but no more than 5%. Managers should have more than $1bn in assets under management for the asset class, and more than $3bn in total assets.Applicants should state performance data to 31 October 2019, gross of fees.Their track record should be at least five years, but a track record since inception is preferred.The deadline for applications for the US small-cap mandate is 9 December.As for the Swiss investor, through search QN- 2577, it is looking to hire one manager to run two separate investment strategies: a fund of hedge funds mandate and an alternative risk premia brief.The asset owner will invest $200m in each strategy, which will have global convergent (RV) and divergent (CTA/Macro) investment styles.The hedge funds mandate will follow the HFRX Global Hedge Fund Index (excl. Equity L/S and Event Driven), while the alternative risk premia protfolio will follow the Société Générale Multi Alternative Risk Premia Index.Applicants should have more than $1bn in assets under management for the asset class, and should state performance data to 30 September 2019, gross of fees.Their track record should be at least five years.The investor has also set up volatility targets over three years with a tracking error of less than 8% for the the hedge fund strategy and less than 6% for the alternative risk premia mandate.The deadline for applications for both mandates with the Swiss investor is 3 December.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] journalists seek infrastructure managerThe Istituto Nazionale di Previdenza dei Giornalisti Italiani (INPGI) – Italy’s first-pillar pension funds for journalists – is looking for closed-end alternative investment funds to invest in infrastructure debt or and/equity.Prospective managers will have until 5 December to apply and will need to fill out an Institutional Limited Partners Association (ILPA) standard due diligence questionnaire and send it directly to the fund ([email protected]).In addition, managers’ presentations and regulation details should also be emailed to the fund directly by the deadline date. The subject of the e-mail must contain, in addition to the identification name of the bidding company, also the wording “Selection FIA Infrastructures 2019”.More information about the tender can be found here.
“This renewed strategy should be an opportunity to ensure a certain coherence of the existing framework”Saïf Chaïbi, policy adviser at PensionsEuropePensionsEurope expressed a similar hope to Efama’s about the Commission’s new strategy.“This renewed strategy should be an opportunity to strengthen the link between all the developments so far and ensure a certain coherence of the existing framework,” said Saïf Chaïbi, policy adviser at PensionsEurope.“This would be to enable pension funds and other investors to comply with the new requirements.” Asset managers and pension providers face a host of new disclosure requirements under the so-called taxonomy and disclosures regulations, two of the three new regulations stemming from the Commission’s original sustainable finance strategy. For products with a sustainability flavour, for example, the taxonomy regulation introduces a requirement to report on the proportion invested in activities that count as “green” under the taxonomy. The rules defining the content of disclosures under the disclosures regulation have yet to be published, but are keenly anticipated and expected in draft form for consultation soon. ESG data register mention pleasesA potentially promising aspect of the Commission’s consultation, according to Chaïbi, is that it “opens the debate on the possibility of establishing a European register of ESG data on companies”.“Moreover, it would be open source, meaning you wouldn’t have to pay to have access to the data,” he said.In the consultation document, the Commission stated that “it may be useful to ensure open and centralised access not only to company reporting under the NFRD, but also to relevant company information on other available ESG metrics and data points”.“To this end, a common database would ease transparency and comparability, while avoiding duplication of data collection efforts,” it said before asking for views on whether it should take action on such an idea.Efama said it welcomed the Commission’s “intention to improve ESG disclosure by investee companies, as well as the market for ESG data and ratings”.It is also encouraged by the Commission posing questions about facilitating shareholder engagement and cross-border voting, which the industry body argues would help develop sustainability and a more long-term focus in capital markets.In the consultation document, the Commission asks for views on whether voting frameworks across the EU should be further harmonised at EU level to facilitate shareholder engagement and votes on ESG issues. Another question asks “Do you think EU action is necessary to allow investors to vote on a company’s environmental and social strategies or performance?”.Other aspects appeared to be less pleasing. It said financial literacy and promoting sustainability awareness were ” somewhat sidelined in the consultation, despite being key for unleashing the full potential of sustainable finance”.“While asset managers play an important role in providing investors with the information they need to make informed decisions, ultimately it is the investor who makes investment decisions,” it argued. The Commission’s consultation is available here. The deadline for responses, via an online questionnaire, is 15 July. The Commission also asks “more generally, how can pension providers contribute to the achievement of the EU’s climate and environmental goals in a more proactive way, also in the interest of their own sustained long-term perfomance?”.“How can the EU facilitate the participation of pension providers in such a transition?,” it adds.The EC has spoken of creating an “enabling framework” to stimulate private and public investment in support of its green economic growth plan – the Green Deal. The Commission launched the consultation on what it calls its “renewed” sustainable finance strategy before the Easter weekend. It is split between a short section of questions aimed at “all stakeholders”, including citizens, and a long section aimed at experts. As the Commission says itself, the consultation covers a diversity of topics. These include the development of a system for determining environmentally harmful economic activities – a “brown” taxonomy – , financial accounting standards, investment protection, the EU green bond standard, and the market for ESG ratings, data and research. It also appears to ask for views about the EU establishing a label for ESG or green funds aimed at professional investors.There are also questions about extending the taxonomy – currently a framework for determining what counts as a “green” economic activity – to social objectives and whether the taxonomy should play in EU public spending programmes.“The consultation substantially widens the strategic scope of Europe’s sustainable finance policy”Climate change think tank E3GClimate change think tank E3G said the consultation “substantially widens the strategic scope of Europe’s sustainable finance policy”.“It proposes new actions for both public and private finance institutions, and puts forward an ambitious global dimension with a strong role for Europe’s external financial mechanisms,” it said. The Commission has said that, building on the achievements of its 2018 sustainable finance action plan, “the current context requires a more comprehensive and ambitious strategy”. ‘Opportunity for more coherence’In an initial reaction to the consultation, Efama, the European investment management industry body, said it was right that the topic of sustainable finance remained very high on the EU agenda, but expressed a hope for ”a more holistic and consistent approach”.”Thanks to the 2018 sustainable finance action plan, we already have in place a framework to integrate sustainability,” it said. “As many legislative proposals were developed in parallel, some inconsistencies and gaps have emerged.“The renewed strategy needs to put the different pieces of the puzzle together and make the new rules work in practice, in a well sequenced, consistent and coordinated manner.”Aleksandra Palinska, senior regulatory policy advisor at Efama, said: ”The biggest challenge is that in a first instance you need ESG data disclosure from investee companies and although the data is supposed to become more available with the Non-Financial Reporting Directive (NFRD) review, the Commission proposal is expected only towards the end of this year, with the rules not likely to take effect before a couple of years’ time.”The Commission recently launched the second part of a two-stage consultation process on the future of the NFRD.Palinska said the late-stage insertion in the taxonomy regulation of reporting requirements for certain large companies was welcome, “but those obligations will kick in at the same time as the obligations for asset managers to disclose”. “So in a way it’s too late because asset managers need those disclosures to prepare theirs, so here the sequencing is very much off,” she said. “There is a lot of uncertainty in the industry and we would very much like a more consistent and holistic approach to enable a proper implementation of the requirements that have been introduced.” The European Commission has included in its wide-ranging new sustainable finance consultation a question that paves the way for views about the possible need for amendments to EU pension fund legislation with regard to member views on environmental, social and governance (ESG) matters.The question asks whether, in light of the planned review of the IORP II Directive in 2023, the EU should “further improve the integration of members’ and beneficiaries’ ESG preferences in the investment strategies and the management and governance of IORPs?”.If respondents choose to answer yes, they are asked how this could be achieved given that members in collective schemes may have diverging views on ESG integration.Another question asks if the EU should “explore options to improve ESG integration and reporting beyond what is currently required by the regulatory framework for pension providers”.