Ronald Wijs, a member of EPRA’s tax committee, said the changes to legislation came about after EPRA and the industry consulted the government on the system’s negative impacts.“This legislation is a major improvement,” he said. “It should allow Dutch REITs to manage their property portfolios in a more dynamic way and to meet the changing demands from investors and tenants.”However, the changes to the tax regime came with several stipulations, EPRA said.The government will only provide tax allowances if the ancillary activities take place in a legitimate subsidiary, and if the activities directly relate to the core investment.It also said the total value of shares in the subsidiary may not exceed 15% of the value of the FBI as a whole, while turnover may not exceed 25%.In line with this, the subsidiary providing the ancillary activities may only be financed by equity.The government said this was to prevent companies from keeping their value artificially low. Changes to the tax regime for Dutch real estate investment trusts (REITS) will see them grow competitively within Europe, according to the European Public Real Estate Association (EPRA).The organisation said the changes, which came into force in 2014, would now allow the Dutch funds, known locally as FBIs, to compete against other REITS.It said the changes would allow FBIs’ ancillary services – such as providing meeting space, in-house catering or energy to tenants – to qualify for the same special tax regime as their core activities.This falls in line with the structure elsewhere in Europe and now sets Dutch funds on a level playing field, EPRA said.
An overweight position in equity holdings – at the expense of government bonds – added the most value to returns at the three KLM pension funds in 2013, according to Mark Burbach, CIO at their asset manager Blue Sky Group.The three schemes, with combined assets of €15.5bn, delivered annual returns of between 1.4% and 2%, with fourth-quarter results ranging from 1.5% to 1.6%. The best performing asset class was equity, generating up to 18.2% during the year.“Although we had expected an outperformance for equity, the degree of consistency of our risk on trade took us by surprise,” Burbach said. He added that Pacific and North American equities accounted for most to the results, and noted that the regions’ frontier markets made strong comeback last year.European low-volatility equity also performed very well over the period, he said.Blue Sky’s CIO said the €2.1bn pension fund for cabin staff was reviewing investments in sustainable equity, following returns of no more than 6.9% and high costs.“Therefore, it has decided to disinvest from sector-specific funds, such as microfinance and alternative energy,” he told IPE.Following rising interest rates, the three KLM schemes – for pilots, cabin staff and ground crew, respectively – lost up to 8% on their fixed income portfolios.Burbach said the performance of euro-denominated government bonds had been the worst since 1986.Overweight positions in US high-yield credit contributed positively, while emerging market debt – denominated in US dollars and local currencies – generated significantly better returns than developed-country government bonds.The KLM schemes reported returns of up to 13% on Asian property and 14% on private property investments in the US.Private and listed real estate in Europe returned 10% and 7%, respectively.Due to rising interest rates and improving equity markets, the pension funds’ 50% interest-risk hedge caused losses of up to 1.8%, while the schemes also lost up to 1.1% on their equity cover.The pension funds saw their coverage ratios improve to 123% (cabin staff), 122% (ground staff) and 132.8% (pilots) last year.
The Church Commissioners have acquired a forestry portfolio for £49m (€61m) for their £6.1bn endowment fund, used to finance the Church of England’s activities, as well as some of its pension obligations.The estates were purchased from UPM Tilhill, a forestry and timber harvesting company, and are made up of 13 forests in Scotland and two in Wales, including two operating wind farms and a mountain biking visitor centre.They take the Commissioners’ total UK forestry holdings to £100m, all of which are certified to Forest Stewardship Council (FSC) standards. The Commissioners are now the largest private commercial forestry investor in the UK.The Commissioners have targeted forestry investments since 2010, and since inception these have delivered an annualised double digit return. Chris West, head of indirect property, timberland and infrastructure for the Church Commissioners said: “We are delighted to complete this acquisition which brings our total forestry portfolio to 4% of the Commissioners’ total assets. Over the past five years, the Commissioners have built a high quality diverse portfolio of forestry assets in the UK, US and Australia, which will be managed for the long term.”He added: “We believe that the acquisition should deliver attractive risk-adjusted returns in our home market and further diversify the Commissioners’ assets.“This is a low carbon investment that first and foremost stacks up on investment grounds, but additionally provides future upside from renewable energy projects.However, the purchase is not connected to the recent decision by the Diocese of Oxford to divest from fossil fuel companies and its call for the Church as a whole to do the same.There is no divestment element to the Commissioners’ climate change policy and the Commissioners are awaiting advice from the Church’s Ethical Investment Advisory Group on the next iteration of this policy.They expect to adopt an updated policy before the Church’s General Synod in July 2015.
Spain’s occupational pension funds have made average returns of 10.61% for the 12 months to end-March 2015, according to the country’s Investment and Pension Fund Association (INVERCO).The results are a marked improvement on the 7.14% returns for calendar year 2014, and 7.2% for the 12 months to 31 March 2014. Average annualised returns for the three years to 31 March 2015 are 8.24%, and for the five years to that date, 5.8%.Total assets under management for the occupational sector rose to €35.6bn, up by 7.3% during the previous 12 months and also an increase on the €34.2bn at end-December 2014. The number of participants remains stable at just over 2m.Assets for individual pension plans also increased over the first three months of the year, from €64.1bn at end-2014 to €67.8bn at end-March 2015.For the first time ever, total pension assets in Spain have surpassed the €100bn mark.According to INVERCO, for pension funds as a whole, there has been a slight shift towards non-domestic investments, both in fixed income and equities.Domestic investments still make up the lion’s share of assets, at 62.7% of portfolios, but this is a decrease from 65.2% three months ago.Non-domestic holdings have risen from 17.4% of assets at end-2014 to 20.5% at end-March 2015.There has also been a slight shift from fixed income to equities.Overall, 57.7% is now invested in fixed income, compared with 22.4% in equities (9% in Spanish and 13.4% in non-domestic shares).This compares with 59.8% in fixed income and 20.1% in equities (8.6% Spanish, 11.5% non-domestic) at end-2014.The biggest single component of pension fund portfolios – 33% – is still invested in Spanish government bonds, although this has fallen from its 35.3% share as at end-December 2014.A further 17.6% is invested in Spanish corporate bonds, again a slight decrease from 18.6% three months’ previous.Finally, ‘other’ assets have risen slightly, to 9.4% of portfolios, with a slight decline in cash holdings to 7.4%.
Dean began her secondment as interim director for policy and product development and became a permanent member in 2014, in a continuation of the role.Before her first secondment to PADA, Dean spent 30 years as a civil servant, lastly within the Department for Work and Pensions (DWP) developing the policy that laid foundations for the creation of NEST.She also worked on the creation of the pension forecasting IT system, and policy that introduced the second-state pension, which allowed accrual based on national insurance contributions.Jones – who leaves after eight years with the provider, having served as its founding chief executive – will step down later this year.This week, NEST revealed its plans for its future offering after the UK government removed compulsory annuitisation.Dean will now oversee the implementation of a complex blend between income drawdown, deferred annuities and cash accounts, as the provider aims to create a default system for members. The UK’s National Employment Savings Trust (NEST) will appoint its head of product and marketing as chief executive after Tim Jones steps down later this year.Helen Dean will take on her new responsibilities in the autumn.Dean, currently an executive director, becomes NEST’s second chief executive.She was initially seconded from central government to the provider while it was still called the Personal Accounts Delivery Authority (PADA), before the official rollout of auto-enrolment.
The €417bn asset manager APG paid about 500 employees bonuses of €63,500 on average last year.According to its annual report, APG said it paid almost €32m in total in bonuses, amounting to 25% of the average salary.Variable pay makes up 10% of salary costs at the asset manager for the €359 civil service scheme ABP.Executive board members, including chief executive Gerard van Olphen, are ineligible for bonuses. At the €114bn MN, the average bonus as a percentage of salary is about half that of APG’s.MN – asset manager for the large metal schemes PME and PMT – capped bonuses at 20% of the basic salary and reported that 5% of its 1,200 employees were eligible for variable pay, compared with 14% at APG.APG said it set a similar maximum for workers reporting directly to its executive board but that variable pay for asset management could increase to as much as 40% of the basic salary.It added that, for its New York and Hong Kong-based workers, it tried to strike a balance between what was acceptable in the Netherlands and what was needed locally to retain valuable employees.APG emphasised that its remuneration policy was aimed at attracting, retaining and motivating qualified staff and said the bonuses it paid in New York were in-line with those for similar positions in the city.
The Royal County of Berkshire Pension Fund is to take a 20% stake in specialist asset manager Gresham House, backing a new alternative investment platform for other local government pension schemes.The Berkshire fund will provide the cornerstone investment for a new £300m (€353m) fund Gresham House plans to launch on the platform, called the British Strategic Investment Fund (BSIF).The BSIF is targeting investment in housing, infrastructure and “innovation” – three themes identified by the UK’s chancellor Philip Hammond in his 2016 Autumn Statement as being of strategic importance to the UK, said Gresham House.John Lenton, chairman of Berkshire Pension Fund, said the platform would enable the pension fund “to reduce costs and obtain diversity in our investments”. He added that the pension fund will target niche areas and smaller and longer-term investments than those that interest “the major investment houses”.“These give us the potential of a higher long-term return which is so important to a pension fund like ours that has to plan for pensions that will be drawn down many years in the future,” Lenton said.The new investment platform is intended to provide investors with access to illiquid alternative investments in niche asset classes that are often “overlooked” and difficult to access by larger funds, according to Gresham House.“For example, it becomes uneconomical for £25 billion pension ‘super-pools’ to monitor and manage sub-£50 million investments,” said the asset manager.The platform is aimed at local government pension schemes (LGPS) like Berkshire, but is also open to private sector pension funds, endowments, family offices, and other investors.“Initial discussions with a limited number of LGPS have confirmed interest in the objectives of the new Gresham House platform,” said the asset manager.UK LGPS are pooling assets to create larger funds capable of benefitting from economies of scale and, as desired by the government, investing in infrastructure.The Gresham platform is intended to allow investors to be involved in the investment process or engage directly with the manager, and to grant discretionary co-investment rights to “top-up” investments in preferred sectors or areas on a deal-by-deal basis.Berkshire’s acquisition of the 20% stake in Gresham House is subject to a vote at a general meeting on 10 March.Its move to enter into a strategic relationship with Gresham comes after the pension fund late last year announced a £15m investment in commercialisation of UK university research as part of an overhaul of its private equity portfolio.Tony Dalwood, CEO of Gresham House, said that the announcement “represents a further significant step in delivering the growth strategy that we set out when repositioning the group two years ago”.The asset manager’s board has identified alternative asset management as “a structural growth area”, it said in a statement.
For example, the PPF has said that it did not “understand why there was an apparent rush to complete the pre-pack administration” and that it had been led to believe that the publisher had “more than adequate cash reserves”, including to pay the next pension contribution of around £800,000 (€895,000) that was due on 18 November.Commenting on this, Field yesterday said: “It doesn’t take a genius to work out that a company that dumps its pensions liabilities just days before it has to put £800,000 into the pension fund might be up to no good.“It’s clear that the PPF, which is left to foot the bill, has serious doubts about this pre-pack deal.”A spokesperson for TPR said it was looking closely at the circumstances of the Johnston Press pre-pack deal, including timing of the company sale.However, pre-packs could happen at short notice and “it is not possible to launch an investigation into a pre-pack that has not taken place”.“Regulating the process leading to a pre-pack is a matter for the other agencies,” added the spokesperson.“Our role is to focus on a pre-pack’s impact on an employer’s pension scheme.”TPR did not have the power to stop a pre-pack taking place, as there was no requirement for either it or the PPF to pre-approve it. The UK’s Pensions Regulator (TPR) is investigating the bankruptcy of media company Johnston Press amid pressure from politicians over the fate of the company’s defined benefit (DB) pension scheme.TPR did not have the power to stop the ‘pre-pack’ deal, it said in a response to influential MP Frank Field, who had raised concerns about the sale of Johnston Press after it was put into administration. This meant its DB scheme automatically entered the Pension Protection Fund’s (PPF) assessment period, with some members set to have their benefits reduced.In a statement issued yesterday, Field, the chair of the UK parliament’s work and pensions committee, said: “The Pensions Regulator has promised to be quicker and tougher — now would be a good time to start.”The politician had already challenged about the sale of Johnston Press and the offloading of the DB scheme, but followed up on this yesterday after “worrying details” about the circumstances of the sale had come to light.
The chief executive of scandal-hit Swedbank has been dismissed by the bank’s supervisory board after the country’s fraud squad broadened its investigation into allegations of money laundering.Three of Sweden’s largest pension funds – all significant shareholders in Swedbank – this morning refused to discharge CEO and president Birgitte Bonnesen from liability, ahead of this afternoon’s annual general meeting.Shortly after this, the bank announced its board had decided to sack Bonnesen. Anders Karlsson has been appointed acting president and CEO.Lars Idermark, chair of the supervisory board of Swedbank said: “The developments during the past days have created an enormous pressure for the bank. Therefore, the board has decided to dismiss Birgitte Bonnesen from her position.” The Swedish Economic Crime Authority said yesterday that the ongoing investigation was being broadened to include suspicion of gross fraud. The fraud investigation team entered the Swedbank’s Stockholm headquarters yesterday as part of the probe.Pension funds hit out at bank Birgitte Bonnesen was sacked from Swedbank this morningAMF – which owns 4.4% of shares in the bank – reiterated that it was still not satisfied with measures taken to deal with the situation, and refused to grant Bonnesen discharge from liability for 2018.Johan Sidenmark, chief executive of AMF, said: “After yesterday’s dramatic development, with the Swedish Economic Crime Authority’s announcement about extended suspicions of serious crime, we have come to the conclusion that we cannot currently grant the company’s CEO discharge for 2018.“Although this is so far only about suspicions, and no one should be regarded as guilty until she or he is convicted, these are such serious allegations that it would be irresponsible to make such a decision at today’s meeting.”Alecta – which held approximately 5% of Swedbank’s stock – also said it would vote against the discharge from liability at the AGM.Folksam, the second-largest shareholder in Swedbank with a 7% stake, has been more satisfied than the other shareholders with the bank’s correspondence during the investigation. However, it also said it would withdraw its support for the chief executive.Thomas Langrot, chief prosecutor of the fraud squad’s Financial Market Chamber (Finansmarknadskammare), said: “Information which has been gathered gives a picture of Swedbank appearing to have spread misleading information to the public and the market about what the bank knew about suspected money laundering within Swedbank in the Baltic countries.”On Friday, AMF and Alecta criticised a report commissioned by Swedbank into the alleged money laundering as inadequate, although Folksam said the report gave answers to important questions.
Promoting sustainable finance won’t help fight climate change and allowing or encouraging policymakers to pursue that agenda could actually hinder sustainable development, according to an individual who used to be in the business of doing just that. Frank Wettlauffer, a co-founder of FNG, the industry association promoting sustainable investment in Germany, Austria and Switzerland, and a former head of international institutional clients at Bank Sarasin, put forward the argument in a recent newsletter from Absolut Research, a research company and publisher focusing on institutional asset management in the German-speaking markets.As appealing as the idea of steering capital towards sustainable investments was, doing so did not stand to mobilise much additional capital to finance sustainability projects in the real economy, he wrote.As long as a company or project was legally sound and promising, it should be able to secure financing commensurate with the risks involved, regardless of whether the investment was sustainable or not. If politicians wanted to channel more capital in favour of sustainable investments in the real economy then they would need to change the policy frameworks so that these became more profitable. The money would then come by itself. Promoting sustainable investing was not only ineffective from the point of view of achieving sustainable development, but could be harmful if politicians thought this let them off the hook, argued Wettlauffer.“When politicians are busy regulating the finance sector, they can’t also pass other – effective – laws for sustainable development,” he wrote.Speaking to IPE, he recalled a German regional minister telling him that “politicians can’t fix this on our own, the finance sector has to help”. Frank Wettlauffer, independent consultant“That’s completely wrong,” said Wettlauffer. “Of course the money has to come from the private sector, but in order for it to come from the private sector it has to be profitable, regardless of whether it is brown or green.“And politicians have to make sure [it is profitable] by regulating.”Asked for an example of a helpful real world measure, he said that in the context of Germany this could be to shorten appeal processes, because civil society campaigns were preventing moves to expand the renewable energy grid.In Germany, most renewable energy is produced in the north but there isn’t the infrastructure to quickly transport it to the west and south, where large metropolitan areas and heavy industry are mostly located. Drop the fairytaleAccording to Wettlaufer, sustainable investments would continue to be successful because they were attractive in terms of risk-adjusted returns, burnished investors’ reputations, and were guilt-free.“But they cannot and will not contribute to sustainable development,” he wrote. “Government promotion won’t change that.”Those truly interested in a better natural environment and society should deploy their resources elsewhere and “quit promoting the fairytale about sustainable investments’ significant contribution to sustainable development”, he concluded.When asked about engagement as a means of contributing to sustainable development objectives, Wettlauffer said “this does help, because it directly influences companies”.Investments such as microfinance could have an impact, he added, but in public markets there was no “additionality”.“The moment a bond or a stock is issued then it doesn’t matter what it’s called, green or brown,” said Wettlaufer. “Wherever there is a seller there is a buyer.”Some have argued that sustainable investing via secondary trading in public markets can still have a positive impact, albeit indirect, by affecting the cost of capital and hence a business’ growth plans.