He said the judge concluded that BNYM had been guilty of many violations and that AP1 had acted correctly.“Our efforts to demand redress for the losses the bank has caused us – and therefore the Swedish pension system – have been successful,” Magnusson said.The judge noted that BNYM had failed in its care in its handling of the fund’s mandate and had therefore been negligent.BNYM was judged liable for damages, which would cover most of the loss incurred by the fund plus interest expenses, it said, but added the exact amount had not yet been set.BNYM will also have to pay most of AP1’s legal costs for the trial.However, AP1 conceded the ruling may be appealed by BNYM.The pension fund said the damages and compensation for legal and interest costs would have a positive impact on its net investment income when the ruling went into force because the full amount of the original loss had been recognised in its 2008 accounts.AP1 had SEK246bn in assets under management at the end of June. Swedish pensions buffer fund AP1 has won damages of up to $33.7m (€24.7m) in a UK court, after a judge ruled Bank of New York Mellon (BNYM) had been negligent in its handling of one of the fund’s mandates.AP1 said it filed the lawsuit in London’s Commercial Court against BNYM as a result of securities-lending transactions carried out on the fund’s behalf.The lawsuit referred to a sum of $33.7m, it said, which now corresponds to SEK219m.Johan Magnusson, managing director at AP1, said: “It is very satisfying that the Commercial Court in London has found in our favour.”
This allows it to integrate small and mid-cap firms and construct differentiated SRI portfolios, he said.Meanwhile, the UK’s Strathclyde local government pension scheme has re-appointed Northern Trust as global custodian for a fourth consecutive term.According to the agreement with the pension fund, Northern Trust will continue to provide global custody, securities lending, cash management and foreign exchange services for the fund’s £13.7bn (€16.6bn) of assets.Richard McIndoe, head of pensions at Strathclyde, said the fund was very pleased to continue its longstanding relationship with Northern Trust.He said the firm understood its specific needs and continued to show its commitment to the local government pension sector with its range of high-quality, tailored solutions. French public pension scheme ERAFP has awarded an equity SRI mandate to Sycomore Asset Management.The SRI French small-cap mandate has a target size of €150m, the independent French asset manager said.It said the ERAFP mandate would be co-managed by the firm’s founding partner Cyril Charlot and Léa Dunand-Châtellet, head of ESG research.Laurent Deltour, chairman and co-founder of Sycomore AM, said ERAFP’s decision validated the firm’s approach in ESG research, which was based solely on a proprietary analysis.
It brings the number of SEB’s corporate pensions contracts in Lithuania to 87.Employees with a minimum one-year service will be able to sign up to one of the two SEB third-pillar funds of their choice.While Teo will pay a monthly defined contribution, members will also be able to top up their account from their own wages.Teo, the former state-owned telecoms operator now majority owned by the Swedish-Finnish conglomerate TeliaSonera, has around 2,000 employees.The contract will significantly boost the Lithuanian third pillar, which at the end of 2014 had some 39,900 members (primarily in individually arranged schemes) and assets of €47.5m.Around 1,100 primarily foreign-owned companies in Lithuania have arranged pension plans, either third-pillar funds or unit-linked investment contracts offered by insurance companies, for some 5,500 employees.The insurance products remain the most popular.SEB Wealth also runs voluntary corporate pension schemes for two TeliaSonera subsidiaries in Latvia.Its contract with its first pension fund customer there, LMT, dates back 15 years.Since 2012, it has had a life insurance agreement with endowments for the Lattelecom Group. Bank of Lithuania (BoL), the country’s central bank and pensions regulator, has become the 76th governing member, and the first from a Baltic state, to join the International Organisation of Pension Supervisors (IOPS), the independent body representing pensions supervisors worldwide.On the BoL website, Vilius Šapoka, director of the Financial Services and Markets Supervision Department of the Supervision Service, said: “Membership in the IOPS will encourage a more productive and closer cooperation with institutions of other countries carrying out the supervision of pension schemes, enable more efficient implementation of the international good practices, provide an opportunity to present for international partners the developments in the supervision of Lithuania’s pension funds and discuss the issues of pension fund supervision relevant for Lithuania.”In other news, SEB Investicijų Valdymas (SEB Wealth Management), the asset management subsidiary of Swedish owned SEB Bankas, has signed a third-pillar pensions contract with IT and telecommunications company Teo LT.The programme, “Save with Teo,” is reportedly the largest such contract in the Baltic region over the last five years.
“At the same time, there needs to be an orderly handover, so I have said I will work with him to make sure that happens in the weeks ahead.”Valdis Dombrovskis, the former Latvian prime minister who is now a Commission vice-president for the euro, has assumed responsibility for Hill’s portfolio.Priority is to maintain financial stability in markets. I highly value the work done by @JHillEU & hope to live up to tasks entrusted to me— Valdis Dombrovskis (@VDombrovskis) June 25, 2016 Jonathan Hill has resigned as European commissioner for financial stability in the wake of the UK’s decision to leave the European Union (EU).Hill, who in 2014 won the coveted position as commissioner for financial stability, financial services and the Capital Markets Union, said he was “very disappointed” with the outcome of the vote, which saw 51.9% ballots cast backing a decision to depart the EU.In a statement released on 25 June, the former leader of the House of Lords, the UK’s upper chamber, said he had agreed his departure with Jean-Claude Juncker, president of the Commission, in discussions several weeks ago.“As we move to a new phase, I don’t believe it is right I should carry on as the British commissioner as though nothing had happened,” Hill said. Hill struck a defiant note in his statement, continuing to emphasise the importance of the UK’s membership of the EU.“I will leave it certain that, despite its frustrations, our membership was good for our place in the world and good for our economy.“But what is done cannot be undone, and now we have to get on with making our new relationship with Europe work as well as possible.”It is unclear whether Hill’s departure – or Dombrovskis’s joining the directorate general financial stability (DG-FISMA) – will delay the publication of the finalised IORP Directive. IPE has seen a final compromise draft dated 20 June, which compromises on full funding for cross-border pension funds.Expectation among the industry last week was that the Commission would publish the finalised directive today (27 June).A spokesman for DG-FISMA told IPE on Friday he would not comment on leaked drafts – nor would he be drawn on a publication schedule. Hill was well-liked in Brussels, and Gerard Riemen, director of the Dutch Pensions Federation, took to social media to lament the commissioner’s departure.Riemen said Hill’s departure was “perhaps in the short-term the biggest setback for pension funds as a result of Brexit”.EU Commissaris Hill stapt op nav Brexit. Wellicht op korte termijn de grootste tegenslag voor de pens.fondsen als gevolg van de Brexit.— Gerard Riemen (@GerardRiemen) June 25, 2016Hill’s departure came a day after UK prime minister David Cameron announced he would resign as leader of the governing Conservative Party, triggering a leadership election set to conclude in October.The opposition Labour Party was also thrown into disarray on Sunday morning, when the dismissal of its shadow foreign secretary, Hilary Benn, by opposition leader Jeremy Corbyn, triggered the resignation of a dozen further shadow ministers in an attempt to unseat Corbyn.
“Just as for unemployment, ‘we have tried everything’ in pensions … except what works,” said IREF.It said an agreement reached for the supplementary pension schemes for private sector workers, Agirc-Arcco, only amounted to a superficial patching up of a regime that was structurally in deficit and could be hard hit by a new recession.It said France was “ideologically attached” to the pay-as-you-go system (système par repartition), pointing to its incorporation in legislation, but argued that the current situation could not continue for much longer.It acknowledged that pension funds were subject to the fluctuations of the markets but said they had recovered from the 2008 crisis.It cited OECD figures of an average real return of 5.7% in 2012, as well as a study by Thomas Piketty, which the think tank said showed returns in a funded pension system were much higher than those in a pay-as-you-go system.IREF also argued that pension funds benefited the economy by acting as a source of lending and investment.Harnessing pension assets for the benefit of the domestic economy is a major motivation behind a law put forward by the French Finance Ministry in March, which proposes regulating pension assets managed by insurers under the IORP framework rather than Solvency II.There are some pension funds in France – such as that for civil servants, ERAFP – but the system is predominantly pay-as-you-go, and, outside that, pension provision is mainly insurance-based.IREF has also proposed changes to France’s insurance-based pension provision, calling for the creation of a personal pension account (Compte Personnel Retraite).Individuals could choose to funnel their first and second-pillar contributions to their account for investment, or remain within the pay-as-you-go system. French liberal think tank IREF has called for the introduction of pension funds in France, saying the country’s pay-as-you-go system is not fit for purpose.The think tank (Institut de Recherches Economiques et Fiscales) said the French pension system was very unequal, with the public regime privileged and financed by taxpayers, while the private sector, in the absence of reform, was heading for failure.It argued that a funded pension pillar had been introduced in almost every other developed, democratic country, noting that pension funds only represented around 0.4% of GDP in France, versus 149% in the Netherlands.The think tank is calling for the introduction of “proper” pension funds in France.
The introduction of VAT in the Netherlands has increased pensions-administration costs by as much as 17% for more than for 5m participants and pensioners, the Pensions Federation has claimed.In a position paper submitted to Parliament, the industry group said the tax policy was at odds with the government’s aim of cutting costs in pensions.The government introduced VAT on pensions-administration provision on 1 January 2015, when it abolished the VAT exemption for pension funds to create a level playing field with insurers.The tax measure, however, does not hit large pension funds, such as the €372bn civil service scheme ABP, the €179bn healthcare scheme PFZW or the €67bn metal scheme PMT. These large schemes make up a “fiscal unit” with providers APG, PGGM and MN, respectively – on account of their being the providers’ only or largest stakeholders.Bram van Els, spokesman for the Federation, said: “This creates uneven effects at pension funds. The extra costs resulting from the VAT levy seem little, but, in the long term, they will come near the level of the expected rights cuts next year, which often comprise a few euros a month.”The Pensions Federation also lamented that VAT was charged on services for defined benefit plans but not defined contribution arrangements.The industry organisation disputed the cited reason for the distinction – that participants in a DC scheme run investment risk, whereas participants in a DB plan supposedly do not.“This conflicts with all other rules, which stipulate that pensions funds must warn their participants of the risks of a DB plan,” Van Els said.The highest court in the Netherlands is now looking into a case, brought by PFZW and Robeco, which have argued that pension funds with a DB plan should be granted a similar VAT exemption as schemes with DC arrangements.
However, some managers will not take mandates if they cannot invest in sectors such as tobacco for fear of missing out on potential returns, Kleeberg said.In the US, the California Public Employees’ Retirement System (CalPERS) is considering lifting its long-standing ban on tobacco stock investments.Research published last year by the $290bn (€270.6bn) pensions consultant Wilshire Associates found that a decision to ban tobacco stocks from CalPERS’s portfolio – initiated more than 15 years ago – had cost about $3bn in missed gains.In total, CalPERS’s divestment programme missed out on gains worth $8bn, Wilshire estimated.Lukas Riesen, a partner at PPCmetrics, said investors “have to accept compromise” on some ESG issues or risk restricting managers too much.“There will always be companies supplying to carbon-intensive companies,” he said. “How far do you go?”Earlier at the conference, strategists speculated that US president-elect Donald Trump might renew the country’s use of fossil fuels, in particular through domestically produced shale gas.Trump’s victory in the presidential election earlier this month has already raised questions about political commitment to action against climate change. Investors must be prepared to compromise with asset managers over environmental, social and governance (ESG) issues, according to fund selectors.At a recent Uhlenbruch investment conference in Zurich, advisers highlighted the tensions that exist between ESG-conscious investors and the managers pitching for their business.Jochen Kleeberg, managing director at Alpha Portfolio Advisors, said: “We are going to have to find managers that comply with ESG criteria [from clients]. Despite the restrictions, they have to find alpha.”For this reason, fund selectors have had to develop “prpfound insights” into ESG managers and mandates, added Michael Simmeth, principal at LGT Capital Partners.
Members of Shell’s Dutch defined contribution (DC) scheme have opted for variable benefits at retirement at a much higher rate than expected.According to Peter Westgeest, supervisory trustee on behalf of the employer, when surveyed just 5% of participants wanted to receive fixed-rate annuities from an insurer at retirement.Other providers of variable benefits have so far observed limited interest from members.Variable payments involves an individual drawing down payments while their remaining pension rights stay invested, accruing additional pension income. In 2013, Shell Netherlands closed its defined benefit (DB) scheme – SSPF – and started its individual DC pension fund for new workers, known as SNPS.Last year, Dutch parliament passed legislation enabling defined contribution pension fund participants to opt for variable benefits, also known as drawdown plans.Shell was among the advocates of such plans for DC arrangements. Without this option, DC schemes would generate lower pension incomes than DB plans.Within DC arrangements like Shell’s, participants must make more choices than at traditional DB schemes, with options for lifecycle investments and benefits.In SNPS, participants can opt for a collective variable pension at Shell at the age of 57.This enables them to annually transfer 10% of their accrued pensions capital to Shell’s benefit scheme, which invests 35% in equity and the remainder in fixed income.Speaking during the World Pension Summit in The Hague last week, Westgeest emphasised that the sponsor refrained from advising participants.“Shell merely provides information and pays the contribution,” he said. “The risks lay with the participants.”The employer does not deploy independent financial planners.Westgeest said that he hoped that participants would be legally enabled to cash in part of their pension in a lump sum – a similar option is open to retirees in the UK.Since the introduction of the legislation, four insurance companies have also developed variable drawdown products, which vary widely in their set up.However, just a small minority of retirees – ranging from one in five at Allianz to one in 10 at Aegon, respectively – has opted for them.
Norway’s sovereign wealth fund – which manages oil-related revenues – received its first capital inflows for three years in June, after a period of strong recovery for oil prices.Norges Bank Investment Management (NBIM), which runs the Government Pension Fund Global (GPFG), reported second-quarter financial results this morning, including a 1.8% overall return.The fund’s total assets increased to NOK8.3trn (€860bn) by the end of June, but the 1.8% investment return for April to June was 0.2 percentage points below the GPFG’s benchmark, NBIM reported.The fund’s equities allocation produced 2.7% in the second quarter, real estate made 1.9%, and fixed income investments were flat. Trond Grande, deputy chief executive of NBIM, said the fund still recorded a net outflow for the whole of the second quarter, despite the NOK1.85bn inflow in June.According to NBIM’s interim report for the fund, the GPFG had a net withdrawal of capital amounting to NOK2bn in the second quarter.NBIM was not immediately available to comment on the reasons behind the inflow, but it followed after a period of rising oil prices.Oil prices fell to a trough at the end of 2015, with ICE Brent crude futures trading at around $28 (€24) a barrel, but have since recovered, hitting a high of $79 towards the end of June.Remarking on its investment activity in the second quarter, NBIM said prices on global stock markets had increased in three-month period, thereby reversing the negative performance at the beginning of the year.“North American and European stocks had a positive development in the quarter despite the prospect of increased trade barriers,” Grande said.The Norwegian krone depreciated against the US dollar during the quarter, which helped boost the value of the fund by NOK47bn, NBIM said.At the end of June, 66.8% of the fund was held in equities, 2.6% in unlisted real estate and 30.6% in fixed income, with asset allocation having undergone a slight shift towards equities and property since the end of March.
Brunel Pension Partnership, a collaboration of 10 UK local authority pension funds, has moved to the main stage of its search for managers for a high-alpha global equities fund.After starting a pre-search and registration process in January, the asset pool today announced the search was active.Mark Mansley, CIO at Brunel, said there was “an excellent initial response” from investment managers to the pre-search process. More than 110 fund managers supplied pre-registration documents, research and thought pieces.“In many ways, Global High Alpha equities is our flagship product and we believe this will be an exceptional opportunity for the right fund managers to form a long-term partnership with us,” he added. Mark Mansley, chief investment officer, BrunelThe total portfolio would be around £2.2bn (€2.6bn), Brunel said, and was due to formally launch in the fourth quarter of this year.Inalytics and Redington are helping Brunel with the manager search. The deadline for receipt of expressions of interest is 11am UK time on 3 April.Brunel’s member local government pension schemes have £28.9bn of assets under management between them, with roughly £8bn pooled so far. Spezialfonds wrapper soughtAn Austrian banking institute has turned to IPE’s request for proposal service to search for a fund wrapper provider.According to search QN-2519 on the IPE Quest platform, the bank is looking for a wrapper for a €82m Austrian multi-asset fund. The planned ‘Spezialfonds’ has two segments managed by external fund managers based in Europe and the strategy is implemented via investments in sub-funds and individual securities.Derivatives are allowed for hedging purposes. The banking institute has supplied a questionnaire and requested that interested parties fill it out in German. The deadline is 29 March at 5pm UK time. Asian investor after long-only global fixed income strategies In another IPE Quest search, an institutional investor in Asia is searching for a global fixed income manager for a $70m (€61.9m) segregated mandate. According to QN-2517, the investor is looking for strategies that can invest across different fixed income sectors, “providing exposure to the best ideas [the] team has through different alpha sources that are adaptable to changing market conditions”.The average quality of the portfolio should be investment grade, but managers could invest in high yield. The investor has indicated having a return target of 3-5% “or better”.Applicants should have at least $2.5bn in fixed income assets under management and $10bn as a firm. They should have a track record of at least five years, although 10 years is preferred.Derivatives can be used but the portfolio must be net long. The deadline for applications is 20 March at 5pm UK time. Performance should be stated to 28 February net of fees.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] In Brunel’s January announcement about the manager search, Mansley said the portfolio was likely to be spread between four or five managers, although today’s statement indicated Brunel had broadened the range to up to six managers.