Vangstrup said the partnership was very pleased with the continued backing from ATP, which manages a total of around €80bn in assets.The partnership said that, as with prior funds, the new fund would have an increasing focus on co-investments with general partners of the ATP PEP portfolio. Geographically, the focus will continue to be on Europe and North America, as well as include select commitments in other parts of the world.Across previous funds, last year’s commitments were all made in the US, Vangstrup said.“If you look at 2013, we only did US funds – we were not able to find anything in Europe that made us do any deployment of capital,” he said. “It was a reflection of the US market being more active, and I don’t think the quality we were looking for, around the managers, was there in Europe in the last year.”Vangstrup said the partnership’s funds had consistently outperformed and put this down to “excellent teamwork, disciplined investment process and the strong relationships we have with ATP, as well as our portfolio of general partners”.The new fund will start making commitments straightaway, ATP PEP said. The private equity arm of Denmark’s giant ATP pension fund is launching its fifth fund, having raised €800m by the final close.The fifth fund – ATP PEP V – is set to follow the investment strategy of the previous four funds set up by the partnership, ATP PEP said.Torben Vangstrup, managing partner of ATP PEP, told IPE: “It’s going to be very much similar to the prior four funds, actually, from a strategic point at least. “It is going to be invested into buyout funds, around 70%, and then we would do some venture and distressed funds as well – and, finally, set aside around 10% for co-investments, primarily with the buyout funds.”
The combined assets of Dutch investment funds increased by 4.5%, or €29.3bn, to a new record of almost €700bn over the second quarter, due in particular to rising equity markets, according to De Nederlandsche Bank (DNB).The Dutch regulator said the total quarterly return on investments, including interest and dividends, was 4.2%, the highest since the first quarter of 2012.Equity holdings increased by 7.8%, on the back of a 5.6% return on investments, it said, adding that net investment in equity amounted to €3.6bn, including €1.8bn in emerging markets.Investment in property funds increased by €1.2bn. By contrast, investment institutions divested €2.4bn from fixed income funds, €200m from mixed funds and €900m from hedge funds, continuing divestment strategies put in place during the first quarter, the DNB said.Despite the divestment from fixed income funds, the asset class returned 3.2% over the period.The DNB also reported positive results for property funds (2.8%), hedge funds (2.2%) and “other” funds (€5.1%).The regulator said the level of assets had climbed to a record level for the fourth consecutive quarter.
“We are much more worried about the medium-term outlook,” said the managing director, with bonds and loans – comprising 40% of the fund’s portfolio – returning virtually nothing.Over the next months the board of directors would “analyse the situation in detail to have a well-founded basis for discussing possible options”, Ryter noted.In 2014, the FX hedges in place cost the MPK some performance as benchmark indices returned just over 9%.Per year-end hedged foreign corporates made up 11.6% of the portfolio and hedged foreign sovereigns 4.8% while unhedged foreign bonds amounted to 4.5%.In total, the MPK had 41.3% in bonds, 4% in loans, 1.5% in liquid instruments, 31.2% in equities and 27.5% in real estate.Ryter is convinced “broad diversification to which we stick also in times of crisis” is the “best protection against unwelcome surprises”.In the wake of the SNB’s decision only “minor tactical adjustments” had been necessary but no major shifts in the asset allocation, he added.Read how other Swiss pension funds increased equity exposure in the wake of the SNB’s decision The CHF21bn (€17.2bn) Migros Pensionskasse (MPK) reported a 7% return for 2014, helping increase its funding level to 121.5%.MPK managing director Christoph Ryter commented the pension fund’s buffers were “fully filled for the first time in 13 years”, after funding increased from 116.9% at the end of 2013 and rose 250 basis points above target.Ryter added that funding remained above target even in the wake of the Swiss National Bank’s (SNB) decision in mid-January to cut the peg to the euro.He confirmed the announcement led to “temporary losses” due to its unhedged currency positions, as well as the Swiss equity holdings within MPK’s portfolio, but noted that the losses had been “partly recovered in the meantime”.
Ben Feiertag, spokesman for the DNB, took pains to emphasise that the survey had not been triggered by any specific incident within the pensions sector, and that similar surveys would be conducted at Dutch banks and insurers.The DNB said the results of the survey would help pension funds contain a number of corruption risks.It said these risks could arise where a “knowledge monopoly” was combined with a concentration of power, adding that remote offices posed a particular risk.According to the regulator, third parties also represent a potential integrity risk, as these relationships – as well as connected private interests – can affect decision making.The DNB warned that bribery and conflicts of interest could destabilise not only the pension funds involved but also the entire Dutch pensions sector, due to the potential for “social outrage”. Pensions regulator De Nederlandsche Bank (DNB) has announced that it is looking into the risk of corruption at Dutch pension funds. The DNB is to conduct a survey – meant as a follow-up to last year’s guide on best practices for fighting corruption – to gain a better understanding of the more “vulnerable” activities and processes at Dutch schemes.The regulator said it has already compiled a selection of schemes with “high-risk” profiles.It declined, however, to identify any of the schemes, or the total number of schemes listed.
It noted that several court rulings had ordered the companies to remove or seal the ash basins, and that the council believed these measures would not be fully implemented for another 10-15 years.“The council also perceives the long-lasting and extensive breaches of the environmental legislation to be a considerable risk factor,” it added.Norges said it decided to exclude Duke Energy after concluding that other measures, such as the exercise of ownership rights, were “not appropriate to use in this case”.NGOs had identified Duke Energy as one of the companies they thought GPFG would have to divest from in connection with a 2015 parliamentary vote on the oil fund’s stocks in coal companies.However, the company was not one of those NBIM excluded from the oil fund in May 2016 on a new coal criterion.As at 31 December 2015, the fund had equity holdings in Duke Energy Corp worth $304m (€270m), equivalent to an ownership stake of 0.62%.It also had fixed income holdings in Duke Energy companies.Duke Energy is one of the largest electric power holding companies in the US. Based in North Carolina, it is listed on the New York Stock Exchange. Norway’s sovereign wealth fund will no longer invest in US energy company Duke Energy and its subsidiaries due the risk of these companies causing environmental damage and breaching environmental legislation.The decision was taken by Norges Bank Investment Management (NBIM), which runs the investments of the Government Pension Fund Global (GPFG), after a recommendation from its Council on Ethics, appointed by the Ministry of Finance.The council made the recommendation “due to the unacceptable risk of these companies being responsible for severe environmental damage”.“For many years,” it said, “these companies have, among other things, repeatedly discharged environmentally harmful substances from a large number of ash basins at coal-fired power plants in North Carolina.”
Investors in private equity are increasing their control over terms and conditions, resulting in lower fees, according to research by Preqin.The data firm found that two-thirds (67%) of clients reported having rejected investments due to unfavourable terms.However, one-third (33%) of investors said they had seen an overall improvement of private equity terms in their favour in the past 12 months.Four in five (79%) buyers agreed manager interests were aligned with those of clients, compared with 70% a year ago and 63% in 2014. “The findings,” Preqin says in its report, “reveal that investors have increased their leverage over fund terms, and their negotiating power has grown significantly as [managers] are eager to secure institutional capital in a competitive fundraising environment.” Source: PreqinInvestors in private equity are becoming gradually more satisfied about alignment of interests with fund managers.The data firm found that buyout funds launched since the start of 2015 and those currently fundraising had an average management fee of 1.78%, while 84% had a performance fee of 20%.However, Preqin warned managers that “misaligned interests … cannot be solved purely by lowering headline fees”.Managers also need to demonstrate an ability to generate above-average returns and consider other aspects of contracts, Preqin said, including governance structures, performance fees and rebates.Preqin’s research also reported a correlation between lower management fees and top-quartile performance.“Across different fund sizes, top-quartile private capital funds consistently have low average management fees,” Preqin said.This is particularly noticeable in smaller private capital funds, including real estate, infrastructure, debt and commodities funds.Top-quartile funds with less than $50m (€47m) in assets charged an average 1.24% annual management fee, while third-quartile funds in the same size range charged 2.08% on average.Funds with more than $1bn in assets charged broadly the same fees, Preqin found.“At the same time,” Preqin said, “it appears that top-quartile private capital funds account for a greater proportion of those funds that charge higher carried interest rates, and which apply higher hurdle rates to their funds.”More than half (56%) of funds with a high hurdle rate – defined as greater than 8% – were in the top or second quartile for performance, Preqin added, “as firms look to further align their interests with those of investors”.
A spokesperson for the minister, Johan Van Overtveldt, said the government had not yet received the text from the European Commission and would only come up with the timing of a decision after seeing the proposal.PensioPlus on Friday said applying an FTT would have a “devastating” impact on Belgian pension funds and a net loss for pension fund members.The “inevitable consequence”, according to a statement from the association, would be that Belgium would lose all “power of attraction” as a destination for cross-border pension funds.Furthermore, it said, those cross-border pension funds already established in Belgium would be prompted to leave, seeing as neither the Netherlands nor Luxembourg are going to apply the tax.Agreeing to an FTT could mean Belgium loses its “prime location status” for pan-European pension funds, said PensioPlus.The government recently announced beneficial administrative and fiscal treatment for cross-border pension funds, its latest move in a drive to position itself as an attractive location for pan-European schemes.PensioPlus also said that, if pension funds fell under the scope of the FTT directive, an employee member of a workplace pension plan would lose out.It said scheme members would lose the equivalent of 5-24 months of pension contributions, as these would go toward paying the tax rather than building their pension.The association said the direct cost to Belgian pension funds would be around €20m on an annual basis but that total costs could be up to 3-4 times as much when indirect costs were taken into account.Under the EU ‘enhanced cooperation’ procedure being followed for the FTT law-making, a minimum of nine member states must endorse the proposal from the European Commission for it to be taken forward. PensioPlus, the Belgian pension fund association, has warned the country’s government against implementing a financial transactions tax (FTT), saying it would undermine its efforts to make the country a prime location for cross-border pension funds.Other financial services industry bodies have also been warning the Belgian finance minister against supporting the introduction of an FTT – or ‘Tobin’ tax, as it is also known.A draft of a directive on an EU FTT, which would apply to 10 of the EU’s member states, is being keenly anticipated by industry bodies in the 10 member states negotiating on this, of which Belgium is one.A statement from the Belgian insurance industry association, Assuralia, suggests it is anticipating a decision from the Belgian finance minister this week.
Tony Persson, Alecta’s head of bonds and strategy, has been appointed temporary CIO until a replacement for Frennberg has been found, the company said.Billing said he regretted that Frennberg was leaving.“The investment model and structure of our asset management will not change,” he said.Alecta had a successful model for its active management and a continued strong focus on high returns, cost efficiency and sustainability, Billing said.Alecta manages occupational pensions on behalf of the collective bargaining parties, Swedish Enterprise (Svenskt Näringsliv) and PTK, the umbrella organisation for 26 private sector trade unions. Frennberg has worked at the SEK709bn (€72.3bn) company since 1995, and has been CIO and a member of the leadership group since 2009. Per Frennberg, the CIO of Swedish pensions giant Alecta, has quit his job at the firm in a sudden move following a disagreement with the chief executive about the company’s business response to increasing digitalisation.In a statement, Alecta’s chief executive Magnus Billing said: “Per has done a fantastic job and delivered sector-leading returns for many years.“But Alecta – in common with the entire finance and insurance sector – is facing new challenges in an ever more digitalised future, and we must continually become more efficient,” Billing added.“Per and I were not in agreement about all aspects of how this should happen,” he said.
Greater Manchester Pension Fund (GMPF) is to manage a £1bn (€1.1bn) pension fund combining three local transport schemes.The schemes cater for employees of FirstGroup – a private company that operates bus services – in Manchester, West Yorkshire and South Yorkshire.UK bus services were privatised in the 1980s but their pension arrangements stayed part of the Local Government Pension Scheme (LGPS).In a statement, Hymans Robertson, adviser to the consolidation effort, said £700m would transfer from the Yorkshire LGPS funds to GMPF. It is the first time a private sector company has consolidated schemes within the LGPS.Malcolm Stanley, senior consultant at Hymans Robertson, said there were more than 100 other private sector employers with pension arrangements in multiple LGPS funds, adding cost and complexity.“By pooling its LGPS funds, FirstGroup will not only reduce the issues brought by this complexity but will also gain greater influence over its overall investment strategy,” Stanley said. “Ultimately, it will be able to work with the GMPF to design a bespoke investment strategy that better reflects its mature liabilities and benefits scheme members.”Richard Murray, group head of pensions at FirstGroup, added that the move would help the company manage risks related to its pension schemes and improve cost control.GMPF is the largest fund within the UK’s local government pension scheme at £21.2bn. It posted a £4.1bn net gain from its investment portfolio in the 12 months to the end of March, according to its most recent annual report.The Greater Manchester and West Yorkshire pension funds are forming the Northern Pool as part of the pooling project across the LGPS. South Yorkshire is part of the Border to Coast Pension Partnership.
“We expect the industry-led approach of the TCFD to continue to drive awareness of the issue,” Edwards said.Kate Brett, principal in Mercer’s responsible investment team, said a proactive approach to consideration of environmental issues could “open up investment opportunities in the green fields of the low carbon economy”.Inactivity on the part of pension schemes, however, brought risks from stranded assets and physical climate risks, as well as reputational risk, she said.“Given increasing regulatory involvement and public concern about climate change, it may be that in time a lack of consideration of ESG risks will be seen as a breach of fiduciary duty,” Brett warned.In the Mercer study, 34% of survey participants said regulation was the main factor in encouraging them to consider ESG risks, while 25% cited the financial materiality of ESG risks, and 18% put it down to the views of individual trustees and reputational risks.One in 10 of those polled cited the need to align investment strategy with their sponsor’s corporate social responsibility strategy, Mercer said. The number of pension funds considering the financial risks of climate change has more than tripled in a year, according to a new study.In its 2018 European Allocation Report, consultancy group Mercer reported 17% of European pension schemes were now thinking about the financial impact of climate change – up from 5% in the firm’s 2017 survey and 4% in 2016.Phil Edwards, Mercer’s global director of strategic research, said: “Nudges by the UK’s Pensions Regulator, the European Commission and the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures [TCFD] are driving increased engagement.”However, at 17% of respondents, there was still further to go in terms of serious investor engagement here, he added.