IVG Immobilien’s ongoing restructuring plan has taken another twist with the appointment of Deloitte as receiver on its ‘Gherkin’ office tower in London.With the property’s loan-to-value ratio having risen above 90% and well above its 67% LTV covenant, it was put into administration last week.IVG’s tranche of the loan is in Swiss francs, which has appreciated against sterling by more than 60%.IVG has a 50% stake in the property, held in the Euroselect 14 fund, with Evans Randall as equal partner. The joint venture paid £630m (€765m) for the 41-storey building in 2007, using £400m of debt.In a statement, Evans Randall said it had equity “ready to invest” but was unable to do so due to uncertainties surrounding IVG’s future.Last month, IVG Immobilien’s creditors and shareholders approved an insolvency plan for the company that included a debt-for-equity swap – taking IVG off the stock market.In total, the company has €3.2bn in debt to restructure.An insolvency ratio of at least 60% must be paid to non-subordinated unsecured creditors.Pending court approval, implementation of the capital measures could then begin, with insolvency proceedings lifted by year-end.
The London Stock Exchange Group (LSEG) has confirmed its interest in purchasing Russell Investments from current owner Northwestern Mutual.The US insurance company has owned Russell since 1999, including its index, consultancy and asset management businesses.LSEG, and its FTSE International brand, would be most interested in the purchasing of Russell’s index business, which may roughly equate to a third of its expected value.The essential merging of the FTSE and Russell indices would give the firm a strong foothold in the US index market, currently dominated by S&P in the large-cap area. However, around 98% of all small-cap investments are associated with the Russell 2000 index, a flagship offering.The confirmed interest from LSEG could be met by a rival bid from MSCI, the global index provider, and other potential private equity firms.MSCI, while a major name in the global index market, has little foothold in US offerings.Both index providers would not necessarily want to purchase the entire Russell business, which is mainly made up of investment management and consultancy.Russell currently provides asset management services, in particular multi-manager options, to both institutional and retail clients, with around $260bn (€190bn) under management.It also offers investment consultancy and fiduciary management services to pension funds.In a statement, LSEG said it was evaluating the merits of purchasing Russell Investments, and that it had entered discussions with the Northwestern Mutual Life Insurance Company.“Discussions remain ongoing, and there can be no certainty that any transaction will be forthcoming,” the group said.“If a transaction were to proceed, LSEG would intend to part-fund it through an equity raise.”Any potential bid could also see a partnership between one of several rival index organisations and private equity investors.This would result in Russell’s asset management and consultancy going to private equity, and the index to LSEG or MSCI.One source, with knowledge of the matter, suggested Warberg Pinkus and the Canadian Imperial Bank of Commerce as potential suitors to the asset business.
The pension fund’s 62% return portfolio produced an overall result of 7.8%, with its equity holdings (32.4%) generating a 14.8% return.US and European equities returned 26% and 20%, respectively.In contrast, the scheme lost 9% on its emerging market holdings, having recently increased the allocation at the expense of investments in Japan and Asia.Kappers’ 9.5% property portfolio returned 0.34%, while its 20.6% credit allocation delivered 2.3%.The industry-wide pension fund for hairdressers and barbers reduced its contribution from 8.6% in 2013 to 7.5% in 2014, while lowering its annual pensions accrual from 0.85% of salary to 0.81%.To raise its coverage ratio to the minimum required level of 105.3%, the scheme had to apply a 2.8% rights cut last April, following a 7% discount last year.At May-end, its funding stood at 109.7%.The board said it expected that any new funding shortfall would be eliminated under a new pensions contract based on the financial assessment framework (FTK).It added that it decided to pay its trustees and chairmen a fixed annual amount of €25,000 and €40,000, respectively.The pension fund reported administration costs of €122,50 per participant and asset management costs of 0.45% of its assets. At year-end, it had 20,750 active participants, 36,750 deferred members and 2,380 pensioners. Kappers, the €457m pension fund for hairdressers and barbers in the Netherlands, lost 0.7% on its investments last year due to the effect of rising interest rates on its fixed income holdings and interest derivatives.On balance, its 37% matching portfolio of government bonds, interest derivatives and mortgages lost 12.2%, according to its 2013 annual report. The largest loss – almost 17% – was produced by the scheme’s 28.6% allocation to government bonds and interest swaps, meant to hedge the interest risk on its liabilities.Mortgages investments, on the other hand, returned almost 7.4%.
TIAA-CREF Asset Management, the investment arm of the US teachers insurance and retirement income fund, is to open a London office in a bid to build its real asset business with European investors.The manager, which has approximately $850bn (€671bn) in assets, has been investing on behalf of European clients for some 10 years and has now decided to bridge the distance in its operations.It currently has around $10bn in European institutional assets but has managed relationships from its US office.The company will run its European operations with a two-man team in London and one in the US. It hired Stephane Marguier as head of institutional distribution and Russell Elliott as a manager for investor relations, both US-based for two years before relocating to manage the new office.Wiebke Wanner-Borchardt, director for mid-market distribution, will support the London office from the US.John Panagakis, head of asset management business development, told IPE that while the company was looking to maintain relationships with existing clients, the London office would also be used to increase its client base.“Asset management is something we have always been doing outside the US, both investing our own portfolio and working with international asset owners,” he said.“We are approaching $10bn of assets under management that we manage on behalf of European investors, so this is just a natural extension as demand grows.”He said the asset manager’s focus would remain on its core strategies of real assets, comprising agriculture and timber, alongside its more traditional socially responsible mandates.Panagakis said the company began socially responsible investing two decades ago, and runs positive and negative screens in both fixed income and equities.It has seen increased demand for this, along with real assets, from European pension funds, insurers and sovereign wealth funds.“[The operation] will be broadly based rather than following a distinctive strategy, and we are thinking of new and different strategies to respond to the market,” Panagakis said.“The focus will continue in the real asset area and looking for potential expansion but beyond our traditional asset classes of agriculture and timber, and we will look at other real asset classes and opportunities in the credit space.”In April, TIAA-CREF announced a merger of its real estate investment business with London-based Henderson Global Investors.The company confirmed TIAA-Henderson Real Estate would remain a separate entity from its new London office, managing all real estate investments.
VER, Towers Watson, S&P Capital IQ, UK National Employment Savings Trust, Capital Group, Credit Suisse, Aon Hewitt, John Lewis Partnership Pensions Trust, Muzinich & Co, Babson Capital, AXA Investment ManagersVER – Jukka Pekkarinen, the current director general of the Finnish Finance Ministry, has been appointed chairman of the supervisory board at state pension fund Valtion Eläkerahasto (VER) for the new three-year mandate period, which begins on 1 March. He will replace outgoing chairman Antti Tanskanen. The current vice-chairman Hannu Kahra, professor of financial economics at the University of Oulu, will continue in the role within the newly appointed board. The new board members to be appointed by the Finance Ministry are Anna-Maija Karjalainen, who works within ICT at the Finnish government and Olli Luukkainen, chairman of the public sector negotiating commission JUKO. The board members who will continue in their roles are Minna Martikainen, professor at the Hanken School of Economics, Pirjo Mäkinen, head of administration at the Trade Union for the Public and Welfare Sector (JHL), and chairman of the Federation of Salaried Employees of Pardia, Pirjo Mäkinen.Towers Watson – Kate Hollis has been appointed to the credit research team. She joins having spent 10 years at S&P Capital IQ, most recently as global head of fixed income/alternatives fund research. Prior to that, she spent five years working for various funds of hedge funds and 15 years in fixed income sales and trading, in London and New York, for Deutsche Bank, Daiwa Securities, Scotia McLeod and Schroders.UK National Employment Savings Trust (NEST) – Sally Bridgeland has been appointed to the trustee board. Bridgeland, who spent seven years as chief executive of BP Pension Trustee before stepping down in April, was named as one of three new trustees by pensions minister Steve Webb. Caroline Rookes, a former director of private pensions at the Department for Work & Pensions (DWP), and Jill Youds, the current chair of the Judicial Pensions Board, were also named as trustees of the £330m (€446m) fund. Capital Group – Henning Busch has been appointed to the newly created position of managing director for institutional clients in Germany and Austria. He joins from Credit Suisse, where he was head of asset management for Germany and a member of the board of Credit Suisse Deutschland. Before then, he worked at Morgan Stanley Investment Management.Aon Hewitt – Adrian Mitchell has been appointed as a partner and senior portfolio manager in the Delegated Consulting Services team. He joins from the John Lewis Partnership Pensions Trust, where for the last three years he has been CIO. Prior to this, he was a founding partner and portfolio manager at Proxima Alfa UK Investments, and director and head of hedge fund investment at FF&P Asset Management. Muzinich & Co – Jamie Cane has been appointed as a credit analyst. He joins from Babson Capital, where he spent more than three years focusing on high-yield bonds and leveraged loans. Before then, he worked at Anglo Irish Bank, primarily in restructuring. AXA Investment Managers – Christophe Fritsch will assume the role of head of structuring in addition to his other responsibilities as co-head of securitisation and structured assets and business development.
“A further factor that contributes to the wide acceptance of carbon intensity and greenhouse gas emissions,” it added, “is that they are quantifiable and clearly defined, making tracking and implementing policies easier than for other ESG criteria.”Private equity investors appeared most convinced of the importance of ESG, as only 12% of respondents said the matter was not considered when appointing a manager within the asset class.The approach to ESG by infrastructure and real estate managers was also important to investors, with 22% and 27% saying it was a significant factor when appointing managers – in stark contrast to the view of those appointing hedge funds, where only 7% said it was a matter of significant concern.Among hedge fund investors, more than one-third said they did not consider ESG at all, twice the number that said it was immaterial when investing in property.The survey is the second in a number of months to show the private equity market increasingly viewing ESG as a core concern.Tycho Sneyers, chairman of the ESG committee at LGT Capital Partners, argued that the survey results showed how ESG had moved “beyond ethical concerns” and found its place as a risk and investment-management topic. The overwhelming majority of asset owners consider environmental, social and governance (ESG) concerns important when selecting private equity, property or infrastructure managers – with such concerns the least important within the hedge fund sector, according to a new survey.The global survey, covering nearly 100 respondents including pension schemes and sovereign wealth funds, found that three-quarters considered ESG when making investment decisions, and that 57% perceived ESG factors as improving risk-adjusted returns.Conducted by Mercer and LGT Capital Partners, the survey also found that greenhouse gas emissions were viewed as the most important environmental issue, closely followed by water scarcity.The survey noted that initiatives, such as the Montreal Carbon Pledge, were seeing institutions demonstrate a greater interest in managing climate-related risks.
Jonathan Hill may be turning to the fables of Aesop to sell the Capital Markets Union, says Jeremy WoolfeIf there’s anything harder in the world than getting the EU’s 28 member state governments to agree on anything, apart from endless chat, it would be good to know what it is. Clearly, today’s challenge has to be to rein back hard on nations cherry-picking their pet interests at EU meetings. Finance commissioner Jonathan Hill must be well aware he is facing an uphill struggle with his flagship project, to set up an effective Capital Markets Union (CMU) in the EU. For a start, there are the bank interests.However, the CMU could spark off economic resurgence and create jobs. It is a top target for the Juncker Commission, whose priority is to save the reputation of the EU before its mandate ends in 2019. Therefore, must it not be easy to find support for the CMU? Difficult for anyone to oppose it? Aah, but look at the history of other crucial sectors. Sadly, examples of vested interests, leading to let-down, are legion.For instance, talk of a pan-EU patent system, a vital prop to EU technology, goes back to the 1970s. But it got stuck in the mud. Only now is it staggering into effect.As for having the EU states approving rules to get railways to run decent services across the EU, forget it. What you get is talk, talk – and more talk. Good for some jobs in Brussels, may be.Against this, what should Hill do? Bang heads? Perhaps … ? At a recent address to a gathering of the Brussels financial elite, he said: “I think confronting people and, in effect, banging their heads against the wall is one way to go.” Hill then half-apologised for referring to Aesop, of ancient Greek fable fame.The commissioner related a story about a dispute between “The Wind and the Sun”. Which was the stronger? There was a traveller on the road below. “I see a way to decide our dispute,” said the Sun. “Whichever of us can cause that traveller to take off his cloak shall be regarded as the stronger. You start.”Hill continued, that, as the Wind blew and blew and blew, the traveller just wrapped his cloak round himself more tightly. At last, the Wind despaired. Next came the Sun, shining his glory upon the traveller, who soon found it too hot to walk with his cloak on.Critically, the finance maestro followed that, if the sunshine technique for the CMU fails to work, “there are other methods available”. Aesop used “humble incidents” to teach great truths. So, is the new philosophy of the European Commission to apply sunshine as the same kind of “truth”? And could the Sun principle be working already? Perhaps. Only days after Hill’s address, the Commission warmly welcomed an EU agreement on measures to bring in the automatic exchange of information on cross-border corporate tax matters.The EU national economic and finance ministers had been unanimous in taking steps to effectively target companies trying to escape paying fair taxes. The new measures will result in the automatic exchange of information among EU member states.Agreement came only seven months after the presentation of the Commission’s ambitious proposal. Also, it is against as background that attempts to reform corporate taxation in Europe going back to the 1960s.Finally, from Hill, was this statement on the CMU: “Free movement of capital was one of the EU’s founding principles”.Sounds serious. Let’s hope.
EIOPA should stop work on the holistic balance sheet (HBS) or any other type of common methodology as a harmonised solvency framework for occupational pension funds because they “do not work”, PensionsEurope has said.The association made the comments in its position paper on the stress tests the European Insurance and Occupational Pensions Authority (EIOPA) carried out on occupational pension funds (IORPs) last year, with the results announced on 26 January.The paper develops PensionsEurope’s initial reaction to the stress tests, when it urged for caution in interpreting them.It reiterates this view and fleshes out doubts it raised about EIOPA’s use of a common methodology. The stress tests measured the resilience to financial turbulence and increased life expectancy of defined benefit (DB)/hybrid and defined contribution (DC) schemes in 17 countries in the European Economic Area.The impact of the shocks was assessed on two bases, with one founded on a “common methodology” developed by EIOPA, the other on the national balance sheet of the pension funds’ home countries.PensionsEurope was unequivocal in its criticism of the common methodology, which it said was the HBS renamed.The stress test results show the HBS “does not work”, said Janwillem Bouma, chair at PensionsEurope.“EIOPA should not continue to work on the HBS model or any other similar ‘common methodology’ as a harmonised solvency framework,” he added.HBS is equated by many in the European pensions industry with the controversial introduction of solvency requirements for pension funds.These have been dropped from the remit of the revision of the IORP Directive currently underway, but EIOPA will still be giving advice on solvency and the use of HBS.It plans to deliver this advice by the end of March, although PensionsEurope suggested EIOPA may be heading for a mistake.“PensionsEurope is willing to explain its concerns in advance of EIOPA’s publishing the Quantitative Assessment report to help EIOPA avoid taking a wrong path,” said Bouma.The HBS has many shortcomings, involving both fundamental and “severe” practical problems, according to the association.The approach, it said, was “neither suitable nor useful”.It welcomed the rejection in late January by the European Parliament’s ECON committee of the further development of IORP solvency models at EU level, which said quantitative capital requirements could “potentially decrease the willingness of employers to provide occupational pension schemes”.PensionsEurope said it remained unclear how sponsor support should be taken into account.Instead of the HBS, EIOPA should propose principles-based guidelines only, according to the association.These could then be considered and adopted where appropriate by national authorities of the relevant countries.EIOPA should “think instead about encouraging alternative risk-management tools”, it said.It referred back to previous suggestions it made, such as an ALM analysis, that could serve similar goals as those EIOPA set for the common methodology but that would be less complex, cheaper and entail “less model uncertainty”.Beyond the HBSPensionsEurope also raised concerns about the stress tests that do not have to do with the HBS – about EIOPA’s conclusion that IORPs do not pose a systemic risk, for example.Given this outcome, according to Matti Leppälä, chief executive at PensionsEurope, “future stress tests would best be used to highlight the risks to individuals’ retirement prospects”.He added: “This would help to underpin the central message we all wish to get across – that more people should be saving more for their retirement.”Overall, EIOPA should carry out any future stress tests only when there are “situations that justify the exercise”, according to the association.The authority has said it will carry out further stress tests, with the next being in 2017 given a two-year cycle, but PensionsEurope said bi-annual stress tests “would be excessive”.The association also raised the issue of the stress tests’ compatibility with the European Commission’s Capital Markets Union (CMU) project.IORPs are “essential players in the realisation of the CMU”, it said, but some assumptions used in the stress tests might prevent their investing long term in sustainable real assets, “which seems counter” to the CMU’s aims.An area of agreement was in relation to the need for more work to understand the potential impact on the real economy and financial markets from the occupational pensions sector’s sensitivity to adverse market developments.It also welcomed EIOPA’s recognition of the heterogeneity of European IORPs and their respective financial assessment frameworks, adding that “a consequence of that heterogeneity is that funding requirements and funding ratios differ between countries”.
“This is because the prices on high-yield bonds are based on a somewhat higher risk of recession than we believe there are grounds for,” he said. He said AP Pension had appointed Babson Capital Management as its new manager for global high yield, and that the pension fund had so far invested DKK1.5bn in this asset class via the new manager.“We have not taken a decision on whether we want to invest more currently,” he added. Of AP Pension’s DKK96bn in assets under management, around DKK18bn is invested in credit bonds.“We have currently placed more than DKK7bn in high-yield bonds and are overweight compared with our strategic benchmark,” Magnussen said.He said he expected the bonds to produce an annual return of 6.5-7.5% with the right manager.“It was important for us to chose a manager that had traditionally captured rises in the market,” he said.Corporate bond yields have been rising partly because of developments in the US energy sector, AP Pension said.Many businesses in this sector have been raising finance by issuing high-yield bonds, it said, but many have been hit hard in the last few years by falling oil prices, scaring some investors away from their bonds.This has increased yields to a level where they represent a good potential investment, the pension fund said.“We are on the lookout for investments that can supplement low-yield bonds and equities, which are experiencing high volatility at the moment,” Magnussen said.“At the same time, we must have control over the risk in relation to the time horizon we are investing in.”He added that AP Pension believed high-yield corporate bonds enabled this control.Magnussen said Babson typically picked corporate bonds with around five years to maturity.Up to now, AP Pension has mainly had a shorter duration on this type of investment, at between one and 1.5 years.Babson is soon to be re-branded under the Barings name as part of recently announced plans by its parent MassMutual. Denmark’s AP Pension is increasing its investments in high-yield corporate bonds and has appointed Babson Capital Management as its manager for global high yield.The DKK96bn (€12.9bn) labour-market pensions provider said yields on high-yield corporate bonds in the US and elsewhere had risen so much that it was now turning its sights towards this fixed income sector.Ralf Magnussen, investment director at AP Pension, said: “We think high-yield corporate bonds, particularly in the US but also in Europe, are an attractive investment.”He said the instruments were now giving high returns in relation to the risks they presented.
Nordea Liv & Pension, the Danish pension provider, has unveiled a new brand to distinguish itself in the country’s highly competitive pensions market as it prepares to become 100% customer owned.The company is to be renamed “Velliv” (Well Life) this autumn, the company said last week.It has grown away from Nordea, its Nordic banking group parent, in the past two years, undergoing structural changes as an association owned by Nordea Liv & Pension’s customers gradually bought the business from Nordea Life Holding.The association, Norliv — previously called Foreningen NLP — upped the 25% stake it bought in Nordea Liv & Pension in 2016 to 70% this January. At the same time it announced that Norliv’s ownership would increase to 100% in the next few years. As part of the name change, Norliv is also rebranding to Velliv Foreningen (association).Anne Broeng, chair of Nordea Liv & Pension’s supervisory board, said: “We have a strong foundation to build on as a customer-owned company.”The business’ three sources of return – a competitive investment strategy, the interest rate from DinKapital, and the first cash bonus from the association Norliv – were now a reality, she said.“We have a value offer that is interesting for existing and new customers,” she added.Nordea Liv & Pension had DKK224bn (€30bn) in total assets at the end of 2017, ranking it as Denmark’s fifth largest pensions provider according to IPE’s 2017 Top 1000 survey (not including the statutory pension fund ATP).Norliv passes 80% of its investment returns to members as a cash bonus through Nordea Liv & Pension, and donates the remaining 20% to mental health charities chosen by Norliv’s members.Peter Gæmelke, Norliv’s chairman and deputy chairman of Nordea Liv & Pension, said the name “Velliv” matched the essence of the association’s activities.“We want to contribute to a good life through activities that promote good mental health,” he said.In an article in Danish news service Finans, Søren Andersen, actuary and director of Danish pensions consultancy FPension, said the new business structure gave Velliv an advantage in terms of return of roughly 20 basis points.“The company is ahead of the bank-owned firms from the start in this respect, because its owners send most of its return on to the customers,” he said.However, Velliv’s biggest challenge would be in maintaining its level of return, Andersen added.“Up until now they have been able to lean on Nordea’s asset management, and it will be exciting to see how the company goes on without Nordea purely from an investment point of view,” he said.