IPE Awards Seminar: Market concentration to boost smart beta – TOBAM

first_img“The cap-weighted benchmark has never been as concentrated as it is today,” he said.In emerging markets, for example, there is a huge concentration towards financials and a second concentration towards materials and energy, he said.He questioned whether the current market therefore represented emerging markets, with financials on the one side and energy and materials on the other.With the MSCI up 31% in the year to date, Choueifaty said markets were doing well.But his firm’s smart-beta strategy will systematically increase eventual returns, he claimed, unless a highly improbable scenario occurred under which markets became fully concentrated.“It is very important to understand that, when you buy the benchmark, you are in fact saying concentration is going to increase,” he said.“Otherwise, why would you put so much money in such a low number of risk drivers like financials and energy and materials only?”Choueifaty and other panellists at the seminar on smart-beta strategies – all from asset management firms that have pioneered such methods – said they were unafraid of the business consequences of having published their formulae.“When a client understands and agrees with your methodology, he will always go with the original and not a copy,” Choueifaty said.François Millet, head of index and quantitative fund development at Lyxor, said allowing the public access to the formula did not equate to giving away the firm’s secret sauce.“Of course, we give away all of the formula, but we also have a lot of applied research – for example, how you calibrate the parameters of your portfolio, […] how you address liquidity,” he said.“There is a lot of added value no matter what we give away regarding the calculation of strategies.”Jeff Wilson, head of institutional relations at smart-beta firm Research Affiliates, said that, 10 years ago, when the firm did its research, it specifically published in order to have the material vetted by the academic community.“Our model is out there – the understanding of why the method works has given investors a lot of confidence to go with one of the pioneers rather than try to go with a new entrant into the market,” he said. Smart-beta strategies are set to give investors higher relative returns in the next few years because market-cap weighted benchmarks have now become so concentrated, according to one of the sector’s key players.Yves Choueifaty, president and chief executive of asset management firm TOBAM, told IPE: “I am sure in the coming years we are going to increase the return by a lot more than that [3%] because the markets are extremely concentrated.”The term smart beta is used to label investment techniques that use rules-based strategies rather than market-cap weighted benchmarks.After a seminar at the IPE Awards in Noordwijk, Choueifaty said that, in the past, TOBAM, with its “anti-benchmark” strategy, had been able increase the return over the market by 3% a year.last_img read more

UK infrastructure fund backed by NAPF completes first investment

first_imgThe investment was completed in conjunction with the Dalmore Capital Fund II.Michael Ryan, manager of both the Dalmore and PIP vehicles, said the PIP’s inaugural investment built on the firm’s “strong existing relationship” with Interserve.“We believe it demonstrates once again our ability to execute complicated deals and to partner with contractors and facilities managers for mutual benefit,” he said.Jonanne Segars, chief executive of the NAPF, added: “It is great news that the PIP has been able to make this investment into low risk, index-linked investments so quickly after reaching first close.”The acquisition comes a few months after IPE reported that three of the platforms’ 10 founding investors had decided to withdraw their support for the undertaking.The London Pensions Fund Authority and BAE Systems cited displeasure with the platform’s risk/return profile as the reason for pulling out, while the BT Pension Scheme said it desired to continue with its own direct infrastructure investment programme. The UK’s Pension Infrastructure Platform (PIP) has completed its first investment, acquiring part of a nearly 50% stake in a holding company for private finance initiatives (PFIs).The PIP – which in February announced the launch of its first, £260m fund following several years under development by the National Association of Pension Funds (NAPF) and Pension Protection Fund (PPF) – bought part of a 49.9% stake from the pension fund for construction company Interserve.In a statement by Dalmore Capital, manager for the fund, it said that Interserve PFI Holding consisted of 13 assets, including schools, government accommodation and projects overseen by the UK’s Ministry of Defence.While the asking price for the assets was not disclosed, the Interserve pension fund acquired ownership of 19 PFI assets in late 2012, when the sponsor transferred a portfolio worth £55m to address an existing deficit.last_img read more

Swiss institutional tenders ‘trade finance’ mandate using IPE-Quest

first_imgAn undisclosed institutional investor based in Switzerland has tendered a $250m (€195m) “trade finance” strategy mandate using IPE-Quest.According to search QN1457, the strategies can be investment grade or sub-investment grade, with a maximum duration target of 18 months.The investor asks that managers have at least $500m in assets under management (AUM) for the mandate itself and $5bn in AUM as a company.It said it would accept a track record of one year but prefer one of three years. Interested parties should state performance, net of fees, to the end of June.The closing date for applications is 7 October.The IPE.com news team is unable to answer any further questions about IPE-Quest tender notices to protect the interests of clients conducting the search. To obtain information direct from IPE-Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]last_img read more

University of Glasgow to divest fully from fossil fuel industry

first_imgThis represents 12% of the university’s endowment funds, worth around £153.9m as at 31 July 2013, the date of the last published accounts.The campaign to persuade the university to divest from fossil fuels has been led by GUCAS, and has lasted around a year.The university already bans directly held tobacco stocks from its portfolio, as these investments run entirely counter to its direct interests in research.David Newall, secretary of the University of Glasgow Court, said: “The university recognises the devastating impact climate change may have on our planet, and the need for the world to reduce its dependence on fossil fuels.“Over the coming years, we will steadily reduce our investment in the fossil fuel extraction industry, while also taking steps to reduce our carbon consumption.”Directly held stocks in the endowment fund portfolio as at 31 July 2013 included Shell, BP, Chevron, Statoil Holdings and BHP Billiton.Portfolio management is split between Schroders and Newton.The commitment to divest is subject to reassurance that the financial impact for the university will be acceptable, the detail of which will be monitored by the University Court.The decision to divest does not extend to the University of Glasgow Pension Scheme, run by separate pension fund trustees.Other UK universities are reportedly considering the issue of fossil fuel divestment within their endowment funds.Oxford University’s executive governing body is set to make a decision early next year.In the US, 13 universities, including Stanford, have now pledged to divest from the fossil fuel industry.Last month, the Rockefeller Brothers Fund, whose endowment is worth $868m (€682m), announced its decision to divest from the industry.Meanwhile, a low-carbon energy system could free up trillions of dollars over the next 20 years to invest in better economic growth, according to two new reports from the Climate Policy Initiative.The reports found that moving to a low-carbon electricity system would bring the global economy around $1.8trn in financial savings between 2015 and 2035 because of significantly reduced operational costs associated with extracting and transporting coal and gas outweigh increased financing costs for renewable energy and losses in the value of existing fossil fuel assets.And changing from oil to low-carbon transport could increase global investment capacity by trillions or result in net costs, depending on policy choices.Governments own 50-70% of global oil, gas and coal resources, and collect taxes and royalties on the portion they do not own.However, governments also control much of the policy that could lead either to asset stranding (losses in the financial value of fossil fuel assets) or financial savings.And, says CPI, the right policies can maximise the financial benefits of a low-carbon transition. The University of Glasgow has become the first European university to commit to disinvesting fully from companies in the fossil fuel industry.The decision was taken by the university’s governing body, the University Court.It follows a consultation process by an independent working group taking evidence from the Glasgow University Climate Action Society (GUCAS) and the university investment committee.Full divestment will mean the reallocation of around £18m (€12.7m) worth of current investments over a 10-year period.last_img read more

Dutch Mortgage Company able to take on €1bn in new commitments

first_imgThe Dutch Mortgage Funding Company (DMFCO) has said it can accommodate at least €1bn in additional investments in residential mortgages next year as demand surges.Since the DMFCO launched its Munt Hypotheken product a year ago, the asset manager had received €5bn in commitments, €3bn of which has been issued as mortgages, according to Marieke Hut, partner and director of business development.She said the DMFCO expected to issue at least another €3bn of mortgages in 2016.To date, seven Dutch pension funds, including PGB and the large metal schemes PME and PMT, have made commitments, ranging from €100m to €2bn. According to Hut, the DMFCO is currently in talks with a number of other pension funds keen to participate in the Dutch mortgage fund.She attributed Dutch schemes’ interest in the DMFCO’s proposition partly to its “extensive governance and low cost”.“We involve our clients closely in our policy, and we can keep costs low, as we are a young and efficient organisation,” she said.“Moreover, we are independent and focus solely on mortgages.”She said the DMFCO’s Dutch mortgage fund was currently providing 200 basis points of additional returns relative to government bonds.She also confirmed that the fund would continue to focus on Dutch pension funds, “as we have developed our proposition together with our first clients”.This means, for example, that the vehicle will target long-term mortgages with a fixed rate.“Having only pension funds as like-minded investors also allows us to be flexible,” Hut said.Most of the participating pension funds have increased their commitments considerably, with PMT and PGB doubling their initial investments to €2bn and €1bn, respectively.Hut said investor demand had increased much faster than the DMFCO expected, and that it now anticipated a total committed amount of approximately €10bn by the end of 2017.The DMFCO estimates the annual market for Dutch mortgage investments in the Netherlands at €60bn.It said it expected institutional investors to play an increasingly important role in the Dutch real estate market, as banks became more reluctant to issue mortgages.last_img read more

IPE Views: Steeling for a battle over pensions

first_imgIt’s questionable whether such a step would be possible, or appropriate, in the case of a private sector company, as it could amount to state aid. However, the other possibility would be for BSPS to fall into the Pension Protection Fund (PPF), a move that already has some precedent when one of the UK’s other traditional industries, coal, encountered problems.The two industry-wide funds associated with the coal industry entered the lifeboat fund as part of a wide-ranging restructure of its sponsor in an attempt to keep coal mining viable in the UK. As part of the agreement to sever ties with its sponsor, UK Coal, the funds were granted a controlling stake in a new property venture. But attempts to keep the industry viable were scotched by a later fire in one of the remaining coal pits. So the absorption of the BSPS into the PPF would not be without precedent, but for the Pensions Regulator (TPR) to agree to such a move, Tata would likely need to offer a reasonable (and costly) settlement to the trustees.The trustee board has so far remained quiet about Tata’s selling out of the UK, only saying that it would expect the company to “discuss […] the implications” of any sale or restructuring. The government must now proceed carefully. TPR’s independence must be preserved, and no impression must be given that either the regulator or the PPF were asked to agree to a deal that is detrimental to those already within the PPF.While the PPF is currently well-funded, and last March reported a £3.6bn surplus, the desire to keep an ailing industry open and avoid the significant unemployment that would come with the collapse of the UK steel industry, must not lead to an outcome that looks like a sponsor dumping its pension obligations – precisely a scenario the current regulatory framework is meant to avoid. With the collapse of the UK steel industry a distinct possibility, Jonathan Williams looks at the future of the British Steel Pension FundAs the UK faces the prospect of its steel industry winding down, attention has focused not only on the possibility of a temporary nationalisation of some of the assets owned by Tata Steel but also on the fate of the British Steel Pension Scheme (BSPS), sponsored by Tata. With £14bn (€19bn) in assets this time last year, BSPS was among the UK’s larger pension funds – and hardly in a unique position that it was reporting a deficit. It is this shortfall – £553m on an ongoing basis in 2011 and up to nearly £1.2bn by 2013 – that means the scheme will play a material part when it comes to settling the future of steel manufacturing in the UK.Commentary in recent days has remarked that Tata’s UK business is a pension fund producing steel, often used when pension obligations are viewed as overwhelming. This perception – however mistaken it may be when part of the funding difficulties are simply down to the low-interest-rate environment – has led to suggestions the government should take on responsibility for the pension fund, including from former secretary of state for business Vince Cable.Cable’s intervention is notable. It was under his tenure the UK government took on the majority of the liabilities associated with Royal Mail, in an attempt to make the company more attractive to private investors ahead of its flotation in 2013. The listed company was left with a significantly scaled-back pension liability and a pension fund now firmly in surplus, while the remaining pensions owed are now simply part of government expenditure.last_img read more

​PensionDanmark books court-win tax refund of DKK218m

first_imgIn its interim report for the first half, PensionDanmark said the refund bumped its profit for the period up to DKK267m.Ongoing pension premiums increased by 7% in the January-to-June period from the same period a year before to DKK6.8bn.Increased prosperity and employment in the Danish economy had  driven the figure to an all-time high, the fund said.Torben Möger Pedersen, PensionDanmark’s chief executive, said: ”Overall, the achieved results in the first six months are very satisfying with a growth in premiums and members, a good return on investment and some of the lowest costs in the industry.”The return on investments rose to DKK8bn before tax in the first half, up from DKK3.8bn in the same period last year. This produced a 5% return before tax for scheme members aged 40, compared to 1.3% in the first half of 2016.For members over 60, the return rose slightly to 3.3% from 3.2% a year ago, the pension fund reported.Total assets grew to DKK224.1bn from DKK188.7bn at the end of June 2016, according to the half-year figures. PensionDanmark added an extra DKK218m (€29.3m) to its profit in the first six months of this year as a result of a large tax refund resulting from a recent court victory.The amount was more than twice the minimum sum the pension fund had been expecting.At the beginning of July, the Danish labour-market pension fund estimated it would get more than DKK100m in refunds from the Danish Customs and Tax Administration (SKAT), related to taxes withheld from foreign investments during the period from 2010 to 2014. The refund came as a result of a ruling from the National Tax Tribunal (Landsskatteretten) in its favour.The case had been led by PensionDanmark and Industriens Pension on behalf of a number of Danish occupational pension funds.last_img read more

Aegon to merge asset management subsidiaries under a single board [updated]

first_imgIn the reorganisation plan, Van Wijk is to become head of responsible business and public affairs. Van der Maarel, who will remain a member of the Global Management Board, is Aegon’s envisaged chief commercial officer for Europe.Aegon said forced redundancies would be possible. However, the company emphasised that the investment teams would not be affected, adding that this would also largely apply to the commercial client teams.A spokesman for the group later said that TKP’s fiduciary services would be ringfenced from the rest of the European organisation through the establishment of separate reporting lines in order to “safeguard the independent nature of these services”.According to the reorganisation plan, all four current offices are to remain operational and the brands Aegon AM, TKPI and Kames Capital would also remain. The €64bn Aegon AM Netherlands is based in The Hague, while the €28bn TKPI has an office in Groningen. Kames Capital operates from London and Edinburgh.The remainder of Aegon AM’s assets are largely managed from the US.Worldwide, Aegon has approximately 1,300 staff, of whom about 300 are based in the Netherlands. At year-end, TKPI employed almost 100 staff.Speaking to IPE’s Dutch sister publication Pensioen Pro, an Aegon spokesman emphasised that Aegon’s central works council (OR) and the supervisors still had to approve the plan.The OR has a six-week period to respond, after which Aegon AM will take a decision about the follow-up steps on integration.Kames and Aegon AM Netherlands have been formalising some aspects of their existing collaborations in recent weeks. Earlier this month Kames named Jacob Vijverberg and Robert-Jan van der Mark – both Aegon AM managers – as co-managers on Kames-branded funds.Kames CIO Stephen Jones said at the time that the appointments marked “a new point for greater co-operation and collaboration between the two teams and will allow us to optimise and strengthen our capabilities in this very competitive sector of the market”.This article has been updated to include a statement regarding TKP’s fiduciary services. Aegon Asset Management has confirmed its intention to merge Aegon AM Netherlands, TKP Investments and its €50bn UK-based subsidiary Kames Capital under a single board.The €317bn asset manager said it wanted to integrate its operational activities in Europe in order to improve decision-making and to achieve benefits of scale and costs savings.Under the current plan, the boards of the three subsidiaries are to be merged into a single European board – chaired by Kames’ chief executive Martin Davis – as part of Aegon AM’s Global Management Board.The current CEO positions at Aegon AM Netherlands (Erik van der Maarel) and TKPI (Roelie van Wijk) are to disappear in the new setup.last_img read more

Seven managers set to lose major LGPS mandates as pooling continues

first_imgBaillie Gifford, JP Morgan Asset Management (JPMAM) and Investec Asset Management all stand to lose UK local authority pension scheme mandates as the sector’s asset pool continues.LGPS Central, one of the eight asset pools formed by Local Government Pension Scheme (LGPS) funds in England and Wales, this morning named Harris Associates (part of Natixis Investment Managers), Schroders and Union Investment to run an active global equity pooled fund for its clients.The pool said it expected the new Global Active Equity Multi-Manager fund to attract more than £2bn (€2.3bn) in investments when it launches later this year.However, the transition means at least seven asset managers stand to lose mandates worth hundreds of millions of pounds for some of LGPS Central’s founder members, according to data from the schemes’ 2017-18 annual reports. Several of LGPS Central’s clients are set to cut managers as they transition assets to the pool.Baillie Gifford ran a significant proportion of the Cheshire pension scheme’s estimated £775m global equity allocation as of 31 March 2018, while JPMAM managed £415m for the Staffordshire pension fund. Investec had a mandate worth £150m with the Shropshire pension fund at the end of March. Credit: Paul CosminLGPS Central’s office is in Wolverhampton, EnglandOther managers that are expected to be cut include Kempen and KBI Global Investors (both managing money for Leicestershire’s scheme), MFS (Shropshire), and Longview (Staffordshire).Harris Associates already runs money for the Shropshire Pension Fund, while Schroders has a number of equity mandates for the Nottinghamshire Pension Fund.LGPS Central said 150 fund managers from around the world “expressed an initial interest” in the Global Active Equity Multi-Manager fund.Jason Fletcher, CIO at LGPS Central, said: “After a rigorous international due diligence and selection process, we are confident that the combined blend and style of these three particular managers will assist us in meeting the investment objectives of our partner funds. We look forward to building a long-term relationship with all three of them.”The Global Active Equity Multi-Manager fund is available to LGPS Central’s nine founder members, the local authority pension funds for Cheshire, Derbyshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, Worcestershire, West Midlands, and the West Midlands Integrated Transport Authority.LGPS Central has £14bn under management and could run in excess of £43bn once all nine schemes’ assets are pooled.At the start of this year the company laid out plans to launch 10 funds by the end of 2018, including passive and active UK and global equity funds, and a global emerging markets fund. Next year it plans to roll out a number of pooled fixed income funds.Last week, LGPS Central chief executive Andrew Warwick-Thompson announced he was stepping down from his role after just over a year at the helm. Joanne Segars, chair of the pool, praised the work he had done to steer the company through to its launch earlier this year.last_img read more

UK roundup: Schroders’ DC funds pass ‘value for money’ test

first_imgSchroders has had 13 of its funds on offer to defined contribution (DC) customers endorsed by an independent trustee company.PTL launched a value-for-money assessment – called Clear Funds – at the start of this year, and the UK-listed asset manager was the first provider to sign up. It submitted 13 funds to be assessed by PTL.Clear Funds is designed to assess and communicate funds’ transaction costs to trustees and governance committees of DC schemes. It also analyses processes for controlling and reporting transaction costs, and produces a report for each fund.A spokeswoman for PTL said a second fund manager to put products through the Clear Funds process would be announced in the new year. 13 of Schroders’ DC funds received PTL’s seal of approval“It has been evident throughout that Schroders has been keen to go beyond the regulatory requirements asked of the business. As a result, we are pleased to have been able to conclude that its transaction costs in the funds we have assessed represent value for money.”Tim Horne, head of UK institutional DC at Schroders, added: “[The assessment] gives our DC clients confidence that we are taking our responsibilities in this area seriously – the more oversight DC schemes have of transaction costs, the better. And, crucially, value for money will result in better retirement outcomes for DC savers.”Reuters scheme seals £625m de-risking deal The UK defined benefit pension scheme for global news service Thomson Reuters has secured a £625m (€693m) insurance buy-in with Canada Life – the insurer’s biggest pension risk transfer deal to date.The £2.2bn Reuters Pension Fund has lined up a series of buy-in transactions aimed at insuring the entirety of the scheme. The transaction announced this week covered “the majority of pensioner liabilities”, according to Reuters’ adviser Aon.The transaction came as Thomson Reuters offloaded a 55% stake in its financial and risk unit to private equity investor Blackstone.John Baines, head of bulk annuities at Aon, said: “A decisive factor of this deal was the ability of the trustees to manage a large buy-in alongside a major corporate transaction.”Greg Meekings, chair of trustees for the Reuters Pension Fund, added: “This transaction has led to a major improvement to the security of our members’ pensions by taking a significant amount of risk out of the scheme.“We are grateful for the excellent advisory support provided by Aon, Sackers and Redington to work collaboratively and complete this transaction in such a short timescale. I would also like to acknowledge the positive sponsor support from Blackstone and Thomson Reuters.” DWP seeks to reassure on post-Brexit pension payments The DWP published a series of questions and answers relating to benefit payments post-BrexitThe Department for Work and Pensions (DWP) has pledged to continue benefit payments – including the state pension – to UK nationals living in the EU even if the country exits the bloc without a withdrawal deal on 29 March.However, annual increases to the state pension have not been guaranteed beyond 2020 due to uncertainty about long-term arrangements between the EU and the UK.In a question-and-answer page on its website, the DWP said Brexit would not affect pension payments. The government was “committed to uprate” payments in 2019-20, it added, but would “take decisions in light of whether, as we would hope and expect, reciprocal arrangements with the EU are in place”.For those claiming benefits in EU countries, the DWP said: “We want UK nationals to be able to stay in the EU countries that they live in when the UK leaves the EU, and for their rights to employment, healthcare, education, benefits and services to be protected.”Individuals collecting annuity or personal pension payments should contact their provider, the DWP added.For EU nationals in the UK, the DWP’s advice was similar. Any EU citizen living in the UK as of 29 March would be able to receive benefits “on broadly the same terms as now”, the department stated.center_img Richard Butcher, managing director at PTL, said: “Throughout the process, Schroders has worked really hard to provide us with what we needed to carry out our rigorous Clear Funds assessment. Schroders has shown real diligence in providing the full range of costs and the detail we needed on its cost control procedures.last_img read more