Consultancy warns on risk naïvety in smart beta allocations

first_imgTowers Watson has warned against smart beta products that are poorly implemented and show naïvety over inherent risks, as clients add $8bn (€7bn) to the asset class in 2014.Describing its client allocations during the last year, the consultancy said 2014 inflows to smart beta strategies brought total client exposure to $40bn, doubling since 2012.However, Luba Nikulina, global head of manager research at Towers Watson, warned against reckless allocations to the newly reinvigorated strategy.“We believe smart betas should be easy to describe and understand, which many of these labelled products are not, as often they are poorly implemented and seem naïve about the inherent risks,” she added. Towers Watson described growth in the strategy over the last five years as “phenomenal” and praised development of the fixed income market which is now where equity selections were in 2010.Over 2014, Towers Watson clients added $1.5bn to smart beta fixed income mandates, triple the amount of inflows seen in 2010, which formed part of the $34.8bn in total credit within client portfolios.“Unsurprisingly, smart beta innovation in the bonds space has been slower than in equities,” Nikulina said.“[This is] partly due to the nature of the indices and the level of complexity which comes with the territory; but this is changing and we think that there is more to do in bonds.”“Most investors in credit want to capture beta efficiently and improve implementation of thematic and tactical views.”However, while innovations were slower, allocations are higher in value terms with $1bn of smart beta equity allocation, compared to $45m in 2010, and from a total of $20.6bn.Overall, the firm also assisted clients in adding $10bn to alternative asset classes, a rise from $7bn in 2012.Within this, $3bn went into real estate with around 10% into smart beta allocations, as $2.3bn was allocated to infrastructure – some 33% of which was smart beta.The growth of the smart beta market has been well documented by research firms. Spence Johnson, an intelligence provider, said European investors would allocate a total of €211bn by 2018.Annual inflows from UK institutional investors would be €15bn by 2018 and €29bn from the continent.Research from State Street Global Advisers found 40% of investors in the US and Europe were allocated to smart beta strategies at the end of 2013, with a further quarter contemplating allocations.For more on smart beta investing, read Martin Steward’s feature on the topic and see IPE’s upcoming March supplementlast_img read more

AI Pension books SEK54m loss in 2014 after switching funding calculation

first_imgSweden’s AI Pension fund for architects and engineers made an overall loss last year as it increased technical provisions, despite lifting investment returns to 13.2% from 8.2%.In its 2014 annual report, the pension fund — previously known as Arkitekternas Pensionkassa — reported an annual loss of SEK54m (€5.8m), down from a profit of SEK1bn the year before.The fund said: “First and foremost, the result was affected by the increase in technical provisions, but also by a good return on capital.”Fixed-income investments returned 8.8% over the year, up from the loss suffered in 2013 of 1.9%, while equities produced a 21.7% return, down from 27.9% the year before. Property generated 15.6%, up from 9.1% and hedge funds produced 1.5%, down from the previous year’s 6.0%, according to the annual report.Premium income increased by 10% to SEK237m from SEK216m.Total assets grew to SEK6.24bn at the end of 2014 from SEK5.54bn, the published data showed.AI Pension said its financial position remained strong, even though the solvency ratio had fallen as a result of the continuing decrease in interest rates to 141% at the end of 2014, from 152% a year before.The funding level for defined benefit plans was unchanged at 131% while funding for defined contribution products had increased to 111% from 106%, it said.The pension fund explained that its council had decided on a new funding policy during the year for both AI ITP and AI Life pensions, with the change prompted by the new interest rate curve to calculate technical provisions.It decided the new curve would be used for both pension types.For AI ITP, the normal funding level was increased to 130% from 120%, with the calculation changing from one based on a fixed interest rate assumption of 3% to floating interest rates.This meant it was now necessary to have a higher level of normal funding as well as a broader funding range, the pension fund said.Within AI Life, the normal funding level was revised down to 105% from 110%, with the the funding range unchanged at 100-115%, it said.AI Pension in February announced its intention to merge with PP Pension, the pension fund for the press and media, by early next year, but was later forced to abandon the proposal due to time constraints.last_img read more

Renewables ‘more attractive’ for UK pension funds after subsidy cuts

first_imgHe told delegates at an infrastructure conference organised by the Financial Times that subsidies were needed to bring down the cost of energy generation, but that the “heavy” subsidy was always difficult for the government to sustain.“Those projects always had that risk,” he said, “whereas now, because the subsidy level is much lower going forward, the cost-production level of renewable projects is much less.“[The changes to subsidies are] actually a much more attractive and sustainable way of providing that power into the UK grid.”His views were shared by Mike Weston, chief executive of the Pensions Infrastructure Platform (PiP), who told IPE that certainty was “absolutely essential” when investing in long-term, buy-and-hold projects.“If you’re saying ‘Well, I can forecast that out five years, and after that it all gets woolly because we might have a new government in five years’ time that changes the policy’, then you inevitably have to put a risk premium on,” he said.“And then, ultimately, the projects get more expensive to be done, and the economics get more unpredictable.”The Church Commissioners indirectly own several wind farms, having acquired the land on which they sit as part of a farmland portfolio in 2014.They are also working with energy company Lightsource to develop solar power opportunities for rural property owned by the Church, and exploring the possibilities for wind farms on other rural real estate assets within its portfolio.The PiP, meanwhile, has recently launched a solar fund managed by Aviva.Click here for more on the pipeline of renewable projects ahead of the Paris climate change conference The UK government’s scaling back of feed-in tariffs for renewable energy makes energy projects more attractive and sustainable, according to the Church of England’s pension manager.Changes to subsidies for renewable projects, including rooftop solar, anaerobic digestion plants and wind farms, have been criticised in some quarters, coming ahead of the UK climate change conference in Paris.However, according to the Church Commissioners, responsible for managing the pension funds and endowments of the Church of England, the scaling back of subsidies may help in the long term.Roy Kuo, head of alternative strategies, said renewables were “more attractive” in the wake of the changes than they were before the cuts were announced.last_img read more

Dutch Pensions Federation softens position on pan-European pensions

first_img“This goes in particular for countries with limited capital-funded pensions,” it said.The Federation’s take on the European Commission’s proposal is far more supportive than that of the Dutch government, which described a European third-pillar pensions product as “superfluous”.The industry group, however, emphasised that it would still be better to promote second-pillar pensions due to the benefits of scale and lower costs.It suggested that the Commission look into the options for additional pensions saving through tax facilitation.The potential for cross-border pensions should also be taken into account, it said.The Federation warned, however, that a personal pension must not undermine existing second-pillar systems and said it feared that an opened-up internal market could trigger a “cost-driven race to the bottom” for pensions.It also highlighted the importance of rules for the benefits phase of a European third-pillar product. The Dutch Pensions Federation has softened its position on the proposed European personal pension and now said that a European standard for the third pillar could “contribute to plugging workers’ pension gaps”.In a letter to the European Commission, however, it argues that Brussels should first conduct a “wider” survey that also considers improving the second pillar.Last year, responding to a consultation by European supervisor EIOPA, the industry body said it had “many doubts about the umpteenth third-pillar product, which would only benefit the happy few”.It now believes a European standard would be needed to achieve additional pensions saving and could contribute to investments in the European economy.last_img read more

AP1, Bpf AVH among investors settling with Brazil’s Petrobras

first_imgOther European plaintiffs include the London Borough of Hounslow Superannuation Fund, and Hampshire County Council Global Equity Portfolio.US retirement funds bringing the action include the New York City Fire Department Pension Fund, the Ohio Public Employees Retirement System and the Boeing Company Employee Retirement Plans Master Trust.AP1 told IPE the reason it became a plaintiff was because of its “assessment of a more favourable outcome of the case”.The Petrobras scandal erupted after prosecutors and federal police in Brazil first uncovered a price-fixing cartel in 2014.The cartel operated between several firms carrying out construction and service work for Petrobras, whose executives decided between themselves which company would “win” a particular contract.The work was then carried out at inflated prices, with some of the surplus used to bribe Petrobras officials and Brazilian politicians.The plaintiffs in the four lawsuits had bought Petrobras securities, traded on the New York Stock Exchange, between 16 October 2010 and 15 May 2015.These included both American depositary receipts (ADRs) and bonds.The plaintiffs claimed the price of these securities had been artificially inflated because of the fraud, and that Petrobras had made false statements of material fact and omitted adverse information relating to its financial position and its anti-bribery and anti-corruption policies.As the scandal unfolded, the value of Petrobras securities fell substantially.In a press release, Petrobras said it would recognise a provision in its third-quarter financial statements as a result of the settlements, and the status of ongoing negotiations with certain other individual plaintiffs.At present, the company expects the provision to amount to $353m (€318m).The oil company said: “Petrobras denies all allegations of wrongdoing and continues to defend itself vigorously in all pending actions. The settlements, the terms of which are confidential, are aimed at eliminating the uncertainties, burdens and expense of ongoing litigation.”A number of similar lawsuits against Petrobras, including the action led by the Universities Superannuation Scheme, are still in progress. Investors including Swedish buffer fund AP1 and Dutch agricultural sector pension fund Bpf AVH have agreed a settlement with Petrobras in four individual securities actions brought in the US, following the bribery and fraud scandal at the Brazilian state oil giant.The lawsuits were filed in the US district court for the Southern District of New York.They were led by the PIMCO Total Return Fund, the Dodge & Cox International Stock Fund, the Janus Overseas Fund and Al Shams Investments.PIMCO is one of the largest bondholders in the Petrobras group, and Dodge & Cox is one of the largest shareholders after the Brazilian federal government and affiliated entities.last_img read more

Asset management roundup: M&G Prudential to split from insurer parent

first_imgInsurance giant Prudential plc is to spin off its UK and European arm, the company announced this morning.M&G Prudential – created last year as part of a major reorganisation of the insurer’s UK businesses – will be formally separated from the rest of the company by the end of next year, according to a notice to the stock exchange.John Foley, M&G Prudential’s chief executive, will continue in this role as the firm seeks to deliver annual savings of £145m a year by 2022.As part of the restructuring, M&G Prudential also announced a deal with Rothesay Life to offload £12bn worth of legacy annuity business. It has already reinsured the annuity book with Rothesay and plans to transfer it completely by the end of next year. 718713MSCI China A Mid Cap RMB  718709MSCI China A Large Cap  718850MSCI China A International Mid Cap  718711MSCI China A RMB  Analytics firm launches investable hedge fund benchmarksInvestment analytics firm Markov Processes International (MPI) has launched the first of a planned series of investable hedge fund indices.A new subsidiary of the company, MPI Hedge Fund Indices, aims to provide benchmarks to help measure “elite” hedge fund performance, split by investment style.The first index has been developed in partnership with BarclayHedge and tracks the performance of the 20 largest managed futures funds.Sol Waksman, president at BarclayHedge, said: “We’ve been approached in the past by firms looking to deliver on a similar promise. In those cases, and despite valiant efforts, index performance quality fell short of our standards. MPI, however, has delivered what we think will be a game-changer.”MPI’s main business is performance analysis. Using its “dynamic style analysis” model it aims to identify the main drivers of an investment fund’s performance. The same analysis forms the basis for the new indices, MPI said in a statement. 718848MSCI China All Shares Mid Cap  718710MSCI China A Mid Cap  718708MSCI China A 718712MSCI China A Large Cap RMB  718849MSCI China A International Large Cap  718874MSCI China All Shares SMID Cap  718847MSCI China All Shares Large Cap  718875MSCI China A International Smid Cap  “The capital benefit of this transaction will be retained within the group to support the demerger process,” the stock exchange notice said.Both M&G Prudential and Prudential plc aim to remain headquartered in the UK and have targeted inclusion in the FTSE 100 index.Foley said the demerger would allow M&G Prudential to “play a broader leadership role in the fast-changing savings and investments market within the UK and Europe”.The restructure is subject to shareholder and regulatory approval.China A-shares indices offered by MSCIIndex provider MSCI has launched 12 China equities indices to track the developing A-shares market.The company announced plans to introduce A-shares in its main global benchmarks for the first time last year, with effect from 1 June 2018.The new indices include large cap, mid cap and “smid” cap (small and medium) benchmarks denominated in US dollars and renminbi.Theodore Niggli, head of Asia-Pacific index products at MSCI, said: “With the increased liberalisation and internationalisation of the China market, investors have expressed a clear need for more insight and tools to make better informed investment decisions.”He added that the company would provide a “full suite” of services connected to the new indices, including risk models and ESG ratings.A-shares are stocks accessed on China’s domestic markets, rather than via Hong Kong (H-shares) or other jurisdictions.Source: MSCIMSCI Index CodeMSCI Index Namelast_img read more

​Folksam boss Henriksson takes Swedbank CEO role

first_imgHenriksson – who has previously worked for Swedbank as head of banking relations – said: “After six fantastic years as president and CEO, it is with a certain sadness that I leave the Folksam Group. At the same time, I feel proud and honoured to have been given the trust to lead Swedbank.” Jens Henriksson, chief executive of Swedish pensions and insurance group Folksam, has been appointed chief executive of scandal-hit Swedbank.At Swedbank, Henriksson will replace Anders Karlsson, who has been acting chief executive since 28 March when the previous chief executive Birgitte Bonnesen was sacked at a crisis point for the bank during revelations about alleged money-laundering.At the end of March, under Henriksson’s leadership, Folksam was among the group of Swedbank’s major investors that refused to back Bonnesen ahead of the bank’s AGM, as Sweden’s fraud squad stepped up its investigation into money-laundering allegations. At the time, Folksam held a 7% stake in the bank.Göran Persson, chairman of Swedbank’s supervisory board, said Henriksson had the competence required to take on the current situation at the bank, as well as handling the rapid technological changes and competition that characterised the banking sector. Jens HenrikssonHe is to take up his new role at Swedbank as soon as possible, the bank said, with Karlsson continuing as acting chief before returning to his regular role as the bank’s CFO.Henriksson is a former state secretary at the Swedish Ministry of Finance, and has been a member of the supervisory board of the International Monetary Fund in Washington. Immediately before joining Folksam he was chief executive of the Stockholm Stock Exchange.Folksam, which manages around SEK600bn (€56bn) of group total assets, said the work of recruiting a new president and chief executive would begin immediately, under the leadership of Lars Ericson, chairman of Folksam Liv (life insurance) and Karl-Petter Thorwaldsson, chairman of Folksam Sak (non-life insurance).In the interim period, Folksam’s deputy chief executive Ylva Wessén will lead the company.Swedbank is currently under investigation by the Swedish and Baltic financial watchdogs and is also being investigated in the US. It faces sanctions and fines in multiple jurisdictions connected to the alleged money-laundering through Eastern European branches, according to a Reuters report.last_img read more

​PKA’s private equity arm opens doors for third-party investment

first_imgThe private equity arm of Danish labour-market pension provider PKA is looking to attract third-party institutional investors to invest in its private markets funds – and expects assets to grow to DKK100bn (€13.4bn) in the next two years.The company has rebranded as Institutional Investment Partners Denmark (IIP Denmark) – it was previously known as PKA AIP Private Funds.In an announcement yesterday, IIP Denmark said it would be “seeking to provide a select few Danish institutional investors access to attractive investment opportunities in private markets” through its existing network as well as partnerships with “new best in class investment managers”.The private equity firm has obtained approval from the Danish Financial Supervisory Authority in order to be able to invest on behalf of others. IIP Denmark was an expansion of its investment platform, PKA said, which had been committing capital to private equity managers globally on behalf of pension fund’s 320,000 members since 2012.The PKA unit said it would continue managing existing commitments while investing its current three-year DKK19bn (€2.5bn) private markets mandate. On top of this, it would also be investing a newly established DKK2bn venture capital mandate. Anette EberhardAnette Eberhard, managing partner of IIP Denmark, told IPE that the firm was investing DKK65bn on behalf of PKA, with that amount was expected to increase.“All together we expect to manage around DKK100bn in two years,” she said.Asked how the addition of third-party investment would benefit PKA’s existing pension funds, Eberhard said: “First of all the third-party investments will lower the cost per Danish krone invested for all IIP investors. Additionally, our platform will consolidate in terms of investment qualifications, governance etc – in short you could call it scale benefits.”“We are pleased to have all the support from PKA and look forward to welcoming new investors,” Eberhard added.PKA announced in April 2018 that it was splitting its alternatives investment arm into two businesses and inviting co-investments – one part of which became AIP Private Funds under Eberhard’s leadership from October 2018.last_img read more

Global managers register largest yearly AUM increase in 2019

first_imgIPE’s Top 500 Asset Managers Report also highlights impact of Q1 2020 market crash on managed assets,Global asset managers saw a record increase in assets under management last year, according to IPE’s annual asset management study.Driven by strong returns across all asset classes during 2019, global managers saw their aggregate AUM increase by 22.1% year-on-year, to reach €81.1trn. This was the largest yearly increase since the start of the decade.Assets managed on behalf of European institutional investors also grew strongly during 2019, reaching €11.4trn. The figure represents a 11.7% increase from the previous year.This year a further 100 managers were added to the ranking. Enlarging the universe added €285bn of assets, equating to 0.37% of the total. IPE’s study also analysed the performance of a sample of 70 managers during the first quarter of 2020, as markets suffered one of the worst crashes in history.During the period, managers in the sample saw their AUM collapse by 9.7%, as markets reacted to the global economic shutdown imposed by governments in response to the COVID-19 pandemic.Across the 70-manager sample, assets collapsed from €45.6trn to €41.2trn during the first three months of 2020.The subsequent market recovery in April and May erased part of the drawdowns suffered during that period.During the first quarter of the year, BlackRock was the biggest loser in absolute terms, registering a drawdown of €857bn. In relative terms, quant house PanAgora Asset Management was the biggest loser, experiencing a 29% drawdown.There were also managers that recorded higher AUM at the end of the period, compared with the end of 2019. Infrastructure and private equity house Foresight Group posted a 12% increase in AUM, the largest increase in relative terms.With €6.7trn under management, BlackRock topped the ranking of global managers again this year. Fidelity Investments climbed to third place replacing State Street Global Advisors, which dropped to fourth place.Capital Group and BNY Mellon IM swapped places, with the former taking fifth place and the latter taking seventh place. Goldman Sachs Asset Management entered the top 10 in tenth place, while PGIM dropped to twelfth place.Total assets managed by the top 10 managers increased in 2019 relative to the remaining managers. Cumulatively, the top 10 held 34.7% of assets compared with 33.6% in the previous year.The top 10 ranking of European Institutional managers saw some significant changes outside the first four places, which were unchanged. BlackRock retained the top spot, followed by Legal & General Investment Management, BNY Mellon Investment Management and Insight Investment.The largely capitive APG Asset Management reached fifth place, as PIMCO dropped to tenth place. Allianz Global Investors and UBS Asset Management took eighth and ninth places respectively, while Aberdeen Standard dropped to eleventh place.At global level, BlackRock recorded the largest net client inflows during the year, adding nearly €387bn to its AUM. For the second year in a row, Aberdeen Standard Investments recorded strong net client outflows as clients withdrew €72.2bn.The IPE Top 500 Asset Managers report can be found here.last_img read more

Swoon-worthy Noosa penthouse sells to Boomers for $4m-plus

first_imgThe view from the penthouse at 23/8 Quamby Pl, Noosa Heads. The kitchen in the penthouse at 23/8 Quamby Pl, Noosa Heads. The lounge room in the penthouse at 23/8 Quamby Pl, Noosa Heads.And up the chandeliered stairwell is the sky terrace.The property is within walking distance of top restaurants in Quamby Place, Hastings Street and Noosa’s Main Beach.Other features include onsite management, lift, a pool, spa, sauna, barbecue, car space with store room and furniture. The stunning view from the penthouse at 23/8 Quamby Pl, Noosa Heads.“Regularly I’m showing properties to people from the capitals who say they need space and extra living area for the kids and the grandkids.”The penthouse is one of three out of 25 apartments in the building.More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours agoFrom its 12m long balcony, you can see across the Noosa River to the North Shore and beyond to the Coloured Sands; south along the park-fringed Noosaville foreshore which stretches to the Everglades as well as a backdrop of Mount Cooroy.And for the exclusive use of Las Rias residents, there is an idyllic white-sand beach and private jetty. TOMIC MAKES LAST DITCH DUPLEX BID The penthouse in this complex at 8 Quamby Pl, Noosa Heads, has sold for $4.05m.A PENTHOUSE complete with its own private beach, sky terrace and designer furniture has sold for $1.6 million more than it fetched just two years ago.The ultimate holiday home in Noosa Heads has sold for $4.05 million to a Baby Boomer couple from the state’s southeast. GET THE LATEST REAL ESTATE NEWS DIRECT TO YOUR INBOX HERE The three-level, three-bedroom, three-bathroom penthouse at 23/8 Quamby Place last changed hands in September 2016 for $2.425 million. The bathroom in the master suite of the penthouse at 23/8 Quamby Pl, Noosa Heads.center_img A three-level penthouse in this complex has sold for $4.05m. The view from one of the bedrooms in the penthouse at 23/8 Quamby Pl, Noosa Heads.The spacious living and dining spaces, fitted with deluxe furniture and accessories that come with the apartment.The kitchen features Caesar stone double island benches, Carrera marble splashbacks, a walk-in pantry and a Vintec beverage centre fridge in the bar area.On the mid-level, the master suite with volcanic stone bath and two kingsize bedrooms with a shared bathroom open out to another balcony. THE HOME THAT $5.6M CAN’T BUY The view from the balcony of the penthouse at 23/8 Quamby Pl, Noosa Heads.Selling agent Luke Chen of Tom Offermann Real Estate said the apartment had been “completely gutted back to a concrete shell” and furnished with designer and bespoke pieces made especially for it.Mr Chen said the buyers bought the property as a holiday home, primarily for its location.“It’s got one of the best views down the Noosa River you can get,” he said. ONLY AUSTRALIAN CAPITAL WHERE HOME VALUES ARE RISING Mr Chen said Noosa’s unit market was still on the upswing, with strong demand for large, prestige apartments.“We are seeing a trend of Boomers from the capital cities buying units here with the motivation of wanting to create something that the family can gather in,” he said. Inside the penthouse in Noosa Heads.Tom Offermann Real Estate principal Tom Offermann said the trend of visitors becoming property buyers in Noosa was one that had been around for more than 30 years and there was no sign of it stopping.“Many of these buyers will not compromise on having an exclusive Noosa Heads’ address,” Mr Offermann said.“Among the hottest locations is naturally on the waterfront. “Sun-drenched, especially in winter, it affords the convenience of living in the hub, safe in the knowledge the investment is underpinned by a never-ending pool of future buyers also wanting the same.”last_img read more