Hans Blix (pictured), formerly the UN’s most senior weapons inspector in the lead-up to the Iraq War, and Anat Admati, author and professor at Stanford University, are two of the keynote speakers at the 13th IPE Awards seminar in the Netherlands this November.Blix, the highly respected professor of international law and former Swedish foreign minister, will discuss recent global security issues and their impact on global financial markets during his keynote in Noordwijk on 21 November.Admati will be sharing her insights into financial markets regulation in the wake of the crisis, a topic she has written about extensively.Blix was named director general of the International Atomic Energy Agency (IAEA) in 1981, a position he held until 1997, after spending two decades as part of Sweden’s delegation to the UN General Assembly. It was following his 16 years at the IAEA, upon being named executive chairman of the UN Monitoring, Verification and Inspection Commission (UNMOVIC) by UN secretary general Kofi Annan in 2000, that Blix became a household name as a result of his status as the UN’s chief weapons inspector.After stepping aside as head of UNMOVIC in June 2003 in the wake of the Iraq War, Blix spent five years as chair of the Weapons of Mass Destruction Commission.Blix, born in Uppsala, studied at the university of his home town, as well as at Columbia University, and received a PhD in law from Cambridge.He spent time as a professor of international law before joining the Swedish Foreign Affairs Ministry in 1963, eventually being named under-secretary in 1976 and minister for foreign affairs in 1978.Admati’s latest book, ‘The Bankers’ New Clothes’, examines the structural problems facing the global banking system and proposes reforms to increase the percentage of equity banks must hold to 30% of the balance sheet.Co-written by Martin Hellwig, director of the Max Planck Institute for Research on Collective Goods, the book was widely praised, including by then-Bank of England governor Mervyn King.In addition to Admati’s academic work, she is also a member of the Federal Deposit Insurance Corporation’s Systemic Resolution Advisory Committee.Admati is currently the George GC Parker professor of finance and economics at Stanford Graduate School of Business.Completing her undergraduate studies at the Hebrew University in Jerusalem, she went on to complete her masters and doctorate at Yale University.Register for the IPE European Pension Fund Awards here to hear Dr Blix’s views on global security and the impact on financial markets, and Dr Admati’s latest views on corporate governance and the way forward for the banking industry.For further information, please contact Yvonne Cooke.
Source: IPEDelegates were polled on if they knew the cashflows of their pension funds.The former consultant called on pension funds to start thinking like businesses, explaining how it was at first hard for her trustee board to understand why actuaries were attempting to assess the value of cash flows from the fund’s holdings.“The reality is that most businesses and most businesses when they are thinking about a long-term project will look at cash flows,” she said.“Really, that is the common sense – you apply that business thinking to the problem.“Why are we thinking about volatility and market values? That’s irrelevant. What matters is volatility and diversification of cash flows.”Bridgeland said it was important to change the mindset of all involved in monitoring asset performance, and that she wanted to compare the performance of a long-lease property with that of infrastructure debt, without having to place the assets into different categories.“You want to get the best price for the cash flows, and you want to assess risk based on the characteristics of those cash flows,” she said. Bridgeland said that, when she first joined the BP scheme, it resembled a balanced fund in its investment approach, but that she had implemented a number of strategy changes since 2007 and knew exactly where she wanted the plan to be in 2023 – even if the path towards achieving her goals was an unpredictable one.#*#*Show Fullscreen*#*# Market volatility and fluctuating asset values are “irrelevant” and should be ignored in favour of an approach based around the monitoring of cash flows, Sally Bridgeland of the UK’s BP Pension Scheme has said.The chief executive of the £16.6bn (€19.9bn) fund also told attendees at the IPE Awards Seminar in Noordwijk that pension funds were unlikely to be prepared for the operational challenges coming their way in a post-Lehman Brothers world.Five years after the financial institution’s collapse, Bridgeland was interviewed by Amin Rajan, chief executive of CREATE-Research, on how the demise of the investment bank had changed approaches to investment.“For me, the interesting thing is that, 10 years ago, nobody used the word ‘risk’,” Bridgeland said. She also expressed surprise at a poll of attendees that found 58% knew their pension fund to be cash-flow positive.Only 6% of attendees said they did not know into which category their scheme fell.Bridgeland said the focus on risk and the fact pension fund employees knew their fund was cash-flow positive “[signalled] the fact we are moving into a different era”.#*#*Show Fullscreen*#*# Delegates were also asked during Bridgeland’s panel about their overall risk appetite.“I’m not sure the asset management industry, the consulting industry and even individual pension funds have the operational flexibility they need to do that kind of journey – that’s what reality is going to throw at us,” she said. Weighing in on an earlier debate about smart beta – one that saw the strategies branded “old wine in new bottles” – the chief executive said the challenges over ever-changing strategies facing the pensions industry was a different one.“It’s symptomatic of not old wine in new bottles but middle-aged people on Harley-Davidsons,” she said. “It’s a bit of a mid-life crisis, where everyone is trying to grapple with what we’ve got to try, and make sense of the journey ahead.”Bridgeland predicted that, rather than wine, pension funds in future would want cocktails of asset allocation.“Different pension funds will want different ways of looking at their assets, and they might want it shaken and they might want it stirred because of the particular characteristics they have,” she said.
Anderson added: “It’s a very, very important issue that we will try and do our best on in the years ahead – to get them to play the important role they can.”The group chair also expressed disappointment that the NOK4.7trn (€581bn) Government Pension Fund Global, Europe’s largest institutional asset owner, had not been “more of a beacon in the darkness” in promoting the benefits of long-term investing.However, he said convincing large investors, including global SWFs, to back the investor forum publicly upon its launch in mid-2014 should not be viewed as the sole measure of success.“It would be very ironic if we got too obsessed by counting and numbers, where that’s not what we should be doing,” he said.Instead, he noted that it would be more important to focus on how the collaborative spirit of the forum could bring about change in the way UK-listed companies planned for the future.“What we really do believe we should be importantly involved in is trying to check that each company has got a strategic vision, and that strategic vision is not simply expressed in ‘Our targets for 2014 are X, Y and Z’,” he said. For more on corporate governance, see the Special Report in the February issue of IPE Norway’s Government Pension Fund Global should be a “beacon in the darkness”, espousing the benefit of long-term investing over short-term gain, the chair of the UK’s Collective Engagement Working Group has suggested.James Anderson, responsible for overseeing the initial development of the investor forum proposed in a 2012 report by academic John Kay, also likened the battle to convince sovereign wealth funds (SWFs) to be less short-termist to a fight for the funds’ souls.He said SWFs were “instinctively not keen on engagement”, but that the forum could help allay some of their concerns and allow them to make their presence known without requiring them to “stick their heads above the parapet”.“I think in many cases these sovereign wealth funds are cautiously feeling their way,” Anderson told IPE. “Of course they have sensibilities, and of course they have big skills of their own, but I do worry we are fighting for their soul over the next few years. There is a temptation for them, however stupid it may seem, to become near-term profit maximisers obsessed by the next quarter.”
Damgaard Jensen said the challenges the funds would face in future included not only increasing administrative demands but also the demands created by the low level of interest rates, high levels of market volatility and changing age compositions.“The bigger the pension fund, the more robust it is in the face of the economic and risk-related volatility we experience from time to time,” he said.Bent Hansen, the new chairman of the Pension Fund for Nurses and Medical Secretaries, said the decision reached by the boards and members of the pension funds was far-sighted.“And the starting point has been good because both pension funds are strong economically, their pension terms and statutes are broadly similar, and they know each other well from the PKA cooperation,” he said.Jens Stenbæk, the new chairman for the Pension Fund for Social Workers, Social Education Practitioners and Office Staff, said it had been possible to complete the merger by consensus, with all parties having been informed and given the chance to discuss implications.“We have met no objections,” he said.The new Pension Fund for Nurses and Medical Secretaries will have around DKK102bn in total assets and 109,000 members, while the newly formed Pension Fund for Social Workers, Social Education Practitioners and Office Staff will have DKK51bn and 95,000 members.PKA stressed that the mergers would not worsen individual members’ pension terms, or reduce their pension size or other rights they had in any way.The mergers are subject to final approval from the Danish FSA and expected to be completed by September or October, PKA said.Following the mergers, PKA will administer just three pension funds, including the two new funds and the Healthcare Professionals’ Pension Fund (Pensionskassen for Sundhedsfaglige), which has DKK46bn in assets and 48,000 members.Until 2011, PKA managed eight pension funds.In that year, four of the smaller pension funds merged to become the Healthcare Professionals’ Pension Fund. Four of the labour-market pension funds run by Danish pensions administration group PKA are to merge with another fund within PKA with the aim of becoming more robust in the face of economic and risk-related volatility.Peter Damgaard Jensen, managing director at PKA, which manages around DKK195bn (€26.1bn), said: “The whole aim of the mergers has been to create more robust and stronger pension funds that can meet the many challenges that lie in the future.”The State Registered Nurses’ Pension Fund (Pensionskassen for Sygeplejersker) and the Medical Secretaries’ Pension Fund (Pensionskassen for Lægesekretærer) are merging to form the Pension Fund for Nurses and Medical Secretaries (Pensionskassen for Sygeplejersker og Lægesekretærer).Meanwhile, the Social Workers and Social Education Practitioners’ Pension Fund (Pensionskassen for Socialrådgivere og Socialpædagoger) is joining forces with the Office Staff Pension Fund (Pensionskassen for Kontorpersonale) to become the Pension Fund for Social Workers, Social Education Practitioners and Office Staff (Pensionskassen for Socialrådgivere, Socialpædagoger og kontorpersonale).
Dialogue is the answer to tackling the complex and common problems faced by pension systems worldwide, says Paul Schott Stevens of the Investment Company InstituteThe pressure on pension systems shows no sign of relenting. Even before the financial crisis, both governmental and employer-based retirement plans were struggling to cope with longer life expectancies, funding challenges and fiscal pressures. An extended period of slow economic growth and low interest rates since the crisis have only exacerbated the challenges, for all types of schemes – pay as you go, defined benefit and defined contribution.Coping with those challenges demands the best thinking and cooperation from all sectors. That is why ICI Global – the worldwide voice of regulated investment funds – recently brought together regulators, academics and fund industry retirement experts in Geneva for its second Global Retirement Savings Conference. More than 20 experts from 12 countries on five continents shared knowledge and insights about pension reforms around the world.In particular, they addressed the challenges of investor attitudes and financial education, the role of a wide variety of default products in helping workers reach their retirement goals and the means to deliver sustainable incomes when workers become retirees, and drawdown of assets replaces accumulation. What did we learn? I took away three overarching themes. First, pension systems are complex – and must be considered in all of their complexity. As one speaker put it, pensions are “so special, so important, so individual, so complex”. In every country, retirement provision has been shaped by social relationships, labour-force structures and economic and cultural factors. Most systems are composed of interlocking, overlapping programmes designed to deal with different sectors of the population and different social needs. Any assessment of a system’s adequacy in providing retirement security must take into account all of those elements. As a result, pension reform requires widespread social commitment and strong political leadership – unfortunately, all too often in short supply.Second, the movement toward defined contribution options continues apace – with no evidence that it will stop. Country after country is experimenting with DC models, whether voluntary or mandatory, to supplement or replace older systems. As Pablo Antolin-Nicolas, head of the private pensions unit at the Organisation for Economic Cooperation and Development (OECD) explained in his keynote address, the experience of these countries highlights key principles – the need for coherent and efficient design to deliver adequacy in resources – for others to follow.Regulated funds can play a vital role in these emerging DC systems. Funds provide diversified access to a wide range of markets in a transparent product with comprehensive investor protections. Investment through funds also benefits economies, fostering the development of financial markets and providing a flexible source of capital to businesses and governments. And in many retirement systems, funds have led the way to innovations, including target-date funds, that have simplified and strengthened investing.The third theme is that DC systems, new and old, face a common set of concerns. They need to maximise participation – particularly in voluntary schemes – and increase contribution levels to ensure workers are saving at the optimal level. And they need innovative measures to harness market forces – especially in mandatory schemes – to create strong incentives to reduce costs.In each case, one key to addressing these concerns is simplicity in design of pension schemes. Tim Jones, chief executive of the UK’s National Employment Savings Trust Corporation (NEST), challenged industry participants to make pension systems clearer, less intimidating and more appealing to average citizens. Retirement savings plans should provide a reliable, clearly understandable product without requiring a deep understanding of finance – just as carmakers sell an automobile without bombarding drivers on the details of engine design.A fourth conclusion: dialogue on these issues is vitally important. As Solange Berstein, former head of the Pension Supervisory Authority in Chile, told our conference: “We still have a lot to do – but, in retirement policy, we always still have a lot to do.”Paul Schott Stevens is president and chief executive of the Investment Company Institute
Nearly two-thirds of self-employed workers in the Netherlands – known as ‘zzp’ers’ – have expressed a “serious interest” in joining a collective pension scheme, according to a survey by APG subsidiary Loyalis.The income insurer said 60% of the 3,700 respondents said they were likely to participate in its new scheme, with 10% saying they would definitely join.The survey was conducted among the members of industry organisations Zelfstandigen Bouw, Stichting ZZP Nederland, PZO-ZZP and FNV Zelfstandigen.Loyalis said two-thirds of those expressing an interest in the scheme indicated they wanted to contribute a variable amount, depending on their annual turnover. It added that almost 17% wanted to limit their deposit to the maximum amount liable to tax deduction, while 12% said they preferred to contribute a fixed amount each year.Zzp’ers who said they would join expected to contribute an annual amount of €4,200 on average, whereas more than one-quarter planned to deposit more than this.They also wanted to accrue an annual pension income of €31,000 on average through the new scheme, and made clear they wanted to accrue an additional €11,000 on average through other means of pensions saving, according to Loyalis. Loyalis said it also found that a “substantial” number of zzp’ers had already built up pension assets, mainly through saving or investing.Approximately 36% had invested in property – usually their own home or business premises – while almost 30% had created a pensions reserve through an individual pension plan, annuity insurance or a tax-friendly life-course (levensloop) savings scheme.The collective pensions fund for the self-employed – announced by industry organisations in June – is to be launched on 1 January 2015.
AMF’s basic scenario was that it remained in an environment of low yields, Hasslev said.Group profit dropped to SEK13.4bn (€1.4bn) in the first nine months of 2014, from SEK42.1bn in the same period in 2013.This huge swing was largely due to the effect of changes in the discount rate for calculating liabilities, which AMF said reduced the 2014 result by SEK20m, having increased last year’s by SEK19.9m.Premium income from traditional insured products fell to SEK13.5bn for January to September 2014, from SEK14.5bn in the same period last year.Total assets under management rose to SEK488bn from SEK436bn.In other news, Swedish life and pensions provider Folksam Liv returned 8% in the first nine months of this year at the parent company, up from 3.5% in the corresponding period last year.Reporting financial figures for January to September, Folksam said all asset classes contributed positively to the overall return, with equities – which made up 33% of total assets – producing a particularly strong return.Folksam’s solvency ratio was 157% at the end of September compared with 162% at the end of September 2013.Assets under management increased to SEK339bn at the end of September from SEK304bn at the end of December 2013.Meanwhile, local government pension scheme KPA – owned by Folksam – returned 9.2% during the first three quarters of the year, compared with 4.2% for the same period in 2013.Premium income at KPA climbed 10% in the period to SEK9.3bn from SEK8.4bn.Folksam attributed this rise to the fact many people had actively or by default chosen KPA as their occupational pension provider, particularly within the KAP-KL collective bargaining area, but also within PA-KFS. Swedish pension fund AMF has reported an increase in its total return for the first nine months to 8% from 5.9% in the same period last year, but warned of October’s change in market mood.AMF’s solvency level decreased to 207% by the end of September from 221% at the same point last year.Peder Hasslev, deputy president and head of investment at AMF, said: “The nine-month period was marked by rising stock markets and falling yields.“In October, major concerns spread about the future developments, which could come to characterise the rest of the year.”
DEPF, the €1.7bn pension fund of coffee producer Douwe Egberts, is considering replacing its government bond holdings with interest swaps to “create space” for better-returning investments.Director Elvin van den Hoek said DEFP would look into the possible strategy change if the pension fund decided to ramp up the investment portfolio’s risk profile, something it is currently considering.Long-term government bonds in a matching portfolio make up 29% of DEPF’s total assets.“The returns on long government bonds is very low at the moment,” Van den Hoek said. “If we could replace them for swaps, we would create space for better-performing investments, which would improve the potential for indexation.”Last year, the pension fund introduced a 4.9% allocation to residential mortgages at the expense of its government bond holdings, according to its 2014 annual report. DEPF reported an investment return of 18.8%, attributing the 0.6% underperformance to fund managers’ “disappointing” execution – both for the matching portfolio and alternative investments.Alternatives returned 7.5%, while equities returned 14.3%.The pension fund’s combined holdings in government bonds, mortgages and interest derivatives returned 25.2%.Over the course of 2014, the Douwe Egberts scheme reduced its interest hedge from 50% to 45% of its liabilities, whilst keeping the level of its strategic cover at 50%.It also kept the strategic currency hedge of the US and Hong Kong dollars, the British pound and the Japanese yen at 66.7%, after losing 1.4% due to the weakening of the euro against other currencies.However, it added that it would look into the possibility of introducing a dynamic currency hedge. The pension fund granted active participants a 2% indexation, while deferred participants and pensioners received an inflation compensation of 0.3%. DEPF said it could reduce the contribution from 26% to 21% due to cost-cutting on pension arrangements.It said it was able to limit transaction costs to 0.08% in 2014 by re-balancing its portfolio annually rather than on a monthly basis, in addition to allocating government-bond returns to its liquidity policy instead of re-investing the proceeds.The pension fund reported administration costs per participant of €150.At April-end, DEPF’s official ‘policy’ funding was 112.5%.The scheme has 2,225 active participants, 3,695 deferred members and 4,320 pensioners.
Klijnsma, however, has now decided that mandatory sector-wide pension funds can establish or join an APF if mandatory participation is linked with a pension plan.In this case, social partners can set up a mandatory scheme as a separate “ring” with an APF or another provider.This would also apply to the large industry-wide pension funds.The state secretary said one of the conditions for the new legislation would be that mandatory participation must remain intact.She added that social partners must be able to move their pension plans to another provider, and that there must be no incentive to stick with an existing provider.Hans van Meerten, a professor of international pensions legislation, recently noted that, in several cases, Dutch legislation was at odds with European law, citing the mandatory participation of companies in industry-wide schemes as an example.To address this potential problem, he suggested linking mandatory participation to a pension plan rather than a provider. The Dutch government is planning to change the regulation requiring mandatory participation in a pension fund. In a letter to the Dutch Parliament, Jetta Klijnsma, state secretary at the Ministry of Social Affairs, said a Bill – soon to be tabled – would allow social partners to choose providers to carry out specific pension arrangements.Her announcement comes after a recent legal verdict that prohibited mandatory sector schemes from joining the so-called ‘general pension fund’, or APF.As a consequence of this ruling, the options for industry-wide pension funds wishing to scale-up by ringfencing their assets were reduced.
The European pension supervisor’s occupational pensions stakeholder group (OPSG) has announced more than 20 new members – and the departure of its chair Philip Shier – as it prepares for its next two-and-a-half-year term.Alongside Shier’s departure comes that of Chris Verhaegen, the OPSG’s inaugural chair from 2011; PGGM’s Niels Kortleve; Joachim Schwind of Germany’s Hoechst Pensionskasse; and Fritz Janda of FVPK, Austria’s pension fund association, among others.All five have served the maximum two terms allowed under the constitution, having joined in 2011.Overall, 21 of the 30 OPSG members are new, leaving behind current deputy chair and PensionsEurope chief executive Matti Leppälä and Janwillem Bouma of Shell’s Dutch pension fund. Łukasz Budzyński of XBUG, representing the interests of multi-national companies with cross-border pension arrangements, and Michaela Koller, who heads up industry association Insurance Europe, also remain.Notable new appointees include Fieke van der Lecq, formerly APG chair of pension markets at the Erasmus School of Economics in Rotterdam and also a member of Dutch regulator AFM’s committee on financial reporting and accounting; Philip Neyt, who heads up Belgian pension association PensioPlus; Kevin O’Boyle, head of pensions at UK telecoms giant BT; and Senka Fekeža Klemen of Croatia’s Erste Pension Fund Management.Gabriel Bernardino, EIOPA’s chairman, welcomed the new appointees and thanked the outgoing members for their contribution.“I want to extend my sincere thanks to all former Stakeholder Group members for their continuous commitment and highly valuable input to the work of EIOPA during the past years,” he said.“Our common goal is to ensure a sound regulation, robust supervision and enhanced consumer protection in Europe.”The 21 new members of the OPSG are:Paul Brice, RPMI (UK, IORP representative)Francesco Briganti, European Association of Paritarian Institutions (Italy, IORP representative)Senka Fekeža Klemen, Erste Pension Fund Management (Croatia, IORP representative)Stefan Nellshen, Bayer Pensionskasse (Germany, IORP representative)Philip Neyt, PensioPlus (Belgium, IORP representative)Kevin O’Boyle, BT (UK, IORP representative)Alf Alvinisussen, independent consultant (Norway, SME representative)Bernard Delbecque, European Fund and Asset Management Association (Belgium, professional association representative)Paul Kelly, Institute and Faculty of Actuaries (UK, professional association representative)Sonia Maffei, Assogestioni (Italy, professional association representative)Falko Valkenburg, Actuarial Association of Europe (Netherlands, professional association representative)Tomas Bern, PTK (Sweden, employee representative)Damien Lagaude, UNI Europe (France, employee representative)John O’Quigley, pension trustee (Ireland, employee representative)Alexandru Ciuncan, Romanian Association for Insurance Promotion (Romania, beneficiary representative)Claudia Menne, German Trade Union Confederation (Germany, beneficiary representative)Guiseppe Corvino, Bocconi University Milan (Italy, academic representative)Paul Cox, University of Birmingham (UK, academic representative)Zdeněk Hustak, Prague University (Czech Republic, academic representative)Raimond Maurer, Goethe University Frankfurt (Germany, academic representative)Fieke van der Lecq, Free University Amsterdam (Netherlands, academic representative)EIOPA said it received 176 applications for the vacant positions at the OPSG and its insurance equivalent.The new OPSG will meet for the first time on 28 April.