Dijsselbloem made clear that the risk of losses on the state-backed mortgages would firstly lie with the issuer, and would only shift to the government if the issuer went bust.“In that case, we would need to deal sensibly with the mortgages portfolio and subsequently sell it at the right moment,” he said.According to the Treasurer, any additional risks would be assessed during the elaboration of the NHI concept and translated into a risk premium.Dijsselbloem noted that the set-up of the NHI was still subject to approval by the European Commission.During the same meeting, Henk Kamp, the minister for Economic Affairs, indicated that the also new Netherlands Investment Institution (NII) will initially focus on projects for sustainable energy, offering potential for investments of up to €20bn.The NII, another government-backed initiative, aims to upscale projects into investment-ready proposals, but without financial backing by the state.Another focus of the NII will be on the translation of short-term financing of rental property and energy infrastructure into long-term financing, the minister said.He added that the NII plan, which is expected to be presented before April, would also target regional projects that failed to attract bank financing.Kamp stressed that the Cabinet did not want to force investments on institutional investors.“Only they are to decide what is responsible investment,” he said.However, the minister noted that the European Commission and the European Central Bank have also voiced support for increased investment by institutional investors in the financing of projects. Jeroen Dijsselbloem, the Dutch Treasurer, has said the National Mortgage Institute (NHI) currently under development will market its government-backed mortgage bonds not only to local institutionals but also foreign investors.During yesterday’s consultations with the parliamentary select committee for Economic Affairs, Dijsselbloem said the NHI would primarily issue bonds backed by new mortgages, in addition to mortgages approaching their flexible interest rate phase.The purpose of the NHI is to ease banks’ funding and pass on the benefits of lower costs to consumers, in order to get the stalled local housing market moving again, the minister said.The market for high-grade Dutch mortgages is estimated at €150bn.
KLP, the Norwegian local government pension fund, has called for the chairman of chemicals producer Yara International to step down, following governance concerns over the company’s involvement in Norway’s biggest-ever corruption scandal.KLP is one of Yara’s largest shareholders. The offences included bribes to consultants or other contacts in India, Libya and Russia, some of them to secure joint venture deals.The bribes were paid between 2004 and 2009. This January, Yara – one of Norway’s biggest companies – admitted responsibility and accepted a fine of NOK295m (€35.4m) imposed by ØKOKRIM, the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime.One member of staff and three former employees were also indicted and now face trial.In April 2011, Yara had informed ØKOKRIM of “possible irregularities”, at the same time hiring legal firm Wiersholm to conduct a private investigation.This uncovered “unacceptable” payments, including $15m (€10.9m) of disbursements from Yara Balderton (now Yara Switzerland), the company’s Swiss subsidiary, to individuals working with suppliers.Yara says it has invested considerably in its long-term work to ensure compliance with its ethical standards and has continued to strengthen its ethics and compliance function since its establishment in 2009.Since 2011, it has fully integrated its ethics and compliance programme in investment activities, published a manual with rules of conduct when participating in joint ventures and amended reporting lines so the chief compliance officer reports directly to the chief executive.But, in spite of Yara’s subsequent efforts to improve governance, KLP still has concerns, which it has communicated to Yara’s management through letters, meetings and the nomination committee, which represents shareholders and elects four directors to the Yara board.It has also conducted its own investigation, including speaking to former company employees.Earlier this month, KLP told other members of the nomination committee that it felt Yara’s chairman, Bernt Reitan, should resign.The news was published on KLP’s website in a blog written by Jeanett Bergan, KLP’s head of responsible investment.In her blog, she said: “Yara has established a sound regulatory framework that includes policies and procedures as well as training programmes and controls.“Nevertheless, the information we have shows there is doubt as to whether the company’s actions are in keeping with this policy.”The blog continued: “This includes the lack of response to warnings about possible corruption, the central location of the accused employee and the circumstances surrounding the departure of key staff in ethics and the control area, as well as further problematic transactions. The company would be best served by a change in its board.”Bergan told IPE: “We have been following up this governance problem as we always do with companies we invest in. We are not sure whether the action taken has been enough.”She added: “We have asked the nomination committee to strengthen the board because we don’t think the board has performed its control function, and the board must bear the responsibility for the doubts we have concerning the corruption case.” But she said KLP had never been in a situation that required divestment, and that the pension fund did not believe divestments would be necessary in the case of Yara either.Other shareholders have also had concerns, including the Norwegian Ministry of Trade, Industry and Fisheries, representing the government – the biggest shareholder in Yara, with a 36% stake.Ministry representatives have already met Reitan to discuss how Yara now acts to prevent corrupt activities happening again.The ministry said it is encouraging Yara to be as transparent about the matter as possible.Martine Røiseland, head of communication at Norway’s Ministry of Trade, Industry and Fisheries, said: “Corruption is illegal. There should be no doubt the state as owner has zero tolerance for corruption and expects Norwegian companies to have the same attitude.”Meanwhile, Folketrygdfondet, the manager of the Government Pension Fund-Norway, which owns 5.6% of Yara’s shares, has also met Reitan and the company’s chief executive, and received confirmation that anti-corruption measures have now been implemented.But Olaug Svarva, managing director at Folketrygdfondet, said: “We recommend that the board of Yara present a summary of the corruption case and explain its decision to accept the fine.“We assume this to be public information and thus available to the entire market.”At its quarterly results meeting on 12 February, Yara emphasised that it has established and developed routines and systems to prevent the irregularities from happening again.It said it regards zero tolerance for corruption as a licence to operate, and that this is a solid platform for the company going forward.
BlueBay Asset Management – Pierre-Henri de Monts de Savasse has joined as a portfolio manager in the convertible bond team. He joins with 15 years’ experience in portfolio management with a strong quantitative background in portfolio construction and optimisation. His most recent role was at Aberdeen Asset Management where, for the past five years, he was head of convertibles.Charles Russell – Esther White has joined as senior associate in the pensions team at law firm Charles Russell. She joined from Independent Trustee Services and has over 10 years’ experience advising companies and trustees on all aspects of pension law, including issues in relation to corporate re-structuring, mergers and acquisitions and auto-enrolment.JLT Employee Benefits – Chris Devlin has joined JLT Employee Benefits as senior consultant as part of the firm’s plan to expand its Scottish business. He joins JLT with over 15 years’ experience and will take on responsibility for business development at the firm’s Edinburgh office. He was previously at Aon Hewitt where he was a development and client manager.Equiniti – Lucy Dimes has been appointed chief operating officer of the adminstration and payment solutions provider. Dimes will report to chief executive Guy Wakely and takes her position joining from telecommunications company Alcatel. Dimes has been a board level executive for around 15 years and had a 19 year stint at UK communications company BT. Veritas, Keva, Hermes Fund Managers, BlueBay Asset Management, Charles Russell, JLT Employee Benefits, EquinitiVeritas — Taru Narvanmaa and Mikael Zilliacus have been appointed as new members of the supervisory board at Veritas Pension Insurance. At the Finnish company’s annual general meeting earlier this month, Narvanmaa was chosen to replace board member Henry Wiklund and Zilliacus was picked to take over from Ove Grandell.Keva – The Finnish local authority pension fund has named Jukka Männistö its new managing director, following the resignation last year of Merja Ailus. Männistö joins from the Finnish Student Health Service, where he has been managing director since 2009.Hermes Fund Managers – Mark Miller is to join the manager as head of UK & MENA institutional at the end of June. Miller, is currently Amundi Asset Management’s head of UK institutional business, will lead the fund manager’s UK & MENA institutional business, concentrating on its growth plans for the coming years. He will report to Harriet Steel, head of business development. He has previously worked at Blackstone Alternative Asset Management, Fidelity International and Legal & General Investment Management.
The Veja Mate project is located in the German part of the North Sea approximately 95 km from the coast. It will consist of 67 Siemens turbines of 6MW each.CIP said it was part of a consortium arranging the total financing for the 402MW project, along with Siemens Project Ventures and Highland Group Holdings, which are providing the equity part of the financing. This includes non-recourse financing of €1.27bn, which the parties said was the largest deal of its kind in Germany so far.Under non-recourse financing, lending banks are only entitled to repayment from the profits of the project being funded, not from the borrower’s other assets.This part of the financing was signed with a consortium of eight financial institutions, including the KfW programme for offshore wind, Danish export credit agency Eksport Kredit Funden and six mandated lead arrangers: Commerzbank, Deutsche Bank, KfW IPEXBank, Natixis, Santander and SMBC.The debt amount represents 67% of the investment budget and has a maturity of 12 years after the wind farm has been built, which matches the duration of the elevated tariff the project is entitled to under German law for renewable energy. Copenhagen Infrastructure Partners II was launched last October.In March this year, it invested DKK1.6bn (€214m) in the Brite biomass-fired power plant project in the north of England.Separately, PensionDanmark announced it is investing around DKK225m to build 96 residential units in Vejle harbour in Jutland.The sum includes the purchase of land from the municipality of Vejle, as well as the cost of construction. The 96 homes will be built in two tower blocks containing a total of 10,700 sqm of space.The land for the new project is next to the canal-front (Kanalfronten) residential development PensionDanmark built earlier, which was offloaded to property manager Nordic Real Estate Partners (NREP) last summer as part of the labour-market pension fund’s sale of its entire residential portfolio.Torben Möger Pedersen, chief executive of PensionDanmark, said Vejle was an location where the population was growing fast.“Because of this, we expect that, as with Kanalfronten, there will be good demand for our homes,” he said. Danish private equity group Copenhagen Infrastructure Partners (CIP), backed by several Danish pension funds, is investing €250m in German offshore wind project Veja Mate as part of an overall financing deal worth €1.9bn.The investment is being made via CIP’s fund Copenhagen Infrastructure II, whose investors include Danish pension funds PensionDanmark, Lægernes Pensionskasse, PBU, JØP, DIP and PFA, as well as institutional investors Nordea and Nykredit and other international investors.Christina Sørensen, senior partner at CIP, said: “We are very satisfied with this investment, which benefits from the strong German regulatory framework, and we look forward to contributing with our competence and experience in cooperation with our partners.”The wind farm is a fully developed and procured offshore wind project with a grid connection on the BorWin2 platform that Sørensen said would deliver stable returns for many years from 2017.
Walsh questioned what would constitute a new fund launch.“If you’ve got some company merger or restructuring, then very often that would involve setting up a new scheme – maybe as a reconfiguring of existing schemes,” he said.“If you change the scheme rules, perhaps because of a change in benefits or contributions, does that constitute a new scheme?“It’s a question for lawyers, but you could make the case that it constitutes a new scheme.”Walsh said there was otherwise “plenty” for the NAPF to welcome in the Irish MEP’s report, which is yet to be amended by other ECON members.He also praised the changes suggested to the Pension Benefit Statement (PBS), for which the Commission has previously proposed a list of prescriptive rules, including a maximum length.Instead, Hayes included several high-level principles and asked for an exchange of best practice between schemes on how best to present the information.“There’s a lot of helpful simplifications, such as greater freedoms for member states, but there are some points where there’s some serious work still to do,” Walsh said.An area he identified as needing work was Hayes’s silence on depositories for defined contribution (DC) funds.Previous amendments proposed by member states during negotiations at Council of the EU level removed the requirement for DC funds to employ a depository where the assets were otherwise protected, but Hayes did not address the issue. Changes aimed at relaxing full funding requirements within the revised IORP Directive risks capturing all pension schemes undergoing mergers or restructuring, the National Association of Pension Funds has warned.James Walsh, EU policy lead at the UK trade association, said that while he was supportive of any attempt to reform funding requirements for cross-border funds, wording contained within a report by MEP Brian Hayes could impact any existing scheme making material changes.Hayes, the rapporteur within the European Parliament’s Economic and Monetary Affairs committee (ECON) responsible for the Directive, released his draft report that erased mention of cross-border activities from a clause on funding arrangements.Where the European Commission’s proposed draft said cross-border funds should be fully funded, the version proposed by Hayes states that the fund’s technical provisions should be fully funded “from the moment when the institution starts operating a new or additional scheme”.
Elo, Nordea, Russell Investments, Deutsche AWM, BlackRock, Aon Hewitt, River and MercantileElo – Eeva Grannenfelt, head of corporate lending at Finland’s Elo, has left the pensions mutual after less than two years in her role. Grannenfelt – named Elo’s director of corporate lending, alternative investments and macro views when the provider was created from the merger of Pension Fennia and LocalTapiola in January last year – has left to pursue “new opportunities”. Director of real estate Timo Stenius will take on responsibility for private equity and corporate finance, while Jonna Ryhänen, responsible for equities, fixed income and currency, will also take charge of all hedge fund investments.Nordea – Snorre Storset has been promoted within the Nordea banking group to deputy head of the wealth management division with effect from 1 November. Since 2012, he has been head of Nordea Life & Pensions (NLP), part of the wealth management business area. Storset has also been appointed to head a new private banking unit within Nordea, which combines the private banking units in Denmark, Finland, Norway and Sweden, as well as the international private banking unit. He has been appointed as a member of the group’s executive management. In the meantime, Johan Nystedt, CFO at NLP, has taken on the role of acting head of NLP until a new head of that division has been appointed.Russell Investments – Sarah Leslie has been appointed head of fiduciary management for Ireland and the UK. She joined Russell’s fiduciary management team in 2010. Before then, she assisted in the development of one of Aon Consulting’s flagship fiduciary management solutions. She has also worked at Mercer. Deutsche AWM – Blanca Koenig has been appointed to look after fixed income product development and strategy, reporting to Manooj Mistry, head of exchange-traded products and institutional passive for the EMEA. She joins from Blackrock.Aon Hewitt – Five UK-based partners have been promoted at Aon Hewitt’s global consulting business. The new partners are Sangita Chawla-Jopling, Alison Gartside, James Patten, Ben Roe and John Sydenham.River and Mercantile – Mayan Uthayakumar has joined as an equity analyst from Sanford C Bernstein.
“That is the message of the results of the European stress test for occupational pension funds.”It said the results were positive when examining the outcome under the Belgian National Balance Sheet (NBS) and the holistic balance sheet (HBS), the common methodology devised by EIOPA to enable a cross-border comparison of IORPs.The FMSA attributed the positive outcome principally to the large buffers maintained by the pension funds tested but also the presence of strong sponsors.“Belgium is thus one of the top five states able to maintain full coverage of their commitments in all stress scenarios,” it said.The Belgian pension fund association, recently renamed from the Belgian Association of Pension Institutions (BAPI) to PensioPlus, was also pleased with the stress test results.It said the outcome demonstrated the resilience and sustainability of Belgian IORPs in unfavourable economic conditions.It stressed, however, that the results were based on general scenarios and models, and that every pension fund should carry out its own risk management and asset-liability management study, or conduct its own stress tests.“Indeed,” said Philip Neyt, president of PensioPlus, “this is a fundamental part of good governance of every pension fund.” Substantial buffers and solid sponsors are the main reasons Belgian occupational pension funds fared well in the stress tests conducted by the European Insurance and Occupational Pensions Authority (EIOPA), the Belgian regulator has said.Sixteen Belgian occupational pension funds participated in the stress tests, accounting for 57% of the total assets under management by Belgian IORPs, according to the Belgian Financial Services and Markets Authority (FSMA).The results, published earlier this week, concluded that the pensions sector posed only a limited risk to financial stability.“The Belgian pension fund sector is highly resilient, even under extremely stressful economic circumstances,” said FSMA, echoing similar statements by its Dutch and UK counterparts.
The Principles for Responsible Investment (PRI) may soon amend its code to reference the UN’s Sustainable Development Goals (SDG) to better ensure signatories invest in line with broader societal objectives.The redrafting of the principles to reference broader societal objectives, which could occur at the same time as the introduction of a seventh principle focused on systemic risks, is expected to be one of the reforms to be put to the organisation’s 1,500 signatories later this year.The PRI’s six principles, drafted more than a decade ago, currently state in the preamble that their application “may better align investors with broader objectives of society”.But Kris Douma, director of investment practice and reporting at the organisation, said it was time to question whether that was enough. “We now have a better idea what these broader objectives of society mentioned in the preamble mean because we have an international agreement on 17 goals,” he told IPE, referencing the SDG.“So that gives us a better chance to look again at the principles and try to conclude in a general sense whether applying the principles contributed to the broader objectives of society.”The SDGs, ratified by world governments last year, aim to eradicate hunger by 2030 and tackle matters of gender equality, but they also focus on sustainable growth and address the affordability of energy supplies.Douma said discussions were in the very early stages and that the idea was presented to the organisation’s board only recently – ahead of discussions with stakeholders over the course of May and June, which will feed into a blueprint document to be published after the organisation’s annual conference, the PRI in Person, in Singapore in September.“One of the ways to amend [the principles] – just one of them, there are probably many – is to say what’s currently in the preamble should be in the principles,” Douma said.“So that is one of the things I’m currently thinking about. Should we take that phrase from the preamble [and] put it in the principles, and therefore make sure we do not just assume our principles will lead to the broader objectives of society but actually work towards that. But as I said, it’s only one of the options.”A survey by ShareAction recently found that a lack of reliable data was stifling investor action on SDGs.
UK pension funds should avoid delaying de-risking strategies, as markets could move against them following the government’s next fiscal policy update, according to BMO Global Asset Management.On 23 November, chancellor Philip Hammond will deliver the Autumn Statement, his first major policy speech since being appointed to prime minister Theresa May’s new Cabinet in July.Rosa Fenwick, liability-driven investment (LDI) manager at BMO, said fiscal easing was expected but warned that investment risks were “finely balanced”.She added that “reduced liquidity often seen towards the end of the year could result in exaggerated moves in rates”. She added: “Given the backdrop, our counterparties now predict a fall in the inflation rate and a rise in nominal and real yields – however, with low conviction on each metric.“This highlights the uncertainty in the market and the impact monetary and fiscal policy can have on the progression of rates.”Investment-bank trading desks polled by BMO said they expected a “modest loosening” of fiscal policy and an increase in Gilt issuance, despite a recent sharp rise in yields.UK 10-year yields registered an all-time low of 0.518% at the close of trading on 12 August but have since more than doubled to 1.169% on 7 November as prices fell.“The market’s response to these policies, in terms of growth projections or issuance, could have a significant effect on long-term yields,” BMO said in a statement.Inflation hedging by UK pensions increased by 11% in the third quarter, according to BMO’s quarterly LDI survey.Investors hedged £25.8bn (€30bn) during the quarter, the asset manager reported, up from £23.2bn at the end of June.Current government bond yields have “profound implications for LDI”, warned John Bilton, global head of multi-asset strategy at JP Morgan Asset Management.Speaking at a press conference this morning, Bilton said pension investors would need to be more active and innovative in their asset-liability matching strategies in the future.UK pension funds invested £741bn in LDI strategies at the end of June, according to a separate survey by KPMG earlier this year.Data from the Pension Protection Fund indicated that UK schemes had an aggregate funding ratio of 77.5% at the end of September.
A leading UK lawmaker has backed critics of the UK’s Financial Reporting Council (FRC) – including the Local Authority Pension Fund Forum (LAPFF) – regarding the watchdog’s approach to accounting rules and UK law.In a speech to a plenary discussion at an LAPFF conference this month, Baroness Sharon Bowles said: “Looking at the arguments it also seemed to me that LAPFF were on to something.“As various [freedom of information] responses… come to light, evidence is mounting that there has been departure from both the law and what the FRC itself has set out in the past.”The intervention of Baroness Bowles, a former chair of the European Parliament’s Economic Affairs Committee (ECON), in the row over the true and fair view in accounting should come as no surprise. She used her tenure at ECON to carve out a reputation as a competent heavy-hitter who was not afraid to tackle technical issues. Baroness Sharon BowlesCredit: libdemmeps.com LAPFF has long argued that the FRC’s approach to International Financial Reporting Standards (IFRS) harmed long-term shareholders such as pension funds because it failed to give them the protections they should have under the UK Companies Act 2006.Baroness Bowles’ take on the FRC was bolstered by the intervention of a former senior partner at City law firm Herbert Smith. Writing in the Journal of Business law this summer, Edward Walker-Arnott argued: “The FRC orthodoxy does not accord with the law… and is based on the opinions of counsel which are flawed.”In her LAPFF address, Baroness Bowles also warned of the dangers posed by vested interests to effective financial services regulation. She said there was a risk, post-Brexit, that the UK parliament “will get squeezed out and the power will be divided between ministers and financial regulators”.Bowles warns of regulatory captureOf the current trend towards global standards, she said that the benefits of common solutions must also be balanced against the risks they bring.“International standard setting is becoming ever more evident,” she said. “It can be a good idea to have pooled expertise, but at the same time it does lay us open to monolithic thinking and the belief that regulators are above the law. The result can be that everyone makes the same mistakes, responds the same, so it is like removing a fire break.”Baroness Bowles singled out the International Accounting Standards Board as an example of regulatory capture.She said: “It always looked like a very homogenous group of people, all trained the same way, part of the ‘initiated’ who permeate every aspect of political, regulatory and corporate life.”She added that the establishment of a monitoring board for International Financial Reporting Standards in January 2009 appeared “in practice to have become a focus of where to concentrate lobbying.”The European Commission currently has a seat on the board alongside the US Securities and Exchange Commission and other regulators.Of her time in Brussels, Baroness Bowles told her audience that she had felt “first hand” the lobbying power of the Big Four accountancy firms against the audit and accounting directives “against well merited changes”. FRC public body status under scrutinyIn a separate development, IPE has secured the release of official papers revealing the full extent of the lobbying effort within central government to help the FRC avoid public-sector scrutiny.Documents from the Office for National Statistics (ONS), the UK government body charged with deciding the FRC’s status as a public body, showed that the accounting regulator’s status had been under review on four separate occasions.In a previously classified document it emerged that, as well as the FRC, the UK government’s Business and Industrial Strategy and Treasury departments both objected to the FRC being designated as a public body.In addition, in one redacted email , the Treasury pressed the ONS to confirm that the FRC was a private-sector body.The official wrote: “[W]e think this is the right outcome but also to do anything else may result in the FRC raising this at a very senior level and/or taking some radical steps such as seeking a judicial review, which could be embarassing for all concerned.”The email continued: “Accordingly, we would be grateful if you could exert some influence over colleagues in the ONS, such that this is addressed asap.”The FRC’s status as a public body has major implications for its oversight of audit firms and the actuarial profession. It also affects all listed and public-interest companies that follow the UK Corporate Governance Code.