Investor United Capital has withdrawn its offer to purchase Doverie, the largest pension fund in Bulgaria, according to Peter Hagen, chief executive at Austrian insurance group VIG, the major shareholder in the scheme.VIG’s previous announcement that it planned to sell Doverie to United Capital caused a major uproar in Bulgaria last year.Critics pointed to a lack of transparency behind United Capital’s financing sources, as well as its overall strategy for the pension fund.Attempts by IPE to get any statement from United Capital on the deal have failed regularly in recent months. Today in Vienna, Hagen said: “A withdrawal from the purchase was not covered by the contract, but we will not be forcing anyone to buy Doverie.”He added that, “for now”, VIG planned to hold onto a “very well performing” pension fund that would report a new record profit of €8m for 2013.But Hagen repeated his statement made over a year ago that “pension funds are not part of our core business”.He said VIG would therefore be open to “attractive purchase offers” for Doverie, as well as its share in the VBV, Austria’s largest pension fund.“If there is somebody who wants to buy our share in the Pensionskasse, we will be very willing to negotiate, and our finance department would be very happy,” Hagen said.
He was later promoted to chief executive for Europe, once Elizabeth Corley was named the company’s global head.In his time in the industry, he has also worked at Goldman Sachs Asset ManagementFaissola said: “We are delighted a leader of James’s standing in the industry has chosen to join us.“With his roots in both the US and Germany, his international experience and his outstanding track record, James has the background and skills to help us deliver our platinum aspiration.”Dilworth replaces Wolfgang Matis, who retired as head of the €490bn active asset management in June.AGI said Dilworth’s departure was by mutual agreement and thanked him for his “significant contribution” in integrating AGI’s European business.“As envisaged in our governance procedures, George McKay, global chief operating officer, will assume the responsibilities on an interim basis,” AGI said in a statement.“We will announce the succession in due course.”McKay joined the company in 2006 as head of Asia-Pacific, and has worked at Mellon Bank and JP Morgan Fleming Asset Management. James Dilworth, European chief executive at Allianz Global Investors (AGI), has left the asset manager to join €934bn rival Deutsche Asset and Wealth Management (DeAWM).Dilworth, who left AGI with immediate effect, is likely to take up his new position as head of DeAWM’s active asset management early next year, subject to approval from Germany’s regulator.His new role will also see him become chief executive of Deutsche Asset and Wealth Management Investment and join the manager’s executive committee, reporting to Michele Faissola, current head of DeAWM.Dilworth has been with AGI since 2009, joining at the time from Morgan Stanley Investment Management.
The Dutch Investment Institution (NLII) has launched its first propositions for local corporate financing for institutional investors. It said it expected its new investment funds for subordinated loans (ALF) and corporate loans (BLF) to initially attract €300m and €500m, respectively, to finance small and medium-sized companies in the Netherlands.The NLII estimated that the new funds would open up €2bn in financing capacity over the next three years.More than 50% of the funds’ initial target has already been committed by institutional investors, including the €60bn metal scheme PMT and the €20bn pension fund for the printing industry, PGB. The pension funds have committed €100m in total to the BLF.Both funds will begin issuing corporate loans over the summer, according to the NLII.It added that ABN Amro, ING and Rabobank were to act as intermediaries.The BLF is the former NL Ondernemingsfonds, launched initially by exchange company Euronext and asset manager Robeco.It is to issue loans of between €5m and €25m, which could be doubled by the bank involved.The ALF is to issue subordinated loans of between €150,000 and €5m to “healthy firms that could otherwise not get bank credit”.Banks are committed to at least double a subordinated loan, which has a 50% guarantee from the Dutch government.The NLII is meant to act as an intermediary to increase the long-term options for institutional players to invest in the Dutch economy.It is to take stock of the demand for projects and financing needs and mould propositions into the appropriate scale, structure and risk/return profile for institutional investors, it said.The investment institution – headed by industry veteran Loek Sibbing – has developed its propositions together with institutional investors, banks, Aegon Asset Management and Robeco, as well as the Ministry for Economic Affairs.Sibbing said the NLII expected to launch investment propositions for sustainable energy and housing, infrastructure and schools at a later stage.The NLII also announced the appointment of Rein Willems and Jan van Rutte as members of its supervisory board, with Willems in the role of chairman.Willems was chief executive at Royal Dutch Shell from 2003 to 2007 and is currently chairman of the supervisory board of energy company Essent and a member of the advisory board for responsible investment at PGGM Asset Management.Van Rutte is currently on the supervisory board at SNS Reaal and Ormit Holding.
STOXX – Eric Zwickel has been appointed director of global asset owners and consultant relations at index provider STOXX in the UK. He started work in the newly created role in October. Zwickel previously worked as a senior investment consultant at Towers Watson. Buck Consultants at Xerox – Celene Lee has been promoted within Buck Consultants at Xerox to head of the investment consulting business. She will report to David Piltz, head of trustee services, and join the firm’s trustee services board. Lee joined Buck Consultants in August 2014 as a senior investment consultant. She is former chair of the National Association of Pension Funds’ North London Group. NN Investment Partners – Kees-Jan van de Kamp has been appointed to work as part of NN Investment Partners’ infrastructure and project finance team. He will be responsible for infrastructure debt origination, execution and portfolio management. Van de Kamp comes to NN Investment Partners from NIBC Bank, where he was most recently responsible for infrastructure and renewables debt capital markets. KPA Pension, Boundary Capital, Banca Finnat, Prévira Invest Sim, STOXX, Towers Watson, Buck Consultants at Xerox, NN Investment Partners, NIBC BankKPA Pension/Finansinspektionen – Erik Thedéen, chief executive of Sweden’s KPA Pension, has been appointed director general of the country’s financial regulator Finansinspektionen. He takes over from Martin Noréus, appointed acting director general at the regulator in April. At KPA Pension, Mia Liblikhas been appointed acting managing director in Thedéen’s place. She was most recently managing director of KPA Livförsäkring.Boundary Capital – Adrian Parton and Grant Hawthorne have been appointed new partners in venture capital firm Boundary Capital. Parton is a biotech entrepreneur whose past businesses include Genera Technologies and food diagnostics firm Matrix MicroScience. Hawthorne was previously manager of business angel network Great Eastern Investment Forum and part of the management team at Azea Networks. Banca Finnat – Giuseppe Caminiti has started a new job at Banca Finnat in Rome, with responsibility for institutional investor clients. He took up the role on 15 September. Caminiti joins from Prévira Invest Sim, where he worked for nearly 14 years, most recently as head of institutional clients.
The £200m (€285m) UK Power Networks Pension Scheme has hired SEI as its fiduciary manager.SEI, in addition to acting as investment consultant and asset management for the defined benefit scheme, will also offer investment advice to the power distribution company’s defined contribution scheme.Michele Hirons-Wood, head of pensions at UK Power Networks, said the company had considered a range of new governance options but settled on a fiduciary mandate.She added: “The trustee was keen to develop their investment strategy in a way that supported opportunistic investing whilst also increasing the focus on the overall funding level and risk budget.” In other news, the Nottinghamshire County Council Pension Fund has hired City Noble as as independent investment adviser.The £3.8bn scheme hired the company to advise on “all aspects of the fund’s structure, management and strategy”, possibly a reference to the choice the local government pension scheme faces on pooling arrangements.
Private equity makes up 23.9% of the portfolio.However, the trust’s investment report said it found it increasingly difficult to find new private direct company investments in a world of excess capital.But returns over the past three years have accelerated, and its immature funds – those raised in or after 2010 – are already performing more strongly than its mature funds (raised before 2010).The net multiple on invested capital (MOIC) is 1.64 times for immature, compared with 1.59 times for mature, funds.Technology venture funds, with an MOIC of 2.12 times, now represent almost 40% of the trust’s private fund exposure.The trust said its partners had largely realised the most successful investments made in the last phase of technology disruption, including US-founded social networking companies such as Facebook and LinkedIn, and China-based e-commerce companies such as Alibaba.It continued: “Their next challenge will be to continue to build and then release value in companies in the next stage of disruption, especially in the ‘decacorns’ – the likes of Uber, Airbnb, Palantir and Didi Kuaidi, where strong demand from investors has allowed valuations to expand and permitted these companies to raise new money while remaining private.”However, Eliza Manningham-Buller, the trust’s chair, said global public equity markets struggled in the run-up to a likely interest rate rise in the US.Overall, 48% of the portfolio is invested in public equities.The lion’s share – 34.6% of the overall portfolio – is invested globally.This segment returned only 0.3% over the 12-month period.Meanwhile, gains of 5.4% from developed market equities were offset by negative returns of 6.8% from growth market equities.Property and property-backed assets have now reached a record 12.9% of the portfolio.The trust avoids investing in traditional institutional property assets such as funds, commercial and retail, preferring assets where control can add greater value.This means that, unlike the rest of the portfolio, property assets are dominated by UK interests.Double-digit returns were again recorded in the directly owned property portfolio, as they have been over three, five and 10 years.Investments are evenly divided between residential, which returned 11.1%, and non-residential, returning 12.1%.Meanwhile, hedge funds – 11.8% of the overall portfolio – had a mixed year, with equity long/short funds (which returned 2.7%) outperforming weak stock markets by more than 9%, while distressed debt funds made a 16.3% negative return.Looking ahead, the trust said it expected volatility to rise from multi-year lows in many markets because of the tightening of monetary policy.“Our focus,” it said, “remains on the generation of long-term cash flows in the core of our portfolio, supplemented by optionality in our higher-risk investments rather than on market values.” The Wellcome Trust, the UK’s biggest charity, has reported a 6.1% investment return for the year to 30 September despite what it calls a “difficult” market, with its portfolio increasing in value to £18.3bn (€25.2bn) by end-September.The results take the trust’s annualised returns to 9.8% for the seven years since the start of the global financial crisis in September 2008, and 8.6% over 10 years.Private equity, venture capital and property all made double-digit returns over 2014-15, with each major element of the trust’s portfolio – public equities, private equity, venture capital, hedge funds and property – performing strongly over three, five and 10 years, the trust said.The principal source of returns was private assets, with the private equity pool returning 18%, led by the 49% return from venture funds.
Bavaria’s civil service pension fund is to file a lawsuit against Volkswagen (VW), according to the German state’s finance ministry.A spokeswoman for the ministry confirmed to IPE its intention to file the suit on behalf of the Bayerische Pensionsfonds, set up after state pension reserves set aside since 1999 were combined.The fund, worth €2.1bn at the end of 2014 and being used to pre-fund the state’s civil service liabilities from 2023, will be suing VW for damages of €700,000.However, the ministry spokeswoman took pains to emphasise that the Pensionsfonds had not made an actual loss, as it intended to continue holding its VW stake. She also acknowledged that even the firm’s current stock price was higher than that paid by the Pensionsfonds when the shares were acquired.The lawsuit comes after the German car manufacturer was embroiled in an scandal over its use of so-called deceit devices to mask the true emissions of its cars.The scandal saw VW’s share price drop from €162.40 to as low as €92.36 at the beginning of October, and has already seen several of the world’s largest asset owners, including the Norwegian sovereign fund and the California State Teachers’ Retirement System, throw their support behind a class action lawsuit.But the suit by the Bayerische Pensionsfonds, to be filed at the Braunschweig District Court, will not be part of the same class action suit brought by other institutional investors. The significantly larger Bayerische Versorgungskammer, which manages €66bn in pension assets, including those for members of Bavaria’s state parliament, told IPE it did not intend to file a suit against VW.
Carillion had more than 400 contracts in place with UK local authorities when it collapsed last weekTony Williams, head of employer risk services at the Local Pensions Partnership (LPP), told IPE that each company seeking such an agreement was subject to a risk assessment by the LGPS to judge its viability and the risk of insolvency. The fund can then recommend that a bond or other form of indemnity is required as security against any potential pension debt.LPP – a collaboration between the London Pensions Fund Authority and Lancashire County Pension Fund – had no exposure to Carillion at the time of its collapse, Williams said.He added: “A recommendation would not be made to admit a body that posed substantial risk to a fund until these concerns were fully addressed. LPP would also monitor the contractor annually via covenant reviews, with action taken if key risks were identified.”Williams said it was up to individual funds within the LGPS to decide how they addressed employer covenant risk.Following Carillion’s demise, he added, LGPS funds would need to assess their exposure and seek actuarial and legal advice about the agreements.In a column for the Observer newspaper published on 21 January, prime minister Theresa May pledged to bring in strict new rules to punish company executives “who try to line their own pockets by putting their workers’ pensions at risk”.Seven of Carillion’s own pension funds have entered the assessment period for entry into the Pension Protection Fund, the UK’s lifeboat fund for private sector defined benefit schemes. The company sponsored 14 schemes in total, with some linked to Carillion subsidiaries that have not yet been declared insolvent.The LGPS funds exposed to CarillionPrivate companies supplying local authorities and employing their staff are required to enter into ‘admission agreements’ with the relevant council. These agreements allow employees transferred to the service provider to continue to accrue LGPS benefits. They also outline how much the provider and employees must pay the LGPS towards the employees’ pension costs.According to 2016-17 annual reports, 13 pension funds within the LGPS system had Carillion as a contributing employer at the end of March 2017:Croydon Pension SchemeDurham County Council Pension FundGreater Manchester Pension FundHounslow Pension FundLondon Borough of Ealing Pension FundLondon Borough of Harrow Pension FundNottinghamshire Pension FundOxfordshire Pension FundSouth Yorkshire Pensions AuthorityTeeside Pension FundTyne & Wear Pension FundWest Midlands Pension FundWest Yorkshire Pension FundHounslow Council terminated its contract with Carillion to supply library services last summer. It is in the process of exiting a separate contract for the management of parks, cemeteries and allotments, according to a statement from the council.Croydon, Nottinghamshire, Teeside and West Midlands pension funds all said Carillion was up to date with contributions as of 15 January 2018.A spokesman for Ealing Council said Carillion still owed £5,000 to the pension fund in relation to “the recovery of the funding costs associated with early retirements on redundancy”. The scheme was also in discussions with liquidators PwC about a pension bond put in place with Carillion, the spokesman said. LGPS officials have been working to ascertain the shortfall in pension contributions as a result of Carillion’s liquidation. At least one of these – the pension fund for the London borough of Ealing – was in talks with liquidators PricewaterhouseCoopers (PwC) about recovering debts (see below).Jeff Houston, head of pensions at the Local Government Association, told IPE: “We don’t have all the data yet but early indications are that in the majority of cases Carillion was fully funded. Unless something unexpected pops up we therefore do not expect to see local authorities having to pick up any significant deficits as a result of this event.”As well as exposure to liabilities, a number of LGPS funds lost money because of exposure to Carillion shares or bonds.The LGPS Advisory Board said in a statement: “Only a very small number of LGPS funds had direct exposure to Carillion on the asset side.“We estimate their total losses to be in region of £3m to £4.5m, or around 0.03% to 0.05% of the total assets of those funds. This compares with the 21% growth in asset values seen by LGPS funds in 2017.”Cost-sharing agreementsContractors applying to join the LGPS must seek an “admission agreement” with the relevant LGPS fund.Martin McFall, a partner in the pensions department at UK law firm Trowers & Hamlins, explained that contractors often persuaded councils to take on more pension costs in return for a lower price for the service being outsourced.In addition, under LGPS rules any employees aged over 55 who are made redundant are entitled to take their pension in full, even if they are yet to reach retirement age. Normally, the employer would foot the bill for any additional costs related to this, but in Carillion’s case McFall said local councils could have to pay.“Each local authority is doing these calculations,” he said. “They don’t know yet what the scale is – and it could be significant.“And it’s not just Carillion; it may have sub-contracted some projects. They may not be able to continue [payments] and the council might have to pick up their costs.“A lot of councils sold [the risk sharing] as a lower service provider cost, and value for money, thinking the service provider was never going to go bust.” A number of UK public sector pension funds could face shortfalls following the collapse of construction company Carillion.The group was placed into liquidation on 15 January with a reported debt burden of £1.3bn (€1.5bn) and cash reserves of less than £30m.At the time of the collapse Carillion had more than 400 outsourcing contracts in place, according to media reports, providing services to local authorities including facilities management, maintenance, road building, library services and delivering school meals.Many of these contracts included cost-sharing agreements related to pensions provided by the Local Government Pension Scheme (LGPS) to staff transferring from the public sector to the private sector, meaning Carillion was registered as an employer contributing to 13 LGPS funds.
Private sector defined benefit liabilities were estimated at £2trn by the ONS.Workplace defined contribution (DC) schemes had roughly £240bn invested in them at the end of 2015. A further £302bn was held in individual DC plans, the ONS reported, although this was not included in the £7.6trn figure.Steve Webb, director of policy at Royal London and pensions minister during the period measured by the ONS, said the figures were “truly mind-boggling”.“Today’s population has built up £7.6trn in pension promises but has only set aside about a third of that amount to pay for them,” Webb said. “The rest will have to be financed by tomorrow’s workers. “If we are to have a meaningful debate about how we pay for an ageing population and about fairness between generations, figures like these need to be published on a regular basis and should inform policy-making.”ONS data also showed that more than a third of employees did not have a pension at all, although the statistics were gathered halfway through the rollout of automatic enrolment rules. The UK’s gross pension liability across workplace and state provision grew by £1trn (€1.1trn) in five years, according to data from the Office for National Statistics (ONS).The total liability hit £7.6trn at the end of 2015, the ONS said, up from £6.6trn in 2010.The total included an estimated £4trn of unfunded liabilities linked to the UK’s state pension – equal to 213% of GDP.Other unfunded public sector pension liabilities – including provision for teachers and National Health Service staff – totalled £917bn. The Local Government Pension Scheme, a funded defined benefit (DB) scheme, had roughly £300bn of liabilities. UK’s total pension liabilities (2015)Source: Office for National Statistics
Major banks were fined billions in total for misconduct around setting LiborThe UK’s asset management trade body has launched a guide to the new risk-free benchmark SONIA, which is due to replace Libor by 2021. The Investment Association (IA) said managers should “identify and mobilise” dedicated teams and resources to manage the transition, and set out measures to assess and mitigate the impact of the change.It was important to act early, the association said, given that market conditions and liquidity could change in the next two years. Managers should also prioritise client communication, the IA said.Galina Dimitrova, the IA’s director for capital markets, added: “Global co-ordination across jurisdictions, currencies and asset classes is also critical to the success of this process. We represent global firms with clients and regulatory obligations in many countries.“Each jurisdiction is moving at its own pace, with slightly different rates coming out of the end of the process. Firms must therefore not only focus on SONIA, but other global benchmarks as well.”The Financial Conduct Authority and other major regulators have been working to replace Libor since 2017 following high-profile scandals.There was more than $240trn of assets in products benchmarked against or referencing Libor, the IA said. A recent survey of its membership revealed that 80% of respondents used Libor-based derivatives for hedging and 90% had at least one fund benchmarked against Libor. Private equity managers are being forced to find more cash to invest in their own funds as demand – and fund size – continues to grow.Research by Investec has found that private equity fund managers expect to commit an average of 2.9% to their next launch alongside external investors.Based on an average target fund size of $1.9bn (€1.7bn), according to data firm Preqin, this meant that managers were expecting to commit roughly $55m on average – the highest level recorded by Investec’s survey.Investec also found that more than half of respondents expected their company’s next launch to be more than 25% larger than their previous fund. Of the 289 private equity professionals polled, 13% admitted they did not know how they would finance their co-investments. This was particularly an issue for more junior team members.More than a third (39%) of investors said they would reinvest carry or proceeds from previous funds, while 14% said they would raise money in the debt markets.Simon Hamilton, head of fund finance at Investec, said: “Funding commitments with carry simply means that GPs [general partners] don’t have the cash available now.“This can be risky, particularly as the uncertain outcome of unfolding political events coupled with concerns around the growing amount of dry powder in the market are becoming harder to ignore…“It is important for limited partners to see that the GP commitment to a fund comes from the entire investment team – it is a key alignment mechanism. The fact that so few team members below partner level know how they will fund this is an issue.”Trade body publishes guide to SONIA