Dutch institutional investors and banks have joined forces to provide financing for companies in the Netherlands.The fund – dubbed NL Ondernemingsfonds – will co-finance company loans and is projected to reach more than €1bn in size.The first loans will be issued later this year.Pension providers MN and Syntrus Achmea, banks ABN Amro, ING and Rabobank, asset manager Robeco and Euronext Amsterdam have taken the initiative to set up NL Ondernemingsfonds, with the purpose of creating a new source of financing for businesses seeking to expand. In the coming weeks, other investors are be invited to participate, organisers said.As from the second half of 2014, Dutch businesses will be able to take out a loan jointly financed by their own bank and the NL Ondernemingsfonds fund.Loans, aimed at companies with a turnover more than €25m, will be for a minimum of €10m.At a later stage, NL Ondernemingsfonds may also provide financing for smaller companies, organisers said.The plan is to expand the scope of the fund to €1bn within five years.The fund will focus on institutional investors and be managed by Robeco.Euronext Amsterdam, drawing on its position in the public capital markets, will “bring the parties together”, together with the support of AF Advisors, Deloitte, PwC and the Dutch Bankers Association.
The pension fund also noted that its “conservative” approach to European bonds, where it invests solely in core Europe, had an impact on its portfolio’s performance.Further, emerging market debt, comprising 5% of Publica’s strategy, lost 15%, while commodities fell by 12%.Gold, which accounts for 2% of Publica’s portfolio, fared particularly badly, the pension fund said.Nevertheless, Dieter Stohler, managing director at Publica, told IPE “it would be wrong to exit these investments based on a short-term valuation loss”.He said: “We are expecting positive returns over the long run in those sectors, with a horizon beyond the end of the year.”However, he acknowledged that Publica was now re-evaluating its asset strategy regularly every two years, which meant “there might be one or two adjustments”.But he rejected a full exit from either emerging markets or gold.At the other end of the spectrum, the BPK, the public pension fund for the Swiss city of Berne, returned 9.3% over 2013.The fund’s equity exposure, 38%, was the main driver for the strong performance, it said.Hans-Peter Wiedmer, head of asset management at the CHF10bn Pensionskasse, said “very good tactical and operational implementation”, as well as “very low asset management costs”, also boosted returns, which raised the funding level to approximately 83%.For 2014, the BPK does not plan any major changes to its strategy. It said it would keep equity exposure at around the same level, with “frequent rebalancing”.Similarly, the PKE, the pension fund for the Swiss energy sector, reported a return of 8.8%, similar to the 2012 return of 8.7%.Following a strategic review, the CHF5bn scheme reduced its equity allocation in 2012 from 42% to around 39% in favour of a slight increase in alternatives and FX bonds.In 2013, “all asset classes had contributed positively” to the performance, apart from foreign bonds, according to Ronald Schnurrenberger, managing director at the PKE. The performance spread between Switzerland’s largest public pension fund Publica and the Pensionskasse for the city of Berne was as large as 580 basis points over the course of 2013, due to their differing approaches to asset allocation.Last year, the average return for Swiss pension funds, according to a number of sources, was approximately 6%.The CHF35.8bn (€29bn) Publica Pensionskasse, which only managed to generate a 3.5% return over the period, cited its “commitment” to emerging markets and commodities.According to its investment strategy, equities currently comprise about 33% of Publica’s overall portfolio, with 10% of equity exposure allocated to emerging markets, which underperformed relative to Swiss or developed-market equities last year.
Deutsche Asset & Wealth Management, UK National Association of Pension Funds, Pensions Infrastructure Platform, Kames CapitalDeutsche Asset & Wealth Management – Astrid Manroth has been appointed managing director and head of Environment and Social Capital within the Sustainable Investments platform of Alternatives and Real Assets in Europe. Based in Frankfurt, she joins from the World Bank, where she has held a number of senior roles over the last 11 years. Before then, she spent six years at JP Morgan in London as head of the Credit Rating Advisory in the Emerging Markets Debt Capital Markets group.UK National Association of Pension Funds (NAPF) – Mike Weston has been appointed chief executive of the Pensions Infrastructure Platform (PIP), shortly after his departure from the £2bn (£2.5bn) Daily Mail General Trust (DMGT). In his role at the PIP, Weston will be responsible for developing an investment programme, building an internal team and increasing the fund’s investor base to help reach the target size of £2bn.Kames Capital – Adrian Hull has joined the fixed income team as a product specialist. He joins from Mizuho International, where he was head of sterling trading and sales. Before then, he was at Nomura International in a similar role, and was previously head of UK sales at ABN Amro Bank.
Instead, the companies are likely to invest in corporate bonds and emerging market government debt, said Carl-Heinrich Kehr, a principal at Mercer Germany.He said he also expected alternatives and equities to play a greater role in DAX companies’ portfolios in future.Kehr told IPE infrastructure and real estate exposure was set to increase via debt and equity instruments and that private debt investments would increase as banks withdrew from their role as providers of financing to smaller companies. According to data collected by Towers Watson, allocation to investment categorised as ‘other’ has increased from 16% in 2013 to 19% last year, while exposure to real estate (2%) and bonds (55%) remained the same, and equities dropped from 24% to 21%.Meanwhile, the drop in interest rates caused a further cut in the discount rate and subsequently an increase of liabilities by 25% to €372bn, according to both consultancies.Towers Watson pointed out that the median discount rate, or Rechnungszins, now stood at 2.15% compared with 3.65% in 2013.The general funding level dropped only slightly from 65% to 61% year on year, mainly because companies put additional money into pension plans amounting to €10.6bn, the consultancy said.However, it added that the funding levels differed greatly from company to company depending on individual funding policy.The Deutsche Bank has the highest funding level at 98%, while Deutsche Telekom, with its own Pensionsfonds and CTA, only has 23% of its DBO covered by pension assets.Thomas Hagemann, chief actuary at Mercer Germany, said he expected the discount rate for German mid-sized companies reporting under the local HGB accounting standard to fall by “twice as much” in 2015 and then again in 2016 than in 2014. For more on the state of pension funding in Germany, see coverage in the upcoming April issue of IPE Investments in alternative asset classes such as infrastructure, real estate, timber, private equity and private debt have helped listed companies in Germany to increase their pensions assets, according to Mercer.Returns on pension plan assets in DAX-listed companies amounted to 11.9% for the last year, generated mainly by falling interest rates and their effects on long-duration bonds with relatively high yields, the consultancy said.But alternatives also contributed in boosting pensions assets to a “new record high” of €228bn.As old bond portfolios mature, Mercer expects re-investment to be channelled away from euro-zone government bonds.
Oxford University has announced measures to strengthen its fossil fuel investment policy but stopped short of full divestment.The measures follow a review in response to students’ calls to divest from the fossil fuel industry.Council, the university’s governing body, said it consulted on the issue and concluded that robust mechanisms were already in place to ensure environmental factors were considered when investment decisions were made.It said there were thorough screening and due diligence processes designed to select investments that produced long-term high returns but also avoided high social and environmental risks. But it has now called for the level of engagement and public reporting on these issues to be strengthened, given the importance of carbon emissions and climate change.The university’s £2bn (€2.7bn) in endowment funds are run by Oxford University Endowment Management (OUEM) on behalf of the university itself and collegiate investors.OUEM is a member of the Institutional Investors Group on Climate Change.Council has asked OUEM to continue to:Avoid direct investments in coal and oil sands companies, of which it currently has none, and also avoid investment in sectors with high social and environmental risksInclude a range of other energy investments with the Oxford Funds, where financially prudent. The council’s investment committee, which sets policy for OUEM, will report annually on OUEM’s voting decisions and engagement with fund managers across all sectorsImprove reporting and communicating on its investment strategy, including in its annual report and on its website. This will include publishing a full breakdown of sector exposures, including the energy sectorThe university’s policy on socially responsible investment states that it is committed to ensuring its investment decisions, including those taken on its behalf, take into account social, environmental and political issues to maintain its ethical standards.However, there is little detail on specific investment criteria.But the university has revealed that the Oxford Funds hold no direct investments in coal and sand, nor do they have any direct investments in the energy sector.As at 31 December 2014, the Oxford Endowment Fund – the permanent endowment segment of the Oxford Funds – stood at £1.7bn, with around 3% in the wider energy sector, more than half of this in exploration and extraction.Professor Andrew Hamilton, vice-chancellor at Oxford University, said: “Our investment managers take a long-term view and take into account global risks, including climate change, when considering what investments to make.“The university believes that approach to be the right one, and today’s decision reinforces it by encouraging greater engagement and reporting on this crucial issue to the environment and all of society.”While campaigners against fossil fuel investing welcomed the move, some pointed out that the decision only applies to directly owned shares and does not commit the university to divesting from all fossil fuels. Meanwhile, as part of the regular review of its policy on investment responsibility, Cambridge University has established a working group to explore the university’s position in the light of developments in the understanding of the integration of environmental, social and governance aspects in investment decisions.
Joseph Mariathasan explores the impact of – and possible solution to – the growing dengue epidemicSummer is approaching, and as thoughts for many turn to what preparations may be required for holidays in the sun, travellers to tropical regions may be looking at stocking up on malaria tablets. These can, in some cases, have rather nasty side effects, but those travelling to Sri Lanka, for example, may not need to bother, as it may become the first-ever tropical country to eliminate malaria officially (if no one is reported with it by October this year).However, whilst malaria may be absent in Sri Lanka, and anti-malaria tablets can, if required, be taken for travel elsewhere, there is another mosquito-borne disease – dengue – that travellers need to be aware of. It causes a severe flu-like illness and can sometimes lead to a potentially lethal complication called dengue haemorrhagic fever. The WHO finds that Central and South America, South-East Asia and the Western Pacific are the most seriously affected regions in the world. What that means is that some 2.5bn people – two-fifths of the world’s population – are now at risk of acquiring dengue. That includes countries such as Brazil, currently preparing for the 2016 Olympics, and popular tourist destinations such as Thailand, with upwards of 25m visitors a year.Estimates of people getting dengue each year are very unreliable, as the symptoms are easily confused with flu and in many cases may be very mild and, as such, unreported. Why dengue is becoming a serious burden for countries is that, according to WHO, up to 50m infections occur annually, with 500,000 cases of dengue haemorrhagic fever and 22,000 deaths, mainly among children. Prior to 1970, only nine countries had experienced cases of dengue haemorrhagic fever. Since then, the number has increased more than fourfold and continues to rise. Some academics have estimated actual dengue cases are probably closer to 400m a year, and there are approaching 100m that have pronounced symptoms. Others have estimated that dengue is now becoming more dangerous than malaria in terms of economic impact and morbidity. Whilst dengue is becoming a major global health issue, there may also be a solution, or rather, a number of solutions. Vaccines are currently being developed by a number of companies, and clinical trials are well under way. The illness itself is caused by one of four variations (serotypes) of a virus. Catching one serotype gives a person immunity for life to that specific serotype. However, it also appears to raise the chances of complications if there is a subsequent infection by a different serotype, and that can result in dengue haemorrhagic fever, which can be fatal. Therefore, any vaccine has to be effective against all four serotypes to give complete immunity.Given dengue’s economic impact, it is unsurprising there is a race to develop a dengue vaccine. Whoever succeeds will potentially save countless lives and alleviate much misery but also profit from an immense market opportunity. What is encouraging for everyone, including investors, is that there does appear to be a real chance of success within the next year or two. Currently, Sanofi Pasteur, the vaccines division of French pharmaceutical company Sanofi, has received a fair amount of attention because it has announced results for clinical trials of a vaccine that shows an overall efficacy against any symptomatic dengue disease of 60.8% in children and adolescents.Whilst this may not sound like a solution, it reported a 95.5% protection against severe dengue and an 80.3% reduction in the risk of hospitalisation during the study. Sanofi Pasteur itself is so confident of its vaccine that it has built a new vaccine-manufacturing facility in France with the objective of reducing the time necessary to provide access to the vaccine once it is licensed. It became operational in 2014 with a production capacity of 100m doses of the vaccine per year. Sanofi, though, is not the only firm working on vaccines. It is highly likely that, within the next year or two, there will be announcements of breakthroughs by firms such as Japan’s Takeda Pharmaceutical, which is undertaking phase-III clinical trials in Sri Lanka and four other Asian countries. The race for a successful dengue virus is well and truly under way.Joseph Mariathasan is a contributing editor at IPE
NBIM previously divested its stakes in Innophos Holdings over its phosphate mining activities in the region, with the Council of Ethics in early 2015 also citing concerns over the unresolved legal status of the land used for the mining.In its recommendation, the Council said: “The situation in Western Sahara is unique in the sense that it is the only non-self-governing territory without a recognised administering power. There are no clear rules on the utilisation of natural resources in such areas.”In a statement, Kosmos said it “fundamentally disagreed” with th divestment decision. ”The Council’s decision is disappointing coming as it does after several years of engagement between Kosmos and the Council,” it contunied.”It was our understanding that the Council would continue to observe our activities and maintain an open dialogue. The Council’s assertion that our activities represent a ‘serious violation of fundamental ethical norms’ is totally at odds with our activities there and remains unexplained even after we requested clarification.”However, the statement did not address the Council’s argument that extraction and exploration should not be conducted in territories without self-governance. Fellow Norwegian investor KLP divested French oil company Total in 2013 over its activities in Western Sahara. The Norwegian sovereign wealth fund has divested two companies due to their involvement with oil extraction in Western Sahara.Norges Bank Investment Management (NBIM), responsible for the Government Pension Fund Global, said it heeded a recommendation by the Council of Ethics to sell its stakes in Cairn Energy and Kosmos Energy, worth a combined NOK475m (€49.6m) at the end of 2015.Referring to the Council’s recommendation, NBIM cited the risk of “particularly serious violations of fundamental ethical norms”, the reason given in the past when the NOK7.1trn fund sold its stakes in companies active in Western Sahara.Cairn, based in London, and Kosmos, based in Bermuda, are both either actively involved in the exploration of oil and gas reserves off the coast of Western Sahara, or of the belief that the question of self-governance for the region does not have to be settled before such exploration begins.
The top-up of £30m would take to £80m the total commitment the pension fund committee has made to the offshore wind fund.According to a document prepared for the pension fund committee, the SPF was offered more favourable terms on the follow-on investment than it was on its initial commitment of £50m, although the new terms will be extended to cover the former commitment, too. New private equity and real estate commitments were also agreed.They are for portfolios managed by Partners Group, which proposed the new allocations for 2016-17 to the pension fund’s investment advisory panel.The new commitments are intended to maintain the SPF’s allocations to the Partners Group portfolios at their target level, taking into account expected cash returns in 2017.The largest new commitment was for Partners Group’s Global Relative Value investment approach, with £230m to be invested over two years – £85m in 2016 and £145m in 2017.This includes approved co-investments.The SPF’s investment advisory panel also agreed a £50m commitment for direct private equity, part of the overall Partners Group private equity portfolio. The target values for the SPF’s Partners Group private equity and property portfolios are 3% and 2.5% of the total fund, respectively.The panel also agreed a £120m commitment for its direct real estate portfolio with Partners Group. The UK’s £17.6bn (€21bn) Strathclyde Pension Fund (SPF) has approved new commitments of £400m (€478m) for private equity and real estate, while also agreeing a top-up of an allocation to a Green Investment Bank offshore wind fund.The SPF is due to increase its investment in an offshore wind farm fund managed by the UK Green Investment Bank (GIB), as the pension fund’s committee approved a £30m “follow-on investment” in Offshore Wind Fund LP.The fund targets the acquisition of equity stakes in operating offshore wind projects in the UK.As an investment in renewable energy infrastructure, it sits within the SPF’s direct investment portfolio (DIP).
At Bosch Group, the concept of zero-guarantee pensions for new entries into its €3.2bn Pensionsfonds was introduced last year and then expanded to cover people retiring from 1 January 2016.Müllerleile said Bosch founded its change of the pension plan on a solid agreement with worker representatives.The legal framework for the amendments were later to be known as “Lex Bosch”; it is, in fact, an amendment to the law governing Pensionsfonds from 2015, allowing these vehicles to offer non-insurance-based plans for retirees. “We have used the same cooperation between employer and employee representatives in amending our pension promises, which is now under debate for industry-wide pension plans at the federal level,” Müllerleile said.He said the changes to the Bosch pension plan had been well received by workers and highlighted the importance of “proper communication”.In a statement on the legal changes in 2015, Bosch pointed out that, if guarantees for new retirees were not made more flexible, workers would face a 17% cut in their pensions due to lower guaranteed returns in the current market.Müllerleile said the government’s new proposal was “well-balanced”, as a pure defined contribution approach, combined with supervisory measures and a collective vehicle, would serve the needs of both companies and workers.He added one note of caution, however, on the new law’s implementation. “With regard to the exceptionally important implementation of IORP II for occupational pension vehicles, it has to be made sure that in the final law that no guarantees could trigger the application of Solvency II regulations to occupational pensions,” he said. The association for company pension plans (VFPK) voiced similar concerns when the government first presented its ideas last year.However, in its statement regarding the most recent draft for the new law, it said its initial fears had been allayed. Hansjörg Müllerleile, director at Bosch Group, has welcomed German government reform proposals calling for the introduction of pensions without guarantees into the country’s second-pillar system.“The draft,” he told IPE, “opens up remarkable ways for expanding occupational pensions without abandoning trusted principles.”Last week, the government put its reform proposal (Betriebsrentenstärkungsgesetz) out for consultation.The draft outlines plans for industry-wide pension funds without guarantees, either within existing schemes or new vehicles to be set up by social partners.
Bouma warned that HBS was “not an appropriate instrument and it should not be part of the stress tests”.He also added a possible alternative approach for EIOPA: “By using alternative approaches such as cash flow analysis many of the problems that the ‘common framework’ would bring could be avoided.” As an example, Bouma cited the mark-to-market approach.But the PensionsEurope chairman also added some positive notes, welcoming the decision to use one scenario, rather than three, “which means fewer costs and less effort for IORPs”.EIOPA chairman Gabriel Bernardino confirmed the stress tests will be issued “in mid-May” this year, as planned.“This year’s stress test will include all European countries with material IORP sectors,” he said.He added that the stress tests would help to “assess the impact of pension funds on the real economy”.“Defined benefit pension funds will have to calculate the impact of adverse market scenarios on plan assets and defined contribution plans the impact on future pension income,” Bernardino said.The EIOPA chairman also called on all stakeholders to take part in EIOPA’s current survey on pan-European DC pension frameworks, which is open until 4 April.Every EU member state must finalise implementation of the IORP II directive by 31 January 2019, but Christian Röhle, head of Pensionskassen management at the pension fund of Hoechst group, warned German funds would have to find a way around a potential problem with the new rules.“A problem might arise from the fact that synergies, e.g. using the same risk manager for the company as for the pension fund, are no longer allowed,” he said.Many companies in Germany are using the same experts and board members for their pension funds but in future they will have to ensure compliance standards are met and conflicts of interests are managed. Röhle called for German authorities to introduce an exemption for this rule and “to keep the proportionality principle in mind”. PensionsEurope wants “no further changes” to the regulations regarding pension funds, as it prepares for the launch of a continent-wide stress test regime.Janwillem Bouma, chairman of PensionsEurope, reiterated a previous call for “a period of legislative calm”, this time until a planned review of the IORP II directive in 2020.Speaking at the occupational pensions conference organised by the German newspaper Handelsblatt in Berlin, Bouma criticised the European Insurance and Occupational Pensions Authority’s (EIOPA) approach to further reforms.“PensionsEurope has rejected the holistic balance sheet [HBS] approach but EIOPA continues to work on the ‘common framework’ – as if a name change was changing the subject,” Bouma said. “IORP II already contains a thorough framework for pension risk management and pension funds already regularly carry out stress tests as part of their own processes.”