Airline Finnair has warned it faces a €30m increase in pension costs if it is unable to agree a new pension package with its pilots.The Finnish flag carrier said its current pension arrangements were more generous than the statutory minimum, which the government is set to reform as part of an increase to the minimum retirement age.Finnair’s pension arrangements, covered by its collective bargaining agreements, offer a defined benefit arrangement for long-serving pilots, while newer employees are only offered a defined contribution fund.If the government’s current draft bill passed without the airline agreeing any changes, Finnair said it would be liable for additional costs associated with the reform. “Consequently, its pension obligations would increase by a total of approximately €30m,” Finnair said in a statement on the Helsinki Stock Exchange.The airline said its pilots currently retired at an age of 58, well below the current statutory retirement age of 63, or the proposed new retirement age of 65 – agreed after negotiations between social partners in 2014.The company added: “Finnair is actively exploring ways to mitigate the impact of implementing the pension reform, which was agreed by the Finnish labour market organisations, without incurring undue extra costs to the company.”
It claimed to be the first international asset manager to make SME loans directly available to institutional investors.In the new venture, Schroders is to line up investors while Neos will select companies that want to finance their growth.Neos said it wanted to fill the gap between bank financing and private equity, and that the level of interest charged was between covered short-term loans and mezzanine debt.It added that the duration of the issued loans was up to seven years.Quirijn Haak, director and co-founder of Rotterdam-based Neos, said: “We have a network of more than 50 local accountants and advisers who select the companies in the target group. Because the companies are their clients, our partners know them well.”According to Haak, who has also been associate director at merchant bank NIBC, Neos is able to assess a company’s loan application within a few days.Michel Vermeulen, director at Schroders’s Dutch division, said the asset manager chose Neos because of its track record.Haak attributed Neos’s success to the fact that it uses the approach and analysis of SME loans usually applied for much larger companies’ structured finance solutions.In his opinion, there are “tens of thousands of firms that would be eligible for this kind of direct loan”.He estimated the Dutch market at approximately €1.5bn annually.“The venture with Schroders should make it possible to service one-quarter of this market in the longer term,” he said. The €425bn global asset manager Schroders has taken a 25% stake in Dutch company Neos Business Finance, which issues loans to small and medium-sized enterprises (SMEs).Neon, which has already provided loans on behalf of the industry-wide pension funds for the furnishing (Wonen) and retail sectors (Detailhandel) in the Netherlands, said it also expected to branch out into Belgium and the UK.To date, Neos has issued 75 loans of up to €1m each – and totalling €48m – through its MKB Impulsfund.Schroders said the new joint venture aimed to offer clients the option to invest in high-yielding loans to local medium-sized companies.
The €18.3bn Philips Pensioenfonds attributed its 5.5% quarterly return to “strongly performing euro-denominated government bonds and credit”, which comprise 35% and 5% of its investment portfolio, respectively.Interest and inflation hedges contributed 0.9 percentage points to the quarterly return.The Philips scheme made a loss on its 29% equity and 10% property allocations.Its emerging-market debt and high-yield credit holdings underperformed over the period relative to their benchmarks.Funding at the Philips Pensioenfonds fell by 2.9 percentage points to 106.4%.Lastly, the pension fund of technical research institute TNO reported a 3.9% return over the period.Because liabilities increased by 9%, however, the scheme lost 5.3 percentage points of funding, which at the end of March stood at 104.9%.The €3.2bn pension fund singled out bonds as the chief contributor to its quarterly result.Its fixed income portfolio, which includes mortgages, generated 6.5%.By contrast, the pension fund made losses on equities (-5.3%), property (-0.6%) and private equity (-3.4%).Its interest and currency hedges each produced 0.7 percentage points of return over the period. Dutch pension funds with large fixed income portfolios have reported strong first-quarter returns thanks to falling interest rates over the period.Because the drop in interest rates had an even bigger impact on their liabilities, however, they saw their coverage ratios fall.Vervoer, the €22bn sector scheme for public road transport, returned 9.1% over the period, due largely to its 62% fixed income allocation.Its funding, however, fell by 2.8 percentage points to 97.7%.
Denmark’s second-biggest commercial pension provider, Danica Pension, saw its corporate profits fall 27% in the first half compared with the same period last year because of turmoil on the financial markets.Group total profit before tax dipped to DKK831m (€111m) in the first six months of this year from DKK1.14bn in January to June 2015, the Danske Bank subsidiary said in its interim report.Per Klitgård, Danica’s chief executive, said: “The performance is as expected and is satisfactory in view of the financial market turmoil, which negatively impacted the performance.”The first half produced negative equity returns and positive returns on the bond portfolio as a result of the lower level of interest rates, according to the report. The overall return on customer funds for unit-link products was a loss of 1.9%, down from a 5.5% profit in the first half 2015, while the return on customer funds for traditional with-profits pensions was 6.8%, up from a 0.3% loss in the same period last year, Danica said. The return on the company’s key unit-link product Danica Balance was 1.7% for the six-month period for customers with 15 years to retirement, which it described as satisfactory relative to market developments.The product had a 5% return on alternatives including direct investments and 4.4% on bonds, and a loss of 3.2% on equities.Total group assets increased to DKK410bn by the end of June from DKK465bn a year earlier.Direct investments in particular helped returns in the first half, Danica said.Between January and June, it said it made several direct investments in Danish companies, including Sitecore, Netcompany, Tandlægerne.dk and Ferrosan Medical Devices. “These investments are to provide high long-term returns for our customers,” the company said.Total group premiums rose to DKK15.9bn in the first half, up 3% year on year.Within this, premiums in Denmark rose by 7% to DKK10.5bn, while premiums in Norway were up 18% at DKK1.1bn.The company explained a 10% fall in Swedish premiums by saying premium income here in the first half of 2015 had been extraordinarily high.
Alex Struc, portfolio manager and co-head of the ESG initiative at PIMCO, said: “Historically, this type of strategy has been pursued by equity investors but we firmly believe that engagement as a debtholder is equally important. Across the vast fixed income universe, small change can have an enormous positive impact.”In a statement, Eric Moen, managing director of ESG research at MSCI, told IPE: “We believe we are seeing a tipping point for ESG integration with many of the world’s leading equities and fixed income investors realising the value of incorporating ESG signals into their investment processes to identify risks and opportunities not normally flagged by conventional financial analysis.”Also in fixed income, Lombard Odier Investment Managers (LOIM) today announced a partnership with Affirmative Investment Management (AIM), a fixed income manager dedicated to impact strategies.The aim of the partnership is to add to Lombard Odier’s impact investing capabilities and to launch a new fund “designed to help combat climate change in a verifiable way”, the Swiss firm said. No further information has been provided about the fund. In a statement, Carolina Minio-Paluello, global head of sales and solutions at LOIM, said that “a major shift in capital” was required to bridge the funding gap standing in the way of meeting the COP21 target of limiting the global temperature rise to two degrees.“Our investors are keen to understand how they can be involved,” she added. “We are extremely pleased to be partnering with the specialists at AIM and together with our own robust impact investing expertise, we are seeking to develop a compelling and competitive proposition for investors.”Stephen Fitzgerald, co-founder and chairman of AIM, said: “Responsible capitalism has often been perceived as coming at a cost; either lower returns or increased risk.“Our approach seeks to combine mainstream portfolio management and impact, without compromising either.”AIM describes itself as “the first dedicated green bond manager focusing solely on bond and cash investments that generate positive environmental and social externalities”.Its CEO, Stuart Kinnersley, created the first dedicated green bond fund at Nikko AM in 2010, and its head of sustainability Judith Moore originated the criteria for the creation of green bonds when she was head of the corporate responsibility team at the World Bank.Finally, Northern Trust Asset Management has teamed up with GRESB for the launch of a new sustainable real estate index incorporating ESG factors, with a Dutch-pooled fund tracking the index.The fund is designed to provide passive investors with exposure to the performance of listed real estate companies in developed markets whilst integrating responsible investment criteria.The index is being described as an “industry first”. It uses data from GRESB, an organisation based in Netherlands that assesses the ESG performance of real estate and infrastructure assets.Sander Paul van Tongeren, managing director of GRESB, said: “This new fund will, uniquely, allow investors to passively gain exposure to companies that are highly transparent about their ESG performance and reducing environmental and social impact while also incorporating broad geographic and sector diversification.”He also said the use of GRESB’s ESG data “further institutionalizes the important role of environmental, social and governance information in the financial market”. A flurry of ESG fund announcements from major asset managers yesterday underscores the mainstreaming of responsible investment, including through its integration in asset classes beyond equities. US fixed-income investment manager PIMCO announced that it had launched an environmental, social, and governance (ESG) investment platform that aimed to offer “a range of fixed income solutions to investors seeking attractive returns while making a positive social impact”.In a statement, the asset manager said it had launched a global bond ESG fund for the Europe, Middle East, and Africa (EMEA) region as part of the move, and modified two of its socially responsible funds in the US to incorporate a wider range of ESG considerations into the investment process.The PIMCO GIS Global Bond ESG Fund invests in sovereign and investment grade corporate bonds, the company said. It aims to maximise total return while favouring bond issuers that are deemed “best-in-class” with respect to ESG practices, and those working to improve them.
Danica Pension, Denmark’s second-biggest commercial pension provider, recorded a 9% increase in labour market pension scheme clients in 2016.It announced the figure in connection with the release of its full-year financial results. Danica Pension’s total profit before tax was DKK2.22bn (€299m), against DKK1.96bn in 2015.It said that premiums from business customers with more than 200 employees increased by about DKK900m, due in part to an increase in the number of these clients.Per Klitgård, Danica Group CEO, said: “We are pleased that so many companies in 2016 chose Danica Pension for their employees, and we see the trend continuing into 2017, as we have welcomed several major customers – companies as well as in the labour market pension area.” The pension provider will increase its focus on handling large customers, he added. A spokeperson for Danica, which manages DKK380bn of assets, told IPE that it does not disclose the name of clients.Last October one of Danica’s competitors, PKA, the DKK250bn labour-market pension provider, launched a drive to win new business from the country’s big providers. The Danica spokesman said that it has “no comment on PKA or other firms in the business”.Danica said its strategy to grow its market share in Norway and Sweden resulted in a 17% increase in premiums in Norway relative to 2015, and a 13% increase in premiums in Sweden.It said the growth in total premiums in 2016 – more than 14% – also reflected the effect of it strengthening its collaboration with Danske Bank, aimed at “ensur[ing] attractive pension offers and comprehensive solutions for both personal and business customers”.The full-year figures Danica reported for its pension products are largely in line with early return figures it announced in January, as reported by IPE.It reiterated its view that the results show its investment strategy, which the provider has modified to increase direct investment, is working. Danica said it was able to provide “a satisfactory and attractive return” in 2016.Klitgård said: “We are pleased that our investment strategy is now really paying off, to the benefit of our customers in the form of attractive returns in 2016. “Our strategy [is] creating long-term, robust portfolios, so that major political events such as Brexit and the US presidential election do not expose our customers’ savings to unnecessary risk. We succeeded in this respect, providing our customers with strong absolute returns while taking a prudent approach to risk.”The return on its Balance, Link, and Select products was 5.5% before tax in 2016, with the lifecycle product Danica Balance producing an overall return of 5.7% before tax.A customer with a medium-risk profile in the Balance product would have received a return of 7.5%, according to the pension provider, placing it second among Danish commercial pension companies in terms of returns.Expenses fell by DKK52m – roughly 4% – in 2016, and now account for 0.36% of provisions, according to the provider.Last year Danica Pension made it possible for private investors to invest directly in its property portfolio, and it said that “our customers showed great interest in the product”.
The chief executive of Sweden’s AP4 has called on the country’s legislators to give the funds the direct investment tools they need to make use of proposed new investment freedoms.Niklas Ekvall said in the fund’s newly-published annual report: “We are to be given the opportunity but not the tools, which we find hard to believe is the intention.”He referred to the proposed change in the investment rules for Sweden’s five AP funds, which invest capital to support the country’s first pillar pension schemes. The rules are currently going through the legislative process.Ekvall praised the proposal for allowing more flexibility in terms of allocation between different types of investment, with the key elements being a reduced requirement to hold liquid and high-quality interest-bearing securities and increased scope to invest in illiquid assets. “It is important, however, that this modernisation at the allocation level is followed by the corresponding level of modernisation of investment and instrument types in order not to significantly limit the more flexible allocation mandate, and impose unnecessarily expensive management,” Ekvall said. Niklas Ekvall, chief executive, AP4It was particularly important that the AP funds had the opportunity to make long-term and cost-effective direct investments such as joint ventures in unlisted companies, as well as investments in infrastructure, unlisted loans, and long-term sustainable assets.Ekvall made similar comments in the pension fund’s consultation response last autumn.The reform – part of a broader pensions overhaul in Sweden – is scheduled to take effect this summer.In financial results, AP4 reported it made a 9.1% net return on investment in 2017, on the back of “generally favourable performance for the global equity markets”.This return matches the return posted by AP2 earlier this month.AP4 said it would continue developing sustainable investments in its focus areas of climate, environment, and corporate governance.“Our low-carbon strategies increased to almost 31% of the global equity portfolio during 2017,” Ekvall said. This compared to 24% of the portfolio a year earlier.He said AP4 intended to increase these investments further and also widen the scope of sustainable investments.“We are doing this to lower the risk in the portfolio and create conditions for better returns,” he said.AP4’s total assets increased to SEK356.6bn (€35.6bn) at the end of 2017, from SEK333.9bn a year earlier.
PGGM – Dutch pensions administrator and asset manager PGGM has appointed Gerko Baarslag in the newly created role of chief information officer, effective 1 November. He will focus on taking the company’s IT organisation to a new level, the group said.Previously, IT was the responsibility of PGGM’s chief finance and risk officer, but the company said it was splitting the responsibility as IT was of “great strategic importance for possible future scenarios” in the pensions sector.Baarslag joins from ground research firm Fugro, where he was responsible for IT and digital innovation. He is also supervisor at the Dutch government’s bureau for IT examination, which assesses the chances of government IT projects succeeding.Earlier this year, PGGM said it would require an entirely new IT system if the Netherlands opts for a new pension system based on individual accrual.Lazard Asset Management – The $238bn (€202.5bn) investment house has opened its first office in the Netherlands. Marcel van Ostaden will run the Amsterdam base as director of sales. He was previously head of sales for the Benelux region at Lombard Odier Investment Managers, and has also held sales roles at BlackRock and BMO Global Asset Management.Jeremy Taylor, Lazard’s CEO, said the Netherlands was “an important and growing market for us”.LifeSight – Willis Towers Watson’s UK defined contribution master trust has named Mark Bennett as director of sales. LifeSight runs more than £2bn (€2.2bn) of assets but aims to grow further and “capitalise on the significant market opportunity in the master trust sector”, it said. Bennett joins from Legal & General’s workplace pensions team where he was a key account director.Actuarial Association of Europe – Esko Kivisaari has been elected chair of the AAE for the year to October 2019, succeeding Thomas Béhar. Kivisaari is a former president of Finland’s actuarial association, and chaired the AAE’s insurance committee for five years to 2017. He is also a member of the EU’s High Level Expert Group on Sustainability.“With a new strategic plan and a new governance, we are ready to address the fascinating challenges that Europe and our profession face today,” Kivisaari said.“Our special focus will remain on the new European regulations and the review of the existing ones. We will also open our work to the wider fields, meaning notably the impact of the fintech world and the new technology in our European practices.”Falco Valkenburg was elected vice-chair.Tesco – The €15bn pension fund for the Tesco supermarket chain has hired David Linehan as a fund manager for its internal investment team. Linehan joined this month, according to his LinkedIn profile. He was previously a senior investment manager at Ireland’s National Treasury Management Agency where he worked on the country’s €22bn sovereign wealth fund.De Nationale APF – Henk de Bruijne is to depart as executive board member of De Nationale APF, the general pension fund of Dutch asset manager Nationale Nederlanden Investment Partners and its administrative subsidiary AZL.De Bruijne has been responsible for asset management and finance since the scheme’s inception, but said he wanted to focus on the content of asset management. He is due to leave on 1 November but will stay on for up to two months if the board fails to find a successor in time.QMA – Quantitative Management Associates, part of US asset management giant PGIM, has hired Liisa Juntunen as head of UK consultant relations. She will join on 1 October from Legal & General Investment Management, where she was head of the strategic client team. She has also worked at Rogge Global Partners, Ignis Asset Management and AllianceBernstein. QMA opened its London office earlier this year, its first presence outside of the US.Aegon AM – Aegon Asset Management has appointed Marianne Hamerslag as institutional business development manager, tasked with extending the business towards investment solutions as well as alternative and illiquid strategies. She joins from Robeco, where she focused on investment solutions. Schroders – Ped Phrompechrut has joined the FTSE-listed asset manager’s multi-asset solutions team to provide specialist advice on private markets. He was previously head of private market solutions at Willis Towers Watson, overseeing the consultancy giant’s advice on private equity, real estate, infrastructure and private credit.Neil Walton, head of investment solutions, said Phrompechrut’s expertise was important “as more of our clients look beyond traditional asset classes to help them deliver the returns they require to meet their liabilities”.Unigestion – The Swiss asset manager has hired Salman Baig and Joshua Seager as investment managers on its multi-asset team. Baig was previously an investment associate at Bridgewater, and at Unigestion will focus primarily on the company’s Cross-Asset Navigator strategy. Seager joins from EQ Investors and will primarily focus on the alternative risk premia strategy.GAM Investments – Juan Landazabal has joined the Swiss asset manager’s London office as global head of trading, a newly created role. He was previously head of fixed income and foreign exchange trading at DWS, and has also led fixed income trading at Fidelity.Cairn Capital – The specialist credit asset manager has appointed Mark Stieler as head of fundamental credit research. He joined Cairn in 2007 and is currently head of loan research, a role he will continue alongside his new position. The company has also appointed Tina De Baere as head of ESG and macro strategy. She has worked at Cairn since 2008, and provides macro strategy input for the firm’s multi-asset credit and managed accounts.Invesco – Invesco’s exchange-traded fund (ETF) business has hired two fixed income specialists to its portfolio management team in response to “strong investor demand” for fixed income ETFs.Wayne Parker joins from FinEx London where he was an ETF portfolio manager and trader, and in his new role he will oversee fixed income and multi-asset products. Deepak Bharti was previously a senior equity ETF portfolio manager at DWS’s DB X-trackers ETF business. At Invesco Bharti will manage fixed income funds in Europe, the Middle East and Africa, as well as working on US equity products. Barnett Waddingham, PGGM, Lazard, LifeSight, Actuarial Association of Europe, Tesco, De Nationale APF, QMA, Aegon AM, Schroders, Unigestion, GAM, Cairn Capital, InvescoBarnett Waddingham – The UK actuarial and consultancy group has appointed a head of data science “to widen its expertise in line with the changing expectations of its clients”, according to a press release.Filip Deryckere has taken on the newly created role. He joined Barnett Waddingham last month from NoisyChannels, a Belgian advisory firm he set up in 2015.“The uses for data science in businesses are manifold and it is an exhilarating time for companies able to harness this,” Deryckere said. “Barnett Waddingham’s large and diverse set of services allows us to go further for our clients, we aim to continuously enhance our offering in the area of data visualisation, machine learning and practical applications based on data science, to the benefit of our clients.”
According to the three organisations, a “third generation” of responsible investors was beginning to do so, with “pockets of excellence” emerging in technical understanding of integrating impact in investment decisions.The PRI said investors were increasingly considering “impact duties” such as decarbonisation targets, gender equality, or the impact of their investments on wider society.However, fundamental legal questions remained, including whether investors were legally required to integrate the sustainability impact of their investment activity in their decision-making processes, or whether there were any legal impediments to investors adopting “impact targets”.Another question, according to the project organisers, was “on what positive legal grounds could or should investors integrate the realisation of the Sustainable Development Goals in their investment decision-making”.PRI, UNEP FI and The Generation Foundation will appoint a law firm to carry out the legal analysis work, which is scheduled to go on until the second quarter of next year.“In some jurisdictions, the legal analysis may find that there are legal impediments to incorporating sustainability impact, in which case the project will recommend policy change”‘A Legal Framework for Impact’ project overviewThe organisations indicated the study would look at how investors should manage their multiple duties – a fiduciary duty to integrate all financially material factors, including environmental, social and corporate governance factors, and their “impact duties” – within existing legal frameworks.“In some jurisdictions, the legal analysis may find that there are legal impediments to incorporating sustainability impact, in which case the project will recommend policy change,” they said.According to the project timeline, a reference group of experts from investment firms was due to have been set up during the first quarter of this year, but this has not yet happened and the project organisers are currently looking for members.The PRI said the group will help support the research by sharing policy developments, questions, concerns and information on the legal, regulatory and fiduciary implications of managing sustainability impact. The new project comes as EU lawmakers are negotiating over the European Commission’s sustainable finance action plan, a major policy initiative that seeks to harness the power of investors to, in the first instance, rein in man-made climate change.Last week the European Parliament and EU Council reached a political agreement on a regulation to create new categories of low-carbon benchmarks, one of three regulations put forward by the Commission last March. The Principles for Responsible Investment (PRI) has launched a project to address “fundamental legal questions” surrounding the consideration of investing activity’s impact on sustainability.The PRI is collaborating with the United Nations Environment Programme Finance Initiative (UNEP FI) and The Generation Foundation on the project, dubbed ‘A Legal Framework for Impact’.The organisations said assessing and accounting for the sustainability impact of investment decisions needed to become a core part of investment activity within the next decade.The project would involve preparing and publishing legal analysis as well as practical recommendations for investors seeking to make “sustainability impact” a core part of their activity.
Swedish pensions and insurance group Länsförsäkringar said it ramped up its investments in green and sustainable bonds last year, tripling its holdings in the debt type to over SEK9bn (€850m) – more than 7% of its total assets under management.Kristofer Dreiman, head of responsible investment at Länsförsäkringar, said: “The rapid move in 2019 has been possible because we are increasingly making our own direct investments in green bonds in the primary market.”He said that since the company had strengthened and focused its management towards this market, it had also been able to positively affect the return.Investments in green and sustainable bonds for the institutional portfolios in the firm’s divisions Länsförsäkringar Liv, Sak and Fondliv increased to SEK9.5bn at the end of 2019 from SEK3.2bn at the beginning of the year, the group said. Issuance of the green and sustainable bonds that the firm now holds is divided between companies, supranational and intergovernmental organisations, both local and global, Länsförsäkringar said, with the bonds coming from 90 different issuers.“We have a clear ambition to increase our proportion of climate-smart investments,” said Dreiman.He said Länsförsäkringar aimed to align its portfolios with the Paris Agreement’s goal of limiting global warming to 1.5°C by 2030.The firm also said an analysis showed most of the capital it had invested in green bonds had gone to issuers that intended to combat climate change, and to those targeting climate adaptation.