Activist asset management can ‘create alpha’, says RWC

first_imgHe told IPE: “The regulatory uncertainties relating to, for example, the Alternative Investment Fund Managers Directive, have left European investors hesitant to look to alternative strategies. But we believe that will change.”Activist strategies are expensive strategies to run. However, the value proposition is higher due to the creation of alpha.”Mannix admits activism has historically had some negative connotations, as a result of the aggressive tactics of some investors, particularly in the US, where the market dynamics are supportive of more explicitly aggressive behaviour.He believes that, in Europe, activist fund managers generally only get things done when they have a positive relationship with corporate management.He added: “It is different in the European market. There, we have to have empathy with the local market dynamics that are varied across the different countries.”RWC took over the Focus Funds from Hermes in 2012. It has three strategies – Japan, UK only and pan-Europe.Mannix said: “We saw the opportunity to reposition the focus funds in the minds of investors and have seen significant inflows into the European strategy since the teams joined us.” Activism is essentially about being an alpha creator, according to investment manager RWC.But to date, activist funds are more widespread in the US.RWC chief executive Dan Mannix said: “In Europe, there is a lack of fund managers who do this well. In addition, there is a lack of capital support from European institutions.”However, Mannix said that, thanks to recommendations – for example, those coming from the UK’s Kay review – there is an increasing belief that fund managers have a duty to be good stewards and engage with the companies they invest in, increasing the interest in pure play activist managers.last_img read more

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Friday people roundup

first_imgEuropean Securities and Markets Authority, Avida International, Comgest Global InvestorsEuropean Securities and Markets Authority (EFAMA) – The Authority has elected three new members to its management board to replace outgoing members whose term expires in November this year. The successful candidates, who will serve two-and-a-half-year terms beginning on 1 December, are:Lourdes Centeno, Comisión Nacional del Mercado de Valores (CNMV), SpainKlaus Kumpfmüller, Finanzmarktaufsicht (FMA), Austria (re-elected)Elisabeth Roegele, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), GermanyThe outgoing members were Kostas Botopoulos from the Hellenic Capital Markets Commission (HCMC) of Greece, and Martin Wheatley of the UK’s Financial Conduct Authority (FCA). Avida – Avida International has appointed Peter Kolthof as managing partner, responsible for Avida’s clients in the Netherlands. He will also focus on multinational companies and the improvement of the investment governance of their pension funds. Kolthof was previously an independent consultant for pension funds. He has also been head of equity at Shell Asset Management Company (SAMCo), as well as finance manager at Shell Chemicals.Comgest Global Investors – Chief executive Vincent Strauss is to give up his seat on the board, as well as his portfolio positions, in 2016, when he is to join the company’s supervisory board. On 1 March, Arnaud Cosserat will take over as chief executive. Cosserat was appointed as CIO last January and has been portfolio manager for European equity at Comgest since 1996. He will keep both positions.last_img read more

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Aviva Investors poaches from LGIM in senior management hire

first_imgClayton most recently was director of group finance at Standard Life, spending six years in the role.He joined the company in 2008 from PwC, where he had worked, in various roles, since 1983.Both will be based in London, joining the executive team and reporting directly to chief executive Euan Munro, who joined Aviva Investors in 2013 from Standard Life Investments.Munro said he was delighted at Craston and Clayton’s joining.“While the business has made considerable progress in the past couple of years, we are just getting started in terms of realising Aviva Investors’ long-term potential,” he said. “I have every confidence David and Mike will play a critical role in helping us achieve our ambitions.” AUM€304bn* European institutions229 Aviva Investors has poached rival Legal & General Investment Management’s (LGIM) head of distribution, hiring Mike Craston as its global head of business development.The appointment comes as the asset manager grows its senior management team, also naming David Clayton as CFO.The hire of Craston comes only a year after he was named vice-chairman of LGIM’s US business, which he has also overseen as chief executive.During his decade at LGIM, Craston has also served as managing director of global institutional business, responsible for pension fund clients, joining in 2004 after working at Aegon Asset Management and Scottish Equitable Asset Management. External institutions€42.9bn (Source: IPE Top 400 Asset Managers 2015) Aviva Investors fact sheetAviva Investors  *As of 31/12/14 External worldwide€96.4bnlast_img read more

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ABN Amro scheme targets emerging market debt, catastrophe bonds

first_imgThe pension fund has introduced a dynamic investment policy based on nominal interest rates and coverage ratio, scaling back its return portfolio when funding hits 140%.Its matching portfolio is set within a bandwidth, ranging from a minimum of 40%, when 20-year interest rates are negative, to 85%, when 20-year rates are more than 4%.The pension fund has set upper and lower limits on portfolio adjustments, to avoid having to make transactions – and incur trading costs – on limited market movements.As of the end of 2015, its entire interest hedge – also including liquid assets and government bonds – covered 64% of the interest risk on its liabilities.The scheme fully hedged the currency risk on developed market equities.It acknowledged it had failed to grant indexation, as the consumer index had been at zero, adding that its financial position had been too weak to pay any inflation compensation in arrears.As of the end of May, the scheme’s day-to-day funding stood at 114%.The ABN Amro Pensioenfonds has 97,500 participants in total, of whom 19,800 are workers and 25,625 are pensioners. ABN Amro’s €23.5bn pension fund in the Netherlands has started investing in catastrophe bonds and emerging market debt in a bid to further diversify its investment portfolio.According to its 2015 annual report, the scheme is looking to increase its 0.9% allocation to insurance-linked securities to 5%, and its 4.2% allocation to emerging market debt to 10%. The ABN Amro Pensioenfonds reported an overall annual return of 1.7% for 2015, with its return portfolio generating 4.4%, due chiefly to the rebound in equity markets.By contrast, it lost 1.6% on its matching portfolio, due largely to rising interest rates.last_img read more

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PKA returns 5.6% in H1 on low interest rates and infrastructure

first_imgDenmark’s PKA, which runs three social and heathcare sector pension funds, has reported a 5.6% investment return for the first half of the year in a period when many pension funds say results have been depressed by weak equities markets.The DKK250bn (€33.6bn) pensions provider said low interest rates and its infrastructure investments were among factors boosting returns in the January-to-June period.In 2015, PKA made a 1.7% full-year investment return.Peter Damgaard Jensen, chief executive, said: “At a time when labour-market pensions on a with-profits (gennemsnitsrente) basis are being declared unfashionable, it is satisfying to note that we have achieved a great result for the first six months.” He said he was very pleased with the result in the light of a turbulent period on the financial markets and Brexit.If the trend seen in the first six months continued throughout the year, it would be a good year for PKA and its members, he said.In absolute terms, the first-half return was DKK11.1bn.PKA said the result had been generated by alternative investments including infrastructure, corporate bonds and private equity investments as well as by the firm’s interest-rate hedging activity.Within fixed-income, emerging markets’ bonds produced a high return, and the real estate portfolio delivered a pleasing ongoing return seen in the light of the low level of interest rates, it said.PKA said it would continue to focus on alternative investments, and particularly on infrastructure investments such as the recent investment in a biomass power plant in Northern England and co-investments with private equity funds.This was both because this type of investment made a positive difference environmentally and produced a good return for members, but also because they reduced costs, he said.“It requires some internal resources, but the benefit is that we save costs on fees to managers by investing directly without compromising on quality with our investments,” he said. The three pension funds run by PKA are the Healthcare Professionals’ Pension Fund (Pensionskassen for Sundhedsfaglige); the Pension Fund for Nurses and Medical Secretaries (Pensionskassen for Sygeplejersker og Lægesekretærer) and the Pension Fund for Social Workers, Social Education Practitioners and Office Staff (Pensionskassen for Socialrådgivere, Socialpædagoger og Kontorpersonale).Combined pension contributions at the three funds rose to DKK3.9bn in the first half of 2016, PKA reported, up from around DKK3.7bn in the same period last year.last_img read more

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ATP to scrutinise private equity risks, says new CEO

first_img“I think there are limits as to how successful you would be with active, tactical asset allocation,” Hyldahl said. “What we do is more top down, in the sense that you construct a portfolio in a robust and balanced way, and then it is bottom up in that you make sure that the asset pricing is at the right level.”At the beginning of 2015, ATP officially started applying its new risk-factor-based portfolio construction approach to its DKK100bn investment portfolio that consists of its free reserves, or bonus potential. It was designed to fare well in all market environments, distilling assets into four risk factors — interest rates, inflation, equity, and ‘other factors’ — and then using these as building blocks for the portfolio.The building blocks are used to give ATP full consistency between its asset pricing approach and risk management approach, Hyldahl said.“We will be continuing this this work, both on the construction side and with the bottom-up approach,” he said. “It is exactly what has been developed in ATP, but it has not been fully implemented yet and we will continue to work on this.”The next stage was to refine the way the four factors are modelled, Hyldahl continued, with a particular focus on ‘other risks’.Private equity under scrutiny“We need to refine the illiquidity risk aspect, and how we price this risk when we invest in private equity,” the CEO said. “Basically you give a commitment to a private equity fund, but they have the option to deploy the money at their discretion over a period of time.“What is the value of that option, and how much return should we get for giving the manager the freedom to deploy that money when they decide? There is a lack of control in the flexibility we give to the manager, and that has a price.”Similarly, extension risk needed to be taken into account with private equity fund investment: the chance that the investment would continue for longer than anticipated because holdings could not be exited within the standard 10-year timeframe.“That type of risk is a risk that is on our balance sheet and it seems to be in the favour of the private equity funds. We need to make sure we get adequate return for all these types of flexibility that we grant the managers,” Hyldahl said.Unlisted assets generated a third of ATP’s overall return for 2016, according to its results released last week.Asked about the current market environment, Hyldahl said uncertainty would be a “big theme” for this year. However, broadly speaking, he said the uncertainty brought about by Brexit and the change of government in the US was priced into financial markets.“But it is very difficult,” he added. “It depends on what likelihood you put on some tail events – and maybe some of it you cannot even foresee.”The CEO continued: “There are too many scenarios to be able to position yourself, so at the end of the day when you line up 10 or 20 large big-effect scenarios, you end up with having to have a portfolio that is very robust and that is the only approach that we can have.”Protectionism was worrying him, he said.“Global trade has served the world really well for many years, and maybe the wealth has not been distributed well over 30 years, but overall, global growth has been very high and I think if we start to put up barriers to global trade that would be bad for the global economy,” Hyldahl said.“I think protectionism is the wrong way to address the unequal distribution of wealth,” he said.The pension provider posted a 15% gain in 2016. The new captain of Denmark’s DKK759bn (€102bn) statutory pension fund ATP intends to put private equity managers under the microscope to address a perceived imbalance in control.Far from changing tack on ATP’s investment strategy in order to navigate 2017’s many uncertainties, Christian Hyldahl told IPE he wants to deepen the fund’s ‘all-weather’ portfolio approach.“I truly believe that is the right way to run a portfolio in the uncertain times that we’re in, and I don’t believe in a very active, tactical asset allocation,” Hyldahl said.He was head of the asset management division at Nordea for two years, following four as CIO, before officially succeeding ATP’s last chief executive Carsten Stendevad on 1 January. He cited his experience at the Nordic financial services giant as demonstrating the success that an all-weather portfolio can achieve.last_img read more

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Dutch sector fears ‘unworkable political compromises’ for new system

first_imgAs worst-case examples, Riemen cited “a pensions system with individual assets” or “we support a freedom of choice combined with full mandatory participation”.“These kind of statements could be very paralysing, as they raise a lot of questions,” he said.Riemen stressed that there was no margin for paralysis, “as millions of participants can’t be waiting in fear of rights cuts every year”.In his opinion, employers and unions (known as the “social partners”) and the pensions sector should produce a plan before the formation of a new government starts.Benne van Popta, employer chairman of the €67bn metal scheme PMT, agreed, arguing that an accord between these parties would offer the negotiating political parties a widely supported solution.Earlier, Jetta Klijnsma, state secretary for social affairs, repeatedly urged the social partners to reach a deal for a new pensions contract.She warned that, without a joint proposal, the social partners and the pensions sector would lose the direction, leaving the decisions to the negotiators for a new cabinet.Representatives of employers and unions were reportedly in favour of waiting until after Dutch elections next month to announce a deal. They are thought to believe that announcing a plan during coalition negotiations would help avoid unwanted government interference.Van Popta said that in the worst case scenario, with differing political views on pensions, there could be “a very complicated compromise which has to be implemented by the sector within a short period”. The Dutch pensions industry has voiced fears of “unworkable political proposals” for a new pensions system, if the sector doesn’t come up with proposals of its own.Gerard Riemen, director of the Pensions Federation, warned that a government coalition agreement wouldn’t offer any footing for a sound system update.Speaking to IPE’s Dutch sister publication Pensioen Pro, Riemen said his biggest worry was that a coalition agreement would contain “ill thought-out sentences” that “nobody knows how to implement”.A new government is expected to comprise four or even five political parties, with widely differing views on a future pensions system.last_img read more

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Asset management roundup: ERAFP awards €2bn currency mandate

first_imgThe mandate is initially for four years, with the option for ERAFP to extend for two successive two-year periods.Millennium Global said the mandate meant it had grown its assets under management by 50% since the start of 2017. The currency specialist runs $21bn (€17bn).BlackRock, JP Morgan collaborate on ESG bond indicesJP Morgan has launched a range of global fixed income indices designed to tap into the growing demand from bond investors for environmental, social and governance (ESG) considerations when investing in emerging markets.The JP Morgan ESG index, conceived in conjunction with BlackRock, the world’s largest asset manager, covers more than 170 countries with over 650 issuers analysed on a daily basis.“Responsible investing is becoming the cornerstone of many of our clients’ strategies and having access to a proper global fixed income benchmark that integrates ESG is essential,” said Gloria Kim, head of the global index research group at JP Morgan.Sergio Trigo Paz, head of BlackRock’s emerging market debt (EMD) team, said that strong ESG practices worked in favour of creditworthiness over the long term. He added: “Up until now, ESG in emerging market debt has been more bespoke and project-based, as opposed to providing solutions at scale.“Establishing these benchmarks will be instrumental in redefining the investment universe and setting an industry standard to help make ESG investment within EMD more broadly accessible to all investor types.”The index applies an ethical screen to thermal coal, tobacco and weapons, as well taking account of the United Nations Global Company principles.Amundi launches European leveraged loan fundAmundi – Europe’s largest asset manager with €1.4trn under management – is to launch a European leveraged loan fund aimed at institutional investors.Amundi Leveraged Loans Europe 2018 will be structured as a sub-fund of the firm’s Luxembourg-domiciled Sicav and will invest in senior secured leveraged loans that have been issued to finance leveraged buy-outs or larger acquisitions.Thierry de Vergnes, head of acquisition debt funds at Amundi, said: “We invest in both the primary and secondary markets with the aim of taking advantage of market opportunities, and we also seek diversification across both sectors and geographic regions in the portfolio.“The objective of this active, diversified management is to generate regular returns with low volatility.”Amundi said the portfolio of leveraged loans would invest mostly in issuance from private equity-owned European companies with a target return of 4% above Euribor until the fund matures in 6-8 years’ time.The asset manager runs €5bn in its private debt team and €3bn in its leveraged loans team. French public sector pension fund ERAFP has awarded a currency mandate worth roughly €2bn to Millennium Global Investments.BNP Paribas Asset Management and Russell Investments were named as back-up managers for the mandate to hedge foreign exchange risk linked to ERAFP’s €30bn portfolio.“The strategy implemented will include both a passive component and a dynamic component of foreign exchange risk hedging,” the pension fund said in a statement.Millennium Global was selected in particular for the “robustness” of its management process, ERAFP added.last_img read more

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MP Pension chief calls for Danske Bank’s Borgen to exit immediately

first_imgJens Munch Holst, CEO, MP Pension In his resignation statement last week, Borgen took responsibility for the shortcomings, despite Bruun & Hjejle – the law firm that conducted the review of Danske’s Estonian operation – finding that he was not legally culpable. The head of Danske Bank should leave his job immediately, following the money-laundering scandal at the Estonian branch of Denmark’s biggest bank, according to the chief executive of one of the country’s largest pension funds.Thomas Borgen, CEO of Danske Bank, resigned on 19 September – the same day the Nordic banking giant published an internal report into the money-laundering scandal. In a statement announcing Borgen’s decision, Danske said he would continue in his position until a new CEO was appointed.Jens Munch Holst, chief executive of the DKK114bn (€15.3bn) MP Pension, said: “We have confidence that Danske Bank will safeguard itself as well as possible against money laundering in the future… But we don’t understand how the director Thomas Borgen can still turn up at Danske Bank.”Holst added: “He must stop immediately… anything else is incomprehensible and unsatisfactory.”center_img Thomas Borgen, outgoing Danske Bank CEOMP Pension – which covers academics at Denmark’s public sector universities and schools – currently holds almost DKK600m of Danske Bank stock in its portfolio but has “quarantined” the company since July due to its concerns over the money-laundering case, meaning the pension fund cannot add to the position.However, Holst emphasised that the bank and its staff were running a good business overall. MP Pension’s investment team had discussed whether the equities should be sold off entirely, but Holst said that it did not think this was appropriate.“Danske Bank is important for the whole of Danish society,” Holst said. “So we prefer to remain as owners of the company in order to make our influence count.”A year ago, Danske launched an investigation into its branch in Estonia because of suspicions that it had been used to launder several billion kroner between 2007 and 2015. The resulting report found that staff in Tallinn may have helped or colluded with customers on suspicious transactions. It identified around 15,000 customers as being associated with a non-resident portfolio in question, and a total flow of payments of some €200bn. Danske Bank said a “significant part” of this was likely to be suspicious.At the time of publication Danske Bank had not responded to questions from IPE on the implications of the scandal for its pensions business, Danica Pension.Danske Bank’s share price has lost more than a quarter of its value since the start of this year, falling from DKK242 at the start of January to DKK170 when the Danish stock market closed on 21 September.last_img read more

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Dutch financial education body calls for mandatory pensions saving

first_imgIt suggested that the automatic pensions accrual would be subject to conditions, such as a minimum accrual percentage.Only those who could prove having sufficient income for all their expenses after retirement should be allowed to deviate from the default option, Nibud said.The consumer organisation, which surveyed more than one thousand 65 to 80-year olds, indicated that one in three pensioners already had problems getting by financially.In particular, it found that respondents had financial difficulties when they had been divorced (51%), were living in rental property (33%), or had been self-employed (44%). Nibud added that 36% of Dutch pensioners had less than €5,000 in savings, and that it was worried about low-income pensioners who needed care.Nibud made clear that it did not support suggestions to allow workers to use pension savings for the purchase of a home.“The expectation that pensioners can live off the proceeds of their property is too optimistic, as most pensioners want to keep on living in their house as long as possible for social and health reasons,” it said.In the organisation’s opinion, every Dutch citizen should be offered an insight into their income and expenses after retirement every five years, because careers were more diverse than ever.It suggested that employers, pension funds as well as organisations for the self-employed should facilitate periodic “insight conversations”.Recently, Dutch employer organisation AWVN proposed to make the second pillar accessible for all workers, by replacing the current special tax benefits for self-employed with tax-friendly pensions accrual.The AWVN said that it had noted that social security had lost its connection with the labour market, resulting in a too big gap between employees and self-employed. Nibud, the Dutch consumer organisation for financial education, has called for mandatory pension saving for all workers, including the self-employed.Citing several surveys showing that many people fail to take the initiative to financially prepare for retirement, it said it feared that more pensioners would struggle to get by in 15 to 20 years time.According to Nibud, looking ahead and setting money aside for later was difficult for consumers, who also tended to have an aversion against moving to a smaller and more affordable home.In its opinion, people would benefit more from automatic pensions saving than from organising their financial future themselves, as they almost always put more value on their present situation and spend accordingly.last_img read more

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