Swedish buffer fund AP4 saw investments return of 14.1% in 2013, with equities the largest single contributor, producing a 25.5% return.The fund said it made a net profit of SEK32.4m (€3.6m), or 15%, up from SEK22.7m the year before.Reporting annual results, AP3 said 2013 was characterised by improving economic conditions, especially in the US. The fund’s capital totalled SEK258.5bn at the end of 2013, up SEK25.8m from 2012, after payments of SEK6.9m to the pension system. Fixed income investments ended 2013 with a 0.1% loss, while credit made a return of just 0.13%The inflation risk category returned 1.6%, and currencies ended with a loss of 0.9%.Absolute-return strategies generated just 0.3% last year.AP3 said it had now achieved its target of 4% real annual return measured over the last three, five and 10-year periods.Kerstin Hessius, chief executive at AP3, said the Swedish pension system had come under financial pressure again, which would result in a 2.7% cut in pensions this year.“This unfortunate situation is due primarily to labour market conditions,” she said.The positive performance of the AP funds will have a positive effect on pensions, she said, but she added that this would not be seen by Swedes until 2015.The latest forecast from the Swedish Pensions Agency suggested pensions would increase by more than 5% next year, she said.
Invesco Real Estate has bought a portfolio of four mid-market InterCityHotels in Germany for a UK institutional investor as part of a pan-European long-lease strategy.The €80m investment is, Invesco said, a long-term play for the client, with average leases of between 15 and 25 years.The hotels, in Darmstadt, Mainz, Rostock and the Frankfurt Airport, come with 30-year hybrid leases to operator Steigenberger Hotels.Long-lease strategies have been very popular recently with UK pension funds pursuing liability-driven investment (LDI) strategies, but most are focused on the UK property market. Invesco told IP Real Estate last year that it had been devising a pan-European long-lease strategy.The fund manager was unable to reveal the identify of the UK investor behind its new mandate.According to Mark Socker, senior director of hotel fund management at Invesco, the German hotel market is a “relatively stable and attractive marketplace”.Invesco said it had a number of mandates with an allocation to the hotel sector and was assessing other opportunities across Europe – with a focus on mid-market (3-4 star) hotels.“This part of the sector offers the optimal risk/reward balance,” Socker said.Global hotel consultancy HVS London estimates that total hotel transactions across Europe reached a value of €7.7bn last year – up 39% on 2012 and at their highest point since 2007.
Today, Østergaard said the system in Denmark was generally good, but still resulted in ordinary families being hit by an effective marginal tax on pension savings.This is much higher in some cases than the rate they paid on their income, he said.Østergaard said there had to be security for pensioners who had the least, and added that the tax-financed public pension and labour-market pensions had to remain the basis for Danish pensions.He said the desire and ability of people to make pension savings should not be discouraged by the complexity of pension rules.“There are no easy solutions, and a thorough piece of analysis will be required to create a viable solution,” he said.“We should not throw ourselves into changes without a full and clear picture of the consequences.”The ministry said the pension commission’s work should involve key stakeholders and organisations, and will report to the government by Autumn 2016.Pensions and insurance industry association Forsikring & Pension (F&P) welcomed the decision to establish the commission and said it was important that it looked at the offsetting rules for public benefits, since this destroyed the incentive to save for retirement.But it said the real problem was that pensions were by far the most heavily taxed type of savings in Denmark. A year before retirement, pension savings were taxed at more than 170% and still at well over 100% five years before retirement, F&P said.Per Bremer Rasmussen, chief executive of the association, said: “For a broad group of citizens, it cannot pay to save when they get close to retirement.”According to Bremer Rasmussen, it paid to stop making pension payments and take an early exit from the labour market for some Danish citizens, adding that both of these actions were contrary to the government’s stated aims.He said it was not occupational pensions and individual pensions that made things complicated and destroyed incentives to save, but rather the rules for public pension contributions.“Therefore, we need to look at offsetting rules in the public system,” Bremer Rasmussen said, acknowledging that solutions were not simple. Denmark is to create a commission studying the country’s pension system to find solutions for complex rules and high taxation of pensions, the Ministry for Taxation has announced.The commission will be chaired by Torben Andersen, professor of economics at the University of Aarhus.Morten Østergaard, the minister for taxation, said: “Now we want to let a number of experts look at the system in detail, so we can get ideas for a more transparent pension system, which is attractive for everyone to save for retirement.”Last month, Østergaard revealed he was open to the idea of setting up a commission.
Henrik Henriksen, chief strategist at PFA Pension, said that while stock and bond markets in Denmark had started with a fall this morning, the Greek crisis was relatively isolated.“The European economy is in better shape than the last time the Greeks were in crisis,” he said.The latest growth indicators from European companies were at their highest level in four years, despite the fact the data was collected in the middle of June, when the Greek crisis had grown, Henriksen said.He said he was not nervous about the Greek referendum set for 5 July to vote on the aid package from the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission.“There will be financial turmoil for rest of the week, and the Greek opinion polls ahead of the referendum may have a central role,” he said. If Greeks do vote in favour of the creditors’ bailout, as figures now indicate they will, and shares start to recover, the market will then probably rally, Henriksen said.“But it requires a Greek government that can implement a yes,” he warned.Schelde said he agreed with the consensus there would be limited contagion in the event of a Greek exit from the euro.“I don’t think markets will start pricing contagion effects in any serious way, but, obviously, Greek assets are selling off sharply, and, combined with the increased uncertainty, that does raise the risk premium in other markets as well,” he said.Schelde said Nordea Life & Pension in Denmark, because the situation was so unclear and could go both ways, would not be making any tactical moves at the moment to protect its investments.“But should markets outside Greece start to sell off sharply for some reason anyhow, I would tend to see that as an buying opportunity,” he said.Henriksen said there was no prospect of the stock market falls seen earlier today escalating because of the positive trends in the European economy and also because private investors have positioned themselves defensively against the Greek turmoil.He also said the European Central Bank’s quantitative easing programme announced in January could be used to stem the turmoil in the markets. Danish pension providers PFA Pension and Nordea Life & Pension expect continued volatility on financial markets this week as the crisis over Greece’s debt repayments remains acute but believe it unlikely the situation will escalate to cause broader troubles in the EU economy.On Monday morning, banks and cash machines in Greece were closed as the Greek government imposed capital controls after talks broke down with its creditors.Anders Schelde, CIO at Nordea Life & Pension in Denmark, told IPE: “The situation is very unclear, so obviously there is a risk of further falls. But let’s not forget there could also be positive surprises that could send us in the other direction.“Thus, it is really anybody’s guess at this stage, and market volatility seems to be the only certainty.”
The remaining 17.5% was owned by New Zealand-based Equity Partners Infrastructure Company (EPIC), which announced over the summer it was discussing the sale of its stake to an undisclosed bidder.In a statement to shareholders, EPIC said the sale resulted in a “very good” valuation but declined to disclose a price.In March 2012, EPIC has NZD92m (€56.5m) in assets under management, with its stake in Moto its only asset.At the end of March, USS had 21.4% in private market assets, including infrastructure, property and inflation-linked debt.It returned 17.9% over the course of the 2014-15 financial year.In July, it announced it entered a £130m direct inflation swap deal with Yorkshire Water, building on its past activities with regulated utilities that saw it in 2013 provide £100m in debt to Affinity Water.Its other infrastructure holdings include a stake in London’s Heathrow Airport and part of the rail line connecting Australian city Brisbane with its airport. The £49bn (€66.9bn) Universities Superannuation Scheme (USS) has acquired the UK’s largest motorway service station operator for an undisclosed sum.USS said in a statement it reached two separate, definitive agreements that will see it acquire a 100% stake in Moto Hospitality, which comes only a few months after the Abu Dhabi Investment Authority and the Ontario Municipal Employees Retirement System were part of a consortium to buy Germany’s Tank & Rast.The acquisition of Moto comes after reports that Australian infrastructure fund manager Macquarie, the previous majority owner, was looking to liquidate its stake, bought in 2006 as part of a £1.8bn sale of the company.The UK’s largest pension fund said it acquired a 82.5% stake in Moto from an unnamed group of institutional investors.
She added: “I would hope we might want to adopt it because, if we want to stay part of a united Europe, that’s an area that makes sense to align ourselves with.“I can’t tell you exactly what’s going to happen, but that would be my best answer for you.”Altmann’s comments were in response to a question from Catherine Howarth, chief executive of ShareAction, a responsible investment campaign organisation that was also co-host of the event.Citing provisions in the IORP II compromise text relating to ESG factors and climate risk, Howarth had asked Altmann to comment on whether the UK government – “whatever happens on the Brexit question” – will ensure that UK pension savers “have the same level protection as other pension savers in the EU”, whether this be through the transposition of the IORP Directive or a new law.The IORP II Directive has still to be passed by the European Parliament, but this is largely seen as a formality, given the agreement reached on a final compromise text. A plenary vote is understood to be due to take place in September, and there is a two-year timeline for member states to implement the directive. The newly agreed revised IORP Directive will have to become UK law despite the vote to leave the European Union, given the overlap between the timetable for transposition of the directive and that for the UK’s remaining an EU member, pensions minister Ros Altmann has suggested.Speaking at an event to mark the passing of two years since the Law Commission released its report on the fiduciary duties of investment intermediaries, Altmann said she was “really proud of work the UK has done within Europe to get the IORP to the place where it has ended up”.She added: “We have protected the UK pensions industry to a large degree. It could have been a pretty big disaster in some ways.”Qualifying her answer to a question about the UK decision on IORP II by saying that “I can’t tell you what is going to happen because, as we all know, nobody knows”, Altmann then said she would expect that, as “we are still in the EU, and we are going to be in the EU for at least another two years, by then, the IORP will have started […] we will have to adopt it anyway”.
But, with interest rates continuing at low levels and no end in sight to the quantitative easing policies of central banks, he questioned the use of annuity rates in the minimum funding standard calculation.“Private sector DB schemes don’t have to go to the market to purchase annuities, yet we continue to assume they do, for the minimum funding standard calculation,” Moriarty said.“It would be a real tragedy if those schemes that have survived were to be forced to wind up because of the way in which we value the liabilities, rather than focusing on their ability to pay out benefits over the next 30 or 40 years.“It is now time to take a wider look at DB funding and the minimum funding standard basis.”Moriarty also called for action on the issue of universal pensions, the other key aspect of Ireland’s pension system he said needed urgent attention.“It has been parked for too long, and we owe it to future generations to start something now so we can pre-empt the challenges of changing demographics,” he said. But he cautioned against making any changes that would make it more difficult for the “many good employer schemes” that exist to continue to operate.“While there are many benefits to having greater scale,” he said, “it is also important engaged trustees and employers can continue to operate schemes that offer high contribution rates and very low charges.” The Irish Association of Pension Funds (IAPF) has called for a rethink on the calculation of defined benefit (DB) pension scheme liabilities, given the financial climate.Speaking at the association’s annual benefit conference in Dublin, Jerry Moriarty, chief executive at the IAPF, said a big issue exercising trustees was the continuing increase in the valuation of the liabilities of DB schemes, as a result of historically low interest rates.“The DB schemes that have survived have generally done so because of tough decisions and considerable effort and pain for members and employers,” he said.“Many employees have seen their benefits reduced, and many employers have had to agree to significant increases in their contributions to those schemes.”
Veritas, the smallest of Finland’s four pension insurance companies which provide the bulk of the country’s earnings-related pensions, has poached a top investment manager from one of the big two pension insurers.Kari Vatanen, who was head of cross asset derivative strategies and allocation at the €47.4bn pension insurer Varma until now, has been appointed as Veritas’ new CIO.He will replace Niina Bergring who left at the end of December after six years in the role to become executive vice president, asset management at Aktia Bank.Vatanen – now on “gardening leave” from Varma, according to his LinkedIn profile – has spoken out in Veritas’ announcement of his appointment about the current need for institutional investors to be agile and change their beliefs. “It is hard to imagine a more exciting time than now to start working as a CIO in a pension insurance company,” said Vatanen, who will take up his new role at the €3.5bn pension provider on 1 March.“Speaking of economic growth, we are in the late cycle. Behind us we have more than 10 years of rising equity market and the rates have declined to the extreme low levels,” he said.Though traditional asset classes had produced strong returns for many years, he said risks seemed higher in forthcoming scenarios than expected returns.Capital markets were already strongly supported by central banks, he said, and all markets could be driven down at the same time when growing geopolitical tensions erupted, adding that there were then no means left to diversify the risks in the investment portfolio.“In this economic environment it is valuable for institutional investors to be agile and able to update their investing beliefs,” Vatanen said.When questioned by IPE, Vatanen declined to comment on any concrete plans he had for Veritas, but referred to his previous writing on diversification and the lack of it.“Diversification to the alternative asset classes or even to the macro factors or alternative risk premia doesn’t automatically guarantee well-diversified portfolios in all the economic environments,” he told IPE.“Investors should be aware of the tail dependencies between asset classes or factors and be ready to adjust their expectations and portfolio risk levels in the changing market environment,” he said.According to first half 2019 report, Veritas had 39.3% of its assets in fixed income, 36.8% in equities, with 14.5% in real estate and 9.3% in “other” investments – a category which included 7.7% in hedge funds.
The EU financial markets watchdog has told national supervisory authorities not to rush to any supervision or enforcement of ESG-related disclosure obligations for benchmark administrators because the rules detailing those obligations are not ready.The European Securities and Markets Authority (ESMA) also wrote to the European Commission about the need for “prompt adoption” of the so-called delegated acts.The draft delegated acts were published on 8 April for a one-month consultation period, while the new environmental, social and governance (ESG) disclosure requirements under the Benchmarks Regulation were applicable from yesterday. In its letter to the Commission, ESMA said that without the delegated acts, benchmark administrators face legal uncertainy. “Without the delegated acts, there is no specific selection of ESG factors or appropriate level of transparency specified by the new requirements,” ESMA wrote in its “opinion” document to the EC.” This gives rise to legitimate doubts on their legal consequences and proper application.“The range of potential approaches by administrators will cause the sustainability-related aspects of benchmarks to be incomparable by users of benchmarks, preventing them from being able to choose appropriately amongst benchmarks in relation to ESG factors for investment purposes.”It added: “This risks generating a fragmented approach to sustainability-related disclosures for benchmarks in the Union, which is contrary to the objectives of the new disclosure requirements.”National supervisory authorities were told not to “prioritise any supervisory or enforcement action against administrators” regarding the new requirements until the delegated acts apply.After the Commission adopts the delegated acts they will be subject to a scrutiny period by the European Parliament and by the Council before they enter into force. The rules it has proposed are based on recommendations from the technical expert group (TEG) that has been advising it on sustainable finance.For benchmarks pursuing ESG objectives, the disclosure duties referred to by ESMA oblige benchmark administrators to:include in their methodology document an explanation of how the key elements reflect ESG factors for each benchmark or family of benchmarks; andinclude in their benchmark statement an explanation of how ESG factors are reflected in each benchmark or family of benchmarks provided and publishedThe obligations stem from legislation adopted under the Commission’s sustainable finance action plan, which amends a pre-existing EU benchmarks regulation and is arguably better known for the EU climate benchmark categories and labels that it introduces. These are voluntary.Cost benefit considerationsSmart beta index provider Scientific Beta recently commented on the draft delegated acts relating to the sustainable finance-related benchmark regulations.Echoing criticisms it has made of the underlying TEG proposals, it said the draft delegated act relating to benchmark statement disclosures presented “long lists of ESG indicators to be computed and disclosed”.It said “such extensive” minimum disclosures would entail material costs for benchmark administrators and stood to harm competition in the industry, with the minimum disclosures required also being of low “overall informational potential”. In an explanation of the delegated act, the Commission said it expected compliance costs with the new rules to be limited, arguing it was “already current market practice for benchmark administrators to disclose ESG information in so-called ‘factsheets’”.It said it was proposing to “refine further the approach suggested by the TEG, streamlining in particular the list of ESG factors to be disclosed, simplifying the terminology used and referring, where applicable, to international standards, treaties and conventions”.
The home’s kitchen is practical with brand new fittings. PICTURE: Picturesque Real Estate PhotographySelling agent Michael Skuse of LJ Hooker Cairns Marlin Coast said the property was one for aspiring buyers to inspect. “There are no small spaces in this house. Everything is huge,” he said. “The bedrooms are massive and they flow out onto a second-storey balcony. The ensuite is also very big.“I imagine the people who inspect this will be an aspirational family. It’s far from your typical brick home.” The parcel of land the three-bedroom home sits on totals 1200m², a key feature for potential new owners to consider. “It’s a massive block of dirt,” Mr Skuse said. “It has a pool house with his and hers change rooms. The pool house is not typical; it was a perk built to lift the prestige of the area.“The garden is perfect for entertaining, for the kids to play. It’s fully tree-lined on three of the four boundaries with beautiful, big established trees.” The living room flows to the outdoor space. PICTURE: Picturesque Real Estate PhotographyMore from newsCairns home ticks popular internet search terms2 days agoTen auction results from ‘active’ weekend in Cairns2 days agoHe said the architectural design set the home apart from the average Cairns property. “You can see that it’s special by looking at the price point,” he explained. “It’s architecturally designed and that gives it unique character. It’s the antithesis of a cookie-cutter family home. When you walk in you have this atrium that is flooded with light. It’s been very thoughtfully built.” The ideal buyer for this home is one with taste and style according to Mr Skuse. “There are discerning buyers out there who are looking for more than a project home. They’ll be moving up from their first or second home and will want somewhere to settle down, somewhere to be their forever home.“This property sits in a secure residential enclave. It’s more than a typical home.” 18 Cascade Ave, Kewarra Beach is on the market for $765,000. PICTURE: Picturesque Real Estate PhotographyA STUNNING Kewarra Beach home is on the market for just the second time since it was built in 2000. The grandeur of 18 Cascade Ave cannot be understated, as the property boasts all of the trappings of a comfortable, safe and secure family home but with the glamour of an architecturally designed display home. Each bedroom boasts its own ensuite. PICTURE: Picturesque Real Estate PhotographyThe home has recently been retiled with glossy, show stopping grey tiles and features stone benchtops.Mr Skuse said the internal living area blended seamlessly with the outdoor area. “There are stacking sliders that open right up to the outdoors, so naturally most of your living would be done outdoors at this home,” he said. “Opening those doors up also allows for a beautiful breeze through the home.” The former display home has only changed hands twice since it was built in 2000. PICTURE: Picturesque Real Estate PhotographyMr Skuse said the family who owned the property had bought it in 2004 and put it on the market because the home had outgrown them. “The home definitely served its purpose for about 14 years for them, but now it’s time to move on from this house,” he said. “Having them live here for so long is testament to what a lovely home and lovely place this is to live in.”