BlackRock to enter Dutch DC pensions market
He added: “I can confirm that our plans have reached an advanced stage, and we believe we will launch a pension product before the end of this year.”Van Heel pointed out that companies with operations in the Netherlands were switching increasingly from defined benefit to DC arrangements.“This trend is gaining momentum as a result of the continuing uncertainty, increasing complexity and rising cost of defined benefit plans,” he said.“This is a trend that cannot be reversed. For us, this creates opportunities.“After all, BlackRock has a wealth of experience implementing DC plans in other countries. In addition, our office in the Netherlands has a lot of expertise, both on the retail and on the institutional side of the business.”Although Van Heel was not at liberty to divulge any details at this point, he made a point of adding that BlackRock’s pension offering would not necessarily take the form of a PPI, the new Dutch DC pension vehicle.“There are other ways to implement DC plans that might be better suited to the purpose,” he said. BlackRock, the world’s largest asset manager, is moving into the market for defined contribution (DC) pension provision in the Netherlands.Marc van Heel, country manager for the Benelux area, told IPE sister publication IPNederland that BlackRock intended to launch a DC product before the end of the year.The asset manager is currently exploring a possible collaboration with a partner specialising in benefits administration.Van Heel declined to reveal which players BlackRock was speaking with, but he implied that talks were progressing well.
Realdania, the Danish philanthropic organisation that supports projects in the built environment, made a 15.9% return for the calendar year 2014 on its investment portfolio, slightly less than the previous year’s 16.3%.By far the best-performing asset class in the overall portfolio – worth €2.9bn at end-2014 – was equities, which achieved a 25.1% return.Within this asset class, listed equities provided a 25.5% return, while private equity made 22.9%.Listed equities form 49.8% of the portfolio, with a further 8.2% in private equity. Alternatives were the next highest performer, returning 9.5% on a 2.1% allocation, while real estate made 5% from its 10% allocation.Fixed income returned 1%. Bonds make up 29.9% of the portfolio, split roughly 40:60 between investment-grade and non-investment grade bonds.Realdania’s investment activities are built on value creation through active management, primarily using external asset managers in more than 70 portfolios.It invests globally to achieve diversification and believes that equities, credit bonds and other equity-like assets give higher returns than government bonds over the long term.In its annual report, Realdania said its strategic asset allocation aimed to provide the highest risk-adjusted returns throughout an entire economic cycle.But it went on to point out that expected annual investment returns were highly dependent on the current phase of the economic cycle.It said: “Realdania therefore believes dynamic tactical asset allocation creates value and exploits macro-economic fluctuations and inefficient market conditions to create additional returns within the framework of the investment strategy.”Chief executive Jesper Nygård added: “It’s been a good year for us, with satisfactory results, especially when you consider it has been a difficult year on the stock markets, with substantial price fluctuations and large differences in returns between the various stock markets.“Our forecast for the coming year is that we will achieve a lower return than for 2014, when we benefited from very favourable price developments.”
In a position paper, the association recommends that all member states automatically recognise pension funds in an effort to reduce the administrative costs and timescale involved in the WHT refund process, which in some instances has spanned a decade.The paper states: “If a pension fund, according to the law of its home country, qualifies as a pension fund – or other privileged entity or tax-exempt investor – it shall automatically get recognition as a pension fund, according to statutory terms or categories in the host country.”It also notes that, in a number of cases, member state practices have been found to be discriminatory by the ECJ.Matti Leppälä, chief executive at PensionsEurope, argued that the current system was too complex.Pension funds, he said, avoid requesting refunds to which they are entitled due to bureaucracy and uncertainty surrounding outcomes.Dutch healthcare fund PFZW has previously called for harmonised tax rules for pension funds across the EU, and the EU itself vowed to review potentially discriminatory tax policies when it published its CMU Action Plan.PensionsEurope also called for action on “inadequate” double taxation treaties to allow for mutual recognition of pension funds, an area recently examined by the OECD when it proposed a new tax framework.,WebsitesWe are not responsible for the content of external sitesLink to PensionsEurope paper on withholding tax Countries across the European Union must do more to remove tax barriers hampering the pension industry’s ability to invest cross border, according to PensionsEurope.Janwillem Bouma, chair of the industry association, said obstacles stemming from withholding tax (WHT) refund procedures were a major barrier to the establishment of the European Commission’s Capital Markets Union (CMU).“To boost economic growth in the EU, PensionsEurope calls on the EU member states and the European Commission to remove all the WHT barriers to cross-border investments,” said Bouma, who is also managing director of the Dutch pension fund for Shell employees.“This means the EU member states shall respect the case-law of the Court of Justice of the European Union (ECJ), reciprocally and automatically recognise pension funds and simplify their WHT processes.”
An undisclosed European pension fund has tendered a factor-investing mandate using IPE Quest.According to QN-2182, the client is looking for a manager that can passively track a multi-factor benchmark for Europe, as well as one for the US.The mandates are worth €250m each.Although tracking error should not exceed 0.5%, the return and tracking errors are “less relevant”, as the benchmark – which the client is to provide – has not yet been decided. The client said its main selection criteria for the mandates were “organisation, the investment team, trading capabilities and management fees”.Applicants should have at least €3bn in assets under management (AUM) in the asset class itself and €10bn in AUM as a company.They should also have a minimum track record of five years.Interested parties should state performance, gross of fees, to the end of March.The deadline for applications is 13 May.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email jayna.vishram@ipe-quest.com.
“An analysis will be included of the role of the major pension funds’ consultants in influencing the knowledge and practices of pension funds with regards to climate change and stranded assets risks,” she added. The IPE Scholarship of €5,000 will enable Harnett to reduce the amount of paid work required to fund her research, providing increased opportunity for fieldwork and networking opportunities within the pension fund industry.“This will maximise the benefit of my research and allow me to complete my doctorate on time,” she said. Dingemans’s research for her post-doctorate project focuses on working retirees in the UK and the Netherlands. The IPE Pensions Scholarship Fund has made two awards this year for research into retirement provision.The first is a €5,000 grant to Elizabeth Harnett (pictured below), a PhD candidate at Oxford University, while the second is to Ellen Dingemans for €2,000 to assist with her post-doctoral research at the Netherlands Interdisciplinary Demographic Institute (NIDI-KNAW) and the University Medical Centre Groningen (UMCG-RUG).The focus of Harnett’s PhD studies is on increasing the understanding of the information and communication channels pension funds find useful and important in translating climate-change science into actionable knowledge.Harnett said it was not clear that simply providing more information on climate change would impact pension fund managers’ decisions and behaviour. Elizabeth HarnettShe will investigate the key drivers of post-retirement employment in both countries and to what extent the decision on this ‘bridge’ employment is experienced differently by subgroups in society – along the lines of gender or education, for example, or health differences.The €2,000 grant from the IPE Scholarship Fund enabled her to travel and collaborate directly for a period with colleagues at University of Manchester (UoM) on this project.She said her visit would greatly enhance her scientific network and help to further establish a research agenda for her post-doc period. The expected output of the UoM collaboration is an article in an international peer-reviewed journal, a scientific presentation in one of the MICRA seminars of UoM and a Netspar discussion paper, she said.Congratulating Harnett and Dingemans, the IPE Pensions Scholarship Fund’s board said it was very pleased to be supporting research projects with such positive potential outcomes.Fennell Betson, chair of the fund and founding editor of IPE magazine, said: “We look forward to their findings with great interest.”The fund’s board comprises Chris Verhaegen, former chair of the Occupational Pensions Stakeholder Group at EIOPA; Peter Melchior, former executive director and actuary at PKA Pension Fund in Denmark; and Peter Borgdorff, executive director at Pensioenfonds Zorg en Welzijn in the Netherlands.The fund’s Academic Adviser is Debbie Harrison, visiting professor at the Pensions Institute, Cass Business School in London.These are the fifth and sixth awards made by the fund to candidates involved in pension fund and retirement income research.The fund is open to other proposals for supporting those undertaking studies and research into these areas at European universities and academic and research bodies.IPE established the Scholarship Fund in 2011 on a non-profit basis, with contributions being received from IPE and others in the pensions community.For further details, please email Fennell Betson or visit the website
These are by far the most popular choice, accounting for just over half of assets and membership.In contrast, the return of four low-risk funds (25-35% equity) fell from 3.08% to 2.48%, and that of the six conservative bond funds from 1.24% to 0.79%, reflecting the low interest rates.Membership grew over the year by 3.4% to 1.25m, and assets by 17.4% to €2.5bn.Investment activities accounted for €79m of the increase in assets, and the base contribution, levied at 2%, a further €153m, the latter boosted by last year’s strong wage growth.In 2016, both the additional employee and state budget contribution rates doubled to 2%, raising accumulated assets by €67m and €70m, respectively.In the smaller third pillar, all the funds likewise produced positive results, while the average return increased from 3.62% to 4.9%.The returns of the five high-equity funds rose from 4.85% to 7.72%, those of the four medium-risk plans from 3.33% to 3.55%, and those of the conservative funds from 1.66% to 2.48%.Membership rose by 9% to 51,600, and assets by 29.4% to €79.5m.This year, the pension system is to be reformed as part of the agenda of the Lithuanian Peasants and Greens Union, the centre-left party that now leads the coalition government following last year’s general election.One issue under discussion is that those workers whose second-pillar pension funds would be insufficient to purchase an annuity on retirement are moved back fully into the first pillar. Lithuania’s voluntary second-pillar funds returned a nominal average of 4.37% in 2016 compared with 3.61% a year earlier, according to pensions regulator Bank of Lithuania.Although all 21 plans generated positive results, these ranged from 11.25% to 0.39% depending on the equity and bond allocations, while inflation that year averaged 0.9%.The four highest-risk funds, which can invest up to 100% in equities, delivered by far the best return and best year-on-year improvement, of 9.2%, compared with 6.64% in 2015.In the case of the seven medium-risk funds, with an equity allocation of 50-70%, the return increased from 3.63% to 4.66%.
Section 172 says company directors must not only run a successful business but must also take account of a wide number of stakeholders such as employees, its suppliers, the wider environment, and even the wider reputation of the company.Environmental campaigners ClientEarth have become increasingly vocal over climate-change disclosures by extractive-industry companies.Top four audit firms face £10m finesA report conducted for the FRC has recommended greater use of non-financial penalties to improve audit quality, as well as plea bargains to speed up the disciplinary process.The 68-page report by a panel headed by a retired judge also found that fines of £10m (€11.2m) or more could be appropriate in cases where one of the so-called “big four” accounting firms delivered a “seriously bad” audit.The highest fine so far is the £5.1m sanction slapped on PwC in August for its audit of RSM Tenon.IPE understands that fines are handed over by the FRC to the Institute of Chartered Accountants in England and Wales to fund the latter’s audit quality initiative.In their submissions to the inquiry, the accountancy firms argued that fines were “already too high”, especially in cases not involving dishonesty or recklessness.The firms also argued that there was “an excessive focus on financial penalties which was inappropriate in cases of unintentional fault”.IASB backs off from non-financial reportingThe International Accounting Standards Board (IASB) has voted to add a project to revise and update its Management Commentary Practice Statement (MCPS).The board first issued the MCPS in December 2010 as non-mandatory guidance to preparers.The move marked one of the first forays by a financial reporting body into what is now known as integrated reporting. Since then the document has been overshadowed by competing models such as the Integrated Reporting Council’s framework and the Climate Disclosures Standards Board’s model. The UK Financial Reporting Council (FRC) has confirmed it will “shortly” launch a consultation on changes to the UK Corporate Governance Code.Among the proposals, the watchdog said, would be the need for companies to link corporate governance to purpose, engagement with wider stakeholders, and “consider how they benefit wider society”.The FRC added that it would sound out views on the future development of the UK Stewardship Code, including the extent to which the interests of wider stakeholders and broader social impacts – including environmental, social and governance factors – were integrated into engagement and monitoring by investors. The development comes after the FRC faced a torrent of criticism from corporate-governance campaigners over claims that it had failed to enforce the requirements of s172 of the Companies Act 2006. Hans Hoogervorst, IASBHowever, in a speech to a Brazilian international accounting seminar held on 9 November in São Paulo, IASB chairman Hans Hoogervorst ruled out any wide-ranging board interest in non-financial reporting.He said: “Let me be clear: we do not plan to get into environmental and sustainability reporting. That is not our area of expertise.“There are many other players. Our remit is, and will remain, financial reporting – with focus on the participants in the capital markets. That is investors and potential creditors.”UK watchdog to scrutinise smaller company reportingThe FRC has revealed plans to conduct a a series of targeted thematic reviews of company financial reports during 2019.The audit watchdog said the reviews, which will supplement its routine oversight of financial reporting, will focus on four key areas. In its sights are smaller listed and AIM companies, revenue recognition, lease and financial instruments accounting.The FRC said it planned to contact 40 small quoted companies before their financial year-end and select two areas of disclosure from their upcoming reports and accounts for review.The areas that the FRC will select for review, it said, will be drawn from five areas that have been flagged up in recent thematic reviews or in Financial Reporting Lab reports.The IASB has recently introduced major new standards covering revenue, leases and financial instruments.Disclosures about the effects of Brexit are also on the FRC’s hit list.
The International Financial Reporting Standards Interpretations Committee (IFRS IC) has provisionally ruled that the right to receive a discount following an earlier overpayment of contributions to a defined contribution (DC) pension scheme does not mean the plan is a defined benefit (DB) scheme.According to the committee’s official decision wording: “The existence of the potential discount would not in itself result in classifying the plan as a defined benefit plan.”Eight committee members voted in favour of the agenda decision earlier this month.The ruling came despite warnings from some committee members that their actions could open the door to structuring by plan sponsors. IFRS IC member Robert Uhl said: “The notion of the circumstances in which the employer is exposed to downside risk in my view requires a bit of a broader assessment of the substance of the overall arrangement.”He argued it was possible to design a DC benefit promise that was exposed to downside risk “because the amount of refund you’re going to get in the future is dependent on future actuarial experience [and] investment return”.The query concerned schemes classified as DC in which the sponsor had an obligation to pay fixed annual contributions to a separate fund – but also had the right to a discount if it paid any excess contributions. The discount would apply if the ratio of plan assets to plan liabilities exceeded a certain level, meaning it could fluctuate as a result of changes in actuarial assumptions or the return on plan assets.At issue was whether the existence of the possibility of receiving a discount would mean that the plan had to be classified as a DB plan.The decision also restated a principal within International Accounting Standard 19, Employee Benefits (IAS 19), namely that a DC plan was a pension plan into which a sponsor paid a fixed amount of contributions with no further obligations. Under the standard, any plan that is not a DC plan is automatically a DB plan. This means that a DC plan is one where there is “no possibility that future contributions could be set to cover shortfalls in funding employee benefits relating to employee service in the current and prior periods”.The committee added that IAS 19 also specified that “actuarial risk and investment risk fall in substance on the employee” with a DC plan, in contrast to a DB plan where the same risks fell on the sponsor.Not all committee members, however, were convinced that sponsors would structure benefit promises in order to achieve a particular accounting outcome. Bertrand Perrin said internal control processes made it unlikely that an entity would accept paying “more on a yearly basis just to structure the plan to become a defined contribution plan”.However, he urged the committee to make it clear that additional future contributions related to past service cost meant a plan was DB, whereas future contributions in respect of future service cost made it DC. Interested parties have until 15 May to comment on the draft agenda decision. Meanwhile, the International Accounting Standards Board (IASB) has published an opinion piece by vice-chair Sue Lloyd dealing with the timely implementation IFRS IC agenda decisions. The IASB explained last December that companies should have “sufficient time” to implement changes to their accounting policies arising from the committee’s decisions. Since then a number of preparers have approached the board for further clarification.Lloyd said that the IASB would normally expect preparers to implement accounting policy changes within “a matter of months rather than years”.
In addition, the two asset owners also pledged support for a shareholder proposal requiring the board chair to be an independent member of the board, rather than the company’s CEO. Darren Woods has held both roles at Exxon since 2017. The proposal was filed by the Kestrel Foundation and would be phased in for the next CEO transition if adopted. Church Commissioners for England and the New York State Common Retirement Fund (NYSCRF) will vote against all board directors at oil giant ExxonMobil’s annual general meeting on 29 May.Edward Mason, head of responsible investment at the Church of England’s £8.3bn (€9.6bn) endowment fund, said: “Exxon continues to lag its industry peers on climate change and to fail to engage properly with shareholders. We are showing our dissatisfaction in the strongest possible way by voting against the re-election of the entire board.”The Church Commissioners and NYSCRF have also stated their intentions to back two other shareholder proposals asking Exxon’s board to create a “climate committee” to evaluate the company’s “strategic vision and responses to climate change”, and requiring the company to issue a report on its governance of, and spending on, lobbying.However, a previous resolution filed by the two funds last December asking Exxon to disclose its emissions reduction targets has been taken off the agenda after US regulator the Securities and Exchange Commission granted the company’s request to bar it. Ringhorne, an oil rig formerly operated by ExxonMobilThomas DiNapoli, New York State comptroller and NYSCRF trustee, said: “A corporate board exists as oversight of management. When the CEO serves as board chair, it not only presents an inherent conflict of roles, but is also a larger warning sign of bad corporate governance as it raises serious questions that the board may be merely a rubber stamp instead of providing genuine oversight.”DiNapoli continued: “Exxon’s failure to demonstrate it is prepared to take steps towards the transition to a lower carbon future puts its business at risk. We encourage other investors to join us in voting to separate the roles of chair and CEO.”
Jeanett Bergan, head of responsible investment at KLP, said: “Despite growing awareness in the financial sector, investors find it challenging to identify and address risks as a result of deforestation.”While significant attention had been given to carbon emissions and fossil fuels, she said, there had been far less focus on emissions produced by tropical deforestation.Bergan said the clearing and burning of forests released greenhouse gases and also reduced the earth’s ability to store carbon. Protecting forests and other natural ecosystems could contribute as much as a third of what is needed to prevent climate change, she said.The NOK765bn pension fund said the tool gave an overview of existing investor strategies in the field, identifying the data sources, tools and methods currently available for risk analysis and ownership dialogue.To read the digital edition of IPE’s latest magazine click here. Norwegian pension providers KLP and Storebrand have joined forces with the NGO Rainforest Foundation Norway to produce a guide on how investors can handle financial risks related to deforestation.KLP, Norway’s main provider of municipal pensions, said firms with exposure to deforestation activity were at significantly increased financial risk, and that the risk of reputational damage, reduced market access and legal sanctions could have a major impact on their returns and their shareholders.KLP, Storebrand and the Rainforest Foundation Norway commissioned a report from UK-based Hindsight Consultancy entitled: “Deforestation tools assessment and gap analysis: How investors can manage deforestation risk”.The report includes recommendations for investors, NGOs, ESG data providers and the authorities on how to address the environmental issue.