Ramsay Brufer, Alecta’s shareholder representative, said the decision to reject the offer was based on the conclusions of internal analysis and the independent committee’s findings.“The offer does not fully reflect Scania’s long-term fundamental value,” Brufer said.“The decision has not been easy, but, in the longer term, this is what best serves the interests of our clients.”Alecta’s decisions matches that of Swedish buffer fund AP4 and fellow Swedish institutions AMF and Skandia.AP4, whose shareholding equates to around 0.65%, also said it was following the recommendations of the independent board, a stance echoed by AMF and Skandia.At the time, the buffer fund said it was willing to suffer short-term falls in Scania’s value under the belief Swedish citizens would benefit if the company remained independent and listed.The trio, alongside Swedbank Robur, have long clashed with VW over its ownership of Scania, its influence on the board and its 89% voting power, via preference shares, despite only owning 62.6% of the capital structure.VW first invested in Scania in 2000 and steadily increased its holdings, eventually looking to merge the firm with MAN to achieve cost efficiency.However, it was VW’s ownership of MAN which highlighted potential governance concerns at Scania, after the Swedish manufacturer unexpectedly pulled out of a lucrative contract only for it to be awarded to MAN. Alecta, the Swedish occupational pensions manager, has joined fellow institutional investors in Scania in rejecting VW’s proposed takeover of the automotive manufacturer.The manager, and the third largest shareholder in Scania, said it rejected the offer after its own internal analysis.VW, currently the largest shareholder in Scania, has been looking to takeover the Swedish outfit and merge it with rival German truck manufacturer MAN.However, its offer of SEK200 (€22.30) per share was met by dismay from fellow shareholders and Scania’s independent committee, which called for a full-blown rejection of VW’s valuation, as it failed to take into account long-term prospects.
The pension fund of Aon Group Netherlands is considering placing its pensions in a Belgian IORP, it has indicated. In a letter to its participants, dated mid-April, it explained that Aon had finished its contract for pensions provision with its pension fund, and transferred the pension accrual to a defined contribution plan with an insurer.For the accrued pension rights under average and final salary plans, “a liquidation of our pension fund, including a collective value transfer, is the most realistic scenario”, the scheme said in its letter.According to the pension fund, the employer has made clear it would prefer a transfer to an IORP in Belgium. “This alternative is included in our investigation, as it seems to offer benefits to all parties involved,” it said.The IORP could also house pension rights from Aon staff in Belgium and possibly other European countries.Speaking to financial daily FD, René Mandos, chairman of the Aon scheme, said it had already concluded that the Belgian option was the most beneficial for the scheme’s participants.“The financial requirements in Belgium are different, resulting in less risk of a funding shortfall,” Mandos said, adding that the likelihood of indexation would also be greater than placing the pension rights with a Dutch insurer.In his opinion, the pensions would be properly secured in Belgium, as the employer must plug a funding shortfall.According to the chairman, no decisions have been taken, nor has the company filed for value transfer.However, there are discussions with both the Dutch supervisor DNB and the regulator in Belgium, he said.A decision is due before 1 July.Although moving to Belgium has been discussed by Dutch pension funds since 2007, relatively few employers have developed concrete plans to date.In 2011, the tiny Pensioenfonds Lugtigheid moved south, followed by the pension funds of clearinghouse Euroclear and contact lens manufacturer Alcon.The pension fund of pharmacy Johnson & Johnson is developing plans to do so.However, according to Andrew Davies of pensions adviser Towers Watson, at least 10 Dutch pension funds, including two €1bn schemes, are gearing up for similar moves due to increasing regulatory pressure in the Netherlands.Cost is also a contributing factor, due to Belgium’s VAT exemption, as well as lower supervisory costs. Meanwhile, Jeroen Dijsselbloem, the Dutch Treasurer, has criticised any move by a pension fund to avoid Dutch supervision and regulation “irresponsible”.“If this is the reason, it seems to me this will make the schemes’ participants very vulnerable,” he said.
The UK pensions minister has forcefully rejected calls from lobby groups and opposition MPs to consider delaying a raft of changes to defined contribution (DC) schemes, expected in 2015.Speaking at the industry conference, Pensions and Benefits UK, Steve Webb, a Liberal Democrat minister, said he would not consider further delays to implementing a charge cap.The minister originally launched a consultation in the Autumn of 2013 on capping charges in auto-enrolment default investment funds, expected to be implemented by April 2014.However, after concerns were raised by the insurance lobby, a large provider of default auto-enrolment solutions, the government conceded a delay to April 2015. The government followed this with a raft of changes to at-retirement options for DC savers, and pensions lobby groups called for further postponement having raised issue with the amount of legislative changes in 2015.In response, Webb said he saw no reason to allow for further delays in ensuring savers being auto-enrolled received value for money.“People are saying we should slow down and April 2015 is too soon to give people value for money in pensions,” he said.“What my answer is: over my dead body.“Whenever we get pressed to do something about things, and then do it, people say we have rushed it. We have waited quite long enough. Auto-enrolment will have been running for almost three years by the time the charge cap comes in.“April 2015 is a firm deadline, it is not moving.”The statement comes after Dame Anne Begg, a Labour MP who chairs the committee charged with scrutinising government pensions policy, said it had tried to rush in reforms announced in the Budget.She said the reforms, which see the removal of requirements of DC savers to annutised, and the right to access free face-to-face guidance on retirement options, would be a challenge, and ‘tight”.However, Webb shot down suggestions these reforms could also be delayed to ease the pressure on the pensions industry.“Absolutely not,” he said.“Every year, people tell me why this year is the wrong time. Virtue is always best deferred, I gather, but we have to get on with it.”
AP2 returned 4.1% last year, despite suffering losses exceeding 9% from its emerging market equity holdings.Eva Halvarsson, chief executive of the Swedish buffer fund, said it was “gratifying” to see its active management generate a 0.9% outperformance over the course of the year, despite the market turbulence seen in 2015.The fund’s emerging market equity portfolio was the worst performing asset class, losing 9.1% during 2015, followed by a 7.2% loss from emerging market fixed income.Despite the losses from emerging market equity, Swedish equity holdings and developed market equity returned 15.2% and 9.4%, respectively. Overseas corporate and government bonds also returned 2.1% and 3.2%, while Swedish fixed income achieved a return of 0.7%.Across the main seven asset classes, the fund achieved a return of 2.4%, boosted to 4.1% once it taking account of its alternatives portfolio.Alternatives – comprising property investments such as the Cityhold Office Partnership with AP1 and stakes in agricultural land, including its joint ventures with TIAA-CREF – returned 9.4%.Halvarsson said 2015 saw its assets under management exceed SEK300bn (€32bn) for the first time – equating to total investment returns of SEK175bn since it was launched in 2001 – and welcomed that AP2 had now completed its three-year programme of bringing management of assets in-house.The transfer of SEK50bn in mandates since 2012 now saw global credit and emerging market fixed income managed internally, the fund’s annual report said.“The in-house management of this capital will mean a significant cost saving, while also enabling us to better utilise and develop the high levels of competence within the fund,” Halvarsson said.
“Contrary to this expectation,” the paper adds, “funds actually covered both ongoing charges and explicit transaction costs and delivered returns higher than that of the benchmark.”The paper examines costs of 1,350 equity funds over a three-year period, starting in June 2012, covering UK and global equity funds but also those in the IA’s Asian and North American sectors.It finds that, across the universe of UK All Company funds, costs stand at 30 basis points.“Explicit transaction costs,” it adds, “are by far the largest component of total investment costs, and of that, approximately two-thirds are tax and one-third commission.”Jonathan Lipkin, director of public policy at the IA, insisted the industry should be judged on actual performance rather than “perceptions of delivery”.“Our research with Fitz Partners is a detailed empirical analysis of equity fund performance in the context of quantified charges and costs,” he said.The IA’s condemnation of supposed hysteria surrounding management fees comes amid a push by the UK pensions industry for greater transparency on management fees.The association has already responded by promising to launch a new disclosure framework, with the board advising on its creation to be chaired by Mark Fawcett of the National Employment Savings Trust.The new code is likely to draw on the work undertaken by UK local authority funds, with a standalone consultation on its own voluntary code for fees to be launched in the coming weeks.The initiatives come amid a push for the UK to adopt a disclosure code based on the mandatory framework agreed for Dutch pension funds. The UK investment industry has hit back against claims of high hidden fees charged by fund managers, equating their existence with that of the mythical Loch Ness monster.The Investment Association (IA) said that, while it took allegations of hidden fees seriously, those claiming the use of such fees had yet to prove their existence conclusively.It noted that research, conducted by Fitz Partners, found that the average turnover rate of equity funds examined was 40%, which it claimed cast doubt on “hidden-fees hysteria”.Based on the 40% turnover rate, the research estimated transaction costs across the funds stood at 0.17%, with ongoing charge costs of 1.42% across the examined universe.
For the second time in less than six months, investors are left scratching their headsThe election of Donald Trump as US president represents a sea-change in politics, and, for a second time in less than six months, following the UK’s Brexit vote, investors are left unscrambling the implications for markets over various time horizons.Ahead of the election, investors saw a short position on the Mexican peso versus the dollar as a key instrument to hedge against a Trump win. Indeed, the Mexican peso fell by 7.5% the day after the election. Healthcare, tipped to benefit from Trump’s policies, was up by 3.3%.Overall, the initial market reaction was muted, but the longer-term implications are less clear. Trump’s hostility towards free trade and institutions of supranational governance, including NAFTA and NATO, have been widely discussed. It is assumed that a more protectionist US with higher tariff barriers to trade will lead to lower growth and prosperity over the long term. Precisely how and the extent to which this plays out will remain a matter of conjecture. Trump’s election will be judged with hindsight as a key staging post in a series of political events that includes Brexit and the possible success of populist parties and candidates in Dutch, French and German elections across 2017.There is an indisputable current of popular discontent in the West, probably caused by declining living standards among a large section of the population. Populist, usually right-wing, politicians, parties and movements, including Trump, have succeeded in harnessing this discontent using anti-immigration, anti-globalisation and anti-elite rhetoric to fan the flames.In the US, much will hinge on the administration that Trump forms, and there was moderation in his tone after his election. A mainstream Republican appointment as treasury secretary would reassure markets. Trump’s Keynesian ambitions on infrastructure spending may remain an aspiration, as it is uncertain how he would push an ambitious package through a fiscally conservative Republican Congress, even if there is support for more infrastructure spending.Trump’s hostility towards climate change is worrying, and his rhetoric has extended to questioning global-warming science itself. While the Paris Agreement became international law in November, an about-turn on US climate change policy – as looks likely – would represent a setback to the 2°C carbon-emission reduction target. It would also weaken the resolve of others.Pragmatism and Trump’s supposed deal-making skills may soften the edges of his presidency as stump promises are abandoned. Or his presidency may become mired in acrimony and failure as the contradictory nature of his objectives becomes clear. For investors, political uncertainty is back like never before.Liam Kennedy is editor of IPE
“Based on the generated results, we see a mixed picture,” he said. “Overall, Danish venture funds have not performed satisfactorily – in fact they underperformed compared to other investments.”Jan Østergaard, head of private investments at labour-market pension fund Industriens Pension, said: “Such an investment depends on a number of parameters, which we do not know yet.“Generally speaking, investments in Danish venture funds are relatively risky, and it is crucial be very selective in relation to which venture funds you will invest in.“We would like to consider it more closely if we get more details, but we will hardly invest a very large amount in the area due to the investment’s risk profile.”According to the plan, the fund – Dansk Venturekapital – is to be established along the same lines as two existing growth funds from state financing fund Vækstfonden, known as Dansk Vækstkapital 1 and 2. However, the new vehicle is to comprise 50% venture funds and 50% private equity funds, according to the proposal.It should be set up within the next one or two years, IT-Branchen said, so it is ready at the point when Vækstfonden has invested funds from Dansk Vækstkapital 2.Pension funds could invest half of the capital in the form of debt, with first losses covered by Vækstfonden, the proposal suggested.Peter Wilmar Christensen, co-founder of software company Greenwave Systems and chairman of IT-Branchen’s capital committee, said one in five IT businesses in Denmark found lack of capital was a significant barrier to growth and job creation.“If we are going to get growth companies up and running, we must have Denmark’s biggest money tanks in the game,” Christensen said. “The pension companies have some giant stores of money, but they are used to a large extent for bonds and shares in large international businesses.”He added: “Why not get some of these many billions of kroner out and working for small and medium-sized Danish companies, so that all Danes can benefit from the shift to digital?”But PFA’s Nøhr Poulsen said previous returns from Danish tech companies meant it would be more selective at home than in the US, for example.“We have similar investments in both Denmark and abroad,” he said. “Last year, we, together with ATP, invested in the private equity firm VIA equity, which has special focus on Danish tech companies, and we also hold investments in US venture capital funds investing in US tech companies.”However results were generally better in the US than the those seen in Denmark, he said.“This does not mean that we will refrain from making investments in Denmark, but our approach to Danish investments are much more selective in this area,” said Nøhr Paulsen. Danish pension funds PFA and Industriens have responded cautiously to a proposal from the country’s IT industry association to launch a state-supported venture capital fund for the sector.The Danish IT industry association, IT-Branchen, has outlined a proposal for a new venture capital fund-of-funds to raise money for the sector, targeting investment of 1% of pension fund contributions in Denmark, which would equate to around DKK1bn (€134m) a year.Henrik Nøhr Poulsen, chief investment officer of equities and alternatives at Denmark’s biggest commercial pensions provider PFA, told IPE: “We are very interested in investing in companies that create Danish jobs. However, it is [important] that the investments go hand in hand with PFA receiving a reasonable return proportional to the risk we take.”Nøhr Poulsen said venture capital was an area of investment he had studied and backed over the last 20 years.
In addition, the £1.9bn (€2.1bn) scheme had a significant amount of “orphan liabilities”, Hair said, as a result of employers exiting the scheme before the section 75 rule come into force in 2005. The bill for these liabilities was being paid by current members, she said.In response to calls from MPs for government intervention, Opperman said some of the issues faced by employers involved in the plumbing industry scheme would be addressed in a forthcoming white paper from the Department for Work and Pensions (DWP). The department consulted specifically on section 75 rules last year.However, he emphasised that it would be difficult to make changes specifically for the plumbers’ scheme because of the potential implications for other multi-employer DB schemes.Opperman also said the government did not support making the Pension Protection Fund (PPF) the guarantor of last resort for the scheme’s orphan liabilities.He said: “The government’s provisional view is that it would not be right or fair to pass this burden on to the PPF and its levy payers, which are, of course, other pension schemes, and their sponsoring employers, who have no connection with, or responsibility to, the scheme.” The Plumbing and Mechanical Services Industry Pension Scheme plans to consult on a revised method of calculating section 75 debt from next month. Last week the trustees agreed with employers and unions to stop employers from exiting the scheme without explicit consent for the rest of 2018 in order to allow time to “secure a strong and equitable future for the scheme”.DWP hints at delay to DB reform paper Guy Opperman, undersecretary for pensions and financial inclusionSource: Chris McAndrew During the debate about the plumbers’ scheme, Opperman also hinted that the much-anticipated government paper on DB reform could be delayed.In October last year at an industry conference, Charlotte Clark, director of private pensions and stewardship at the Department for Work and Pensions, said her team was aiming to publish the document by the end of February 2018.However, Opperman told MPs that “the white paper will be delivered at some stage this spring… it will certainly be delivered before the summer period”.A DWP spokeswoman told IPE that no firm date had been set for publication.Clark had said the paper would not lead directly to legislation but instead would aim to set out a “direction of travel” for changes to the DB system.The first version of the document – titled ‘Security and Sustainability in Defined Benefit Pension Schemes’ – was published last year and explored ideas including alternative liability calculations, funding methods, new powers for regulators and consolidation of schemes. This rule requires companies exiting multi-employer schemes to pay a lump sum upfront to secure their staff’s benefits. Although the defined benefit (DB) scheme was 101% funded, according to a 2014 actuarial valuation, it was roughly 75% funded on a full buyout basis, pensions minister Guy Opperman told MPs during yesterday’s discussion. UK politicians have urged the government to consider rule changes to help small plumbing companies deal with their pension liabilities.In a debate yesterday, Kirstene Hair, Conservative MP for the Scottish constituency of Angus, highlighted the difficulties faced by small companies that were members of the Plumbing and Mechanical Services Industry Pension Scheme.She warned that a number of business owners were unable to retire from the multi-employer scheme as to do so would involve shutting down their company and triggering a so-called ‘section 75 debt’.“Plumbers have been checkmated by the legislation,” Hair said. “They have no room to manoeuvre, no way out. Every possible move, it seems, will trigger the employer debt and bring it crashing down on them and their livelihoods.”
They will also be required to give an account of the business history of the fund manager and a “relevant and coherent return history for a fund”, the Pensions Authority said.Other requirements include a minimum level of sustainability work in the administration of funds; a demand for good practice and suitability within the PPM; and the stipulation that asset managers’ actions must not damage the PPM.In addition, a fund agreement must be signed for each fund. Currently, cooperation agreements can include several funds run by the same company.The requirements were established after the Swedish parliament passed legislation aimed at shoring up the scandal-hit PPM last year.The proposal was drawn up in conjunction with the Swedish parliament’s cross-party pensions group following input from many stakeholders and experts, including Cardano’s Stefan Lundbergh and independent consultant Mats Langensjö.The authority also said that, as of 1 July 2018, there will be a requirement for savers to sign agreements on the exchange of funds and a ban on telephone sales.The PPM is the defined contribution part of the Swedish state pension, which allows individuals to allocate a proportion of contributions to private investment providers or use the lifecycle-based default option, AP7’s Såfa. Sweden’s Pensions Authority has published a list of tougher requirements for potential investment providers participating in the first-pillar Premium Pension System (PPM), as a long reform process comes to fruition.The system, for which AP7 is the default provider, has been subject to a regulatory review in an attempt to improve standards and cut the risk of savers investing in sub-standard products.Erik Fransson, head of the Pension Authority’s Fund Task Department, said: “For pensioners, the changes that are taking place will increase the security of the premium pension fund marketplace.”From 1 November, investment providers operating in or wishing to join the system’s funds marketplace will have to reach a minimum assets threshold for funds run outside the PPM. Each asset manager will permitted to list a maximum of 25 funds on the PPM’s marketplace.
In the first half of 2018, the fund’s investments gained 3.3% after expenses, driven mostly by its exposure to currency and inflation. The fund outperformed its benchmark by 1.1 percentage points.Hessius said the total return was “buoyed by a continued upswing in our real estate investments and a strong dollar”, and noted that AP3 had scaled back portfolio risk during the first half of the year in light of its outlook for investment markets.The fund highlighted a $100m (€86m) commitment to an external unlisted insurance fund, saying that this “broadens AP3’s strategy to include insurance instruments in run-off and adds stability and balance to the portfolio”.AP3 also said it was on track to meet sustainability goals it set itself four years ago.The goals were to be achieved by the end of 2018 and included halving the carbon footprint of AP3’s listed equity and credit portfolio compared with 2014, more than tripling the value of its green bond holdings, and doubling its “strategic sustainability investments”.Another goal it set itself was to work to ensure that Vasakronan, the real estate investor in which AP3 has a 25% equity stake, would “continue to lead the way in sustainability in the real estate sector in Sweden”.CEO Hessius said the fund was expected to have achieved the four goals by the end of the year.At the end of June, AP3’s green bond holdings totalled SEK15.3bn, just above its SEK15bn target for the end of 2018. The holdings accounted for 16% of the fund’s fixed income portfolio.At the end of 2017, the buffer fund’s strategic sustainability investments totalled SEK25bn, SEK5bn above the target for the end of 2018.The carbon intensity of its listed equity and credit holdings, meanwhile, fell by 45% in 2017, said AP3. Sweden’s AP3 incurred costs of around a third less than the average for its international peers over five years, according to the state pension buffer fund’s interim report.In that period the SEK353.1bn (€33.6bn) fund posted an annual average return of more than 10%.AP3’s chief executive Kerstin Hessius said that, according to data from CEM Benchmarking, the fund had delivered this return “with a cost base 35% below the international average for funds with a similar investment profile”.Its annual average return over the past 10 years was 7.3%.