Morris said the GMPF would regard the investment primarily as capital-related, but with income elements.He added: “The joint venture will create a series of opportunities over time – for instance, we may become a long-term holder of some of the properties that are built, if we’re offering the best price.”At present, property makes up around 7% of the pension fund’s £12.5bn portfolio.Morris said the Airport City investment would be less than 1% of its total assets.The GMPF’s property development arm, Greater Manchester Property Venture Fund, invests in projects across the North West.Morris said: “Local investment always has to have twin aims. Commercial success is vital. And we are supporting our local area. It actually helps to be local, as we know the market.”Construction of Airport City is due to begin next year, with the entire project estimated to take 10-15 years to complete.Argent has been appointed development manager for the scheme.MAG launched its search for joint venture partners at the end of 2012, advised by CBRE and Eversheds The Greater Manchester Pension Fund (GMPF), the pension scheme for the 10 local authorities in Greater Manchester and other bodies such as schools and charities, is to invest in Manchester Airport’s planned £800m (€944m) Airport City development, with a 10% stake in the project.The development will form the core of a government-designated enterprise zone surrounding the airport, the third-busiest in the UK.The development – the largest development project in the UK since the Olympic redevelopment in East London – is a joint venture between Manchester Airports Group (MAG) with a 50% share, Beijing Construction Engineering Group and support services company Carillion (20% each) and the GMPF.Peter Morris, director of pensions at the GMPF, said: “It’s a good investment opportunity. The airport is an international gateway to Manchester, and the scale and location of Airport City is attractive to occupiers, particularly as this development could not be built next to other large airports.”
A pooled $20m-40m (€14m-28m) US fund should have the same credentials, it said.AHV, which also manages invalidity compensation scheme IV (CHF4.7bn) and military service/maternity leave scheme EO (CHF600m), returned 2.8% last year, below the Swiss national average of 6%.As per year-end 2013, the fund had 5% invested in real estate, with 52% in mainly domestic bonds, 13% in loans and 26% in equities.The remainder was commodities (2%). AHV is looking to invest in European and US real estate on the back of below-average returns last year.Switzerland’s CHF30bn (€24.4bn) first-pillar pension fund is looking to the core and core-plus segments of both continents.An exclusively European €15m-20m pooled fund is being targeted with a maximum 50% leverage ratio.AHV is looking for stabilised, income-producing real estate assets.
Additionally, more popular asset classes, such as corporate bonds, had seen their fees increase by 30% or more over the last five years, as pension funds began increasing their holdings in the area, LCP found.Mark Nicoll, investment partner at LCP and the survey’s author, said the mist surrounding many investment fee agreements was gradually lifting.“However, greater transparency is needed, as there are still far too few managers disclosing the level of transaction costs, and this intransigence threatens the reputation of the whole industry,” he said. LCP said only 17% of participating managers this year were unable or unwilling to disclose all their indirect costs.,WebsitesWe are not responsible for the content of external sitesLCP UK Investment Manager survey 2015 Individual asset managers’ unwillingness to increase fee transparency risks damaging the entire industry’s reputation, according to LCP, as it claimed fee structures were yet to align with clients’ best interests.The consultancy’s annual survey of investment management fees argued that many payment structures were rewarding firms simply for retaining clients rather than delivering returns.It noted that even a hypothetical global equity mandate that had underperformed the benchmark by 200 basis points would have seen fees increase ahead of the UK’s retail prices index over the last five years, with the proposed agreement seeing fees increase in line with mandate size rather than manager performance.The survey, which covered around four-fifths of the UK institutional manager market, found that fees had risen by 57% for the average global equity mandate, and that there was an increase in UK equity manager prices stemming largely from a reduction in the number of firms overseeing such strategies.
The call for greater flexibility comes despite data from Preqin showing investors have committed $101bn (€88.2bn) to infrastructure funds that have yet to be drawn down, pointing towards a lack of suitable projects.Insurance Europe also argued that any initiatives to come out of the CMU should be complementary to any action taken by member states.It pointed to the European Long-Term Investment Fund (ELTIF) as an example of potentially successful Commission initiative, as long as the ELTIF were granted the same “look through” status as other European fund vehicles. If the European Commission wishes for the Capital Markets Union (CMU) to succeed, there must be a more flexible definition of ‘infrastructure’ under Solvency II, Insurance Europe has urged. The industry group argued that capital requirements and all regulatory definitions for infrastructure needed to be “urgently refined” to ensure there were no barriers to investing in the asset class.It said there was a need for a tailored approach to regulation of infrastructure under Solvency II.The association’s response to the CMU green paper added: “This should include a flexible definition of infrastructure, as well as changes to the standard formula for both infrastructure debt and infrastructure equity to better reflect the true risks.”
“The Fed continues to expect a December hike, as signalled by its dots chart,” he said.“However, there were otherwise doveish elements to (the) announcement, including a lowering of short-run growth and inflation forecasts and long-term growth, unemployment and the Fed funds rate projections.”He said AXA IM believed the FOMC was likely to hike in December, particularly if the Q3 employment cost index shows some signs of revival.“In the interim, we expect speculation to rise that the Fed will not tighten policy this year,” he said.In a global research report, Bank of America Merrill Lynch said the Fed’s decision was about as doveish as it could be for equity investors, with the committee members having committed to watch international developments.“Similar to deferral of Fed tapering in 2013, we see this as supportive to equities given the de-risking already undertaken,” it said.Peter O’Flanagan, head of foreign exchange trading at ClearTreasury, also noted the way the Fed statement referred to worries about the slowdown in the external environment.“Previously, the Fed had indicated it would be focused on the domestic economy when making decisions around rate hikes, but things have certainly changed,” he said.“Now, it is looking at events in China and other emerging markets and their potential impact on global growth.”Although the Fed maintained it still expected to hike this year, O’Flanagan said December was the only real possibility for this to happen.He said he saw the first quarter of next year as a more realistic target.Lee Ferridge, head of North American macro strategy at State Street Global Markets, said the Fed’s international focus had increased the importance of dollar strength, with the US currency being “the doorway by which the global economy affects the domestic one.”“Now it’s a waiting game again, and every upcoming meeting is on the table so long as data and conditions can justify a move,” he said.“However, there is no guarantee the conditions will be satisfactory ahead of the end of 2015.”Meanwhile, Rick Rieder, CIO of fundamental fixed income at BlackRock, said there were strong signals that a rate hike before the end of the year was very probable.Rieder said the timing of the next increase was much less important than the pace of credit tightening, and that the Fed had already said it would be measured in its approach.“It is very clear the Fed’s monetary policy this upcoming cycle will be nothing like the historic tightening cycles of the past in terms of the consistency of movement at each meeting, or the long-term trajectory of significant rate rises,” he said.Felix Wintle, head of US equities at Neptune Investment Management, also said he expected a rate cut this year.“At Neptune, we are still confident the Fed will raise rates in 2015 and believe December is now the most likely time for this,” he said.Even though the language accompanying yesterday’s decision was doveish, rate rises may come quicker than the market expects, he said.Rising rates will change the investment landscape, he said, with a rising rate environment creating winners and losers among sectors and stocks.“This is because, as interest rates rise, so does the cost of capital – i.e. the cost of credit to corporates,” he said.He said this spelled trouble for companies relying on raising capital to run their business and those that were highly geared.At Amundi, Philippe Ithurbide, global head of research, strategy and analysis, and Bastien Drut, head of strategy and economic research, saw December as the most likely time for the FOMC to make its first rate hike.“But it will stay in very gradual mode and, at the most, tighten by 25 basis points per quarter,” they said.Robeco’s chief economist Léon Cornelissen said that, if the economic climate remained favourable, the most likely scenario was for the Fed to make a first modest rate hike in December, followed by an explanatory press conference by Yellen. The US Federal Reserve’s decision yesterday to hold its key interest rate at zero, coupled with its cautious comments and new focus on the possible impact of external factors, means the cost of central bank credit may stay put until next year, according to asset managers and economists.Although most expected a rate rise to happen in December, many analysts also scrutinised comments by Fed chair Janet Yellen following the decision, which were seen as indicating a more doveish attitude to raising interest rates, as well as a downward revision in its long-term rate outlook.At its meeting yesterday, the Federal Open Market Committee (FOMC) left the Fed funds rate unchanged at 0.00-0.25%.At AXA Investment Managers (AXA IM), senior economist David Page said it was important the Fed lowered its long-term rate outlook to 1.8-2.2% from 2-2.3%.
The Life & Longevity Markets Association (LLMA) has asked Australia’s Macquarie University to research the basis risk for longevity risk transactions.Supported by the University of Waterloo in the Canadian province of Ontario, the Australian National University in Canberra and Mercer Australia, the Sydney-based university, will seek to design a “readily applicable methodology” for use in longevity risk indices.“Such mortality indices are often used in pension benefits and annuitant liabilities, as well as in providing actuaries with key data,” the LLMA said in a joint statement with the UK’s Institute and Faculty of Actuaries (IFoA), which is also supporting the research.The LLMA and UK actuarial body said the project was the second step in its research, building on phase one, which concluded in 2014 and developed the methodology to be used by the Australian and Canadian institutions. Colin Wilson, president-elect of the IFoA, said the institute was “delighted” to be announcing its partners for the next step of its research.“Managing longevity risk is a major concern for pension funds and life insurance companies,” he said.“The practical application of assessing basis risk will be useful to many in the industry.”Jackie Li, associate professor at Macquarie University, noted that longevity increases posed significant challenges to pension-fund sponsors and governments.“It is of utmost importance to find theoretically sound and also practically feasible approaches to manage longevity risk,” she said.“In particular, the use of population-based mortality indices has great potential to deal with this risk, but the problem of the existence of basis risk remains unsolved.”The development of a functioning longevity risk market has long been desired by a number of academic bodies.The OECD has repeatedly called for governments to consider intervening and growing the market by issuing longevity bonds.
The fund invests in quoted shares of companies that have a significant part of their business in environmental and climate-orientated products and services.Both equities and bonds contributed positively to the 2016 LD Vælger result, the pension fund said.The global equities fund also produced a high return in 2016, generating 9.4%, it said, up from 7% in 2015.Danish shares, however, lost 2.8% over the year – down from the 37.5% return they generated in 2015.The low-risk LD Short Bonds fund ended last year with a 1.8% return, and LD Mixed Bonds generated 3.9% for 2016 – a result LD described as very good seen in the light of the very low level of interest rates.“There were periods of significant falls in share prices in 2016, and, despite this, the year finished with what is a very good result, seen overall,” LD said.“Developments at a few large Danish companies were decisive for the Danish stock market.”The global equities markets were more severely affected by uncertainty about growth in the world economy, as well as some key political events such as Brexit and the US election, LD said.It added that the bond markets absorbed the first small step in the direction of higher interest rates. An 11.6% return on its climate and environment investment fund gave a boost to the main balance pension product of Denmark’s Lønmodtagernes Dyrtidsfond (LD) last year, according to preliminary financial data published by the pension fund.LD’s balanced unit-link investment option LD Vælger (LD Discretionary Investments) – which holds the assets of around 90% of LD’s members – made a return of 5.3% in 2016, it reported, which is the same as the previous year’s return.The pension fund said LD Vælger had invested for the first time in its LD Environment & Climate fund in May last year, putting DKK750m into the fund and getting a return of more than DKK100m.The climate fund made a 5.3% return in 2015.
In total, 130 Pensionskassen (94%) were considered to have sufficient “risk-bearing capacity”, according to BaFin’s statement.BaFin supervises 138 Pensionkassen. It excused 16 from taking part in the stress test because it considered their “risk-bearing capacity” to be assured as a result of them pursuing low-risk investment strategies.A spokesman for BaFin said that Pensionskassen’s ability to bear risks had not changed significantly since last year.In an introduction to the regulator’s 2016 annual report, BaFin president Felix Hufeld said that Pensionskassen were under considerable pressure from low interest rates and have already begun to take measures to strengthen their risk-bearing capacity.Nearly all Pensionskassen have built up additional provisions, he said.However, he warned that some might not be able to deliver promised benefits in full if interest rates stayed low.According to statistics published in BaFin’s 2016 annual report, the average funding level at Pensionskassen was 131% and therefore in line with last year’s level of 132%.As at the end of 2016, Pensionskassen in Germany had €155bn in assets, up 5% from 2015. BaFin said they remained mainly invested in investment units, bearer bonds and other fixed-income securities, as well as registered bonds and loans.BaFin today said it would not disclose the names of the Pensionskassen and Pensionsfonds, nor those of the companies financing them, that are due to participate in EIOPA’s second stress test of EU pension funds. Eight German Pensionskassen did not pass the German financial regulator’s stress test for 2016, BaFin has said.BaFin said the eight schemes were smaller Pensionskassen – insurance-based occupational pension plans – and did not belong to the 40 largest in the sector.The stress test examines how Pensionskassen would fare in four different situations involving short-term, adverse capital market changes. Last year seven did not pass the stress test, and the year before it was nine.The eight Pensionskassen failed BaFin’s stress test because they did not pass all scenarios tested. The supervisor said they generally missed the required funding level by a small margin.
A Scandinavian investor is tendering a €50m global “cross-asset, systematic trend following” mandate via IPE Quest.The investor requires a UCITS fund and has a minimum volatility target of 10%.According to search QN-2324, interested parties should have at least €10bn of assets under management, and €1bn for this particular asset class or approach.Applicants should state performance to 31 March, gross of fees. The deadline is 16 June. A Dutch pension fund, meanwhile, is researching managers and strategies for emerging market debt (EMD) and government bond mandates via IPE Quest’s Discovery service.The emerging market debt mandate is for a €50m allocation, while the global government bond mandate will receive €20m.For the EMD allocation (IPE Quest reference DS-2323), the pension fund wants an actively managed, investment grade bond strategy. Managers pitching their ideas should have a track record of at least five years.The global government bond option (IPE Quest reference DS-2322) should be a passive strategy, the pension fund said. It should also be investment grade only, and offered through a pooled fund.The deadline for both searches is 7 June.The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation 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 [email protected]
“However, with the level of contributions made towards the pension deficits over the year, companies would have been hoping for an improvement.”The average IAS19 funding level for the companies in the survey was 91% in 2016, down from 94% in 2015. Barnett Waddingham said this equated to an increase in the deficit of around £10bn.The actuarial firm also highlighted a decrease in schemes’ allocation to traditional growth assets since 2015 – down from 31% to 29%. In 2009 the allocation, which includes equity and property, stood at 46%. Bonds and fixed income assets increased from 41% in 2009 to around 54% in 2016.The survey also found a slight reduction in life expectancy assumptions, with Barnet Waddingham saying the value of liabilities in the companies in its survey could fall by around £15bn if all companies updated their mortality projects.The aggregate deficit among all the UK’s private sector DB schemes is estimated to have shrunk from £245.6bn to £232.3bn during May, according to the Pension Protection Fund. T-Mobile trustees appoint fiduciary manager The trustees of T-Mobile International UK Pension Scheme have appointed BlackRock as fiduciary manager.The mandate is for total plan management of the £100m DB scheme, with an overall aim of closing the scheme’s deficit over time.BlackRock has been mandated to design a customised investment strategy, provide strategic investment decisions, and implement these across a range of managers.The investments are divided into three main areas: liability-driven investment to reduce liability risk, “liquid growth” (which includes equities and fixed income), and alternatives.BlackRock was appointed following an open tender market testing process run by Barnett Waddingham.The chair of the pension scheme trustee board, Steve Carrodus of Pitmans Trustees, said: “We wanted to set a long-term strategy for the scheme and to implement this without increasing the governance burden for the trustee board. Fiduciary management seemed the right solution for us and BlackRock outlined a compelling proposal to achieve our objectives.”Scottish public fund finalises investment performance measurement mandateLothian Pension Fund, the £5.4bn local government pension scheme for the city of Edinburgh, has appointed Leeds-based Portfolio Evaluation for an investment performance measurement and risk analysis mandate.The contract is also open for use by the pension fund for neighbouring Falkirk council.The Falkirk and Lothian pension funds already collaborate on investment, in infrastructure, and have been debating deepening their collaboration. Scotland’s public pension funds overall have been looking into options for increased pooling, such as of shared services or investment assets. The overall deficit of the largest UK-listed companies’ defined benefit (DB) pension schemes grew by more than £10bn (€11bn) last year despite significant contributions from sponsors, according to a new survey.The deficit rose to nearly £25bn as at the end of 2016, according to Barnett Waddingham’s annual survey of FTSE100 pension accounting disclosures.A decrease in the average discount rate by 1.1% from 2015 along with higher inflation assumptions combined to increase the value of liabilities by £100bn, it said.Martin Hooper, associate at Barnet Waddingham, said: “On the face of it, the deficits disclosed by the FTSE100 remained remarkably stable, given the scale of movements in discount rates and inflation expectations.