PWRI, the €6bn pension scheme for disabled workers in the Netherlands, must consider if staying independent will allow it to reach the long-term returns its beneficiaries require, according to chairman, Xander den Uyl.The fund has previously spoken of the “considerable” financial damage caused by the Participation Act coming into force next year, which will aim to increase the participation of workers with disabilities.Den Uyl said that it was unlikely the fund would see any new entrants in future.“At present, the market is not best suited to a relatively small fund such as PWRI,” he told IPE. “As a result, the fund is really looking at its future and asking itself if it is going to merge with other funds, or is it going to remain as a standalone, closed fund.“You should really ask whether or not you can deliver the long-term return you are aiming for,” he added. “It’s quite a debate at the moment.”Den Uyl also said the fund was considering its future involvement in private equity, an asset class in which it had so far only invested 2%.“Our private equity is European small- and mid-caps, but could we not get the same kind of returns if we went into publicly listed small- and mid-cap funds?” he asked.Frans Prins, the pension fund’s director, previously said that the scheme hoped to maintain its independence, but it calculated that contributions would need to rise above 40% of pensionable pay by 2050. The Dutch regulator DNB earlier this year contacted 60 local funds, asking them to reconsider their future as separate entities.PWRI currently has 100,000 active participtants, 40,000 pensioners and a further 70,000 deferred members, with a coverage ratio in March above 110%.For more on PWRI, see the upcoming May issue of IPE read more

De Nederlandsche Bank (DNB), the Dutch financial regulator, has said clear ownership rights, a balanced sharing of risks, and more realistic participant expectations about future pension benefits must be addressed in the Netherlands’ new pensions system.Speaking at the annual congress of FD Pension Pro IPE in Amsterdam, Joanne Kellermann, the DNB’s director of supervision, said these building blocks would be essential for building a sustainable system.According to Kellermann, participants need to regain trust in the system, and it is therefore vital to provide them with a realistic picture of their future pension, based on clear communication of an “explicable” concept.“We must also find solutions for the current elements of rights redistribution within the system,” she said, noting that structural redistribution was “bad for social support”. In the opinion of the DNB director, the new pensions system must also be efficient, in order to contribute to the economy through stable contributions and benefits.She added that a certain level of collective approach remained important to keep costs down.Theodor Kockelkoren, who sits on the executive board of the Financial Markets Authority (AFM), added: “Trust is the key word.”He observed that the “call for a defined benefit guarantee” was dying down, and that participants must therefore be provided with clarity in order to arrive at more realistic expectations.In his opinion, the current uniform pensions statement (UPO) is not enough.Kockelkoren also argued that uncertainties over future returns on investments must be better explained.“Returns could, due to costs not yet factored in, turn out to be lower than we have told participants so far,” he said.He said cost efficiency should get more attention because of its importance for the ultimate level of pension benefits.He also asked that the ongoing debate over pensions reform should be conducted with open minds rather than being “based on dogmas”. read more

The Association of British Insurers (ABI) has criticised the UK government over its readiness for the defined contribution (DC) market upheaval just six weeks before new rules come into force.Comments from ABI director general Huw Evans come as the at-retirement market for DC savers changes from compulsory annuitisation to allowing members to access their pots at age 55 and drawdown in any manner.The reforms are underpinned by a free guidance service for consumers to help alleviate confusion over products, and is funded by the pensions and insurance industry but managed by public sector bodies.In a speech at the ABI’s 2015 retirement conference, Evans said the government, regulators, providers and advisers were unprepared to help customers effectively come 6 April. He said the industry did not want to become involved in a failure “blame game” with the government but stressed it was impossible to say its policies were ready for the reforms.“That is a statement of fact not an attribution of blame,” he said.“The ABI and many of the providers we represent welcomed the chancellor’s Budget reforms [and] want them to succeed for customers.”Evans said key information regarding the guidance service for consumers was missing, and that legislation of tax and drawdown was yet to be presented.“We are also still waiting for crucial rules from the Financial Conduct Authority (FCA) to guide providers on how they need to interact with customers,” he added.“The government has simply not been able to deliver enough at this stage to ensure the reforms have a flying start when they go live. Critical pieces of the jigsaw are still missing and will not be in place in time.“I see no point in a blame game and would hope this will not develop as the reforms go live, despite the pressures of the pre-election period.”The reforms were announced in March last year by Conservative chancellor George Osborne, but clashed with several other changes coming into force for DC providers such as the 75 basis point charge cap on auto-enrolment default investment funds.The combination of policies from the Department for Work and Pensions (DWP) and HM Treasury had seen many calls for some proposals to be delayed to allow the industry to play catch-up.Influential Labour MP Dame Anne Begg, chair of the parliamentary committee for pensions policy, said the annuities policy implementation would be tight.At the National Association of Pension Funds conference in October 2014, chairman Ruston Smith complained about the lack of detail over the reforms.Pensions minister and Liberal Democrat Steve Webb has said delays to policy implementation would happen “over his dead body”.Read Taha Lokhandwala’s analysis on the impact of the Budget’s pension freedom proposals on the at-retirement DC market read more

But it argued that the resulting European Markets Infrastructure Regulation (EMIR) was not based around the risk of default.“Without a fundamental review, pensioners (European tax payers) are expected to pay for a system that facilitates highly profitable private institutions to benefit substantially from mandatory clearing,” it said. “But this system puts pensioners’ money at risk, and pension funds may even become less safe as a result of EMIR.”It also said the proposed financial transaction tax (FTT) should distinguish between short-term speculative investments and long-term, buy-and-hold investors.Separately, PensionsEurope threw its weight behind the idea that the Commission should reduce the political risks associated with long-term investments such as infrastructure.The Institutional Investors Group on Climate Change previously suggested EU-level guarantees could be offered to insulate investors from retroactive policy changes affecting renewable energy projects.Joanne Segars, chair of PensionsEurope, said the Commission should address any barriers holding back pension funds from being long-term investors.“This PensionsEurope discussion paper calls on policymakers to refrain from imposing inappropriate quantitative measures or capital requirements on pension funds, which would have negative effects on their investment capabilities – and, consequently, on the goals of the CMU,” she said. Segars warned that the European Insurance and Occupational Pensions Authority’s (EIOPA) proposed holistic balance sheet would be “disastrous” for all affected IORPs and the goals the Commission hoped to achieve by launching the CMU.She also questioned the need for EIOPA’s current stress tests and said the supervisor had yet to make the case for enhanced solvency rules that could follow on.Her comments come after Jonathan Hill, commissioner for financial stability, said he was “not opposed” to further solvency rules being introduced.,WebsitesWe are not responsible for the content of external sitesLink to PensionsEurope paper on Capital Markets Union Mandating central clearing of derivatives trades would only serve to increase profits for clearinghouses and could increase risk, PensionsEurope has warned. In a discussion paper on the Capital Markets Union (CMU), published to coincide with the industry group’s annual conference in Brussels, the association warned that a more coherent capital market could be undermined by regulatory requirements diverting funds away from investment opportunities.It said the CMU would only be a success if it truly facilitated long-term investment by pension funds, and the sector were not hampered by existing prudential regulation that “excessively” limits exposure to long-term projects.The association said it accepted that central clearing of derivatives, from which the sector recently won a further two-year exemption, was an important piece of the financial reform decided upon by G20 nations in the wake of the financial crisis. read more

The €22bn Rabobank Pensioenfonds has appointed Bernard Walschots as chief executive to succeed Jos Dirks, who has retired after nine years at the helm.Thijs Berenst, manager of the central treasury of Rabobank Netherlands, has been appointed as Walschots’s successor.Berenst has been a board member of the pension fund since 2008.Walschots, after having worked as Rabobank’s global head of financial markets research in London, had been CIO at the Rabobank scheme since 2007. In a past interview, he told former IPE sister publication IP Nederland that the pension fund had just revamped its risk hedge to anticipate tail risks when the financial crisis hit in 2008.After moving to protect its funding – approximately 160% at the time – through a combination of equity-linked swaptions, equity puts and interest swaptions, the pension fund’s coverage ratio stood at approximately 130% at the end of 2008.But Walschots said the very low interest levels of today had made Dutch pension funds “very vulnerable”.The Rabobank Pensioenfonds last year cut its interest hedge by 10 percentage points to approximately 40%, while increasing its equity cover to balance its risk profile, according to its 2014 annual report.In the past, the pension fund has cited interest risk as one of the most important elements of its risk-management strategy.According to the scheme’s 2014 annual report, its combined inflation and interest hedge contributed 8 percentage points to its 17.1% return.As of the end of June 2015, the scheme’s official funding ratio stood at 118.2%, while its required coverage was 116%.The pension fund granted a 1.1% indexation over the course of 2014 and managed to keep its annual pensions accrual at 2%, despite the tax-facilitated accrual being reduced to 1.875%. read more

The South West venture, announced in October with the backing of eight funds worth £19bn, falls short of the threshold, which Baxter said had made them “open to other like-minded funds joining”.While Oxfordshire’s joining would boost the venture’s chances of gaining the approval of the government, the nine funds combined would still have just £21bn in assets.Oxfordshire currently runs a listed private equity portfolio, accounting for 8.8% of assets, in-house, but it outsources the remainder of its portfolio to eight managers.Legal & General Investment Management, which runs its fixed income and passive equity portfolios, has seen significant gains from pooling exercises by other funds.Other managers include Baillie Gifford, UBS Global Asset Management, Wellington Management, Insight Investment Management and Partners Group, as well as Adams Street Partners.Oxfordshire’s LGPS previously explored a merger with two other funds – those for the Royal Borough of Windsor and Maidenhead and Buckinghamshire County Council.The merger, part of a larger consolidation of three neighbouring councils, fell through after 18 months of talks. Oxfordshire’s local authority fund may join the asset pool being launched by schemes in the South West of England, boosting the £19bn (€24.4bn) venture’s viability.The £1.8bn local government pension scheme (LGPS) said it had also been weighing up joining regional pools for the Midlands and South East of England, but that Oxfordshire County Council CFO Lorna Baxter had instead recommended membership in the South West pool.In a report to the fund’s pensions committee, Baxter noted that, outside of the London CIV, the South West venture had “demonstrated the clearest vision of the way forward”, while noting existing ties with Gloucestershire, one of the South West pools’ existing participants.The move by Oxfordshire to join the pool comes after the Department for Communities and Local Government (DCLG) announced how it would assess the pooling exercises, which it said should meet a £25bn asset threshold. read more

UK pension schemes have several “flexibilities” that allow them to respond to adverse market conditions in a variety of ways that suit their individual circumstances, he added.  TPR noted that it had a DB code of practice that gave guidance to trustees on how to manage their schemes’ funding, and encouraged the use of a variety of qualitative and quantitative approaches to risk management, including scenario testing.The UK accounted for nearly 40% of the sample of defined benefit schemes EIOPA tested. Out of 140 Europe-wide participants, 61 were UK defined benefit schemes.The Netherlands was another large contributor, accounting for 44% of the DB sample.The Dutch Pensions Federation, meanwhile, said it was not surprised by the outcome of the stress tests, “as they had been conducted while pension funds’ balance sheets were already stressed”.It attributed EIOPA’s conclusion, that Dutch pension funds posed a limited risk to financial markets, to the long-term character of schemes’ liabilities and recovery plans.“As a consequence, Dutch pension funds have a stabilising effect on financial markets,” the Federation said.It further noted that Dutch schemes were permanently monitoring vulnerabilities and systemic risks through asset-liability management studies (ALM).However, in the Federation’s opinion, the stress tests have not generated a proper view on the risks for defined contribution (DC) plans.“The tests in particular provide information about the financial position directly after a crisis but hardly about the impact on the ultimate pensions income,” the industry group said.The Dutch supervisor De Nederlandsche Bank concluded that, from a European perspective, Dutch schemes have a high-risk profile. However, it also noted that the stress tests had made clear the Dutch pensions sector posed no systemic risk.Dutch pension funds that have participated in the tests represent more than 50% of all Dutch pension assets.According to DNB, Dutch pension funds would in particular be hit in a scenario of declining security markets, falling interest rates and increasing spreads. Pension funds would also suffer in a scenario where security markets were hit less hard but interest rates fell further, even slightly. DNB said the impact of both scenarios was down to the relatively large equity portfolios of Dutch pension funds, as well as the fact they have hedged only a part of their interest risks.The impact of the longevity scenario, which assessed the impact of a 20% longevity increase, was less severe, according to the Dutch supervisor.The spectre of HBS Other EU pensions industry participants have cautioned against reading too much into the stress test results and raised the matter of the HBS, the idea of an accounting tool that can accommodate the national specificities of different pension regimes.The HBS informed the common methodology EIOPA developed to be able to make cross-border comparisons of the stress test results, but the HBS otherwise hardly comes up for mention in EIOPA’s documents on the stress tests and was not a topic of discussion during the press conference.PensionsEurope, however, raised the topic of the HBS in a reaction to the stress tests. Overall, it urged caution in interpreting the results, saying it only covers a small portion of the total number of IORPs.“PensionsEurope concludes that the results do not necessarily give the correct picture of the European IORPs’ ability to cope with stress scenarios,” it said.Janwillem Bouma, chair at PensionsEurope, brought up the issue of the HBS, saying he has “serious doubts” about it or other common European methodologies used by EIOPA.“The results based on existing prudential frameworks in each member state are in many ways different than those based on the European methodology, and I am not convinced a European framework as envisaged by EIOPA is suitable or useful,” he said.Francois Barker, head of pensions at the UK law firm Eversheds, warned that the “threat” posed by the HBS remained, and that the stress test results could revive the debate around its use.Barker noted that EIOPA was due to report on the need for a solvency-based regime for pension funds, the results of which stem from a quantitative assessment launched at the same time as the stress tests.“EIOPA could recommend a new reporting requirement be introduced for European defined benefit plans to require them to report their funding position on the holistic balance sheet basis to national regulators,” he predicted.The lawyer warned that such a measure would be “costly” and make the use of the HBS to measure the solvency of defined benefit plans more likely. Dutch and UK pension regulators have welcomed EIOPA’s findings that occupational pension schemes in their countries do not pose a systemic risk, while other EU industry participants have responded to the stress tests by focusing on the perceived threat of the holistic balance sheet (HBS).Regulators in the UK and the Netherlands, two of the biggest contributors to the sample of defined benefit (DB) schemes EIOPA tested, welcomed the regulator’s conclusion that the pension sector had a limited ability to pass on financial shocks. EIOPA chairman Gabriel Bernardino said further work needed to be done to assess the potential consequences on the real economy of increased pressures on sponsors.Andrew Warwick-Thompson, executive director of regulatory policy at The Pensions Regulator in the UK, said: “We are not surprised EIOPA’s pension stress test found only a limited link between pension schemes and financial stability.” read more

Its share price had recovered to €126.55 at closing on 23 June, but, in common with stocks across global exchanges, it has been hit by volatility after the UK’s vote to leave the European Union.As of 14:00 CET on 27 June, it was trading at €108.90.While Volkswagen is not among the sovereign fund’s 10 largest equity holdings, at the end of 2014, its stake was worth NOK9.7bn, equivalent to a 1.22% share of the firm’s equity.However, by the end of 2015, it had sold off some of its stake.In December, it held 1.02% of shares – worth NOK6.6bn and granting it 0.26% of votes, down from 0.49% the year prior. Norway’s sovereign wealth fund has joined the California State Teachers’ Retirement System (CalSTRS) and around 800 other institutional investors in suing Germany’s Volkswagen.Norges Bank Investment Management (NBIM) issued a short statement on behalf of the Government Pension Fund Global, confirming it joined the lawsuit on 20 June, which follows last year’s revelation Volkswagen used ‘defeat device’ software to underplay the emissions of diesel vehicles.The NOK7.1trn (€745bn) fund added that it would be represented by Quinn Emanuel Urquhart & Sullivan, which filed the suit claiming around €2bn in damages, backed by CalSTRS and others, in the Braunschweig District Court. NBIM said in May it planned to sue Volkswagen over last year’s emissions scandal, which saw the company’s share price drop from €162.40 to as little as €92.36 at the beginning of October. read more

A visit to Belfast last week by China’s provincial pension funds manager, the National Committee for Social Security Fund (NCSSF), to meet its Northern Ireland counterpart could signal offshore investment intentions, according to sources.Those familiar with the Chinese pension system told IPE the trip could be a precursor of more to come as the NCSSF familiarises itself with the practicalities of offshore investment with foreign counterparts such as the Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC).NCSFF officials met with their counterparts at the £6.6bn (€7.9bn) NILGOSC, a global investor responsible for managing Northern Ireland’s largest investment fund.In a statement, NILGOSC chief executive David Murphy said the meeting covered pension fund management and governance. “We face similar challenges and were able to share forecasts for the UK markets in the light of Brexit and wider global markets,” he said.Nicholas Britz, senior associate with Z-Ben, a Shanghai-based asset management consultancy, said: “It’s an interesting one.”He said the dialogue with NILGOCS would certainly have touched on comparative pension management structures – and how respective best practices could be leveraged.But such dialogue would be standard and regular practice, he pointed out.“Europe remains a key destination for Chinese outbound institutional investment,” Britz said. “If I had to call it, I believe they are likely to be investigating long-term investment opportunities – whether PPP or with third-party managers – that would allow them to enter LP arrangements.“This plays to the fact they heavily mandate out the offshore portfolio, as opposed to running it in-house. I have no doubt global asset managers would be positioning to get some face time with the delegation.”Others who spoke to IPE  believe that, with investors such as China Investment Corporation (CIC) or SAFE Investment Company, the investment arm of the State Administration of Foreign Exchange (SAFE), NCSSF would be “a passive investor” over a relatively long investment horizon.The NCSSF, which oversees CNY1.5trn (€206bn) in social security funds, recently named 21 companies, including seven with offshore affiliations, to handle domestic equities investment. read more

Charles Prideaux is to step down from his role at BlackRock as EMEA head of active management and leave the company, IPE has learned.Prideaux had been appointed to his current role earlier this year, having been head of EMEA institutional business since the firm’s merger with Barclays Global Investors in 2009.Prior to that, he had been global COO for the fundamental equities business.He also sat on the EMEA executive committee. Prideaux joined BlackRock’s predecessor firm, Mercury Asset Management, in 1988, where worked on the UK equities team, and has worked for the firm continuously since then.Mercury was acquired by Merrill Lynch in the 1990s, and the combined entity was acquired by BlackRock in 2006. Prideaux’s institutional business role was split following his move to head EMEA active management, with Justin Arter becoming UK institutional head and Peter Nielsen becoming head of Continental Europe.He will not be directly replaced in his current role. A statement to staff today from Rob Kapito, president of BlackRock, and David Blumer, head of EMEA, said: “The work [Prideaux] has been doing this past year has helped provide the regional coordination our business requires.“With Charles now moving on, Nigel Bolton, Pierre Sarrau and Tim Webb will continue to drive that coordination and regional investment oversight.”BlackRock reported net inflows of $70bn (€66.9bn) in the third quarter of this year and $7.5bn of long-term active net inflows from institutional clients, mainly to multi-asset, but $3.4bn net equity outflows from quant and European strategies. read more