R&M said the merger would benefit both arms of the business, as it creates a natural extension from its equity specialism to other asset classes.For P-Solve, the company said, the merger provides the opportunity to develop its asset allocation and derivative capabilities.Faulkner told IPE that, with the demand for outcome-led solutions growing, the merger made sense given the two sets of skills.“There is a logic to bringing together the skills, based on the trend to outcome orientation in investment markets,” he said.“We can do this by bringing together the alpha and security selection skills [from R&M] and derivatives and asset allocation skills [from P-Solve], which help manage the downside of equity investing.”Responding to concerns over potential conflicts of interest between the investment consultancy and investment management arms of the new group, Faulkner said managing potential conflicts would be akin to the ones the firm already comes up against.“The conflict question is one of the things we have to be wary of, and one we have to address properly,” he said.“We are not going to change the fiduciary proposition, which is something that finds a range of managers, and suddenly fill it up with internal products.“That isn’t the rationale for what we’re doing.“This is just like the normal conflicts of doing business. There are currently some clients that choose to engage us on a pure consultancy basis, sometimes on a fiduciary, and some in between, and all of those require different types of behavior.“This is the same idea, and we have managing those sorts of issues forever.”On the deal, James Barham said the merger would accelerate plans for R&M to develop a broad-based diversified business.“We will have a strengthened platform from which to work and support our clients and consultants,” he said. UK investment consultancy and fiduciary manager P-Solve is to merge with equity boutique River & Mercantile (R&M) to form a new group that will look towards integrating specialist skills for product development.P-Solve, previously a wholly owned subsidiary of UK consulting group Punter Southall, has joined forces with R&M as both look towards product development in their current areas of focus.P-Solve chief executive Mike Faulkner will remain head of the new group, which will be known as R&M Group, with James Barham, current chief executive of R&M, continuing to run the equity management business in addition to becoming the group’s head of distribution.The R&M Group will continue to offer P-Solve’s investment, and delegated, consultancy propositions, as well as the equity management business from R&M.
Jupiter — Martin Harris has been hired as head of institutional business at investment management firm Jupiter. Jupiter said Harris would responsible for improving its institutional business strategy internationally. He joins Jupiter from Kames Capital where he was head of distribution for five years. Before that, he was global head of investor relations and capital raising at CQSLondon.ING Investment Management – Matthijs Claessens has been appointed head of business development for institutional clients in the Netherlands. He will focus on investment strategies and integrated client solutions. Claessens is to report to Paul van Eynde, head of institutional clients in Europe. Over the past three years, Claessens was in part responsible for acquisitions, as well as positioning of ING IM in the institutional market. Finnish Pension Fund Association — Timo Toropainen has been appointed president and chief executive of Eläkesäätiöyhdistys, the Finnish Pension Fund Association, replacing Pasi Strömberg, who has headed up the association since August 2011. Strömberg is leaving the association to become chief executive of Finnish private pension fund Verso. Toropainen was previously a political reporter, working at MTV News, UK broadcaster Channel Four News and Finnish newspaper Helsingin Sanomat.Ardian — Tobias Gewolker has been appointed as director in the infrastructure team at private investment firm Ardian, and will be based in Paris in the new role. Before joining Ardian, he worked at DC Advisory, following four years at Barclays Capital. LCP — UK consultancy LCP has promoted five of its staff to become partners in the firm. The new partners are Gareth Davies, Catherine Drummond, Carla Lakey, Tom Porter and Gordon Watchorn. LCP said the five promotions brought its number of partners to 98, after marked growth in the business over the last five years. BNP Paribas Securities Services — José Placido has been appointed to the executive committee of BNP Paribas Securities Services, and will join the bank on 22 April. He will co-head sales and relationship management alongside Charles Cock, the current head of client development. From January next year, Placido will become global head of sales and relationship management, at which point Cock will become vice-chairman in a new senior client executive role focusing on key customer relationships, the bank said. Placido was previously chief executive of RBC Dexia. At BNP Paribas Securities Services he will be based in London and report to general manager Patrick Colle.
A senior UK civil servant has warned local government pension schemes (LGPS) that recent changes to structure might not be enough to secure sustainability among the 89 funds.Bob Holloway, head of local government pensions at the Department for Communities and Local Government (DCLG), said it would be unwise for schemes to assume no further reforms would take place for 25 years, a government promise.Holloway, who began working in local government pensions policy some 20 years ago, said he still personally questioned the affordability of the scheme over the long-term, despite the new reforms.Earlier this year, the 89 LGPS funds in England and Wales changed from final salary to career-average along with additional changes to the accrual rate. Holloway said, based on the 2013 triennial valuations at the funds, these reforms would save around 1.5% in the short term.Speaking at the Local Government Pension Investment Forum 2014, Holloway said the schemes were in a better place than six years ago, and that the savings from the move to career-average would extrapolate over the long term.“But when you consider the levels of reduction ministers talk about in terms of local government, we are not talking about single-figure percentages,” he said.“I do not see things getting better, and the challenges will increase. We really need to seriously address how we can make the schemes sustainable and affordable.”He said while no formal discussion had taken place at the DCLG level, delegates should contemplate a future where schemes were not administered at local level, but done so nationally.MyCSP, a joint venture between private sector company Equiniti and the national government, currently administers the nationwide Civil Service Pension Scheme after it was outsourced by the current government.Holloway said MyCSP had approached DCLG over a national administration platform for the LGPS but was rebuffed over business model calculations.Holloway also warned that public sector pensions were not safe from a switch to defined contribution (DC).He said a recent survey of LGPS managers showed one scheme had seen a 100% increase in enquiries about transferring from the defined benefit (DB) LGPS to DC funds.He added that the recent changes to DC at-retirement models announced in this year’s Budget removed the requirement to annuitise, which made DC much more attractive.“There will be a massive shift from people wanting to move away from public service pension schemes to DC arrangements,” he said. “DB was head and shoulders above DC schemes, but, if we’re not careful, DC could be more popular than staying in the LGPS.”He said it was worth considering discussions with HM Treasury to allow a better commutation rate for LGPS members or to allow them to drawdown pensions on a drip-feed basis, similar to those available in the private sector and DC schemes.“We can rely on ministers to keep a watchful eye on the cost of local government pension schemes, but there will come a time very shortly that we will have to look at ourselves and ask the question over the need for further reform,” he said.
IIGCC chairman Donald MacDonald added that the text was a “momentous achievement”, singling out the lower temperature goal for praise.MacDonald, also trustee director at the BT Pension Scheme, said climate-risk appraisal would move from “the margins to the mainstream” and predicted a “swift” change as pension funds recognised their fiduciary duty to tackle climate change.The agreement, which endorsed the use of carbon pricing as a means of cutting emissions, showed that the world had a “shared vision”, according to Philippe Desfossés, chief executive at ERAFP, the supplementary pension scheme for French civil servants.“Investors will encourage every country keen to build a sustainable economy to develop a long-term, low-emissions development strategy,” Desfossés said, noting the future importance of carbon pricing.Jeanett Bergan, head of responsible investment at Norwegian pension provider KLP, agreed that the text showed “great potential” but warned there were still still risks. “It all depends on how each and every government is implementing the ambitions,” she told IPE.She cited KLP and other asset owners’ shift away from coal-intensive industries as one step to be taken to align portfolios with a 2°C or lower target.But she also pointed out the recent RE100 initiative by ShareAction, which aims to get companies to commit to 100% renewable energy use, as a way of getting them to do their part.Bergan added: “All of that will, together, be part of the important drivers for the solution.”Damgaard Jensen agreed, noting that PKA had long called for “clear and secure” political guidelines to make climate-friendly investments possible – a goal seemingly achieved during the Paris negotiations.“But it’s important politicians, companies and investors take concrete measurements to actively make the agreement a reality,” he said. Pension funds have hailed the Paris climate change agreement as a “momentous achievement” but cautioned that its success hinges on the commitment of individual countries.Investors said the agreement, reached after two weeks of intensive negotiations as part of the UN Climate Change Conference, showed “great potential” and would accelerate the global transition away from fossil fuels to a low-carbon economy.Peter Damgaard Jensen, chief executive at Denmark’s PKA, welcomed the “historic milestone”, which saw the nearly 200 participating companies endorse a final text aiming to keep global warming at or below 1.5°C of the pre-industrial average, a more ambitious target than the 2°C initially expected.The chief executive of the Institutional Investors Group on Climate Change (IIGCC), Stephanie Pfeifer, added that the agreement was an unequivocal signal to investors that an escalation of financing for low-carbon infrastructure was needed to deliver the targeted reduction in carbon emissions.
“Now that the Federal Reserve has pulled the trigger and hiked rates,” it said, “all eyes will be on the timing of additional increases, and if other central banks – particularly the UK – will follow.”Those exposed to commodities stocks witnessed a continual decline in prices – down 8.6% in December alone – as the 32.9% fall in value since the beginning of the year marked the fifth consecutive year the category was the worst performing within the asset class.Despite funding ratios closing out the year below levels in January, the consultancy did estimate that a rise in both AAA and AA euro-zone bond yields had led to a 0.8% decline in DB fund liabilities.However, this contrasted with liabilities overall increasing by 3.5% over the course of the year, outstripped by a 4.6% rise in asset value since January 2015. Irish defined benefit (DB) schemes closed out 2015 with declining funding ratios, after volatile equity markets wiped out funding gains made over the course of the year. LCP said the funding level of its sample DB scheme fell 2.3 percentage points to 96.1% over the course of December, below the 96.8% funding level recorded at the beginning of the year and well shy of its funding in excess of 100% in May.The consultancy said equity market volatility in December cancelled out the gains achieved in the two months prior to December but that global equity markets overall finished nearly 10% higher than at the beginning of the year, at least when returns were measured in euros.In a summary of December markets, LCP also warned that the rate hike by the US Federal Reserve was likely to be the first of many by central banks globally.
TPRA, a pensions rating agency, has said it found, after surveying more than 230 Dutch pension funds, no correlation between higher asset-management costs (or portfolio scale) and higher returns on investment. The Amsterdam-based agency, however, acknowledged that some pension funds with relatively high asset management costs – including those of Mars (1.86%), Hunter Douglas (1.05%) and C&A (0.9%) – had outperformed the market, returning as much as 6.6% over 2015.By contrast, the pension fund for Dutch communications watchdog AFM, with costs of 0.87%, returned just 0.6%.The survey showed that asset management costs ranged between 0.14% and 1.86%, and that they had largely remained unchanged year on year. TPRA said the most significant cost reductions were the product of pension funds simplifying their investment portfolios or switching from active management to passive.It added that the divestment of alternative holdings, as well as a reduction in the number of mandates tendered, had also played a role.The survey also found that administration costs per participant increased at 65% of the schemes, by 5.5% on average.It attributed the increase in these costs chiefly to the introduction of the new financial assessment framework (nFTK) in the Netherlands.It also cited the cost of planned liquidations, adjustments for re-insured arrangements and the introduction of new administration systems.The survey highlighted significant differences in how administration costs have developed at Dutch schemes, with costs at some increasing by more than 100%, and at others falling by 50%.TPRA estimated that costs per participant, adjusting for pension funds’ scale, stood at €117 on average.It placed AT&T’s pension fund at the top of the scale, with costs of more than €6,000 per participant, whereas Ring A of the multi scheme of Pon limited its costs to €20.The researchers, however, put the figures into perspective by explaining that the AT&T scheme had the smallest number of participants, while Pon’s plan predominantly implemented “easy to administer” surviving-relative arrangements.The rating agency placed combined costs for pension funds at 0.69% of assets under management on average, ranging between 0.21% and more than 2%.It also claimed that pension funds had improved transparency and comparability, paying increasing heed to reporting guidance issued by the Dutch Pensions Federation.
Trustees would need to consider the trade-off between the strength of the sponsor covenant being given up, and the strength of the financial covenant built into the solution.The strength of the existing covenant could be measured from the sponsor’s credit rating and hence the probability of default over different timeframes. This could then be incorporated into a long-term risk model to arrive at what Redington called a “probability of paying pensions” (POPP).The strength of the consolidator’s covenant, meanwhile, could be assessed from the funding level of its structure and the size of any additional capital reserve, relative to the investment risk being run in the structure. A long-term risk model could also be run with these capital reserves built in, to assess POPP.According to the report, DB scheme consolidators are a developing market providing a third option to scheme trustees planning their endgame, in addition to an insurance buyout or a long-term run-off where the scheme is self-sufficient.They provided the ability to sever ties to a corporate sponsor at a price that is less than full buyout.Until recently, consolidators had generally been seen as a way in which pension funds could achieve cost savings from economies of scale, enabling more effective investment strategies and improving governance. Two commercial DB consolidators have launched – Clara Pensions and The Pension Superfund – in the past 12 months in order to offer these benefits to trustees.However, Elliott said: “We think the main tangible benefit of a consolidator fund will end up being the exchange of a corporate covenant for a financial covenant.”The UK’s Department for Work and Pensions is consulting on a legal framework for consolidators; the consultation closes on 1 February. Trustees of defined benefit (DB) schemes must weigh up loss of control over investment strategy against a stronger convenant when considering transferring to a commercial consolidator, according to a new report.‘The Road Less Travelled’, from the Redington Ampersand Institute, said possible drawbacks of consolidators – also known as superfunds – included loss of control over investment strategy and the risk that assets would not be built up to a sufficient level to provide economies of scale.Furthermore, members would not benefit from any future increase in the sponsor’s covenant quality, for example from increased profitability. It was also possible that the consolidator’s own return requirements would cancel out the economic benefits for the scheme.Marian Elliott, head of integrated consulting at Redington and co-author of the report, said: “Moving a scheme to a consolidator will be a very big decision for any group of trustees, and what is most needed in this situation is a framework for making the decision… a compact series of questions and metrics that capture the key principles that govern the decision, from an investment, funding, covenant, and legal perspective.”
The fiduciary management industry saw assets under management increase 21% to reach £172bn at the end of June this year, up from £142bn as at end-June 2018, according to new research from KPMG. The firm’s 2019 UK Fiduciary Management Survey found the total number of mandates in the industry rose by 10% to 946 in the 12 months to 30 June 2019, following the 9% growth in mandates over the preceding 12 months.The survey results are based on responses received from 19 established fiduciary managers operating in the UK pensions market – including Aon Hewitt, Legal & General and Cardano – using data for the 12 months to 30 June 2019.Anthony Webb, head of fiduciary management research at KPMG, said: “The return to growth in the market is encouraging, but the increase in new mandates has not yet reached previous levels of 15% annual growth.” Webb said the sizeable boost in assets under management was significant, but had been helped by rising Gilt values and high levels of liability hedging.He said he believed that mandates had been held back by the recent Competition and Markets Authority (CMA) investigation into the industry.He commented: “We expect next year’s survey to capture a surge in tenders, as some early adopters are required to go back to the market and retender to meet the CMA’s requirements.”Meanwhile, the survey also found that despite a surge in interest in environmental, social and governance (ESG) issues, few pension fund trustees are going beyond the minimum requirements.Nearly all (98%) of the trustees surveyed were engaging with their fiduciary managers on ESG matters, compared with just over half last year (58%).But most (87%) had conducted no more than a light-touch review of ESG, only one in ten (10%) had thought about it carefully, and a mere 1% had taken bespoke action, according to the survey.Many trustees are heavily guided by their providers’ default positions, the survey showed.Webb said that the concern of trustees and investment committees for ESG matters appeared not to have led to changes in behaviour.He said: “We have seen most pension schemes undertake ‘light touch reviews’ whereas it is the next step of designing and implementing bespoke policies that could lead to real action.”When asked about their “end-game” plans for their full UK mandates once they have reached full funding on a long-term objective, nearly half (44%) of fiduciary managers said they would look for a buy-out, while just over a third (38%) suggested a run-off.
The list also includes major asset managers such as Legal & General Investment Management, NN Investment Partners, Skandia and Storebrand Asset Management.In the letter the signatories said that since the establishment of the Amazon Soy Moratorium (ASM) in 2006, soy production in the Amazon had increased 400%, which showed that forest protection and agricultural expansion could be compatible.“Today, there is enough existing agricultural land to continue to increase soy production in the Amazon by an additional 600% compared to current figures,” they wrote.In September this year, nearly 70 asset owners backed a statement calling on companies to reinforce their efforts to make sure their operations and supply chains did not contribute to deforestation.This came as a response to the forest fires in Brazil and Bolivia and was signed by 230 institutional investors with $12.6trn (€11.3trn) in assets under management, including Norway’s KLP, with asset owners accounting for 30% of signatories.Norway’s SWF relaxes watchful stance on PetrobrasIn other Brazil-related pensions news, Norway’s sovereign wealth fund announced earlier this month that it has removed the “observation” status which had been imposed on Petroleo Brasileiro (Petrobras), because of concerns about corruption at the firm.The move follows a recommendation by the Government Pension Fund Global’s (GPFG) Council on Ethics to take the Brazilian oil and gas firm off the fund’s observation list, because the risk of corruption had now shrunk.Petrobras was placed under observation by Norges Bank Investment Management (NBIM), the manager of the NOK10.2tn (€1tn) fund, in 2016, on the council’s advice.The council had advised doing so after revelations that senior executives at the company and major suppliers had for a decade operated a system where bribes had to be paid in order to win Petrobras contracts.Though some investigations are still live, the council said it considered the risk of corruption in the company has decreased, despite the risk inherent in the fact that the Brazilian government, as the controlling shareholder, appointed a majority of Petrobras’s board members, it said.“This assessment rests partly on the legal settlement entered into with the US Department of Justice which confirms that Petrobras has implemented wide-ranging improvement measures since the investigations commenced in 2014, and that it has undertaken to report on the further implementation of its compliance programme and internal control measures each year until 2021,” the council said.At the end of 2018, the GPFG had NOK392.5m invested in Petrobras equities, amounting to a 0.59% stake in the company. Seven major European funds have joined food companies in an open letter calling on Brazil to stick to an agreement that soy production in the Amazon happens only on existing agricultural ground.While the investors and firms that buy and use the soy commended the progress made so far, they said that deforestation due to other causes, such as cattle ranching, had increased to a billion hectares in the last year, from 460 million hectares in 2012, according to recently-published Brazilian government data.Signatories to the open letter, coordinated by the environmental, social and governance (ESG) investor network FAIRR, wrote: “These deeply concerning figures reinforce the importance of continuing to uphold the ASM.”Some of the UK and Nordic’s largest pension players such as Norway’s KLP, Swedish national pension funds AP2, AP3, AP4 and AP7 and the Strathclyde and Environment Agency pension funds in the UK were among signatories, alongside many food producers and retailers including Mars, Asda Stores and Carrefour.
26 Birt Ave, Surfers Paradise. 26 Birt Ave, Surfers Paradise.This is exactly what vendors Natasha and Matthew Black hoped for when designing and building the home at Surfers Paradise’s Budds Beach. They wasted no time knocking down the house that originally stood on the 567sq m block to make way for their dream home.As an interior designer and architect, the couple had a clear vision of what they wanted.“Everyone is doing Hamptons so we wanted to put our own spin on it,” Mrs Black said.“When we were building it, we had no budget to follow so we pretty much just put everything we wanted into it. 26 Birt Ave, Surfers Paradise. Address: 26 Birt Ave, Surfers Paradise Agent: Ron London, London Estate Agents Features: Freshwater swimming pool with spa jets, fireplace, dual living option Price: $2.35 million Inspections: Sunday, 10-10.30am 26 Birt Ave, Surfers Paradise.“I put 10 seats on it but you can easily seat 14 people at it,” she said.“We often would have people around for dinner parties.”Above all else, Mrs Black said the location was one of the best parts of the home.Originally from the Sunshine Coast, they discovered Budds Beach while on holiday and “loved it” because it was right next to the hustle and bustle of Surfers Paradise but quiet. STEP BACK IN TIME LIVE OFF THE GRID “For people that don’t live on the Gold Coast, it’s one of those areas you probably wouldn’t drive into — you’d probably just drive past it and not even know it was there,” Mrs Black said. 26 Birt Ave, Surfers Paradise.HAMPTONS-style homes have become all the rage in recent years but this one is unlike any other.It has a coastal theme throughout but luxury features, including statement mirrors and light fixtures, give it a classy elegance.Its blue and white exterior with a dark-grey roof also makes it stand out among the sea of white and beige properties that surround it. 26 Birt Ave, Surfers Paradise.“People were stopping and asking about it, whether it was for sale and what we would take.”They drew inspiration from multiple Hampton-style homes they toured in the US but made an effort to stay true to their Australian roots. “Over there, they use a lot of brown so we put more cooler colours in to suit being so close to the ocean,” Mrs Black said.“We really did put a lot of attention into the detail.” More from news02:37International architect Desmond Brooks selling luxury beach villa17 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago26 Birt Ave, Surfers Paradise.They had been living in the six-bedroom, four-bathroom home six months when an opportunity to move overseas with their two young children came up. Mrs Black said it would be hard to let go of the home but they were glad they got the chance to build it.“We’re about to go overseas otherwise we wouldn’t be selling because we just love it so much,” she said.The curved staircase was Mr Black’s favourite part of the home while Mrs Black liked the pool and dining room with 3.2m table.