Swedish institutionals take dim view of Volkswagen’s Scania bid

first_imgAnd a statement from Swedish pension company AMF, which along with AMF Funds owns 0.7% of Scania, said: “Our mission is to ensure good long-term returns for our clients.“Therefore, it is particularly important not to make a decision based only on short-term key performance indicators for 2014 or 2015, but also take Scania’s long-term potential in consideration.“We will not sell any shares until our assessment is completed.”The two institutions have teamed up with the Fourth Swedish National Pension Fund (AP4) and Swedbank Robur to highlight governance concerns at Scania.Under the Swedish A and B share system, VW’s share ownership equates to 89.2% of voting power.The group of investors claims VW used its influence to remove Scania’s nomination committee, reducing smaller shareholders’ influence within the company.Furthermore, they say VW’s ownership of rival truck manufacturer MAN Group, based in Germany, presents a potential conflict of interest.VW intends to merge Scania into the VW group and says this would result in annual savings of €650m through synergies, although this would only be achieved over the next 10-15 years.Meanwhile, Scania said it has set up an independent committee to evaluate the offer. Minority institutional investors in Scania, the Swedish heavy vehicles manufacturer, appear reluctant to accept a takeover bid from Volkswagen (VW), which already owns 62.6% of the group’s share capital.VW first invested in Scania in 2000.On 21 February, it announced the offer for a cash consideration of SEK200 (€22) a share, which it said represents a premium of more than 50% on the share price.But a spokesman for Skandia, one of the largest minority shareholders, told IPE the insurer was “negative” to the offer.last_img read more

Rising equities fail to dent UK pension deficits in April

first_imgDefined benefit (DB) pension schemes in the UK saw their deficits expand marginally last month while funding levels remained static, according to data from consultancy Mercer.Funding levels for the 350 largest DB pension schemes in the UK stood at 83% at the end of April, unchanged from the end of March, while the schemes’ accounting deficits rose to £128bn (€172bn) from £127bn, Mercer’s monthly pension risk survey showed.Asset values fell by £4bn between the end of March and the end of April, to stand at £625bn, while liability values were down £3bn at £753bn.The company said that, even though liability values had fallen during the period — driven by a rise in corporate bond yields — this had been offset by the fall in asset values. Ali Tayyebi, senior partner in Mercer’s retirement business, said: “The deficit remained substantially unchanged during April.”He said this masked quite big changes in corporate bond yields and market implied inflation over the one-month period.“This month, they happen to have had broadly opposite effects on the calculation of the liabilities,” he said.Tayyebi said this volatility was a continuation of a trend seen over recent months.Mercer said deficits at DB schemes had increased by almost 20% so far this year, and that it was disappointing for sponsors as well as trustees that the funding position was still weak.It observed that certain parts of the investment market had done well during April – equities in particular – while others such as interest-rate reductions had been negative.Le Roy van Zyl from the firm’s financial strategy group, said: “Dealing with the pension scheme risk at an acceptable cost is, therefore, very much about looking below the headlines.”He said schemes had to look at the individual financial drivers, as well as respond to emerging opportunities and threats.last_img read more

Faull leaves financial services department over UK referendum

first_imgOver the next 15 years, he held a number of senior roles within DG Competition, eventually becoming deputy director-general responsible for state aid cases in 1999.He was Commission spokesman for four years during the presidency of Romano Prodi but then was promoted to director-general of DG Justice.In 2010, he was named the most senior civil servant at the directorate-general for internal market, headed by commissioner Michel Barnier, and retained his position when it was reshaped into DG FISMA under current president Jean-Claude Juncker.Guersent has worked for the French government and competition authority before joining the Commission in 1992, working within a number of commissioners’ private offices and directorates-general.He has been Faull’s deputy since the summer of 2014.The UK Conservative government won the election in May promising to offer an in/out referendum on EU membership by 2017. Jonathan Faull, the most senior European Commission civil servant in charge of financial regulation, is to leave the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) at the beginning of September.Part of a wide-ranging reshuffle of directors-general within the Commission, Faull is to head up a new directorate overseeing issues relating to the UK’s referendum on its European Union membership.Olivier Guersent, currently Faull’s deputy at DG FISMA, is to succeed him when the changes take effect from 1 September.Faull has worked for various European institutions for decades, starting within the department responsible for competition in 1984.last_img read more

FSB suspends work on systemic risk posed by asset managers

first_imgThe Financial Stability Board (FSB) has suspended work on regulation for asset managers aimed at addressing systemic risk concerns, falling into line with the International Organisation of Securities Commissions (IOSCO).The FSB, a Switzerland-based organisation of financial policymakers and central bankers, consulted on additional regulations earlier this year.Working together with the IOSCO, a market regulator umbrella group, the FSB was assessing whether asset managers were systemically important to financial markets.The organisation could have proposed additional capital requirements on those asset managers or investment funds deemed systemically important, but it has now confirmed it will suspend its work until a wider financial-stability risk study is complete. This follows on from an IOSCO statement in June, where the organisation said its immediate focus would be a full review of the asset management market in a global financial context, instead of systemic risk.IOSCO chair Greg Medcraft told a conference in London that the problem of systemic risk should be tackled only after the market review, and that previous work identifying this should be reviewed.The FSB said the market review would improve the analysis of stability issues and thereby inform any future assessments. Its proposals originally focused on risks associated with market liquidity and asset management activities, including sources of vulnerability for asset managers.Asset managers – which have downplayed their relative importance to the financial system, being mere agents for other investors – will welcome the decision.Vanguard and BlackRock, responding to the FSB and the IOSCO’s consultation earlier this year, argued that managers were just one component of the market and called for a wider focus on markets and asset classes.last_img read more

UK roundup: Hackney Pension Fund, Pensions Regulator, Willis Towers Watson

first_imgHe said: “There is also a threat to our pension fund in that investments in fossil fuel assets become stranded, which means that they’ll lose their value as a result of necessary world-wide action against climate change.”Hackney was the first London borough to set itself a clear risk reduction target within a realistic amount of time in order to make the necessary changes with the minimum of risk, he said.But Chapman cautioned that the council had to make sure any changes to how the pension fund was managed were made extremely carefully. “Our first responsibility is towards those whose pensions we manage as well as other stakeholders, which include local council taxpayers,” he said.In other news, the Pensions Regulator (TPR) reported that membership of defined contribution (DC) schemes had overtaken that of defined benefit (DB) schemes for the first time.In its latest annual DC Trust report, TPR said there were now around 14.8m memberships of DC schemes, compared to 11.7m DB arrangements.Andrew Warwick-Thompson, executive director for regulatory policy at TPR, said: “We have now passed a significant point in UK private sector pensions provision with 55% of all private sector pension scheme members and 85% of active members being participants in DC schemes.”This big change was directly due to the success of the automatic enrolment system (AE) introduced in the last few years, he said, which had seen more than 7m workers join a pension scheme for the first time.“Master trusts have played a major role in the success of AE and so the introduction of a mandatory authorisation and supervision regime via the Pension Schemes Bill is vital,” Warwick-Thompson said.The regulator now needed to make sure there there was “a level playing field” for the protection of consumers investing in contract-based and trust-based multi-employer pension plans, he said, adding that it was clear market forces alone would not have made this happen.Meanwhile, DB pension funds looking to offload liabilities to bulk annuity providers may find lower prices this year due to greater insurance capacity, according to a new report.But they face continued competition from insurance companies seeking to offload risk, Willis Towers Watson said in its 2017 de-risking sector report.Last year was relatively quiet compared to 2015 in terms of pension schemes passing longevity risk to insurers. However, several insurers passed on back books of annuity business to other insurers and reinsurers, such as Aegon’s sale of its £9bn annuity portfolio to Legal & General and Rothesay Life.Ian Aley, head of transactions at Willis Towers Watson, said: “It is not just pension schemes that are competing in the longevity risk market, and the market as a whole has been as busy as ever, if not busier in some cases.“Looking forward there may be continued competition from back-books, with rumours that Prudential has recently started the sales process for its £45 billion pension liabilities operation, including its annuity business.”However, one of the report’s authors, Sadie Scaife, said that the longevity risk market would give “well-prepared buyers” access to attractive pricing terms.Pension schemes offloading liabilities this year were now likely to find cheaper deals, she suggested, as much of the insurance sector’s risk reduction was complete.“The longevity hedging aspect of this activity was largely completed by the end of 2016 and we therefore expect pension schemes carrying out transactions in 2017 to benefit from an excess of supply and consequent lower costs,” she wrote in the report.But this trend was not sustainable in the long term, Scaife warned, because of the size of UK defined benefit (DB) pension liabilities and the rate at which they are maturing, she said.“A recent survey of our clients showed that 50% expect to reach their end-game target in the next ten years,” she said. “Regardless of whether this is in the form of self-sufficiency or buyout, longevity risk protection may well be needed.” The London borough of Hackney has committed its £1.1bn (€1.3bn) pension fund to becoming free of fossil-fuel investments in the long term.The move starts with a six-year plan to cut the fund’s exposure to the carbon-producing assets by 50%, the council announced today.The council said: “This radical move follows a review which looked at the financial risks posed to the pension fund’s fossil fuel investments in light of the Paris Agreement, a global action plan to help limit global warming.”The pensions committee chair, Councillor Robert Chapman, described climate change as “probably the greatest threat facing humankind”.last_img read more

Financial regulation failing to improve stability: survey

first_imgThe survey also asked about the executives’ views on investor confidence.Duff & Phelps noted that just over half of respondents (51%) said financial regulation had done little to improve investor confidence. However, 42% believe regulations have helped cement investor confidence, and just 6% said new rules had reduced investor confidence.Julian Korek, global head of compliance and regulatory consulting at Duff & Phelps, said the findings are not very different to previous years’ but that they “added import in light of recent political upsets in the US and, perhaps, the UK”.“More needs to be done to build stability in financial services and ensure the system is resilient in future, for both banks and the alternative investment industry,” he said.“The major regulatory bodies have been very clear about future areas of focus and concern, but the fact that so many still think there is potential for another crash is worrying – even without Trump or Brexit potentially taking the market down a quite different regulatory path.”Nearly a quarter (23%) of the respondents said regulators had created effective global regulatory frameworks, and 57% said regulators were getting better at collaborating and coordinating across borders.The survey was carried out for the fifth edition of an annual global regulatory outlook that Duff & Phelps has published since 2012. Financial regulation has done little or nothing to make financial markets more stable, and may have made the situation worse, according to just over half of senior financial services professionals surveyed by corporate finance adviser Duff & Phelps.It polled 183 senior financial services executives at investment banks and asset managers in Asia, Europe, and the US.Just over a third (35%) believe recent financial regulation had little or no impact on financial stability, with a further 17% believing regulation has made “the financial services world” less stable. This compares with 43% who say it has increased stability.Only 10% said they believe changes to regulation have fully addressed the risk of a future crash, although 55% indicated they thought this risk had been party addressed. A third did not believe the regulatory framework has adequately created safeguards to prevent a future crisis.last_img read more

Dutch regulator criticises unions for delaying pensions reform

first_imgThe central bank’s president said replacing the current average rate of pensions accrual with an – actuarially fairer – degressive method could end the current redistribution from younger workers to older colleagues and from low educated employees to higher educated workers.  Klaas Knot, the president of the Dutch central bank and pensions regulator De Nederlandsche Bank (DNB), has blamed trade unions for delaying pensions reform by demanding too much.“They want to keep the retirement age at 66, want better chances for indexation and also demand the option of early retirement for people in hard jobs,” he said, at the presentation of DNB’s annual report for 2018.“This is all understandable, but it comes at a price, and the money is not available at the moment.”Knot added that he was not satisfied with the lack of progress “as pension reform is badly needed to improve the connection between the pensions system and the labour market, and also to decrease tensions between generations”. Klaas Knot, DNB“In addition, more tailor-made investments could better spread risks across young and old,” he said. In November 2018, negotiations about pensions reform between unions, employers and the cabinet collapsed.In February this year Wouter Koolmees, minister for social affairs, presented a framework for pensions reform to be fleshed out without the unions if necessary.However, the unions have insisted that the government must give in to their key demands before they would be willing to return to the negotiation table.Last week, Tuur Elzinga, lead negotiator of FNV, the Netherlands’ largest union, told IPE that freezing the state pension age at 66 remained one of the unions’ “firm conditions” for pension system reform.“It needs to remain 66 until a fairer method has been developed,” he said.The unions’ other demands were improved pension provision for the self-employed and workers in temporary arrangements, as well as a new “collective and solidarity” pensions contract, rather than individual pensions accrual as the government wanted.last_img read more

Swiss scheme seeks reform to address negative rates, COVID-19 impacts

first_imgThe Swiss occupational pension scheme Stiftung Auffangeinrichtung BVG, or Foundation Institution Suppletive LPP, is seeking parliamentary approval for its request to open a non-interest bearing account that will help fend off the impact of negative interest rates, the impact of the COVID-19 pandemic, and potentially rising unemployment.“We are relieved that the Federal Council has accepted our request for a non-interest bearing account and we hope that parliament will approve the proposed amendment,” the Stiftung told IPE in a statement.The institution, supported by the social partners, is required to accept all vested benefits from pension funds if employees cannot transfer them to another fund after the termination of an employment position.In its draft law, which would reform the second pillar, the Federal Council foresees a temporary deployment of vested benefits to the Federal Finance Administration, or Eidgenössischen Finanzverwaltung (EFV), worth up to CHF10bn (€9.3bn), without interest rates, if the funding ratio of the Stiftung Auffangeinrichtung BVG falls below 105%. At the end of May, the funding ratio for Stiftung Auffangeinrichtung BVG stood at 105.85%, down from 108.7% at the end of 2019The impact of the COVID-19 pandemic on the stock exchanges, negative interest rates adopted by the Swiss National Bank, and the obligation to guarantee nominal value of the vested benefits are taking a toll on the Stiftung.The institution believes that corrections in financial markets, including the one triggered by the coronavirus pandemic, offer more attractive investment opportunities.It tries to seize such opportunities in order to mitigate the result of the investments with negative interest rates, it said, adding that the situation remains challenging, and a new decline in prices on stock exchanges is a real, threatening scenario.Based on the current investment strategy, the foundation’s board is forced to take immediate measures that reduce risk, including a pro-cyclical sale of risky assets (stocks, bonds) and increase liquidity, the government wrote in its message to reform the law.The Stiftung could see a significant inflow of funds because of unemployment, which in turn can lead to a lower funding ratio.“In the medium term, we expect an even stronger inflow of vested benefits due to rising unemployment. For occupational pensions, we anticipate an increase in the bankruptcies of our affiliated employers,” the institution said.In times of negative interest rates, the guarantees for provisions, capital preservation, vested benefits accounts and a statutory conversion rate of 6.8%, is a challenge that can hardly be mastered, it said.In the past, the institution was able to compensate the negative interest on its liquid funds through the returns on other asset classes, and even slightly increase the coverage ratio for vested benefits, from 108% in 2014 to 108.7% in 2019.For Lukas Müller-Brunner, member of the executive board responsible for social policy and social insurance at the Swiss Employers’ Association (SAV), the foundation is in an “almost unsolvable dilemma” caused by the obligation to accept money and the ban to charge negative interest rates.“In this respect, I think it is right that the legislator intervenes, and at least temporarily grants the institution an alternative,” he told IPE.“In this respect, I think it is right that the legislator intervenes, and at least temporarily grants the institution an alternative”Lukas Müller-Brunner, Swiss Employers’ Association (SAV)But the real problems are “structural”, he said, explaining that the inability to control the inflow of money from those insured who immediately join a new pension fund generate an “enormous” volume of capital with guarantee that leads to costs no longer sustainable in the current interest rate environment.The interest of financial service providers in vested benefits is fading due to negative interest rates, he added. The Stiftung Auffangeinrichtung BVG received around CHF1.38bn in vested benefits in 2019. In 2018, the inflow was just under CHF800m, while vested benefits in banks decreased in 2018 by CHF474m.“Interest rates will hardly improve in the foreseeable future, this means that the structural problems at the institution will continue to exist,” Müller-Brunner said.“The current policy approach makes sense in the short term, but does not solve any fundamental problems, and here I see the greatest danger: that one continues to muddle through without discussing the actual causes. In my opinion, there is no way around this,” he said.To read the digital edition of IPE’s latest magazine click here. Once approval is granted, the Stiftung can deposit the money in the new fund for three years, a buffer period to find a long-term solution to its structural problems.“The long-term risk of underfunding becomes very problematic because vested benefits cannot be restructured with negative interest rates,” the Stiftung added in the statement.At the end of May, the funding ratio for Stiftung Auffangeinrichtung BVG stood at 105.85%, down from 108.7% at the end of 2019. In March, the coverage ratio fell to 101.6%.last_img read more

USS warns of higher costs to employers as COVID-19 hits hard

first_img“We would need employers’ support. If we can get the support that is required, we can bring the costs down”Bill Galvin, CEO of USSIn a statement, UCU head of higher education Paul Bridge said the union had “no confidence in the needlessly cautious methodology”.“Members are leaving the scheme because of its high cost – calling for unnecessarily large reductions in benefits and increased member contributions is not the way forward,” he said.“Universities need to start demanding more from USS and push back against this approach.”In response, Galvin emphasised that all stakeholders “need to understand that the cost of providing defined benefit pensions has increased, however you look to manufacture it. […] The cost has gone up on any measure”.He also echoed the union’s concerns about the scheme’s high opt-out rate, estimated at 15%. Around a third of these members cited affordability as the reason for not joining USS, he said.The current contribution levels – 21.1% from employers and 9.6% for members – have been in place since October 2019. These were adopted as a default option after discussions between Universities UK, which represents higher education establishments, and the University and College Union (UCU) failed to reach an agreement.A further default increase – to 23.7% for universities and 11% for staff – will kick in from October 2021 if no agreement is reached.UCU members launched nationwide strikes in 2018 in protest at a plan to close the defined benefit section of the scheme, and further industrial action took place last year.After the methodology consultation is complete, USS will carry out further consultations related to the valuation – including the crucial negotiations over future contributions.To read the digital edition of IPE’s latest magazine click here. UK universities are facing higher demands from their pension fund after the country’s largest scheme published a consultation on the methodology for its latest valuation.The deficit for the £66bn (€73.5bn) Universities Superannuation Scheme (USS) could reach as high as £17.9bn and require contributions from employers and employees of as much as 67.9% of payroll, depending on the outcome of the consultation and how much risk universities are willing to take on.The trustee board published a consultation paper yesterday setting out several potential outcomes – all of which will involve higher contributions to fund a significantly higher deficit than was recorded in 2017, the last time USS went through a formal valuation.Bill Galvin, chief executive officer of the pension scheme, said the COVID-19 pandemic had posed significant challenges to the higher education sector, with uncertainty over student numbers a particular concern – meaning the higher demands from USS were “difficult messages” to hear. In their foreword to the consultation, outgoing trustee chair Sir David Eastwood and his replacement Dame Kate Barker acknowledged that some of the outcomes were likely to be unpalatable to both employers and staff given the significant rise in costs.To avoid the worst outcomes from the consultation, universities would have to agree not to exit the scheme without the trustees’ approval – a clause that Galvin indicated would last for 30 years – and grant USS parity as a creditor for any debt raised externally. Both measures are currently in place on a temporary basis through to October next year.Employers would also have to accept the scheme taking more investment risk – something they have previously resisted.“We have laid out a way in which the scheme can take more risk,” Galvin told journalists at an online media briefing yesterday. “We would need employers’ support. If we can get the support that is required, we can bring the costs down.”last_img read more

Gold Coast family retreat has two residences

first_img3 Green Lane, Tallebudgera.Mrs Adams said they really wanted to incorporate the Hamptons style as it was “a bit more relaxed”.“It has that free flowing feel,” she said. The barn, which was used for milking cows before the family bought it, has been rejuvenated without destroying its character.“We wanted to keep that history there,” Mrs Adams said.It has an extra three bedrooms, rumpus room, study and combined kitchen, living and dining area.“We’ve put so much heart and soul into the property,” Mrs Adams said. 3 Green Lane, Tallebudgera. 3 Green Lane, Tallebudgera. 3 Green Lane, Tallebudgera.center_img 3 Green Lane, Tallebudgera.“It’s a bitter sweet scenario but we’ve always dreamt of going around Australia with our boys before they start high school.”While it is difficult for the Adams family to sell it, they said it was the right time.More from news02:37International architect Desmond Brooks selling luxury beach villa15 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“We thought we’d be here forever (because) we’ve always wanted acreage,” Mr Adams said.“Things change.” TWO HOMES FOR THE PRICE OF ONE IS AN AUCTION THE BEST METHOD TO SELL A HOUSE? The sprawling country property has two residences – the main house and a modernised barn.The family chose a design for the home then tweaked it to fit their needs. It has five bedrooms and three bathrooms with an open kitchen, dining and living area as well as a separate family room. 3 Green Lane, Tallebudgera.IT was a dream come true for Sam and Sharney Adams to build a house on acreage.The couple loved the 0.62ha Tallebudgera block so much when they bought it almost two and a half years ago they decided it would be home for the rest of their lives.But they have since decided to give up on one dream for another.“We’ve had our hearts set on travelling,” Mr Adams said.“We’re literally selling it to be able to afford a caravan and car.last_img read more