The assumption that any investment in Russia should be into its oil and gas reserves could not be further from the truth, Caroline Liinanki investigates
A seismic shift has hit the Swiss pensions market since the turn of the century, with a number of high profile moves from DB to DC, writes Spencer Anderson
While investment institutions obsess about beating the market, a new bulging underclass of ‘citizen investors’ is shaping the future of the global pensions arena
Get the best rates from your local emerging market
The uncertain economic future of the western powerhouses makes local emerging markets all the more appealing for their ability to decouple and stay resilient
Emerging markets have often elicited extreme sentiments. On several occasions in the last 20 years, they have epitomised default risk, high indebtedness and hyperinflation. In the last five years, it seems that the pendulum has swung towards the other extreme.
With the overwhelming majority of DC plan members investing according to their plans’ default solution, it is crucial that the strategy caters to everyone
With its interest rates giving global commentators vertigo and an ever-weakening Icelandic krona, tough decisions lie ahead for the Nordic state. Spencer Anderson reports
With emerging markets boasting a favourable risk/return ratio, funds should consider applying a 130/30 strategy to these fledgling economies to truly capitalise
While many EU countries are still seen as emerging markets, their vital statistics prove otherwise. Thomas Escritt investigates when a country stops emerging.
Specialist manager East Capital understands the intricacies of investing in emerging markets and tells Thomas Escritt of the dangers for an EM-hungry fund
With the battle for the title of ‘jurisdiction of choice’ hotting up, several continental powers are making their moves to be the preferred pan-European provider
With markets in the Middle East steadily opening up their borders to foreign money, Spencer Anderson analyses the potential opportunities for European funds
The choppy and murky nature of the waters surrounding property investments means finding a fund manager with the right resumé is a discipline in itself
With the UK pensions savings system deadline in sight the industry is looking north, but not without a few critical pointers. Chris Newlands investigates
It is that time of year when a search for a new external asset manager could be on the cards. How do you avoid the pitfalls of a radically changed market?
Government plans for personal pension accounts have sparked controversy over unfair competition for the private sector. But is it really a win-win situation? Hannah Williams reports
In response to pension funds’ 130/30 fever, asset managers have saturated the market with new products, but will only the best survive? Kristen Paech reports
With this flood of new 130/30 products, there is no way of assessing past performance, so how do you know which fund you should be investing in? Kristen Paech investigates
Multi-national companies now have four locations to choose from to place their cross-border pension assets, so which one has the edge? Christine Senior reports
The spat between neighbours over who should host cross-border pensions has prompted Belgian BVPI president Philip Neyt to respond to Dutch criticisms. He talks to Chris Newlands
When mulling over the chaos that has swept across global equity and bond markets in recent weeks, Mark Duke, principal at Towers Perrin stressed one key message for pension funds: you are kidding yourself if you think you can ever get extra return without risk.
Of all the nations to criticise the new Belgian international pensions law, the most unexpected disgruntlement comes from its neighbours, the Netherlands. But now Belgium has hit back, claiming that the Dutch have misunderstood the proposals, as well as suggesting all the ballyhoo has actually been beneficial, writes Anke Claasen
In a shift from traditional Swiss adherence to the rules, many institutional investors are taking advantage of the extention clause of the latest BVG investment guidelines. Michael Lennert reports on pension funds’ gripes
Two leading thinkers in the UK pensions industry put their heads together for the Deregulatory Review of Private Pensions and, taking influence from other European nations, came up with a number of honest and interesting suggestions. Iain Morse reports
The high fees commanded by hedge funds are a hurdle to institutions wishing to up their ability to go short. 130/30 funds are proving to be a cheaper alternative, but do they really offer enough to become a viable solution in the search for alpha? James Hand from Investec reports
The pensions market in Italy is in the early stages of development, and a generous social security system has meant limited scope for supplementary pensions. This, combined with a lack of sophistication among local employees, means it is an uphill struggle to implement the new defined contribution system, writes Marcello Marchese
US equities may be underperforming at the moment, but increasingly institutional investors need to look at their portfolio in global terms. In addition, foreign merger and acquisitions firms capitalising on a weak dollar may be playing a dangerous game, writes Thomas Escritt
To the outsider, the prospects for the US market do not look promising, with most recommending an underweight position. However, in order to see the good news, local players claim you have got to be on the ground. Thomas Escritt reports
As fears over global warming become ever-present, institutions have been more willing to look for greener sources to invest in. Soft commodities, such as forestry and alternative energy sources, have proven popular, writes Kristen Paech
Pension funds have traditionally invested in commodities through indices, but a recent contango has exposed the limitations of riding the curve and perhaps the time is right to get active. Kristen Paech investigates how pensions are diversifying their allocations
In the eighth installment of a 10-part series, Matt Weaver examines how the traditionally paternalistic Nordic states and its companies are realising that the generous defined benefit pension system is just not sustainable
Gaining access to the best private equity managers can be a tricky business, as they are often full up and give preferential treatment to existing investors. However, there are ways to get in with the top talent. Christine Senior reports
The way managers are remunerated has always been something that investors have bridled at. On top of annual management fees of perhaps 1.5 per cent of funds committed for large buyout funds, and for venture capital up to 2.5 per cent, managers take “carried interest” or performance fees of around 20 per cent of the uplift. The carried interest is a reward for outperformance, and it is a way of bringing the interests of the manager into line with investors’.
Concerns have been raised that a private equity bubble may be about to burst, as prices rise and easy opportunities are harder to come by. However, should pension funds even be playing the cycle, when they should be thinking more long-term? Christine Senior reports on how to make the most of private equity investments
European pension fund investors have been allocating 3 to 5 per cent to private equity. At the same time the allocations of some big pension funds, though percentage allocations have been relatively low, equate to big sums of money.
After Dutch pension funds were exposed on national television for investing in firms that produce munitions, the issue of socially responsible investment has been pushed to the fore. But, as the law allows such investments, public opinion is divided as to where the line should be drawn with ‘sin stocks’, writes Mariska van der Westen
Microfinance is regarded with mixed feelings by institutional investors. On one hand, the image of “tiny loans hand-carried inland on the back of a moped spark the imagination,” as one pension fund manager put it. But although the default risk for these micro loans is surprisingly low, so is the volume, and costs for servicing the loans are high. And although micro credit funds are beginning to offer some volume, there are virtually no opportunities for pension funds to invest directly in the asset class.
In part seven of a 10-part series on defined contribution, christian lux looks at how the occupational pension market in Spain has traditionally been confined to two funding vehicles, which lack the sophistication of other European countries. However, recent regulation has allowed the possibility of multi-management
Many investors plan to increase their exposure to infrastructure in the next six months, particularly those in Denmark and Finland. But how will a gradual shift towards privatisation affect the asset class’ propects? Kristen Paech reports
Unlike many countries, whose governments are seeking to shift the financing for public infrastructure from their balance sheets, privatisation in the Nordics has been almost non-existent.
The DKr431bn (e58bn) pension fund ATP has taken a pragmatic approach to infrastructure investment since making its foray into the asset class last year.
New regulations have allowed Finnish pension funds a 10 per cent increase in equity allocations, as well as more access to alternatives and non-eurozone investments. Caroline Liinanki reports
Faced with an ageing population, Belgium is coming under pressure to produce new pensions legislation. As with other countries, limiting the volatility of pensions costs by switching to defined contribution is proving tempting. However, a general lack of understanding could cause a headache, write Sven Schroven and Gökçe Nakisoglu
The Master KAG has driven the internationalisation of asset management in Germany – attracting many new providers along the way. For some, the Master KAG is becoming difficult to control. Competition in the world of fund administration is moving to another level, writes Clemens Schuerhoff
No longer a minority interest, quantitative asset management is now a priority for names such as Goldman Sachs and Crédit Agricole. Iain Morse looks at quant’s progress since the bull market of the late-1990s that spawned it
The shift in risk from the employer to the employee has made DC very tempting to German companies, with nearly 90 per cent considering a similar move. However, current pension law in the country means that they must make the transfer without cutting benefits, and this is a slight stumbling block, writes Marc Oliver Heine
The fixed income market in Europe is showing investors conflicting signals – offering both strong economic fundamentals and scope for further rate rises. However, those with the ability to see things globally could find that there are some tasty opportunities on the horizon, writes Andy Howse
M&A activity is set to continue at the record levels of last year, which could see the creation of yet more banking behemoths. While many welcome a less crowded market, most pension funds are wary of any large mergers. Chris Newlands reports
epn’s sister magazine, nrpn, asked the following question to the 10 pension and insurance funds who responded to its latest quarterly investment survey: would it worry you if one of your appointed managers merged with another investment house?
Of all the column inches eaten up by the proposed merger of Barclays, the UK's third-largest bank, and the biggest Dutch bank, ABN Amro, not much has been said on what a possible tie-up might mean for the two houses’ respective asset management operations.
Merging pension schemes in the event of a take-over is often a recipe for disaster, as it risks a clash of funding levels and liability profiles, as well as taking on a greater regulatory burden. Thomas Escritt reports
Keith Ambachtsheer, president of KPA advisory services, is a sharp-tongued critic of defined benefit pensions, but does not see DC as a viable alternative. He has his own model for a pension system that would suit individuals. Mariska van der Westen reports on this and his opinions on the current landscape in the Netherlands
Individuals with a pension scheme are being left to the wolves, according to experts. A recent article, written by pension experts Keith Ambachtsheer and Rob Bauer, states that at least 2 per cent of individually saved pension fund returns is skimmed off annually by the investment sector.
While the rest of Europe makes the switch to defined contribution, the economies of scale afforded to the giant pension funds in the Netherlands has meant that defined benefit prevails. And while there are benefits to the DC method that may change things, inefficiencies remain a stumbling block, writes Roland van Gaalen
Belgium’s prime minister is vigorously promoting the country’s cross-border pensions vehicle in Europe, the idea being to have Brussels at the epicentre bringing the big players into town. However, there seems to be very little evidence of any moves towards pooling on the continent, writes Thomas Escritt
Sceptical investors may scoff at the prospect of a new form of tactical asset allocation after the debacle during the 1990s, but the latest breed of GTAA employs derivative and forward contracts and is genuinely global in scope, writes Iain Morse
Despite a common name, the risk budget of unitised GTAA funds can vary quite widely. Most include equities bonds and currencies. One fund currently allocates 40 per cent to currencies, 20 per cent to 30 per cent to equities, and the balance in fixed interest. Another allocates 50 per cent to currencies, 30 per cent to fixed interest and 20 per cent to equities. These allocations are not permanent, but they are strategic and prescriptive, comprising a neutral position for the fund manager at any given time.
Weak and sometimes volatile global equity and bond markets since 2000 have prompted a search for new sources of uncorrelated alpha by pension fund investors and insurance companies. But judged over the long term interest in both TAA and GTAA has been cyclical.
In the third installment of our 10-part focus on defined contribution pensions, we see how third-pillars are developing across Eastern Europe as the region enters a period of change. However, there are varying degrees of creativity shown in developing these systems and individual countries often pay little attention to what their neighbour is doing, writes Michael Brough
It seems as though there are rich pickings to be had by undertaking class action law suits against companies, with $18bn recovered last year. However, critics say that creates costs, affects insurance premiums and does not fix problems over the long term. Kristen Paech reports on how Europe is following in the footsteps of the US
The e209bn Dutch pension giant ABP is not new to the litigation arena. The fund has actively engaged in class action suits for a number of years and is currently awaiting a decision from a US judge on its application for lead plaintiff status in the case against Dell over alleged accounting fraud.
Despite dating back to the mid-1980s, defined contribution schemes in Ireland are still relatively unsophisticated. However, as there is an increasing dependency on DC, companies and trustees are addressing its development. Ray McKenna and James Kavanagh continue our 10-part DC focus
Global property is on the up, and although Asia-Pacific only accounts for a small proportion of this, the prospects look good for commercial property as domestic and international players continue their rapid expansion in the area, in spite of the recent equity wobble, writes John Su
An increase in transparency from hedge funds has seen institutions begin to flock towards the asset class as a new source of investment. Once a sticking point, high fees have begun to come down, which may explain the new-found enthusiasm. Thomas Escritt examines the latest trends and other shorting options
Europe, which already generates 60 per cent of the assets flowing into hedge funds globally, is also catching up as a hedge fund domicile, with London leading the way.
Institutional investors are starting to crack the whip with hedge funds in an attempt to prise open their inner workings, a report by State Street has concluded.
While some countries still remain reticent to up their allocations to hedge funds, many are beginning to embrace hedge funds as the wild card reputation starts to fade, writes Dermot Keegan of Old Mutual Asset Management
In the first installment of a 10-part series focusing on defined contribution pensions, Gary Smith of Watson Wyatt examines how DC is becoming the pension type of choice across Europe, the drivers for this and how companies should take steps to ensure adequate provision and avoid a ‘ticking time bomb’
All but one of the Nordic region’s biggest pension funds saw returns fall last year, and worst-hit Denmark is blaming poor bond performance and reliance on derivatives. Reeta Cevik hears how investors are planning to dig themselves out of the unexpected downturn
Investors are moving away from the bond versus equity debate and searching for more innovative solutions to attain higher returns. Pirkko Juntunen finds out how each of the Nordic countries are opening up to new investment ideas
According to the results of nrpn’s latest quarterly investment survey, which polled 16 major Nordic investors with more than E230bn of assets under management, 40 per cent of respondents intend to increase their exposure to equities over the next six months – despite two-thirds of investors having concerns over market risk.
Sweden’s so-called AP funds were established as buffer funds within the country’s reformed retirement system in 2001. They are often seen as a benchmark for the Nordic pensions industry and represent the region’s ability to adapt to a changing world.
Once eyed as an opportunity to profit at the expense of others’ misfortune, short selling has since become a method for fund managers and pension funds to deliver ever-more important outperformance. Roel Thijssen looks at combining long and short investing for maximum benefit
The surge in M&A activity could be hazardous to pension funds looking to short as part of their 130/30 portfolios. However, with many asset managers expecting long-only to be a thing of the past, and hedge fund fees proving prohibitive to some, 130/30 may be the way forward. Thomas Escritt reports
The parceling up of the German custody market, has moved into a new phase, driven by the complex demands of both the market and investors. German companies are jostling for positions, but lag behind international firms. Clemens Schuerhoff reports
In the wake of recent investment regulations, Finnish pension funds have been able to increase their allocations to alternative investments, while also expanding their equity holdings outside the eurozone. Reeta Cevik reports on a new era for the country
The Polish government shows no signs of lifting the restrictions that force pension funds to invest domestically and in vanilla asset classes like equities and fixed income. The problem is exacerbated by the Warsaw Stock Exchange’s failure to keep pace with demand. Thomas Escritt reports
Portfolio managers are a scarce commodity in Hungary, with few well-trained specialists and even fewer emerging from the country's universities. On the other hand, the companies that employ them are well entrenched, with little prospect of new entrants joining the asset management market alongside the existing giants. Thomas Escritt reports
Norway’s Government Pension Fund - Global may be looking to secure a sound return based on moderate risk, but keeping an eye on the ethical practices of the firms in which it invests is a key consideration as it grows. James Hydzik speaks to Martin Skancke of the Norwegian Ministry of Finance about this policy
Players in the insurance industry have had to cope with a raft of regulation over the past few years and the demands show no sign of abating. Many are considering outsourcing their asset management business in order to free up more resources for core competencies, say joachim liese and Philip Michaelsen
With all the acronyms being bandied about the investment management world, and liability-driven investment being heralded as the answer to current woes, it is easy to forget that the premise is very simple and a diversified portfolio may be the solution pension funds are looking for, writes Richard Graham
In this environment of liability-driven investment and aggressive pursuit of returns, many wonder how index providers can keep pace. With some doomsayers predicting the end of such traditional structures, others have responded by claiming that it will take more than passing investment fashions to break down the benchmarks. Thomas Escritt reports
Most index providers are experimenting with higher-margin, premium indices, with FTSE’s toe in the water being a benchmark that aims to mimic the characteristics of active management.
While some of the global index providers are experimenting with custom indices filtered to meet ethical or sustainability criteria, one company has been offering sustainability indices for more than a decade.
During the last few years, the weather has developed from boring small talk into an interesting asset class. Mariska van der Westen spoke with weatherman Alex Schippers, head of ABN Amro’s weather derivatives desk, to get the forecast
The old-fashioned view of emerging markets as unstable and risky has been slow to die, but the growth of Brazil, Russia, India and China has sparked investor interest. Pirkko Juntunen also investigates newer ‘frontier’ emerging market players to find out which negative preconceptions are unfounded – and which ones are not
The oft-cited emerging markets revival barely touched the diversified and outperforming debt markets until recently, but investors are increasingly aware of a tightening in potential returns as the creditworthiness of these countries improves.
Sharp-eyed investors know where the European action is
Emerging markets aren’t limited to Brazil, Russia, India and China. Thomas Escritt reviews the performance and outlook for Central and Eastern European markets
All the t-charter needs is legal scrutiny and the rubber stamp from the UK Financial Services Authority. Iain Morse finds how this ‘final’ version is part of a welcome trend transparency in service provision
State Street Global Advisors (SSgA) and Dutch civil servants fund ABP committed $100m in acquisition capital and $1bn in seed capital in December to develop their strategic partnership, State Street Global Alliance. Mariska van der Westen and Anke Claassen ask Paul Spijkers, CIO of alternative investments at ABP, and Jared Chase, chairman of Global Alliance, about the partnership’s plans for the future
Fiduciary management has caught the attention of many Dutch pension fund directors in recent years. At the same time, investment managers both domestic and foreign have either positioned themselves as fiduciary managers or are acquiring the resources to do so. Thomas Escritt looks at the phenomenon, at a time when opinions differ as to the precise service that fiduciary management entails
Accountancy regulations are prompting Dutch pension funds to migrate to so-called collective DC, and a stricter FTK solvency framework is forcing smaller funds to outsource or join larger industry schemes. Is the Netherlands heading for a pensions monoculture, or can smaller schemes find a place? Mariska van der Westen reports
Mariska van der Westen spoke with former ABP director Jean Frijns about the Dutch pension system. Here he shares his views on the challenges and rewards of collective DC schemes, inter-generational solidarity and the importance of clear risk distribution
Dutch pension funds migrated en masse from final salary to average salary-related benefits in the early years of this decade. Now some funds are moving to what has been termed ‘collective defined contribution’, pioneered by the Arcadis pension fund (see p23).
China is the top performer in a very strong year for global equity markets despite the correction in the summer. However, looking forward, investors are cautious with many predicting weaker returns and slower growth. Pirkko Juntunen crunches the numbers
Robeco is looking to rekindle its reputation for lively specialist asset management and aims to to do this through deals following the acquisition of a stake in Zurich-based Sustainable Asset Management. The firm’s CEO, George Möller, speaks to Thomas Escritt on its future goals
For SAM Group, a specialist sustainability investment manager set up in Zurich in 1995, the Robeco tie-up offers better distribution and the chance to experiment with new asset classes.
The Swiss BVV 2 occupational pensions law provides a comprehensive range of regulation, but there are ways for Swiss institutions to circumvent these precise quantitative restrictions. Moreover, there is a growing body of opinion in favour of an overhaul of the BVV law in favour of so-called prudent person rules, or at least to update it to take account of modern investment practice. Michael Lennert reports
Investment in property is moving into uncharted territory – more, costlier, faster and with greater transparency. Quantitative methods are also very much on the increase, uncovering even more advantages to investing in the asset class. Maik Rodewald reports
Institutional investors should not be shy of double-digit investment in property as an asset class should for – particularly when considering the long-term. This is at least the opinion of Piet Eichholtz, professor of finance and real estate at the University of Maastricht – his recent trip to the US has brought back fresh arguments on the asset class. He speaks to Maik Rodewald
Reits, which shift the tax burden from manager to investor, are a good method to obtain property exposure, and should attract the attention of institutional investors, writes Dirk Molenaar
ATP, Denmark’s E51bn labour market pension fund, is about to conclude its 18-month project to separate alpha and beta. The two are now embedded in a new structure, in separate portfolios and with their own CIOs. Liam Kennedy discussed the new setup with Henrik Jepsen, CIO for beta and Fredrik Martinsson, CIO for alpha
The International Accounting Standards Board recently delivered a strong hint that it favours immediate recognition of actuarial gains and losses on defined benefit pension plans in profit and loss. Stephen Bouvier gauges the reaction
The International Accounting Standards Board is using risk-based analysis to classify retirement plans along the continuum from definedbenefit to defined contribution, writes Stephen Bouvier
The pressure on pension funds to embrace liability-driven investment means there is still a need to generate alpha. A few funds have also embarked on what they term alpha-beta separation. Some see this as a variant of portable alpha, finds Liam Kennedy
Peter Norman, executive president of Sweden’s seventh AP fund, is an advocate of pure alpha, urging investment managers to create products that do not allow them to hide behind beta performance. In the last of our interviews with the AP funds, Hugo Greenhalgh spoke to him about the fund’s alpha-beta split and the future of AP 7, which provides the default fund and an optional fund for the country’s PPM system
Deutsche Bank began to deal with the issue of global pension fund governance a little more than four years ago. One main goal was the better development of assets and liabilities. The vast majority of the more than E9bn in liabilities are domicilced in Germany, the UK and the USA.
Following the Myners and Morris reviews in the UK, and last year’s OECD guidelines on pension fund governance, a number of other European countries are tackling the issue of best practice in the management, execution and internal control of pension fund activities. Michael Lennert reports
The decisive factor in pension fund governance, as far as the SFr10bn (e6.2bn) Credit Suisse Group’s Swiss pension fund is concerned, is how to represent the interests of both the participants and the invested capital. So, for example, as a result of the turbulent nature of the financial markets in 2001 and 2002, the investment strategy from 2003 onwards is no longer orientated towards a largely rigid reference index. All investment decisions are now more aimed towards an absolute target return. In so doing, the pension fund hopes to achieve a performance level of about 5.5 per cent a year.
In December 2005, the study group for pension fund governance of the Dutch labour foundation (STAR) broadly accepted a proposed code of conduct for pension funds. How has that code been implemented? Mariska van der Western spoke with Gerard Verheij, secretary for pension policy at the Confederation of Netherlands Industry and Employers and chairman of the STAR study group
The benefits of pan-European pensions are clear, but there are many hurdles to implementation. However, a large number of companies plan to set something up by 2010. Chris Newlands reports
In the second of a series of articles focusing on Sweden’s AP funds,
Hugo Greenhalgh speaks to Kerstein Hessius, CEO and CIO of AP 3, and Thomas Halvorsen, who holds the same position at AP 4. Both funds have fared relatively well in the recent difficult market conditions, but their approaches for long-term performance are very different
A risk-averse regulatory regime is condemning Swiss funds to sup-optimal asset allocations and returns, Swisscanto’s latest annual survey of the country’s pension funds has found. Public sector funds are more downbeat in their future returns expectations than private sector funds. Thomas Escritt reports
