Norwegian sovereign fund returns 10.7% despite oil price crash

first_imgAt the end of the year, the equity portfolio accounted for 58.1% of assets, with 47.9% in Norwegian equity and a further 10% in stocks listed in Finland, Sweden and Denmark.Its largest single holding was Statoil, closely followed by banking group DNB and Telenor.Combined, the three companies accounted for one-third of the fund’s equity holdings, spread across 144 companies.Due to the fund’s sizeable shareholding in Statoil, Folketrygdfondet has previously called for the oil firm to improve its disclosure around shale gas.Svarva credited the 9.8% return on fixed income to falling interest rates, and cautioned that the returns would not be easily repeated.“We are concerned about what low and negative interest rates could mean for how capital is invested, and for the economic development over time,” she added, accepting that the challenging times ahead could also offer “opportunities”.The GPFN, funded with the historic surplus of national insurance contributions, has achieved an average return of 7.8% over the last decade.Read more about the GPFN, the smaller sibling of the NOK6.7trn Government Pension Fund Global One of Norway’s sovereign wealth funds achieved above-benchmark returns of nearly 11% last year, boosted by strong equity growth despite declining oil prices.The NOK185.7bn (€20.5bn) Government Pension Fund Norway (GPFN) noted that the Oslo Stock Exchange was down 5.5% over the end of the fourth quarter – with energy sector stocks falling in value by 25% – but nevertheless finished the year up by 5% due to the consumer and materials sectors.Olaug Svarva, managing director at Folketrygdfondet, which runs the GPFN, said the fund’s 2.1 percentage point benchmark outperformance was its best since 2008 but cautioned that a return of 10.7% – resulting in asset growth of nearly NOK18bn – was unlikely to be repeated.She added that the 10.6% return on the fund’s equity portfolio – 3.3 percentage points above benchmark – was largely down to the listed firms benefiting from low interest rates and the weakening kroner.last_img read more

Dutch pensions industry voices concern over delay of APF vehicle

first_imgShe warned that full clarity about the new vehicle might come too late, as many contracts – for insured pension plans, for example – expired at year-end.Obdam said she hoped Parliament moved quickly to address the APF Bill in its current form, and suggested contentious issues that might delay passage of the legislation – such as accommodating mandatory industry-wide schemes – be addressed at a later stage.According to Obdam, the only important question to be answered at the present moment is the level of capital requirements for the new vehicle.However, Sako Zeverijn, a professional trustee at several pension funds, said he preferred the APF to be “hammered out properly”.His view was echoed by John Smolenaers, a partner at Deloitte, who said on Twitter that the postponement offered the market more potential for a “proper business case”.The €188bn asset manager and pensions provider PGGM said it was prepared for the quick introduction of the APF, while Jeroen de Munnik, head of institutional business, pointed out that many small pension funds were looking for an alternative to their current pension plans.Meanwhile, Cor Zeeman, chairman of the Dutch pension fund of Alcatel-Lucent, said feared the APF would come too late as the potentially favoured alternative for his scheme.The pension fund is currently facing liquidation, as the employer terminated the implementation contract with the scheme after it reported a funding shortfall. The Dutch pensions industry has met the government’s recent decision to postpone the introduction of the new pensions vehicle APF by six months with dismay, according to IPE sister publication PensioenPro.Opinions varied, however, on the necessity of the delay and its potential benefits.The Dutch Pensions Federation, which called on the government to expedite the APF a year ago, said the delay might serve as an opportunity to open the vehicle to mandatory industry-wide pension funds.But, in the opinion of Nicolette Opdam, a pensions lawyer at law firm Holland van Gijzen, the biggest impact of the postponement is that it narrows the options of a large number of pension funds considering liquidation.last_img read more

Ageing populations ‘a threat for fixed income investors’

first_img“We’re certainly seeing a shift into different asset classes, such as alternative credit and also investment grade corporate bonds,” said Nick Tolchard, head of Invesco fixed income for Europe, the Middle East and Africa. “Within fixed income, there is also a movement into longer-dated debt – while most respondents thought there will only be a slow rise in interest rates, they are prepared to take on that uncertainty because of yield compression.”Tolchard added: “With most investors expecting yields to rise, many expect to respond by increasing allocations to core fixed income.”Most investors said they took a hybrid approach to implementation, splitting between external and internal management. Only 12% used just an in-house team.Tolchard told IPE: “It’s common for investors to manage part of their core fixed income allocations internally, but not alternative credit – this is more complicated, so they tend to use global managers specialising in the area.”He said that while 67% of the whole sample used investment consultants, only 42% of larger investors did so. Consultants were used predominantly for portfolio monitoring, although smaller investors were also likely to use them for manager selection.The survey also revealed a growing tendency to extend environmental, social and governance (ESG) principles from equities to fixed income investments, driven in part by pension fund stakeholders.Tolchard said: “Clients are saying they’d like to include ESG strategy in their manager’s agreements, but at the level of relationships, rather more than just products or asset classes.”The 79 interviewees were typically heads of fixed income, but also included CIOs and heads of investment strategy working across pension funds, sovereign investors, insurers and private banks in Europe, North America and Asia.Subscribers to IPE Reference Hub can access the paper here. Ageing populations, regulation and geopolitics have joined low and falling yields as challenges for fixed income investors, according to a new study.Invesco’s Global Fixed Income Study 2018 was based on interviews with fixed income specialists within asset owners holding a total $4.4trn (€3.6trn) as at 30 June 2017.The survey also found that underfunded defined benefit (DB) funds were turning to riskier assets within fixed income portfolios, while managers expecting more geopolitical and other “left-tail” events to occur were looking to increase core fixed income allocations.Three-quarters of respondents said ageing scheme member populations would affect their fixed income allocations within the next three years, with DB funds facing the greatest fallout. As a result, investors have become more adventurous in selecting cashflow-matching securities.last_img read more

Cutting carbon emissions could cause losses of up to 25%, says consultant

first_imgReducing carbon emissions in line with the Paris climate accord could come at the expense of at least 5% of the value of listed energy and utility companies, according to risk and actuarial consultancy Triple A Risk Finance.A more abrupt transition away from fossil fuels could increase these losses to up to 25%, said Ridzert van der Zee, senior risk consultant at the Amsterdam-based firm, last week during a meeting for large investors about climate risks and energy transition.The losses would come as a consequence of stranded assets, reduced turnover and potential emissions taxes, he said.Together with energy consultancy Ecofys, and commissioned by the German government, Van der Zee has calculated the impact of the energy transition on investments. While highlighting that the findings were a snapshot in time, he cited the example of coal-fired power plants, which are being closed in the Netherlands following government policy based on the 2015 climate agreement.Van der Zee said that equity would take the worst hit, followed by corporate bonds.The impact on government bonds would be limited, but it could increase for countries with a high dependence on fossil fuel for their energy needs, he said.According to the consultant, based on current fossil-fuel-based energy generation, reducing CO2 emissions would mean a significant decrease of turnover for energy companies.Under the Paris accord’s central scenario – limiting the average global temperature rise to two degrees above pre-industrial levels – energy and utility companies would lose more than 5%. Losses would increase to 12% if governments were to set the target at 1.5 degrees.Stranded assets would in particular hit mining companies and energy firms, while utility companies would suffer from high costs for replacing their equipment. Steel and cement producers would have to invest heavily in reducing carbon emissions, he added.According to the consultant, an abrupt energy transition could drive up losses to 70% at some companies as a combined result of lost turnover, costs and stranded assets.This meant investors must not just look at the carbon footprint, “as this is only part of the story”, Van der Zee said. He suggested that investors should include assessments of stranded assets and costs to their method of analysing risks, as a way to further fine-tune their equity selection.last_img read more

Master trust authorisation process attracts 38 applications

first_imgThe UK’s Pensions Regulator (TPR) has received 38 authorisation applications from defined contribution (DC) master trusts as the extension period for authorisation ends.TPR revealed yesterday that, of the 10 schemes it had granted an extension to, eight had filed an application, with one scheme no longer meeting the definition of a master trust, while the other scheme decided not to apply for authorisation.The deadline for master trust submissions for authorisation was 31 March, but schemes could request a six-week extension from the regulator.Kim Brown, head of master trust authorisation and supervision at TPR, said: “We now have the final number of applications for existing master trusts and we will be continuing to assess these applications over the coming months. “Once authorised, master trusts will immediately be supervised by us. The supervision of authorised master trusts is vital to ensure the new standards imposed in this market are not only demonstrated to us as part of the application process but also continue to be met in the future.”Six master trusts have already been granted authorisation, the latest of which was the DC section of the Universities Superannuation Scheme. Two trusts run by Legal & General (L&G), Willis Towers Watson’s LifeSight offering, and the Crystal Trust and BlueSky Pension Scheme – both administered by Evolve Pensions – are the others to have secured authorisation.Mark Futcher, partner and head of DC at Barnett Waddingham, said: “The most interesting aspect of the authorisation process will be those master trusts that do not receive authorisation. “We would expect a number of casualties from this list of 38; the industry knows there are still some poorly run master trusts out there – some still have historic errors to rectify.”He added: “On an ongoing basis, we would expect the bar to rise which would mean some master trusts winding up in the future.”Those schemes that fail to meet the application deadline will be forced to exit the market. Last year, TPR estimated that 30 providers could exit the market, including some as a result of mergers.In a blog on the TPR website, Brown said for those schemes leaving the market that “we continue to oversee the process and ensure trustees are taking the right steps to protect savers when they are moved to an alternative arrangement”.last_img read more

ING scheme to wrap six plans into single arrangement

first_imgThe €29bn ING Pensioenfonds is reducing its six pension arrangements to a single one, in order to improve communication and automation, in addition to offering a more sophisticated array of investment options to its members.During the past years, several mergers and take-overs had caused a patchwork of exception, transitional as well as compensation arrangements for the closed scheme’s 70,000 participants and pensioners.The pension fund explained that the simplified set up will offer retiring participants more choice, including retiring between the age of 55 and 71. It added that people who prefer a part-time pension can do so in lump sums of 10%.Improved digitalisation of the scheme will also be a bonus. The pension fund said that a large majority of trade union members have approved the changes, which amount to a €25m project. Costs are expected to be recouped within three years, it added.In an interview on the scheme’s website, Edward Heijkers, director of services at pensions provider and ING subsidiary AZL, explained that the harmonisation process was complicated, “as company pension plans in the financial sector have many bells and whistles”.He added that, in the industry, a pension plan is considered to be a primary labour condition, ”to attract and retain people”.As a part of the simplification, schemes such as contribution compensation, temporary old age pension, and interim pension, have been merged into a single plan. The target pension age for almost all participants has been set at 65.Emanual Geurts, trustee at trade union De Unie, said it was the first time the unions had been involved in major changes in a closed pension plan.He said the unions were satisfied the value of all pension rights for all participants had been maintained.In a statement, board member Vandana Doekhie highlighted the importance of the simplification project for the scheme’s long-term future. She said the changes made pension provision future proof and more cost-effective.ING Pensioenfonds closed its defined benefit plan to new entrants in 2014, after ING split into ING and Nationale Nederlanden.Since then, participants continued pensions accrual in collective defined contribution schemes at the respective new companies.last_img read more

ABP chair: ‘Concept for new pension system lacks crucial elements’

first_imgWortmann highlighted that mandatory merging of pension rights is “crucial for ABP as an industry-wide pension fund”.“Without compulsary joining, the risk is that our sectors drag their heels, which will delay reform,” she argued.“And we don’t want a pension fund managing existing pension rights alongside a second one for accrual under the new rules.”The chair said the issue must be solved in order to improve conditions for ABP’s participants and pensioners.In her opinion, new DC arrangements – without pension claims, but with merely targets – also require solid assumptions for future returns. “This must be translated into different discount rules.”“It is important that, in times of economic tailwind, results can benefit participants rather than be added to a pension fund’s financial buffers,” Wortmann noted.However, she also acknowledged that participants must equally accept the impact of bad financial conditions on their pensions as well.ABP’s chair reiterated that it is too early to make firm predictions about any rights cuts next year because of current “unknowns”, but said that there is a “fair chance” that pensions need to be reduced.That said, she noted that the social partners and the minister could take the planned new pensions contract into account when deciding about a pensions reduction in 2021.Wortmann further highlighted the urgency of a new pensions system. “Given the low interest rates, the elaboration of the pensions accord must succeed,” she said.She said that the introduction of an entire new system as a “big bang” in 2027 – as reportedly being discussed in the steering group for pensions reform – would be a “very long shot”.“Although the introduction requires a lot of preparation, we hope that we can adopt the new rules sooner,” she said.The chair also said ABP had given up hope that it can ever make up for inflation compensation in arrears. The pension fund hasn’t been able to grant indexation in the past 10 years.Looking for IPE’s latest magazine? Read the digital edition here. Corien Wortmann-Kool, chair of the €440bn Dutch civil service scheme ABP, said she was worried that not all important issues would have been solved, when the concept of the fleshed out pensions agreement is to be presented in the coming weeks.In an interview with Dutch pensions publication Pensioen Pro, she said she wasn’t aware of any satisfactory proposals for merging existing pension rights with pensions to be accrued under new arrangements.She added that she had also failed to spot recommendations for more generous return assumptions that pension funds could apply under the planned defined contribution (DC) contract, which is to replace defined benefit (DB) plans.Social affairs’ minister Wouter Koolmees had promised to send the draft of a new pensions system to parliament before the summer.last_img read more

Danica adds to Danish backing of net-zero asset owner group

first_imgDanica Pension has joined a now 26-strong group of asset owners committing to a carbon-neutral investment portfolio by 2050, with the DKK450bn (€60bn) provider stating it viewed active ownership as an important tool for doing so.It is now the fourth Danish member of the UN-convened Net-Zero Asset Owner Alliance, after MP Pension and PFA joined in the past two months;  PensionDanmark was a member at launch.Danich Pension CEO Ole Krogh Petersen said the provider’s €60bn in assets under management “can make a huge difference for the green transformation”.“That is our focus already now and will be for many years to come,” he said, adding that long-term ambitions were “a good thing but acting in a timely manner is even more important”. Danica is aiming to have DKK30bn invested in the “green transformation” by 2023, DKK50bn by 2025, and DKK100bn by 2030; the latter represents around one-fifth of the provider’s current assets under management.In the first quarter, Danica increased its green transformation investments by 38%, from around DKK10bn to DKK14bn.Announcing its net-zero commitment, Danica said it saw active ownership as an important tool in the work to achieve a carbon-neutral portfolio.“By addressing climate issues through climate dialogue and voting at general meetings, Danica Pension as an investor can help, encourage or require the companies to transform their business on a scale and at a pace that is consistent with the Paris Agreement’s 1.5° target,” it said.Earlier this month Danica released its first climate report, according to which the CO2 emissions related to its equity and corporate bond investments were 33 tons per DKK1m invested at the end of 2019, 21% less CO2 than the global benchmark for these asset classes.The Net-Zero Asset Owner Alliance was launched in September. Its action “focuses on implementing the Paris Agreement, the main goal of which is to limit the rise in global average temperature to 1.5°C”.Participating investors’ must emphasise emission reduction outcomes in the real economy. According to the alliance, those joining make their commitment to net-zero “in the expectation that governments will follow through on their own commitments to ensure the objectives of the Paris Agreement are met”.The Net-Zero Asset Owner Alliance is part of a new campaign called Race to Zero that is seeking to build momentum ahead of COP26, rescheduled for November 2021, by rallying the private sector, including finance, to achieve net zero emissions by 2050.It is under the stewardship of Nigel Topping and Gonzalo Munoz, UN high-level climate champions for the UK and Chile, and supported by Mark Carney, UN special envoy for climate and finance and advisor to the UK government on COP26.Looking for IPE’s latest magazine? Read the digital edition here.last_img read more

Nominal rise in vacancy rates

first_imgFile photoTOWNSVILLE’S vacancy rates have increased slightly to 4 per cent but are still well below 2017 levels.The latest REIQ Rental Survey shows that vacancy rates rose from 3.8 per cent in March 2018 to 4 per cent in June 2018.More from news01:21Buyer demand explodes in Townsville’s 2019 flood-affected suburbs12 Sep 202001:21‘Giant surge’ in new home sales lifts Townsville property market10 Sep 2020A REIQ spokeswoman said despite Townsville’s vacancy rate being the second weakest of a major centre, there was positive signs.“The Townsville rental market has shown signs of improvement over the past 12 – 24 months,” she said.“In March 2017 the Townsville vacancy rate was 6.2 per cent so this market is clearly moving in the right direction and is headed toward recovery.”In September 2016 vacancy rates in Townsville peaked at 7.1 per cent before making a steady decline.In September 2008 they stopped as low as 1.5 per cent before they started to rise.According to the REIQ Townsville’s rental market will remain weak until vacancy rates fall below 3 per cent.last_img read more

Land fast-tracked to meet demand

first_imgBenchmark Property project marketing manager Karla Johnston said the “boom” at Waterlea was brought on by strong demand for developer RBG Service’s first two stages.Ms Johnston said stage three, The Village, would be unveiled in the first quarter of 2019, with 34 house and land lots initially and more than 40 homes under construction. Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 1:50Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -1:50 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels720p720pHD540p540p360p360p180p180pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenDifferences between building in new or established estates01:50 TV presenter sells Brisbane home For best friends Jo Adams and Suzy Alvisio, they have bought identical homes in the Waterlea at Wallon community and will soon move into their homes, just seven doors down from each other.Buyer demand has resulted in a developer fast-tracking the third, $35 million stage, of its Walloon community. They said they fell in love with the community and were quick to decide on a design from builder Escape Homes with four bedrooms, two bathrooms and double garage. “We’re confident the exceptional results will continue with The Village release because of its southeastern corner position giving buyers ease of access to the community’s facilities and the wider Walloon township,” she said. MORE:center_img Ex-AFL player’s home set for auction Southeast land sales lead the way MORE: More from newsParks and wildlife the new lust-haves post coronavirus15 hours agoNoosa’s best beachfront penthouse is about to hit the market15 hours agoWaterlea at Walloon’s stage 3A + 3B release plan.“The Village is the most exciting release to date as it’s the closest precinct to the train station, school, township of Walloon and the extensive waterways parkland being constructed.“It also fronts the first section of the creekside parklands which will have a path that runs through the beautiful landscape. Ms Johnston said the 200th buyer would soon move into the community. She said buyers included relocating or downsizing second and third home buyers.Best friends Jo Adams and Suzy Alvisio have bought identical homes in the development’s second stage and will soon live seven doors down from each other. >>FOLLOW EMILY BLACK ON FACEBOOK<<last_img read more