UK set to confirm collective DC as future pension in DA debate

first_imgCollective defined contribution (CDC) schemes are set to be selected as a future pension scheme option in the UK, with legislation to be put forward in the next Parliament.Reports from national newspaper, The Sunday Telegraph, suggested the implementation of CDC will be laid out in Wednesday’s Queen’s Speech, which sets out the legislative agenda for the next Parliamentary session.In the launch of a government consultation on DA and greater risk-sharing in November 2013, the government name-checked CDC and the Danish ATP model as two potential outcomes.The response to the consultation has not yet been published, although it was expected earlier this year. Pensions minister, Steve Webb, has long been a supporter of CDC, and with the legislative introduction set to be announced, CDC could be left as the sole definition of DA.The newspaper suggested CDC legislation could be in place by 2016.However, its implementation could be complex as the first round of auto enrolment will almost be complete by then, and, uncertainty over how, and if, it complements recent changes to DC landscape announced by the Treasury.Aon Hewitt, the consultancy, and support of CDC in the UK, said its attraction outweighs that of other potential DA designs and defined benefit (DB), due to the lack of guarantees.On how CDC would fit into the post-2014 Budget DC environment, partner at Aon Hewitt, Matthew Arends, said individuals would still want to generate an income in retirement, such as that provided by CDC.“There will be a need for some form of income generating solution from at least part of members’ DC pots to replace income that previously would have been provided by an annuity.“We can expect a proliferation of market innovation to fill this need. However, many of these new options will expose members to increasingly complex decumulation decisions.“CDC plans have a big role to play because they are pooled vehicles and so avoid the need for members to take investment decisions,” he said.“We envisage that many employers will take the opportunity to use CDC as a core part of retirement savings to provide an income – in addition to fully flexible DC cash savings,” he added.The debate over CDC’s implementation has split the industry, with previous debates highlighting Aon Hewitt as strong supporters and Mercer suggesting the government should focus on reducing stringent DB requirements.Towers Watson said CDC would require a “radical” change to pensions legislation in the UK, and employers would refrain from taking on additional risk voluntarily.Colin Richardson, client director at independent trustee firm PTL, said CDC’s major benefit, even post-Budget, is still its longevity pooling.“There are other advantages to CDC of course in relation to potential greater predictability of future pensions and greater pension amounts,” he added.“However, great care is needed in comparing the potential pension amounts as most CDC scheme studies were performed before the March 2014 budget and are thus based on outdated comparisons with constrained DC schemes.”CDC was first touted as an option for UK employers in 2009.A study into its feasibility, by the then Labour Government, said the legislative changes required were too complex and there was a lack of interest from employers, resigning CDC to the legislative scrap heap.Current Labour MP Rachel Reeves, and shadow work and pensions secretary, said sharing risk and rewards across generations, such as in CDC, appeals to the principles of the country.“We need to be clear that such schemes do expose people to a different set of risks and this makes it all the more important that they are subject to robust governance mechanisms,” she said in a speech last week.“Opening the way to CDC schemes makes it all the more important the government takes up our call to impose a legal requirement on all pension scheme providers to prioritise the interests of savers above those of shareholders – policed, where possible, by independent trustees.”last_img read more

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IBM Germany pension fund makes first foray into private equity

first_imgIBM Germany is preparing to diversify its pension portfolios by making its first foray into in senior secured loans and private equity.Speaking at the recent Handelsblatt conference in Berlin, Hans Dieter Ohlrogge, chairman at the company’s Pensionskasse and Pensionsfonds, said the former could not have considered private equity sooner due to the regulatory uncertainty for insurance-based vehicles surrounding the implementation of the Alternative Investment Fund Managers (AIFM) Directive.“But now we know we do not need complicated structures to invest in this asset class, we can start choosing managers and decide on which segment to invest in,” he said.Amendments to the new investment rules – applicable to insurers, Pensionskassen and Versorgungswerke – clarify which funds qualify for investments in private equity, direct lending or real estate. Any closed AIF or similar vehicle domiciled within the EEA or OECD with a sufficient license can be used to invest in private equity up to a limit of 15% of the total portfolio.Ohlrogge said it was important for the Pensionskasse to “really understand the products and their mechanics” offered in any asset class.“This has so far not been really the case for private equity, and we do not like managers that play their cards close to their chests,” he said.Ohlrogge said the pension fund would “like to do buyouts” but that this market was “more or less emptied out”.He said the scheme was therefore looking into venture capital, adding that, “in any case, if possible, we would also like to include secondaries”.For the initial planning process, IBM Germany enlisted the support of its US-based parent company, which has  invested in private equity for last 25 years.Ohlrogge also noted that the pension funds of IBM’s Dutch and UK subsidiaries invested in private equity in recent years and “have generally had good experiences”.But he acknowledged that, for the IBM Germany scheme, co-investments with the parent company or other subsidiaries would be “impossible”, as UK and US asset managers found it “difficult to guarantee tax transparency in those vehicles”.Additionally, IBM Germany used a consultant to come up with a long-list of possible managers, but Ohlrogge said he and his team wanted to do the final beauty contest themselves, “as we do in other alternative asset classes with face-to-face meetings”.Overall, Ohlrogge said he liked real assets because “yields are lastingly higher than from securitised debt”.However, the Pensionskasse is not invested in real estate because “too many others are looking into top locations, especially large insurers”.As a next step, he wants to look for further bond surrogates in the alternatives space and diversify more of the portfolio out of Germany.In the equity portfolio, Ohlrogge said he was “very content” with the overlay the Pensionskasse has had in place for more than four years now.He said this overlay was necessary, as “you cannot have a sufficient real-asset allocation without a risk overlay” in an equity portfolio.He confirmed that the overlay had cost the Pensionskasse 100 basis points of return in 2012 when markets were volatile, but he added that it gained the scheme the same amount a year later when markets were more stable.“Overlays cost money and cut off performance at the top, but, if you know that and calculate that in, it can protect you from massive losses and outperform in stable markets,” Ohlrogge said.For more on the changes in the new investment directive, particularly for real estate and infrastructure, click herelast_img read more

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European pensions-tracking service must add value ‘without legislation’

first_imgA European pension tracking system must be low-cost and offer sufficient “added value” to entice providers to join rather than rely on statutory underpinning, the European Commission has been told.Compiled by the TTYPE project – short for Track and Trace your Pension in Europe – the report concluded that a not-for-profit entity partially funded by the Commission should be launched to coordinate a European tracking system (ETS), which would build on existing tracking services put in place by member states.The report comes two years after the Commission asked the Finnish Centre for Pensions (ETK), Denmark’s PKA and four pension managers from the Netherlands – PGGM, APG, Mn and Syntrus Achmea – to investigate the feasibility of an ETS, building on their experience with national tracking systems.TTYPE urged the Commission not to use legislation to establish the ETS, pointing out that a “bottom-up” voluntary approach had received broad support among the stakeholders with which it consulted. “However, it cannot be ruled out that, in some countries, legislative measures can be helpful or even necessary to enable providers to connect to the ETS,” the report added.It suggested that any such steps should be decided by individual member states.To ensure support for the project in the absence of a legal framework, the report proposed it adhere to four principles.With an eye on data-protection concerns, it was suggested that the ETS draw up a privacy policy but also ensure that the individual controlled the use of personal data shared through the portal.The proposed ETS would not retain any data on individual pension entitlements but rather use each provider’s method of authentication to request the information each time a user logged in to the ETS.Matters of data protection were previously raised by the Actuarial Association of Europe as a potential stumbling block.In a recent paper, the organisation noted that the unique identifier used in many countries to track pensions could only ever be used by a government-controlled entity.Additionally, it would be made clear to users that any data displayed through the ETS was only to be used for information purposes rather than as the basis for a claim, with the responsibilities of both provider and the ETS laid out in a binding contract.The report further proposed that the governing body, called STEP, would include representatives from unions, pension providers, existing tracking services and the Commission on its board to ensure ongoing support.It said that, in instances where a national tracking service was not in place – such as Spain, Portugal or Italy – the ETS could either take the place of a national provider or assist in the launch of a national system.The report accepted that while it hoped it had presented a feasible solution, this was not the same as one that could be successfully implemented.“In the end, the success of the ETS will be measured in terms of its usage, finding lost beneficiaries or raising mobility figures, rather than in terms of functionality,” it said.It speculated that, even if it only captured workers who had already worked in a second member state, it would cover 8m people.Steven Janssen of the Belgian tracking system SIGeDIS previously cautioned the Commission that it should not be overly ambitious in its plans for an ETS.last_img read more

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Smart beta growth hits 29%, as demand for minimum variance takes hold

first_imgEuropean investors pumped more than €30bn into ‘smart beta’ investments in 2014, with research suggesting institutional investors accounted for almost two-thirds of the overall market.Figures from UK research firm Spence Johnson showed that the Continental European market topped €132bn by the end of last year, and predicted annualised growth of 21% over the next five years.It also said institutional investors would see their market dominance diminish over time, with the research suggesting retail investors would account for 42% of the €340bn market by 2019.Spence Johnson, supported by research by CAMRADATA, separated smart beta strategies into single factor, multi factor, minimum variance and parity strategies. There are three approaches to these strategies called ‘advanced beta’, advanced index’ and ‘alternative index’, with the component of active management diminishing through the list.The latest market growth is driven by single-factor mandates and allocations to minimum variance strategies, specifically into the more passive alternative index space of the smart beta market.The report said single-factor assets grew to €50bn from €39bn, mostly allocated to alternative index approaches.There is now €10bn in minimum variance strategies, an increase of 56% from 2013.“Our predictions,” Spence Johnson said, “suggest minimum variance strategies will be the fastest growing smart beta product type for both institutional and retail/wholesale investors.”Net inflows into the advanced beta approach fell over 2014, except for those into minimum variance strategies.Flows into alternative index approaches rose across all strategies, suggesting investor preference for the more passive, and inherently cheaper, products.However, Spence Johnson said that, while investors’ cost cutting was a major driver of growth in smart beta products, inflows into advanced beta (minimum variance) suggested it was not the primary focus.“This observation,” the report said, “is supported by survey evidence that lists factors such as return enhancement, risk diversification and even a desire to complement traditional active or passive allocations all ranked higher than cost as key drivers for both institutional and wholesale investors.”Spence Johnson also said the market remained equity focused, with slow innovation for products in other asset classes, particularly fixed income.eVestment, the institutional investment data provider, only lists nine unique ‘smart beta’ or ‘enhanced index’ strategies for fixed income, dwarfed by its own traditional market, and equity smart beta.Equity accounted for 79% of total smart beta assets, but the research firm said evidence of demand for fixed income products led it to expect strong growth of the market, estimated to be 35% per year until 2020.The research, separating Continental and UK investors, suggested UK allocations were more focused on single-factor index products – but there were also signs of a growing demand for low-volatility strategies.European investors use risk-weighted approaches more, with €26bn in minimum variance and €18bn in risk parity products.“Historically, UK investors have favoured simple single-factor strategies, with an estimated €26bn,” Spence Johnson said.“Evidence from UK consultants, however, suggests demand for low volatility approaches is growing among UK institutional investors concerned about the high levels at which current equity markets are trading.”To read more on pension funds’ smart beta strategies, see this month’s On The Recordlast_img read more

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Campaign groups hit out at UK charge disclosure proposal

first_imgAgathangelou was a member of the IA’s independent advisory committee that fed into the development of the proposed code, but admitted he was “not a fan” of how it had operated, and refused to endorse the code.He also argued that the IA’s code “doesn’t consider” the interests of retail consumers.He called on supporters of the TTF – a voluntary group of professionals campaigning for transparency across the investment industry – to help produce a strong official response to the IA’s consultation paper.“Given that very real possibility of the IA’s draft code becoming the rulebook, I think we need to help ensure the code is as good as it can be from an investor’s perspective, while continuing to argue that it should be the FCA itself that leads regulatory activity in this space,” Agathangelou said.He said the FCA should “look at the entire value chain, not just the asset management sector”.“It seems to me we are heading for exactly the kind of ‘patchwork quilt of protocols’ that will result in weak, inconsistent, and virtually unenforceable regulation that has prevailed for decades; unless of course the FCA conclude that it should not be the trade body to the asset management sector that writes the rules,” Agathangelou concluded.Gina Miller, who leads the True and Fair Campaign for transparent fund costs, also criticised the IA’s proposal, describing it in a post on Twitter as “pure jargon and complexity”.“Transparency can blind if not focused or simple,” she said.Chris Cummings, chief executive of the IA, said in his foreword to the cost disclosure consultation that “it cannot and should not be the intention of the industry to impose a framework on its clients”.Other organisations have been more supportive of the IA’s proposal.Graham Vidler, director of external affairs at the Pensions and Lifetime Savings Association (PLSA), UK pension funds’ trade body, said: “The PLSA has always recognised the importance of understanding transaction costs in order to ensure value for money on behalf of scheme members, and it’s good to see the IA taking steps to standardise disclosure. We will respond to the consultation, with a focus on ensuring that the code permits consistency and comparability.“We urge our members and the pensions industry as a whole to respond to this important consultation.”Vidler was also a member of the disclosure code’s advisory committee.The FCA has said it would not be bound by industry proposals. Speaking at the PLSA conference in Edinburgh last month, Chris Woolard, the regulator’s director of strategy and competition, said it had all too often become “stuck” with “whatever comes out the other end of the pipeline” from industry-led solutions.“I want to be absolutely crystal clear we are not going to be put in that position,” he said. “So if we find that there are industry solutions that don’t measure up then that’s philosophically where we’ve got to be prepared to go to.”The IA’s consultation is open until 19 May, and can be accessed here. The founder of a transparency pressure group has criticised the Investment Association’s (IA) stated aim of getting a new cost disclosure code enshrined in the UK regulator’s lawbook.Andy Agathangelou, founder of the Transparency Task Force (TTF), warned that such an outcome would mean the UK’s investment charges rules were “designed by a highly conflicted trade body whose primary responsibility is, and remains, the welfare of their members and not the actual investors themselves”.The IA, the trade body for UK asset managers, on Monday published a framework for cost disclosure, including transaction charges, that it said would comply with multiple regulations and client types.It asked the Financial Conduct Authority (FCA) to grant “regulatory recognition” for the code once it is finalised by adopting it into its Conduct of Business Sourcebook, the UK’s financial services rulebook.last_img read more

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Switzerland seeks to ban cantons from regional supervisory boards

first_imgThe Swiss federal government has published draft legislation aimed at preventing local governments from being represented on the boards of regional pension fund supervisors.The proposal runs counter to that of a parliamentary initiative on the subject and means that there is now “competition” between the two, according to Dominique Favre, director at As-So, the supervisory authority for occupational pensions in western Switzerland.The reform proposal, announced by the government last week, was presented mainly as “modernising” the first pillar, but it also touches on aspects of the second pillar.One of these includes provisions to “guarantee the independence of the regional supervisory authorities” by forbidding members of Swiss cantonal governments to sit on the authorities’ supervisory bodies. The government had previously said it would draft legislation on this and in so doing has effectively backed the position of the federal supervisory authority. The federal authority said having government officials from the cantons on regional supervisory authorities’ oversight boards was incompatible with the legal requirement that supervisory authorities be independent. Equally, the authority said, it was not good governance.There are seven regional occupational pension supervisory authorities in Switzerland. Some of these were formed by several cantons in a given region. The ones for western, eastern, and central Switzerland have representatives of the cantons’ executive on their board of directors. They disagree with the federal supervisory authority’s position.Fighting their corner is a member of Switzerland’s upper chamber of parliament, Alex Kuprecht, from the Swiss People’s Party. In June last year he called for an amendment to the law on occupational pensions to “reinforce the autonomy of the cantonal and regional bodies charged with supervising occupational pensions institutions”.As-So’s Favre claimed the government hoped Kuprecht’s initiative would fail, given it ran counter to the government’s reform suggestion. “We now have competition between the Kuprecht intiative and the government’s draft legislation, which is the result of the will of the federal supervisory authority,” he said.Kuprecht’s proposal was endorsed by the upper chamber’s social security and public health committee in November, and is scheduled to be discussed by the same committee in the lower house in May. It should go to parliament in the autumn, according to Favre.The federal government is consulting on its reform proposal until 13 July. Dealing mainly with matters of pension supervision, it is separate to Altersvorsorge 2020 (AV 2020), the major pensions reform package that was narrowly passed by parliament last month and will be voted on in a referendum in September.Favre said it had not been feasible for the government to include a rule about the composition of the regional supervisory authority boards in the AV2020 package given the latter’s focus, and said that it had instead found an opportunity to house it in the reform proposal it had been targeting to modify first pillar supervision.  According to the government, there are three main thrusts to this reform proposal. One involves adopting a forward-looking and risk-oriented approach to supervision of the first pillar fund and supplementary social security benefits. A second is for governance to be strengthened, and a third relates to standardising and updating information technology and data systems.Another second pillar aspect, besides that relating to the regional supervisory authorities, has to do with making more precise the tasks carried out by occupational pension “experts”.Read more about the AV2020 reform in the next IPE magazinelast_img read more

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French reserve fund gains 7%, targets more impact investments

first_imgFrance’s pension reserve fund wants to increase its allocation to impact investments, it announced in connection with its performance result for 2017.The fund was only at the beginning of its thinking about how to pursue this goal, but would probably issue a tender for impact investing this year, according to Olivier Rousseau, member of the executive board of Fonds de réserve pour les retraites (FRR).Another option would be for FRR to add impact requirements – in particular social and environmental – to equity mandates that were to be renewed this year, but at the moment the fund was more likely to opt for a separate impact investing tender.  Rousseau indicated the fund would seek to allocate a substantial amount to impact investing. FRR existing investments included what it called “ESG momentum” mandates, in which managers invest in mid-cap companies with potential to improve their environmental, social and governance (ESG) performance and have this as a goal. Since 2014 FRR has also invested in funds with an environmental – mainly climate – theme. Olivier Rousseau, FRRJust over 1% of FRR’s assets, roughly €400m, were allocated to these mandates, Rousseau indicated.This year FRR planned to further lower the carbon footprint of its portfolio, the fund said in a statement.It would also award “development capital” mandates and establish dedicated “innovation capital” funds, part of a €2bn programme of investment in French private assets. It was given approval for this in 2015, and more than half has been committed. Rousseau told IPE that FRR will also be tendering out four equity mandates this year: for French, European and US smallcap stocks, and for Japanese equity. It would require managers to have greater integration of ESG factors as part of these mandates, he said.Equities drive 2017 performanceFRR’s investments returned 7.16% in 2017, led mainly by equities, it reported this week. In absolute terms, its assets increased to €36.4bn as at 29 December.FRR’s assets are managed in two portfolios: a return-seeking portfolio and a liability-hedging portfolio. The return-seeking portfolio gained 13%, and the fixed-income assets in the hedging portfolio 1.5%. The return-seeking portfolio made up 56% of the fund’s total assets at the end of last year.Surplus assets grew from €14.3bn in December 2016 to €16.5bn at the end of 2017.FRR’s liabilities were fixed at the beginning of 2011, since when it has had to make annual payments of €2.1bn to Cades, the agency that refinances France’s social security debt.With last year’s return, FRR’s net assets have increased by €14.1bn since 2011. The fund said this had “enabled it to reduce the anticipated decrease in value of its portfolio to a very significant extent”.Read more about FRR in November’s How We Run Our Money interview for IPE magazinelast_img read more

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ATP shifts €2.7bn to hedging portfolio after longevity data change

first_imgATP, Denmark’s giant statutory pension fund, has announced it is shifting DKK20bn (€2.7bn) from its investment portfolio into its hedging portfolio to account for the latest change in its longevity projections.More detailed data — and excising US figures from the information used — has meant an adjustment in its longevity model, the DKK768bn pension fund said, with the new projections adding 3.7 years to the expected lifespan of an average newborn boy in Denmark and just under two years to that of a baby girl.Christian Hyldahl, ATP’s chief executive, said: “We have expanded the methodology and for the first time included detailed data, including causes of death, which is enabling us to provide an even more accurate estimate of the development of lifespans.”According to the new projections, 40% of girls born in Denmark now are expected to live to see their 100th birthdays, he said. The main reason for the changed projections comes from the removal of the US from the data, because causes of death there differ significantly from those observed in Denmark, ATP said.The US has historically represented about 40% of the data in the lifetime model, and therefore has had a major impact on life expectancy, it said.Scotland and Luxembourg, meanwhile, which are more like Denmark, are included in the new data set, which – capturing 330 million people – is still very large, the pension fund said.Narcotics-related causes of death are 5.5 times more common in the US than they are in Denmark, and traffic accidents are 3.5 times more likely, according to ATP.As of today, ATP is moving DKK20bn from the bonus potential — which makes up the investment portfolio — to the fund’s large hedging portfolio, which backs the pension guarantees.In accounting terms, the transfer will affect the half-year earnings negatively, but members’ total assets remain unchanged, ATP said.ATP’s hedging portfolio will have DKK677.3bn of assets after the adjustment, and the bonus potential will amount to DKK99.1bn.Back in 2016, ATP added an extra DKK9.9bn to its coverage of guaranteed pensions to account for longer average lifespans observed in the country’s population.last_img read more

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People moves: André Tapernoux exits Mercer’s Swiss business

first_imgAP3 – The SEK353.1bn (€33.6bn) Swedish state pension buffer fund has appointed Mattias Bylund as chief operating officer. He was previously chief financial officer and chief risk officer, and has worked for AP3 for 16 years in a number of investment and operations roles.Verband der Firmenpensionskassen (VFPK) – Hubert Stücke, managing director of the €1.1bn Pensionskasse for Nestlé Deutschland, has been elected to the board of the association of German corporate pension plans. With his appointment, the VFPK board is back to the four members it counted before the death of Peter Hadasch, one of the founders of the association, in October last year.Stücke has spent his entire career at Nestlé in Germany. He was chief financial officer of Nestlé Deutschland from 2007 until 2017 and since the beginning of this year he has been the board member responsible for business and corporate development. He has been on the board of Nestlé’s pension schemes since 2007.VFPK noted that as CFO of Nestlé Germany, Stücke was actively involved in political discussion on issues surrounding Pensionskassen, and that he was very familiar with occupational pension topics.   Lazard – The $238bn asset manager has hired Stephan Heitz as a managing director and head of Lazard Fund Managers. He takes on responsibility for retail and institutional distribution in Switzerland, Italy, Spain, Portugal, Belgium and Luxembourg, from the company’s office in Zurich. Heitz was previously head of continental Europe for AXA Investment Managers, where he worked for nine years. He was CEO of Swiss Life Asset Managers between 2001 and 2008.Jupiter – The UK-listed fund manager has hired Paul van Olst as head of Netherlands as it seeks to build its international presence. Van Olst is based in the company’s new office in Eindhoven and will be responsible for building a distribution team for the country. He joins from Fidelity International where he worked for 15 years in various sales management roles in the Netherlands and Benelux, most recently as head of distribution for the Netherlands.Jupiter has also hired William Lopez from Columbia Threadneedle as head of Latin America and US offshore, as well as Nick Anderson from BlackRock as a senior adviser on the Middle East and Africa.State Street – Jörg Ambrosius and Mike Fontaine have been appointed co-heads of global services for State Street in Europe, the Middle East and Africa (EMEA).Ambrosius was previously head of sector solutions for EMEA and is based in Munich. He joined State Street in 2001, having started his career with Deutsche Bank. Fontaine was previously executive vice president of US investor services, and has relocated to Dublin for his new role. He joined State Street in 2007 as part of the company’s acquisition of Investors Financial Services Corporation.Vanguard – The passive investment giant has hired Paul Young as European senior exchange-traded fund (ETF) capital markets specialist. In his new role he is responsible for supporting the liquidity of Vanguard’s products. He was previously head of ETF capital markets for EMEA at State Street Global Advisors. He has also worked at UK wealth manager St James’s Place and Morgan Stanley Investment Management.JO Hambro Capital Management – Ken Lambden has left JOHCM after less than two years as chief executive. Emilio Gonzalez, chief executive of JOHCM’s Australian parent company Pendal Group, has temporarily relocated from Sydney to London to fill in while a search gets underway for a permanent replacement.Before joining JOHCM in October 2016, Lambden was chief investment officer at Barings Asset Management, and previously worked at Schroders for 15 years, including spells as CEO for Australia and global head of equities. Keller Pensionskassenexperten, AP3, VFPK, Lazard Fund Managers, Jupiter Asset Management, State Street, Vanguard, JO Hambro Capital ManagementKeller Pensionskassenexperten – André Tapernoux, the former head of risk management at Switzerland’s pension regulator, has left Mercer to join Keller Pensionskassenexperten, a local pensions consultancy. Tapernoux will join Keller, a family business, at the beginning of September as one of four partners.An actuary, Tapernoux was head of risk management at the Oberaufsichtskommission Berufliche Vorsorge (OAK) from 2012 until January 2015, after which he moved to Mercer to lead its local retirement business. Tapernoux spoke to IPE in 2016 about the pressures facing Swiss pension funds from liability management and regulatory change.last_img read more

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Investors call for action after Brazilian mining disaster

first_imgThe Church Commissioners for England and the Church of England Pensions Board (CEPB) have been joined by the Council on Ethics for Sweden’s AP1, AP2, AP3 and AP4 funds, Dutch pension giant APG, the UK’s LGPS Central and New Zealand Super, as well as several asset managers. The Church of England is leading calls from institutional investors for a global independent public classification system to monitor the safety risk of “tailings” dams linked to mines, after a collapse in Brazil killed 100 people.More than 200 people are missing following the collapse of the dam in Brumadinho in the south east of Brazil on 25 January.The dam was an embankment used to store by-products of iron ore mining operations, and its collapse resulted in mudslides that engulfed local communities. The human toll was accompanied by potential contamination from the red iron ore waste that swept across the countryside.The Mina Feijão operation in Brumadinho is owned by Brazil’s largest mining company, Vale. “We have lost confidence in the sector’s ability to regulate itself on this issue”John Howchin, AP funds’ Council on EthicsThe group has proposed that the new classification system for safety risk should be independent of mining companies and require annual audits of all tailings dams, as well as verification that the highest corresponding safety standards were being implemented. All reporting should be made public through a database accessible to communities, governments, civil society and investors. John Howchin, secretary general of the Council on Ethics, said: “We have lost confidence in the sector’s ability to regulate itself on this issue. The consequences when something goes wrong are clear. We will be working with other investors to insist the necessary steps are taken.”Adam Matthews, director of ethics and engagement for the CEPB, said: “These failures of tailings dams should not be happening. These are not black swan events.“An independent classification system will ensure that communities, workers and investors know the safety standards of tailings dams are in place and if they are being applied. This proposal will drive a new level of accountability and transparency within the mining sector.”The group is planning to convene a meeting of international industry experts and major investors in the sector. This will take place in London, chaired by David Urquhart, Bishop of Birmingham.All shares in Vale held within the Church Commissioners’ and CEPB’s portfolios – worth £10m (€11.4m) in total – were disposed of shortly after the disaster occurred.Institutional investors have previously called for change at mining corporations including Vale following a similar disaster in Brazil in 2015.The CEPB said it has engaged for some years in ongoing dialogue with mining company senior staff in relation to the companies’ role in society. It has also “heavily engaged” with commodities giant Glencore on climate, and health and safety.last_img read more

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