PRI in Person: Long-term versus short-term debate ‘divisive’

first_imgOther speakers on the panel acknowledged that the debate was a question of difference – that long-term investors rightfully co-exist with investors whose model is short term.However, Sandy Frucher, vice-chairman of Nasdaq, said a long-term view was a better way to gain asset appreciation than a short-term perspective.Thabo Khojane, managing director Africa Client Group at Investec Asset Management in South Africa, said that, for an investment manager, time horizon was primarily a function of the client’s mandate.It comes down to what an investor thinks about risk.He said: “If it is important for clients to have a benchmark against an index or against a peer group, and the way they think about risk is in terms of volatility or tracking error, then the horizon will be slightly shorter, typically a rolling 12-month or three-year horizon.“However, if the client is for an absolute outcome, a benchmark against cash and against inflation, and the way they think about risk is not in terms of volatility or tracking error but in terms of capital cost, then typically the mandate will give you a much longer horizon.”He added: “The reality is that, the longer the horizon, the more time an investment manager has, the easier it is and the more likely it is that he will be able to deploy his skills and meet the requirements of the client.“Clearly, a longer-term horizon makes it easier to make money.” The long-term versus short-term debate, which has occupied financial markets across the world post-crisis, is divisive, responsible investors have been told.Speaking at the recent ‘PRI in Person’ event in Cape Town, South Africa, Erika Karp, founder and chief executive at US-based Cornerstone Capital, said: “The problem is the use of language in a kind of judgemental and in a potentially divisive way. There is nothing inherently wrong with short-term [investing] if the systemic risk is managed reasonably well and there is transparency.“The language of sustainability – whether it is SRI, sustainable investment, the double or triple bottom line, impact investing, values-based investing – they all are good, […] and the opposite is implied to be bad. This is where it gets divisive.“So this needs not to be about an ideology, it needs to be about pragmatism. It doesn’t need to be about values, it needs to be about creating value. So any debate like long-termism or short-termism, […] to some degree, could be a waste of time.”last_img read more

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Norwegian oil fund re-instates investment ban on Israeli construction firms

first_imgNorway’s Government Pension Fund Global (GPFG) has excluded three companies from its investment universe, including two Israeli firms only re-admitted in August last year.The move to blacklist Israel’s Danya Cebus and Africa Israel Investments, previously excluded over their involvement in construction work in the West Bank, came as the Norwegian Ministry of Finance said it would also bar the nearly NOK5.1trn (€606bn) sovereign wealth fund from owning North Korean, Syrian and Iranian government debt.The ministry said the decision to bar the two Israeli companies came after the fund’s Council of Ethics was informed that Danya Cebus – a listed subsidiary of Africa Israel Investments – was now undertaking construction work on settlements in East Jerusalem.The Council recommended in November last year that both companies be divested once more, as there was a risk they were “contributing to serious violations of the rights of individuals in situations of war or conflict”. The decision comes only weeks after Dutch pension manager PGGM sold its shares in five Israeli banks over their involvement in settlement activities, causing the Israeli government to summon the country’s Dutch ambassador to explain the move.Additionally, the GPFG will also blacklist mining company Sesa Sterlite after Vedanta Resources, excluded in 2007, gained a controlling interest in the Indian firm.The Council’s recommendation said Vedanta’s exclusion should be maintained, and that Sesa should be added to the list of barred companies over the “unacceptable risk of the company being responsible for severe environmental damage and systematic human rights violations”.The Finance Ministry has also decided to allow the fund to invest in sovereign and government-backed bonds issued by Myanmar.In a statement, it stressed that the oil fund was not to be viewed as an instrument of foreign policy and that it only barred sovereign bond investments in exceptional circumstances.“The Ministry of Finance, in consultation with the Ministry of Foreign Affairs, has made such an assessment and concluded that the exemption should no longer apply to Myanmar, but that North Korea, Syria and Iran should now be covered by the exemption,” it said.As of the end of 2012, the GPFG had no fixed income exposure to any of the three newly banned countries.,WebsitesWe are not responsible for the content of external sitesLink to the recommendations by the Council of Ethicslast_img read more

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UK local government funds criticise Barclays over executive pay

first_imgThe Local Authority Pension Fund Forum (LAPFF) has said it will vote against Barclay’s executive remuneration plan at today’s annual general meeting (AGM), while attacking its decision for Sir John Sunderland to lead the selection of the bank’s new chairman.The forum, a shareholder voting group for 60 local authority funds with more than £120bn (€146bn) in assets, said it believed institutional shareholder pressure was the only meaningful way to spur change at the bank.Sunderland is currently non-executive director at the bank, and former head of the remuneration committee, which came under severe criticism from shareholders for excessive pay.Councillor Kieran Quinn, who chairs the forum, said: “Sir John Sunderland has fortunately recognised it is inappropriate for him to serve as chair of the remuneration committee, but how can it be appropriate for him to lead the selection of Barclay’s new chair? “It appears that a continuing series of no votes by institutional shareholders is one of the few options open for meaningful engagement at Barclays.”The re-election of Sunderland and planned remuneration are two of the bank’s proposals expected to be rejected by the Forum and fellow institutions at today’s AGM.Pensions & Investment Research Consultants (PIRC), a proxy-voting service, has advised its members to follow suit.Standard Life Investments (SLI), asset manager and institutional shareholder, also denounced the bank’s remuneration policy.Owning 1.92% of the bank on behalf of its clients, SLI said it did not take the decision to reject the remuneration report lightly.Alison Kennedy, stewardship director at the manager, said: “We appreciate there were competitive pressures. Nevertheless, we are unconvinced the amount of the 2013 bonus pool was in the best interests of shareholders.“The board has stated its intention of reducing the compensation to net income ratio over the medium term. We support this intention, and it is important that, over time, the board demonstrates convincingly this will be achieved.”A spokesman for the LAPFF added that, while Barclays was a high-profile example, it was the tip of the iceberg for the problems in the financial sector.“The LAPFF has a long history of raising governance concerns at Barclays and at banks in general, going back to the LIBOR scandal, executive remuneration and accounting standards,” he said.“It is clear Barclays is the tip of the iceberg of dissatisfaction from pension funds.”last_img read more

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Denmark’s Sampension makes first direct green energy investment

first_imgDenmark’s Sampension has said it is making its first direct investment in green energy, financing a new 33MW wind farm to be built in west Jutland.The DKK195bn (€26.1bn) labour-market pension scheme is financing the 10-turbine Ulvemosen wind farm project in Varde, which will be established and operated by wind and solar-power developer European Energy.Anne-Charlotte Mark, head of equities and alternative investments at Sampension, said: “Ulvemosen is our first direct investment within renewables and part of the strategy to increase exposure to energy-related infrastructure.”Sampension said it had high expectations for the project. European Energy said the project would be owned by Sampension but that a part of it would be owned and operated by local land-owners and neighbours to the project.The developer said it had been planning the project for the last 4-5 years.The plant will have an estimated output of around 100GWh a year, equal to the energy consumption of 20,000 households, European Energy said.Danish manufacturer Vestas said European Energy has placed an order with it for 10 V117-3.3MW turbines, which is being financed in collaboration with Sampension.The turbines are expected to be delivered and commissioned in the fourth quarter of this year.last_img read more

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Icelandic pension funds agree to finance $300m silicon metal plant

first_imgIcelandic pension funds are to partially finance a $300m (€266m) silicon metal plant in the country’s north, partnering with Germany’s development bank for the project.The factory, to be built for Germany’s PCC Group near the town of Húsavík, will attract up to ISK7bn (€46m) in direct investment over the next three years, Íslandsbanki Corporate Finance estimated.KfW IPEX Bank, the subsidiary of Germany’s Kreditanstalt für Wiederaufbau dedicated to project finance, will cover the majority of the construction costs.The domestic pension sector was previously said to be contributing more than one-quarter of the $300m in financing, with a statement from Íslandsbanki confirming that the funds would now contribute $80m through Bakkastakkur, a joint venture among more than 10 funds and the bank. Bakkastakkur and the associated pension funds will offer debt financing and receive preference shares in PCC BakkiSilicon for providing financing.The project received final approval after three years of planning when the EFTA Surveillance Authority, the regulator charged with overseeing the European Economic Area, ruled in May that the terms agreed between Iceland’s state power company and PCC to supply energy to the new plant did not constitute state aid.Birna Einarsdóttir, chief executive of Íslandsbanki, hailed the final agreement as an “important milestone”.“It is a very positive step for the Icelandic economy, as it directly supports employment development in the northern part of Iceland, as well as investment,” she said. Icelandic pension funds soon face the prospect of the government relaxing capital controls imposed after the 2008 collapse of several local banks.last_img read more

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Italy’s Mario Negri pension fund tenders bond, equity mandates

first_imgThe pension fund, which divides assets strategically among various major asset classes and has a conservative investment profile, said investment managers tendering for the mandates should have assets under management of at least €5bn.The “Mario Negri” pension fund provides details of how managers should respond using its published questionnaires.It said that, on the basis of the replies it receives, it will then move on to pre-select managers to go through the next phase.A second phase of the process will then consist of possible direct meetings to gain further information and clarification on proposals.The pension fund had €2.3bn in total assets at the end of 2014. The Italian pension fund for executives of commercial, haulage and transport companies, Fondo di Previdenza “Mario Negri”, has announced a tender for three investment management mandates.The pension fund is offering mandates for three portfolios – global balanced (bonds and equities), US equities and European small and mid-cap equities – according to a notice from the fund.The fund did not state the value of the mandates.The deadline for tenders to be received is 8 March.last_img read more

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Late surge in investment returns rescues Ilmarinen’s 2016 result

first_img“During the year, we reduced fixed income investments and increased investments in real asset classes,” he said. “We continued to diversify our real estate investments abroad and invested in new properties in Frankfurt, Berlin and Amsterdam, among other places.”The market value of Ilmarinen’s portfolio rose to €37.2bn by the end of December, from €35.8bn a year earlier.Equities were the best performers among the main asset classes despite market volatility, Ilmarinen reported, returning 6.5%.Investments in listed Finnish equities returned more than 15% in 2016, Ritakallio said, adding that US and emerging economy equities had also performed well.“However, investments in other European equities and shares lowered the overall return on the equity portfolio,” he added.Solvency capital was 29.2% of the technical provisions in 2016 compared to 29.6% the year before, and the solvency position remained at two times the solvency limit.Ritakallio also said implementation of Finnish pension reform had got off to a smooth start at the company.“It will be interesting to see how the reform will impact retirement in the long run and how Finns will make use of the new pension types,” he said. Finland’s second largest pensions insurer Ilmarinen recovered from early losses to report 4.8% in overall investment returns for 2016.The return was lower than 2015’s 6% gain, with European equities a drag, according to Timo Ritakallio, president and chief executive of Ilmarinen.“The Brexit referendum and the US presidential election fuelled political uncertainty, causing stock price volatility,” Ritakallio said. “Against this challenging backdrop, we reached a reasonably good investment return.”Ritakallio said the “good” full-year result was attributable to Ilmarinen’s long-term investment strategy, as well as diversifying investments both geographically and across various asset classes.last_img read more

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Pensioen Pro Awards: Unilever’s APF voted best pension fund in the Netherlands

first_imgUnilever closed its defined benefit (DB) scheme Progress to new entrants in 2015, when it placed pensions accrual in a new collective defined contribution pension fund, Forward.Earlier this year, both schemes joined the new APF, enabling them to operate with one asset manager and under a single board.In the opinon of the jury, this was a significant step towards a ‘future-proof’ plan.Jetta Klijnsma, state secretary for social affairs, won the award for Extraordinary Contribution to the Sector, because of innovations introduced under her watch. These included the new financial assessment framework (nFTK), the introduction of the APF, and legislation to improve governance and communication.The jury also credited Klijnsma with the nationwide dialogue concerning the update of the pensions system.The Unilever APF was also awarded the Innovation prize, while the sector scheme for the hospitality industry (Horeca & Catering) was awarded for its customer service.The ESG Award went to the €45bn metal scheme PME. The small Calpam pension fund won the awards for Best Investment Policy and Best Long-term Investment, as well as the silver award for Best Small Pension Fund.The bronze awards for best strategies for equity, bonds, and property were bagged by BPL Pensioen (the former sector scheme for agriculture), Pensioenfonds TNT Express, and the occupational pension fund for general practitioners (SPH), respectively.The industry-wide pension fund for building materials (HiBiN) won the prize for best medium-sized scheme, while the Unilever APF was also awarded silver for Best Large Pension Fund.The sector pension fund for painters and decorators (Schilders) won the award for best funding improvement. Its coverage ratio increased from 94.2% in June last year to 109.8% at March-end. Unilever’s general pension fund (APF) has won the golden Pensioen Pro Award for the Best Dutch Pension Fund of 2017.A jury of pension selected the Unilever APF from a shortlist of three candidates, after 1,628 experts had cast their votes.Rob Kragten, the scheme’s chief executive, received the award last week from Hamadi Zaghdoudi of Willis Towers Watson, during the annual congress of IPE’s Dutch sister publication Pensioen Pro in Amsterdam last week.The event was attended by 330 representatives from the sector.last_img read more

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Brexit roundup: MPs to explore UK financial services’ post-EU future

first_imgA cross-party committee of MPs has launched an inquiry into the future of the UK’s financial services after the country has left the EU.The Treasury Select Committee – made up of members of the UK’s lower house of parliament – will examine what the government’s financial services priorities should be when it negotiates the UK’s future trading relationship with the EU and other countries.The inquiry will also consider whether the UK should maintain the current regulatory barriers that apply to third countries.Nicky Morgan, chair of the committee, said: “London is the world’s premier financial centre, and many of us want to keep it that way.” Headquarters of the CSSF, Luxembourg’s financial regulatorThe Luxembourg financial services regulator, the CSSF, has issued a reminder that fund management responsibilities could still be delegated to the UK in the event of the latter leaving the EU without a withdrawal deal, if companies fulfil certain conditions.The CSSF said it was working towards the required co-operation with the UK’s Financial Conduct Authority (FCA) being in place by 29 March in the event of such a “no deal” Brexit.The regulator also reminded Luxembourg firms and investment funds passporting activities into the UK that a temporary permissions regime had been operating since 7 January.Firms and investment funds notifying the FCA under this regime would be authorised to continue existing regulated business within the scope of their current permissions in the UK for a limited period after 29 March while seeking full FCA authorisation.The regime also allowed inbound marketing of EU funds in the UK to continue temporarily.According to Luxembourg for Finance, a public-private partnership established to develop the Duchy’s financial centre, the country’s regulators granted 80 new licences for banks, management companies, alternative asset managers, insurers and investment firms in 2018.This included several financial institutions that had publicly announced their decision to relocate some activities because of Brexit.The agency said 47 financial institutions had publicly disclosed Brexit relocation plans involving Luxembourg, half of which were asset managers.M&G and Columbia Threadneedle are among those who have announced plans to transfer assets to Luxembourg. Others have opted for Dublin. She added: “Brexit will have a significant and long-lasting impact on the financial services sector, including the insurance, retail banking and asset management sectors, in the UK, the EU, and potentially the rest of the world.”The inquiry will weigh up the pros and cons of different possible future relationships with the EU – convergence, equivalence, or divergence.“We’ll also seek to conclude whether it would be in the long-term interests of the UK to align closely with EU financial rules, or to forgo financial services trade with the EU and pursue trade with other third countries,” said Morgan.The committee would also consider “the opportunities outside Brexit”, such as fintech, she added.There is no set deadline for submitting written evidence to the inquiry.  Luxembourg regulator issues Brexit delegation reminderlast_img read more

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​MP Pension sheds Vale stock as engagement fails

first_imgMP Pension had an equity stake of DKK26.2m in Vale and corporate bonds amounting to DKK5.7m linked to its subsidiary Samarco Mineracao. Source: TV NBR An aerial view of the Brumadinho dam collapseThe disaster at Vale’s dams in Brumadinho drew attention to the dangers of tailings, or waste, dams all over the world. In the immediate aftermath, a group of investors led by the Church of England Pensions Board and the Swedish AP Funds’ Council of Ethics came together to form the Mining and Tailings Safety Initiative .The group said it made a request for dam-by-dam disclosure, supported by 100 investors with $12.5trn (€11.2trn) in assets under management. It contacted 655 companies, gathering information about global tailings facilities and asking them to disclose whether they operated waste dams.Adam Matthews, director of ethics and engagement at the Church of England Pensions Board and co-lead of the initiative, said: “It is clear there has been insufficient attention paid by the investment community and tailings have in effect been treated as an externality. These disclosures begin to change that understanding. The Danish pension fund for academics is selling off its stake in Brazilian mining company Vale, after holding the stock in “quarantine” since the end of January.MP Pension said it had been in talks with the company since the collapse of a tailings dam in January caused the deaths of 169 people in Brumadinho, Brazil.The DKK114bn (€15.3bn) fund said it had sought to address issues related to Vale’s mining activities in the Moatize mine in Mozambique, but talks had since failed. As a result, the fund planned to sell its DKK31.9m worth of investments in the company.Anders Schelde, MP Pension’s CIO, said: “In recent months, MP Pension has strengthened its efforts to influence the company through dialogue, but it has not led to the desired improvements, so now they are coming onto our exclusion list.”center_img “Not disclosing is unacceptable and poses a very real risk to our investment”John Howchin, AP Funds Council on Ethics“We now know who has a facility, where it is, and we are beginning to understand the risks associated with individual dams.”While 453 companies contacted did not respond to the disclosure request, 202 of the firms did respond, including 29 of the 50 largest mining companies in the world. This resulted in information being made public about thousands of facilities.John Howchin, secretary-general of the AP Funds’ Council on Ethics, said: “Not disclosing is unacceptable and poses a very real risk to our investment. We are now working with partners to develop a global tailings database that can standardise independent reporting and monitoring of tailings.”last_img read more

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