Archive : September, 2020

Investors urged to ignore ‘key-man departure’ as PIMCO outflows hit $23bn

first_imgThe shock departure led to the swift appointment of Daniel Ivascyn as the California-based manager looked to calm fears among investors and stem outflows from Gross’s former flagship fund.PIMCO confirmed that its September net outflows from the $211bn (€167bn) Total Return Fund hit $23.5bn, with the largest daily outflow happening immediately after Gross’s resignation was made public.However, the company also stressed that outflows on the following two days were significantly lower.Aegon’s analysis showed other key-man departures had little impact on the institutional and retail funds they managed, with some new managers outperforming their predecessors.It highlighted UK asset manager Schroders’ loss of Richard Buxton from its UK Alpha Plus fund, who left the firm after 11 years. Buxton’s replacement Philip Matthews still managed to achieve 2.8% above benchmark for the fund.The manager’s European Opportunities fund, managed for 11 years by Chris Rice until 2013, saw replacement Steve Cordell achieve returns of 5.3% above benchmark, higher than Rice’s annualised return in his time in charge.Other ‘key-man’ losses for Fidelity, Henderson and AXA Framlington also saw replacement managers stabilise the funds and achieve above-benchmark returns.Dixon said investors considering exiting PIMCO’s previously coveted fund should strongly evaluate their decisions before moving assets.“Bill Gross has left a distinct investment DNA at PIMCO, with talented analysts and a strong team culture,” Dixon said.“These qualities will endure for many years after Gross’s departure and should be reflected in PIMCO’s future performance.“It is also important to think hard about the costs associated with moving money – potential fees, out of market risk and missing likely gains from existing funds. Investors must weigh up the benefits with the costs and remember that often the wisest move may be to stay put.”At PIMCO, Gross’s shock departure is only a continuation what has been a turbulent period for the bond house.Earlier this year, then chief executive Mohammed El-Erian stepped down, raising questions about the expected succession plan for the 70-year-old Gross.Since the start of the year, outflows from the Total Return Fund have been consistent, as investment performance began to slide on a short-term basis.This was capped by the eventual departure of Gross, which sent shockwaves through PIMCO and its investors. Gross will begin managing an unconstrained bond portfolio at Janus on Monday.In an update to investors, PIMCO said: “As we engage our clients around the world, we are confident the vast majority of them will continue to stand with PIMCO as we demonstrate why we have earned the reputation as one of the world’s premier investment managers.” Bond investors in PIMCO’s Total Return Fund are being urged to remain loyal to the fund after Bill Gross’s departure after new analysis showed detriment to investments after leaving.Data from Aegon, the Dutch insurance firm, showed nine from 11 funds still outperformed benchmarks even after the departure of a significant fund manager.Aegon’s investment director, Nick Dixon, said investors in Gross’s former funds should “think carefully” before making any snap redemption decisions.The analysis was done after Bill Gross stepped down as CIO at PIMCO, a company he started in 1971, and left to manage a new, much smaller bond fund at Janus Capital Management.last_img read more

ESMA critical of ‘unsatisfactory’ asset-backed security assessment

first_imgESMA’s research found that CRAs were not ensuring that the due diligence underlying issuances was obtained prior to rating the instruments, something the supervisor said prejudiced a rating agency’s ability to conclude whether information on those assets was of “sufficient quality”.“ESMA also noted that, while some CRAs have enhanced the process of collecting such due diligence or third party assessment for new ratings, the same information is not always available for outstanding ratings issued before the entry into force of the [CRA] Regulation.”The supervisor suggested that disclosures on the assessment of the quality of information underpinning issuances be made as each rating was issued.A spokeswoman for Fitch told IPE that it had reviewed the review’s findings of residential mortgage-backed securities (RMBS) with interest.“While we are confident that our policies and procedures are robust and meet regulatory standards, we will continue to co-operate fully with ESMA,” she added.A spokeswoman for Moody’s added: “Moody’s continuously strives to improve its strong analytical processes. We will review our policies and procedures and adjust as appropriate.”Asset-backed securities, such as RMBS and commercial mortgage-backed securities (CMBS), have been controversial in the wake of the credit crisis, which saw a number of large pension investors suffer losses and subsequently sue a number of banks over their holdings.Dutch civil service scheme ABP in late 2013 settled with Credit Suisse and Morgan Stanley over alleged mis-selling of RMBS.The European Commission has recently said it would like to see renewed growth in the European securitisation market in order to stimulate lending to small firms.Read more about the European Central Bank’s attempts to grow the asset-backed securities market in a recent issue of IPE,WebsitesWe are not responsible for the content of external sitesLink to ESMA’s investigation into structured finance ratings Credit ratings agencies’ assessment of structured finance instruments is, at times, unsatisfactory and must be improved, Europe’s markets supervisor has insisted.The European Securities and Markets Authority (ESMA) examined the procedures employed by four large credit ratings agencies (CRAs) – DBRS Ratings, Fitch, Moody’s Investors Services and Standard & Poor’s – and said it found shortcomings in the way the underlying data was reviewed.Steven Maijoor, chairman of ESMA said that the high volume of structured finance instruments and the renewed interest in securitisation, partially stemming from the European Commission, made its nearly year long investigation timely.“All registered CRAs should take note of the problems identified and ensure that they properly incorporate the requirements and objectives of the CRA Regulation into their working practices in order to ensure the quality of credit ratings and maintain investor confidence,” he added.last_img read more

PensionsEurope appoints board replacement for Benne van Popta

first_imgFollowing the resignation, the OPSG elected Philip Shier as replacement chair.Bouma has been with the Shell’s Dutch pension fund since 2010, now overseeing both its defined benefit and defined contribution arrangements.He is also a member of the Dutch Pension Federation’s board.The organisation declined to comment on the appointment, noting that Van Popta’s replacement on the PensionsEurope board would need approval from its membership.The industry group is due to hold its general assembly in Spain in late April. Janwillem Bouma has joined the board at PensionsEurope, filling the void left by the departure of Benne van Popta.IPE understands that Bouma, director of the pensions office at Shell Netherlands, will join chair Joanne Segars of the UK’s National Association of Pension Funds and vice-chair Pierre Bollon, director general of France’s AFG, on the organisation’s board.The appointment marks the second time Bouma has replaced Van Popta, following his appointment to the European Insurance and Occupational Pensions Authority’s pension stakeholder group (OPSG).Van Popta resigned from his European roles – both as chair of the OPSG and vice-chair of PensionsEurope – earlier this year to focus his attention on his responsibilities in the Netherlands, which include positions at metal workers fund PMT and retail sector scheme Detailhandel. last_img read more

UK think tank calls for launch of social investment option

first_imgThe UK should learn from France’s approach to social investing and consider launching an investment option aimed solely at impact and charitable assets, according to a think tank.In a paper funded by asset manager Big Society Capital, the Social Market Foundation (SMF) argued there was a case for introducing what it termed social pension funds in the UK.It said the fund could be based around a retail savings product – the solidarity investment fund, or 90/10 fund – in place in France since 2001.In its report, ‘Good pensions: Introducing social pension funds in the UK’, the SMF said: “Whilst regulatory change is largely not needed for the establishment of the funds, the government could promote their development through targeted regulatory action, such as by allowing ‘mark to model’ pricing to overcome liquidity constraints within the social element of the fund, as well as to provide assurance to trustees they are not failing in their fiduciary duty.” The ‘mark to model’ approach, based on the French model, would base asset value on pre-determined prices and help reduce liquidity constraints within the immature social investment market, the SMF said.However, the paper argues that many social investment funds are focusing on screening and exclusion rather than a positive social outcome.“This does not provide the positive social intention that survey evidence suggests could be mobilised,” it argues.“These ethical funds also often fail to effectively analyse and report on the social impact achieved in the same engaging way and with detail that modern social impact reporting achieves.“Second, even these ethical funds do not appear to reflect consumer priorities.”The report also said pension investors were failing to include impact investing in their portfolios.A number of UK local authority pension funds have recently committed to social or affordable housing projects, while interest in renewable projects with a measurable impact has also increased.Interest in ethically themed investment options among defined contribution members has also been low to date, with the National Employment Savings Trust – which had £420m (€570m) in assets under management at the end of its most recent financial year – only seeing £660,000, or 0.15%, allocated away from its default fund option to ethical fund options.last_img read more

Cass proposes new ALM model linked with asset allocation

first_imgAcademics at Cass Business School say they have devised an approach to valuing funding levels in defined benefit (DB) pension funds by adding investment risk to the discount rate.Cass said corporate sponsors were misleading investors and pension fund members by failing to value their pension funds and portray financial risks accurately.Supported by the University of Melbourne’s Joanchim Inkmann and Zhen Shi, professor David Blake, director at the Cass Pensions Institute, proposed an asset/liability model using a “funding risk-adjusted discount rate” and asset allocation to match.Blake said this should help corporate-scheme stakeholders, giving members and investors greater insight on “true valuations”. “Our approach also increases transparency for the sponsoring company,” he said.“Its shareholders are now better able to plan for future contributions into the pension schemes and value the sponsoring company more accurately.“A revision to the accounting standards that report the valuation of corporate defined benefit obligations is a clear policy implication from our analysis.”The new asset/liability model aims to paint a more accurate picture of risk within a pension fund by accounting for liabilities that are consistent with asset allocation.Cass said its new model differed from the current system, where liabilities and investments of assets are treated separately.In a paper entitled ‘Managing Financially Distressed Pension Plans in the Interest of Beneficiaries’, the authors argue that liabilities must be valued using a discount rate that actually reflects a scheme and its sponsor’s funding ability.And this, they say, depends on asset allocation.“We cannot value the pension obligation without knowing the strategic asset allocation policy of the pension plan,” the academics write.“What we are proposing is nothing less than a fully integrated asset-liability management solution for pension plans.“The ability of schemes and sponsors to fund pension promises depends on the future values of assets, which themselves depend on the current strategic asset allocation.“Thus, funding spreads that appropriately reflect funding risk depend on the chosen asset allocation.”last_img read more

Threat of asset manager exodus sees Godfrey depart industry body

first_imgIn 2013, he was named director of risk, compliance and legal.Prior to his time at the IMA, Sears, a trained solicitor, spent three years as deputy chief executive at the Association of Private Client Investment Managers and Stockbrokers, and worked at both the Securities and Investment Board and the Financial Services Authority, established in 1997 to succeed the SIB.Helena Morrissey, chair of the Investment Association, thanked Godfrey for his “significant” contribution over the course of his tenure.“During his time, Daniel has driven a number of important initiatives, including the transformative merger with ABI Investment Affairs,” she said. “His commitment and passion for our industry is widely admired by all those who have worked with him.“We owe him a great debt of gratitude and wish him the very best for the future.”Godfrey’s departure comes after reports that Schroders and M&G – which account for around one-tenth of the £5.5trn (€7.1trn) in assets represented by the association – would let their membership of the association lapse at the end of the year.IPE understands M&G still intends to let its membership lapse. Daniel Godfrey, chief executive of the UK asset management association, has stepped down following reports that M&G and Schroders were to let their membership lapse.Godfrey, who has been chief executive since December 2012, will step down with immediate effect.Current director of risk, compliance and legal Guy Sears will take over as interim chief executive until a permanent replacement is found.Sears joined the Investment Management Association (IMA), as the Investment Association was known until last year, in 2007 as its director of institutional.last_img read more

PFA divests Ryanair shares citing airline’s failure to adapt

first_imgRyanair became embroiled in a heated dispute with trade unions in Denmark last summer that spilled over into airport protests and social media clashes between the company and Copenhagen mayor Frank Jensen.At the heart of it was Ryanair’s insistence on employing Denmark-based staff on Irish work contracts, which denied them the same rights as other Danish workers.Last month, Ryanair chief executive Michael O’Leary claimed at a Copenhagen press conference to launch the airline’s new flight programme that the negative publicity had been good for Ryanair because it made people more aware of the company, according to Danish media reports.Last year, ATP, Industriens Pension and PensionDanmark sold their investments in Ryanair amid the controversy.Nøhr Poulsen said PFA viewed Ryanair as a special case within its investment policy.“For an extended period of time, we’ve been worried about the debate about labour relations and trade union rights, and we’ve also been concerned about how the company acts and behaves when it enters a new market,” he said.Generally, he said, PFA wants to see the businesses in which it invests as being robust and sustainable, as well as able to adapt to local markets.“After a long evaluation, we came to the conclusion Ryanair was unable to adapt to local standards, and we decided we therefore did not want to be involved,” Nøhr Poulsen said.He said PFA saw responsible investing as an integrated part of its investment process and as an extended risk analysis of the stocks in which it invests. Denmark’s biggest commercial pension provider PFA has sold all its shares in Ryanair in the wake of the Irish airline’s high-profile dispute with Danish trade unions, even though it held onto the investments longer than some other Danish schemes.Henrik Nøhr Poulsen, CIO for equities and alternatives at PFA’s investment arm PFA Asset Management, told IPE: “I can confirm we have divested our shares in Ryanair over the last month.”The total holding was worth between DKK15m (€2m) and DKK20m, he said.“This was a very small decision for us, given that we are a pension fund with DKK400bn under management,” Nøhr Poulsen said.last_img read more

Irish sovereign fund targets robotics firms with latest investments

first_imgThe Irish sovereign development fund has increased its exposure to the domestic technology sector, investing at least €20m in Atlantic Bridge’s latest fund.The Dublin-based manager said Atlantic Bridge III, with a target size of €140m, had already attracted support from a number of institutions, including the Ireland Strategic Investment Fund (ISIF) for its first close.The fund – which has also attracted funding from government agency Enterprise Ireland, €13m from the British Business Bank  and commitments from an undisclosed number of pension funds – will invest in the Irish and European technology sector.In a statement, Atlantic Bridge noted its interest in cloud technology, augmented and virtual reality software and robotics companies, among others. It said it would limit its exposure to no more than 20 companies.It has so far invested in seven. Eugene O’Callaghan, director at the ISIF, said the fund would allow Irish companies to attract customers in global markets including China.The investment is the ISIF’s third to be managed by Atlantic Bridge.The ISIF previously invested €10m in the firm’s second fund, and Atlantic Bridge also co-manages a $100m (€73m) technology growth fund set up by the ISIF and China Investment Corporation.O’Callaghan added: “The Atlantic Bridge model of connecting Irish technology companies with key global markets makes it a key component of the funding landscape, and we are excited to continue our partnership with Atlantic Bridge for Fund III, following the strong performance achieved by Fund II.”The ISIF, split between a discretionary portfolio investing to stimulate the Irish economy and a directed portfolio containing Ireland’s stakes in its nationalised banks, recently said its discretionary holdings achieved a 1.5% return over the course of the fund’s first full year in operation.last_img read more

Company pension funds show support for German reform proposal

first_imgThe association also “noted positively” the proposal to stop counting savings in occupational pension plans towards the so-called Grundsicherung, a basic income for people who do not earn enough to support themselves. “For lower earners in particular, this removes a major obstacle to participating in occupational pension plans,” the VFPK said.The comments were made days after the government presented its plan for a new type of industry-wide pension plan, which can be set up by the social partners either in new vehicles or within existing ones.Among the key innovations is the Zielrente, a defined ambition or target pension approach without guarantees or long-term liabilities for employers.This model is new to Germany, where sponsor companies have been required to back any pension promise, topping up funding whenever necessary.MetallRente – one of the few already existing industry-wide second-pillar schemes based on collective-bargaining agreements – said social partners in Germany needed “a strong vehicle” to increase the number of companies with supplementary pension plans.Managing director Heribert Karch, who is also chairman of the pension fund association aba, welcomed the reform proposals for lower incomes.These include state subsidies and the simplification of social and tax contributions on incomes from various pension sources, such as the German state-subsidised Riester-Rente or a Pensionskasse.He was critical, however, of the fact that companies, due to tax reasons, would still have to choose different pension vehicles for different levels of income to avoid having to make double contributions for lower earners.“This,” he said, “would be socially unfair.”He also renewed his criticism of the shortfall caused by increasing the tax-exempt contribution level to just 7%. Germany’s corporate pension funds have given the thumbs-up to government plans to strengthen occupational pensions in the country.The VFPK, the association representing company pension funds, welcomed the government’s proposal.“This opens the way for occupational pension products that are suitable for a low-interest-rate environment,” it said.It added that the government’s plan to do away with guarantees would ensure that pension promises – excepting those from providers considered IORPs under EU rules – would remain “outside the Solvency II regime” for insurers.last_img read more

Benelux insurance company tenders private credit mandate via IPE Quest

first_imgThe mandate is for core active management, with the Credit Suisse Western Europe Leveraged Loans Index to be used as the benchmark.Bidding parties should have at least €1.5bn of assets under management for the asset class, and €15bn assets under management in total.They should have a track record of at least five years.Interested parties have until 8 March to apply, and should state performance gross of fees to 28 February. The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information direct from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected] A Benelux insurance company is looking for a private credit manager for a €150m mandate put out to tender via IPE Quest.According to search QN-2279, the manager should ideally be able to “combine exposure to European leveraged loans with other forms of private debt such as direct lending”.“At inception the mandate could be 100% loans and transition to a certain percentage direct lending (off-benchmark) in time depending on market circumstances,” the client indicated.It could allow some off-benchmark exposure to other regions, mainly the US, “if desirable”, it said.last_img read more