Polish pension reforms hinder stock market growth, report says

first_imgThe impact of the “slider”, which incrementally transfers the OFE savings of those with 10 or fewer years left before retirement to the Social Insurance Institution (ZUS), will be more pernicious.In 2015, slider transfers will total around PLN3.7bn (€901m) in 2015, while new contributions (from those fund members who chose to remain in the system when it became voluntary) fall to PLN2.7bn, from PLN8.2bn the previous year.Those savings accumulated when the system was mandatory.As yet, the funds have not been obliged to liquidate equity holdings to meet their ZUS obligations only because of the dividends they have accrued and reinvested, primarily in Polish equities, but the slider gap will have doubled to some PLN2bn by 2020.When the second pillar was launched in 1999, it was mandatory for those born after 1968 and optional for those born between 1949 and 1968, so the slider currently applies to the latter, smaller category.From 2026 onwards, the first cohort of mandatory payees falls into the slider, and net outflows start to exceed inflows.The impact on the WSE is already evident.Before 2014, the OFEs invested in around half of the exchange’s listed companies.As of the end of 2013, their investment accounted for around 20% of market capitalisation and around 50% of the free float.In the case of 55 companies, OFE investment exceeded 25% of those firms’ capital.The paper argues that, in addition to listed companies that will now need to seek alternative market investors, the number of IPOs will shrink drastically as a result of the OFEs’ reduced purchasing power.In 2014, the value of WSE IPOs by market capitalisation fell to an eight-year low of PLN1.3bn, from PLN4.7bn in 2013 and a five-year high of PLN15.6bn in 2010, in contrast to global stock market trends.Overall market turnover on the WSE fell by 9% year on year in 2014, and by 15% in the first quarter of 2015.The effect on NewConnect, the WSE’s alternative trading platform launched in 2007 for smaller, mostly high-tech companies, will be more striking.The number of companies making their debut on the platform plunged from 172 in 2011 to 42 in 2013 and only 22 in 2014.The paper stresses that the investment capital accumulated by the OFEs was one of the attractions for these high-growth companies to list on NewConnect.Alternative capital market sources for corporate investment are scarce.The third pillar remains unattractive, with only a small number of Poles saving in either IKE or IKZE accounts.Meanwhile, the government’s ban on OFE advertising over April-July 2014 (when members had to decide whether to remain in the system), coupled with its own negative campaigning against the second pillar, has resulted in a minuscule take-up by new labour market entrants of only some 5,000. Government attacks on Poland’s second-pillar pension funds (OFEs) are putting the brakes on capital market development, according to an analysis from the Civil Development Forum Foundation (FOR), the Warsaw-based think tank founded by Leszek Balcerowicz, architect of Poland’s port-communist economic transition.The paper, written by Tomasz Bardziłowski, vice-president of Polish brokerage Vestor Dom Maklerski, argues that capitalisation growth at the Warsaw Stock Exchange (WSE) over the last 15 years was mainly due to the growth of OFE savings.Overhauls to the system, starting in 2010 when the contribution rate was cut from 7.3% to 2.3%, and more recently in 2014, is shrinking the availability of capital finance for local companies.Following the transfer of nearly half of OFE assets to ZUS in 2014, Polish pension fund savings as a share of GDP fell from 19% to 9%.last_img read more

​Luxembourg reserve fund in €500m global property move

first_imgThe two €250m mandates would, if immediately invested, take FDC slightly above its 3.5% targeted global exposure, but future asset growth would rectify the overweight.The fund decided last year to build up its global exposure through holdings in real estate funds to further diversify its portfolio and increase exposure to inflation-linked assets.Managers are asked to submit proposals by 18 September, with a final decision expected by the end of 2015.To date, the portfolio, which returned 10.96% last year, has largely been split between fixed income – accounting for nearly 60% of assets – and equities (38.4%).,WebsitesWe are not responsible for the content of external sitesLink to FDC’s mandate Luxembourg’s €14.3bn pension reserve fund is tendering real estate mandates worth €500m in an effort to reach its target allocation to the asset class.The Fonds de Compensation commun au régime général de pension (FDC) said it was seeking to appoint two global real estate managers to the unlisted property mandates.According to the fund’s most recent annual report, it had €247m in real estate holdings at the end of 2014, accounting for just 1.7% of assets – far short of its 8.5% target allocation.FDC’s property portfolio to date consists entirely of domestic holdings, although the strategic asset allocation, since 2008, has allowed for 3.5% exposure to global property and 5% to domestic property.last_img read more

Norwegian oil fund calls for companies to focus on energy efficiency

first_imgNorway’s sovereign wealth fund has called for a greater focus on energy efficiency, arguing that companies should disclose their renewable energy consumption targets and report on use of low-carbon products.Responding to changes proposed by CDP – formerly the Carbon Disclosure Project – to its climate change questionnaire, which gathers comparative data on the water, energy and carbon footprint of around 5,000 companies, Norges Bank Investment Management (NBIM) said it welcomed the move to improve data quality.NBIM cited the importance of usable data, as it would allow the NOK7.1trn (€776n) Government Pension Fund Global’s manager to understand the financial risks associated with climate change.In a joint letter by Petter Johnsen, equities CIO, and William Abrose, the fund’s global head of ownership strategies, the manager said: “We support the development and disclosure of consistent and objective data on current and potential future greenhouse gas emissions, reported according to well-defined and transparent methodologies.” Johnsen and Ambrose said any estimates of carbon disclosures should enjoy the confidence of investors to allow them to influence investment decisions.“NBIM believes that introducing measurement and reporting of sector-specific climate-change challenges will facilitate a deeper and richer understanding of the operational challenges and risks for groups of companies,” the letter added. “The addition of sectoral questionnaires will help cater for sector specificities.”It also stressed that it would be important to include energy-transition initiatives – such as low-carbon products and self-imposed targets for renewable energy consumption – to further help investors.The letter concluded: “In this context, we want to stress the importance of energy efficiency in the transition to a lower-carbon economy and would recommend adding metrics to give companies the ability to report on energy-efficiency achievements.The California Public Employees’ Retirement System’s director of global governance Anne Simpson recently highlighted the importance of energy-efficiency targets in limiting the global temperature increase to 2° C, a target seen as the best chance of averting catastrophic climate change by the Intergovernmental Panel on Climate Change.last_img read more

​UK initiative tackles ‘unsustainable’ voting record of pooled funds

first_imgTo allow pension investors to pursue an active voting policy, the AMNT said it drafted a series of voting instructions to be passed on to asset managers.The voting instructions, or “red lines”, were drafted in the wake of the UK Law Commission’s report on fiduciary duties, which set out that trustees should take into account environmental and social matters where these had a financially material impact.Covering environmental, social and corporate governance matters, the instructions call for companies to establish environmental sustainability committees, disclose carbon emission reductions targets and boost workforce diversity.They would also see investors vote against any remuneration package where any director is paid more than 100 times the company’s average pay.Bill Tryhall, an AMNT committee member, said the organisation supported the challenges the UK government set for companies in improving board diversity and acknowledged  “widespread” concerns about the level of executive pay.Noting the multiple of 100 chosen to trigger a vote, Tryhall added: “We recognise that many will say this is too high, but the aim of AMNT is to achieve the greatest consensus.”Despite the broad focus on governance and social concerns, AMNT said it recognised climate change was the “biggest issue” facing asset owners.The report was launched as asset owners, including France’s ERAPF and Norway’s KLP, urged companies to commit to using only renewable energy.The consortium of 20 investors worth £352bn, which also included the UK’s Strathclyde Pension Fund, said companies should pledge publicly to switch to renewables, a pledge already backed by Google and BMW Group.Philippe Desfossés, chief executive of ERAFP, said he was “very pleased” to be supporting the RE100 initiative, launched by responsible investment charity ShareAction.He added: “The promotion of energy is critical to the decarbonisation of the global economy.”Desfossés has repeatedly stressed the importance of energy efficiency as key to reducing carbon output, citing better energy grid connectivity as an area worth exploring. Pension investors must address the “unsustainable” voting record of their pooled holdings by drafting clear voting instructions for asset managers, according to a UK trustee body.The Association of Member Nominated Trustees estimated that around £2.5trn (€3.4trn) of assets managed in the UK were held within pooled funds.Its founding co-chair Janice Turner argued that such structures left investors “unable to set the agenda”.“This is unsustainable and an issue that has to be addressed in the interest of investors, pension savers and anyone for that matter with investments in pooled funds,” she said.last_img read more

UK regulator accused of cutting governance standards in listing rules

first_imgHowever, questions have been raised over the possible loosening of governance standards. The UK’s Investment Association (IA), which represents the asset management sector, said it welcomed the fact that the FCA had listened to concerned parties, but criticised certain aspects of the new rules. The new listing rules are believed to be designed to aid oil giant Saudi Aramco’s IPOChris Cummings, CEO of the IA, said it was critical that the UK remained a globally competitive and attractive place for companies to list, but added: “We are disappointed by the lack of a requirement for independent votes…“The acid test for this new premium listing category will be whether companies meet the high standards expected by their investors. Savers must have confidence that a company is run for all shareholders.”The Institute of Directors (IoD), which represents senior business leaders, was less circumspect in its response.Stephen Martin, director general of the IoD, said the organisation was “deeply disappointed” that the FCA had decided to plough ahead with its creation of the new listing category.“This decision has been made despite opposition from across the governance spectrum and without providing evidence as to the necessity for the reduction in standards,” he said.“By allocating [a premium listing] term to organisations which are not obliged to meet key requirements in relation to minority shareholder protections and independent directors – a central tenet of UK corporate governance – the FCA not only risks the market’s reputation with investors but the UK’s global reputation as a leader in best practice and good governance.”London has been competing with New York to convince Saudi Aramco – owned by the government of Saudi Arabia – to choose the UK capital for the possible listing of 5% of the oil company in what could be the world’s biggest flotation. The UK regulator has courted controversy with the introduction of a new premium listing category for sovereign-controlled companies that is widely believed to pave the way for Saudi Aramco, the world’s biggest oil company, to opt for a London listing.Following a lengthy consultation process that began in July last year, the Financial Conduct Authority (FCA) amended its final proposals “to ensure the regulatory requirements are appropriately calibrated” for companies owned by a sovereign nation.Under the terms of the new rules, which come into effect on 1 July, there would be independent votes conducted for independent directors and disclosure obligations “on related party transactions beyond market abuse regime disclosures”, the FCA said.“These rules mean when a sovereign-controlled company lists here, investors can benefit from the protections offered by a premium listing,” Andrew Bailey, FCA chief executive, said. “This raises standards. This package recognises that the previous regime did not always work for these companies or their investors. These rules encourage more companies to adopt the UK’s high governance standards.”last_img read more

Authorisation regime slashes size of UK master trust market

first_imgSource: TPR. Figures correct as at 5 November 2019Nicola Parish, executive director of frontline regulation at TPR, said the number of schemes leaving the market “shows that these laws are demanding – and rightly so.“The 37 authorised master trust schemes will continue to be closely supervised by us to make sure they continue to operate within the law.”Due diligence ramps upThe regulator said authorisation had resulted in many improvements to the schemes, including “a major shift” in the level of financial due diligence applied by DC trustees. In a number of instances, trustees took covenant advice on the corporate entities sitting behind master trusts, it noted.TPR also said its engagement with schemes during the authorisation process led to the total amount of financial reserves held by the schemes increasing by £93m. The reserves cover the costs of winding up a scheme and protecting members’ pension pots.“Because of authorisation, the quality of master trust products and providers has improved; therefore increasing protection for members,” said TPR.“The authorisation of master trusts offers a route for consolidating DC schemes, and the reduction in the size of the market by 53 schemes is evidence of the high bar for authorisation.” The regulator’s starting figure of 90 includes several schemes that decided to leave the market after it ran a pre-authorisation voluntary application process, as well as schemes that legal advice ultimately showed did not meet the definition of a master trust in legislation: a trust-based occupational defined contribution (DC) scheme that is used by two or more unconnected employers.TPR said 11 schemes have exited the master trust market so far, and a further 36 have notified it of “a triggering event to exit the market” and will transfer their members to an alternative master trust scheme or other appropriate vehicle.The 37 authorised schemes have more than £36bn (€41bn) in assets under management between them, 16 million memberships, and total financial reserves of £524m.Master trust application and authorisation figures The number of master trusts in the UK has more than halved following the introduction of authorisation requirements, the country’s pensions regulator announced yesterday.Under a new law brought in 2017, master trusts in the UK have to meet new standards or close, with The Pensions Regulator (TPR) opening an authorisation process for existing entities in October last year. The main deadline to apply for authorisation was 31 March 2019, although schemes could request a six-week extension.Yesterday the regulator announced that the final schemes had been authorised – Salvus Master Trust and FCA Pension Plan – and that the market had shrunk from 90 master trusts from before the authorisation process to 37; 38 schemes applied for authorisation but SuperTrust UK this week announced it was withdrawing from the market.One new master trust has submitted an application for approval, which TPR is currently assessing.last_img read more

UK roundup: 3i plan fully insured after final, £650m buy-in

first_imgAccording to the statement, 3i group is fully supportive of the latest buy-in, although it was achieved without relying on it for any additional contribution.Carol Woodley, chair of the 3i Group Pension Plan trustees, said: “This transaction is a significant step forward in providing a more certain and secure solution for members’ future benefits and removes significant risks in the plan that would otherwise be difficult to hedge.“Achieving this level of security is especially valuable in the current economic climate and we are delighted that, with the support of our advisers, we have been able to take this step sooner than previously anticipated.”Laura Mason, CEO Legal & General Retirement Institutional, said: “We are delighted to have continued our partnership with the 3i Group Pension Plan and help complete the final step of its de-risking journey, providing a solution that ensures the long-term benefits promised to its members are fully secured.”The trustees were advised by LCP, Linklaters and Lincoln Pensions. 3i Group was advised by Mercer and Slaughter and May, and legal advice was provided to Legal & General by Macfarlanes.Legal & General noted that its asset manager has provided investment support to the 3i pension plan since 2004.Market movements triggered by the coronavirus crisis have made for attractive pricing opportunities in the bulk annuity market. PLSA opens forum to progress pensions climate risk agenda The Pensions and Lifetime Savings Association (PLSA) will be hosting a series of online roundtables from 12 June to give pension schemes a structured forum to discuss “ideas, solutions, and barriers to the pension industry operating in ways which have a positive impact in helping the UK achieve its Paris climate agreeement commitments”, it said today.In addition, it is inviting pension schemes, the wider financial services industry, the public and any other stakeholders to share their views on the practical ways the retirement savings sector can address climate risk.It is seeking responses to the followinq questions:How are pension funds currently incorporating climate considerations into their investment approaches?What are the biggest practical challenges to effective consideration and implementation of climate-aware investment strategies?To what extent will existing industry, policy or regulatory initiatives be effective in overcoming these challenges?Are there any industry, policy or regulatory initiatives which would support you in consideration of climate risks and opportunities? The group pension plan for private equity manager 3i has struck its final buy-in, a £650m (€716m) deal with Legal & General Assurance Society, it was announced today.The transaction is thought to be the largest UK pension risk transfer transaction announced this year.It covers the benefits of around 280 pensioners and 570 deferred members and, according to a statement from Legal & General, means the plan is now fully insured through buy-in policies held as assets of the plan.The trustees previously completed two pensioner buy-ins, one in 2017 with the Pension Insurance Corporation and one last year with Legal & General. Richard Butcher, chair of the PLSAThe PLSA has made climate risk one of its top policy priorities for 2020. It considers that ”a significant amount of good work has been undertaken by both policymakers and the investment industry to achieve greater decarbonisation [but] there remains room for improvement”.Its view is that tackling climate change and ensuring the ongoing stability of the financial system requires all segments of the investment chain to “work in alignment”. It is working on finding workable solutions to the remaining barriers to green finance, and providing practical support for actors across the investment chain.Richard Butcher, chair of the PLSA, said: “The PLSA is rightly proud of its efforts to encourage the pension industry to prioritise climate risk to date.“With the engagement this work has brought, and new climate regulations in force, I am excited to be getting the opportunity to discuss with scheme CEOs, CIOs, trustees and anybody else to turn enthusiasm into action and take the agenda further.”Q1 hurts 2019’s best performing fiduciary managers hardestThe outbreak of the coronavirus drove a 10% differential between the best and worst performing fiduciary managers in the UK in the first quarter of 2020, according to XPS Pension Group.The consultancy analysed the performance of fiduciary managers in the first quarter for a special edition of its regular ‘FM Watch’ report, and found that those managers that made the strongest gains through high equity allocations in 2019 also sustained the biggest losses in 2020, while managers that made lower returns in 2019 tended to be better prepared for the market falls.Three-quarters of fund managers made changes to their portfolio in early 2020, to take advantage of emerging opportunities and to defend against losses. Towards the end of March and early April, there was a divergence of views on economic outlook, XPS said, with some managers looking to increase exposure to equities and others acting more defensively and increasing allocations to government bonds or cash.“The market downturn was the first big challenge for the majority of fiduciary managers”André Kerr, head of fiduciary oversight at XPS Pensions Group“The market downturn was the first big challenge for the majority of fiduciary managers,” said André Kerr, head of fiduciary oversight at XPS Pensions Group.“The industry was only in its infancy during the 2008 financial crisis and since then managers have enjoyed one of the strongest bull markets in history. While all managers suffered losses last quarter, these were most severe for bulls in the bull market.“As the initial shock of Covid-19’s arrival begins to subside, trustees at pension funds with an outsourced fiduciary management must understand what is driving strategic decisions and whether they align with their investment beliefs.”To read the digital edition of IPE’s latest magazine click here.last_img read more

Aon: DC schemes re-evaluate operation models amid pandemic

first_imgAon has said that the effects of the COVID-19 pandemic – both present and expected – are giving UK defined contribution (DC) schemes reasons to re-evaluate many of the ways they operate, including their investment approach and administration.As part of the consultancy’s 2020 DC & Financial Wellbeing virtual conference series, the firm conducted a poll among its attendees on how the current pandemic had affected objective setting and long-term goals of their schemes.The poll showed that more than 50% of the respondents said they had reviewed objectives for their DC plan following the events of the first half of 2020. And 20% said they had subsequently made changes to get back on track where necessary.However, another 40% of respondents said they had yet to consider their longer-term objectives, as short-term actions had dominated their time and thinking, Ben Roe, senior partner and head of DC consulting at Aon, said: “The last four months have provided plenty of challenges and UK DC schemes have had much to think about.“However, given that disruption, it is encouraging that many DC schemes have still been able to step back and consider the long-term impact of COVID-19. Some have already looked into the steps they need to take to mitigate any downside where possible.”He said that for some schemes, the main focus had been on the immediate challenges the pandemic had brought them. “That’s no surprise – the combination of market volatility, resource constraints or administrators with differing levels of ability to adapt to new ways of working, would exercise any scheme,” he added.Roe said it was important for pension schemes “to ensure that their immediate crisis resilience plan response is effective in the short term, before also considering the longer-term impact”.The firm stated that this COVID-19-driven reassessment was also beginning to lead to a more fundamental review of the way schemes were operating, with one in four schemes considering changes to the way they were run or administered.“The last four months have provided plenty of challenges and UK DC schemes have had much to think about”Ben Roe, senior partner and head of DC consulting at AonResults of the poll also revealed that one in seven sponsoring employers had already started to consider cost savings that were likely to impact their DC schemes. By contrast, it seems that despite actions such as furloughing and the expectation of recession, very few DC scheme members had so far reduced their contributions.“It may be a case of schemes and organisations not wanting to ‘waste a crisis’ but one outcome of the recent challenges is that a quarter of schemes are considering changes to how their scheme is managed,” Roe said.“There may be a variety of reasons for this – gaps in resource or inadequate systems back-up, both of which may have been highlighted by recent events. It’s likely that this is accelerating the drive to a more modern or outsourced approach, such as moving to a master trust or shifting to a bundled administration or investment provider,” he continued.Either way, he said, both situations could become more widespread as COVID-19’s economic impact is felt more broadly. “This will put the onus on those in charge of running schemes to retain the ability to stay flexible and to be capable of adjusting their planning in line with whatever transpires over the coming months and years.”To read the digital edition of IPE’s latest magazine click here.last_img read more

Top two sales on the Gold Coast last week were in the city’s heart

first_img13 Thornton St, Surfers Paradise.A LUXURY three-storey beach house has claimed the top spot on the Gold Coast’s most recent list of highest recorded sales.The Surfers Paradise property at 13 Thornton St set the bar last week after it was snapped up for $1.79 million.Chris Couper and Associates principal Darrin Couper, who handled the sale, said local buyers were the successful bidders.“They liked it because it’s quite a big house,” he said.“In that part of town, it’s the only house like it. 13 Thornton St, Surfers Paradise.“There’s a lot of apartments to choose from at the moment, it’s still been pretty good though.“I think after the Commonwealth Games it was a little slow but now it’s starting to ramp back up.”The CoreLogic figures recorded up until May show the median house price in the suburb has dropped 1.1 per cent in the past year to $1.325 million while the median apartment price has dropped 2.6 per cent to $375,000. 13 Thornton St, Surfers Paradise.More from news02:37International architect Desmond Brooks selling luxury beach villa15 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“Most of them are older homes or the original properties are still on (the block).”He said the four-bedroom house, which had long-term tenants living there until recently, attracted plenty of prospective buyers because it was modern and about 100m from the beach.“It had a lot of interest and (there were) a number of offers on the property before those people snatched it up,” he said.A Surfers Paradise apartment on Cypress Ave also made the top sales list, coming in close second after selling for $1.705 million.While latest CoreLogic data shows the market is starting to slow in Surfers Paradise, Mr Couper said on the ground, it was performing well.“People are still pretty positive,” he said.last_img read more

Broadwater Parklands’ only approved residential project half sold

first_imgOceanic Tower will have 107 apartments. The first building in the development, Oceanic Tower, will soar 28 storeys high and offer 107 apartments. Resort-style amenities on the fourth floor will include an infinity pool with sundecks, barbecue facilities, alfresco dining areas and a gym. Retail and hospitality will occupy the ground level. MORE NEWS: North Bondi home of Gold Coast Suns coach Stuart Dew for sale Each apartment has been designed to maximise panoramic water views. Melbourne-based developers Three Pillars worked alongside Brisbane firm WallaceBrice Architects to make the most of the Southport location. Inside, luxury finishes include oak timber floors, limestone benchtops, SMEG appliances, floor-to-ceiling glass and sliding doors that lead to a balcony, which take in the coastal vistas. Plus, every apartment has basement storage and carparks. Construction is set to commence early this year and completion is earmarked for December 2020. More than 50 per cent of the apartments have been purchased so far. A display is open daily from 10am to 4pm at 165-167 Marine Pde, Southport. It is Broadwater Parklands’ only approved residential project. More from news02:37International architect Desmond Brooks selling luxury beach villa12 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago MORE NEWS: Paradise Point house taken from drab to fab One, two, three and four-bedroom apartments are on offer with one-bedroom pads starting at $349,000 and two-bedroom apartments from $469,000. Body corporate fees for a one-bedroom apartment will be about $55 per week, $65 for a two-bedroom apartment and $75 for a three-bedroom property. Southport’s latest development, Marine Quarter, offers prestige parkside living. GREEN surrounds, picture-perfect costal views and a convenient lifestyle await at the Broadwater Parklands’ only approved residential project. The Southport development, Marine Quarter, is just a stone’s throw from the Broadwater edge and each apartment has been designed to maximise panoramic water views. Green surrounds are part of the package. The development was already catching the eye of a broad range of buyers, according to 360 Residential Project Marketing sales managing director Peter Malady. “We knew that offering the only new residential building within the Broadwater Parklands would resonate with owner-occupiers, first-home buyers and locals looking to relocate within Southport,” Mr Malady said. “We have obtained interest across all apartment layouts and achieved over $30 million in sales. “We have highly competitive prices per square metre, an exclusive location with quick access to Australia Fair, hospitals, restaurants and cinemas, as well as resort-style amenities.” Buyers seeking an active outdoor lifestyle are said to be fans of the location, which has easy access to the Broadwater bike and walking tracks, parks and boat ramps. last_img read more