Ilmarinen sees equity portfolio boosted by Nokia deal

first_imgIlmarinen, the €31bn Finnish pensions mutual, has seen its listed equity holdings return more than 14% in the past quarter, boosted partially by its large stake in Nokia.Deputy chief executive and CIO Timo Ritakallio told IPE the mutual was on course to lower its domestic equity exposure to around 30% at the beginning of 2013, but that it increased again during the third quarter.“The main reason for this is that we are such a big owner of Nokia, and Nokia’s shares went up after the Microsoft deal,” he said.September’s announcement that Microsoft would buy Nokia’s mobile phone business for €5.4bn resulted in Ilmarinen’s stake in the Finnish business being valued at €312m by the end of the month, up from €168.2m at June-end. The company’s shares rose from €3.90 prior to the deal’s announcement to €7.15 at the beginning of the week.The mutual’s listed equity holdings returned 14.6% over the quarter, lagging behind the 22% return from unlisted stocks but ahead of the 6.3% gains from its €1.4bn private equity portfolio.Its fixed income portfolio, accounting for 45% of market value, returned 3.2%, led by its sovereign bond portfolio gaining 5.3%.Ilmarinen’s real estate portfolio performed on par with fixed income, growing by 3.3%, while its €1.5bn portfolio composed of hedge fund, commodities and other investments lost 6.8%.Ritakallio said the pension insurer, despite gains from Nokia’s increased share price, was not looking to meet any immediate targets by reducing its equity exposure.However, he noted that the current exposure would not continue into the next decade, as proposed in its new investment approach, internally referred to as Investment Strategy 2020.He said: “If I’m thinking about the situation at the end of the decade, I see that the Finnish share of our equity portfolio will be lower – it will be between 20% and 30%. Maybe closer to 20%.”He also said the strategy would instead see capital redeployed towards other asset classes.“It is part of our 2020 strategy that we will increase our real estate investments, especially abroad,” he said.“Another area we will increase is infrastructure investments, and the third issue is to increase private equity investments“They are nowadays 4.6%, and our target is that it would be 6%.”For more on Ilmarinen’s investment approach, see the November issue of IPElast_img read more

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Unipension cites equity returns for schemes’ strong 2013

first_imgPetersen said Unipension produced one of the very best returns in the pensions industry for its scheme members over the last five years, both compared with traditional with-profits products and unit link pensions that had the same risk profile.He said the international economy was improving, and companies were tending to recognise that better times were on their way.“The optimism has rubbed off on the stock market in 2013, and this is why we have seen these price rises,” he said.However, while progress had been made in the world economy in 2013, there are still big challenges in the US and Western Europe in the form of high unemployment and low investment, Unipension said.Petersen said one of the most interesting topics in 2014 would be how the rollback of US expansionary fiscal policy will be received in the financial markets.“The US has pumped an almost unimaginable amount into circulation to stimulate the economy, and when the flow of cash stops as planned in 2014, the markets will have to deal with the new situation,” he said.On top of this, there are still problems in Southern European economies, which could well flare up again in 2014, he warned.But overall, he said the world economy was in better shape than a year ago. Denmark’s Unipension produced 2013 investment returns of between 8.3% and 9% for the three professional pension schemes it runs, and said returns were driven in particular by strong equities performance.The Architects’ Pension Fund returned 8.4%, the Pension Fund for Danish MAs, MSCs and PhDs (MP Pension) produced 8.3% and the Pension Fund for Agricultural Academics and Vets ended the year with a 9% return, Unipension reported in preliminary figures for last year.The 2013 returns are lower than investment profits the pensions administrator produced the year before, which were between 12.8% and 13.3% for the three pension funds.Niels Erik Petersen, head of investment at Unipension, said: “The return in 2013 was especially driven by shares, which have performed very well.”last_img read more

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Japan’s Government Pension Fund reports first loss in seven quarters

first_imgJapan’s $1.23trn (€905bn) Government Pension Investment Fund (GPIF) has posted a loss of 0.8% in the January to March quarter, its first loss in seven quarters, as domestic shares slid.However, the fund returned 8.6% in the year to 31 March, helped by a rally in domestic and overseas equities over the first three quarters.For the full year, the fund’s Japanese shares returned 18%, while international stocks had the best performance among the asset classes, with a 32% gain.Overseas bonds delivered a 15% return, while local debt returned 0.6%. The fund’s asset value was JPY126.58trn (€913bn) at the end of March, down 0.2% from December’s record high but up 5% for the fiscal year.The GPIF’s weighting in domestic bonds was little changed at 55%, while Japanese shares made up 16% of holdings, down from 17% in December.Foreign equities increased to 16% from 15%, while overseas debt, which includes infrastructure, was virtually unchanged at 11%.The GPIF is expected to shift more money into local equities in the coming months.Prime minister Shinzo Abe’s government has pressed the GPIF to overhaul its portfolio, putting more money into domestic stocks and other riskier instruments to seek higher returns for Japan’s rapidly ageing population.Among the GPIF’s active local stock managers, Nomura Asset Management oversaw the most money, with JPY528bn in assets.last_img read more

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SNB reverses deposit exemption for Switzerland’s largest pension fund

first_imgHowever, a few exceptions were made to that rule, including federal deposits, an account by the first-pillar fund AHV, the liquidity account of Publica and that of the SNB’s own pension fund, as well as two cantonal accounts.Yesterday, the SNB decided that only the federal deposits, as well as the AHV account, would continue to be run on 0% interest, while all others will have to pay the negative interest.Dieter Stohler, chief executive at Publica, told IPE the SNB’s decision “does not change Publica’s situation significantly”, as the scheme’s CHF38bn (€46.4bn) in assets “are still broadly diversified”.He added that no decisions had yet been made on any potential portfolio changes in light of falling interest rates, although he said the fund was continually assessing its asset allocation.At the moment in Switzerland, many banks have yet to pass on the fees they pay on their deposits with the SNB, partly as a means of attracting new clients. But Philippe Lüthy, head of investment consulting at Mercer Switzerland, expects this to change, by this autumn at the latest, as “banks cannot continue to pay these fees without passing them on”.At that point, the investors will have to decide “whether it hurts more to pay a certain amount in fees for a cash deposit or in management fees for an investment fund in another asset category”, Lüthy said.In any case, “most Pensionskassen are trying to hold as little cash as possible”, he added.  Read here how pension funds reacted to the first issuing of 10-year Swiss government bonds with a negative interest rate The Swiss National Bank (SNB) has ruled that Publica, the country’s largest Pensionskasse, as well as its own pension fund, must now pay for accounts they have with the central bank.  Commenting on the decision, Publica said it was “disappointed” but added that the change was “understandable given the Swiss debate”.It also said the decision’s effect on the Pensionskasse should “not be overstated”, as it only affected its liquidity account, and the fund did “not need much liquidity to operate”.In February, a negative rate of 0.75% was introduced on the deposit account balances Swiss banks hold with the SNB.last_img read more

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Austrian pension funds return 2.36% on average over 2015

first_imgAustria’s 13 pension providers, including single company and multi-employer plans, produced an average return on investments of 2.4% over the course of 2015, according to data compiled by pension fund association FVPK. Because multi-employer pension funds must offer individual asset allocations for certain members, their “very heterogeneous” portfolios produced returns ranging from 0.1% to more than 6.4%, the FVPK said.Austrian pension funds’ average 28% allocation to equities and 66% allocation to bonds boosted overall returns, with Andreas Zakostelsky, chairman at the FVPK, adding that corporate bonds had “gained in significance” in the portfolios.He said active equity management also played a “very important” role in the range of performance, as did real estate, which, on average, accounted for approximately 3.5% of portfolios. According to the FVPK, Austrian pension funds’ long-term performance since the inception of the system in 1991 now stands at nearly 5.6%, and the 10-year average return at 3.8%.Overall, assets in the system have increased by 3% to €20.2bn year on year.The FVPK attributed this increase not only to returns on investment but also the increase in new pension fund contracts signed by companies.For the first time, this number was well above the long-term average of around 200 per year; in 2015, more than 400 companies joined a Pensionskasse, half of them being small businesses.The number of pension fund providers is now down to 11, with Bonus Pensionskasse having taken over Generali’s company pension fund and the multi-employer Pensionskasse offered by Victoria-Volksbanken.last_img read more

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Ilmarinen to cut bond exposure by over 10 points, target equities, real assets

first_imgFinland’s third-largest pension fund Ilmarinen has set a strategic target to reduce its fixed income allocation by more than 10 percentage points over the next 5-10 years, reallocating the assets to equities and real assets investments.Since the earnings-related pension provider had assets of €36.5bn at the end of September, even before allowing for the probable strong rise in assets over the next few years, a 10-percentage-point reallocation from bonds would mean shifting €3.6bn of assets.Mikko Mursula (pictured), Ilmarinen’s CIO, said in an interview with IPE: “We will be taking money out of fixed income and putting it into listed equities and real assets, though the division of the funds released between these two asset classes is totally subject to the investment opportunities available.”The low-yielding environment was the main challenge facing Ilmarinen from an investment point of view, he said, noting that yields on 10-year German government bonds had plummeted as low as -0.15% a couple of weeks ago. “These are levels they have never been to before, and it makes all of us seek alternatives for our fixed income,” he said. Mikko Mursula“There is a still lot of money that has yet to come out of the fixed income markets, and this is why we have been looking at investments to hold as an alternative to bonds.”At the end of September, fixed income made up 44.9% of Ilmarinen’s overall investment portfolio, having fallen from 50.3% 12 months before.Listed and non-listed equities, shares and private equity investments increased as a proportion of assets, meanwhile, climbing to 39.1% of total assets from 35.7% at the end of September last year.Real estate increased to 11.2% of all assets, up from 8.8% at the same point in 2015.Mursula said Ilmarinen had around 2% of assets in infrastructure right now.It is about to become easier for Finnish pension insurers to boost their allocations to listed developed-market equities from the regulation side, as a result of new solvency rules brought in and coinciding with the country’s major pension reform taking effect at the beginning of 2017.As part of the new solvency framework, the coefficients used to multiply the equity return percentage to determine how much the equity return buffer should be increased will rise to 15% at the beginning of 2017 from 10% now, and rise again a year later to 20%.In practice, this means individual pension insurers may be able to raise their equity allocation by 3-4 percentage points at the start of 2017 and then by a further 3-4 percentage points at the beginning of 2018 – all in all, by 7-8 points.“The reasoning behind that is that the expected return from equity is higher than for bonds, and the regulator wanted to raise the average level of risk pension insurers can take,” Mursula said.For more on pensions in the Nordic region, see stories from IPE’s special report herelast_img read more

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Flexible retirement ‘a double-edged sword’ for governments: OECD

first_imgReporting on its latest ‘Pensions at a Glance’ analysis, the think tank for developed country governments said its findings indicated that, in many OECD countries, flexible retirement is possible and not discouraged.However, despite stated interest in more flexible forms of retirement, individual take-up has been low, it noted.‘Low adoption of flexible retirement due to barriers outside the pension system’According to the OECD, in Europe about 10% of individuals aged 60-64 or 65-69 combined work with drawing pensions, representing about one in five and one in eight pensioners, in the respective age groups. The average share of workers older than 65 working part-time in OECD countries had been stable at 50% over the past 15 years, it added.Low adoption of flexible retirement was due to barriers outside the pension system, such as age discrimination by employers and limits to people’s autonomy in deciding when to retire, the OECD said.To resolve this, governments must complement pension policy measures with wider labour market policies to make flexible retirement work, it said.“The challenges of financial sustainability and pension adequacy mean that bold action from governments is still needed,” said OECD Secretary-General Angel Gurría. “The world of work is changing fast and policy makers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement.”UK bottom for replacement rate, Denmark ‘top’ for retirement ageElsewhere in the OECD’s report, it found that:The net replacement rate from mandatory pension schemes for full-career average-wage earners entering the labour market today is equal to 63% on average in OECD countries, ranging from 29% in the UK to 102% in TurkeyThe pace of pension reforms has slowed in the last two years as improving government finances relieved some of the direct pressure to reformUnder legislation currently in place, by 2060 the normal retirement age will increase in roughly half of the OECD countries, by 1.5 years for men and 2.1 years for women on average, reaching just under 66 years. The future retirement age will range from 60 years in Luxembourg, Slovenia and Turkey to 74 in Denmark, according to the latest estimationIncreasing the retirement age is a source of tension in many countries, however. In Italy, political parties are promising to lower the state pension age and increase pension benefits, while in the Netherlands the country’s largest union opposes the government’s decision to raise the state pension age to 67 in 2021. The full OECD report can be found here. Flexible retirement is a double-edged sword for governments, according to the OECD.Calls for more flexible retirement rules were resurfacing in the public debate as a response to pressures from population ageing and financial stability concerns, as well as a resistance to higher pension ages, the economic body said.From a government perspective, flexible retirement could increase people’s wellbeing and may entice some people to work longer, in turn helping to increase workers’ future pensions and boost economic growth and tax revenues.It could also bring risks, however, such as individuals underestimating their financial needs in retirement and finding themselves at risk of old age poverty.last_img read more

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Irish sovereign fund backs $400m genomics research project

first_imgIreland’s €8.9bn sovereign wealth fund has invested in a medical technology group aiming to become a major employer in the country.In a statement released today, the Irish Strategic Investment Fund (ISIF) said it had contributed $70m (€62m) to a $400m collaborative investment in WuXi NextCode, a specialist genomic technology company, to fund an acquisition in Ireland that could create 600 new “high value” jobs.ISIF invested alongside Singapore’s SGD275bn (€176.6bn) Temasek sovereign fund, as well as high-profile private equity firms Sequoia Capital and Yunfeng Capital.The investment has allowed WuXi NextCode to acquire Genomics Medicine Ireland (GMI) and will fund what ISIF described as “one of the world’s largest whole genome sequencing programmes”. Leo Varadkar, Irish prime ministerGMI was to become a “cornerstone” of a new International Centre for Advanced Life Sciences, modelled on Dublin’s technology hub, known as Silicon Docks, according to ISIF’s statement.Leo Varadkar, prime minister of Ireland, said the investment would help position Ireland as world centre for genomics and other medical research.“Twenty-four of the world’s largest pharmaceutical and biotechnology companies are located here, creating valuable employment and contributing to our economic success,” Varadkar said.“With this partnership between GMI, ISIF and WuXi NextCode we are creating an ecosystem of expertise in advanced life sciences right here in Ireland. That, in turn, will ultimately deliver better health and wellness management to people and patients in Ireland and turn the advances we make here into benefits for people around the world.”According to today’s announcement, GMI aimed to collect data from 400,000 volunteers from across Ireland – roughly 10% of the country’s population – which ISIF said would “help to deliver healthcare benefits to Irish patients and create a unique platform for research and discovery of new precision medicines for the treatment of life-limiting conditions which currently have no cure”.Sequoia Capital was an early stage investor in a number of major technology companies including Google and Apple, while Yunfeng Capital was co-founded by Jack Ma, chairman of Chinese retail giant Alibaba and specialises in Chinese private equity. Paul Saunders, ISIF’s head of innovation, said: “This investment shows ISIF’s ability to act as a catalyst for major investment in high-value economic activity in Ireland by teaming up with top-tier co-investment partners from around the globe…“This is an excellent example of ISIF’s ‘double bottom line’ mandate of supporting economic activity and employment in Ireland while seeking a commercial return.”In 2017, ISIF invested €667m in domestic companies and projects, and helped attract a further €1bn from other co-investors.Ireland to create major life sciences hublast_img read more

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​Norway to cut €6.7bn of ‘upstream’ oil and gas companies from SWF

first_imgNorway’s Finance Ministry has decided against culling virtually all oil and gas stocks from the NOK8.9trn (€901bn) Government Pension Fund Global (GPFG).Instead, the ministry announced today a proposal for the fund to divest NOK66bn worth of exploration and production – also known as ‘upstream’ – oil and gas companies.In its report on energy stocks in the sovereign wealth fund – which will now go on to be discussed by parliament, the ministry and the fund’s manager Norges Bank – the ministry said the move was aimed at reducing the aggregate oil price risk in the Norwegian economy.Shortly after the report was released, Norges Bank said that, according to index provider FTSE Russell’s definitions, the GPFG held exploration and production companies with an approximate value of NOK66bn at the end of 2018. This corresponded to 1.2% of the fund’s equity holdings and less than 1% of its overall portfolio.Norges Bank also published a list of upstream oil and gas companies held in its portfolio at the end of 2018, which included Tullow Oil, Cairn Energy, CNOOC and Chesapeake.  Siv Jensen, Norwegian finance ministerPresenting the proposals, Siv Jensen, the finance minister, said: “The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline. Hence, it is more accurate to sell companies that explore and produce oil and gas, rather than selling a broadly diversified energy sector.”Norges Bank had recommended in late 2017 that the fund remove all oil and gas sectors from its benchmark index, which would have resulted in around NOK300bn of divestment.This idea has been the subject of much discussion since, with the bank suggesting in May last year ways in which the fund could remain invested in the sector.In August, a commission chaired by Øystein Thøgersen released a report arguing that selling energy shares would not be effective insurance for the fund against a permanent decline in oil prices.Divestment to boost diversificationThe ministry said today that companies classified as exploration and production companies by index provider FTSE Russell would be excluded from the GPFG’s benchmark index and investment universe.“It is anticipated that almost all of the growth in listed renewable energy over the next decade will be driven by companies that do not have renewable energy as their main business”Siv JensenThe proposal would serve to reduce the aggregate concentration risk associated with this type of activity in the Norwegian economy, it said, adding that – like the advice from Norges Bank – its assessment did not reflect any specific view on the oil price, future profitability or sustainability of the petroleum sector.“The oil industry will be an important and major industry in Norway for many years to come,” Jensen said, adding that Norway’s revenues from the continental shelf were, as a general rule, a consequence of the profitability of exploration and production activities.“Therefore this measure is about diversification,” she said.Exploration and production companies would be phased out of the fund gradually over time, the ministry said. Plans for divestment would be prepared in consultation with Norges Bank after parliament has debated the proposal.Explaining its decision to exclude only upstream oil and gas activities, the ministry said the energy sector was broad and included businesses throughout the value chain, as well as pure-play renewable energy companies.“It is anticipated that almost all of the growth in listed renewable energy over the next decade will be driven by companies that do not have renewable energy as their main business,” Jensen said, adding that the GPFG should be able to participate in this growth.The ministry said the government did not plan to sell shares held by the State’s Direct Financial Interest, a portfolio of directly held oil and gas shares, nor would it sell out of state-owned energy group Equinor.It also planned to ask Norges Bank to review its efforts relating to climate risk in the GPFG, particularly regarding the individual companies that contributed the most to this risk within the fund.last_img read more

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Dutch watchdog wants new rules for pension funds’ DC products

first_imgDutch financial communications watchdog Autoriteit Financiële Markten (AFM) has demanded new legal requirements for defined contribution (DC) products developed by pension funds to ensure “safe, cost-efficient and comprehensible” plans.In a letter to Wopke Hoekstra, the finance minister, the watchdog said that its current mandate for the supervision of product development was limited.Binding rules for DC products are already in place for insurers and the low-cost DC vehicles known as PPI.In the AFM’s opinion, such requirements were vital because in DC plans the risks were with the participants who, following new legislation, also faced difficult choices about whether to opt for drawdown arrangements at retirement. As part of its supervision of insurers and PPIs, the AFM checks whether new pension products take the consumer’s interest into account, and define their target groups.In addition, it makes sure that the product functions in accordance with its aims, and whether suppliers provide proper information.The AFM also said it had found “points of interest” regarding DC products from six pension insurers, including issues about accuracy, clarity and balanced information.The regulator said it would consult the ministry of social affairs and De Nederlandsche Bank.Yesterday, the Dutch Association of Insurers (VvV) announced an initiative to improve the comparability of DC products, in particular regarding communication and the product selection process.In a position paper, VvV said it wanted its members to provide uniform information about risk and use equal norms and standardised questionnaires to assist participants in picking the right option.The VvV also advocated the introduction of the option of a one-off switch, from variable to fixed annuities or vice versa, for pensioners whose financial position had changed since retirement.last_img read more

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