The working group was formed in April in response to the Kay Review’s recommendations, and supported by the Association of British Insurers (ABI), the Investment Management Association (IMA) and the National Association of Pension Funds (NAPF).“The investor forum we have announced today will drive cultural change and act as a mechanism for investors to work together more effectively when there are issues at particular companies that have not been resolved by conventional engagement,” Anderson said.The forum will have its own secretariat to progress its aims and manage engagement action groups, the working group said.These action groups will be open to overseas investors as well as traditional UK investors, and are meant to solve problems arising at major UK listed companies, it said.Funding for the forum has been secured for at least two years from investors and trade associations.Among its conclusions, the working group said cultural change was needed.“Asset owners, asset managers and companies need to develop a shared sense of partnership, with the objective of promoting long-term strategies for prolonged competitive advantage at companies – leading to sustainable wealth creation for all stakeholders,” it said.Major listed companies should hold an annual strategy meeting for institutional investors outside the results cycle, it said.At these meetings, investors and company executives will be able to link governance to the company’s long-term strategy without the focus on short-term results, it said.The group also said engagement on governance issues should be integrated into the investment process.Vince Cable, secretary of state for Business, Innovation and Skills, welcomed the report and creation of an investor forum.“We now need to see immediate and concrete action to make the forum a reality,” he said.Prominent UK economist John Kay, who chaired the original review, said the forum had been central to his recommendations.Glen Moreno, chairman of Pearson and deputy chairman of the Financial Reporting Council, described the approach as constructive and helpful.“It provides a practical mechanism for managing the engagement process, particularly with foreign investors,” he said, adding that the annual strategy and governance meetings could help form effective engagement between institutional investors and company boards.The IMA, NAPF, ABI also expressed their support for the new forum. The investor forum envisaged in last year’s Kay Review of UK equity markets and long-term decision-making will be up and running by next June, according to the group tasked with putting the review’s ideas into practice.The aim of the forum is to find out how investors might be able to work with listed companies to improve sustainable performance, as well as overall returns to end savers, the Collective Engagement Working Group said in its report launched today.James Anderson, partner at Baillie Gifford and chair of the working group, said: “We insist that improvements in the collective engagement process are not a chimera.”They are feasible, he said, with consistent and long-lasting effort.
United Utilities, the FTSE 100 water supplier, will look to diversify its pension fund’s liability-matching asset classes, as valuations show the scheme is on track for full funding after timely hedging.The company, born out of the merger of the former public-sector Northwest England water and electricity boards, sponsors the United Utilities Pension Scheme.The £2bn (€2.4bn) defined benefit (DB) plan allocated 80% of its assets to liability-matching classes in 2013, focusing on UK government bonds, cash and corporate bonds.However, head of pensions Steven Robson said the latest triennial valuation, to be finalised in the coming weeks, showed the scheme was on course to exceed the funding target set in 2009. Robson said the positive outlook, underpinned by timely interest rate hedging in 2010, had led the scheme to look at diversifying its liability-matching portfolio.While increasing its corporate bond allocations given the impact of narrowing credit spreads, Robson said the scheme was also looking at private debt, real estate and infrastructure.He added that serious work was being undertaken for the scheme to enter the private debt market soon.However, while Robson said the fund would consider infrastructure investments, historically, it has struggled with the risk-adjusted returns on offer in the UK market.“With the nature of United Utilities, we know infrastructure quite well,” he said. “So when the internal analysts at the company do the sums, we sometimes don’t see the value in projects.”“The risk-adjusted returns come back at a lower value than we would expect compared with what United Utilities undertakes internally.”Robson said the lower market returns were understandable in light of required third-party assistance, due to schemes’ lack of management expertise in infrastructure and scale.He also said the fund had avoided entering the Pension Protection Fund (PPF) and National Association of Pension Funds’ (NAPF) flagship infrastructure project, the Pensions Infrastructure Platform (PIP).The PIP, beset by delays, is still in the process of selecting managers despite suggestions it would be ready in 2013.This, the returns and Robson’s concerns over his scheme’s lack of scale led to the ruling out of PIP investment.“We are only a £2bn fund, so we can’t afford to commit hundreds of millions towards a single asset class or project,” Robson said.“We are still not sure what the [PIP] investments are going be, nor how it will fit with our de-risking plans.”
However, for 65 year olds, the AG found a slight drop in life expectancy for both men (0.6 years) and women (0.1 years), compared with its 2012 figures.This, it said, would have little impact on Dutch schemes’ coverage ratios.However, it added that funding could increase by approximately 0.7 percentage points at schemes where participants consisted wholly of older males. In other news, Groenten en Fruit, the €224m pension fund for the vegetable and fruit processing industry, is to join Landbouw, the €10bn pension fund for the agricultural sector, at year-end.Groenten en Fruit has more than 3,000 active participants, 3,370 pensioners and more than 9,000 deferred members, affiliated with 56 employers.Its administration costs were €252 per participant, whereas Landbouw reported costs of €101 per participant.Following the merger, Groenten en Fruit is to leave provider Syntrus Achmea for Aegon subsidiary TKP, Landbouw’s current provider.At July-end, the funding of Groenten en Fruit and Landbouw was 115.2% and 109.6%, respectively.Both schemes have not granted any indexation in recent years years.Lastly, the €886m pension fund for the Telegraaf Media Group (TMG) has said that its employer intends to introduce a new individual defined contribution plan with an insurer, replacing its current collective DC arrangements.According to the scheme, TMG prefers a new pension plan, as the current is under pressure from rising longevity and low interest rates.It also wants to offer more flexibility.TMG stressed that accrued pension rights would be unaffected by the planned changes.At the moment, the employer is discussing its plans with the works council (OR), which has demanded an explanation for the need of a change.At year-end, the Telegraafpensioenfonds had 6,755 participants in total, of which 1,295 were pensioners.Its funding at the end of August was 110.5%. Longevity for both men and women in the Netherlands is still increasing, according to the Actuarial Society’s (AG) latest bi-annual estimates. Although the AG’s new observations largely tally with its prognosis in 2012, it said it found a strong increase in life expectancy for newborns, with girls and boys living 5.2 and 3.4 years longer than 65 years olds. At the moment, a 65-year-old male has 19.7 years ahead of him, which would have increased to 22.9 and 25.5 years in 2039 and 2064, respectively, the AG said. It said the corresponding figures for 65-year-old females were 22.8, 25.6 and 27.8 years.
NEST Corporation, the trust’s corporate sponsor, was created with a loan from the Department for Work & Pensions (DWP), and also received grants while auto-enrolment was still in relative infancy.The European Commission (EC) forced restrictions limiting members from transferring funds from other pension providers or contributing more than £4,500 (€5,710) a year, as NEST rivals private sector providers.In the summer, the EC agreed restrictions could be lifted in 2017 after an appeal from the UK government.However, Danish provider Now Pensions, part of ATP, said it continued to have concerns over the lifting of the restrictions.It also said it was unclear why this consultation was relevant.“The consultation question itself does not canvas opinion on the merits or otherwise of lifting the restrictions,” it said.“Instead, it is phrased from a legal perspective on the premise that the lifting of restrictions will, indeed, take place.”It also had concerns with the independence of the NEST team inside the DWP from the auto-enrolment team, with concerns that wider policy issues were being made with NEST’s commercial interests at heart.The company reiterated its desire to operate with a level playing field and berated NEST for its government funding and differing governance requirements as it chose to opt-out of a voluntary master-trust governance code.The People’s Pension, a master-trust service by not-for-profit firm B&CE, said there were fundamental questions on the market impact of lifting restrictions that the government had yet to answer.NEST currently charges 1.8% on upfront contributions and an annual management charge of 0.3%.B&CE director of policy Darren Philp said clarity was needed on whether 1.8% would be charged on pots transferring into NEST after restrictions were lifted.“If it is, then this disadvantages members,” he said. “If it isn’t, then this provides NEST with an unfair advantage, made possible through government funding.”Now Pensions said it and other providers wanted to continue serving the pensions market as auto-enrolment reached smaller employers.“This ambition will continue to require significant investment,” it said. “We do not have the luxury of government funding, and we, therefore, believe that a level playing field will be vital in this environment, to ensure that healthy competition continues.”Last year, the government announced it would lift the NEST restrictions, although the EC only agreed to this a year later. Rival master trusts to the UK’s National Employment Savings Trust (NEST) have questioned the legitimacy of a government consultation on lifting its transfer and contribution restrictions.The government is currently consulting on whether changes made to the legal order on the creation of NEST would be suitable for the removal of restrictions by April 2017.Master trusts Now Pensions and People’s Pension said the consultation was irrelevant and that wider questions should be asked over the impact.NEST has a public-service order to accept all employers auto-enrolling employees under their legal obligation.
Amundi and Electricité de France (EDF)’s newly combined asset management company is targeting €700m for its first real estate fund.The closed-end fund is expected to reach a first close in June. Amundi and EDF have already committed to seed the pan-European fund with €300m.Amundi has applied to the Luxembourg regulator for the fund, for which external capital is now being raised. Four investments for the fund have already been made: two offices and a hotel in Berlin, and a shopping centre in Cottbus, close to the German-Polish border.Amundi’s planned asset management tie-up with EDF is something of a first for France’s financial markets regulator (AMF).Amundi will hold a majority stake in the new – and currently unnamed – asset management company.The focus will be renewable infrastructure and real estate, with an AUM target of €700m-800m in the first year and €1.5bn over three years.Discussions with EDF started in August last year, and the joint venture was announced in the autumn.Fierce competition and scarcity of investment opportunities in alternative asset classes were among factors behind the creation of the new €1.5bn fund management company, Pedro Antonio Arias, global head of alternatives at French investment manager Amundi, told IPE sister publication IP Real Estate in December last year.Infrastructure investments will be managed by a French fund under French supervision, which is also currently pending authorisation.A recent focus has been recruitment, and initially there will be 15 people – five or six in Luxembourg and nine or 10 in Paris, depending on whether one or two new renewables funds are launched.The teams will partly be staffed with personnel from EDF and Amundi, although the real estate team could involve external recruitment.The identity of the chief executive has yet to be disclosed.Amundi and EDF will both commit seed capital to mature solar and wind assets currently owned by EDF Energies Nouvelles, which will sell a stake to the new venture.A further fund is likely to focus on energy efficiency, an existing business model in the US and Germany but new to France.Next year, the venture could look at hydro assets.At the moment, there are no plans to invest in core infrastructure, although this is possible in the future if the market becomes more liquid and transparent, with more addressable volumes.See the May edition of IPE for more on Amundi and EDF’s new asset management collaboration
The UK regulator has replaced three trustees after an alleged scam saw close to £14m (€19.5m) in pension contributions lost.The trustees – Alan Barratt, Susan Dalton and Julian Hanson – were responsible for 17 pension funds but have been replaced by Dalriada Trustees after the Pensions Regulator (TPR) found they had “misappropriated” £13.7m.The regulator said the money, belonging to 242 members, had “all but disappeared” due to the payment of “exorbitant” fees and other commission charges.The Determinations Panel found that the three trustees were acting under instructions from David Austin, sole shareholder in Friendly Trustees Limited, who was operating as a “shadow trustee”. The Panel added that there was “ample” evidence Barratt and Dalton had abdicated their responsibilities as trustees to their respective schemes, and that they “knew or ought reasonably to have known” of Austin’s actions.“It is recognised that it is possible for trustees to delegate certain of their duties in certain circumstances,” it added.“However, it is unlikely this was a proper case of delegation. No trustee, acting reasonably and responsibly, could have acted in the way Mr Barratt and Ms Dalton appear to have acted.”Andrew Warwick-Thompson, executive director at TPR, said the case bore many of the hallmarks of a pension scam.“Our appointment of an independent trustee has helped secure approximately £400,000 from the schemes,” he said.“However, for many hundreds of members, hard-earned savings have most likely been lost.”In other news, the Pension Protection Fund (PPF) has seen the aggregate deficit within its 7800 Index increase by £31.3bn.The increase, from £280.4bn to £311.7bn over the course of September, also saw the funding ratio fall by 1.7% to 79.9%, reflecting 5,101 of the 6,057 pension funds captured being in deficit.The PPF added that scheme assets fell by 0.3% in the month to September but that overall assets increased by 4.2% to £1,234bn since the beginning of the year.
PKA and Danica Pension have increased their existing stakes in Danish biopharmaceutical company Symphogen, with commitments to a new convertible debt facility totalling €67.5m.They have been joined by other existing investors including Novo A/S, the investment arm of the Novo Nordisk Foundation, Danish firm Sunstone Capital – which invests in early stage life science and technology companies in Europe – and US-based Essex Woodlands Health Ventures.Symphogen, a private company founded in 2000, develops antibody therapeutics based on antibody mixtures, allowing treatments to fight cancer more effectively, and potentially turning it from a deadly disease to a chronic condition.The company is aiming ultimately to bring oncology products to the market itself. The proceeds of the loan will be used to progress Symphogen’s pipeline, specifically Sym004, an antibody mixture for colorectal cancer, currently undergoing Phase 2b clinical trials in Europe and the US.Since its inception, the company has raised €249m in the form of equity capital.Investors in the current financing round can convert their debt to shares at any time until end-2019.Kirsten Drejer, founding chief executive at Symphogen, told IPE: “The financing has been structured as a loan because not all existing investors have participated, so, until the loan is converted, it does not alter the relative shareholdings.“Furthermore, it gives investors a guaranteed return, as we are still several years away from marketing our first product.”She said the company was now trying to identify additional investors, especially from the US, to take part in the loan facility.PKA is investing around DKK140m (€19m) in this financing round.Claus Jørgensen, head of equity at PKA, told IPE: “Since our first investment in Symphogen was made in 2011, the company has shown impressive results and lived up to PKA’s expectations.“Also, the company has a strong Danish and international investor base led by Novo A/S, which allows it to develop the pipeline in an efficient way.”The investment return over the past 10 years on PKA’s portfolio, now worth DKK215bn, is 7.4% p.a., with a good contribution from the private equity portfolio, Jørgensen said.Symphogen is one of the few unlisted companies in PKA’s portfolio with a directly held stake.Most of PKA’s investments in unlisted companies are made through funds and co-investments with these funds.However, Jørgensen said PKA had no current plans to make similar investments in other healthcare companies.
Nicolas Moreau has been appointed to lead Deutsche Asset Management, joining from French insurance group AXA, where he held a number of positions, including chief executive of its asset management arm AXA Investment Managers.Most recently, he was in charge of AXA’s activities in France.Effective October 1, Moreau is to succeed Quintin Price, who stepped down in June for health reasons after only a few months in the role.Price, previously head of alpha strategies at BlackRock, joined Deutsche Bank’s asset manager in January after a management reorganisation that saw the company drop its previous name, Deutsche Asset & Wealth Management (DeAWM). Price was named in September 2015 as replacement to Michele Faissola, DAWM’s inaugural and only head, after the German bank decided to abandon its use of the DAWM “super-brand” and hold onto the asset management business entities it was unable to sell.Paul Achleitner, chairman of the board at Deutsche Bank, lauded Moreau’s “deep knowledge” of the asset management industry from both the “supplier and a client perspective”.“In addition, he possesses a wealth of experience as a member of the management board of a complex, global financial institution, providing the ideal basis for further developing Deutsche Asset Management,” he said. Deutsche Bank also appointed Kim Hammonds and Werner Steinmüller to the management board, effective 1 August.Hammonds has been employed by Deutsche Bank since November 2013, while Steinmüller joined in 1991.In October 2015, Deutsche Bank decided to split DeAWM, formed after Guggenheim Partners backed out of buying real estate business RREEF in 2012, into the private wealth management business, part of the private and business clients division.The re-branded Deutsche Asset Management became a standalone business division, with an exclusive focus on institutional clients.At the time, Achleitner said the changes had been some of the most fundamental in the company’s history.
The future of the €900m Dutch mandatory pension fund for the Rhine and inland shipping could be in jeopardy if it fails to increase support among employers in the sector, according to the pension fund.In its annual report, it said that less than 41% of its participants were employed by firms affiliated with employer organisations. Under Dutch law, at least 50% is required in order to keep the scheme’s mandatory status. The Bedrijfstakpensioenfonds voor de Rijn- en Binnenvaart said the Netherlands’ ministry of social affairs was likely to revoke mandatory participation if employer support hadn’t improved by May 2020. Currently all employers in the inland shipping sector must participate in the scheme.Hylke Hylkema, the scheme’s chairman, said that employer support was a matter for unions and employers to discuss, but he warned that the pension fund did not see the point of continuing independently if it became a voluntary industry-wide scheme. “There is a fair chance that many employers would leave, which would render us too small,” he explained. “Without mandatory status, there is no future for the pension fund.”Hylkema said there was no precedent for the withdrawal of a pension fund’s mandatory status, so the scheme did not know how this would pan out.“However, we know that [the ministry] would consult supervisor De Nederlandsche Bank and that it would be a careful process,” he added.At the end of 2017 the pension fund had approximately 5,000 active participants and 2,800 pensioners. Its funding stood at 119.7% at the end of last month.The sector has been suffering from a low level of engagement from employers, most of whom are small companies with few staff.The ministry of social affairs, which oversees pension legislation, can withdraw a scheme’s mandatory status if the percentage of members employed by firms affiliated with employer organisations is between 50% and 55%. It can also refrain from this if there are sound reasons.In 2014, the Rijn- en Binnenvaart scheme’s representation level was 52%, but the ministry agreed to extend its mandatory status because the previous economic crisis had forced employers to economise on memberships. It also cited a merger between employer organisations.
The IA has this month launched a list of “repeat offenders” to highlight the companies that receive repeated protests about the same issues.Among the “repeat offenders” are three financial services firms with asset management arms: Investec plc, Ashmore Group and a fund listed by Impax Asset Management.Ninian said: “We expect these companies to provide an update statement to their shareholders on the engagement they had since the AGM vote, the views heard from shareholders and the follow-on actions taken.”John Scott, chairman of the board of Impax Environmental Markets plc, an investment trust, said the IA’s register “brings necessary transparency to shareholder voting”.“As a board we find dialogue with the IA on governance to be beneficial, however it is not always the case that these votes are an indication of future shareholder revolt or poor corporate governance, they can also reveal the application of rigid ‘one size fits all’ proxy advice,” he said.In the investment trust’s case, Scott said the votes against the board registered by the IA related to a proxy adviser’s recommendation for shareholders to vote against the reappointment of Ernst & Young (now EY) as auditor of Impax Environmental Markets, arguing that the group was not independent.“This view was not shared by other proxy advisers and is not consistent with applicable regulations for the appointment of auditors,” Scott said. “The board has engaged with the proxy adviser on this issue and believes it has taken adequate steps to safeguard independence… The votes against and the board’s response in 2018 are a matter of public record.”The Public Register also showed that an increasing number of companies are facing shareholder opposition, with rebellions up by just under a quarter in 2018. Some 287 individual resolutions have been added to the Public Register so far in 2018, a jump of 22% from 2017.Ashmore and Investec declined to comment. The UK trade body for asset managers has warned more than 30 of the UK’s public companies – including three asset managers – about ignoring shareholder concerns.In a letter to 32 companies of all sizes listed on the London Stock Exchange, the Investment Association (IA) said it had noted these firms had been taken to task by shareholders two years running for the same issue, indicating they had failed to tackle it effectively.Andrew Ninian, director of stewardship and corporate governance at the IA, said: “While many companies are taking the necessary action and engaging with their shareholders, a frustrating number are failing to address investor concerns.”These companies appeared on the IA’s Public Register, which it launched in 2017. This register tracks FTSE All-Share companies that have received more than 20% votes against any resolution at an annual general meeting or otherwise. It also records resolutions that were pulled before a vote, potentially avoiding a revolt.