He added: “F&C and BMO both take pride in having built distinctive and engaging brands – grounded in a long history of trust – and we share a deeply held conviction in working in the best interests of our clients.”Richard Wilson, Downe’s counterpart at F&C, said changes implemented in recent years put the cpmpany in a good position to develop.“Looking forward, BMO represents a unique opportunity to broaden and accelerate our ambitions,” he said.“The products, geographic presence and cultures of both organisations are truly complementary, and, with BMO’s commitment to growth, this is clearly a very positive outcome for both our clients and employees. We look forward to joining the BMO organisation.”At the end of 2013, F&C reported assets under management (AUM) of £82bn, down from £95bn just 12 months’ prior.At the time, more than 80% of its AUM stemmed from European institutional clients, according to IPE’s Top 400 Asset Managers 2013. F&C Asset Management is set for a £700m (€845m) acquisition by the asset management arm of Canada’s Bank of Montreal in a deal that values the company at a nearly 30% premium over its pre-deal stock price.BMO Financial Group, both the bank and BMO Global Asset Management’s parent company, announced today that it would offer F&C shareholders 120 pence per share, significantly up from its 93.8 pence price at the end of last week and resulting in a £708m offer.The Canadian group said F&C’s board would unanimously recommend shareholders accept the deal, with the acquisition set to close in May, subject to regulatory approval.Bill Downe, CFO at BMO, praised F&C’s “established pedigree” in fixed income, equity and property investments.
Naïm Abou-Jaoude, chief executive at Candriam, told IPE the brand change was necessary, would reinvigorate the business and give it a positive momentum among clients and staff.He said now the transformation was complete, the business would focus on its third-party distribution and its institutional business – which accounts for around two-thirds of the manager’s assets.“With our new brand offering a fresh start, coupled with the stability of the management,” Abou-Jaoude said, “we can fully enhance the business, and in particular our relationships with the consultants, who are likely to be more open to having new discussions with us on what we can offer to their clients.”Candriam, within the next nine months, wants to grow institutional business in Switzerland and Germany while increasing third-party distribution exposure in the UK.Abou-Jaoude said institutional business in the UK was an ambition but would be more realistic in 18 months’ time.With regard to offerings, the chief executive said Candriam was looking to build on its previous products and provide more suitable solutions to institutional clients.“We want to go in two directions,” he said. “One is offering a flexible multi-asset fund, and a multi-asset income fund, which will capture the spreads from different asset class.“The second is short high-yield offering, using a combination of long-short strategies.”The firm is also working on equity products for its insurance clients that will utilise the benefits of derivatives, mitigating the downside of equity investing, and reducing the capital requirements under Solvency II.In terms of the asset manager’s new partnership with NYLIM, the firm said its expansion would not include the US, given its complementary offering to its parent’s other boutiques.“We cover some other products NYLIM does not have, so the idea is to complement the offering and see how we can develop synergies on both sides,” Abou-Jaoude said.Yie-Hsin Hung, co-president of NYLIM and chair of Candriam, told IPE the boutique owner would also continue its expansion after its foray in the European market with the Dexia acquisition.“We continue to want to grow our business,” she said.“Our aspiration would be to grow in areas we don’t have a presence today, but our immediate focus is that Candriam is successful and can leverage all the resources available from NYLIM.” Candriam, the new trading name for Dexia Asset Management, will look to expand its offering in three new territories following its rebrand and completed takeover by New York Life Investment Management (NYLIM).The manager, which was plagued by uncertainty for more than two years as it was subject to takeover talks, saw business deteriorate as clients awaited confirmation of the firm’s future.However, in December 2013, US-based NYLIM, the asset management arm of insurer New York Life, completed its rumoured takeover of the European manager, adding it to its multi-boutique operation.The following February, it was announced the firm would shed its Dexia brand, moving forward from the turmoil under the name Candriam.
Joseph Mariathasan wonders what, if anything, can check the technology giant’s astonishing growthApple was valued at more than $770bn (€687bn) at its peak in February, making it by far the single-most valuable listed company on the planet. Despite its mammoth size, its chief executive, Tim Cook, announced that it could grow at a rate more akin to a start-up. But how large can a company grow? For some companies, there may be a clear upper limit – how many cans of sweetened fizzy drinks can Coca-Cola sell to a global population, with increasing worries over an epidemic of obesity-related afflictions such as diabetes?That may be a reasonable question to ask of Coca-Cola, but can an analogous question be asked of Apple, with an enormous market, global distribution and a strong brand that, despite being enormous, still has a lot of growth in front of it? Will the limit to Apple’s growth be set when every person on earth has an iPhone?Mega companies were clearly growth companies at an early stage of their lives to reach their gargantuan sizes. But, at what stage should mega-cap mega brands be seen as purely post-growth and value/dividend plays? Deciding when a company such as Apple has reached that position is unclear. The limits to growth are clearly dependent on the business strategy a company chooses to follow. Apple is clearly not a one-trick pony. It is not just a hardware company like Dell, having built an ecosystem around a seamless integration of innovative products and applications way beyond production of commodity hardware. The limits to growth are further away for companies with three key characteristics. First, as famously outlined by Warren Buffet as the companies he favours, are those with an economic moat that protects them against competitors, with a well-known brand name, pricing power and a large portion of market demand. This can provide the ability to grow enormously, but, sometimes, disruptive technologies can overwhelm even the widest moat. Kodak is a classic example, where its domination of photography could not withstand the impact of digital technology. But Apple has become the ultimate consumer brand, with the ability to create interest in any new product or variation of an existing product by just adding the prefix ‘i’.A second economic driver for growth also requires high-quality companies to be able to get better as they get bigger. Bigger does not always mean better, and the banking industry is the prime example of this. Citibank has a global footprint, but its value lies in having a few particularly strong local franchises in countries like Mexico.The insurance industry is another case in point. Life insurance and property and casualty insurance are locally regulated and require capital to be domiciled in local markets, giving few benefits in size, beyond reducing the overall volatility of results. Reducing volatility benefits senior management but not shareholders who could gain equivalent diversification themselves. At the reinsurance level, however, size can bring benefits because of the nature of the business and the size of the transactions. For Apple, the iPhone ecosystem that has grown is a classic example of something that gets better the bigger it grows.The third key characteristic that virtually all mega companies have is the ability to seek customers in the emerging markets.Any constraints to its size are further away for Apple than for most other companies, as it has all the three factors for growth in spades. So what can be the limits to growth for Apple? “The biggest risk for most of the companies we own is anti-trust regulation in the US that will force them to split apart,” said one fund manager on his Apple weighting. “We don’t like that problem, but we certainly prefer it to others we might have!”That is exactly what happened to the old AT&T, which once dominated the US telephone market and was forced to split up in 1982 into seven regional telephone companies – the ‘baby Bells’. That is unlikely to happen to Apple, given that it does not operate in oligopolistic markets and its innovations have attracted rapid and ferocious competition.There appears to be no limits to size for Apple. But then, AT&T, at its height, employed 1m people. Apple employs less than one-tenth of that. A great investment for its shareholders but perhaps also a sign of the problems society faces with the new generation of mega companies that are great at producing returns for shareholders but lousy at producing jobs.Joseph Mariathasan is a contributing editor at IPE
The average nominal return on investments over the past 10 years is now 5.5% per year.Varma said its investment returns developed strongly during the first half of the year, but uncertainty in investment markets caused the result to fluctuate considerably during the second half.The last quarter in particular was very turbulent.Reima Rytsölä, CIO at Varma, said: “The investment result was improved by a fairly strong focus on the US markets. Instead of a stagnant Europe, we were involved in a growing economy.”Returns were generated consistently across the different asset classes.Equities – which make up 41% of the portfolio, including 32% in listed stocks and 6% in private equity – were the best performers, with a 9.1% return (21.8% in 2013).The decline in interest rates ensured the return on fixed income investments was also good, at 5.5% (compared with 1.2% in 2013).At end-2014, fixed income made up 30% of investments.Returns were also boosted by hedge fund investments, which returned 7.8%, compared with 8.8% in 2013.The weighting had been increased early in 2014, taking the allocation to 17% by end-2014, compared with 13% the previous year.Real estate returned 3.8% over 2014, increasing from 3.1% the year before. The asset class made up 10% of the portfolio at end-2014.Rytsölä said: “It is realistic to expect lean times for investors. Interest rates are hovering around zero, and if economic growth does not pick up, the return on equities might also remain modest.”The company warned that the economic environment remained challenging for Finland.It said the change in the value of the euro and the drop in the price of oil would promote growth this year and next.But growth forecasts remain moderate with respect to recent history, and for investors, the interest rates especially are dramatically low.Risto Murto, president and chief executive at Varma, said: “We are used to a situation where low interest rates reflect a strong economy and stable currency, but that is not the case now. The record-low interest rate levels indicate economic problems, not strengths.”Meanwhile, during 2014, the company wrote premiums totalling €4.3bn and paid pensions of €5bn. Varma Mutual Pension Insurance, Finland’s largest earnings-related pension insurer and private investor, has announced a return on investments for calendar 2014 of 7.1% (€2.7bn), taking its solvency to a record high level.By the end of last year, its investment portfolio had reached €40bn – again, a record high – from €37.7bn the year before, while solvency capital was at €10.3bn, compared with €9.1bn at end-2013.This meant solvency capital amounted to 34% of technical provisions (31.6% in 2013).However, returns were lower than the previous year’s €3.2bn (9%).
Pensioenfonds IBM, Radstand Pensioenfonds, Edmond de Rothschild Group, Robeco, EDHEC-Risk Institute, PIMCO, UNEP, Credit Suisse, Jones Day, Focus Orange, Sweco Capital Consultants, Insight Investment, Global Impact Investing Network, PGGM, Association of Consulting Actuaries, LCP, Invesco Perpetual, Standard Life InvestmentsPensioenfonds IBM – Wouter van Eechoud has been appointed director and executive board member of the Dutch pension fund. He succeeds Ruud Hommes, who is to leave the pension fund after 18 years. Van Eechoud was a supervisor of pension funds at regulator De Nederlandsche Bank and has also worked in the banking sector.Randstad Pensioenfonds – Han Thoman has been named chairman of the Randstad Pensioenfonds, completing the new and independent board. Thoman is already independent chairman of the pension funds of Grolsch and SNS Reaal. He has been director at DSM Pension Fund Services and asset manager and pensions provider Blue Sky Group. Thoman has also chaired the foundation for company pension funds (OPF), which merged into the Dutch Pensions Federation.Edmond de Rothschild Group – Roderick Munsters has been named chief executive of the Swiss firm’s asset management business. Munsters, who most recently was chief executive at Robeco, replaces Laurent Tignard at the Swiss asset manager. Prior to leaving Robeco last year, where Munsters spent six years as chief executive, he was CIO at APG. EDHEC-Risk Institute – Riccardo Rebonato has joined the institute from PIMCO, where he was global head of rates and FX research. Rebonato, who will also join the EDHEC Business School’s faculty, has previously worked at Royal Bank of Scotland, where he was head of front-office risk management and head of client analytics, as well as head of derivatives research at Barclays Capital.United Nations – Erik Solheim is being lined up as the executive director of the UN Environment Programme (UNEP), having been chosen by UN secretary general Ban Ki-moon as his candidate for the position. Solheim has been chair of the Development Assistance Committee of the OECD since 2013 and was Norway’s minister for the environment and for international development from 2007 to 2012. Mexican diplomat Patricia Espinosa Castellano is poised to succeed Christiana Figueres as the UN’s chief climate change official, also having been selected by Ban. Castellano is the Mexican ambassador to Germany and was Mexico’s foreign affairs minister from 2006 to 2012. Figueres will step down as executive secretary of the UN Framework Convention on Climate Change in July. Credit Suisse – Eric Varvel has been named head of asset management at the Swiss bank, filling a vacancy left by last year’s departure of Bob Jain. Varvel, a former chief executive of Credit Suisse’s investment banking division, will assume his new role at the beginning of next month. In his time at the bank, he has also served as its chair for the Middle East and Asia-Pacific regions, in addition to serving on its executive board.Jones Day – Irene Vermeeren has been named a partner at the law firm, based in Amsterdam. Vermeeren is to focus on Dutch and European pensions, benefits and compensation. She also chairs the advisory committee on pensions law at the Dutch bar association and is a board member of the knowledge network Women in Institutional Pensions. Previously, Vermeeren was head of the pension industry group at law firm Baker & McKenzie.Focus Orange – Eko Loijenga has joined consultancy Focus Orange as an associate partner. Loijenga is to focus on total rewards, executive remuneration and people analytics. He has worked at Hewitt, Aon, Deloitte, Towers Perrin and PwC.Sweco Capital Consultants – Lilian ter Doest and Philip Bischop have started as senior consultants at Sweco Capital Consultants, formerly Grontmij Capital Consultants. They are responsible for direct and indirect property investments, client relations, acquisition and development. Previously, Ter Doest worked as commercial director at fund and property manager Annexum. Bischop joined from the €113bn asset manager and pensions provider MN, where he was head of property portfolio management.Insight Investment – Tom McKeon has been named head of portfolio oversight within the manager’s farmland investment team. McKeon was most recently chief executive at Hassad Australia, the agribusiness subsidiary of the Qatar Investment Authority. Prior to joining Hassad in 2011, McKeon ran his own consultancy and worked for Great Southern as national manager for water resources.Global Impact Investing Network – Wouter Koelewijn has joined the network as global liaison for Europe. Koelewijn was most recently senior innovation manager at Dutch pension manager PGGM, but he has also worked at Deloitte.Association of Consulting Actuaries – Bob Scott has been elected chairman of the UK association, succeeding outgoing chair David Fairs, effective from June. Scott is senior partner at consultancy LCP, where he has worked in a number of roles since 1982.Invesco Perpetual – Sebastian Mackay is to join the manager’s multi-asset team from September. He joins from Standard Life Investments (SLI), where he was investment director, but also a member of the global absolute-return portfolio construction team. Mackay began his career at Scottish Widows Investment Partnership in 2000.
Institutional investors in Europe and the Middle East (EMEA) have a “more voracious” appetite for high-yield corporate debt than those on a global level, but they lag when it comes to alternatives, according to a survey by Allianz Global Investors (Allianz GI).For the fourth year, the asset manager has surveyed hundreds of institutional investors across the world on their attitudes to risk, portfolios and asset allocation.This year, the report covers 755 investors across 23 countries representing more than $26trn (€23trn) in assets under management.It is split by region, with 250 respondents in the Americas, 250 in the EMEA region and 255 in Asia-Pacific. One-third of the respondents for the EMEA were pension providers, with insurance companies the next biggest category (27%).According to AllianzGI, the study shows global investors have hardly changed their risk-management strategies since the financial crisis in 2008, yet investors in the EMEA have.The use of duration management in the EMEA increased by 15 percentage points compared with pre-crisis levels (43% to 58%).Diversification approaches – by geography and by asset class – remain prevalent, however.“This is understandable,” according to AllianzGI, “given that institutional investors in the EMEA region consider market volatility to be among the biggest investment concerns, along with monetary policy and the low-yield environment.”EMEA investors are less concerned about market volatility than institutional investors globally (36% versus 42%), but they view the low-yield environment as a greater challenge than do their global peers (29% versus 24%).In terms of asset allocation, equities are the preferred asset class for investors in the EMEA, as they are globally, although with a strong home-region bias.High-yield corporate debt is the second most attractive asset class among EMEA investors.“This highlights the thirst for yield in the region and hints at the increased risk EMEA investors are willing to stomach for performance,” AllianzGI said.“To further underline this trend, they have a larger appetite for private equity than their global counterparts (19% versus 12% globally).”The asset manager said that, despite this, investors in the EMEA region lagged the rest of the world when it came to investing in alternative assets.Corporate high-yield debt was one of the three top asset classes EMEA investors said they would go long on/buy, selected by 28% of respondents.The asset class did not make the top three list for investors globally.As concerns alternatives, 65% of institutional investors in the EMEA invest in this asset class compared with 74% worldwide.AllianzGI said it was interesting that fewer EMEA investors than globally believed alternatives could help as a source of diversification (18% versus 25%).Another finding of the survey was that institutional investors primarily incorporate ESG principles into the way they invest for ethical reasons.The desire to minimise risk was more of a driver for this for EMEA investors than worldwide (by 2%), while the “demand of corporate policy” was less of a factor.In terms of threats to portfolio performance, European institutional investors were most concerned about event risk, according to AllianzGI.It suggested this could be due to concerns about terrorist attacks, as well as the upcoming EU referendum in the UK.,WebsitesWe are not responsible for the content of external sitesLink to AllianzGI RiskMonitor report
The €6.3bn pension fund of insurance provider UWV has raised its risk profile by increasing exposure to private equity and infrastructure.According to its 2015 annual report, it also plans to increase real estate investments and holdings in commercial and residential mortgages at the expense of its euro-denominated government bond and equity allocations.The scheme said it had decided, based partly on a survey into the risk appetite of its participants, to allocate 10% of its portfolio to risk-bearing investments, adding that it had already reduced its strategic interest hedge from 60% to 50%.It estimates its policy change will increase its surplus return by 0.7 percentage points to 2.2%. The UWV scheme aims to raise the combined private equity and infrastructure allocation to 5%, with the help of asset manager Partners Group.Its property and mortgages portfolios are to account for 10% and 6% of overall assets, respectively.The scheme has placed the four asset classes in a separate portfolio that holds illiquid investments – next to its regular matching and return portfolios – specifically meant for generating returns for indexation.The Pensioenfonds UWV said it also wanted to focus on cost-saving via passive investment, pointing out that its developed-market equity, government bond, inflation-linked bond and commodities holdings were already under passive management.It said it would update its contracts with pensions provider TKP Pensioen and fiduciary asset manager Allianz Global Investors this year.Last year, it replaced Morgan Stanley as its active manager for local-currency emerging market debt (EMD) with Legal & General, which now manages the investments passively.It said it would review Aberdeen AM as active manager of its hard-currency EMD holdings after the manager underperformed last year by 4.1 percentage points. The UWV scheme posted a net return of -0.6% due largely to a 3.3% loss on its matching portfolio, as well as negative results on its interest and currency hedges.It said its strategy shift also reduced its return by 0.5 percentage points.The pension paid €152 per participant for pensions administration and spent 0.38% and 0.17% on asset management and transactions, respectively.Its funding stood at 95.7% as at the end of June.
PWRI, the pension fund for disabled workers in the Netherlands, and healthcare scheme PFZW have abandoned their plans to merge the schemes.The €7.5bn PWRI said in a statement that both parties had decided to end negotiations, which had been resumed in July.PWRI and the €179bn PFZW had been discussing a possible merger since last year but decided to suspend talks last spring, citing “decreasing funding and volatile financial markets”.PWRI’s annual report later suggested that previous negotiations had stalled because of differing views. During the resumed talks, much attention was paid to both schemes’ financial positions, according to PWRI.In the meantime, however, their financial positions have failed to improve, while coverage ratios have fallen.PWRI said the resumed negotiations had lead to the conclusion that a merger would “not provide sufficient benefits for the participants under current circumstances”.Its spokeswoman declined to elaborate on the exact reasons why the talks broke down, or how PWRI envisaged its future.The pension fund has been closed to new entrants since last year, following the introduction of new legislation aimed at shifting disabled workers from “sheltered” workshops into the general workforce.As a consequence, PWRI participants will be increasingly joining the pension plans of their new employers.Last year, the scheme still had more than 94,000 active participants working in sheltered workshops.The pension fund said it expected its contributions would have to rise following the gradual ageing and thinning of its population.Because it also foresees that it will need to reduce its investment risk, and that the potential for indexation will decrease, it concluded that it would require a “large, robust merger partner”.As of the end of August, funding at PWRI stood at 99.8%, while coverage at PFZW stood at 91.1%.
“ It should be stressed that a decision to implement a hedging strategy now would not represent a tactical play on markets or reflect any fixed view on the short-term outlook for sterling,” McIndoe said.“ It is entirely possible that sterling will maintain its current value for a protracted period or depreciate further. In the former of those cases the fund would have incurred some additional cost for no additional benefit. In the latter, gains from currency would be reduced by the hedging. On the upside: future losses, should sterling subsequently recover, would similarly be reduced.”Alongside the currency hedge, the Strathclyde trustees also approved investments worth £160m (€180m) into its Direct Investment Portfolio, which consists primarily of allocations to Scottish and UK assets, including private equity, infrastructure and renewable energy projects.Within the new allocation, £80m is to be invested in the Pensions Infrastructure Platform’s (PIP) Multi-Strategy Infrastructure fund. Strathclyde was a founder member of the PIP – a collaboration between UK pension funds to promote investment in domestic infrastructure – and has already invested £50m in the multi-strategy fund.Strathclyde is also to invest in three other funds through the Direct Investment Portfolio:£30m in a renewable energy fund run by London-based boutique Temporis Capital;£30m in a private debt portfolio managed by Toscafund Asset Management; and£20m in a specialist wind power fund run by Resonance Asset Management.The Strathclyde Pension Fund gained 2.1% in the second quarter of the year, CIO Jacqueline Gillies reported, bringing the fund’s assets above £20bn for the first time. Scotland’s biggest public sector pension fund has moved to hedge the currency risk in its equities portfolio and crystallise investment gains.Strathclyde Pension Fund’s trustee board agreed earlier this month to hedge a third of its overseas listed equity exposure, which made up roughly 80% of its overall equity portfolio at the end of March this year.In a report to the trustee board, Strathclyde head of pensions Richard McIndoe said the fund had made “significant” gains from its foreign currency exposure in the 12 months to 31 March. This was largely down to the fall in the value of sterling following the UK’s vote to leave the European Union in June 2016.The pension fund – which caters for public sector workers in the Scottish city of Glasgow – returned 23% in the 2016-17 financial year, according to its annual report released earlier this year.
Hijlke Hijlkema, the chairman of the pension fund, attributed the lack of support to the structure of the sector, with its 1,100 affiliated companies employing an average of just four staff.“They comprise many unattached entrepreneurs, skippers who are averse to too many rules and obligations,” he argued. Credit: Erich WestendarpIngrid Blom, responsible for social affairs at the employer organisations CBRB and BLN-Schuttevaer, said that the social partners wanted to develop new, non-mandatory pension arrangements, in order to generate sufficient scale and lower barriers for employers to join.However, both Blom and Klein said this would require extending the compulsory status of the pension fund by at least one year to allow for the transition.Hijlkema said he feared that suspending the scheme’s mandatory status would lead to a domino effect.“As large firms already pay wages from abroad and avoid mandatory participation, suspension may also tempt other employers to do the same,” he said. “This would lead to a vicious circle, with ever-increasing costs for the remaining companies.”Last year, the pension fund spent €327 per participant on pensions administration.At the end of last June, its funding ratio stood at 118.3%. Its financial position enabled the scheme to grant its participants and pensioners inflation compensation of 1.27%.The shipping scheme reported a 2% loss on investments. It has 4,985 workers, 11,335 deferred members and 2,910 pensioners. The €970m Dutch sector scheme for the Rhine and inland shipping is likely to lose its mandatory status, as not enough employers support the current compulsory participation.In its annual report for 2018, the Pensioenfonds Rijn- en Binnenvaart said that 40.7% of active participants were employed by companies affiliated with an industry organisation that had requested mandatory participation.This figure must be at least 50% for the pension fund to keep its legal mandatory status, and both the pension fund and its social partners have warned that the necessary improvement is unlikely be achieved before the deadline in May next year.According to Bert Klein, trustee at trade union Nautilus International, possible alternatives – such as setting up a employer organisation dedicated to pensions, or a merger with another sector scheme – had already been ruled out “as they would create new problems”.