Kapoor ‘optimistic’ about SRI sea change at Norwegian oil fund

first_imgWhile Kapoor said it was so far only a relatively small amount to be invested in infrastructure, he welcomed the move.He told IPE: “So far, it is only the political programme of the new government without any details, but they have agreed the agenda, so this is definitely happening.“They have also said they will look into sustainable investment, which was our second recommendation. While they are not committed to doing it, they are [at least] committed to looking into it.”He said it was positive that political parties seemed to have “made a break with the past” and declared there was going to be a change in strategy.“Of course,” he added, “how far they go and at what speed remains to be seen. But we are hopeful given how responsive they were to the initial suggestions, and that this has been one of their declared intentions.”One driver for the change in strategy, according to Kapoor, is the performance of the fund, which stands at 3.17% since its inception 15 years ago, well below its 4% target.Another reason is political.“Because the political parties [in power now] were not associated with the original design, they find it easier to come up with new ideas,” he said.“If the same government had remained in place, it would have been politically harder to change, partly due to their fear this would somehow implicitly mean what they were doing before was not great.”A report by Re-Define and the Norwegian Church Aid published earlier this year sharply criticised the current investment strategy of the $760bn (€560bn) GPFG, lamenting particularly its lack of investments in emerging markets, unlisted assets and green projects.It also attacked its dependency on oil and gas revenues.Kapoor had been in touch with the political parties before and after the publication of the report.He will set up more meetings for November. One of the sharpest critics of Norway’s Government Pension Fund Global (GPFG) is cautiously optimistic following the turnaround in its investment strategy announced by the new government.According to Sony Kapoor, managing director at think tank Re-Define, the fund is finally breaking with its past by moving to adopt a new investment strategy.His comments come in the wake of proposals by the Norwegian centre-right coalition government to invest part of the GPFG – NOK100bn (€12.4bn) – in transport and communications infrastructure.The government said GPFG would also invest in emerging and developing countries and consider opportunities in renewable energy.last_img read more

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IPE Views: Tail risk protection or Texas hedge?

first_imgHowever, tail risk assumes non-normal distributions. Therefore a pure risk parity approach may result in a misleading representation of what the risk profile could be in extreme cases. Investors have to beware that they have not entered into a Texas hedge and replaced one risk with another. Diversifying across asset classes may sound a good idea, but if all asset class correlations tend to narrow in a crisis, it does not provide any downside protection, whilst replacing an element of, say, a bond allocation with commodities that may end up being a classic Texas hedge.The unfortunate truth may actually be that there is no magic solution to managing what really matters to institutional investors, namely tail risk. For they face the problem that a high net worth individual or a family foundation may not face, namely that the agents acting on their behalf have to focus first and foremost on their own career risk and their own firm’s business risk.As one insurance company fund manager once told me, “We don’t mind going over the cliff as long as we end up doing so after our competitors!” For them, having slightly better performance most of the time would enhance their own and their firm’s success, even if tail risk was increased. The issue that institutions should perhaps focus more on is that financial markets are still unstable. Developed market bonds may be in bubble territory, whilst US equity markets seem to have been treated as a safe haven to deposit money – despite the uncertainties surrounding the US economy.Now may be the time to think seriously about setting up a systematic risk management plan, to be brought into play in the event of extra-ordinary market volatility that could presage yet another market crash. Having a plan, whether a simple stop loss with position limits to a more complex drawdown control system is certainly better than being forced into exiting the market at the bottom!Joseph Mariathasan is a contributing editor at IPE Is diversification at all costs the right decision? Could diversification of asset classes be masking the real risks associated with investment, wonders Joseph MariathasanAugust is often a quiet time for markets, with very thin trading as it becomes impossible to make any committee-driven decisions within large institutions. Half the committee is on holiday, whilst the other half is preparing to go. But after recent financial markets more closely resembled a roller coaster ride, August may be the right time to think about preparing for the next inevitable crisis.What institutional investors really want is to have exposure to most, if not all, of the upside of the their investments, but be able to protect themselves from the worst of the downside – so as to protect themselves from tail risk events, so-called “black swans” or low frequency/high impact events. The problem that an institutional investor faces is very different from that of a family foundation and really results from the conflicts between acting as an agent, as institutional managers are doing, and acting as a principal, which is what  a family foundation can, at least under certain circumstances do. After a major crash, Institutional investors are often forced to reduce risk exposures, which means selling equities at the bottom of the market. Investors not faced with explaining their losses to their clients can in turn afford to ride out the downturns and maintain positions hoping markets will bounce back.Of course, it is possible to buy insurance in the form of put options on a continuous basis, but this would be an expensive proposition. Diversifying asset classes is, of course, the obvious route. But the real question is: how do you measure diversification? Measuring the market capitalisations is one way, but that gives no information about how risky each asset class may be. Another would be to look at risk through a risk parity approach.last_img read more

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Brussels to move ahead with creation of Investment Court System

first_imgThe European Commission is going ahead with proposals to create an Investment Court System to resolve disputes between investors and EU member states.It would replace the existing investor-to-state dispute settlement mechanism (ISDS).The ISDS instrument of public international law grants an investor the right to use dispute settlement proceedings against a foreign government.Provisions for ISDS are contained in a number of bilateral treaties. However, according to trade commissioner Cecilia Malmström, “the old traditional form” of dispute resolution suffers from a “fundamental lack of trust”.She said EU investors were the most frequent users of the existing model.The Commission’s current initiative has already been debated in the European Parliament and EU member state government representations in Brussels.  However, the US Chamber of Commerce in Washington has voiced its opposition to the proposals.Marjorie Chorlins, the chamber’s vice-president for European affairs, said the US business community could not endorse the EU proposal “in any way”.The EU position, she said, was “not grounded in fact”.Her concerns are based on the plan’s implications for the Transatlantic Trade and Investment Partnership (TTIP), the proposed free trade agreement between the EU and the US.“If the EU still regards the TTIP as a serious objective, today’s proposal is deeply flawed,” Chorlins said.But Emma McClarkin, British member of the European Parliament, dismissed “scaremongering” over the trade talks.The Conservative MEP for the East Midlands criticised “negativity” on the proposed Investment Court System, as well as “the old-fashioned protectionist lobby”.Commission vice-president Frans Timmermans said the court proposal would bring in a system with three qualified judges and transparent proceedings.Its decisions, he said, would be subject to review by a new appeal tribunal.Next steps will be further revision in Brussels, most likely before the year end. They are to be followed by a “final” proposal from the Commission.last_img read more

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Progress scheme cuts investment risk after closing to new entrants

first_imgProgress, the €4.8bn defined benefit pension fund for the Dutch employees of Unilever, is to scale back investment risk as the fund is closed to new entrants.According to its 2015 annual report, Progress will cut its current 32% equity allocation by 10 percentage points in favour of growing its fixed income holdings.It will also link its interest hedge to the 30-year swap rate instead of its coverage ratio, which stood at 130% as of the end of March.As a consequence, it has lowered its interest hedge to 32.5% of the nominal interest risk, to benefit from rising interest rates. It said the increased short-term risk of the move was acceptable, as it expects interest-rate risk to fall over the long term.Progress has also dropped its dynamic, anti-cyclical investment policy.To further diversify, it increased exposure to Dutch mortgages – the best-performing asset class within its fixed income portfolio, returning 7.2% – from 13.8% to 19.4%. It has also started investing in European senior loans, as well as environmental, social and governance (ESG) “value creation”, targeting sustainable agriculture and energy, as well as hygiene.The Unilever scheme reduced its commodities allocation from 5% to 4.4%, as the asset class “contributed insufficiently to diversification”.It said it would cut its commodities exposure – which last year produced a 32.3% loss – even further.Private equity, in contrast, generated 30.1%.Progress also reported positive results on real estate (14.1%), fixed income (4.2%) and equity (9.4%).The pension fund reported an investment return of 0.2%, after losses of 3.5% on its 80% hedge of the main currencies, 1% on its interest cover and 0.9% on its 50% inflation hedge.Progress closed to new entrants at the start of last year; pensions accrual is now taking place in its new collective defined contribution scheme Forward.The two pension funds, which already share pensions-provision costs, have applied for a licence to run a new low-cost ‘general’ pension fund, or APF.last_img read more

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Sweden’s AP1 seeks high-yield managers for around SEK12bn

first_imgSweden’s first national pension fund, AP1, has put out a tender to find investment managers to run three high-yield bond strategies in an exercise aimed at broadening its universe of the asset class geographically.AP1, which managed SEK298bn (€30.4bn) in assets at the end of June, asked managers for expressions of interest to take on mandates for global high yield, US high yield and European high yield.It said its allocation to high-yield bonds was approximately 4% of its total assets under management as of 30 June, with this exposure mainly in US high yield.“The objective of this search is to broaden the universe to global high yield,” AP1 said in the tender notice. Strategies that were similar to the three requested might be considered, the fund said.In the notice, AP1 said it had a sustainability policy that applied to the whole fund, including externally managed mandates.“In the evaluation process, special attention will be paid to how the manager considers and integrates ESG factors in the investment process,” it said.Managers – apart from being able to document experience in management of institutional accounts for the specified mandate, and show a live GIPS-compliant (global investment performance standards) track record for the product of at least 12 months – must also reserve capacity in the submitted strategy of at least $300m (€287m), AP1 said.AP1 said it would publish questions from the managers and answers regarding the procurement on its website on 18 January.The last day to submit RFPs is 31 January 2017.last_img read more

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Vikberg to replace Hansson as SPK chief executive

first_imgLars-Åke Vikberg has been named CEO of SPK, Sweden’s pension fund for the banking industry.He will replace Peter Hansson on 1 September, with the current chief executive set to retire after 25 years at the helm.Vikberg is currently an independent consultant, and was chief executive of KPA Pension between 2009 and 2015.Hansson joined SPK in 1993 and became CEO in 2005. Along with chief investment officer Stefan Ros, he oversaw a major overhaul of the fund’s investment strategy in 2014 following a change in discount rate rules in Sweden. The fund shifted from 70% in core fixed income to allocate significant portions of the portfolio to infrastructure, risk premia, and alternative fixed income strategies. Peter Hansson collects one of SPK’s many IPE awardsAlongside his career at SPK, Hansson also chaired the Swedish occupational pension fund association, Tjänstepensionsförbundet, between 2008 and 2017.He told IPE that, following a transition period, he would consider non-executive roles or board memberships. He is currently chair of the investment committee for a Swedish children’s cancer charity.SPK won the award for best Swedish pension fund for the sixth consecutive year at IPE’s annual conference in Prague in November last year.last_img read more

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Rolls-Royce UK pension fund seals record £4.6bn de-risking deal

first_imgThe Rolls-Royce UK Pension Fund has insured the pension benefits of around 40% of its members in a £4.6bn (€5.2bn) deal with a Legal and General unit.The transaction will reduce Rolls-Royce’s post-retirement obligations by around £4.1bn. In addition to offloading these pension liabilities, the trustee will transfer around £4.6bn of assets to the insurer.Rolls-Royce will also make an exceptional cash contribution of around £30m.The deal covers the benefits of around 33,000 in-payment pensioners out of a total of 76,000 members. Joel Griffin, head of global pensions & benefits at Rolls-Royce, said: “This agreement will result in increased security for Rolls-Royce pensioners and reduced risk for our business.“This would not have been possible without the close collaboration and commitment of our trustees and advisers over many years, ensuring that the scheme is well-funded.”Stephen Daintith, Rolls-Royce’s chief financial officer, said: “This is a significant transaction which represents another step on our journey to simplify, de-risk and strengthen the company.”The transaction was structured as a partial buy-in to buyout, meaning Legal & General would also become responsible for administering and paying the pensions.The insurer noted that the deal “involved a number of significant and innovative solutions”, such as the transfer of a hedging portfolio and the restructuring of an existing longevity swap held by the pension fund.The insurer said the deal represented about 30% of the pension fund’s assets and was equivalent to 25% of the market capitalisation of Rolls-Royce Holdings.Legal & General said the transaction was the UK’s largest pension buyout. The previous largest UK bulk annuity transaction was a £4.4bn deal between the British Airways Pensions Scheme and Legal & General.The insurer has struck more than £6bn worth of global bulk annuity transactions this year.last_img read more

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Swiss central bank: sticking with negative rates ‘in pension funds’ interest’

first_imgJordan said: “The SNB is not responsible for social policy. [But] by consistently and credibly pursuing a policy geared to price stability, the SNB is contributing significantly to a solid foundation [for the pension system].”He also ruled out distributing some of its income to pension funds, saying this raised the issue of potential conflicts of interest with central bank’s mandate.  Thomas Jordan, chair of the governing board of the Swiss National Bank (SNB), has defended the bank’s policy to keep negative interest rates in front of an audience of pension fund trustees, saying it would not be in pension funds’ interest to do so.Addressing delegates at a conference hosted by PK-Netz in Berne yesterday, Jordan said Switzerland’s negative interest rate – currently -0.75% – and the SNB’s willingness to intervene on the foreign exchange market were still essential in order to ease upward pressure on the Swiss franc. If unchecked, this pressure would lead to lower economic growth, lower share prices and no improvement in earnings for pension funds, he said.Lower economic growth would also provoke higher unemployment, reducing the pension funds’ contribution base, he added.  The SNB has often been called upon to abolish the negative interest rate to relieve pressure on pension funds.  Swiss National BankJordan applauded pension funds’ actions to improve sustainability such as increasing allocations to equities and real estate, and cutting benefits, but said that the measures were now insufficient because of rising life expectancy.“Only a limited number of adjustment mechanisms can be used to restore the equilibrium of a pension system,” he cautioned, suggesting that either benefits could be decreased or the period of benefit payments could be shortened.Last month a group of Swiss pension fund bodies called on politicians to urgently pass reforms to address the harm done to the Swiss pension system from sustained negative interest rates. Denmark, Sweden exemplarsDespite this, he held up Denmark and Sweden as examples of countries that have found workable solutions to the pension fund headache of rising life expectancy and low interest rates.He noted that the two Nordic countries, which are now ranked several places ahead of Switzerland [in the Melbourne Mercer Global Pension Index], had implemented far-reaching and thus painful measures to stabilise and modernise their pension systems.Jordan said: “Denmark has linked the retirement age to life expectancy, and Sweden is making the level of pension payments directly dependent on demographic and economic developments. These two examples show that it is possible, even in this politically fraught area, to find workable solutions.”He concluded: “As pension fund managers, you have fulfilled your obligations and have taken action in the very challenging environment of the past few years.Switzerland’s political bodies, too, recognised some time ago that the pension system must take account of the economic realities. Some initial steps have already been taken along this rocky road. But there is still a way to go.”last_img read more

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MP Pension sheds DKK13m of G4S stock, following Norwegian lead

first_imgDanish pension fund MP Pension has decided to exclude UK security firm G4S from its investments after finally losing confidence in the company’s ability avoid behaviour which breaches the DKK131bn (€17.5bn) pension fund’s policy on responsible investment.Anders Schelde, the fund’s chief investment officer, told IPE the decision had led to an instruction on 16 January to external managers working for MP Pension to sell off DKK13m of G4S stock.The pension fund’s internally-managed portfolio, on the other hand, had had no exposure to the UK firm’s equity at the time, he said.“Our managers have been reducing their exposure to G4S on behalf of us by quite a lot throughout last year, and at the beginning of this year, they only had about a quarter of the investment that they’d had in the summer of 2019,” he said. “We’ve been engaging with the company for years and years, through our services provider.“G4S have been on our radar for years, and when the Norwegian oil fund decided to divest in late autumn, and then KLP made a similar move in December, we put the stock on the agenda of our responsible investment committee’s January meeting,” said Schelde.The Council on Ethics of the Norwegian Government Pension Fund Global (GPFG) said in November it had recommended the exclusion because of unacceptable risk that the company was contributing to or was responsible for serious or systematic human rights violations.The advisory panel specifically cited labour rights violations in the Qatar and United Arab Emirates operations of G4S, where its employees were mostly migrant workers.However MP Pension said that its own reasons for excluding the company were broader than this.“We decided to exclude G4S from our investments because there was too big a risk that we would be continually connected to breaches of our policy by staying invested, after a series of issues over many years,” Schelde said.G4S had been responsive, addressing some of the concerns expressed over the years by investors, and had, for example, developed human rights policies, Schelde said.But recurrent breaches had nevertheless painted a picture of a company unable to effectively implement these policies in its operations, he added.IPE asked G4S to comment on the divestment, but none was received by deadline.last_img read more

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Teneriffe house with 270 degree views hits the market

first_imgCheck out the views from the rooftop terrace at 243 Kent St, Teneriffe.THIS house is the perfect mix between classic Queenslander and contemporary living.When Stephen and Nora Atkinson bought the 243 Kent St house at Teneriffe a decade ago, they knew whatever renovations they undertook, they would have to encompass the block’s incredible views. Upstairs is a more contemporary living space.On the middle level there is a shift to modern architecture, and while polished timber floorboards continue through the area, there is a more contemporary vibe, with a pane of glass in the floor to look down to the level below, and a gas fireplace surrounded by a stone feature wall. The front of the house at 243 Kent St, Teneriffe, is modest but charming.“It’s quite an interesting spot,” Mrs Atkinson said.“We loved its aspect.“You get 270 degree views, from the airport control tower to the Story Bridge.”To make the most of the city skyline, they built a rooftop terrace.“You feel like you’re on top of Brisbane when you’re on top of the roof deck,” Mrs Atkinson said. Take a dip on those hot summer days.Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 0:51Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:51 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels720p720pHD576p576p432p432p270p270pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenStarting your hunt for a dream home00:51 Polished timber floorboards sweep through the kitchen.The house spans across several levels, including the terrace, and the lower level has the elements of a Queenslander, with polished timber floorboards, VJ walls, dado rails, stained glass windows and ornate fretwork. More from newsParks and wildlife the new lust-haves post coronavirus16 hours agoNoosa’s best beachfront penthouse is about to hit the market16 hours agoThis level has VJ walls, dado rails and decorative fretwork.Other elements of the renovations included an extension out the back, adding more entertainment areas, and building the property upward. This loft makes for a cool studio space.On this level is also a separate studio space, which follows pitched rooflines.“I practice my yoga or meditation in there, or the kids have music jam sessions up there,” Mrs Atkinson said.“We did have guests occasionally stay in there, it is extremely versatile.”Upstairs is the master suite and the pool.last_img read more

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