Goldman Sachs AM plans ‘big push’ into UK fiduciary management
Goldman Sachs Asset Management has set its sights on capturing 10% of the flows into the UK fiduciary management market for its Global Portfolio Solutions division (GPS), which currently manages worldwide assets worth $22bn (€16.3bn).The firm, which manages £25bn (€29.7bn) across all UK institutional assets, sees fiduciary management – where an asset manager, consultant or other agent takes the reins of strategic advice, investment implementation and risk management alongside its institutional client – as a fast-growing part of the UK pensions market, albeit still in its early stages.David Curtis, GSAM head of UK institutional business, told IPE: “Although the trend has yet to be established, we think fiduciary management and delegated solutions will be a major part of the UK market going forward.“Over the course of next year, fiduciary management is going to be a major business initiative for us.” The firm claims to be one of the first asset managers to have established a fiduciary management capability, having worked with clients according to the model since 1995.The vast majority of the GPS assets come from US institutional investors, but the firm said it aims to increase its fiduciary management assets by capturing 10% of the flows into both the US and the UK markets.A September publication from human resources group Aon Hewitt, ‘Delegated Investment Survey 2013’, found that 36% of the 275 UK defined benefit (DB) scheme respondents, representing some £130bn of assets, had appointed a delegated investment provider, up from 18% in its 2011 survey.Aon Hewitt estimates that 5% of all UK DB schemes have moved to a fiduciary management approach and expects 25% to have employed a fiduciary manager within the next five years.While Curtis acknowledged activity among larger UK schemes seems modest, he noted that fiduciary managers have enjoyed considerable success winning mandates from schemes at the £50m mark and below.“That trend is moving up the food chain – my sense is that there are a lot of schemes in the £100m-150m range that are looking, and that’s where we want to start offering our services and where we are planning a big push,” he said.Recognising that the UK’s powerful investment consultants, offering their own fiduciary management or ‘implemented consulting’ solutions, could pose a significant barrier to entry, Curtis emphasised that scheme trustees should be aware of the challenges of implementation and not assume fiduciary management services are a natural extension of the traditional consulting role.However, GSAM has had its own problem as a fiduciary manager, in the key European market of the Netherlands.Its relationship with transport workers’ scheme Vervoer ended badly in 2012, with the fund suing for damages in an ongoing case in the English courts, alleging unreasonable delays to investment implementation and subprime crisis-related losses.The Dutch fund has since dropped some of its claims against GSAM.Curtis declined to comment on this relationship or the court case, but he did underline the importance of clients genuinely “wanting to engage” with the fiduciary management concept.“This is not about outsourcing, it’s about the client engaging with its service providers in a different way from how they previously engaged,” he said.“It’s an opportunity for the fiduciary manager to do the day-to-day work so the client can concentrate on the strategic work – and your client needs to be present at the table with you on that strategic work, or else the project fails.”
TNO – The €2.5bn pension fund of technical research institute TNO has appointed Kostijn van Gerven as director. He replaces Joop Ruijgrok, who has now retired. Van Gerven, who started in his role on 1 October, has been director of finance and facilities at TNO since 2006, and has also been board member of the pension fund during this period.MN – The fiduciary manager has appointed Donny Hay as its head of clients for the UK. Hay will be responsible for existing clients and developing MN’s fiduciary management business in the UK market.LawDeb Pension Trustees – Gerry Degaute has joined the LawDeb pension trustee team this month. Until June, Degaute was chief executive at Royal Mail Pensions Trustees, where he led trustee support for, and was involved in all aspects of, the Royal Mail Group’s pension schemes.Schroders – Ugo Montrucchio has been appointed portfolio manager in Schroders’ multi-asset investment and portfolio solutions business. He will be based in London and take up the post in January 2014. He joins from BlackRock’s multi-asset group, where he was a director and a lead portfolio manager for its diversified growth and risk-parity strategies. Generali Investments Europe – The asset management company of Generali Group has appointed Wilfrid Pham as head of its equity department and Vivek Tawadey as head of credit research. Both will focus on supporting the company’s investment team and ensuring a strong alignment between analyst and portfolio managers.Lombard Odier Investment Managers – The firm has named Ruud Hendriks to the new post of senior adviser. He will report to Hubert Keller, the managing partner of Lombard Odier responsible for LOIM. Hendriks will work closely with LOIM’s sales leadership to strengthen its distribution capabilities to institutional clients in Europe and beyond.MacKay Shields – The investment management firm has recruited Matthew Nagele as managing director and head of distribution for the UK and EMEA. Nagele will be based in the firm’s recently opened London office. He will report to John Akkerman, executive managing director and global head of distribution.Barnett Waddingham – The firm’s compliance officer, Zoe Smith, has joined the committee for the Association of Member-directed Pension Schemes (AMPS). She joins AMPS in place of outgoing chairman and Barnett Waddingham partner Andrew Roberts, who has stepped down after six years as a member and two years as chairman.iShares – BlackRock’s ETF platform is expanding its EMEA fixed income sales team with the appointment of Jessica Eistrand and Deri Bainge, both joining as directors. While Eistrand will cover the Nordics and Benelux, Bainge will cover Germany, Switzerland and Austria. They will report to Leen Meijaard, head of iShares EMEA sales.Dalriada Trustees – The trustee firm has recruited Adrian Kennett as head of practice for its ongoing trusteeship business. The appointment will give Dalriada a presence in the South West of England with the opening of new offices in the city, alongside offices in London, Glasgow and Belfast.
Negotiations on the revised IORP Directive are “close to successful closure”, Jeroen Dijsselbloem, president of the Eurogroup, said ahead of a trialogue meeting on 15 June.The Dutch finance minister said the “next and hopefully last” trialogue meeting between the European Commission, member states and European Parliament to settle details of the Directive was due to take place this evening.He provided the update when addressing the European Parliament’s Economic and Monetary Affairs Committee (ECON) on 14 June during a meeting discussing the soon-to-conclude Dutch presidency of the Council of the EU.Dijsselbloem said the council was “working very hard to facilitate the finalisation of the negotiations between the co-legislators” on the proposal for IORP II. “I think we are close to a successful closure there,” added Dijsselbloem.ECON is chaired by Italian MEP Roberto Gualtieri, who Dijsselbloem noted had already mentioned today’s scheduled trialogue meeting in his remarks to the committee.Dijsselbloem’s comments on the IORP negotiations come after Brian Hayes, Irish MEP and the rapporteur on the project of the directive’s revision, earlier this month said that disagreements remained on cross-border funding and the use of custodians – referred to as depositories within the legislation.“We have made progress in a number of key areas, but it’s fair to say quite a number of outstanding issues remain,” he said on the occasion of the launch of a business plan for a European pension-tracing service in Brussels on 1 June.He said the discussions were “very intensive”.Thomas Mann, another MEP and a member of the Employment and Social Affairs Committee of the European Parliament, had previously spoken about tension over the designation of pension funds as financial service providers but still said he hoped the revised IORP law would be finalised by June at the latest.
The UK government will soon be launching a consultation on defined benefit (DB) pension schemes, the new pensions minister told delegates at a major industry conference yesterday, flagging a “nudge” towards consolidation as a possible solution to problems in the sector but also saying he was very wary of being too downbeat about DB pensions. Addressing delegates at the PLSA annual conference in Liverpool, Richard Harrington emphasised having an “open door” policy in terms of receiving feedback from the industry.Harrington, who became a member of Parliament in 2010 and took on the ministerial pensions brief three months ago, also defended his position, in particular his independence.“I don’t think it’s unusual to have a minister without a background in the field, and I don’t feel it’s right to criticise the system or me,” he said. “I’m not there as a crony of anyone.” However, he said he happened to be good personal friends with key ministers at the Treasury, and that having relationships like this could be helpful for co-ordination between the two government departments. He then turned his attention to the major pension issues in the UK, expressing his commitment to auto-enrolment before addressing issues in the DB pension sector. The minister said he was “very wary of too much doom-mongering” about the DB pension system and that he was in close contact with The Pensions Regulator (TPR) and carefully monitoring the situation.He said he did not know why UK pension funds were not investing more in higher-yielding assets such as residential rental real estate, adding that one reason could be that the industry was too fragmented.“Several fund managers said this to me, ‘we can’t get in on these really big deals because we’re too fragmented’,” said Harrington. “Well, maybe the government needs to nudge it.”He said that, where the government had done this with local authority pension funds, consolidation had come quickly – a reference to the formation of eight asset pools in the local government pension scheme (LGPS) sector.The minister said he has been trying to find out what the government could do to alleviate pressure on DB schemes, such as whether the system of valuation was something the government could change, or whether regulations were preventing pension funds from investing in higher-yielding assets.The government will soon be launching a Green Paper on DB pensions, he said, inviting stakeholders to participate in the consultation. Harrington was speaking a day before the PLSA’s DB taskforce released an interim report that is quite critical of the current situation in the UK, calling the DB system inefficient and urging change. Picking up on recent calls from TPR for it to be given more powers, the minister said the government was “very open-minded about this”.It is waiting for the regulator to finish its negotiations with Philip Green over BHS, said Harrington, and it will then be considering “what powers the regulator’s got, what [Lesley Titcomb, TPR chief executive] has used, what she hasn’t used and what additional powers she might need”.He dismissed the idea of there being a conflict for companies between dividends and pension scheme payments, saying he didn’t “buy” this.“There’s a conflict between everything and dividends,” he said. “Why are pensions so different?”Master trust bill, IORP II The government introduced a highly anticipated bill to regulate master trusts yesterday, and the minister described this as “a comparatively simple bill” that was mainly about consumer protection.“We can’t have a situation where some pension systems are regulated more than others,” he said.The bill starts in the House of Lords before moving to the House of Commons.Given the chance to briefly speak to the minister later, IPE asked Harrington whether the UK government would stick with the revised Directive on Institutions for Occupational Retirement Provision (IORPs), the EU pension fund legislation due to be voted on by the European Parliament in November.EU member states will have two years to implement the law, which would be before the UK leaves the EU if Article 50 if is triggered in March 2017 and the exit takes all or close to the maximum of two years Article 50 allocates. Harrington said his understanding was that, generally, most EU law would be be adopted and that “I have no reason to believe [the EU Directive] won’t be”.“But, of course, it will be up to us, as opposed to the EU,” he said, adding that he could not predict what would happen with Brexit, and that the effect on pensions was unknown.
The deal will increase Tikehau Capital’s AUM to €9.8bn via a €700m boost to its leveraged loans and CLO business.Mathieu Chabran, co-founder of Tikehau Capital and managing director at Tikehau IM said: “We are delighted to have signed this agreement with Lyxor, which allows us to expand in the UK and continue developing our expertise in leveraged loans and European credit markets.”Lionel Paquin, chief executive at Lyxor, said: “This agreement plays to Lyxor’s well-recognised strengths for working in partnership with external asset managers, a field in which we have a nearly 20-year track record.“By remaining the management company of the funds, Lyxor continues to accompany its clients.”In other news, Investcorp is poised to acquire the debt management business of 3i (3iDM) from the UK’s 3i Group, which will more than double its AUM.The alternative investment manager last year announced it was aiming to grow its AUM to $25bn (€23bn) in the medium term, and the acquisition of 3i’s debt management business will be a big step towards this, as it will increase Investcorp’s AUM by $12bn to $23bn. Investcorp already offers investment products across private equity, real estate and alternative investment solutions (formerly hedge funds).The transaction with 3i is for a total of £222m (€249m) and is expected to close in the first half of 2017, subject to regulatory approvals.It is largest strategic acquisition Investcorp has made and will be fully funded through the company’s existing balance sheet.With 3iDM, Investcorp will have private and institutional clients spanning Europe, Asia, the US and the Arabian Gulf. Tikehau Capital is expanding into the UK by taking over the European senior debt business of the UK entity of fellow French asset manager Lyxor.Under the terms of the deal, Tikeau Investment Management (Tikehau IM), the asset management arm of Tikeau Capital, will replace Lyxor UK as the investment manager of the latter’s four European senior debt funds, with €700m in assets under management (AUM).Lyxor UK’s European senior debt operational team will join Tikehau IM in London.Lyxor will remain the management company of these funds and continue to provide second-level supervision of risks and valuation.
The regulator issued a “financial support direction” (FSD) to ITV in December 2011. FSDs create a legal requirement on a company to contribute to deficit repairs within a pension scheme it has links to.The company referred the decision to the Upper Tribunal court in 2012, but since then the two parties have been involved in a protracted legal battle that delayed the case coming to court.Mike Birch, TPR’s director of case management, said the ruling “brings closer the prospect of greater certainty for members”.“We have fought at every stage to bring our case for an FSD and are pleased the courts have agreed with our position,” Birch said. “This sends a clear message that we will not shy away from pursuing regulatory action to protect workplace pensions.”A spokesman for ITV said the company believed the case to be “wholly unmeritorious”.“ITV has never participated in the Box Clever scheme and has had no control over the growth of its deficit,” the spokesman said. “ITV believes strongly that there will be cases in which it is appropriate for the regulator to use its powers, but equally strongly that Box Clever is not one of them.”He added: “The tribunal previously stated in its judgment that the regulator has not alleged, and does not allege now, that there was anything improper or negligent about ITV’s conduct. Yet ITV is being pursued for unquantified sums in relation to a transaction that took place 17 years ago, before the regulator ever existed, and before the current powers it seeks to evoke were even on the statute book.“ITV has defended the case robustly over the last six years and will continue to do so.”The hearing will start on 29 January 2018 and will be the first time an anti-avoidance case by TPR has been heard in full in the Upper Tribunal, the regulator said. The UK’s Pensions Regulator (TPR) will head to court next year as it attempts to force broadcaster ITV to fund a pension scheme.TPR wants ITV to pay contributions to close a £90m (€99m) deficit in the Box Clever Group Pension Scheme. The scheme is connected to Box Clever, a firm formed in 2000 through a merger involving ITV’s predecessor company Granada. The company went bust in 2003.In a statement published today, TPR said the UK Court of Appeal had rejected an appeal from ITV against a ruling allowing the regulator to bring in new evidence in the case, which has been running for nearly six years.It was the fourth time the UK courts had considered the case and agreed with TPR’s position, the regulator said.
Border to Coast Pensions Partnership – a £46bn (€51bn) collaboration between 12 UK local government pension schemes (LGPS) – has hired oil giant Saudi Aramco’s head of portfolio management as its first permanent chief investment officer.Daniel Booth started his new role today, according to a statement from Border to Coast published this morning. He will work with interim CIO John Harrison to ensure a smooth leadership transition over the next few months, the company said.During an eight-year spell at Saudi Aramco, Booth built up the oil company’s investment programme, which incorporated corporate pension, endowment and insurance portfolios.According to Border to Coast, Booth oversaw the Saudi Aramco investment team as it became “the top performing multi-asset Saudi investment entity”. Booth previously worked at Frankfurt-based Prime Capital, an alternatives asset manager, where he was head of alternative asset research. He has also worked as an investment director at German research firm FERI.Rachel Elwell, CEO of the asset pool, said Booth brought a “strong understanding of the investment world, and in particular in private markets”.Daniel Booth said: “The UK pension pooling agenda will allow our partner funds to compete with the most sophisticated global investors and maximise their future risk-adjusted investment returns.“It is an honour to accept this role and I will endeavour to protect and serve the needs of the many pension scheme members and taxpayers of the different underlying local government pension funds to the best of my abilities.”Chris Hitchen, chair of Border to Coast, added: “Our ability to attract a CIO of Daniel’s calibre and experience is testimony to both the importance of our voice as a pensions pool and Daniel’s vision for how that can develop in the future.”Border to Coast opened for business in July, pooling £7bn worth of UK and global equities previously run in-house by three of the pool’s LGPS clients. It is also considering tenders for external managers for UK equities.Last month IPE reported that Border to Coast was seeking to appoint a permanent head of external investment capabilities, to take over from former Aviva CIO Graham Long, who joined the company in March on an interim basis. In addition, Jane Firth joined from South Yorkshire Pensions Authority as head of responsible investment.
Pension funds should not count themselves rich as a consequence of the recent unexpected slowdown of life expectancy improvements according to a renowned American demographer.James Vaupel, founder of the Max Planck Institute for Demographic Research, said there was no reason to assume that the upward trend of the past 150 years would end soon.Since 1840, life expectancy had increased by 2.5 years per decade on average, but recent prognoses suggested a slowdown or even a ‘plateau’. Speaking at the Cass Business School’s annual longevity conference in Amsterdam last week, Vaupel rejected the suggestion that there was a limit to human longevity. He pointed out that the slowdown relative to the prognoses had only been observed in a limited number of countries. James VaupelCredit: Bengt Oberger Vaupel argued that extrapolation was a better way of predicting life expectancy than actuarial forecasts.He highlighted longevity-boosting developments such as potential treatments for cancer and ageing, as well as the rejuvenation of skin and organs.“For an assessment of the future, you could take into account the predictions of experts who often turn out to be wrong, or look at risk factors or causes of death,” he said.“But time and again, the only useful predictor appears to be extrapolation of historic data.”Vaupel claimed it was more likely that life expectancy would increase spectacularly than that it was to stabilise.He noted that increased longevity had coincided with a strong concentration of mortality, as more people died around their predicted life expectancy.Vaupel said: “In the past, people had a fair chance of dying during the course of their life, but nowadays the odds of dying in your 70s or 80s in developed countries are very low, and most people die around the same age.“Japan, where women die massively around 90, is a clear example.”Healthier for longerThe demographer contended that people were able to keep on working for longer to keep pensions affordable, “as they also stay healthier for longer”.“The health and life expectancy of a 65-year old now are the same as for a 55-year olds in 1970,” he added.Vaupel, who is 73, put the relative increase of unhealthy years in the last stage of life into perspective by arguing that, with heart problems and high cholesterol, he was ill by definition.“But thanks to my pacemaker and the right medication, I am able to do my job very well,” he saidWhile some experts have predicted an increase in dementia cases, Vaupel played down the concerns, “as in my calculations, which have also been confirmed by other studies elsewhere, future generations will develop the illness later in their life”.Vaupel voiced support for the Netherlands’ decision to set the number of years in retirement at 18.26 years, and to raise the retirement age for the state pension in line with life expectancy improvements.However, he acknowledged that the duration of retirement was up for discussion: “In Denmark it is 14.5 years. What is that based on?”Vaupel said he was worried about the longevity gap between low and high educated workers, which he observed as widening and difficult to solve.“But if it is pretty certain that somebody is living a shorter life, the level of the pension could be adjusted,” he suggested.As an example, he indicated that some insurers offered people with an “impaired life” higher payments through their annuities. The argument that the age of the oldest living human had not risen for a while “was simply not true from a long term perspective”, he added.
Almost 70% of self-employed Dutch workers (zzp’ers) expect to have sufficient pension savings at retirement, according to a survey of 5,000 workers.The outcome of the survey – commissioned by lobbying organisations ZZP Nederland, PZO and ZZP Pensioen, and conducted by Motivaction – was 10 percentage points higher than a study by pensions think-tank Netspar found last year.In a letter to social affairs minister Wouter Koolmees and parliament, ZZP Nederland and PZO said the survey was triggered by the discussion between the social partners and parliament about the mandatory participation of self-employed in pension funds.They noted that the zzp sector as stakeholder hadn’t been consulted, and argued that the discussions had been based on “incorrect assumptions”. The position of zzp’ers had been one of the stumbling blocks for the failed negotiations for pensions reform, with the trade unions demanding the introduction of mandatory participation.The self-employed, however, strongly opposed mandatory pensions saving and highlighted that they, as entrepreneurs, were capable of looking after their pension interests themselves.Almost six out of 10 zzp’ers intended to save for a pension, the survey found, with 50% of them also having second pillar pension claims accrued from previous jobs.The survey also found that having the option to adjust their pension contribution to fit their income was very important to zzp’ers.It reported that 40% wanted the flexibility to deploy their pension assets for other purposes, such as labour disability.
It said, therefore, it had three options: to maintain the status quo and rely on The Pensions Regulator (TPR) to oversee them with its existing powers; to legislate to prevent consolidation; or to create a regulatory regime that would work for all stakeholders.This government chose the third option “to proceed with what is a difficult but potentially worthwhile program to enable a properly regulated superfund consolidation sector”.However, upon the launch of the consultation, the DWP noted that it already aimed to strengthen the power of TPR to oversee the new, burgeoning sector, and ensure those operating in it passed a fit and proper person test. Source: PLSAGuy Opperman addresses the PLSA conference in October 2018Guy Opperman, minister for pensions and financial inclusion, said: “Well-run superfunds have great potential to deliver more secure retirement incomes for workers while allowing employers to concentrate on what they do best – running their businesses.”In the 67-page consultation document, the DWP said it was seeking the views of trustees, companies operating pension funds, and other stakeholders in the corporate landscape.Adam Saron, chief executive of Clara Pensions, welcomed the DWP’s efforts “in embracing innovation while also recognising the need for robust regulation”.Saron said the momentum behind the consolidation of DB schemes had gathered pace and the publication of the consultation was an important next step.He said: “The DWP has clearly put a great deal of work into considering important elements of the consolidation model, such as ensuring sufficient protections for members, financial sustainability and good governance. It is right that we have a debate about the financial sustainability of consolidators.”Luke Webster, CEO of The PensionSuperFund, said there was “nothing in the guidance that is incompatible with our initial transaction” and that it could therefore move to submitting it for regulatory clearance. The government department is also considering how to build an accreditation scheme for existing DB master trusts such as TPT Retirement Solutions, which it felt did not require authorisation or specific legislation as they were already bound by pension scheme regulation.The DWP said it preferred a voluntary, industry-led scheme that would raise awareness of these vehicles for DB schemes and was considering changing the name to avoid confusion with defined contribution master trusts.Opperman said: “We’re clear there needs to be proper regulation, and we’re consulting to ensure we get that right. We’re transforming pensions saving in this country through our radical reforms, and this is yet another innovation which will improve retirement prospects.”The consultation can be found on the DWP’s website and will close on 1 February 2019. The UK’s Department for Work and Pensions (DWP) has launched a long-awaited consultation on defined benefit (DB) scheme consolidators – dubbed “superfunds” – as the sector grows in prominence without appropriate regulation in place.In the last 12 months, two commercial DB consolidators have launched – Clara Pensions and The Pension Superfund – as maturing schemes look to de-risk. However, the two vehicles as yet have not written any business.The consultation document stated: “The current legislative framework does not prevent a superfund setting up and attempting to attract other funds to consolidate. However, there are clear risks in doing so without a suitable regulatory framework to ensure member protection.”The paper said the government wanted to do more to encourage consolidation, recognising the benefits it can bring in reducing scheme costs per member, enabling more effective investment strategies and improving governance. 