The average discount rate applied by many Pensionskassen in Germany is still above 3.5% despite the yield from bonds having fallen in recent years, Udo Mangold, senior consultant at Towers Watson Germany, told delegates at the consultancy’s Pensionskassen Day in Frankfurt.This means pension funds have had to issue guarantees on reaching this return level – and this is “strangling Pensionskassen” and decreasing benefits, he said.“Too high guarantees are endangering the future survival of a Pensionskasse,” he added.According to Mangold, lowering the discount rate to 0% or 1% would allow Pensionskassen more freedom in their investments, as well as higher returns, which over the long term would benefit members. Earlier this year, Rainer Jakubowski, managing director at Germany’s largest Pensionskasse, the €25bn BVV, argued that limits on investment options were leading to “wrong” asset allocations.At the Towers Watson conference, Marco Herrmann, head of strategy, law and communications at the BVV, confirmed that his fund was already in the process of lowering discount rates – including in existing contracts.According to Mangold, the average discount rate in Pensionskassen will remain high over a long period if a new discount rate is only applied to new contracts.“Transitions where the Rechnungszins is lowered in existing contracts have already been made, and they have been okayed by the German supervisor BaFin,” he said.The consultant also pointed out that guarantees were based on the assumption new entrants would be paying into the Pensionskasse continuously over the next 45 years, which was not always the case.He warned Pensionskassen against promising a life-long pension payout when the contract was signed, as opposed to offering a one-off payout of accrued assets on retirement.“Providers can always offer a pension payout option later,” he added.Herrmann suggested a way to increase assets in Pensionskassen would be to allow a higher percentage of the salary to be transferred.The German government argues that many members have not even reached the 4% threshold currently allowed.But the BVV representative pointed out this was different for members in his fund, which all are working in the financial sector.“In fact, we would need an 8-10% threshold to ensure they can keep up their standard of living on retirement,” he said.The BVV is now trying to encourage more people to contribute to the Pensionskasse themselves.
Devon County Council Pension Fund has appointed Northern Trust for a global custody and securities lending mandate for the fund’s £3bn (€3.73bn) in assets.The appointment was made using the National LGPS Global Custodian Framework, Northern Trust said. Mark Gayler, assistant county treasurer at Devon County Council, said: “Northern Trust’s ability to provide high-quality tailored solutions to meet our specific requirements, combined with their leading expertise across the local government pension scheme sector, were key factors in their appointment.”On top of this, he said the custodian’s strong securities lending capabilities supported the pension fund’s aim of maximising its investment portfolio. Robert Frazer, head of Northern Trust’s institutional investor group for the US, said pension funds were increasingly looking for guidance, particularly with discussions that were now taking place about consolidation and boosting efficiency.Meanwhile, consultancy Inalytics said it has been appointed by four UK local authority pension funds, including the Cumbria and Warwickshire county council pension funds, to help them understand the level of fund managers’ investment skill.Mathew Dawson, acting treasury and pensions group manager at the Warwickshire pension fund, said the fund had chosen Inalytics’ service because it could show what was really behind a manager’s performance. “Whilst our active equity managers are both performing very well, demonstrating manager skill beyond the relative benchmark will provide clear evidence to the investment sub-committee,” he said.In other news, the London & Quadrant Housing Trust Staff Benefits Plan has put out an EU tender for pension administration and investment advisory services.The trustees of the affordable housing charity pension scheme are looking for a firm to provide pension administration, investment advice and actuarial support services for the pension plan, which has both defined benefit and defined contribution sections.The contract will potentially be for five years, including an initial three-year period, plus two one-year extensions.The 1,550-member scheme said it envisaged inviting between five and eight providers to tender or participate.Applicants will be asked to give details of technical ability, processes for ensuring quality and capacity.The applicant must also act as the scheme actuary, the pension fund said.The deadline for tenders is 22 July.
Eumedion, the Dutch corporate governance and sustainability platform for institutional investors, has welcomed the California Public Employees Retirement System (CalPERS) as its newest member.Rients Abma, Eumedion’s director, said: “As a reputable player, CalPERS will add weight to our efforts to improve corporate governance and sustainability at Dutch listed companies, as well to our influence on policymakers in both the Netherlands and Brussels.”He said the US pension fund was the first to join the Dutch platform, adding that CalPERS’s investments in the Netherlands totalled approximately €900m.CalPERS becomes the second-largest pension fund among Eumedion’s 70 members, after the €373bn Dutch civil service scheme ABP. Eumedion membership is available to all institutional investors with a stake in companies listed in the Netherlands.Approximately 50% of the organisation’s members are pension schemes; three lobbying organisations for pension funds are affiliated members.Currently, the platform has 12 foreign members, including the UK’s Universities Superannuation Scheme, Railpen and Capital Group, as well as US-based asset manager BlackRock.According to Abma, Eumedion’s members manage approximately €4trn in assets.He added that their combined investments in the Netherlands covered 25% of Dutch listed equity.Eumedion recently called for engagement with fossil fuel companies rather than divestment.It also argued against granting extra voting rights or a ‘loyalty dividend’ for long-term investors, “as this would chiefly benefit governments and families at the expense of other investors”.The proposal was part of the EU’s Shareholder Rights Directive.Eumedion is chaired by Peter Borgdorff, director of the €178bn Dutch healthcare pension fund PFZW.
The improvement in the funding position was largely due to higher bond yields, which resulted in pension liabilities falling given higher discount rates.The magnitude was 40 basis points.Positive investment returns in the fourth quarter contributed to a small extent to the improvement in the index, according to the consultancy.It said returns on assets typically held by Swiss pension funds were 0.5% higher in the final quarter compared with the preceding quarter.Trump’s win in the November US presidential elections is behind the end-2016 improvement in Swiss pension plans’ funding, according to Willis Towers Watson.Michael Valentine, senior investment consultant at the consultancy, said: “Despite vague and sometimes contradictory political statements, Trump’s election victory triggered a proper rally on the equity markets in December 2016.“As a result of higher inflation expectations, investors plunged into equities and sold bonds, which is why yields and discount rates rose.”Peter Zanella, head of retirement solutions at the consultancy, said Swiss companies still need to be careful despite the improvement in their balance sheets and encouraged them in particular to check if the conversion rate (Umwandlungssatz) their plans offer is sustainable in the long-run.The conversion rate is used to calculate members’ pension payout levels.Persistently low yields over the past several years have caused some pension funds in Switzerland to lower conversion rates. Positive asset returns from foreign equities drove the Credit Suisse Pension Fund Index to an all-time high at the end of December.It rose by 0.81% over the fourth quarter to hit 159.91.The index is based on yields achieved by Swiss pension providers, before administrative costs, that have mandated the bank as a global custodian.Credit Suisse said that, as in the previous quarter, foreign equities contributed the most to the index’s rise (0.92%), followed by domestic equities, alternative assets, real estate and other holdings.Swiss franc bonds, foreign bonds and mortgages had a negative impact.The annualised return since January 2000 is 2.80%, compared with the annualised mandatory minimum rate for pension funds of 2.44%.The minimum return is set out in the BVG, the law goverining the Swiss pension system. Swiss pension plans’ funding position improved markedly over the course of the final quarter of 2016 largely due to market moves following the election of Donald Trump as US president, according to Willis Towers Watson.The consultancy calculates an illustrative funded ratio index – the ratio of pension assets to pension liabilities – for Swiss pension schemes as part of a quarterly review on how their financing is affected by capital market developments.The index was up by 6.6 percentage points over the fourth quarter, rising to 96.8%.At the end of December 2015, it stood at 94.8%.
Anders Schelde, the CIO of Nordea Life & Pension in Denmark, has been appointed as the new CIO of MP Pension, the labour-market pension fund for academic public sector staff.He is set to take up the new post on 1 November.Jens Munch Holst, chief executive of MP Pension, said Schelde had achieved tremendous results for Nordea Life & Pension.“Under Anders, we will continue to focus on creating a high level of return on a responsible basis for the pleasure and benefit of our members,” Munch Holst said. Schelde will take over the CIO role from MP Pension’s previous head of investments Niels Erik Petersen, whose departure after 10 years at the pension fund was announced in April.Schelde said: “I am pleased to be part of a developing organisation with skilled co-workers, a clear strategy and a strong focus on responsible investment.”At MP Pension, Schelde will be in charge of investing the fund’s total pension assets of DKK106bn (€14.3bn), according to 2016 end-of-year figures. Nordea Life & Pensions Denmark had total assets of DKK227bn at the end of last December, and is part of the larger Nordea Life & Pensions group in the Nordics.“Many large organisations have energy and muscle they can use, but in a smaller organisation you can see the light as soon as you press the button,” Schelde said, quoted by Danish news site FinansWatch.The effect of one’s work was seen immediately, he said.“That is the great thing about being in a smaller organisation,” Munch Holst added, also quoted by FinansWatch.MP Pension recently became independent, after years of cooperation with the Architects’ Pension Fund and the Pension Fund for Agricultural Academics and Veterinary Surgeons under the Unipension common pensions management umbrella came to an end in December 2015.
A leading critic of the UK Financial Reporting Council (FRC) has called for the audit and corporate governance watchdog to be shut down. Sharon Bowles, a member of the UK parliament’s upper chamber and former MEP, told IPE: “The FRC is fatally flawed in the way it was set up and has been operating, and distance needs to be put between that culture and the future regulator.“This is most likely to be effective if the FRC is wound up and a comprehensive, fully accountable companies regulator set up that is not based on trade association relationships and which follows fully all the principles of public life.”Her intervention in the debate over the future of the FRC came as the UK Department for Business, Energy and Industrial Strategy (BEIS) invited the public to submit evidence to its inquiry over the regulator’s future. Bowles’ comments added to growing support for a major shake-up at the watchdog. In March, the Local Authority Pension Fund Forum said the FRC should be wound up.Sir John Kingman, who is leading the inquiry, said: “The FRC’s work is critical to financial markets, the economy and public confidence. Trust, quality and credibility are the questions at the heart of [the] consultation.“The review wants to hear the widest possible range of views on how the regulatory system can best deliver for the future.”Among the areas covered by the inquiry are the FRC’s legal status, its relationship with government and its handling of conflicts of interest.Interested parties have until 6 August to make their views known.Under-pressure regulatorThe FRC has come under fire in recent years over claims that it was too close to the audit profession that it regulates, and that it had failed to take timely action regarding high-profile corporate collapses.During a parliamentary hearing into the collapse of services group Carillion in January, politicians accused the regulator of being “toothless”, “useless” and “ineffective”.FRC chief executive Stephen Haddrill argued in the regulator’s defence that it needed greater powers in order to address the perceived shortcomings.The Kingman inquiry has been taking evidence from interested parties since April, but in its latest call for evidence opened its doors to the wider public for input. Bowles said she had already met Sir John to give evidence and had urged him during their meeting to take more views into account.As for the likely outcome of the review, she added: “It is too soon to know how the Kingman review will go but the questions are comprehensive.”She also warned against shying away from wide-ranging reform of the watchdog.“When solutions are asked for, there is always the risk of the status quo being preserved because there is no single solution – even if the status quo is by no means given majority support,” Bowles said.Last month, Sir John unveiled the membership of an 11-member panel of experts and accounting insiders to assist him during the review process.An FRC spokesperson told IPE: “We welcome this independent review of the FRC’s governance, impact and powers. It is an opportunity to assess our past and our future.“The board is determined to meet public expectations and support UK business in attracting global investment for the long term.“We hope interested stakeholders will respond to Sir John Kingman’s call for evidence.”
At year-end, its infrastructure holdings totalled €20m.Despite the strong real assets returns, the €7.3bn pension fund posted an investment loss of 0.8% for the year as most of its asset classes had performed badly.Its overall result was worsened by the performance of its currency hedge, which lost 1.5% a year. After accounting for the impact of hedging, the fund lost 1.6% in 2018.Achmea attributed the loss on its currency hedge to the appreciation of the US dollar relative to the euro. It had fully hedged major currencies including the Swiss franc and the Australian, Canadian and Hong Kong dollars.Other Dutch schemes, including BpfBouw and Philips Pensioenfonds, were also hit by exchange rate fluctuations last year.Equities and bonds disappointAchmea’s equity portfolio produced an overall loss of 4.5%, with global equity down by 3.5% and emerging markets equity falling by 10.3%.The scheme said its large fixed income portfolio had returned 0.4% due to falling interest rates. Euro-dominated government bonds gained 3.5%, but emerging market debt lost over the year, with hard currency investments declining by 3.7% and local currency investments falling by 1.5%.The latter result was in part due to rising US interest rates, but Achmea also said the loss had been limited by the depreciation of local currencies, in particular the Turkish lira and Argentinian peso, relative to the euro.High yield credit fell by 3.9%, which the pension fund said was due to the “defensive approach” of its Worldwide High Yield Fund and underlying managers.Based on a funding of 124.5% at year-end, the Achmea scheme granted its workers full indexation of 2%. Its deferred members and pensioners received inflation-linked compensation of almost 1.2%.The pension fund reported costs per participant of €309 and said it had spent 0.25% and 0.09% on asset management and transactions, respectively.At year-end the scheme had 11,850 active participants, 19,895 deferred members and 5,395 pensioners. The pension fund of Dutch insurer Achmea recorded an investment return of 23.8% from its direct real estate holdings in 2018.In its annual report for the year, it said that the return – an outperformance of 9.4 percentage points relative to its benchmark – was caused by a revaluation of residential property and offices in particular.With a profit of 8.6% and an outperformance of 6 percentage points, infrastructure also performed strongly, Achmea said.The pension fund has since decided to switch its 10% real assets allocation to non-listed funds. As a consequence, it has divested its discretionary residential property portfolio and committed €200m to four real estate funds, as well as €75m to the IFM Global Infrastructure Fund.
FOLLOW SOPHIE FOSTER ON TWITTER MORE: NRL star’s renovated unit goes viral More from newsParks and wildlife the new lust-haves post coronavirus15 hours agoNoosa’s best beachfront penthouse is about to hit the market15 hours agoBeautifully styled. 4 Cambridge Street, Nundah, has had offers made but no deal has yet been struck.This home in suburban Brisbane is the hottest in the country this week, generating the most views of all listings across Australia.Five homes in the Sunshine State were in the top 10 led by a freshly renovated Queenslander in inner Brisbane suburb Nundah — which has been described as “the new Hendra”.The home at 4 Cambridge Street, Nundah, was marketed as a “once in a generation opportunity” given it was fully renovated and in a tightly held part of Brisbane. The home has a walk-in 200-bottle wine cellar, a soundproof home theatre, a kitchen with scullery, a full suite of Miele appliances including integrated fridge freezers, imported New York marble and a state-of-the-art therapeutic Magnesium Magna pool.Every one of the five bedrooms is kingsize and the master suite was designed to be “akin to a six star hotel”.It has a huge triple car garage, five bathrooms and sits on a 608 sqm block.Agents Vaughan Keenan and Cobey Parnell of Grace and Keenan Newstead were stoked that the home resonated nationally. The home theatre is sound proof.“I think it’s a two-fold thing, the presentation of the house and the renovation is amazing. I think the owner has delivered a home that is very much on trend with what people are looking for these days. Pretty always sells well,” Mr Keenan told The Courier-Mail.“We’ve had over 37 groups through in the last five days. There has been three offers so far. We’re still working on them now. We haven’t put a price on it yet. All the interest has come in above mid-$1m, so we’re getting up to where we thought we’d be.” There’s even a fenced off grassy spot for kids to play.The home is being marketed as being “in a hidden pocket of Nundah Heights that almost never transacts” with “some of Brisbane’s most beautiful character homes”.“It’s definitely the new Hendra, that border of Nundah/Wavell Heights has got that height and consistency that you see around Clayfield but not the price tag.”. MORE: Clive Palmer’s son loses small fortune on land bank Perfect setup for a hot summer. Luxury in the master bath. There is a walk-in wine cellar beside the kitchen. A walk-in robe to lust after. Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 1:58Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -1:58 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels720p720pHD576p576p360p360p216p216pAutoA, 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 Rate1xFullscreenWhy location is everything in real estate01:59 MORE: Pat Rafter misses out on $1m payday 4 Cambridge Street, Nundah, has a large three car garage. The home has been recently renovated.
The apartment featured house-like proportions and luxurious finishes.The living area features an open-plan design that incorporates the kitchen, dining room and the lounge while white marble tiles flow throughout the living areas.There are three balconies to take full advantage of its beachfront location. Agent Evelyne Castaldi said apartments in Reef Royale were tightly held and always in high demand when they hit the market.“It is a quality building in a spectacular and yet quiet location on the beachfront,’’ she said. 6/20 Marine Pde, Miami. 6/20 Marine Pde, Miami.A RENOVATED Miami apartment set to go under the hammer this month is attracting strong buyer interest.Long-time Miami residents Ralph and Ann Cottrill are selling the three-bedroom residence in the Reed Royale. 6/20 Marine Pde, Miami. 6/20 Marine Pde, Miami. 6/20 Marine Pde, Miami. ON THE MARKET The pair bought the apartment in the six-storey tower 21 years ago, shortly after the building had been completed.More from news02:37International architect Desmond Brooks selling luxury beach villa13 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“We wanted to be close to the beach and we were also wanting to be in a building with no holiday rentals,’’ said Mr Cottrill. “Reef Royale only has nine apartments and they were all owner-occupiers, so it was perfect for us.”Now retired, Mr Cottrill said the couple had enjoyed living on the beachfront because there was no through-traffic and they could wander to the Miami Surf Life Club and Piccolo café, which were both less than 200m away. Address: 6/20 Marine Pde, Miami Agent: Evelyne Castaldi and Jeff Burchell, Professionals John Henderson Real Estate Auction: January 22, Mermaid Beach Bowls Club, 6pm Inspections: By appointment
Norbert Kaess at the site of his next development. Picture: Shae Beplate.A TILER by trade, Norbert Kaess purchased his fourth property when he was just 22 without any financial support from his parents. With a mind set to work hard, he bought his first house in Townsville’s West End at the age of 20 and is now making about $1600 a week in rental yield.“I have a lot of confidence in the Townsville market, and think it’s the perfect place for young buyers to invest,” Mr Kaess said. When he finished high school he started saving for a house deposit from scratch. “I followed in the footsteps of my older brother Martin, because I had seen him invest in property and do it very successfully. Without his mentorship I don’t think I would have achieved as much,” Mr Kaess said. Norbert Kaess at the site of his next development. Picture: Shae Beplate.“I worked long hours and saved … I would still go out with friends on a Saturday night, but instead of being hungover in bed on Sunday I’d be hungover at work.“My first house deposit was about $20,000, and because it was my first purchase, I didn’t need to pay stamp duty.”By 21, Mr Kaess had bought his second property in Belgian Gardens, and at 22 he owned another two in Brisbane and Bowen. “I didn’t use equity to buy the next properties, I started from scratch again and saved for a deposit. I didn’t want to stick to one economy so I decided to buy in low, medium and high-risk areas, he said. “Low-risk was Brisbane because it’s metro, high-risk was Bowen because I figured it was subject to Adani going through, and medium-risk was Townsville.” More from news01:21Buyer demand explodes in Townsville’s 2019 flood-affected suburbs12 Sep 202001:21‘Giant surge’ in new home sales lifts Townsville property market10 Sep 2020Mr Kaess said he learnt the value of having a property manager after a horror experience with tenants in one of his properties.“In one of my places I had tenants who didn’t pay rent for a few months, and they damaged a lot of things when they left,” he said.“I lost a few grand there just from not using a property manager.”He also said that young buyers should be realistic in what they could afford, and be cautious not to bite off more than they could chew. “I see a lot of people saying ‘cheers to a lifetime of debt’ when they buy a property, but when you buy a house you should be buying it for financial freedom and less stress,” he said. “If you are buying a place and having more stress, you are either buying above what you can afford or not making a calculated investment.”Kaess’s key tips for young investors 1. Use a mortgage broker: These people have years of experience; they will compare a range of banks and talk it through with you so you’re getting the best deal. 2. Don’t buy brand new: If you’re looking to invest, don’t buy a new place or build because the profit has already been made by others along the way. You will lose value just by being the first person to open the door. 3. Look for deceased or repossessed estates: The people who own the property didn’t pay for it, and they don’t have an emotional attachment, so they’re usually willing to settle for less. 4. Buy on multi-use land: It’s attractive to a broader range of people; including developers at re-sale. You should also check with a town planner before you buy so they can tell you exactly what you can and can’t do with the block. 5. Pick your first property wisely: Do a lot of research into your first house; find out the median house price for the suburb, look at the properties history, and compare it against recently sold properties in the area. If you don’t choose your first house wisely, it can set you back years. MORE IN REAL ESTATE NEWS