Oooh! Aaah! Eurostar?READERS of our regular Passenger Portfolio feature will no doubt be familiar with the continuing efforts of train operators worldwide to keep their business clintele supplied with the creature comforts that they have come to expect. Eurostar (UK) appears to have gone one better than at-seat video or power points for laptops by offering first class passengers a massage during a two-week trial period from June 18.With a ’special massage chair’ located in a dedicated area of one first class coach on the weekday 09.53 London and 17.10 Paris departures, a 15min hand and arm or neck and shoulder treatment was available from British cosmetics company Molton Brown for £15. ’This is yet another way for customers to relax and enjoy some of the three hour journey time from London to Paris in a useful and beneficial way’, said Mark Furlong, Marketing Director at Eurostar (UK). ’Reaction to the service will be carefully monitored’, he added, suggesting that a pre-booking service for Premium First customers might be implemented if massages were to be offered on a regular basis. o
The build-to-rent approach differs from a number of high-profile residential developments in London that are being sold unit-by-unit to private buyers.Robert-Jan Foortse, head of European property investments at APG, said the joint venture would create “a scalable, branded residential-rental platform” that would “fill a need in the undersupplied London residential market”.He added: “APG is focused on increasing its residential exposure in Europe, particularly in key cities such as London, given its expected population growth.”Delancey employed a similar approach for the East Village residential development near London’s Olympic Stadium, establishing rental management company Get Living London with joint-venture partner Qatari Diar.The developer has already acquired Tribeca Square, another residential development close to the Elephant & Castle Shopping Centre, and intends to create a new ‘South Village’ district through the redevelopment of both sites.The previous owners of the Elephant & Castle Shopping Centre, St Modwen and Salhia Real Estate Company, had originally planned to redevelop the property while retaining its existing structure, but Southwark Council have made it clear it wants a full demolition.Bill Oliver, chief executive at St Modwen, said the owners had “looked forward to redeveloping the centre to drive a wider-scale regeneration of the area”.He added: “However, both St Modwen and Salhia believe the price offered fully reflects the potential of the scheme and provides certainty of exit, while crystallising a significant profit for our shareholders.”Councillor Fiona Colley said: “I welcome Delancey and APG’s purchase of the shopping centre and very much look forward to working with them on our plans to provide a destination town centre.“We have already publicly expressed our requirement for full demolition for this to happen and spoken about our aspirations for better pedestrian access to the stations and new market square and park.” APG plans to increase its exposure to the London residential market by redeveloping a shopping centre in the south of the city with Delancey.The Dutch pension asset manager and UK property developer have entered into a joint venture to acquire the Elephant & Castle Shopping Centre for £80m (€97m) and plan to replace it with homes for rent.APG and Delancey will build 600 residential units and let them directly to tenants as a part of a wider regeneration of the Elephant & Castle area, situated close to central London.Delancey said the homes would be “offered for rent rather than for sale … direct to residents, with no fees, a choice of one, two and three-year tenancies and transparent rental pricing”.
Analysis by the UK government has shown charging in both trust and insurance defined contribution (DC) schemes stands higher than estimates – and on the cusp of, or above, a proposed charge cap.The Department for Work & Pensions (DWP) conducted more than 1,300 interviews with trust and contract schemes, as well as the 11 largest insurance DC providers in the UK.Through its research, and analysis of scheme data, the department found the average annual charge for members was 75 basis points in trust schemes and 84bps in insurance schemes.Previous estimates by the Association of British Insurers (ABI), a lobby group for insurance-based pension providers, said the average charge among its members was 52bps. Average figures also differed significantly when split by the size of the scheme.A small insurance scheme (six to 11 members) was paying as much as 91bps, while a trust scheme (with 12-99 members) was paying 94bps.Average annual charges fall as scheme size increases, the government said.An insurance scheme with more than 1,000 members fell below the 75bps threshold recently touted by the DWP.Charges for the largest trust schemes marginally fell below those of the larger contract-based schemes, with an average charge of 42bps.The government had been consulting on implementing a cap on member charges within DC schemes.The cap, which was initially expected to be between 50bps and 100bps, was aimed at schemes used for the rollout of auto-enrolment, with expectations for its application across all schemes.However, the cap was expected to be implemented by April this year, until it was announced by pensions minister Steve Webb that complications had forced the government to delay by at least a year.This sparked a backlash from opposition ministers in the UK Parliament, amid accusations the government had given in to vested interests in the insurance industry.In its research, the department added that the size of the scheme, along with adviser commissions, contributions and when the scheme was set up, impacted the most on charging levels.Trust schemes set up before 1991, on average, had a higher charge by 10bps to those set up after 2001.The difference between schemes in the insurance sector was 20bps.The use of active member discounts (AMDs), which results in non-contributory members facing additional charges, and another aspect the current government aimed to abolish, were also analysed.Government research showed only 3% of trust schemes operated such a policy, with marginally more insurance providers doing so, at 10%.On average, non-contributory members faced an additional 38bps charge in their DC fund compared with active members.
Sverre Thornes, chief executive at KLP, said: “It is extremely gratifying to note our results for 2013 are so good it means we are completing the strengthening of our premium reserve in order to meet the positive development of people living increasingly longer.”KLP is strengthening its premium reserve by NOK4.5bn (€543m) for longevity, while NOK5.9bn is being transferred to the customers’ premium fund.Meanwhile, with Storebrand and DNB Livsforsikring pulling out of the public sector occupational pensions market, 78 local authorities and 440 operations with a total of NOK60bn in premium reserves will have to switch providers.Last year, 48 local authority customers chose to move to KLP, while agreements have also been concluded with 48 enterprises with public sector occupational pensions.This means 100,000 new members will join KLP during 2014, with an inflow of NOK20bn in premium reserves.The group is expecting a major inflow of new customers next year as well.“KLP is facing the change in the market situation with continued focus on value creation through good returns, low costs and good service,” said Thornes.Total assets for the KLP Group at end-2013 were NOK369.8bn, up from NOK331.8bn in 2012.Its solvency margin continued a slight decline to 228.8%, down from 233.2% the year before. Norwegian pension fund company KLP has announced the best value-adjusted returns of any company competing in the public sector occupational pensions market for the fifth consecutive year.Value-adjusted returns for calendar year 2013 were 6.7%, the same as for 2012, while book returns rose to 6.4% from 5% the year before.The company said the most significant contributors to its results were equities, property and hold-to-maturity bonds.However, it warned that, with increasing life expectancy, there was a need to strengthen its premium reserve, and that all life insurance companies would be using a large part of their 2013 surplus to do the same.
The Pension Protection Fund (PPF), the UK’s lifeboat fund, has set out its expectations for the next three years, suggesting it could reach £22bn (€27bn) in assets under management (AUM).By 2017, the fund will have grown from its current size of £15.6bn and seen the number of members grow from 204,000 to 280,000.The PPF said it saw 120 schemes transfer into the fund over the last financial year, which will be joined by 80 schemes this year, and 90 schemes each in the following two.Its expenditure on fund management fees is expected to rise from £85.4m to £120.6m, in line with its growth in AUM. It also confirmed it was on track to complete its funding mission of self-sufficiency, expected by 2030.Elsewhere, research conducted by the National Association of Pension Funds (NAPF) showed the recent changes announced in the Budget to DC at-retirement options would lead to growth in second-pillar savings.Some 28% of workers contacted by the lobby group said they were now more likely to start, or increase, saving in a pension scheme following the Budget.This compared to 3% who said they were less likely to save, or stop entirely.The research also highlighted potential issues for DC investment strategies, with a quarter (24%) saying they would take their entire pension in cash.However, 58% said they preferred to receive a regular income, such as an annuity.Some 19% agreed they would take the cash irrespective of whether they had other savings elsewhere, suggesting the number of pensioners choosing this route could be significantly higher than the government anticipates, the NAPF said.And finally, the monthly bulk annuity market monitor, produced by Aon Hewitt, showed pricing for both buyouts and buy-ins were better than 12 months previous.It also showed growth in assets would leave schemes in a much better position for a buyout than many trustees expected.However, it also argued the Budget had had little impact on bulk annuity pricing, despite expectations individual annuity providers would shift business towards the bulk space, potentially leading to a competitive lowering of prices.Authors of the report, Dominic Grimley and Paul Belok, said: “This will help to sustain competition in the bulk annuity market as demand from schemes rises.“We do not expect bulk annuity pricing to react materially in the short term, as the market is already competitive.”
The European Securities and Markets Agency (ESMA) has called for a review of the UCITS Directive to account for the central clearing of derivatives required under the European Market Infrastructure Regulation (EMIR).The agency, charged with financial market regulation, said, given the impact of the EMIR regulations, the UCITS Directive should be amended to apply the same rules to derivatives that are centrally cleared or exchanged traded.The European Commission has at the same time launched its review of EMIR to produce a general report on the state of the regulation to the European Parliament and Council.Currently, the UCITS Directive allows investments in both exchanged-traded derivatives (ETD) and over-the-counter (OTC) derivatives, but only the latter are subject to counterparty risk-exposure limits. Under the new EMIR regime, certain OTC have to be centrally cleared, which ESMA said raised questions about how the limits to counterparty risk should be calculated for OTC transactions that are centrally cleared, and whether the same rules for OTC trades should also be applied to ETDs.Steven Maijoor, chair at ESMA, said the current UCITS regime needed to change, as it would be unable to account for the central clearing obligation in EMIR.“ESMA, therefore, invites the EU institutions to consider amending the UCITS Directive to make it more compatible with the clearing obligation under EMIR,” he said.The agency said counterparty risk limits should change to match the differing arrangements, and, under individual segregation, the UCITS regime should not apply risk limits but continue to do so under omnibus client segregation.The UCITS Directive is currently on its fifth amendment as of July 2014.The Commission review, to be undertaken via a stakeholder questionnaire, will focus on the delegated acts within EMIR, particularly the section that requires standard derivative contracts to be cleared through central counterparties and the reporting of trades to repositories.In addition to the consultation, the Commission is to hold a public hearing on 29 May in Brussels.Commissioner for Financial Services, Stability and Capital Markets Union, Jonathan Hill, announced the review of EMIR in Edinburgh earlier this year.Pension funds have also been granted an additional two-year exemption from EMIR until August 2017 by the Commission over concerns it would dramatically affect funds’ investment models.At the time, Hill said he understood the concerns of asking pension funds to clear derivatives centrally but said no alternative had yet been found.
The association also questioned whether EIOPA had the mandate and powers to set up a pan-European occupational DC framework, which would require “fundamental” social, labour, tax, and supervisory issues to be addressed.It also claimed that the questions EIOPA asked suggested the supervisory authority was more interested in getting respondents to agree with certain statements than in identifying problems and solutions.The Pensions and Lifetime Savings Association (PLSA), the UK pensions trade body, did not respond to the survey, partly because of a lack of appetite for running cross-border schemes among its members.James Walsh, EU and international policy lead at the PLSA, told IPE: “It is quite clear that EIOPA are keen to press ahead with this whole project for establishing a framework for pan-European occupational DC schemes. We don’t detect any great demand for that and we don’t see how you can easily circumvent the difficulties that arise from having different national tax systems, and different national regulatory systems.”An EIOPA spokeswoman emphasised to IPE that the survey was a first step to gauge stakeholders’ initial views on and potential appetite for a pan-European occupational DC framework.“The questionnaire included a number of open questions inviting stakeholders to provide additional comments and, for instance, bring up issues that may not be covered in the questionnaire,” she added.She said that EIOPA was welcoming all the comments and ideas from the stakeholders, “many positive but also negative ones”.EIOPA has said that it would feed responses to the survey into a discussion paper that it planned to publish later in the year.“The discussion paper will outline early stage proposals to foster the development of cross-border activities in Europe and give the opportunity for all stakeholders to submit their first views,” it said.EIOPA is organising a workshop next month as a follow-up to the survey to gain a better understanding of the views shared by stakeholders, according to the spokeswoman. It is also engaging with the authority’s Occupational Pensions Stakeholders Group.EIOPA floated the idea of a pan-European occupational DC framework in late 2015. It has said that such a framework “would outline a number of proposals seeking to foster the further development of cross-border activities for occupational DC pensions in Europe”. These proposals could take the form of a pan-European occupational DC scheme or a “good practice guide”. Germany’s occupational pensions association has strongly criticised a survey carried out by the European Insurance and Occupational Pensions Authority (EIOPA) on a proposed pan-European occupational defined contribution (DC) framework.The idea is to encourage and develop an internal market for second pillar pensions in the EU, with a focus on DC. EIOPA sees its work on facilitating more cross-border activity as being in line with the revised IORP Directive and its mandate to facilitate supervisory convergence.But there is resistance to this in some quarters.aba, Germany’s occupational pensions association, claimed the survey did not address certain key issues, such as whether respondents think such a framework was needed, and what the evidence was for this.
A leading fund services provider is to switch its international fund trading platform to blockchain technology from May, in a move it claims will cut distribution costs by up to £3.4bn (€3.8bn) a year.Calastone said it would be the first transition to blockchain for the global funds sector and would make products more accessible to all market participants and investors across 40 markets and more than 1,700 financial organisations.Calastone’s clients – all of which will be switched onto the blockchain platform – include Danish pension fund AP Pension and asset managers Hermes Investment Management, JP Morgan Asset Management, Aviva Investors and Baring Asset Management, according to its website.The whole network will start to use blockchain technology in May 2019 through Calastone’s new Distributed Market Infrastructure (DMI), a trading platform. Campbell Brierley, Calastone’s chief innovation officer, said: “Calastone’s DMI will totally transform the trading and servicing of funds and has the potential to realise significant long-term value.”He said that, by gathering all trading relationships together in a digital infrastructure, all participants would benefit from the real-time view of each record.From a data perspective, this would give them “a single version of the truth”, he said.“Instantly this alleviates common friction points that exist today, including areas such as reconciliation and settlement, which are resolved automatically with all transactions being performed in the same environment,” Brierley said.In a statement announcing the development, Calastone argued that the investment fund industry “trails other financial services sectors, still beset by manual processes, outdated systems and technologies”. The current system of fund trading was “opaque, fragmented, and doesn’t work in the interests of consumers”, Calastone said.
UK local authority pension funds have called on asset managers to improve their performance on environmental, social and corporate governance (ESG) matters.The Local Authority Pension Fund Forum (LAPFF) said it had gathered “disappointing feedback” from a survey of its membership, which includes 79 pension funds and five local government pension scheme asset pools.In a report on the survey, which was carried out at the end of last year and to which 29 funds responded, LAPFF said the findings were “encouraging in one sense as managers are not heavily criticised” but that “a less generous assessment would be that they are damned with faint praise”.“Whichever way you interpret the results, there is certainly room for improvement,” the organisation continued. “In this respect the report throws down the gauntlet for asset managers to do much more when it comes to exercising their stewardship functions.” Overall, the LAPFF said, survey respondents were underwhelmed by their asset managers. A majority (60%) said their ESG needs were being met “somewhat well”, while just 8% gave top marks. One in five said their ESG needs were being met “very well” by managers.The survey also found that the majority (63%) of respondents felt asset managers were “somewhat effective” at engaging with portfolio holdings “to achieve concrete and measurable change in ESG behaviours”, but only 4% gave the top score.When asked how likely pension funds were to recommend their asset manager to another investor based on ESG performance, funds give an average “net promoter score” of 6.5 out of 10, which LAPFF said meant the funds were “close to being classed as unhappy customers”.Almost half (45%) of respondents stated that while asset managers asserted that ESG was integral to investment processes and valuation methodologies, they provided little evidence this was the case.At the same time, those funds who placed more weight on ESG issues were more likely to have also stated they were clearly integral to the manager’s investment processes and valuation methodologies, according to the report.“In this respect, the weight given by funds to ESG in selection matters, as it [sic ] appears to be matched in the investment processes,” said the report.“If it achieves nothing else, this survey should be a wake-up call for some actors in the asset manager sector that they are being judged on ESG performance and are often viewed as underperforming,” it continued.The report was compiled by Paul Hunter of PIRC, LAPFF’s research and engagement partner.Last week a report from the Association of Member-Nominated Trustees and UKSIF put the spotlight on the role of investment consultants in helping pension fund clients meet new ESG-related regulatory requirements, saying trustees should ensure they understood consultants’ processes for including ESG in manager selection, appointment and monitoring. Further reading: The very real limits of ESG integrationDo asset managers have what it takes?Consultants’ ESG advice ‘paramount’ given new regulationsEuropean investment professionals reject forced consideration of ESG
Boris Johnson faces the same Brexit challenges as his predecessor Theresa May when he takes over as prime minister this week, according to asset managers.Johnson was elected leader of the ruling Conservative Party by its members today, replacing May, who quit two months ago after failing to get the UK’s EU withdrawal agreement passed by parliament. He will officially become UK prime minister tomorrow following a meeting with the Queen.While Johnson led his campaign for the leadership promising to leave the EU on 31 October with or without a withdrawal agreement, asset managers today warned that the opposition to both the agreement and a ‘no-deal’ Brexit within parliament meant the new prime minister faced an uphill task in the next three months. Azad Zangana, senior European economist and strategist, Schroders“It is clear that there is no majority for the current withdrawal agreement, and a significant majority against no-deal. Indeed, we expect those opposed to Brexit to successfully raise motions that would compel the government to seek an extension in the absence of a deal being approved by parliament.“Given the low likelihood of a successful re-negotiation, the most likely outcome ahead of the Brexit deadline is therefore another delay.”Leigh Himsworth, portfolio manager at Fidelity International, said: “With Boris Johnson as prime minister, the options facing the UK remain broadly the same: a withdrawal agreement similar to that presented by Theresa May, a general election to win a greater majority for the Conservative Party, or a new [EU membership] referendum.”Philip Smeaton, chief investment officer at UK-based wealth manager Sanlam, added: “While the chances of leaving with a no deal have significantly increased, we still question whether this is a viable route considering the parliamentary arithmetic.“Equally, we don’t believe the EU will cave to the UK’s demands around the Irish backstop… Despite having a new prime minster, it’s still a case of catch 22 for the UK.”Buying opportunity?Although uncertainty would prevail in the short term, some investors speculated that it could signal a buying opportunity for UK assets given the recent fall in the value of sterling and declining appetite for UK equities.Jason Borbora-Sheen, a multi-asset portfolio manager at Investec Asset Management, said uncertainty for investors would “likely continue long into the future as the trading relationship is negotiated” between the UK and the European Union.However, he added that there would “likely be a buying opportunity once there is more clarity over the Brexit outcome”. “[Johnson’s] appointment arguably increases the odds of a hard or no-deal Brexit,” Borbora-Sheen said, “which will likely cause sterling to weaken and would hurt the UK’s near-term growth opportunities, favouring the UK-listed multinationals over domestic plays. After a short while, however, we would expect investors to take advantage of the situation and start to look for oversold opportunities in the UK and add exposure.” Azad Zangana, senior European economist and strategist at Schroders, said Johnson’s Brexit rhetoric – he promised to take the UK out of the EU on 31 October “come what may” – “simply lacks credibility”.“While at some level it makes sense for Johnson to use the threat of no-deal as a negotiation strategy, the fatal flaw is that the parliamentary maths has not changed, and does not support the strategy,” Zangana said. “Boris Johnson was a great supporter of the City of London when he was mayor, and we look forward to working with him to ensure that the investment management industry continues to thrive and grow under his leadership in government”Chris Cummings, chief executive, the Investment AssociationFidelity’s Himsworth said: “While it is easy to argue that the UK equity markets offer great value versus their peer group, this is especially true of a deal or new referendum scenario. The jury remains firmly out regarding a ‘no-deal’ as this would be too much of a step into the unknown.“We may well look back in a few years’ time and regard this period as quite simply one of the best opportunities that we have seen to invest in UK equity markets.”Over the past three years the FTSE All Share has gained 26.4% in sterling terms, according to FE Analytics. However, the S&P 500 is up 49.9% in that period, while the Euro Stoxx 50 index has gained 36.1%.Policy demandsAway from the investment outlook, some industry commentators called for the new prime minister and his cabinet – expected to be appointed within the next few days – to push forward with expected policy decisions and legislation.Helen Morrissey, pension specialist at Royal London, said: “While Boris’s in-tray is likely to be straining under the weight of Brexit related issues there’s a domestic agenda that has been in limbo for far too long. We call upon the prime minister to devote some time to pressing issues such social care funding and the Pensions Bill, which will allow the industry to make much needed progress with initiatives such as the pensions dashboard.”Barnett Waddingham senior consultant Malcolm McLean called for an “urgent review” of the UK’s pension tax relief regime after reports emerged of some doctors having to reduce their working hours in order to avoid huge tax bills for breaching UK pension rules regarding how much individuals can accrue.Several government consultation papers covering various areas of pensions policy have emerged in the past two years, but most have only promised legislation “when parliamentary time allows”.