Pension providers including Sweden’s AP2, Canada’s Caisse de dépôt et placement du Québec and TIAA-CREF have been heavily criticised in a report claiming their Brazilian farmland investments are linked to a local businessman accused of land-grabbing and suspected of involvement in money laundering.The report also says farms have been acquired through a company structure that avoids Brazil’s tight regulations on foreign investment.The research was carried out by the NGOs GRAIN, which supports small farmers in working for community-controlled and biodiversity-based food systems, Rede Social de Justiça e Direitos Humanos, Inter Pares and Solidarity Sweden-Latin America.The investments were made through the TIAA-CREF Global Agriculture fund (TCGA), which launched in 2012 with $2bn (€1.9bn) committed to investing in farmland in “major grain-exporting nations” – the US, Australia and Brazil. The researchers said their investigations revealed that some of the farms TCGA acquired “were owned by the companies of a Brazilian businessman [Euclides de Carli], who is the subject of several criminal investigations, before being sold to TCGA. This businessman is accused of resorting to an illegal and often violent process of land grabbing.”They added: “The pension funds buying Brazilian farmland through their investments in the TCGA are now directly involved in the country’s serious land conflicts.”The researchers also said TCGA funds were invested through a separate company, Tellus Brasil Participações Ltda, managed by the Brazilian sugar company Cosan.According to the report, TCGA ultimately owns 49% of Tellus, with Cosan owning the other 51%.Tellus acquires farmland on behalf of TCGA but is not subject to Brazilian regulations restricting foreign ownership of farmland, since it is 51% owned by the Brazilian company Cosan.However, according to the report, Tellus raises funds for its acquisitions by issuing debentures to two companies controlled by TIAA-CREF.The report says: “By acquiring these farms through the purchase of debentures from Tellus, TCGA can effectively ensure complete control over its farmland acquisitions without surpassing the 49% ownership of Tellus that would subject the company to Brazilian laws restricting foreign ownership of farmlands.”It continues: “This expansion of agribusiness also spreads a disastrous model of agriculture. The plantations growing commodity crops, like sugarcane and soybeans, deplete soils and water sources, pollute and poison local communities with pesticides and provide few jobs to a desperate and exploited rural workforce.”It concludes: “TCGA’s cash inflows are fuelling an expansion of plantations across many states in Brazil, which is destroying the environment, facilitating labour exploitation and generating severe land conflicts.”AP2 and TIAA-CREF are both founding members of the group of international institutional investors that launched the Principles for Responsible Investment in Farmland in September 2011.These principles aim to improve sustainability, transparency and accountability of investments in farmland. AP2 told IPE: “Sustainability factors are central to AP2’s investments in farmland. Our strategy is to invest in large-scale agriculture real estate in countries that possess clearly defined legal structures.“We do not acquire small family-owned farms in Brazil. We are confident in the due diligence process TCGA has in place.”Last August, TIAA-CREF announced it had raised $3bn for TCGA II from 20 investors, including AP2, Cummins UK Pension Plan Trustee, Environment Agency Pension Fund, Greater Manchester Pension Fund, New Mexico State Investment Council and the TIAA general account.The fund will invest in farmland across North and South America and Australia.The report is available here.
Danish statutory pensions institution ATP is increasing its key pension – the ATP Lifelong Pension – by 1.5% from the beginning of next year, reflecting good investment results.However, it said returns on its bonus reserves had not been high enough to warrant distributing a general bonus to all pension scheme members.The 1.5% increase, for pensioners only, matches the uprating given this year and that of the year before. ATP’s chief executive Carsten Stendevad said: “Based on many years of good investment results, ATP can now increase the guarantees for pensioners for the third year in a row.” He said this meant the pension fund had given pensioners a rise of 4.5% since 2013.Explaining its bonus policy, ATP said it was able to increase pensions for all members, both current and future pensioners, when its free reserves amounted to at least 20% of provisions for the pensions it promised.If those reserves were between 15% and 20% of that amount, then pensions could be increased by 1.5% just for members above pensionable age.At the end of the third quarter of this year, free reserves were 16.4% of provisions.It said bonus distribution depended particularly on the development of longevity and the financial markets, as well as how well ATP invests.Meanwhile, labour-market pension scheme PensionDanmark said it was buying a retail property in the North-Zealand town of Lyngby, incorporating around 16,000sqm of space.The property – currently leased to the firm Johannes Fog and housing its DIY and home furnishings shop Fog Bolig & Designhuset – consists of 8,807sqm of retail space and 7,400sqm of parking including 265 spaces.PensionDanmark did not disclose the value of the deal.Johannes Fog said it was selling the property to focus on core activities.It said it was making a big financial profit from the sale, which gave it room to develop its main activities further.Torben Möger Pedersen, chief executive at PensionDanmark, said: “With its location in the centre of Lyngby, the property and the carpark are very attractive.”At the same time, the pension fund will have a good and stable tenant in Fog, he said.The pension fund, which managed DKK171bn (€22.9bn) in assets overall at the end of 2014, said it now had a real estate portfolio of DKK15bn divided among commercial, residential, retail and public/private partnership projects.
The assets of Particuliere Beveiliging have quickly increased, from €482m in 2009 to €1.1bn at present.“Given our larger scale and our increased professionalism, we wanted to have the option of more than a one-stop shop,” said Kestens.According to the chairman, costs have not played a crucial role in the scheme’s decision to leave PGGM for BMO.“Costs will strongly depend on the chosen managers, the preferred investment style and the services we would buy.”Kestens made clear that the pension fund was not considering a change of investment policy.He said that the scheme illiquid investments, including its infrastructure holdings, would remain with PGGM “as long as it was necessary and useful”.He added that Syntrus Achmea Real Estate & Finance would remain the manager of its 5% investments in mortgages and property.The scheme said the switch-over to BMO was the result of an evaluation of fiduciary management in 2015 as well as a tender. The €1.1bn sector scheme for the Dutch security industry, Particuliere Beveiliging, has replaced fiduciary manager PGGM with provider BMO.Hans Kestens, the pension fund’s chairman said that an important criterion for the change was the fact that BMO allowed the fund more leeway for selecting external asset managers.“At PGGM, the connection between the disciplines of fiduciary advice and the implementation of asset management was much stronger,” he said.“Although we could deviate from this, as a client one ties itself to their philosophy,” he explained, adding that his scheme was not dissatisfied with PGGM.
Hymans Robertson – Board chairman John Dickson is to become senior partner at the UK pension consultancy from 1 April. He takes on the position from Ronnie Bowie. Dickson joined Hymans Robertson in 2003, going on to lead its investment consulting business. He became chair of the company’s board at the start of 2014. Bowie will continue as a partner, working with several of Hymans Robertson’s major clients, the company said in a statement. Bowie joined Hymans Robertson in 1980.Dickson said: “Ronnie’s incredible commitment and dedication to our firm has played a huge role getting us to where we are today. For almost 40 years he has been, and will continue to be, a universally respected leading figure both within our business and the wider industry. Over that time our markets have changed dramatically and have become vastly more complex. Ronnie has continually adapted to, and led us through, much of that change.”Cindu – The Dutch company pension fund of Cindu International has appointed Jacco Heemskerk as its independent chairman. He succeeded Rob van Pernis, a former chief executive of Cindu, who had been at the helm of the scheme since 2007. Heemskerk was previously an executive trustee at the Dutch pension fund of Royal Bank of Scotland, which has merged with the general pension fund (APF) of insurer Centraal Beheer, part of Achmea Group.NN IP – The Dutch asset manager NN Investment Partners has named Hester Borrie as head of strategic business development and integrated client solutions as of 1 April. This will be in addition to her position as head of the client group. She will replace Martin Nijkamp, who is to leave NN IP after 30 years. Nijkamp is to stay on until 1 November to assist with a smooth transition, the company said.bfinance – The UK consultancy has hired Paul Doyle as a director in its client consulting team. He joins from Kempen Capital Management where he oversaw client relationships for the Dutch firm’s UK fiduciary clients. bfinance has also hired Chelsie Doyle as senior associate within the client consulting team. The pair will work with head of consulting Sam Gervaise-Jones to expand the group’s client base in the UK and Ireland.De Nationale APF – Matthijs Swarts has been named secretary of De Nationale APF, the general pension fund (APF) of Nationale Nederlanden. Swarts joins from pensions provider and NN subsidiary AZL, where he was an adviser to the board. He is a certified pension executive.GAM – The Swiss asset manager has appointed Ben Edwards as head of its institutional sales in the UK and Ireland. He previously held a similar role at PIMCO, leading institutional distribution for the US bond fund manager.AXA IM – Julien Fourtou, global head of multi-asset client solutions and trading and securities finance at AXA Investment Managers, will leave the firm after 17 years. He plans to pursue a “new entrepreneurial project”, according to a statement from the France-headquartered asset manager. His responsibilities will be taken on by Laurence Boone, in addition to her role as global head of research and investment strategy, from 3 April.Axioma – Jacqueline Gaillard has joined Axioma as managing director for people and talent, responsible for recruitment strategy at the portfolio software provider. She was previously senior vice president for human resources and talent management at International Securities Exchange.FundRock Management Company – Louise Harris has joined the Luxembourg-based fund services company to lead its legal and compliance team in Ireland. She joins from Abbey Capital, an Irish alternative investment management firm, where she was general counsel. The company said the appointment would help grow its services for Dublin-domiciled funds. Altis IM – Martin Sanders and Kees Verbaas have been appointed as the new management team for Altis Investment Management, the €50bn fiduciary management subsidiary of NN Investment Partners.Sanders is to start as managing director on 1 May. He joins from Univest Company, the provider for the pension funds of Unilever, where he was chief investment officer for several of the company’s European funds.Verbaas is to join as director of investments on 1 June, heading the team of senior portfolio managers and analysts. Currently, he is head of fund management at the €20bn asset manager Blue Sky Group, responsible for multi-manager funds. Previously he has worked at Robeco, ABN AMRO Asset Management, and Hermes.Last month, Kempen Capital Management poached four staff from Altis IM: Richard Jacobs, Sven Smeets, Edzard Potgieser, and Bram Bikker.
The Pensioenfederatie and the Dutch government have warned that this would disrupt the common organisation of the market and jeopardise the justification for mandatory pension scheme participation.Finance minister Wopke Hoekstra has supported a ban on the implementation of PEPP for mandatory industry-wide schemes, which he put to parliament in December last year. He mentioned the option for the EU member states to have the opportunity to exclude certain funds.The Association of Insurers and the PPI Association want to prevent all second-pillar pension providers in the Netherlands from being excluded from offering a PEPP. Instead, they have proposed that the ban should not apply to pension providers that do not carry risks related to life expectancy, work disability and death. Both stakeholders also want everyone with a PEPP to have the right to ‘shop around’.The Pensioenfederatie has opposed the insurance sector’s proposal. The federation deemed it undesirable that the demarcation of tasks and responsibilities within the pensions industry in the Netherlands should change because of European rules.“The debate regarding which institutions should offer which product should be conducted in Dutch parliament,” a spokesman said. “For this reason we do not support the European PEPP regulation prescribing that a PPI is allowed to offer a PEPP.”Dutch parliament decided last week to invite Dutch MEP Sophie in ‘t Veld for a public debate on the PEPP. She is leading the discussion on the pension product in the European Parliament. In ‘t Veld stated on Twitter that she had accepted this invitation. The meeting in The Hague is scheduled for 6 March. Industry associations in the Netherlands say they want premium pension institutions (PPI) to be able to offer personal European pension plans (PEPP).The Association for Insurers and the PPI Association both voiced their support. PPI are a third alternative to defined contribution pension funds and insurance products, and were approved by the Dutch government in 2011.The Pensions Federation (Pensioenfederatie) has opposed the suggestion as it would change the existing demarcation of tasks and responsibilities in the Dutch pension industry.The European Commission (EC) published a proposal last summer for the introduction of PEPP. It has been designed as a third-pillar solution that should encourage people to start saving more themselves as a supplement to state-backed and workplace pensions. The EC’s proposal also stated that second-pillar pension providers would be able to offer a PEPP, with the aim of competing directly with other financial institutions.
Credit: Paula GarridoDublin’s River Liffey There is a large gap between government rhetoric about investing in infrastructure and the reality of the asset class, according to Amin Rajan, CEO of think-tank CREATE-Research.Speaking in Dublin at IPE’s annual conference this morning, Rajan said governments spoke about big infrastructure projects and public-private partnerships, but were “very quick to [move] the goalposts”.“They virtually rewrite those contracts because they have to respond to public opinion,” he said.According to the sixth annual survey of European pension plans carried out by Rajan’s CREATE-Research and Amundi, infrastructure was the second most favoured asset class for investors after global equities: 58% of respondents said it was most suited to meet their pension plan’s goals over the next three years. The OECD has estimated that annual global infrastructure investment of around $6.3trn (€5.5trn) was needed from 2016 to 2030 to support growth and development, without considering further climate action.Infrastructure investment was “turning out to be a very good opportunity”, said Rajan.However, he suggested governments needed to minimise political risk for institutional investors.According to Rajan, many investors that participated in Amundi and CREATE-Research’s study had said they would accept governments offering guaranteed returns within a band, “because those sort of guarantees would be really worth something”.There was a huge backlog of infrastructure investing that needed to take place that would only be cleared as a result of private-public partnerships, which governments were beginning to realise, said Rajan. Meanwhile, if governments wanted to fund their infrastructure spending by issuing green bonds, they would have to offer higher interest rates than they were currently, he added.“The yield differential between green bonds and traditional sovereign bonds is not that big, but it can be bigger,” he said. “This is going to generate a lot of positive externalities and the governments will really have to increase that rate to attract people to buy those green bonds.”Governments were likely to take that step, but in Rajan’s view, green bonds would take off “later rather than sooner”.‘Safe haven equities’The asset class that European pension plans would most favour over the coming years was global equities, according to the Amundi-CREATE Research survey – 64% of respondents said it would be the most suitable asset class for them over the next three years.Acknowledging that this seemed paradoxical given talk about investors switching to risk-off mode, Rajan said global equity seemed to be acquiring a ‘safe haven’ status.This was partly because many companies covered by that asset class were “cash flow generators,” he said, adding: “They’ve got good brands, they’ve got good pricing power, they also have good dividends and they have large free cash flow.”Investors were becoming very selective in global equities because it was these cash flow generating attributes they were pursuing, said Rajan.Many defined benefit pension plans in Europe are or are becoming cash flow negative.
IPE research shows that at least 19 listed companies have reported estimated or actual GMP equalisation costs since October’s ruling, with RBS the biggest so far. The Royal Bank of Scotland’s (RBS) pension scheme has reported a £102m (€116m) cost due to the UK high court’s recent ruling on gender discrimination in pension payments.In its annual report for 2018, published today, RBS Group said it had revised slightly its initial assessment of the cost to its £45bn scheme of implementing October’s ruling.The UK High Court ruled last year that “guaranteed minimum pension” (GMP) payments accrued between 1990 and 1997 must apply equally to men and women, meaning schemes faced having to revisit 30 years’ worth of records and potentially pay billions to members who missed out.RBS Group’s £102m cost equates to just under 0.3% of its £36bn defined benefit pension obligations. The scheme has a funding surplus of more than £8bn. RBS’ head office in LondonCost estimates range from 0.3% to 1.9% of liabilities.Several estimates of the total cost to the pensions sector have emerged in recent months.Aon initially forecast a combined industry bill of £15bn, while Mercer put the total at £20bn. JLT Employee Benefits has warned that company profits could be hit with costs as high as £32bn in total, depending on how the costs are reported on company balance sheets.Meanwhile, the annual report also showed that the RBS Group scheme’s listed equity exposure had been dramatically reduced during 2018, from 21.9% of assets at the end of 2017 to just 3.7% a year later.Assets were reallocated to index-linked bonds (up from 30.6% to 40.1% of the portfolio), private debt (up from 1% to 5.2%) and private equity (from 4% to 5.2%).‘Ring-fencing’ rules create new schemeRBS Group subsidiary NatWest Markets – its high street banking operation – also reported for the first time since the implementation of so-called “ring-fencing” rules.These require the separation of investment banking operations from consumer-facing businesses. As a result of the restructuring, NatWest Markets was created and took on a portion of RBS’s total pension liability.The company’s inaugural annual report showed NatWest Markets had taken on responsibility for two pension schemes with a combined £1.4bn in assets. They have a net surplus of £281m.
“Deciding whether to transfer out of a DB scheme is one of the most complex financial decisions a consumer may have to make and it is vital customers get high quality advice. Our ambition is for pension transfer advice to reach the same standard as that of the rest of the financial advice market.” “The sooner that action is taken against those who are not doing a proper job, the more confidence consumers can have when they seek transfer advice”Sir Steve Webb, Royal LondonSir Steve Webb, director of policy at Royal London and the UK pensions minister when so-called ‘pension freedoms’ were introduced, said: “Good advisers are rigorously screening out people who should not transfer and make clear the advantages of staying in a DB scheme. But some are relying on unregulated introducers to drum up business and seem to be leaning much too far towards recommending transfers.“The sooner that action is taken against those who are not doing a proper job, the more confidence consumers can have when they seek transfer advice.”Bob Scott, senior partner at LCP, added that greater flexibility regarding access to DB savings could help reduce the number of inappropriate transfers, but acknowledged that “there are no signs the government intends to act on this”.“As long as DB flexibilities aren’t directly available, trustees and employers might consider whether to offer partial transfers,” he said. “Such arrangements can enable members to access some of their DB pension flexibly while not giving up all of the security that a DB pension brings.”Ford’s UK pension scheme announced plans to introduce partial transfers last year.LCP’s Scott added that employers and pension scheme trustees “should consider whether to appoint a dedicated IFA to their scheme and offer paid-for or subsidised advice to members on certain occasions that would help members understand all their options better, and would guard against people taking inappropriate decisions on the basis of bad advice”.The FCA’s DB transfer advice survey in numbers2,426 Advice firms polled by the FCA that worked on DB transfer cases234,951 Scheme members who received advice162,047 Scheme members who were recommended to transfer out of their DB scheme£82.8bn Total value of DB pensions on which transfer advice was given£352,303 Average value of DB pot per member Megan Butler, FCAMore than 1,400 advice companies – out of 3,015 surveyed by the regulator – recommended a transfer out of a DB scheme for more than 75% of their clients. However, when the FCA factored in advisers’ “triage” processes, the figure fell to 55%.While the FCA acknowledged that the data did not reflect the “suitability” of advice, it gave the regulator “the information it needs to focus its supervision work to drive up the quality of advice”.The regulator said it would write to “all firms where the potential for harm has been identified in the data the firm has supplied”.Transfers from DB schemes to defined contribution (DC) arrangements have increased in recent years following a 2015 rule change that opened up greater flexibilities for DC savers at retirement. The UK’s financial regulator has issued a damning report on advice relating to transfers out of defined benefit (DB) schemes, declaring that “too much advice… is still not of an acceptable standard”.The Financial Conduct Authority (FCA) has been conducting an in-depth review of the UK’s financial advice market for several years, redoubling its efforts since the restructuring of the British Steel Pension Scheme highlighted the vulnerability of DB pension savers to inappropriate or fraudulent advice.It reviewed cases for 235,000 DB members who received advice about moving their pensions out of DB schemes and into other arrangements. Of those, 69% were recommended a transfer, despite the FCA and the Pensions Regulator repeatedly warning that doing so was rarely in scheme members’ best interests.Announcing the findings today, Megan Butler, executive director of supervision, wholesale and specialists at the FCA, said: “We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.
According to his LinkedIn profile, Corrigan is also senior investment advisor at Resco Asset Management, and was CIO at multi-family office Sandaire Investment Office from November 2016 to March 2019. Before that he worked at Lombard Odier for more than six years, most latterly as head of fundamental fixed income.Hall has been part of the pool’s investment team since 2017, having held senior roles at Lloyds and Standard Life Investments before that.According to Westminister County Council documents, Kevin Cullen, client relations director, intends to retire at the end of March this year, but will be helping London CIV with succession arrangements before then.The asset pool has advertised for a permanent CIO, with a deadline for applications of 2 February.Other recent developments at London CIV include the launch of its first infrastructure fund. It is preparing to launch several vehicles for real estate. Rob Hall has been promoted to deputy chief investment officer at the £8.6bn (€10.2bn) regulated asset pooling vehicle for 32 London local authority pension funds, which has recently commenced the search for a permanent CIO.Announcing Hall’s new position this week, London CIV also revealed that Larissa Benbow, its head of fixed income, had left the pool.It said that new joiners Azim Meghji and Andrea Wildsmith, who have been appointed on an interim basis, will cover fixed income and investment risk, respectively.Hall will also be supported by Kevin Corrigan, who became interim CIO in November following the departure of permanent CIO Mark Thompson after only a few weeks in the job.
Denmark’s pensions and insurance industry association has called on the government to facilitate more flexible working patterns around retirement age, highlighting several aspects of the country’s much-lauded pension system which it said are ripe for change.Per Bremer Rasmussen, chief executive officer of Insurance & Pension Denmark (IPD, Forsiking & Pension), said in a commentary that though the Danish pension system was considered world-class today, “there are actually several elements that we in the industry want to put under the microscope – without weakening the foundation.”The government-planned pension commission should look at increasing flexible retirement both before and after state pension age, work to simplify the public pension system and rules applying to private pensions, and ensure the best possible interaction between the various pillars of the pension system, so that it always pays to save up for retirement, he said.Evidence suggested that increased flexibility was required in the country’s pension system, said Bremer Rasmussen, citing a study conducted by IPD which found that 25% of Danes wanted to retire before retirement age – along with another study that found a third wished to retire later. He proposed a smoother transition away from working life, with the option for employees to reduce their hours incrementally while approaching retirement age, arguing that this increased flexibility could allow many Danes to work for longer after the official retirement age.The decision in Denmark to increase state pension age in line with demographic changes – reached as part of the 2006 Welfare Agreement – was an important precondition for maintaining the affordability of the current welfare system, said Bremer Rasmussen.“From our point of view, the development requires more flexibility in the pension system than we have today,” the CEO said.But there were currently several barriers to flexibility both before and after the state pension age, he said. such as the inability to delay the start date for “ratepensioner” (installment pensions).“The retirement decision is for most an either-or decision – for many, a smoother transition to retirement will be preferable,” he said.The Ministry of Employment is currently preparing the agenda for the proposed pension commission. Its establishment was agreed in May 2019, as part of a pact between the then Liberal Party-led coalition government, the Danish People’s Party and Radical Liberal Party, on pension reforms to increase the coverage of the senior pension – an early-retirement disability pension.The presidency of the Danish Economic Councils (De Økonomiske Råd) said last year the commission should also consider other pensions issues, such as the relationship between the public private sectors, and pension coverage for groups with a loose connection to the labour market.Looking for IPE’s latest magazine? Read the digital edition here.