Month: September 2020

Economist Wescott predicts early end to quantitative easing in US

first_imgThe US economy is humming along nicely – so nicely, in fact, that the Fed might well decide to hasten its exit out of quantitative easing (QE) this year, according to Robert Wescott, economics adviser to former US president Bill Clinton and head of economic research consultancy Keybridge Research.IPE sister publication IPNederland spoke with Wescott as he visited Amsterdam at the end of January on the invitation of Pioneer Investments.“In 2013,” he said, “US GDP growth came out at around 1.9%, and this would have been 3.8% if it hadn’t been for fiscal consolidation.“Fiscal tightening last year amounted to some 2% – the US government implemented more cuts in a single year than the administration [of UK prime minister David Cameron] did in its entire lifetime.” Robust growth of more than 3.5% cannot be reconciled with QE measures designed to speed up the economy.“Financial markets have been led to believe the Fed will opt for gradual tapering and keep interest rates near zero for an extended period of time,” he said.“They believe any real discussion about the Fed’s exit is set for 2015, not 2014.”But Wescott warned that they might be in for a surprise.“Although a 1.9% growth is not enough to knock the Fed off its gradual tapering path, chances are we’ll see significantly higher figures this year, as fiscal consolidation is no longer an issue, at least for the next two years,” he said.“I can easily picture an acceleration of the economy, where, suddenly, the Fed says ‘we are not going to taper by $10bn every six weeks – we’ll just cut QE in half by 50% today’.”A sudden withdrawal rather than gradual tapering is likely to throw the markets into turmoil and will no doubt hit emerging markets.But emerging market troubles have no significant impact on the US economy and will not be taken into consideration, according to Wescott.“This may not be what people want to hear – and I personally think we should think more carefully about the exit ramifications – but the reality is the Fed bases its decision only on what is good for the US.”Increasing the likelihood of a 2014 exit – Fed chairman Ben Bernanke’s successor may be a dove, but the contingent of hawks within the Fed is gaining strength, said Wescott, who counts himself among the hawks.Stimulating the economy is fine as long as the economy needs the boost, he said, but no longer.“As the US economy is gathering steam,” he added, “those measures bear close monitoring.”last_img read more

NPRF drops State Street Global Advisors following £23m fine

first_imgThe National Pensions Reserve Fund (NPRF) has terminated all of State Street Global Advisors Ireland’s (SSgA) mandates in the wake of a £23m (€27.9m) fine imposed on State Street’s UK transition management business.The penalty, imposed by the UK’s Financial Conduct Authority, was handed down after the regulator concluded the firm had “deliberately” overcharged six clients using its service – clients including the NPRF, which previously reclaimed €2.65m in non-contractual fees charged when it liquidated €4.7bn worth of its portfolio.A spokesman for the NPRF confirmed that SSgA Ireland – at the end of 2012 in charge of €861m across three equity and one infrastructure mandates – had been let go.In its statement, the spokesman only alluded to the termination of the indexed equity mandates, worth more than €600m, by the NPRF Commission. It is unclear if the infrastructure mandate was still overseen by SSgA.Separately, the fund also announced it had seen a 27% return in 2013, almost exclusively the result of a revaluation of the shares held in its directed portfolio, employed to support bailed out Bank of Ireland and Allied Irish Banks. A €4.5bn increase in the bank portfolio was announced in January, with AIB ordinary shares valued at €0.0126 at the end of the year, up from €0.0079 in 2012.According to a performance update published by the NPRF Commission, the directed portfolio returned 57.6% over the course of the last year, while the discretionary portfolio – still controlled by the Commission and soon to be redeployed to fund the Ireland Strategic Investment Fund – returned 1.8% in the three months to December, and 6.3% for the year.At the end of December, the €6.8bn discretionary portfolio was 40% cash, 23% alternative investments, 25% equity and 10% euro-zone corporate and inflation-linked bonds.last_img read more

Mandate roundup: Kames, BlackRock, RQFII, Nikko AM

first_imgOliver Polson, pensions manager for UK and Ireland at Molson Coors UK, said that, with the additional allocation, Kames would oversee more than half of the pension plan’s total absolute return bond investments.In other news, BlackRock has been given permission to invest an additional RMB20bn (€2.7bn) in Chinese onshore stocks and bonds under the government’s Renminbi Qualified Foreign Institutional Investor (RQFII) programme.The additional award, assigned to BlackRock’s Singapore-regulated subsidiary, takes the total amount of China investment quotas allocated to BlackRock entities to more than $4.9bn (€4.4bn).Ryan Stork, chairman at BlackRock Asia Pacific, said: “The ongoing programme of capital markets reform is vital to international investors wishing to gain access to the world’s second-largest economy, notably the steps taken to broaden global investors’ participation in onshore fixed income and equity markets.”The decision by the Chinese authorities comes two weeks before index provider MSCI decides whether to include mainland Chinese shares, called A-shares, in its benchmark emerging market index.Last year, MSCI decided against doing so due, as it considered there were still too many restrictions governing foreign investment in China.The Ontario Pension Board and the Canada Pension Plan Investment Board late last year became the first pension funds to obtain an RQFII licence to access China’s mainland capital markets.  Lastly, the London-based global fixed income team of Japan’s Nikko Asset Management has recently secured a number of Japanese institutional mandates, mainly for US fixed income.There has been a significant increase in demand for global fixed income products from Japanese institutional clients, according to Nikko, after the Japanese central bank moved to negative interest rates in January, taking government bonds into negative yield territory.No further information about the recent Nikko mandate wins was available at the time of publication. The £1.7bn (€2.2bn) Molson Coors UK Pension Plan has increased its allocation to absolute return bond funds, investing the additional allocation entirely with Kames Capital.The brewer’s UK pension plan already had £100m invested in absolute return bond funds via Kames Capital, which was awarded the original mandate in 2015.The corporate’s legacy defined benefit plan is running a long-term de-risking programme.In connection with this, it recently increased its allocation to absolute return bond funds from 15% to 19.5%.last_img read more

​Hesse, Baden-Württemberg and Greater Manchester funds sue VW

first_imgThe Hessian finance minister, Thomas Schäfer of the centre-right Christian democrats (CDU), said it was the government’s fiduciary duty to reclaim losses caused by “bad crisis management and lacking investor disclosure”.Baden-Württemberg, which in total has €5.2bn in pension reserves covering civil servants and the state’s judiciary, cited similar concerns when explaining its suit, which it so far has only filed on behalf of the €3.2bn civil service reserve managed by Germany’s central bank, the Bundesbank.In a statement, the state finance ministry said it expected a suit would filed on behalf of its €2bn reserve fund for the judiciary by its external asset managers.Meanwhile, the UK’s largest local authority fund, the £17bn (€21bn) GMPF, joined a class action suit financed by Bentham Europe.Covering 80 investors from 15 countries, including several European nations, the €2bn suit financed by Bentham covered investors holding nearly 20% of VW’s free float, according to Bentham CIO Jeremy Marshall.Cllr Kieran Quinn, chair of the Greater Manchester Pension Fund, said of his fund’s decision to join the suit: “Playing our role in litigation is one way we can fulfil our fiduciary duty to maximise the fund’s returns, but we also hope there will be lessons learned from the VW scandal to raise corporate governance standards more generally.”VW’s share price dropped from €162.40 to as low as €92.36 at the beginning of October last year in the wake of the emissions scandal.It has since partially recovered and stood at €122.60 when German markets closed on 15 September.A number of large investors have filed cases against the car manufacturer in the wake of the scandal, including the California State Teachers’ Retirement System and Norway’s sovereign fund, the Government Pension Fund Global.Read more about the choices facing asset owners considering a lawsuit against VW in the current issue of IPE Volkswagen is being sued by two further German state pension funds, after the governments of Hesse and Baden-Württemberg joined Bavaria in filing suits in the wake of the car manufacturer’s emissions scandal.The German state governments announced their lawsuits the same day as the UK’s Greater Manchester Pension Fund (GMPF) joined an 80-strong class action suit looking for €2bn in damages.In separate statements from their respective finance ministries, the German states said they decided to file cases against VW at Braunschweig District Court to avoid missing the statute of limitations associated with 2015’s emissions scandal.Hesse estimates its €2.4bn reserve fund for civil servants suffered losses of €3.9m after it was revealed VW had used so-called defeat devices to mask the true level of its cars emissions, while Baden-Württemberg estimates losses of €400,000.last_img read more

Och-Ziff Capital’s Hugh Cutler joins Affiliated Managers Group

first_imgHugh Cutler is to join US asset management conglomerate Affiliated Managers Group (AMG) in the New Year.Cutler is managing director at hedge fund firm Och-Ziff Capital Management, where he has overseen business strategy in Europe since 2014.Prior to joining Och-Ziff, Cutler was head of distribution at Legal & General Investment Management.He has also led the Global Strategic Solutions group at Barclays Global Investors and was a consultant at Railpen and Towers Perrin (now Willis Towers Watson). Cutler said he was “extremely enthusiastic” about the new role, which he will take up from 1 March 2017.He added: “With AMG’s reputation as the partner of choice to many of the world’s best active equity and alternative managers, there is a large and expanding opportunity to build increasingly strong and multi-faceted client relationships on a global basis.”Sean Healey, chairman and chief executive at AMG, said: “Given Hugh’s experience in leading multi-region distribution efforts for global asset managers across the full spectrum of asset classes and investment disciplines, and track record of developing and managing highly effective sales teams across multiple geographies and channels, we look forward to his contributions to the continued long-term success of our global distribution franchise, including through the development of potential new strategic avenues and regions of coverage.”AMG takes stakes in – and provides services such as distribution to – boutique asset managers in a number of countries.Among its affiliate firms are AQR Capital Management, Artemis Investment Management, Pantheon and Veritas Asset Management.last_img read more

Danish pension funds’ share offer prompts Nykredit IPO rethink

first_imgSome of Denmark’s biggest pension funds have clubbed together to make an offer to buy a minority stake in the country’s main mortgage lender, according to reports.The move has prompted Nykredit, which has a 41% share of Denmark’s mortgage lending market, to reconsider its plans to list on the stock market.Nykredit announced that Forenet Kredit – the customer association that owns most of the company – received an offer to purchase a minority share of its holding in Nykredit.According to local media reports, the offer has been made by a consortium of investors including Danish pension funds PFA Pension, AP Pension and PensionDanmark. The consortium is reportedly offering to invest between DKK10bn (€1.34bn) and DKK15bn in Nykredit.PFA Pension, AP Pension and PensionDanmark all declined to comment on these reports.Nykredit said in its announcement to the Copenhagen Stock Exchange: “The boards of directors of Forenet Kredit and Nykredit A/S as well as the group executive board will now consider whether this offer, on balance, constitutes an attractive alternative to a stock exchange listing, including whether it ensures a satisfactory scope for raising new equity capital.”After considering this, the board would decide whether to recommend the offer for approval by the committee of representatives of Forenet Kredit, said Nykredit. The committee would make the final decision on a potential sale of shares.In the meantime, it said preparations for an initial public offering (IPO) would continue unchanged.Nykredit has been working on plans to seek a stock exchange listing since February 2016, aiming for the IPO to take place before February 2018.Forenet Kredit has said the group decided to raise more capital in order to meet its regulatory capital requirements and adapt to new and significantly higher requirements known to be on the way.Nykredit said that “as a natural part of this process”, its group executive board had also looked at alternatives to a stock exchange listing.The group said it had also looked into the option of selling a minority shareholding before Forenet Kredit decided to start IPO preparations.“At the time, this was not a viable solution,” it said.However, in the intervening period, the Nykredit Group’s financial performance had improved significantly, and investors’ demand for unlisted equity investments has grown, it said. The new purchase offer was made against this backdrop.last_img read more

Trio of pension funds call for action at administrator after data failings

first_imgDutch pensions provider AGH has been questioned by three clients about its ability to properly manage internal processes after a series of administration problems.The industry-wide pension funds for butchers (Slagers), the food trade (AVH) and the drinks industry (Dranken) all reported having to carry out additional checks on AGH’s processes.The issues were highlighted by the schemes’ external auditors tasked with assessing internal processes and controls. The €725m Dranken scheme said AGH hadn’t checked that annual statements for pensioners contained all the required data. The same applied to communications with new joiners and departing staff. Dranken also found that the amounts quoted on annual statements were too low, as the figures had been based on 11 months rather than 12.Although AGH had paid for the necessary corrections, the pension fund said these incidents also caused reputational risk.John Klijn, chairman of the €2.3bn Slagers scheme, said that its accountant had been forced to check calculations as the bookkeepers had doubts about accuracy.Klijn suggested that the errors had been caused by AGH’s rapid growth in 2017, when both Slagers and the €272m sector scheme for millers joined, followed by the €813m pension fund for hairdressers earlier this year.Klijn said that he expected AGH to improve its its performance.“My impression is that the reporting by AGH is correct, but we have to prove this to supervisor De Nederlandsche Bank,” he said. “Currently, we are checking all processes.”The €1.3bn AVH said it was worried about the quality of internal processes at AGH, although it did not provide specific examples.Both AVH and Dranken – founders of AGH – have also objected to the provider’s proposals to amend its articles of association, which would end their right to binding nominations for trustees at AGH.The court in The Hague has already ruled that AGH must honour AVH’s nomination for two trustees. In another case, Dranken and AGH have asked a Rotterdam court to rule whether the provider was allowed to unilaterally amend its articles of association.AGH said it was not able to comment on the issues because of the holiday period in the Netherlands.last_img read more

Accounting roundup: More work needed on ‘too big to fail’ banks

first_imgIn order to identify the scope for abuse, the researchers examined quarterly data instead of relying purely on annual risk scores.The economists also called for prudential regulators to conduct further research into “whether an alternative metric for the risk score calculation”, such as a smoothing or averaging of quarterly scores, could unpick the unintended consequences of the framework for assessing systemically important banks.The researchers claimed that although there was “empirical evidence” to suggest that the framework had incentivised banks to lower their exposure to risk, it might equally “have incentivised some banks to window dress” their risk scores.IASB eyes new pension standardMeanwhile, the International Accounting Standards Board (IASB) has updated its workplan to confirm a decision to launch a standard-setting project on pension benefits that depend on asset returns.According to the latest information, the board plans to have completed a review of the available research by the middle of next year.In July, the IASB voted to delay work on its controversial IFRIC 14 project in order to align that work with its parallel standard-setting project on pensions.IASB staff have signalled that work on pension plans that depend on an asset return could potentially widen the scope of its IFRIC 14 amendment.EU plots financial reporting ‘lab’Finally, more details have emerged of the European Union’s plans to structure its proposed “financial reporting lab”.According to a call for applicants to join the body released on 13 September, the new group will draw its membership from investors, academics and civil society.This contrasts with the FRC’s Financial Reporting Lab in the UK, which draws its membership mainly from investors and business.The EU body will have no responsibility for financial reporting at this stage, focusing instead on non-financial matters and sustainability reporting.Jean-Paul Gauzès, president of the European Financial Reporting Advisory Group (EFRAG), will chair the lab, but EFRAG’s board will not itself play a role in decision making.The new lab’s vice-chair is Alain Deckers, who heads the European Commission unit responsible for corporate reporting. A group of European Central Bank economists have called for further analysis to confirm whether the framework for managing global systemically important banks incentivises institutions to massage their risk profile downward.The four economists – Markus Behn, Giacomo Mangiante, Laura Parisi and Michael Wedow – claimed such manipulation could “distort the relative ranking of banks’ systemic importance and have adverse effects on the functioning of capital markets and the provision of financial services”.In particular, they noted studies showing that banks had arbitraged regulatory and reporting differences between different EU member states to reduce their risk scores.Other studies relied on by the researchers pointed to the potential for banks to reduce their repo activities at year-end.last_img read more

​Skandia Liv fined €3.2m by Swedish watchdog

first_imgThe investigation, which covered the period Q4 2016 to Q3 2019,  also included the documentation the company was obliged to prepare when calculating commitments, FI said.“For several years, Skandia Liv has used an inaccurate assumption of the risk of premature termination of insurance policies, so-called lapse,” it said.As a result of this, the firm had not correctly and realistically calculated both its commitments and the capital set aside for these commitments, thereby impeding a fair assessment of the protection for customers and the company’s solvency, FI said.“The documentation for the calculation of commitments also demonstrated deficiencies that further impeded such an assessment,” it said.“Skandia Liv’s failure over a long period of time to correctly apply the rules is serious,” it said, but added that the company had taken steps to rectify the deficiencies.Therefore, the regulator said, it has decided to give the firm a warning and an administrative fine of SEK35m.Skandia cheif executive officer Frans Lindelöw said his firm had addressed the Swedish FSA’s criticism and took it very seriously.“It is important to point out that customers have always been safe and not exposed to any risk,” he said, adding that Skandia was a financially strong and well-managed company that lived up to its future commitments to its customers.Skandia said it had taken on board FI’s comments on the interpretation of the regulations, and that during the fourth quarter of 2019, it had implemented changes in the calculation of technical provisions and capital requirements related to cancellations.Overall, these changes had no significant impact on Skandia Liv’s capital strength, the company said, adding that it was a stable and secure company with a capital ratio of 465% at the end of 2019, giving it almost five times the regulatory capital required. Swedish occupational and private pensions provider Skandia Liv has been given a warning and a SEK35m (€3.2m) fine from the country’s regulator for not calculating its capital requirements and commitments to customers properly for several years.In a statement, Finansinspektionen (FI) said: “This has meant that the protection of the customers and the company’s solvency situation could not be assessed in a fair way.”Skandia has responded by saying it took the criticism very seriously but that customers were not exposed to risk.The Swedish regulator said it had investigated whether Skandia Liv complied with the rules for calculating its commitments to policyholders – the technical provisions – and the capital the company had to set aside to be able to manage the risks in its operations.last_img read more

Centenary of memories attracts $1 million sale

first_img >>>FOLLOW THE COURIER-MAIL REAL ESTATE TEAM ON FACEBOOK<<< The property at 167 Brighton Rd, Sandgate as it looks today.Professionals Sandgate principal, Darren Patrick, said the property, originally built in 1920, was on 1118sq m and in original condition.More from newsFor under $10m you can buy a luxurious home with a two-lane bowling alley5 Apr 2017Military and railway history come together on bush block24 Apr 2019“These sorts of homes come up once in a blue moon,’’ Mr Patrick said.“It is very original but very well loved, with the original kitchen and bathroom. A very clean canvas that no one has touched. The 1920 Sandgate house is on a large 1118sq m block.Sandgate is the fourth highest growth suburb in Brisbane according to CoreLogic data for the 12 months to the end of August. Median house prices have grown 22.4 per cent in 12 months and now stand at $758,750. Only Lamb Island, Kangaroo Point and Dunwich have achieved a greater growth in median house prices.center_img The original kitchen of 167 Brighton Rd, Sandgate.“Everybody who wanted to buy it wanted to build a beautiful home.”The property had a two street frontage but with a steep slope on one side, had only one street access. This property at 167 Brighton Rd, Sandgate has just sold for over $1 million.A SANDGATE house that had been owned by the one family for more than 50 years fetched one of the highest prices for a property on Brisbane’s northside this month.With 100 people viewing the property in the four weekends it was open for inspection, seven registered bidders turned up to auction day and three were active bidders. The house at 167 Brighton Rd sold at auction for $1,052,000 to a bidder from Brisbane.last_img read more