The latest move means that the pension fund’s president will be chosen by the Pope from among three candidates nominated by the Council for the Economy – which sets policy guidelines for the Vatican’s economic activities – and who could include members of the laity.Up till now, the role has normally been held by the president of the Administration of the Patrimony of the Apostolic See (the Vatican’s Treasury), the current incumbent being Cardinal Domenico Calcagno.In future, the pension fund president will serve for a five-year term, which can be renewed once.Furthermore, the pension fund’s board of directors will include four external members with experience of insurance and pension fund management, also appointed by the Council for the Economy.However, according to press reports, Father Federico Lombardi, director, Vatican press office, said no changes are planned for the pension fund’s investment policies in the immediate future. Its new board of directors will have the power to advise the pension fund president on investment strategy.Last February, the fund’s board and auditors issued a press statement in response to “alarmist information” in the media, relating to the fund’s sustainability. For the first time, financial data – including the size of the portfolio and annual income figures – was published.The press statement also said there was a “substantial balance” between available resources and commitments to current and future employees, and that the funding ratio was 95%.Contributions have been increased to a rate of 26% on taxable income, while retirement ages have been raised by two years, to 67 for lay staff, and 72 for clergy.Recently, a number of prominent industry professionals have come on board to support the Vatican’s push for improved financial management.In July last year, Jean-Baptiste de Franssu, former head of Invesco Perpetual’s Continental European business, was appointed president of the Vatican Bank.At the same time, the Council for the Economy set up a technical committee to recommend changes to strengthen the pension fund’s sustainability.The committee included industry veterans Antoine de Salins, deputy general manager and chief investment officer, Groupama; Andrea Lesca, general manager, Intesa Sanpaolo Previdenza; and Nino Savelli, professor of risk theory at the Catholic University of Milan and a member of EIOPA’s insurance and reinsurance stakeholder group. Pope Francis has issued new statutes for the Vatican pension fund which provide for the fund’s president to be appointed directly by the Pontiff himself, and for the inclusion of laity on the board of directors.The pension fund had net assets of €477.7m as at end-December 2014, with its portfolio estimated to be worth €504m at the end of 2015.The changes have been introduced by a motu proprio, a document issued by the Pope on his own initiative.They form part of an ongoing shake-up in Vatican finances prompted by the Pope since his election in 2013.
The €186bn Dutch asset manager PGGM and the €110bn Danish statutory pension fund ATP have bought minority stakes in Dutch car-lease company LeasePlan.They made the investment as part of an international group, which purchased full ownership from Global Mobility Holding – jointly owned by Volkswagen Group and Germany-based Fleet Investments – in a €3.7bn transaction.The consortium included the sovereign wealth funds of Abu Dhabi (ADIA) and Singapore (GIC), as well as institutional investment funds managed by TDR Capital and Goldman Sachs’s Merchant Banking Division.PGGM spokesman Maurice Wilbrink said: “We consider LeasePlan as a very promising company with a solid growth strategy for added value.” PGGM, asset manager for the €166bn healthcare scheme PFZW, cited its participation as “a long-term investment with an attractive risk/return ratio”.It said it would supply one of the consortium’s additional two members on the supervisory board of the car-lease firm, and that the group would share its expertise with the company’s management.Wilbrink declined to provide details about PGGM’s stake or about expected returns.The €19.7bn company, however, reported a net profit of 14% over 2014.On behalf of the consortium, Eric-Jan Vink, head of PGGM’s private equity team, said: “We are investing in the future of a company with an unmatched portfolio of market-leading assets, highly knowledgeable and dedicated staff and a sound strategy under a highly experienced management.”According to LeasePlan, the group intended to finance the acquisition through an equity investment of approximately 50% of the purchase price, a mandatory convertible note of €480m and a cash-pay debt facility of €1.55bn.Founded in 1963, the company has become a global market leader, with operations in 32 countries and total fleet management of 1.4m vehicles.It employs 6,800 staff in total.The deal should be concluded by the end of this year, pending regulatory approval.
Company accounts prepared using International Financial Reporting Standards (IFRS), the accounting rules issued by the International Accounting Standards Board (IASB), fail to provide a true and fair view of a company’s financial position.Nor do they allow companies to assess how much of their profit each year is available for distribution to shareholders.That is the view of the leading commercial Queen’s Counsel George Bompas in a second legal opinion sought by the Local Authority Pension Fund Forum (LAPFF) looking at the legality of IFRS accounts.LAPFF chairman councillor Kieran Quinn said: “The Opinion sets out how the problems flow from misreading legislation and applying false logic.” The LAPFF is now calling on the European Parliament to block any attempt within the EU to adopt the IASB’s new financial instruments accounting standard, IFRS 9.Councillor Quinn added: “The proposed endorsement of IFRS 9 would be defective because the form of fair value accounting in IFRS 9 does not enable a determination of distributable profits.”This is because the standard mixes up “unrealised mark-to-market and mark-to-model gains with realised profits”.The forum is an umbrella body for some 65 UK public sector pension fund members, with approximately €235bn in combined assets.The organisation has for some time been concerned that what it says are defective IFRS accounting standards helped fuel and worsen the fallout from the recent financial crisis by masking losses at banks such as RBS with false or illusionary profits.In June 2013, the LAPFF, Threadneedle Investment and USS Investment Management released a first Opinion from George Bompas QC.The Opinion supported the view of those investors who argue that IFRS as it currently stands pays too little heed to protecting the interests of providers of capital by failing to meet the requirements of UK company law.The investors also argued that IFRSs have moved away from prudence as a fundamental accounting principle, and that they fail to include capital maintenance as an explicit purpose of accounts.On 3 October 2013, the UK Financial Reporting Council (FRC) hit back by posting a statement on its website declaring that Bompas was wrong.“On the specific issue of its legality,” the statement read, “the Department for Business (BIS) has today confirmed that the concerns expressed by some are misconceived.”Alongside this, the FRC obtained its own legal Opinion from Martin Moore QC, which, the watchdog said, “accords with” the BIS view.The LAPFF, however, contends that Martin Moore QC relied on “defective” advice produced by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants of Scotland from 1982.That advice, George Bompas QC now argues, is not what UK company law provides for.The LAPFF also believes it is a conflict of interest for the FRC to rely on guidance from the ICAEW, which it regulates.Councillor Quinn said: “We cannot think of another area of law where the regulated party is not only involved in setting and endorsing standards under the law but has also been in control of the interpretation of the law under which the standards are set, which in this case is an incorrect representation of the law.“By this route, the accounting profession has effectively become a ‘state within a state’, interpreting the law incorrectly to suit its own interests and, in the LAPFF’s opinion, against the public interest.”Sources close to the discussions say investors, despite engaging with the FRC extensively, have formed the view that they have made little, if any, progress from the contact.In line with this latest Bompas Opinion, they believe there are three core problems with the current accounting framework and the IASB’s IFRS standards:They do not result in a ‘true and fair view’ of a company’s financial position but rather achieve the lesser objective of ‘usefulness’This ‘usefulness’ criteria does not focus on specific elements in the accounts such as assets, liabilities and the profit or loss but rather applies to anything within the accounts generallyIFRS accounts do not enable a company’s management to determine the profits that can be safely distributed to shareholders and, as such, fail to provide a true and fair view, which is the main purpose of UK company lawNow, concerns over the soundness and purpose of the IASB’s standards have led the LAPFF to issue an urgent plea to the European Parliament to block the IASB’s high-profile financial instruments accounting standard, IFRS 9.The investors believe this standard is defective and, if adopted for use by Europe’s banks, could lead to a re-run of the financial crisis.In 2009, the IASB launched its project to replace its existing financial instruments accounting standard, IAS 39, with an entirely new standard.IAS 39 was viewed by many as a flawed rulebook that failed miserably when put to the test by the financial crisis.In particular, critics argued that its backward-looking impairment model led banks to recognise losses too late.The IFRS 9 project is, however, a flagship IASB effort.Any bid by Europe to block the standard could deal a fatal blow to the London-based quango’s credibility.The IASB’s opposite number, the FASB, has walked away from efforts to develop a joint financial instruments standard.The move has complicated the IASB’s bid to become the world’s single global accounting standard setter.
The UK pensions regulator is pushing for stricter regulation of defined contribution (DC) master trusts, questioning whether a currently voluntary assessment framework should be mandatory.Lesley Titcomb, who joined the Pensions Regulator (TPR) as chief executive from the Financial Conduct Authority in March, said the regulator was in discussions with the government about making the assessment of a master trust’s health mandatory.It will also examine the entry requirements for master trust operators, currently set by HM Revenue & Customs.She noted that the current regulatory hurdles to launching a master trust focused mainly on the ability to administer tax relief. Titcomb told attendees at the National Association of Pension Funds annual conference in Manchester: “Given my objectives, of course I have a rather different set of interests in what those master trusts are doing.”She outlined a number of the regulator’s concerns.“Are [master trusts] going to be able to look after the customer’s assets, administer it well [and] be a well-governed scheme?” she asked.“Are they able – should they not succeed in business for any reason – to […] wind themselves up in an orderly fashion?” Titcomb also expressed regret at the small number of master trusts to have completed the so-called assurance framework, published last year and drawn up in conjunction with the Institute of Chartered Accountants for England and Wales.The assessment has to date only been completed by four schemes – The People’s Pension, Now Pensions, the National Employment Savings Trust and the SEI Master Trust – with only the first two listed by TPR as recommended schemes, a step that requires the provider to accept any UK employer wishing to use the scheme for the purposes of auto-enrolment.Titcomb said the regulator’s list was a short one, but she expressed hope that it would grow.She also hinted that the assurance framework could in future be mandatory for schemes wishing to take in members through auto-enrolment.“One of the things we could ask the government to look at is to make master trust assurance compulsory if you’re going to be open to any[one],” she said. “We have to look at the issue of master trusts and the regulatory regime that applies to them. They are fulfilling a hugely important role in auto-enrolment, particularly as we get into the small and micro [company] world.”
The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) should strengthen its recommendations relating to the standardisation and comparability of data, according to the Institutional Investors Group on Climate Change (IIGCC).However, the group believes the draft report represents real progress toward harmonisation and wider adoption of climate disclosure.In an overview of its submission to the TCFD’s recent consultation, IIGCC said the task force’s recommendations represent “a vital step forward in global efforts to drive harmonisation of climate-related disclosure”.It welcomed several aspects of the draft recommendations, but also made suggestions for improvements to the framework the TCFD has proposed. It said that “the number one requirement” for asset owners and managers to be able to clearly disclose how they address climate risk across their portfolios “is for them to have more complete, meaningful, reliable and consistent data across companies and sectors”, but warned this is not yet the case.IIGCC suggested the TCFD’s proposed framework would leave it up to each organisation to select the metrics they want to use to assess climate-risks and opportunities.This could work against consistency in financial filings over time, which could hinder comparability, and may encourage companies to evade robust disclosure until specific reporting metrics are required by financial regulators, according to the group.The Task Force presented its draft recommendations on climate-related financial disclosures in December, with a 60-day consultation running until 12 February.The recommendations addressed disclosures by companies as well as investors.One of the TCFD’s key recommendations was for companies to disclose a climate change scenario analysis. Stephanie Pfeifer, CEO of IIGCC, said “our members back this as an important form of risk assessment”.IIGCC also called for a standardised ‘best practice’ approach employing a two-degree scenario with commonly determined (and disclosed) assumptions and procedures.This would help “normalise the use of such analyses and improve the comparability of the outcomes and costs they show,” according to the group. It also called for several key reinforcements to the task force’s recommendations on corporate disclosure.One of these is that companies should be tasked to disclose which climate-related risks and/or opportunities they consider financially immaterial regardless of whether these are identified as potentially material by investors, regulators, or other key stakeholders. The IIGCC also called for additional disclosures under the TCFD’s framework:board-level expertise on climate risk;whether or not remuneration at board and management level reflects climate-related performance; and“the processes used by the board member responsible for climate policy to ensure consistency between public policy positions adopted by the company and any trade associations to which it also belongs”.With respect to the TCFD’s guidance for reporting by investors, IIGCC called for this to cover more asset classes than just equities.Pfeifer emphasised the importance of the TCFD’s final recommendations being fully implemented: “Following on from the letter we sent to heads of state last September, IIGCC urges the G20 to show leadership during the German 2017 presidency on implementation of the TCFD’s recommendations, as well as the evolution of climate disclosures going forward.”
Eight public sector pension funds in Wales have appointed Russell Investments and Link Asset Services to help pool and run £15bn (€17bn) of investments.The Wales Pension Partnership (WPP) – one of eight asset pools being set up by UK local government pension schemes (LGPS) – announced today that Link Asset Services would operate a collective investment vehicle to pool its assets.Russell has been appointed for investment advice and manager selection. The mandates for Russell and Link include portfolio construction, cost reduction, currency hedging, transition management and other services.Chris Moore, director of corporate services at Carmarthenshire County Council, described the appointments as “a significant milestone” in pooling the Welsh funds’ assets. Peter Hugh Smith, managing director of Link Fund Solutions, part of Link Asset Services, said: “We are pleased to have been selected by WPP to facilitate the pooling of the assets of the eight existing local government pension schemes in Wales.“The pooling of the assets into a collective investment vehicle means the constituent authorities will benefit from enhanced governance and the protection of a regulated tax transparent structure.”Jim Leggate, head of UK institutional and Middle East at Russell Investments, added that pooling “provides the opportunity to deliver significant savings over the long-term, which will create additional value for scheme members”.In 2016, WPP appointed BlackRock to run nearly £3bn of passive mandates on behalf of the eight pension funds, replacing State Street Global Advisors and Legal & General Investment Management. This arrangement will continue outside of the collective investment vehicle being established by Link.The LGPS pools must be ready to accept assets from early April, according to the government’s deadline.Link is one of the UK’s leading fund administration providers, and according to its website oversees roughly £45bn of annual payments across various product types.
Telecoms giant BT cannot change the index it uses to calculate pension increases for certain members of its pension scheme, according to a UK court ruling today.The company was seeking to find out whether it would be able to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) to calculate inflation-linked annual pension increases. The CPI is typically lower, so being able to use it would have helped the company deal with a large deficit in its defined benefit (DB) pension scheme.According to BT’s annual report for the 12 months to 31 March 2017, the pension scheme had a shortfall of £7.6bn (€8.6bn). However, a funding update issued by the trustees last year put the deficit at nearly £14bn as of 30 June 2016.The company had agreed in principle with the trustee of the BT Pension Scheme (BTPS) to switch its inflation measure to the CPI, but it wanted to check whether this would be deemed compatible with the scheme rules. The High Court today ruled against BT.The company said it was disappointed with the decision.“[W]e will now consider the judgment in detail in order to decide next steps, including the possibility of an appeal,” it added in a statement.According to Slaughter and May, which acted for the BTPS trustees, BT had argued that RPI had “become inappropriate” for the purposes of the relevant scheme rules and that the company could therefore, following consultation with the trustee, switch away from RPI. The trustee said it was in the process of analysing the judgment and would provide a further update once this was done.BTPS is the largest private sector pension scheme in the UK and the 11th largest in Europe, according to IPE’s Top 1000 Pension Funds report.The court ruling comes as BT has just completed a consultation on changes to its main DB and defined contribution (DC) schemes.The company has proposed closing BTPS to future accrual in April, with all members’ contributions moving to the BT Retirement Saving Scheme (BTRSS), the main DC plan. BT would pay additional contributions into the BTRSS for up to 10 years.As an alternative, the company proposed keeping BTPS open on a significantly amended basis, whereby benefits would increase more slowly in future and members would have to contribute more.BT said it was now considering employees’ feedback to the consultation before concluding its review of its pension schemes.Trade union CWU has opposed the proposals. Prospect, another union, said it was in the process of finalising a new pension deal with the company.BT said it was in “constructive discussions” with the BTPS trustee in relation to the triennial valuation, and that it still expected to complete the valuation in the first half of this calendar year.
Fewer than 2% of investment funds distributed in France charge “substantially high fees”, according to AMF, the country’s financial markets regulator.A review it carried out found that, out of just over 8,000 funds, 148 charged substantially higher charges than their competitors. This represented 0.33% of assets under management.The majority of these funds (70%) had less than €20m in assets, which probably meant they could not benefit from economies of scale, said the AMF. Also, most of them charged additional fees when their fund manager bought or sold portfolio securities, which increased the level of ongoing charges disclosed in the funds’ key investor information documents (KIIDs).“The AMF nevertheless observed that some of these UCITS have since merged or been liquidated, which could be the result of competition from other UCITS that charge lower fees,” it said. The regulator’s study also found that, in general, foreign funds charged slightly higher fees on average than French funds for equivalent asset classes.The findings emerged from an analysis of funds’ key investor information documents for the financial year 2015 and the ongoing charges disclosed by 8,038 UCITS funds distributed in France.‘Value for money’ reporting toolFund research company Fitz Partners has launched a service intended to allow fund fee committees and fund directors to evaluate share classes on fees, asset size and performance.In a statement, the company said it launched the fund board reporting service “in response to greater demand for better fund governance and investment managers’ requirements for ’value for money’ reviews”.It said requests for independent reviews came from asset managers and also from fund buyers and regulators. In Europe fund boards are not obliged to assess value for money, although in the UK the Financial Conduct Authority last year proposed requiring asset managers to assess whether funds offer value for money. PTL, a UK independent trustee firm, has also launched a ‘value for money’ assessment service for defined contribution investment funds, with Schroders announced as the first asset manager to sign up.Aberdeen Standard in private markets offeringAberdeen Standard Investments has launched what it said was its first comprehensive private markets fund.It has been launched with £138m (€155.8m) of assets, and will invest in a diversified global mix of private equity, infrastructure, real estate and private credit, the asset manager said in a statement.Carillion questioning UK politicians have written to investors including BlackRock and Standard Life Aberdeen as part of an inquiry into the circumstances surrounding the collapse of UK construction firm Carillion.In their letters, dated 26 January, the chairs of the two parliamentary committees behind the inquiry said they wanted to examine whether major institutional investors complied with the Stewardship Code. They asked the investors to set out what engagement they had with Carillion following the publication of its annual report and accounts for 2016 and the interim financial results for 2017. The institutions were also asked to set out what steps they took to influence the financial decisions of the board, the response they received, and their reasons for deciding to sell shares in the company when they did.The politicians asked for responses by 2 February. BlackRock has been given an extension, a spokeswoman for the asset manager told IPE.Goldman Sachs-Amundi fund tie-upGoldman Sachs Fund Solutions is partnering with Amundi to use its asset management operational platform, Amundi Services, for its Luxembourg-domiciled funds.Amundi Services will provide investment management and ongoing control and oversight services to Goldman Sachs Fund Solutions, which runs systematic investment strategies. Amundi will also provide management, due diligence and monitoring services to Goldman Sachs’ UCITS platform dedicated to external alternative fund managers.Goldman Sachs Fund Solutions said it aimed to significantly increase its assets over the coming years, primarily through institutional investors and financial intermediaries.Amundi Services has more than 23 third party asset managers and asset owners as clients, according to Guillaume Lesage, head of the operations, services and technology division of Amundi.
Anglian Water said that the various unions had accepted its pensions package relating to its £2bn (€2.2bn) scheme on 16 March following a recent email ballot of 2,000 workers.“Our obligation is to provide an equitable, fair and financially sustainable pension for all our employees, and a bill that is affordable for customers,” a spokesperson for the company said. “This is something that simply wouldn’t be possible given the escalating costs of our old DB scheme.”A spokesperson for United Utilities – which runs a roughly £3.9bn DB scheme – said the unions had helped to form the final version of the company’s replacement scheme.“Rather than scrap the defined benefit scheme as planned, we agreed to introduce a hybrid scheme, which will cost us considerably more,” the spokesperson said. “So, we have made considerable concessions already and hope that the unions will show a similar desire to compromise.” The UK’s largest trade union has stepped up its lobbying efforts this week to prevent the closure of some of the final remaining defined benefit (DB) schemes offered by UK companies.Unite, which has more than 1.4m members, has backed an investigation by parliament’s Work and Pensions Select Committee into the decisions by Anglian Water and United Utilities to close their respective DB plans.The union said it was concerned that the companies’ profits were “heavily skewed towards the shareholders” and warned that the closures could see staff lose as much as £100,000 from their overall pension pots.Peter McIntosh, acting national officer for energy and utilities at the union, said: “A line in the sand needs to be drawn, otherwise the pensions of thousands of water workers will be seriously eroded by shareholder-obsessed bosses.” Source: BentleyBentley, maker of the Continental luxury car, wants to close its DB scheme Frank Field MPOn 28 March, Frank Field, chair of the Work and Pensions Select Committee, wrote to water regulator Ofwat demanding clarity on the pension issues.In his letter, Field asked for Ofwat’s view of “the proposals by Anglian Water and United Utilities to close their defined benefit pension plans while continuing to make large distributions to shareholders”.Ofwat said it would respond soon to Field’s enquiry.Bentley staff threaten strike action over DB closureIn a separate development this week, Unite announced its support on Tuesday for the decision by union members at Bentley Motors’ Crewe headquarters to opt for industrial action in the face of moves to close the luxury carmaker’s DB scheme.According to the union – which dubbed Bentley “pension snatchers” – 98% of its members voted in favour of going out on strike.“This massive vote in favour of action demonstrates the anger and strength of feeling among workers over Bentley’s pension proposals, which could result in workers losing thousands of pounds in retirement income,” said Phil Morgan, Unite regional officer.The closure of the scheme will hit the 1,200 workers who remain part of the Rolls-Royce and Bentley Pension Fund (RRBPF).In a statement, Bentley said that the RRBPF consultation process had “not been an easy step to take”.The company added: “We are looking at this now because of the significant growth in the deficit to over £500m in the last two years. We are fully committed to funding this deficit, which poses a significant financial challenge to our business. “While no decisions have yet been taken, we have to manage risk and ensure the sustainable future of the company and our colleagues.”
Corporate non-financial reporting does not allow investors to understand companies’ impacts and “by extension their development, performance and position”, according to a group of civil society organisations and experts.The Alliance for Corporate Transparency analysed reporting by 105 European companies. Although the vast majority of companies acknowledged the importance of environmental and social issues in their reports, “more often than not” the information was not clear in terms of concrete issues, targets and principal risks, the alliance said.The solution, according to the group, is for EU rules on non-financial reporting to be more specific about what companies should disclose.“The results of our research suggest the need for the standardisation of disclosure and clarifications on when companies ought to report such information with respect to several key issues,” the report added. For example, with respect to climate change, legislation ought to clarify the requirement for the disclosure of companies’ long-term transition plans to a zero-carbon economy and their economic implications, in line with the recommendations of the Task Force on Climate-related Financial Disclosures.Filip Gregor, head of responsible companies at law firm Frank Bold, the project co-ordinator, said: “Our research shows that most companies don’t disclose sustainability information that really matters, but that there is a not insignificant minority that does provide meaningful information.“To ensure comparable and meaningful disclosure by all companies the legislation needs to be clearer. Standardisation of disclosure balanced with flexibility is absolutely indispensable to enable sustainable finance as well as corporate accountability.”The research project set out to analyse how European companies implemented requirements of the Non-Financial Reporting Directive (NFRD) and recommend how it could be improved.European Commission updatesIts report comes as the European Commission is preparing to update the non-binding guidelines that accompany the EU framework.According to the technical expert group advising the Commission, the Commission planned to adopt the revised guidelines in June and to seek feedback from stakeholders on the update with a one-month online consultation to start by the end of February.The technical expert group was tasked with providing recommendations to the Commission about how to include guidance for companies on climate-related disclosures as part of the revision of the non-binding guidelines. These were published in a report last month.The findings of the Alliance for Corporate Transparency chime with those of a project carried out by the Cambridge Institute for Sustainability Leadership in conjunction with the Investment Leaders Group.Together they developed the “Cambridge Impact Framework”, a set of metrics that investors could use as proxies for their progress towards the UN’s Sustainable Development Goals, in the absence of data that would allow the social and environmental impact of investment funds to be properly assessed.