AXA Investment Managers has appointed Christophe Coquema as global head of its Client Group, replacing Laurent Seyer, who has decided to leave the €582bn asset manager. Julien Fourtou will succeed Coquema as global head of Multi-Asset Client Solutions & Trading Securities Financing (MACS&TSF) and join the management board.Commenting on the appointments, Andrea Rossi, chief executive at AXA IM, said: “Christophe has an in-depth knowledge of AXA IM, having led our strategy and business development team and served as our global chief operating officer, since joining AXA IM in 2006.Rossi cited Coquema’s strong track record in “managing change”, and said the new appointment would help accelerate AXA IM’s growth with third-party clients. Fourtou, since joining AXA IM in 2000, has occupied various positions across AXA IM’s investment teams, including COO of the fixed income division.The departing Seyer joined AXA IM in May 2012. As global head of Distribution – recently renamed the Client Group – he created two segmented business lines, defining strategy, product offering and content.AXA IM is a multi-expert asset management company within the AXA Group, and one of the largest Europe-based asset managers.It employs more than 2,400 people worldwide and operates out of 26 offices in 21 countries.
The independent body tasked with tackling high fees levied by legacy UK defined contribution (DC) workplace pensions has told scheme providers to find their own solutions and agree remedial action by the end of next year.Campaign group ShareAction immediately slammed the proposals as shockingly weak, and the union umbrella group TUC responded by calling for strong action from regulators and government.The Independent Project Board (IPB) — which includes representatives of the Association of British Insurers (ABI), Financial Conduct Authority (FCA), Department for Work and Pensions (DWP) and the Pensions Regulator (TPR) — made the proposals in its final report of a review into charges and benefits in legacy DC workplace pension schemes. The IPB was charged with the audit of old, high-charging contract and bundled trust schemes, following the now defunct Office of Fair Trading’s (OFT) September 2013 study of the DC workplace pensions market. In its study, the OFT also agreed a series of measures with government and industry including singling out poor-value schemes, improving transparency and bolstering governance.The IPB said it was writing to the provider of each scheme where savers were “potentially exposed to high charges”, recommending that they review their data, identify what action they could take to improve outcomes for savers and give this information to their relevant governance body — the new independent governance committees (IGCs) or trustees — by the end of June 2015.“The IPB recommends that governance bodies agree remedial actions and an implementation plan with their provider by end December 2015 at the latest,” the ABI said.On top of this, it said the IPB recommended the DWP and FCA jointly review the progress the industry was making with this, and report on it by the end of 2016.Carol Sergeant, chair of the IPB, said the audit had “highlighted the importance of understanding the impact of scheme design on individual savers and has shown that there is no ‘one size fits all’ charge structure that will ensure all savers get value for money all of the time.”The IPB said it had collected a comprehensive set of data on charges and benefits from providers. It found that around £900m (€1.1bn) of assets under management (AUM) in the DC schemes were “potentially exposed” to charges above 3%, although the majority — £42bn of the total £67.5bn of AUM — had charges of less than 1%.Schemes where savers were potentially exposed to the very highest charges were more likely to have complex charge structures, the report found.Most of the AUM with charges of more than 3% was held by savers who had pots of less than £10,000, it said, adding that more than 90% of this was held by savers that had stopped contributing.“For such savers the impact of monthly fees can result in a very high impact of charges,” it said.In its response to the report, ShareAction said the boards of the insurance companies — not the IGCs — should bear the responsibility to remedy the situation.“Independent Governance Committees will only come into existence in April 2015 and their effectiveness is not yet proven,” the group said.Catherine Howarth, chief executive of ShareAction, said: “Today’s report is shocking in terms of the scale of rip-off fees uncovered and the weakness of the action proposed in response.”The FCA needed to show it could take decisive action to protect consumers from “the worst excesses of a financial services industry which has been ripping them off for decades,” she said.“The government needs to set out clearly the steps pension providers need to take and what will happen to them if they fail to clean up their act,” Howarth said.Meanwhile, TUC general secretary Frances O’Grady said it was not good enough for the industry to be given more time to put its affairs in order. “The worst offenders need to be named and swift measures taken to end these shocking practices,” she said.“We need to see strong action from regulators and government to ensure that there’s no loss of public faith in the pensions system at the very time millions of people are getting their first pension savings, thanks to automatic enrolment,” O’Grady said.
APG, the €424bn Dutch asset manager, has criticised French shareholder legislation that grants double voting rights to investors that hold a stake in a company for more than two years.It argued that limiting double voting rights to registered shares, as stipulated in the Florange Act, placed an entire group of shareholders – including institutional investors with long-term horizons – at a disadvantage against larger stakeholders.APG, asset manager for €373bn civil service pension fund ABP, made its objections public soon after the French government indicated that it aimed to increase its stake in Air France-KLM from 15.88% to 17.58%.The Dutch manager said it strongly supported the principle of one-share/one-vote, “as these voting rights match a shareowner’s economic interest in a company’’. “Granting extra rights for voting or receiving dividend to specific shareholders differentiates between investors with the same economic interest,’’ it said.“Such control-enhancing mechanisms lead to distortion between share ownership and voting rights, and provide powerful tools to keep or gain control of companies at low costs, and sometimes at the expense of minority shareholders.’’APG said it would support the proposal to opt out of the double voting rights – tabled by the executive board of Air France-KLM – during the company’s AGM on 21 May.The asset manager has a 0.1% stake in the airline.
AP4 noted that evaluation by external consultants had put the cost of the plans – which would see private equity fund AP6 merged with AP2 and a second, as-yet undecided buffer fund closed – at SEK3bn-6bn, well ahead of the estimated SEK60m in savings that would be achieved with the overhaul.AP4 also questioned the establishment of the National Pension Fund Board, which, it argued, will make it harder for the buffer funds to invest for the long term.Eva Halvarsson, Andersson’s counterpart at AP2, echoed AP4’s concerns, stressing that the buffer fund’s current configuration had proven a “well-functioning, cost-efficient operation” since inception 15 years ago.“To develop this further, I welcome the proposal to open up investment rules and to introduce a so-called prudent-person principle,” she added.Halvarsson warned against a “large, expensive and risky” reorganisation of the funds, however. AP3 was similarly adamant that a number of proposed changes should not proceed, rejecting out of hand any legislative underpinning for cooperation across unlisted assets – which, it has been suggested, would be consolidated into AP2 and overseen by a joint investment committee.It dismissed the idea that the Swedish national audit office should be responsible for each fund’s annual audit, and was critical of the proposal to establish a National Pension Fund Board.It also argued that it would be “negligent” to approve any of the reforms before the results of a full impact assessment were known.The four main buffer funds recently wrote an opinion piece for a Swedish newspaper, warning that the reform put the buffer fund system at risk of “political micromanagement”.Riksbank, the country’s central bank, also questioned whether the proposals would allow the funds to remain as long-term investors. The proposed reform of Sweden’s buffer fund system would make it “difficult if not impossible” for the AP funds to invest in a long-term fashion, AP4 has warned.In its response to the government consultation that proposed the closure of two AP funds, AP4 said the annual evaluation of performance – coupled with reliance on a reference portfolio – would increase “uniformity and short-sightedness” in the investment of the buffer funds’ SEK1.2trn (€126bn) in assets.Mats Andersson, managing director at AP4, said it was regrettable that the proposal put forward would be so “obviously” to the detriment of the AP funds’ “final clients” – Sweden’s population.“The proposal,” it added, “has almost no relevant impact assessment of the comprehensive proposals presented.”
What that also means is that certain sectors and types of companies are pretty limited – utilities are a case in point. But, as Coca Cola and Apple have shown, there are few restrictions for consumer companies and tech companies, and that holds true for drug companies as well. But ageing countries can also face challenges in developing the next generation of mega companies – few would expect to see new ones coming out of ageing Japan.The limits to growth for companies with a long runway depend on the business strategy a company chooses to follow. What does appear to be the case is that the limits to growth are further away for companies with three key characteristics.The first – as famously outlined by Warren Buffet as the characteristic of a company he favours – is one with an economic moat that protects against competitors, with a well-known brand name, pricing power and a large portion of market demand. This provides the opportunity to expand, but disruptive technologies can sometimes overwhelm even the widest moat. Kodak is a classic example where its domination of photography could not withstand the impact of digital technology.A second economic driver requires high-quality companies to be able to improve as they grow. There is a tendency for large caps to emerge when you get network effects in areas such as technology or consumers. Apple is the clear example of this, combining technology and consumers. Apple is not a one-trick pony, having built an ecosystem around a seamless integration of innovative products and applications way beyond the production of commodity hardware. It has become the ultimate consumer brand, with the ability to create interest in any new product or variation of an existing product by just adding the prefix ‘i’.Bigger does not always mean better, however, and the banking industry is the prime example of this. Even for those banks such as Citibank with a global footprint, their value lies in having a few particularly strong local franchises in countries such as Mexico. Chinese banks may have a high position in the Forbes list because of the size of their domestic markets, but their domestic focus precludes their being global companies. But others could certainly become so, Alibaba being an example.The third key characteristic virtually all mega companies have is the ability to seek customers in the emerging markets that are driving global growth. China and India are huge markets still experiencing phenomenal growth rates compared with the developed world.Investors, however, need to be aware that becoming a megacap does not necessarily go hand in hand with being a good investment. Just because a company needs a lot of capex, such as the energy industry, does not make it a great investment if the returns on the investment are poor. Tech companies may not have an issue with capex, but issuing a tremendous amount of stock options reduces earnings-per-share growth, reducing returns to investors.Where will the megacaps come from in a decade’s time? While Asia may supplant Europe, it is difficult to see the US losing its position as the undisputed champion of megacap generation.Joseph Mariathasan is a contributing editor at IPE Joseph Mariathasan explores where the megacap companies of tomorrow might originateIn February, Google beat Apple in market capitalisation. But does size really matter? The Top 4 companies in the 2015 Forbes Global 2000 list of the world’s largest, most powerful public companies – as measured by revenues, profits, assets and market value – are all Chinese. Apple does not make even the Top 10 on this basis since it fails on the metric of assets.But Apple, measured on market cap alone, of course led the list, followed by Google, Exxon Mobil, Berkshire Hathaway and Microsoft, with eight of the Top 10 being US companies, alongside China’s Petrochina and ICBC. On the Forbes criteria, the US leads the list with 579 companies, while China (mainland and Hong Kong) has 232, adding more companies than any other country and surpassing Japan for the first time. The UK is in fourth place, while France ceded fifth to South Korea. Europe overall, with 486 companies, was beaten by Asia with 691.One manager told me the key attribute for companies to be able to grow to megasize is “a long runway”. Nestlé would never have been a global megacap if its market was just Switzerland. The dominance of the US and Chinese companies is unsurprising in this respect, given the size of their markets. As the manager explained, one reason the US has so many megacaps that have grown since the 1980s is because of the runway the US market offers domestically for retail companies. Companies such as WalMart or Home Depot can start off in Maine and roll out their stores to Los Angeles with no changes required at all for local conditions. In Europe, that would be inconceivable, with at least five languages required for an analogous rollout. Whilst the US retailers may not have succeeded outside, the US is big enough.
An undisclosed pension fund based in the Nordic region has tendered a €300m global equity mandate using IPE Quest.According to search QN-2210, the scheme is seeking a manager for a value-focused fund with the freedom to invest in companies of any size by market capitalisation and in any territory.The fund is to be actively managed against either the MSCI ACWI Value or the MSCI World Value benchmarks.The pension fund will consider candidates with a minimum track record of three years, but five years is preferred. The performance record should be stated to 30 June and supplied gross of fees.Managers must have a strong focus on value investing and a “robust and long-standing value investment philosophy”.A fundamental, active approach (number of stocks below about 50), a proven process with a strong valuation framework, a relatively low turnover and a solid long-term track record are also required.The fund has an all-cap, all-country strategy, unconstrained versus the benchmark, with the ability to have a 0% weight in large benchmark stocks.The investment strategy should be led by a portfolio manager with a very long experience of investing in global value stocks.A stable and competent team of analysts, dedicated to the global value strategy, is also expected.Continuity is considered to be very important to the scheme – both the manager and the investment philosophy should have been unchanged for the lifetime of the track record provided, and the process should have evolved gradually.The portfolio manager must be prepared to take quarterly meetings to discuss portfolio and market development, positioning and performance. Strategies that have been created due to an existing strategy having reached full capacity will not be considered for this mandate.The deadline for submissions is 19 August. The IPE.com news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information direct from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]
AP6, Dina Försäkringar, Folksam, Danish Pension Fund for Pharmaconomists, PGGM, Abu Dhabi Investment Authority, AXA Investment Managers-Real Assets, UBS Global Asset Management, Lyxor Asset Management, Hymans Robertson, Buck Consultants, Axioma, Confluence Technologies, Standard Life Investments, JP Morgan Asset Management, Xafinity, KPMGAP6 – Catrina Ingelstam has been appointed by the Swedish government as a supervisory board member at the sixth national buffer fund AP6, replacing Katarina Bonde. Bonde is leaving the board after many years as a member. Ingelstam is an economist and has experience in senior operational positions and directorships in the finance, real estate and insurance sectors. She was CFO at Dina Försäkringar, a partnership of 13 insurance companies, as well as at pensions and insurance provider Folksam.Danish Pension Fund for Pharmaconomists – Peter Bache Vognbjerg, chief executive of the Danish Pension Fund for Pharmaconomists (Pensionskassen for Farmakonomer), has decided to retire. He has been in the top management role at the professional pension fund since 2001. Before that, he had been CIO since 1995. The pension fund’s supervisory board has now begun the process of finding someone to replace Bache Vognbjerg. Pharmaconomists are professionals in Denmark who are qualified experts in pharmaceuticals.Abu Dhabi Investment Authority – Maarten van der Spek has joined as a senior strategist in the UAE. He was previously a director of strategy for private real estate at PGGM, having joined the Dutch investor in 2009. He has also worked for ING Real Estate Management (now CBRE Global Investors) from 1999 until 2008. He is a member of ANREV’s performance-management committee. AXA Investment Managers-Real Assets – Mark Gilligan has been appointed head of infrastructure equity. He will report to Ruulke Bagijn, global head of real assets private equity. Gilligan joins from UBS Global Asset Management, where he was head of European infrastructure. Before joining UBS in 2007, Gilligan spent 10 years as a lawyer at Mallesons Stephen Jacques (now Kings & Wood Mallesons) in Australia.Lyxor Asset Management – Matthieu Mouly has been promoted to chief executive at Lyxor UK, subject to regulatory approval. Mouly replaces Pierre Gil, who will take on a new role within the Société Générale group. In 2010, Mouly became head of ETF sales in French-speaking countries at Lyxor, before being appointed global head of ETF sales in 2014.Hymans Robertson – Adam Porter has been appointed as an associate investment research consultant. He joins from Buck Consultants, where he was a senior research analyst focused on multi-asset, infrastructure and property investment managers. Before then, he held roles with Willis Towers Watson and RBS.Axioma – The provider of risk and portfolio management solutions has appointed Bao Chau Nguyen to the newly created position of head of regulatory and risk reporting. The appointment forms part of Axioma’s goal to expand market share in North America and Europe. Nguyen joins from Confluence Technologies, where she was global alternative investment operations director.Standard Life Investments – Imran Ahmad has been appointed investment director for emerging market debt. He joins from JP Morgan Asset Management, where he was a currency portfolio manager.Xafinity – Paul Cuff has been appointed joint managing director alongside existing managing director Ben Bramhall. Cuff joins from KPMG, where he was a partner in the pensions practice for eight years and latterly head of the London pensions team.
Finland’s State Pension Fund, VER, has posted a return of 6.7% for 2016, with profits on infrastructure and real estate outpacing those of the fund’s other investment classes, according to the fund’s annual results.The return is up from 4.9% in 2015.Infrastructure was the strongest performer last year, returning 13.8%. Real estate gained 11.9% for the fund.Timo Viherkenttä, VER’s chief executive, said: “Aside from infrastructure and real estate investments, the strong performance in 2016 was aided, in particular, by fixed-income investments in emerging markets.” The market’s positive mood had held up this year so far, he said.“A carefully diversified investment portfolio is a sound precaution in view of the choppy seas created by positive macroeconomic news on the one hand and political uncertainties on the other,” Viherkenttä said.The pension fund said its average nominal rate of return over the past five years is 7.4%, and 6.3% in real terms.VER’s investment assets increased to €18.8bn at the end of December from €17.9bn at the end of 2015.Last year, the funding ratio of the state pension system was more than 20% for the first time in history, VER said.The fund, which contributes the equivalent of 40% of the Finnish state’s total pension spending to the government’s annual budget each year, transferred around €1.8bn last year, and received about €1.5bn in pension contribution income.Meanwhile, Keva, the Finnish municipal pension fund, said it has started work on revamping its investment strategy. It said this was a necessary change given that returns are predicted to be much lower in future.It has reported a return of 7.4% for 2016, however, which CIO Ari Huotari said was “tremendous”, and had been bolstered by a 14.5% profit on private equity.Huotari said 2017 would be the first year in the system’s history that pensions paid out would exceed pension contributions. “On top of this, investment return expectations for the next few years are significantly lower than before,” he said.“Because of this, at Keva we have been working on our new investment strategy,” Huotari added.In 2016, listed equities produced an 8.8% return, fixed income 6.5%, real estate 5.0%, and hedge funds 3.6%, according to Keva. The value of Keva’s investments grew to €48.6bn at the end of last year, from €44.9bn the year before.
The chairman and founder of Analytical Research died from cardiac failure earlier this month.Jean-Stéphane Lods, known to many as Stephan, was on a rare holiday, in the south of France, when he passed away on 3 August, according to the alternative investment analytics firm.“The entire AR family mourns this loss,” it said in a note on its website.“He was a ‘sparring partner’ to clients (and many others),” it added. “He challenged us to push the boundaries on thinking differently – to find the exception with the highest level of conviction, to deliver to our clients what they cannot find anywhere else.” He also co-founded Eurogestion & Partners and was founding partner of Bucephale Group, the investment advisor of the first listed company on the Zurich Stock Exchange to invest in hedge funds (CreInvest AG). Lods also held investment roles with Union Bancaire Privée and Lombard Odier & Cie.He had also been a longstanding valued judge of IPE Awards and contributed to IPE Magazine .Analytical Research said that, unbeknownst to many, Lods was also appointed to the executive committee of the Convention of Independent Financial Advisors (CIFA) and a CIFA permanent representative to the United Nations. Described as “a true pioneer” in hedge fund investing, Lods founded Analytical Research in 2008.
Assets in the investment portfolio – which consists of the bonus potential plus borrowing from the hedging portfolio – stood at DKK337bn at the end of June.More than half of the DKK24.9bn return generated by the investment portfolio in the period came from government and mortgage bonds, which produced DKK14.4bn. ATP said this was one of the highest quarterly returns it had ever made on fixed income investments.In its interim report, the pension fund said: ”The government bond portfolio, which included exposure to European and American government bonds, returned DKK12.6bn, primarily as a result of positive contributions from European and American government bonds as a result of falling European and American interest rates.”Other strong returns came from listed international equities, which produced DKK5.9bn, and Danish equities, which added DKK4.4bn.The bonus potential also benefited from a transfer of DKK3.2bn from the fund’s guaranteed benefits pot in the second quarter of this year, after ATP adjusted its long-term life expectancy development prognosis after a small drop in life expectancy in Denmark.Data published by ATP showed that, within the investment portfolio, risk increased slightly over the first half of 2019 in absolute terms.However, in relative terms, risk levels fell down over the period as the portfolio’s asset values increased.Bo Foged, chief executive of ATP, told IPE: “We are being a bit more prudent in the current macro environment, where the economic cycle is at at late stage and so the likelihood of a recession is increased.”ATP said in its interim report that during the first half of the year nearly all assets classes had produced positive returns in the investment portfolio. “This is exceptional and a development that ATP is keeping a close eye on,” the fund said.Only inflation-linked instruments made a loss in the period, declining by DKK2.7bn.Foged said the pension fund was making progress in its search for a new CIO following the announcement in June that Kasper Ahrndt Lorenzen was set to join PFA Pension next month.“We have started the process and we have drafted the brief, and now we are looking for a long list of candidates,” he said. Denmark’s ATP reported a significant increase in the size of its bonus potential after making one of its highest-ever quarterly fixed income returns.The labour-market supplementary pension fund’s bonus pool swelled to DKK120bn (€16bn) at the end of June, the fund reported this morning. This compared to DKK109bn at the end of March and DKK92bn at the end of December 2018.Including the fund’s DKK766bn hedging portfolio, which backs ATP’s pension guarantees, the fund’s overall assets grew to DKK880bn at the end of the first half from DKK785bn six months before.