Global Pensions Wrap: July 6 edition
If UK defined benefits are considered to be unaffordable, spare a thought for Kentucky - where contribution rates have almost doubled to 83 per cent of salary in one year. This and more global pension headlines in our weekly round-up.
World’s top pension fund warns against risk of green-bond ‘fad’
FT: Green bonds risk becoming a "passing fad" if changes are not made, the chief investment officer at the world's biggest pension fund has warned. Some $200bn (£157.5bn) of green bonds could be issued in 2019, but Hiro Mizuno of Japan's Government Pension investment Fund says they are "more costly and complicated and cumbersome" to arrange for issuers, while investors get the same credit rating with less liquidity. The GPIF puts environmental, social and governance constraints on its managers and is working with the world Bank to improve green bonds, but Mr Mizuno says that unless they become more cost effective for borrowers, they will not catch on.
AustralianSuper warns investors of future negative returns
Ignites Asia: The largest of Australia's superannuation funds has warned its savers that they could see negative returns in the future, despite delivering stellar gains over the past year, according to Bloomberg. AustraliaSuper returned 8.7 per cent in its default fund over the last 12 months, as overseas assets benefited from a weak Australian dollar. CIO Mark Delaney said that the current economic cycle is nearing its end, meaning that the fund could see a patch of very low or negative returns.
Kentucky Pension Contribution Rates Skyrocket as legislative fix remains elusive
Fundfire: Employer contribution rates have shot up to more than 83 per cent of salary at the start of a new fiscal year for the Kentucky Retirement System, as the state's pension funding crisis deepens further. The unsustainable contribution demands on health districts and universities will heap further pressure on the Republican-controlled state legislature and Governor Matt Bevin to find a solution.
Global View: European asset owners ease off on unlisted debt
MandateWire: European asset owner interest in private debt is finally showing signs of stabilising, after years of significant inflows into unlisted credit assets. Globally, investment activity in the asset class rose by almost a third in the final quarter of 2018, but the bulk of the rising interest was generated within the North American market. European investors' actual commitments to private debt by increased by 22.7 per cent, but there has been no increase in the number of searches or planned allocations.
Chicago mayor seeks state takeover of city's pension funds
Fundfire: Persistent underfunding of Chicago's pension funds has prompted the city's mayor to suggest that the plans are consolidated and taken over by the state, Crain's Chicago Business reports. Lori Lightfoot's proposal would lead to a statewide system at a time when Illinois governor Jay Robert Pritzker is also considering consolidation options, although crain's calculates that Chicago's taxes would need to be hiked by more than $1bn (£790m) over the next three years to return the city's plans to full funding.
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