Global Pensions Wrap: November edition
A round-up of the pensions industry stories published across the FT Group – including Mercer’s warning to fund clients over redemptions at Fisher Investments and the Swiss central bank’s ‘essential’ negative interest rate policy.
Mercer cautions pension clients on Fisher
Fundfire: Consultancy Mercer has warned its pension fund clients that redemptions and staff turnover at Fisher Investments could affect fund performance, following an outcry over comments made by founder Ken Fisher. After co-chief investment officer Mr Fisher reportedly made sexist remarks at a chief executive seminar last month, the company’s funds have been beset by redemptions of around 2 per cent of total assets under management. Mercer’s rival NEPC recommended that clients withdraw their allocations, but according to Reuters did not go as far after a meeting with Fisher’s top executives.
Aussie superfund mergers to spark rise in internalisation
Ignites Asia: Superannuation funds are predicted to move more of their fund management in-house as consolidation and net inflows bring greater scale to providers, according to Investment Magazine. Experts have recited that the final number of companies in the market will be between 25 and 30. Consolidation is quickening in response to the prospect of tighter regulation, after a Royal Commission report into value for money found serious failings. At the A$165bn (£88.5bn) AustralianSuper some 40 per cent of client money is now managed internally.
GPIF president reprimanded for improper relationship with colleague
Ignites Asia: The president of Japan’s Government Pension Investment Pension Fund has been the subject of disciplinary action over his inappropriate relationship with a female colleague. Norihiro Takahashi will see his pay temporarily reduced to 80 per cent for six months, the world’s largest pension fund announced. The probe into Mr Takahashi’s behaviour is said to have focused on frequent lunches and rides in his company car for the female colleague, although it did not find evidence of favouritism in the hiring process that selected her.
Negative interest rates ‘essential’ for Swiss economy, says central banker
FT: The head of Switzerland’s central bank has defended his policy of setting negative interest rates, arguing that the policy is necessary to protect the country’s currency and exports. Thomas Jordan told a conference of pension funds – which are particularly affected by negative bond yields – that the Swiss National Bank would be unlikely to reverse its policy unless economic conditions changed significantly. At minus 0.75 per cent, the SNB’s benchmark rate is the lowest of the G10 economies, and 10-year government bonds have been charging investors for locking up their money for more than a year. Some economists have warned the policy will distort capital allocation in the economy, while pension funds hit with worsening funding levels have poured money into property, sparking a building boom.
Poor returns underline smart beta’s structural problems
FT: Factor-based investing has failed to live up to expectations, as macroeconomic changes have dragged down returns in many strategies. Billed as a ‘middle way’ for tapping into the factors that drive active management performance at fees closer to that of passive tracker funds, many smart beta funds have disappointed investors. The pension fund of Dutch bank Rabobank, for example, has been invested in smart beta products for almost a decade, but conceded that in 2018 its allocation did not add anything to performance. Experts said that the synchronised downturn in both the value and momentum factors, which usually act as diversifiers to each other in multi-factor portfolios, was to blame for the poor returns.