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34 PENSIONS COUNTRY REPORT SPAIN AND PORTUGAL COUNTRY REPORT COUNTRY 00 XXXXX 00 XXX 00 XXX 00 XXXX 00 XXXX 00 IPE SURVEY: XXXX XXXXXX COUNTRY REPORT 35 LIFE & PENSIONS 36-46 ASSET ALLOCATION 48 APOTEKET 50-58 SWEDISH PENSION REFORM 54 IPE SURVEY: MANAGERS OF NORDIC INSTITUTIONAL ASSETS COUNTRY REPORT NORDIC REGION INVESTMENT 47 ASSET CLASS PRIVATE EQUITY 47 OUTLOOK 49 ASSET ALLOCATION 50 VENTURE CAPITAL 52 IPE SURVEY PRIVATE EQUITY MANAGERS An expanding universe OUTLOOK JOSEPH MARIATHASAN A significant growth in direct lending has helped boost the private equity market T he past couple of years have set records for private equity fundraising backed by an explosion in direct lending and what appears to be strong evidence of superior returns to public markets in private equity over long periods. For investors new to the market, though, detailed information to its being a direct investor in a large number of funds. Its comparison of private equity performance with public markets shown is based on an exact like-for-like comparison of cashflows. In most years, an investment in the private equity marketplace, as a whole, would have beaten an investment in the global equity index, while investing in the first and second quartiles of funds would have given substantial outperformance on top. Whether that will continue to be the case is the dilemma for investors. The attractive performance, combined with a net distribution of funds for the past seven years, has supported a benign environment for fundraising in both 2017 and 2018, says Toni Vainio, a principal at Pantheon, a private equity firm. Given the success, there have been many new entrants to the market- place. “We are also seeing GPs looking to capture limited partner demand so large-cap buyout firms KEY POINTS Valuations are high after a period of strong returns Returns for private equity inves- tors look good on a like-for-like basis An explosion in direct lending has helped to finance acquisi- tions Fundraising has enjoyed a benign couple of years post-acquisition. Comparing private equity returns with public markets has always been a difficult and controversial area, with private equity returns often characterised as being opaque and potentially misleading. Willis Towers Watson (WTW), which advises on both public and private markets, admits to higher returns being seen in private markets which justifies the growth in size of assets. Hamilton Lane, an alternative investment management firm, claims to have the most comprehensive database of private equity informa- tion in the marketplace. Richard Hope, a managing director of the firm, attributes the firm’s access to current pricing and competition in deal sourcing poses challenges. Last year there was over $1trn (€870bn) of uninvested private equity capital looking for a home, according to Hamilton Lane. The risk is that pricing gets inflated. But, as he adds, that has not just been driven by the amount of dry powder. Stockmarkets, until the correction in the final quarter of 2018, were also at historical highs. There has also been an abundance of debt capital with debt pricing at attractive levels. “It is a perfect storm, as there is a lot of liquidity with a significant amount of private equity capital and significant supply of debt able to be lent, and these two, by definition, will push prices up,” says Nikos Stathopoulos, a partner at private equity firm BC Partners. For investors in private equity, that means they need to find general partners (GPs) who can not only find value when making acquisitions but also identify ways of adding value “It is a perfect storm that will push prices up” Nikos Stathopoulos 74 INVESTMENT PORTFOLIO STRATEGY CREDIT 74 ASSET ALLOCATION 76 MULTI-ASSET CREDIT 80 CONVERTIBLE BONDS 84 FACTOR INVESTING 88-92 PRIVATE DEBT 92 FIRST STATE SUPER Reading the cycle ASSET ALLOCATION CHRISTOPHER O’DEA The complex prevailing economic and politicial environment makes it difficult to predict how long the current credit cycle will continue deep inside a cave 200 miles (322km) east of Cape Town, South Africa. Etched by a prehistoric artist more than 73,000 years ago with a red ochre crayon on a small stone, the markings represent the earliest evidence of human drawing. The lead researcher of the mission says the marks – six parallel lines criss- crossed by three diagonals, akin to the modern-day hashtag – is defi- nitely a symbol conveying a message. Just what that message is remains unclear. What is clear is that credit investors and investment managers face a similar dilemma, says Randy Schwimmer, senior managing KEY POINTS Investors are looking for signals about how much longer this credit cycle might last, and which assets might perform Incumbent chief investment officers who lived through the 2008 crisis are more disciplined and risk-averse Credit managers have rotated into higher-quality assets because spreads over government bonds do not cover the additional risk of holding some corporate credit assets Interest rates may stay low for longer and support credit asset performance A s summer wound down and investors began returning to their desks to focus on another round of central bank policy meetings, archeologists announced the discovery of ancient markings director and head of origination and capital markets at Churchill Asset Management, which concentrates on lending to private-equity-sponsored middle-market companies. Like archeologists, participants in loan and credit markets are also “experts at digging for meaning among otherwise inscrutable signs”, Schwimmer says. For today’s investors, the search for meaning turns on decoding the symbols of the credit cycle – and whether that exercise can provide useful messages about when and where to invest in credit markets. “People are looking for signals, asking what do we have to go on, in order to figure out what lies ahead,” says Schwimmer. The archaeologists might have the easier task. “There are a lot of cross-currents these days,” he says. “Even the most sophisticated observers are having a difficult time sorting it all out.” In interviews with IPE, several leading credit investment managers discussed how they look at cycles, where we might be in this cycle, and how they are positioning credit strategies in a long-running cycle that might yet continue for some time to come. Central banks received high marks ASSET CLASS EUROPEAN EQUITIES 84 LOW VOL 86 FACTOR DEFINITIONS 92 STRATEGY PERSPECTIVE ATP’S LEADERSHIP WOES 30 APK 32 GERMANY 49 THOUGHT LEADERSHIP 67 MANAGER SELECTION 82 STEWARDSHIP 83 CHEYNE CAPITAL APRIL 2019 THE VOLATILITY PARADOX FACTOR INVESTING PERSPECTIVES PENS 70 INVESTMENT ASSET CLASS US EQUITIES US EQUITIES A time to focus on value ATIONS small-cap companies is floating rate and they are likely to be badly affected by rate rises. In contrast, of the S&P 500 ex-financials, only 11% of debt is floating rate and the fixed-rate debt has an average maturity of 11 years, so any rise in rates will take some time to affect large caps, says Dallas. The key for non-US markets to outperform US is for earnings growth in other markets to outpace that of the US. But US tax reforms have led to a sharp increase in the shareholder take of corporate earnings, with virtually all US companies benefit- ays CT Fitzpatrick, CEO of sed in 70 VALUATIONS 72 INTEREST RATES 73 US ECONOMY 75 TRUMP EFFECT 77 IPE SURVEY US EQUITY MANAGERS 26 PENSIONS COUNTRY REPORT SPAIN AND PORTUGAL COUNTRY REPORT SPAIN PORTUGAL 00 XXXXX 00 XXX 00 XXX 00 XXXX 00 XXXX 00 IPE SURVEY: XXXX XXXXXX COUNTRY REPORT 27 AUTO-ENROLMENT 29 INDUSTRY VIEWS 29 PENSION REFORM 31 DB FUNDING 34 IPE SURVEY: MANAGERS OF IRISH INSTITUTIONAL ASSETS COUNTRY REPORT IRELAND IPE SURVEY SUPPLEMENT TOP 400 ASSET MANAGERS PORTFOLIO STRATEGY INDICES & BENCHMARKS 17 LSR'S CEO 22 MMT 28 GENEVA’S CPEG 45 EUROPE OUTLOOK 56 ACTIVE ETFS JUNE 2019 MARCH/APRIL 2019 LOGISTICSTHE GLOBAL BOOM CONTINUES INTERVIEWIVANHOÉ CAMBRIDGE CORE FUNDSOPEN-ENDED GROWTH STORY IPFMTHE NEW AUSTRALIAN MANAGER TAKING ON EUROPE 68 INVESTMENT ASSET CLASS GOVERNMENT BONDS 68 EURO-ZONE 70 US TREASURIES 74 IPE SURVEY: GOVERNMENT BOND MANAGERS Turning Japanese EURO-ZONE DEWI JOHN The euro-zone appears to be in a low-growth liquidity trap redolent of Japan rebound. Alongside this, with March’s euro-zone inflation print at 1.4%, the European Central Bank (ECB) is struggling to meet its 2% target. Indeed, inflation expectations are at 1.35%, five years out, with “an arm wrestle between the ECB and the market. We’re inclined to agree with the market,” Lindsay says. This, again, is all reminiscent of Japan over the past three decades. Sylvain de Ruijter, lead portfolio manager, LDI and rates at NN Investment Partners (NNIP), worries that Europe, like Japan, could fall into “a low-growth G lobal markets were a one-way street in the years following the global financial crisis – with loose mon- etary policy and ultra-low rates. Then, global markets showed signs of getting off life support. As usual, the US was ahead of the cycle, its growth accelerating first. Add to this ultra-hawks taking control at the US Federal Reserve, 2-3% and said it can’t get any lower,” says Iain Lindsay, co-head of global portfolio management within the global fixed income team at Goldman Sachs Asset Management. “Well, look at where we are now. Europe is in danger of being Nipponified.” Growth, inflation and rates Euro-zone growth has bumped along at 1.1%, its lowest for more than five years. At the end of 2017, consensus was that mean reversion would see European risk assets outperform. That did not happen, and the market seems to have given up on any KEY POINTS Low euro-zone growth and infla- tion, reinforced by European Central Bank (ECB) policy, are set to keep core sovereign bond yields low for the foreseeable future Central bankers navigate the dangers of pain now or later in applying monetary stimulus A positively sloping yield curve presents resents relative value opportunities compared with other currencies Issuance from Italy and Spain offers better yield than Bunds, although investors need to decide whether they are being rewarded for the additional risk and global monetary policies have begun to diverge. Europe looks like it is Japanese, or rather, the euro-zone economy does – an unending liquidity trap for low growth, where even the lowest of rates cannot encourage investors to throw their weight behind risk assets. This both shapes, and is shaped by, the outlook for euro-zone sovereign debt – of no small concern for institutional investors who hold a rather large stack of them. “I’m old enough to remember when, 25 to 30 years ago, people looked at Japanese sovereign debt at “Europe is in danger of being Nipponified” Iain Lindsay XXXXXX A XXXXXX A NOVEMBER 2018 SPECIAL REPORT ESG ● INTEGRATION ● PASSIVE ● LOW-CARBON ● FIXED INCOME ● RESEARCH ● SUSTAINABLE FINANCE ● LEADING VIEWPOINTS PENSIONS 37 PENSIONS COUNTRY REPORT XXXXXXXXX 00 GUEST VIEWPOINT "Xxxxx" Xxxx 00 XXXX 00 Xxxxx 00 Xxxxx 00 Xxxx 00 XXXX XXXXXXXXX 00 Xxxxxxx XXXXXXX 00 XX 00 XXXXX XXXXXXXXX 00 POINTS OF NOTE Xxxxxx Xxxxxxxx Xxxxxxx Xxxxxx Xxxxxx Xxxxxxx. Xxxxx Xxxxx “ Xxxxxx” Quote Attribution XXX XXXXX Xxxxxx ipe.com/event 38 FIRST PILLAR REFORM 40 WERNER HUG 42 ASSET MANAGEMENT 44 ESG 48 RISK MANAGEMENT 50 ILLIQUID INVESTMENTS 51MORTALITY 52 IPE SURVEY: MANAGERS OF SWISS INSTITUTIONAL ASSETS COUNTRY REPORT SWITZERLAND SUPPLEMENT IMPACT INVESTING 57 PRIVATE DEBT 59 MACS 62 TRADE FINANCE PERSPECTIVE SHARE BUYBACKS 16 DEBIASING 30 RAILPEN 34 NETHERLANDS 56 ROB ARNOTT 68 HEDGE FUNDS MAY 2019 HEADING FOR THE CLOUDS CAN YOUR PRIVATE DEBT MANAGER NAVIGATE A DOWNTURN? 34 PENSIONS NETH KEY POINTS Parliament has adopted a legal amendment designed to limit pension funds’ abil- ity to outsource fiduciary ass management The initiator of the amendm claims that fiduciary mana ment would no longer be possible The social affairs minister Wouter Koolmees has de fiduciary management is become unlawful The ultimate responsibi outsourcing services st with a pension fund’s b P ieter Omtzigt, Christian Dem has caused a s fiduciary man sector by tab amendment forbidding pension fun 46 IPE SURVEY: MANAGERS OF DUTCH INSTITUTIONAL ASSETS INVESTMENT 61 PORTFOLIO STRATEGY INDICES & BENCHMARKS The Chinese dam breaks CHINA JOSEPH MARIATHASAN Global bond indices have started including the Chinese domestic bond markets in their benchmarks KEY POINTS Chinese bonds are now being included in global indices This is a key step in the opening of Chinese domestic capital markets to foreign investors The implications for capital flows are what makes the index inclusions so dramatic China might one day replace the US as the benchmark for global fixed income T he dam has finally broken. China’s huge onshore bond markets have been included in global bond indices. Bloomberg led the way with China’s inclusion in its Global Aggregate index from April and it is expected that other providers will follow suit this year. That is likely to result in a flood of foreign capital flowing into China’s onshore bond markets. The inclusion of China’s onshore bonds into the main international bond indices is the biggest change in capital markets, according to Hayden Briscoe, head of Asia Pacific fixed income at UBS Asset Management. When fully accounted for in the denominated bonds have tradition- ally been underrepresented in the main global bond indices relative to the size of China’s economy and the stock of renminbi-denominated debt outstanding. This is despite the fact that China has bond markets that are close to developed market standards. Moreover, notes Jan Dehn, head of research at Ashmore, China’s bond market is enormous. Its corporate and sovereign bonds comprise about 48% of total emerging market fixed income and more than 10% of the global bond market. “The size of China’s markets means that these bonds will become a prominent – and eventually dominant – feature in both EM and developed market fixed income benchmark indices,” he says. China’s market The inclusion of Chinese bonds into indices is an important step in the opening of China’s capital markets to international investors. China’s bond Bloomberg Global Aggregate index, local currency Chinese bonds will be the fourth largest component following the dollar, euro and yen. Using data as of 24 January 2019, the index would include 363 Chinese securities representing 6% of a $54trn (€48trn) index upon completion of the phase-in, according to Bloomberg. The significance of the events is that, as Mark Leung, CEO of JP Morgan China indicates, renminbi- 61 CHINA 63 EUROPEAN BENCHMARKS 64 ESG “There is no reason for a delay as you can buy all the bonds you want today” Hayden Briscoe ON THE RECORD: EUROPE ON BREXIT 50 SOLUTIONS 52 NORDIC FOCUS 54 GROEIFABRIEK PORTFOLIO STRATEGY CURRENCY 34 BANK OF IRELAND 36 UK PENSIONS 59 REGULATION 70 CHINA TECH 73 IMPACT DATA 75 IG CREDIT MARCH 2019 PENSIONS TECH FOR DUMMIES MADE TO MEASURE JANUARY/FEBRUARY 2019 ESG SPECIAL IMPACT INVESTING INTERVIEWGUNNAR BRANSON, AFIRE PARISTHE GRAND PLAN M&ATAKING REITS PRIVATE REAL ESTATE FUND MANAGERS TAKE IT ON THEMSELVES TO CAPTURE ESG DATA + IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS 400 2019 ASSET MANAGEMENT GUIDE }TOP 400 }DIRECTORY }PROFILES 019 30 PENSIONS COUNTRY REPORT SPAIN AND PORTUGAL COUNTRY REPORT SPAIN PORTUGAL 00 XXXXX 00 XXX 00 XXX 00 XXXX 00 XXXX 00 IPE SURVEY: XXXX XXXXXX Xxxx COUNTRY REPORT 31 POLICY 34 SECOND PILLAR 37 CARLO COTTARELLI 38 ASSET ALLOCATION 40 BYBLOS 44 TELEMACO 41 IPE SURVEY: MANAGERS OF ITALIAN INSTITUTIONAL ASSETS COUNTRY REPORT ITALY INVESTMENT 63 ASSET CLASS US EQUITIES 00 XXXXX 00 XXX 00 XXX 00 XXXX 00 XXXX 00 IPE SURVEY: XXXX XXXXXX Xxxx XXXX XXX Xxxxx KEY POINTS Xxxx Xxxx Xxxx X xxx ASSET CLASS US EQUITIES 00 XXXXX 00 XXX 00 XXX 00 XXXX 00 XXXX 00 IPE SURVEY: XXXX XXXXXX Xxxx XXXX XXX Xxxxx KEY POINTS Xxxx Xxxx Xxxx X xxx ASSET CLASS 63 GLOBAL VIEW 66 ASSET ALLOCATION 68 IPE SURVEY MANAGERS OF EMERGING MARKET DEBT Sentiments drown out sense GLOBAL VIEW JOSEPH MARIATHASAN The political and economic uncertainty surrounding Turkey and Argentina is distracting investors from the sound fundamentals to be found elsewhere across the asset class over half the hard currency market is rated investment grade, it illustrates the dominance of sentiment over fundamentals in emerging markets. Investors seeing the emerging markets sell-off may be pondering what lies ahead. “We have seen this movie before. But the main charac- KEY POINTS Rising US interest rates and trade tensions have exerted downward pressure Argentina and Turkey have domi- nated emerging market news Most emerging markets are stronger since the 2013 taper tantrum The potential for changes in sentiment complicates local currency debt investment T hisyear has seen a reversal in sentiment regarding emerging market debt (EMD). By the third quarter, local currency drawdowns were close to the worst seen since the benchmark was created in 2003, greater than in the taper tantrum of 2013. Hard currency spreads of 370bps over US Treasuries in mid-September, were troubling peaks last reached in 2013. Rob Drijkoningen, co-head of EMD at Neuberger Berman, points out that the widening of hard currency spreads against US high- yield bond spreads has been more striking (see figure). Hard currency spreads surpassed US high yield for the first time since 2005. Given that ters always seem to change and the plot thickens each time,” says Anders Faergermann, an EMD portfolio manager at Pinebridge Investments. Sentiment in emerging markets driven by headline news, often seems divorced from fundamentals. Currently, it is Turkey and Argentina that dominate the bad news. But investors need to be able to separate idiosyncratic stories from the underlying fundamentals. At the end of the day, says Faergemann, markets are likely to calm and reverse back up into next year: “In the current environment however, it is not time to be a hero.” There are certainly economic drivers that have created headwinds for emerging markets. First, US interest rates have risen steadily since 2015. “Emerging market investors were unnerved earlier this year when the yield on US 10-year Treasuries went past 3% yield,” says Sergei Strigo, co-head of EMD at Amundi. The significant negative perfor- mance in EMD across all classes came from April with a broad-based sell-off after dollar appreciation. That put pressure on emerging market currencies, which caused an under- performance in hard currency EMD. The Trump administration’s trade strategy is also causing uncertainties, particularly regarding the impact on China. Strigo says: “The continuous threat of more and more tariffs on China may slow Chinese growth, and hence several EM countries, particu- larly in Asia where there are smaller open economies dependent on global trade.” He also points to political uncertainties arising from a heavy election schedule in 2018 in Mexico, Malaysia, Turkey and Brazil, where it is unclear who is going to win, which EMERGING MARKET DEBT 70 INVESTMENT PORTFOLIO STRATEGY LIABILITY MANAGEMENT 70-77 CASHFLOW-DRIVEN INVESTMENT 77 NETHERLANDS The end of LDI as we know it? CASHFLOW-DRIVEN INVESTMENT CARLO SVALUTO MOREOLO The DB pension industry is nearing peak LDI and a new understanding of liability management is taking hold T he job of managing UK defined benefit (DB) pension funds has become much harder over the past two decades, not in small part due to the unprec- edented fall in interest rates. This has driven up the value of liabilities faster than the value of assets on the balance sheets of DB pension funds. Throughout this period, most pension funds have relied on liability-driven investment (LDI) strategies to manage interest rate and inflation risk. Today, however, LDI is morphing into something quite different, as pension funds mature KEY POINTS UK DB pension schemes are nearing full-funding status Commentators believe the pace of hedging is likely to slow For DB funds, the attention will turns towards cashflow- matching Liability-driven investment (LDI) is becoming ‘cashflow-driven investing’ (CDI) and focus on meeting cashflows requirements as well as managing balance sheet risks. Asset-liability management has existed, in various iterations, since banking begun. But LDI for pension funds, probably its latest incarnation, took the stage at the turn of the century. In 2001, the DB pension scheme of Boots, the UK pharmacy chain, switched all its assets into bonds. Three years earlier, a paper by Jon Exley, Shyam Mehta and Andrew Smith, entitled ‘The financial theory of defined benefit pension schemes’ had argued for the use of a mark-to- market approach to value DB scheme liabilities. It was the beginning of a not-so-small revolution that led to the creation of a roughly £900bn (€1trn) industry in the UK. That is the notional value of UK DB liabili- ties hedged against interest rate and inflation risk at the end of 2016, according to a well-known survey published by KMPG. To some, LDI might seem like an abstract concept. But in reality, LDI activity by DB schemes has signifi- cantly contributed to the fall of interest rates over the past two decades, that has had very real consequences. Today, however, there are signs that the LDI industry is approaching a turning point. Winds of change In June this year, BlackRock suggested that UK DB schemes had reached full funding, meaning that on aggregate level the industry was in surplus, as assets exceeded liabilities. Andrew Tunningley, BlackRock’s head of UK strategic clients, made the comment in relation to the June release of the PPF 7800 index. This is the main index documenting the funding position of UK DB schemes. It is published by the Pension Protection Fund (PPF), the UK’s lifeboat scheme. In reality, the aggregate deficit of the 5,588 schemes in the index was estimated be £94bn at the end of May 2018, up from a deficit of FUTURE D NOVEMBER/DECEMBER 2018 TOP 100REA AUMBREAKD FLEXIBLE OFFI INVESTOR PR WHERE CITIES ARE MEANS FOR REAL + IPE’S GUIDE TO €7.2TRN PENSION ASSETS 1000 EUROPEAN PENSIONS GUIDE }TOP 1000 FUNDS }RANKINGS }COUNTRY GUIDE 2019 019 84 INVESTMENT PORTFOLIO STRATEGY FACTOR INVESTING 84 LOW VOLATILITY 86 DEFINITIONS 92 STRATEGY 93 MULTI-FACTOR ETFS 95 EMERGING MARKETS 97 TAXATION The paradox of low volatility LOW VOLATILITY JOSEPH MARIATHASAN Despite scepticism by some investors, low-volatility investing does appear to work, especially during market downturns KEY POINTS Low-volatility investing seems to run counter to narrow ideas of economic rationality The empirical evidence suggests low-volatility investing does work MSCI’s low-vol indices are among the most popular Some remain sceptical of the low-vol approach E conomics is not an experimental science despite appearing to have a strong case of physics envy when it comes to developing theoretical frameworks to explain the real world. Investment behaviour sometimes seems to run counter to what might be expected from a narrow view of economic rationality. Take two models that are central to the whole edifice of financial economics. Modern portfolio theory (MPT) was constructed around Nobel prize winner Harry Markowitz’s approach to creating efficient portfolios based on the assumption that investors would demand greater returns for assets with greater risks. That, in turn, led to the capital asset pricing model (CAPM), and the associated idea that investors could obtain portfolios at any risk level desired, by taking the market portfolio and either leveraging it or combining it with cash in each case, paying or receiving interest at the risk-free rate. These constructs are rooted in particular assumptions about human behaviour, albeit that of crowds rather than individuals. In its strongest form, such reasoning assumes rationality, unencumbered self-interest and the idea that human beings strive to maximise well- defined utility functions to achieve happiness. “A lot of emerging market companies can be less volatile than developed. We prefer Malaysian banks, for example, which are more stable than Euro- pean banks” Jan Sytze Mosselaar OUNTRY REPORT PAIN RTUGAL X 00 XXX 00 XXX OUNTRY REPORT TO-ENROLMENT 29 INDUSTRY VIEWS NSION REFORM 31 DB FUNDING OUNTRY REPORT LAND INVESTMENT 47 ASSET CLASS PRIVATE EQUITY 47 OUTLOOK 49 ASSET ALLOCATION 50 VENTURE CAPITAL Y Y n expanding universe OUTLOOK JOSEPH MARIATHASAN gnificant growth in direct lending has helped boost the private equity market T he past couple of years have set records for private equity fundraising backed by an explosion in direct lending and what appears to be strong evidence of or returns to public markets in e equity over long periods. For ors new to the market, though, detailed information to its being a direct investor in a large number of funds. Its comparison of private equity performance with public markets shown is based on an exact like-for-like comparison of cashflows. In most years, an investment in the private equity marketplace, as a whole, would have beaten an investment in the global equity index, while investing in the first and second quartiles of funds would have given substantial outperformance on top. Whether that will continue to be the case is the dilemma for investors. The attractive performance, combined with a net distribution of funds for the past seven years, has supported a benign environment for fundraising in both 2017 and 2018, says Toni Vainio, a principal at Pantheon, a private equity firm. Given the success, there have been many new entrants to the market- place. “We are also seeing GPs looking to capture limited partner demand so large-cap buyout firms e high after a period urns private equity inves- od on a like-for-like on in direct lending to finance acquisi- ng has enjoyed a benign years post-acquisition. Comparing private equity returns with public markets has always been a difficult and controversial area, with private equity returns often characterised as being opaque and potentially misleading. Willis Towers Watson (WTW), which advises on both public and private markets, admits to higher returns being seen in private markets which justifies the growth in size of assets. Hamilton Lane, an alternative investment management firm, claims to have the most comprehensive database of private equity informa- tion in the marketplace. Richard Hope, a managing director of the firm, attributes the firm’s access to current pricing and competition in deal sourcing poses challenges. Last year there was over $1trn (€870bn) of uninvested private equity capital looking for a home, according to Hamilton Lane. The risk is that pricing gets inflated. But, as he adds, that has not just been driven by the amount of dry powder. Stockmarkets, until the correction in the final quarter of 2018, were also at historical highs. There has also been an abundance of debt capital with debt pricing at attractive levels. “It is a perfect storm, as there is a lot of liquidity with a significant amount of private equity capital and significant supply of debt able to be lent, and these two, by definition, will push prices up,” says Nikos Stathopoulos, a partner at private equity firm BC Partners. For investors in private equity, that means they need to find general partners (GPs) who can not only find value when making acquisitions but also identify ways of adding value “It is a perfect storm that will push prices up” Nikos Stathopoulos PENSIONS FOCUS: LIABILITY STRATEGIES 24PERSPECTIVE ASSET CLASS US EQUITIES 32 ENI'SPENSIONS 34 ITALY 52 CHINA BONDS 61 IPOS 64 GEORGE MUZINICH JULY/ AUGUST 2019 QUESTIONS ON CANNABIS INVESTMENT OPPORTUNITY OR ETHICAL THREAT? 34 PENSIONS 34 FIDUCIARY RESPONSIBILITY 36 INVESTMENT 39 STATE PENSION AGE 41 NICOLE BEUKEN 43 COMMENTARY 45 GENERAL PENSION FUNDS COUNTRY REPORT NETHERLANDS 46 IPE SURVEY: MANAGERS OF DUTCH INSTITUTIONAL ASSETS ORTFOLIO STRATEGY URRENCY 34 BANK OF IRELAND 36 UK PENSIONS 59 REGULATION 0 CHINA TECH 00 2019 74 INVESTMENT PORTFOLIO STRATEGY CREDIT 74 ASSET ALLOCATION 76 MULTI-ASSET CREDIT 80 CONVERTIBLE BONDS 84 FACTOR INVESTING 88-92 PRIVATE DEBT 92 FIRST STATE SUPER Reading the cycle ASSET ALLOCATION CHRISTOPHER O’DEA The complex prevailing economic and politicial environment makes it difficult to predict how long the current credit cycle will continue deep inside a cave 200 miles (322km) east of Cape Town, South Africa. Etched by a prehistoric artist more than 73,000 years ago with a red ochre crayon on a small stone, the markings represent the earliest evidence of human drawing. The lead researcher of the mission says the marks – six parallel lines criss- crossed by three diagonals, akin to the modern-day hashtag – is defi- nitely a symbol conveying a message. Just what that message is remains unclear. What is clear is that credit investors and investment managers face a similar dilemma, says Randy Schwimmer, senior managing KEY POINTS Investors are looking for signals about how much longer this credit cycle might last, and which assets might perform Incumbent chief investment officers who lived through the 2008 crisis are more disciplined and risk-averse Credit managers have rotated into higher-quality assets because spreads over government bonds do not cover the additional risk of holding some corporate credit assets Interest rates may stay low for longer and support credit asset performance A s summer wound down and investors began returning to their desks to focus on another round of central bank policy meetings, archeologists announced the discovery of ancient markings director and head of origination and capital markets at Churchill Asset Management, which concentrates on lending to private-equity-sponsored middle-market companies. Like archeologists, participants in loan and credit markets are also “experts at digging for meaning among otherwise inscrutable signs”, Schwimmer says. For today’s investors, the search for meaning turns on decoding the symbols of the credit cycle – and whether that exercise can provide useful messages about when and where to invest in credit markets. “People are looking for signals, asking what do we have to go on, in order to figure out what lies ahead,” says Schwimmer. The archaeologists might have the easier task. “There are a lot of cross-currents these days,” he says. “Even the most sophisticated observers are having a difficult time sorting it all out.” In interviews with IPE, several leading credit investment managers discussed how they look at cycles, where we might be in this cycle, and how they are positioning credit strategies in a long-running cycle that might yet continue for some time to come. Central banks received high marks PENSIONS 37 PENSIONS COUNTRY REPORT XXXXXXXXX 00 GUEST VIEWPOINT "Xxxxx" Xxxx 00 XXXX 00 Xxxxx 00 Xxxxx 00 Xxxx 00 XXXX XXXXXXXXX 00 Xxxxxxx XXXXXXX 00 XX 00 XXXXX XXXXXXXXX 00 POINTS OF NOTE Xxxxxx Xxxxxxxx Xxxxxxx Xxxxxx Xxxxxx Xxxxxxx. Xxxxx Xxxxx “ Xxxxxx” Quote Attribution XXX XXXXX Xxxxxx ipe.com/event 38 FIRST PILLAR REFORM 40 WERNER HUG 42 ASSET MANAGEMENT 44 ESG 48 RISK MANAGEMENT 50 ILLIQUID INVESTMENTS 51MORTALITY 52 IPE SURVEY: MANAGERS OF SWISS INSTITUTIONAL ASSETS COUNTRY REPORT SWITZERLAND L 70 INVESTMENT PORTFOLIO STRATEGY LIABILITY MANAGEMENT 70-77 CASHFLOW-DRIVEN INVESTMENT 77 NETHERLANDS The end of LDI as we know it? CASHFLOW-DRIVEN INVESTMENT CARLO SVALUTO MOREOLO The DB pension industry is nearing peak LDI and a new understanding of liability management is taking hold T he job of managing UK defined benefit (DB) pension funds has become much harder over the past two decades, not in small part due to the unprec- edented fall in interest rates. This has driven up the value of liabilities faster than the value of assets on the balance sheets of DB pension funds. Throughout this period, most pension funds have relied on liability-driven investment (LDI) strategies to manage interest rate and inflation risk. Today, however, LDI is morphing into something quite different, as pension funds mature KEY POINTS UK DB pension schemes are nearing full-funding status Commentators believe the pace of hedging is likely to slow For DB funds, the attention will turns towards cashflow- matching Liability-driven investment (LDI) is becoming ‘cashflow-driven investing’ (CDI) and focus on meeting cashflows requirements as well as managing balance sheet risks. Asset-liability management has existed, in various iterations, since banking begun. But LDI for pension funds, probably its latest incarnation, took the stage at the turn of the century. In 2001, the DB pension scheme of Boots, the UK pharmacy chain, switched all its assets into bonds. Three years earlier, a paper by Jon Exley, Shyam Mehta and Andrew Smith, entitled ‘The financial theory of defined benefit pension schemes’ had argued for the use of a mark-to- market approach to value DB scheme liabilities. It was the beginning of a not-so-small revolution that led to the creation of a roughly £900bn (€1trn) industry in the UK. That is the notional value of UK DB liabili- ties hedged against interest rate and inflation risk at the end of 2016, according to a well-known survey published by KMPG. To some, LDI might seem like an abstract concept. But in reality, LDI activity by DB schemes has signifi- cantly contributed to the fall of interest rates over the past two decades, that has had very real consequences. Today, however, there are signs that the LDI industry is approaching a turning point. Winds of change In June this year, BlackRock suggested that UK DB schemes had reached full funding, meaning that on aggregate level the industry was in surplus, as assets exceeded liabilities. Andrew Tunningley, BlackRock’s head of UK strategic clients, made the comment in relation to the June release of the PPF 7800 index. This is the main index documenting the funding position of UK DB schemes. It is published by the Pension Protection Fund (PPF), the UK’s lifeboat scheme. In reality, the aggregate deficit of the 5,588 schemes in the index was estimated be £94bn at the end of May 2018, up from a deficit of FUTURE DESTINATIONS NOVEMBER/DECEMBER 2018 TOP 100REAL ESTATE INVESTMENT MANAGERS AUMBREAKDOWNS AND FULL ANALYSIS FLEXIBLE OFFICE & CO-WORKING SPACE INVESTOR PROFILE UNISUPER WHERE CITIES ARE HEADING AND WHAT IT MEANS FOR REAL ESTATE INVESTORS 34 PENSIONS 34 FIDUCIARY RESPONSIBILITY 36 INVESTMENT 39 STATE PENSION AGE 41 NICOLE BEUKEN 43 COMMENTARY 45 GENERAL PENSION FUNDS COUNTRY REPORT NETHERLANDS KEY POINTS Parliament has adopted a legal amendment designed to limit pension funds’ abil- ity to outsource fiduciary asset management The initiator of the amendment claims that fiduciary manage- ment would no longer be possible The social affairs minister Wouter Koolmees has denied fiduciary management is set to become unlawful The ultimate responsibility for outsourcing services still lies with a pension fund’s board P ieter Omtzigt, a Dutch Christian Democrat MP, has caused a stir in the fiduciary management sector by tabling a legal amendment last October forbidding pension funds from possible. The industry is struggling to comprehend the meaning of the amendment, but is assuming not much will change in reality. In a further clarification, the MP argued that fiduciary management A question of legality FIDUCIARY RESPONSIBILITY LEEN PREESMAN Managers remain puzzled on meaning of legal amendment should be abolished, as it could hamper the ability of trustees to control their pension funds. Accord- ing to Omtzigt, trustees are responsi- ble for monitoring their investments in particular as IORP II demands pension funds have a risk officer. If a scheme outsources supervision, the risk officer would lose track of the risks being taken, he contended. Commenting on the amendment outsourcing the design of strategic investment policy as well as monitor- ing asset management. In a clarifica- tion, he emphasised that the change – adopted by both the lower house and the senate – meant that fiduciary management would no longer be 46 IPE SURVEY: MANAGERS OF DUTCH INSTITUTIONAL ASSETS Pieter Omtzigt 6TRN IN GLOBAL ASSETS 00 19 ET NAGEMENT DE OP 400 DIRECTORY PROFILES 9 70 INVESTMENT Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx ASSET CLASS US EQUITIES US EQUITIES A time to focus on value VALUATIONS JOSEPH MARIATHASAN Investing into a market with such high valuations presents a challenge T wo factors have stood out in terms of US equity markets since the financial crisis. First, the impact of quantita- tive easing (QE) and near- zero interest rates. Second, the growth of the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Alphabet/Google). US equity markets are expensive on almost every measure. They are costly in absolute terms and exorbi- tant in relative terms. Investment consultants such as Cambridge Associates are recommending that its clients tilt exposures away from the US and towards other developed countries and emerging markets. But interest rates are entering an upward cycle as the Federal Reserve tightens, while Facebook’s recent troubles over misuse of data may prove to be a catalyst for reappraisals. At the end of February, the MSCI US index was 54% premium above its median and more expensive than it has ever been relative to non-US developed markets. “The cumulative underperformance of the world-ex US relative to US was 0.85 (1 being equal) which is as much underper- formance that has ever been seen in the past before it starts to turn around,” says Celia Dallas, chief investment strategist at Cambridge Associates. US small caps are looking particularly vulnerable. While large-cap earnings expectations have been upgraded, small-cap earnings expectations were downgraded 8% in 2017, says Dallas. Half of the debt of small-cap companies is floating rate and they are likely to be badly affected by rate rises. In contrast, of the S&P 500 ex-financials, only 11% of debt is floating rate and the fixed-rate debt has an average maturity of 11 years, so any rise in rates will take some time to affect large caps, says Dallas. The key for non-US markets to outperform US is for earnings growth in other markets to outpace that of the US. But US tax reforms have led to a sharp increase in the shareholder take of corporate earnings, with virtually all US companies benefit- ting, says CT Fitzpatrick, CEO of Vulcan Value Partners, based in Birmingham, Alabama. If the earnings outlook is sending mixed messages, what about the high-profile tariffs that the Trump administration is determined to put into place? Clearly, the ramifications of a trade war would be calamitous, but such an outcome still seems unlikely. Steel and aluminium inputs, together with the other products (lumber, washing machines and solar cells) imported into the US economy together amount to only 0.3% of GDP, says Dallas. Moreover, she adds, the tariffs charged to the US are significantly higher across the board than those charged by the US. From a strategic perspective, Dallas says, negotiating a better balance seems sensible. “The philosophy of having higher tariffs applied to the US than the US was charging made sense at a time when the US was trying to encourage the global growth of capitalism and KEY POINTS The US market is expensive by every measure Increased tariffs may have less of an impact than commentators assume Leadership stocks are particu- larly overvalued Focusing on value may make sense in the current environment 70 VALUATIONS 72 INTEREST RATES 73 US ECONOMY 75 TRUMP EFFECT 77 IPE SURVEY US EQUITY MANAGERS 84 INVESTMENT PORTFOLIO STRATEGY FACTOR INVESTING 84 LOW VOLATILITY 86 DEFINITIONS 92 STRATEGY 93 MULTI-FACTOR ETFS 95 EMERGING MARKETS 97 TAXATION The paradox of low volatility LOW VOLATILITY JOSEPH MARIATHASAN Despite scepticism by some investors, low-volatility investing does appear to work, especially during market downturns KEY POINTS Low-volatility investing seems to run counter to narrow ideas of economic rationality The empirical evidence suggests low-volatility investing does work MSCI’s low-vol indices are among the most popular Some remain sceptical of the low-vol approach E conomics is not an experimental science despite appearing to have a strong case of physics envy when it comes to developing theoretical frameworks to explain the real world. Investment behaviour sometimes seems to run counter to what might be expected from a narrow view of economic rationality. Take two models that are central to the whole edifice of financial economics. Modern portfolio theory (MPT) was constructed around Nobel prize winner Harry Markowitz’s approach to creating efficient portfolios based on the assumption that investors would demand greater returns for assets with greater risks. That, in turn, led to the capital asset pricing model (CAPM), and the associated idea that investors could obtain portfolios at any risk level desired, by taking the market portfolio and either leveraging it or combining it with cash in each case, paying or receiving interest at the risk-free rate. These constructs are rooted in particular assumptions about human behaviour, albeit that of crowds rather tha strongest assumes self-inter beings s defined happine “A lot of market c can be le than dev prefer banks, whic stable pea Jan 26 PENSIONS COUNTRY REPORT SPAIN AND PORTUGAL COUNTRY REPORT SPAIN PORTUGAL 00 XXXXX 00 XXX 00 XXX 00 XXXX 00 XXXX 00 IPE SURVEY: XXXX XXXXXX Xxxx COUNTRY REPORT 27 AUTO-ENROLMENT 29 INDUSTRY VIEWS 29 PENSION REFORM 31 DB FUNDING 34 IPE SURVEY: MANAGERS OF IRISH INSTITUTIONAL ASSETS COUNTRY REPORT IRELAND IPE SURVEY SUPPLEMENT TOP 400 ASSET MANAGERS 31 ATP 38 PER BOLUND 41 ICELAND PORTFOLIO STRATEGY INDICES & BENCHMARKS 17 LSR'S CEO 22 MMT 28 GENEVA’S CPEG 45 EUROPE OUTLOOK 56 ACTIVE ETFS JUNE 2019 GREEN SIGNALS NORDIC REPORT: ATP’S QUANT ESG STRATEGY CONSUMER LED MARCH/APRIL 2019 LOGISTICSTHE GLOBAL BOOM CONTINUES INTERVIEWIVANHOÉ CAMBRIDGE CORE FUNDSOPEN-ENDED GROWTH STORY IPFMTHE NEW AUSTRALIAN MANAGER TAKING ON EUROPE TO UNDERSTAND THE FUTURE OF GLOBAL LOGISTICS, OBSERVE THE END USER Information & Rates 2020 The most effective platform to reach European pension funds & other institutional investors Company overview 2-3 IPE Magazine 4-7 IPE.com 8 IPE Reference Hub 9 IPE Real Assets 10-11 IPE Webcasts 12 IPE Asset Management Guide 14 IPE D.A.CH 15 IPE Conference & Awards 16-17 Other IPE events 18 IPE Quest 19

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Page 1: 2-3 4-7 8 VEY 9 10-11 12 14 15 16-17 18 19 Information ... · 34 pensions t tugal november 2018 investment & pensions europe t c o u n t r y 00 xxxxx 00 xxx pensions 00 00 00 ip e

34 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

november 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

CoUnTrY

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPe SUrveY:

XXXX XXXXXX

COUNTRY REPORT

35 LIfE & PENSIONS

36-46 ASSET ALLOCATION

48 APOTEkET

50-58 SwEDISh PENSION REfORM 54 IPe SUrveY:

MANAGERS Of

NORDIC

INSTITUTIONAL

ASSETSCOUNTRY REPORT

nordICregIon

000-000 Nordics NOV 2018.indd 34

23/10/2018 16:01

INVESTMENT 47

INVESTMENT & PENSIONS EUROPE FEBRUARY 2019

ASSET CLASS

PRIVATE EQUITY

47 OUTLOOK 49 ASSET ALLOCATION

50 VENTURE CAPITAL

52 IPE SURVEY

PRIVATE EQUITY

MANAGERS

An expanding universeOUTLOOK

JOSEPH MARIATHASAN

A significant growth in direct lending has helped boost the private equity market

T he past couple of years have

set records for private

equity fundraising backed

by an explosion in direct

lending and what appears

to be strong evidence of

superior returns to public markets in

private equity over long periods. For

investors new to the market, though,

detailed information to its being a

direct investor in a large number of

funds. Its comparison of private

equity performance with public

markets shown is based on an exact

like-for-like comparison of cashflows.

In most years, an investment in the

private equity marketplace, as a

whole, would have beaten an

investment in the global equity index,

while investing in the first and

second quartiles of funds would have

given substantial outperformance on

top. Whether that will continue to be

the case is the dilemma for investors.

The attractive performance,

combined with a net distribution of

funds for the past seven years, has

supported a benign environment for

fundraising in both 2017 and 2018,

says Toni Vainio, a principal at

Pantheon, a private equity firm.

Given the success, there have been

many new entrants to the market-

place. “We are also seeing GPs

looking to capture limited partner

demand so large-cap buyout firms

KEY POINTS

Valuations are high after a period

of strong returns

Returns for private equity inves-

tors look good on a like-for-like

basis

An explosion in direct lending

has helped to finance acquisi-

tions

Fundraising has enjoyed a benign

couple of years

post-acquisition.

Comparing private equity returns

with public markets has always been

a difficult and controversial area,

with private equity returns often

characterised as being opaque and

potentially misleading. Willis Towers

Watson (WTW), which advises on

both public and private markets,

admits to higher returns being seen

in private markets which justifies the

growth in size of assets.

Hamilton Lane, an alternative

investment management firm, claims

to have the most comprehensive

database of private equity informa-

tion in the marketplace. Richard

Hope, a managing director of the

firm, attributes the firm’s access to

current pricing and competition in

deal sourcing poses challenges.

Last year there was over $1trn

(€870bn) of uninvested private equity

capital looking for a home, according

to Hamilton Lane. The risk is that

pricing gets inflated. But, as he adds,

that has not just been driven by the

amount of dry powder. Stockmarkets,

until the correction in the final

quarter of 2018, were also at

historical highs. There has also been

an abundance of debt capital with

debt pricing at attractive levels. “It is

a perfect storm, as there is a lot of

liquidity with a significant amount of

private equity capital and significant

supply of debt able to be lent, and

these two, by definition, will push

prices up,” says Nikos Stathopoulos, a

partner at private equity firm BC

Partners. For investors in private equity,

that means they need to find general

partners (GPs) who can not only find

value when making acquisitions but

also identify ways of adding value

“It is a perfect storm

that will push

prices up”

Nikos Stathopoulos

000-IPE feb 2019.indd 47

23/01/2019 17:45

74 INVESTMENT

porTfolIo STraTEgy

credit

74 aSSET allocaTIoN 76 MulTI-aSSET crEdIT

80 coNVErTIblE boNdS 84 facTor INVESTINg

88-92 prIVaTE dEbT 92 fIrST STaTE SupEr

Reading the cycleaSSET allocaTIoN

chrISTophEr o’dEa

The complex prevailing economic and politicial environment makes

it difficult to predict how long the current credit cycle will continue

deep inside a cave 200 miles (322km)

east of Cape Town, South Africa.

Etched by a prehistoric artist

more than 73,000 years ago with a

red ochre crayon on a small stone,

the markings represent the earliest

evidence of human drawing. The lead

researcher of the mission says the

marks – six parallel lines criss-

crossed by three diagonals, akin to

the modern-day hashtag – is defi-

nitely a symbol conveying a message.

Just what that message is remains

unclear. What is clear is that credit

investors and investment managers

face a similar dilemma, says Randy

Schwimmer, senior managing

KEY POINTS

Investors are looking for signals

about how much longer this

credit cycle might last, and which

assets might perform

Incumbent chief investment

officers who lived through the

2008 crisis are more disciplined

and risk-averse

Credit managers have

rotated into higher-quality

assets because spreads over

government bonds do not cover

the additional risk of holding

some corporate credit assets

Interest rates may stay low for

longer and support credit asset

performance

a s summer wound

down and investors

began returning to

their desks to focus on

another round of

central bank policy

meetings, archeologists announced

the discovery of ancient markings

director and head of origination and

capital markets at Churchill Asset

Management, which concentrates on

lending to private-equity-sponsored

middle-market companies. Like

archeologists, participants in loan

and credit markets are also “experts

at digging for meaning among

otherwise inscrutable signs”,

Schwimmer says.

For today’s investors, the search

for meaning turns on decoding the

symbols of the credit cycle – and

whether that exercise can provide

useful messages about when and

where to invest in credit markets.

“People are looking for signals,

asking what do we have to go on, in

order to figure out what lies ahead,”

says Schwimmer. The archaeologists

might have the easier task. “There

are a lot of cross-currents these

days,” he says. “Even the most

sophisticated observers are having a

difficult time sorting it all out.”

In interviews with IPE, several

leading credit investment managers

discussed how they look at cycles,

where we might be in this cycle, and

how they are positioning credit

strategies in a long-running cycle

that might yet continue for some

time to come.

Central banks received high marks

november 2018 INVESTMENT & pENSIoNS EuropE

000-IPE Nov2018 NEW.indd 74

24/10/2018 12:31

ASSET CLASS EUROPEAN EQUITIES

84 LOW VOL

86 FACTOR DEFINITIONS

92 STRATEGY

PERSPECTIVE

ATP’S LEADERSHIP WOES

30 APK

32 GERMANY

49 THOUGHT LEADERSHIP

67 MANAGER SELECTION

82 STEWARDSHIP

83 CHEYNE CAPITAL

APRIL2019

THE VOLATILITY PARADOX

FACTOR INVESTING PERSPECTIVES

OFC.indd 9

22/03/2019 13:45

PENSIONS FOCUS: LIABILITY STRATEGIES

24 PERSPECTIVE

ASSET CLASS

US EQUITIES

32 ENI's PENsIONs

34 ITALY

52 CHINA BONDS

61 IPOs

64 GEORGE MUZINICHJULY/

AUGUST

2019

QUESTIONS ON CANNABIS

INVESTMENT OPPORTUNITY OR

ETHICAL THREAT?

OFC.indd 9

21/06/2019 17:47

70 INVESTMENT

may 2018 INVESTMENT & PENSIONS EUROPE

XxxxXxxxXxxx XxxxXxxx Xxxx Source: OECD 2007

aSSET claSS

US EqUITIES

us equities

A time to focus

on valueValUaTIONS

JOSEPh MaRIaThaSaN

Investing into a market with such high valuations presents a

challenge

T wo factors have stood out in

terms of US equity markets

since the financial crisis.

First, the impact of quantita-

tive easing (QE) and near-

zero interest rates. Second, the

growth of the FAANG stocks

(Facebook, Amazon, Apple, Netflix,

and Alphabet/Google).

US equity markets are expensive

on almost every measure. They are

costly in absolute terms and exorbi-

tant in relative terms. Investment

consultants such as Cambridge

Associates are recommending that its

clients tilt exposures away from the

US and towards other developed

countries and emerging markets. But

interest rates are entering an upward

cycle as the Federal Reserve tightens,

while Facebook’s recent troubles over

misuse of data may prove to be a

catalyst for reappraisals.

At the end of February, the MSCI

US index was 54% premium above its

median and more expensive than it

has ever been relative to non-US

developed markets. “The cumulative

underperformance of the world-ex

US relative to US was 0.85 (1 being

equal) which is as much underper-

formance that has ever been seen in

the past before it starts to turn

around,” says Celia Dallas, chief

investment strategist at Cambridge

Associates.

US small caps are looking

particularly vulnerable. While

large-cap earnings expectations have

been upgraded, small-cap earnings

expectations were downgraded 8% in

2017, says Dallas. Half of the debt of

small-cap companies is floating rate

and they are likely to be badly

affected by rate rises. In contrast, of

the S&P 500 ex-financials, only 11%

of debt is floating rate and the

fixed-rate debt has an average

maturity of 11 years, so any rise in

rates will take some time to affect

large caps, says Dallas.

The key for non-US markets to

outperform US is for earnings growth

in other markets to outpace that of

the US. But US tax reforms have led

to a sharp increase in the shareholder

take of corporate earnings, with

virtually all US companies benefit-

ting, says CT Fitzpatrick, CEO of

Vulcan Value Partners, based in

Birmingham, Alabama.

If the earnings outlook is sending

mixed messages, what about the

high-profile tariffs that the Trump

administration is determined to put

into place? Clearly, the ramifications

of a trade war would be calamitous,

but such an outcome still seems

unlikely. Steel and aluminium inputs,

together with the other products

(lumber, washing machines and solar

cells) imported into the US economy

together amount to only 0.3% of GDP,

says Dallas.

Moreover, she adds, the tariffs

charged to the US are significantly

higher across the board than those

charged by the US. From a strategic

perspective, Dallas says, negotiating a

better balance seems sensible.

“The philosophy of having higher

tariffs applied to the US than the US

was charging made sense at a time

when the US was trying to encourage

the global growth of capitalism and

KEY POINTS

The US market is expensive by

every measure

Increased tariffs may have less

of an impact than commentators

assume

Leadership stocks are particu-

larly overvalued

Focusing on value may make

sense in the current environment

70 ValUaTIONS 72 INTEREST RaTES

73 US EcONOMy 75 TRUMP EffEcT

77 iPe survey

US EqUITy

MaNagERS

IPE May 2018.indd 70

24/04/2018 12:02

84 INVESTMENT

APRIL 2019 INVESTMENT & PENSIONS EUROPE

PORTFOLIO STRATEGY

FACTOR INVESTING

84 LOW VOLATILITY 86 DEFINITIONS 92 STRATEGY

93 MULTI-FACTOR ETFS 95 EMERGING MARKETS 97 TAXATION

The paradox of low

volatilityLOW VOLATILITY

JOSEPH MARIATHASAN

Despite scepticism by some investors, low-volatility investing does

appear to work, especially during market downturns

KEY POINTS

Low-volatility investing seems

to run counter to narrow ideas of

economic rationality

The empirical evidence suggests

low-volatility investing does

work

MSCI’s low-vol indices are

among the most popular

Some remain sceptical of the

low-vol approach

Economics is not an

experimental science

despite appearing to have

a strong case of physics

envy when it comes to

developing theoretical

frameworks to explain the real world.

Investment behaviour sometimes

seems to run counter to what might

be expected from a narrow view of

economic rationality.

Take two models that are central

to the whole edifice of financial

economics. Modern portfolio theory

(MPT) was constructed around Nobel

prize winner Harry Markowitz’s

approach to creating efficient

portfolios based on the assumption

that investors would demand greater

returns for assets with greater risks.

That, in turn, led to the capital asset

pricing model (CAPM), and the

associated idea that investors could

obtain portfolios at any risk level

desired, by taking the market

portfolio and either leveraging it or

combining it with cash in each case,

paying or receiving interest at the

risk-free rate.

These constructs are rooted in

particular assumptions about human

behaviour, albeit that of crowds

rather than individuals. In its

strongest form, such reasoning

assumes rationality, unencumbered

self-interest and the idea that human

beings strive to maximise well-

defined utility functions to achieve

happiness.

“A lot of emerging

market companies

can be less volatile

than developed. We

prefer Malaysian

banks, for example,

which are more

stable than Euro-

pean banks”

Jan Sytze Mosselaar

000-IPE April 2019.indd 84

21/03/2019 11:37

26 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

FEBRUARY 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

SPAIN PORTUGAL

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE SURVEY:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

27 AUTO-ENROLMENT 29 INDUSTRY VIEWS

29 PENSION REFORM 31 DB FUNDING

34 IPE SURVEY:

MANAGERS OF

IRISH INSTITUTIONAL

ASSETS

COUNTRY REPORT

IRELAND

IPE SURVEY

000-IPE fEb2019..indd 26

24/01/2019 13:08

SUPPLEMENT TOP 400 ASSET MANAGERS

31 ATP

38 PER BOLUND

41 ICELAND

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

17 LSR'S CEO

22 MMT

28 GENEVA’S CPEG

45 EUROPE OUTLOOK

56 ACTIVE ETFS

JUNE2019

GREEN SIGNALS

NORDIC REPORT: ATP’S QUANT ESG

STRATEGY

OFC GREEn.indd 9

28/05/2019 18:14

w

CONSUMER LED

MARCH/APRIL 2019

LOGISTICS THE GLOBAL BOOM CONTINUES

INTERVIEW IVANHOÉ CAMBRIDGE

CORE FUNDS OPEN-ENDED GROWTH STORY

IPFM THE NEW AUSTRALIAN MANAGER TAKING ON EUROPE

TO UNDERSTAND THE FUTURE OF GLOBAL

LOGISTICS, OBSERVE THE END USER

OFC-M-A 19 RA.indd 3

18/02/2019 12:27

68 INVESTMENT

JUNE 2019 INVESTMENT & PENSIONS EUROPE

ASSET CLASS

GOVERNMENT

BONDS

68 EURO-ZONE

70 US TREASURIES

74 IPE SURVEY:

GOVERNMENT

BOND MANAGERS

Turning

JapaneseEURO-ZONE

DEWI JOHN

The euro-zone appears to be in a low-growth

liquidity trap redolent of Japan

rebound. Alongside this, with

March’s euro-zone inflation print at

1.4%, the European Central Bank

(ECB) is struggling to meet its 2%

target. Indeed, inflation expectations are

at 1.35%, five years out, with “an arm

wrestle between the ECB and the

market. We’re inclined to agree with

the market,” Lindsay says. This,

again, is all reminiscent of Japan over

the past three decades. Sylvain de

Ruijter, lead portfolio manager, LDI

and rates at NN Investment Partners

(NNIP), worries that Europe, like

Japan, could fall into “a low-growth Global markets were a

one-way street in the

years following the

global financial crisis

– with loose mon-

etary policy and

ultra-low rates. Then, global markets

showed signs of getting off life

support. As usual, the US was ahead of the

cycle, its growth accelerating first.

Add to this ultra-hawks taking

control at the US Federal Reserve,

2-3% and said it can’t get any lower,”

says Iain Lindsay, co-head of global

portfolio management within the

global fixed income team at Goldman

Sachs Asset Management. “Well, look

at where we are now. Europe is in

danger of being Nipponified.”

Growth, inflation and rates

Euro-zone growth has bumped along

at 1.1%, its lowest for more than five

years. At the end of 2017, consensus

was that mean reversion would see

European risk assets outperform.

That did not happen, and the market

seems to have given up on any

KEY POINTS

Low euro-zone growth and infla-

tion, reinforced by European

Central Bank (ECB) policy, are

set to keep core sovereign bond

yields low for the foreseeable

future

Central bankers navigate the

dangers of pain now or later in

applying monetary stimulus

A positively sloping yield curve

presents resents relative value

opportunities compared with

other currencies

Issuance from Italy and Spain

offers better yield than Bunds,

although investors need to

decide whether they are being

rewarded for the additional riskand global monetary policies have

begun to diverge.

Europe looks like it is Japanese, or

rather, the euro-zone economy does

– an unending liquidity trap for low

growth, where even the lowest of

rates cannot encourage investors to

throw their weight behind risk assets.

This both shapes, and is shaped by,

the outlook for euro-zone sovereign

debt – of no small concern for

institutional investors who hold a

rather large stack of them.

“I’m old enough to remember

when, 25 to 30 years ago, people

looked at Japanese sovereign debt at

“Europe is in danger

of being

Nipponified”

Iain Lindsay

000-IPE June 2019.indd 68

24/05/2019 11:19

XXXXXX A

MARCH 2017 INVESTMENT & PENSIONS EUROPE

XXXXXX A

NOVEMBER

2018

SPECIAL REPORT

ESG

● INTEGRATION

● PASSIVE

● LOW-CARBON

● FIXED INCOME

● RESEARCH

● SUSTAINABLE FINANCE

● LEADING VIEWPOINTS

PENSIONS 37

INVESTMENT & PENSIONS EUROPE DECEMBER 2018

PENSIONS

COUNTRY REPORT

XXXXXXXXX00

GUEST

VIEWPOINT

"Xxxxx"Xxxx

00 XXXX00 Xxxxx

00 Xxxxx

00 Xxxx

00 XXXX

XXXXXXXXX

00 Xxxxxxx

XXXXXXX

00 XX 00 XXXXX

XXXXXXXXX00

POINTS OF NOTE

XxxxxxXxxxxxxx

Xxxxxxx

Xxxxxx

XxxxxxXxxxxxx.

Xxxxx

Xxxxx

“ Xxxxxx” Quote Attribution

XXXXXXXX

Xxxxxxipe.com/event

38 FIRST PILLAR REFORM 40 WERNER HUG

42 ASSET MANAGEMENT 44 ESG

48 RISK MANAGEMENT

50 ILLIQUID INVESTMENTS 51MORTALITY52 IPE SURVEY:

MANAGERS OF

SWISS INSTITUTIONAL

ASSETS

COUNTRY REPORT

SWITZERLAND

037-Dec 2018.indd 37

24/11/2018 13:35

SUPPLEMENT IMPACT INVESTING

57 PRIVATE DEBT

59 MACS

62 TRADE FINANCE

PERSPECTIVE

SHARE BUYBACKS

16 DEBIASING

30 RAILPEN

34 NETHERLANDS

56 ROB ARNOTT

68 HEDGE FUNDSMAY2019

HEADING FOR THE CLOUDS

CAN YOUR PRIVATE DEBT MANAGER

NAVIGATE A DOWNTURN?

OFC.indd 9

18/04/2019 17:51

34 PENSIONS

MAY 2019 INVESTMENT & PENSIONS EUROPE

34 FIDUCIARY RESPONSIBILITY 36 INVESTMENT

39 STATE PENSION AGE 41 NICOLE BEUKEN

43 COMMENTARY 45 GENERAL PENSION FUNDS

COUNTRY REPORT

NETHERLANDS

KEY POINTS

Parliament has adopted a

legal amendment designed

to limit pension funds’ abil-

ity to outsource fiduciary asset

management

The initiator of the amendment

claims that fiduciary manage-

ment would no longer be

possible

The social affairs minister

Wouter Koolmees has denied

fiduciary management is set to

become unlawful

The ultimate responsibility for

outsourcing services still lies

with a pension fund’s board

Pieter Omtzigt, a Dutch

Christian Democrat MP,

has caused a stir in the

fiduciary management

sector by tabling a legal

amendment last October

forbidding pension funds from

possible. The industry is struggling to

comprehend the meaning of the

amendment, but is assuming not

much will change in reality.

In a further clarification, the MP

argued that fiduciary management

A question

of legality

FIDUCIARY RESPONSIBILITY

LEEN PREESMAN

Managers remain puzzled on meaning of

legal amendmentshould be abolished, as it could

hamper the ability of trustees to

control their pension funds. Accord-

ing to Omtzigt, trustees are responsi-

ble for monitoring their investments

in particular as IORP II demands

pension funds have a risk officer. If a

scheme outsources supervision, the

risk officer would lose track of the

risks being taken, he contended.

Commenting on the amendment outsourcing the design of strategic

investment policy as well as monitor-

ing asset management. In a clarifica-

tion, he emphasised that the change

– adopted by both the lower house

and the senate – meant that fiduciary

management would no longer be

46 IPE SURVEY:

MANAGERS OF

DUTCH INSTITUTIONAL ASSETS

Pieter Omtzigt

PensionNETH.indd 34

19/04/2019 14:22

INVESTMENT 61

INVESTMENT & PENSIONS EUROPE JUNE 2019

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

The Chinese

dam breaksCHINA

JOSEPH MARIATHASAN

Global bond indices have started including

the Chinese domestic bond markets in their

benchmarks

KEY POINTS

Chinese bonds are now being

included in global indices

This is a key step in the opening

of Chinese domestic capital

markets to foreign investors

The implications for capital

flows are what makes the index

inclusions so dramatic

China might one day replace the

US as the benchmark for global

fixed income

The dam has finally broken.

China’s huge onshore

bond markets have been

included in global bond

indices.Bloomberg led the way

with China’s inclusion in its Global

Aggregate index from April and it is

expected that other providers will

follow suit this year. That is likely to

result in a flood of foreign capital

flowing into China’s onshore bond

markets. The inclusion of China’s

onshore bonds into the main

international bond indices is the

biggest change in capital markets,

according to Hayden Briscoe, head of

Asia Pacific fixed income at UBS

Asset Management.

When fully accounted for in the

denominated bonds have tradition-

ally been underrepresented in the

main global bond indices relative to

the size of China’s economy and the

stock of renminbi-denominated debt

outstanding. This is despite the fact

that China has bond markets that are

close to developed market standards.

Moreover, notes Jan Dehn, head

of research at Ashmore, China’s bond

market is enormous. Its corporate

and sovereign bonds comprise about

48% of total emerging market fixed

income and more than 10% of the

global bond market. “The size of

China’s markets means that these

bonds will become a prominent – and

eventually dominant – feature in

both EM and developed market fixed

income benchmark indices,” he says.

China’s market

The inclusion of Chinese bonds into

indices is an important step in the

opening of China’s capital markets to

international investors. China’s bond

Bloomberg Global Aggregate index,

local currency Chinese bonds will be

the fourth largest component

following the dollar, euro and yen.

Using data as of 24 January 2019, the

index would include 363 Chinese

securities representing 6% of a $54trn

(€48trn) index upon completion of

the phase-in, according to

Bloomberg.

The significance of the events is

that, as Mark Leung, CEO of JP

Morgan China indicates, renminbi-

61 CHINA 63 EUROPEAN BENCHMARKS

64 ESG

“There is no reason

for a delay as you

can buy all the

bonds you want

today”

Hayden Briscoe

060-IPE June2019.indd 61

28/05/2019 17:23

ON THE RECORD: EUROPE ON BREXIT

50 SOLUTIONS

52 NORDIC FOCUS

54 GROEIFABRIEK

PORTFOLIO STRATEGY

CURRENCY

34 BANK OF IRELAND

36 UK PENSIONS

59 REGULATION

70 CHINA TECH

73 IMPACT DATA

75 IG CREDIT

MARCH2019

PENSIONS TECH

FOR DUMMIES

OFC.indd 7

25/02/2019 13:12

MADE TO MEASURE

JANUARY/FEBRUARY 2019ESG SPECIAL IMPACT INVESTING

INTERVIEW GUNNAR BRANSON, AFIRE

PARIS THE GRAND PLAN

M&A TAKING REITS PRIVATE

REAL ESTATE FUND MANAGERS TAKE IT ON

THEMSELVES TO CAPTURE ESG DATA

OFC-JanFeb 18 RA.indd 3

24/01/2019 13:20

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

30 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

july/august 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

sPaIN PORtugal

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE suRvEy:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

31 POLICY 34 SECOND PILLAR

37 CARLO COTTARELLI 38 ASSET ALLOCATION

40 BYBLOS 44 TELEMACO 41 IPE suRvEy:

MANAGERS Of

ITALIAN INSTITUTIONAL ASSETS

COUNTRY REPORT

Italy

000-iPe jul-aug2018.V.indd 30

22/06/2018 15:35

INVESTMENT 63

INVESTMENT & PENSIONS EUROPE NOVEMBER 2018

ASSET CLASS

US EqUitiES00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 iPE SURVEy:

XXXX XXXXXX

Xxxx

XXXXXXX

Xxxxx

KEY POINTS

Xxxx

Xxxx

Xxxx

Xxxx

ASSET CLASS

US EqUitiES

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 iPE SURVEy:

XXXX XXXXXX

Xxxx

XXXXXXX

Xxxxx

KEY POINTS

Xxxx

Xxxx

Xxxx

Xxxx

ASSET CLASS

63 gLObAL VIEw

66 ASSET ALLOCATION

68 iPE SURVEy

MANAgERS Of

EMERgINg MARKET

DEbT

Sentiments

drown out sense

gLObAL VIEw

JOSEPh MARIAThASAN

The political and economic uncertainty

surrounding Turkey and Argentina is

distracting investors from the sound

fundamentals to be found elsewhere across

the asset class

over half the hard currency market is

rated investment grade, it illustrates

the dominance of sentiment over

fundamentals in emerging markets.

Investors seeing the emerging

markets sell-off may be pondering

what lies ahead. “We have seen this

movie before. But the main charac-

KEY POINTS

Rising US interest rates and

trade tensions have exerted

downward pressure

Argentina and Turkey have domi-

nated emerging market news

Most emerging markets are

stronger since the 2013 taper

tantrum

The potential for changes in

sentiment complicates local

currency debt investment

This year has seen a

reversal in sentiment

regarding emerging

market debt (EMD). By

the third quarter, local

currency drawdowns were

close to the worst seen since the

benchmark was created in 2003,

greater than in the taper tantrum of

2013. Hard currency spreads of

370bps over US Treasuries in

mid-September, were troubling peaks

last reached in 2013.

Rob Drijkoningen, co-head of

EMD at Neuberger Berman, points

out that the widening of hard

currency spreads against US high-

yield bond spreads has been more

striking (see figure). Hard currency

spreads surpassed US high yield for

the first time since 2005. Given that

ters always seem to change and the

plot thickens each time,” says Anders

Faergermann, an EMD portfolio

manager at Pinebridge Investments.

Sentiment in emerging markets

driven by headline news, often seems

divorced from fundamentals.

Currently, it is Turkey and Argentina

that dominate the bad news. But

investors need to be able to separate

idiosyncratic stories from the

underlying fundamentals. At the end

of the day, says Faergemann, markets

are likely to calm and reverse back up

into next year: “In the current

environment however, it is not time

to be a hero.”

There are certainly economic

drivers that have created headwinds

for emerging markets. First, US

interest rates have risen steadily

since 2015. “Emerging market

investors were unnerved earlier this

year when the yield on US 10-year

Treasuries went past 3% yield,” says

Sergei Strigo, co-head of EMD at

Amundi. The significant negative perfor-

mance in EMD across all classes

came from April with a broad-based

sell-off after dollar appreciation. That

put pressure on emerging market

currencies, which caused an under-

performance in hard currency EMD.

The Trump administration’s trade

strategy is also causing uncertainties,

particularly regarding the impact on

China. Strigo says: “The continuous

threat of more and more tariffs on

China may slow Chinese growth, and

hence several EM countries, particu-

larly in Asia where there are smaller

open economies dependent on global

trade.” He also points to political

uncertainties arising from a heavy

election schedule in 2018 in Mexico,

Malaysia, Turkey and Brazil, where it

is unclear who is going to win, which

EMERGiNG

MARKEt DEBt

063AssetClass.indd 63

24/10/2018 11:53

70 INVESTMENT

porTfolIo STraTEgy

liability

management

70-77 CaSHfloW-DrIVEN INVESTMENT

77 NETHErlaNDS

The end of LDI as we

know it?CaSHfloW-DrIVEN INVESTMENT

Carlo SValuTo MorEolo

The DB pension industry is nearing peak LDI and a new

understanding of liability management is taking hold

The job of managing UK

defined benefit (DB)

pension funds has become

much harder over the past

two decades, not in small

part due to the unprec-

edented fall in interest rates. This

has driven up the value of liabilities

faster than the value of assets on the

balance sheets of DB pension funds.

Throughout this period, most

pension funds have relied on

liability-driven investment (LDI)

strategies to manage interest rate and

inflation risk. Today, however, LDI is

morphing into something quite

different, as pension funds mature

KEY POINTS

UK DB pension schemes are

nearing full-funding status

Commentators believe the pace

of hedging is likely to slow

For DB funds, the attention

will turns towards cashflow-

matching

Liability-driven investment (LDI)

is becoming ‘cashflow-driven

investing’ (CDI)

and focus on meeting cashflows

requirements as well as managing

balance sheet risks.

Asset-liability management has

existed, in various iterations, since

banking begun. But LDI for pension

funds, probably its latest incarnation,

took the stage at the turn of the

century. In 2001, the DB pension

scheme of Boots, the UK pharmacy

chain, switched all its assets into

bonds. Three years earlier, a paper by Jon

Exley, Shyam Mehta and Andrew

Smith, entitled ‘The financial theory

of defined benefit pension schemes’

had argued for the use of a mark-to-

market approach to value DB scheme

liabilities. It was the beginning of a

not-so-small revolution that led to

the creation of a roughly £900bn

(€1trn) industry in the UK. That is

the notional value of UK DB liabili-

ties hedged against interest rate and

inflation risk at the end of 2016,

according to a well-known survey

published by KMPG.

To some, LDI might seem like an

abstract concept. But in reality, LDI

activity by DB schemes has signifi-

cantly contributed to the fall of

interest rates over the past two

decades, that has had very real

consequences. Today, however, there

are signs that the LDI industry is

approaching a turning point.

Winds of change

In June this year, BlackRock

suggested that UK DB schemes had

reached full funding, meaning that on

aggregate level the industry was in

surplus, as assets exceeded liabilities.

Andrew Tunningley, BlackRock’s

head of UK strategic clients, made

the comment in relation to the June

release of the PPF 7800 index. This is

the main index documenting the

funding position of UK DB schemes.

It is published by the Pension

Protection Fund (PPF), the UK’s

lifeboat scheme.

In reality, the aggregate deficit of

the 5,588 schemes in the index was

estimated be £94bn at the end of

May 2018, up from a deficit of

july/august 2018 INVESTMENT & pENSIoNS EuropE

070-IPE Jul-Aug 2018.indd 70

25/06/2018 11:41

FUTURE DESTINATIONS

NOVEMBER/DECEMBER 2018TOP 100 REAL ESTATE INVESTMENT MANAGERS

AUM BREAKDOWNS AND FULL ANALYSIS

FLEXIBLE OFFICE & CO-WORKING SPACE

INVESTOR PROFILE UNISUPER

WHERE CITIES ARE HEADING AND WHAT IT

MEANS FOR REAL ESTATE INVESTORS

+ IPE’S GUIDE TO €7.2TRN PENSION ASSETS1000EUROPEAN PENSIONS GUIDE}TOP 1000 FUNDS

}RANKINGS}COUNTRY GUIDE

2019

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

84 INVESTMENT

APRIL 2019 INVESTMENT & PENSIONS EUROPE

PORTFOLIO STRATEGY

FACTOR INVESTING

84 LOW VOLATILITY 86 DEFINITIONS 92 STRATEGY

93 MULTI-FACTOR ETFS 95 EMERGING MARKETS 97 TAXATION

The paradox of low

volatilityLOW VOLATILITY

JOSEPH MARIATHASAN

Despite scepticism by some investors, low-volatility investing does

appear to work, especially during market downturns

KEY POINTS

Low-volatility investing seems

to run counter to narrow ideas of

economic rationality

The empirical evidence suggests

low-volatility investing does

work

MSCI’s low-vol indices are

among the most popular

Some remain sceptical of the

low-vol approach

Economics is not an

experimental science

despite appearing to have

a strong case of physics

envy when it comes to

developing theoretical

frameworks to explain the real world.

Investment behaviour sometimes

seems to run counter to what might

be expected from a narrow view of

economic rationality.

Take two models that are central

to the whole edifice of financial

economics. Modern portfolio theory

(MPT) was constructed around Nobel

prize winner Harry Markowitz’s

approach to creating efficient

portfolios based on the assumption

that investors would demand greater

returns for assets with greater risks.

That, in turn, led to the capital asset

pricing model (CAPM), and the

associated idea that investors could

obtain portfolios at any risk level

desired, by taking the market

portfolio and either leveraging it or

combining it with cash in each case,

paying or receiving interest at the

risk-free rate.

These constructs are rooted in

particular assumptions about human

behaviour, albeit that of crowds

rather than individuals. In its

strongest form, such reasoning

assumes rationality, unencumbered

self-interest and the idea that human

beings strive to maximise well-

defined utility functions to achieve

happiness.

“A lot of emerging

market companies

can be less volatile

than developed. We

prefer Malaysian

banks, for example,

which are more

stable than Euro-

pean banks”

Jan Sytze Mosselaar

000-IPE April 2019.indd 84

21/03/2019 11:37

26 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

FEBRUARY 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

SPAIN PORTUGAL

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE SURVEY:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

27 AUTO-ENROLMENT 29 INDUSTRY VIEWS

29 PENSION REFORM 31 DB FUNDING

34 IPE SURVEY:

MANAGERS OF

IRISH INSTITUTIONAL

ASSETS

COUNTRY REPORT

IRELAND

IPE SURVEY

000-IPE fEb2019..indd 26

24/01/2019 13:08

INVESTMENT 47

INVESTMENT & PENSIONS EUROPE FEBRUARY 2019

ASSET CLASS

PRIVATE EQUITY

47 OUTLOOK 49 ASSET ALLOCATION

50 VENTURE CAPITAL

52 IPE SURVEY

PRIVATE EQUITY

MANAGERS

An expanding universeOUTLOOK

JOSEPH MARIATHASAN

A significant growth in direct lending has helped boost the private equity market

T he past couple of years have

set records for private

equity fundraising backed

by an explosion in direct

lending and what appears

to be strong evidence of

superior returns to public markets in

private equity over long periods. For

investors new to the market, though,

detailed information to its being a

direct investor in a large number of

funds. Its comparison of private

equity performance with public

markets shown is based on an exact

like-for-like comparison of cashflows.

In most years, an investment in the

private equity marketplace, as a

whole, would have beaten an

investment in the global equity index,

while investing in the first and

second quartiles of funds would have

given substantial outperformance on

top. Whether that will continue to be

the case is the dilemma for investors.

The attractive performance,

combined with a net distribution of

funds for the past seven years, has

supported a benign environment for

fundraising in both 2017 and 2018,

says Toni Vainio, a principal at

Pantheon, a private equity firm.

Given the success, there have been

many new entrants to the market-

place. “We are also seeing GPs

looking to capture limited partner

demand so large-cap buyout firms

KEY POINTS

Valuations are high after a period

of strong returns

Returns for private equity inves-

tors look good on a like-for-like

basis

An explosion in direct lending

has helped to finance acquisi-

tions

Fundraising has enjoyed a benign

couple of years

post-acquisition.

Comparing private equity returns

with public markets has always been

a difficult and controversial area,

with private equity returns often

characterised as being opaque and

potentially misleading. Willis Towers

Watson (WTW), which advises on

both public and private markets,

admits to higher returns being seen

in private markets which justifies the

growth in size of assets.

Hamilton Lane, an alternative

investment management firm, claims

to have the most comprehensive

database of private equity informa-

tion in the marketplace. Richard

Hope, a managing director of the

firm, attributes the firm’s access to

current pricing and competition in

deal sourcing poses challenges.

Last year there was over $1trn

(€870bn) of uninvested private equity

capital looking for a home, according

to Hamilton Lane. The risk is that

pricing gets inflated. But, as he adds,

that has not just been driven by the

amount of dry powder. Stockmarkets,

until the correction in the final

quarter of 2018, were also at

historical highs. There has also been

an abundance of debt capital with

debt pricing at attractive levels. “It is

a perfect storm, as there is a lot of

liquidity with a significant amount of

private equity capital and significant

supply of debt able to be lent, and

these two, by definition, will push

prices up,” says Nikos Stathopoulos, a

partner at private equity firm BC

Partners. For investors in private equity,

that means they need to find general

partners (GPs) who can not only find

value when making acquisitions but

also identify ways of adding value

“It is a perfect storm

that will push

prices up”

Nikos Stathopoulos

000-IPE feb 2019.indd 47

23/01/2019 17:45

PENSIONS FOCUS: LIABILITY STRATEGIES

24 PERSPECTIVE

ASSET CLASS

US EQUITIES

32 ENI's PENsIONs

34 ITALY

52 CHINA BONDS

61 IPOs

64 GEORGE MUZINICHJULY/

AUGUST

2019

QUESTIONS ON CANNABIS

INVESTMENT OPPORTUNITY OR

ETHICAL THREAT?

OFC.indd 9

21/06/2019 17:47

34 PENSIONS

MAY 2019 INVESTMENT & PENSIONS EUROPE

34 FIDUCIARY RESPONSIBILITY 36 INVESTMENT

39 STATE PENSION AGE 41 NICOLE BEUKEN

43 COMMENTARY 45 GENERAL PENSION FUNDS

COUNTRY REPORT

NETHERLANDS

KEY POINTS

Parliament has adopted a

legal amendment designed

to limit pension funds’ abil-

ity to outsource fiduciary asset

management

The initiator of the amendment

claims that fiduciary manage-

ment would no longer be

possible

The social affairs minister

Wouter Koolmees has denied

fiduciary management is set to

become unlawful

The ultimate responsibility for

outsourcing services still lies

with a pension fund’s board

Pieter Omtzigt, a Dutch

Christian Democrat MP,

has caused a stir in the

fiduciary management

sector by tabling a legal

amendment last October

forbidding pension funds from

possible. The industry is struggling to

comprehend the meaning of the

amendment, but is assuming not

much will change in reality.

In a further clarification, the MP

argued that fiduciary management

A question

of legality

FIDUCIARY RESPONSIBILITY

LEEN PREESMAN

Managers remain puzzled on meaning of

legal amendmentshould be abolished, as it could

hamper the ability of trustees to

control their pension funds. Accord-

ing to Omtzigt, trustees are responsi-

ble for monitoring their investments

in particular as IORP II demands

pension funds have a risk officer. If a

scheme outsources supervision, the

risk officer would lose track of the

risks being taken, he contended.

Commenting on the amendment outsourcing the design of strategic

investment policy as well as monitor-

ing asset management. In a clarifica-

tion, he emphasised that the change

– adopted by both the lower house

and the senate – meant that fiduciary

management would no longer be

46 IPE SURVEY:

MANAGERS OF

DUTCH INSTITUTIONAL ASSETS

Pieter Omtzigt

PensionNETH.indd 34

19/04/2019 14:22

ON THE RECORD: EUROPE ON BREXIT

50 SOLUTIONS

52 NORDIC FOCUS

54 GROEIFABRIEK

PORTFOLIO STRATEGY

CURRENCY

34 BANK OF IRELAND

36 UK PENSIONS

59 REGULATION

70 CHINA TECH

73 IMPACT DATA

75 IG CREDIT

MARCH2019

PENSIONS TECH

FOR DUMMIES

OFC.indd 7

25/02/2019 13:12

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

74 INVESTMENT

porTfolIo STraTEgy

credit

74 aSSET allocaTIoN 76 MulTI-aSSET crEdIT

80 coNVErTIblE boNdS 84 facTor INVESTINg

88-92 prIVaTE dEbT 92 fIrST STaTE SupEr

Reading the cycleaSSET allocaTIoN

chrISTophEr o’dEa

The complex prevailing economic and politicial environment makes

it difficult to predict how long the current credit cycle will continue

deep inside a cave 200 miles (322km)

east of Cape Town, South Africa.

Etched by a prehistoric artist

more than 73,000 years ago with a

red ochre crayon on a small stone,

the markings represent the earliest

evidence of human drawing. The lead

researcher of the mission says the

marks – six parallel lines criss-

crossed by three diagonals, akin to

the modern-day hashtag – is defi-

nitely a symbol conveying a message.

Just what that message is remains

unclear. What is clear is that credit

investors and investment managers

face a similar dilemma, says Randy

Schwimmer, senior managing

KEY POINTS

Investors are looking for signals

about how much longer this

credit cycle might last, and which

assets might perform

Incumbent chief investment

officers who lived through the

2008 crisis are more disciplined

and risk-averse

Credit managers have

rotated into higher-quality

assets because spreads over

government bonds do not cover

the additional risk of holding

some corporate credit assets

Interest rates may stay low for

longer and support credit asset

performance

a s summer wound

down and investors

began returning to

their desks to focus on

another round of

central bank policy

meetings, archeologists announced

the discovery of ancient markings

director and head of origination and

capital markets at Churchill Asset

Management, which concentrates on

lending to private-equity-sponsored

middle-market companies. Like

archeologists, participants in loan

and credit markets are also “experts

at digging for meaning among

otherwise inscrutable signs”,

Schwimmer says.

For today’s investors, the search

for meaning turns on decoding the

symbols of the credit cycle – and

whether that exercise can provide

useful messages about when and

where to invest in credit markets.

“People are looking for signals,

asking what do we have to go on, in

order to figure out what lies ahead,”

says Schwimmer. The archaeologists

might have the easier task. “There

are a lot of cross-currents these

days,” he says. “Even the most

sophisticated observers are having a

difficult time sorting it all out.”

In interviews with IPE, several

leading credit investment managers

discussed how they look at cycles,

where we might be in this cycle, and

how they are positioning credit

strategies in a long-running cycle

that might yet continue for some

time to come.

Central banks received high marks

november 2018 INVESTMENT & pENSIoNS EuropE

000-IPE Nov2018 NEW.indd 74

24/10/2018 12:31

PENSIONS 37

INVESTMENT & PENSIONS EUROPE DECEMBER 2018

PENSIONS

COUNTRY REPORT

XXXXXXXXX00

GUEST

VIEWPOINT

"Xxxxx"Xxxx

00 XXXX00 Xxxxx

00 Xxxxx

00 Xxxx

00 XXXX

XXXXXXXXX

00 Xxxxxxx

XXXXXXX

00 XX 00 XXXXX

XXXXXXXXX00

POINTS OF NOTE

XxxxxxXxxxxxxx

Xxxxxxx

Xxxxxx

XxxxxxXxxxxxx.

Xxxxx

Xxxxx

“ Xxxxxx” Quote Attribution

XXXXXXXX

Xxxxxxipe.com/event

38 FIRST PILLAR REFORM 40 WERNER HUG

42 ASSET MANAGEMENT 44 ESG

48 RISK MANAGEMENT

50 ILLIQUID INVESTMENTS 51MORTALITY52 IPE SURVEY:

MANAGERS OF

SWISS INSTITUTIONAL

ASSETS

COUNTRY REPORT

SWITZERLAND

037-Dec 2018.indd 37

24/11/2018 13:35

SUPPLEMENT IMPACT INVESTING

57 PRIVATE DEBT

59 MACS

62 TRADE FINANCE

PERSPECTIVE

SHARE BUYBACKS

16 DEBIASING

30 RAILPEN

34 NETHERLANDS

56 ROB ARNOTT

68 HEDGE FUNDSMAY2019

HEADING FOR THE CLOUDS

CAN YOUR PRIVATE DEBT MANAGER

NAVIGATE A DOWNTURN?

OFC.indd 9

18/04/2019 17:51

30 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

july/august 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

sPaIN PORtugal

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE suRvEy:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

31 POLICY 34 SECOND PILLAR

37 CARLO COTTARELLI 38 ASSET ALLOCATION

40 BYBLOS 44 TELEMACO 41 IPE suRvEy:

MANAGERS Of

ITALIAN INSTITUTIONAL ASSETS

COUNTRY REPORT

Italy

000-iPe jul-aug2018.V.indd 30

22/06/2018 15:35

70 INVESTMENT

porTfolIo STraTEgy

liability

management

70-77 CaSHfloW-DrIVEN INVESTMENT

77 NETHErlaNDS

The end of LDI as we

know it?CaSHfloW-DrIVEN INVESTMENT

Carlo SValuTo MorEolo

The DB pension industry is nearing peak LDI and a new

understanding of liability management is taking hold

The job of managing UK

defined benefit (DB)

pension funds has become

much harder over the past

two decades, not in small

part due to the unprec-

edented fall in interest rates. This

has driven up the value of liabilities

faster than the value of assets on the

balance sheets of DB pension funds.

Throughout this period, most

pension funds have relied on

liability-driven investment (LDI)

strategies to manage interest rate and

inflation risk. Today, however, LDI is

morphing into something quite

different, as pension funds mature

KEY POINTS

UK DB pension schemes are

nearing full-funding status

Commentators believe the pace

of hedging is likely to slow

For DB funds, the attention

will turns towards cashflow-

matching

Liability-driven investment (LDI)

is becoming ‘cashflow-driven

investing’ (CDI)

and focus on meeting cashflows

requirements as well as managing

balance sheet risks.

Asset-liability management has

existed, in various iterations, since

banking begun. But LDI for pension

funds, probably its latest incarnation,

took the stage at the turn of the

century. In 2001, the DB pension

scheme of Boots, the UK pharmacy

chain, switched all its assets into

bonds. Three years earlier, a paper by Jon

Exley, Shyam Mehta and Andrew

Smith, entitled ‘The financial theory

of defined benefit pension schemes’

had argued for the use of a mark-to-

market approach to value DB scheme

liabilities. It was the beginning of a

not-so-small revolution that led to

the creation of a roughly £900bn

(€1trn) industry in the UK. That is

the notional value of UK DB liabili-

ties hedged against interest rate and

inflation risk at the end of 2016,

according to a well-known survey

published by KMPG.

To some, LDI might seem like an

abstract concept. But in reality, LDI

activity by DB schemes has signifi-

cantly contributed to the fall of

interest rates over the past two

decades, that has had very real

consequences. Today, however, there

are signs that the LDI industry is

approaching a turning point.

Winds of change

In June this year, BlackRock

suggested that UK DB schemes had

reached full funding, meaning that on

aggregate level the industry was in

surplus, as assets exceeded liabilities.

Andrew Tunningley, BlackRock’s

head of UK strategic clients, made

the comment in relation to the June

release of the PPF 7800 index. This is

the main index documenting the

funding position of UK DB schemes.

It is published by the Pension

Protection Fund (PPF), the UK’s

lifeboat scheme.

In reality, the aggregate deficit of

the 5,588 schemes in the index was

estimated be £94bn at the end of

May 2018, up from a deficit of

july/august 2018 INVESTMENT & pENSIoNS EuropE

070-IPE Jul-Aug 2018.indd 70

25/06/2018 11:41

FUTURE DESTINATIONS

NOVEMBER/DECEMBER 2018TOP 100 REAL ESTATE INVESTMENT MANAGERS

AUM BREAKDOWNS AND FULL ANALYSIS

FLEXIBLE OFFICE & CO-WORKING SPACE

INVESTOR PROFILE UNISUPER

WHERE CITIES ARE HEADING AND WHAT IT

MEANS FOR REAL ESTATE INVESTORS

34 PENSIONS

MAY 2019 INVESTMENT & PENSIONS EUROPE

34 FIDUCIARY RESPONSIBILITY 36 INVESTMENT

39 STATE PENSION AGE 41 NICOLE BEUKEN

43 COMMENTARY 45 GENERAL PENSION FUNDS

COUNTRY REPORT

NETHERLANDS

KEY POINTS

Parliament has adopted a

legal amendment designed

to limit pension funds’ abil-

ity to outsource fiduciary asset

management

The initiator of the amendment

claims that fiduciary manage-

ment would no longer be

possible

The social affairs minister

Wouter Koolmees has denied

fiduciary management is set to

become unlawful

The ultimate responsibility for

outsourcing services still lies

with a pension fund’s board

Pieter Omtzigt, a Dutch

Christian Democrat MP,

has caused a stir in the

fiduciary management

sector by tabling a legal

amendment last October

forbidding pension funds from

possible. The industry is struggling to

comprehend the meaning of the

amendment, but is assuming not

much will change in reality.

In a further clarification, the MP

argued that fiduciary management

A question

of legality

FIDUCIARY RESPONSIBILITY

LEEN PREESMAN

Managers remain puzzled on meaning of

legal amendmentshould be abolished, as it could

hamper the ability of trustees to

control their pension funds. Accord-

ing to Omtzigt, trustees are responsi-

ble for monitoring their investments

in particular as IORP II demands

pension funds have a risk officer. If a

scheme outsources supervision, the

risk officer would lose track of the

risks being taken, he contended.

Commenting on the amendment outsourcing the design of strategic

investment policy as well as monitor-

ing asset management. In a clarifica-

tion, he emphasised that the change

– adopted by both the lower house

and the senate – meant that fiduciary

management would no longer be

46 IPE SURVEY:

MANAGERS OF

DUTCH INSTITUTIONAL ASSETS

Pieter Omtzigt

PensionNETH.indd 34

19/04/2019 14:22

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

70 INVESTMENT

may 2018 INVESTMENT & PENSIONS EUROPE

XxxxXxxxXxxx XxxxXxxx Xxxx Source: OECD 2007

aSSET claSS

US EqUITIES

us equities

A time to focus

on valueValUaTIONS

JOSEPh MaRIaThaSaN

Investing into a market with such high valuations presents a

challenge

T wo factors have stood out in

terms of US equity markets

since the financial crisis.

First, the impact of quantita-

tive easing (QE) and near-

zero interest rates. Second, the

growth of the FAANG stocks

(Facebook, Amazon, Apple, Netflix,

and Alphabet/Google).

US equity markets are expensive

on almost every measure. They are

costly in absolute terms and exorbi-

tant in relative terms. Investment

consultants such as Cambridge

Associates are recommending that its

clients tilt exposures away from the

US and towards other developed

countries and emerging markets. But

interest rates are entering an upward

cycle as the Federal Reserve tightens,

while Facebook’s recent troubles over

misuse of data may prove to be a

catalyst for reappraisals.

At the end of February, the MSCI

US index was 54% premium above its

median and more expensive than it

has ever been relative to non-US

developed markets. “The cumulative

underperformance of the world-ex

US relative to US was 0.85 (1 being

equal) which is as much underper-

formance that has ever been seen in

the past before it starts to turn

around,” says Celia Dallas, chief

investment strategist at Cambridge

Associates.

US small caps are looking

particularly vulnerable. While

large-cap earnings expectations have

been upgraded, small-cap earnings

expectations were downgraded 8% in

2017, says Dallas. Half of the debt of

small-cap companies is floating rate

and they are likely to be badly

affected by rate rises. In contrast, of

the S&P 500 ex-financials, only 11%

of debt is floating rate and the

fixed-rate debt has an average

maturity of 11 years, so any rise in

rates will take some time to affect

large caps, says Dallas.

The key for non-US markets to

outperform US is for earnings growth

in other markets to outpace that of

the US. But US tax reforms have led

to a sharp increase in the shareholder

take of corporate earnings, with

virtually all US companies benefit-

ting, says CT Fitzpatrick, CEO of

Vulcan Value Partners, based in

Birmingham, Alabama.

If the earnings outlook is sending

mixed messages, what about the

high-profile tariffs that the Trump

administration is determined to put

into place? Clearly, the ramifications

of a trade war would be calamitous,

but such an outcome still seems

unlikely. Steel and aluminium inputs,

together with the other products

(lumber, washing machines and solar

cells) imported into the US economy

together amount to only 0.3% of GDP,

says Dallas.

Moreover, she adds, the tariffs

charged to the US are significantly

higher across the board than those

charged by the US. From a strategic

perspective, Dallas says, negotiating a

better balance seems sensible.

“The philosophy of having higher

tariffs applied to the US than the US

was charging made sense at a time

when the US was trying to encourage

the global growth of capitalism and

KEY POINTS

The US market is expensive by

every measure

Increased tariffs may have less

of an impact than commentators

assume

Leadership stocks are particu-

larly overvalued

Focusing on value may make

sense in the current environment

70 ValUaTIONS 72 INTEREST RaTES

73 US EcONOMy 75 TRUMP EffEcT

77 iPe survey

US EqUITy

MaNagERS

IPE May 2018.indd 70

24/04/2018 12:02

84 INVESTMENT

APRIL 2019 INVESTMENT & PENSIONS EUROPE

PORTFOLIO STRATEGY

FACTOR INVESTING

84 LOW VOLATILITY 86 DEFINITIONS 92 STRATEGY

93 MULTI-FACTOR ETFS 95 EMERGING MARKETS 97 TAXATION

The paradox of low

volatilityLOW VOLATILITY

JOSEPH MARIATHASAN

Despite scepticism by some investors, low-volatility investing does

appear to work, especially during market downturns

KEY POINTS

Low-volatility investing seems

to run counter to narrow ideas of

economic rationality

The empirical evidence suggests

low-volatility investing does

work

MSCI’s low-vol indices are

among the most popular

Some remain sceptical of the

low-vol approach

Economics is not an

experimental science

despite appearing to have

a strong case of physics

envy when it comes to

developing theoretical

frameworks to explain the real world.

Investment behaviour sometimes

seems to run counter to what might

be expected from a narrow view of

economic rationality.

Take two models that are central

to the whole edifice of financial

economics. Modern portfolio theory

(MPT) was constructed around Nobel

prize winner Harry Markowitz’s

approach to creating efficient

portfolios based on the assumption

that investors would demand greater

returns for assets with greater risks.

That, in turn, led to the capital asset

pricing model (CAPM), and the

associated idea that investors could

obtain portfolios at any risk level

desired, by taking the market

portfolio and either leveraging it or

combining it with cash in each case,

paying or receiving interest at the

risk-free rate.

These constructs are rooted in

particular assumptions about human

behaviour, albeit that of crowds

rather than individuals. In its

strongest form, such reasoning

assumes rationality, unencumbered

self-interest and the idea that human

beings strive to maximise well-

defined utility functions to achieve

happiness.

“A lot of emerging

market companies

can be less volatile

than developed. We

prefer Malaysian

banks, for example,

which are more

stable than Euro-

pean banks”

Jan Sytze Mosselaar

000-IPE April 2019.indd 84

21/03/2019 11:37

26 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

FEBRUARY 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

SPAIN PORTUGAL

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE SURVEY:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

27 AUTO-ENROLMENT 29 INDUSTRY VIEWS

29 PENSION REFORM 31 DB FUNDING

34 IPE SURVEY:

MANAGERS OF

IRISH INSTITUTIONAL

ASSETS

COUNTRY REPORT

IRELAND

IPE SURVEY

000-IPE fEb2019..indd 26

24/01/2019 13:08

SUPPLEMENT TOP 400 ASSET MANAGERS

31 ATP

38 PER BOLUND

41 ICELAND

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

17 LSR'S CEO

22 MMT

28 GENEVA’S CPEG

45 EUROPE OUTLOOK

56 ACTIVE ETFS

JUNE2019

GREEN SIGNALS

NORDIC REPORT: ATP’S QUANT ESG

STRATEGY

OFC GREEn.indd 9

28/05/2019 18:14

w

CONSUMER LED

MARCH/APRIL 2019

LOGISTICS THE GLOBAL BOOM CONTINUES

INTERVIEW IVANHOÉ CAMBRIDGE

CORE FUNDS OPEN-ENDED GROWTH STORY

IPFM THE NEW AUSTRALIAN MANAGER TAKING ON EUROPE

TO UNDERSTAND THE FUTURE OF GLOBAL

LOGISTICS, OBSERVE THE END USER

OFC-M-A 19 RA.indd 3

18/02/2019 12:27

Information & Rates 2020

The most effective platformto reach European pension funds

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CFA UK's 2018 Publication of the YearWillis Towers Watson Pensions Publication of the Year, 2018

Company overview 2-3IPE Magazine 4-7IPE.com 8IPE Reference Hub 9IPE Real Assets 10-11IPE Webcasts 12IPE Asset Management Guide 14IPE D.A.CH 15 IPE Conference & Awards 16-17Other IPE events 18IPE Quest 19

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IPE is a multinational, market-leading niche financial information provider which is both European and global with roots in the UK. It is focused on pension funds and other institutional investors, and those who serve them; all of IPE’s products and services have the central objective of facilitating and enhancing interaction between these groups, specifically between the buy and sell side of the industry.

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Read by the top decision-makers and asset allocators at pension funds and other institutional investors

take flight

july/august 2018 tOP 50 glOBal iNfRastRuCtuRe MaNageRsiNteRVieW HUGH O’REILLY, OPTRUSTesg IMPACT INVESTING, CIRCULAR ECONOMYtOuRisM AIRCRAFT, HOTELS, RETAIL

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MAGAZINE

Develop your digital profile and drive traffic to your website in the leading online news service for European pension funds

www.ipe.com realassets.ipe.com

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Brand profiling and association in the leading print publication for European pension funds

XXXXXX 3

INVESTMENT & PENSIONS EUROPE MARCH 2017

XXXXXX 3

MARCH 2017 INVESTMENT & PENSIONS EUROPE

XXXXXX 3

ASSET clASS: EUROPEAN EqUITIES

WHERE WILL FINANCIAL REGULATORS TURN NEXT?

59 FUTURE OF REGULATION

63 EUROPEAN UNION

66 PENSIONS

PORTFOlIO STRATEGY EMERGING MARKETS

30 MP PENSION

37 NETHERLANDS

50 UK PENSIONS

73 DERIVATIVES

74 DUTCH MORTGAGES

MARcH2018

OFC IPE Mar 2018.indd 3 26/02/2018 17:02

MAGAZINE

OverviewGROUP

Editorial

BRINGING TOGETHER EUROPE’S PENSION FUNDS SINCE 1997

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w

IPE International Publishers Ltd. www.ipe.com

Print Guide with over 100+ profiles. Distributed to 6,000+ institutional real estate investors

REIM Reference guide

+ TOP 100 GLOBAL REAL ESTATE INVESTMENT MANAGERS

2019REAL ESTATE INVESTMENT MANAGERS REFERENCE GUIDE}EUROPE}ASIA PACIFIC}NORTH AMERICA }LATIN AMERICA

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IPE Magazine is the unparalleled medium for investment managers and other sevice providers to deliver their message to the decision makers in Europe’s pensions community.

Since the very first issue in 1997, IPE has led the field with a unique brand of information, analysis, news and data dedicated to Europe’s pension fund community. Close connections with that community are our hallmark.

Buy Side | Investors | Capital Owners

PENSION FUNDS & OTHER Capital Owners - Continental Europe 3,672Pension Funds & Other Capital Owners - UK 792Financial Institutions - Continental Europe 2,237Financial Institutions - UK 274Consultants - Continental Europe 596Consultants - UK 275All buy side - Rest of World 327Key Pensions Industry Influencers - Globally 315

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KEY TARGET READERS* Supply Side | Vendors | Service Providers

Asset management 1241Investment banking including institutional broking and derivative sales 18Investment solutions 114Custody and asset servicing 122Exchanges, index providers 93Technology & Software 21Data & Information Providers 60Performance Monitors & Measurement 3Professional services 65Financial Communications 67Other 9

TOTAL SUPPLY SIDE

1,813

TOTAL BUY SIDE 8,488

MAGAZINE

ASSET CLASS: SMALL & MID CAPS SPECIAL REPORT MANAGEMENT & OUTSOURCING

18 US PUBLIC PLANS

28 ZVK

30 FRANCE

50 MONETARY POLICY

55 GERMAN ASSET ALLOCATION

OCTOBER2019

A 100-YEAR HORIZONJAPAN’S GPIF LOOKS TO THE LONG TERM

20 INTERVIEW WITH GPIF'S PRESIDENT NORIHIRO TAKAHASHI

OFC.indd 9 23/09/2019 12:18

04. MEDIA INFORMATION 2020

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Geographical Breakdown

IPE International Publishers Ltd. www.ipe.com

598 North

America

Austria 164Belgium 325

Denmark 399Finland 244

France 731Germany 1,046

Greece 17Iceland 67

Ireland 270Italy 477

Luxembourg 93Netherlands 1,261

Norway 124Portugal 89

Spain 235Sweden 411

Switzerland 820Other European Countries 249

IPE’s circulation is updated regularly to give advertisers the best possible readership within our target market. The circulation is audited by the UK’s ABC, the Audit Bureau of Circulations, which is an independent association responsible for verifying a publication’s circulation. IPE’s average monthly distribution, July 2018-June 2019, was 10,300. The circulation for the June 2019 issue of IPE was 10,298.

Buy Side – Supply Side Circulation Split

82% 18%

Capital Owners8,488

Vendors & Service Providers1,814

2,508 United

Kingdom

266 Other

7,022 Europe Ex-Uk

10,300 Total

circulation

05. MEDIA INFORMATION 2020

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IPE International Publishers Ltd. www.ipe.com

Editorial Calendar 2020

MAGAZINE

COUNTRY PORTFOLIO ASSET CLASS SPECIAL IPE REPORTS/ STRATEGY SURVEYS REPORTS RESEARCH SURVEYS* REPORTS

JANUARY l CEE l Fixed income/ l Investment l Retirement credit Grade Credit income FEBRUARY l Ireland* l Alternatives l Hedge funds l Indices & benchmarks of funds l Longevity & risk transfer MARCH l Netherlands l Equities l European l Regulation Equities l Manager selection* APRIL l Germany* l Fixed income/ l High Yield l Thought Leadership l Austria credit & Loans l Pensions Tech MAY l UK* l Emerging markets l Emerging l Impact investing equities focus Market Equities l Factor investing JUNE l Nordic l Equities l US Equities l Europe Outlook l Top 400 Region Asset Managers* JULY/ l Italy* l Fixed income/ l Currency l Securities &AUGUST credit Investment Services* SEPTEMBER l Netherlands* l Equities l Small & Mid Cap l China l Top 1000 Equities l Commodities Pension Funds OCTOBER l France* l Emerging l Emerging l ETFs l Belgium Market Debt Market Debt l Fees & cost reporting NOVEMBER l Switzerland* l Alternatives l Private Equity l ESG l Spain l Management l Portugal & Outsourcing*

DECEMBER l Nordic l Equities l Global Equities l Prospects Region* for 2021

JANUARY l CEE l Fixed income/ l Investment credit Grade Credit

*IPE Pensions Market Survey. Asset managers wishing to participate in any IPE surveys should contact [email protected]

2020

2021

06. MEDIA INFORMATION 2020

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IPE International Publishers Ltd. www.ipe.com

Publishing Schedule 2020

COPY DATE FOR COPY DATE FOR PUBLISHING SPONSORED ADVERTISEMENTS DATE COMMENTARY

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IPE.com enables asset managers and other service providers to reach pension funds via creative advertising opportunities, thought leadership and content marketing, webcasts for lead generation and email newsletter advertising.

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IPE International Publishers Ltd. www.ipe.com

A GLOBAL PUBLICATION IPE Real Assets is the leading information resource for the global institutional real assets investment industry.

IPE Real Assets is the leading information resource for the institutional real assets investment industry. Through print publications, online media and events it delivers critical intelligence, data and analysis of global property markets and institutional investors.

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IPE Real Assets magazine is delivered to the top decision-makers and asset allocators at pension funds and other institutional investors, including heads of real estate, chief investment officers and consultants.

realassets.ipe.com provides cutting edge daily news on a global basis to a global audience.

FUTURE GROWTH

nOvEmbER/dEcEmbER 2017 TOP 100 REAL ESTATE INVESTMENT MANAGERS FUndS LONG-INCOME STRATEGIESTEcHnOLOGY BIG DATA & REAL ESTATEALSO INVESTORS PROFILES NORDICS

wILL ThE REAL ESTATE FuND MANAGEMENT INDuSTRy CONTINuE ITS RAPID ExPANSION?

OFC-N-D 2017 IPE RA.indd 1 22/11/2017 17:04

10. MEDIA INFORMATION 2020

JAN/FEB ESG & ImpactInvesting Special Issue

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NOV/DEC Top 100 RE Investment Manager Issue

l Aircraft l ESG l Renewables l Infrastructure debt l Lisbonl Shipping l Residential l Timber l Technology l Data centres l Core real estate l China l Agriculture l Telecoms l Top 100 real l Life sciences l Healthcare l Value-add real estate l CEE estate investors l Medical offices l Top 75 l Consumer l Retail l Infrastructure equity l Dallas infrastructure managers trends l Logistics -Fort Worth l Top 100 l Employment l Offices l Opportunistic real estate l Germany infrastructure investors

l Top 100 real l Tourism l Hotels l Real estate debt l Brooklyn estate managers l Transport infrastructure l Aviation

Month Investors & Macro Themes Markets & Sectors Funds & Strategies Geographic

Editorial Calendar 2020

Fund Managers Markets

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IPE International Publishers Ltd. www.ipe.com

REIM REFERENCE GUIDEIn PrintThe REIM Guide is mailed to a circulation of 8,219 with additional copies distributed at key industry events. Present your company information across a double-page spread in the regions where you invest. The Guide is divided into four regions: Europe, Asia Pacific, North America and Latin America.

Online The IPE Reference Hub enables your firm to engage with over 15,000 institutional investors. An investment manager profile on the IPE Reference Hub is a versatile branding and content marketing tool that provides scope and flexibility.+ TOP 100 GLOBAL REAL ESTATE INVESTMENT MANAGERS RANKING

2020REAL ESTATE INVESTMENT MANAGERS REFERENCE GUIDE}EUROPE}ASIA PACIFIC}NORTH AMERICA }LATIN AMERICA

hub.ipe.com

realassets.ipe.com

An exciting high-level informal marketing and networkingopportunity with decision makers at pension funds and other institutional investors in three of Europe’s key markets

COPENHAGEN Tuesday 28 January

AMSTERDAMWednesday 29 January

MUNICH Thursday 30 January

MUNICH

COPENHAGEN

AMSTERDAM

Breakfast Seminar Series 2020

11. MEDIA INFORMATION 2020

Now in its 16th year, the IPE Real Estate Global Conference & Awards has become the premier event of its kind for institutional investors. The Conference is a forum for investors examining the key issues they face. The evening Awards Ceremony recognises and rewards best practice, outstanding performance and innovation within the real estate sector. In 2020, this premier level event will take place at the Villa Hotel in Copenhagen on Thursday 14 May.

NEW The IPE Reference Hub now has its own dedicated section for Infrastructure managers

IPE’s Real Assets and Infrastructure Investment Strategies Conference in Amsterdam on 24 September 2020 will explore these fast growing asset classes. This event will bring together investment decision makers at global pension funds, experts from the asset management community’ leading consultants and academics.

REAL ASSETS & INFRASTRUCTURE CONFERENCE

An exciting high-level informal marketing and networking opportunity with decision makers at pension funds and other institutional investors in selected key European cities.

Copenhagen Tuesday 28 JanuaryAmsterdam Wednesday 29 JanuaryMunich Thursday 30 January

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IPE International Publishers Ltd. www.ipe.com

Overviewl IPE Webcasts enable asset managers to speak directly to prospects to showcase their expertise and thought leadership and help them to convert engaged viewers into customers. l IPE Webcasts are one of the most effective tools for lead generation of potential institutional clients for asset managers.

Simple and measurable

l Your Webcast subscriber details (including job title, phone number and email address) are delivered to you post event in a fully documented activity report. l Your audience is interested and engages with your message only.l Our unparalleled access to investors gets you directly to your market.l You will have the opportunity to vet registrations.l Webcasts have a long shelf life: a recording is stored permamently.

You decide the subject matter and the speaker, we do the rest! l We appoint an independent moderator who works with your speaker or speakers to chair the event including managing the Q&A. l We also offer rehearsals to prepare your speaker or speakers and ensure the smooth running of the webcast.l We are responsible for marketing your webcast and for capturing registered subscribe details. l On request we can invite your wish-list of names to attend the webcastl Each webcast is streamed live with your branding, the speaker’s photograph, the facility to support the webcast with slides and to ask pre-agreed questions of the audience.l The audience has the opportunity to ask questions by emailing the moderator, which the speaker can answer live.l Full technical support is provided throughout.

Interactivewebcasts

IPE typically runs:

120+15-18 250-450IPE has successfully run:

webcast events per year registrations per webcast webcasts since 2010

12. MEDIA INFORMATION 2020

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IPE International Publishers Ltd. www.ipe.com

Digital advertising rates and specifications 2020IPE.com rates | GBP per cpm | cost per thousand impressions £

Run of site Leaderboard and MPU £75 cpm

Half page MPU and expandable MPU and leaderboard £95 cpm

Floor Ad £120 cpm

Site takeover (inc x1 email promotion) £10,000 per day

IPE.com | Technical specifications

Leaderboard 728 x 90

Floor Ad 728 x 90

MPU 300 x 250

Half page MPU 300 x 600

Expandable MPU 300 x 250 (must expand to left 600 x 250)

Expandable Leaderboard 728 x 90 (must expand down to 728 x 180)

IPE Daily Email Newsletter Advertising

Top and Bottom banner Per daily email £750

For 5 days of emails (not consecutive) £3,000

For 20 days of emails (not consecutive) £12,000

Sponsored message £

Per daily email £1,500

For 5 days of emails (not consecutive) £5,000

IPE newsletter | Technical specifications

Sponsored message logo (150 x RIP)

55 words of text (3 lines) plus linking url

Top and Bottom banner 468 x 60 or 728 x 90

+VAT where applicable

Webcast

Each webcast includes pre event

marketing, event hosting and a

file of all attendee contact details

£16,500 per webcast

Reference Hub

For a package of an annual digital profile,

unlimited content hosting and multiple

email promotions of your content across

a range of IPE email services.

Prices range from £9,840 p.a. to £15,000 p.a.

depending on the volume of email

promotion of your content.

13. MEDIA INFORMATION 2020

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IPE International Publishers Ltd. www.ipe.com

Increase your visibility in your target market with this important print guide A double page spread of company information will be delivered to the readership of IPE magazine, which includes over 6,000 senior pension fund executives.

A double page spread for your company profile, consisting of: l Company name & logol Overviewl Investment process & researchl Strategies & productsl Key Datal Key People l Locations Cost per print profile: £3,750

Increase your visibility

in the European Institutional

Market

INCREASE YOUR VISIBILITY IN YOUR TARGET MARKET WITH IPE’S NEW PRINT GUIDE

A double page spread of company information will be delivered to the readership of IPE magazine, which includes over 6,000 senior pension fund executives.

In aDDItIon to YoUR PRInt PRoFILE, YoU Can SHoWCaSE YoUR EXPERtISE to LEaDInG PEnSIon FUnDS WItH a SUBSCRIPtIon to tHE IPE REFEREnCE HUB

l Promote your expertise with unlimited uploads of your white papers, research reports, videos;l Reach IPE’s industry-leading database of pension funds and other institutional investors;l Email campaigns deliver your expertise directly to the inbox of investors;l Hyperlinks from IPE news drive traffic to your Hub profile.

20|Profile|ABC Asset Management Sponsored Section|21

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14. MEDIA INFORMATION 2020

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS

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IPE International Publishers Ltd. www.ipe.com

15. MEDIA INFORMATION 2020

IPE’s business in the D.A.CH region continues to develop through IPE D.A.CH, our Munich-based subsidiary, through business breakfasts,a directory of asset managers active in the region, an annual survey of investor needs in the region and an annual yearbook rounding up developments in the institutional investment industry in the German speaking countries.

For German-speaking institutional investors

institutional-investment.de

Asset Management GuideIPE D.A.CH Asset Management Guide provides detailed profiles of over 100 asset managers active in the D.A.CH market. The Guide is distributed to over 4,700 institutional investors in the Germanspeaking region. The guide is available as a searchable online tool which can be updated any time. Published in January.

Survey of German Institutional InvestorsThe annual survey of over 120 German investors with a combined €600bn of AuM is a study of what respondents are thinking about their strategies, asset allocation, as well as their asset managers and consultants. Published in May.

Asset Management YearbookThis established German language publication reports on the trends in the German institutional market, with analysis of a detailed survey of pension funds and other investors in Germany. Published in June.

Institutional Asset Class FocusPublished quarterly, this new publication will focus on a specific asset class and will be tailored specifically for investors in the D.A.CH region.

Business breakfastsSeries of educational and networking events on specific topics, held throughout the year for local investors in four German cities.

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16. MEDIA INFORMATION 2020

CONFERENCE & AWARDS 2020

MADRID 3-4 December 2020

The most important event for European pension funds, other institutional investors and their service providers

Now in its 20th year, the IPE Annual Conference is a well established fixture in the European pensions calendar. Top-level international speakers with a background in politics, academia and industry practice make this event the leading international forum for discussion of the key trends and issues facing pension funds and other institutional investors.

The Awards Dinner and Ceremony recognises and rewards best practice and innovation among Europe’s diverse pensions providers, and the contribution of leading industry figures. Each year close to 700 senior professionals from across the industry join us for this key event.

IPE International Publishers Ltd. www.ipe.com

l arrange high-level introductions, meetings & networking

l increase brand awareness

l promote brand positioning & association with specific topics

l showcase your expertise

l generate qualified leads

l deepen your market research and intelligence

Unique sales and marketing opportunities

This event affords multiple opportunities to reach and influence the key players in the industry across print, online and at the event itself, with a particular focus on fulfilling the following marketing objectives:

Why do pension funds and other institutional investors attend the IPE Awards?

l Rich, top level content

lTopical panel discussions l Top international speakers

l Networking with other senior professionals at the Conference and at the Awards Dinner

l Recognition of the bar-raising achievements of a diverse range of pension funds from across Europe

l Celebration of excellence by creating a meaningful and broad set of benchmarks

l A rigorous and independent judging process

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At the Conference…

17. MEDIA INFORMATION 2020

Top International Speakers Topical Panel Discussions

At the Awards Dinner...

Recognition of achievement

Al Gore Anders Fogh Rasmussen

Mary Robinson

Celebration of excellence

Networking with other senior professionals

Rich, top-level content

IPE International Publishers Ltd. www.ipe.com

To request a brochure with full details of the IPE Conference & Awards and discuss sponsorship opportunities please contact Ben Pritchett-Brown on +44 20 3465 9315 or email [email protected].

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IPE International Publishers Ltd. www.ipe.com

18. MEDIA INFORMATION 2020

IPE's 2020 events calendar is available on request

Regional & subject-specific events

l Seminar and Half-DayConference SeriesWith each seminar focusing on a specific theme or topic, these series visit different cities across Europe bi-annually, providing pension funds and other local institutional investors with insight and advice as well as a forum for informal discussion.

l IPE In IcelandIPE In Iceland is a unique one-day forum for senior Icelandic pension fund investors, aiming to examine global diversification opportunities in Iceland’s post-capital controls environment.

l IPE Real Assets & Infrastructure ConferenceThe IPE Real Assets & Infrastructure Investment Strategies conference is a specialist event for European pension funds and their service providers to discuss real asset and infrastructure.

l IPE Real Assets Half-Day Seminar SeriesIPE Real Assets half-day seminars visit different cities across Europe annually and are targeted, niche, educational events designed to provide valuable insight for local pension funds and other institutional investors. as well as a forum for informal discussion.

l IPE Equities ConferenceIPE’s equities focused conference targets an audience of senior investment leaders at pension plans in Europe and beyond, covering the latest topics surrounding equities investment.

For more detailed information on all the IPE events please visit: ipe.com/events

Copenhagen | Munich | Amsterdam | Paris | Dublin | London | Zurich | Rome | Reykjavik

IPE International Publishers Ltd. www.ipe.com

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IPE International Publishers Ltd. www.ipe.com

IPE Quest is an online asset manager search facility connecting investors with asset managers. It is used by asset owners to place before asset managers either a Search (RFI/RFP) or Discovery (pre-RFI). Over 2,000 asset managers located worldwide are alerted of the request.

Key Features: Asset owners

l Bespoke service for asset owner RFPs, RFIs and pre-RFI researchl Guaranteed anonymityl Discover over 2,000 vetted global managers of any size and asset classl Prepare research with collated and comparable datal Service is free of charge for asset owners; managers pay a fee to respond to your request

Key Features: Asset managers

l Receive alerts of new, fully vetted RFPs, RFIs and pre-RFI research on all asset classesl Respond to requests on a level playing fieldl Opportunity to put your firm forward in front of key decision makers at asset ownersl Service is free to register and receive alerts; managers pay a fee to respond to a request

Over 1,000 mandates placed since 1999

Searches & discoveries placed on IPE Quest

Searches

Switzerland Equities CHF100m+ Global Equity Smart Beta $50–100m OECD Infrastructure €20m USA All/Large Cap $500m+ Global Convertibles $20m Australia Equities AUD100m+ Emerging Markets All/Large Cap Equities €200m Global Liquid Alternatives €100m

Discoveries

Global Developed Markets Infrastructure Latin America Real Estate Frontier Markets Equities Emerging Markets All/Large Cap Equities Europe Office Real Estate Europe Residential Real Estate

MANAGER SEARCHPRE-RFIRFIRFP

19. MEDIA INFORMATION 2020

Copenhagen | Munich | Amsterdam | Paris | Dublin | London | Zurich | Rome | Reykjavik

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70 INVESTMENT

may 2018 INVESTMENT & PENSIONS EUROPE

XxxxXxxxXxxx XxxxXxxx Xxxx Source: OECD 2007

aSSET claSS

US EqUITIES

us equities

A time to focus

on valueValUaTIONS

JOSEPh MaRIaThaSaN

Investing into a market with such high valuations presents a

challenge

T wo factors have stood out in

terms of US equity markets

since the financial crisis.

First, the impact of quantita-

tive easing (QE) and near-

zero interest rates. Second, the

growth of the FAANG stocks

(Facebook, Amazon, Apple, Netflix,

and Alphabet/Google).

US equity markets are expensive

on almost every measure. They are

costly in absolute terms and exorbi-

tant in relative terms. Investment

consultants such as Cambridge

Associates are recommending that its

clients tilt exposures away from the

US and towards other developed

countries and emerging markets. But

interest rates are entering an upward

cycle as the Federal Reserve tightens,

while Facebook’s recent troubles over

misuse of data may prove to be a

catalyst for reappraisals.

At the end of February, the MSCI

US index was 54% premium above its

median and more expensive than it

has ever been relative to non-US

developed markets. “The cumulative

underperformance of the world-ex

US relative to US was 0.85 (1 being

equal) which is as much underper-

formance that has ever been seen in

the past before it starts to turn

around,” says Celia Dallas, chief

investment strategist at Cambridge

Associates.

US small caps are looking

particularly vulnerable. While

large-cap earnings expectations have

been upgraded, small-cap earnings

expectations were downgraded 8% in

2017, says Dallas. Half of the debt of

small-cap companies is floating rate

and they are likely to be badly

affected by rate rises. In contrast, of

the S&P 500 ex-financials, only 11%

of debt is floating rate and the

fixed-rate debt has an average

maturity of 11 years, so any rise in

rates will take some time to affect

large caps, says Dallas.

The key for non-US markets to

outperform US is for earnings growth

in other markets to outpace that of

the US. But US tax reforms have led

to a sharp increase in the shareholder

take of corporate earnings, with

virtually all US companies benefit-

ting, says CT Fitzpatrick, CEO of

Vulcan Value Partners, based in

Birmingham, Alabama.

If the earnings outlook is sending

mixed messages, what about the

high-profile tariffs that the Trump

administration is determined to put

into place? Clearly, the ramifications

of a trade war would be calamitous,

but such an outcome still seems

unlikely. Steel and aluminium inputs,

together with the other products

(lumber, washing machines and solar

cells) imported into the US economy

together amount to only 0.3% of GDP,

says Dallas.

Moreover, she adds, the tariffs

charged to the US are significantly

higher across the board than those

charged by the US. From a strategic

perspective, Dallas says, negotiating a

better balance seems sensible.

“The philosophy of having higher

tariffs applied to the US than the US

was charging made sense at a time

when the US was trying to encourage

the global growth of capitalism and

KEY POINTS

The US market is expensive by

every measure

Increased tariffs may have less

of an impact than commentators

assume

Leadership stocks are particu-

larly overvalued

Focusing on value may make

sense in the current environment

70 ValUaTIONS 72 INTEREST RaTES

73 US EcONOMy 75 TRUMP EffEcT

77 iPe survey

US EqUITy

MaNagERS

IPE May 2018.indd 70

24/04/2018 12:02

26 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

FEBRUARY 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

SPAIN PORTUGAL

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE SURVEY:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

27 AUTO-ENROLMENT 29 INDUSTRY VIEWS

29 PENSION REFORM 31 DB FUNDING

34 IPE SURVEY:

MANAGERS OF

IRISH INSTITUTIONAL

ASSETS

COUNTRY REPORT

IRELAND

IPE SURVEY

000-IPE fEb2019..indd 26

24/01/2019 13:08

SUPPLEMENT TOP 400 ASSET MANAGERS

31 ATP

38 PER BOLUND

41 ICELAND

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

17 LSR'S CEO

22 MMT

28 GENEVA’S CPEG

45 EUROPE OUTLOOK

56 ACTIVE ETFS

JUNE2019

GREEN SIGNALS

NORDIC REPORT: ATP’S QUANT ESG

STRATEGY

OFC GREEn.indd 9

28/05/2019 18:14

w

CONSUMER LED

MARCH/APRIL 2019

LOGISTICS THE GLOBAL BOOM CONTINUES

INTERVIEW IVANHOÉ CAMBRIDGE

CORE FUNDS OPEN-ENDED GROWTH STORY

IPFM THE NEW AUSTRALIAN MANAGER TAKING ON EUROPE

TO UNDERSTAND THE FUTURE OF GLOBAL

LOGISTICS, OBSERVE THE END USER

OFC-M-A 19 RA.indd 3

18/02/2019 12:27

34 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

november 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

CoUnTrY

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPe SUrveY:

XXXX XXXXXX

COUNTRY REPORT

35 LIfE & PENSIONS

36-46 ASSET ALLOCATION

48 APOTEkET

50-58 SwEDISh PENSION REfORM 54 IPe SUrveY:

MANAGERS Of

NORDIC

INSTITUTIONAL

ASSETSCOUNTRY REPORT

nordICregIon

000-000 Nordics NOV 2018.indd 34

23/10/2018 16:01

INVESTMENT 47

INVESTMENT & PENSIONS EUROPE FEBRUARY 2019

ASSET CLASS

PRIVATE EQUITY

47 OUTLOOK 49 ASSET ALLOCATION

50 VENTURE CAPITAL

52 IPE SURVEY

PRIVATE EQUITY

MANAGERS

An expanding universeOUTLOOK

JOSEPH MARIATHASAN

A significant growth in direct lending has helped boost the private equity market

T he past couple of years have

set records for private

equity fundraising backed

by an explosion in direct

lending and what appears

to be strong evidence of

superior returns to public markets in

private equity over long periods. For

investors new to the market, though,

detailed information to its being a

direct investor in a large number of

funds. Its comparison of private

equity performance with public

markets shown is based on an exact

like-for-like comparison of cashflows.

In most years, an investment in the

private equity marketplace, as a

whole, would have beaten an

investment in the global equity index,

while investing in the first and

second quartiles of funds would have

given substantial outperformance on

top. Whether that will continue to be

the case is the dilemma for investors.

The attractive performance,

combined with a net distribution of

funds for the past seven years, has

supported a benign environment for

fundraising in both 2017 and 2018,

says Toni Vainio, a principal at

Pantheon, a private equity firm.

Given the success, there have been

many new entrants to the market-

place. “We are also seeing GPs

looking to capture limited partner

demand so large-cap buyout firms

KEY POINTS

Valuations are high after a period

of strong returns

Returns for private equity inves-

tors look good on a like-for-like

basis

An explosion in direct lending

has helped to finance acquisi-

tions

Fundraising has enjoyed a benign

couple of years

post-acquisition.

Comparing private equity returns

with public markets has always been

a difficult and controversial area,

with private equity returns often

characterised as being opaque and

potentially misleading. Willis Towers

Watson (WTW), which advises on

both public and private markets,

admits to higher returns being seen

in private markets which justifies the

growth in size of assets.

Hamilton Lane, an alternative

investment management firm, claims

to have the most comprehensive

database of private equity informa-

tion in the marketplace. Richard

Hope, a managing director of the

firm, attributes the firm’s access to

current pricing and competition in

deal sourcing poses challenges.

Last year there was over $1trn

(€870bn) of uninvested private equity

capital looking for a home, according

to Hamilton Lane. The risk is that

pricing gets inflated. But, as he adds,

that has not just been driven by the

amount of dry powder. Stockmarkets,

until the correction in the final

quarter of 2018, were also at

historical highs. There has also been

an abundance of debt capital with

debt pricing at attractive levels. “It is

a perfect storm, as there is a lot of

liquidity with a significant amount of

private equity capital and significant

supply of debt able to be lent, and

these two, by definition, will push

prices up,” says Nikos Stathopoulos, a

partner at private equity firm BC

Partners. For investors in private equity,

that means they need to find general

partners (GPs) who can not only find

value when making acquisitions but

also identify ways of adding value

“It is a perfect storm

that will push

prices up”

Nikos Stathopoulos

000-IPE feb 2019.indd 47

23/01/2019 17:45

74 INVESTMENT

porTfolIo STraTEgy

credit

74 aSSET allocaTIoN 76 MulTI-aSSET crEdIT

80 coNVErTIblE boNdS 84 facTor INVESTINg

88-92 prIVaTE dEbT 92 fIrST STaTE SupEr

Reading the cycleaSSET allocaTIoN

chrISTophEr o’dEa

The complex prevailing economic and politicial environment makes

it difficult to predict how long the current credit cycle will continue

deep inside a cave 200 miles (322km)

east of Cape Town, South Africa.

Etched by a prehistoric artist

more than 73,000 years ago with a

red ochre crayon on a small stone,

the markings represent the earliest

evidence of human drawing. The lead

researcher of the mission says the

marks – six parallel lines criss-

crossed by three diagonals, akin to

the modern-day hashtag – is defi-

nitely a symbol conveying a message.

Just what that message is remains

unclear. What is clear is that credit

investors and investment managers

face a similar dilemma, says Randy

Schwimmer, senior managing

KEY POINTS

Investors are looking for signals

about how much longer this

credit cycle might last, and which

assets might perform

Incumbent chief investment

officers who lived through the

2008 crisis are more disciplined

and risk-averse

Credit managers have

rotated into higher-quality

assets because spreads over

government bonds do not cover

the additional risk of holding

some corporate credit assets

Interest rates may stay low for

longer and support credit asset

performance

a s summer wound

down and investors

began returning to

their desks to focus on

another round of

central bank policy

meetings, archeologists announced

the discovery of ancient markings

director and head of origination and

capital markets at Churchill Asset

Management, which concentrates on

lending to private-equity-sponsored

middle-market companies. Like

archeologists, participants in loan

and credit markets are also “experts

at digging for meaning among

otherwise inscrutable signs”,

Schwimmer says.

For today’s investors, the search

for meaning turns on decoding the

symbols of the credit cycle – and

whether that exercise can provide

useful messages about when and

where to invest in credit markets.

“People are looking for signals,

asking what do we have to go on, in

order to figure out what lies ahead,”

says Schwimmer. The archaeologists

might have the easier task. “There

are a lot of cross-currents these

days,” he says. “Even the most

sophisticated observers are having a

difficult time sorting it all out.”

In interviews with IPE, several

leading credit investment managers

discussed how they look at cycles,

where we might be in this cycle, and

how they are positioning credit

strategies in a long-running cycle

that might yet continue for some

time to come.

Central banks received high marks

november 2018 INVESTMENT & pENSIoNS EuropE

000-IPE Nov2018 NEW.indd 74

24/10/2018 12:31

ASSET CLASS EUROPEAN EQUITIES

84 LOW VOL

86 FACTOR DEFINITIONS

92 STRATEGY

PERSPECTIVE

ATP’S LEADERSHIP WOES

30 APK

32 GERMANY

49 THOUGHT LEADERSHIP

67 MANAGER SELECTION

82 STEWARDSHIP

83 CHEYNE CAPITAL

APRIL2019

THE VOLATILITY PARADOX

FACTOR INVESTING PERSPECTIVES

OFC.indd 9

22/03/2019 13:45

INVESTMENT 61

INVESTMENT & PENSIONS EUROPE JUNE 2019

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

The Chinese

dam breaksCHINA

JOSEPH MARIATHASAN

Global bond indices have started including

the Chinese domestic bond markets in their

benchmarks

KEY POINTS

Chinese bonds are now being

included in global indices

This is a key step in the opening

of Chinese domestic capital

markets to foreign investors

The implications for capital

flows are what makes the index

inclusions so dramatic

China might one day replace the

US as the benchmark for global

fixed income

The dam has finally broken.

China’s huge onshore

bond markets have been

included in global bond

indices.Bloomberg led the way

with China’s inclusion in its Global

Aggregate index from April and it is

expected that other providers will

follow suit this year. That is likely to

result in a flood of foreign capital

flowing into China’s onshore bond

markets. The inclusion of China’s

onshore bonds into the main

international bond indices is the

biggest change in capital markets,

according to Hayden Briscoe, head of

Asia Pacific fixed income at UBS

Asset Management.

When fully accounted for in the

denominated bonds have tradition-

ally been underrepresented in the

main global bond indices relative to

the size of China’s economy and the

stock of renminbi-denominated debt

outstanding. This is despite the fact

that China has bond markets that are

close to developed market standards.

Moreover, notes Jan Dehn, head

of research at Ashmore, China’s bond

market is enormous. Its corporate

and sovereign bonds comprise about

48% of total emerging market fixed

income and more than 10% of the

global bond market. “The size of

China’s markets means that these

bonds will become a prominent – and

eventually dominant – feature in

both EM and developed market fixed

income benchmark indices,” he says.

China’s market

The inclusion of Chinese bonds into

indices is an important step in the

opening of China’s capital markets to

international investors. China’s bond

Bloomberg Global Aggregate index,

local currency Chinese bonds will be

the fourth largest component

following the dollar, euro and yen.

Using data as of 24 January 2019, the

index would include 363 Chinese

securities representing 6% of a $54trn

(€48trn) index upon completion of

the phase-in, according to

Bloomberg.

The significance of the events is

that, as Mark Leung, CEO of JP

Morgan China indicates, renminbi-

61 CHINA 63 EUROPEAN BENCHMARKS

64 ESG

“There is no reason

for a delay as you

can buy all the

bonds you want

today”

Hayden Briscoe

060-IPE June2019.indd 61

28/05/2019 17:23

ON THE RECORD: EUROPE ON BREXIT

50 SOLUTIONS

52 NORDIC FOCUS

54 GROEIFABRIEK

PORTFOLIO STRATEGY

CURRENCY

34 BANK OF IRELAND

36 UK PENSIONS

59 REGULATION

70 CHINA TECH

73 IMPACT DATA

75 IG CREDIT

MARCH2019

PENSIONS TECH

FOR DUMMIES

OFC.indd 7

25/02/2019 13:12

68 INVESTMENT

JUNE 2019 INVESTMENT & PENSIONS EUROPE

ASSET CLASS

GOVERNMENT

BONDS

68 EURO-ZONE

70 US TREASURIES

74 IPE SURVEY:

GOVERNMENT

BOND MANAGERS

Turning

JapaneseEURO-ZONE

DEWI JOHN

The euro-zone appears to be in a low-growth

liquidity trap redolent of Japan

rebound. Alongside this, with

March’s euro-zone inflation print at

1.4%, the European Central Bank

(ECB) is struggling to meet its 2%

target. Indeed, inflation expectations are

at 1.35%, five years out, with “an arm

wrestle between the ECB and the

market. We’re inclined to agree with

the market,” Lindsay says. This,

again, is all reminiscent of Japan over

the past three decades. Sylvain de

Ruijter, lead portfolio manager, LDI

and rates at NN Investment Partners

(NNIP), worries that Europe, like

Japan, could fall into “a low-growth Global markets were a

one-way street in the

years following the

global financial crisis

– with loose mon-

etary policy and

ultra-low rates. Then, global markets

showed signs of getting off life

support. As usual, the US was ahead of the

cycle, its growth accelerating first.

Add to this ultra-hawks taking

control at the US Federal Reserve,

2-3% and said it can’t get any lower,”

says Iain Lindsay, co-head of global

portfolio management within the

global fixed income team at Goldman

Sachs Asset Management. “Well, look

at where we are now. Europe is in

danger of being Nipponified.”

Growth, inflation and rates

Euro-zone growth has bumped along

at 1.1%, its lowest for more than five

years. At the end of 2017, consensus

was that mean reversion would see

European risk assets outperform.

That did not happen, and the market

seems to have given up on any

KEY POINTS

Low euro-zone growth and infla-

tion, reinforced by European

Central Bank (ECB) policy, are

set to keep core sovereign bond

yields low for the foreseeable

future

Central bankers navigate the

dangers of pain now or later in

applying monetary stimulus

A positively sloping yield curve

presents resents relative value

opportunities compared with

other currencies

Issuance from Italy and Spain

offers better yield than Bunds,

although investors need to

decide whether they are being

rewarded for the additional riskand global monetary policies have

begun to diverge.

Europe looks like it is Japanese, or

rather, the euro-zone economy does

– an unending liquidity trap for low

growth, where even the lowest of

rates cannot encourage investors to

throw their weight behind risk assets.

This both shapes, and is shaped by,

the outlook for euro-zone sovereign

debt – of no small concern for

institutional investors who hold a

rather large stack of them.

“I’m old enough to remember

when, 25 to 30 years ago, people

looked at Japanese sovereign debt at

“Europe is in danger

of being

Nipponified”

Iain Lindsay

000-IPE June 2019.indd 68

24/05/2019 11:19

PENSIONS 37

INVESTMENT & PENSIONS EUROPE DECEMBER 2018

PENSIONS

COUNTRY REPORT

XXXXXXXXX00

GUEST

VIEWPOINT

"Xxxxx"Xxxx

00 XXXX00 Xxxxx

00 Xxxxx

00 Xxxx

00 XXXX

XXXXXXXXX

00 Xxxxxxx

XXXXXXX

00 XX 00 XXXXX

XXXXXXXXX00

POINTS OF NOTE

XxxxxxXxxxxxxx

Xxxxxxx

Xxxxxx

XxxxxxXxxxxxx.

Xxxxx

Xxxxx

“ Xxxxxx” Quote Attribution

XXXXXXXX

Xxxxxxipe.com/event

38 FIRST PILLAR REFORM 40 WERNER HUG

42 ASSET MANAGEMENT 44 ESG

48 RISK MANAGEMENT

50 ILLIQUID INVESTMENTS 51MORTALITY52 IPE SURVEY:

MANAGERS OF

SWISS INSTITUTIONAL

ASSETS

COUNTRY REPORT

SWITZERLAND

037-Dec 2018.indd 37

24/11/2018 13:35

SUPPLEMENT IMPACT INVESTING

57 PRIVATE DEBT

59 MACS

62 TRADE FINANCE

PERSPECTIVE

SHARE BUYBACKS

16 DEBIASING

30 RAILPEN

34 NETHERLANDS

56 ROB ARNOTT

68 HEDGE FUNDSMAY2019

HEADING FOR THE CLOUDS

CAN YOUR PRIVATE DEBT MANAGER

NAVIGATE A DOWNTURN?

OFC.indd 9

18/04/2019 17:51

XXXXXX A

MARCH 2017 INVESTMENT & PENSIONS EUROPE

XXXXXX A

NOVEMBER

2018

SPECIAL REPORT

ESG

● INTEGRATION

● PASSIVE

● LOW-CARBON

● FIXED INCOME

● RESEARCH

● SUSTAINABLE FINANCE

● LEADING VIEWPOINTS

30 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

july/august 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

sPaIN PORtugal

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE suRvEy:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

31 POLICY 34 SECOND PILLAR

37 CARLO COTTARELLI 38 ASSET ALLOCATION

40 BYBLOS 44 TELEMACO 41 IPE suRvEy:

MANAGERS Of

ITALIAN INSTITUTIONAL ASSETS

COUNTRY REPORT

Italy

000-iPe jul-aug2018.V.indd 30

22/06/2018 15:35

INVESTMENT 63

INVESTMENT & PENSIONS EUROPE NOVEMBER 2018

ASSET CLASS

US EqUitiES00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 iPE SURVEy:

XXXX XXXXXX

Xxxx

XXXXXXX

Xxxxx

KEY POINTS

Xxxx

Xxxx

Xxxx

Xxxx

ASSET CLASS

US EqUitiES

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 iPE SURVEy:

XXXX XXXXXX

Xxxx

XXXXXXX

Xxxxx

KEY POINTS

Xxxx

Xxxx

Xxxx

Xxxx

ASSET CLASS

63 gLObAL VIEw

66 ASSET ALLOCATION

68 iPE SURVEy

MANAgERS Of

EMERgINg MARKET

DEbT

Sentiments

drown out sense

gLObAL VIEw

JOSEPh MARIAThASAN

The political and economic uncertainty

surrounding Turkey and Argentina is

distracting investors from the sound

fundamentals to be found elsewhere across

the asset class

over half the hard currency market is

rated investment grade, it illustrates

the dominance of sentiment over

fundamentals in emerging markets.

Investors seeing the emerging

markets sell-off may be pondering

what lies ahead. “We have seen this

movie before. But the main charac-

KEY POINTS

Rising US interest rates and

trade tensions have exerted

downward pressure

Argentina and Turkey have domi-

nated emerging market news

Most emerging markets are

stronger since the 2013 taper

tantrum

The potential for changes in

sentiment complicates local

currency debt investment

This year has seen a

reversal in sentiment

regarding emerging

market debt (EMD). By

the third quarter, local

currency drawdowns were

close to the worst seen since the

benchmark was created in 2003,

greater than in the taper tantrum of

2013. Hard currency spreads of

370bps over US Treasuries in

mid-September, were troubling peaks

last reached in 2013.

Rob Drijkoningen, co-head of

EMD at Neuberger Berman, points

out that the widening of hard

currency spreads against US high-

yield bond spreads has been more

striking (see figure). Hard currency

spreads surpassed US high yield for

the first time since 2005. Given that

ters always seem to change and the

plot thickens each time,” says Anders

Faergermann, an EMD portfolio

manager at Pinebridge Investments.

Sentiment in emerging markets

driven by headline news, often seems

divorced from fundamentals.

Currently, it is Turkey and Argentina

that dominate the bad news. But

investors need to be able to separate

idiosyncratic stories from the

underlying fundamentals. At the end

of the day, says Faergemann, markets

are likely to calm and reverse back up

into next year: “In the current

environment however, it is not time

to be a hero.”

There are certainly economic

drivers that have created headwinds

for emerging markets. First, US

interest rates have risen steadily

since 2015. “Emerging market

investors were unnerved earlier this

year when the yield on US 10-year

Treasuries went past 3% yield,” says

Sergei Strigo, co-head of EMD at

Amundi. The significant negative perfor-

mance in EMD across all classes

came from April with a broad-based

sell-off after dollar appreciation. That

put pressure on emerging market

currencies, which caused an under-

performance in hard currency EMD.

The Trump administration’s trade

strategy is also causing uncertainties,

particularly regarding the impact on

China. Strigo says: “The continuous

threat of more and more tariffs on

China may slow Chinese growth, and

hence several EM countries, particu-

larly in Asia where there are smaller

open economies dependent on global

trade.” He also points to political

uncertainties arising from a heavy

election schedule in 2018 in Mexico,

Malaysia, Turkey and Brazil, where it

is unclear who is going to win, which

EMERGiNG

MARKEt DEBt

063AssetClass.indd 63

24/10/2018 11:53

+ IPE’S GUIDE TO €7.2TRN PENSION ASSETS1000EUROPEAN PENSIONS GUIDE}TOP 1000 FUNDS

}RANKINGS}COUNTRY GUIDE

2019

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

INVESTMENT 61

INVESTMENT & PENSIONS EUROPE JUNE 2019

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

The Chinese

dam breaksCHINA

JOSEPH MARIATHASAN

Global bond indices have started including

the Chinese domestic bond markets in their

benchmarks

KEY POINTS

Chinese bonds are now being

included in global indices

This is a key step in the opening

of Chinese domestic capital

markets to foreign investors

The implications for capital

flows are what makes the index

inclusions so dramatic

China might one day replace the

US as the benchmark for global

fixed income

The dam has finally broken.

China’s huge onshore

bond markets have been

included in global bond

indices.Bloomberg led the way

with China’s inclusion in its Global

Aggregate index from April and it is

expected that other providers will

follow suit this year. That is likely to

result in a flood of foreign capital

flowing into China’s onshore bond

markets. The inclusion of China’s

onshore bonds into the main

international bond indices is the

biggest change in capital markets,

according to Hayden Briscoe, head of

Asia Pacific fixed income at UBS

Asset Management.

When fully accounted for in the

denominated bonds have tradition-

ally been underrepresented in the

main global bond indices relative to

the size of China’s economy and the

stock of renminbi-denominated debt

outstanding. This is despite the fact

that China has bond markets that are

close to developed market standards.

Moreover, notes Jan Dehn, head

of research at Ashmore, China’s bond

market is enormous. Its corporate

and sovereign bonds comprise about

48% of total emerging market fixed

income and more than 10% of the

global bond market. “The size of

China’s markets means that these

bonds will become a prominent – and

eventually dominant – feature in

both EM and developed market fixed

income benchmark indices,” he says.

China’s market

The inclusion of Chinese bonds into

indices is an important step in the

opening of China’s capital markets to

international investors. China’s bond

Bloomberg Global Aggregate index,

local currency Chinese bonds will be

the fourth largest component

following the dollar, euro and yen.

Using data as of 24 January 2019, the

index would include 363 Chinese

securities representing 6% of a $54trn

(€48trn) index upon completion of

the phase-in, according to

Bloomberg.

The significance of the events is

that, as Mark Leung, CEO of JP

Morgan China indicates, renminbi-

61 CHINA 63 EUROPEAN BENCHMARKS

64 ESG

“There is no reason

for a delay as you

can buy all the

bonds you want

today”

Hayden Briscoe

060-IPE June2019.indd 61

28/05/2019 17:23

ON THE RECORD: EUROPE ON BREXIT

50 SOLUTIONS

52 NORDIC FOCUS

54 GROEIFABRIEK

PORTFOLIO STRATEGY

CURRENCY

34 BANK OF IRELAND

36 UK PENSIONS

59 REGULATION

70 CHINA TECH

73 IMPACT DATA

75 IG CREDIT

MARCH2019

PENSIONS TECH

FOR DUMMIES

OFC.indd 7

25/02/2019 13:12

MADE TO MEASURE

JANUARY/FEBRUARY 2019ESG SPECIAL IMPACT INVESTING

INTERVIEW GUNNAR BRANSON, AFIRE

PARIS THE GRAND PLAN

M&A TAKING REITS PRIVATE

REAL ESTATE FUND MANAGERS TAKE IT ON

THEMSELVES TO CAPTURE ESG DATA

OFC-JanFeb 18 RA.indd 3

24/01/2019 13:20

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

34 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

november 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

CoUnTrY

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPe SUrveY:

XXXX XXXXXX

COUNTRY REPORT

35 LIfE & PENSIONS

36-46 ASSET ALLOCATION

48 APOTEkET

50-58 SwEDISh PENSION REfORM 54 IPe SUrveY:

MANAGERS Of

NORDIC

INSTITUTIONAL

ASSETSCOUNTRY REPORT

nordICregIon

000-000 Nordics NOV 2018.indd 34

23/10/2018 16:01

INVESTMENT 47

INVESTMENT & PENSIONS EUROPE FEBRUARY 2019

ASSET CLASS

PRIVATE EQUITY

47 OUTLOOK 49 ASSET ALLOCATION

50 VENTURE CAPITAL

52 IPE SURVEY

PRIVATE EQUITY

MANAGERS

An expanding universeOUTLOOK

JOSEPH MARIATHASAN

A significant growth in direct lending has helped boost the private equity market

T he past couple of years have

set records for private

equity fundraising backed

by an explosion in direct

lending and what appears

to be strong evidence of

superior returns to public markets in

private equity over long periods. For

investors new to the market, though,

detailed information to its being a

direct investor in a large number of

funds. Its comparison of private

equity performance with public

markets shown is based on an exact

like-for-like comparison of cashflows.

In most years, an investment in the

private equity marketplace, as a

whole, would have beaten an

investment in the global equity index,

while investing in the first and

second quartiles of funds would have

given substantial outperformance on

top. Whether that will continue to be

the case is the dilemma for investors.

The attractive performance,

combined with a net distribution of

funds for the past seven years, has

supported a benign environment for

fundraising in both 2017 and 2018,

says Toni Vainio, a principal at

Pantheon, a private equity firm.

Given the success, there have been

many new entrants to the market-

place. “We are also seeing GPs

looking to capture limited partner

demand so large-cap buyout firms

KEY POINTS

Valuations are high after a period

of strong returns

Returns for private equity inves-

tors look good on a like-for-like

basis

An explosion in direct lending

has helped to finance acquisi-

tions

Fundraising has enjoyed a benign

couple of years

post-acquisition.

Comparing private equity returns

with public markets has always been

a difficult and controversial area,

with private equity returns often

characterised as being opaque and

potentially misleading. Willis Towers

Watson (WTW), which advises on

both public and private markets,

admits to higher returns being seen

in private markets which justifies the

growth in size of assets.

Hamilton Lane, an alternative

investment management firm, claims

to have the most comprehensive

database of private equity informa-

tion in the marketplace. Richard

Hope, a managing director of the

firm, attributes the firm’s access to

current pricing and competition in

deal sourcing poses challenges.

Last year there was over $1trn

(€870bn) of uninvested private equity

capital looking for a home, according

to Hamilton Lane. The risk is that

pricing gets inflated. But, as he adds,

that has not just been driven by the

amount of dry powder. Stockmarkets,

until the correction in the final

quarter of 2018, were also at

historical highs. There has also been

an abundance of debt capital with

debt pricing at attractive levels. “It is

a perfect storm, as there is a lot of

liquidity with a significant amount of

private equity capital and significant

supply of debt able to be lent, and

these two, by definition, will push

prices up,” says Nikos Stathopoulos, a

partner at private equity firm BC

Partners. For investors in private equity,

that means they need to find general

partners (GPs) who can not only find

value when making acquisitions but

also identify ways of adding value

“It is a perfect storm

that will push

prices up”

Nikos Stathopoulos

000-IPE feb 2019.indd 47

23/01/2019 17:45

ASSET CLASS EUROPEAN EQUITIES

84 LOW VOL

86 FACTOR DEFINITIONS

92 STRATEGY

PERSPECTIVE

ATP’S LEADERSHIP WOES

30 APK

32 GERMANY

49 THOUGHT LEADERSHIP

67 MANAGER SELECTION

82 STEWARDSHIP

83 CHEYNE CAPITAL

APRIL2019

THE VOLATILITY PARADOX

FACTOR INVESTING PERSPECTIVES

OFC.indd 9

22/03/2019 13:45

PENSIONS FOCUS: LIABILITY STRATEGIES

24 PERSPECTIVE

ASSET CLASS

US EQUITIES

32 ENI's PENsIONs

34 ITALY

52 CHINA BONDS

61 IPOs

64 GEORGE MUZINICHJULY/

AUGUST

2019

QUESTIONS ON CANNABIS

INVESTMENT OPPORTUNITY OR

ETHICAL THREAT?

OFC.indd 9

21/06/2019 17:47

PENSIONS 37

INVESTMENT & PENSIONS EUROPE DECEMBER 2018

PENSIONS

COUNTRY REPORT

XXXXXXXXX00

GUEST

VIEWPOINT

"Xxxxx"Xxxx

00 XXXX00 Xxxxx

00 Xxxxx

00 Xxxx

00 XXXX

XXXXXXXXX

00 Xxxxxxx

XXXXXXX

00 XX 00 XXXXX

XXXXXXXXX00

POINTS OF NOTE

XxxxxxXxxxxxxx

Xxxxxxx

Xxxxxx

XxxxxxXxxxxxx.

Xxxxx

Xxxxx

“ Xxxxxx” Quote Attribution

XXXXXXXX

Xxxxxxipe.com/event

38 FIRST PILLAR REFORM 40 WERNER HUG

42 ASSET MANAGEMENT 44 ESG

48 RISK MANAGEMENT

50 ILLIQUID INVESTMENTS 51MORTALITY52 IPE SURVEY:

MANAGERS OF

SWISS INSTITUTIONAL

ASSETS

COUNTRY REPORT

SWITZERLAND

037-Dec 2018.indd 37

24/11/2018 13:35

SUPPLEMENT IMPACT INVESTING

57 PRIVATE DEBT

59 MACS

62 TRADE FINANCE

PERSPECTIVE

SHARE BUYBACKS

16 DEBIASING

30 RAILPEN

34 NETHERLANDS

56 ROB ARNOTT

68 HEDGE FUNDSMAY2019

HEADING FOR THE CLOUDS

CAN YOUR PRIVATE DEBT MANAGER

NAVIGATE A DOWNTURN?

OFC.indd 9

18/04/2019 17:51

34 PENSIONS

MAY 2019 INVESTMENT & PENSIONS EUROPE

34 FIDUCIARY RESPONSIBILITY 36 INVESTMENT

39 STATE PENSION AGE 41 NICOLE BEUKEN

43 COMMENTARY 45 GENERAL PENSION FUNDS

COUNTRY REPORT

NETHERLANDS

KEY POINTS

Parliament has adopted a

legal amendment designed

to limit pension funds’ abil-

ity to outsource fiduciary asset

management

The initiator of the amendment

claims that fiduciary manage-

ment would no longer be

possible

The social affairs minister

Wouter Koolmees has denied

fiduciary management is set to

become unlawful

The ultimate responsibility for

outsourcing services still lies

with a pension fund’s board

Pieter Omtzigt, a Dutch

Christian Democrat MP,

has caused a stir in the

fiduciary management

sector by tabling a legal

amendment last October

forbidding pension funds from

possible. The industry is struggling to

comprehend the meaning of the

amendment, but is assuming not

much will change in reality.

In a further clarification, the MP

argued that fiduciary management

A question

of legality

FIDUCIARY RESPONSIBILITY

LEEN PREESMAN

Managers remain puzzled on meaning of

legal amendmentshould be abolished, as it could

hamper the ability of trustees to

control their pension funds. Accord-

ing to Omtzigt, trustees are responsi-

ble for monitoring their investments

in particular as IORP II demands

pension funds have a risk officer. If a

scheme outsources supervision, the

risk officer would lose track of the

risks being taken, he contended.

Commenting on the amendment outsourcing the design of strategic

investment policy as well as monitor-

ing asset management. In a clarifica-

tion, he emphasised that the change

– adopted by both the lower house

and the senate – meant that fiduciary

management would no longer be

46 IPE SURVEY:

MANAGERS OF

DUTCH INSTITUTIONAL ASSETS

Pieter Omtzigt

PensionNETH.indd 34

19/04/2019 14:22

INVESTMENT 61

INVESTMENT & PENSIONS EUROPE JUNE 2019

PORTFOLIO STRATEGY

INDICES &

BENCHMARKS

The Chinese

dam breaksCHINA

JOSEPH MARIATHASAN

Global bond indices have started including

the Chinese domestic bond markets in their

benchmarks

KEY POINTS

Chinese bonds are now being

included in global indices

This is a key step in the opening

of Chinese domestic capital

markets to foreign investors

The implications for capital

flows are what makes the index

inclusions so dramatic

China might one day replace the

US as the benchmark for global

fixed income

The dam has finally broken.

China’s huge onshore

bond markets have been

included in global bond

indices.Bloomberg led the way

with China’s inclusion in its Global

Aggregate index from April and it is

expected that other providers will

follow suit this year. That is likely to

result in a flood of foreign capital

flowing into China’s onshore bond

markets. The inclusion of China’s

onshore bonds into the main

international bond indices is the

biggest change in capital markets,

according to Hayden Briscoe, head of

Asia Pacific fixed income at UBS

Asset Management.

When fully accounted for in the

denominated bonds have tradition-

ally been underrepresented in the

main global bond indices relative to

the size of China’s economy and the

stock of renminbi-denominated debt

outstanding. This is despite the fact

that China has bond markets that are

close to developed market standards.

Moreover, notes Jan Dehn, head

of research at Ashmore, China’s bond

market is enormous. Its corporate

and sovereign bonds comprise about

48% of total emerging market fixed

income and more than 10% of the

global bond market. “The size of

China’s markets means that these

bonds will become a prominent – and

eventually dominant – feature in

both EM and developed market fixed

income benchmark indices,” he says.

China’s market

The inclusion of Chinese bonds into

indices is an important step in the

opening of China’s capital markets to

international investors. China’s bond

Bloomberg Global Aggregate index,

local currency Chinese bonds will be

the fourth largest component

following the dollar, euro and yen.

Using data as of 24 January 2019, the

index would include 363 Chinese

securities representing 6% of a $54trn

(€48trn) index upon completion of

the phase-in, according to

Bloomberg.

The significance of the events is

that, as Mark Leung, CEO of JP

Morgan China indicates, renminbi-

61 CHINA 63 EUROPEAN BENCHMARKS

64 ESG

“There is no reason

for a delay as you

can buy all the

bonds you want

today”

Hayden Briscoe

060-IPE June2019.indd 61

28/05/2019 17:23

ON THE RECORD: EUROPE ON BREXIT

50 SOLUTIONS

52 NORDIC FOCUS

54 GROEIFABRIEK

PORTFOLIO STRATEGY

CURRENCY

34 BANK OF IRELAND

36 UK PENSIONS

59 REGULATION

70 CHINA TECH

73 IMPACT DATA

75 IG CREDIT

MARCH2019

PENSIONS TECH

FOR DUMMIES

OFC.indd 7

25/02/2019 13:12

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

30 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

july/august 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

sPaIN PORtugal

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE suRvEy:

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Xxxx

COUNTRY REPORT

31 POLICY 34 SECOND PILLAR

37 CARLO COTTARELLI 38 ASSET ALLOCATION

40 BYBLOS 44 TELEMACO 41 IPE suRvEy:

MANAGERS Of

ITALIAN INSTITUTIONAL ASSETS

COUNTRY REPORT

Italy

000-iPe jul-aug2018.V.indd 30

22/06/2018 15:35

70 INVESTMENT

porTfolIo STraTEgy

liability

management

70-77 CaSHfloW-DrIVEN INVESTMENT

77 NETHErlaNDS

The end of LDI as we

know it?CaSHfloW-DrIVEN INVESTMENT

Carlo SValuTo MorEolo

The DB pension industry is nearing peak LDI and a new

understanding of liability management is taking hold

The job of managing UK

defined benefit (DB)

pension funds has become

much harder over the past

two decades, not in small

part due to the unprec-

edented fall in interest rates. This

has driven up the value of liabilities

faster than the value of assets on the

balance sheets of DB pension funds.

Throughout this period, most

pension funds have relied on

liability-driven investment (LDI)

strategies to manage interest rate and

inflation risk. Today, however, LDI is

morphing into something quite

different, as pension funds mature

KEY POINTS

UK DB pension schemes are

nearing full-funding status

Commentators believe the pace

of hedging is likely to slow

For DB funds, the attention

will turns towards cashflow-

matching

Liability-driven investment (LDI)

is becoming ‘cashflow-driven

investing’ (CDI)

and focus on meeting cashflows

requirements as well as managing

balance sheet risks.

Asset-liability management has

existed, in various iterations, since

banking begun. But LDI for pension

funds, probably its latest incarnation,

took the stage at the turn of the

century. In 2001, the DB pension

scheme of Boots, the UK pharmacy

chain, switched all its assets into

bonds. Three years earlier, a paper by Jon

Exley, Shyam Mehta and Andrew

Smith, entitled ‘The financial theory

of defined benefit pension schemes’

had argued for the use of a mark-to-

market approach to value DB scheme

liabilities. It was the beginning of a

not-so-small revolution that led to

the creation of a roughly £900bn

(€1trn) industry in the UK. That is

the notional value of UK DB liabili-

ties hedged against interest rate and

inflation risk at the end of 2016,

according to a well-known survey

published by KMPG.

To some, LDI might seem like an

abstract concept. But in reality, LDI

activity by DB schemes has signifi-

cantly contributed to the fall of

interest rates over the past two

decades, that has had very real

consequences. Today, however, there

are signs that the LDI industry is

approaching a turning point.

Winds of change

In June this year, BlackRock

suggested that UK DB schemes had

reached full funding, meaning that on

aggregate level the industry was in

surplus, as assets exceeded liabilities.

Andrew Tunningley, BlackRock’s

head of UK strategic clients, made

the comment in relation to the June

release of the PPF 7800 index. This is

the main index documenting the

funding position of UK DB schemes.

It is published by the Pension

Protection Fund (PPF), the UK’s

lifeboat scheme.

In reality, the aggregate deficit of

the 5,588 schemes in the index was

estimated be £94bn at the end of

May 2018, up from a deficit of

july/august 2018 INVESTMENT & pENSIoNS EuropE

070-IPE Jul-Aug 2018.indd 70

25/06/2018 11:41

FUTURE DESTINATIONS

NOVEMBER/DECEMBER 2018TOP 100 REAL ESTATE INVESTMENT MANAGERS

AUM BREAKDOWNS AND FULL ANALYSIS

FLEXIBLE OFFICE & CO-WORKING SPACE

INVESTOR PROFILE UNISUPER

WHERE CITIES ARE HEADING AND WHAT IT

MEANS FOR REAL ESTATE INVESTORS

+ IPE’S GUIDE TO €7.2TRN PENSION ASSETS1000EUROPEAN PENSIONS GUIDE}TOP 1000 FUNDS

}RANKINGS}COUNTRY GUIDE

2019

84 INVESTMENT

APRIL 2019 INVESTMENT & PENSIONS EUROPE

PORTFOLIO STRATEGY

FACTOR INVESTING

84 LOW VOLATILITY 86 DEFINITIONS 92 STRATEGY

93 MULTI-FACTOR ETFS 95 EMERGING MARKETS 97 TAXATION

The paradox of low

volatilityLOW VOLATILITY

JOSEPH MARIATHASAN

Despite scepticism by some investors, low-volatility investing does

appear to work, especially during market downturns

KEY POINTS

Low-volatility investing seems

to run counter to narrow ideas of

economic rationality

The empirical evidence suggests

low-volatility investing does

work

MSCI’s low-vol indices are

among the most popular

Some remain sceptical of the

low-vol approach

Economics is not an

experimental science

despite appearing to have

a strong case of physics

envy when it comes to

developing theoretical

frameworks to explain the real world.

Investment behaviour sometimes

seems to run counter to what might

be expected from a narrow view of

economic rationality.

Take two models that are central

to the whole edifice of financial

economics. Modern portfolio theory

(MPT) was constructed around Nobel

prize winner Harry Markowitz’s

approach to creating efficient

portfolios based on the assumption

that investors would demand greater

returns for assets with greater risks.

That, in turn, led to the capital asset

pricing model (CAPM), and the

associated idea that investors could

obtain portfolios at any risk level

desired, by taking the market

portfolio and either leveraging it or

combining it with cash in each case,

paying or receiving interest at the

risk-free rate.

These constructs are rooted in

particular assumptions about human

behaviour, albeit that of crowds

rather than individuals. In its

strongest form, such reasoning

assumes rationality, unencumbered

self-interest and the idea that human

beings strive to maximise well-

defined utility functions to achieve

happiness.

“A lot of emerging

market companies

can be less volatile

than developed. We

prefer Malaysian

banks, for example,

which are more

stable than Euro-

pean banks”

Jan Sytze Mosselaar

000-IPE April 2019.indd 84

21/03/2019 11:37

26 PENSIONS

COUNTRY REPORT

SPAIN AND PORTUGAL

FEBRUARY 2018 INVESTMENT & PENSIONS EUROPE

COUNTRY REPORT

SPAIN PORTUGAL

00 XXXXX 00 XXX 00 XXX

00 XXXX

00 XXXX 00 IPE SURVEY:

XXXX XXXXXX

Xxxx

COUNTRY REPORT

27 AUTO-ENROLMENT 29 INDUSTRY VIEWS

29 PENSION REFORM 31 DB FUNDING

34 IPE SURVEY:

MANAGERS OF

IRISH INSTITUTIONAL

ASSETS

COUNTRY REPORT

IRELAND

IPE SURVEY

000-IPE fEb2019..indd 26

24/01/2019 13:08

w

CONSUMER LED

MARCH/APRIL 2019

LOGISTICS THE GLOBAL BOOM CONTINUES

INTERVIEW IVANHOÉ CAMBRIDGE

CORE FUNDS OPEN-ENDED GROWTH STORY

IPFM THE NEW AUSTRALIAN MANAGER TAKING ON EUROPE

TO UNDERSTAND THE FUTURE OF GLOBAL

LOGISTICS, OBSERVE THE END USER

OFC-M-A 19 RA.indd 3

18/02/2019 12:27

Chartered Financial Analysts Society of the UK’s 2018 Publication of the Year

Willis Towers Watson Pensions Publication of the Year, 2018

Contacts

Liam KennedyEditor, IPE Magazine / Editorial Director, IPET +44 20 3465 9300E [email protected]

Ben Pritchett-Brown Group Commercial Director T +44 20 3465 9315 E [email protected]

Sam SmithProduction Manager - AdvertisingT +44 20 3465 9332E [email protected]

The most effective platformto reach European pension funds

& other institutional investors

CFA UK's 2018 Publication of the YearWillis Towers Watson Pensions Publication of the Year, 2018

+ IPE’S GUIDE TO €7.2TRN PENSION ASSETS1000EUROPEAN PENSIONS GUIDE}TOP 1000 FUNDS

}RANKINGS}COUNTRY GUIDE

2019

+ IPE’S GUIDE TO €66TRN IN GLOBAL ASSETS4002019ASSET MANAGEMENT GUIDE

}TOP 400}DIRECTORY}PROFILES

BRINGING TOGETHER EUROPE’S PENSION FUNDS SINCE 1997


PENSIONS CHAPTER 43 PENSIONS

PENSIONS CHAPTER 43 PENSIONS

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