James Price, investment consultant at Towers Watson, said: “There might be some alpha in an individual strategy. However, when you start to collate the hedge funds together, the overall returns take on the properties of the opportunity set they are using.”Price said the exposures to alternative betas did vary, but that approximately 60-70% of the returns could be explained by combining alternative betas.“As an asset owner, you could access those alternative betas through other means,” he said.“We tried to think very carefully about how we use this, and make sure what comes through is logistically consistent, and replicate what could have been.”The research showed that, from 1999 to 2013, a minimum of 70% of HFRI composite returns could be explained by a combination of betas.However, the paper also highlighted additional diversification benefits provided by the use of alternative beta.The use of hedge funds in pension fund portfolios has commonly been for diversification benefits.However, with hedge funds using equity, value and macro strategies, the diversification away from traditional portfolios could be overstated.The correlation between alternative beta strategies, while providing additional and cheaper returns, could also add diversification benefits, Towers Watson said.Its analysis showed the average correlation coefficient between equities and credit to be around 0.59, with 1 meaning the two assets are perfectly correlated in returns and losses.However, the use of a foreign exchange carry strategy, another alternative beta category, and momentum equities only yielded a 0.03 coefficient.Equities and volatility premium strategies have a correlation of 0.22, and equities versus a value strategy was negatively correlated at -0.22.“They have very good diversification properties,” Price said, “especially compared with equities and bonds, which investors already own in their portfolios.“It’s a way of injecting additional diversification into a portfolio. It is important to think about these risks. There is many different ways to look at the portfolio, and alternative betas is a valuable additional tool.”Towers Watson said genuine alpha was a source of uncorrelated returns and worth its weight in gold.However, pension funds should consider the fees being paid for alpha, which can be achieved through beta strategies, it said.The paper added: “Over-diversified hedge fund strategies risk moving to industry-average returns and therefore closer to the returns that can be captured with beta. This is exacerbated when funds of hedge funds are used.” More than half of returns experienced by hedge funds could be explained by factors termed as ‘alternative beta’, rather than true alpha, research shows.Analysis from Towers Watson showed that, after studying an equity long/short strategy between 1996 and 2013, 84% of the returns, on an aggregate basis, derived from beta strategies.Within a equity long/short strategy, what the firm referred to as alternative beta was defined as the premium received for the volatility of equities, the momentum of stocks and the size of the equity investment.Looking at the HFRI Composite Index, the representative index for hedge funds, 84% of the returns could be explained by a combination of bulk and alternative beta strategies, the consultancy said.
Monthly Archive: September 2020
Zurich Assurance has agreed a life longevity hedge for an undisclosed UK pension plan.The hedge, for £90m (€124m) of pension member liabilities, is structured as a “whole of life” insurance policy and covers approximately 200 named pensioners and contingent dependants, hence the “named life” label.Mercer was the lead advisory to the trustees of the plan.Zurich UK immediately reinsured the risk with Pacific Life Re. Suthan Rajagopalan, lead transaction adviser and head of longevity reinsurance at Mercer, said named life longevity hedges had previously only been executed for schemes with more than £400m of liabilities.He added: “This deal unlocks the door to competitive longevity reinsurance pricing for small and medium-sized schemes, which are more exposed to so-called concentration risk, where there is greater variability in members’ life expectancy due to diverse pension amounts in smaller populations.”In other news, the Financial Conduct Authority (FCA) has fined Threadneedle Asset Management £6m in relation to incidents in 2011.The FCA said the fine was for “failing to put in place adequate controls in the fixed income area of its front office, and for providing inaccurate information to the regulator and for failing to correct the inaccurate representation for four months”.Responding to the FCA’s statement on the fine, Threadneedle said that, in August 2011, it was the intended victim of an attempted fraudulent trade involving collusion between a Threadneedle employee, an external broker and an FSA-regulated entity.“Threadneedle has cooperated fully with the regulator’s investigation,” it added.“Today’s fine relates to these historic events. We are confident the issues identified have been fully addressed and are pleased to move forward and continue to focus on delivering for our clients.”
The Swiss government has re-affirmed its intention to draft legislation that would back the position of the federal supervisory authority for occupational pensions in a dispute with cantons over the governance of regional supervisory authorities.The federal council laid out its plan earlier this month in response to a request from a member of parliament, Daniel Fässler, a member of the Christian Democratic People’s Party.Fässler called on the government to clarify what responsibilities the law grants the federal supervisory authority for occupational pensions – the Oberaufsichtskommission (OAK), or Commission de haute surveillance (CHS).The backdrop to this is a dispute over whether the Swiss cantons should be allowed to have representatives from their governments on the boards of regional supervisory authorities, as is currently the case. The cantons are defending this organisation, arguing that it has never posed a problem and that they comply with the law.The OAK is against this practice, saying it is incompatible with the legal requirement that supervisory authorities be independent.“The OAK has communicated this viewpoint to the supervisory authorities several times, but they are sticking with their organisation,” an OAK spokesman told IPE.“That is why the federal council will, by the end of this year, consult on draft legislation that will include a proposal to strengthen the independence of the occupational pension supervisory authorities.” In its response to the request from the member of parliament, the federal council said it was well aware of the discussions around the independence of the cantonal and regional supervisory bodies and that it previously found this could be impeded if cantonal government officials were members of these bodies.Conflicts of interest are more likely to arise in relation to supervision of public sector pension providers, it added.“The federal council,” it said, “will therefore by the end of this year consult on a bill that, in addition to a draft law to modernise first-pillar supervision, will include a proposal to strengthen the independence of the occupational pension supervisory authorities.” The statement confirmed the government’s previously announced plans and the related timetable – it has commissioned the interior ministry to draw up a reform plan and gave it until the end of this year to come up with its proposal.Dominique Favre, director at As-So, the supervisory authority for western Switzerland, told IPE the cantons were “angry” about the government’s plan to change the law, which they see as a step towards centralisation.“If you want the cantons to no longer have a say, then you need a centralised system, like FINMA, and everything would have to be done in Bern, and the federal administration would manage occupational pension provision,” he said.“But, if they wanted a regional system, it’s normal that the local, regional or cantonal authorities would participate. It’s a fight against the centralisation of supervision.”FINMA is the Swiss financial markets supervisory authority; in contrast to occupational pensions, the supervision of banks and insurers is centralised at the federal level. The dispute between the OAK and the cantons has its origins in a 2012 reform of the Swiss supervisory system for occupational pensions, which led to the creation of the OAK and also provided for the merger of the mostly cantonal supervisory authorities to form regional supervisory bodies.The consolidation had been underway before this, however.Today, there are three regional occupational pension supervisors in Switzerland, for the west, central and the east.Some cantons have continued to organise supervision on a cantonal level, eschewing regional co-operation.The three regional bodies have boards that comprise representatives from the cantonal governments.The board of As-So, the supervisory authority for western Switzerland, for example, is made up of one representative from each of the four cantons it covers: Waadt (Vaud), Wallis (Valais), Neuenburg (Neuchâtel) and Jura.Fässler, whose request the federal council rejected earlier this month, is in the cantonal government of Appenzell Innerrhoden and is the vice-president of the board of the supervisory authority for eastern Switzerland – precisely the type of situation the OAK is against.The OAK has no legal right to influence the composition of a supervisory authority’s board, its spokesman told IPE.
The committee’s terms for its earlier investigation already include the level of resources made available to TPR, and how it prioritises its workload.TPR has already suggested its powers could grow to allow it to scrutinise mergers and acquisitions where these directly impact a company’s pension fund.The regulator has repeatedly come in for criticism since the insolvency of BHS, which saw the company’s two underfunded schemes transferred to the PPF.A report by the Pensions Institute recently concluded it was faced with “irreconcilable” legal objectives, arguing it led to its role being “muddled”. UK lawmakers are set to review the powers granted to the Pensions Regulator (TPR), as they push ahead with a broader examination of the regulatory framework.The work and pensions select committee, which recently conducted hearings into the collapse of retailer BHS and how TPR and the Pensions Protection Fund (PPF) were affected by the insolvency, will expand the hearings to focus more broadly on defined benefit (DB) schemes.The new hearings are set to be scheduled once MPs return from summer recess in September, according to a spokeswoman for the committee.The additional hearings are not being viewed as a separate inquiry, allowing the terms of reference set for the previous enquiry into the PPF and TPR to continue.
The results took the year-to-date returns for the three assets classes to 9.3%, 4.8% and 4.6%, respectively.The scheme’s interest hedge resulted in 4 percentage points of return over the past three quarters.Meanwhile, the €8.1bn pension fund for KLM ground crews returned 3.1% in the third quarter and 10.2% over the first nine months of the year.Its funding rose by 0.7 percentage point to 102.4% as of the end of September.Although its official policy coverage – the twelve-month average of its funding, and the criterion for rights cuts and indexation – dropped just below the required minimum level of 104.2%, the board of the Algemeen Pensioenfonds KLM said it saw no reason for a review of its asset allocation or de-risking measures.It pointed out that it only recently abandoned its tactical asset allocation while at the same time deciding to slightly reduce its emerging-market equity allocation.Lastly, the €8.3bn Pensioenfonds Vliegend Personeel KLM reported a quarterly return of 2.6% and a year-to-date result of 7.1%.While the pilot pension fund’s coverage improved over the third quarter, its policy funding fell by 2.1 percentage points to 115.5%, 8.3 percentage points short of its required financial buffer.The airline and VNV, a union for pilots, are locked in a legal dispute over whether the employer is obligated to plug this funding shortfall.The Pensioenfonds Vliegend Personeel KLM is also preparing a lawsuit against KLM after the airline cancelled the contract as a result of the same dispute. KLM’s three largest pension funds said they have benefited from improving equity markets, stabilising oil prices and “nearly stable” interest rates over the third quarter.All three schemes – whose assets are managed by Blue Sky Group – reported rising coverage ratios on the back of quarterly returns as high as 3.5%.The €2.9bn pension fund for cabin staff posted the best quarterly result, adding that its year-to-date return stood at 10.8% as of the end of September.The Pensioenfonds KLM Cabinepersoneel’s fixed income holdings returned 1.7% over the period, while equities returned 4.8% and real estate 1.6%.
Allianz has announced an expanded climate strategy phasing out all proprietary investments in coal-based business by 2040 and divesting from a wider range of companies that fail to cut their greenhouse gas emissions to a level in line with a low-carbon economy. The insurer also announced it would halt all insurance coverage of coal-based business by that time.The stated aim of its expanded policy was to ensure the 2°C target of the Paris Agreement was integrated in all of group’s relevant business activities, it said. Allianz’s expanded climate strategy involves a tightening of criteria for exclusion of coal-based businesses, as well as pushing companies in carbon-intensive sectors to cut their greenhouse gas emissions so they are aligned with the 2°C target. Companies that do not succeed in doing so over the coming decades would be gradually removed from Allianz’s portfolio, the insurer said.“This will be implemented for example by active dialogue with the companies and by requests for long-term climate protection targets, similar to the ESG scoring approach, which is already applied to companies with high ESG risks,” it added.A spokeswoman for Allianz said the company had committed to the Science-Based Target Initiative, which meant decarbonising its corporate operations as well as the proprietary investment portfolio by 2050.She said this meant expecting decarbonisation in line with science from the corporate issuers the insurer was invested in, but that it could not be more specific about details and sector-specific targets at this point in time. The insurer has also sharpened the criteria for exclusion of coal-based business models, for which a divestment policy was announced in 2015.Currently, Allianz will not invest in a mining or energy company that derives 30% or more of its revenue or energy generation from coal. The insurer today announced it would be reducing this threshold in five-percentage-point steps to 0% by 2040.The company also announced that it would no longer invest in energy companies that “put the two-degree target at risk by extensively building coal-fired power plants”.Climate strategy breakthrough?Climate think tank The 2° Investing Initiative said Allianz’s decision, along with the move to exit the coal insurance business, “marks a breakthrough in integrating climate criteria into investment and capital stewardship [and] engagement decisions that go beyond backwards-looking metrics to forward-looking indicators”.According to the think tank, Allianz had become “one of the first, if not the first, major investor to publicly announce a forward-looking climate strategy that explicitly integrates the capital expenditure plans of companies”.A spokeswoman said divestment volumes would depend on how companies would change their business models to phase out coal.“Given that we pursue a strong ESG integration approach across our whole portfolio and already followed an ambitious coal policy since 2015, we think that measuring success on divestment volumes might be a bit misleading,” she added.She said the company estimated foregoing around €50m in premiums per year as a result of the decision to stop insuring single coal-fired power plants and coal mines, whether they were operational or planned.Allianz will work with the non-profit organisation Science-Based Target Initiative on the methods and targets that should underpin its climate strategy. The policy applies to the proprietary assets of Allianz Group, which amount to around €690bn, not to assets of third party clients managed by Pimco or Allianz Global Investors.
Developer: Traders in Purple Price: Three-bedroom from $899,000 Vave Scarborough Vave Scarborough launched this month.TWO new projects from builders Traders in Purple have been launched on the Redcliffe Peninsula, offering owner-occupiers the opportunity to invest in a growing region. Bathers Beachside at Margate Beach is currently under construction, and Vave Scarborough launched this month. Both aim to compete with the waterfront property markets of Sydney and Melbourne while remaining affordable. A render showing a kitchen at Vave.He said Redcliffe Peninsula’s beaches and the recent addition of the train line meant it was an attractive place to invest. “The Redcliffe apartment market continues to perform strongly, with increased buyer demand off the back of infrastructure improvements attracting a diverse range of buyers for its location, value and overall laid-back beach lifestyle and cafe culture,” he said.*** THE BASICS Bathers couple David Brougham and his wife Nora Hyde.“We selected that apartment because it’s boutique, and it gives us the layout we wanted,” Mr Brougham said. “Three bedrooms give us room for visitors.“But what we want to do is just push a paddleboard out.”Mr Brougham also cited the recently completed Redcliffe Peninsula rail line as a factor in choosing the area, as his wife could easily commute to her work in the CBD. “We weren’t seriously looking at Redcliffe until the rail line had been completed,” he said.More from newsLand grab sees 12 Sandstone Lakes homesites sell in a week21 Jun 2020Tropical haven walking distance from the surf9 Oct 2019Traders in Purple chief executive Brett Robinson said the two projects would complement the area’s beachfront location in a similar fashion to the company’s recent project at The Sebel Brisbane.“Both developments capitalise on the picturesque coastal setting and more affordable waterfront housing compared with Sydney or Melbourne,” Mr Robinson said. “The village feel and waterfront living boasts 23km of flat walking paths along the waterfront, and close proximity to the new Sebel hotel at Margate Beach.” Vave Scarborough encompasses 50 two and three-bedroom options, including 11 penthouse apartments, while Bathers Beachside will have 24 three-bedroom apartments. Vave Scarborough launched this month.“The development of both Bathers Beachside and Vave Scarborough will offer something for buyers at every stage of their lives and every budget, including those who wish to downsize from the family home,” Mr Robinson said. Developer: Traders in Purple Price: From $585,000 for two-bedroom, from $768,000 for three-bedroom Bather’s Beachside Bathers Beachside at Margate Beach is currently under construction.Recent data showed Redcliffe was one of the southeast top 10 markets for interstate buyers looking for a new home. David and Nora Brougham have bought a three-bedroom apartment at Bathers Beachside. They said their main motivation for buying in to the project was the lifestyle on offer.
Chris Allan and Annie Moir with her mum Jan Moir outside the squatter’s cottage which is the next to be restored at Rosenthal. Picture: Michael Nolan.ONE of Queensland’s oldest properties, that is said to have sheltered Australian explorer Ludwig Leichhardt and bushranger Captain Thunderbolt at different times, will have its restoration journey revealed to Australia tonight. The dilapidated squatters cottage as it looked in 2016. Picture: CoreLogic.“We don’t have any children, so it’s time to turn the page regrettably,” Mrs Mulcahy told the Warwick Daily News prior to the auction.“I hope someone buys it who has the money and the time to restore it back.”More from newsParks and wildlife the new lust-haves post coronavirus13 hours agoNoosa’s best beachfront penthouse is about to hit the market13 hours agoTheir wish came true when mother and daughter team Jan and Annie Moir bought the lot at auction for $845,000.“I am so grateful to them,” Annie Moir said.“They were going to sell it in three lots of 20 acres and there were five people wanting the homestead.“Mum and I had a quick drink at the bar and decided we really wanted all 60 acres so we went up and bid against the vendor for the lot.”For the past two and a half years, Annie and her partner Chris Allan have worked to preserve the property, while running the nearby Killarney Hotel which is another historic building.“You have to sometimes kick yourself that we actually got the property in the first place,” she said.“It was riddled with white ants. I put my hand through a VJ board at one point, but that didn’t’ stop me. I really wanted the place.” >>>FOLLOW THE COURIER-MAIL REAL ESTATE TEAM ON FACEBOOK<<< The property is littered with historical relics. Picture: Michael Nolan.The restoration is running into the hundreds of thousands of dollars, with the main homestead finished and Jan Moir moving in.Annie and Chris are now working to turn the squatter’s cottage into their own home.“The homestead is three great big rooms with a big hallway going through it. We had to make a hallway to stabilise the structure.“There was a lot of white ant damage.” MORE REAL ESTATE STORIES Rosenthal Homestead at Warwick on the Darling Downs was built in the 1840s and is part of Queensland’s pioneering history for its role in the breeding of Merino sheep and cattle. The Mulcahy family bought the property in 1919 and ran a dairy farm until the 1980s.In 2016, third-generation owners, Jim and Diane Mulcahy, made the hard decision the sell the heritage-listed property which included the homestead, a squatter’s cottage, kitchen building, plus sheds and a meat box that served as a garden shed. When Jan and Annie Moir bought the historic property, the rooms looked like this, with all the original furniture inside. Picture: CoreLogic.Their story has been documented by ABC TV’s Restoration Australia program over the past two and a half years and ‘Rosenthal’ will air tonight at 11.30pm. The original homestead at Rosenthal is the focus of an ABC documentary to air tonight. Picture: Michael Nolan.
Villa World’s $200 million The Meadows at Strathpine is a near sellout. Buyers Crisalyn and Marvin Tenio with daughter’s Autumn and Winter.First homebuyers are snapping up property at Villa World’s $200 million The Meadows, with stage three almost sold out.Following strong sales and the success of stage one late last year, The Meadows has fast tracked construction.The Strathpine development on Brisbane’s northside has secured 137 sales since its launch 18 months ago which Villa World Development Queensland director Peter Johnson attributed to the family-friendly aspect of the community.“The Meadows’ parklands which includes a playground, walking track, exercise stations and community gardens has been a real drawcard for young families, where they are able exercise, socialise and relax,” he said.More from newsParks and wildlife the new lust-haves post coronavirus12 hours agoNoosa’s best beachfront penthouse is about to hit the market12 hours ago“Our residents feel comfortable knowing their neighbours have also bought at The Meadows for its sense of community and family-oriented focus.”Mr Johnson said The Meadows was one of Villa World’s Active8 communities, with a 2km cycle loop, sit-up benches, push-up bars and a range of interactive exercise stations.Marvin and Crislayn Tenio and their two daughters moved into their four-bedroom home at The Meadows after realising their budget would not get them far in Sydney.“Our family did a weekend trip to inspect homes around Brisbane, but nothing came close to the product and value we were getting at The Meadows,” Mrs Tenio said.“We managed to stick to our budget, getting a brand-new family home that we love, and we were also entitled to the first homeowners grant, which was a real bonus.’’The Meadows feature a collection of contemporary family homes and will comprise 393 homes upon completion.
Springbrook and Bellmere Lane land releases at Redlynch for property coverREDLYNCH’S largest and most popular masterplanned residential community, Springbrook, has fast-tracked the release of its latest stage to meet demand in the sought-after area from locals.Less than 15 minutes’ drive from Cairns CBD, one of the area’s fastest-growing suburbs is showing no signs of slowing down. Springbrook and Bellmere Lane land releases at RedlynchWith median house prices in the area rising by almost 7 per cent from 2018 to 2019, the appetite for affordable land options in the region continues to grow. “Over the past year, demand in the area has grown as more people look to build their homes in well-known property ‘hot spots’, with an easy traffic-free commute to the CBD,” Fortress Group sales manager Garett Kleinschmidt said.“The long-awaited release is located in a quiet cul-de-sac offering large-level lots up to 895 square metres in size, with prices beginning at $257,000.” Children on a playground in Redlynch’s largest and most popular masterplanned residential community.“Featuring some of the largest land available in Bellmere Lane to date, we are excited to offer premium homesites ranging from 1910sqm to 2535sqm in size with extra wide frontages allowing buyers to build the homes of their dreams,” Mr Kleinschmidt said.The large, level lifestyle blocks are located in the secluded boutique community of Bellmere Lane and are fully serviced by high pressure town water and sewerage.“This is our final land release, so the lots are in high demand,” he said.For more information on land now available at Springbrook and Bellmere and how to build your dream home, visit www.fortressgroup.com.au or phone 4051 4422. Redlynch’s largest and most popular masterplanned residential community, Springbrook, has fast-tracked the release of its latest stage to meet demand in the sought-after area from locals. June 2019More from newsCairns home ticks popular internet search terms2 days agoTen auction results from ‘active’ weekend in Cairns2 days agoSpringbrook offers a highly desirable address in an established, premium community surrounded by parks, playgrounds and bike trials.“Its proximity to established amenities — including a host of reputable state and private schools, James Cook University, shopping and health precincts — make it an attractive option for buyers,” Mr Kleinschmidt said.“The response in such a short time has been overwhelming; buyers are relishing the opportunity this vibrant estate offers to customise their homes in a very personal yet affordable way.”With the population of Cairns projected to grow to almost 223,000 by 2036 (from around 150,000 in 2016), Springbrook is set to deliver more than 320 homes for around 1000 residents.As one of Cairns’ premier lifestyle destinations, there’s no wonder buyers are flocking to the area with its proximity to the beaches and beautiful rainforest right at their doorstep.A number of major infrastructure projects currently underway are also contributing to the job growth and economic development in the region. Along with the early land release at Springbrook, Mr Kleinschmidt said Fortress Group was also proud to present the final release of large rural residential land in the north of Cairns.