South Korean pension fund buys global real estate; survey finds renewed appetite for investment risk; pension funds employ liability-driven investing strategies: Germany forecasts pension growth
South Korean pension fund buys global real estate South Korea's National Pension Service (NPS) has acquired the United Kingdom headquarters of investment banking group HSBC Holdings, based in London's Canary Wharf financial district, for £772.5 million ($1.39 billion). HSBC will retain control of occupancy for the remaining 17.5 years of an existing 20-year lease at a rent of £46 million ($82.9 million) a year. The NPS has ramped up its acquisition of assets globally in 2009, having suspended investments in overseas assets last year to support the South Korean won.
Survey finds renewed appetite for investment risk Merrill Lynch's October survey of fund managers found investors' risk appetite had rebounded amid continued optimism for a global economic recovery and rising corporate profits. The survey showed investments shifting out of cash and back to equities as appetite for risk returned. Thirty-eight per cent of fund managers were overweight in equities, up from 27 per cent in September. Technology, energy, materials and industrials were the favoured sectors for asset allocators in October. Some 229 fund managers, managing a total of $616 billion ($672.8 billion), participated in the global survey.
Germany forecasts pension growth The German government has forecast that state pensions are set to grow despite a freeze on pension increases through 2010. Bloomberg reported that payments for retirees in the compulsory plan were expected to grow by an average 1.6 per cent annually to 2023, while monthly contributions from gross pay should vary from 19.9 per cent now to 20.6 per cent by 2023. According to a report from the German Federal Statistics Office, the country's working population of 20-64 year olds accounted for 50 million out of a total population of 82 million. That is expected to shrink to around 40 million between 2020 and 2035 as baby boomers eased into retirement.
SEI survey shows increase in LDI investing Fiduciary manager SEI has found the percentage of pensions employing a liability-driven investing strategy (LDI) in their portfolios has nearly tripled in the past three years from 20 per cent in 2007 to 54 per cent in 2009. Of the 150 executives drawn from North America and Europe who completed the survey, 70 per cent said market volatility had increased the value of LDI. Absolute return is no longer the highest ranked benchmark, according to the survey, with only 15 per cent ranking it as the primary success metric, compared to 28 per cent in 2007. Nearly 100 per cent of respondents said they were using long duration bonds as part of their LDI strategy. The second most common product was interest rate derivatives at 40 per cent.
UK pension fund body urges pay restraint The National Association of Pension Funds (NAPF) has written to the chairmen of the FTSE's top 350 companies urging executive pay restraint. As global economies pick up and firms start to unfreeze bonus payments and pay hikes, NAPF stressed that restraint shown in 2009 needed to continue next year. NAPF head of corporate governance David Paterson is encouraging the trend of deferring parts of bonus payments into the coming year. "There is a clear focus on linking pay to results and to the long-term interests of shareholders, such as pension funds," Paterson said.
Scottish Life widens fund list Scottish Life, the pensions specialist arm of Royal London Group, has introduced 10 new funds to its core fund range in response to feedback from independent financial advisers and market analysts. The new funds give access to five new investment sectors: commodities, United States mid caps, total return, global property and global bonds. Nine of the funds are actively managed. The funds can be used in conjunction with Scottish Life's governed range and any of the 10 new funds can be used by an adviser.
