International

Natalie Cogan

Fri 29 Jan 2010

More US pension money to flow to emerging markets

US pension funds are set to increase their asset allocations to emerging markets over the next five years, according to JPMorgan.

Through the fourth quarter of 2009, JPMorgan estimated that US defined benefit plans had just 0.3 per cent of an estimated US$3.7 trillion ($4.1 trillion) invested in emerging markets debt and 2.1 per cent in equities.

In its Emerging Markets Outlook and Strategy research report, published 5 January, the bank said strategic inflows into emerging markets fixed income reached US$22.9 billion ($25.4 billion) in 2009 and should rise to US$30 billion to US$35 billion ($33.3 billion to $38.8 billion) in 2010.

According to the report, inflows into emerging markets are increasingly diverse, including sovereign wealth funds, Japan retail flows, crossover investors and US pension funds.

JPMorgan appointed Belgian custody mandate

JPMorgan's Worldwide Securities Services (JP WSS) has been mandated to provide custody and related services to Amonis OFP, Belgium's largest pension fund for healthcare employees.

Amonis chief executive Hugo Lasat said the fund had moved to two new asset allocation structures: an income portfolio based on the pension fund's expected cash flows and a growth portfolio that delivers a superior investment return.

Amonis is Belgium's second-largest pension scheme with 1 billion euros ($1.57 billion) in assets under management and around 25,000 active members including dentists, doctors and pharmacists.

JP WSS's head of business development, Benjie Fraser, said the firm would continue to expand its work with pension funds across Europe.

Northern Rock split paves way for sale

Northern Rock will create a new pension plan for existing active members, offering the same terms as its existing 367.5 million-pound ($656.6 million) defined benefit plan but shelving past liabilities.

The nationalised firm was split on 1 January 2010 into an asset management arm valued at around 50 billion pounds ($89.3 billion), which holds the majority of the previous residential mortgage book and unsecured loan accounts, and Northern Rock plc, a new savings and mortgage bank to be sold to the private sector.

National Australia Bank and Virgin Money are considered contenders for the "good bank".

The current pension scheme, with an estimated 60 million-pound ($107.2 million) deficit, will remain with the asset management or so-called "bad bank" arm and accrued benefits are frozen. Only future liabilities of the remaining employees in the closed final salary scheme will remain with Northern Rock plc.

Bigger role for EU pensions supervisor

As part of the European Commission's proposal to strengthen regulation of the European financial sector, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) will become the European Insurance and Occupational Pensions Authority (EIOPA).

As an authority and not a committee, EIOPA will have the power to issue binding decisions and is expected to intervene only in emergency situations to settle pension scheme disputes between national supervisors.

The European Council approved the creation of EIOPA in December as well as a European Banking Authority (EBA) and Securities and Markets Authority (ESMA).

The three European supervisory authorities will be part of a European System of Financial Supervisors, will work with member state supervisors and are expected to replace three existing EU committees of supervisors.

The commission is pushing for legislation to be passed on the new authorities by January 2011.

CalPERS' pension fund recovers ground in 2009

The California Public Employees' Retirement System (CalPERS) earned an 11.8 per cent return on investments in 2009, increasing the market value of its assets by US$46 billion ($51 billion). Total fund assets for the biggest US public pension fund stood at US$203.3 billion ($225.5 billion) by the end of the year and had notched up a further US$3 billion ($3.3 billion) in just the first three weeks of January.

CalPERS' global equity portfolio was the biggest gainer in 2009 with a 35 per cent return dominated by improved gains in international stocks, while global fixed income was up 14 per cent. Real estate was the hardest hit asset class, down 47 per cent.

The fund swallowed "tough medicine" on its real estate assets and would be aggressively reviewing investment allocation for 2010, CalPERS chief investment officer Joe Dear said.

"Last year was a wild ride for all investors, but we finished very strong," Dear said.

Reliance tapped to manage Malaysia funds

India's Reliance Capital Asset Management (Reliance) is in talks with the Malaysian government to manage up to half of Malaysia's US$5 billion ($5.6 billion) in public and government funds, India's Economic Times reports.

That will include Malaysia's national pension, the Employees Provident Fund, which has around US$9 billion ($10 billion) under management and is one of the government's main investment arms.