BYLINE: John A ReochChairman, International Heavy Haul AssociationAS THE current Chairman of the International Heavy Haul Association, it is my pleasure and privilege to welcome railway professionals throughout the world to the Sixth International Conference of the IHHA, being held on April 6-10 in Cape Town, South Africa.This year’s event includes post-conference tours and, for the first time, a special post-conference educational course to be held in conjunction with the University of Pretoria.The IHHA believes that the heavy haul freight railways of the world play a key role in worldwide economic development, and seeks to serve these railways in their pursuit of excellence in heavy haul operations and technology, and the design, development and maintenance of fixed and rolling assets. The Association was formed in the first instance to promote and disseminate the full range of technologies and operating practices required for successful heavy haul operations. In both mandate and practice, the IHHA has been strongly technical and research-orientated.The railway scene is changing. Privatisation, corporatisation, commercialisation and outsourcing of a wide range of services, and shifting organisational patterns are increasingly part of the mosaic of railway practice in many parts of the world. All this is creating fresh challenges for the railway professional. The Cape Town conference has been designed with these in mind.Even so, the IHHA has not departed from its roots. Applied research as well as operating and maintenance issues will be very much in view. Heavy haul railroading – all railroading in fact – is a technology-based business. The particular challenge that the Cape Town conference organisers have undertaken is to ensure that a business focus runs through the entire conference, even when technical specifics are being addressed.The Cape Town conference will be a broad-based event with the theme Strategies beyond 2000. The IHHA sponsors bi-annual conferences that alternate between ’Specialist Technical Sessions’ that put a spotlight on highly specific issues, and broad-based conferences like the 1997 Cape Town event that survey the full range of issues currently affecting heavy-haul railroading and which may advance the industry. This will be an important event in the railway calendar for railway professionals, generalists and specialists alike. oConference detailsThe Sixth International Heavy Haul Conference is being held at the Cape Sun Inter-Continental hotel in Cape Town on April 6-10.Late registration is being handled by:Connex, PO Box 111, Johannesburg 2000, South Africa.Tel +27 11 884 8110 Fax +27 11 884 3090Other enquiries should be addressed to:Chairman of the Organising Committee, IHHA “6” 1997, PO Box 2737, Joubert Park 2044, South Africa. Tel +27 11 773 8486 Fax: +27 11 773 2393
Investors have expressed concerns over today’s rate cuts by the European Central Bank (ECB) and lamented the lack of progress on an asset purchase programme.Today, Mario Draghi, president of the ECB, took the bold move of introducing negative deposit rates, now at -0.1%, as the ECB looks to charge European banks for leaving capital in its reserves.The central bank’s move seeks to deter the parking of capital, and for banks in the euro-zone to provide more finance to consumers and business, to spur on economic growth and stave off deflation. The move was coupled with a 10 basis point reduction in the refinancing rate, leaving it a record low of 0.15%. However, investors and economists have warned that the ECB’s move is public acknowledgement of a fear of deflation in the euro-zone, with work now underway for an asset purchase programme.Quantitative easing (QE), an asset purchase programme in the UK and US, resulted in central banks purchasing large segments of government debt to boost liquidity in the market and increase inflation.However, such a programme in the UK artificially boosted the value of Gilt assets, while pushing down the yield of notes, affecting pension scheme valuations.Dawn Kendall, senior strategist at Investec Wealth and Investment, said: “The ECB has signalled a series of measures to combat [deflation] that have been widely predicted. In short, planning work is underway to commence QE.”Neil Williams, chief economist at Hermes Fund Managers, was less positive, saying the move was too little, too late.He said the negative deposit rate would be a red herring given the low demand for credit within the euro-zone and pressure on banking balance sheets, with further rates cuts required.“The ECB’s ‘ground work’ on private asset purchases may help but are not the bazooka of unlimited sovereign QE it could have fired today,” he said.“Draghi’s hesitancy to use all his bullets reflects how empty his policy tool box is.”However, the bank did announce further measures including boosting liquidity in the euro-zone.Such measures reduced the value in the euro, which have recently affected exporters and euro-zone equity performance.Andrew Mulliner, portfolio manager at Henderson Global Investors, said: “Whether the measures taken today have the desired effect will take some time for investors and the ECB to divine.“The impact on credit creation and inflation will only likely be boosted in the medium term, although the ECB has sent a clear message to investors, and the market reaction suggests investors are listening.”
Con Keating, head of research at BrightonRock Group, considers the ‘main’ advantage of the CDC modelAt the TUC’s recent ‘ABCs of CDC’ conference, my good friend Bernard Casey of Warwick University asked a question of Gregg McClymont, the shadow pensions minister, as to the sources of the superior projected performance of collective defined contribution (CDC) over individual DC. The question was whether different speakers have emphasised the “main” advantage of CDC. One said it reduced volatility. Another said it generated higher returns because it allowed investing long term, and in higher-risk assets, and a third said it generated better returns because, via scale economies, costs were lower. Which is it?”The answer, of course, is all and none – all are sources, but the dominant one in practice will vary with circumstances. In the various model projections that were undertaken – by the Government Actuaries Department, by Aon Hewitt and by the Royal Society of Arts – the detail of the model construction and calibration will have determined the answer. In fact, as the order in which effects are considered in an attribution analysis determines their magnitude, the question of a unique most important source is not even well framed.Bernard’s question and its target were a piece of pure devilment, of which I might have been proud myself. The various projections are all concerned with scale and scope in pension management. However, there is a more important aspect to CDC as a form of organisation. We have known since the work of Teresa Ghilarducci that the form of organisation can have effects upon the broad economy. Here, empirical work on US data showed that individual DC is more procyclical that collective defined benefit, exacerbating economic downturns and heightening booms. The driver of this analytic result was rather more the collective risk-sharing of DB than the pooling aspect – most individual DC assets are invested in collective mutual funds. At the conference, Steve Webb, the UK pensions minister, repeatedly emphasised the risk-pooling face of CDC to the point that the audience might have thought risk-sharing among members in a CDC scheme was entirely absent. It isn’t – well-designed CDC schemes are both risk-sharing and risk-pooling. CDC schemes allow greater commitment, in both amount and over time, than individual DC, even after considering the collective nature of DC investment funds. The key insight here is that it is commitment that allows our industrialists and entrepreneurs to create further wealth. Simply put, greater commitment can be expected to deliver greater wealth, a larger pie from which pensions may be delivered.There are a number of approaches to the analysis of commitment. We might have used Claude Shannon’s 1948 work on information theory in combination with Georgescu-Roegen’s 1971 “The entropy law and the economic process”, but that is perhaps too abstract for pensions practitioners. It would, though, deliver the insights that, although all wealth is information, not all information is wealth, and that commitment is ineluctably related to irreversibility.Colin Mayer recently wrote an excellent book ‘Firm Commitment: Why the corporation is failing us and how to restore trust’, which offers a corporate finance perspective on these issues, but more directly relevant is Pankaj Gehmawat’s 1991 ‘Commitment: The dynamic of strategy’. From Colin Mayer, we may note the relation between trust and commitment; from Gehmawat, we may distinguish between strategy and tactics, and by extension between investment and speculation. The irreversible nature of commitment, or trust, makes it risky. Indeed, the analysis may be expanded to consider soft and hard commitments, the value of flexibility as an option, and decisions that are, rather than absolutely irreversible, merely costly to reverse, which is the problem more usually faced by investment managers.Several analysts have purported to address empirically the question of whether CDC schemes do, in fact, invest more for the longer term or are more committed. They suggest that conservative asset allocations are observed. However, there are two problems with these studies. First, the data are derived from legacy Dutch DB schemes that many have wrongly rebranded as CDC, and second – and more important – these schemes are subject to a strict regime of risk-based regulation (FTK), as if their liabilities were hard promises.Solvency ratios are the heart of this FTK regulation, and, simply to calculate a solvency ratio, it is necessary to attribute an estimate to liabilities. Indeed, the Dutch regulator has required cuts in pensions in payment. Against this background, it is perfectly sensible to maintain conservative, low-volatility asset allocation strategies. As we are still to see the detail of the UK CDC regulation, we should bear in mind this caution when thinking about that.Many commentators have questioned the sustainability of CDC. “If I am a young employee, why should I join a scheme that is already in deficit?” is one way this is usually put. It is not clear how potential members become aware of a possible shortfall or indeed if that concept has any meaning given the absence of hard pension promises.The reality is that younger members face far more risk and uncertainty than older members – and the magnitude of that risk and uncertainty can be estimated from the high relative cost of buying deferred annuities for that group. They also need to consider their alternatives – if the investment performance of their individual DC choices is as much lower than CDC, as the various projections suggest, the deficit in a CDC scheme would have to be substantial indeed to offer worse potential outcomes and warrant non-participation. Finally, as this article has pointed out, if these employees do not participate, they are facing a future that is, by their own making, less rich and satisfying.Con Keating is head of research at BrightonRock Group
Cees de Veer, ABP’s vice-chairman, said the pension fund did not yet have to “take measures” on the shortfall but conceded that ABP was concerned how funding might evolve over the course of 2015.Dutch pension funds, following the introduction of the new financial assessment framework (FTK) on 1 January, must now use the average funding of the previous 12 months to calculate their coverage, rather than the average market rate of the previous three months.According to the Dutch Pensions Federation, the new “policy funding ratio” would be slightly higher at most schemes.ABP said its new coverage would be 104.7%.The Federation warned that, as long as interest rates – the criterion for discounting liabilities – remained low, the new accounting method was likely to show a downward trend this year.ABP reported quarterly results for equity and fixed income of 3.7% and 3%, respectively.Returns on real estate and private equity were 9.2% and 4.2%. The scheme lost 22.6% on its commodities portfolio due to falling oil prices, while its hedge of 25% of the interest risk on its liabilities contributed 3.7 percentage points to its annual result.Meanwhile, the €162bn healthcare scheme PFZW reported annual and quarterly returns of 15.5% and 3.1%, respectively, while its funding fell by 3 percentage points to 102% over the last quarter. PFZW made a positive quarterly return on almost every asset class, with commodities (-33%) being the exception.It said its interest hedge of one-third of its liabilities contributed 8.4 percentage points to its annual performance. BpfBouw said its hedge of approximately 60% of its interest risk accounted for 15.5 percentage points of its 2014 return.Its 45% fixed income portfolio, with an annual return of 12.5%, also performed well, it said.However, because falling interest rates also increased its liabilities, the scheme’s funding ratio increased by just 0.7 percentage points as at year-end, it said.BpfBouw’s investments in equity, property and alternatives returned 18.1%, 8.8% and 1.5%, respectively, over 2014, while fourth-quarter results were 4.2%, 2.6% and -6.5%, respectively. The €58.5bn metal scheme PMT reported a quarterly return of 5.9% and an annual return of 20.6%, although its coverage ratio increased by just 0.2 percentage points to 103% over the last quarter. PMT said its 58% fixed income allocation produced an annual return of 26%, adding that equity, property and alternatives returned 12.2%, 15.6% and 17.4% over the period.The €39.5bn metal pension fund PME, meanwhile, returned 4.8% in Q4 and 17.8% over the course of 2014.However, liabilities increased by 20% over the same period, while funding fell by 0.6 percentage points to 102% in the fourth quarter. PME’s chairman Franswillem Briët warned that persistently low interest rates could force the pension fund to take measures that would have an “enormous impact” on participants and pensioners.Over 2014, PME returned 11.5% on equity and 12.9% on fixed income.The scheme’s 50% interest hedge contributed 5.5 percentage points to its annual result. Falling interest rates over the course of 2014 have led to funding shortfalls at four of the Netherlands’ five largest pension funds, according to fourth-quarter reports.The only exception was the €47.6bn pension fund for the building industry, BpfBouw, which saw funding slightly increase to 114.5% on the back of an annual return of 24.3%.The €344bn civil service scheme ABP reported a return of 14.5%.However, over the fourth quarter of 2014, its coverage ratio fell by 2 percentage points to 101.1% – 3.1 percentage points short of the minimum required level.
The €345bn civil service pension fund ABP is to reduce its pension contribution from 19.6% to 17.8%, as of 1 January.It said its decision was based on changes made by the social partners to the salary agreement between the government and unions.As a consequence, the pension fund replaced the salary index with the consumer index as the criterion for its indexation policy.The new contribution does not take into account the one-off 0.9% levy, applied last year, to cover the increase in the retirement age for the state pensions AOW. ABP’s board, however, said it might raise the premium again on 1 April if a new recovery plan – based on the scheme’s funding ratio at year-end – showed the need for additional improvements.The pension fund’s coverage was 99.3% at October-end, 10.7% short of its required minimum funding.Corien Wortmann-Kool recently, chair at ABP, said the scheme’s financial position precluded granting any indexation over the next five years.The scheme’s indexation in arrears is 11.7%.In other news, the two pension funds of Unilever – Progress and Forward – said they would grant their pensioners and deferred participants a full indexation of 0.44% against the consumer index.Progress – the closed €5bn defined benefit scheme – said its funding stood at 135% at October-end.It said the financial position of the new collective defined contribution plan Forward also allowed for a full indexation.Meanwhile, the €25bn Pensioenfonds ING said it would grant the former workers and pensioners of ING Bank an indexation of 1.25%, while former employees and pensioners of NN Group will be awarded an inflation compensation of 0.5%, all drawn against the salary index.It said it had not yet taken a decision on indexation for the part of the staff of ING Bank and NN Group subject to the consumer index.The ING scheme reported a funding ratio in real terms of 92.9% last month.Lastly, Jetta Klijnsma, state secretary for Social Affairs, said pension providers could start operating their general pension funds (APFs) on 1 March, if the legislation comes into force on 1 January.During an additional reading of the Bill in Parliament, she said she would urge supervisor De Nederlandsche Bank to deal with requests for a permit as quickly as possible.However, Klijnsma stressed that providers would be prohibited from launching their APFs retrospectively as of 1 January.
The €417bn Dutch asset manager APG has entered a partnership with technical research institute TNO and Maastricht University to investigate whether artificial intelligence and blockchain technology could benefit its operational management.The research will also explore ways APG can reduce carbon emissions.A spokesman for APG said the asset manager was considering committing a significant part of its innovation budget to the study.He said it was too early, however, to specify what APG expected from the new technologies, and that the project would last for years. “The technologies are certainly promising, and we can’t ignore them,” he said.“After all, if we already knew the outcome of the research, the study wouldn’t be necessary.”He added that APG was keen for other companies and start-ups to participate in the research.The research is to be conducted at the ‘smart services’ campus in Heerlen, in which APG also has a stake.APG has set up a dedicated team – headed by Joep Beukers, its innovation director – to implement the project.
In a letter to the Financial Times last week, ShareSoc and the UK Shareholders’ Association, two shareholder groups, expressed their concerns that “not only did the Aviva preference share price drop from 170p to 120p, but the whole asset class suffered a 25% fall as a consequence of the announcement”.Aviva declined to comment on Wednesday.Metzler sets up separate company to house pension businessMetzler Asset Management has created a dedicated subsidiary for its pension management business.Gerhard Wiesheu, partner with responsibility for asset management at the German private bank, will also be the partner responsible for the new company.Christian Remke will lead the front office, Martin Thiesen the middle office, and Steffen Beltz the back office. Thiesen joined Metzler at the beginning of the year as an asset liability management specialist.Metzler said it intended to expand its consultancy offering in the occupational pensions sector. It said it would be adding to its services asset-liability management studies, liability-driven investment strategies and strategic asset allocation structuring.Wiesheu said: “The establishment of a standalone company underlines the extraordinarily high strategic importance pension management has for Metzler.”Metzler was the first asset manager in Germany to launch a Pensionsfonds and a multi-employer contractual trust arrangement, two of the vehicles German companies can choose for pension financing.La Française takes full ownership of Inflection PointGroupe La Française is to acquire full ownership of Inflection Point Capital Management (IPCM), a London-based investment research boutique that it launched with leading sustainability expert Matthew Kiernan in 2013.IPCM, which will be rebranded as Inflection Point by La Française, was established to encourage development and adoption of responsible investment research, advisory services and investment products.La Française said the move would strengthen its responsible investment innovation capabilities.Roland Rott, managing director of IPCM, said the focus of the company was two-fold: “Managing non-financial data and generating respective investment insights in close co-operation with portfolio management teams of the group.”The new simplified structure would allow IPCM to be fully aligned with La Française’s investment strategy, Rott added. “We will jointly drive ESG integration and sustainable investment across all asset classes of La Française.”Kiernan will retire as chief executive of IPCM at the end of June.Schroders to nurture fintech startupsSchroders has launched an in-house technology ‘incubator’ to allow financial services-focused startups to tap into the global investment house’s range of business and investment expertise.Under the Cobalt programme, technology companies focusing on investment management that have moved beyond the conceptual or early-growth stage will be able to access relevant business divisions within Schroders – which oversees more than €500bn of customer assets – as well as benefit from its resources and potential investment.The programme comprises a 12-month residency, with the startup’s staff gaining a sponsor to promote the business’s interests within the investment manager. Mentors from various arms of Schroders will be available, as will the opportunity to pitch for investment.Peter Harrison, group chief executive at Schroders, said the Cobalt programme was designed to showcase the asset manager as the “natural home for fintech startups”.The programme would also give the company “direct access to a pipeline of innovators enabling us to harness tomorrow’s technology to better tackle today’s investment and industry challenges”, Harrison added.Note: This article’s headline has been updated to clarify that Aviva’s preference shares were not cancelled. Aviva faces questions from the UK’s financial services regulator as to whether plans by the FTSE 100 insurer to cancel £450m (€513.5m) of preference shares earlier this month contravened market abuse regulations.The insurer – which also owns a £352bn asset manager, Aviva Investors – had faced growing pressure from investors and politicians over its initial decision to cancel the preference shares, leading Aviva to jettison its plans last week.In a statement, Andrew Bailey, chief executive of the Financial Conduct Authority, said the body would not be conducting a formal investigation at this stage. However, he said the regulator’s immediate concern was to “understand the basis upon which Aviva was acting, including the clarity of the information available to securities holders along with the market integrity concerns that the proposals raised”.Investors protested when the value of their preference shares plummeted in the wake of the cancellation announcement.
If not, then PEPP documents “should at the very least include a prominent warning about the devastating impact of inflation and fees on the real value of pension savings over time”, Better Finance argued.“Otherwise, [we] will have no choice but to strongly recommend for EU citizens to steer clear of such a misleading and value-destroying option,” the group said.A recent study conducted by Better Finance – albeit based on a limited sample – found that “fund documentation in the US… contains more and far clearer information on the evolution of asset allocation over time” than proposed documents for the PEPP.“What’s more is that the average annual fee for these funds was found to be above 1.6% in the EU, versus about 0.6% in the US,” the lobby group added.Better Finance has also argued in favour of PEPP providers having to “publish their past performance alongside the PEPP’s past performance for at least the last 20 years”.Alternatively, the results should be made known “since the inception of the product”, it said. The group noted that this was suggested by the parliament’s Economic and Monetary Affairs Committee (ECON) in a draft report.A compromise position for PEPP is being sought in Brussels by 10 September. A financial services lobby group has raised concerns over lack of capital protection measures in the current development of legislation for pan-European personal pension products (PEPP).Better Finance, a Brussels-based lobby group for consumer protection, aired its protests as European politicians worked towards a PEPP regulation, with discussions taking place involving the European Parliament and national government representations.The group told IPE that it had repeatedly emphasised that a real capital protection or guarantee implied that capital must be “calculated on the basis of the amounts saved before the deduction of all accumulated fees, charges and expenses directly or indirectly borne by investors”.It added that this should be in real terms, if possible, “offsetting the heavy negative impact of inflation over time”.
FAMILY ESCAPE: With a pool, tennis court and stables there is plenty to do in this backyard.There is no need to find a good park for the kids to play in with this back yard.The Nundah home at 37 Carew Street was perfect for Fiona Hatch and her three children for everything outside the home.“The backyard is huge and private,” Ms Hatch said.“We bought it within the first hour of seeing it because it is just wonderful for the kids.”The large windows overlook the expansive back yard.The sizeable yard had almost everything to keep her three children away from the TV, with a full-size tennis court and a 13m x 4.5m inground swimming pool.“When the kids were a bit older we had the stables put in so the kids could have their horses over for the weekend,” she said.More from newsNew apartments released at idyllic retirement community Samford Grove Presented by Parks and wildlife the new lust-haves post coronavirus18 hours agoThe home has high ceilings.The home was built in the late 1980s on a 2004sq m triple allotment just behind Kalinga Park.“It is at the highest point on the street and it is a level block,” she said.The home was architecturally designed and built in 1988, and with its cathedral ceilings, exposed brick and timber it has a distinctive look that is very different to other homes in the area.Fiona Hatch plans to downsize from her Nundah home. (AAP Image/Josh Woning)Part of the back of the house has floor to ceiling glass windows, which help give an unrestricted view into the back yard.“The house has been designed to face the back yard, and it is all very private and tranquil,” Ms Hatch said.The home is going to auction this weekend.With five bedrooms and a study over its two floors, the home was ideal for her children when they needed space to themselves.“They had piano rooms and guitar rooms and the house was always quiet between floors,” she said.With her kids now moved out, Ms Hatch planned to downsize and hoped that another young family would move in and make it their own.The house will go to auction on Saturday, June 9on-site at 9am by Ian Cuneo at Ray White — Ascot.
Generic image of existing houses in Brisbane (AAP Image/Glenn Hunt) Herron Todd White Brisbane residential director David Notley said buyers should research builders, developments, public transport and any other important factors before making a purchase.But developer Don O’Rorke of Consolidated Properties said prices for house and land packages had remained relatively steady. Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 1:50Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -1:50 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels720p720pHD540p540p360p360p180p180pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenDifferences between building in new or established estates01:50BRISBANE’S “abundance of land” and affordable prices are driving the great migration from interstate.But a new report has found that building a new home may not be as economical as purchasing an existing property.“In most cases, we’ve found building contracts have become more expensive over the past 12 months,” Herron Todd White’s (HTW) Month In Review report has found.“It’s becoming increasingly difficult to support the cost of land plus construction as equal to or above the end value of the completed property.” An aerial view of the Brisbane CBDMore from newsParks and wildlife the new lust-haves post coronavirus13 hours agoNoosa’s best beachfront penthouse is about to hit the market13 hours agoIt found there was serious competition between new and established stock within some estates, with some existing properties trading for up to $40,000 less.It also found that many of those existing properties were “substantially larger” than the newer builds – an attractive option for buyers.