Got Your Triennial Valuation This Year? Bad Luck.

(November 27, 2013) — Around 70% of UK pension funds with a triennial valuation in 2013 have seen their funding position worsen since their last valuation in 2010, according to data from PwC.

The auditing giant found this phenomenon was largely driven by government bond yields, which are used by most schemes as a basis to discount liabilities.

Relevant government bond yields fell from 4.6 % a year to 2.9% a year between April 6, 2010 and April 6, 2013.

Some 94% of schemes surveyed currently have a scheme funding deficit. As a result, more schemes are lengthening their recovery period to deal with increased deficits than in previous years. PwC found 68% of schemes have extended the time to reach full funding by three years or more.

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In addition, 69% of schemes who have a higher deficit have increased their contributions to the pension fund, but PwC said evidence showed that putting more money into the pension pot was doing little to reduce the deficit in the long run.

This theory was also discussed recently by Pension Insurance Corporation and Fathom Consulting: they believed that government and central bank policies to protect householders’ debt levels has been at the expense of driving meaningful growth—leading ultimately to financial repression and corporates being forced to put more money into pension funds.

Earlier this year, the pensions regulator suggested schemes might consider extending the recovery period, increasing contributions and allowing for greater investment outperformance to structure their recovery plans.

However, the report found just 59% of recovery plans are based on the assumption that part of the deficit will be made good through additional investment outperformance, with an average allowance of 0.8% a year.

When asked if they had an integrated risk management plan that considered funding, investment, and sponsor covenant in place, around 43% of plans with more than £1.5 billion under management said yes, although another 50% said they were considering such a plan.

PwC also found that just 20% of UK pension funds were considering a buy-in or full buyout, and even fewer have the necessary tools to track their exact funding levels, making monitoring pension risk transfer triggers more difficult.

Only 11% of schemes have access to real-time funding results, PwC said, which meant buying opportunities were often missed.

A summary of the PwC report can be found here.

(November 27, 2013) — PGGM, ATP, insurer CNP Assurance, PensionDanmark, and the Railways Pension Trustee Group are among the investors with the greatest allocation to infrastructure assets in Europe today.

The findings, presented in Preqin’s latest special report on European infrastructure, showed Dutch pension giant PGGM had the largest allocation to infrastructure assets at €4 billion.

It plans to target global infrastructure assets in the next few months, along with 47% of European infrastructure investors, according to Preqin.

But the majority of European infrastructure investors were targeting European and North American assets.

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Preqin’s survey found 66% of them are targeting European investments in the next 12 months, compared with 24% seeking similar investments in North America. Just 6% are targeting infrastructure investments in Asia.

ATP already has €1.9 billion invested in infrastructure assets, and is targeting both North America and Europe next year. The same was true for PensionDanmark, which has €1.1 billion in infrastructure assets.

The German government agency DEG and German asset manager KGAL—both prolific investors in infrastructure assets with almost €3 billion in investments between them—were only targeting European assets.

The majority of infrastructure deals (44%) completed in between October 2012 and October 2013 involved social infrastructure, such as schools and healthcare facilities.

This was followed by energy (30% of infrastructure deals), transport (14%), utilities and telecoms (5% each), and waste management (1%).

One of the key reasons for the increase in annual European infrastructure deal ﬂow has been the growth of the European unlisted infrastructure fund market, Preqin said.

Europe-focused unlisted infrastructure funds holding final closes have raised €9 billion to date in 2013, the same amount that was raised by all the Europe-focused funds that closed between 2000 and 2006.

“With more investors seeking to gain exposure to the stable long-term yields often available from established European infrastructure assets, a larger number of fund managers are bringing Europe-focused funds to market and putting capital to work in European assets,” said the report.

The full report can be found here.