Danish Pension Fund ATP Opens Up to Investing in Europe

Denmark’s ATP fund has revealed it is open to investing in Europe’s rescue vehicle, which will be created with the goal of saving the region’s most indebted members.

(October 30, 2011) — Denmark’s biggest pension fund, ATP, has revealed that it is open to investing in Europe’s rescue vehicle.

“We’ll look into it, whenever the details arrive, with substantial vigilance,” Lars Rohde, chief executive officer of the $140 billion fund told Bloomberg.

This week, Euro area heads agreed to inflate the European Financial Stability Facility (EFSF) to $1.4 trillion. German Chancellor Angela Merkel told parliamentary leaders that the European Union’s rescue fund would be leveraged by providing first loss guarantees on peripheral sovereign bonds and through contributions made by the International Monetary Fund.

Rhode added: “A major issue is whether there’s enough money in the EFSF…Just how much leverage and how it’ll be carried will be essential questions to sort out before committing to such a structure.”

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Earlier this year, ATP revealed that it would avoid government bonds issued by the European Union’s most indebted nations. The fund noted that it had completely avoided government debt issued by Greece and Ireland, with European government bond holdings only including Danish, German and, to a lesser degree, French bonds.

The renewed commitment to investing in Europe by ATP follows statements made by Dag Dyrdal, Chief Strategic Relations Officer at Norges Bank Investment Management (NBIM), who told aiCIO in March that the fund has played a major role in the EFSF, and will remain positive toward the initiative to rescue nations from default.

Industry officials, such as the philanthropist billionaire and hedge fund legend George Soros, have expressed heightened support for a European bailout fund to guard the area from its debt crisis. “We got much less than we asked for — about 3% of the total amount of EFSF’s issue,” Dyrdal said in March, noting that the fund views eurozone bonds as having less risk than single-sovereign debt. “We remain big players in fixed-income investment in Europe, and are long-term investors.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Mayor Michael Bloomberg and New York City Comptroller John Liu have announced a sweeping overhaul of the city’s five main public employee pension systems.

(October 30, 2011) — New York City Mayor Michael Bloomberg has revealed aims to merge the investment management of the city’s five pension funds — representing the first major reform of pension investment structure in the city in roughly 70 years.

“The current structure — with five separate boards and five separate pension investment structures — was put in place in 1941. This is an historic, game-changing move for the city, since the overhaul would allow us to be more nimble in today’s markets,” Mike Loughran, Senior Press Officer at the Office of NYC Comptroller John C. Liu, told aiCIO, noting that the move is based on efforts to lower costs, improve decision-making, and enhance returns.

The agreement was announced by Bloomberg, City Comptroller John Liu, and labor leaders at a press conference at City Hall. The proposal delegates investment authority for all five pension funds to one newly created body authorized to hire an independent professional manager. According to a release by the Office of the Mayor, the plan — which needs the approval of the state Legislature in Albany — would form an independent investment board along with a chief investment officer position.

As stated by the release: “The proposal is intended to insulate management of pension assets from any political office, further professionalize it and make it more consistent with industry best practices. The proposal aims to increase investment returns, lower the City’s pension costs, protect and strengthen pensions for current and future retirees, enhance accountability and guard against the possibility of fraud and corruption. The City’s five pension funds currently have 58 trustees, each with a different weighted vote, who decide investment policy. No two systems are governed, managed or operated in the same manner, resulting in complexity, inconsistency and inefficiency.”

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Comptroller Liu stated: “The City’s pension system dates back more than one-hundred and fifty years…This new paradigm will enable us to achieve better results in today’s more complex financial markets. Depoliticizing, professionalizing, and streamlining the management of our pension funds will enhance investment returns and reduce pension costs. Our labor leaders and trustees have delivered a huge win for taxpayers and City workers alike with this game-changer.”

As outlined in a statement, the major provisions of the investment reform proposal include the following:

1) The five New York City Pension Funds would delegate investment authority to a newly created pension investment board composed of City and labor representatives. The board would set strategic objectives and policy for the funds.

2) The Bureau of Asset Management would be moved out of the Comptroller’s Office and be re-established as an independent investment entity that will determine consultant and asset manager pools and manage certain asset classes in-house. The proposal calls for the investment entity to be staffed by experienced industry professionals and for compensation packages to attract those investment professionals.

3) A Chief Investment Officer will lead the new investment management entity. The Chief Investment Officer will report to the new pension investment board – not to any individual elected official – and will be appointed to a fixed term that will not coincide with citywide election cycles.

4) The new pension investment board and new investment staff will adopt best-in-class ethics, governance, training, and code of conduct policies and procedures to protect against fraud, waste and abuse.

aiCIO investigated New York City’s underfunded pension system in its Spring 2011 issue, revealing the tension between the Mayor and Comptroller.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742