Denmark Fund Restructures, Merging Private Debt and Alts Units

Denmark’s pension system is combining its private debt and alternatives arms, as the head of the debt division also assumes leadership of the alts function.

The merger between the two departments is the result of the departure of the alts chief at Denmark’s $35.7 billion pension fund.

Kim Nielsen, PensionDanmark’s head of private debt, will replace Claus Lyngdal as the new head of alternatives.

“With Claus Lyngdal’s decision to move on, we have decided to merge our two teams— Private Debt and Alternative Investments—into one,” Claus Stampe, the fund’s chief investment officer, told CIO.

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Lyngdal is leaving the retirement plan for a similar job at Danske Bank Asset Management, the organization confirmed.

Nielsen’s new department includes infrastructure and direct lending. The news coincides with the fund’s recent decision to allocate more to infrastructure and real estate investments. It expects to reap more “moderate” future returns.

Stampe said PensionDanmark expects to “harvest synergies” in areas such as asset management and compliance with the new alternatives unit. “On top of that, it will enable us to have a more flexible approach to where we invest in the capital structure, when we enter into new projects,” he said.

The fund allocated 26.4% to alternatives under the old unit as of December 31. The rest was 48.7% to equities and credit, and 24.7% to investment-grade bonds.

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Tags: Alternatives, Claus Stampe, Kim Nielsen, Pension, PensionDanmark

The SEC has settled charges against 79 investment advisers who will return more than $125 million to clients as part of the regulator’s Share Class Selection Disclosure Initiative.

The initiative, which the SEC’s Division of Enforcement announced in February 2018, encourages investment advisers to self-report violations of the Investment Advisers Act, such as undisclosed conflicts of interest. As an incentive to get advisors to self report, the Division of Enforcement agreed to recommend that the SEC accept favorable settlement terms for them.

Among the firms charged are Deutsche Bank Securities, BB&T Securities, Oppenheimer & Co., Raymond James Financial Services Advisors, RBC Capital Markets, Santander Securities, TIAA-CREF Individual & Institutional Services,

Transamerica Financial Advisors, Wells Fargo Clearing Services, and Wells Fargo Advisors Financial Network.

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According to the SEC’s complaints, the 79 investment advisers failed to adequately disclose conflicts of interest related to the sale of higher-cost mutual fund share classes when a lower-cost share class was available.

“The federal securities laws impose a fiduciary duty on investment advisers, which means they must act in their clients’ best interest,” Stephanie Avakian, co-director of the SEC’s Division of Enforcement, said in a release. “An adviser’s failure to disclose these types of financial conflicts of interest harms retail investors by unfairly exposing them to fees that chip away at the value of their investments.”

The SEC said that the investment advisers placed their clients in mutual fund share classes that charged recurring 12b-1 fees deducted from the fund’s assets, without disclosing that lower-cost share classes of the same fund were available.

According to the SEC, the 12b-1 fees were routinely paid to the investment advisers in their capacity as brokers, to their broker-dealer affiliates, or to their personnel who were also registered representatives. The regulator said that this created a conflict of interest as the advisers stood to benefit from clients paying higher fees.

Without admitting or denying the findings, each of the settling investment advisers consented to cease-and-desist orders finding violations of Section 206(2) and, except with respect to state-registered-only advisers, Section 207.

The firms also agreed to a censure and to disgorge the improperly disclosed fees and distribute the money with prejudgment interest to affected advisory clients. Under the agreement, each adviser will review and correct all relevant disclosure documents concerning mutual fund share class selection and 12b-1 fees, and evaluate whether existing clients should be moved to an available lower-cost share class and move clients. The SEC agreed not to impose penalties against the investment advisers in light of the terms of the initiative.

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Tags: Advisers, BB&T Securities, Deutsche Bank, Mutual Funds, Oppenheimer & Co., SEC