Norway, Denmark Swoop for More UK Real Assets

(December 3, 2013) – Norway’s sovereign wealth fund (SWF) has taken a further chunk of London’s premier shopping area, while PensionDanmark has announced the purchase of wind farms in the UK.

Norges Bank Investment Management, which oversees the assets of the world’s largest SWF, today said it had bought a 25% stake in a building named Quadrant 3 from the Crown Estate, the organisation that looks after property owned by the UK sovereign.

The deal marks a further acquisition in the London’s Regent Street area for the SWF, which made its first purchase in 2011, and more generally a deeper move into prime commercial real estate. The fund has a stake in Sheffield shopping centre Meadowhall and took a substantial holding in central Paris earlier this year.

It has earmarked 5% of its assets, which were revealed yesterday to have risen to $818 billion, to the asset class. This means some $41 billion is to be put to work. Today’s announcement accounts for just $97 million.

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Elsewhere in the region, PensionDanmark announced another infrastructure deal in the energy sector. It has paid £153 million for a 49% stake in six wind farms based in Scotland and Wales.

“Our investments in different types of infrastructure ensure our members an attractive and inflation linked return for many years,” said Torben Möger Pedersen, CEO at PensionDanmark.

Last month, the fund agreed an historic deal with an Abu Dhabi-based energy company to acquire 40% of a Dutch gas pipeline system for $240 million and in August, it invested £128 million in a new biomass power plant in the UK.

This followed Danish national fund ATP and PFA Pension, Denmark’s largest commercial pensions company, announcing they had bought new shares worth DKK2.2 billion ($400 million) and DKK800 million ($144 million) respectively in local energy giant DONG in October.

These funds are some of the largest in European infrastructure, according to data from Preqin.

An AllianceBernstein survey showed DC participants in the UK felt only slightly accountable for their pension investments and were vague on their retirement dates.

(December 2, 2013) — Defined contribution (DC) plans’ menus may be moot points, as a survey has shown participants rarely use them.

AllianceBernstein’s poll revealed that almost half of 500 UK respondents have never made a change in their DC investments and 22% said they do not believe it is their responsibility.

“These findings provide a clear reminder that the majority of savers are not engaged when it comes to saving for retirement,” said David Hutchins, AllianceBertstein pension strategies head.

Furthermore, 41% of respondents said they believe monitoring their investments once every six months was adequate. More than half said they pay little attention to notices regarding their DC plans from their providers.

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Such lack of responsibility extended to participants’ prospective retirement dates.

The survey found 73% of respondents had no or only a vague idea on when they will retire. More than half of participants over the age of 55 were unsure of their retirement dates as well.

“As peoples’ retirement plans change, through early retirement or delaying full retirement beyond state retirement age, employers and trustees must ensure their chosen investment strategy is flexible enough to adapt to their changing needs,” Tim Banks, pension strategies managing director at AllianceBernstein, said.

Though the majority of DC funds are organized around a fixed retirement date chosen by current employees, the survey suggested the approach might not be suitable for some participants.

“In order to meet today’s working environment, default investment strategies need to offer flexibility around members’ retirement dates, and provide for a smoother, more gradual de-risking process as they grow older,” Banks said.

In a white paper, Russell Investments echoed Banks and stated that fiduciaries must be more diligent and take on more responsibility in managing DC plans due to many participants’ inexperience in investing: “Most are really looking for their plan sponsor fiduciaries to provide prudent, appropriate investment options that give them the best chance of meeting their retirement income needs.”

The asset management firm suggested plan sponsors divest from mutual funds and move towards separate accounts and commingled funds to better ensure members’ futures.