Letters From... – Page 8
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Letter from Brussels: Pensions in their sights
EU big shots working on how to release capital flows from funds into SMEs under the new Capital Market Union (CMU) programme should look at an existing scheme with similar aims.
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Letter from the US: A model for future cuts?
The pension industry is concerned with the consequences of a bipartisan amendment to the $1.1trn (€924 bn) ominbus spending bill that Congress approved in December. This cuts benefits for multi-employer plan members and experts are now debating whether it is a model for further cuts across the industry.
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Letter from the US: Data managers
Technological tools, data management, attention to governance and transparency are the most important issues for pension fund CIOs right now.
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Letter from the US: End to pensions taboo
Pension reform is no longer a taboo subject for voters: this is one of the outcomes of the 4 November mid-term elections.
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Letter from Brussels: Capital market union
The capital market union (CMU) is a new emphasis in Brussels and Jonathan Hill, the new Commissioner for financial services, mentioned the subject repeatedly at his initial vetting by MEPs.
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Letter from the US: Pensions and start-ups
Can pension funds play a greater role in stimulating start-ups and economic growth? Some US politicians think so and are trying to deploy public retirement assets for this goal. But critics claim that results have been disappointing so far, mostly because pension funds invest through private equity funds that demand very high fees. So a new idea is gaining support – pension funds investing directly in private companies, cutting out intermediaries.
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Analysis
Woody at work
Woody is the villain of the new book The US Pension Crisis – What We Need to Do Now to Save America’s Pensions, by Ronald Ryan. According to Ryan, Woody is the “pension pencil” or “the weapon of mass destruction in financial America”, used since the 1990s for accounting gimmicks that conceal the real financial situation of pension funds.
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A stinging rebuke
The private pension product sector is “persistently the worst-performing retail services market of all throughout the European Union”, according to the European Commission, as cited in a new report.
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Rethink on alternatives
After five strong years in the equity markets, some US pension funds are disappointed by the performance of their alternative assets and moving out, while others are keeping them but focusing on de-risking.
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What's outstanding
The EU’s institutional world is starting a new term. Now that the parliamentary elections are over, the commissioners have only until the end of October before their replacements take up office. With the increasing presence of euro-sceptic MEPs, it could be a stressful five years ahead.
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Analysis
On track with 401(k)
Individual retirement savings accounts (IRAs) have been helping US workers navigate the ups and downs of Wall Street since the 2008 financial crisis. IRAs and employer-sponsored defined contribution (DC) plans grew to $6.5trn and $5.9trn (€4.8trn and €4.3trn), respectively, at year-end 2013, up from $5.6trn and $5trn the previous year, according to data in the 2014 Investment Company Fact Book.
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Lighting dark corners
The European Commission’s planned revisions to rules on shareholder rights aim to encourage a culture of long-term equity investment across the EU.
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TIAA-CREF expands
Six years after taking the helm as president and CEO of the Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA-CREF), Roger Ferguson announced the acquisition of Nuveen Investments in April for $6.25bn (€4.5bn), including debt.
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The countdown begins
The countdown has started. By the end of May, 751 members of the European Parliament will have been selected by as many of the 400m electors who care enough to vote.
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Glide paths and targets
Target-date funds (TDFs) are so popular in the US that even the nation’s largest defined contribution (DC) pension system – the $400bn (€290bn) Thrift Savings Plan, the 401(k)-style retirement plan for federal staff – is thinking of making its TDF the default option for new employees. But with an increasingly diverse array of TDFs, concern is growing among plan sponsors and advisers about the level of fiduciary responsibility involved.
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Towards a 29th regime
A single-market regime for third-pillar pensions has moved closer with a paper entitled Towards an EU-Single Market for Personal Pensions from the European Insurance and Occupational Pensions Authority (EIOPA).
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Retirement saving boost
Who will manage the new My Retirement Account (MyRA) retirement savings vehicle? This is a big question for the US pension fund industry now that President Barack Obama has created the new programme.
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Brussels to develop rules for social funds
Brussels looks set to flesh out the existing EU regulation for European Social Entrepreneurship Funds (EuSEFs), which lays down broad principles as to how funds should be governed.
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Intriguing opportunities
De-risking strategies are likely to become more popular with US corporate pension funds now they have reached their healthiest state since the crisis. This trend has been ongoing for the last couple of years but may substantially accelerate in 2014, says consultancy Towers Watson.
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Long-term critics
The European Commission’s report on responses to its consultation paper on long-term investing looks to be at least six months late. But don’t imagine the debate has gone away. The issue is likely to re-ignite in Brussels in the coming months after the Commission produces its assessment this quarter.
