Bouwinvest – Property investor Bouwinvest REIM has appointed Kees Beuving and Roel Wijmenga as members of its five-strong supervisory board. Beuving has been executive chairman at Friesland Bank, as well as Fortis Bank Netherlands. Wijmenga has been in several financial positions on the board of insurers AMEV, Interpolis and Eureko/Achmea. His most recent job was CFO at ASR Insurances. Mirae Asset Global Investments – April Yeung has been appointed by Korean emerging markets firm Mirae Asset Global Investments as client portfolio manager covering the UK, European and Middle Eastern markets. She will be based in the firm’s London office and be in charge of product management client communication. Yeung joined Mirae Asset Global Investments in 2010 in Hong Kong as an assistant manager in the product development and marketing team, and became head of the product development and marketing team in 2013. Invesco – Invesco’s ETF business Invesco PowerShares has hired Gilles Boitel as business development director in Switzerland. The appointment is part of the business’s ongoing expansion in Europe, it said. Boitel comes to Invesco from Source, where he was in charge of institutional clients in Switzerland and Liechtenstein. Before that, he worked at Accenture. The Pensions Trust – Mike Ramsey has been chosen as chief executive of the Pensions Trust in the UK, having been acting as interim chief executive at the workplace pension fund since April. His most recent role was chief executive of Barbon Insurance Group. The trust said Ramsey’s appointment comes during a period of restructuring, with the business focusing on strategic development. AXA Investment Managers – Bill Healey has been hired as global head of smart beta and UK head of buy and maintain at AXA Investment Managers, while Philip Roantree has been appointed senior portfolio manager within the asset manager’s fixed income team. Both men will be based in London, with Healey reporting to AXA IM’s CIO and head of European and Asia fixed income Chris Iggo, and Roantree reporting in turn to Healey. Healey was previously working for JP Morgan Asset Management as head of European high-yield debt for three years. Roantree comes to AXA IM from Morningstar, where he was a fund analyst covering fixed income and absolute return funds. Kames Capital – Alexander Pelteshki is joining Kames Capital as investment manager in the firm’s financials teams, reporting to Gregory Turnbull-Schwartz. Pelteshki previously worked at ING Bank in the Netherlands as senior credit analyst. Before that, he worked in New York for UBS Wealth Management. GAM Holding – David Solo is stepping down as group chief executive at GAM Holding at his own request, and being replaced by Alexander Friedman with effect from 8 September. Solo joined the group in 2004. Before joining GAM Holding, Friedman was global CIO at UBS Wealth Management and Wealth Management Americas. Prior to that, he was CFO at the Bill & Melinda Gates Foundation. Mirabaud Asset Management – Majid Hassan has been appointed head of business development activities for the Middle East at Mirabaud Asset Management. He will be based in Dubai. Hassan has worked for the HSBC Group in Dubai, as well as AIG Investments and Standard Chartered. Threadneedle Investments – Maya Bhandari joined Threadneedle Investments as investment strategist in the firm’s multi-asset allocation team on 18 August. She is based in London, reporting to head of asset allocation Toby Nangle. Threadneedle said her appointment followed the recent hiring of Craig Nowrie as client portfolio manager to the team. Bhandari was previously a director of global macro strategy and asset allocation at Citigroup. Lombard Risk Management – Nigel Gurney has been appointed to Lombard Risk Management’s board as CFO. He previously worked at Lepe Partners as CFO. Avida International – Simone Lavelle is joining Avida International as a partner in its UK office. She has previously been a director at Law Debenture and before that was COO and CFO at Cardano UK. Tikehau Group – Nathalie Bleunven and Luca Bucelli have been appointed by Tikehau Group to join the firm’s private debt team. Bleunven was previously managing director and deputy head of mid-caps, LBO and corporate acquisition team at Société Générale. Bucelli was most recently at AlixPartners, where he was involved in financial and operational restructurings with French and Italian clients. Pictet Asset Management – Percival Stanion, Andrew Cole and Shaniel Ramjee are joining Pictet Asset Management in next few months, coming to the firm from Baring Asset Management, where they have worked for 13, 28 and seven years, respectively. Pictet Asset Management said the hires were part of a move to improve its multi-asset product offering. Stanion will become vice-chairman at Pictet Asset Management, and his role will be head of multi asset strategies, excluding Switzerland. He will report to head of asset allocation and quantitative investments Olivier Ginguené. Heidrick & Struggles – John Hindley has been hired by consultants Heidrick & Struggles as partner within the financial services practice and be based in the firm’s London office. He previously worked for Credit Suisse Prime Services, as head of the EMEA Prime Consulting team. Goldbridge Capital Partners – Neal Kutner has been appointed head of business development at Goldbridge Capital Partners. He comes to the firm from BNY Mellon Asset Management, where he was managing director, based in Switzerland. Petercam, Capital Group, Aviva Investors, Bouwinvest, Mirae Asset, Invesco, The Pensions Trust, AXA IM, Kames Capital, GAM Holding, Mirabaud Asset Management, Threadneedle Investments, Lombard Risk Management, Avida International, Tikehau Group, Pictet Asset Management, Heidrick & Struggles, Goldbridge Capital PartnersPetercam – The €14bn Belgian asset manager Petercam Institutional Asset Management has extended its Dutch team with the appointment of Lennaert Huijing as senior sales and account manager. Together with Marco van Diesen, Huijing will focus on existing and new institutional clients in the Netherlands. Lennaert comes from BlackRock, where he has been working as an account manager for Dutch institutional clients. He will be operating from Petercam’s Amsterdam office. Capital Group – The active investment manager has appointed Marnix van den Berge as business development manager for the Benelux region. He will be based in Capital Group’s Luxembourg office, focusing on financial institutions. Van den Berge joins from CBP Quilvest, where he was head of investor solutions. Prior to this, he held positions at Deutsche Asset and Wealth, where he was responsible for Northern European distribution, and Credit Suisse Asset Management, where he was head of Benelux, France/Monaco and Nordic distribution. Aviva Investors – David Lis has been hired by Aviva Investors as CIO of equities and multi-assets, moving from his current role as head of equities at the company. Lis will join Aviva Investors’ executive committee with immediate effect and report to the company’s chief executive Euan Munro.
The £850m (€1.1bn) Merchant Navy Ratings Pension Fund (MNRPF) has hired Towers Watson as its fiduciary manager, further growing the consultancy’s footprint in delegated management.Towers Watson said in a statement it would offer strategic advice and execute the strategy set out by the MNRPF’s trustees.It said it had been appointed fiduciary manager after the scheme conducted an independent review of how to amend its governance.Chris Wagstaff, independent chairman of the MNRPF’s investment committee, said: “After a comprehensive process to identify our investment beliefs and the best governance structure for the fund, we are pleased to have Towers Watson as our fiduciary manager. “As a result of this approach, we believe we have the governance structures and working arrangements in place to build an investment portfolio consistent with our investment beliefs to deliver optimal fund performance for our members.”The fund also selected Barnett Waddingham as its independent intermediary, assessing the performance of Towers Watson as fiduciary manager.The approach is similar to one pursued by the Merchant Navy Officers Pension Fund (MNOPF), which in 2010 selected Towers Watson as its delegated CIO.The appointment eventually led to the hire of Hymans Robertson to introduce a “check and balance element” into the arrangement.Since hiring Towers Watson, the MNOPF has steadily focused on de-risking, recently completing a buyout of the £1.3bn old section and transferring £1.5bn of longevity risk to a re-insurer.
PFZW, the pension fund for the Dutch healthcare industry, and PWRI, the pension fund for disabled workers, have suspended talks on a possible merger. In a joint statement on PWRI’s website, the schemes cite “unstable financial markets and falling funding ratios” as the chief reasons behind their decision.To continue to aim for a value transfer on 1 January 2017, they said, would not be in their participants’ interest.They said they would resume merger talks once their financial position and the overall economic situation had improved. Past updates on the progress of the merger negotiations show that both pension funds’ coverage ratios began to diverge last summer.At January-end, the €165bn PFZW reported an official funding of 97%, while PWRI’s coverage stood at 105.4%.A difference in the scale of the schemes’ respective interest hedge might partly explain the divergence.In 2014, PWRI covered 50% of the interest risk on its liabilities, while PFZW’s hedge was no more than 28%.PWRI has been seeking a merger partner since the start of 2015, when it closed to new entrants due to legal changes that prevented new workers in shelters from joining the pension fund.Since then, new staff has been employed by local councils or regular companies.As of the end of 2014, PWRI had almost 219,000 participants, with 100,000 active members.
ESMA argues that the prohibition on recycling is in line with paragraph 122 of IAS 19.Further, in relation to the UK Brexit referendum, ESMA has signalled businesses must disclose the principle risks they face as a result of the vote, as well as detail the steps they have taken to mitigate that risk.Of particular interest to DB sponsors in the wake of the Brexit vote, ESMA’s statement singles out fair-value disclosures under IFRS 13, as well as disclosures about the fair value of scheme assets under IAS 19, as areas for attention.The ESMA statement also urges preparers to start work on implementing a trio of standards affecting financial instruments (IFRS 9), revenue recognition (IFRS 15) and leases (IFRS 16) “as soon as possible”.In particular, ESMA said issuers must focus on “the expected impacts in accordance with paragraph 30 of IAS 8 as soon as they are known or reasonably estimable”.The supervisor’s warning comes as the Basel Committee on Banking Supervision seeks views a deferral of the International Accounting Standards Board’s new impairment model for regulatory purposes.The committee cites “the limited time until the effective date of IFRS 9, and to allow thorough consideration of the longer-term options for the regulatory treatment of provisions”.Its proposals are set out in a recently issued consultation paper entitled ‘Regulatory treatment of accounting provisions – interim approach and transitional arrangements’.The deferral proposals affect the regulatory treatment of credit-loss provisions under both the standardised and the internal-ratings based approaches under the Basel regime.In addition, the Basel Committee is also asking for views on whether a “transitional arrangement for the impact of ECL accounting on regulatory capital” is called for.The consultation document explains that the committee wants to assess if “any transitional arrangement is warranted to allow banks time to adjust to the impact that the new ECL accounting standards will have on capital for regulatory purposes”.This latest development comes after IPE revealed in March that prudential regulators were in the dark over the regulatory impact of the IASB’s new financial instruments accounting rules, International Financial Reporting Standard 9, Financial Instruments.In a letter to the European Parliament’s Economic Affairs Committee, European Central Bank chairman Mario Draghi said the European System Risk Board had “not yet assessed the impact of the new accounting standards on the financial sector as a whole.”The IASB launched its IFRS 9 project in 2009 to replace its existing financial-instruments accounting standard.The European Union is expected to finalise its endorsement of the standard shortly for use by listed entities for accounting periods beginning on or after 1 January 2018.Lastly, a study from data analysis specialists Jaywing Risk has found that, although lenders surveyed are optimistic about the benefits IFRS 9 will deliver, more than half fear that a lack of analytical expertise will hamper their ability to build compliant models.The IFRS 9 Confident Report took soundings from 100 senior decision makers with responsibility for IFRS 9 within their organisation.Among the sectors examined were UK banks and building societies, as well as consumer, auto and SME finance companies.In terms of readiness, the Jaywing study reported that almost half of banks surveyed were in the implementation and testing phase, while building societies were lagging behind. The European Securities and Markets Authority has published a statement detailing its 2016 European enforcement priorities.The statement identifies financial reporting topics listed companies and their auditors should pay close attention to when preparing and auditing IFRS financial statements for the year ending 31 December.The 2016 priorities capture the reporting of financial performance, the distinction between financial liabilities and equity instruments and disclosures around the impact of new IFRSs.In relation to employee benefits accounting under International Accounting Standard 19, ESMA has taken the step of reminding preparers that remeasurements of the defined benefit (DB) liability/ asset should not be recycled from Other Comprehensive Income.
The German government’s draft law for a reform of the second-pillar pension system, published last week, has garnered much praise but also drawn criticism.On Friday, the social ministry BMAS published the official final draft of the Betriebsrentenstärkungsgesetz on its website.In a first reaction to the reform proposals, the German pension association aba welcomed the “direction” of the draft, which outlines how industry-wide pension plans, without guarantees, are to be introduced.As reported by IPE last week, aba chairman Heribert Karch supports the idea of “more flexible guarantees” and defined ambition plans to increase return potential. The association, however, sees “urgent need for amendments” in the government’s proposal on tax incentives.For years, the aba and other stakeholders have lobbied to increase the tax-free threshold for employer contributions to second-pillar plans.Under the government’s proposal, the percentage of tax-free contributions would be increased from 4% to 7% of the annual payroll (i.e. the part used to calculate contributions to the first pillar).The government, however, wants to apply the 7% to all contributions, not just those over €1,800, as the current legal provision states.According to Marco Arteaga, a partner at law firm DLA Piper, this is practically no improvement at all.“When the fixed rate of €1,800 is scrapped, we are back at the beginning because 4% plus €1,800 is the same as allowing 6.5% tax-free contributions,” he told IPE previously.For aba’s Karch, the 7% proposal “falls far behind requirements”. Another problem with this part of the reform was pointed out by legal publishing group Wolters Kluwer on its website: The increase to 7% applies to tax exemptions but not to exemptions from social contributions.Companies will therefore have to continue to use different pension vehicles for different types of pension promises, the publisher notes.Added complexity was also highlighted by Reiner Schwinger, managing director at Willis Towers Watson Germany.In a statement, he pointed out that companies that already have well-established pension plans will have to set up new ones adhering to industry-wide standards should they wish to switch to defined ambition.“In total, social partners’ influence in occupational pensions – an area that, to date, has been widely dealt with at the company level – will increase,” he said.Overall, however, aba – as well as the consultancies Willis Towers Watson and Mercer – said they saw a lot of positive approaches in the reform draft.They all welcomed lower guarantees, the possibility of opting-out models and subsidies for low-income workers in particular.Mercer Germany disputed the risk of “a race to the bottom” regarding pension guarantees, primarily because not all companies will change their existing pension plans.Mercer’s occupational pension expert Uwe Buchem said he was sceptical the social partners would make full use of the new law.“It would almost be tantamount to a revolution should the unions agree to make use of all the new possibilities,” he said.Stakeholders in the German pension industry have until 24 November to comment on the government draft.The aba has called its members to a special meeting on that same date to analyse and discuss the reform proposal.Possible amendments will be discussed by the government in early December.
The European custodian bank said the cost of trading could amount to 20% of the total cost of ownership (TCO) for an investment fund.The advantages for pension schemes of making costs transparent had been made clear in the Netherlands: KAS Bank said it found that the average TCO per Dutch pension scheme fell 37% between 2015 and 2016. This was based on a survey of its Dutch clients.“These findings coincide with the introduction of a cost transparency framework, and widespread consolidation of Dutch pension schemes,” KAS Bank said.The Cost Transparency Initiative (CTI) was launched earlier this month by the PLSA – which represents UK pension schemes – the Investment Association, and the LGPS Advisory Board.It will oversee trials of cost disclosure templates with a number of UK pension schemes, starting in the new year. The templates are designed to help asset managers report the many layers of costs and charges incurred during the investment process, including those related to transactions, brokerage, custody, legal services and performance fees. Mel Duffield, pensions strategy executive at the Universities Superannuation Scheme, was appointed the CTI’s first chair. More than 80% of UK pension scheme managers believe more action needs to be taken to educate scheme trustees about transaction cost transparency, according to a new survey.In a poll it carried out among pension professionals at the recent annual conference of the PLSA, the UK pension fund association, KAS Bank said it found that 32% of trustees did not know – or did not factor in – transaction costs when evaluating an asset manager.Citing the increasing focus on cost transparency in the UK – including the Financial Conduct Authority’s formation of an industry working group for disclosure and the subsequent launch of the Cost Transparency Initiative – KAS Bank said: “An industry push is needed to ensure that the various market participants are aligned.“However, only with sufficient education will cost transparency be properly and successfully implemented in the UK,” it said.
Investors’ approach to value creation could be a drag on efforts to achieve global sustainable development goals, according to the chief financial officer (CFO) of global food company Danone.Speaking in Paris at the PRI’s annual responsible investment conference, Danone’s Cécile Cabanis spoke of the need for a new mindset that did not look at value from a “yearly profit and loss [P&L] point of view” but considered externalities.Asked by Eva Halvarsson, CEO of Swedish buffer fund AP2, what her message to investors would be about how they could support companies’ work on the UN Sustainable Development Goals (SDGs), Cabanis said simply: “Join us.”She proceeded to explain how Danone had reached an agreement, with its banks, to tie the interest rate on a €2bn loan to the pace at which it achieved its goals for ‘B Corp’ certification – “for us the most demanding standard in terms of environmental, social and governance performance”. “These 12 banks agreed that if we were going at the right pace in being certified B-Corp it was less risk to the business or more value to the business, beta or alpha, it depends on the way you want to measure it,” she said. “This is tiny, it’s a drop in the ocean, but it shows that it’s moving.”“The reality is that you will know it’s moving not when we talk about it but when investors are ready to put it in their decision of investment,” she added.She appeared to suggest that this had not yet happened.“Today if you look at what they do, they do their job, they have probably incentive that relates to their Excel return model and we can’t blame them,” Cabanis said, “but we need to shift the conversation and we need to make sure we are clear on the risk avoidance and the value creation and that we can measure the externalities with them, so that when it comes to take a decision we are not only looking at what we are used to looking at in the 1980s [such as] P&L, discounted cash flow.”There was a “tension” between the short-term and the long-term agenda, Cabanis said, and Danone took the view that this needed to be managed when making decisions about resource allocation.“It’s difficult, it creates a lot of tension, but it’s necessary, and if we can’t have this conversation with investors I think it will not happen fast enough and we won’t be able all together to create material sustainable change.”At a Deutsche Bank consumer conference earlier this year Cabanis – according to a transcript from the event – spoke about how the company needed, on a daily basis, to keep “the right tension between delivery of the short term and transformation in order to make sure that we can rebuild value in the food system and we can really ensure that we are walking towards the goals for 2030 under the One Planet, One Health vision.” ESG reporting ‘a mess’Cabanis also spoke about what she referred to as reporting – information requests from investors, or for investors.“There are so many indexes, it’s a mess,” she said.“We have teams and teams that are doing the reporting, everyone wants it a different way, everyone measures different things, so that the end of the day there is a lot of data,” the CFO said. “It could be very meaningful if we would all agree on how to really measure impact and externalities, but because everyone wants to keep his reporting its own way I think it’s really a waste of resources and it’s time that we don’t take to act – we take time to report, at the same time we don’t act.”She highlighted a tool being developed by B-Lab – the organisation behind the B Corp certification – and the UN Global Compact, saying SDG assessment was “the level where we all need to go”.“It’s a tool to help everyone to really learn how to measure in a transparency and structured way,” she said. “And I hope this initiative will be followed by more, which is how we organise that and make sure all together we all agree on what are the standards that make sense and how we measure it.”
The IA said its framework would help firms address cultural issues “in a meaningful and holistic manner”, including by:defining culture using a set of values that support the overall business strategy;measuring culture in a qualitative and quantitative way, including factors such as diversity and inclusion, effective leadership and psychological wellbeing;benchmarking existing culture and conduct risk and assessing this at division, department and desk level; andmonitoring cultural direction over time through surveys and reviews.Pauline Hawkes-Bunyan, director of business, risk, culture and resilience at the IA, said: “Culture is the central ingredient that creates a positive environment where people look forward to coming to work, feel valued and do their best work.“Although we know a healthy culture when we see one, it is important that we are able to define, measure and evaluate it over time as creating a healthy culture is not a one-off project, but a central plank to business’ productivity and success.”Manulife opens Ireland office Dublin, IrelandCanadian asset manager Manulife Investment Management has opened an office in Dublin as part of a planned expansion in Europe, as well as a means of mitigating Brexit-related risks.In a statement this week Manulife said it had appointed Angela Billick as chief operating officer and head of the Ireland office. She is currently head of European investment product for Manulife Wealth & Asset Management, a role she will continue to hold.The asset manager – which runs €318.2bn according to IPE’s 2019 Top 400 Asset Managers survey – has also brought in Mary Cahill as investment officer and Fergal McIntyre as financial controller.Cahill was previously head of global investment selection at Davy Asset Management, while McIntyre was most recently financial controller at Anima Asset Management.Manulife said the Dublin office would help provide oversight for the company’s UCITS fund platform as well as help mitigate the risks associated with Brexit. A number of asset managers with operations in the UK have set up new offices in other EU states ahead of the UK’s expected departure from the bloc.Andrew Arnott, head of Manulife Investment Management in the US and Europe, said: “Growing our European presence to meet the potential of the market continues to be a priority, and the establishment of our Dublin office will better serve the needs of our customers at a global scale.”Billick added: “This strategic location will enhance our ability to engage with our partners across multiple geographies. I look forward to collaborating with our dedicated global team to deliver our diverse investment solutions to investors.”EU financial centres’ share of post-Brexit relocations (%)Chart Maker The UK asset manager trade body has launched a self-assessment framework for its members in an effort to improve workplace culture within the investment industry.The Investment Association (IA) – the lobby group for the UK’s £7.7trn (€8.7trn) asset management industry – teamed up with law firm Latham & Watkins to produce the ‘Culture Framework’, involving a “comprehensive tool kit” to help companies monitor factors that influence corporate culture.The report follows the expansion of the Senior Managers and Certification Regime (SMCR), a regulatory drive by UK regulators to address cultural issues within financial services firms that could lead to rule breaches.The Financial Conduct Authority and Prudential Regulatory Authority brought in the SMCR last year for banks and insurers. Other areas – including asset managers – will be subject to the new rulebook from 9 December this year.
The year-on-year impact of a financial market shock on the Dutch economy through the country’s pension funds would be limited, but felt for many years, the Dutch regulator has said on the basis of the latest stress test of European pension funds by supervisor EIOPA.DNB implied the financial market shocks would have a disproportionate impact on the Dutch economy and pension funds because of the relatively large pensions sector in the Netherlands.In the stress test EIOPA assessed the impact of a highly adverse scenario consisting of significant falls in equity markets and rapidly rising spreads.New in the stress test was the elaboration of the cashflow analysis – showing the value of benefits, including indexation and rights cuts, participants would receive annually during the coming 100 years. The analysis had been requested by DNB and the Dutch Pensions Federation. DNB explained that under the scenario, the effect of pension funds refraining from offering inflation compensation and making rights cuts would only become clear gradually.It said that, in the very negative scenario, disposable income could drop by 4% and could lop off 0.5% of GDP.DNB added that the losses incurred during the financial crisis in 2008 had attributed to the slow economic recovery in the Netherlands, as a consequence of the scale of the Dutch pensions sector, which has €1.4trn in assets.EIOPA’s stress test focussed on a sharp decline of securities – including equities and real estate – slightly higher interest rates as well as rapidly increasing risk premia, while assuming that “safe haven investments” kept their status.DNB attributed the hit to Dutch pension assets in such a scenario to schemes’ large portfolio of variable yield investments maintained to fund indexation.It said that funding at the pension funds that participated in the stress test exercise would drop by 23 percentage points on average, which roughly equates to schemes’ required financial buffers.As most pension funds – with a funding of 99% on average – lack these reserves, the stress scenario would immediately lead to large rights cuts, according to the Dutch watchdog.The stress test also showed that assets of Dutch low cost defined contribution vehicles (PPI) would drop almost 30%, mainly as a result of the equity stress.Because of their relatively young participant population, PPIs have a relatively large portfolio of variable yield securities, such as equity.The Dutch pension funds that participated in the stress test were civil service scheme ABP, healthcare pension fund PFZW, the metal schemes PME and PMT, as well as the pension funds for the building industry (BpfBouw) and the retail sector (Detailhandel), and ABN Amro.Together, they represented 60% of total pension assets and participants in defined benefit arrangements in the Netherlands.
Funding ratios of Dutch pension funds have plummeted further in the wake of falling interest rates and declining equity markets caused by investors’ worries about the spread of the coronavirus, also known as COVID-19.Aon saw coverage ratios decline no less than six percentage points to 95% on average in February.Mercer, while using a different calculation method, observed a drop of five percentage points to 96%, while consultancy Sprenkels & Verschuren saw a decrease of four percentage points to 97%.According to Aon, the 30-year euro swap rate – the main criterion for discounting liabilities – had dropped to no more than 13 bps, resulting in a 4% rise of liabilities on average last month. Mercer came up with slightly higher figures. Aon noted that the ultimate forward rate (UFR) – applied to market rates in order to artificially raise the discount rate – had also dropped from 2.1% to 2%.Worldwide developed equity markets fell 7.8% where there was a 50% hedge of the main currencies, Mercer said. Without such a cover, losses were of 7.6%. Emerging markets equity lost 4.4%.Mercer also reported losses on listed property (-4.5%), commodities (-4.2%) and credit (-10bps). Only government bonds gained, rising 0.5%, according to the pensions advisor.Aon said that fixed income portfolios had gained 2% on average, despite the increased credit risk. It concluded that the overall investment portfolios had lost 2% on average in February.The exact impact per pension fund depends on schemes’ investment mix and the degree to which they have hedged the interest risk on their liabilities. In January, the fall in interest rates and declining equity markets already caused a funding shortfall in Dutch pension funds of between 2-3% on average.The €465bn civil service scheme ABP and the €238bn healthcare pension fund PFZW reported funding declines of 3.7% to 94.1% and 3.5% to 95.7%, respectively.Both PMT and PME, the large pension funds for the metal sector, posted a drop of 2.5%. At the end of January, the funding ratio of the metal schemes stood at 96.4% for PMT and 96.2% for PME.BpfBouw, the €67bn pension fund for the building sector, estimated that its coverage ratio had dropped three percentage points to approximately 108% in February.David van As, its director, said the funding drop was merely an indication of the situation, adding that the long-term economic impact of the coronavirus was more important than current market valuations.In November, social affairs’ minister Wouter Koolmees – under pressure from unions – granted pension funds a reprieve from looming rights cuts by temporarily lowering the minimum required funding level in 2020 to 90% from 104.3%, pending the elaboration of the pensions agreement between the government and the social partners.Although Koolmees hasn’t ruled out an extension of the exemption beyond this year, the minimum required coverage of 104.3% could be in place again in 2021 if insufficient progress has been made on the pensions accord.Commenting on the most recent developments, Frank Driessen, chief executive officer at Aon Retirement & Investment, said that, with the current funding levels, millions of pension fund participants are headed for rights cuts at the end of the year again.“This lays a bomb under the pensions agreement and the quietness created by the minister’s postponement of rights cuts.”Driessen said it is increasingly likely that the Dutch cabinet is to scrap the current discount rate for liabilities linked to the interest-free interest rate.