LONDON - Gordon Brown, Britain's chancellor of the exchequer, unveiled in his annual budget this month the scrapping of the controversial Minimum Funding Requirement and endorsed the findings of the wide-ranging report on institutional investing.
In a joint statement by the Treasury and the Department of Social Security, the government proposed the MFR be replaced by a number of measures, including the use of longer term, plan-specific funding requirements; a "strong regime of transparency and disclosure"; and a recovery plan to bring underfunded schemes to full funding.
A large section of Britain's pension industry has clamored for the abolition of the MFR, which some say has distorted investment returns for pension funds. But Towers Perrin principal Mark Duke was concerned about what would replace the requirement, wondering whether there would be enough security for plan members and if the government was more interested in encouraging investment in specific asset classes than protecting the rights of plan members.
CAPS median return
was -1.4% for 2000
LONDON - British pension plans produced a median return of -1.4% for the year ended Dec. 31, according to figures from Combined Actuarial Performance Services. This is the fifth time in the last 30 years that the overall annual median return for British pension plans has been negative. U.K. active managers saw a reversal of fortune last year, however, with a median return of -3.5%, compared with a -5.9% return for the FTSE All Share index. By the end of 2000, 57% of the 1,710 pension plans surveyed were using scheme-specific benchmarks, compared with 45% at the end of 1999.
INVESCO Global boosting
Asian Pacific business
MELBOURNE, Australia - One of AMVESCAP PLC's major fund management arms is aggressively building up its Asian Pacific business after a recent A$110 million (US$57 million) takeover of County Investment Management Ltd., Melbourne. AMVESCAP's acquisition of County, via INVESCO Global, the division responsible for all but the North American business, ranks it among the 20 largest fund managers in Australia with A$14 billion under management, most of which is pension fund money.
Michael Benson, the London-based head of INVESCO Global, recently said the group might need six to nine months to bed-down its acquisition of Perpetual PLC in the U.K. and Trimark Financial Corp. of Canada. (That came ahead of the Feb. 28 announcement of AMVESCAP's $200 million purchase of National Asset Management Co, Louisville, Ky.) But he also indicated the group was interested in expanding in Southeast Asia because of the likely growth of pension fund business. (Regional Director Andrew Lo directs INVESCO's Asian Pacific operations from Hong Kong. The head of Australian operations, Michael Parsons, reports to Mr. Lo.)
Cyril Twomey, a principal of Towers Perrin in Hong Kong, said although many companies are lining up in the Asian market, his perception is "the INVESCO people really understand the business."
INVESCO Asset Management Australia Ltd., Sydney, also plans to grow aggressively in Australia using the County Investment asset base. The County name will be phased out in Australia.
Mr. Parsons said the expansion would be directed at both the institutional and retail levels, aiming to win wholesale mandates from superannuation funds.
Mr. Benson indicated the group is unlikely to attempt to buy distribution capacity, relying instead on its reputation as a global, independent manager to get its "products on the shelves" of the big investment distributors.
SEI, VermogensGroep
set up joint venture
AMSTERDAM - SEI Investments, Oaks, Pa., and Dutch manager-of-managers VermogensGroep, Amsterdam, created a securities and funds processing joint venture. SEI VermogensServices BV, based in Amsterdam, will provide fund processing, transaction and administration services to VermogensGroep clients, said Maarten de Groot, executive director. VermogensGroep will remain responsible for portfolio construction and manager monitoring.
The new company plans to market its services to financial institutions in the Netherlands and the rest of Europe, he added.
Kim Kirk, SEI managing director, could not be reached for comment.
Appeal mulled
in British Air ruling
LONDON - Lawyers acting for the beneficiaries of the British Airways Pension Scheme are considering whether to appeal a recent ruling in the English High Court over how the plan's L1.2 billion ($1.7 billion) surplus should be used.
They have until March 23 to appeal the ruling that effectively confirmed the status quo in England, said a lawyer close to the case but who asked not to be named.
The court ruled that BA would have to use the surplus to cover a planned 30-year contribution holiday for the œ6 billion plan and that trustees could decide, with agreement from the plan sponsor, what should be done with any money left over. This could involve setting up a reserve fund or giving the employees a contribution holiday.
Linda Jackson, legal manager for the scheme, would not comment on the ruling as it was subject to appeal.
Lawyers at Nabarro Nathanson, legal representatives for the beneficiaries, did not return calls by press time.
Royal Bank of Canada
considers sale of RT
TORONTO - Royal Bank of Canada is considering selling RT Capital Management, its institutional asset management operation, which was hit by a stock manipulation scandal last year, according to Graham Harris, bank spokesman. Putnam Lovell Securities is advising.
Separately, Royal Trust Global Securities Services, another unit of Royal Bank, will give its global custody clients access to custody services through a new web portal, Portfolio Information.
The portal will provide reporting capabilities and allow clients to import custody data into report writer, spreadsheet or word processing software.
Royal GSS has about C$1 trillion (US$650 billion) under custody.
Non-U.S. DC assets growing
at 17% a year in 14 countries
STAMFORD, Conn. - Defined contribution pension assets grew an average 17% a year between 1995 and 1999 across 14 major economies outside the United States, according to a survey published by InterSec Research Corp. The survey - which looked at plans in Argentina, Australia, Brazil, Canada, France, Germany, Hong King, Italy, Japan, Mexico, South Africa, Spain, Switzerland and the United Kingdom - estimated the defined contribution market in those countries to be worth a combined $543 billion.