Canadian Pensions Cross ESG Threshold?

Aaron Kirchfeld and Alastair Marsh of Bloomberg News report, Al Gore's Generation, Caisse de dépôt teamed up to acquire fintech FNZ:

Al Gore’s Generation Investment Management LLP and Canadian pension fund Caisse de dépôt et placement du Québec teamed up to acquire control of wealth-management services provider FNZ in one of the year’s largest fintech deals.

The acquisition of a two-thirds stake held by the private equity firms General Atlantic and HIG Capital values FNZ at around $2.2 billion U.S., according to a statement from the companies Tuesday that confirmed an earlier report by Bloomberg News.

The deal is the first investment to be made by a new partnership formed by Canada’s second-largest pension fund and the investment firm co-founded by former U.S. vice-president Gore and former Goldman Sachs Group Inc. partner David Blood. The duo plan to deploy $3 billion initially for investments with an 8-to-15-year duration, taking a longer view than the typical private equity deal.

The FNZ agreement adds to a surge in fintech transactions, which totaled more than $39 billion in the first half amid investments in payment processing, financial data and machine learning, according to a report from advisory firm Hampleton Partners.

FNZ, founded in New Zealand in 2003 by Adrian Durham, provides services to asset managers, banks and insurers including behemoths such as Aviva Plc, Barclays Plc and Vanguard Group Inc. The capital infusion will help FNZ tap a bigger share of the $30 trillion global market, according to Durham.

“The deal will help us grow share in the wealth-management platform market to trillions versus hundreds of billions,” said Durham. “You have to be a scale player.”

Durham and the firm’s 400 employees plan to retain about a third of the company following the transaction. FNZ joined in a 2009 management buyout with HIG Capital, while General Atlantic provided an additional investment in 2012.

HIG, which initially injected less than 10 million pounds in FNZ’s equity, is now selling its stake for about 450 million pounds, according to a person familiar with the matter, who asked not to be identified because the transaction was private.

JPMorgan Chase & Co. advised the sellers.

The Caisse put out a press release, CDPQ and Generation Investment Management make long-term investment in FNZ:

La Caisse de dépôt et placement du Québec (“CDPQ”) and Generation Investment Management LLP (“Generation”) have today announced the acquisition, subject to regulatory approval, of General Atlantic and H.I.G. Capital’s investment in FNZ, in a deal valuing the company at £1.65 billion. The acquisition, which is one of the world’s largest FinTech transactions this year, represents the first investment by CDPQ-Generation, the unique, sustainable equity partnership announced today by CDPQ and Generation.

FNZ is a global FinTech firm, transforming the way financial institutions serve their wealth management customers. It partners with banks, insurers and asset managers to help consumers better achieve their financial goals.

The business has grown rapidly in recent years, as its institutional customers have used FNZ’s platform to improve transparency, choice and drive down long-term costs for consumers of wealth management products across all segments: from mass-market workplace pensions to mass-affluent and high-net-worth clients.

Today, FNZ is responsible for over £330 billion in assets under administration (AuA) held by around 5 million customers of some of the world’s largest financial institutions, including Standard Life Aberdeen, Santander, Lloyds Bank, Vanguard, Generali, Barclays, Quilter, UOB, Aviva, Zurich, UBS, BNZ, Findex and FNZC. In total, FNZ partners with over 60 financial institutions across the UK, Europe, Australia, New Zealand and South-East Asia.

FNZ was founded in New Zealand in 2003 by Adrian Durham and FNZC, New Zealand’s leading investment bank and wealth manager. To accelerate growth, the company partnered in a management buy-out with H.I.G. Capital in 2009. General Atlantic provided additional investment in 2012. Today, the company has over 1,400 employees in the UK, Czech Republic, Shanghai, Singapore, Australia and New Zealand. Around 400 employees are shareholders, who will continue to own about one third of the equity of the company following this transaction.

FNZ expanded from New Zealand to the UK in 2005, initially partnering with Standard Life Aberdeen and basing its UK operations & technology in Edinburgh. The company was a significant beneficiary of the UK’s global leadership in the consumer regulation of financial advice. The 2013 retail distribution review (RDR) improved fairness, transparency and costs for consumers of financial advice and has been followed around the world, including recently in Europe with the introduction of MiFID2.

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Adrian Durham, CEO and founder of FNZ said: “We started FNZ by asking: how can technology solve the problems faced by consumers of long-term savings products? We saw investors being charged so much that their retirement income was halved by charges alone. They were no better off than a bank deposit, despite taking risk and investing in managed funds for over 30 years. Choice was non-existent and the entire value chain was managed using paper.

Our approach has entirely digitised the value chain, reducing cost and complexity for financial institutions and consumers alike. Our clients have all moved to Platform-as-a-Service (PaaS) combining cloud-based software with transaction and custody services. This frees them to focus purely on their customer proposition, transferring all the technology, transaction & asset servicing to FNZ.

This unique PaaS approach, combined with regulatory change, has reduced total consumer costs in long-term savings by around 40% over the last decade. It has transformed the accessibility, choice and transparency of a consumer’s long-term savings.

We see a unique opportunity to create a global-scale platform for wealth management. This requires a willingness to invest for the long-term. The firm’s 400 employee shareholders are firmly committed to this outcome and CDPQ-Generation is the perfect partner, given its unique 8-15 year time horizon and focus on sustainable investments.”

Stephane Etroy, Executive Vice-President and Head of Private Equity at CDPQ, said: “We have researched the best global financial services technology businesses with a focus on companies that have long term, truly global-scale potential. We are extremely excited to partner with FNZ management team to build a business over a time period which is not typical for either private equity or public equity businesses. Through our newly announced partnership with Generation, we are creating a new model of sustainable equity investing which reflects the ethos of both companies, and is ideally suited to the objectives of long term sustainable value creation.”

David Blood, Senior Partner and Co-Founder at Generation, said: “FNZ represents an outstanding first investment for our new partnership. It is an exceptional company with a management team that has demonstrated its ability to innovate and grow in the fast-moving FinTech sector. We believe our long-term approach will suit the company and allow it to continue to invest in its technology and service proposition to the benefit of savers and pensioners, as well its employees, customers and investors”.

About FNZ

FNZ is a global FinTech firm, transforming the way financial institutions serve their wealth management customers. It partners with banks, insurers and asset managers to help consumers better achieve their financial goals.

FNZ's technology, transaction and custody services enable their clients to provide best-in-class wealth management solutions to financial advisers, end-investors and the workplace that are efficient, flexible, transparent and scalable, supporting market, demographic and regulatory trends worldwide.

Today, FNZ is responsible for over £330 billion in assets under administration (AuA) held by around 5 million customers of some of the world’s largest financial institutions, including Standard Life Aberdeen, Barclays, Lloyds Bank, Vanguard, Generali, Quilter, Santander, Aviva, Zurich, UOB, UBS, Findex and BNZ.

In total, FNZ partners with over 60 financial institutions globally and employs over 1,400 in London, Edinburgh, Bristol, Basingstoke, Sydney, Melbourne, Wellington, Hong Kong, Singapore, Shanghai and Brno.

ABOUT CDPQ

Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at June 30, 2018, it held CA$308.3 billion in net assets. As one of Canada's leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.
About Generation Investment Management

Generation is a sustainability-focused investment management firm, founded in 2004. It is an independent, private, owner-managed partnership with offices in London and San Francisco. Its approach to active investment management is focused on long-term performance and based on an investment process that fully integrates sustainability analysis into decision-making. It is dedicated to generating long-term success by investing in sustainable businesses that provide goods and services for a low-carbon, prosperous, equitable, healthy and safe society. As of June 30, 2018, Generation managed appx US$20 billion of assets on behalf of professional investors globally.

This was a huge deal that was brought to my attention last week by Geoffrey Briant, President and CEO of G2 Alternatives Advisory Corp.

Geoff shared this with me:

It's definitely different. 8-15 year hold for PE instead of the usual 10 years. So-called "sustainable equity" investments. A partnership...not a fund. GIM invests in public and private investments.

In the CDPQ 2017 Stewardship Investing Report - its first ever - CDPQ states they want to take "concrete action" on the "international stage". If that is what as intended, this Impact Investment may qualify for meeting that commendable and profitable objective.

You will recall Michael Sabia, the Caisse's CEO, came out recently to sound the alarm on climate change. His message was simple, climate change is real and it's not just a risk but also an economic opportunity and pensions need to invest in these opportunities.

Anyway, Geoff Briant invited me to the CAIP conference being held in Montreal today. You can view the agenda here.

I typically avoid these conferences like the plague (they're dreadfully boring) but I wanted to hear the panel on ESG as well as listen to Pierre Lavallée, the CEO of the Canada Infrastructure Bank.

Pierre gave an excellent overview of the CIB, its mandate to invest $35 billion over the next ten years in revenue generating infrastructure projects.

He talked about the $1.28 billion, 15-year loan to the Caisse's REM project and how they learned a lot from that deal to help them with other greenfield infrastructure projects.

He said they will invest across the capital structure and are not always looking for market rates of return but to facilitate infrastructure projects they will identify on their website (data will be public).

Importantly, the CIB is not looking to displace private investors but to co-invest alongside them and the federal and provincial governments. Obviously, priority will be given to projects that are aligned with governments' infrastructure priorities ('or else we won't get permits to build").

I wish they put that presentation up on their website or YouTube, he did a great job and admitted it's still early innings for this organization which is growing fast.

He also said CIB is open for business with large and small Canadian and global investors (the big deals aren't only going to go to Canada's large pensions but it's obvious they will be in on them).

Now, moving on to the ESG panel which started at 2:30:

2:30 PM | ESG’s STEALTHY SPREAD
How Investors will Benefit
Many institutional investors are learning that ESG is a core approach to investing — and the products which are out there are proving it. As more and more investors move into the field, discover the advantages of integrating in ESG into decision-making and hear about the approach of leading pension funds. Take away key insights on:

ESG, PRI, SDGs — demystifying the acronyms
Trends and best practices in ESG integration
The key ESG integration
ESG integration v. impact investing

Moderator:
Francois Boutin-Dufresne
Founder
Sustainable Market Strategies

Panel:
Stephanie Lachance
Vice President, Responsible Investing
PSP

Martha Tredgett
Executive Director
LGT Capital Partners

Rosalie Vendette
ESG Practice Leader
Desjardins Group

I took a picture of the panelists which you see at the top of this comment. It was a very interesting panel and they covered a lot.

Stéphanie Lachance, Vice President Responsible Investing at PSP, emphasized that ESG integration isn't just about due diligence, the focus is shifting on actively monitoring these risks once the investment is made across public and private markets (click on image):

She said PSP is focusing on some 'ESG themes' like climate change (fully support the TCFD) and diversity where they're part of the 30% club and fully support it.

On impact investing, she gave the example of renewables which used to require enormous subsidies to be profitable and now they're part of every pension's portfolio.

Interestingly, during lunch, she told me that every large Canadian pension has integrated ESG in their investment framework even if they do not all advertise it. She also told me that perceptions are changing because ESG used to (wrongly) be considered a money-losing operation but now investors see the added value and how it can enhance risk-adjusted returns.

She also put up a nice slide on ESG vs Impact Investing (click on image):

Martha Tredgett, Executive Director at LGT Capital Partners, put up a similar slide but what I found fascinating is how LGT was early to the ESG approach and they considered these risks as part of a holistic risk framework long before many investors even knew what ESG is all about.

She also put up a slide on how LGT measures the environmental impact of their portfolio (click on image):

Rosalie Vendette, Practice Leader, ESG at Desjardins Group, also had many excellent insights on ESG integration and how impact investing isn't just about measuring financial results but outcomes.

She made a good point about what good are pensions if by the time people start collecting them, they cannot breathe fresh air and drink clean water.

She also put up a nice slide on fiduciary duty featuring comments from Al Gore (click on image):

Following this panel, I stuck around to listen to Richard Burnett, Chief Sustainability Officer at the Nobel Sustainability Fund:

An Innovative Way to Integrate ESG into Global Growth Private Equity Portfolios
Sustainable investing is one of the fastest-growing segments of the asset management industry. And, used well, it can deliver attractive returns relative to risk with low correlation to both traditional and alternative investments. In this fascinating presentation, hear how the Nobel Sustainability Fund, launched in 2017 with the support of H.S.H. Prince Albert of Monaco, has developed a proprietary impact assessment tool — the Earth Dividend — giving investors a unique scorecard to develop the highest possible return on their investments — and dispelling the myth that ESG focus comes at a cost to financial performance.

Speaker:
Richard Burrett
Chief Sustainability Officer
Nobel Sustainability Fund

The Nobel Sustainability Fund is a late-stage private equity fund which gives them more control over implementing an ESG approach.

Richard works with Earth Capital Partners and I met him and Gordon Power, the CIO, the prior day with Geoffrey Briant who represents them in Canada. Richard and Gordon are very impressive, they have tremendous experience in impact investing and they really know their stuff.

I'm not going to go over Richard's entire presentation but I like their holistic approach to understanding risks using their trademark scorecard (click on images):

He also emphasized that ESG investing leads to higher returns (click on image):

This is an important point because many pensions don't start off with an ESG approach, only focus on it after they identified an attractive investment but this argues the approach is all wrong or at least needs to incorporate more ESG factors from the getgo.

Richard and Gordon gave an example of a toilet company they invested in which uses significantly less water but they saw they could add value by using recycled plastic and this way, not only do they use less water and there are less aerosol contaminants, but they are produced using a more sustainable method.

These toilets are being used in Cape Town, South Africa and are now in China where they can be scaled massively.

Alright, I thank Geoffrey Briant for inviting me as a guest to this conference, it wasn't as dreadfully boring as I feared and I got a chance to meet interesting people, including Donna Jones, Senior Manager Client Relations at BCI (give Gordon Fyfe, Jim Pittman and Mihail Garchev my regards).

One last thing, CPPIB put out a sustainability report explaining where it will invest its green bonds proceeds and pushing for more board effectiveness:

The @CPPIB Sustainable Investing report is now live. We became the first pension fund in the world to issue green bonds this year. Interested in what we plan to use the proceeds for? Let us show you. https://t.co/Z2WvaDSbWV #sustainability #sustainableinvestments #esg pic.twitter.com/v34VBCPfA0

— CPPIB (@cppib) October 15, 2018

For more information on CPPIB's approach to sustainable investing or to read the 2018 Report on Sustainable Investing, please click here.

And Deborah Ng, Head of Responsible Investing at OTPP, discusses the importance of protecting human capital with Top1000 Funds:

“It is within our fiduciary duty to ask companies for hard plans about their future.” Our Head of Responsible Investing Deborah Ng on the role investors can play in protecting human capital via @Top1000Funds https://t.co/GYPtVRJXpA

— OTPP (@OtppInfo) October 15, 2018

The article is available here and I encourage you to read it.

If there is anything I need to add here, feel free to email me at LKolivakis@gmail.com.

Below, an interesting panel discussion on how to measure social impact investments featuring Case Foundation's Jean Case, Earth Capital Partners LLP's Marcelo de Andrade, Startupbootcamp's Tanja Kufner, and Bloomberg's Ed Robinson at Web Summit 2017.

Has the Market Topped Out?

Matthew J. Belvedere of CNBC reports, 'We've had the bulk of the gains we're going to get' in stocks, warns a disciple of Julian Robertson:

The stock market has basically topped out and won't deliver the eye-popping returns that investors have become accustomed to in recent years, hedge fund manager David Gerstenhaber told CNBC on Monday.

"I'm not predicting a bear market at this point. I want to be very clear about that," said the Argonaut Capital Management president. "[But] you probably don't get a peak of substance in the market until the end of the economic cycle is in sight."

Stocks traditionally tend to shoot up in the last legs of an economic cycle, Gerstenhaber said. While he did not predict when that cycle might end, he did say, "If things work out quite well, you probably get 3 to 5 percent over the market next year."

Gerstenhaber is one of Julian Robertson's first so-called Tiger Cubs, stars who managed money at Tiger Investment Management. As a trained economist, Gerstenhaber launched the macro investment group at Robertson's shop, which was responsible for some of the fund's biggest calls during the 1990s, such as betting on the collapse of the British pound and the sharp slide in crude prices following the onset of the Persian Gulf War.

About 10 days ago, Gerstenhaber said he thought the market looked vulnerable. He put on "put spreads" on the S&P 500 and the Nasdaq. He said he's evaluating when to cover those "put spreads," which are an options strategy for investors who are moderately bearish. "[The market] has gotten down to where I thought it was going to get in terms of the hard break."

In early trading on Monday, the S&P 500 has been down and up, continuing the volatility of last week, which ended with strong gains on Friday. But those gains were not nearly enough to make up for the rout on Wednesday and Thursday. The S&P 500 fell 4 percent for the week.

"Looking back a year, the Fed was radically mispriced, in my opinion. It seemed economic growth was pretty strong. The Fed had indicated that they wanted to tighten and the market really didn't believe it," Gerstenhaber said in a "Squawk Box" interview.

But that changed on Oct. 3. After the market closed that day, Federal Reserve Chairman Jerome Powell said monetary policy was a "long way" from neutral, touching off concerns the central bank would hike interest rates more aggressively than forecast. The stock market has essentially been under pressure ever since as higher rates make equities less valuable.

In 2018, the Fed increased rates in three 0.25 percentage point moves in March, June, and September to a range of 2 percent to 2.25 percent. Another hike is expected in December.

After their September meeting, central bankers were projected on a path to raise rates to 3.4 percent, before pausing.

In making his case for capped market gains, Gerstenhaber said he sees the Fed raising rates "multiple times next year" after hiking in December.

"They are doing that against the backdrop of slower economic growth and slowing profit growth," he continued. "The inflation rate is probably creeping up, in my opinion, given what we're likely to see on wages at this point. So the Fed will keep going."

Against that backdrop, Gerstenhaber said investors must be prepared for lower rates of return on financial assets. "It's an argument for more cash, unequivocally at this point."

The S&P 500 is coming off a 19.4 percent gain last year, on top of a 9.5 percent advance in 2016. The index was basically flat in 2015, after three straight years of double-digit gains.

I had a very long day so forgive me if I keep this comment short and to the point.

On Friday, I wrote about a jittery week on Wall Street and will let my readers reread that comment to understand what's at stake here.

If Gerstenhaber is right and the Fed moves "multiple times" next year after hiking in December, then the risk of a full-blown emerging markets crisis will rise considerably and that will heighten the risk of another deflationary wave headed our way.

This morning, he even admitted he wouldn't go long emerging markets after the selloff and reasonable relative valuations because of the Fed, the dollar and the rise in oil prices.

Basically, he confirmed my worst fear, namely, the biggest risk in markets now is a major Fed policy blunder, hiking way too much as the US economy gets set to slow.

Gerstenhaber also stated that big tech names have likely seen their best days and it's better to focus on defensive sectors like healthcare as the economy slows.

Below, David Gerstenhaber, Argonaut Capital Management president, joins 'Squawk Box' to discuss the markets after last week's selloff. Listen carefully to his comments, he's an excellent macro manager.

I'm a bit more bearish than he is on the economy and stocks and think a big bear market is coming sooner than we think, especially if the Fed keeps hiking rates which is why unlike Gundlach, I'd be loading up on US long bonds here (read this blog comment from PIMCO).

Tomorrow, I will attend an ESG conference here in Montreal, it should be very interesting. Hope to see a few of you there.

A Jittery Week on Wall Street?

Kate Rooney of CNBC reports, JP Morgan's widely followed market analyst says it's time to buy the dip:

J.P. Morgan is telling its clients to make the most of the market's massive sell-off this week, as it's almost over.

The bank's widely followed analyst Marko Kolanovic said the dip was largely technical and followed the same selling template as the Dow's massive drop in February.

"Given that equity indices already experienced comparable declines to February (and e.g. Russell 2000 even a bigger drawdown), we think that the current setup favors buying the dip," Kolanovic, J.P. Morgan's global quantitative and derivatives strategy analyst, said in a note to clients Friday. "A risk to the thesis is that market volatility continues to move higher which would result in further outflows from Volatility Targeting funds."

February fears were largely similar to those of this week: rising yields and the Fed's more hawkish stance. U.S. stock markets struggled to regain footing Friday after a 1,300-point drop earlier in the week.

"This risk is now balanced, and can turn into a positive impact, i.e. option hedgers buying equities," Kolanovic said.

Kolanovic is regarded by many as an expert in volatility and derivatives and has gained some notoriety for his timely market calls. Some cite the circulation of his note on trading floors as a reason why stocks rolled over during a trading session in July last year.

The analyst said selling by CTAs, or commodity trading advisors, is "likely largely behind us," and tends to happen relatively fast.

"CTAs have already executed the bulk of their selling," he said. "The remaining part of systematic selling is from volatility targeting (insurance, parity funds, etc.) which will go on for several more days."

Kolanovic said he expects the market to go higher into year-end and maintained the firm's S&P 500 price target of 3,000.

"We expect a net positive earnings season in October, strong buyback activity in November, and positive seasonal effects in December," he said.

It's been a volatile week on Wall Street, following a brutal selloff on Wednesday and Thursday, stocks bounced back on Friday but still lost 4% this week.

So what's going on? Every time we se these brutal selloffs, different analysts blame it on CTAs, others on risk-parity funds, others on volatility targeting funds, etc.

My take is very simple, nothing goes up in a straight line and the increase in rates is making all risk assets (not just stocks) a lot more volatile. 

In fact, last week I warned my readers the rate rise could signal market trouble but I also said the backup in yields was overdone. 

Still, this isn't an environment for risk-takers. You can ignore the first few rate hikes but when we reach number 8 and counting, the cumulative effects of those rate hikes start biting financial markets and the real economy (with a lag).

Not surprisingly, the stocks that got pummeled the most this week before bouncing big on Friday were momentum favorites like Square (SQ) and Roku (ROKU) which were flying high this year prior to this week's selloff:

There were plenty of others but the point I'm making is the stocks that sold off the most were the high-flyers that ran up the most prior to this week.

Of course, you'd expect this but I would be shocked if this group of momentum stocks bounces back to make new highs this year given the rise in rates. At one point, gravity takes over and in the financial world, rates act as a weight on stocks.

Still, the technical damage is there and there could be a bounce in stocks following a terrible week:

As shown above, the S&P500 ETF (SPY) sliced below its 50-day and 200-day moving average and if it holds its 200-day, it could bounce back in a big way.

Still, I doubt we will see new highs on the S&P but I want to emphasize something, it's not time to panic just yet. 

Taking a step back and looking at the five-year weekly chart on the SPY, you will see this is just another dip to its 50-week moving average. If it holds and starts to climb higher, great, but if it doesn't and starts heading lower, watch out, it could get ugly:

For me, the problem remains the Fed and what is going on outside the US, particularly in emerging markets. If deflationary forces spread to the US, stocks are cooked for the rest of the year and next year too.

That all remains to be seen, it's too early to speculate on where stocks are headed but my antennas are up and yours should be too.

Below, the best interview of the week. Jeff Gundlach says massive bond issues coming, homebuilders already entered bear market and higher rates from here will negatively impact the stocks and real estate markets. If it doesn't load below, watch it here, great insights.

The Pension Dashboard?

Maria Espadinha of the FT Adviser reports, Pension dashboard could be 'foundation' for innovation:

The pension dashboard could help drive innovation in the same way open banking has, fintech provider Origo argued.

The company, which has been developing and testing a dashboard prototype, published a 13 page paper called Pensions Dashboard to Open Pension which explained how the project can deliver an "open pensions" system.

The pension dashboard, which is due to launch in 2019, is a project to allow savers to see all of their retirement pots in one place at the same time, giving them a greater awareness of their assets and how to plan for their retirement.

Anthony Rafferty, managing director at Origo, said there had been suggestions the dashboard could leverage the open banking approach, since this would lead to a free market environment where innovation helped improve the customer experience.

Open banking is aimed at increasing competition and allows customers to share their current account information securely with other third-party providers, who can then integrate this information into their services.

Examples of market entrants making use of open banking are Moneyhub, Yolt, and Squirrel Investing.

A fully functioning dashboard will allow for delegated authority to regulated financial advisers and the Single Financial Guidance Body, to inform retirement planning, to obtain pension comparisons, or to populate a budgeting style app, he argued.

Mr Rafferty said: "We believe there is a need for a specific approach for the pensions industry.

"The current proposals for the pensions dashboard should be the catalyst for consumer engagement, building on the success of open banking to deliver an open pensions landscape, incorporating highly sophisticated centralised controls for consumer protection, privacy and consent management.

"The pensions dashboard lays down the firm foundations the industry needs to enable fintech innovation."

But Mr Rafferty said while it was natural to draw parallels between the two initiatives, there were specific requirements in the pensions industry which required different approaches.

He said: "Open banking was regulatory driven as a means to increase competition in banking.

"The pensions dashboard, on the other hand, is designed to help people find their pension pots wherever they may be, in a secure manner and obtain information about them."

Mr Rafferty said another difference was the composition of the markets.

There are more than 300 pension providers in the UK of "all shapes and sizes - each with different legacies, online capabilities and supporting architecture," he noted, but with open banking only nine large banks were involved.

"Scale in the pensions sector needs to be tackled differently," he said.

Another key factor was that people know who they bank with and their online banking credentials, Mr Rafferty said.

He said: "Compare this to the pensions world where a consumer may have up to 11 pension pots and may not know of or have lost track of some.

"Furthermore, not all pension administrators will have issued credentials for online access as some simply do not have the capability to do so."

This meant the dashboard required a single identity verification point and a central Pension Finder Service to search the entire market to ascertain where an individual’s pensions may be, and to feed the information back to the individual, through the dashboard screen.

"This is all quite different to the open banking approach," he stated.

"Also significant is the complexity of pensions information – the differences between arrangements such as DB and DC arrangements, for example," he added.

Last month, the government said it would let the industry take lead on the project and shied back from committing to force providers to submit client data.

Paul Gibson, managing director of Granite Financial Planning, said: "The pension dashboard could lead to an open pensions system but may struggle to gain traction particularly with some pension providers who struggle to even provide an online valuation system that works.

"Newer pensions should not be an issue but legacy products may prove problematic."

I don't know, I'm not an expert on the UK pension system but the pension dashboard sounds a lot more complicated than it needs to be. Nevertheless, it is a step in the right direction, if it gains traction.

Last week, I spoke with Randy Cass, founder and CEO of Nest Wealth, Canada's first digital wealth manager. Randy is a former fixed income/ quant manager at Ontario Teachers' who left that organization and subsequently founded this company which is a great success story.

Anyway, it was a very interesting conversation, we spoke of a recent survey which states, 69% of Canadian Employees Say They Would Leave Their Job Without a Company Savings Plan to Go to a Company With a Group RRSP:

• Nest Wealth releases study examining the link between employee access to group investment tools and workplace happiness and productivity
• Nest Wealth study shows how financial worry and retirement planning can have a negative impact on business performance, company culture and overall employee happiness
• 79% of those able to contribute to a group savings plan at work feel they know how much they need to save for retirement, alleviating stress1.
• Overall results conclude that offering employees a way to save for their future made a difference to their overall happiness, confidence and consequently their work performance.

TORONTO, Oct. 3, 2018 /CNW/ - Today, Nest Wealth, a leader in financial investment technology, released a study examining how financial worry and retirement planning impact business performance, company culture and overall employee happiness across the country. The report, titled "Strengthening Productivity: How to Relieve Employee Stress and Grow Your Business", finds that the simple act of offering employees a way to save for their future at work made a significant difference to their overall happiness, confidence in their financial future and consequently, their work performance. The full report can be found here.

The study reveals that 42% of Canadian employees rank 'money' as their greatest stress, ahead of work (23%), personal health (19%) and relationships (17%). It's clear that Canadians are worried for their financial future - 65% of men and 75% of women stated that they are afraid they aren't saving enough for retirement. Collectively this stress is making Canadians lose sleep, reconsider past financial decisions, and argue with partners. The impact of this tension extends far beyond the personal lives of employees. Industry statistics show that unhappy workers cost North American businesses over $350 billion annually in lost productivity.

To build a more secure financial future, 82% of Canadians believe it is important to have a Group Savings Plan through work. Unfortunately, millions of Canadians lack access to a Group RRSP or some other form of savings mechanism offered through an employer.

Organizations that do not offer a Group Savings plan should take note - 69% of Canadians say they would choose a new job with a plan over a current one without it. This could clearly impact the ability of small to medium-sized businesses (SMBS) to retain talent if they don't offer Group RRSPs 6; 79% of those who contribute to a plan feel better informed and that they know how much they need to save for retirement, alleviating stress.

Historically, the complexity in offering and managing an employee group savings plan, particularly for SMBs, was one of the main reasons employees lacked access to a Group Savings Plan. In fact, 83% of SMBs cited administrative simplicity as a critical factor when deciding to offer a retirement plan for their employees. This is particularly important when HR resources are limited.

To overcome these administrative challenges, Nest Wealth developed Nest Wealth at Work, Canada's first, fully-digital, group RRSP platform for SMBs. Employers now have the ability to attract, retain and motivate employees by offering a group RRSP plan that is low cost, easy to use and effortless to administer.

"We know that happy employees collaborate better, make stronger leaders, think more creatively, are willing to take on new challenges and are less absent," said Randy Cass, Founder and CEO of Nest Wealth. "Our study found that the simple act of offering a Group RRSP Plan can significantly increase employee's confidence and sense of security both in the workplace and at home. By helping alleviate the stress related to financial security, Canadian companies can have a greater chance to attract and retain talented employees, play a positive role in their employee's lives and create a healthier company culture and a stronger Canadian workforce."

About Nest Wealth

Through their leading-edge technology platform and industry-tested investment rules, Nest Wealth Asset Management Inc. (Nest Wealth) provides investors with a smarter, quicker way to reach their financial goals. Nest Wealth offers an automated, low-cost and transparent direct-to-investor wealth management solution that makes it easier for investors to obtain sophisticated management of their financial portfolio. Nest Wealth Pro offers advisors and investment firms a white label practice management solution to better serve their clients through simple onboarding, greater transparency and fully-integrated back office and compliance functionality. Nest Wealth at Work, a fully-digital group RRSP plan, is the only group RRSP offering developed specifically for small-to-medium-sized businesses to quickly and easily offer their employees a path to financial well-being. Together, Nest Wealth has built a better way to invest.

I truly enjoyed my conversation with Randy and think Nest Wealth is onto something here, namely, simplifying group RRSPs to make them easy for employers at SMEs to offer them to their employees.

The way Randy explained it to me, it's extremely easy to set up and onboard employees and it makes a lot of sense, helping them save for the future.

I told him a couple of years ago, I did a major study and presentation on robo-advisors so I know all about Nest Wealth and its competitors.

I also told him that while I like robo-advisors and think they offer a lot to employers and employees looking for group RRSPs, my preference is an enhanced CPP managed by the CPPIB as the ultimate pension solution because they invest across public and private markets all over the world at a very reasonable cost and are delivering great long-term results.

Still, I truly believe Randy is onto something important and told him to contact the Business Development Bank of Canada and Export Development Canada to inform them of their products for SMEs.

A lot of Canadians are stressed out about their retirement and they don't have any way to invest in a group RRSP at work. Given the extinction of defined-benefit pension plans is almost upon us, it's no wonder so many Canadians are stressing about retirement.

Is the pension dashboard the solution? No, it's a lot more complicated than that. We need policies that work and just like we cover everyone for healthcare, we need to cover people properly for their retirement.

That's another conversation for another time.

Below, Randy Cass, CEO/Founder/Portfolio Manager, Nest Wealth on founding Nest Wealth and the future of robo advising. Very sharp guy and very nice too, I really enjoyed our conversation.

PSP Acquires Forth Ports?

Private Capital Journal reports, PSP Investments acquires Forth Ports buying out Arcus:

Public Sector Pension Investment Board (PSP Investments) has acquired the majority stake (62.6%) held by Arcus European Infrastructure Fund 1 LP in Forth Ports Limited, one of the UK’s largest port groups.

Edinburgh, Scotland based Forth Ports owns and operates eight commercial ports on the Firth of Forth, the Firth of Tay and the Thames, with strategic positions in Tilbury (London), Grangemouth, Dundee, Rosyth and Leith (Edinburgh).

PSP Investments will partner with other long-term investors who are well aligned to support the future growth of Forth Ports.

Arcus first invested in Forth Ports in 2008 and along with PSP Investments took Forth Ports private for £751 million in 2011.


News Release

Forth Ports announces Arcus’ sale of its shares in the company to PSP Investments

Edinburgh, Scotland; London, England; and Montréal, Canada (October 3, 2018)

Forth Ports, one of the UK’s largest port groups, announces this morning that Arcus European Infrastructure Fund 1 LP (“Arcus”) has agreed to sell its shares in the company to the Public Sector Pension Investment Board (“PSP Investments”). After financial completion, PSP Investments will partner with other long-term investors who are well aligned to support the future growth of Forth Ports.

Forth Ports is a dynamic, UK-based multimodal ports owner and operator, with ports serving as logistical gateways across the UK, connecting the UK with Europe and the rest of the world. It owns and operates eight commercial ports on the Firth of Forth, the Firth of Tay and the Thames, with strategic positions in Tilbury (London), Grangemouth, Dundee, Rosyth and Leith (Edinburgh). Tilbury is the site of a major new port terminal, Tilbury 2, while the Port of Dundee is strongly positioned to service the needs of the growing offshore wind sector and North Sea oil and gas decommissioning industry.

“This is a landmark transaction for PSP to increase our stake in a strategically located, top-tier infrastructure asset in the UK,” said Patrick Samson, Managing Director and Head of Infrastructure Investments, PSP Investments. “Since PSP’s original investment seven years ago, Forth Ports’ world-class management team has led the company through consistent high performance and growth. We are now entering the next phase of our journey together, which includes a specific plan to enhance our asset management responsibilities. This plan is being headed by our London-based team under the leadership of Patrick Charbonneau, Managing Director, Infrastructure Investments (Europe).”

“This is an exciting time for Forth Ports as we continue to deliver our ambitious expansion and investment programme around the UK,” said Charles Hammond, Group Chief Executive of Forth Ports. “Our colleagues at PSP are already long-term, committed shareholders and this new investment ensures continuity for the business as we evolve to meet the customer demands of the future. I want to personally thank Stuart Gray, Simon Gray and all the team at Arcus for their constant support, insight and strategic guidance over the past seven years. Forth Ports is in a strong position with a clear vision for the future.”

“The Arcus team have been a long-term shareholder in Forth Ports and we leave the business in an excellent position, with a strong platform for continued growth,” said Stuart Gray, Arcus Partner. “We have enjoyed working in partnership with the management team, growing the business substantially during our period of ownership, and we will continue to monitor how the business evolves over the years with the new shareholding structure in place. We wish the management team every success for the future.”

Ends 3rd October, 2018

About Forth Ports
Forth Ports Limited is one of the UK’s largest port groups and owns and operates eight commercial ports in the UK – Tilbury on the Thames, Dundee on the Firth of Tay and six on the Firth of Forth – Leith, Grangemouth, Rosyth, Methil, Burntisland and Kirkcaldy. Within and around the Firths of Forth and Tay, Forth Ports manages and operates an area of 280 square miles of navigable waters, including two specialised marine terminals for oil and gas export and provides other marine services, such as towage and conservancy. www.forthports.co.uk @forthports

About Arcus Infrastructure Partners

Arcus Infrastructure Partners is an independent fund manager focussed solely on mid-market investments in European infrastructure. Arcus invests on behalf of institutional investors through discretionary funds and special co-investment vehicles and, through its subsidiaries, currently manages investments with an aggregate enterprise value in excess of €17bn (as of 30th June 2018). Arcus targets value-add infrastructure investments, with a particular focus on businesses in the transportation, energy and telecommunications sectors. www.arcusip.com

About PSP Investments

The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investment managers with C$153 billion of net assets as of 31st March, 2018. It manages a diversified global portfolio composed of investments in public financial markets, private equity, real estate, infrastructure, natural resources and private debt. Established in 1999, PSP Investments manages net contributions to the pension funds of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York and London. For more information, visit investpsp.com or follow us on Twitter and LinkedIn.

Patrick Samson, Managing Director and Head of Infrastructure Investments at PSP put it well:

“This is a landmark transaction for PSP to increase our stake in a strategically located, top-tier infrastructure asset in the UK. Since PSP’s original investment seven years ago, Forth Ports’ world-class management team has led the company through consistent high performance and growth. We are now entering the next phase of our journey together, which includes a specific plan to enhance our asset management responsibilities. This plan is being headed by our London-based team under the leadership of Patrick Charbonneau, Managing Director, Infrastructure Investments (Europe).” 

So PSP's Infrastructure team co-invested with Arcus Infrastructure Partners on this deal and now they are going to own a majority stake (63%).

The news release states that "after financial completion, PSP Investments will partner with other long-term investors who are well aligned to support the future growth of Forth Ports" but it doesn't specify which partners are coming in on this deal. It could be one of many large Canadian pension funds.

As far as Arcus, the release states: "Arcus invests on behalf of institutional investors through discretionary funds and special co-investment vehicles and, through its subsidiaries, currently manages investments with an aggregate enterprise value in excess of €17bn (as of 30th June 2018). Arcus targets value-add infrastructure investments, with a particular focus on businesses in the transportation, energy and telecommunications sectors."

Ports and airports are part of value-add infrastructure investments. Ontario Teachers' has a special team which manages airports for their plan. That's all they do. PSP also has a team managing airports and other infrastructure like ports.

It takes specialized knowledge to "add value" to these investments, specialization that these large pensions need to pay for if they are to realize their value creation plan.

I've never met Patrick Samson but a friend of mine who works at the Caisse has met him and told me he liked him a lot and he really knows his stuff.  I'm sure he and Patrick Charbonneau worked very hard on this deal and it is a good long-term deal for PSP.

Ports like all infrastructure assets are a long-term play on the economy. The more economic activity, the busier airports, ports, toll roads and other transportation assets are, the more they are worth to investors.

You still need to manage them properly and have a value plan to execute on your strategy and that's where specialized knowledge comes into play.

By the way, since I am talking about UK infrastructure, I wanted to mention that CBRE Caledon recently appointed a head of their new London office:

CBRE Caledon has hired Andreas Köttering to lead its newly established London office. Köttering will serve as Partner and Head of Infrastructure for Europe and be responsible for building a team in London to originate, execute and manage private European infrastructure investments for CBRE Caledon.

Köttering has more than 20 years’ experience in infrastructure. Prior to joining CBRE Caledon, he served as the Co-Head of Infrastructure-Europe for GIC. In this role, he oversaw the London-based team that was responsible for originating, executing and managing infrastructure investments in Europe. He also previously held senior infrastructure roles with the Canada Pension Plan Investment Board, Citi, Schroders and Siemens.

“Andreas is a well-respected leader and infrastructure investor, and we are delighted that he is taking on this significant role and leveraging his talent and expertise to build our London office and broaden our investment capabilities in Europe,” says Stephen Dowd, Principal, CBRE Caledon. “Europe has long been one of the most important markets for infrastructure investments, and CBRE Caledon has been an active participant in the European private infrastructure market since 2010. We believe that establishing a London office will enhance our ability to originate and execute on investment opportunities and manage our existing portfolio in Europe to continue to generate strong long-term performance for our clients.”

In June, CBRE Caledon completed a AU$90 million investment into joint venture that will acquire Origin Energy’s Acumen smart meter business and create Australia’s leading smart meter operator. You can read the details on this deal here.

Aaron Vale, Vice President at CBRE Caledon shared this with me: "In combination with the Australian smart meter co-investment we did, the London office shows how we help pensions build out their infrastructure and PE portfolios and are now expanding the team to include a European office."

I like Aaron, David Rogers and Stephen Dowd, think they are running a great shop and would highly recommend them to my institutional readers looking to invest intelligently in infrastructure.

Below, Shipping TV discusses the PSP Forth Ports deal. I also embedded an older clip where Lux magazine traveled to Edinburgh and spoke to Dr Derek McGlashan, energy and environment manager at Forth Ports in Leith, about how LED lighting - installed throughout the site - not only saved energy and money, but also secured the company a green award from the Edinburgh Chamber of Commerce. Very interesting discussions.