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Pension Plans: Challenges and Responses
Continental European Investment Management 2011




29 September 20111

CONFIDENTIAL
Ateb 2011   Greenwich Speech V F2
Summary of Key Findings

 ▪   Continental European institutions reported rising asset levels on the back of the rebound in equities; however
     they stand well below 2007/8 levels and recent events in global markets and substantial falls in key risk assets
     will have been detractive to most portfolios.

 ▪   In the broad market, international equity allocations have risen on the back of positive markets and now almost
     match allocations to domestic equities, which have contracted. Fixed income remains the dominant asset
     category and allocations to alternatives remain anemic. A minority of institutions anticipate making significant
     asset allocation changes. The weight of responses indicate reductions in European government bonds and
     increases in private equity.

 ▪   The proportion of total assets managed externally has increased meaningfully. Fixed income dominates
     externally managed assets, although equities is becoming increasingly important. Of total assets, a higher
     proportion of equities is externalized than fixed income. Both equity and fixed income external allocations are
     focused on European product except in the case of pension funds, where international equities is dominant.

 ▪   Defined benefit pension fund asset allocations are quite dislocated from their policy targets. The sovereign debt
     crisis has driven a tactical rotation out of passive European government bonds into active product and
     international bonds; Meantime, European credit and active equities are well below target and passive equities
     above – meaning that an unwinding of these positions will eventually be needed to rebalance to target
     allocations.

 ▪   Large funds have expanded the number of external managers used, diversifying away manager-specific risk
     and hiring more specialist firms. In aggregate, however, both manager hiring and solicitation activity has slipped
     while forward looking hiring expectations have fallen to a new low characterized by little product focus.

 ▪   A significant minority of institutions – mostly pension funds – are applying derivatives for the purposes of liability
     and risk management. The focus on liabilities is being driven by maturing pension funds, accounting regulations,
     and the market environment.

 ▪   Investment consultant usage has fallen again.

                                                             2                                                   CONFIDENTIAL
Key issues facing institutional investors

 ▪ Achieving the target rate-of-return is cited
   as the number one concern by many                  Representative Quotes
   institutional investors
                                                      •“Capital markets will not generate the fund return demanded
                                                      within reasonable risk limits.” –German Corporate Pension
 ▪ Other key issues include:                          Fund

                                                      •“We need 3.5% performance every year which is a challenge
         — Sovereign debt crisis                      as long as Swiss bonds return only 2%.” –Swiss Insurance
                                                      Company
         — Risk of inflation
                                                      •“Issuer risk [is driving us] away from high-risk Euro-Govies.”
                                                      –German Endowment/Foundation
         — Interest rate increases
                                                      •“The Euro debt crisis is currently our major concern.” –
                                                      Belgian Insurance Company
         — U.S. deficit
                                                      •“[We are] very worried about an interest rate increase.” –
                                                      Belgian Corporate Pension Fund
         — Japan disaster
                                                      •“We want to get out of interest rate guarantees [ ] I am
         — Arabian political turmoil                  deeply worried about high interest rates.” Danish Corporate
                                                      Pension Fund

                                                      •There are major political issues to worry about, the U.S.
                                                      deficit, the Japan disaster, the Arab dictator states etc.” –
                                                      Swedish Corporate Pension Fund


Source: Greenwich Associates 2011, CEIMF-11




                                                  3                                                         CONFIDENTIAL
Key issues facing institutional investors

 ▪ Regulatory developments are causing                Representative Quotes
   additional stresses across the region:
                                                      • “Increased regulation coming from the central bank [is] putting
                                                        pressure on smaller pension funds and making their life difficult to
         — Regulations impacting Dutch pension          impossible” –Dutch Corporate Pension Fund
           funds are widely seen as overly            • “[We are experiencing] undue and irresponsible big pressure
           restrictive and not in member’s best         from the 2 regulators on pension funds.” – Dutch Corporate
           interests                                    Pension Fund

                                                      • “We have to become so transparent that we have to inform the
         — Solvency II implementation                   regulator beforehand what investments we intend to make. This
                                                        is not in the interest of our clients at all.” –Dutch Corporate
                                                        Pension Fund
         — Basel III and liquidity requirements
                                                      • “The restricting regulations imposed on the pension funds created
                                                        by the state to contribute to the Swedish general pension system
                                                        limits the placement possibilities and thereby makes it difficult to
                                                        obtain a satisfactory rate of return.” – Swedish Corporate Pension
                                                        Fund

                                                      • “Solvency II regulations and at the same time, the bank regulation
                                                        Basel III, keeps me up at night.” –Danish Bank

                                                      • Basel III regulations and its consequences [are leading to] tighter
                                                        liquidity, forced equity increases and more difficult refinancing.” –
                                                        German Insurance Company

                                                      • “It is unclear at this time what the impact of Basel III will be on the
                                                        capital requirements of the bank which could affect substantially
                                                        our Depot A.” –German Bank
Source: Greenwich Associates 2011, CEIMF-11




                                                  4                                                               CONFIDENTIAL
Asset allocation trends

 ▪ A significant number of institutional
   investors are contemplating more active
                                                  Representative Quotes
   management of their assets in order to
   selectively avoid exposure to perceived        • “ [We are becoming] more active and less passive because of the
                                                    PIIGS problems.” –Norwegian Endowment/Foundation
   risk areas.
                                                  • “[We are] shifting the government bonds portfolio to low-risk-
                                                    government bonds.” –German Corporate Pension Fund
 ▪ Investors are diversifying out of
   government bonds.                              • “Shift from government bonds to inflation linked corporate
                                                    bonds.” –German Corporate Pension Fund

 ▪ While positioning portfolios to benefit        • “There is too much enthusiasm for emerging markets, so we are
                                                    liquidating Asia and moving into Global Emerging Markets
   from the shifting economic balance               including Eastern Europe and Latin America.” –Dutch Insurance
   between emerging and developed                   Company
   markets, there is growing concern of a         • “We are increasing our investments in Emerging Markets such as
   bubble forming.                                  BRIC, but nothing in Africa.” – Swedish Corporate Pension Fund

                                                  • “Alternatives are potentially interesting but there is still lack of
 ▪ Transparency remains a major hurdle to           transparency and liquidity in some products.” –Swiss
   investing in alternatives.                       Endowment/Foundation

                                                  • “We are short duration, and now contemplating doing a swap or
 ▪ Use of derivatives for risk management           buying put options or even inflation linked bonds.” –Swiss
                                                    Corporate Pension Fund
   purposes is growing.


Source: Greenwich Associates 2011, CEIMF-11




                                              5                                                                CONFIDENTIAL
Institutional assets levels are recovering, but still fall well short of 2007
highs


        C.E. Institutional Investors’ Total Institutional Assets 2001 – 2011, by Type of Institution (excluding Banks and Savings Banks)

                        € 3,000



                                                                                                                            € 2,454
                        € 2,500                                                                                                              € 2,305

                                                                                           € 2,035
                                                                                                            € 1,978
                        € 2,000                                                                                                                                                               € 1,885
                                                                                                                            € 1,161                          € 1,699          € 1,655
     Euros (billions)




                                            € 1,489                        € 1,484                                                           € 1,258
                                                                                             € 939           € 890
                        € 1,500                                                                                                                                                                 € 778
                                  € 1,281
                                                          € 1,214
                                                                                                                                                               € 882           € 763
                                            € 658
                                                                            € 736
                        € 1,000   € 505
                                                            € 575
                                            € 100                                                                             € 750                                                             € 549
                                                                                             € 653           € 631                            € 491
                         € 500                                                                                                                                 € 371           € 417
                                  € 490     € 483                           € 493
                                                            € 449
                                                                                                                              € 412           € 434                                             € 467
                                                                                             € 360           € 330                                             € 309           € 334
                                  € 192     € 195           € 143           € 217
                            €0
                                   2001      2002           2003             2004            2005             2006            2007             2008            2009             2010            2011

                                                      Corporate Pension             Public Pension          Corporate Treasury             Foundations          Insurance
Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: C.E. assets shown in billions of Euros. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit and defined
contribution plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. Banks and Savings Banks not shown as
trend impacted by change in question methodology.



                                                                                                       6                                                                                     CONFIDENTIAL
While fixed income continues to dominate, international equity allocations
have grown on the back of positive markets and now almost match
European equity allocations which have contracted


                                                              C.E. Institutional Investors Asset Allocation 2011
                                                                                                                               Allocations to Alternatives have
                                                                                                                               reduced since 2009 from a low
                                                             100%                           5.0%                                             base
                                                                                            3.3%
                                                             90%                            6.6%                               Real Estate has increased by 7%
                                                                                            6.1%
                                                             80%
                           Proportion of Total C.E. Assets




                                                             70%                                                              Cash allocations are little changed


                                                             60%

                                                             50%                            60.6%
                                                                                                                                Fixed income is broadly stable,
                                                             40%                                                               growing by about 3% since 2009

                                                             30%
                                                                                                                                  International Equity allocations
                                                             20%                                                                  have more than doubled since
                                                                                            9.6%                                                2009
                                                             10%                                                                  European Equity has reduced
                                                                                            10.7%                                      by15% since 2009
                                                              0%
                                                                                            2011

                           European equities                                  International equities   Fixed income
                           Cash                                               Real Estate              Alternatives
                           Other
Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit plan assets
together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations.




                                                                                                               7                                                                           CONFIDENTIAL
A minority of institutions anticipate making significant changes to their
overall asset allocation in the next 3 years; weight of responses indicate
reductions in European government bonds and increases in private equity


                                 C.E. Institutional Investors’ 3-Year Allocation Expectations for Institutional Asset Allocation

                                                                                                       Significantly Decrease                Significantly Increase                                 No Change
                                                                                                                                                                                                       179
                 European Credit Bonds – Active                                                  28                                                                                  33
                     International Equities – Active                                              26                                                                             31                    147

                        European Equities – Active                                          31                                                                                  29                     173

                                            Real Estate                                                      16                                                                 28                     156
         European Government Bonds – Active                             48                                                                                                 24                          176
                                          Private Equity                                                                         2                                        22                           137
                       International Bonds – Active                                                             14                                                   19                                138
            Commodities or Natural Resources                                                                                         1                          14                                     110
                                         Hedge Funds                                                                  10                                   12                                          144
      European Government Bonds – Passive                                                                     15                                           12                                          129
             Cash and Short-Term Investments                                                     28                                                        11                                          133
              European Credit Bonds – Passive                                                                   14                                        10                                           150
                     European Equities – Passive                                                                 13                                   9                                                146
                                          Infrastructure                                                                         1                    8                                                105
                    International Bonds – Passive                                                                                2                    8                                                128
                 International Equities – Passive                                                                           5                     6                                                    134
                                                    Other                                                                    4                4                                                         45
                       European Bonds – Passive                                                                                  2            4                                                        145
                                                            60          50          40         30          20          10                0            10             20         30        40   50       60
                                                                                                                     Number of C.E. Investors


Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Three year outlook.
Results are for corporate and public defined benefit plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations.



                                                                                                       8                                                                                       CONFIDENTIAL
Anticipated change levels in Belgium


                              Belgian Institutional Investors’ 3-Year Allocation Expectations for Institutional Asset Allocation

                                                                                                      Significantly Decrease                         Significantly Increase                               No Change

                                                                                                                                                                          3                                   17
                 European Credit Bonds – Active                                                                              1
                                                                                                              3                                                                                               10
                     International Equities – Active                                                                                                                                  5
                                                                                              5                                                                                                               14
                        European Equities – Active                                                                                                                        3
                                                                                                                                                                                              6               13
                                            Real Estate                                               4
         European Government Bonds – Active                                                                   3                                                                                               13
                                                                                                                                                                                      5
                                                                                                                                                                                                              11
                                          Private Equity                                                                                 0                1
                       International Bonds – Active                                                                                                       1                                                   10
                                                                                                                             1
            Commodities or Natural Resources                                                                                             0 0                                                                  8

                                         Hedge Funds                                                                                     0 0                                                                  8

      European Government Bonds – Passive                                                      5                                                          1                                                   10

             Cash and Short-Term Investments                                                  5                                                  0                                                            10
              European Credit Bonds – Passive                                                                                1                   0                                                            9
                     European Equities – Passive                                                              3                                           1                                                   11
                                          Infrastructure                                                                             0                    1                                                   7
                    International Bonds – Passive                                                                                    0                            2                                           8
                 International Equities – Passive                                                                            1                   0                                                            8
                                                    Other                                                                            0           0                                                            4
                       European Bonds – Passive                                                                                      0           0                                                            10

                                                            10      9      8      7      6        5       4       3      2       1           0        1       2       3       4   5       6       7   8   9   10
                                                                                                                      Number of Belgian Investors


Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Three year outlook.
Results are for corporate and public defined benefit plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations.



                                                                                                       9                                                                                              CONFIDENTIAL
The trend towards the use of external managers is gathering pace;
Belgian and Norwegian Schemes are least likely to go external
    C.E. Institutional Investors’ Assets
   Managed Internally versus Externally –                                 C.E. Institutional Investors’ Assets Managed Internally versus Externally 2011, by
              Matched Sample                                                                                    Country




                                                                           Proportion of Total C.E. Assets
                                                                                                                            10.3%
                                                                                                             30.6%          9.5%        27.7%                       25.9%               25.0%
                                                                                                                                                    49.4%                                7.9%
                                       25.8%      26.5%                                                                                                             12.7%
                                                                34.1%                                                                   41.7%
                                                                                                                            80.2%
                                                                                                             64.3%                                                  61.4%               67.0%
     Proportion of Total C.E. Assets




                                                                                                                                                    49.7%
                                       10.3%      11.5%                                                                                 30.6%

                                                                18.0%                                        Austria        Belgium    Denmark      Finland         France            Germany




                                       63.9%      62.0%                   C.E. Institutional Investors’ Assets Managed Internally versus Externally 2011, by
                                                                                                                Country
                                                                47.9%
                                                                           Proportion of Total C.E. Assets




                                                                                                             8.6%                                   10.9%
                                                                                                                                                                    21.6%               23.3%
                                                                                                             22.2%          42.9%       43.0%       17.8%

                                                                                                                                                                    33.3%               29.3%
                                                                                                                             6.6%
                                                                                                                                        25.3%
                                       2009       2010          2011                                         69.2%                                  71.3%
                                                                                                                            50.5%                                   45.1%               47.4%
                                                                                                                                        31.7%
                                        Discretionary Mandate
                                        Pooled or Commingled Funds
                                                                                                             Iberia           Italy   Netherlands   Norway         Sweden            Switzerland
                                        Internally Managed
Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit and defined
contribution plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. Question methodology was changed in
2011 in order to raise the accuracy of responses.



                                                                                                                       10                                                               CONFIDENTIAL
Asset mix of total DB pension assets and externally managed assets; a
higher proportion of equities than fixed income is externalized


                                     C.E. Institutional Investors Defined Benefit Plan Asset Allocation 2011 – Total Mix versus External Mix, by Type of Institution

                                                 100%                            2.9%
                                                            5.0%                                        4.5%                     4.2%                   5.5%
                                                                                 3.8%
                                                            6.1%                                        4.6%                     5.2%
                                                 90%                                                                                                    7.3%
                                                                                14.9%                   8.9%                     7.5%
  Total Externally Managed C.E. DB Plan Assets




                                                            11.1%                                                                                                                     24.4%
    Proportion of Total C.E. DB Plan Assets or




                                                 80%                                                                                                    13.1%


                                                 70%

                                                 60%                                                                                                                                  27.9%
                                                                                42.3%                                        53.7%
                                                            45.6%                                      54.6%                                            37.8%
                                                 50%

                                                 40%

                                                 30%
                                                                                                                                                                                      33.6%
                                                                                22.4%
                                                            18.9%                                      11.2%                 13.7%                      25.6%
                                                 20%

                                                 10%
                                                                                13.3%                  15.2%                 15.3%
                                                            11.6%                                                                                       8.5%                          10.7%
                                                  0%
                                                        Pension Funds -    Pension Funds -     Corporate Pensions - Corporate Pensions -        Public Pensions -              Public Pensions -
                                                           Total Mix         External Mix            Total Mix          External Mix                Total Mix                    External Mix


                                                                    European equities   International equities    Fixed income     Cash   Real Estate        Alternatives       Other

Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit plan assets.
Question methodology was changed in 2011 in order to raise the accuracy of responses.



                                                                                                                 11                                                                        CONFIDENTIAL
Corporate DB plans’ anticipated asset returns fall short of mean actuarial
earnings rates by 20 basis points
                                                                                                                                     C.E. Corporate Defined Benefit Plans’
                                                                                                                                   Average Actuarial Earnings Return on Plan
C.E. Corporate Defined Benefit Plans’ Anticipated 5-Year Average Return on Plan Assets                                                              Assets



                                                                                              9.1%
                                                                                                     8.9%


                                                                                                                           Current
                                                          7.5%




                                                                                                                                         Actuarial Earnings Rate of Return
                                                   7.1%                                                                    actuarial
     Expected Total Rate of Return




                                            6.9%                                                                           earnings
                                     6.7%
                                                                                                            6.4%             rate
                                                                                                                   6.2%
                                                                              5.7%5.7%                                                                                       5.4%   5.5%    5.5%
                                                                                                                          GAP = -0.2%


                                                                 3.9% 4.0%
                                                                                                                             Actual
                                                                                                                           expected
                                                                                                                          rate of plan
                                                                                                                             return




                                     European      International Fixed income Real Estate      Private      Hedge Fund                                                       2009   2010    2011
                                      equities        equities                                 Equity

                                                                               2010    2011

Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.                                                                    Note: Mean calculation excludes reported answers of "0" and / or
Note: Mean calculation excludes reported answers of "0" and / or "None".                                                           "None".




                                                                                                      12                                                                                   CONFIDENTIAL
Public DB plans’ anticipated asset returns exceed actuarial rates by 50
basis points

                                                                                                                               C.E. Public Defined Benefit Plans’ Average
  C.E. Public Defined Benefit Plans’ Anticipated 5-Year Average Return on Plan Assets                                          Actuarial Earnings Return on Plan Assets

                                                                                              9.7%10.0%




                                                                                                                       Actual




                                                                                                                                    Actuarial Earnings Rate of Return
                                                          7.3%                                                       expected
                                                   7.1%                                                   7.1%
     Expected Total Rate of Return




                                            6.8%                                                               6.8% rate of plan
                                     6.6%                                                                              return
                                                                              6.4%
                                                                                     5.8%
                                                                                                                                                                               5.1%    5.2%
                                                                                                                       GAP = 0.5%                                       4.8%

                                                                 3.8% 3.9%
                                                                                                                        Current
                                                                                                                        actuarial
                                                                                                                        earnings
                                                                                                                          rate




                                     European      International Fixed income Real Estate      Private    Hedge Fund                                                    2009   2010    2011
                                      equities        equities                                 Equity

                                                                               2010    2011

Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.                                                                Note: Mean calculation excludes reported answers of "0" and / or
Note: Mean calculation excludes reported answers of "0" and / or "None".                                                       "None".




                                                                                                   13                                                                                 CONFIDENTIAL
DB pension funds will need to unwind passive equity allocations and
increase active equity allocations to reach policy targets

                                     Difference Between C.E. Pension Investors Defined Benefit Plan Asset Allocation and
                                                      Target Defined Benefit Plan Asset Allocation 2011


                   Int'l. Equities – Passive                                                                                                                       9.7%

         European Gov't. Bonds – Active                                                                                                      5.2%

                         Int'l. Bonds – Active                                                                                        3.7%

                                   Alternatives                                                                                      3.5%                          Currently Overweight
                                  Real Estate                                                                                     2.9%

                                           Other                                                                                       1.7%

           European Equities – Passive                                                                                               1.2%

                     Int'l. Bonds – Passive                                                                                     0.2%

                                           Cash                                                               -1.2%
             European Bonds – Passive                                                                             -2.3%

                      Int'l. Equities – Active                                                              -3.6%

     European Credit Bonds – Passive                     Currently Underweight                          -4.4%
        European Credit Bonds – Active                                                             -5.4%

      European Gov't. Bonds – Passive                                                              -5.4%

              European Equities – Active                                                         -5.9%

                                                 -15%                    -10%                     -5%                     0%                      5%                     10%                     15%
                                                                                                 Current Allocation Less Target Allocation


Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit plan assets.




                                                                                                     14                                                                                    CONFIDENTIAL
In line with the lower proportion of assets managed externally Belgian
schemes on average use fewer managers than seen in most markets


                                                      C.E. Institutional Investors Average Number of Investment Managers Used, by Country

                                                                                                                                                             2011
                                  12

                                                                              10.6
                                                                                                                                            10.4

                                  10

                                           8.6                                            8.7                                 8.7
                                                                                                                                                       8.2
  Number of Investment Managers




                                                       7.8
                                  8

                                                                  6.6
                                                                                                      6.3
                                                                                                                  6.1
                                  6




                                  4




                                  2




                                  0
                                          Total       Austria   Belgium      France     Germany      Iberia       Italy   Netherlands   Nordics    Switzerland
                                       Institutions


Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.




                                                                                                15                                                  CONFIDENTIAL
Belgian investors’ use of investment consultants is in line with the
corporate and public pension fund averages in Europe.
                                                                                                                                                                             Belgian Institutional Investors Using
    C.E. Institutional Investors Using and Expecting to Hire Investment Consultants for                                                                                     Investment Consultants for Advice on
                  Advice on Investment Matters 2011, by Type of Institution                                                                                                           Investment Matters

                                    60%                                                                                                                                     60%


                                                                                                                                                                                                   50%
                                    50%                                                                                                                                     50%
                                                                                13%

                                                       5%                                                                                                                                                    43%




                                                                                                                                          Proportion of Belgian Investors
                                                                    5%
     Proportion of C.E. Investors




                                    40%                                                                                                                                     40%

                                             4%
                                                                                                                                                                                   31%     31%
                                    30%                                                                                                                                     30%


                                                                                          1%
                                                                                                                       4%
                                                       42%         40%          40%
                                    20%                                                                                                                                     20%
                                            33%                                                         3%


                                    10%                                                   20%                          20%                                                  10%
                                                                                                        15%


                                    0%                                                                                                                                      0%
                                           European Corporate     Public    Corporate Insurance        Banks        Savings                                                        2008    2009    2010     2011
                                          Investors - Pensions   Pensions   Treasury                                 Banks
                                             Total
                                                                 Now Use 2011    Expect to Hire 2011                                                                                       Now Use 2011

Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: “Now Use” refers to investments used by investors in the past 12 months. “Expect to Hire” refers to expected hiring for investments in the next 12 months.




                                                                                                       16                                                                                                 CONFIDENTIAL
Average fees paid to external managers have slipped


                                               Average Fees Paid by C.E. Institutional Investors to External Managers

                    70

                                                                                                                                                                 60.5
                                                                                                                                       59.3
                    60
                                                                                        54.1
                                                                               51.9               51.1
                    50
                                                         44.6                                                                                 44.9
                                                 41.2            41.7
     Basis Points




                    40
                          35.3
                                 32.5
                                        30.9
                    30
                                                                                                                   24.7
                                                                                                            22.6          22.5

                    20



                    10

                                                                                                                                  NA                 NA   NA
                     0
                         All Outside Managers Active European equity          Active international          Active fixed income    Multi-Asset        Real estate
                                                                                     equity

                                                                                             2009        2010   2011

Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: Shown in basis points. Mean calculation excludes reported answers of "0" and / or "None".




                                                                                                    17                                                         CONFIDENTIAL
In Summary

 ▪   Each in their own way, DB pension plans continue to struggle with the challenge of closing funding gaps and
     generating returns required to meet future obligations.

 ▪   As a consequence, pension plan policies are shifting away from the strong de-risking seen in 2009-2010.
     International equity allocations have risen and now almost match allocations to domestic equities. Fixed income
     remains the dominant asset category and allocations to alternatives remain anemic. Anticipated changes
     include reductions in European government bonds and increases in private equity.

 ▪   Similarly, pension schemes are more willing to see if outsiders can help generate alpha and diversification. The
     proportion of total assets managed externally has increased meaningfully. Fixed income dominates externally
     managed assets, although equities is becoming increasingly important. Of total assets, a higher proportion of
     equities is externalized than fixed income.

 ▪   Large funds have expanded the number of external managers used, however, on average both manager hiring
     and solicitation activity has slipped while forward looking hiring expectations have fallen to a new low.

 ▪   Portfolio rebalancing will be a key theme in the next year as defined benefit pension fund asset allocations are
     quite dislocated from their policy targets. European credit and active equities are well below target and passive
     equities above – meaning that an unwinding of these positions will eventually be needed to rebalance to target
     allocations.

 ▪   A significant minority of institutions – mostly pension funds – are applying derivatives for the purposes of liability
     and risk management. The focus on liabilities is being driven by maturing pension funds, accounting regulations,
     and the market environment.




                                                             18                                                  CONFIDENTIAL
Methodology

         ▪            From February to May 2011, Greenwich Associates conducted personal interviews with 418 of 709 of the
                      largest institutional funds in Continental Europe.

         ▪            These institutional investors comprise corporate and public pension funds, corporate treasuries, foundations,
                      insurance companies, and banks with externally managed assets greater than €500 million. In some markets
                      where the universe of large institutional investors is limited, we conducted supplemental interviews with
                      institutions with between €250 million and €500 million in externally managed assets.

         ▪            Senior fund professionals were asked to provide quantitative and qualitative evaluations of their investment
                      managers, qualitative assessments of those managers soliciting their business, and detailed information on
                      important market trends.

         ▪            Overall, 59% of institutions targeted participated in our research. Of the 418 institutions interviewed, 96%
                      allowed disclosure of participation and 75% allowed attribution of their individual responses.


                      Research Coverage of C.E. Institutional Investors 2011,                                                        Research Coverage of C.E. Institutional Investors 2011,
                                       by Type of Fund                                                                                                   by Country
  C.E. Institutions




                                                                                                                 C.E. Institutions
                         201                                                                 Universe                                 111             102                                                                             Universe
                                    171                                                                                                                          85       83            82                                            Interview ed
                                                                                             Interview ed                                              69
                         119        106       123                                                                                                                                               60
                                                           90                                                                          46                        51       48            57               50                 40         30
                                                                    61                                                                                                                                            41                            25
                                              70                              40                  24                                                                                            41                          30
                                                           51       34        23                                                                                                                         27                            15       19
                                                                                                  15                                                                                                              15
                                                          Savings
                                              Insurance




                                                                                                 Treasury
                        Corporate




                                    Pension




                                                                    Banks


                                                                               Foundations




                                                                                                                                                                                                         Iberia
                                                                                                                                                                                        Italy
                                                                                                                                       Switzerland




                                                                                                                                                                 France




                                                                                                                                                                                                Sweden




                                                                                                                                                                                                                                                Finland
                                                                                                                                                                                                                            Belgium
                                                                                                                                                     Germany &




                                                                                                                                                                          Netherlands




                                                                                                                                                                                                                  Denmark




                                                                                                                                                                                                                                       Norway
                         Pension




                                                          Banks
                                     Public




                                                                                                  Corp.




                                                                                                                                                      Austria



Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research.
Note: C.E. assets shown in billions of Euros. C.E. assets are not projected and comprise institutional investors disclosing asset information.




                                                                                                            19                                                                                                                        CONFIDENTIAL
Contact Information

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                     Canada                                                                                                                    Tel: +81 3 3513 6667
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© 2011 Greenwich Associates, LLC. All rights reserved. No portion of these materials may be copied, reproduced, distributed or transmitted, electronically or otherwise, to external parties or
publicly without the permission of Greenwich Associates, LLC. Greenwich Associates®, Competitive Challenges®, Greenwich Quality Index®, and Greenwich Reports® are registered marks
                                 of Greenwich Associates, LLC. Greenwich Associates may also have rights in certain other marks used in these materials.



                                                                                              20                                                                             CONFIDENTIAL

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Ateb 2011 Greenwich Speech V F2

  • 1. Pension Plans: Challenges and Responses Continental European Investment Management 2011 29 September 20111 CONFIDENTIAL
  • 3. Summary of Key Findings ▪ Continental European institutions reported rising asset levels on the back of the rebound in equities; however they stand well below 2007/8 levels and recent events in global markets and substantial falls in key risk assets will have been detractive to most portfolios. ▪ In the broad market, international equity allocations have risen on the back of positive markets and now almost match allocations to domestic equities, which have contracted. Fixed income remains the dominant asset category and allocations to alternatives remain anemic. A minority of institutions anticipate making significant asset allocation changes. The weight of responses indicate reductions in European government bonds and increases in private equity. ▪ The proportion of total assets managed externally has increased meaningfully. Fixed income dominates externally managed assets, although equities is becoming increasingly important. Of total assets, a higher proportion of equities is externalized than fixed income. Both equity and fixed income external allocations are focused on European product except in the case of pension funds, where international equities is dominant. ▪ Defined benefit pension fund asset allocations are quite dislocated from their policy targets. The sovereign debt crisis has driven a tactical rotation out of passive European government bonds into active product and international bonds; Meantime, European credit and active equities are well below target and passive equities above – meaning that an unwinding of these positions will eventually be needed to rebalance to target allocations. ▪ Large funds have expanded the number of external managers used, diversifying away manager-specific risk and hiring more specialist firms. In aggregate, however, both manager hiring and solicitation activity has slipped while forward looking hiring expectations have fallen to a new low characterized by little product focus. ▪ A significant minority of institutions – mostly pension funds – are applying derivatives for the purposes of liability and risk management. The focus on liabilities is being driven by maturing pension funds, accounting regulations, and the market environment. ▪ Investment consultant usage has fallen again. 2 CONFIDENTIAL
  • 4. Key issues facing institutional investors ▪ Achieving the target rate-of-return is cited as the number one concern by many Representative Quotes institutional investors •“Capital markets will not generate the fund return demanded within reasonable risk limits.” –German Corporate Pension ▪ Other key issues include: Fund •“We need 3.5% performance every year which is a challenge — Sovereign debt crisis as long as Swiss bonds return only 2%.” –Swiss Insurance Company — Risk of inflation •“Issuer risk [is driving us] away from high-risk Euro-Govies.” –German Endowment/Foundation — Interest rate increases •“The Euro debt crisis is currently our major concern.” – Belgian Insurance Company — U.S. deficit •“[We are] very worried about an interest rate increase.” – Belgian Corporate Pension Fund — Japan disaster •“We want to get out of interest rate guarantees [ ] I am — Arabian political turmoil deeply worried about high interest rates.” Danish Corporate Pension Fund •There are major political issues to worry about, the U.S. deficit, the Japan disaster, the Arab dictator states etc.” – Swedish Corporate Pension Fund Source: Greenwich Associates 2011, CEIMF-11 3 CONFIDENTIAL
  • 5. Key issues facing institutional investors ▪ Regulatory developments are causing Representative Quotes additional stresses across the region: • “Increased regulation coming from the central bank [is] putting pressure on smaller pension funds and making their life difficult to — Regulations impacting Dutch pension impossible” –Dutch Corporate Pension Fund funds are widely seen as overly • “[We are experiencing] undue and irresponsible big pressure restrictive and not in member’s best from the 2 regulators on pension funds.” – Dutch Corporate interests Pension Fund • “We have to become so transparent that we have to inform the — Solvency II implementation regulator beforehand what investments we intend to make. This is not in the interest of our clients at all.” –Dutch Corporate Pension Fund — Basel III and liquidity requirements • “The restricting regulations imposed on the pension funds created by the state to contribute to the Swedish general pension system limits the placement possibilities and thereby makes it difficult to obtain a satisfactory rate of return.” – Swedish Corporate Pension Fund • “Solvency II regulations and at the same time, the bank regulation Basel III, keeps me up at night.” –Danish Bank • Basel III regulations and its consequences [are leading to] tighter liquidity, forced equity increases and more difficult refinancing.” – German Insurance Company • “It is unclear at this time what the impact of Basel III will be on the capital requirements of the bank which could affect substantially our Depot A.” –German Bank Source: Greenwich Associates 2011, CEIMF-11 4 CONFIDENTIAL
  • 6. Asset allocation trends ▪ A significant number of institutional investors are contemplating more active Representative Quotes management of their assets in order to selectively avoid exposure to perceived • “ [We are becoming] more active and less passive because of the PIIGS problems.” –Norwegian Endowment/Foundation risk areas. • “[We are] shifting the government bonds portfolio to low-risk- government bonds.” –German Corporate Pension Fund ▪ Investors are diversifying out of government bonds. • “Shift from government bonds to inflation linked corporate bonds.” –German Corporate Pension Fund ▪ While positioning portfolios to benefit • “There is too much enthusiasm for emerging markets, so we are liquidating Asia and moving into Global Emerging Markets from the shifting economic balance including Eastern Europe and Latin America.” –Dutch Insurance between emerging and developed Company markets, there is growing concern of a • “We are increasing our investments in Emerging Markets such as bubble forming. BRIC, but nothing in Africa.” – Swedish Corporate Pension Fund • “Alternatives are potentially interesting but there is still lack of ▪ Transparency remains a major hurdle to transparency and liquidity in some products.” –Swiss investing in alternatives. Endowment/Foundation • “We are short duration, and now contemplating doing a swap or ▪ Use of derivatives for risk management buying put options or even inflation linked bonds.” –Swiss Corporate Pension Fund purposes is growing. Source: Greenwich Associates 2011, CEIMF-11 5 CONFIDENTIAL
  • 7. Institutional assets levels are recovering, but still fall well short of 2007 highs C.E. Institutional Investors’ Total Institutional Assets 2001 – 2011, by Type of Institution (excluding Banks and Savings Banks) € 3,000 € 2,454 € 2,500 € 2,305 € 2,035 € 1,978 € 2,000 € 1,885 € 1,161 € 1,699 € 1,655 Euros (billions) € 1,489 € 1,484 € 1,258 € 939 € 890 € 1,500 € 778 € 1,281 € 1,214 € 882 € 763 € 658 € 736 € 1,000 € 505 € 575 € 100 € 750 € 549 € 653 € 631 € 491 € 500 € 371 € 417 € 490 € 483 € 493 € 449 € 412 € 434 € 467 € 360 € 330 € 309 € 334 € 192 € 195 € 143 € 217 €0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Corporate Pension Public Pension Corporate Treasury Foundations Insurance Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: C.E. assets shown in billions of Euros. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit and defined contribution plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. Banks and Savings Banks not shown as trend impacted by change in question methodology. 6 CONFIDENTIAL
  • 8. While fixed income continues to dominate, international equity allocations have grown on the back of positive markets and now almost match European equity allocations which have contracted C.E. Institutional Investors Asset Allocation 2011 Allocations to Alternatives have reduced since 2009 from a low 100% 5.0% base 3.3% 90% 6.6% Real Estate has increased by 7% 6.1% 80% Proportion of Total C.E. Assets 70% Cash allocations are little changed 60% 50% 60.6% Fixed income is broadly stable, 40% growing by about 3% since 2009 30% International Equity allocations 20% have more than doubled since 9.6% 2009 10% European Equity has reduced 10.7% by15% since 2009 0% 2011 European equities International equities Fixed income Cash Real Estate Alternatives Other Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. 7 CONFIDENTIAL
  • 9. A minority of institutions anticipate making significant changes to their overall asset allocation in the next 3 years; weight of responses indicate reductions in European government bonds and increases in private equity C.E. Institutional Investors’ 3-Year Allocation Expectations for Institutional Asset Allocation Significantly Decrease Significantly Increase No Change 179 European Credit Bonds – Active 28 33 International Equities – Active 26 31 147 European Equities – Active 31 29 173 Real Estate 16 28 156 European Government Bonds – Active 48 24 176 Private Equity 2 22 137 International Bonds – Active 14 19 138 Commodities or Natural Resources 1 14 110 Hedge Funds 10 12 144 European Government Bonds – Passive 15 12 129 Cash and Short-Term Investments 28 11 133 European Credit Bonds – Passive 14 10 150 European Equities – Passive 13 9 146 Infrastructure 1 8 105 International Bonds – Passive 2 8 128 International Equities – Passive 5 6 134 Other 4 4 45 European Bonds – Passive 2 4 145 60 50 40 30 20 10 0 10 20 30 40 50 60 Number of C.E. Investors Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Three year outlook. Results are for corporate and public defined benefit plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. 8 CONFIDENTIAL
  • 10. Anticipated change levels in Belgium Belgian Institutional Investors’ 3-Year Allocation Expectations for Institutional Asset Allocation Significantly Decrease Significantly Increase No Change 3 17 European Credit Bonds – Active 1 3 10 International Equities – Active 5 5 14 European Equities – Active 3 6 13 Real Estate 4 European Government Bonds – Active 3 13 5 11 Private Equity 0 1 International Bonds – Active 1 10 1 Commodities or Natural Resources 0 0 8 Hedge Funds 0 0 8 European Government Bonds – Passive 5 1 10 Cash and Short-Term Investments 5 0 10 European Credit Bonds – Passive 1 0 9 European Equities – Passive 3 1 11 Infrastructure 0 1 7 International Bonds – Passive 0 2 8 International Equities – Passive 1 0 8 Other 0 0 4 European Bonds – Passive 0 0 10 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 Number of Belgian Investors Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Three year outlook. Results are for corporate and public defined benefit plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. 9 CONFIDENTIAL
  • 11. The trend towards the use of external managers is gathering pace; Belgian and Norwegian Schemes are least likely to go external C.E. Institutional Investors’ Assets Managed Internally versus Externally – C.E. Institutional Investors’ Assets Managed Internally versus Externally 2011, by Matched Sample Country Proportion of Total C.E. Assets 10.3% 30.6% 9.5% 27.7% 25.9% 25.0% 49.4% 7.9% 25.8% 26.5% 12.7% 34.1% 41.7% 80.2% 64.3% 61.4% 67.0% Proportion of Total C.E. Assets 49.7% 10.3% 11.5% 30.6% 18.0% Austria Belgium Denmark Finland France Germany 63.9% 62.0% C.E. Institutional Investors’ Assets Managed Internally versus Externally 2011, by Country 47.9% Proportion of Total C.E. Assets 8.6% 10.9% 21.6% 23.3% 22.2% 42.9% 43.0% 17.8% 33.3% 29.3% 6.6% 25.3% 2009 2010 2011 69.2% 71.3% 50.5% 45.1% 47.4% 31.7% Discretionary Mandate Pooled or Commingled Funds Iberia Italy Netherlands Norway Sweden Switzerland Internally Managed Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit and defined contribution plan assets together with other institutional assets and non-defined benefit plan assets held by corporate treasury, insurance, banks, and foundations. Question methodology was changed in 2011 in order to raise the accuracy of responses. 10 CONFIDENTIAL
  • 12. Asset mix of total DB pension assets and externally managed assets; a higher proportion of equities than fixed income is externalized C.E. Institutional Investors Defined Benefit Plan Asset Allocation 2011 – Total Mix versus External Mix, by Type of Institution 100% 2.9% 5.0% 4.5% 4.2% 5.5% 3.8% 6.1% 4.6% 5.2% 90% 7.3% 14.9% 8.9% 7.5% Total Externally Managed C.E. DB Plan Assets 11.1% 24.4% Proportion of Total C.E. DB Plan Assets or 80% 13.1% 70% 60% 27.9% 42.3% 53.7% 45.6% 54.6% 37.8% 50% 40% 30% 33.6% 22.4% 18.9% 11.2% 13.7% 25.6% 20% 10% 13.3% 15.2% 15.3% 11.6% 8.5% 10.7% 0% Pension Funds - Pension Funds - Corporate Pensions - Corporate Pensions - Public Pensions - Public Pensions - Total Mix External Mix Total Mix External Mix Total Mix External Mix European equities International equities Fixed income Cash Real Estate Alternatives Other Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit plan assets. Question methodology was changed in 2011 in order to raise the accuracy of responses. 11 CONFIDENTIAL
  • 13. Corporate DB plans’ anticipated asset returns fall short of mean actuarial earnings rates by 20 basis points C.E. Corporate Defined Benefit Plans’ Average Actuarial Earnings Return on Plan C.E. Corporate Defined Benefit Plans’ Anticipated 5-Year Average Return on Plan Assets Assets 9.1% 8.9% Current 7.5% Actuarial Earnings Rate of Return 7.1% actuarial Expected Total Rate of Return 6.9% earnings 6.7% 6.4% rate 6.2% 5.7%5.7% 5.4% 5.5% 5.5% GAP = -0.2% 3.9% 4.0% Actual expected rate of plan return European International Fixed income Real Estate Private Hedge Fund 2009 2010 2011 equities equities Equity 2010 2011 Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Mean calculation excludes reported answers of "0" and / or Note: Mean calculation excludes reported answers of "0" and / or "None". "None". 12 CONFIDENTIAL
  • 14. Public DB plans’ anticipated asset returns exceed actuarial rates by 50 basis points C.E. Public Defined Benefit Plans’ Average C.E. Public Defined Benefit Plans’ Anticipated 5-Year Average Return on Plan Assets Actuarial Earnings Return on Plan Assets 9.7%10.0% Actual Actuarial Earnings Rate of Return 7.3% expected 7.1% 7.1% Expected Total Rate of Return 6.8% 6.8% rate of plan 6.6% return 6.4% 5.8% 5.1% 5.2% GAP = 0.5% 4.8% 3.8% 3.9% Current actuarial earnings rate European International Fixed income Real Estate Private Hedge Fund 2009 2010 2011 equities equities Equity 2010 2011 Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Mean calculation excludes reported answers of "0" and / or Note: Mean calculation excludes reported answers of "0" and / or "None". "None". 13 CONFIDENTIAL
  • 15. DB pension funds will need to unwind passive equity allocations and increase active equity allocations to reach policy targets Difference Between C.E. Pension Investors Defined Benefit Plan Asset Allocation and Target Defined Benefit Plan Asset Allocation 2011 Int'l. Equities – Passive 9.7% European Gov't. Bonds – Active 5.2% Int'l. Bonds – Active 3.7% Alternatives 3.5% Currently Overweight Real Estate 2.9% Other 1.7% European Equities – Passive 1.2% Int'l. Bonds – Passive 0.2% Cash -1.2% European Bonds – Passive -2.3% Int'l. Equities – Active -3.6% European Credit Bonds – Passive Currently Underweight -4.4% European Credit Bonds – Active -5.4% European Gov't. Bonds – Passive -5.4% European Equities – Active -5.9% -15% -10% -5% 0% 5% 10% 15% Current Allocation Less Target Allocation Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Percentages are Euro-weighted. C.E. assets are not projected and comprise institutional investors disclosing asset information. Results are for corporate and public defined benefit plan assets. 14 CONFIDENTIAL
  • 16. In line with the lower proportion of assets managed externally Belgian schemes on average use fewer managers than seen in most markets C.E. Institutional Investors Average Number of Investment Managers Used, by Country 2011 12 10.6 10.4 10 8.6 8.7 8.7 8.2 Number of Investment Managers 7.8 8 6.6 6.3 6.1 6 4 2 0 Total Austria Belgium France Germany Iberia Italy Netherlands Nordics Switzerland Institutions Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. 15 CONFIDENTIAL
  • 17. Belgian investors’ use of investment consultants is in line with the corporate and public pension fund averages in Europe. Belgian Institutional Investors Using C.E. Institutional Investors Using and Expecting to Hire Investment Consultants for Investment Consultants for Advice on Advice on Investment Matters 2011, by Type of Institution Investment Matters 60% 60% 50% 50% 50% 13% 5% 43% Proportion of Belgian Investors 5% Proportion of C.E. Investors 40% 40% 4% 31% 31% 30% 30% 1% 4% 42% 40% 40% 20% 20% 33% 3% 10% 20% 20% 10% 15% 0% 0% European Corporate Public Corporate Insurance Banks Savings 2008 2009 2010 2011 Investors - Pensions Pensions Treasury Banks Total Now Use 2011 Expect to Hire 2011 Now Use 2011 Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: “Now Use” refers to investments used by investors in the past 12 months. “Expect to Hire” refers to expected hiring for investments in the next 12 months. 16 CONFIDENTIAL
  • 18. Average fees paid to external managers have slipped Average Fees Paid by C.E. Institutional Investors to External Managers 70 60.5 59.3 60 54.1 51.9 51.1 50 44.6 44.9 41.2 41.7 Basis Points 40 35.3 32.5 30.9 30 24.7 22.6 22.5 20 10 NA NA NA 0 All Outside Managers Active European equity Active international Active fixed income Multi-Asset Real estate equity 2009 2010 2011 Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: Shown in basis points. Mean calculation excludes reported answers of "0" and / or "None". 17 CONFIDENTIAL
  • 19. In Summary ▪ Each in their own way, DB pension plans continue to struggle with the challenge of closing funding gaps and generating returns required to meet future obligations. ▪ As a consequence, pension plan policies are shifting away from the strong de-risking seen in 2009-2010. International equity allocations have risen and now almost match allocations to domestic equities. Fixed income remains the dominant asset category and allocations to alternatives remain anemic. Anticipated changes include reductions in European government bonds and increases in private equity. ▪ Similarly, pension schemes are more willing to see if outsiders can help generate alpha and diversification. The proportion of total assets managed externally has increased meaningfully. Fixed income dominates externally managed assets, although equities is becoming increasingly important. Of total assets, a higher proportion of equities is externalized than fixed income. ▪ Large funds have expanded the number of external managers used, however, on average both manager hiring and solicitation activity has slipped while forward looking hiring expectations have fallen to a new low. ▪ Portfolio rebalancing will be a key theme in the next year as defined benefit pension fund asset allocations are quite dislocated from their policy targets. European credit and active equities are well below target and passive equities above – meaning that an unwinding of these positions will eventually be needed to rebalance to target allocations. ▪ A significant minority of institutions – mostly pension funds – are applying derivatives for the purposes of liability and risk management. The focus on liabilities is being driven by maturing pension funds, accounting regulations, and the market environment. 18 CONFIDENTIAL
  • 20. Methodology ▪ From February to May 2011, Greenwich Associates conducted personal interviews with 418 of 709 of the largest institutional funds in Continental Europe. ▪ These institutional investors comprise corporate and public pension funds, corporate treasuries, foundations, insurance companies, and banks with externally managed assets greater than €500 million. In some markets where the universe of large institutional investors is limited, we conducted supplemental interviews with institutions with between €250 million and €500 million in externally managed assets. ▪ Senior fund professionals were asked to provide quantitative and qualitative evaluations of their investment managers, qualitative assessments of those managers soliciting their business, and detailed information on important market trends. ▪ Overall, 59% of institutions targeted participated in our research. Of the 418 institutions interviewed, 96% allowed disclosure of participation and 75% allowed attribution of their individual responses. Research Coverage of C.E. Institutional Investors 2011, Research Coverage of C.E. Institutional Investors 2011, by Type of Fund by Country C.E. Institutions C.E. Institutions 201 Universe 111 102 Universe 171 85 83 82 Interview ed Interview ed 69 119 106 123 60 90 46 51 48 57 50 40 30 61 41 25 70 40 24 41 30 51 34 23 27 15 19 15 15 Savings Insurance Treasury Corporate Pension Banks Foundations Iberia Italy Switzerland France Sweden Finland Belgium Germany & Netherlands Denmark Norway Pension Banks Public Corp. Austria Source: Greenwich Associates 2011, CEIMF-11, Top Tier Research. Note: C.E. assets shown in billions of Euros. C.E. assets are not projected and comprise institutional investors disclosing asset information. 19 CONFIDENTIAL
  • 21. Contact Information UNITED STATES EUROPE ASIA 6 High Ridge Park 90 Basinghall Street 137 Amoy Street Stamford, CT 06905 London #03-05 Far East Square USA EC2V 5AY Singapore, 049965 Tel: +1 203 625 5038 United Kingdom Tel: +65 6236 0142 800 704 1027 Tel: +44 (0)203 418 8200 CANADA EMAIL JAPAN 14 Prince Arthur Avenue, Kagurazaka FN Building 9th Floor ContactUs@greenwich.com Suite 208 6-67 Kagurazaka, Shinjukuku Toronto, Ontario Tokyo 162-0825 or visit www.greenwich.com M5R 1A9 Japan Canada Tel: +81 3 3513 6667 Tel: +416 925 0197 © 2011 Greenwich Associates, LLC. All rights reserved. No portion of these materials may be copied, reproduced, distributed or transmitted, electronically or otherwise, to external parties or publicly without the permission of Greenwich Associates, LLC. Greenwich Associates®, Competitive Challenges®, Greenwich Quality Index®, and Greenwich Reports® are registered marks of Greenwich Associates, LLC. Greenwich Associates may also have rights in certain other marks used in these materials. 20 CONFIDENTIAL