F&C Asset Management has been awarded a mandate by Resolution Life to administer the £1.2bn (€1.75bn) insurance assets of Swiss Life UK.

This huge contract confirms the trend among insurers towards outsourcing the management of their assets. Some of the biggest names in the insurance world – including Zurich and Abbey – have already outsourced their investment management to third parties, with many others expected to follow the suit.

Charities are overly cautious with their investments, according to Jeremy Wells, head of charities investment at JPMorgan Fleming, but they are at least seeking out alternatives to equities and bonds.

Many charities in the UK are being too negative in predicting future returns, with most anticipating a modest 4 to 5 per cent over the next three to five years, said Mr Wells. This contrasts sharply with the 12 per cent average return of the WM Charity Unconstrained Universe for the year ended Q3 2004.

Corporate governance has emerged as a major concern for fund managers in a new report, but they are divided on how to tackle it. A survey conducted by Morningstar found that 57 per cent of European fund managers feel that corporate governance has increased in importance for their industry over the past three years. The same percentage said they would add more resources to handle corporate governance issues in 2005.

The world’s pension funds are still not doing enough to find the funds to meet their looming liabilities. Investment consultants say they may not only need to change their investment strategies but also cut the benefits offered.

Antipathy on the part of UK investment consultants towards collateralised debt obligations (CDOs) has driven a London-based mezzanine finance specialist to design a new structured product especially for the British pension fund market.

Intermediate Capital Group (ICG), which manages €2.25bn in six CDOs for institutional investors in continental Europe, is looking to circumvent the concerns of UK consultants with an investment structure that behaves a bit like a CDO without containing its unwanted characteristics.

Principal Global Investors (PGI), part of the Principal Financial Group, has won a $1.1bn (€840m) fixed income mandate from the Iowa Public Employees‘ Retirement System (IPERS), the state’s largest public retirement system.

US institutional investors are shunning domestic stocks in favour of international equities and alternative investments, on the grounds that traditional investments will not produce enough to meet future liabilities.

Pimco has been picked by two European pension funds to manage two different fixed income briefs.The largest of the contracts came from Dutch-based Laurus Pension Fund, which chose Pimco to manage a €240m mandate investing in government and corporate bonds.

This move by Laurus is part of a new investment strategy, formulated in conjunction with consultants Watson Wyatt, and designed to better match its pension liabilities. Laurus aims to limit interest rate risk by combining active management with additional investments in shares and alternative asset classes. The fund also awarded a €100 global equity brief to AllianceBernstein.

America’s second largest public pension fund, the $120bn New York State Common Retirement Fund has appointed Access Capital Partners, a European private equity fund of funds manager, to run up to €250m in European mid-market buy-out funds.

Investment managers are bidding to run pension funds’ entire assets. Andrew Barber explains.

Over the last couple of years the term liability-led investing has received much publicity within the pension fund industry. Much of the debate surrounding it has wrongly presumed that the concept is new. What is new, however, is that several managers have developed liability-led products and are offering them to pension funds.

Baring Asset Management under new American ownership is honing its marketing strategy in order to bulk up in assets.

ING’s announcement that it was selling off its Baring Asset Management (BAM) funds arm generated barely a whimper of dissent. BAM’s $34.5bn (€26bn) assets under management, including briefs from trophy clients such as CalPERS, the Ohio pension system, and Electricité de France, are now under the ultimate ownership of Massachusetts Mutual Life Insurance (MassMutual).

It may look like small fry to the likes of Credit Suisse or Merrill. But it gives a large, AAA-rated US-centric manager a European platform. With its newly acquired assets, MassMutual now runs more than $350bn.

ABN Amro’s fixed income chief Paul Abberley tells Paula Garrido why the value of local research in a multitude of European cities doesn’t amount to very much.

Paul Abberley, chief investment officer, fixed income, at ABN Amro Asset Management (AAAM) knows the bond markets like the back of his hand. A fixed income portfolio manager by trade, Mr Abberley is now responsible for the major restructuring of the fixed income division of AAAM, a company he joined in 2000 after 14 years at Lombard Odier.

Excessive exposure to traditional equity markets forced the pension fund of Belgium’s Suez-Tractebel to split its portfolio into more risk-graded classes. Henry Smith reports.

Suez-Tractebel, an international industrial services and engineering group, manages the largest pension fund portfolio in Belgium with three defined benefit schemes containing a total of €1.3bn and two defined contribution funds of €10m and €1.5m each.

The DC schemes were launched in 1999 and 2001 respectively and now serve as pensions savings vehicles for all new employees of Tractebel and Electrabel. They were set up to take over eventually from the DB schemes, two of which are already closed to new investors. The third DB scheme is also due for closure in the near future.

Edwin De Boeck, managing director of KBC Asset Management, tells Henry Smith how the Belgian firm is responding to the European trend towards specialist mandates.

KBC Asset Management is an established and recognised player in the European retail market. Through a bank branch network in its home country of Belgium and in the Czech Republic, Hungary, Poland and Slovakia, KBCAM distributes mutual funds, money market funds and capital guaranteed products which account for the lion’s share of the €100.9bn of total assets under management.

The firm’s retail business has extended to south east Asia, where it has joined forces with HSBC and Hang Seng Bank to distribute products which last year brought in €600m from investors in Hong Kong.

The fundamental backdrop for European equities looks as bright now as any point over the last few years, with the European economy demonstrating tentative growth, inflation subdued and monetary policy accommodative. Unfortunately, a dark cloud continues to hang over world equity prospects - the spectre of an ongoing spike in the price of oil.

Activity decelerated in the second half of 2004 and the trough was reached in the fourth quarter (recorded GDP of only 0.2 per cent quarter-on-quarter), in particular, GDP fell in Germany, Italy and the Netherlands. Overall, slowing trade subtracted 0.2 per cent to GDP.

US equity markets rallied after the presidential election in November 2004, closing the year with surprisingly strong performance in the face of rising interest rates, volatile energy prices, and a weak dollar. The same challenges faced the markets in the first quarter of 2005, but without the catalyst of an election, equity markets generally sagged.

Think South American economics and inflation comes to mind. One of the much-trumpeted structural improvements in Latin American creditworthiness has been the move from fixed to floating exchange rates.

Over the last 10 years, fixed exchange rates have been abandoned in Mexico, Argentina, Brazil and Uruguay. Countries will not squander valuable exchange reserves defending unsustainable exchange rates. More recently, given the bullish environment for global liquidity, investors have steadily returned to invest in Latin American currencies.

By the end of February the Korean Kospi index had returned just over 40 per cent from the August lows following the period of significant risk aversion in mid 2004. Spring 2004 saw the Kospi lose 20 per cent in a month and bottom in late July but the benchmark index is now hovering just below the 1000 level and is now at 5-year highs.

The Kospi has only broken above 1000 points on three previous occasions: in 1989, 1994 and late 1999. Korea has been enjoying renewed vigour on the back of local participation in the stock market.

The $51.7bn (€40bn) Pennsylvania Public School Employees’ Retirement System(PSERS) is boasting an investment return of 14.9 per cent for 2004. Chief investment officer Alan Van Noord puts this strong performance primarily down to the fund’s investments in real estate and other alternatives.

Bank//Pension, the Dkr9.9bn (€1.3bn) pension fund for a group of Danish financial companies, has added State Street Global Advisors to its asset manager line up, which is otherwise somewhat biased towards local fund managers.

Trust in UBS has come from both public and corporate pension schemes. Paula Garrido writes.

As past ‘recoveries’ have proved to be no more than a correction within the dollar’s broad downward trend, the current revival will likely be shortlived, says Neil Mellor.

Europe has been busy buying into the ETF market this year owing to growing interest from the pension fund market which views them as an investment product that can reduce risk, while offering a good geographic exposure. Gerry O’Kane reports.

This year has produced some interesting statistics for the global exchange-traded fund (ETF) market, showing that Europe has arrived as a player. Figures from Morgan Stanley reveal that while worldwide assets under management for ETFs increased by 1.7 per cent since the beginning of 2005, this was largely due to European activity in the market.

It is all fanfares at Deutsche Börse as it celebrates its fifth year of exchange trade fund business in Europe. The London Stock Exchange may feel somewhat piqued since it was only two days behind the Frankfurt-based exchange but has yet to match the volumes and breadth of product offering found on XTF, DB’s segment for ETF trading.

The most crucial opportunity to reduce the holding costs is to lend the long position of ETFs back to a broker or a hedge fund who is short in the products. Juergen Fritzen explains how.

Although exchange-traded funds (ETF or tracker) should be familiar to nearly all professional participants in the equity and bond markets, the excellent applications offered are still underestimated. While an increasing number of institutional investors such as asset managers, insurance companies, banks, pension funds or other players are discovering and using ETFs for active portfolio management purposes, the applications can be more multifunctional than many portfolio managers think.

The $250m (€191m) Oklahoma Tobacco Settlement Endowment Trust Fund is looking for investment managers to invest $40m in US large-cap value equities. Those interested in getting the business will have to undertake not make any investments in tobacco-related stocks.

An active currency management programme can contribute among the highest quality and most diversified sources of alpha to a portfolio, says Dori Levanoni.

Pension funds, endowments and foundations rightly spend a lot of time thinking strategically about asset allocation decisions. These strategic allocations have also historically determined in which asset classes they will seek to generate so-called “excess return”, which is the incremental return that is over and above what a passive allocation to the market would have generated.

Risk management and diversification benefits are luring many to CDOs, but costs must fall if they are to appeal to UK institutional investors. Roxane McMeeken and Henry Smith report.

Collateralised debt obligations are moving into the mainstream, as a wide range of institutional investors are starting to use the products to increase and diversify their investments in the bond markets. Accordingly, the CDO market is growing rapidly. It has progressed from being the preserve of banks and insurers when it took off in 1995 to a market used by institutions ranging from hedge funds to pension schemes.

Successful electronic systems provide clear efficiency and productivity gains, improve transparency, as well as provide access to liquidity. Andy Nybo explains.

While awareness of money market funds is growing, corporate treasurers still overwhelmingly favour bank deposits. Henry Smith reports on the JPMorgan Fleming cash management survey.

Weak growth, higher distribution costs and more volatile fund volumes globally have contributed to rising European interest in the sub-advisory model,says Ingo Ahrens.

The strategy behind the Orbis Leveraged fund is to borrow money to invest in the Orbis Optimal fund which in turn invests in a series of the firm’s own equity funds. Paula Garrido explains.

Two potential bids now with Competition Commission for next six months.

The ongoing saga of whether the London Stock Exchange (LSE) will finally succumb to a takeover came to a pause following the decision by the UK’s Office of Fair Trading on March 29 to refer two potential bids – from Deutsche Boerse and Euronext – to the Competition Commission.

Alternext, the new and less regulated market for smaller companies, will officially launch on 17 May. Designed as part of a Euronext initiative to enable such enterprises to raise capital in the eurozone, simplified market access and more flexible rules will be offered in return for a commitment to financial transparency and investor protection.

Kas Bank, the Netherlands-based custodian, has declared that its volume of assets under custody is not important, since it makes so much money from value-added services.

Crédit Agricole Investor Services (CA-IS) implemented the first true cross-border globalisation structure in October 2004, using the CA-IS patented Cloning technique. Last February, the cross-border Cloning project was hailed as the most innovative project of the year in the Securities Services industry.

The cross-border globalisation scheme, already running for over six months, applies to a Luxembourg-based fund and a Dublin-domiciled fund launched on September 24, 2004.

Fixed-income trading in Europe and the US has been profitable for most over the past 12 months, but it is those who possess information-packed front-to-back infrastructures that are set to reap further rewards. Roger Aitken reports

Luxembourg’s reawakening, Ireland’s growing pains and Malta’s bid to ‘do a Dublin’. Henry Smith reports on Europe’s preferred ‘offshore’ centres for fund administration.

Europe’s main “offshore” fund administration centres of Luxembourg and Ireland might enjoy critical mass but each is aware that tough competitive challenges lie ahead and complacency is not an option.

Luxembourg, the elder statesman of the back-office, has built up a distinguished reputation in the retail arena over its many long years of service.

Whereas Luxembourg and Dublin benefit from critical mass, Malta wants to take advantage of its small size, offering swift decision making and easy access. Paula Garrido reports.

With its offshore past a distant memory, European Union member Malta is forging ahead with establishing a solid, regulated yet accessible financial services sector.

After jibes that it was insufficiently proactive, Luxembourg has boosted its hedge fund prowess. Roger Aitken reports.

While for many observers Luxembourg lays valid claim to being the pre-eminent tax efficient centre for continental Europe, the financial services industry of the Grand Duchy has by no means been resting on its laurels.

Many myths abound about this tiny nation, which together with neighbouring Belgium and the Netherlands covers a land mass equivalent to 1 per cent of the US.

Challenges abound for Dublin’s maturing hedge fund servicing industry in the form of highly demanding institutional investors and comparatively strict regulation. Henry Smith reports.

Bermuda hopes to provide quality personalised services and make greater use of technology. Roger Aitken reports.