Mercer – Norbert Fullerton has been appointed by Mercer as a partner in its financial strategy group (FSG). He will be based in London and focus on expanding the consultancy’s investment advice business to large UK pension funds, with an emphasis on strategic risk management. He joins Mercer from Russell Investments, where he was director in the pension solutions business area. Before that, Fullerton was a senior investment consultant at Towers Watson. Inalytics – Neiloy Ghosh has been appointed to the data and analysis company’s client servicing team. Ghosh joins from Hermes Investment Management, the asset management arm of the BT Pension Fund, where he was head of the investment office, adding to his 17 years’ experience in asset management. He joins as a director.KGAL – Kurt Holderer, the chief executive and CFO of German asset manager KGAL, is leaving the company at the end of December at his own request, the company said. He will be replaced as chief executive by Gert Waltenbauer. Holderer said he was leaving the company, which he first joined in 2007, to make a “personal and professional change”, and added that he had not taken the decision to leave lightly. Waltenbauer joined KGAL in 1993, and has been managing director of KGAL GmbH & Co since 2007. Deutsche Asset & Wealth Management – Munish Varma has been hired by Deutsche Asset & Wealth Management to its loans and deposits group as head of structured solutions – a newly created role. He is based in London and reports to Balaji Prasanna, head of lending in the deposit products and wealth planning solutions division. Varma was most recently global head of structured credit at Nomura, having previously worked for Deutsche Bank in its global markets division for 10 years. UK National Employment Savings Trust – Otto Thoresen, acting director general of the Association of British Insurers (ABI), is to be appointed by the UK government as chairman of the National Employment Savings Trust (NEST). He will replace Lawrence Churchill, who is to step down in February 2015 after five years in the role. Thoresen has led the UK’s insurance lobby group since 2005, and he was chief executive at Aegon Group from 2005 to 2011.Lloyds Bank – Miranda Zhao has been appointed by Lloyds Bank as head of UK funds, taking over from Robina Barker Bennett. Barker Bennett has moved to New York and is leading the bank’s global funds team there. Zhao will be based in London and report to Barker Bennett. She comes to Lloyds Bank from Erste Group Bank, where she was leading the international business and risk-management division. Before that, she was at Citigroup, in the role of director of structured products. Pemberton – Thomas Duetoft and John Doyle are joining asset manager Pemberton in loan origination. Duetoft will be head of origination, leading the company’s investment sourcing team across Europe, focusing on the UK, Germany, France, Benelux, Italy and Spain in particular. Meanwhile, Doyle has been hired as head of origination for the UK and Ireland. Duetoft was previously at Citibank, Dresdner Kleinwort Wasserstein and Royal Bank of Scotland. Doyle joins Pemberton from Siemens Bank, where he headed the European leveraged finance platform.
Whether Altmann’s new position means she’d join the Department for Work & Pensions as de-facto successor to Webb, or straddle the Treasury and Department for Business, Innovation and Skills – in charge of annuities, pension taxation and consumer protection, respectively – will become clearer as Cameron announces his new Cabinet in the coming days.For those that have been calling for greater transparency of fees, note that Altmann has told a UK newspaper she is in favour of a “pounds and pence” approach to fee disclosure, a view championed by the Investment Association, formerly the IMA.While on the face of it a common-sense approach, those saving small sums may well be left under the impression they are being charged reasonable amounts when in fact the percentage of contributions deducted would undermine their future savings goals.Regardless of Altmann’s approach, the end of Webb’s tenure in Parliament is likely to see the end of his focus on defined ambition and greater risk-sharing in pensions. The recent budget freedoms, based solely around a saver’s ability to withdraw his pension pot at his convenience, run counter to the collective approach pursued in the Pensions Scheme Act 2015 that allowed for the launch of a collective DC model in the UK.Gone is the focus on improving the outcome for a cohort as a whole – such as by introducing Independent Governance Committees to oversee insurance-based contract arrangements – replaced by a need to ensure individuals have the ability to understand the costs associated with each pension product, rather than pooling risk at retirement.In short, the UK should expect to see a shift to a traditional Conservative view of individualism and free markets, with an overtone of consumer protection as it now affects a part of the population key to future electoral victories. But those hoping for a quiet revolution that could have seen the UK emulate the European system of solidarity will be disappointed by Webb’s departure and the failure of Gregg McClymont’s Labour party to form the next government. Steve Webb MP is no more. The Liberal Democrat front-bencher who, as a result of 2010’s hung Parliament became the UK’s longest-serving pensions minister, was one of close to 50 parliamentarians from the junior coalition party to lose his seat in Thursday’s general election. In a surprise to everyone, including the Conservatives led by David Cameron, the incumbent prime minister won a majority after months of polls suggesting no party would have control of the House of Commons. The pensions industry now faces the reality of a new minister, maybe one with less of a grasp of the subject matter.On the other hand, the person charged with bedding in the pensions freedoms unveiled by George Osborne last year may be an all too familiar face: Ros Altmann. Altmann, a former director general of Saga Group, is already well known to the outgoing government for her work as Business Champion for Older Workers, recently drafting a report that suggested a minister should be put in charge of extending working lives.While the notion of a dedicated minister for older people was rejected by Cameron, who argued during the campaign that the concerns of the UK’s ageing population should be on the mind of all within the Cabinet, it was announced a few weeks ago that Altmann would join the House of Lords if the Conservatives won a majority.Altmann’s peerage would see her join the UK’s unelected upper house in charge of financial consumer protection and financial education, the party said, with a review of pension product charges and the development of Pensions Wise, the body offering guidance to those confounded by their new ability to draw their pension pot down from age 55.
Institutional investors including Ilmarinen and AP2 are standing by their Chinese equity holdings despite ongoing and pronounced market turbulence, which last week led the local regulator to intervene in the market.The China Securities Regulatory Commission (CSRC) last week prohibited any shareholder owning more than 5% of a locally listed company from selling down its shares for six months.The move was a reaction to volatility that saw two Chinese exchanges fall by 10% on opening, triggering their suspension. Finnish pensions mutual Ilmarinen, which has allocated more than 5% of its equity portfolio to Chinese equities, declined to speculate on how the volatility might affect its holdings. Anna Hyrske, a Hong Kong-based equity portfolio manager at Ilmarinen, told IPE the limitations imposed by the CSRC were “not favourable steps in opening up the markets”.But she noted that the ban on selling shares would have little effect on Ilmarinen, due to the size of its investments in the region.“China is one of the largest markets in the world, and its inclusion in the main indices is more a question of when rather than if,” she said.“Therefore, it is important we keep an eye on the market and learn more how it behaves, how it moves – what the triggers are affecting this market.”Index provider MSCI in 2013 warned investors to prepare for the eventual inclusion of China into its indices.In May, rival provider FTSE announced it would be including Chinese A shares in two emerging market indices, gradually increasing the exposure from 5% to 32% of each index.Hyrske said the recent volatility, although remarkable for its speed, was perhaps understandable.“The Chinese stocks have had a massive rally in the past year,” she said.“It is natural that, after such a rally, there will be some price adjustments. The speed and scale is just something that caught everybody off guard.”For its part, Swedish buffer fund AP2, which in February said it would allocate a further $200m (€175.5m) to Chinese equities after its holdings in the region returned 59%, also stood by its investments.A spokeswoman stressed that the SEK240bn (€25.2bn) fund’s interest in Chinese equity was for the long haul.“When making our allocation decision, we have been well aware of the short-term volatility it could entail and have scaled our exposure appropriately,” she said. “Since entering the market, our returns, including the recent turmoil, have been very good.”Hyrske added that Ilmarinen would monitor any future market changes and focus on large-cap companies with sufficient liquidity – particularly ones offering greater transparency.“Certain sectors,” she said, “offer interesting opportunities with attractive valuations, especially consumer-related sectors in the ‘new economy’.”Meanwhile, APG, asset manager for Dutch civil service pension fund ABP, pointed out that the largest problems – high volatility and the suspension of stock market quotations – had occurred chiefly at the Shanghai and Shenzhen exchanges.A spokesman said: “We are not active in listed A-shares over there for our clients, as these local exchanges and this local legislation are still in their infancy.“APG has been investing in China for years through H-shares on Hong Kong’s stock exchange. However, these seem to be less affected than specific A-shares, and this portfolio has not been subject to listing suspensions.”
Lithuania’s voluntary second-pillar pension funds returned a nominal average 2.2% in the first nine months of 2016, a marked improvement on the 0.11% result generated a year earlier, according to data from pensions regulator Bank of Lithuania (BoL).In the third quarter, the average return rose to 2.32%, from 1.12% in the second quarter, minus 1.18% in the first and minus 4.28% a year earlier.Audrius Šilgalis, chief specialist of BoL’s financial services and market analysis division, told IPE the improvements were due to growth in the European and US financial markets.While all the second-pillar funds generated positive results in the third quarter, the best returns came from equity-weighted plans, while bond-weighted vehicles were dampened by low interest rates. By far the highest return, of 4.19%, came from the four highest-risk funds, which can invest up to 100% in equities.This marks a sharp turnaround from last year’s average negative return of 9.27%.Both the seven medium-risk funds, investing 50-70% in equities, and the four low-risk ones (25-35%) also moved from negative to positive territory, with average returns of 2.55% and 1.68%, respectively.In contrast, the four bond-investing conservative funds returned only 0.45%, 1 percentage point lower than a year earlier.Membership of the second pillar grew by 3.8% year on year to 1.25m, with 51.3% of the total invested in medium-risk funds, followed by low-risk ones (23.5%) and high-risk plans (16.9%).Assets grew by 18.4% to €2,238m, boosted by this year’s increase in additional member and state budget contributions.In the third pillar, third-quarter returns averaged 2.82%, compared with minus 6.03% a year earlier, with the five high-risk funds generating 3.98%, the four medium ones 2.44% and the three conservative plans 1.45%.However, due to earlier market turbulence, the 3.73% average nine-month returns of conservative funds outperformed those of the high-risk (3.11%) and medium-risk (1.71%) plans.The number of subscribers grew by 9.3% over the year to 49,714, of whom 50.7% chose medium-risk plans and 31.9% high-equity vehicles.Assets increased by 35.7% to €70.8m.
One conservative MP criticized the step, saying only the return should be considered for investments of pension money. He said he wanted to put forward a motion banning Swiss Pensionskassen from becoming members of SVVK-ASIR and applying ethical or sustainable criteria to their investments.German civil servants’ scheme to exit energy firmsMeanwhile in Germany, the local government pension fund for the civil servants of North Rhine-Westphalia announced it would divest from energy producers EDF and ENGIE.This is part of a new sustainability strategy for the €10.4bn portfolio, which was created last year.Beginning this month, investments are to be screened under a new set of criteria. These have not been published in detail, but include a ‘best-in-class’ approach. Where necessary, divestments are made.The regional finance ministry confirmed in a statement the ENGIE corporate bonds had been sold the same day the divestment decision was made. ENGIE runs nuclear power plants via its Belgium subsidiary. These plants have been criticized for security failures and other potential risks. One of the largest critics was the German province of North Rhine-Westphalia, which borders Belgium. AP2 invests in Dutch-issued affordable housing bondSwedish national pensions buffer fund AP2 has invested an undisclosed amount in a social bond issued by NWB Bank in the Netherlands to finance affordable housing in the country.In a statement, the Swedish fund said: “Social bonds fit well into the AP2’s global interest rate portfolio as it broadens the fund’s ESG work and provides opportunities for further diversification and is a way to combine good return on capital with allocation of investments in important and good social project.”The pension fund said it made its first social bond investment in 2014, and has put money into a number of such bonds since.“The return needs to be similar to other fixed income investments with similar credit risk,” it said.NWB Bank launched the Affordable Housing Bond at the beginning of this month in two tranches, a seven-year €1.5bn issue and a 15-year €500m issue.The proceeds are to finance lending to social housing associations in the Netherlands in accordance with the bank’s Affordable Housing Bond Framework, the bank said. The seven-year bond carries a 0.25% annual coupon, and the re-offer price is 99.799%, while the 15-year bond has a 1.25% annual coupon and a re-offer price of 99.946%. The notes will be listed on the Luxembourg Stock Exchange, NWB Bank said. The largest Swiss Pensionskasse, the CHF38bn (€34.9bn) Publica, is to divest from five unnamed arms manufacturers.Patrick Uelfeti, CIO at Publica, confirmed the decision on Swiss national radio.It follows the recommendations by the SVVK-ASIR sustainable investment platform that Publica co-founded in 2015.In March, the analysts issued a list of 15 arms companies producing either cluster ammunition, nuclear weapons in countries without a nuclear weapons arsenal, or anti-personnel-mines.
The UK financial markets regulator has finalised rules strengthening the duty of asset managers to act in the best interests of investors in their funds.The rules are the first that the Financial Conduct Authority (FCA) has adopted following its landmark asset management market study. The study, published last year, found weak price competition among asset managers and led it to refer the investment consultant sector for a competition investigation.The regulator dropped the term ‘value for money’ from the rules requiring fund managers to justify to investors the charges they take from funds, following a consultation.However, requirements published today stated that fund charges should be assessed annually in the context of the overall value delivered. Christopher Woolard, executive director of strategy and competition at the FCA, said: “Today’s announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.”The new rules also require fund managers to introduce independent directors to fund boards and to repay so-called box profits to the fund for the benefit of investors. Another measure brings individual focus and accountability to certain fund managers.The FCA said the measures would deliver better protection for all investors, both those who were actively engaged with their investments and those who were not.The regulator also said it wanted managers to improve communication regarding their funds so that investors could more easily understand what their choices were and what they ultimately invested in.“We welcome the FCA recognising that people judge their asset manager by investment performance and service, as well as cost.”Chris Cummings, Investment Association chief executive Alongside the policy statement, the FCA has launched a further consultation on improving communications, aiming to address:fund objectives – according to the FCA these should be expressed more clearly and be more useful to investors;benchmark constraints – where funds are benchmark-constrained or limited in how far their holdings can differ from an index, this should be clear;appropriate use of benchmarks – if a fund has a benchmark, its use must be explained and consistently disclosed.The FCA today also published a paper on the findings of an experiment it carried out on the impact of how information was presented. It said the work “reinforced the importance of disclosing costs and charges in a clear and meaningful way” and that investment managers should consider the results when thinking about their disclosure under new regulations.Industry reactionAt the Investment Association, the fund management trade body, chief executive Chris Cummings praised the regulator for “recognising that people judge their asset manager by investment performance and service, as well as cost”.Richard Dowell, co-head of clients at Cardano, said the report was “a step in the right direction” for ensuring investment managers acted in the best interests of investors, “and crucially, show how they actually do this”.In Dowell’s view, however, the FCA should have kept the term ‘value for money’ because managers might differ from each other in how they present the value they have delivered. This could “cause headaches every year” at the time of the annual assessment, he said.Caroline Escott, policy lead for investment and defined benefit at the Pensions and Lifetime Savings Association, said: “Cost transparency is vital but it is important to avoid a ‘race to the bottom’ on costs and we must instead encourage investors to focus on the broader value for money they receive.” Andrew Glessing, head of regulation at Alpha FMC, a consultancy, added: “Far from kicking its proposed package of remedies into the long grass, as many commentators suggested last year, the FCA has remained committed to the direction of travel it set out through consultation.”The FCA’s policy statement on changes to fund governance is available here.Its consultation paper on improving communication and information disclosure is here.The results of and report on the regulator’s work on information presentation is here.
In March APG sold its subsidiary Inadmin – which specialises in the administration of low-cost defined contribution vehicles (PPI) – to Dutch administration firm RiskCo.ABP established Loyalis in 2002 in order to offer its members insurance products.However, as Dutch regulator De Nederlandsche Bank decided that this posed unfair competition in relation to the insurance sector, Loyalis was made an independent entity in 2008.Initially it offered a savings product to compete with banks. Currently it focuses on labour disability insurance.Its expectation of significant growth in pension products for self-employed workers has not materialised, with approximately 2,700 clients at year-end – significantly short of its target of 50,000 by 2019.APG’s annual report also revealed that price reductions on pensions provision negatively affected its profit.As pension funds paid less for its services, APG had to write off €74m from its margin. As a result its profit dropped 27% to €47m.A spokesman declined to provide details about which pension fund clients had their costs reduced.However, its main client, ABP, said in its annual report for 2017 that its costs for pension provision had decreased €5m as a result of a new cost-cutting agreement with APG.Last year, APG paid staff at its asset management division €30m in bonuses against €31.5m in the previous year. APG, the asset manager of the €405bn Dutch civil service scheme ABP, is considering selling its insurance subsidiary Loyalis as it needs “scaling-up”.In its annual report for 2017 APG said that, together with Loyalis, it was carrying out a “broad investigation” into the “best chances for the desired growth” for its insurer.Sale was an option, an APG spokesman confirmed to Dutch financial newspaper FD. “All options are on the table,” he said.According to the FD, a sale was the most logical outcome given ongoing consolidation in the Dutch insurance sector due to price pressure and a declining life insurance market.
Innovative technology such as robo-advice and artificial intelligence could play an important role in the future of pensions, according to panellists at the annual conference of IPE’s sister publication Pensioen Pro.At last week’s conference Evert Jaap Lugt, director of tech incubator YES!Delft, gave the example a robotised “pensions expert” that would be able to simultaneously explain to millions of people how their accrued pension would be affected if they were to cut their working hours, or take earlier retirement.He also suggested that increasing amounts of data could be gathered and analysed by artificial intelligence through the expansion of the “internet of things”.Health-related data could, for example, be used to assess life expectancy and have an effect on the pensions sector as a consequence, argued Lugt – considered by some as the Dutch equivalent of Mark Zuckerberg. Source: YES!DelftEvert Jaap Lugt, director, YES!DelftLugt also predicted improved longevity “as bio-technology would improve the ability to recognise and fight cancer, and 3D printing could be used to artificially reproduce human organs”.Gerard Roelofs, director of client solutions at Kempen Capital Management, emphasised that asset managers should ready themselves for the impacts of innovation as well.“Artificial intelligence and big data could be used for establishing the value of an investment,” he said.Roelofs said blockchain could play an important role in improving the liquidity of illiquid investments by enabling small investors to take a limited stake in a pipeline or a building.“Some property funds are already investigating the options,” he said.Medium-sized asset managers that don’t outperform should focus particularly on innovation or risk being marginalised, Roelofs argued.“Fintech firms who take over asset manager operations are popping up everywhere,” he added. He also argued that blockchain could be deployed to increase efficiency in pensions administration and reduce costs – something that is already being explored by Dutch pensions managers APG and PGGM.
Law Debenture, Santander, APG, Montae, Shell, Franklin Templeton, Martin Currie, KPMG, ICI Global, BMO GAM, NILGOSC, Hymans RobertsonLaw Debenture/Santander – The financial services group has hired Santander’s pension director Brian Kilpatrick as a trustee director within its independent trustee business. He was previously acting director of pensions for the UK arm of the Spanish bank, having taken over from Anthony Barker, who left last year.Before joining the Santander pension scheme, he worked at the group’s asset management arm advising institutional clients on investment strategy. He was previously head of investments at UK high street chain Marks & Spencer for approximately 10 years, and was latterly head of the Marks and Spencer Pension Trust. He also has experience working in the Local Government Pension Scheme.Michael Chatterton, managing director of LawDeb Pensions Trustees, said: “Brian’s experience in managing pension schemes in both the financial service and retail sectors mean he will hit the ground running, delivering value to his clients from the outset. An expert understanding of investment strategy is increasingly a core skill for trustees and one of which Brian has an abundance.” APG – Bart Le Blanc has stepped down as chairman of the supervisory board (RvC) of APG Group as of 22 July. He has been on the RvC since 2014, and has completed his term as scheduled. Until a successor is appointed, Pieter Jongstra, the RvC’s vice-chair, will temporarily carry out his tasks. Le Blanc remains a member of the RvC of APG Asset Management where he started as chair on 22 July.Montae – Janwillem Bouma is to join Dutch pensions consultancy Montae as a partner as of 15 September. Bouma, who has been director of the two pension funds of Shell Netherlands since 2010, will become responsible for modernising collective pensions provision in the wake of Montae’s co-operation with Swedish fintech firm Söderberg & Partners.Bouma joined Shell in 1987 and has held several operational and financial management positions at the energy giant. He has been chairman of industry organisation PensionsEurope since 2015.Franklin Templeton Investments – The US asset manager has hired Andrew Ness as a portfolio manager within its emerging markets equity division, effective from 17 September. He will join the team running the UK-listed Templeton Emerging Markets Investment Trust alongside lead manager Chetan Sehgal.Ness joins from Martin Currie’s global emerging markets team, and has previously held similar roles at Scottish Widows Investment Partnership and Deutsche Asset Management.Franklin Templeton has been rebuilding and growing its emerging markets team in recent months following the departure of Mark Mobius, who left to set up his own investment company, taking fellow managers Carlos Hardenburg and Greg Konieczny with him.Martin Currie – Meanwhile, Martin Currie has moved quickly to replace the departing Ness with the appointment of Paul Sloane to its global emerging markets team from 13 August. Sloane previously worked on Martin Currie’s global equity team before leaving for the charity sector last year when his fund was shut down.KPMG – Jorge Morley-Smith has joined the accounting and consultancy giant from the Investment Association (IA), the UK’s asset management trade body. In his new role, Morley-Smith is a director in KPMG’s asset management tax team.At the IA he was head of tax for six years, before becoming the association’s lead on Brexit negotiations. Morley-Smith said: “The issues surrounding tax and the investment industry more broadly are constantly evolving, both locally and globally. I look forward to helping clients understand and keep pace with that change.”Investment Company Institute (ICI) – The US-based asset management organisation has named Patrice Bergé-Vincent as the managing director of its global division from the start of next year. He will replace Dan Waters, who is retiring after seven years in the role, the ICI said.Bergé-Vincent has been managing director for ICI Global in Europe since April 2015. He was previously a partner with PwC France in its asset management division, and has also led asset management regulation at the French financial regulator Autorité des marchés financiers (AMF).In addition, Alexa Lam, a former senior official at Hong Kong’s financial regulator, has been appointed chief executive officer for ICI Global’s Asia Pacific division, effective 1 October. She is currently a professor in the law faculty at the University of Hong Kong, and will succeed Qiumei Yang.BMO Global Asset Management – The fund management arm of the Bank of Montreal has hired Anne Coupe to the newly created role of head of global consultant relations. She will be responsible for expanding the company’s engagement with leading global investment consultants as it seeks to grow its global institutional business.Coupe was previously head of consultant relations at UBS, and has also worked for companies including Deutsche Bank, William Blair and JP Morgan Chase.NILGOSC – Northern Ireland’s department for communities has extended the term of appointment of Trevor Salmon as chair of the Northern Ireland Local Government Officers’ Superannuation Committee, which oversees the £4bn Local Government Pension Scheme in Northern Ireland.Committee members Joseph Donaghy, Bumper Graham and Celine McCartan have also had their second term of appointment extended from 1 July 2018 to 31 December 2018. They have all served on the Committee since July 2009. Lindsay Todd, who joined the committee in May 2013, has been reappointed for a four-year term from 1 July 2018 until 30 June 2022.Hymans Robertson – Gary Evans has been appointed head of the consultancy’s third-party administration practice. He has held a number of senior operational and client management roles, most recently at Mercer and prior to that at PwC and Willis Towers Watson.Evans sits on the board of the Pensions Administration Standards Association and is currently leading an industry wide review of the DB transfer process. He was also involved in drafting the original industry guidance on pension scams and developing industry standards for DC transfers.
“The financial market plays a central role in this transition and by promoting the market for green bonds, the government wants to increase the opportunities for sustainable investments.” Sweden’s largest pension fund Alecta has welcomed the government’s plan to issue green bonds for the first time by next year – but others have voiced doubts about the proposed environmentally-linked sovereign debt.The Swedish government announced last week that it would instruct the Debt Office to issue green bonds by 2020 at the latest. While green bonds had previously been issued by both public and private bodies in Sweden, this would mark the first state issuance, the government said.The bonds will finance budget expenditure for sustainable schemes and projects, it added.Per Bolund, Swedish financial markets minister, said: “The fact that the state is now issuing green bonds is an important part of the transition towards sustainable development. “The expected return of green bonds should not be lower just because they are qualified as green investments”Magnus Billing, CEO, AlectaIn 2018, the government-commissioned report ‘Promoting the Market for Green Bonds’ concluded that the most important promotion measure would be for the government itself to issue the bonds.Alecta chief executive Magnus Billing told IPE his pension fund welcomed the government’s decision to issue green bonds, and it would participate “if the price is right”.He added: “The expected return of green bonds should not be lower just because they are qualified as green investments. At the moment, the demand for green bonds is much higher than the supply, and that is reflected on the pricing.”Last month, Billing advocated the issuance of Swedish government green bonds in a newspaper opinion piece.AMF casts doubtHowever, Sweden’s third-largest pension fund AMF expressed doubts about the effectiveness of the proposed assets, warning that the bonds risked overturning the green transition in a worst-case scenario.Jonas Eliasson, chief executive of the firm’s AMF Funds unit, said: “As we understand it, it is not possible to earmark certain funding for certain projects in the state budget. This means that these investments would be implemented regardless of whether the green bonds were issued or not. The lower funding cost from green bonds will thus benefit both brown and green objects.”Eliasson added that, although green bonds were in high demand among fund companies wishing to appear sustainable, it was doubtful that investments in government green bonds would be any greener than other government-issued bonds.Swedish life and pensions firm Folksam said that, having already invested over SEK30bn (€2.9bn) in green and sustainable bonds, it welcomed the government’s decision. Tobias Fransson, head of strategy and sustainability, AP4A spokesperson for Folksam said: “The vision of the Folksam Group is that our customers should feel secure in a sustainable world. Sustainable investments that go hand-in-hand with good returns are an important part of our core business.”Although it declined to comment specifically on the planned green bond, national pensions buffer fund AP4 said there had to be a strong connection between green bonds and underlying green assets for the market to be successful.Tobias Fransson, AP4 head of strategy and sustainability, told IPE: “An asset-backed structure where green bonds are backed by green assets would contribute to a unique set of expected return and risk characteristics, which would lower cost of capital for green projects and attract many more investors than at the current situation.”In May, the Dutch government issued the country’s first state green bonds, with European pension funds becoming heavy subscribers to the €5.9bn issue.