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FRIDAY TICKER: OCTOBER 31TH 2014: - The re-election of President Dilma Rousseff on Sunday has important implications for Brazil's Baa2 sovereign rating, as well as for the credit quality of the country's banks, corporations and securitisations, says Moody's. The rating agency says the narrow margin of her victory underscores the challenges she faces as she looks to revive Brazil's lacklustre economic performance - Facebook has reported third quarter results, again showing strongest year-on-year growth in mobile, where daily active users (DAUS) rose by 39% to 703 million, while overall daily users rose 19% to 864 million DAUS - Francisco Partners, a global technology-focused private equity firm, today announced it has completed the acquisition of Vendavo, Inc., a leader in business-to-business (B2B) pricing solutions. David Mitchell, an operating partner of Francisco Partners, will join Vendavo as CEO and lead the company’s worldwide business strategy and operations. Incumbent CEO Neil Lustig will transition into an advisory role with Vendavo. Francisco Partners now has a controlling stake in the Silicon Valley company. The acquisition by Francisco Partners provides additional resources to bolster Vendavo’s aggressive growth strategy, enabling the company to expand sales and marketing while accelerating cloud development. Vendavo completed a record first half of 2014, with nearly 30-percent growth in bookings, and the release of two breakthrough solutions for price and sales effectiveness. Based in Mountain View, Calif., Vendavo provides revenue and price optimisation solutions for B2B mid-market and enterprise companies.Francisco Partners was advised by JMP Securities, and Vendavo was advised by William Blair. Financial terms of the transaction were not disclosed – The International Finance Corporation, or IFC, issued the four-year, triple-A rated bond only to Japanese retail investors, tapping into the growing interest in low-risk investments with a social or environmental focus. The World Bank, has sold several billion dollars in green bonds over the past six years, with proceeds going to help countries and firms cut greenhouse gas emissions and adapt to climate change. The latest offering, Inclusive Business bonds, would finance firms that work with or sell to the 4.5bn people in the world that make less than $8 a day. IFC said while most poor people do not spend a lot individually, as a whole they represent an estimated $5trn consumer market that firms could tap into - NAKA Mobile, a telecoms and technology specialist based in Switzerland, has claimed the industry’s first virtualised evolved packet core (vEPC). Utilising Cisco’s NFV services, NAKA claims it will transform its network architecture, expand beyond Switzerland, and provide its mobile Internet services to customers across the world - The Internet Society and Alcatel-Lucent have agreed to provide support and equipment for the development of the Bangkok Internet Exchange Point (BKNIX). The project will utilise the Internet Society’s Interconnection and Traffic Exchange (ITE) programme and is intended to deliver a stronger and more robust Internet infrastructure for South East Asia.

Is trustee confidence in managing DB risks waning?

Monday, 23 July 2012
Is trustee confidence in managing DB risks waning? As Defined Benefit (DB) scheme sponsors and trustees in the UK work to put their schemes on a more stable footing amid continued market volatility trustees' confidence in their ability to successfully manage the DB risks facing their plans may be waning, according to MetLife Assurance Limited’s 2012 UK Pension Risk Behaviour IndexSM (UK PRBI).   http://www.ftseglobalmarkets.com/

As Defined Benefit (DB) scheme sponsors and trustees in the UK work to put their schemes on a more stable footing amid continued market volatility trustees' confidence in their ability to successfully manage the DB risks facing their plans may be waning, according to MetLife Assurance Limited’s 2012 UK Pension Risk Behaviour IndexSM (UK PRBI).  

As Defined Benefit (DB) scheme sponsors and trustees in the UK work to put their schemes on a more stable footing amid continued market volatility, scheme trustees’ confidence in their ability to successfully manage the DB risks facing their plans may be waning, according to MetLife Assurance Limited’s 2012 UK Pension Risk Behaviour IndexSM (UK PRBI).   The study of 89 sponsors and trustees analysed how each group viewed 18 investment, liability and business risks that affect their pension schemes, and assessed how well they believed they were managing those risks.

The overall index value of the 2012 UK PRBI,which measures the importance that sponsors and trustees ascribe to each risk, their perceived success at managing each risk and the consistency between the two,remained consistent from 2011 to 2012 at 79 out of 100. However, the Index value for trustees fell another two points year-on-year to 78 in 2012 from 80 in 2011 and 82 in 2012. Conversely, the Index value for scheme sponsors is steadily rising, increasing by two points to 80, from 78 in 2011 and 75 in 2010. These movements, taken together, account for the overall 2012 Index value remaining level.



The drop in self-reported success at managing several key DB-related risks, including Scheme Governance and Inflation Risk, helps to partially explain the inverse relationship of the Index values between sponsors and trustees over the past three years.  In 2012, trustees rated their overall success at managing risks a 4 or 5 (out of a scale of 1-5, with 5 indicating success) 77% of the time, down from 80% in 2011 and 83% in 2010.

“Constant regulatory changes appear to undermine trustees’ confidence, as evidenced by the fall in the reported success of Scheme Governance and Inflation Risk.  Increasing levels of uncertainty being generated by issues such as Guaranteed Minimum Pension (GMP) Equalisation and Solvency II for pension schemes are impacting trustees’ confidence in managing some of the critical risks facing their schemes. Where once there was a degree of certainty, the revisiting of GMP Equalisation by the Department for Work and Pensions now requires that trustees again reconsider and tackle this issue,” holds Wayne Daniel, chief executive officer of MetLife Assurance Limited. 

Funding deficits is the most important risk facing scheme sponsors and trustees for the second year in a row, according to the 2012 UK PRBI. The ranking of Funding Deficits as the most important risk for the second year in a row reflects significant fluctuations in scheme assets and liabilities, mainly as a result of the volatility in equities and rising bond prices. At the same time, schemes may have also seen their liabilities grow due, in at least part, due to corporate bond and gilt yields, and continued uncertainty around the Eurozone.

Scheme sponsors and trustees continue to face unprecedented challenges on the economic and regulatory front. Volatile markets, driven in part by the Eurozone crisis, have demonstrated how quickly and significantly pension liabilities (and funding deficits) can change. "As a result, we expect sponsors and trustees to pay even greater attention to the connection between investment strategies and the risks that impact a scheme’s funding status. Additionally, scheme sponsors and trustees should consider incorporating triggers for de-risking the scheme in order to protect it.,” adds Daniel.

To ensure the viability of their schemes and safeguard members’ benefits, sponsors and trustees, says the report, are continuing to closely monitor the Employer Covenant. This risk ranked second among trustees for the second year in a row, and third among scheme sponsors.  Interestingly, the Importance Selection Rating, or the number of times the risk was selected by respondents when presented alongside other risk factors, for Employer Covenant is rising considerably among scheme sponsors: from 41% in 2011 to 49% in 2012. This may reflect the increased focus among scheme trustees on the Employer Covenant following The Pensions Regulator (TPR) guidance issued in November 2010.

The results of the 2012 UK PRBI demonstrate that scheme sponsors and trustees are continuing, and strengthening, their focus on a handful of key risks.  The overall Importance Rankings for the top four risks remained consistent from 2011 to 2012.

2012 vs. 2011 UK PRBI Overall Importance Ranking

RISK FACTOR                   

2012 RANKING

2011 RANKING

Funding Deficits

1

1

Employer Covenant

2

2

Asset and Liability Mismatch

3

3

Meeting Investment Return Targets

4

4

Measurement of Technical Provisions/Liabilities

5

7

In addition, the range between the Importance Selection Rates for the most important risk and least important risks this year is 66 percentage points, compared to 57 percentage points in 2011. This continues the trend established in the inaugural UK PRBI in 2010. 

Scheme sponsors and trustees continue to move toward a co-ordinated holistic approach to pension risk prioritisation, according to the 2012 UK PRBI. The importance rankings between trustees and sponsors are aligned within one or two ranking spots for all but one risk factor:  Asset Diversification. Trustees rank this fifth in importance whilst sponsors rank it 10th.

More details on the 2012 UK PRBI can be found at: www.metlifeassurance.co.uk/knowledge-centre/research

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