Standard Life fat cats

The first "fat cat" demo at an AGM I can remember for quite a while. This time is was the Amicus bit of Unite having a pop at recently-floated Standard Life for embracing the rewards of public listing whilst cutting the pensions of employees in the company. Plenty of coverage yesterday in the Grauniad, Times, Scotsman and so on.

More final salary closure to come say actuaries

From the Professional Pensions site -

FINAL salary schemes will be hit with a second wave of closures to new entrants and future accruals, the Association of Consulting Actuaries warn.

The trade body’s chairman Ian Farr said new style shared risk schemes are the future of occupational pensions in the UK urged the government to legislate quickly for the new “third regime”.

He said: “We need a new vision for the future of occupational pensions in this country. From employers that we are advising, we know there is a second wave of closures to future accruals coming.

”Most schemes will be replaced by defined contribution arrangements. Our concerns about these schemes is how they apply to moderate earners - the volatility of return from DC is at issue.

“Risk sharing schemes can offer the ‘safety valve’ to provide the degree of cost and benefit predictability that employers need, while providing members with a more stable pension than DC.”

Hewitt actuary Richard Mulcahy said a new model must address the reality that employers only want to be exposed to a limited amount of risk.

”Indexation, both pre and post retirement needs to be in place. It does not give absolute certainty that everyone would like but it is a compromise necessary to limit costs that companies will accept,” he said.

Members of a shared risk scheme would remain contracted in to give a guaranteed layer of DB. The employer would determine the accrual rate based on pay in a year.

The employer would control expected cost of future service accruals using “prudent assumptions”. Employees would be guaranteed the value of their benefit will at least exceed the value of heir contributions.

Farr and Mulcahy said it was essential legislative changes were made to accommodate the shared risk schemes and said the current government deregulatory review should be addressing this.

Mulcahy said risk sharing would also allow mid to large sized employers control over their potential section 75 debt and could lead to lower Pension Protection Fund levies.

Farr said: “This isn’t pie in the sky – shared risk type schemes must more common than DC in the Netherlands. Many companies do not want to shift 100pc of the risk on to employees.

”We need to embrace indexation. We need to get people excited about occupational schemes in this country. Simplifying legislation will allow us to move forward to sharing risk between members and employers. This is a once in a generation opportunity.”

GMB urges Boots trustees to take a tough line

An interesting intervention from the GMB in the Boots private equity buyout story. It doesn't immediately appear that the GMB is actually calling for anything more than the trustees were already doing (although I need to go back and check if the £1bn being knocked about relates to funding the scheme on a buyout basis). It's interesting that quotes don't come from the pensions bods at the GMB too. It all suggests that the unions are well aware of the role the pension funds could/should play in buyout activity. Which is definitely a good thing.

The GMB is also putting something out next week -

GMB's Congress next week will consider a report on the extent to which private equity companies are linked to insolvent pension funds with massive unfunded liabilities which were passed over to the tax payer and other pension funds to make up.

IUF guide to private equity

Finally, a link to the IUF doc A Workers' Guide to Private Equity.

Here's the blurb from the IUF's buyout-watch site:

New IUF Publication: A Workers' Guide to Private Equity Buyouts
The IUF first drew the attention of the international trade union movement to the growing scale of private equity buyouts in the context of the "financialization" of corporate investment to deliver maximum short term financial returns to shareowners. The secretariat has briefed UK and European parliamentarians on the threat of private equity, established a unique website on private equity in the IUF and other sectors (www.buyoutwatchinfo) and assisted affiliates in responding to private equity buyouts.

The secretariat has now published a A Workers' Guide to Private Equity, a 36 page A5 brochure, aimed at IUF affiliates and trade unions and their members around the world. Available in English, and shortly in French, German, Spanish and Swedish, the publication sets out in accessible language what private equity is, how it operates and the dangers it represents to workers and unions. It points to possible strategies in bargaining with the private equity funds who are becoming increasingly significant players as owners and employers in many IUF sectors. It explains how a specific political environment (deregulation) has made it possible for the funds to expand globally, and how political action can contain the funds.

Single copies of the brochure are CHF 5 per copy, plus postal charges (CHF 6.20 for Europe, CHF 8.50 for the rest of the world, for a total of CHF 11.20 for Europe and CHF 13.50 for the rest of the world).

Bulk copies of the brochure are available from the secretariat for CHF 3 per copy for orders of ten or more, plus postage. Bulk orders may be purchased by direct bank transfer, or we can invoice via paypal for secure online payment with a credit card. For more information, contact the secretariat at www.iuf.org

More US union voting research

The US unions were the first ones to start scrutinising how fund managers exercise their shareholder voting rights. Initially this was via the AFL-CIO's Key Votes Survey. But since mandatory voting disclosure for mutula funds was introduced the reports have become more specialised. See for example this report on exec pay votes by AFSMCE. Now the Change To Win Investment Group (the activist investor arm of the splinter union fed in the US) has produced a similar report. Click on the link that reads 'Rubberstamping the Agents of Excess' on their front page.

Private equity prepares its defence

From Today's Telegraph

The British private equity industry is preparing to take the stand to mount a defence against its detractors as the Treasury Select Committee publishes the full agenda for its inquiry into the sector.

The giants of the industry - including Blackstone and KKR - are set to go head-to-head with unionists including the GMB and Unite in front of the committee, which is chaired by veteran Labour MP John McFall. The inquiry follows months of claims by trade unions and Labour politicians that the private equity industry cuts jobs and benefits from tax breaks.

The committee's decision to hold the inquiry was announced in March, after almost six weeks of constant claim and counter-claim by the two sides.

As part of its terms of reference, the committee said it is particularly interested in discussing the regulatory environment surrounding private equity funds, taxation, and the economic context in which the industry operates. Interested parties were asked to submit filings ahead of a May 9 deadline to help the committee's understanding of the key issues.

But the release of the full timetable for the three-day inquiry highlights that the approach is a very open. As well as the obvious private equity houses that will be asked questions, the committee has asked not only TUC general secretary Brendan Barber to attend, but representatives from both the GMB and Unite unions.

Industry body the British Venture Capital Association (BVCA) will also attend, as will a financial markets group of the London Stock Exchange, the Association of Investment Companies, the Association of British Insurers and the CBI.

The sessions are likely to be the first time that the industry learns of the initial thoughts of Sir David Walker - who is chairing an industry committee to look into transparency and disclosure and who is due to attend on the final day. The sessions begin on June 12, with the second and third sessions taking place at Portcullis House on June 20 and July 3.

A view from the industry - 2

I'll post about something other than private equity soon, honest. But this bit from the Telegraph over the weekend is worth a read. Again it's from someone within the industry so it has some interesting perspectives. He is very scepital of the value of much reporting by public companies. Also he says that the big private equity firms are evolving into multi-asset firms, whilst other investors are starting to steal the private equity industry's tricks. Interesting.