Month: March 2014

Unify CEO: ‘millennials are changing communication’

Posted on by Ashton Wenborn

“It used to be that you’d work in a fixed location of some sort, and people were tethered to that environment, whereas today it’s entirely untethered,” says Dean Douglas, newly appointed CEO of Unify – formerly Siemens Enterprise Communications.

“I haven’t been down to my office in a few weeks now, and I think that increasingly we’re all finding this to be very much the case for ourselves. No matter how you work, the fact is that you’re no longer tied to your desk, and that, in essence, is the fundamental change affecting our industry.”

In recent years the communications software services industry has undergone a period of transformation, after having long ago advanced from its simple beginnings in telecommunications and more recently incorporated all manner of devices into the mix.

“Because of these multi-faceted communications, business has changed dramatically,” says Douglas, who spoke to World Finance about the ways in which the workplace dynamic has transformed and how it is the communications business has changed as a result.

Studies undertaken by the Pew Research Centre show that by 2020 approximately 50 percent of the workforce will consist of millennials, who, says Douglas, are best characterised by a desire to be social and to leverage technology wherever they can in satisfying this pursuits. As such, the future of the workplace will be a product of both technological and cultural change, and one that will be typified by a multi-faceted, web-based and increasingly mobile approach to communications.

“I find myself doing as many video conferencing calls as regular conference calls these days, and, on top of that, maintaining a strong presence on various social media platforms which is becoming an important part of my business day-to-day. These social aspects, coupled with the increasingly complex ways in which we communicate today, have been the biggest driving forces behind the company and the wider industry in recent years,” says Douglas.

Technological evolution
It is imperative in today’s hyper competitive climate that businesses are able to easily communicate their performance targets and strategy with as little complication as possible.

The communications software services industry has undergone a period of transformation, after having long ago advanced from its simple beginnings

“Only a few short years ago in what some would call a “traditional business environment”, if you wanted to host a video conference for example, you’d have to go into a specially fitted room with the appropriate equipment and support.

“Skip forward to the present day and most enterprises can dial into a web-based platform and download the appropriate software to make just about any video conversation happen. When you think about that huge transition, you begin to wonder about what else can be achieved. If you can make something as extraordinarily complex as video accessible to all, then think of what else is in store for the future of communications.

“Having experienced this evolution first hand, I think this is why the marketplace today is looking for a way to incorporate that same sense of innovation in various other areas, while at the same time integrating the whole solution.”

Born of Siemens’ engineering DNA, Unify builds on a rich heritage of excellence and innovation to bring integrated communications and networking solutions to 75 percent of the Global 500. Late on in 2013 the vendor rebranded as Unify, and, with this announcement, stated its intent to focus specifically on addressing the various ways in which the workplace dynamic has changed communications for good.

“The fact is that the marketplace is changing significantly and we’ve got a brand that really does embrace where we want to be and where the marketplace is heading, and that is unifying communications beyond on-premise capability.”

The new brand reaffirms Unify’s commitment to be a transformational leader in the segment and brings the company’s focus to moving to solutions that go beyond simple unified communications to solutions that bring communications, content and context together to provide more powerful collaboration than was ever possible before.

This shift in the way people communicate, driven by an increasingly millennial workforce, is something that we feel we have to address

“These developments drive progress for a lot of organisations, ourselves included, and call for a much more robust communications solution. This shift in the way people communicate, driven by an increasingly millennial workforce, is something that we feel we have to address.”

Unify’s principal targets are fourfold in nature, says Douglas, with each focal point designed to bring the company’s diversified communications solutions to market ahead of the rest, and to keep apace with the rapid rate of technological and cultural change in the industry. The company’s first area of focus is to make sure that they’re adequately leveraging its people.

“What I mean by that is we take advantage of the broad skill sets that we have here and that we make sure our employees’ skills and capabilities are capitalised on to full effect.”

Unify’s second area of focus is to gain a further understanding of the changing marketplace and, as a result, the challenges that its customers are facing in the communications space in the future.

“Over the last few years we’ve seen customers challenge traditional views in our industry as communications have become a lot more mobile, and gathered web capability like never before.

“For this reason we need to keep moving to make sure that we’re very much in sync and prepared for these market changes, both from a customer requirement and an education standpoint.”

Aside from Unify’s recent efforts to plug its new combined communications platform Ansible, the company continues to focus on product development and expansion among its existing portfolio.

“Thousands of companies, including some of the largest in the world, have substantial investments in Unify on-premise communications solutions. Our role as their trusted advisor is to help them with a road map to address these marketplace changes and the demands of an increasingly mobile and millennial workforce, while maximising their investments in existing technology.”

Spearheading specialised products
The company’s final point of focus is through expanding its geographic reach and tapping emerging markets. As the developing world becomes much more technologically adept, emerging nations will come to require Unify’s services in a way that is efficient and cost-effective for their specific set of circumstances.

As the developing world becomes much more technologically adept, emerging nations will come to require Unify’s services in a way that is efficient and cost-effective

Expansion in this field represents a sizeable opportunity for companies such as Unify, one that it cannot afford to ignore if it is to remain at the forefront of the industry. Its products differ quite crucially depending on their stated purpose. Whereas the company offers some products that are horizontal in the sense that they address basic communications requirements for just about any enterprise, its second area of focus is on providing specialised solutions for specific clients in numerous industries.

“One of the crucial areas we’ve addressed in terms of the vertical marketplace is financial services; we have a trading desk platform that is very robust, in fact one of the largest traders, Wells Fargo, uses our platform for trading,” says Douglas. “We also have a set of capabilities that address specific requirements for healthcare providers, which are very distinct from what you might find in other enterprises.”

The product that best characterises Unify’s unified approach to communications, however, is ‘Ansible’, which looks to redefine the way in which people interact in the modern day workplace.

“Ansible is a suite that allows for meaningful communications across virtually any interactive channel or device. What it creates is seamlessness across various devices and the ability to have the same conversation on any number of platforms.

“I think that a robust communications solution should provide for the opportunity to make more accurate decisions because all the facts are accessible. If you’ve got the ability to address various sources of relevant information then there’s no reason why companies can’t respond rapidly to whatever opportunities there may be,” says Douglas.

Ansible is a direct response to the changing demands of the workplace and something that will surely improve team productivity, given that the opportunities for collaboration and communication are almost endless.

It is only with a focus on the changing workplace dynamic and a continued commitment to matters of technological development that Unify will continue to be a leader in the communications space.

“We will ensure that we continue to be a market leader by providing innovation while maintaining that same level of quality we have become renowned for,” says Douglas.

“Some of the biggest brands in the world rely on us for key elements of their communications, so we’ve got to be able to provide them with the capabilities to communicate effectively both internally and externally.”

There is no doubt that the workplace we know today will change dramatically in the future, however, with new and innovative products such as Ansible, Unify is well positioned to cater for any forthcoming market changes.

Energy market critical to Romania, says OMV Petrom

Posted on by Ashton Wenborn

Romania’s two-decade long and ongoing market liberalisation has seen the country undergo extraordinary changes, and while macroeconomic indicators have improved as a result, there remains a fair few areas in need of improvement if the country is to match ambitious EU targets. Not least of Romania’s economic constituents is the oil and gas sector, which has undergone perhaps the biggest transformation to date.

However, for the industry to realise its full potential it must first negotiate the inherent complications of Romania’s free market transition.

“The energy market is quite critical to Romania’s continued economic success and I would say it has great potential to become a key economic growth driver,” says Mariana Gheorghe, CEO of South-East Europe’s largest oil and gas producer, OMV Petrom.

“The first reason for this being that it has quite a diverse primary energy mix, made up of oil and gas, hydro, nuclear and coal to name a few; the second being that the region boasts a strong presence of foreign investors, and plays host to numerous and world renowned names from across the energy value chain.”

The poster child business
Gheorghe is well positioned to pass comment on the transition, as OMV Petrom is seen by many as the poster child of Romania’s turn from state-run to free market economy.

“These past 10 years have seen what was a former state-owned company turned into the country’s largest commercial entity,” says Gheorghe, who has led the company from strength to strength since the beginnings of Romania’s market liberalisation.

Responsible for 40 percent of Romania’s oil and gas supply as well as €9bn worth of investment into the recovery and modernisation of the national oil and gas sector, OMV Petrom’s clout in the market is more than substantial. The company’s activities span exploration, production, refining and marketing, and its oil and gas reserves stand at approximately 750 million boe (barrel of oil equivalent) in Romania alone.

OMV Petrom

40%

Of Romania’s gas and oil supply

€9bn

Investment into recovery and modernisation of oil and gas sector

750m

Oil reserves (barrel of oil equivalent)

“Here I’m talking about OMV Petrom being the largest contributor to the Romanian state budget, having contributed almost €14bn to state coffers in the last nine years, which approximates to 10 percent of the revenues to the state budget.”

The company has occupied a space in the Romanian market since 1856, and in 2004 Austria’s OMV acquired a 51 percent stake in the company to mark the beginnings of an extensive transitional period, bearing a certain likeness with that of the national economy. A decade later and “we have turned the company into a role model of successful and sustainable performance,” says Gheorghe.

“We’ve changed many things, from the way we’ve developed our strategy, to the investments we’ve made, the systems we’ve put in place, our management structure and style, and the emphasis we place on developing a socially responsible company.”

These changes are far from exclusive to OMV Petrom, however, and can be seen across the entirety of Romania’s economy, although there are none that have weathered the transition with quite the same proficiency.

“The sector has been subjected to innumerable changes for over a decade now, and while many of the reforms have been completed, it will take time for those affected to adjust,” says Gheorghe, who admits Romania still lags behind in certain departments. “All of these regulatory as well as technical challenges are continuing to put pressure on our performance.

“First, the energy liberalisation has not been completed so we’re really seeing the risk in that the regulatory changes are still on going. We also have changing oil and gas prices to contend with, we are a European market therefore the activity of these international prices impacts on us. Not to mention the fact that we have a special situation here in Romania where the health and safety regulatory practices fall short of some other countries, therefore we need to catch up in that field.

The energy market is quite critical to Romania’s continued economic success

“In Romanian oil and gas we have two situations, we have the old fields with the challenges of maturity, or the very new deep off shore fields, which are posing different types of technological challenge to us.”

Nonetheless, OMV Petrom has adjusted to market changes with unparalleled success, and in doing so has become the country’s most valuable company. “Given that we’ve had such tremendous success, we’ve set a benchmark for those undergoing transformations, transitions and conversions in this new economic environment.”

Speaking on the ways in which OMV Petrom intends to advance Romania’s energy industry, Gheorghe says that the company’s strategy is founded on three pillars: business, people and social responsibility.

“Our objectives are very clear, we want to continue to be the leading integrated oil and gas company in South-East Europe. We’re geared to on one hand grow in upstream activities, particularly in the Black Sea region, which means the exploration of new territories and on the other the stabilisation of current mature production. In downstream, what is important for us is to optimise and modernise our existing portfolio of assets. All of this requires financing of between €1bn and 1.2bn per year.”

“People are a key resource in this technologically challenged world,” Gheorghe adds. “What is important for us is to gear their skillset for our growth strategy. We have quite a lot of initiatives and projects, and our labour force is very much engaged with what we do,” which leads onto OMV Petrom’s final commitment to matters of social responsibility.

People are a key resource in this technologically challenged world

“The last pillar is very critical for us, that sort of role modelling and listening to the public agenda is a big chunk of our past, present and future strategy. As the largest oil and gas company in Romania we have a responsibility to the wider communities in which we work, and in this field, in recent years we have trained 10,000 students and almost 2,000 teachers on entrepreneurship.

“In the last five years, we have developed hundreds of community projects, and have encouraged more than 6,000 volunteers from our own workforce and from those of our partners’ to engage with the community. We are the largest private employer in Romania,” says Gheorghe. “We’re currently responsible for 20,000 direct jobs and a further 60,000 indirect jobs from our 15,000 suppliers. This, along with our continued investment into the country’s energy industry means that our industrial, economic and social contribution is second-to-none.”

Becoming a company role model
Granted, OMV Petrom’s responsibility for such a substantial proportion of Romania’s oil and gas products, as well as 10 percent of the country’s electricity supply is a critical measure of the company’s success, however its role in reviving Romania’s struggling energy sector is of equal significance.

Corporate governance at OMV Petrom

10,000

Students trained on entrepreneurship

6,000

Community volunteers from OMV Petrom

20,000

Direct jobs

“We dare to say we’ve put the Romanian oil and gas industry back on the map because of what we’ve achieved in terms of consolidating our existing operations and venturing into new territories, such as deep offshore projects and new onshore technologies.”

Many of the issues that have inhibited the country’s energy industry are far from exclusive to Romanian shores, “in the gas market, for example, we’ve seen demand decrease by almost a third in recent years and overcapacity stymied our earning potential, which are on going challenges for us and the wider industry.”

The very fact that the country is still adjusting to ongoing reforms means that corporate governance standards and regulatory practices are certainly trailing those of other countries, especially those in the EU.

“Corporate governance is an especially big challenge for Romania’s industry, being an entirely alien concept to a former communist country where for such a long time there was no such a corporate dimension,” says Gheorghe. “Therefore, it’s important for us to not only have business aims and strategies but to demonstrate the benefits of strong corporate governance in practice. That’s really something that we take pride in, as we believe it’s essential to have strong corporate governance and to be a good corporate citizen where possible.

“All of these are elements that, because they’re alien to the majority of businesses and people working in Romania, need a huge push and we strive to demonstrate in practical terms what it means to implement good governance.”

One of the other ways in which Romania has been put on the map is with a recent OMV Petrom partnership with industry leader ExxonMobil, which in turn has boosted the international appetite for investment in the oil and gas sector.

“As one top official said, “Here we have the leader of the Romanian industry coupled with the leader of the global oil and gas industry” and that’s what I would say is the beauty of this partnership.”

What is also crucial about this relationship is that ExxonMobil’s international clout combined with OMV Petrom’s local expertise and know-how will see both parties exploring a series of new deep offshore targets and add to Romania’s already extensive oil and gas reserves. Although the project is still in the exploration stage, the partnership is indicative of Romania’s budding energy sector.

Provided that businesses in Romania adapt to market changes in much the same way as OMV Petrom has done, the energy sector will soon escape the trappings of a state-run economy and begin to enjoy the benefits of its newly instilled free market regime.

Brazilians are underprepared for retirement, says HSBC Fundo de Pensão

Posted on by Ashton Wenborn

Based on the ninth edition of a research study into global retirement trends, commissioned by HSBC, over half (59 percent) of Brazilians think their financial preparations for a comfortable retirement are inadequate: 19 percent are not preparing at all, while 41 percent are not doing enough.

Brazilians understand the importance of preparing for retirement from early on in life – on average, they see the age of 33 as the latest by which people can start planning financially and still expect to maintain their standard of living in retirement.

The findings show that saving (putting money aside for the future) and financial planning (evaluating the current situation, identifying future goals and taking action to achieve them) start at varying and different ages. On average worldwide, retirement saving starts four years before planning for retirement starts, yet in Brazil both retirement saving and financial planning start at similar ages – typically 25 and 26. Although this is earlier than most other countries surveyed, the average figure hides the fact that 64 percent of Brazilian respondents have never saved for retirement, including 69 percent of 45- to 54-year-olds.

Tackling short-termism
One of the obstacles to retirement saving, according to the research, is the tendency to focus on the short term: immediate savings needs are more tangible and therefore may be given a higher priority than far-off goals like retirement. When asked to choose whether they would save towards a holiday or retirement, if they could only afford to save for one in a single year, Brazilians were more likely to choose a holiday, with 49 percent choosing this option compared with 43 percent choosing to save for retirement. This suggests that for many, short-term financial needs take precedent over longer-term financial priorities. In addition, Brazilians are willing to dig into their retirement savings as a means of dealing financially with an unforeseen crisis. 38 percent would look to their retirement savings to get through serious financial hardship. Alternatively, 29 percent would use other savings, and 30 percent say they would look for better-paid work. Taken together, this means that not only does putting shorter term savings goals first act to reduce contributions to retirement savings, the readiness to draw on long-term savings in an unexpected crisis will also act to lower the value of retirement savings for some Brazilians.

64%

Of Brazilians have never saved for retirement

On the other hand, there are many different reasons why people begin to save for retirement, though fear of financial hardship in retirement is by far the most common motivator, chosen by nearly half (45 percent) of research respondents. More positive developments such as starting work (seven percent), a promotion (nine percent) or getting out of debt (11 percent) are far less important triggers.

HSBC Fundo de Pensão believes that good communication with plan members is the key to promote financial education and retirement savings. Lectures are performed with plan members in order to explain the design of the plan, the different tax regimes and their impact over the accumulation period and upon retirement, as well as the characteristics of the investment portfolios available and the importance of starting early to save.

On the investment side, the year of 2013 was marked by a shift in investors’ expectations – interest rates ended 2012 at their lowest levels since 1995, and for the first time at one-digit levels, and the expectations were that the rates would remain at those levels or even drop and stabilise at lower levels. During 2013, the Brazilian Central Bank decided to raise interest rates, which reached two digits by the end of the year.

The fixed income market was one of the highlights of negative performance in the year, with the raise of both high nominal and real interest rates. The increase in pre-fixed rates in the US, along with the release of inflation figures in Brazil and the upward revision of expectations about the cycle of high interest rates in Brazil, determined that movement.

One of the obstacles to retirement saving, according to the research, is the tendency to focus on the short term

In the equities market, stock exchanges in developed countries have benefitted from the reduction in risk aversion, due to the improvement of the crisis in the eurozone and the dissemination of better than expected economic data, particularly in the US. Emerging countries, however, suffered from signs of a slowing Chinese economy, as well as the expected reduction in the purchase of bonds by the Fed and the consequent high rates of US government bonds (treasuries). Moreover, the domestic scenario remains complicated, with inflation being pressed, high interest rates and weak growth numbers, which keeps the drop bias in corporate profitability.

The shift in this expectation caught long-term investors by surprise. All these factors caused volatility in long-term investments, including those in retirement plans. In some cases, the instinctive reaction of retirement plan members was to withdraw their savings, losing the chance to recover the losses in the year, and giving up all the benefits they had in the past with very good investment performance.

All the volatility in Brazilian economy experienced in 2013 only reinforces the importance of starting to save early for retirement, as investment performance (good or poor) will smooth over time, in addition to the fact that capitalised financial resources make retirement cheaper to sustain.

Multi-sponsored funds
Other important factors are the fees charged, usually reduced from investment returns, which affect accumulation for retirement. The lower the fees are, the less they will impact accumulation negatively. In a multi-sponsored pension fund, where costs are shared among all sponsors, the negative impact on investment returns is significantly reduced. Summing that to the fact that higher assets allow better negotiation of fees, multi-sponsored pension funds have turned out to be a very attractive vehicle to save for retirement.

“At HSBC, we help people to plan financially for their future, both to realise their dreams and to help them protect against the bad times which sometimes threaten. We believe it’s important to understand our customers’ hopes and fears, and to provide them with options to develop effective financial plans for their future,” says Alfredo Lalia Neto, Chairman of the Board of HSBC Fundo de Pensão.

Marcelo Teixeira, HSBC Group Head of Insurance, says: “Life happens – we have families, our children require education, we have accidents, we accumulate wealth and we grow older. Our clients are individuals and businesses and we work very hard to identify and meet their needs through life, pension, investment and protection products.”

Founded 35 years ago, HSBC has assets of BRL 5.6bn and leads multi-employer funds with a 33 percent market participation rate. Its nearest competitor is far behind at 16 percent. HSBC has 200 sponsoring companies with their own pension plans, more than 80,000 active participants and in the region of about 9,000 retirees.

[W]e help people to plan financially for their future, both to realise their dreams and to help them protect against the bad times

HSBC gives its clients the opportunity to participate in its multi-sponsored pension fund, which is managed as a non-profit private pension closed entity. This allows for the joint management of separate private pension plans so that the features of every specific benefits plan are retained and remain appropriate to each company’s individual needs. Each plan has its own actuarial appraisal, enabling the identification of specific costs based on the profile of the staff that join the plan, and the benefits selected by the company.

The HSBC Multi-sponsored Pension Fund was the first independent fund of this type to be launched in Brazil, having been approved in December 1979 when it was first regulated and inspected by the Superintendência Nacional de Previdência Complementar. The fund made it unnecessary to invest in own administrative structures and corporate pension funds because the structure already exists, and is shared among sponsors of the pension fund.

Shared participation
HSBC’s plans are all independent. The results are individualised and all costs are plan-specific. As the fund reaches self-sustainability, costs are reduced for the company and all its plan members, allowing them to concentrate on their core business. The internal structure of the fund operates so as to enable the total participation of both sponsors and plan members within a policy of absolute transparency. This works through a mechanism known as the ‘three powers’, where the sponsor has the power to make decisions, the administrator is in charge of managing the fund and the plan member inspects and supervises operations.

“For HSBC, it’s not enough to offer the best corporate pension plans,” says Neto. “We also insist on [putting in place] specialised consultancy services to guide customers in their choice of the most appropriate products for their company. Our team is ready to assist through all the processes involved in the development, implantation and appraisal of our corporate pension plans. The solutions we offer are capable of meeting all human resource needs, in accordance with the company’s financial means. Many companies and foundations have chosen multi-sponsored funds, willing to avoid the high cost of maintaining a proper structure. That’s because the administration of assets and liabilities requires professionals fully dedicated to managing the day-to-day of a pension plan, which also involves legal advice, welfare, administrative, technological and actuarial work.”

There are many advantages to a company using HSBC’s Multi-sponsored Fund as compared with funds from competitors. The fund is Brazil’s oldest, and HSBC’s 35 years of experience administrating corporate plans is unmatched in the region. Customers can expect highly customised plans with relation to each individual company, complete with permanent assistance and specialised technical consultants at the ready.

HSBC Fundos de Pensão is a member of the Associação Brasileira das Entidades Fechadas de Previdência Complementar. It has also been selected by Associação Nacional dos Contabilistas das Entidades de Previdência as the being the best multi-sponsored pension fund in Brazil.

The fund’s administrative services are provided by HSBC Administração de Serviços para Fundos de Pensão (Brasil), while assets are managed by HSBC Global Asset Management, one of the largest managers of third party assets in Brazil.

Intense reforms shake Spanish pensions; Ibercaja responds

Posted on by Ashton Wenborn

The Spanish pension fund industry is being affected by an intense reform of its public pension system, the so called ‘first pillar’. In the last three years, several laws have been approved which will have a long-term impact. In 2011, the ‘27/2011 Act on the updating, improvement and modernisation of the social security system’, was adopted. This law upped the retirement age to 67, and has changed the reference period for calculating pension benefits; it has increased the number of years of contribution required to receive the maximum allowance; and it has also tightened eligibility requirements for early retirement. The government’s aim has been to reduce future liabilities for public accounts by reducing the estimated coverage of the pension benefit over the last wage, to around 65-70 percent.

The higher rate of substitution by the pension payments of the last wage earned explains the relatively low development of the pension fund industry in Spain compared to other European Union economies (14 percent of the financial assets of households vs 36.9 percent in the EUR13, according to EFAMA). The expected reduction of such coverage due to the reforms suggests an attempt to increase the rate of savings in pension plans to approach the levels other EU countries (see Fig. 1).

Recently the government also approved the ‘23/2013 Act on regulating the sustainability factor and the revaluation index for the pension benefits of the social security system’. This rule delinks the annual pension increases from the inflation rate. It also provides for the implementation, in 2019, of a sustainability factor, which will relate benefits paid with life expectancy and with workers’ contributions within the same year.

European-families'-assets,-2011

In the current scenario, in which the public pension scheme is essentially a pay-as-you-go system with a very small trust to prefund it (it is estimated to run out of funds in 2020 if things do not improve) and benefits, future and present, are linked to worker contributions, it is no coincidence that the system is immersed in a debate over its long-term sustainability. A future with increasingly low public pensions brings up the need for families to plan for alternative savings that enable them to maintain their living standards after retirement.

Incentive review
The ‘Occupational Pension System’ in Spain, or the ‘second pillar’, is highly concentrated in certain economic sectors such as the civil service, utilities, banks and former public monopolies such as telecommunications or tobacco. Its development within the small and medium enterprise sector has been slow to say the least. At present, Employment Pension Programmes manage €33.5bn for 2.1m members and beneficiaries, only around nine percent of the Spanish workforce. While legislative changes to promote the sector have been promised, the last amendment of the tax code has actually worsened its incentives, removing the benefits that employees making pension fund contributions enjoyed in their payments to the social security system.

This law upped the retirement age to 67, and has changed the reference period for calculating pension benefits

Finally, the ‘third pillar’, voluntary personal pension plans, administered €58bn in 2013. These schemes displayed high annual growth rates until 2006, but from then on, assets under management have stabilised as a result of the loss of some tax incentives and by the recession experienced in the Spanish economy, which has significantly affected household savings.

At present, in Spain, contributions to occupational and personal pension plans are exempted from income tax. The annual amounts are limited at €10,000 for people under 50 years old and €12,500 for those over 50. The benefits are subject to income tax, though, so part of the fiscal saving is paid back during the retirement period. The cumulative savings can only be recovered in the event of retirement, disability, death, long-term unemployment or serious illness. The government is considering increasing the number of situations when it is possible to retrieve the money from the pension fund in order to stimulate the use of these investment vehicles. It is clear that developing the second and third pillars is critical, and this is where Ibercaja Pension’s efforts are focused. The company was formed in 1988, the same year pension plans were created in Spain. Having recently celebrated its 25th anniversary, it has become the sixth-biggest pension fund company in Spain (5.55 percent market share) with €5.1bn of assets under management and more than 240,000 clients.

About Ibercaja Banco

The Spanish financial sector underwent an intense process of recapitalisation and restructuring during 2012-13 in accordance with the Memorandum of Understanding agreed between the Spanish authorities and the EU. Ibercaja Banco has been one of the companies that has managed to meet the needs of the capital required without any public support, showing itself to be one of the most creditworthy entities in the country.The volume of activity in Ibercaja Banco amounts to €74.1m of assets. Its business focus is the retail market (primarily households), although in recent years it has been growing its presence in the corporate sector. Its financial arm, formed largely by the mutual fund manager, the pension fund manager and the insurance company, is recognised as one of its strengths.

Ibercaja Pensión and Ibercaja Gestión (the mutual fund company) have gained recognition from major fund rating agencies such as Standard & Poor’s, Morningstar, Lipper, AllFunds Bank and Interactive Data, and from Spanish newspapers Expansion and Cinco Días, and international brands such as Citywire. The company was also named the Best Pension Fund in Spain, 2014 by World Finance.

Taking decisions
Ibercaja Pension manages 25 personal pension plans with different investment profiles. The investment mandate is defined by the sponsor entity, in this case Ibercaja Banco. Our portfolio of funds includes fixed income, mixed assets, long only equity, alternative strategies and guaranteed yield funds. We have expertise in investing in private equity funds, mezzanine debt funds, long-short equity funds, commodity funds, real estate through private equity funds and forex relative value funds. We also manage internally what we call ‘dynamic funds’, which are a kind of flexible fund that introduces alternative strategies implemented through shares, derivatives, funds or currencies.

Through Ibercaja Banco and Ibercaja Pension, clients receive an initial assessment of what their savings need to be to complement the estimated public pension at their desired level. According to their age and risk profile, they are recommended one or more pension plans from those mentioned above. They are also informed of the tax implications of their contribution, and when the members reach their retirement age they are offered a personalised study of the best options to rescue the plan, according to their needs and tax situation. Transparency is very important for us, and customers receive updated information on results, costs incurred, fund characteristics and risks as time goes by.

The marketing process is very different in the case of occupation pension funds. The sponsor company, with the help of the trade union, sets up a control committee with representation from the company management and the workers. This supervisory board selects the asset manager and lays down rules on the contributions and benefits of the plan, as well as dealing with issues raised by members. Once the asset manager is selected, the control committee establishes an investment mandate where certain requirements are set, such as investment horizons, performance objectives, maximum risk levels, minimum and maximum exposures to each asset class, etc.

[T]he ‘third pillar’, voluntary personal pension plans, administered €58bn in 2013

Ibercaja Pension administers pension plans for the employees of Spanish electricity company Endesa, the Bank of Spain, Ibercaja Banco, the civil servants of Aragon’s Government (Ibercaja Banco’s most traditional area of influence) and for other cities. This makes our company the third-largest in Spain by assets under management in this area, with a 10.75 percent market share (up from 2.28 percent in 2003).

Ibercaja Pension has expertise managing defined contribution, defined benefit and hybrid defined benefit-defined contribution plans. It is also now immersed in a new co-management project with one administrating company and several investment entities including Credit Suisse, Blackrock and Santander Asset Management, a model not typically used in the Spanish market.

Occupational pension funds include socially responsible investing practises in their investment mandates. The implications for fund managers are relatively small at present, but it is a trend that has to be taken into account. In order not to be left behind, Ibercaja Pension decided to incorporate socially responsible criteria into its investment process and has been a signatory of the United Nations Principles for Responsible Investment since 2011.

Risk control is a very important part of our philosophy as asset managers: management, fund managers, middle office and the control department are all involved in monitoring it. The control department is independent in its analysis and reports on any issues directly to the board of directors.

Furthermore, even though Spanish law allows the investment entity and the security custodian of a pension fund to belong to the same financial group, it is good practice for these companies to be independent. The custodian has control duties which can be more strictly conducted when it does not share an owner with the investment entity. For this reason, most of the funds that Ibercaja Pension manages have custodians who do not belong to Ibercaja Banco’s financial group. This is a format that is becoming more and more common in the Spanish market, although some of the biggest financial groups do not yet follow the practice.

Challenges ahead
In our view, the two more important challenges for the Spanish pension fund industry are the globalisation of financial markets and the reform of the public pension system. In Spain, it is expected that, as the economy recovers, demand for pension plans by families and workers will grow significantly. In this context, Ibercaja Pensión has a professional and solid company model to turn that need into a business opportunity. Being a midsize company in terms of AUM, though, it cannot be a specialist in all the global financial markets, which are more and more interrelated, but it has access to multiple financial intermediaries who cover any possible need. On the other hand, its size gives it the flexibility that bigger organisations lack. So we think Ibercaja Pension has the control systems, the capabilities and the knowledge necessary to cope with these and other challenges.

We always try to be dynamic in the way we manage our funds, changing the geographical composition of the portfolios, introducing new investments, and adding new layers of control to avoid any operational or financial risk, and so on. Results are on our side, but we know that the market changes every day and we have to change with it.

Technology boosts Islamic finance; ITS provides solutions

Posted on by Ashton Wenborn

Islamic finance is on the rise, gaining prominence across the world, thanks to a number of sharia-compliant institutions achieving increasing acclaim within the global banking industry. However, many banks still find themselves falling short and need to accelerate their efforts to meet the technological and global challenges that they are likely to face.

The UK Islamic Finance Secretariat (UKIFS) indicated recently that Islamic finance assets worldwide continued their upward trend to reach $1.46trn by the end of 2012. Considering the growth experienced in 2013, the market expects it could top $2trn in assets by the end of 2014. These findings demonstrate that Islamic finance has shown strong resilience despite the slowdown in the global economy and the pressure on conventional banking in Western countries. In fact, global Islamic finance assets have doubled since the start of the economic downturn.

Within the GCC specifically, Islamic finance commands an estimated 25 percent share of the banking market. However, for many Muslims and non-Muslims alike, Islamic finance is still a concept that is clouded by unfamiliar terms and principles, which often leads to confusion and hesitancy. To those without an Islamic or banking education, concepts such as riba, mudarabah and sukuk require a lot of explanation (see Fig. 1), but many more people are taking the time to understand their meaning.

A report released by Ernst and Young projected that by 2015 the MENA Islamic banking industry will be worth $990bn as the uptake of Islamic banking surges, more than double the 2010 figure of $416bn. With such a vast increase in growth on the horizon, many are asking the question: what is it that is causing this boost?

One of the core foundations of Islamic finance is the promotion of itself as an ethical system

Tangible assets
Islamic banking’s popularity is attributable to many different factors, but one thing is certain; the growth would not have been possible without the deployment of contemporary financing techniques or structures that underpin the industry. Take sukuk (Islamic bonds), for example (see table); they can be seen as a union between religious principles and modern financing techniques. In light of the recent banking crisis, it is understandable that sukuk are now seen as a more tangible investment than a conventional bond, as the owner has a stake in the underlying asset rather than a share of the debt.

One of the core foundations of Islamic finance is the promotion of itself as an ethical system. Islamic banking is set up in accordance with the principles of sharia, the morale code and religious law of Islam. Many of its rules have been specifically laid out with business and trade in mind, an important aspect, which has attracted the eyes of many small- and medium-sized enterprises.

Notable-sukuk-issuance

The main difference between a Western high street bank and an Islamic one is that Islam prohibits investors from making money from simply lending it. This means that customers with an Islamic savings account or current account are not paid interest on their deposits and borrowers with an Islamic mortgage do not pay interest on their debt.

Technology boost
Because banking practices differ from region to region, the significant growth experienced by Islamic financial institutions has demanded diversified technology that supports both traditional and Islamic banking on the same platform.

Islamic banks tend to view technology in the same light as their conventional counterparts do, but Islamic institutions can often end up with the realisation that there is a total scarcity of systems that cater specifically to their Islamic principles. By utilising the right technological solutions that are on offer, a bank can quickly react to the demands of its customers by introducing new products and reducing the turnaround period required to bring them to market.

For many years Islamic banks have tended to adopt technology solutions from specialised vendors, which offer dedicated solutions. Traditionally, these vendors have been small and did not have the funds to meet the increasing sophistication of the bank’s needs. When Islamic financial institutions were starting up, they too were small and needed to penetrate the market quickly with minimal technology spend; however, over the years the customers of these Islamic banks have grown in sophistication and what they demand from their bank has developed in line with this. Islamic banks now need to be better equipped with state-of-the-art technology support in order to compete in the market, providing solutions from larger technology vendors that are capable of supporting the developing needs of Islamic banks, moving far beyond simple automation. They are expecting technology to assist in creating products in a short time, attracting and retaining customers by offering the best service possible.

As Islamic financial institutions develop, technology is becoming a key enabler for future business. Islamic finance institutions offering sharia-compliant products need a dedicated end-to-end Islamic banking system that facilitates and automates sharia-compliant banking operations and enables banks to scale up their operations to meet global competition, grow market share, retain the loyalty of their customers and, above all, enhance their profitability.

Maximising growth
International Turnkey Solutions’ (ITS) ‘ETHIX’ suite of financial products provides Islamic banks with a comprehensive total banking solution that is widely recognised as one of the most flexible and scalable technology solutions worldwide. Developed in accordance with sharia guidelines, ETHIX empowers Islamic banks to improve operational efficiency and reduce cost of ownership in specific areas of Islamic banking, while maximising opportunities for growth.

It offers an integrated and comprehensive system for financial institutions and banks to deliver sharia-compliant products. ETHIX is in full compliance with the Accounting and Auditing Organisation (AAOIFI) and International Accounting Standards (IAS).
As a standalone module, it is easy to integrate and offers full support through its back-end accounting functionalities with straight through processing (STP) built on an SOA platform and a web services based model.

ETHIX offers a complete repository of industry-specific products and functions for Islamic finance and investment, core banking, delivery channels, trade finance, branch automation, online banking, dashboards and comprehensive reports in addition to other banking services.

Global Finance Solutions, part of the ITS group, has been in the region for over 30 years, gaining a breadth of ethical banking knowledge and experience, counting many of the leading Middle Eastern and global Islamic financial institutions among its wide portfolio of customers.

AMAC Aerospace private jets become second home

Posted on by Ashton Wenborn

As the regions stimulating global economic development become increasingly diversified, with the BRIC countries gaining traction and the newly emerging MINT (Mexico, Indonesia, Nigeria and Turkey) countries rising in the international business landscape, the need for convenient, efficient, safe modes of transport serving executives, driving business forward, is imperative.

Private jet charter or ownership is often the most efficient and time-saving option that cash-rich but time-poor senior executives have; one which guarantees them efficient access to the growing number of business regions. Executive aviation now supports a wide variety of business travellers who utilise these valuable business tools as more than just a means of transport.

More business people crossing continents on a regular basis means an increasing number of business jets are serving as offices in the sky. In many cases they are a second home for the international entrepreneur. Hub and spoke commercial aviation dominates the skies yet rarely provides all the necessary direct connections.

According to the European Business Aviation Association (EBAA) in 2011, 96 percent of city pairs served by private aviation had no scheduled connection. While advanced technology supports video conferencing, the EBAA notes that 66 percent of corporate decision makers regard face-to-face meetings as critical to M&A success. There is nothing like sitting with new business colleagues to really learn about them.

Face-to-face business
Time is a finite commodity for these executives. Jets reduce unnecessary waiting times at airports, offer direct routing and allow for comprehensive schedule changes. More importantly, they provide the security to discuss high-level deals and a quiet space to contemplate the next meeting while mapping out ideas with colleagues. A route that has seen significant growth over the past year is China to the Middle East through Africa to South America.

Any passenger travelling the hours these journeys require welcomes an intelligently specified interior that offers not only comfort but office space with connectivity. Business jet completion centres are increasingly facing the challenge of providing a workspace in the sky combined with a comfortable home-from-home interior. One of the leading players in the business is AMAC Aerospace.

AMAC Aerospace

2007

Founded

15

Aircraft

$1bn

Worth of business undertaken to-date

600

Size of workforce

The company has developed a business expertise in creating just the right environment for clients, including members of the Fortune 500, heads of state, royal families and international entrepreneurs, among other high-net-worth-individuals. Established in 2007, it is located at EuroAirport Basel-Mulhouse-Freiburg, Switzerland and specialises in both aircraft maintenance and completions, and through its Zurich based business – AMAC Corporate Jet business – it also provides aircraft charter and management with a combined portfolio of 15 aircraft under AMAC management.

The founders, including Group Executive Chairman and CEO Kadri Muhiddin, have strong heritage in the sector, and genuinely understand what owners require in terms of reliability. In response to these needs the founders recognised that reliable completions offering best in service quality, delivered on time and within budget, were a valuable resource for the private aviation market.

Complementing this, the capacity to keep aircraft fully maintained ensures efficiency and best use of the asset for the owner. The family run, privately owned business chose the acronym AMAC as the letters represent Aircraft Maintenance and Completion which succinctly describe the core competencies of the business.

Its Swiss facility now boasts three hangars, suitable to accommodate wide-bodied aircraft. The bare airframe is delivered on the customer’s behalf to AMAC where it finishes the aircraft, taking into account the bespoke requirements of the owner, while fitting all furnishings, technology and completing some paintwork.

A strong fleet for greater demand
As the distance between business centres expand the demand for longer range aircraft is increasing, and AMAC has positioned itself to serve this market. It has approvals from major aircraft manufacturers Airbus and Boeing to undertake completions and maintenance on the A320 series, A330s, A340s, ACJs (Airbus Corporate Jets), BBJ’s (Boeing Business Jets), B777s and B747s.

It has the capacity to work on short- and mid-range aircrafts, but at its heart is the growing skill-set required to provide highest quality completions featuring the latest in design, comfort, and connectivity.

It can also support the market end-to-end from a maintenance perspective, and has recently become the first European company to complete a 16-year heavy maintenance check on a Gulfstream V, which involved taking the aircraft back to its skin to carry out a complete structural and maintenance check. AMAC also recently performed its first wide body maintenance project on an Airbus A340, which went without incident proving the company’s ability to take on any request.

Jets reduce unnecessary waiting times at airports, offer direct routing and allow for comprehensive schedule changes

Insurance, Air Operating Certificates (AOCs) and general equipment safety rely on detailed maintenance checks to ensure security and efficiency of the operational asset for the owner. This is integral to business continuity as if the aircraft undergoes unnecessary down time this is costly for the owner, and can disrupt international business schedules.

AMAC Aerospace is proud to be the largest family run business in private aviation anywhere in the world. Basel-Mulhouse was selected due to its a central location for an established business aviation market in Europe, in addition to recognising the importance of the growing markets of Russia, the Middle East, which is relatively a young sector in business aviation terms, as well as providing service to North Africa and further south into the Sub Saharan regions.

To further support these markets, in September 2012 AMAC Aerospace opened AMAC Aerospace Turkey, reflecting the vision of the founders. Turkey is now part of the MINT economic group and as a location perfectly serves the Middle East, India and the burgeoning Eurasian market.

With orders for the next two years, AMAC is in open dialogue with other potential clients and has undertaken over $1bn worth of business since forming as a organisation. As a result, management is exploring the option of a fourth hangar purchase at its home base which will underpin maintenance of wide-body VIP aircraft, an area of the market that is rapidly developing due to the economic global stretch.

Currently, 65 percent of the work is completions based, but the company is hoping to balance this to a 50:50 split within the next 12 months. AMAC aims to offer lifetime service to the aviation sector from initial completion through to the long-term heavy maintenance checks.

One of the biggest challenges AMAC faces is to provide a working environment that is comfortable and practical for the owners of the jets. This means the designer has to consider many elements when designing the interiors. Alongside the cabinetry, soft furnishing, and full size double beds, the company also installs state-of-the-art cabin management systems to support crew activity, and what has arguably become the most important part of any cabin completion project: a full-scale communications suite and complementary Inflight Entertainment system.

The need for effective connectivity has become a leading part of the design process. The capacity to make calls as if you were on the ground and the need for speedy and reliable internet access and all office amenities for tablets and smart phones is integral. These tools develop with such speed that AMAC often has to predict what the client will need before the product even exists.

Entertainment systems evolve so fast and therefore the company is currently working on the design and implementation process for the installation of high definition screens for 3D viewing on board. It has full in-house capability for installing all of these vital elements, in addition to the capacity to update them as quickly as the systems change.

Having built a reputation for focusing on detail, the recent interior of an Airbus Corporate Jet ACJ319 saw it furnished with soft, high quality leathers, specially selected wood veneers and an attractive decorative cabin door inlaid with carved mother of pearl and wood marquetry panels.

A home away from home? AMAC Aerospace private jets are designed to provide cash-rich, time-poor executives with a comfortable home office in the sky
A home away from home? AMAC Aerospace private jets are designed to provide cash-rich, time-poor executives with a comfortable home office in the sky

This may sound opulent but in an environment that is invariably the owner’s second home, these details matter. Clients need to know that they will have a comfortable space to live in, combined with an efficient working environment.

Since its launch AMAC’s rapid growth reflects the founders’ extensive network of contacts and their intuitive vision to develop markets. The VIP aviation market is relatively compact so networks are essential for success and AMAC continues to deliver what these demanding customers expect.

The customer portfolio extends way beyond Europe as the company has approvals from the authorities in Brazil, Russia, Aruba, Bermuda, the Cayman Islands, the Kingdom of Saudi Arabia, Qatar, Oman, the UAE, Cameroon, Nigeria and Chad, to name a few, and to carry out maintenance operations in Switzerland.

Today AMAC employs a talented workforce of over 600 people who have built a unique set of skills for an expanding sector of the aviation market. As the world extends from a business perspective, AMAC Aerospace is as well positioned to serve the established business regions as it is to work with those in emerging destinations such as Nigeria, Brazil and Indonesia.

While currently the largest part of its client base is in the Middle East, these new markets are becoming as interesting as those with established wealth. The clients from these areas now demand prestigious aircraft with elite finishes flying into the heart of Africa and on to Russia, Brazil and further afield. As the world’s economic barometers change, AMAC is ready to support and develop with them.