‘Record demand’ for index-linked Gilts stems from pension duration gap

first_img“However, with circa £400bn of index-linked Gilts in issue versus around £1trn of inflation-linked pension liabilities, the supply and demand imbalance is unlikely to be eased any time soon.”The issuance, which matures in 2058, will grant many institutions the ability to address both duration and maturity gaps in their existing hedging portfolios, according to Barron.“In addition, the significant supply at the syndication has highlighted hedging opportunities for pensions schemes that have flexible LDI mandates in place to take advantage of the current attractive pricing for hedging inflation risk separately to interest rate risk,” she said.“The cost of hedging long-dated inflation risk using either inflation swaps or index-linked Gilts with their interest rate sensitivity removed is at the most attractive level in over a year.”The comparatively low volume of index-linked Gilts, when viewed against pension liabilities, has caused the UK National Association of Pension Funds to warn that it was “creating risks” for pension funds.“There has been increasing frustration from schemes that, to reduce their interest rate and inflation risks, they are effectively ‘forced’ buyers of Gilts with low or negative real yields,” the association said in June. A UK Gilt issuance that attracted £14.5bn (€18.3bn) in offers is proof that pension investors are keen to address their duration mismatches in their hedging profiles, despite falling bond yields.Following the syndication of £5bn in 45-year index-linked Gilts, AXA Investment Managers (AXA IM) said interest, which stood at £14.5bn, proved there was still significant demand for such issuances, despite a negative yield of 5.3 basis points a year.Lucy Barron, senior solutions manager at AXA IM, said the demand clearly stemmed from domestic pension providers wishing to manage liability risk.“Index-linked Gilts continue to be seen as the best match to inflation-linked liabilities,” she said.last_img read more

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PFA, PensionDanmark lift H1 returns with all asset classes positive

first_imgIn the first half of this year, the bond portfolio produced around 5% in return, PFA said.“This was particularly due to the foreign bonds, which represent a total value of well over DKK100 billion in the portfolio,” it said.Overall, assets dipped to DKK411.2bn at the end of June from DKK417.5bn at the end of December.PFA said the gains in foreign bonds were mainly due to its exposure to emerging markets and underlying, strong-performing portfolios, which yielded almost 7% during the first six months of 2014. On top of this, the falling level of interest rates during the first half had led to positive returns on bonds and interest rate hedging, it said.Equities returned around 9.5%, it said, mainly due to the focus on Danish shares, which increased by more than 20% in the period.Alternative investments had grown by more than 10% in the first half, it said, adding that it was increasingly investing in non-listed companies now.Property generated around 4.3%, it said.The pension provider’s investment returns translated into a return of between 5.5% and 7.5% for customers with unit link pensions, compared to an average rate of 2.3% in the same period last year, according to the interim report.Customers with traditional with-profits pensions would get an 8.0% return compared with a 2.2% loss in the first half of 2013.Meanwhile, labour-market pension fund PensionDanmark posted a first half return of DKK9.9bn —higher than the entire 2013 return of DKK9.1bn, and beating the DKK2.2bn return generated in the first six months of last year.The 2014 first half investment return led to scheme member returns of between 6.5% and 6.6%, the pension fund said, adding that these returns had increased since the end of June to 8.3% and 8.4%.Torben Möger Pedersen, chief executive of PensionDanmark, said: “This is a satisfactory result, which reflects the fact that there have been positive returns on all asset classes.”He said it was unusual in markets to have rising equities prices and falling interest rates at the same time.“We are trying to put together a balanced portfolio that can do well both when the sun shines and when it rains,” he said.Contributions had increased in the January-to-June period to DKK6.8bn from DKK5.2bn, PensionDanmark said, boosted mostly by DKK1.8bn of transfers from other pension funds due to job changes.Total assets increased to DKK165bn at the end of June from DKK152bn at the end of December. Denmark’s PFA reported an investment return of DKK24.7bn (€3.3bn) for the first half of the year, bouncing back from the DKK4.9bn loss it booked in the same period a year ago, with results boosted by a high proportion of foreign bonds.The results came as PensionDanmark also published half-year results that saw investment income for the first six months outstrip income from all of 2013.PFA, the commercial mutual pensions provider said: “This year, PFA obtained its historic high return based on its successful interpretation of the markets on several fronts.”The provider has explained the loss recorded in the first half of 2013 by saying it had not recognised the operational risk charge due to the increase in interest rates during the reporting period.last_img read more

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Pension funds should appoint data protection officers: regulator

first_imgPension funds should appoint a dedicated officer for the protection of personal data, according to the chair of the Netherlands’ Personal Data Authority (AP).At a conference hosted by IPE’s Dutch sister publication Pensioen Pro last week, Aleid Wolfsen spoke about the introduction of local data protection rules for the Netherlands, in the wake of EU-wide legislation for privacy protection that is to come into force as of next May, known as GDPR.He suggested that the task could also be carried out by a board member of the pension fund, rather than a new member of staff. In his opinion, such an officer could also serve several pension funds.The Dutch regulation requires government organisations, as well as organisations that process sensitive data on a large scale, to appoint somebody to hold responsibility for this data and the implementation of the new rules. Wolfsen said that organisations that did not appoint such an official must explain their decision to enable the AP to check whether they have made the correct assessment.Based on a conversation with the Pensions Federation, Wolfsen said he expected that the pensions sector in general was properly preparing for the data protection regulation.According to the chairman, 10% of all data leaks reported to the AP during the first six months of 2017 came from the pensions sector.However, he immediately put the issue into perspective by explaining that the breaches predominantly were about wrongly delivered mail, which officially counts as a data leak.Wolfsen’s comments contrasted with the findings of a survey by an audit, tax and advisory firm, which reported in August that UK trustees were “unprepared” for the new European-level rules on data protection.Eddie Hodgart, risk and assurance director at Crowe Clark Whitehill, said at the time that many trustees felt “out of their depth with non-traditional risks such as cybersecurity”. “More work is needed to educate pension trustees on managing non-traditional risks which impact pension schemes,” he added.last_img read more

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Joseph Mariathasan: Sustainability presents an opportunity for investors

first_imgPorter says a big part of the problem lies with companies that see value creation in a very narrow sense, focusing on optimising short-term financial performance. This overlooks many factors, such as the wellbeing of their customers and the depletion of natural resources vital to their businesses.The growth in acceptance of environmental, social and governance issues is causing a change in attitudes. Sustainable investment is now being accepted both by investors and by corporations.However, as Porter points out, our understanding of the potential of shared value is just beginning.Corporations are struggling to determine how best to measure their impact in terms of “externalities”. Fund managers are faced with the issue of how best to apply a consistent framework in assessing companies across diverse sectors and geographies.Yet progress is being made. Firms such as Trucost are providing independent assessments of the positive impact of investments. Companies such as Olam have taken a lead in trying to incorporate natural and social capital within a company’s balance sheet. Olam’s Chris Brown and Ravi Abeywardana argue that a natural and social balance sheet would be analogous to a financial balance sheet. The latter provides stakeholders with an understanding of what the company owns (assets) and owes (liabilities), and whether it is solvent and can meet short-term debts.A natural and social balance sheet would highlight whether a company’s operations were sustainable or unsustainable when assessed against predefined boundaries.A group of Oxford University economists recently released a report entitled The Wealth of Nature, exploring the linkages between natural capital and human prosperity. They argue that the erosion of natural capital poses threats to continued national and global prosperity, yet political and economic systems are unprepared for that risk for three reasons.First, natural capital is not being accurately measured or valued in the context of ecological tipping points and thresholds. Second, aggregate economic models are ill-equipped for identifying the dependencies between ‘capitals’. The problem with most cost-benefit analyses and economic methodologies used is that they assume natural capital is akin to man-made capital. But how does one value a tiger when they may no longer exist?Thirdly, the economists argue that society currently lacks appropriate political and economic institutions to manage natural capital effectively. National wealth accounts still provide an incomplete picture of the value of natural capital.The Oxford report makes a couple of important recommendations. Firstly, all natural capital – including minerals, resources, fossil fuels, but also valuable ecosystem assets and natural infrastructure – could support greater prosperity if it were more appropriately valued and hence more efficiently used. The Economics of Ecosystems and Biodiversity (TEEB) global initiative was an attempt to remedy this, but there is still a long way to go.Secondly, critical natural capital – such as a stable climate and well-functioning ecosystems – should be protected with governance regimes based on scientifically informed political decisions. That is, however, looking more difficult with the Trump administration’s stance. The EU, China and India seem more likely to take the lead in this respect.Al Gore’s own fund management company, Generation Investment Management, has built a substantial business from the idea of investing in sustainable companies. These companies do not borrow from future earnings to support current earnings; their sustainability practices, products and services drive revenues, profitability and competitive positioning; and they provide goods and services consistent with a low-carbon, prosperous, equitable, healthy and safe society.The real measure of the success of sustainable investment, however, would be when all investment managers can claim the same.For investors, if Al Gore’s optimism holds true, there is plenty to be excited by. At the IPE Conference in Prague last week, Al Gore declared the world was experiencing a global sustainability revolution with the magnitude of the agricultural and industrial revolutions, but the speed of the digital revolution.He declared it as the single largest investment opportunity in history, emanating from developing and developed countries alike.For both fund managers and corporations, there are both opportunities and pitfalls. Michael Porter, in a 2011 Harvard Business Review article titled Creating Shared Value, argues that the concept of shared value – i.e. the idea that there are links between societal and economic progress – has the power to unleash the next wave of global growth.Yet, as he points out, the capitalist system is under siege as business has increasingly been viewed as a major source of societal, environmental and economic problems. President Trump’s retreat from globalism with a focus on “America first” is just another manifestation of a diminished trust in the ability of businesses to deliver societal good.last_img read more

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People moves: Mars investment director joins Delta Lloyd as supervisor

first_imgPensioenfonds Delta Lloyd – As well as Eelens, the €3.3bn Pensioenfonds Delta Lloyd has named Peter de Groot and Jeroen Hilbrands as members of its RvT, with De Groot chairing. It has established an RvT because company pension funds with more than €1bn of assets are no longer allowed to use an external visiting committee for internal supervision.De Groot is a member of the supervisory boards of ABP and the pension fund for the Dutch regulator, DNB. Hilbrands also holds a number of board positions, including the industry schemes Waterbouw and Foodservice. He is also on the visiting committee for Blue Sky Group. BlackRock – Jens van Egmond has become head of LDI strategy for the Netherlands at asset manager BlackRock, responsible for designing, developing and supporting investment solutions for existing and potential clients. He will operate from both Amsterdam and London. Van Egmond is also a member of BlackRock’s LDI team for EMEA.Prior to BlackRock, he worked at Dutch risk manager Cardano, initially as a risk adviser based in Rotterdam and, for the past two years, as consultant to defined contribution pension plans in London. He is also a board member of the €100m Pensioenfonds Sportfondsen.Longial – Jan Niebuhr has been named managing director of the German pensions consultancy, joining from Pricewaterhouse Coopers. He moved to Longial at the beginning of November and will lead the consultancy together with Michael Hoppstädter. Mark Walddörfer, who was part of the Longial management team since 2012, will leave the company at the end of the year.Het Nederlandse Pensioenfonds – Astrid Roelofs has started as operational manager at Het Nederlandse Pensioenfonds, the general pension fund (APF) established by insurance company ASR. Roelofs joined from the €1.1bn Pensioenfonds Arcadis, where she was director. The pension fund placed its assets in an individual compartment at the APF as of 1 July.Cardano – The fiduciary manager has hired Dana Day to its London team as business development director. She was previously regional director for institutional partnerships at the CFA Institute. She has also worked in business development for Aviva’s global financial institutions business.CEO Kerrin Rosenberg said: “As we near the end of a successful year for the business, we are now looking ahead to what could be a challenging year for the pensions industry. During this time, an increasing number of schemes might seek support in their risk management and asset allocation decisions as the market backdrop demands a more nimble and agile approach.”Candriam – The Belgian asset manager has appointed Derek Brander as head of UK distribution – he was previously UK wholesale director. Prior to joining Candriam in 2016, he was director of UK wholesale at Natixis and has also worked as a sales manager at GLG Partners, SGAM, Aegon and First State Investments. Renato Guerriero, global head of distribution, said Candriam was “committed to the UK market” and planned to expand its presence in the country.Mirabaud Asset Management – The CHF9bn (€7.9bn) Swiss asset manager has hired Hywel Franklin as head of its European small and mid-cap equities team. He joins from UBS Asset Management, where he was a global equities manager and led its global small caps team for four years. He has also worked for New Amsterdam Partners and UBS Phillips & Drew.SAREF – Annemarie Maarse has been named as director for residential properties at asset manager Syntrus Achmea Real Estate & Finance (SAREF) as of 2019. She will be tasked with generating returns on the 28,000 units SAREF manages for its clients. She succeeds Peter Appeljan who is to retire.Maarse is to report to Nicole Maarsen, head of property at SAREF, and joins from Altera Vastgoed, where she was head of asset management for residential real estate, managing €1.1bn worth of properties. Mars, Delta Lloyd, BlackRock, Longial, Het Nederlandse Pensioenfonds, Cardano, Candriam, Mirabaud, SAREFMars Pensioenfonds – Evalinde Eelens has left her role as investment director at the Dutch pension fund of chocolate maker Mars. She has taken up a career as a board member and supervisor for pension funds.She began working for the boards of the the industry schemes for painters and private security workers in August, and has recently been appointed to the new supervisory board (RvT) of Pensioenfonds Delta Lloyd. Prior to working at Mars, Eelens was a senior investment strategist at PGGM.last_img read more

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​AP1 awards $1.5bn private equity mandate to Hamilton Lane

first_imgMore changes to AP funds’ investment rules on the horizon Sweden’s AP funds should be allowed to invest directly as part of a continued modernisation of their investment rules, according to a government-commissioned report from consultancy group McKinseyHow We Run Our Money: Första AP-fonden (AP1) Mikael Angberg (pictured), AP1’s chief investment officer, speaks to Carlo Svaluto Moreolo about the buffer fund’s investment philosophy AP1 – one of Sweden’s five state pension buffer funds – has signed a deal with private markets manager Hamilton Lane allowing it to make up to $1.5bn (€1.3bn) of private equity investments over the next three years.The Stockholm-based pension fund said it was planning to lift its overall private equity exposure across its investment portfolio.AP1’s head of private equity Jan Rådberg told IPE: “We aim to increase our private equity exposure from 5% to a maximum of 6%, of AP1’s total assets.”Based on the fund’s SEK324bn (€30.6bn) portfolio at the end of 2018, a one-percentage-point increase would mean adding SEK3.2bn. “It is a very flexible investment service solution which allows AP1 to commit $1.5bn to private equity over the next three years,” Rådberg said.He said recent revisions to the investment rules for the four main AP funds had opened up the possibility of increased exposure to illiquid investments.“As a consequence, we are planning to increase our private equity exposure slightly,” he said.The investment rules for AP1, AP2, AP3 and AP4 were revised by the Swedish government last year, with the changes taking effect at the beginning of January.AP1 deal with Hamilton Lane followed a SEK300m investment in a private equity fund committed to aligning with the UN’s Sustainable Development Goals.Stockholm-based private equity firm Summa Equity said it had raised SEK6.5bn in total to invest in Nordic and European companies working for solutions to global challenges.Further readinglast_img read more

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Estonia set to overhaul €4.4bn second-pillar system

first_imgEstonia is set to become the latest eastern European country to scale down its second pillar pension system.Membership of the €4.4bn system is to become voluntary and the level of the country’s state pension is to be raised as part of the coalition agreement struck in April between the Centre Party, Conservative People’s Party of Estonia and Isamaa.When the second pillar was introduced in 2002, it was mandatory for those above the age of 18 and voluntary for workers above the age of 60, an option which stopped at the end of 2010.It is funded by diverting 4% from Estonia’s employer-funded state pension tax, alongside an additional 2% of salary from workers. Alexander Nevsky Cathedral, TallinnThe bill is still to be published. If passed by the Estonian parliament, the second-pillar change would take effect at the start of 2020.While returning the employer-funded portion of second-pillar contributions to the first pillar would boost the state system, there have been inter-party disagreements about when the pensions rise would take effect, as the government has no way of knowing how many workers will take up the option.As of mid-August the second pillar had a membership of around 738,000 – around three quarters of the total labour force – and assets of €4.4bn.Weak performanceOne of the government’s rationales for the reform was the system’s relatively low investment returns, a long-standing criticism of all Estonian retirement vehicles.According to the OECD, as of the end of December 2018 the annual real rate of return fell to a loss of 5.5%, from a loss of 0.1% the previous year.The real annual average performance over the 15 years to end 2017, net of expenses, was a loss of 0.2%.Meanwhile management fees – although cut by a third at the start of this year – remain among the highest in the OECD.The second-pillar system has also experienced issues with its payout system, which is mostly done through lifetime annuities. This has proven expensive as only three insurance companies provide such products.Opponents voice concerns#*#*Show Fullscreen*#*# The government plans to allow second-pillar members to suspend existing contributions and transfer existing savings to a personal investment account, in which profits are reinvested tax-free into further assets, while withdrawals are subject to income tax.center_img Credit: Rainer SüvirandTallinn, EstoniaCritics of the proposed reform, including the Estonian central bank and the International Monetary Fund, have warned that the changes could result in lower pensions for future generations. They have urged the government to focus on solving the system’s issues rather than dismantling it.Kristjan Tamla, CEO of Swedbank Investment Funds, said changing the mandatory funded pension system “has been presented under the slogan of ‘giving people wider choice in managing their pension savings’, though in reality what has leaked from the plans emphasises the possibility of withdrawing pension savings before retirement”.“The inevitable consequence of future lower old age benefit levels has never been mentioned,” he added.Tamla heads a pensions working group set up by the trade body FinanceEstonia earlier this year. One of its two main proposals was to ensure that the pension system did not end up with lower savings.“Instead, we have advocated and proposed a number of options to increase savings via, for example, occupational pensions, which are currently totally absent in Estonia,” Tamla told IPE.“The second is to reduce the current excessive administrative burden of pension funds. This has made it expensive to operate the current system and has created a barrier to increased competition.”last_img read more

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​AMF backs coronavirus crisis tech winner with €29m placement

first_imgA close-up of one of Yubico’s security keys“It also feels good to be part of and invest in companies that help strengthen Sweden’s position as an innovation and technology country,” he said.AMF has announced a series of investments in unlisted Swedish companies since the COVID-19 crisis took hold, having earmarked large sums in particular to recapitalise struggling local firms with strong long-term prospects.Last month, it unveiled a new joint venture it was forming with bank SEB and FAM, the holding company of the Wallenberg foundations, through which SEK3.5bn would be invested in unlisted domestic firms under pressure from the pandemic-induced economic crisis.To read the digital edition of IPE’s latest magazine click here. Stina Ehrenswaard, chief executive officer and founder of Yubico, said: “With strengthened cash from a long-term Swedish owner such as AMF, we are now investing in new products and services and increased production capacity in Sweden.”AMF’s head of asset management Tomas Flodén said the pension fund had good prior experience investing in unlisted, growing technology firms – such as iZettle and Spotify – and he believed this new investment had the potential to generate strong, long-term returns for its customers. Sweden’s second-largest pension fund AMF announced a private placement investment of SEK300m (€29m) in Stockholm-based IT security firm Yubico, a company it said had seen revenue surge during the COVID-19 crisis.The SEK600bn Swedish blue-collar pension fund said Yubico counted nine of the world’s 10 largest IT firms among its customers, and that its ordinary-share investment in the company corresponded to around 5% of equity in the firm, making it Yubico’s fifth-largest shareholder.AMF said in a statement: “As more and more people work from home via the Internet, phishing attacks and online scams have also increased sharply.”The pension fund said Yubico’s main security product YubiKey – a physical security key for secure login to web services and mobile applications – had been proven to be the safest and most economical solution for securing user accounts online, according to numerous user studies, including Google research.last_img read more

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Balinese delight to go to auction

first_img14 St Andrews Close, KirwanThe home is positioned .4 hectares of land in a premium pocket of Kirwan, has been immaculately maintained and has more than 400sq m of under-roof space.About Town Real Estate Townsville agent Anthony Dare said homes in that part of Kirwan were on larger blocks. 14 St Andrews Close, KirwanA KIRWAN home reminiscent of a Balinese resort will be sold under the hammer on July 14.The four-bedroom, three- bathroom home at 14 St Andrews Close will go to auction on site at 11am. More from news01:21Buyer demand explodes in Townsville’s 2019 flood-affected suburbs12 Sep 202001:21‘Giant surge’ in new home sales lifts Townsville property market10 Sep 202014 St Andrews Close, Kirwan“There is a lot of larger allotments there and the homes aren’t your standard spec homes,” he said.“They all have architectural features.“This home would suit families and extended families because there is two distinct wings and then you have a central living and dining area, so it is very family friendly orientated.“The size under roof is very generous but it still has a welcoming intimate feel so it’s not echoey. 14 St Andrews Close, Kirwan 14 St Andrews Close, Kirwan“Interest has been very strong, mainly from families.”The home has a formal entry with granite floors and the gourmet kitchen overlooks the polished timber floor living areas.The manicured gardens have a bore pump, a four-bay garage, a pool with waterfall and spa and a circular driveway, which leads to the entrance of the home. It will be open for inspection on Sunday, 1-1.45pm and Wednesday, 5.30-6pm. For more information call Mr Dare on 0455 859 528. last_img read more

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Auctioneer has winning bid

first_imgThe four finalists in the REIQ Auctioneer of the Year, with winner Gavin Croft (front left)The competition saw a volley of more than 100 bids designed to test the competitors on their memory, maths, resilience and endurance. Scripted challenges came from a lawyer, who attempted to de-legitimise the auction on multiple occasions, and from an extremely litigious registered bidder whose winning bid was ultimately not accepted by the vendor.Auction chapter delegate, and author of the scripts, Peter Burgin said the goal was to create a realistic setting as well as testing the competitors’ legal and technical knowledge.“We wanted this competition to feel like a real-life auction, but also we wanted to make sure that the competitors had the knowledge and the understanding of the legislation that someone at this level should have,” he said.But in the end there could only be one winner and there was no love lost between Mr Croft and Mr Nickerson.“We’re people who tend to hang out a lot, so we get along,” Mr Nickerson said. “We’re all crazy in our own crazy ways.”Mr Croft and Mr Nickerson will now represent the REIQ at the Australasian Auctioneering Championships in 2019, when the REIQ will host the event. REIQ Auctioneer of the Year winner Gavin CroftJETSETTING auctioneer Gavin Croft has been named Auctioneer of the Year by the Real Estate Institute of Queensland.Mr Croft, who flies between Auckland, Sydney and Brisbane every week to call auctions, beat friend and 2017 winner Justin Nickerson for the top gong.“I think to come back to where I was born and bred, it’s a nice little award,” Mr Croft said.Mr Croft grew up in Queensland but has spent time in Sydney calling auctions for Bresic Whitney. He recently returned to the Sunshine State and will continue to call auctions in Sydney, Brisbane and New Zealand for Sotheby’s International.“Auckland and Sydney are really sophisticated markets,” he said. “The Sydney market expects high performance.“You sense things are changing, and starting to change quite quickly.“We saw that in eastern Sydney about 30 years ago, and we’re starting to see that here in Brisbane, hence why I am starting to spend a little more time in Brisbane.”Runner-up Justin Nickerson, who has won the title five times, will represent Queensland at the Australasian Auctioneering Championships in New Zealand this October with 2018 runner-up Mitch Peereboom (Ray White). He said Brisbane’s strength was its reliable and stable market.“I think the Brisbane market is seeing a lot of consistency,” Mr Nickerson said. “We haven’t had the huge dips.”It was a sentiment echoed by Mr Croft, who is Mr Croft is now only the second person to win an REI Auctioneer of the Year title in two states. He said Brisbane’s stability was in sharp contrast to behaviour witnessed at Sydney auctions.More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours ago“People climbing over each other and so on. It was just an interesting experience,” he said. It was a tough battle between the top four contenders for the title, which included former REIQ Auctioneer of the Year (2015) Mark MacCabe (Apollo Auctions) and LJ Hooker national auction manager David Holmes.last_img read more

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