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Caisse Warns of Giant Risk in Private Debt

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Paula Sambo of Bloomberg News reports that the Caisse sees giant risk growing in corner of the private-debt market:
Direct lenders and big banks are competing for the largest companies in the red-hot market for private credit, which is eroding underwriting standards, according to Canada’s second-biggest pension fund manager.

“The bigger, more solid companies are closer to having access to capital markets, so there’s a bit more erosion there because you have large direct lenders that are competing with each other,” along with the big banks to offer credit, said James McMullan, head of corporate credit for Caisse de Depot et Placement du Quebec, which has about $327 billion under management.

Like other asset managers, the pension fund is working to increase its exposure to higher-yielding private credit, but is doing so slowly as finding and screening companies is labour intensive, said McMullan. The Caisse currently holds around US$4 billion in the market, part of its US$41 billion cre…

PSP Investments' Strikes a Few Deals

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IPE Real Assets reports that Aviva Investors and Public Sector Pension Investment Board (PSP Investments) just extended their partnership with an agreement to invest up to £250m in commercial property in eastern England:
The companies said the new venture will acquire a mix of ground-up and standing assets located in the CB1 Estate in Cambridge, a master-planned development covering 26 acres.

The acquired assets include 50/60 Station Road, a fully-let 167,000sqft development completed in April 2019 and 30 Station Road, a pre-let 81,500sqft scheme.

Construction commenced in September, with completion scheduled for the third quarter of 2021.

Aviva Investors will act as development manager and asset management partner, working alongside Brookgate as the developer.

Aviva Investors and Canadian pension investment manager PSP Investments in 2015 invested in a portfolio of commercial properties in central London, currently worth over £400m.

Daniel McHugh, managing director, real estate, Aviv…

Is the Capitalist System Really Broken?

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Catherine Clifford of CNBC reports on how America’s capitalist system is ‘broken,’ according to billionaire financier Ray Dalio:
“The world has gone mad and the system is broken.”

So says Ray Dalio, the billionaire financier and founder of Bridgewater Associates, the largest hedge fund in the world with $160 billion in assets.

There are several problems, including an overzealous lending market, a growing mountain of government debt and a widening divide between the rich and poor that’s becoming more tense, he says.

“This set of circumstances is unsustainable and certainly can no longer be pushed as it has been pushed since 2008. That is why I believe that the world is approaching a big paradigm shift,” Dalio wrote in a LinkedIn post published Tuesday.

Dalio, 70 and worth almost $19 billion, does not elucidate what that paradigm shift will be in his post, but he has been outspoken in his criticism of the very capitalist system that made him successful. In an interview with C…

The Teachers' Battle in Alberta Heats Up

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Danielle Walker of Pensions & Investments reports that Alberta proposes AIMCo take on management of teachers' fund:
The Alberta government proposed in its recent budget that management of the C$18 billion ($13.8 billion) Alberta Teachers' Retirement Fund, Edmonton, be shifted to Alberta Investment Management Corp.

AIMCo is an institutional investment manager with more than C$108.2 billion of assets from more than 30 pension, endowment and government funds in Alberta.

The move is intended to "lower costs and achieve significant and necessary economies of scale" that would "protect returns to pensioners," the budget plan, published Oct. 24, said.

A spokeswoman for the Alberta Treasury Board and Finance said in an email Wednesday that the transfer is a proposed change until the appropriate legislation is introduced and passed in the Legislative Assembly.

As part of the budget proposal, the Alberta government also recommended that assets from the C$10.3 bi…

CalSTRS Sees a Big Drop in Carried Interest

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Alicia McElhaney of Institutional Investor reports on why CalSTRS paid less to invest in 2018:
The overall cost of investing for the California State Teachers’ Retirement System has fallen, but not because investment managers have decreased their fees.

This is according to CalSTRS’s annual investment cost report, which was released ahead of the retirement system’s monthly meeting on November 6. The report showed that the total cost of managing the retirement system’s portfolio decreased by six percent year-over-year.

The reason? Two words: carried interest. As the performance of investments that charge carried interest — a type of performance fee — fell year-over-year, so too did the cost of investing for CalSTRS.

According to the report, the overall costs of investing for CalSTRS were lower in 2018 because carried interest paid by the pension fell by 36 percent in absolute dollars from the previous year. CalSTRS paid nearly $1.72 billion in investment costs in 2018, the …