Pension Pulse

According to the Organisation for Economic Co-operation and Development (OECD), companies should help staff make the right investment decisions as employees play an ever larger role in managing their pensions : In a review of its pension fund governance guidelines expected next month, it will recommend employers and financial supervisors fill a "governance vacuum" in pension schemes known as defined contribution (DC) schemes. Under these schemes, the final lump sum accrued through investments depends on the contributions set aside and the market and employers no longer guarantee a fixed outcome. These schemes are growing quickly in the UK and are the main offering in most continental European countries already, because they are cheaper to finance. "Although in theory it (the scheme) is an individual contract, it is the employer who selects the provider and what the investment choices are," said Fiona Steward, who is an pension expert at the OECD. The new OECD guidel...

U.S. stocks gained, capping the biggest weekly advance for the Standard & Poor’s 500 Index in 34 years, on speculation that government bailouts will shore up the economy : Citigroup Inc., which had $306 billion in troubled assets guaranteed by the government last weekend, rallied 18 percent for its fourth straight gain. General Motors Corp. climbed 8.9 percent and Ford Motor Co. surged 25 percent as the automakers considered cutting debt and labor costs to win federal aid. Target Corp. slumped 3.9 percent as retailers extended discounts to lure shoppers amid what is forecast to be the slowest holiday shopping season in six years. “It’s going to be a really tough Christmas shopping season, but a lot of this is built into the stocks, and there is huge stimulus coming down the pipeline,” Alan Gayle, senior investment strategist at Ridgeworth Capital Management in Richmond, Virginia, said on Bloomberg Television. “We are cautiously bullish.” Ridgeworth manages $70 billion. The S&P ...

Tonight I have a treat for you. Bill Tufts of WB Benefit Solutions has graciously provided me with a commentary to share with you on my blog. Before I get to Bill's commentary, I want to cover a few things. Today is Thanksgiving in the U.S. so the stock markets were closed in New York. The Canadian stock market was open and the S&P/TSX pushed higher for a fifth straight session : The Toronto stock market finished higher for a fifth session Thursday as investors continued to flock to beaten-down commodity stocks, particularly those in the base metals sector. "There seems to be some growing expectations that metal prices are going to continue to retrace some of the lost ground that they've seen and (they're) trying to climb their way back up again," said Fred Ketchen, manager of equity trading at Scotia Capital. Investors have taken in news in the past week of lower interest rates and a stimulus program in China, raising hopes that demand for metals will ...

The stock market bolted higher Wednesday, propelling the Dow Jones industrials and Standard & Poor's 500 index to their first four-day advance since last spring : The market reversed losses from earlier in the session after President-elect Barack Obama pledged he would have a plan to deal with the nation's economic crisis on his first day in office. After filling more spots to his economic team, Obama stated that "help is on the way." The major indexes built on their gains through the afternoon, but analysts warned that this latest advance came on light pre-holiday volume. The Dow is up 1,174 points, or 15.5 percent, during the past four days, and the S&P 500 is up 135, or 18 percent -- giving both indicators their biggest four-day rise since the Great Depression. The rally marks a string of gains that seemed impossible to achieve in the depths of selling that began in mid-September after the collapse of Lehman Brothers Holdings Inc. Analysts saw encouraging s...

I just got back from Toronto. I flew with Porter Airlines, which I liked, but I simply hate the hustle and bustle of airports (note to self: next time you go to Toronto, take the train!). I went to listen to the Canadian Business Outlook 2009 and to my surprise, I found it quite interesting (I usually dread these events and avoid them like the plague but duty called so I went). There were several interesting presentations. Professor Roger Martin, Dean of the Rotman School of Management, opened things up with a discussion on creating conditions for prosperity. He discussed productivity trends in Canada. He highlighted several interesting points, but the ones that stuck with me were that at in the 1990s, Canada started spending more on health and financed it by cutting back on spending on education. The U.S. kept up its spending on education and according to professor Martin, this explains a lot on the "prosperity gap" between Canada and the U.S. He also noted th...

The markets were on fire today as Wall Street went on a buying spree after the U.S. government bailed out Citigroup : Wall Street barreled higher Monday for the second straight session, this time in a relief rally over the government's plan to bail out Citigroup Inc. -- a move it hopes will help quiet some of the uncertainty hounding the financial sector and the overall economy. The Dow Jones industrials soared nearly 400 points and the major indexes all jumped more than 4.5 percent. The advance gave the market its first two-day advance since Oct. 30-31. Although investors sensed last week that a rescue of Citigroup was forthcoming, investors nonetheless were heartened, even emboldened, by the U.S. government's decision late Sunday to invest $20 billion in Citigroup and guarantee $306 billion in risky assets. Wall Street's enthusiasm surged not only because the bailout answered questions about Citigroup but also because many observers saw the move as offering as a model for...

My last entry was about the Caisse and the major internal and external challenges it faces to come out of this crisis. But as I stated, it isn't just the Caisse that is suffering; other large Canadian pension plans are also experiencing similar challenges. One of those plans is Ontario Teachers. For years, those of us in the pension community were told to try and emulate Teachers. Why? Because, as the saying goes, Ontario Teachers got it right. They took a page from the Harvard and Yale endowments, aggressively moving into alternative assets early on. They shoved billions into real estate, private equity, hedge funds, commodities, timberland, infrastructure and everything else that was supposedly not correlated to public equities. Funny thing about correlations, they always break down when you need them the most. What you want want is for asset classes to be non-correlated when a crisis hits, not when the good times are rolling. And in a systemic crisis like the one we are currentl...