Pension Pulse

It didn't take Michael Sabia long to shake up the ranks at the Caisse, Canada's largest fund manager. Konrad Yakabuski of the Globe and Mail reports that Mr. Sabia is targeting risk controls : The new head of the powerful Caisse de dépôt et placement du Québec has set the tone for his mandate by putting the emphasis squarely on risk management and a shift in the $120-billion pension fund manager's culture. In an executive and organizational shake-up unveiled Thursday, Michael Sabia tapped Susan Kudzman to become the investment giant's chief risk officer and doubled the ranks of the risk management division. With the move, Mr. Sabia aims to “change the culture” of Canada's biggest institutional investor, which was rocked by massive losses last year. “Risk management is not only a question for the risk management team,” Mr. Sabia, the former BCE Inc. chief executive officer named Caisse CEO in March, said on a conference call with journalists. “It's a challenge to...

Following up on my last comment on CPPIB getting grilled in Ottawa , I received a few questions on benchmarks. I will elaborate on benchmarks in this post. But first, CPPIB contacted me to tell me that they posted Ms. Warmbold's opening remarks to the Standing Committee on Finance. I am still waiting for PSPIB to post Mr. Valentini's remarks on their website, but given that the last press release dates back to October 2007 , I doubt they'll post his remarks on their website. Anyways, back to Ms. Warmbold's opening remarks ( added notes are mine ): Good morning, Mr. Chairman and Members of the Committee. My name is Benita Warmbold, and I am Senior Vice President and Chief Operations Officer of the CPP Investment Board. With me today is Mr. Don Raymond, Senior Vice President and head of Public Market Investments. When the federal and provincial ministers of finance successfully reformed the Canada Pension Plan in the mid-1990s, they endowed the CPP – and the CPP Investm...

The New York Times reports that the plight of carmakers could upset all pensions : Decisions that the government will make soon on the future of General Motors and Chrysler could accelerate the decline of traditional pension plans, which have sheltered generations of workers from an impoverished old age. Pension experts predict that a government takeover of the two giant plans would spur other auto companies and all types of manufacturers to abandon such benefits for competitive reasons. For hundreds of thousands of retired auto workers, a federal pension takeover would mean sharply reduced benefits. For the federal agency that insures pensions, it would mean a logistical nightmare in the short term — and most likely a slow demise eventually as fewer and fewer small plans remain in the system and pay premiums. So far, the prospect of a grueling grind through bankruptcy court has been a major deterrent to companies that might want to rid themselves of pension obligations. But retiremen...

Today is my birthday. I am now 38 years old. No big deal, it is just another Sunday for me. I woke up, had a cup of java and watched ABC's This Week with George Stephanopoulos. There was an interesting interview with Iran's President, Mahmoud Ahmadinejad. The roundtable discussed President Obama's first 100 days and George Will stated he is convinced that the $9 trillion of public borrowing will lead to "stagflation" four years from now and this will be reflected in the polls, hurting Obama. Poor George Will. Love listening to him but he is always wrong when it comes to economic prognostication. Four years from now, we will be in the midst of the longest debt deflation episode in post-war history (you can quote me on that!). But today is my birthday and I wanted to discuss health issues. First, I read an interesting article in the Telegraph stating that adult stem cells 'able to reverse symptoms' of Multiple Sclerosis (MS): Some have been left free from s...

Writing in the Financial Post, Stephen Donald, a consulting actuary with Buck Consultants, reports on the pension killer : When I started my career in 1973, the economy promptly went into a recession. The S&P 500 fell 48% and took four years to get back to break-even. At the end of 1973 near the market peak, Warren Buffet said he could not find any stock bargains and returned investors their money. Companies had large deficits in their pension plans and had to start making large contributions, and that was before solvency funding! 2009 is déjà vu with the average solvency-funded ratio below 70% and many large well-known companies on the brink of chapter 11 bankruptcy. How did pension plans get into this mess? Back in the ’70s, actuaries assumed conservative discount rates at least 1% less than expected, and this represented a margin in the order of 20%. At the same time, the market woes of the mid-’70s resulted in large company contributions going into their pension plans. Then we ...

Morneau Sobeco released the results of its Performance Universe of Pension Managers’ Pooled Funds for the first quarter of 2009 : According to the report, in the first quarter of 2009, diversified pooled fund managers posted a median return of -2.2% before management fees. According to Jean Bergeron, a Principal in the Asset Management Consulting practice at Morneau Sobeco, “the pension plans’ situation stabilized somewhat in the first quarter of the year mainly because of the stock market rebound that we experienced in March. However,pension plans’ financial positions will probably continue to be difficult for quite sometime. Actuarial valuations of pension plans will be completed in a few months and will show large deficits. The contributions that will be required to eliminate these deficits will create substantial pressure on plan sponsors.” On average, pension fund managers added value when their performance is compared to the benchmark portfolio. In fact, the managers’ median retu...

I was invited to Ottawa today to speak at the Standing Committee on Finance on matters relating to pensions. I was there as an independent analyst. This was the first time I ever attended one of these committees so I was a bit nervous. I had lots to talk about and it had to be condensed in a short five minute speech. I was feeling under the weather but determined to show up and talk about pension governance. Joining me was a prestigious panel including Claude Lamoureux, the former president and CEO of Ontario Teachers' Pension Plan. Mr. Lamoureux was there as a Special Advisor to the Canadian Institute of Actuaries to present the actuarial profession's views on the long-standing issues that continue to challenge the retirement savings system in Canada. Other speakers included Susan Eng, Vice-President, Advocacy at the Canadian Association of Retired Persons and three speakers representing the Federally Regulated Employers - Transportation and Communication ( FETCO ) : Siim Va...