Showing posts from August, 2009

Time to Clean House at Pensions?

The CBC reports that Ontario cleans house at the OLG:
Ontario's finance minister has fired the head of the Ontario Lottery and Gaming Corporation and accepted the resignations of the entire board of directors in an attempt to head off another scandal.Dwight Duncan told a news conference at Queen's Park on Monday that he was "taking action to ensure protection of taxpayers money."Duncan said there had been problems with expenses and they represented "symptoms of much larger problems" at OLG.The corporation's CEO, Kelly McDougald, was fired "for cause," said the minister. The entire six-member board stepped down.The provincial auditor general has been asked to conduct a thorough review of OLG expenses.Both McDougald and the board members were brought in to clean up the scandal-plagued organization.Duncan released two years' worth of expense claims filed by OLG executives and senior staff that include questionable claims filed by executives go…

Overhaul or Tweak Pensions?

Reporting for the NYT, Mary Williams Walsh asks, An Overhaul or a Tweak for Pensions:
After more than three years of deliberations, the board that sets the accounting rules for state and city governments is still far away from issuing a new standard for public pension funds. What may seem like tedious labors over technical matters can have a large impact on public employees, taxpayers and investors. Many municipalities around the country are grappling with serious shortfalls in their pension funds caused by the recession and other woes. Since the deliberations began, San Diego’s finances have been rocked by a pension scandal; Vallejo, Calif., has filed for bankruptcy after promising costly benefits; and New Jersey has warned that it lacks the cash to comply with its actuary’s instructions. The panel, the Governmental Accounting Standards Board, heard impassioned testimony on Wednesday on the need to make public pension numbers more straightforward, more closely mirroring the pension ac…

A Lesson in Liquidity?

I want to follow-up on my last post on Harvard's mea culpa. Last week, James B. Stewart reported in the WSJ that Ivy League Schools Learn a Lesson in Liquidity:
Just a year ago, in the midst of the subprime meltdown, many of the nation's top universities and colleges were reporting significant gains. This year, the University of Pennsylvania is being hailed for Ivy League-leading results—with a decline of 15.7% for its fiscal year ended in June.Results from other schools are still trickling in, but Harvard University has said it is expecting to report a drop of 30%, and Yale University about 25%. Considering the size of these endowments, these are staggering losses in absolute terms—many billions in the case of both Harvard and Yale.Students soon will be heading back to larger classes, curtailed extracurricular activities and cheaper dining-hall fare. But the results are also of more than academic interest to investors like me, who have to some degree modeled their portfolios o…

The End of a 30-Year Wealth Bubble?

David Leonhardt and Geraldine Fabrikant of the NYT report that the Rise of the Super-Rich Hits a Sobering Wall:
They began to pull away from everyone else in the 1970s. By 2006, income was more concentrated at the top than it had been since the late 1920s. The recent news about resurgent Wall Street pay has seemed to suggest that not even the Great Recession could reverse the rise in income inequality.But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.For every investment banker whose pay has recovered to its prerecession levels, there are several who have lost their jobs — as well as many wealthy investors who have lost millions. As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerou…

Bonusgate Spreads to New Brunswick

CBC reports that N.B. pension managers reap bonuses despite big losses:
A group of pension management executives who presided over the loss of $1.6 billion in investment assets for the New Brunswick government last year collected $592,000 in bonuses. The New Brunswick Investment Management Corporation disclosed in its annual report released Wednesday that a number of its executives were paid the performance bonuses, even though the funds they supervise lost more than 18 per cent of their value in the same year.The rest of the civil service was placed under a strict governmentwide freeze on bonus payments and similar bonuses were cancelled at other Crown corporations, such as NB Power.The corporation defended the bonuses, noting they were much less than the $1.3 million paid out a year earlier. Additionally, these payments were meant as a reward for good results over a four-year period despite poor results in 2008-09."The previous three fiscal years had positive net value added res…

A Private Equity Quagmire?

Bloomberg reports pension plans' private equity cash depleted as profits shrink:
U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans. The California Public Employees’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement Fund -- among the few pension managers to disclose details of their investments -- had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven’t reaped a paper gain from funds formed in the past seven years. The wisdom of those investment decisions …

Pensioners Taking a Back Seat to Bondholders?

A week ago, MacLean's magazine published an article, Pressure rises to protect our pensions:
At long last, there is a ray of hope for workers whose employers have filed for bankruptcy. Currently pensioners, the disabled, and employees owed severance pay are treated the same way as banks and other sophisticated creditors: when a company goes under, they have to get in line to fight for a piece of what’s left with everyone else. But a group of former Nortel employees is looking to change that. They have asked the federal government to make an emergency amendment to the Bankruptcy and Insolvency Act to give preferred status to the claims of pensioners, the disabled and severed employees—essentially putting workers at the front of the line.In principle, there is already agreement to consider the amendment amongst all the federal political parties. Driven by concern that Nortel pensioners could lose 30 to 40 per cent of their pension income, on June 16 NDP MP Wayne Marston (Hamilton Eas…