Pension Pulse

A couple of days ago, Jack Dean of Pension Tsunami posted a link to an article by Arleen Jacobius of Pensions & Investments, How CalPERS strategy backfired (hat tip, Bill Tufts): Behind CalPERS' staggering real estate losses lies a strategy that took on too much risk and lacked adequate oversight. Once the fund's star asset class, the real estate portfolio of the $201.1 billion California Public Employees' Retirement System lost nearly half its value during the one-year period ended Sept. 30. The fund's real estate consultant, Pension Consulting Alliance Inc. , predicts losses will continue for at least another year. At the heart of the problem is a freewheeling approach that took on massive leverage, gave enormous discretion to staff and experienced poor timing with its investments. The decision-making process and risk management need to be much more rigorous, acknowledged Joseph A. Dear, who joined CalPERS as chief investment officer earlier this year. The co...

On Monday, the Montreal Gazette published its first of three editorials, Pension anxiety: a crisis in the making : Christmas is over, and Boxing Day, too, and grim reality will return with the mail: credit-card bills and other evidence of our recent financial folly. New Year's Day will open RRSP season, when we're urged to invest for retirement. There's a new anxiety about retirement in many Canadian households. After the investment tumult of the last couple years, Canada's greying population is coming to realize that "the golden years" may be turning to dross. Today, we begin a three-day series of editorials on Canadians' pensions. Below, we outline the problem. Tomorrow, we'll look at some proposed remedies. And Wednesday we'll suggest where the national debate should go from here. Typically, Canadians have three sources of money for retirement: government pension, workplace pension and private savings. But government pensions are not generous, w...

Nick Clark of the Independent reports that Abu Dhabi in for EDF asset : The auction for EDF Energy's electrical distribution business is expected to heat up after news emerged that Abu Dhabi, which has run the slide rule over the asset in the past, has held talks over a potential £5bn joint bid. The Abu Dhabi Investment Authority, the Gulf state's sovereign wealth fund, is understood to have joined the Canadian Pension Plan in a joint bid for the business, which the French energy group put on the block two months ago. Goldman Sachs and Lexicon Partners are understood to be involved in an advisory capacity to the consortium. EDF, which is majority owned by the French government, revealed in October that it was considering its "ownership options" for the electricity distribution business in the UK. At the time it said it "regularly receives spontaneous expressions of interest". The group, which hired Barclays Capital, Deutsche Bank and BNP Paribas to oversee ...

I would like to follow-up on my last comment on Katie Piper's Christmas message with another inspirational story from yet another beauty who survived a harrowing ordeal five years ago. ABC's David Muir reports on Petra Nemcova: Healing Five Years After the Tsunami : Nearly five years ago Petra Nemcova was swept from her hotel room when a tsunami struck Thailand. Now the 30-year-old model is helping to heal others by rebuilding schools for the children who lost everything, not just in the deadly 2004 tsunami but in natural disasters around the world. "Really, honestly, what I'm doing now, being able to improve, and better lives of children, that's what I always wanted to do," Nemcova said. Four months after Nemcova clung to a tree for eight hours to save her life she went back to visit the tsunami zone. She said she would never forget the faces of the children. "They lost their parents or their brothers and sisters. They didn't have anywhere to go. ...

The Telegraph recently published an article, Appreciate beauty, acid attack victim tells Christmas viewers : The model and aspiring TV presenter before the attack has received thousands of supportive messages from the public. In her message, appeared in a Cutting Edge documentary titled Katie: My Beautiful Face this autumn -she reflects on her progress over the last year and how strangers' words of kindness have helped her to move forward. Piper was left fighting for her life after former boyfriend Daniel Lynch raped her and then arranged for another man to hurl the corrosive liquid. The acid burned through all four layers of skin on her face, some spilling down her throat, and she was left blind in one eye. Piper has undergone more than 30 operations on her face and throat. But she tells how it took the tragedy for her to reassess her ''self-obsessed'' life. Piper says: ''This year I wanted to give a Christmas message to e...

Henny Sender of the FT reports that top hedge funds bet on big rise in yields : The recent rise in long-term US interest rates comes as good news for several leading hedge fund managers, including John Paulson, who have positioned their trading books to benefit from higher yields on US Treasury securities. Mr Paulson, who made big gains earlier this decade by betting against the subprime mortgage market and whose firm, Paulson & Co, manages $33bn, has said he believes that government stimulus efforts would inevitably lead to higher inflation and a corresponding rise in rates. “It will be difficult for the government to withdraw the economic stimulus,” Mr Paulson said in a speech. “An increase in the monetary base leads to an increase in the money supply, which leads to inflation.” Bond prices fall as yields rise, and Mr Paulson told the Financial Times last week that he has been hoping to benefit in the Treasury market by buying options that would become profitable if rates headed ...

Steve Ladurantaye of the Globe and mail reports that CPP goes shopping : T he Canada Pension Plan Investment Board snapped up a Scottish shopping mall Monday, partnering with an English fund Hammerson on the $479-million deal. The Silverburn mall, which opened in 2007, is a single-level covered centre anchored by Debenhams, M&S, New Look, Next and Tesco Extra. It provides 94 retail units let to high quality retailers, has an occupancy level of 98 per cent, and an average unexpired lease term of over 12 years. The centre attracts approximately 14 million customers per year. “ T his transaction represents a unique opportunity to acquire a high quality asset alongside one of the top retail developers and operators in Europe," said Graeme Eadie, senior vice-president of real estate investments for CPPIB. "We are delighted to be partnering with Hammerson as co-investor and manager, given their proven track record in managing similar assets.” Karen Mazurkewich of the National ...

Gretchen Morgenson of the New York Times reports on Mercer’s Little Alaska Problem (hat tip Dan Braniff): Although it has received little coverage lately, a bombshell of a lawsuit inching its way through the superior court of Alaska has revealed the financial strain visited on state workers there and promises to have ramifications for public pensions across the country. The Alaska Retirement Management Board, a state agency, filed the suit in 2007 against Mercer, the human resources consulting firm. The lawsuit says that Mercer’s mistakes hindered the ability of Alaska’s retirement system to meet its obligations to former public employees. Mercer, the agency contends, made multiple errors as the state’s actuarial consultant when it estimated the amounts that two of the state’s retirement plans needed to set aside for health care and pension benefits. The agency seeks damages of $2.8 billion. Earlier this year, Mercer, a unit of Marsh & McLennan , had asked Patricia A. Collins, the...

Last Sunday, I posted on Paul Salmuelson's legacy in economics , paying a tribute to a giant in economics. But not every economist shares these views. On Friday, Paul Krugman referred to Michael Hudson's critical assessment of Samuelson in a recent blog entry, Why economics is the way it is : A number of people are linking to this reprinted critique of the work of the late Paul Samuelson. I could point out that the critique thoroughly misunderstands what Samuelson was saying about international trade, factor prices, and all that. But there is, I think, an interesting point to be made if we start from this complaint: Can it be “scientific” to promulgate theories that do not describe economic reality as it unfolds in its historical context, and which lead to economic imbalance when applied? Actually, there was a time when many people thought that institutional economics , which was very much focused on historical context, the complexity of human behavior, and all that, would be...

Johann Hari reports in the Independent on the truths Copenhagen ignored (hat tip Tom Naylor): So that's it. The world's worst polluters – the people who are drastically altering the climate – gathered here in Copenhagen to announce they were going to carry on cooking, in defiance of all the scientific warnings. They didn't seal the deal; they sealed the coffin for the world's low-lying islands, its glaciers, its North Pole, and millions of lives. Those of us who watched this conference with open eyes aren't surprised. Every day, practical, intelligent solutions that would cut our emissions of warming gases have been offered by scientists, developing countries and protesters – and they have been systematically vetoed by the governments of North America and Europe. It's worth recounting a few of the ideas that were summarily dismissed – because when the world finally resolves to find a real solution, we will have to revive them. Discarded Idea One: T...

Terence Corcoran of the National Post reports on the pension debate : In Whitehorse today, Canada’s finance ministers meet to discuss the future of Canada’s pension system. No agreements are expected on how to enhance Canadians’ retirement savings. A pension summit is expected to take place later this year. Today, FP Comment launches the first in a series on The Pension Debate. Is Canada’s pension system a shambles, as some argue? Are Canadians ill prepared to meet their financial futures post-retirement? Is the private defined-benefit system permanently impaired? Are mutual funds and other savings vehicles, including RRSPs, up to the job of protecting Canadians? Do we need a new, government-backed secondary pension regime to accompany the Canadian Pension Plan and associated government retirement relief? The Canadian pension management industry, in today’s first commentary , argues against new government intervention and in favour of reforms to enhance the role of the private secto...