Pension Pulse

Frederic Tomesco of Bloomberg reports, Caisse Pension Fund May Borrow More After C$8 Billion Program, Sabia Says : The Caisse de Depot et Placement du Quebec, Canada’s biggest pension fund manager, isn’t ruling out selling more bonds after completing an C$8 billion ($7.8 billion) borrowing program three months ago, Chief Executive Officer Michael Sabia said. The Caisse in June sold 750 million euros ($1 billion) in 3.5 percent bonds maturing in 2020 through its CDP Financial unit, the last step in a seven-month plan to replace short-term borrowings with longer-term debt. As of June 30, the Montreal- based Caisse, which manages Quebec’s public pension plan, had net assets of C$135.8 billion. “We did the C$8 billion that we set out to do,” Sabia said Sept. 28 in an interview at Caisse headquarters in Montreal. “We dealt with the most pressing problem. Whether or not down the road at some point we decide to do something else, that’s possible. I won’t necessarily rule that out.” The latest...

Invest in NZ reports, New Zealand Yellow Pages sale suspended : The Yellow Pages Group has suspended its planned sale of the business, citing a satisfactory price as unattainable in the current economic situation. The owners of the New Zealand business said they had withdrawn their planned sell because they felt the business would not achieve what they termed “a satisfactory price” in the prevailing economic conditions. The firm’s owners, Unitas Capital, based in Hong Kong but formerly known as CCMP Capital Asia, and Canada’s Ontario Teachers’ Pension Plan purchased the firm in 2007. Back then, the two firms paid 2.24 billion for the New Zealand Yellow Pages. Whereas a number of interested parties had shown great interest, the Yellow Pages Group shareholders, together with the banking syndicate decided to close the planned sell, said the firm Monday. The firm said it will not be pursuing the sell further. According to the firm, the existing economic situatio...

Peter Lattman of the NYT reports in the Globe & Mail, U.S. state takes page from CPP, Teachers (HT: Keith): For decades, public pension funds have bankrolled the private equity industry, investing billions of dollars with large firms like Apollo Global Management and the Blackstone Group. Now, frustrated by what it sees as expensive fees and lack of transparency at private equity firms, one state has decided on a do-it-yourself approach. South Carolina’s pension fund is creating an independent firm to oversee the fund’s private equity holdings - doing what it would have paid a private equity firm to do. The effort is similar to the direct investment funds created by two of Canada’s biggest pension plans - the Ontario Teachers’ Pension Plan and the Canada Pension Plan Investment Board - but is believed to be the first of its kind in the United States. “It’s high time that state pension funds are able to develop structures that have greater transparency and lower costs,...

BIV Business today reports, Canada’s pension system remains among world’s strongest : Canada’s public pension system helps make its financial system one of the strongest in the world. The World Economic Forum has called Canada’s financial system the strongest in the world for the past three years. Part of the credit for that is reflected by the Canada Pension Plan, said David Denison , president and CEO of the Canada Pension Plan Investment Board (CPPIB). At an event held at the Sheraton Wall Centre last week, Denison noted that reforms made 15 years ago are putting Canada in the enviable position of having one of the most secure national pension systems in the world. “One of the primary reasons for the fiscal instability in Greece is that their national pension system is not sustainable. We’ve had strikes in France over the last two weeks because of changes to their retirement system. The same situation is in Spain, Italy. So many countries around the world are just getti...

Friday morning, I met up with Petros Christodoulou, the man Spiegel International dubbed "Greece's savior" in an article which appeared in late March, The 300 Billion Euro Man : It is the most thankless job that exists in Greece these days: Petros Christodoulou, the new head of the Public Debt Management Agency , in Athens, has been tasked with guiding his country out of debt. He has already charted his course on the 300 billion euro voyage and says "there's no room for emotion." When Petros Christodoulou sits at his desk, his gaze inevitably falls on a relic of better days. To him, it must feel like a reminder of a laudable achievement gone wrong -- and a warning. A neatly framed certificate perched on the windowsill across the room reads: "Best Government Borrower." It was an award bestowed upon the Athens government in 2007 by the British financial newspaper EuroWeek . Back then, taking on debt in Athens was more of a straigh...

Lorene Yue of Chicago Business reports, Moody's goes negative on $25B in Illinois bonds : Moody's Investors Service Inc. on Thursday lowered its rating outlook for Illinois' general obligation debt, citing the state's continuing problems funding is pension program and a fiscal shortfall. The state's rating now stands at A1 with a negative outlook. It previously stood at A1 with a stable outlook. The change will affect roughly $25 billion in general obligation bonds. "The outlook for the state of Illinois is negative, reflecting the state's fiscal deterioration as demonstrated in its fiscal 2009 audit, as well as a heightened potential for further weakening as a result of economic underperformance and the inability to meet statutory pension funding requirements," Moody's analysts said in its report. Thursday's move follows a series of downgrades that began in April 2009. In the last change, on June 4, Moody's set the A1 rating with...

Cathy Bussewitz of the Huffington Post reports, CalPERS Bumped Pay as Fund Dived (HT: Peter): As its investment portfolio was losing nearly a quarter of its value, the country's largest public pension fund doled out six-figure bonuses and substantial raises to its top employees, an analysis by The Associated Press has found. Board member Tony Olivera said the California Public Employees' Retirement System tried to reduce the bonuses but was under contractual obligations to pay them. CalPERS' plunging value came as stock values tumbled around the world, the state's economy suffered its worst decline in decades and basic state services faced severe budget cuts. Virtually all of CalPERS' investment managers were awarded bonuses of more than $10,000 each, with several earning bonuses of more than $100,000 during the 2008-09 fiscal year. The cash awards were distributed as the fund lost $59 billion. Steve Deutsch, director of pensions and endowment at Morningstar Inc., ...

Alison Campsie of Scotland's Herald reports, UK pension gap worst in Europe : Britain has the largest pensions gap in Europe and people need to put £10,300 a year more on average into their pension pot if they want to keep their current standard of living in retirement, new research claims. The average pension gap – the difference between the income needed to live a comfortable retirement and the actual income individuals can expect from their current pensions – is also higher than in any other European country, according to the study by insurance giant Aviva and accountancy firm Deloitte. The research was conducted on the basis that people would need 70% of their income in retirement to meet the same standard of living enjoyed during their professional life. The erosion of final-salary pension deals and a misunderstanding of the scale of contributions needed to build up pension capital are leaving savers short...

Richard Riordan, the former mayor of Los Angeles, and Alexander Rubalcava, president of an investment advisory firm, wrote an op-ed in the NYT, How Pensions Can Get Out of the Red (HT: Jason): This summer’s revelation that New Jersey had misled the public about the health of its state pension funds is only the latest incident in a looming nationwide crisis. Public pensions at the state and local level are underfunded by more than $1 trillion ; in many cities, pension obligations will soon consume a quarter or more of the annual budget — money that will be unavailable for parks, libraries, street maintenance and public safety. Part of the problem is that pension funds need significant new financing to cover the growing number of retirees. But the real issue is the lack of incentive to improve pension performance. What we need, then, is a federal program that combines stimulus with serious fund reform. The pension-fund crisis is rooted in the intersection of excessi...

FINalternatives reports, Major Public Pensions’ Hedge Fund Portfolios Soar : It seems some large public pension funds really know what they are doing when it comes to investing in hedge funds. According to Pensions & Investments, a sample of eight of them is easily besting the overall industry with their own hedge fund portfolios. Those plans, with between $1.2 billion and $5.5 billion in hedge fund assets, saw their hedge funds return an average of 11% over the past year. That’s well above the performance of most hedge fund indices. The Pennsylvania Public School Employees’ Retirement System saw its $5.1 billion hedge fund portfolio return 15.6% in the 12 months ended June 30. The New Jersey Division of Investment’s hedge funds soared 13.9% over the same period. The Missouri State Employees’ Retirement Systems’ hedge funds rose 12.6%, those of the California Public Employees’ Retirement System rose 9.8% and the Texas Teacher Retirement System’s 7.7%. These are impressive returns (...

Mitchell Schnurman of the Star-Telegram reports, Fort Worth pension bubble will blow up in our faces (HT: Robert): To understand why Fort Worth's pension system is such a financial disaster, look at one month's list of recent retirements. In January, a 53-year-old policeman retired with an annual benefit of $90,312 for life, plus $256,000 in a lump sum payment. Another policeman, 57, got almost $74,000 annually, plus $313,000 in a lump sum. A 54-year-old firefighter got an annual pension of $90,130, plus $178,000 in cash. These are not typical cases, but they're not rare, either. The shocking takeaway from the 22 retirees is that they stand to earn significantly more from their pensions than they earned on the job. With an average age of 50 for the police and 54 for the firemen in this group, they're likely to spend more years in retirement than they worked. An analysis for the City Council, presented in July, projected that the retiring policemen would collect $3.1 mi...