Pension Pulse

A follow-up to my previous Budget 2012 comment focusing on pensions. James Bagnall of the Ottawa Citizen, Pensions still OK for those still on job : More than 400,000 federal government workers across the country can relax. Their entitlement to rock-solid pensions, fully indexed to inflation, is intact. Under measures introduced in Thursday's federal budget, employees will have to contribute more to their pensions before they collect them. Assuming the new requirement passes a number of legal and practical hurdles, government employees eventually will absorb 50 per cent of the costs of providing promised pensions, compared with roughly one-third at the moment. It's not clear how quickly the employees' share will be hiked, though the process will occur over many years. Current legislation caps the costs borne by employees at 40 per cent and puts annual limits on how much contribution rates may rise . At the moment, employees kick in 6.2 per cent of salary up t...

Mark Kennedy and Jason Fekete of Postmedia News report in the Vancouver Sun, Pension eligibility age rises to 67 starting in 2023; public service will shrink; $5.2 billion spending : For the first time since taking office in 2006, Prime Minister Stephen Harper's Conservatives have put their imprint on Canada through a budget that includes major changes to pensions, industrial research, immigration, energy and the size of government. The development came Thursday, as Finance Minister Jim Flaherty introduced a budget touted by the Tories as a forward-looking plan to foster Canada's economic strength in the long term. The fiscal blueprint, although identifying $5.2 billion in annual cuts to program spending within a few years, falls short of the austerity package that some had feared. "Our government is looking ahead, not only over the next few years, but also over the next generation," Flaherty told the Commons in his budget speech. "We are avoiding for...

Sarah Krouse of Dow Jones Financial News reports, Smaller hedge funds best larger rivals : Smaller hedge funds have outperformed their larger rivals over the last 16 years, according to an exhaustive study of over 20,000 funds by a team at the Imperial College of London. The Risk Management Laboratory at the Imperial College of London’s business school used figures from research providers BarclayHedge, EurekaHedge, Hedge Fund Research, Morningstar and Tass in a bid to confirm previously studied trends in the industry. They presented their findings at panel event in London this week. The combined database, which the centre plans to update several times a year, includes 24,749 unique hedge funds and 48,121 share classes, covering the period from 1994 to 2010. It shows that funds with assets under management of less than $10m delivered average annual returns of 9.89%, while those managing between $250 to $500m returned of 4.84%. Funds with...

Alyshah Hasham of the Toronto Star reports, Pension reform: Is bigger really better? : Ontario's big three in the public-sector pension fund world have combined assets of more than $200 billion. The new budget means a fourth could be joining the list. The province plans to introduce a framework this fall to pool the investment management functions of smaller public-sector pension plans. The management of assets could be run by an existing large public-sector fund — like the Ontario Teachers' Pension Plan, the Ontario Municipal Employees Retirement System (OMERS) or the Healthcare of Ontario Pension Plan (HOOPP). Or they could be run by a new entity altogether. It's about time, says Keith Ambachtsheer, the director of the Rotman International Centre for Pension Management at U of T. ...

Don't you just love end-of-quarter window dressing where funds sell their losers and buy the winners? Earlier today discussed how some hedge funds are booking profits after a bumper Q1 , but let me go over where I think the action will be in Q2 and beyond. First, spent my day reading more bad news on China, the latest from some analyst at Barclays who recently came back with some bad news : Barclays analyst Gayle Berry recently visited China, and met with various industrial firms, and came back with some grim news: Things are weak, and it's not just a matter of the Lunar New Year. Here is our summary of Berry's key points: Demand for copper in China remains weak, and the outlook for the rest of the year doesn't look so great. Some manufacturers cranked up production in January/February in anticipation of a rebound in Q2, but "demand has been softer than they expected." Appliance demand is weak thanks to slow construction and poor real estate sales. Copper...

Lawrence Fletcher of Reuters reports, Hedge funds take profits after bumper Q1 : Hedge funds are cashing in some of their chips after enjoying a bumper first quarter, wary that a sudden change in market sentiment could see them take the sort of losses suffered in last year's volatile markets. Hedge funds returned 5 percent in the first two months of the year, the best start to a calendar year since 2000 according to Hedge Fund Research, as the European Central Bank's 1 trillion euro ($1.3 trillion) cash injection boosted assets across the board. Some star names recorded huge gains. Crispin Odey's Odey European fund gained 21.1 percent and Johnny de la Hey's Tosca fund rose 13.7 percent to mid-March, while Michael Hintze's $1.4 billion CQS Directional Opportunities fund was up 13.9 percent to end-February. Many managers remain positive on markets, but in a number of cases have opted to trim their bets, influenced by sharp volatility last year during th...

Nathaniel Popper of the Los Angeles Times reports, More municipalities betting on pension bonds to cover obligations : Struggling to pay employee pensions, local governments are increasingly borrowing money to cover their obligations — exploiting a loophole in federal law that allows them to issue taxable bonds without seeking voter approval. Oakland took a bet on its pension fund that ended up costing the city an estimated $245 million — nearly a quarter of its annual budget. That hasn't stopped the city from looking to try its luck one more time. The bets are being made using an exotic but increasingly popular financial instrument known as a pension obligation bond. Cities, counties and states use the bonds to take out high-interest loans from private investors to plug shortfalls in their employee pension funds. If the pension funds make smart inve...

Nikolaj Gammeltoft and Whitney Kisling of Bloomberg report, Hedge Funds Capitulating Buy Most Stocks Since 2010 : Hedge funds trailing the Standard & Poor’s 500 (SPX) Index for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years. A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the Standard & Poor’s 500 Index by 2.65 percentage points. Money managers struggling to catch up with the gains have contributed to the rally that pushed the S&P 500 up 27 percent since October as economic reports beat estimates. Market bulls say they are a continuing source of cash that can move stocks higher. Bears say capitulating hedge fun...