Pension Pulse

Martin Z. Braun and Henry Goldman of Bloomberg report, NYC Pension Chief Seeks $500,000 Managers Not Wall Street : New York City’s $140 billion retirement system pays Wall Street money managers about $360 million a year, the only one of the 11 biggest U.S. public-worker pensions that refuses to manage any assets internally. Larry Schloss, the city’s chief investment officer, says the practice must end. Schloss, 58, points to Ontario’s C$130 billion ($126 billion) teachers’ pension fund, which has returned an average 9.6 percent annually on its investments since 2003 -- 1.6 percentage points better than New York’s funds. The Canadian system reaped those gains mostly without paying outside asset managers. Schloss says the same in-house approach could work in New York. “I’m not looking for John Paulson,” said Schloss, who earns $224,000 a year, referring to the billionaire hedge-fund manager. “I’m just looking for a VP at MetLife (MET) who makes 500,000 bucks.” The 38 staff mem...

Margie Lindsay of Hedge Funds Review reports, Cern Pension chief urges others to ‘think like global macro hedge funds’ : CEO of the Cern Pension Fund Theodore Economou says pension funds should use the techniques of the best global macro hedge fund managers to control risk and volatility while producing absolute returns. Pension funds should use the sophisticated risk management tools used by the best hedge funds to lower volatility and achieve better returns, says Cern Pension Fund CEO Theodore Economou. Cern invests its entire Sfr4 billion ($4.1 billion) pension fund as if it were a large global macro hedge fund. "We manage towards an absolute return target," says Economou. "We believe our model can and should be replicated by pension funds with the same goals as Cern because we think the model represents an answer to the industry's challenges." For those funds not able to replicate the Cern model, Economou advocates turning over the entire pension ...

Norma Cohen and Matthew Steinglass of the Financial Times report, Yawning deficits force Dutch pension funds to cut payouts : Marianne Keestra, a former teacher in the Dutch city of Haarlem, has seen her monthly pension payments cut, and she knows who she blames – her former employer. “The government stuck their hand in the pension pot,” says Ms Keestra, 71. “And they never paid it back.” For years, the Dutch government and many businesses systematically underfunded their employee pension plans, relying on high investment returns to make up the shortfall. Now, a combination of record low rates, sluggish economic growth and lives that last far longer than anyone imagined even a decade ago have resulted in yawning deficits. At the end of 2012, the funds were €30bn short of what is needed to cover promised benefits. For the Dutch, the cutbacks are the first ever in a nation which has the second largest “defined benefit” system in Europe. But defined benefit provision, under w...

Frederic Tomesco of Bloomberg reports, Caisse de Depot Sells Europe Properties Amid ‘Dark Night’ : Caisse de Depot et Placement du Quebec is selling some of its European property and redeploying proceeds in assets such as infrastructure while the euro-area economy shrinks, Chief Executive Officer Michael Sabia said. About 20 percent of the Caisse’s C$18 billion ($17.5 billion) of real estate assets are in Western Europe, according to its 2012 annual report. Canada’s largest public pension-fund manager oversaw net assets of about C$176 billion at the end of last year, including C$6.31 billion in infrastructure such as toll roads and a stake in London’s Heathrow Airport. “We are selling real estate assets in Europe,” Sabia said in an interview yesterday at the Bloomberg Canada Economic Summit in Toronto. “Real estate pricing among top quality, platinum-quality assets -- the pricing is quite good, and we are trying to benefit from that and in some other asset categories as well,...

Barbara Shecter of the National Post reports, OMERS considering proposal to reduce pension payouts : Faced with a $10-billion pension-funding deficit, one of Canada’s largest pension funds is considering a drastic proposal that would reduce benefits paid to retiring workers — or force them to work years longer for the same retirement income. The Ontario Municipal Employees Retirement System (OMERS) Sponsors Corporation, which determines benefits and contribution rates for one of the largest pension operators in the province of Ontario, is mulling a change that would reduce the key figure used to calculate how much money an employee will receive each year in retirement. A decision on the proposed change to the formula, which would take effect in 2015, is expected by the end of June. OMERS is an umbrella organization for more than 900 employers and their workers in the province, including paramedics, transit workers, firefighters, police and city workers. It represents al...

James Greiff of Bloomberg reports, Can Hedge Funds Survive Bernanke? : You have to wonder how long an industry that underperforms the broader market will stay around. Goldman Sachs Group Inc. published a chart today comparing the performance of hedge funds that invest in equities with the major stock-market indexes. Based on Goldman's research, the average hedge fund is up just 5.4 percent so far this year. During the same period, the Standard & Poor's 500 Index has risen 15.4 percent, and the average mutual fund has gained 14.2 percent (click on image below). This kind of subpar showing surely can't sit well with investors who shell out as much as 20 percent of their gains to the fund manager, who also collects a fee that can be as much as 2 percent of the assets under management. There could be any number of explanations for why hedge funds have done so badly. Goldman says many hedge funds bet against stocks such as Johnson & Johnson, expectin...

Armina Ligaya of the National Post reports, Ontario Teachers’ Pension Plan to open Hong Kong office : The Ontario Teachers’ Pension Plan says it will open up an office in Hong Kong within months, as it pushes to increase their exposure to emerging markets from 15% to 20%. Jim Leech, the chief executive of the largest-single profession pension plan in Canada, says the plan on Tuesday received notification that it received the appropriate licensing to open an office in Hong Kong to cover Asia. “We will be opening up a Hong Kong office in the next couple of months, with some feet on the street there,” he said in remarks at Bloomberg’s Canada Economic Summit Tuesday. “And I think that signals what we’re doing. Most projections show something like 70 to 80% of world trade are going to be intra-Asian trade, and that’s where wealth is going to be created, and that’s where we’ve got to be to be able to take advantage of it.” The plan, which had net assets of $129-billion as of...