Pension Pulse

Nicholas A. Vardy, Chief Investment Officer at Global Guru Capital, wrote a comment for MarketWatch, How one man in Nevada is trouncing the Harvard endowment : This past weekend, I attended a gala reception for over 500 European Harvard alumni gathered in the impressively refurbished main hall of the Deutsches Historisches Museum (German Historical Museum) in Berlin. Harvard's President Drew Faust regaled alumni with self-congratulatory statistics on how Harvard is spending the fruits of its current $6.5 billion fund raising campaign, refurbishing undergraduate housing and getting Harvard' science and engineering departments up to snuff. There was other news from Cambridge, Massachusetts that President Faust ignored in her polished plea to well-heeled alumni in Berlin. And that has been the embarrassing performance of the Harvard endowment over the past decade. For all of Harvard's fund raising prowess — second only to Stanford — six years of Harvard's curr...

Michael McDonald of Bloomberg reports, Harvard Called ‘Lazy, Fat, Stupid’ in Endowment Report Last Year (h/t, Johnny Quigley): Harvard University’s money managers collected tens of millions in bonuses by exceeding “easy-to-beat” investment goals even as the college’s endowment languished, employees complained in an internal review. The consulting firm McKinsey & Co., in a wide-ranging examination, zeroed in on the endowment’s benchmarks, or investment targets. Some of those surveyed said Harvard allowed a kind of grade inflation when it came to evaluating its money managers. “This is the only place I’ve seen where people can negotiate the benchmark they get compensated on,” read a “representative quote" in the McKinsey report . The McKinsey assessment offered an explanation of what it called the “performance paradox” at Harvard’s $35.7 billion endowment, the largest in higher education. Year after year, Harvard would report benchmark-beating performance while fall...

The Public Service Alliance of Canada (PSAC) put out a press release, Liberal bill an attack on pensions : The Liberal government is following the Conservatives’ lead by introducing legislation that will allow employers to reduce pension benefits. Bill C-27 , An Act to amend the Pension Benefits Standards Act, had its first reading in the House of Commons last week. A target benefit pension plan is a big gamble This bill will allow employers to shift from good, defined benefit plans that provide secure and predictable pension benefits, into the much less secure form of target benefits. Unlike a defined benefit plan, where the employer and employees contribute and retirees know how much they can expect when they retire, the amount you receive under a target benefit pension plan is just that, a target. Meaning, the plan aims to give you a certain pension benefit, but there’s no guarantee . The other big difference is that target pension benefit plans shift the financial ri...

Lee Barney of Plan Sponsor reports, A Pension Plan That Makes No Promises (h/t, Suzanne Bishopric): Variable benefit plans are a type of defined benefit (DB) plan that have been around for decades, according to Matt Klein, a principal and leader of the actuarial services practice at employee benefits consulting firm Findley Davies in Cleveland. However, few sponsors and retirement plan advisers know about them, he says, estimating that there are fewer than 100 of these types of plans in the United States. Nonetheless, he believes that sponsors and retirement plan advisers might be interested in them since they shift the investment risk off of the sponsor’s shoulders onto the participant’s—while moving the longevity risk over to the sponsor. Employers continue to shut down their pension plans, redeploying their employees into defined contribution (DC) plans, Klein notes. But unless participants are automatically enrolled into their DC plan at meaningful deferral rates into an...

Theresa Tedesco and Barbara Shecter of the National Post report, Inside the risky strategy that made Canada’s biggest pension plans the new ‘masters of the universe’ : They are among the world’s most famous landlords with stakes in major airports in Europe, luxury retailers in New York and transportation hubs in South America. They rank as five of the top 30 global real estate investors, seven of the world’s biggest international infrastructure investors, and were at the table during six of the top 100 leveraged buyouts in corporate history. And they are Canadian. The country’s eight largest public pension funds, which collectively manage net assets worth more than $1 trillion, have acquired so much heft in the past decade that they are being lauded in international financial circles as the new “masters of the universe.” Their clout has caught the attention of major Wall Street investment firms angling for their business, as well as institutional investors around the world that ...