Pension Pulse

Amy White of Chief Investment Officer reports, How Liquidations Hurt Hedge Fund Returns (h/t, Ken Akoundi, Investor DNA ): It’s not just pension funds that have to worry about liability risks. Hedge funds with high exposures to funding level risks “severely underperform” less exposed funds, according to research from the Copenhagen Business School. “A good hedge fund follows alpha-generating strategies and simultaneously manages the funding risk that arises from the liability side of its balance sheet, that is, the risk of investor withdrawals and unexpected margin calls or increasing haircuts,” wrote PhD candidate Sven Klinger. “If not managed properly,” he continued, “these funding risks can transform into severe losses because they can force a manager to unwind otherwise profitable positions at an unfavorable early point in time.” At a time when many institutional investors are pulling out of hedge funds, proper management of liability risk is particularly essential—an...

In a response to Bernard Dussault, Canada's former Chief Actuary, Bob Baldwin, a consultant and former board of director at PSP Investments, sent me his thoughts on Bill C-27, DB, DC and target benefit plans (added emphasis is mine): Bernard Dussault has circulated an article and slide presentation in which he has provided a endorsement of DB workplace pension plans coupled with an expression of concern about certain design features of DB plans that he sees as discriminatory. I share his preference for DB. But, I think his account of DB is incomplete and avoids certain issues and problems in DB that DB plan members, people with DB governance responsibilities and DB advocates should be aware of. In his article “ How Well Does the Canadian Landscape Fare? ” Bernard says: “… DB plans offer better retirement security because they attempt to provide a predetermined amount of lifetime annual retirement income at an unknown periodic price.” The unknown nature of the price is unavo...

Anna Kitanaka and Shigeki Nozawa of Bloomberg report, World’s Biggest Pension Fund Finds New Best Friend in Trump : One of the world’s most conservative investors has found an unlikely new ally in one of its most flamboyant politicians: Donald Trump. The unconventional president-elect’s victory is helping Japan’s giant pension fund in two important ways. First, it’s sending stock markets surging, both at home and overseas, which is good news for the largely passive equity investor. Second, it’s spurred a tumble in the yen, which increases the value of the Japanese manager’s overseas investments. After the $1.2 trillion Government Pension Investment Fund reported its first gain in four quarters, analysts are betting the Trump factor means there’s more good news to come . “The Trump market will be a tailwind for Abenomics in the near term,” said Kazuhiko Ogata, the Tokyo-based chief Japan economist at Credit Agricole SA. “GPIF will be the biggest beneficiary among Japanese inve...

Philippe Hynes, President of Tonus Capital here in Montreal, recently went on a trip with Concordia University students to meet the Oracle of Omaha. He shared his thoughts with me and his clients this morning via an email going over the meeting (added emphasis is mine): I had the privilege to meet legendary investor Warren Buffett in Omaha last Friday. He occasionally meets with university students and Concordia University, where I have been teaching since 2006, was selected. For more than two hours, a group of 15 students accompanied by a few teachers could ask questions to The Oracle . I have always admired the human and professional qualities of Warren Buffett. Not only is he an outstanding investor but he is also an excellent communicator . You will find attached to this email a summary of his comments. His thoughts coincide with our advantageous structure at Tonus Capital. As expected, Mr. Buffett mentioned that few opportunities are present on the market. He recommends ...

Grace Macaluso of the Windsor Star reports, Opposition MPs, labour groups decry federal 'anti-pension' bill : A growing number of seniors could face poverty if the federal Liberals proceed with proposed legislation enabling Crown corporations and federally regulated private sector employers to back out of defined benefit pension plans, Essex MP Tracey Ramsey said Monday. “With less and less retirement security, seniors in Windsor-Essex are living more precariously than they ever have because of the erosion of benefits,” said Ramsey . In Windsor-Essex, one in 11 seniors was living in poverty, according to figures compiled by the Windsor-Essex County United Way. For a single family household, the low income cutoff totalled about $19,900 a year. The NDP member and labour groups are sounding the alarm over Bill C-27, which would amend the Pension Benefits Standards Act, and allow federally regulated employers and Crown corporations to replace defined benefit plans with t...

Ben Eisen of the Wall Street Journal reports, The $19.8 Trillion Hurdle Facing Higher U.S. Inflation : The rise in Treasury yields slowed this week, highlighting skepticism in some quarters that Donald Trump’s presidency will usher in a period of rising inflation. The yield on the 10-year Treasury note, which falls as prices increase, fell Wednesday, following a muted rise on Tuesday, while the 30-year bond yield fell both Tuesday and Wednesday. Yields had surged since the U.S. presidential election on the view that Mr. Trump’s tenure will generate a period of rising inflation, as he pursues policies such as tax cuts, regulatory rollbacks and infrastructure spending to boost economic growth (click n image below). Market-based inflation indicators were rising before Mr. Trump’s victory last week, following sharp declines earlier in 2016. But some investors say factors including the size of the U.S. debt load could limit the effectiveness of any fiscal-stimulus effor...