Posts

Showing posts from July, 2018

Exporting The CDPQ Infra Model?

Image
Maxime Bergeron of La Presse had a good interview with the Caisse's President and CEO, Michael Sabia and Macky Tall, President and CEO of CDPQ Infra. The interview is in French and is available here but I tried to translate it below using Google so bear with me as I did my best to tidy it up (and it's far from perfect):
The news went under the radar last May. Just a few weeks after the groundbreaking of the Réseau express metropolitain (REM), held in the shadow of the skyscrapers of downtown Montreal, the Caisse de depot et placement du Quebec has quietly embarked on the first stages of a similar light rail system project in Auckland, New Zealand.

This multi-billion dollar project, if it comes to life, could mark the first milestone in a brand new export model of the institution's know-how in complex infrastructure projects. In an interview with La Presse, Michael Sabia, the Caisse's boss, and Macky Tall, president and CEO of the subsidiary CDPQ Infra, confirm that th…

Canada's Pensions in Great Shape?

Image
Chris Butera of Chief Investment Officer reports, Why Canada’s Pension Plans Are in Such Good Shape:
In a post-financial crisis world, many US public pension plans are finally beginning to see a light at the end of the tunnel, but others are still at their wit’s end on how to crawl out of their obligatory holes.

Canada, on the other hand, is doing just fine.

With most of its pension plans at either fully funded status or close to it, Canadians have achieved a balance that the US has only seen in the corporate sector. In fact, some Canadian plans, such as the Colleges of Applied Arts and Technology ($8.3 billion) and the Healthcare of Ontario Pension Plan ($59.9 billion) have become overfunded.

Eight Canadian pension funds ranked in the top 100 global funds by size in a 2015 Boston Consulting Group study titled “Investing for Canada on the World Stage.” Three were in the top 20.

This begs the question: What do Canadian pension systems do that those in the US don’t?

GOVERNANCE, LOW RISK …

Did Markets Just Get Facebooked?

Image
Jeff Cox of CNBC reports, Facebook's tumble threatens to take a big bite out of the Trump rally:
Facebook's sudden and stunning vulnerability threatens to undercut the foundation of the stock market rally since Donald Trump was elected president.

The social media giant has been the cornerstone of the FAANG trade — Facebook, Amazon, Apple, Netflix and Google parent Alphabet. Just by itself, Facebook has gained more than 80 percent since Trump's November 2016 victory. The S&P 500 more broadly is up some 35 percent during the time period.

But a disappointing earnings report Wednesday, particularly regarding its growth forecast, had investors fleeing the company Thursday and pulling down tech stocks in general. Other market indexes were not impacted as strongly.

Facebook was off more than 18 percent Thursday morning, costing the company more than $120 billion of its market cap. The loss by the social media giant pulled down the technology sector broadly, with the Nasdaq inde…

CalSTRS Gains 9% in Fiscal 2017-18

Image
Randy Diamond of Chief Investment Officer reports, CalSTRS Returns 9% for Fiscal Year:
The California State Teachers’ Retirement System (CalSTRS) saw a 9% net return in the fiscal year ending June 30, exceeding its assumed expected return of 7% by two percentage points, Chris Ailman, the system’s CIO, told the CalSTRS investment committee Friday.

The 9% return also beat the system’s custom benchmark of 8.6%.

The overall returns for the $223 billion retirement system, the second-largest in the US by assets under management, beat the nation’s largest retirement system, CalPERS, which announced last week fiscal year returns of 8.6% for the June 30 fiscal year.

“We will rank high compared to similar funds, but it is only one year,” Ailman said. “We need to repeat that performance year in and out, on average, over the next 30 years.”

Private equity was the best-producing asset class with returns of 13.8%, slightly under its custom benchmark of 14.7%.

This was followed by global public equitie…

Behind the US Public Pension Crisis?

Image
Elizabeth Bauer of Forbes reports, The Public Pension Crisis Is Not The Result Of Legislators' Failure To Fund:
Or, to be more, precise, it's not the primary cause.  Rather, a study by Wirepoints made available on their website yesterday points to a far more troubling cause:  the value of promised benefits has skyrocketed in the years since 2003, both in absolute terms and relative to measures such as those states' GDP growth.

Here is their headline, eye-popping chart:

What's going on?

In some cases, there is a simple answer:  as readers will recall from my prior article, the accounting rules for public pensions differ, depending on whether there's enough future projected assets, including future scheduled contributions, to cover promised pension benefits.  If there is, the plan discloses liabilities based on the expected future returns from those assets.  If not, then for the portion of the benefits which are not even hypothetically funded from planned …