Showing posts from October, 2018

The Danger of Cutting DB Pensions?

Diane Oakley, executive director of the National Institute on Retirement Security, a non-partisan research non-profit in Washington, D.C., wrote a great column for Forbes, The Dangerous Consequence Of Cutting Public Safety Pensions:
Management consulting firm McKinsey reports that organizations that appear on “best places to work” lists often make the cut because their business strategy is premised on a long-term relationship with their employees. McKinsey credits companies for both the large and small signals sent to employees that an organization cares about its people.

Valued by employers as a workforce management tool to recruit and retain talent, offering defined benefit (DB) pension benefits is one way that employers send a loud signal to employees that they are committed to a long-term relationship. The structure of a pension increases the financial value of a DB pension benefit over an employee’s career. This provides a meaningful incentive for employees to stay in their jobs.…

Wasting $4 Billion on the Caisse's Train?

Michel Girard of Le Journal de Montréal recently wrote an article stating we need to reopen the Caisse's REM deal. The article is in French but I did my best to translate it below using Google Translate and tidying it up: It does not make sense to see the Quebec government will have to pay 55% of the REM ridership bill for the sole purpose of covering the average annual return of 8% that the Caisse de dépôt et placement has required to operate its electric train. If the Quebec government financed the REM itself, it would save $4 billion over 30 years.

Premier François Legault is expected to reopen the agreement with the Caisse de dépôt et placement and its REM (Réseau express metropolitan) and renegotiate the decline that the former Couillard government had agreed to pay him.

In my column last Saturday, The real bill of the Caisse's train, I mentioned that Quebec would pay over a horizon of 30 years the sum of $ 7.25 billion (average $ 240 million a year in today's dollar…

Are Global Stocks Cheap?

Akane Otani of the Wall Street Journal reports, Global Stocks Haven’t Looked This Cheap Since 2016:
Global stocks are trading at their lowest valuations in more than two years as pessimism grows over the growth outlook, dangling the prospect of opportunity to some bargain-minded investors.

After a punishing October, major indexes in Europe, Japan, Shanghai, Hong Kong, Argentina and Canada are all languishing in correction territory—a decline of at least 10% from a recent high. The U.S. is teetering on the edge of joining its peers there after a selloff last week wiped out all of the S&P 500 and Dow Jones Industrial Average’s gains for the year.

The breadth of the declines shows a remarkable reversal from 2017, when optimism about the global economy sent shares around the world to multiyear highs.

“The expectation at the start of the year was this story of synchronized global growth,” said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management based in Horsham, P…

The Worst October Since 2008?

Fred Imbert, Ryan Browne and Eustance Huang of CNBC report, Dow plunges 300 points, S&P 500 dips into correction territory:
Stocks plunged Friday as the release of disappointing quarterly results from key tech companies overshadowed strong economic data.

The Dow Jones Industrial Average fell 340 points, with Home Depot lagging, and was about 1.5 percent away from entering correction levels. Meanwhile, the Nasdaq Composite dropped 2.3 percent.

The S&P 500 declined 1.8 percent and was briefly down more than 10 percent from its 52-week high, entering correction territory. The broad index hit a record high on Sept. 21.

Seven of the 11 S&P 500 sectors are also down at least 10 percent from their respective 52-week highs, including energy, materials and financials. Around 80 percent of the index's stocks are also in a correction. The average stock market correction results in a 13.8 percent drop and lasts five months, according to Gluskin Sheff Research.

Larry Benedict, CEO o…

Risks to Canada's Retirement System?

Steve Randall of Wealth Professional reports, Canada’s retirement system is strong but there are risks:
The aging population remains a risk to the stability of Canada’s retirement system but overall things are in good shape.

The annual Melbourne Mercer Global Pension Index has looked at 34 pension systems to assess which nations are best placed to meet the challenges ahead.

Canada is ranked 10th overall with the Netherlands and Denmark best placed with A-Grade world class retirement income systems with good benefits - clearly demonstrating their preparedness for tomorrow’s ageing world.

The right balance between adequacy and sustainability is a good starting place for a strong pension system, says study author and Senior Partner at Mercer Australia, Dr. David Knox.

“For example, a system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is – what’s…

CAAT's DBPlus Helps Grow Membership?

Martha Porado of Benefits Canada reports, CAAT wins pension performance award for membership growth strategy:
The Colleges of Applied Arts and Technology pension plan’s plan to share its expertise with as many Canadian workers as possible nabbed it the award for pension performance at Benefits Canada’s 2018 Workplace Benefits Awards in Toronto on Oct. 11.

With a backdrop of strong fund performance in its main plan, as evidenced by its 118 per cent going-concern funding as of Jan. 1, 2018, the CAAT is seeking to grow the number of employers and employees it serves. In May 2018, it launched the DBPlus pension, a secondary plan design that employers and other plan sponsors can join as a simple method of offering a defined benefit pension to employees.

“We’re not growing because we have to grow, we’re a very strong sustainable pension plan,” says Derek Dobson, chief executive officer of the CAAT. “But we’ve been listening to the industry and to employers and governments, and there seems to…

OPTrust’s Safe Space for Innovation?

Sarah Rundell of top1000 reports, OPTrust’s safe space for innovation:
Pension plans are not designed for innovation, they are designed to be efficient. Yet Canada’s C$20 billion ($15.3 billion) OPTrust, the pension fund for Ontario’s blue-collar civil servants, is challenging that idea.

OPTrust president and chief executive Hugh O’Reilly told delegates at the Fiduciary Investors Symposium at Stanford University about the pension fund’s new entity, OPTrust Labs, where an internal research and development team will nurture and integrate innovation across administration and investment processes.

In a panel discussion with Ashby Monk, executive director of the Stanford Global Projects Center, O’Reilly said the inspiration for the idea came from an observation that OPTrust needed to be part of the innovation economy. He observed that many pension funds’ administrative processes were still rooted in the mid-1980s. The fund’s beneficiaries needed an experience like what they had w…