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Showing posts from June, 2019

Index Investing Beats Teachers' Pension?

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Scott Burns wrote a comment for Dallas News, Couch Potato investing beats the teachers' pension fund — again:
The Teacher Retirement System of Texas pension fund is $46.2 billion in the hole, only 76.9% funded. Had the managers chosen the simplicity of Couch Potato investing 10 years ago, the pension would be fully funded.

That's quite a difference.

I learned this while examining the latest report from the largest public pension fund in our state. Then I measured it against the simple, low-cost index fund investing method I have advocated for nearly 30 years.

The report puts a good face on the results for the year ending Aug. 31, 2018. It notes that the 8.2% return for the 2018 reporting period is higher than its target return of 7.6%.

But here's the reality. Another year of complexity, alternative investments and hedge fund commitments has tripled the annualized return gap between the pension fund and Vanguard Balanced Index fund (Admiral shares) over the traili…

Pensions Making Riskier Real Estate Bets?

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Christine Idzelis of Institutional Investor reports on how pensions are making riskier bets in real estate as investor demand for alternative assets rises, according to Joseph Azelby, the head of real estate and private markets at UBS Group’s asset management unit:
They’ve been shifting a portion of their core real estate holdings to properties under development or renovation, Azelby said Thursday during a UBS Asset Management lunch with media in New York. Azelby, who joined UBS from Apollo Global Management this year, said on the sidelines of the gathering that pensions may pick up an additional 200 basis points to 300 basis points of yield by doing so.

Azelby sees these riskier bets as an area of potential concern because pensions had similarly stretched for yield in the runup to the 2008 financial crisis. Rising investment in properties being developed during the later stages of the economic cycle is worth monitoring because a downturn could leave pensions holding vacant building…

Piling Into North American Infrastructure

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Arleen Jacobius of Pensions & Investments reports on how institutions are piling into infrastructure across North America:
Relatively new as an institutional asset class in the U.S., infrastructure is one of the fastest growing real asset classes in North America, albeit from a small base, industry insiders say.

Infrastructure, along with energy, exhibited the most growth of any private asset class among the largest 200 U.S. defined benefit plans in the year ended Sept. 30, according to Pensions & Investments' annual survey.

This trend is expected to continue as investors look for consistent income. Further underscoring the asset class, the Trump administration unveiled a plan as part of its 2019 budget proposal that it said would generate $1.5 trillion in public and private infrastructure investment during the next decade, according to the administration's Rebuilding America's Infrastructure fact sheet. However, the proposal does not include a funding source. In …

Vestcor Gains 1.96% in 2018

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New Brunswick's Vestcor recently reported a 2.08% gross, 1.96% net return for 2018:
Vestcor Inc. (Vestcor) has released its 2018 Annual Report, which reflects the successful amalgamation on January 1, 2018 of its predecessor companies, Vestcor Investment Management Corporation (VIMC) and Vestcor Pension Services Corporation (VPSC). Vestcor operates as a private, not-for-profit company offering global investment management and pension and benefit administration services to public sector entities.

“Despite difficult market conditions, especially during the last quarter of 2018, we are proud to announce that Vestcor has been able to achieve positive investment performance for our clients” said John A. Sinclair, President and Chief Executive Officer. “Our clients frequently cite capital preservation as a key objective for their investment strategies. Despite a negative market environment for risk assets in 2018, we are pleased to have delivered on that objective during the year.”

T…

Honoring a Canadian Pension Pioneer

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The Canadian Business Hall of Fame recently welcomed four noteworthy companions and among them, Claude Lamoureux, the inaugural CEO of the Ontario Teachers' Pension Plan:
In recognition and celebration of their lifetime achievements, four exceptional business leaders will be inducted as Companions of the Order of the Business Hall of Fame by Chancellor David Denison during the 41st annual Gala Dinner and Induction Ceremony, taking place tonight at the Metro Toronto Convention Centre.

Each year, outstanding business leaders from across the country gather to celebrate and honour Canada's most distinguished leaders across all areas of business for their impact and enduring contributions to the economy and Canadian society.

The Inductees being recognized this year include:
Claude Lamoureux O.C., FCIA, Retired President & Chief Executive Officer, Ontario Teachers' Pension PlanChief Clarence Louie O.C., First Nations leader, Chief of the Osoyoos Indian BandStephen J.R. Smith…

Beyond the Fed's Pivot

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Jeffrey Gundlach, chief executive of DoubleLine Capital and the most widely followed bond investor, said the Federal Reserve’s dovish turn in its policy statement on Wednesday took its lead from the bond market:
The Fed is doing “what the bond market says - with a lag,” said Gundlach, who oversees more than $130 billion in assets. “The bond market definitely helped to encourage the ‘Fed pivot.’”

The Fed on Wednesday signaled it could cut interest rates by as much as half a percentage point over the remainder of this year, as it responded to increased economic uncertainty and a drop in expected inflation. The U.S. central bank’s next policy meeting will be held in July, with the following meeting in September.

In a telephone interview with Reuters, Gundlach said economic data would have to be weak for the Fed to slash rates in July. If policymakers do cut rates next month, “They are basically admitting they are behind the curve,” he said.

Federal funds futures implied traders were ful…