Pension Pulse

Jeff Cox of CNBC reports Bridgewater's Ray Dalio warns of ‘serious problems’ and a bond ‘blow-off’ as a repeat of the late 1930s looms: Hedge fund titan Ray Dalio is worried that the current landscape is starting to resemble Depression-era conditions that could hammer investors. In a LinkedIn post  Thursday, the billionaire Bridgewater Associates founder said high levels of debt and central banks’ ineffectiveness are two of the key factors that need watching. The U.S.-China conflict is adding to the problems as an existing power battles an emerging one. “If/when there is an economic downturn, that will produce serious problems in ways that are analogous to the ways that the confluence of those three influences produced serious problems in the late 1930s,” Dalio wrote. The post was consistent with a previous warning he delivered about a “paradigm shift” in which gold will serve as a profitable hedge as investors get caught holding too much risk. In the latest ess...

John Gittelsohn of Bloomberg reports that global markets have become so synchronized that money managers risk losing on every front, according to Hiromichi Mizuno, chief investment officer of the world’s largest pension fund: Global markets have become so synchronized that money managers risk losing on every front, according to Hiromichi Mizuno, chief investment officer of the world’s largest pension fund. Japan’s $1.5 trillion Government Pension Investment Fund lost money in equities, fixed-income and currency positions in the last three months of 2018, Mizuno pointed out on Tuesday in Sacramento, California. “Conventional wisdom of portfolio diversification is when we lose money in equity we make a profit in fixed income,” Mizuno told the board of the California Public Employees’ Retirement System, the largest U.S. pension. “But we lost in every single asset classes and lost in the currency translation as well. It never happened in the past.” The Japan system’s annual...

Paulina Pielichata of Pensions & Investments reports that Denmark's ATP tallies 27% gain in first half of 2019: ATP, Hilleroed, Denmark, posted a 26.9% return on its investment portfolio for the six months ended June 30, owing the outsized gain to falling interest rates and positive performance of the fund's foreign and domestic equity strategies. An update Wednesday said the pension fund's net increase equaled 24.8 billion Danish kroner ($3.7 billion), compared with a return of 2.7%, or a rise of 3.2 billion kroner, for the six months ended June 30, 2018. Assets increased 12% to 880.8 billion kroner from Dec. 31, and grew 12% over the first half of 2018 The fund's investment portfolio is split according to risk factors. As of June 30, equity risk factor accounted for 42% of the portfolio; interest rate risk factor, 33%; inflation risk factor, 17%; and the remaining 8% was attributable to other risk factors. For the three months ended June 30, the bigges...

Anchalee Worrachate of Bloomberg reports that the pension world is reeling from 'financial vandalism' of falling yields: A once-unthinkable collapse in global bond yields is forcing pension funds to buy bonds that offer negative returns -- putting the financial security of future retirees in jeopardy. U.S. institutions managing trillions of dollars in retirement savings -- including the California Public Employees’ Retirement System -- have been ratcheting down return expectations. Japan’s Government Pension Investment Fund, the world’s largest, has warned that money managers risk losses across asset classes. In Europe, pension funds may be forced to cut benefits in part thanks to the decline in rates. Investors were already taking on more credit risk to make up for dwindling income elsewhere , with some chasing less liquid markets like private debt . Now, negative yields on over a quarter of investment-grade bonds -- with more monetary easing to come -- are incre...