Pension Pulse

James Kwak of The Baseline Scenario wrote a comment on how Fees Add Up : Public pension funds are having a tough time. On the one hand, the average funding ratio (assets as a percentage of the present value of future obligations) is below 80% because of inadequate contributions by sponsors (states and municipalities) and poor investment returns since the collapse of the technology bubble in 2000. On the other hand, because pensions responded to low returns by shifting more of their money into hedge funds and private equity funds, a larger proportion of their assets is siphoned off as investment fees each year . Unlike some people, I am not against hedge funds and private equity funds in principle. I think it’s highly likely that there are people who can beat the market on a sustained basis—particularly if they are people who are especially good with computers —both for theoretical reasons (someone has to be the first person to discover each relevant piece of information or acti...

Justin Giovannetti of The Globe and Mail reports, Ontario plans to ease rules for pension plan funding : Ontario is planning to ease the rules around how some pensions are funded and how officials judge the long-term health of those plans. The changes would affect how defined benefit plans provided by single employers are funded in Ontario and would reduce the amount of money that they need to invest in plans that are currently undercapitalized. The expected legislation follows a decade of low interest rates and poor returns in which the provincial government has twice been required to help private-sector plans that have failed strength tests. The new rules, unveiled by the Finance Ministry on Friday, would reduce the solvency funding requirement. The requirement is a stress test where a pension fund needs to calculate how much would be available in the plan immediately to meet all future obligations. Plans that currently can’t pay 100 per cent of obligations need to make ...

David Randall and Svea Herbst-Bayliss of Reuters report, Large hedge funds moved out of financial stocks in first quarter : Several big-name hedge fund investors trimmed their stakes in financial companies in the first quarter as hopes for immediate tax cuts and loosening of regulations after President Donald Trump’s victory in November began to fade. Boston-based Adage Capital Management cut its position in Wells Fargo & Co, which has come under fire for its sales practices, by 3.9 million shares, according to regulatory filings, while John Burbank’s Passport Capital cut its stake in the company by 947,000 shares. Third Point cut its stake in JPMorgan Chase & Co by 28 percent, to 3.75 million shares, while Suvretta Capital Management sold all of its shares of Morgan Stanley, JPMorgan Chase and Citigroup Inc. Overall, financial companies in the S&P 500 were up 2.1 percent in the first quarter, compared with 5.5 percent for the index as a whole. Financials signif...