Pension Pulse

Ryan  Swift of the South China Morning Post reports on how global pension funds are raising bets on South Korea logistics assets as the pandemic spurs next wave of e-commerce transactions: Some of the world’s biggest pension funds are preparing to plough more money into logistics assets in South Korea, seeing them as winners, as the coronavirus pandemic spurs the next wave of e-commerce transactions. The Canada Pension Plan Investment Board, Dutch pension administrator APG and Hong Kong-listed ESR Cayman are putting US$1 billion into a joint venture called ESR-KS II, according to an email statement on Thursday. The vehicle, on a 45:35:20 equity participation basis, can grow up to US$2 billion. The new venture is a successor to their US$1.15 billion South Korean investment from late 2015, and a bet on rising demand industrial and warehouse properties to process online transactions. Total e-commerce revenue in South Korea grew to US$92.4 billion in 2018 from US$...

Leanna Orr of Institutional Investor reports on AIMCo’s $3 billion volatility trading blunder: The Alberta Investment Management Corp. — which manages pension assets, sovereign wealth, and other public money — lost billions of dollars on wrong-way volatility trades when markets crashed earlier this year, and then shut down the strategies, according to informed sources. The now-defunct volatility-trading program cost pensioners and Albertans about $3 billion, the sources said. That’s on top of substantial, first-quarter losses to portfolio value that nearly all public funds are dealing with amid the coronavirus crisis. “It’s not very hard to lose $3 billion selling volatility,” said one quantitative hedge fund manager who frequently trades with the likes of AIMCo. “You’re doing stuff that has a minus-infinity potential outcome.” Another highly complex strategy — AIMCo’s derivative-based “portable alpha” overlays — may have exacerbated the bleeding, according to one of the ...

Ted Liu of Private Capital Journal reports CPPIB and OTPP complete 40% stake acquisition in IDEAL: Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan Board (OTPP) have completed the tender offer period to purchase 40% of the shares of Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. (IDEAL) (BMV: IDEAL B-1). The acquired shares will be transferred to CPPIB and OTPP on April 17 and the tender offer will formally settle on April 23. CPPIB will own a 23.7% interest in IDEAL and OTPP will own a 16.3% stake. The current majority owners of IDEAL’s outstanding shares will continue to hold a majority shareholding in the company. IDEAL is a sizable and important investment that provides exposure to existing and future infrastructure projects throughout Mexico. IDEAL’s portfolio includes 18 infrastructure concessions in Mexico (13 toll roads, three logistics terminals and two wastewater treatment plants), as well as an electronic tol...

Mary Williams Walsh of the New York Times reports that Illinois is seeking a bailout from Congress for its pensions and cities: Illinois needs more than $40 billion in relief from the federal government because of the coronavirus pandemic — including $10 billion to help bail out its beleaguered pension system, according to a letter the Illinois Senate president sent to members of Congress. The letter, sent this week by State Senator Don Harmon, also seeks a $15 billion grant to “stabilize the state’s budget,” $9.6 billion in direct aid to Illinois’s cities, $6 billion for the state’s unemployment insurance fund, and hardship money for hospitals and nursing homes, among other things. “I realize I’ve asked for a lot, but this is an unprecedented situation,” Mr. Harmon, a Democrat, wrote in the letter to the state’s congressional delegation, a copy of which was viewed by The New York Times. A spokesman confirmed that Mr. Harmon had written the letter. The letter was shared wi...