Pension Pulse

Ten days ago, CNW reported, RBC Dexia survey: Canadian Pensions Surge Ahead of Pre-Crisis Levels (HT: Bruce): Strength in Canadian equities have helped Canadian pension plans surge ahead of their pre-financial crisis levels of 2008, according to a survey just released by RBC Dexia Investor Services, which maintains the industry's most comprehensive universe of Canadian pension plans and money managers. Within the $340 billion RBC Dexia universe, pension assets earned 4.3 per cent in the quarter ending December 2010 , improving the full year performance to 10.4 per cent, making this a second consecutive year of double digit returns. Despite the volatility in the global markets during the past ten years, Canadian pension plans have achieved an average annualized return of 5.4 per cent. "What the last decade has taught us is that diversification and disciplined investing is key over the long run," noted Fay Coroneos, Global Head of Risk & Investment Anal

Ellen Kelleher of the FT reports, Private equity rewards pensions : The private equity holdings of the world’s largest public-sector pension funds outperformed most other asset classes in the short and long term, new research suggests. The 20 largest public pension funds now have an estimated $224bn allocated to private equity deals – or 5.5 per cent of their capital on average. Their investment have provided strong returns, according to a study by Preqin , an independent research house that focuses on alternative assets. The study of the financial statements of more than 150 public pension funds from North America, Europe and the UK suggests the returns on their private equity investments and also their fixed income holdings in many cases, outshone hedge funds, real estate and listed equities. As of the second quarter of 2010, private equity and fixed income were the only investment types to generate positive median returns across one, three, five and 10-year periods; t

Back in May, I asked if Greek protests are going global? With the recent events in Egypt, it looks like we are heading for another round of geopolitical tension. Market participants are very anxious because the global repercussions of this latest episode can be significant. While some in the media are proclaiming this the "Arab world's Berlin moment", I'm very skeptical. Spero News had an interesting interview with George Friedman, founder of STRATFOR , asking whether the end of Mubarak will lead to democracy or disaster (added emphasis is mine): For more than 30 years, the geopolitics of the Middle East has been built on the American-Egyptian-Israeli relationship. STRATFOR founder Dr. George Friedman contemplates current events in Egypt and the prospect of the end of an era. For more than 30 years, the geopolitics of the Middle East has been built on the American-Egyptian-Israeli relationship. Much of that time, the lynchpin has been Cairo and Egyptian Preside

Lisa Lambert of Reuters reports, Pension issues may hurt state ratings: Moody's : Some U.S. states face so much pressure to fund pensions for public employees that it could hurt their credit ratings, Moody's Investors Service said on Thursday. As concerns grow over the financial health of many states after the 2007-2009 recession and how they will cut spending to cope, the ratings agency combined pension and debt data to rank the liabilities of each state. In the past, Moody's evaluated credit risks from pensions and debt levels separately. Lower credit ratings could raise the costs to states of borrowing money. Connecticut, Hawaii, Illinois, Kentucky, Massachusetts, Mississippi, New Jersey and Rhode Island, along with Puerto Rico, have the largest debt-and-pension loads, Moody's found. Nebraska and South Dakota have the lowest. "Large and growing debt and pension burdens have been, and will continue to be, contributing factors in rating changes,&qu

Robert Van Daalen and Paul Hodkinson of Dow Jones report in the WSJ, Pension Funds Sell Equity Arm to Carlyle : AlpInvest Partners, Europe's largest private-equity investor, has been sold to Carlyle Group and the AlpInvest management in a move that looks set to shake up Europe's buyout landscape. Carlyle and AlpInvest have entered into a joint venture that separates the investor from its Dutch pension-fund owners, APG and PGGM, the parties said Wednesday. A purchase price wasn't disclosed. The sale gives the pension-fund managers more room to invest their clients' money in private-equity funds other than AlpInvest, PGGM Chief Executive Martin van Rijn said. "We have multiple clients, and a sale of AlpInvest gives us the opportunity to provide our clients with various choices to invest in private equity," he said. PGGM and APG control the money of two of the Netherlands' largest pension funds. They have committed an additional €10 billion ($13.68

Kathy Bergen and Monique Garcia of the Chicago Tribune report, SEC probes Illinois pension savings projections : When Gov. Pat Quinn signed pension reform legislation in April, he estimated the new law would save taxpayers more than $200 billion over nearly 35 years. And the relief would be immediate, lawmakers projected at the time. They estimated that $300 million to $1 billion could be trimmed from the state's required pension contribution in fiscal 2011, which began July 1. Now, the Securities and Exchange Commission is conducting an inquiry into the state's projected savings, the governor's office confirmed Tuesday. The probe, which began in September, is looking into "communications relating to the potential savings or reductions in contributions by the state," the state disclosed in preliminary documents related to the planned sale Feb. 17 of $3.7 billion in pension obligation bonds. Proceeds would fund the state's

Steve Eder of the WSJ reports, Insider Probe Impact Felt by Pension Funds : The federal insider-trading probe is being felt beyond the world of hedge funds and "expert network" firms in New York and Silicon Valley. Investors in some of the hedge funds involved are struggling to get information and decide whether to sell their positions. The scandal hit close to home for the $10 billion School Employees Retirement System of Ohio: The pension fund is invested in two hedge funds raided as part of the investigation. Soon after the news of those raids broke in November, executives of the pension fund flew to New York to question the two firms, Level Global Investors LP and Diamondback Capital Management LLC. A contact at Diamondback told them the fund's managers would be limited in what they could say about the investigation but offered to provide an update on the fund's portfolio. The pension executives balked. "We have to do our job. I don't want a p

N.J.C. Morales of BusinessWorld Online reports, Dutch pension fund manager invests in Century Properties : High-end real estate developer Century Properties, Inc. has secured more than P2 billion in funding from a European asset manager to finance projects in the “premium” market segment. The investment from APG will be used for expansion, Century Properties said, pointing to a favorable business environment. “APG, one of the largest global pension asset managers based in the Netherlands, with €266 billion of assets under management, has invested P2.25 billion in Century Properties,” the property firm said in a statement yesterday. “The investment of APG will allow Century Properties to capitalize on the current high-growth and low-inflation environment of the Philippines,” Jose E. B. Antonio, chairman and chief executive of Century Properties, said in the same statement. Mr. Antonio said the cash infusion wou

Naomi Powell of the Globe and mail reports, In Sweden, pension problems are so 1989 : There’s no shortage of pension woes in Europe these days. Everywhere, it seems, governments are hiking retirement ages, cutting benefits and quelling protests from outraged workers. Not in Sweden. It isn’t that the Swedes escaped the troubles now facing many of their European neighbours, they were just forced to deal with them a long time ago. Still, the economic crisis presented the first real test of the country’s pension reform, one it weathered relatively well. In the late 1980s, the government realized that without a major overhaul, the public pension system would be bankrupt in about 20 to 25 years. The reasons are familiar: a rapidly aging population and a defined benefit system that would collapse without consistently strong economic conditions. “You had this big tanker of pensioners who were going in one direction and you had pensions that had to be paid by law,” said Edwar

Tara Perkins of the Globe and Mail reports, OMERS eyes shift into private market : Michael Nobrega, chief executive of the Ontario Municipal Employees Retirement System, has to figure out how to deploy about $20-billion into private investments in the next five years. It’s a tall order, and it explains why Mr. Nobrega and his colleagues are opening new offices and courting well-connected partners in places such as London and New York. The key goal for OMERS in coming years is to shift its asset mix so that half its assets are invested in the private market, in areas such as infrastructure, real estate and private equity, with the rest in public market investments such as stocks and bonds. The pension fund’s desire to make this change was heightened by the financial crisis, which wreaked havoc on public markets. The most recent figures, as of Dec. 31, 2009, show that more than 60 per cent of OMERS’ $48.4-billion of assets was invested in public markets. Mr. Nobrega’s chal

Alison Vekshin of Bloomberg reports, Brown to Propose Overhaul for California’s Underfunded Pensions : California Governor Jerry Brown said he will propose changes to the most-populous U.S. state’s underfunded public-employee retirement plans. Brown did not say specifically what facets of the two biggest pension systems he would like to alter. His administration will release ideas in coming weeks, Brown said today in a speech to the League of California Cities, a conference in Sacramento for mayors, city council members and administrators. “It’s going to be a continuing process as we understand exactly what the stock market provides and what the stock market doesn’t provide,” said Brown, who was Oakland’s mayor from 1999 until 2007. Public pensions across the U.S. face a gap of as much as $3 trillion between their recession-battered assets and promised retiree benefits, according to a June study by researchers at George Mason University’s Mercatus Center in