Pension Pulse

The Financial Post reports that OMERS chief calls for pension consolidation : It is a call for pension consolidation. In a keynote address delivered Monday, Michael Nobrega, president and chief executive of the Ontario Municipal Employees Retirement System (OMERS), is calling for the creation of "super-funds" comparable in size to the Ontario Teachers' Pension Plan. In a speech delivered at the Conference Board of Canada's "Summit on the Future of Pension: From Crisis to Sustainability," Mr. Nobrega argues that the Ontario pension industry is highly fragmented into many thousands of small plans ranging from big banks and insurance companies with pension fund assets up to $6-billion to universities with assets under $1-billion. Mr. Nobrega argued that these funds "cannot afford to deliver the quality and depth of governance, investment skills and risk management expertise their members need and deserve." Last month, in its budget the Ontario governm...

The WSJ reports on the public pension shakedown : President Obama's auto fix-it man, Steven Rattner, is in the news as one of the Wall Street financiers hit up for big money as part of New York state's unfolding pension-kickback scandal. The White House says he's done nothing wrong, and there's no public evidence that he broke any laws. But Mr. Rattner's high profile is nonetheless useful in drawing attention to the real story here, which is the growing evidence of corruption by officials who use their power over public pension funds to shake down private companies. This is the same political class that has been blaming banks for "greed" in the financial crisis. The pension fund scandal exposes the myth of the superior virtue of the public and nonprofit worlds. Greed is universal. And the opportunity for corruption is enormous when political discretion is tied to vast sums of public money. New York Attorney General Andrew Cuomo and the Securities and Excha...

It's Orthodox Easter so that means family, food and more food. I wanted to post something really funny that you might not have seen. By now, everyone in the world saw Susan Boyle's amazing singing performance on Britain's Got Talent show. If you have not seen it, click here to watch her mesmerizing performance. This lady has incredible talent that went undiscovered until now. But there was another funny skit you might have not seen. It was a father and son dancing their version of Michael Flatley's Lord of the Dance. Click here to watch it on YouTube and I hope it puts a smile on your face. I wish all Orthodox Christians a Happy Easter.

Leah McLaren writes in the Globe and Mail that Generation debt is in for a rough ride : A few years ago, I interviewed University of Toronto demographer David Foot, author of the bestseller Boom, Bust & Echo . Over tea at a campus pub, he assured me that my generation - which included the youngest of what he dubbed the "busters" and the eldest of the "echos" - was in for a sweet ride. We were destined to be prosperous and "in demand," he said, as a result of being born in the mid-to-late 1970s, when the birth rate was at an all-time low. What Foot didn't know was that an economic meltdown would conspire to all but scupper my generation's hopes and dreams, just as they seemed about to come to fruition. The lucky, plucky, anointed-for-greatness offspring of the first boomers, now in our late 20s and early 30s, have fared the worst in the current financial crisis, all things considered. After finally managing to land decent jobs, we are the firs...

In my last post, I discussed how CalPERS is seeking to buy TARP holdings and Citigroup assets . I said that this carries enormous risks, especially if the recovery turns out to be very modest or even worse, it falters. The U.S. government invited CalPERS and other large pension funds to take part in the new program to buy these assets from the banks with the help of hedge funds and private equity funds. You might stop and ask why does any government get involved in the investment decisions of public pension funds? Consider the case of the National Railroad Retirement Investment Trust where stock losses may be a lesson : A special pension fund for railroad workers that was given permission during the Bush administration to invest its assets in the stock market lost more than a third of its value during a recent 18-month period, a loss that could influence an ongoing debate about how to keep government-affiliated retirement programs solvent. After the National Railroad Retirement Invest...

Bloomberg reports that the New Jersey pension system deficit rose to $34 billion : The funding deficit of New Jersey’s public pension system climbed to $34.4 billion as of June 30, from $28.4 billion in mid-2007. The pensions were 72.6 percent funded as of June 30. That compares to a funded ratio in June 2007 of 76 percent, according to state Treasury Department officials. New Jersey’s largest pension fund, the Public Employees’ Retirement System, had an unfunded liability of $10.82 billion as of June 30, up from $9.07 billion as of mid-2007. That combines state and local systems. The state PERS had a funded ratio of 65.6 percent, compared with 68.8 percent in June 2007. The state has less money than it owes for anticipated pension obligations because of investment losses earlier this decade, a lowering of the retirement eligibility age and a failure by past governors to make annual contributions. The value of the pension system’s assets dropped to $56.3 billion as of February, from mo...

The FT reports that U.K. pension deficits hit £250bn : The aggregate deficit of corporate UK pension funds soared past £250bn ($373bn) in March, setting a record for a shortfall due in large part to the drop in gilt yields as the Bank of England’s quantitative easing commenced. According to the Pension Protection Fund, the insurance scheme for the underfunded pension plans of insolvent employers, the aggregate gap between the value of scheme assets and the value of liabilities it guarantees rose to £253.1bn. That reflects the aggregate shortfall of schemes in deficit, which is 90 per cent of all plans. Overall, the shortfall is £242bn, but that number has little meaning because the surplus of one scheme cannot be used to cover the deficit on another. The PPF calculates its 7800 Index – named for the number of schemes it insures – based on average asset mix and interest rates prevailing on long-term conventional and index-linked gilts. In March, rising equities markets increased the va...

Before I get into the latest topic, I want you all to read Rolfe Winkler's latest post on Well's Dodgy Accounting . After that, read Tim Knight's Be a Fool or Fight It? (I'd rather be a fool and make money in Q2). Now to the latest topic. Diane Urquhart sent me this NYT article, He Doesn't Let Money Managers Off the Hook : EVERY once in a while, if only for sanity’s sake, it is wise to leave our bankrupt era behind and seek out a bit of wisdom from a moral authority. It’s a challenging exercise, given that so many formerly stellar reputations are now shipwrecked and that all those once-smart guys and gals have been reduced to bull-market geniuses. And yet there are a few voices of reason and integrity left in this upside-down world. One is John C. Bogle’s. He is the founder of the Vanguard Group, an author and an investor advocate. With almost 58 years in the money management business, Mr. Bogle has kept his reputation intact. That alone sets him apart. But Mr. ...

A follow-up on Friday's post on what happened to CAW's pension guarantees . The Globe & Mail's Andrew Steele writes on the tragic history of GM's pension : It needs to be said again: The NDP government in Ontario really screwed up when they absolved General Motors of meeting their pension obligations. (I've covered the whole sordid history on the NDP and pensions here and talk about the GM pension challenge here .) Despite being deemed by the NDP as "too big to fail," GM has now failed. Today, GM is basically owned and operated by Barack Obama, and he's thinking very seriously about bankruptcy. That would throw open the company's obligations to creditors, including its shareholders, parts suppliers, its current workers and - most tragically - its former workers. Bankruptcy could force the "wind-up" of GM's pension plan. Thanks to chronic underfunding of their pension obligations, there is not enough money to ...