Pension Pulse

A couple of interesting articles appeared this Sunday. Graham Bowley of the NYT reports, In Striking Shift, Small Investors Flee Stock Market : Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market. Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute , the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds. If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked. Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday. One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible ...

Mary Williams Walsh of the NYT reports, Pension Fraud in New Jersey Puts Focus on Illinois : The federal government’s crackdown on the State of New Jersey this week for misrepresenting the condition of its pension funds raises a question: Who else might have pension numbers that could draw regulatory fire? Cities and states are scrambling to make sure their pension disclosures are in order, and investors in distressed debt — who make money off financial trouble — are scrambling too, sensing opportunity. “No one knows exactly how to attack this market yet, but people are going to be watching the New Jersey case and others like it very closely from an investment point of view,” said Jon Kibbe, a lawyer who specializes in distressed debt. Though some advisers are urging caution, New Jersey and other states have continued to issue new debt at reasonable rates as investors clamor for high-grade securities in a low-rate environment. Harry J. Wilson, a Republican candidate...

Anupreeta Das and Gina Chon of the WSJ report, Deals Stage a Comeback : Global merger activity is sweeping to its highest levels since late 2009, presenting a glimmer of economic confidence while the bond and stock markets continue to price in a weakening U.S. economy. On a day of bleak jobless news and a 144-point drop in the Dow Jones Industrial Average, Intel Corp. surprised investors by unveiling plans for a $7.7 billion all-cash takeover of Internet security company McAfee Inc. That came just hours before First Niagara Financial Group Inc. in Buffalo announced the biggest bank merger since the peak of the 2008 financial crisis, a $1.5 billion acquisition of NewAlliance Bancshares Inc. Both deals pale in size next to BHP Billiton's hostile $39 billion offer for Potash Corp. of Saskatchewan, disclosed Tuesday. U.S. deal activity had been weak through most of 2010, as corporations husbanded cash and waited for more signs of economic revival. Many of the biggest deals ...

The Caisse de dépôt et placement du Québec, Canada's largest pension fund, reported its results for the first half of 2010 : The Caisse de dépôt et placement du Québec announced today that the weighted average return of the depositor funds for the first half of 2010 amounted to 2.33%, compared to -0.74% for its overall portfolio’s benchmark index. The Caisse outperformed the markets by 307 basis points (3.07%), leading to $4.1 billion in value added compared with the benchmark index. The Caisse’s net assets stood at $135.8 billion, as at June 30, 2010, compared to $131.6 billion, as at December 31, 2009. “The markets were challenging and volatile in the first half of the year, with sharp declines in global stock market indicators and significant concerns about European and U.S economic outlooks," said Michael Sabia, Caisse President and Chief Executive Officer. “Despite this fact, the Caisse navigated this unfavourable environment well. Our results reflect the work...

Colin Barr of Fortune/CNN reports on the unpoppable bond bubble : Bond prices have been soaring since U.S. job growth hit a wall in June. Yields on government bonds have dropped to levels last seen in March 2009, when stocks were still reeling from the post-Lehman Brothers bust. The 10-year Treasury yielded 2.6% Wednesday, down from 4% just four months ago. With hopes of a V-shaped recovery fading, income-generating bonds look like a smart play. But Siegel writes in an op-ed published Wednesday in the Wall Street Journal that "those who are now crowding into bonds and bond funds are courting disaster." Siegel, author of "Stocks for the Long Run," notes that if interest rates merely rise back to levels seen in April, recent buyers of 10-year Treasury bonds will face capital losses more than three times the size of the interest payments they stand to receive in a year. He likens the recent rush to bonds to the tech stock bubble that burst a decade ago, co...

Peter Cohan of DailyFinance asks, Hedge Funds Bet on Inflation, Institutions Bet on Deflation. Who's Right? : The smart money -- by which I mean hedge funds and institutional investors -- is placing its bets outside of the stock market. But the smart money isn't by any means in agreement about the direction of those bets: Hedge funds are doubling down on big inflation down the road by buying gold. But institutions are buying corporate bonds -- a wager on deflation, since bonds grow in value as prices and interest rates fall. The only thing they do agree on is that neither group wants to invest in stocks. But should you follow them? And if so, which way? Hedge fund honchos such as George Soros, Leon Cooperman, John Paulson and Erich Mindich are making big bets on gold because they see the specter of inflation ahead. Bloomberg reports that Mindich's $13 billion Eton Park Capital Management bought 6.58 million shares of SPDR Gold Shares ( GLD ) -- an exchange-traded f...

Quarterly filings were released on Monday and all eyes are on star hedge fund managers. The WSJ reports, Paulson Adds Goldman Sachs, Other Financial Stakes : Hedge fund manager John Paulson continued to add to his holdings in the U.S. financial services industry with new stakes in Goldman Sachs Group Inc. (GS), mortgage insurer PMI Group Inc. (PMI) and regional bank Popular Inc. (BPOP). Paulson, who runs Paulson & Co., reported in a quarterly filing with the Securities and Exchange Commission that he added a new position with 30 million Bank of America Corp. (BAC) warrants, increased his holdings in common stock of Wells Fargo & Co. (WFC) by 4.5 million shares to 17.5 million, and raised his holdings in Hartford Financial Services Group Inc. (HIG) by more than 31 million shares to 44 million. But Paulson reported reducing its stake in CIT Group Inc. (CIT) by just over one million shares, to 3.3 million. Paulson was among the first big hedge fund managers to buil...