Pension Pulse

John Geddie of the International Financing Review reports, Portugal plunders pension fund to tackle debt cliff : The Portuguese government plans to tap nearly all of its state-owned pension fund to ease it over the hump of a hefty €27.5bn of financing needs over the next two years, according to domestic news reports. Portugal’s social security minister Pedro Mota Soares is evaluating whether to invest up to 90% of the €10bn Social Security Financial Stabilization Fund (FEFSS) in Portuguese government debt, according to Economico on Tuesday. The fund had €5.5bn invested in Portuguese public debt at the middle of last year, according to earlier reports in the same newspaper. The new measures would free up a further €3.5bn, meaning the fund would own around 7.5% of all Portugal’s outstanding government debt, deemed sub-investment grade by all the major ratings agencies and viewed as one of the riskiest assets in eurozone government bond markets by investors. In Spain, a count...

Eleanor Warnock of the WSJ reports, Japanese Pensions Moving Into Alternatives Overseas : Since the Bank of Japan unleashed a massive new easing program last month, European and U.S. investors have waited with bated breath for more BOJ bond buys to push Japanese lifers overseas. The truth: Japanese pension funds are already ahead of them. They’ve been putting more of the world’s second-largest pool of retirement funds into everything from global real estate to Namibian debt. According to a survey of 128 funds released in April by J.P. Morgan Asset Management, pensions cut the share of domestic bonds to 29.4% of their assets by the end of March from a targeted level of 35.4% four years earlier, and domestic stocks to 13.9% from about 22%. That’s made room for alternative investments such as real estate and foreign debt to nearly double to 11.8%. Consultants and fund managers say they’ve got no choice but to find something less risky than stocks, but better yielding than domes...

Elise Young of Bloomberg reports, N.J. Pension Fund Posts 13.31% Return Fiscal Year to Date : New Jersey’s public pension fund returned 13.31 percent over the ten months of the fiscal year that began July 1, boosted by stock gains. Domestic equities in the fund’s portfolio returned 20.52 percent through April 30, while non-U.S. equity gained 24.58 percent. The fund’s assets are valued at $75.3 billion, up from $71.8 billion a year earlier. The total return missed the fund’s 14.54 percent benchmark, partly because of a reporting lag from alternative investments such as hedge funds. The return may be as much as 14 percent, according to a report by Tim Walsh, director of the state’s investment division. Treasuries and Treasury inflation-protected bonds, or TIPS, underperformed equity and credit markets, while emerging market exchange-traded funds also hurt performance, he said. “We continue to watch markets, we continue to diversify, we continue to try to make the best decisi...

Janet McFarland of the Globe and Mail reports, CPP fund returns top 10 per cent : The Canada Pension Plan fund rode a wave of strong gains in foreign stock markets to push its investments up by 10.1 per cent last year and boost its assets to $183-billion. While bonds and Canadian equity holdings posted slower growth in the year ended March 31, the Canada Pension Plan Investment Board, which manages the CPP’s assets, said its $64-billion portfolio of foreign equities had a stellar year. Private equity holdings in foreign countries earned 17 per cent for the year, while publicly traded stocks in foreign countries posted 13-per-cent growth. “That strength in global equity markets was the primary factor driving our solid returns for the year,” said Eric Wetlaufer, CPPIB’s head of public market investments. The CPPIB’s overall returns were typical for a Canadian pension plan last year. A survey by RBC Investors Services Ltd. found that pension plans earned an average of 9.4 p...

Barry Critchley of the National Post reports, After 20 years, real estate as part of pension funds still solid : Two decades on, Stan Hamilton and Robert Heinkel, both from the University of British Columbia, are working on a revised edition of what can be considered to have been a game changing book about pension fund management. In 1993, the two finance professors and trustees of the faculty pension fund, penned a 165-page book, The Role of Real Estate in a Pension Portfolio . One of the key conclusions: “Having considered the liquidity and management issues relating to real estate, we conclude that real estate should compose between 5% and 15% of the pension portfolio.” The two – Heinkel is still at it while Hamilton has retired – argued real estate ”is the only asset class that reacts significantly and positively to expected inflation changes.” Reached Tuesday, the day after a column about the Canadian arm of LaSalle Investment management launching its fourth ins...

Madhavi Acharya-Tom Yew of the Toronto Star reports, Teachers’ pension plan names successor : Ron Mock will take over as president and chief executive officer of the Ontario Teachers’ Pension Plan when Jim Leech retires at the end of the year, OTPP said Tuesday. Mock is currently senior vice-president of fixed income and alternative investments at the fund, which manages around $129.5 billion in assets. He said in an interview that he looks forward to working closely with Leech through the transition period. “[Jim] is a very successful leader and he’s had an unbelievable term here. He has led the organization on so many different fronts and I will have the luxury of being beside him for the next seven months while we transition through this,” Mock said. “Our focus has been and will be on our pension plan members.” Mock joined Teachers’, as the pension plan is known, in 2001 as director of alternative investments. “Ron brings the ideal combination of experience, kno...

Alec MacFarlane of Financial News reports, Canadians continue UK push with Civica buyout : The private equity arm of one of Canada’s largest pension funds has fended off bids from two of Europe’s largest buyout houses to buy UK software provider Civica from 3i Group, amid an increasing drive by Canada’s main pension funds to invest directly in the UK. Omers Private Equity, the private equity arm of the Ontario Municipal Employees Retirement System , saw off the rival bids to buy Civica from 3i for an enterprise value of £390m. 3i, which bought Civica in 2008 in a £109m public to private transaction and has since completed 10 add-on acquisitions for the company, has generated total proceeds of £228m and a 2.1-times money multiple from the deal, according to a statement from 3i. The business provides software systems, cloud-based IT services and technical outsourcing, primarily to public sector organisations such as local government, education, social housing, healthcare, and ...

Richard Barley of the Wall Street Journal reports, Bonds Hear Bubble Echoes : The squeeze is on. Persistently low yields on safe-haven government bonds and ultra-loose central-bank policy are pushing money into European credit markets. Portugal is the latest beneficiary, selling its first 10-year bond since its bailout in 2011, but it isn’t alone. Investors are increasingly buying riskier corporate bonds. The problem is that the underlying economic fundamentals look as poor as ever. Portugal’s €3 billion ($3.92 billion) bond attracted orders of €10.2 billion, despite offering little premium to the government’s outstanding paper. Yields on 10- year Portuguese bonds are less than 5.5%, down about 6.5 percentage points in the past year or so. For Portugal, the benefit is clear: It has covered its 2013 funding needs and is regaining market access. For investors, it isn’t so clear-cut. They are betting that if Portugal is to run into trouble, it is a ways off yet. For now, Europe w...