Pension Pulse

Randy Diamond of Chief Investment Officer reports that CalPERS strikes gold in Gatwick Airport investment: The value of the 10% investment the California Public Employees’ Retirement System (CalPERS) made in London’s Gatwick Airport nine years ago has skyrocketed, turning an initial $155 million investment into a stake worth more than $1.24 billion. The disclosure came during the pension system’s semiannual retreat meeting in Santa Rosa, California, last week, during a panel highlighting the importance of infrastructure investments to the $356.6 billion retirement plan. Small changes at the airport like giant luggage trays designed to help travelers get through airport security faster have meant the airport can accommodate more travelers, increasing landings, departures, and profits, said Adebayo “Bayo” Ogunlesi, chairman and managing partner, Global Infrastructure Partners (GIP). The firm runs the investment consortium that manages Gatwick. Speaking before a panel, chaired...

British Columbia Investment Management Corporation (“BCI”) and ATL Partners (“ATL”) recently announced that they have acquired Valence Surface Technologies, the largest independent aerospace surface finishing platform in North America: Founded in 2013 and based in Houston, the Company provides critical surface treatments such as non-destructive testing, shot peening, chemical processing, plating, painting and spray coating to aerospace and defense components that require complex finishing to meet engineering specifications. Valence currently operates eight (8) facilities throughout the U.S. in key aerospace and defense manufacturing regions, serving over 3,000 customers and processing over 12 million individual parts annually. “Over the last several years we have built Valence into a market leading platform and we look forward to expanding the Company’s capabilities and geographic footprint as we seek to offer additional, differentiated services to our growing customer base” ...

Chief Investment Officer reports CalPERS board member and State Controller Betty Yee says it may be time for the retirement system to cut its holdings in companies running private prisons, a major reversal for the influential California politician who has previously sided against divestment: Yee’s comments to CIO came after three dozen faculty members at the California State University system pressed the CalPERS board at its retreat meeting on Monday to divest their holdings in US private prison companies CoreCivic and The GEO Group. The faculty members, along with other CalPERS members opposed to the system’s investments in the private prison companies, have become a fixture at CalPERS meetings. But the board, which generally is against being forced to divest from companies, has not publicly taken up the issue despite the outcry. The CalPERS board also has opposed action by state legislators that would bar the retirement system from investing in the stock of the prison co...

Ontario's New Democrats are accusing Finance Minister Rod Phillips of political patronage: In one of his first acts as Finance Minister, Rod Phillips appointed one of his major donors and long-time business partner Neil Selfe to the Investment Management Corporation of Ontario (IMCO). Another long-time Phillips business associate, Brian Gibson, was also quietly appointed to the IMCO board on June 20. Official Opposition NDP MPP Taras Natyshak said Doug Ford and the Conservatives are continuing to rubber-stamp patronage appointments of close friends and insiders to key roles. That’s why Natyshak and the NDP are calling on these and all recent Conservative appointees to appear before the Standing Committee on Government Agencies to face questions about potential conflicts of interest, and their qualifications. “It’s troubling that Phillips’ first move as Ontario’s Finance Minister was to hand out a couple tickets on Doug Ford’s gravy train, rather than get to work on the th...

Barbara Shecter of the National Post reports on the smartest guy in the room: How a pension guru worked his magic, beat the market and saved Home Capital: There are seminal moments in any career and Jim Keohane’s is a doozy. He knew something was wrong when his lowball offer for Canadian Pacific Railway shares, lobbed in at $1 below the asking price, was instantly accepted. It was October 1987 and by the time the shares he had traded overseas opened on the Toronto Stock Exchange hours later — on what would become known as Black Monday — they had dropped a further $5 per share. Keohane, who will step down next year after a widely praised 20-year run as chief investment officer and then chief executive of the $79-billion Healthcare of Ontario Pension Plan (HOOPP), recalls that his loss on that day’s trade was painful as markets historically tumbled to a depth and at a speed few thought possible, but it was far from the worst thing that happened. The firm where he worked, Wood...

This morning, I had a chance to speak with Chun Wang, a portfolio manager who produces great research at the Leuthold Group . Chun just wrote a Macro Monitor comment, Slowdown Or Recession? Confidence Is Key , where he outlines these main points: The dovish pivot of global central banks is part of the reason behind the impressive rate decline, but the recent string of sub-par economic numbers also helped to push global rates lower. The question is, “How low can rates go?” Over the medium term, it boils down to a call on recession. We present our preferred recession indicators in a dashboard and compare their patterns during a recession versus during a slowdown. A traffic-light system is used to indicate the current status (green = no recession). Right now, there are five green lights and six yellow lights. That means we are still in the slowdown camp, not the recession camp (yet). Risk Aversion Index: Stayed On “Higher Risk” Signal While the low inflation, slow growth ...

Kevin Orland of Bloomberg reports on how competition for real assets is forcing the Alberta Investment Management Corporation (AIMCo) to get creative in its approach: Alberta Investment Management Corp. is being forced to get creative in its hunt for real assets like office buildings, timberland and wind-power installations as rival pension-fund managers pile into the increasingly popular sector. Chief Executive Officer Kevin Uebelein, 59, says the manager for 31 Alberta pension, endowment and government funds is looking to buy into companies that have strong existing assets and top management teams that can build on those bases — a practice he refers to as platform investing — rather than just buying into existing projects or those under development. That strategy is necessary as rivals shift more of their funds into illiquid assets, threatening to bid up prices and drive down returns, Uebelein said. “There are too many dollars chasing too few projects,” Uebelein said in an...

Gareth Gore of Thompson Reuter's International Financial Review reports that pension giants are adding leverage as 30-year-old Canadian model flounders: In the late 1980s, the Ontario government set up a task force to tackle what it saw as a ticking financial time bomb. After decades of under-funding, it was worried that the pensions of teachers and other public servants might one day place an insurmountable burden on state finances. The pay-as-you-go model, with workers contributing just 1% of their salaries and the state filling any shortfalls, was seen as unsustainable. The task force recommended a complete overhaul of the system, proposing that public-sector pensions be spun off and managed independently by teams of professional investors. Though controversial, in 1990 the state launched the first such fund – the Ontario Teachers’ Pension Plan – that rapidly became a template for other public-sector pension schemes not just in Ontario but across the whole of Canada. ...