Pension Pulse

Jeff Cox of CNBC reports, What Bubble? Why Bond Pros Are Still Betting on Junk : Plunging yields and surging supply has triggered a scare in high-yield bonds, but bubble hunters may be looking in the wrong place. Average yields in the junk market recently slipped below the pivotal 7 percent mark, while global issuance hit its highest July ever last month. With economic growth slowing, some pros are speculating that the aggressive run in high yield is about to end. But those fears come as cash remains around record levels on corporate balance sheets, defaults remain low, and the stock market continues to rally. Still, the fears persist that the flock to junk, spurred by extremely low yields in government debt, is creating a bubble ready to pop. "People wanted more yield than the United States Treasury was willing to give. So they went to other places to get it, and that's a risky situation," says Kevin Ferry, president of Cronus Futures Management in Chicago. "...

Joshua M. Brown, author of The Reformed Broker blog, wrote a comment that was published in the Christian Science Monitor, A defense of the hedge fund industry. Really. : I can't believe I'm about to defend the hedge fund industry, but here goes... I like Matt Taibbi 's work although a lot of my peers on the financial web despise him. Even when they agree with his basic premise (The Street does more harm than good in society) they tend to take issue with his use of over-generalizations or seemingly devastating barbs which are much less so once put into context. But even so, the truth he gets at is undeniable and I always read his stuff when it hits. But his latest, on hedge funds, caught my attention because of how uncharacteristically sloppy it was. He riffs on the fact that only 11% of hedge funds are performing ahead of the S&P 500 year-to-date and that they're basically all buying Apple to catch up at this point. all those super-rich people who tur...

Richard Blackden of the Telegraph reports, The Canadian pensioners who own Britain (h/t Suzanne Bishopric): In less than ten years, a handful of the country's biggest funds have bought outright or own stakes in some of the UK's most prized infrastructure. That includes High Speed One, the railway line that connects London to the Channel Tunnel; Scotia, Scotland's biggest gas network; the ports of Southampton and Grimsby; Birmingham and Bristol airports and Camelot, the operator of the national lottery. They've also been part of consortiums that have purchased engineering company Tomkins and, in May of this year, software maker Logica. Just three weeks ago one of them secured a slice of the national game when Goals Soccer Centre, the biggest operator of five-a-side football pitches in the country, was acquired . Britain is far more open to foreign takeovers than large parts of Europe, the US and even Canada itself. Even so, it is har...

Michel Kelly-Gagnon, president of the Montreal Economic Institute, wrote an op-ed for the Toronto Sun on Canada's pension plan straitjacket : Defined-benefit private pension plans are those in which an employer promises a predetermined monthly benefit based on the employee's earnings history, tenure of service and age, rather than depending on investment returns. In Canada, these plans are under a lot of stress. About 90% of them have a so-called "solvency" deficit, meaning they would come up short if the companies sponsoring them were suddenly to go bankrupt or otherwise cease their operations. When a company goes bankrupt, employees' benefits have to be paid out at once, and retirees' pensions have to be purchased from an insurance company. The main cause of these solvency deficits is that long-term interest rates are exceptionally low. For example, since 2000, rates have decreased from 6% to 2.5% on long-term federal government bonds and from 4...

Sam Forgione of Reuters reports, Cash-strapped U.S. pension funds ditch stocks for alternatives : Faced with growing obligations and shrinking returns, many of the largest U.S. public pensions have raised their exposure to alternative investments to record levels this year, despite ongoing criticism of the risks and costs. Public pension fund managers have poured billions of dollars into alternative investments, ranging from Polish energy facilities to catastrophe bonds, as lackluster stock market returns and historically low interest rates have made it difficult for pensions to earn enough. Public plans with more than $1 billion had a median of 15 percent in alternatives as of June 2012, the highest ever and up from 9.2 percent in June 2011, according to the Wilshire Trust Universe Comparison Service. The increase carries risks of unstable performance and high fees amid a funding shortfall of $1.38 trillion as of 2010, according to Pew Center on the States data. Alread...

Luann Lasalle of the Canadian Press reports, Caisse de depot et placement earns average return of 3.5% on first half of 2012 : Quebec's main pension fund manager says it earned an average return of 3.5 per cent on depositors' funds for the first six months of 2012. The Caisse de dépôt et placement du Québec says its net assets reached $165.7 billion as the end of June, up $6.8 billion from $159 billion at the end of 2011. The fund's investments contributed $5.4 billion to the increase and depositors made a net contribution of $1.4 billion. Over a three-year period, the Caisse said it posted a 10.5 per cent average annual return. It said all major asset classes had positive returns for this period, surpassing their benchmark. "Despite turbulent markets and a global economic downturn, the Caisse generated a positive return in the first half, in line with the long-term needs of its depositors," president and CEO Michael Sabia said in a statement. "Conditi...

Earlier this week, wrote a comment on setting your sights on Soros where I briefly discussed what some top hedge funds bought and sold in Q2 2012. Will dedicate this weekend to take an in-depth look at how top funds positioned themselves during the second quarter. Before I proceed, please remember the three sacred rules of 13-F filings: Never buy or sell any stock based solely on 13-F filings. Never buy or sell any stock based solely on 13-F filings. Never buy or sell any stock based solely on 13-F filings. Got it? Good because if you don't adhere to these rules you will suffer enormous losses chasing the latest fad that some "guru" is supposedly buying. And yes, I am thinking of the Facebook ( FB ) IPO flop. I cringe in horror when I read articles on how a dozen top hedge funds own Facebook . If that's the case, then they're getting burned badly along with millions of retail schmucks who thought they were going to become instant overnight millionaires...