Pension Pulse

Abby Sewell of the L.A. Times reports, Bankrupt San Bernardino halts payments to CalPERS pension fund : The city of San Bernardino has stopped making payments to CalPERS, the state's public employee pension fund, since filing for Chapter 9 bankruptcy protection Aug. 1. CalPERS spokeswoman Amy Norris said the city had failed to make $5.3 million in payments, and $1.2 million was considered delinquent. It is not common for cities to become delinquent on their payments to the pension system, Norris said. The cities of Stockton and Mammoth Lakes, which also filed for bankruptcy this year, have continued to make their payments. In a statement, CalPERS said it had been working with the city in an attempt to resolve the issue. "If CalPERS and the City cannot resolve the missed payments, CalPERS will assert its rights and remedies available under applicable law; however, the filing of the bankruptcy case creates a stay of certain actions against the City,” th...

Atossa Araxia Abrahamian of Reuters reports, GE, McDonald's give Wall Street a black eye on '87 crash date : Stocks ended the week on Friday with their worst day since late June after Dow components General Electric and McDonald's, both barometers of the overall economy's health, added to a disappointing earnings season. Technology shares kept up a pattern of recent weakness, hurt by anemic results from Microsoft (MSFT) and another losing day for Google (GOOG). The Nasdaq closed down 2.2 percent. For the Dow, Friday's slide marked its biggest loss since June 21 - with the sell-off coming on the 25th anniversary of Black Monday, when the Dow plunged 22.6 percent in its worst single-day percentage drop ever. For the week, though, the Dow still managed to squeak out a gain of 0.1 percent, while the S&P 500 gained 0.3 percent despite Friday's losses. Wall Street's mood was sour, given that a large number of companies have fallen short of top-lin...

James Mackintosh of the FT reports, Investors fall out of love with hedge funds : Have hedge fund managers lost their mojo? This week another of the industry’s rock stars retired and one of the most successful funds cut its fees, as figures showed hedge funds struggling to attract new money. The exit, at 41, of Greg Coffey, co-chief investment officer of Moore Capital’s European business, follows a tough three years for the trading style he followed. Freewheeling global macro trading involves bets on currencies, interest rates and broad markets, and has been whipsawed by the on-again, off-again crisis since 2009’s recovery. Caxton Associates, one of the most successful global macro funds there has been, told investors this week it would cut its fees. That came 10 months after the grandfather of global macro speculation, George Soros, stopped running other people’s money. Net new investments in hedge funds by the end of September were just $31bn, according to Hedge Fund Resea...

Kathryn May of the Ottawa Citizen reports, Changes to pensions will create two-tier workforce in the public service : Canada’s public servants will have to pay more for their pensions and new hires will have to work longer than their older colleagues before they can retire with full pension benefits. The changes will create the first two-tier workforce within Canada’s bureaucracy with all new hires losing the once-sacrosanct early retirement provisions that let public servants retire at 55 and they will be forced to work until age 65, rather than age 60, to retire without a pension penalty. The government introduced the reforms as part of sweeping changes to pensions for both public servants and MPs in its second budget implementation bill. It expects the measures will generate about $2.6 billion in savings over five years. Almost all of those savings will come from changes to the plans for public servants, RCMP and the Canadian forces. About $29 million of the savings are ge...

Olga Kharif and Noah Buhayar of Bloomberg report, Verizon Sends $7.5 Billion in Pension Funds to Prudential : Verizon Communications Inc. (VZ) is transferring about $7.5 billion in pension obligations, or one- fourth of the total, to Prudential Financial Inc. (PRU) in a drive to remove risk from its balance sheet. Prudential, the second-largest U.S. life insurer, will take on responsibility for making future annuity payments to certain management retirees of the New York-based telephone company, Verizon said yesterday in a statement. Verizon is using the agreement to lower risks related to pensions while improving its financial profile. It follows General Motors Co. in paying Prudential to assume the risk that market returns are inadequate or that beneficiaries live longer than expected. Transferring obligations can reduce swings in earnings tied to securities and relieve companies of the need to manage large pools of money. “What Verizon is doing is what a lot of companies ...

John Whitesides and Samuel P. Jacobs of Reuters report, Obama takes offensive against Romney in debate rematch : U.S. President Barack Obama launched aggressive attacks against Republican rival Mitt Romney on jobs, energy and Libya in their second debate on Tuesday as the Democrat tried to reclaim the momentum in a tight White House race. Obama was much sharper and more energetic than in their opening debate two weeks ago, when his listless performance was heavily criticized and gave Romney's campaign a much-needed boost in the run-up to the November 6 election. The president scolded Romney for accusing him of trying to take political advantage of the attack by Islamist militants in Libya last month that killed four Americans, including the U.S. Ambassador Chris Stevens. "That's not what we do. That's not what I do as president, that's not what I do as commander in chief," Obama said during the debate at Hofstra University in Hempstead, New York, c...

Hilary Russ of Reuters reports, Study shows $1.2 trillion gap for public pensions : The largest 100 public pension funds have around $1.2 trillion of unfunded liabilities, about $300 billion above the nearly $900 billion they reported themselves, according to a new actuarial study to be released on Monday. The pension systems reported a median funding level of 75.1 percent. The study by the actuarial firm Milliman, which used different ways to value assets and measure liabilities, finds an aggregate level of funding of 67.8 percent. But Milliman, one of the world largest actuarial firms took a close look at U.S. public pension funding for the first time, and said the multibillion-dollar difference was good news. Rebecca Sielman, the report's author, said results should reassure the public that America's public pensions in general are accurately reporting their funding shortfalls. The difference between what public pensions across the United States have reported and...

James B. Stewart of the NYT reports, University Endowments Face a Hard Landing : For years, America’s largest, richest and most prestigious universities have been the envy of investors. They churned out double-digit returns over the last two decades, even with steep losses during the financial crisis. Harvard’s endowment today is over $30 billion and has generated annualized returns of 12.5 percent over the last 20 years. Their investing success along with their vaunted academic reputations led many financial experts to conclude that Harvard and its peers at the pinnacle of higher education had solved an age-old conundrum: how to generate higher returns with lower risk. An investment stampede ensued as other universities, giant pension funds and even individuals slavishly copied their strategy, which stressed diversification along with high-cost, often illiquid alternative investments like hedge funds, venture capital and private equity funds. Today, it’s hard to find...