Pension Pulse

Jane Cai of the South China Morning Post reports, China's pension fund seeks to grow asset base : China's state pension fund has renewed its calls for an expansion of its assets under management to meet a growing need for pensions as society ages. The fund's party secretary, Dai Xianglong, was quoted by Xinhua yesterday as saying that the central government should transfer 30 per cent of capital gains it receives from state-owned enterprises (SOEs) to the National Social Security Fund (NSSF). The government should also transfer any of its shareholdings in SOEs in excess of 51 per cent to the pension fund, Dai said. SOEs currently assign 10 per cent of their shares to the fund during their initial public offerings. He said the NSSF hopes its assets under management will grow to three trillion yuan (HK$3.8 trillion) by 2020 from 890 billion yuan now. "The call highlights the pension fund's ambition to expand at a time when China has difficulty in meeting...

Russ Banham of CFO magazine reports, The Great Pension Derisking : Thrice burned, twice shy. After experiencing steep funding shortfalls in their defined-benefit retirement plan obligations three times in a row over the past generation, corporate plan sponsors are finally fighting back, with an array of innovative weapons designed to reduce their pension liabilities. Such pension “derisking” approaches include lump-sum payouts to vested, terminated employees; liability-driven investment (LDI) strategies that match up plan assets with pension liabilities by moving from equities to long-term bonds; and the one currently making headlines — annuitization, the transfer of a sizable percentage of pension obligations to an insurance company for a paid premium. These tactics join more-traditional approaches, such as freezing and closing pension plans. Taken together, they constitute a sea change in pension-plan treatment. Just in time, too. “Since the financial crisis reared, there ha...

Chuck Mikolajczak of Reuters reports, Wall Street Week Ahead: A year of returns, all before mid-April : The S&P 500 stock index's stunning run since the start of the year has made many bullish analysts look conservative. As the benchmark S&P .SPX has roared to record highs this year with a gain of more than 11 percent, many Wall Street analysts have been forced to concede their prior targets were too low and adjust accordingly. In fact, it has taken less than four months for the S&P to surpass year-end 2013 targets of about two-thirds of the strategists polled by Thomson Reuters in December. Of 47 analysts surveyed, 30 of them expected to see this year end at a level already exceeded by the index. The midyear targets are even more lopsided, as the S&P is above the midyear forecast for 27 of the 28 analysts who estimated where the index would be by the end of June. "When we started the year at 1,425 that implied about a 15 or 20 percent total retur...

Frank Dohmen and Dietmar Hawranek of Der Spiegel report, Luxury Pensioners: German Execs Scrutinized over Fat Retirement Plans (h/t, Suzanne Bishopric): Despite public outcry, German executive pay continues to grow. While most people in the country are gradually becoming concerned about whether their retirement pensions will be adequate, many top executives can look forward to worry-free golden years. There are no longer many certainties in the lives of Edwin Eichler, Olaf Berlien and Jürgen Claasen. At the moment, the three former executive board members of steelmaker ThyssenKrupp don't know what the future holds for them. Will they be able to find new jobs, or are they simply no longer capable of being placed? They were let go at the end of last year after ThyssenKrupp posted a loss of €5 billion ($6.5 billion). There had been some failed business deals in North and South America, and the supervisory board wanted to send a message. Now the three managers are tainted w...

Andy Kessler, a former hedge-fund manager and author of "Eat People," wrote an op-ed for the WSJ, The Pension Rate-of-Return Fantasy : It has been said that an actuary is someone who really wanted to be an accountant but didn't have the personality for it. See who's laughing now. Things are starting to get very interesting, actuarially-speaking. Federal bankruptcy judge Christopher Klein ruled on April 1 that Stockton, Calif., can file for bankruptcy via Chapter 9 (Chapter 11's ugly cousin). The ruling may start the actuarial dominoes falling across the country, because Stockton's predicament stems from financial assumptions that are hardly restricted to one improvident California municipality. Stockton may expose the little-known but biggest lie in global finance: pension funds' expected rate of return. It turns out that the California Public Employees' Retirement System, or Calpers, is Stockton's largest creditor and is owed some $900 mi...