Pension Pulse

Randall Smith of the New York Times DealBook reports, Stung by Scandal, Giant Pension Fund Tries to Make It Right (h/t, Suzanne Bishopric): After a pay-for-play scandal tarnished its reputation, the nation’s largest public pension fund turned to a courtly native of Quebec to help it restore order and improve performance in a crucial investment sector. One of the main tasks for Réal Desrochers, the Quebecer who has been head of private equity investments at the pension fund, the California Public Employees’ Retirement System, since 2011, is to reduce the number of outside management firms, which now stands at 389. The portfolio is “overdiversified,” hurting its ability to generate above-average returns, he told fund board members last month. In an effort to achieve returns that exceed those of the overall stock and bond markets, many large public pension funds like California’s, which is known as Calpers, turn to so-called alternative investments like private equity, real esta...

Janet Tavakoli of Tavakoli Structured Finance sent me her latest comment, Did Banks Dump Structured Financial Products in Your Pension Fund ?: Almost five years after the financial crisis, Congress confirmed Richard Cordray, former Attorney General of Ohio, as the head of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established Consumer Financial Protection Bureau (CFPB). As Ohio’s AG, Cordray took JPMorgan Chase, Bank of America and Citigroup to court over their mortgage servicing practices, robo-signing, foreclosure fraud, and losses to state pension funds. He asserted banks were “operating on a business model built on fraud” and “defrauded our courts” by presenting false evidence manufactured in boiler rooms. He wanted banks to halt foreclosures in every case where they presented the courts with false evidence. He also publicly criticized Bank of America and GMAC; and said Wells Fargo had a serious problem on its hands. R...

Nick Harding of The Independent reports, Jordan Belfort: The real Wolf of Wall Street and the men who brought him down : The pitch could have been barked by any of the "motivational-training" snake-oil salesmen who ply their wares in the corporate sector. But the man behind this particular "sales and persuasion" one-day course in Australia last year thought himself special enough to demand a US$5,000 entrance fee. The inflated price tag may have been something to do with the quality of the after-dinner anecdotes, as the man hosting the event was Jordan Belfort - a 51-year-old American ex-con who is among the most infamous crooked businessmen in recent history. In the 1990s, Belfort was reputed to have been worth £60m, earning £600,000 a week. He owned a sprawling estate in the Hamptons, a fleet of supercars and a 167ft yacht which once belonged to Coco Chanel and which he sank in the Mediterranean. He had a supermodel wife and a drug and alcohol habit. He emp...

Janet McFarland of the Globe and Mail reports, Canadian pension plans post dramatic rebound : Canadian pension plans posted a major turnaround last year as strong returns made all their “dreams come true,” and are looking forward to another positive year in 2014 that could push many into unaccustomed surplus status. Pension plans saw their funded status in 2013 hit the highest level in 12 years as stock market returns soared and bond yields climbed. The picture could brighten even further this year as most investment categories are expected to post gains, according to a new forecast from pension consulting firm Mercer. The average plan in Canada was 99.9 per cent funded at the end of 2013, Mercer said, meaning it had nearly all the assets needed to provide pensions to plan members if it were wrapped up immediately. Only 6 per cent of plans were below 80 per cent funded. Those figures are based on data from 607 public and private sector funds that are Mercer clients. Calculat...

Louie Woodall of Risk.net reports, Insurers to ramp up private equity exposure in 2014 : Insurers are rethinking their investment strategies and beginning to increase their exposure to private equity. Some are even looking at it from an asset-liability management perspective. Insurers have begun to shrug off their risk-averse attitude to investing. While caution remains the watchword as the world economy braces itself for a potentially bumpy exit from quantitative easing, companies are becoming less afraid of certain assets that had spooked them during the dark days of the financial crisis. One such asset class is private equity. Most insurers either froze or reduced their allocations to this class as they waited to ride out the storm that broke in 2008. Now some are taking furtive steps back into the market and investing in private equity assets. Like other alternative assets such as infrastructure and corporate loans, private equity works at the fringes of insurers’ port...

Anne Tergesen of MarketWatch reports, 3 ways to cure ‘pension envy’ : Pension envy: These days a lot of people have it – and for good reason. According to a new analysis by Hearts & Wallets , a financial-research company in Hingham, Mass., retirees with pensions are considerably better off than their counterparts without pensions. On one level, that’s what an observer would expect. After all, on average, pensioners have four sources of income – Social Security, the pension, dividends, and withdrawals from 401(k)s, IRAs and other retirement accounts – versus only three sources for non-pensioners. The pensioners’ advantage is reflected in several statistics from the study. Among them: Despite similar incomes, the average non-pensioner with a household income above $100,000 is on track to replace 70% of his or her income in retirement, versus 81% for those with government pensions and 74% for those with private pensions. The median non-pensioner withdraws 5.4% of his or h...