Pension Pulse

Chris Cooper of Bloomberg reports, Japan's $1.1 Trillion Pension Fund Boosts Infrastructure Section (h/t: Pension360 ): Japan’s 135 trillion yen ($1.1 trillion) Government Pension Investment Fund is building up its alternative investment department after raising bets on infrastructure projects more than 10-fold to secure higher returns than low-yielding bonds. The world’s largest retiree fund has boosted staff in its alternative investment section, formed last year, to five people, Shinichirou Mori, director of the fund’s planning department, said Dec. 11 in Tokyo. The fund is still trying to hire more people for the department, according to its website . The fund’s investments in infrastructure rose to about 70 billion yen at the end of September , based on figures supplied by GPIF, up from 5.5 billion yen at the end of March. The decision to invest in infrastructure is drawing interest abroad, with India’s railway minister urging the nation to invest in rail p...

Luc Vallée, chief strategist at Laurentian Bank Securities, wrote a comment over the weekend for the Globe and Mail, The Federal Reserve’s tacit aim is to stabilize the dollar : Here we are again, days from yet another Federal Reserve meeting to decide whether to increase U.S. interest rates for the first time in more than nine years. This time should be the one, though. As former Fed vice-chair Alan Blinder wrote recently , “Only the stubborn remain unconvinced” that liftoff will happen next Wednesday. And I concur. Barring a disaster, Fed chair Janet Yellen would lose too much credibility if she did not deliver the long-awaited hike. But, as some Fed officials have warned, too much attention is being paid to the timing of the first move rather than the path of subsequent rate increases. Credibility aside, there are excellent reasons for the Fed to finally want to move away from its zero-interest-rate policy (ZIRP), which was adopted after the financial crisis. And let’s face...

Tim McLaughlin of Reuters reports, Third Avenue junk fund blow-up exposes risks of unsellable assets : The blow-up of Third Avenue Management's junk bond fund this week, the biggest mutual fund failure since the financial crisis, show the dangers of loading up on risky assets that are hard to trade even in good times. At least one-fifth of Third Avenue's Focused Credit Fund , with less than $1 billion under management, was composed of illiquid assets, meaning they trade so infrequently that they don't have a market price, according to a Reuters analysis. That's one of the highest percentages of exposure in the junk bond sector. Meanwhile, some of the most popular U.S. junk bond funds also have made large bets on assets considered the hardest to trade and value in the industry, and their portfolios may not reflect the full extent of the current downturn in the junk bond market, said junk-bond analyst Marty Fridson, chief investment officer of Lehmann Livian Fri...

Paul Taylor of Reuters reports, As pension reform crunch nears, Greek coalition looks fragile : Greek Prime Minister Alexis Tsipras' governing majority is looking fragile as crunch time approaches for a pension reform that will test his resolve to impose painful measures to satisfy Athens' international creditors. The coalition of Tsipras' leftist Syriza party and the right-wing nationalist Independent Greeks has a majority of just three seats in parliament, and pro-European opposition parties that voted for Greece's latest bailout are publicly refusing him any help on the toxic pension issue. The overhaul, which must deliver savings worth 1 percent of gross domestic product or 1.8 billion euros next year, is the most sensitive of a raft of reforms demanded by the euro zone and the International Monetary Fund in return for up to 85 billion euros in aid in the country's third bailout since 2010. Trade unions have staged two 24-hour general strikes against ...

David Parkinson and Barrie McKenna of the Globe and Mail report, Bank of Canada opens door to negative interest rates as oil, dollar sink : The Bank of Canada has restocked its emergency kit to defend the Canadian economy against major shocks, including indicating that it would consider pushing interest rates as much as a half percentage point into negative territory in the event of a crisis. But Governor Stephen Poloz stressed that the central bank’s new framework for using negative interest rates and other unconventional monetary policies, which he introduced in a speech Tuesday, does not mean the bank is preparing to use any of these measures – even as the country deals with the aftershocks of the collapse in the price of oil and other commodities. “Today’s remarks should in no way be taken as a sign that we are planning to embark on these policies,” he told an Empire Club of Canada luncheon in downtown Toronto. “We don’t need unconventional policy tools now, and we don’t e...