Pension360 | The Complete View of Public Pensions

Canada Pension Buys Big Stake in San Francisco Office Tower

The Canada Pension Plan Investment Board (CPPIB) is buying a major stake in a popular San Francisco office tower, the fund announced on Thursday.

The rest of the property is owned by Hudson Pacific Properties, Inc.

From Bloomberg:

Canada Pension Plan Investment Board agreed to pay about $219.2 million for part of a San Francisco office building where ride-sharing company Uber Technologies Inc. and mobile-payment provider Square Inc. have their headquarters.

The pension fund plans to buy the 45 percent stake in 1455 Market St. from Hudson Pacific Properties Inc., the companies said today in a statement. Los Angeles-based Hudson Pacific has owned the 22-story tower since December 2010 and will continue to oversee management and leasing.

The purchase is the Canadian pension’s first direct investment in San Francisco, where office rents have soared 88 percent in almost five years, according to Jones Lang LaSalle Inc. (JLL) Demand for office space has been buoyed by annual job growth of 3.6 percent in the city, outpacing the U.S. by one percentage point, the brokerage said in a report this week.

San Francisco is “one of the best-performing U.S. office markets and a key strategic market for CPPIB in that country,” Peter Ballon, head of real estate investments in the Americas for the pension, said in today’s statement.

The 1.03 million-square-foot (95,300-square-meter) property, formerly a Bank of America Corp. data center, was built in 1976 and has ground-floor retail.

Read the press release here.

Photo by ilirjan rrumbullaku via Flickr CC License

Detroit Pension Fund Fires Top Lawyer

Detroit’s Police and Fire pension fund fired its general counsel, Joseph Turner, on Thursday.

Reports had surfaced weeks ago that trustees were uncomfortable with having Turner on staff because he was with the fund when it was embroiled in corruption scandals.

Trustees reportedly wanted a clean break from the pension fund’s past mismanagement.

From Detroit News:

The 9-7 vote to fire general counsel Joseph Turner and his law firm, Clark Hill, comes three weeks after The News exclusively reported that some members of the pension fund had lost confidence in Turner. His continued involvement in the pension board raised questions about the city’s ability to move past a history of corruption, mismanagement and bad investments that helped push Detroit into bankruptcy, critics said.

“I respect their decision,” Turner said after the meeting. “I don’t agree with it, but I respect it.”

Clark Hill will continue to represent the pension fund in matters related to the city’s bankruptcy case, and some ongoing lawsuits, pension fund spokesman Bruce Babiarz said.

The board will seek a replacement in coming months.

Turner admitted in court that years ago, he gave previous trustees large amounts of cash as “birthday presents”. Those same trustees later voted to give Turner a raise.

Photo credit: “DavidStottsitsamongDetroittowers” by Mikerussell – Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons

Top Kentucky Lawmaker Close to Filing Bill For Additional Teacher Pension Funding

Kentucky House Speaker Greg Stumbo says he is planning on filing a bill by the end of the week that would give additional funding to the state’s Teacher Retirement System.

The funding would come through bond sales and could lead to an infusion of nearly $1 billion into the teachers’ system.

Not all lawmakers are on board with the idea of issuing bonds to pay down pension debt. But Stumbo says the time is now.

From the Courier-Journal:

Stumbo, D-Prestonsburg, said authorizing bonds would allow the system to capitalize on historically low borrowing rates and refinance its pension debt. He compared it to refinancing a home mortgage.

“I don’t generally favor bonding these pension obligations, but since the market is so favorable, it would be irresponsible for us not to at least consider what they proposed,” he said.

Stumbo said Thursday that the bill remains under review by pension officials but that he expects to file legislation within the next day.

KTRS has proposed two options for lawmakers to consider in the 2015 legislative session.

One involves a $1.9 billion bond issue to help fully fund teacher pensions for the next four years and eventually decrease annual pension costs by about $500 million by fiscal year 2026.

A second option for $3.3 billion in bonds could fully fund the system for eight years and save around $445 million annually by 2026.

The Kentucky Teacher Retirement System has $14 billion in unfunded liabilities.

San Bernardino Sued By Creditor For Favoring Pension System During Bankruptcy

The bankrupt city of San Bernardino, California has been sued by one of its bondholders for favoring pensioners over creditors during its bankruptcy.

San Bernardino has largely kept up with its payments to CalPERS. But the lawsuit claims the city has not extended equal favor to its bondholders.

From BusinessWeek:

Pension-bond holder Erste Europaische Pfandbrief- und Kommunalkreditbank AG sued San Bernardino yesterday in federal bankruptcy court in Riverside, California, claiming equal status with Calpers. The company, which holds about $50 million in pension obligation bonds, didn’t name Calpers in the suit.

“Any payment of the Calpers pension obligation portion requires equivalent payment of the bondholder pension obligation portion,” the company, a unit of Frankfurt-based Commerzbank AG (CBK), said in the filing.

Cities often issue bonds to raise money to bolster their pension obligations. In San Bernardino’s case, the money was used to fill a hole in its pension fund, which is administered by Calpers. The city also makes regular payments on behalf of its employees to Calpers, which in turn pays retired city workers.

[…]

The lead bankruptcy attorney for the city, Paul Glassman, referred questions to San Bernardino’s elected city attorney, Gary Saenz, who didn’t immediately respond to an e-mailed request for comment on the suit.

San Bernardino filed bankruptcy in 2012. Although it stopped paying CalPERS for a period of a few months, it has since resumed payments so that no pension benefits would be cut as part of its bankruptcy.

Canada Pensions Facing Weak 2015: Survey

A survey of investment managers conducted by Mercer reveals that Canadian pension funds could be looking at a weak 2015.

From the Globe and Mail:

Canadian pension plans are facing another weak year in 2015 with interest rates forecast to remain low and Canadian economic growth expected to trail global gross domestic product expansion.

A survey of investment managers by consulting firm Mercer shows most are expecting modest increases in interest rates this year and low investment returns, combining to create slow growth in pension plan funding in 2015.

[…]

Mercer said its Pension Health Index, which tracks the solvency position of a hypothetical pension plan with typical asset allocations, fell from a surplus position of 106 per cent at the end of 2013 to a shortfall position of 95 per cent by the end of 2014.

Mercer partner Mathieu Tanguay said most pension plans saw their funded status drop in 2014 because long-term interest rates fell, undermining investment returns for the year. Pension plans determine the size of their long-term funding liability using long-term interest rate levels, so falling interest rates mean a greater cost to fund pensions for plan members.

“Last year wasn’t too bad from an asset-return perspective only,” Mr. Tanguay said. “If you look at financial markets, a typical investor would have earned in the area of 10 to 12 per cent. So it’s not bad. But what hurt pension plans was the fact that interest rates dropped. Assets went up, but liabilities went up higher.”

The weakening was especially acute in the final quarter of 2014 as long-term interest rates fell toward 60-year lows. Long-term government of Canada bonds closed the year at 2.3 per cent, a drop from 3.2 per cent at the start of 2014.

Mercer’s Mathieu Tangua said the survey results paint a picture that pension funds are unlikely to see a funding improvement in 2015.

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Canada_blank_map.svg#mediaviewer/File:Canada_blank_map.svg

Raimondo Seeks Pension Settlement, But Has “No Interest” In Negotiating Changes to Reforms

Rhode Island Gov. Gina Raimondo said during an interview Wednesday that she is still hoping for a settlement with public workers in the lawsuit over the state’s 2011 pension reforms.

But while she is willing to settle, she has “no interest” in re-opening negotiations on the reforms.

From NBC 10:

She said during a taping of “10 News Conference” that she is pushing to have pension reform settled, but she is not calling for negotiations.

Raimondo and other state leaders have said they would like to see the pension reform lawsuit settled out of court, and a deal was negotiated that was approved by a majority of the unions involved. But one unit rejected it, scuttling the deal.

The incoming governor says that deal is the best that she will agree to. When the agreement was announced nearly a year ago, she said it preserved the bulk of savings for taxpayers. And as far as she is concerned, while she would prefer to have all sides agree to those terms, she is not willing to offer unions and retirees anything better.

“I have no interest in changing the terms of that,” Raimondo said. “Otherwise, we can go forward with the litigation. The state has a very strong case. But it’s in everyone’s interest to have some finality.”

Raimondo said she will reach out to all the parties to try to reach agreement, but admits it may not be possible. But it’s something she’d like to get finalized soon.

The state’s 2011 pension reforms were especially controversial because they applied to all workers and retirees, not just new hires.

Photo by By Jim Jones (Own work) [CC BY-SA 3.0]

Questions Surround Bruce Rauner’s Pension Proposal, But Rauner To Be Mum on Specifics Until Court Ruling

Illinois’ pension reform law currently sits in legal limbo. But if the Supreme Court deems it unconstitutional, all eyes will shift to Illinois Gov. Bruce Rauner, who will need to propose a new solution to the state’s pension woes.

On the campaign trail, Rauner supported a plan to shift workers into a 401(K)-style plan. He has since softened his stance a bit, but hasn’t offered much in the way of clarification as to the specifics of his plan.

From the Chicago Tribune:

With Rauner taking over, the pension debt remains unsettled. As has been the case on many issues, the Republican has offered general answers about his preferences for dealing with public pensions and how he’ll respond if the new law is struck down.

“We have some very specific thoughts on that, but we’ll be developing those with the General Assembly,” Rauner said during a postelection visit to the Capitol. “We need a comprehensive, fair overhaul of the pension system, and we’ll make that a top priority.”

[…]

Asked recently if the state should begin working on a “Plan B” while the pension law is debated by the state Supreme Court, Rauner said his “preference is probably to wait until the Supreme Court rules, so we have some ground rules for what probably works and what won’t work. I think that’s a smarter way to do it.”

Would Rauner’s 401(k) plan work? Would it be constitutional? What are the specifics? And is that still his plan? From the Chicago Tribune:

In his successful campaign, Rauner spoke generally about wanting to shift public employees from receiving a defined pension benefit into becoming members of a defined contribution plan similar to a 401(k)-style system.

Rauner has said public workers should be able to keep the benefits they have already accrued, but, moving forward, go into a defined contribution system. He also has said public safety workers should stay in the current system. And, with 80 percent of public employees not eligible to receive Social Security, Rauner has said he favors some unspecified plan to create a retirement safety net.

But it’s unclear whether Rauner’s concept is constitutional, as he maintains, or how it would address the current unfunded pension liability since payments would go into a new retirement system rather than address the shortfalls in the current system.

“Not only does it not solve the problem, but it makes it worse in the near term,” Dye said. “Whatever the solution is will cost something, and I don’t know how it would be implemented. It’s hard to add (Rauner’s concept) up as a fiscal benefit for the state.”

Illinois is expected to make $6.6 billion in pension payments in fiscal year 2015. The state is saddled with over $100 billion of pension debt.

By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Philadelphia Pension CIO Steps Down

The chief investment officer of Philadelphia’s municipal pension fund has resigned and will leave the fund on January 15, according to ai-cio.com.

Sumit Handa is stepping down from his post at the Philadelphia Board of Pensions and Retirement to enter the private sector, but it isn’t yet know where he is going.

From Chief Investment Officer:

Sumit Handa is set to depart the $4.7 billion fund effective January 15, according to the pension system’s Executive Director Francis Bielli. An interim CIO and recruitment/replacement plan have not yet been determined, Bielli said, but the division’s board will settle both matters at an upcoming meeting.

“We appreciate Sumit’s contributions to the fund and wish him all the best,” Bielli told CIO.

Handa joined Philadelphia’s pension fund as CIO in June 2011. Prior to that, he spent six years as a portfolio manager for New York-based hedge fund DKR Capital.

He will be departing the public sector and Philadelphia for his next role as CIO of a major financial institution, according to someone with knowledge of the situation.

Salary information for the city pension’s CIO role has not been made public. However, similar positions for the municipality indicate compensation in line with most US public pensions.

In fiscal year 2012, the latest for which data is available, the city’s finance director and pension board chair earned a total of $171,456.

Handa oversaw the management of $4.7 billion in pension assets.

Photo credit: “GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania” by Massimo Catarinella – Own work. Licensed under CC BY 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania.jpg#mediaviewer/File:GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania.jpg

New York City Pensions Pulled $4.9 Billion From Pimco in 2014

New York City’s pension funds have pulled $4.9 billion from Pimco since Bill Gross left the firm in September.

A City spokesman confirmed that the pullout was due to “organizational change” within the firm.

From Reuters:

“The New York City Pension Funds recently transitioned out of $4.9 billion in Pimco accounts due to concerns over recent organizational changes,” Eric Sumberg, a spokesman for New York City Comptroller Scott Stringer, said in a statement.

Gross shocked bond markets in September by leaving Pimco, which he co-founded, for smaller rival Janus Capital, where he now manages the Janus Global Unconstrained Bond Fund (JUCAX.O).

The assets pulled from Pimco by the city pension funds were distributed to the city’s existing asset managers, Sumberg said.

Existing managers include BlackRock (BLK.N), Goldman Sachs (GS.N) and State Street (STT.N), among others.

According to Morningstar, the Pimco Total Return Fund, formerly managed by Gross, had record outflows of $103 billion in 2014. Investors pulled $150 billion from Pimco’s U.S. open-end mutual funds for 2014, Morningstar data also showed.

The New York pension funds still hold $2.4 billion in Treasury inflation-protected securities (TIPS) accounts with Pimco.

“At this time the Systems are in the midst of a search for TIPS mangers,” Sumberg said in the statement.

As noted above, New York’s pension funds haven’t exited Pimco entirely; they still have $2.4 billion invested with the firm.

The City’s pension funds collectively manage $158.7 billion in assets.

Photo by Tim (Timothy) Pearce via Flickr CC License

Indiana Pension Commits $100 Million to Real Estate Fund

The Indiana Public Retirement System has committed $100 million to a Blackstone fund that invests in real estate.

From IPE Real Estate:

The US pension fund, which has had limited exposure to core-plus funds, said it was unconcerned by Blackstone’s move into core-plus property and its branching out into opportunistic strategies.

Most of Indiana’s fund investments in real estate – totalling approximately $2bn – have been in core and opportunity funds.

The pension fund has made three previous investments with Blackstone, totalling $216m, including a co-investment and two investments in the fund manager’s opportunity funds VI and VII.

With the new investment, Indiana joins several other public pension funds in the Property Partners fund.

The Virginia Retirement System and the Texas Permanent School Fund each made $100m commitments to the fund last year, while the Arizona State Retirement System committed $50m.

Blackstone is looking to raise $1bn for the fund, which is open-ended and leveraged at around 50%.

The fund manager is co-investing $35m.

Limited partners are projected to achieve 9-11% returns from the fund, focused solely on US multifamily, office, retail and industrial real estate.

The fund will buy single properties, as well as make entity-level investments in real estate operating companies.

The Indiana PRS manages $30 billion in assets.

Photo credit: “Flag map of Indiana” by Map_of_USA_IN.svg: This version: uploaderBase versions this one is derived from: originally created by en:User:WapcapletFlag_of_Indiana.svg:derivative work: Fry1989 (talk) 22:26, 19 June 2011 (UTC) – Map_of_USA_IN.svgFlag_of_Indiana.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag_map_of_Indiana.svg#mediaviewer/File:Flag_map_of_Indiana.svg

Deprecated: Function get_magic_quotes_gpc() is deprecated in /home/mhuddelson/public_html/pension360.org/wp-includes/formatting.php on line 3712