The above interview features Axel Merk, President and Chief Investment Officer of Merk Investments, talking about the impact of the asset allocation shifts untertaken by Japan’s Government Pension Investment Fund (GPIF) earlier this month.
From the video description:
Axel Merk, President and Chief Investment Officer, Merk Investments, says the overdue correction in U.S. stocks is delayed due to the asset allocation change in Japan’s Government Pension Investment Fund (GPIF).
Tom Corbett has until January 20 before Tom Wolf takes over as governor of Pennsylvania. Corbett has spent the last year pushing for pension reform, but the proposed bills never gained traction in the legislature.
Now, a handful of lawmakers are considering quickly putting together and pushing through a pension reform bill — although the odds of it coming together so quickly are unlikely.
From the Pennsylvania Independent:
There’s still technically time for a final drive to pass legislation near and dear to conservatives. Whether lawmakers and outgoing Gov. Tom Corbett use it or just take a knee is the question.
State Sen. Jake Corman, the new Republican majority leader in his chamber, hasn’t ruled out having session days in the two weeks that fall between new lawmakers being sworn in Jan. 6 and Democratic Gov.-elect Tom Wolf taking office Jan. 20.
But, Corman told the PA Independent on Monday, it’s “highly, highly unlikely” legislation as complicated as liquor privatization or pension reform could be ready to sign before Corbett leaves office.
“We may get them started,” said Corman, a Centre County Republican who chaired the Appropriations Committee before ascending to floor leader earlier this month.
For anything to get to Corbett’s desk before his term ends, the state House would also have to convene, and legislation would have to clear both chambers. There’s time for it to happen, but bills would have to move quickly.
State Rep. Dave Reed, R-Indiana, the new House majority leader, has read about Corman’s comments, but said there have been no discussions in the House about a topic that’s quickly become political water cooler talk.
“It seems like an awful lot of folks are talking about it,” Reed said. “I think more folks outside the building than inside the building are talking about it at the moment.”
State Rep. Fred Keller, R-Snyder, said there has been “scuttlebutt” among rank-and-file lawmakers about the possibility of convening during the two-week period known as interregnum.
Keller would “absolutely” be in favor of it, he said, especially if pension reform is addressed. He also sees the controversial paycheck protection as possible legislation that could arise in the final weeks before Wolf takes over.
At least one lawmaker wouldn’t be on board with pushing through pension reform before Wolf takes officer. From the Independent:
Senate Minority Leader Jay Costa, D-Allegheny, has already sounded alarms that having a session before Wolf takes office would be “inappropriate, unprecedented and inexcusable.”
“The ill-conceived idea to empower and use an unaccountable governor in his last days in office to revive already rejected policies would be viewed as an act of desperation and a serious blow to reform,” Costa said in a written statement. “I would be very surprised if Governor Corbett would allow himself to be used by Republican leadership in this way.”
Officials in Dawson County, Texas have revised a plan to pay down pension debt this week.
Originally, officials planned to fully pay down the county’s pension debt over a period of 15 years. Now, the county plans to pay down its debt completely by 2018.
From the Seminole Sentinel:
The Commissioners’ Court approved a decision to pay in full a deficit in the retirement plan for county employees during the next four years instead of during a longer period of time. By paying sooner than later, the county will save $ 861,000 in the long run, said County Auditor Rick Dollahan. The new payment plan is a decrease from original 15-year plan.
“I think it’s a good return on our investment, said Court member Blair Tharp.
Employees receive benefits through the Texas County and District Retirement System, in which a percentage of their paychecks, chosen by employers, are deposited into their TCDRS accounts. The savings grow at an annual, compounded rate, and upon retirement, employees receive a benefit payment for life based on the final account balance and employer matching. Employers pay 100 percent of their required contribution rate each year. The current deficit does not negatively affect employees’ retirement plan investments.
“I don’t want our retirees to get scared or worried. We’re in great shape,” Dollahan said.
Currently, the plan is funded at about 80 percent; the county plans to pay the deficit by 2018.
The Texas County & District Retirement System manages $23 billion in assets and works with 655 counties in Texas.
Kentucky’s Public Pension Oversight Board, a panel of lawmakers that “assists the General Assembly with its review, analysis, and oversight” of the Kentucky Retirement Systems (KRS), has made 13 recommendations aimed at improving the health of KRS and altering other KRS policies.
A handful of the key recommendations, from the Courier-Journal:
– The General Assembly should secure additional money to stave off any insolvency problems in KERS non-hazardous — the largest pension plan for state workers, which has only 21 percent of the money it needs to cover benefits.
– The Kentucky Teachers’ Retirement System, along with pension plans for lawmakers and judges, should be reviewed by the oversight board as part of its official duties.
– KRS should better publicize its board meetings, particularly to employee, retiree and interest groups.
– The General Assembly should enact legislation to regulate how agencies withdraw from the pension system — a concern that has emerged amid the bankruptcy of Seven Counties Services, the community mental health center for the Louisville area.
More on the measures related to improving the system’s funding situation, from CN2:
Of 13 recommendations tentatively approved by the oversight board, two dealt directly with securing additional funding for KERS non-hazardous. One, submitted by Sen. Jimmy Higdon, R-Lebanon, would seek financing to maintain the plan’s solvency while the other, filed by Rep. Brent Yonts, D-Greenville, and Sen. Joe Bowen, R-Owensboro, would support increased funding to KRS and particularly KERS non-hazardous to improve its cash flow issues.
One other recommendation seeks to cut down pension “spiking”. Eliminating “spiking” is not likely to have a big effect on the system’s funding situation.
Retiree advocacy group Kentucky Government Retirees released this statement on the proposals dealing specifically with improving funding:
As stakeholders in Kentucky Retirement Systems, we were gratified that the Public Pension Oversight Board today approved a recommendation calling upon the General Assembly to provide additional funding to avert insolvency in the Kentucky Employees Retirement System non-hazardous fund. The nation’s worst-funded state pension fund desperately needs an infusion of funds above the employer contributions. We hope the 2015 General Assembly will make the difficult decision to act on this recommendation.
Rhode Island governor-elect Gina Raimondo and the state Investment Commission held a closed-door meeting last week to review a particular hedge fund, Mason Capital, in which $61.7 million of pension money is currently invested.
The exact reason for the meeting, and what was said during, is unknown because the session was exempt from the state’s Open Meetings Law.
The minutes of the meeting are sealed to “protect the interest of the state’s pension fund”, according to a Raimondo spokesman,
More from the Providence Journal:
Asked to explain [the meeting], Raimondo spokesman Ashley Gingerella-O’Shea drew attention to the exemption that the state’s Open Meetings Law provides for any “matter related to the question of the investment of public funds where the premature disclosure would adversely affect the public interest.”
The state has had an investment in Mason Capital since January 2012 that has increased in value by an average of 1.02 percent per year in the nearly three years since, according to an Oct. 31 report to the investment commission.
It was one of the hedge funds in which Raimondo, a former venture capitalist, invested an overall $1.176 billion in a controversial shift in strategy that figured prominently during her heated primary and general election campaigns. Her opponents keyed their criticism to the sharp increase in state-paid investment fees since she took office.
When pressed, Gingerella-O’Shea sent a further statement on Monday that said the investment commission “reviewed the calendar year-to-date performance” of all of the state’s hedge fund investments during the open portion of last Wednesday’s meeting.
[…]
But a review of the last online Investment Commission report indicates the value of the state’s investment in Mason Capital dropped by about $4.7 million during October, from $66.4 million to $61,751,634.
While the market value of some of the state’s other “global equity hedge funds” dropped in October, none dropped this much.
The closed portion of the meeting was only a segment of a larger, open-to-the-public discussion on the year-to-date performance of the pension system’s hedge fund investments.
The Mason Capital fund returned around 1.02 percent annually over the last three years. Meanwhile, the state pension system’s hedge fund portfolio has averaged returned of 6.9 percent over the same time period.
When talking pensions on the campaign trail earlier this year, Bruce Rauner said that new hires, current workers and retirees all would need to be on the receiving end of pension benefit cuts.
But Rauner has softened that stance this week; the Illinois governor-elect now says the benefits accrued by current workers and retirees need to be protected.
The change is perhaps due to a recent circuit court ruling overturning the state’s pension reform law; the ruling makes it increasingly unlikely that pension reforms can legally come in the form of benefit cuts for retirees.
More on Rauner’s comments from NBC Chicago:
Gov.-Elect Bruce Rauner changed his tune to defend retired state employee’s pensions on Monday, remarking that it’s most important to “protect what is done—don’t change history. Don’t modify or reduce anybody’s pension who has retired, or has paid into a system and they’ve accrued benefits. Those don’t need to change.”
[…]
“What we should change is the future—the future accruals, the future benefits for future work,” he said, according to the Chicago Sun-Times. “That is constitutional. It’s also fair and appropriate for the taxpayers and the workers themselves.”
“Hopefully (the state Supreme Court) will give us some feedback that will help guide the discussion for future modifications as appropriate for the pensions,” noted Rauner.
[…]
The Republican investor said on the campaign trail earlier this year that he’d slash benefits to retirees and current workers and lead a transition into a corporate-esque 401(k) arrangement. But as he prepares to take over the governorship, and see his ambitious election-season statements clash with political realities, Rauner has apparently softened his views on pension reform to pardon those who’ve invested income—placing money (and trust) in a dysfunctional system.
The Illinois pension reform law, which will soon head to the Supreme Court, froze cost-of-living-increases and increased the retirement age. But a circuit court judge ruled last week that the benefits of current and retired workers are protected under the Illinois constitution.
By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
As a result of exceeding investment return benchmarks, CalPERS paid out a total of $9 million in bonuses in fiscal year 2014. The fund paid out $7.9 million in fiscal year 2013.
More details from SF Gate:
The rewards are based on three-year performance verses a benchmark, as well as the earnings of each asset class and individual portfolios, said spokesman Brad Pacheco.
“These awards are part of the overall compensation we provide to recruit and retain skilled investment professionals needed to ensure success of the fund,” Pacheco said.
[…]
The biggest bonus earner was Ted Eliopoulos, the chief investment officer, who recorded a $305,810 bonus last year in addition to his $412,039 base pay.
That bonus was paid when Eliopoulos was acting chief investment officer after predecessor Joe Dear died in February from cancer. Prior to that, Eliopoulos headed the fund’s real estate portfolio. He now earns $475,000 in base pay after he was tapped for the top investment job in September.
[…]
Four executives outside the CalPERS investment office were paid a total of $295,930 in bonuses last year, the fund said. CEO Anne Stausboll got $113,679; Chief Actuary Alan Milligan earned $75,748 and Chief Financial Officer Cheryl Eason was paid $89,703, almost double a year earlier.
CalPERS says it pays bonuses to compete with Wall Street for talented staff.
The pension fund’s investments returned over 18 percent in FY 2014.
A survey of 187 public pension plans across the U.S. and Canada suggests that funds are feeling more confident about their long-term sustainability and their “readiness to address future retirement issues.”
The survey, conducted by the National Conference on Public Employee Retirement Systems (NCPERS) and Cobalt Community Research, was released Monday.
The main findings of the survey:
– Confidence continues to grow about readiness to address future retirement trends and issues. Respondents’ overall confidence rating measured 7.9 on a 10-point scale, up from 7.8 in 2013 and 7.4 in 2011.
– Funds experienced an increase in average funded level – 71.5 percent, up from 70.5 percent in 2013. Two factors contributed to the change: average one-year investment returns of 15 percent and lower amortization periods.
– Funds continue to experience healthy investment returns: 14.5 percent for one-year investments (compared to 8.8 percent in 2013); 10.3 percent for three-year investments (up from 10.0 percent last year); 9.8 percent for five-year investments (up from 2.7 percent last year); 7.8 percent for 10-year investments (up from 7.0 percent), and 8.1 percent for 20-year investments (virtually unchanged from last year’s 8.2 percent). Funds continue to work toward offsetting sharp losses from the Great Recession in 2008 and 2009 by strengthening investment discipline. Signs point to long-term improvement in public retirement systems’ funded status.
– Public funds continue to be the most cost effective mechanism for retirement saving. The total average cost of administering funds and paying investment managers was 61 basis points. According to the Investment Company Institute’s 2014 Investment Company Fact Book, the expenses of most equity funds average 74 basis points and hybrid funds average 80 basis points.
– Funds continue to tighten benefits, assumptions and governance practices. Examples include a continued trend toward increasing member contribution rates, lowering inflation assumptions, shortening amortization periods, holding actuarial assumed rates of return and lowering the number of retirees receiving health care benefits.
– Income used to fund public pension programs came from member contributions (8 percent); employer (government) contributions (19 percent) and investment returns (73 percent).
The full summary of the study, including comments by NCPERS’ Executive Director, can be found here.
A Rhode Island panel, established three years ago to make recommendations to improve the health of local pension plans, finally submitted its proposals to state lawmakers Monday.
The panel submitted 11 recommendations in all, but only a handful had majority support from the panel. From the Providence Journal:
As drafted, the recommendations and ideas from the Locally Administered Pension Plans and OPEB Study Commission range from the practical, such as establishing a permanent board to oversee locally managed pension and retiree health plans, to the proactive, such as requiring actuarial reviews when a new collective bargaining agreement is going to impact pension or “other post-employment benefit” costs.
Both of those recommendations had support from a majority of the commission members as did others, including recommendations that the state require annual reports on local plan investment returns, and that city and town budgets state the “actuarially determined contribution” for local pension plans and also state how much of that contribution a proposed budget will make.
Some of the recommendations that were submitted without majority support from the panel:
There was no consensus, for instance, on whether having a local pension plan that is in “critical status” — or less than 60 percent funded — be one of the factors that can lead to a state takeover of a city or town’s finances.
Nor was there agreement on whether the state should create a voluntary pathway for locally managed pension plans to become part of the state-run Municipal Employees Retirement System. In that case, the commission recommended further study, and it did the same on the question of requiring funding improvement plans for retiree health funds that are in critical status, even though the improvement plans are required for pension funds that are in critical status.
Rhode Island’s 34 local retirement plans are collectively shouldering $2.1 billion of unfunded liabilities.
The New Jersey Division of Investment, the arm of the state government that manages and invests pension assets, is pulling $100 million out of U.S. real estate and shifting the money to a fund that invests in Asian real estate.
The fund will invest in real estate in China, Japan, Singapore and Australia. More details from IPE Real Estate:
The New Jersey Division of Investment is pulling capital out of two core US real estate funds and redeploying it into an Asia-Pacific property fund.
New Jersey is redeeming all of its $91m (€73.2m) interest in the AEW Core Property Trust as well as a partial redemption from its $400m interest in the CT High Grade Partners II fund.
The pension fund has approved a $100m commitment to SC Investment Management’s Real Estate Capital Asia Partners I, which will be funded by the two redemptions.
Following a recent recovery in US real estate prices, New Jersey decided to rotate capital from existing managers to new opportunities. Over the past several months, the pension fund has been evaluating core investments it made between 2006 to 2008.
New Jersey is seeking to capitalise on sustained occupier and investor demand in Asia Pacific, driven by long-term demographic and urbanisation trends in the region.
[…]
SC Invesmtent is targeting a 9% return by investing in undervalued, under-managed and distressed properties where value creation opportunities exist.
According to New Jersey, SC Investment has been a consistent top-quartile performer. In the manager’s previous investment funds, deals generated a 35% gross IRR and 2.1x return, with proceeds of $600m.
The Division of Investment manages $81.22 billion in pension assets.