Pension360

Last month, Bloomberg reported that Japan’s Government Pension Investment Fund (GPIF) would have to buy $54 billion worth of stocks to meet its allocation target of 25 percent.

Now, a report from a brokerage firm suggests the pension fund has room to add billions worth of local stocks to its portfolio in the near future.

From Bloomberg:

The world’s biggest retirement fund has scope to buy $47 billion in Japanese shares after they tumbled this year, according to Daiwa Securities Group Inc.

The 139.8 trillion yen ($1.2 trillion) Government Pension Investment Fund’s domestic equities probably fell to about 21 percent of assets at the end of February, short of the 25 percent goal for such investments, the brokerage wrote in a report published Tuesday. That means the Japanese fund could purchase as much as 5.3 trillion yen in shares, it said. GPIF may cut domestic bonds by 11.2 billion yen as holdings probably exceed their target, according to Bank of America Corp.’s Merrill Lynch unit.

[…]

“GPIF investment in Japanese stocks might well underpin prices even as stocks feel downward pressure due to concern about the global economy,” Merrill Lynch strategists led by Shuichi Ohsaki wrote in a report Tuesday. If equities continue to weaken, GPIF “will probably have to further rebalance its portfolio.”

There are signs Japan’s public retirement managers have already been adding to holdings. Trust banks, whose clients include pension funds, purchased a record 500 billion yen in local stocks in the week ended Feb. 19, a 13th straight week of net buying.

GPIF manages $1.3 trillion in assets.

Photo by Ville Miettinen via Flickr CC License

Japan’s Government Pension Investment Fund (GPIF) posted a 3.6 percent return in the 4^th quarter of 2015, making it the fund’s best quarter of the year.

The boon is welcome after a 3^rd quarter in which the fund posted its worst return since 2008.

More from Bloomberg:

The results provide some respite for Prime Minister Shinzo Abe, who oversaw the fund’s doubling of its allocation to stocks, after GPIF had its worst loss in comparable data starting from April 2008 in the previous three months. They came as Japanese and global equities rebounded at the end of last year from a slump following China’s shock currency devaluation. Still, the gains will probably prove fleeting as share markets resumed their downturn in 2016, an election year in Tokyo.

“The return from Japanese stocks was a little bigger than expected. They must have been adding to holdings,” said Shingo Ide, chief equity strategist at NLI Research Institute in Tokyo. Still, “Japan’s investing environment is getting worse. GPIF is quickly blamed for losses and they might find it hard to take risk.”

GPIF held 38 percent of assets in Japanese debt as of Dec. 31 and 23 percent in the nation’s equities, according to the statement. The fund had 14 percent of holdings in foreign bonds and 23 percent in overseas stocks. Alternative investments made up 0.04 percent. GPIF targets 25 percent each for shares at home and abroad, 35 percent for local bonds and 15 percent for overseas debt.

Most of GPIF’s equity holdings are passive, which means performance tends to track benchmark gauges. The Topix index of Japanese stocks had a total return of 9.8 percent in the quarter ended December, including reinvested dividends, while GPIF posted a 9.9 percent gain on local shares.

GPIF oversees $1.3 trillion in assets and is the world’s largest pension fund by AUM.

Photo by Ville Miettinen via FLickr CC License

An Illinois House committee on Monday weighed two proposals that would allow state workers, at their time of retirement, to “buy out” of their pension and take a lump sum.

The sponsors of the proposals argue that they would pass constitutional muster because benefits aren’t reduced.

From the Pantagraph:

The House Personnel and Pensions Committee held its first hearing Monday on proposals from Republican state Reps. Mike Fortner of West Chicago and Mark Batinick of Plainfield. Both plans would allow workers to choose at retirement whether they want to take their money out of one of the state pension systems with the goal of giving the retiree more control over their money while helping to cut down the state’s $111 billion in unfunded pension liabilities.

[…]

At retirement, a worker would be able to take 75 percent of the “net present value” of his or her pension, not just amount he or she put in. Currently, the average value is about $700,000, Batinick said.

The retiree would then be out of the state pension plan, thus reducing the unfunded liability in the system.

Retirees would benefit from having more control over how their money is invested and taxed, and they would be able to will it to their families, which isn’t possible with pensions, Batinick said.

Representatives from the major state retirement systems attended the hearing, and, according to the Pantagraph, didn’t express outright opposition to the proposals.

Photo credit: “Gfp-illinois-springfield-capitol-and-sky” by Yinan Chen – www.goodfreephotos.com (gallery, image). Via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Gfp-illinois-springfield-capitol-and-sky.jpg#mediaviewer/File:Gfp-illinois-springfield-capitol-and-sky.jpg

A U.S. Senate hearing, scheduled for Tuesday at 9 a.m. CST, will focus on recent reforms aimed at multiemployer pension plans.

A 2014 federal law allows multiemployer plans to cut benefits in order to “right ship”.

More from the Kansas City Star:

The Senate Finance Committee will take up “The Multi-employer Pension Plan System: Recent Reforms and Current Challenges” at 9 a.m. Central.

Central States, which covers 400,000 workers and retirees, has said it needs $11 billion to avoid collapse in the next 10 years. It has proposed cutting the benefits of current retirees, many by half or more, under a controversial 2014 law.

[…]

Presenters scheduled for the Washington hearing include Rita Lewis, an Ohio woman who receives benefits from Central States as the widow of a driver who died late last year.

The U.S. Treasury has tapped mediator Kenneth Feinberg to decide whether the Central States proposal meets the requirements of the 2014 law.

Others scheduled Tuesady are Joshua Gotbaum at the Brookings Institute, Andrew G. Biggs at the American Enterprise Institute and Cecil E. Roberts Jr. with the United Mine Workers of America.

Watch the hearing live here.

Photo by  Bob Jagendorf via Flickr CC License

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

Ben Martin of the Telegraph reports, Canadian pension funds and Kuwait to buy London City Airport:

Three Canadian pension funds and the Kuwait Investment Authority have won the takeover battle for London City Airport with an offer of about £2bn.

A consortium made up of Ontario Teachers’ Pension Plan (OTPP), Borealis, AIMCo and Wren House, an infrastructure investment vehicle owned by the sovereign wealth fund of Kuwait, are understood to have struck a deal to buy the airport from Global Infrastructure Partners (GIP), the giant private equity firm.

The group saw off stiff competition for the site, including bids from Chinese airlines owner HNA and Cheung Kong Infrastructure Holdings, the firm controlled by Li Ka-Shing, Asia’s richest man.

Suitors have been circling the airport since last August, when GIP revealed that it was selling the site. The auction, which was run by Credit Suisse, drew a host of bidders from the infrastructure investment world, attracted to the rare opportunity of acquiring an airport.

GIP, which is also an investor in Gatwick, bought City from Irish billionaire Dermot Desmond for £750m a decade ago. Since then, it has enjoyed brisk growth, catering for 3.7m passengers in 2014, up from 2.8m in 2010.

However, the new owners face obstacles to further growth.

Boris Johnson, the outgoing London Mayor, has blocked City’s plans for expansion that would see the airport’s capacity rise to 6m by 2023. City is appealing his decision.

The new owners must also contend with Willie Walsh, the boss of British Airways parent International Airlines Group, who has warned he will pull jets from City if airport charges are increased. BA is City’s biggest airline. CityJet, the airport’s second-largest carrier, has also voiced concerns about higher charges.

The airport is popular with financiers and business travellers because it is close to Canary Wharf and the Square Mile. The Telegraph revealed last year that OTPP, Wren House, and Borealis were interested in buying City.

Chad Bray of the New York Times also reports, Canadian-Led Consortium to Buy London City Airport:

A consortium of investors led by the Ontario Teachers’ Pension Plan said on Friday that it had agreed to buy the operator of London City Airport, which is favored by the financial industry because of its proximity to the center of the British capital.

The airport, which handled flights for 4.3 million passengers in 2015, is relatively close to the City of London, the traditional home of London’s financial community, and to Canary Wharf, where many of the world’s biggest banks have their London offices.

Terms of the transaction were not disclosed, but a person with knowledge of the discussions, who was not authorized to discuss the matter publicly and who spoke on the condition of anonymity, said the purchase price was more than 2 billion pounds, or about $2.8 billion.

“London City Airport is a premium infrastructure company, operating in a very attractive market,” the consortium said in a news release. “We look forward to working closely with the airport’s strong management team to achieve the business’s full long-term potential.”

As well as the Ontario Teachers’ Pension Plan, the consortium includes the Ontario Municipal Employees Retirement System; Alberta Investment Management Corporation, a Canadian institutional investment manager; and Wren House Infrastructure Management, a unit of the Kuwait Investment Authority.

The Ontario Teachers’ Pension Plan has already made investments in airports in the English cities of Birmingham and Bristol, as well as in Brussels Airport in Belgium.

Tanya Powley, Arash Massoudi and Joseph Cotterill of the Financial Times also report, London City airport sold to Canadian pension funds:

The £2bn race to own London City, an airport favoured by corporate executives, has been won by a Canadian-led consortium of pension funds, narrowly beating rival bids from two Chinese groups.

The sale of the airport, close to the Canary Wharf financial district, ends a process started last August by its US private equity owners, Global Infrastructure Partners, people close to the matter said.

The valuation has proved controversial, with British Airways, the largest airline at London City, threatening to pull most of its aircraft out of the airport if the hub’s new owner raised airline charges to cover the high sale price.

Willie Walsh, chief executive of International Airlines Group, BA’s parent, told the Financial Times this month he had serious concerns about the £2bn valuation, which he called a “foolish price”.

GIP bought the airport for an estimated £750m in 2006 from Dermot Desmond, the Irish financier, who paid just £23.5m for it in 1995 from Mowlem, the UK construction group. GIP owns 75 per cent of London City, with Oaktree Capital having the remainder.

The deal adds to the growing portfolio of Ontario Teachers’ Pension Plan, which now owns five European airports including Bristol and Birmingham.

“We own four airports, so why wouldn’t we look at London City Airport?,” Jo Taylor, Teachers’ European head, told the Financial Times last year.

The consortium, which includes Borealis Infrastructure, AimCo and Kuwait’s Wren House Infrastructure Management, trumped bids from HNA, China’s aviation and shipping conglomerate, and a rival Canadian group led by pension fund PSP Investments, according to people familiar with the matter.

Cheung Kong Infrastructure Holdings, controlled by Hong Kong tycoon Li Ka-shing, was also among the four groups that submitted an offer late last week.

Seven miles from London’s traditional business district and even closer to the financial centre at Canary Wharf, London City has become one of the favoured ways to travel by business travellers, who account for two thirds of its traffic.

Passenger numbers have doubled over the past decade from 2m in 2005 to an estimated 4.2m in 2015, despite the financial crisis.

London City is in the middle of a planning battle over a £200m development that would increase the number of passengers it handles to 6m by 2023. The plans were blocked last year by Boris Johnson, mayor of London, over concerns of sound pollution. London City is appealing against the mayor’s decision.

The Canadian Teachers’ fund, which has $160bn in assets, also owns the high-speed rail link between London and the Channel tunnel and the National Lottery’s operator.

GIP and Ontario Teachers’ declined to comment.

Benjamin Katz, Richard Weiss and Christopher Jasper of Bloomberg also report, Canadian pension plans buy London City Airport, but the rich price could drive away its biggest customer:

London City Airport’s sale to a Canadian-led group of investors at a steep premium received a cool reception from both its biggest user and the top U.K. airline, which said they won’t accept the higher fees that might be imposed to justify the price.

Willie Walsh, chief executive officer of British Airways owner IAG SA, said Friday that a deal reckoned to be valued at 2 billion pounds (US$2.8 billion) could wipe out already-thin margins.

“We’re not going to be in a position where a new owner can just jack up prices and we’ll continue to do what we’ve done historically,” Walsh said. “If they do increase charges we will carry out our strategy and reduce capacity. If the routes to London City are not profitable, then we won’t go there.”

While London City has increased its passenger tally by 50 per cent in five years and is the closest terminal to the U.K. capital’s financial center, it’s a fraction the size of Britain’s leading hubs, faces opposition from leading politicians and is limited in its growth prospects by a runway that can’t take full-size jets.

According to people with knowledge of the matter, the winning bid, from Alberta Investment Management Corp., Ontario Teachers’ Pension Plan and OMERS, is about 44 times London City’s earnings before interest, tax, depreciation and amortization of 45.8 million pounds in 2014, the latest year with available data. No price was given when the deal was announced Friday.

Top Dollar

The average multiple for airport deals in 2014 was 17, including debt, according to aviation consults ICFI. Investment funds are increasingly willing to pay top dollar for assets offering stable long-term returns after years of low interest rates.

The CityFlyer arm of IAG’s British Airways unit would most likely shift services to London Stansted, Walsh said. BA said this month that the unit would start flights from the airport 30 miles north of London — which has direct rail services to the banking district — in order to better utilize London City-based Embraer SA planes unable to operate during a weekend flight ban there.

CityJet Ltd., the airport’s biggest carrier, share’s IAG’s doubts about the deal, according to owner Intro Aviation, where CEO Peter Oncken said it had provoked “some concern.” Intro bought CityJet in 2014 after Air France had struggled for 18 months to sell the unprofitable business, and said in October it would bring in 15 Russian Superjet 100s to refresh the fleet.

Runway Limit

“I don’t think refinancing the purchase price with higher fees would work,” Oncken said in an interview. “London has six airports, and passengers would think twice about how to get from A to B if one got more expensive. The owners know this and we expect them to come forward to tell the airport users how they plan to proceed.”

While London City, six miles from the main financial district and half that distance from the new banking hub of Canary Wharf, is a favorite with passengers partly because of the modest size of its terminal, which means they can get from the curb to the plane more rapidly than at bigger bases, the ease of travel is partly a reflection of operational limitations.

Because City was built on a quayside on the banks of the Thames its runway is so short at 1.2 kilometers that only regional aircraft can operate with a full fuel load, limiting each flight’s passenger total and range. BA operates the Airbus Group SE A318 fitted with 32 lie-flat business seats there, though must refuel in Ireland in order to complete the trip to New York.

Political Dimension

London Mayor Boris Johnson wants to limit operations at City and even close the airport on the grounds that its inappropriate for terminals to be located in urban centers because of the associated noise and air pollution.

Johnson, one of Britain’s leading politicians and seen as a possible future prime minister, last year vetoed a 250 million- pound plan to add aircraft stands, an arrivals terminal and taxiway to help City make an already-authorized jump to 6.5 million passengers a year by 2023, compared with 4.32 million in 2015. An appeal is scheduled to be held shortly.

London Heathrow, the capital’s biggest hub and the busiest in Europe, attracted 75 million travelers last year — or 17 times as many.

The airport’s sale is expected to close on March 10, according to a statement from 75 per cent owner Global Infrastructure Partners. The Canadian-led group, which also includes Kuwait Investment Authority, had vied with China’s HNA Group and Cheung Kong Infrastructure Holdings Ltd. to acquire the facility.

Opened in 1987, City was sold to Irish businessman Dermot Desmond for 23.5 million pounds in 1995 before being acquired by GIP American International Group Inc. in 2006. Reports at the time said the companies paid 750 million pounds, though terms weren’t disclosed. Two years later, AIG sold its stake to GIP and Highstar Capital, which will also dispose of its 25 per cent holding.

It was just a couple of weeks ago when I discussed how Canadian pensions are cooling on infrastructure. Several senior executives expressed serious concerns that the pricing of deals was becoming expensive and they needed to “stay disciplined” (seems like they’re saying one thing and doing the exact opposite).

I’m scratching my head trying to figure out how a consortium which includes Ontario Teachers’, AIMCo and OMERS Borealis bought the London City Airport by submitting a bid which is about 44 times London City’s earnings before interest, tax, depreciation and amortization of 45.8 million pounds in 2014, according to the latest year with available data.

This is just nuts and it proves my point that global pensions and sovereign wealth funds are inflating a massive infrastructure bubble. It also might help explain why Ontario Teachers’ dumped $1 billion of private equity funds in the secondary market.

Is London City Airport a “premium infrastructure asset”? Absolutely which is why you had Asia’s richest man as well as another Canadian consortium led by PSP Investments bid on it. But even they must have been surprised by the hefty price tag paid for this airport.

I know, ultra low rates are here to stay and infrastructure assets have a long investment horizon and are a better match for the long-dated liabilities of pensions, but when a consortium pays more than twice the average multiple for airport deals in 2014, it better hope this premium asset grows by leaps and bounds over the next decade because there’s not much of a buffer there in case something goes wrong and it sure doesn’t look like the new owners will be able to increase the charges on their airline customers.

What else worries me about this deal? London is in a mega bubble which will burst during the next financial crisis. High end real estate prices are already coming down fast there. And if global deflation hits, watch out, airlines will get crushed and so will London’s tourism industry.

I might be too critical of this deal but I think the biggest winners are Global Infrastructure Partners (GIP) and Oaktree Capital. They’re getting top dollar for this airport and made a killing on this deal.

In other infrastructure news, Kirk Falconer of PE Hub reports, PSP Investments to buy New England hydroelectric assets for $1.2 bln:

The Public Sector Pension Investment Board (PSP Investments) has agreed to acquire a New England portfolio of hydroelectric assets totaling 1.4 gigawatts from French gas and power utility Engie Group. The assets, which have an enterprise value of US$1.2 billion, reflect core operational merchant hydroelectric facilities located on the Connecticut River in Massachusetts and the Housatonic River in Connecticut. PSP Investments, a Canadian pension fund manager, said the acquisition fits with its strategy to leverage industry-specialized platforms. The latter include H2O Power LP, a hydroelectric power platform majority owned by PSP Investments.

PRESS RELEASE

PSP Investments to acquire 1.4GW hydroelectric assets in New England

MONTRÉAL, Feb. 25, 2016 /PRNewswire/ – The Public Sector Pension Investment Board (“PSP Investments”), one of Canada’s largest pension investment managers, announced today that it has entered into a definitive agreement to acquire from ENGIE Group (EPA: ENGI) a New England portfolio of hydroelectric assets totaling 1.4GW for an enterprise value of US$1.2 billion. PSP Investments intends to maximize the potential benefits of combining its ownership in these premier assets with the operational expertise of its existing hydroelectric power platform, H2O Power LP (“H2O Power”).

“PSP Investments is extremely pleased with the acquisition of these significant hydroelectric facilities which form an important component of the Eastern U.S. energy market,” said Guthrie Stewart, Senior Vice President, Global Head of Private Investments at PSP Investments. “The purchased assets are an excellent fit with PSP Investments’ long-term investment horizon and its strategy to leverage industry-specialized platforms, such as H2O Power,” Mr. Stewart added.

The assets to be acquired are core operational merchant hydroelectric facilities located primarily on the Connecticut River in Massachusetts and the Housatonic River in Connecticut. They constitute the 2nd largest privately-owned hydroelectric portfolio within the well-developed and functional ISO New-England (ISO-NE) power market. They include the 1,168MW Northfield Mountain pumped-storage facility as well as 12 conventional hydroelectric facilities, the three largest of which represent an aggregate generation capacity of 134MW. The portfolio generates Renewable Energy Credits.

Majority-owned by PSP Investments, H2O Power currently owns and operates 10 hydroelectric generating stations located in Canada and the United States, representing 170MW of power generation capacity.

When I went for a haircut yesterday, I read in the Journal de Montréal that the Caisse and Hydro Québec were going to partner up on hydro power generation deals. By the looks of things, maybe Hydro Québec should partner up with PSP Investments (lots of former Hydro employees there).

I don’t know enough on the multiples of this particular deal to comment on pricing but Guthrie Stewart is right, this is a great acquisition and fits nicely in PSP’s current portfolio.

I’m signing off for a week. Please take the time to reread my comment on the Caisse’s 2015 results. I corrected a passage on the Caisse’s Real Estate index:

The real estate benchmark is a private real estate index adjusted for leverage. Basically, Aon constructs CDPQ’s index using IPD data for Canada, UK and France; and NCREIF for the US and they overlay a leverage threshold on top of the direct real estate return data. The infrastructure benchmark has public market beta in it which makes it tough to beat when those stocks are soaring. Both these benchmarks are very tough to beat.

It’s also worth noting that while the Caisse’s Infrastructure group is underperforming its benchmark over the last four years, it trounced it in 2015, returning 6.6% vs -5.1% for its benchmark (too much public market beta in that benchmark!).

As always, I don’t claim to hold a monopoly of wisdom on pensions and investments. Leo de Bever, AIMCo’s former CEO and the godfather of infrastructure, shared this with me this morning in an email:

“AIMCo’s infrastructure benchmark had same cyclical issue when I was there. I believed it was the right thing in the long run but uninformed criticism can be punitive in the short run if the cycle does not match compensation horizon.”

Benchmarking private equity, real estate and infrastructure isn’t easy but as pension funds increasingly shift their asset allocation to these alternative investments, we need to understand how they benchmark these asset classes to determine their compensation.

On that note, I’m taking a much deserved break from markets and pensions to spend time with my beloved. I will return Monday, March 7th to resume my blogging.

Photo by  Caitlin ‘Caity’ Tobias via Flickr CC License

Reporter Ed Mendel covered the California Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com.

With the vote tied 6-to-6 last week, CalPERS President Rob Feckner cast the tie-breaker that rejected term limits for top pension board posts, allowing him to run again and exposing a structural split between members backed by unions and the governor.

The board president and committee chairs would have been limited to four consecutive one-year terms beginning next Jan. 1. Prior service in the office would have been counted, and eligibility to run again restored after two years out of office.

As one of the most powerful state agencies, the 13-member CalPERS board sets annual pension rates that must be paid by state and local governments, while managing a huge pension fund (worth $278 billion last week) and the nation’s second largest purchaser of health care.

Most of the public debate last week was about term limits — refreshing leadership and giving board members an opportunity for growth, for example, versus reducing voter choice and avoiding the inexperience that led to lengthening legislative term limits.

But some said the underlying issues were the ambition of one board member, Henry Jones, to become president without a disruptive battle and union worry about giving governors an opening to control the board presidency.

Jones chairs the most powerful board committee, investments, and was re-elected vice president last month when Feckner was re-elected president, his 12th one-year term in the top board post.

Previous governors have clashed with the CalPERS board and public employee unions with a “raid” on pension funds, backing a candidate for the board presidency, and switching new hires from pensions to 401(k)-style retirement plans.

Gov. Brown has made unsuccessful proposals to add two “independent” board members ineligible for CalPERS pensions, speed up employer rate hikes needed to pay down pension debt, and give state workers a high-deductible retiree health plan to cut costs.

Public employee unions opposed the term limits proposal. The issue of current and retired employees retaining control of key CalPERS board posts surfaced in the CalPERS governance committee.

George Linn, president of the Retired Public Employees Association, told the committee the “chair of the organization” should always come from the six board members elected by current and former CalPERS members.

“That way we members always have a direct link to the president of the board,” Linn said.

Earlier, a CalPERS board member speaking in support of term limits, Richard Gillihan, Brown’s human resources director, told the committee a board member seeking a chairmanship is likely to have experience, such as serving as vice chair.

“The fact is some of us would never have a chance to get some of these positions if it were not for some forced opportunity to reconsider leadership,” said Gillihan.

Responding to Linn’s suggestion, Bill Slaton, a Brown appointee representing local elected officials, told the full board it’s a “bad idea” because the board should have “equal participants,” not “senior” and “junior” members.

“The concern about maintaining leadership by elected members I think is a false issue,” Slaton said, noting that term limits would not change the requirement that seven votes are needed to elect board presidents and chairs.

Six of the 13 CalPERS board members are elected by all or parts of active and retired employees, two appointed by the governor, one appointed by the Legislature, and four are officeholders: treasurer, controller, human resources, and personnel board.

Term limits moved out of the governance committee and deadlocked 6-to-6 at the full board with the support of two of the six board members elected by active and retired employees, Jones and J.J. Jelincic.

Jones made an unsuccessful motion at the full board to lengthen term limits to six years, an apparent bid to get the vote of board member Theresa Taylor. She had mentioned that four-year limits seemed short during the governance committee meeting.

Jelincic, often at odds with the leadership, is an on-leave CalPERS employee barred from some board discussions and decisions, particularly about executives who may later supervise him. The board censured him in 2011 for sexual harassment of co-workers.

CalPERS presidents and committee chairs customarily vote only to break a tie. When the governance committee deadlocked at 3-to-3, the chair, Slaton, cast the tiebreaker vote that sent the term limits proposal to the full board.

Voting “yes” were Jones, Jelincic, and Richard Costigan, the personnel board member. Voting “no” were Feckner, elected by school members, Michael Bilbrey, elected by all members, and Ron Lind, legislative appointee.

When the full board rejected term limits the following day, the president, Feckner, broke another tie vote.

Others voting “no” were Bilbrey, Lind, Priya Mathur, elected by local government members, Taylor, elected by state workers, Treasurer John Chiang, and Controller Betty Yee’s representative, Lynn Paquin.

Voting “yes” were Jones, Jelincic, Slaton, Costigan, Gillihan, and Dana Hollinger, a Brown appointee representing the insurance industry.

In an unusual departure from CalPERS custom, Sean Harrigan became CalPERS president in February 2003 by decisively defeating Willie Brown in an 8-to-4 vote by their fellow board members.

“As long as I’ve been on the board, the custom is an elected member serves as president,” Robert Carlson, who had served on the CalPERS board 31 years, told the San Francisco Chronicle four months before the vote.

Harrigan was not an elected member, serving instead in the personnel board seat since 1999. But he was a private-sector labor leader, regional director of the United Food and Commercial Workers union.

Brown was appointed by former Gov. Gray Davis, who supported his bid for the CalPERS presidency. He was mayor of San Francisco then, after gaining national fame while serving 14 years as speaker of the state Assembly.

Harrigan was ousted in December 2004 when the Personnel Board did not elect him to the CalPERS board. He said it was retaliation for shareholder drives to change behavior at companies like Disney, Safeway, and the New York Stock Exchange.

At the Capitol, some thought it might be payback from Brown for a rare defeat. In a 3-to-2 Personnel Board vote to drop Harrigan, two Republican members were joined by Maeley Tom, a top Democratic legislative aide during Brown’s speakership.

The ouster of Harrigan made Feckner acting CalPERS president. He had replaced Carlson as CalPERS vice president at the same time that Harrigan defeated Brown for president.

Photo by jypsygen via Flickr CC License

Last month, Pension360 covered a Kentucky bill that would give the state Senate the power to confirm certain high-ranking pension officials.

Just as controversially, the bill would require full disclosure of all investment fees and contracts – even those associated with PE and hedge fund investments.

The bill has already flown through the Senate. It currently sits in the House.

Kentucky Retirement Systems (KRS) executive director William Thielen spoke to CIO about his opposition to the bill, which he argues would politicize the hiring process and harm investment performance.

From CIO:

“Several provisions will make the systems less efficient, less competitive, and will result in the expenditure of additional funds,” Thielen argued.

The Senate would have final approval over executive director and board member appointments, and state government a significant role in KRS’s hiring process, including the last word on staffing and promotion decisions.

“We’ve got our issues here and it’s hard enough attracting applicants,” Thielen said, referencing KRS’s status as one of the worst-funded pensions in the country.

Thielen, who announced his intention to retire last year, has already had to stay on longer than planned due to a lack of qualified applicants for his position. Requiring Senate confirmation of executive director appointments would make finding a replacement that much more difficult, and more politicized, Thielen said.

[…]

Provisions regarding fee and holding transparency do also worry Thielen—but only because industry fee disclosure practices are not currently at the level that the bill would require.

“We are putting everything we have out there,” Thielen said, explaining that KRS already discloses fees by asset classes and reports returns as net of fees. “We just don’t want to be put in a position where we’re violating the requirement because we can’t get the information.”

Read the full story here.

KRS is among the worst-funded public pension system in the United States.

Photo credit: “Ky With HP Background” by Original uploader was HiB2Bornot2B at en.wikipedia – Transferred from en.wikipedia; transfer was stated to be made by User:Vini 175.. Licensed under CC BY-SA 2.5 via Wikimedia Commons

A group of Canadian institutional investors – including the Ontario Municipal Employees Retirement System and the Ontario Teachers’ Pension Plan – has agreed to buy the London City Airport.

The purchase price is just south of $3 billion, according to a source who talked to the New York Times.

More from the Times:

The airport, which handled flights for 4.3 million passengers in 2015, is relatively close to the City of London, the traditional home of London’s financial community, and to Canary Wharf, where many of the world’s biggest banks have their London offices.

Terms of the transaction were not disclosed, but a person with knowledge of the discussions, who was not authorized to discuss the matter publicly and who spoke on the condition of anonymity, said the purchase price was more than 2 billion pounds, or about $2.8 billion.

“London City Airport is a premium infrastructure company, operating in a very attractive market,” the consortium said in a news release. “We look forward to working closely with the airport’s strong management team to achieve the business’s full long-term potential.”

As well as the Ontario Teachers’ Pension Plan, the consortium includes the Ontario Municipal Employees Retirement System; Alberta Investment Management Corporation, a Canadian institutional investment manager; and Wren House Infrastructure Management, a unit of the Kuwait Investment Authority.

The Ontario Teachers’ Pension Plan is no stranger to airports; it holds stakes in three other airports around Europe.

Photo by Christian Junker via Flickr CC License 

A municipal pension fund in Michigan is leading a lawsuit against BHP Billiton Ltd, accusing the mining company of misleading investors about the safety of a particular project that ended in disaster last year.

BHP Billiton owns a dam in Brazil that burst in November 2015, leading to numerous deaths and criminal charges. It’s considered the worst natural disaster in the country’s history.

More from Reuters:

In a complaint filed on Wednesday in the U.S. District Court in Manhattan, investors led by the Jackson County Employees’ Retirement System in Michigan said BHP inflated the price of its American depositary receipts by ignoring safety risks and overstating its commitment to safety before the disaster.

Four BHP officials were also sued, including Chief Executive Andrew Mackenzie and Chairman Jac Nasser.

BHP said in a statement emailed to Reuters on Thursday that it disputed the allegations of the complaint.

[…]

Wednesday’s lawsuit follows the Nov. 5, 2015 dam burst in Minas Gerais, Brazil’s main mining state, at the mine run by Samarco, a joint venture between BHP and Brazil’s Vale SA.

The burst unleashed huge quantities of mud and waste that destroyed a nearby village and killed at least 17 people, in Brazil’s worst environmental disaster.

The price of BHP’s ADRs closed that day 20 percent below where they traded before the dam burst, and the complaint said BHP should compensate ADR investors for that decline.

“Defendants knew or recklessly disregarded the precarious condition of the Fundão dam and Samarco’s tailings facilities,” causing harm to investors when the truth came out, it said.

The lawsuit seeks class action status for ADR investors between Sept. 25, 2014, when BHP touted its focus on safety in a U.S. regulatory filing, and Nov. 30, 2015, when Brazil sued.

The name of the case is Jackson County Employees’ Retirement System v. BHP Billiton Ltd et al, U.S. District Court, Southern District of New York, No. 16-01445.

Photo by  Lee Haywood via Flickr CC License