Here’s a chart listing the strongest-performing hedge fund portfolios over the 12 month period ended September 30, 2014.
You can also see whether or not the portfolio outperformed its benchmark, and the percentage of system assets dedicated to hedge funds.
Chart credit: Pensions & Investments
A Pennsylvania representative is planning to introduce a bill in January that would levy a 3.5 percent tax on companies that frack in the state. The revenues – estimated to be $400 million annually – would then go to paying down the Public School Employees’ Retirement System’s (PSERS) unfunded liabilities.
From Main Line Media:
The way state Rep. Kate Harper sees it, a shale tax could ensure drillers are paying their fair share and help solve the state’s pension crisis at the same time.
Harper, R-61, began circulating a memo Dec. 17 to get co-sponsors for a bill she plans to introduce in January calling for a 3.5 percent shale tax, with the proceeds estimated at $400 million annually, going toward the state’s $32 billion unfunded Public School Employees’ Retirement System liability.
“If we don’t get pensions under control, everybody’s school taxes are going up,” Harper said. “My bill adds a severance tax to the existing impact fee and uses it for education, specifically pensions.
“I believe the majority of Pennsylvanians are OK with fracking,” she said, but they want two things: regulation of the industry to ensure the water stays clean; and, if the money is needed that the drillers pay their fair share.
The bill is similar to one introduced last session by state Rep. Madeleine Dean, D-153, that Harper co-sponsored but didn’t even get out of committee, in that it would keep the current impact fee in place, she said.
Those fees are used to address infrastructure and other impacts in communities where drilling takes place, and to contribute to several statewide environmental programs, a press release from Harper says. So far, the impact fee has generated more than $630 million.
[…]
“If the tax is too high we will lose jobs, so I’m trying to have them pay at a reasonable level and not discourage them so they leave the state,” Harper said. The 3.5 percent tax she is proposing “is not onerous on the drilling industry” and “compares favorably with the 5 percent tax in West Virginia,” she said.
PSERS was 63.8 percent funded as of June 30, 2014.
A board on Monday approved a $195 million payment that Michigan will make to Detroit’s pension system as part of the city’s plan to avoid steeper benefit cuts.
From the Lansing State Journal:
Detroit’s two pension funds are expected to receive the state’s “grand bargain” bankruptcy contribution of $194.8 million on Feb. 9 after a state panel gave final approval to the payments on Monday.
The three-member Michigan Settlement Administration Authority approved the payments after board members were advised all legal claims against the state related to the largest municipal bankruptcy in the nation’s history had been dismissed.
The authority — made up of Treasurer Kevin Clinton, Budget Director John Roberts, and Huntington Woods attorney William Cohen — is not expected to meet again. Its sole function was to oversee payment of the state’s contribution to a grand bargain that helped settle the bankruptcy. The Legislature approved the payments last May.
The state’s contribution is part of more than $800 million raised from foundations, private donors and the Detroit Institute of Arts to shore up city pension funds and protect a sell-off of the DIA’s collection of artwork during Detroit’s Chapter 9 proceedings, which ended this month.
[…]
The money will go into the investment funds of the two pension funds.
The state is financing the payments from a fund established from money it received through the settlement of a multi-state lawsuit against tobacco companies.
Detroit will reportedly receive the money on February 9.
Photo credit: “DavidStottsitsamongDetroittowers” by Mikerussell – Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons
The world’s largest pension funds have significantly increased their allocations to alternative investments over the last four years. But allocations to infrastructure haven’t followed that upward trend, according to an OECD report.
Reported by Pensions & Investments:
Infrastructure investing activity remains low among the largest pension funds and public pension reserve funds worldwide, despite increased allocations to other alternative investments, a report from the Organization for Economic Co-operation and Development showed.
[…]
Average allocations to alternatives increased to 19.5% from 17.6% between 2010 and 2013 among the 10 largest pension funds surveyed, while infrastructure allocations were more stable. Of the 71 funds that responded to the OECD survey, unlisted equity and debt infrastructure investments totaled $80 billion, or 1% of total respondent assets, at the end of 2013, up slightly from $72.1 billion, or 0.9% of total respondent assets, at the end of 2012.
Mr. Paula and Raffaele Della Croce, lead manager on the OECD’s long-term investment project and co-author of the report, attributed the slow uptake to unstable regulatory frameworks and a lack of bankable projects.
“Pressure is on the policy side to provide the right conditions for investors to accept infrastructure,” Mr. Della Croce said in a telephone interview.
Although infrastructure investment activity remains low, plan executives are expressing interest in the asset category.
Large pension funds like the €20 billion ($24.5 billion) Etablissement de Retraite Additionnelle de la Fonction Publique, Paris, and $28 billion Afore Banamex, Mexico City, plan to establish new target allocations to infrastructure, according to the report.
Read the full OECD report here.
For more than a year, the Massachusetts Bay Transportation Authority (MBTA) Retirement Fund didn’t publicly disclose the problems plaguing a hedge fund that held MBTA money.
Those problems included civil fraud charges filed against the firm, Weston Capital Asset Management, which is now shutting down.
From the Boston Globe:
In its annual report, released Dec. 10, the $1.6 billion pension fund for transit workers said that it removed its money from Weston Capital Asset Management in September 2013. Nine months later, Weston Capital unraveled as federal securities regulators filed civil fraud charges against the firm and its top executives for allegedly draining $17 million from one of its hedge funds to other accounts and to themselves.
[…]
With Weston Capital, the T fund appears to have escaped unharmed. But investment specialists said changes in leadership and ownership at the firm at the time the agency was investing should have raised suspicions.
For instance, the firm’s chief investment officer left just months before the MBTA pension committed money to it. And five months after the T invested, Weston Capital’s founder and chief executive, Albert Hallac, agreed to sell the firm to a financially troubled company — a deal that would ultimately fall apart.
“Turnover is never good in that kind of a situation. You’re [investing] based on their record and their proven results,’’ said Timothy Vaill, the former chief executive of Boston Private Financial Holdings Inc., a banking and investment firm. “If you’re going to be hiring third-party managers, you’ve got to deeply dive into their world.”
A spokesman for the pension fund, Steve Crawford, said in an e-mailed statement that officials did not learn of the Securities and Exchange Commission’s investigation of Weston Capital until this year. But sometime in 2013, he said, the pension fund “initiated discussions with other” investors in the same hedge fund to withdraw their money.
It’s not the first time the MBTA fund has invested money with a troubled hedge fund. From the Boston Globe:
The T’s pension fund said it did not lose money on its 2009 Weston Capital investment. But this is the second time in a year the secretive MBTA retirement fund has belatedly acknowledged problems with its investments.
Last December, the Globe reported that the pension fund had lost $25 million on a hedge fund run by Fletcher Asset Management in New York — an investment recommended by the T fund’s former executive director, Karl White.
In that case, too, the pension fund did not keep close tabs on a risky investment. White had persuaded the trustees in 2007 to commit $25 million to Fletcher, his new employer. White left Fletcher the next year without telling the T. By 2011, the pension fund could not get its money out of Fletcher, which filed for bankruptcy protection in 2012. It was another year before the pension fund disclosed the loss to the public.
The MBTA Retirement Fund manages $1.6 billion in assets.
Photo by Paul Becker via Flickr CC License
Kansas Gov. Sam Brownback’s team is reportedly exploring options to improve the long-term sustainability of the state’s pension systems.
One option on the table: privatization.
From the Associated Press:
Two top aides to Republican Gov. Sam Brownback proposed Friday that Kansas study privatizing the pension system for teachers and government workers.
Budget Director Shawn Sullivan and Secretary of Administration Jim Clark told a joint legislative committee on pensions that “reform options” for bolstering the public pension system’s long-term health should be examined. Their list included converting pension benefits into annuities managed by a private insurer.
“It’s an idea worth pursuing,” Sullivan said after presenting the proposal to lawmakers.
The committee urged Brownback’s aides to gather more information about private companies’ experiences with such moves and present it once legislators open their next annual session Jan. 12.
[…]
Clark said with converting pension obligations into annuities, a private company assumes the long-term financial risks for a fee, while the state can provide competitive benefits at a lower cost.
At least one lawmaker and one union leader weighed in on the idea. Reported by AP:
Rep. Steve Johnson, an Assaria Republican, said the idea has merit, but, “I am not optimistic that there would be a buyer of that liability at a lower cost.”
And Rebecca Proctor, interim executive director of the largest union for Kansas government employees, said private companies’ need for profits would compete with the pension system’s drive “to generate benefits for employees.”
“Any time you put a profit motive in a state service, it’s a problem,” she said.
Last week, Gov. Brownback proposed cutting the state’s pension payment by $41 million to plug budget holes elsewhere.
Photo credit: “Seal of Kansas” by [[User:Sagredo|. Licensed under Public Domain via Wikimedia Commons
The Arizona Public Safety Personnel Retirement System is searching for a new director, and the fund has reportedly narrowed the field to three candidates.
The candidates, according to the Arizona Republic:
– Jared Smout, acting administrator at PSPRS. Smout was the organization’s deputy administrator from September 2011 to July 2014, when he was promoted to his current job. He also has done accounting, budgeting and financial consulting. He has a Master of Public Administration degree from Brigham Young University.
– Kevin Olineck, vice president for client services for British Columbia Pension Corp. Olineck has been in this position since May 2009, and he previously was vice president of pension services for the Alberta Pensions Services Corp. He has a bachelor of arts degree in the Advanced Program in Public Administration from the University of Saskatchewan.
– Deric Righter, former chief executive of ThyssenKrupp USA, a Michigan-based holding company for a German conglomerate. Righter also was a vice president of public banking for JPMorgan Chase in Detroit. He has a Master of Business Administration degree from Northwestern University.
More from the Republic:
The pension system is significantly underfunded, and the new director likely will work with the Arizona Legislature on state laws and policy issues for PSPRS members and retirees.
The job, which pays up to $269,000, attracted roughly 70 applicants.
The three finalists were selected from a group of five semifinalists, who recently interviewed with a selection committee. One of those who didn’t advance was Maricopa County Supervisor Andy Kunasek, who withdrew from consideration, according to Palmer.
The job came open when the previous administrator, Jim Hacking, reached a settlement in July to leave the trust after The Arizona Republic uncovered evidence that he had given raises to his investment staff without state Department of Administration approval, as required by law.
The fund plans to hire one of the candidates by the end of January, according to a spokesman.
Photo credit: “Entering Arizona on I-10 Westbound” by Wing-Chi Poon – Own work. Licensed under CC BY-SA 2.5 via Wikimedia Commons
The Ontario Teachers’ Pension Plan has announced it will buy PODS, a moving and portable storage company.
Ontario Teachers’ will purchase the entire company; the sale will be finalized in early 2015.
From the Tampa Bay Business Journal:
“We are excited about our new ownership by Teachers’ and are also appreciative of the support we received from Arcapita and our board of directors the past seven years. We look forward to working with Teachers’ to continue our growth and our commitment to our customers,” John B. Koch, president and CEO at PODS, said in a statement.
Teachers’ has a diverse portfolio of companies across the globe including Burton’s Biscuits in the United Kingdom, Canada Guaranty Mortgage Insurance Co. in Toronto and Mattress companies Serta and Simmons in the United States.
The price of the deal has not yet been released.
Arcapita bought PODS in 2007 for $430 million, according to sister publication Atlanta Business Chronicle. PODS says it pioneered the portable moving and storage industry and now operates in more than150 locations, both corporate and franchise owned, in the U.S., Canada, Australia and the U.K.
The OTPP manages $138.9 billion in assets.
Republicans control both houses of Congress, and there are many leadership shifts underway at the committee level as well. These shifts open the door for changes to retirement plans coming from the federal level.
One idea sure to be brought up is Senator Orrin Hatch’s SAFE Retirement Act. From Pensions and Investments:
At the committee level, the change of leadership raises the prospects for serious consideration of new retirement ideas, like incoming Senate Finance Committee Chairman Orrin Hatch’s SAFE Retirement Act proposal, which would expand the use of multiple employer plans, allow public defined benefit pension funds to purchase private annuities, and create a “starter 401(k) plan” for small, private-sector employers.
Lawmakers could also take a closer look at defined-contribution plans and cash balance plans. From P&I:
As the tax reform debate heats up, “Republicans are going to want to cut expenses and raise revenue,” said Michael Webb, vice president of Cammack Retirement Group, Wellesley, Mass., a consulting firm specializing in defined contribution plans. “How do you do that? By changing things like deductibility on retirement plan contributions.”
Along with those discussions, “there might be opportunities in 2015 for retirement plan proposals that would enhance coverage and benefits,” said Kent Mason, an attorney at law firm Davis & Harman LLP, Washington, who is outside counsel for the American Benefits Council, Washington. He and others note that multiple employer plans enjoy bipartisan support in Congress, which could convince regulators to make them easier to create.
Both Republicans and Democrats would like to see more automatic enrollment and escalation in defined contribution plans. “This is showing up in bipartisan bills because (current default rates) are not high enough” for retirement security,” said Mr. Mason. “This is an area where I could see common ground.”
Hybrid retirement ideas like cash balance plans will come up early, starting with a Jan. 9 hearing on IRS regulations finalized in September for plan years after 2015. “I do think there is pent up demand for some type of DB (proposal),” said Alan Glickstein, Dallas-based senior retirement consultant at Towers Watson & Co. Hybrid pension plans for the military will also come up early in the year, when recommendations from the Military Compensation and Retirement Modernization Commission are due, sources said.
Read the full article here.
The board of the San Diego County Employees Retirement Association (SDCERA) heard plans to begin recruiting a new chief investment officer in 2015 – including job postings and coming up with a pool of candidates.
Previously, it had only been decided that the fund would move on from current-CIO Salient Partners, and a general salary range for the new job was decided upon.
But board members wondered aloud at Thursday’s meeting whether the internal drama at the fund would scare good candidates away.
From ai-cio.com:
Mary Hobson of recruitment firm EFL Associates told the board on Thursday that job postings would go up early in the new year. She said she aims to present a pool of candidates to the board for consideration by February 6.
Already, according to Hobson, between eight and ten people have contacted her expressing interest in the position.
However, board members themselves indicated that recruitment efforts could be hamstrung by their highly public and ongoing infighting.
Vice Chairman David Meyers, who has consistently supported the deal with Salient Partners, asked that transcripts of yesterday’s meeting and one in September be combined and given to serious candidates for the job.
“The hypocrisy of this board should be shared with any new CIO that comes forward,” Meyers said. “Talk about running scared.”
The salary for the new position remains capped by lawmakers at $209,000 per year, although Hobson intends to recruit candidates that could fall outside that range.
“I want to leave us wiggle room to talk to people who may need more than that, to see if you can try and push that through,” she said. The job posting will stipulate “a competitive salary,” and said, intentionally leaving compensation details “pretty vague.”
Following individual discussions with the board members, Hobson strengthened the posting to say SDCERA “encouraged diversity” from interested parties, and she would work to present them with minority and women candidates.
The CIO would oversee $10.5 billion in assets.
Photo by Nathan Stephens via Flickr CC License