canada pensions | Pension360

Canada Pension Plan Invests $325 Million in U.S. Cancer Treatment Provider

The Canada Pension Plan has invested $325 in 21^st Century Oncology Holdings Inc., a cancer care service provider. The details, from Reuters:

Canada Pension Plan Investment Board (CPPIB), the investment arm of Canada’s national pension plan, said on Friday it has invested $325 million in privately held radiation oncology services provider 21st Century Oncology Holdings Inc through purchases of convertible preferred shares.

Fort Myers, Florida-based 21st Century operates the world’s largest integrated network of cancer treatment centers and affiliated physician practices. It has 179 treatment centers in the United States and in six Latin America countries.

The investment will give CPPIB the right to nominate two directors to 21st Century’s board.

An active global dealmaker, CPPIB manages net assets of C$226.8 billion on behalf of the Canada Pension Plan.

More details on 21st Century Oncology, from BusinessWeek:

21st Century Oncology Holdings, Inc., together with its subsidiaries, operates as a physician-led provider of integrated cancer care services.

As of February 19, 2014, 21st Century Oncology Holdings, Inc. operated 179 treatment centers primarily under the 21st Century Oncology brand, including 145 centers located in 16 states of the United States; and 34 centers located in 6 countries in Latin America. It was formerly known as Radiation Therapy Services Holdings, Inc. and changed its name to 21st Century Oncology Holdings, Inc. in December 2013. The company was founded in 1983 and is based in Fort Myers, Florida.

Photo by hobvias sudoneighm via Flickr CC License

Canada Pension Board to Open India Office

Pension360 covered last week the reported interest in Indian investments expressed by the Canadian Pension Plan Investment Board (CPPIB). Today, that interest became much clearer, as the CPPIB announced plans to open an India office in Mumbai.

More details from the Economic Times:

Canada Pension Plan Investment Board (CPPIB), the giant pension fund that makes private-equity investments, plans to open an India office and has hired Kotak Realty Fund executive V Hari Krishna as a key member of its local team.

Krishna would join CPPIB in the coming month from the Kotak fund where he was a director for more than nine years, said two people having direct knowledge of the matter. He has also worked at real estate consultancy firms in the pat.

The proposed India office will be the second for CPPIB in an emerging market, indicating the fund’s growing focus on India where the economy is expected to turn around after two years of sub-5 per cent growth. “The India office will be set up in Mumbai in the next two-three quarters and CPPIB intends to do direct transaction over the next 12-18 months,” said one of the two people. “The fund has been looking to hire heads for real-estate, infrastructure and equities for India to drive investment.”

The pension fund refused to comment on office opening or recruitment in India, including of Krishna. “As a growing global investment organisation, we do look at expansion to more locations,” said Mark Machin, senior managing director and president of Asia at CPPIB. Krishna didn’t reply to a text message seeking comment.

The CPPIB appears to be primarily interested in Indian infrastructure and real estate investments. From the Economic Times:

In June this year, it offered to invest around $322 million in India’s infrastructure sector through L&T Infrastructure Development Projects, a unit of Larsen & Toubro.

It offered another $250 million in a strategic alliance with Piramal Enterprises to provide structured debt financing to residential projects across major urban centers this February, and a $200 million strategic alliance with the Shapoorji Pallonji group to acquire stabilised office buildings that are foreign-direct-investment compliant in late 2013.

“India is a key long-term growth market for CPPIB. The fund has committed approximately US $1.4 billion in India since 2010 and will continue to look to India for investments that fit with our long-term investment mandate,” CPPIB’s Machin said in an email response.

The CPPIB would not confirm or deny the plans for an India office.

Newspaper: Report on Canadian Investment Expenses “Misses the Point”

Last week, Pension360 covered a report questioning the Canada Pension Plan’s new investment strategy, which had led to a more than 100 percent increase in investment expenses since 2006.

But one newspaper, the Hamilton Spectator, says the report missed the point entirely. From the Hamilton Spectator editorial:

Rousing displays of verbal fireworks could not conceal the study’s failure to find out what Canadians need to know. […] The country needs to know whether private-sector plans or the public plan is a more efficient way of saving for retirement.

The authors found the government collects the contributions to the Canada Pension Plan and pays out the pensions, for an administrative cost of around $550 million a year. The government recovers that cost by skimming an administrative charge off the contributions. If the CPP Investment Board counted that cost as part of its operating costs, those costs would be $550 million higher.

But we need to know if the government’s costs for collecting contributions and mailing out cheques are out of line with operators of private-sector pension plans. The study’s authors make no inquiry on that point.

A more useful study would produce evidence both from the public and private spheres. That study would have to be written by authors who gather the evidence first and then draw their conclusions. The study published last week seems more like the work of an agency with a narrow agenda — what you might call a self-serving bureaucracy.

The report, released last week, found the Plan’s investment expenses had increased from $600 million or 0.54% of assets in 2006 to $2 billion or 1.15 per cent of its assets in 2013.

Group Calls For Transparency In Canadian Pensions As Investment Expenses Rise

The Canada Pension Plan Investment Board (CPPIB) has been an active investor in private equity, real estate and infrastructure around the world. Pension360 has covered Board’s endeavors into infrastructure and real estate in India and warehouses in California.

But those kinds of investments carry fees and expenses, and one Canadian think tank is calling on the CPPIB to make those expenses clearer. From CBC News:

The report, by former Statistics Canada chief economic analyst Philip Cross and Fraser Institute fellow Joel Emes, says the Canada Pension Plan Investment Board should more clearly explain the added costs of its new approach to investing.

Beginning in 2006, the CPPIB broadened its holdings beyond traditional stocks and bonds to invest in areas such as international real estate and infrastructure projects.

That new approach resulted in an additional $782 million for external management fees and $177 million on transaction fees, the authors say.

The CPPIB, which manages the funds not needed in the near term to pay Canada Pension Plan benefits, has moved away from traditional holdings because of low interest rates that keep bond returns low, according to CEO Mark Wiseman. In the past year, it has also invested selectively in stocks because of their high valuations.

Wiseman says the “active investment” approach is needed to create value “over an exceedingly long investment horizon” and to diversify the CPPIB portfolio.

The CPPIB has invested in infrastructure projects in countries such as Brazil and India and real estate portfolios in the U.S. and Australia.

The strategy led to returns of around 16 percent in 2013. But investment expenses have spiked as a result of the active management. From CBC:

The Fraser Institute argues the CPP has faced a big hike in the cost of its investments as a result of its new strategy — from $600 million or 0.54% of assets in 2006 to $2 billion or 1.15 per cent of its assets in 2013.

That figure includes the cost of collecting the CPP from Canadian paycheques and sending benefits to pensioners.

It is being less than transparent in failing to report its external management fees and transaction costs as part of CPPIB accounts, the report says. Instead those costs appear in federal government public accounts and overall accounts for CPP.

“The CPPIB needs to be more transparent about the expense of designing and implementing its investment strategy; every dollar spent on behalf of the CPP is one less dollar available to beneficiaries,” the Fraser Institute says.

External management fees might include investment banking fees, consulting fees, legal and tax advice and taxes on transfer of real estate, which would apply to the new style of investing, but might not be as high in stock and bond investing.

The Fraser Institute, the think tank that produced the report, advocates for smaller government and greater personal responsibility.

Canada Pension Plan’s Quarterly Returns Come Up Short; New $500 Million Investment On Horizon

The numbers are in for the Canada Pension Plan’s investment performance over the first quarter of fiscal year 2015, and the country’s largest pension fund probably isn’t thrilled with the results.

The CPP returned 1.6 percent over the three month period ended June 30. Far from disastrous, the performance still falls short of its peers: the median return of Canadian pension funds over the same period was 3 percent.

In a statement, Canada Pension Chief Executive Mark Wiseman said: “All of our programs reported positive investment returns during the quarter and we continued to further diversify the portfolio globally across various asset classes.”

To that end, the Canada Pension Plan’s Investment Board also announced today that it will be allocating an additional $500 million to investments in the U.S. industrial sector.

Specifically, the investments are in warehouse facilities in high-demand areas of California that will subsequently be leased out. From a CPP press release:

The six logistics and warehouse developments GNAP has committed to are:

GLC Oakland – 375,000-square-foot Class-A warehouse distribution facility recently completed in Oakland, California, adjacent to the Oakland International Airport.

GLC Rancho Cucamonga – two warehouse distribution facilities totaling up to 1.6 million square feet in Rancho Cucamonga, California, 40 miles west of Los Angeles, in the Inland Empire West submarket.

Commerce Center Eastvale – three logistics warehouses providing in excess of 2.5 million square feet located in Eastvale, California, 50 miles west of Los Angeles, in the Inland Empire West submarket.

GLC Fontana – 640,000-square-foot warehouse distribution facility located in Fontana, California, 50 miles west of Los Angeles, in the Inland Empire West submarket.

GLC Compton – 100,000-square-foot distribution facility in Compton, California, a prime infill location within the South Bay submarket of Los Angeles.

GLC Santa Fe Springs – three warehouse distribution facilities totalling up to 1.2 million square feet located in Santa Fe Springs, California, a prime infill location within the Mid-Counties submarket in Los Angeles.

The CPP already had allocated $400 million to the Goodman North American Partnership (GNAP), a joint venture formed between the CPP Investment Board and Goodman Group.

Photo: “Canada blank map” by Lokal_Profil. Licensed under Creative Commons Attribution-Share Alike 2.5 via Wikimedia Commons

Why Did Ontario Lawmakers Wait So Long to Release A Report Critical of Its Pension Systems?

There’s been much concern in Ontario about the sustainability of its public pension systems, particularly in the electricity sector. Ontario Auditor General Bonnie Lysyk warned in 2013 that electricity sector pensions were unsustainable and quite possibly too generous.

Union leaders, taxpayers and other concerned parties agreed that the systems deserved a closer looking-at.

So, last December, Ontario lawmakers appointed Jim Leech—former head of the Ontario Teachers’ Pension Plan—to examine the pension systems inside and out to produce a report and make recommendations to improve their sustainability and affordability.

On March 18, 2014, the report was delivered to Ontario lawmakers. But not to the public.

For over four months it didn’t see the light of day. But last Friday, August 1, the report was finally released to the public. And it was highly critical of the sustainability and cost of the electricity sector’s public pension plans.

[The entire report can be read at the bottom of this page.]

From the Toronto Star:

As reported by the Star’s Rob Ferguson, the 45-pagestudy by former Ontario Teachers’ Pension Plan head Jim Leech finds that Ontario taxpayers contribute $5 for every $1 employees are putting into their pension plans at Hydro One.

Ontario Power Generation isn’t much better, with employees contributing just 24 per cent of contributions compared to 76 per cent by the publicly owned utility.

Meanwhile, compared to other public-sector plans, the ones at Ontario’s four electricity agencies are “generous, expensive and inflexible,” Leech wrote.

What’s more, the study found all four pension plans “are far from sustainable.” Wrote Leech: “Should plans go further into deficit, the sponsors and, ultimately, ratepayers will be required to pay even larger contributions.”

The report has already accomplished part of its purpose: get the government thinking about ways to make these systems more sustainable and less costly.

But new questions are being raised about the transparency issues surrounding the report’s release. Although lawmakers saw the report in March, the public had to wait. Why was it allowed to gather dust for nearly five months?

Other stakeholders are wondering the same thing. Some reactions, as reported by The Star:

“This is awfully suspect,” said Progressive Conservative MPP Vic Fedeli, his party’s finance critic, questioning Wynne’s oft-stated goal of running an “open and transparent” government.

“There was ample opportunity to release this document with good public scrutiny. What are they hiding? What didn’t they want us to know?”

Also:

“Why now, why not before the election so people would have known what’s happening?” said Plamen Petkov, whose lobby group opposes the ORPP as too expensive.

“We’re very worried to see government agencies where employees are paying only 20 cents on the dollar for their pensions when taxpayers pay the other 80 cents. No wonder the government itself expects electricity prices to go up 42 per cent over the next five years,” he told the Star.

“It’s really disappointing. We recommend the government clean its own house first before they ask employers to contribute $3.5 billion a year to the Ontario Retirement Pension Plan.”

Government officials said they originally planned to release the report on May 1, when Ontario’s new budget was passed. But the budget wasn’t passed, and that led to new elections being held.

The report was held as elections played out. The results of those elections weren’t confirmed until June 24^th. Still, the report remained in the hands of the government for another 5 weeks afterward.

Here is the report, which can also be found on Ministry of Finance website.

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Photo: “Ontario-flag-contour” by Qyd. Licensed under Public domain via Wikimedia Commons

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