investment strategy | Pension360

Quebec Pension Buys Manhattan Office Tower for $2.2 Billion; Second Most Expensive Office Sale in U.S. History

Canadian pension fund Caisse de dépôt et placement du Québec said on Friday it had completed the second most expensive office sale in U.S. history by buying a Manhattan office tower for $2.2 billion.

The fund partnered with Callahan Capital Properties to buy the building, located at Three Bryant Park.

CalPERS Seeks PE Portfolio Manager

CalPERS is looking to hire a private equity portfolio manager (the listing can be accessed here).

The salary range is $11,666.66 – $17,500.00 monthly.

More information from the listing:

Duties include but are not limited to:

* Evaluate performance of legacy partnerships and co-investments

* Lead investment strategies to monetize investments to include secondary sales and monthly calling efforts

* Attend annual meetings, advisory board meetings and conduct quarterly monitoring calls

* Manage and monitor workload for investment professional in his/her reporting structure

Minimum Requirements and Experience:

* Bachelor’s degree in business administration, economics, finance, or a closely related field

* Five years of broad and extensive investment management experience for a major financial institution or firm, or government agency, including some experience leading or coordinating professional staff, and review of large and varied investment portfolio

* 3 years experience restructuring investment commitments ( private equity or equity strongly preferred, other private market experience such as real estate would be relevant in a commingled fund environment.)

* 5 years experience managing people

Desirable Qualifications:

* CFA

* Previous experience working for pension, foundation or endowment fund

* Previous experience leading and mentoring staff

* Ability to work well in a collaborative team environment

* Highly motivated self-starter

CalPERS is the nations largest public pension fund.

Photo by Nathan Stephens via Flickr CC License

Top Kentucky Lawmaker Introduces Teacher Pension Funding Bill; Seeks $3 Billion in Bonds

Kentucky House Speaker Greg Stumbo has taken up the Teachers Retirement System on one of their funding proposals.

Stumbo on Friday filed a bill calling for the issuing of $3.3 billion in bonds that will be used to fund the teachers system.

More details from the Courier-Journal:

Stumbo, D-Prestonsburg, said Friday that the retirement system could capitalize on current low interest rates of around 5 percent and use the bonds to supplement the state’s pension contribution for the next eight years.

“This window is going to close pretty soon,” Stumbo said. “I think the feds, this year, will allow those rates to rise some because the economy is getting better and because the banks aren’t making any money on deposits.”

KTRS estimates that a $3.3 billion bond issue would save the state around half a billion dollars annually by 2026. But the plan only works if investments yield a higher rate of return than the interest on the bonds.

Supporters compare the idea to refinancing a home mortgage at a lower rate. But skeptics view it more like using credit cards to pay off debt, and the measure would need support from a supermajority of lawmakers to pass in an odd year of the legislature.

But lawmakers haven’t forgotten about the transparency issues present at both state pension systems. Lawmakers may still attach strings to the funding that forces the teachers system to make some changes to their opacity. From the Courier-Journal:

Stumbo said he is comfortable allowing bonds for teacher pensions because KTRS appears prudent in its investment strategy. But he said lawmakers might consider additional measures to improve oversight of the system as part of the debate.

Stumbo added that lawmakers are not interested in providing bonds to Kentucky Retirement Systems — the pension system for state and local workers — because of lingering questions over investments and transparency.

The Kentucky Teachers Retirement System is one of the worst funded educator’s pension funds in the U.S.

Likewise, the Kentucky Employees Retirement System is one of the worst funded plans in the country.

Canada Pension Takes On $198 Million Real Estate Project in Suzhou

The Canada Pension Plan Investment Board (CPPIB) has committed $198 million to a massive real estate development project in Suzhou, China.

The fund is investing in the Times Paradise Walk project, a 735,000 square meter space consisting of residential, retail, office and hotel space.

From a release:

Canada Pension Plan Investment Board (CPPIB) and Longfor Properties Company Ltd. (Longfor) announced today that they have formed a new joint venture for a major mixed-use development project in Suzhou, Jiangsu Province, China.

The new joint venture was formed on December 23, 2014 with CPPIB committing RMB 1,250 million (C$234 million) to jointly develop the Times Paradise Walk project in Suzhou, the fifth most affluent city in China with a population of 10 million. The mixed-use development is an integrated project comprising residential, office, retail and hotel space covering a total gross floor area of 735,000 square metres. It is designed to be a top quality, one-stop commercial destination in Suzhou with completion scheduled in multiple phases between 2016 and 2019.

“This is CPPIB’s first direct joint venture in a mixed-use development in China and we are pleased to be doing this alongside Longfor, a well-respected and experienced developer in China,” said Jimmy Phua, Managing Director, Head of Real Estate Investments Asia for CPPIB. “We look forward to building a long-term strategic partnership with Longfor that will allow CPPIB to continue to invest in large scale mixed-use and retail projects in China, a market in which we see long-term growth potential.”

Located in the heart of the Central Business District of the Suzhou Gaoxin District with connections to the subway lines, Times Paradise Walk Suzhou, which started construction in 2013, has already received strong responses following two separate residential launches in 2014 with total contract sales of RMB 1.9 billion.

The CPPIB manages $234.4 billion for the Canada Pension Plan.

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

Dutch Pension Drops Hedge Funds

The Netherlands’ second-largest pension fund has announced plans to exit its hedge funds investments.

The fund, PFZW, has already began the process of winding down the investments.

The fund cited complexity, lack of performance and excessive costs as reasons for the pullout.

From Reuters:

The Netherlands’ PFZW has become the latest major pension fund to announce it will no longer use hedge funds to manage investments, citing excessive costs, complexity and a lack of performance.

[…]

About 2.7 percent of the fund’s assets had been invested with hedge funds in the year 2013, but the pension fund said on Friday that it had “all but eradicated” their use by the end of 2014.

“With hedge funds, you’re certain of the high costs, but uncertain about the return,” the company’s manger for investment policy Jan Willem van Oostveen said.

He added that PFZW wanted to have greater control over of its investments, and that hedge funds’ methods were too complex because of their diverse investment strategies.

In September, the $300 billion California Public Employees’ Retirement System said it had scrapped its hedge fund programme, pulling out about $4 billion.

PFZW manages $185 billion in assets for the country’s health care workers.

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.

Ontario Pension Invests $200 Million in European Infrastructure

The Ontario Pension Board has invested $200 million with AMP Capital’s Global Infrastructure Fund.

The fund invests in European utilities, communication and transport infrastructure.

More details from SuperReview:

The Ontario Pension Board (OPB), the administrator of the 80,000 member defined benefit Public Service Pension Plan with $22 billion in assets, invested the sum which will make up 10 per cent of the strategy’s target size of US$2 billion.

AMP Capital Global Head of Infrastructure Equity Boe Pahari said the investment was an endorsement of the strength of the strategy which accesses diversified European infrastructure equity in sectors such as transport, communication and utilities.

OPB Private Markets’ managing director Glenn Hubert said the pension fund board was impressed with the longevity, scope and success of AMP Capital’s infrastructure investments as well as it growing market presence in North America which includes an infrastructure equity investment team based in New York.

AMP Capital Head of Americas, Infrastructure Equity Dylan Foo said the group would continue to grow in that region by focusing on mid-market opportunities where it could see relative value versus larger transactions.

The move by the OPB follows reports that Canadian pension funds were also being drawn to invest in Australian infrastructure projects and developments resulting from the Federal Government’s efforts to boost spending in that sector.

The Ontario Pension Board manages $22 billion in assets.

Ohio School Pension Makes $350 Million in Real Estate Commitments; Hires REIT Portfolio Manager

The Ohio School Employees Retirement System has committed $350 million to three real estate funds, as well as hired BlackRock to manage a $100 million REIT portfolio.

Reported by Pensions & Investments:

[Ohio SERS] committed $200 million to CBRE U.S. Core Partners fund, a core real estate fund managed by CBRE Global Investors; and $75 million each to Almanac Realty Securities VII, a value-added real estate fund managed by Almanac Realty Investors, and Mesa West Core Lending Fund, an open-end, direct lending real estate fund managed by Mesa West Capital.

The BlackRock hire and the three commitments fall within the pension fund’s 15% global real assets target, which was created in June 2013 to reflect greater investment flexibility than the previous 10% target to real estate.

As of Sept. 30, the actual allocation to global real assets was 10.6%.

The Ohio School Employees Retirement System manages $12.6 billion in assets.

Sustainable Investing Experts Weigh In On Fossil Fuel Divestment; Is Engagement A Better Strategy?

Different pension funds have different opinions on how climate change should affect investment strategy.

Some, like Norway’s largest pension, are willing to divest from certain fossil fuels entirely.

Others, like CalPERS, prefer to use their leverage as major shareholders to engage with companies rather than divest. Many others cite their fiduciary duties to pensioners as a reason they can’t divest from fossil fuels.

What do sustainable investing experts have to say? The Financial Times talked to them:

“The idea that shaming an industry will somehow reduce greenhouse gas emissions is not correct,” says Jonathan Naimon, managing director of Light Green Advisors, a New York asset management firm that specialises in environmental sustainability investing. “It isn’t like divestors are bringing any solutions to the table.”

“It’s actually projects and technologies that reduce emissions and the people developing them are in energy supply companies as well as energy-using companies,” he adds.

[…]

But Bill McKibben, the US environmental activist and writer who co-founded the 350.org climate campaign group spearheading the divestment push, says engagement strategies only suited some companies.

“If we have a problem with Apple paying Chinese workers bad wages you don’t need to throw away your iPhone and boycott Apple stock. You need to put pressure on them so they pay people better and the price of an iPhone goes up a dollar and everyone’s happy,” he says.

But he argues fossil fuel extraction companies are a very different case because their value is so dependent on their reserves of oil, gas and coal. “There’s no way that engagement can persuade them to get out of this business as long as it remains a profitable business,” he says

“The idea that anyone else is going to merrily persuade Chevron or BP that they want to be in the renewables business or something is nuts,” he says. He argues this would only happen with government pressure and that in turn would require the dilution of energy companies’ political power by efforts such as the divestment movement.

[…]

Carbon Tracker itself does not recommend a pure divestment strategy.

“We’re not advocating blanket divestment,” said Anthony Hobley, the group’s chief executive. “We think both engagement and divestment together will achieve more. The sum is greater than the parts because either alone isn’t going to achieve the ultimate objective of a climate-secure energy system.”

What does an oil executive think about fossil fuel divestment? Click here to read his take.

Photo by Paul Falardeau via Flickr CC License

Research Firm: Institutional Investors Still Hungry for Hedge Funds

Research from eVestment indicates institutional investors are still hungry for hedge funds even after a year that saw low returns for the investment vehicles. The research estimates that investors will put at least $90 billion in hedge funds in 2015.

From Money News:

Wealthy investors are poised to put at least $90 billion into hedge funds next year, even after returns have largely been lackluster this year, research firm eVestment said.

Fresh demand from pension funds, endowments, and insurers looking for alternatives to traditional stock and bond holdings will fuel next year’s flows, the researchers wrote in a report.

“Will institutional investors maintain their investments and continue to allocate more to hedge funds in 2015 … The short answer is yes,” they wrote, adding “We expect asset flows into hedge funds of at least between $90 billion and $110 billion in 2015.” Hedge funds manage roughly $3 trillion in assets.

The appetite for hedge funds remains strong even after the $300 billion California Public Employees’ Retirement System, the largest U.S. pension fund, said in September it was pulling out of hedge funds because they are too costly and complicated.

Hedge funds took in roughly $112 billion in new money this year even though returns have been paltry, with the average fund returning roughly 4 percent this year through November. As hedge funds posted low single digit returns, the stock market raced to a series of fresh highs and the Standard & Poor’s 500 index gained 12.8 percent since January. Last year, investors added $62 billion in new money to hedge funds.

The research suggested that investments in stock-oriented hedge funds could slow down, but investments in multi-strategy hedge funds will likely rise in 2015.

Photo by 401kcalculator.org

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