pension

Greek Pension `Time Bomb’ May Be Difficult to Defuse for Unwed Daughters

June 18, 2010

By Maria Petrakis June 18 (Bloomberg) — Sophia Constantinidou works as a teacher in a private school in Athens. She also has a more lucrative job: remaining unmarried. The 52-year-old gets 400 euros ($496) a month from the Greek government, part of her late mother’s state pension. Under the current system, Constantinidou qualifies to receive the payment for life as the only surviving child of a deceased civil servant, provided she doesn’t tie the knot. “It’s not that I didn’t want to get married,” Constantinidou, whose mother died 20 years ago, said in an interview. “But after I turned 40, I realized I wouldn’t be getting married and that thankfully I had this.” As the European Union, International Monetary Fund and bond investors scrutinize debt-ridden Greece, they need look no further than the pension system for a prime example of how the country is living beyond its means. Greek pensioners on average live on 96 percent of the salary they had when they worked, more than twice the proportion of earnings as Germans, according to the Organization for Economic Cooperation and Development . Greece “is a classic case of entitlements granted by short-sighted governments that didn’t bother to secure financing sources,” said Miranda Xafa , a former director at the IMF and now a senior investment strategist at Geneva-based IJPartners. “The political benefit of pension entitlements granted is immediate, but the cost will be incurred later.” Arduous Jobs The OECD as long as three years ago described Greece’s state pension system as a “fiscal time bomb.” Led by Prime Minister George Papandreou , lawmakers will begin passing legislation this month to overhaul the system, which the EU and IMF say contributed to the country’s debt crisis. Under terms of last month’s 110 billion-euro ($123 billion) bailout agreement, Greece will increase the retirement age to 65 from as early as 58, curtail early retirement and calculate payments over a longer period of employment. The aim is to bring uniformity to a system riddled with exemptions granted over decades by governments yielding to pressure from trade unions and other groups. The bill will be the first enacted by Papandreou’s government since the May 6 package that pledged 30 billion euros of wage and pension cuts and tax increases over the next three years. There’s one pensioner in Greece for every 1.7 workers, compared with one for every four in 1950, according to a government study published on May 12. There are 637 occupations the Greek state deems to be arduous in nature and qualify to stop work earlier. They include hairdressers, car washers, steam-bath attendants and radio technicians. ‘Paramount Reform’ Constantinidou isn’t included because she’s paid by the hour and doesn’t have enough of a private pension to live on when she’s older. She’s reliant upon the stipend she inherited from her mother, who worked at a state hospital. Should the country keep its generous benefits, Greek pension spending will rise to 24 percent of gross domestic product in 2060, double the proportion of 2007, the European Commission estimated last year. Pensions are “going to be the paramount reform in terms of medium-term budgetary perspectives,” EU Monetary and Monetary Commissioner Olli Rehn said on June 11. With unions promising a “storm” of protests, the government is trying to push through the bill before the September deadline set by the EU and IMF and ahead of Greek municipal elections, tentatively scheduled for October. Extending Work Dina Karahali, 47, is waiting to see the final form of the bill to know whether she will be penalized by the new system or manage to escape with the early pension she expected when she began working as a childcare worker 25 years ago. With a 16-year-old son, Karahali said she could take early retirement now on less than a full payment. What she fears is the new law will make her work an extra 13 years. “It’s difficult,” she said by telephone in Athens. “Do I get a pension now and not receive any money until I am 50? Or, will I have to work till I am 60?” About 5,000 state workers, mostly women, have submitted applications for early retirement this year, said Despina Spanou, an official at the civil servants’ labor union, ADEDY . That’s almost double the number filed at the same time last year, she said. Concerns about Greece’s long-term pension finances have long played a part in the wider spread in Greek bonds over those of Germany or Italy, the OECD said in its July 2009 report. That was before the 58-year-old Papandreou revealed the country’s budget shortfall was more than twice the previous government’s estimate, stoking concern about Greece’s ability to avert default and prompting the bailout package. Bonds Collapse Greek 10-year government bond yields were about 1.4 percentage points, or 140 basis points, higher than benchmark German bunds at the beginning of October as Papandreou came to power. The so-called yield spread widened to as much as 965 points on May 7 and yesterday was at 665 points. Generous Greek pensions played prominently in Germany, where public opinion has been largely opposed to the bailout. Germany lifted the retirement age to 67 from 65 in 2007, affecting about half of the nation’s 82 million residents. While Greece has a statutory retirement age of 65, and 60 for women, exemptions and special rules can allow a full pension at 58. Former European Central Bank Chief Economist Otmar Issing said in February that German taxpayers can hardly be expected to support Greek pensions. Bild Zeitung , Germany’s biggest-selling tabloid, ran a front-page headline in April asking: “Why do we have to pay Greece’s luxury pensions?” Best Years Greeks get a pension calculated on the last five years of their working life, which tend to be the highest-paid. German, Italian and Portuguese pensions are based on wages worked over a lifetime. Spain bases them on the best 15 years of work. In the Greek civil service, the so-called replacement rate can be as much as 149 percent, according to a report by the European Commission in October. The rate is a measure of how effectively a pension system provides income during retirement. The EU-IMF agreement states that Greece should move to a system basing earnings on the entire lifetime and introduce a price-based indexation system, used by most OECD countries. Such a system, according to the Paris-based OECD , would allow Greece’s biggest retirement fund to scale back spending by some 20 percent by 2050 to 2055, equal to about 1 percent of GDP. Governments since the end of the military junta in 1974 have struggled to force through reforms the EU has long demanded to the pension system or opening up product and labor markets to make Greece more competitive. ‘Dramatic Worsening’ “The reasons for the dramatic worsening of the pension systems finances are demographic developments, the exhaustion of the abilities of the pay-as-you-go system and decisions of the political system of our country for the past 35 years,” Labor Minister Andreas Loverdos told the International Labor Organization in a June 14 speech. Civil servants didn’t pay anything towards their pensions until 1992. Female civil servants with children under 18 can get early retirement. Unmarried daughters of state workers say the payment became a factor in staying single. Unions argue that going after employers who don’t pay mandatory contributions to pension funds is preferable to cutting benefits and raising the retirement age. Non-payment of contributions to state pension funds, prevalent among the self-employed, is estimated by the OECD at between 20 percent and 30 percent of revenue collected. Constantinidou is one such worker. She never managed to secure a permanent post and doesn’t get state benefits in her job supplementing the studies of high-school students at a central Athens college. “I work in the private sector and would need to work till I’m 65 to get a pension but it’s not going to happen,” she said. “No-one is going to hire a 60- or 65-year-old woman. Thankfully I have this.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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Transurban Rejects Increased $6.4 Billion Offer From Canada Pension Funds

May 11, 2010

By Victoria Batchelor May 12 (Bloomberg) — Transurban Group said its board rejected the takeover proposals from Canada Pension Plan Investment Board, CP2 Ltd. and Ontario Teachers’ Pension Plan Board.

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State Street Beats BlackRock to Manage $2.1 Billion in Massachusetts Funds

April 6, 2010

By Christopher Condon April 6 (Bloomberg) — State Street Corp. won two mandates to invest a total of $2.1 billion for Massachusetts’ public pension fund, beating BlackRock Inc. in each case. The state’s Pension Reserves Investment Management Board , which oversees retirement funds for public employees and teachers, awarded State Street’s asset-management unit $1.5 billion for non-U.S. investments and $600 million for emerging markets, according to an agenda published today. The board cited Boston-based State Street’s lower fees and “organizational stability” in making the selection. BlackRock’s bid included proposed fees nearly three times State Street’s, according to the pension board. It also said BlackRock “faces significant integration risk from its $13.5 billion acquisition of Barclays Global Investors in December 2009.” The deal made BlackRock the world’s largest asset manager, with $3.35 trillion in investments. State Street oversaw $1.91 trillion as of Dec. 31. Brian Beades , a spokesman for New York-based BlackRock, declined to comment. Both of the pension board’s mandates are for passive investments that track a market index. The larger mandate will increase the fund’s non-U.S. stock holdings overseen by State Street to $3.85 billion. The fund managed $42.2 billion as of Feb. 28. Bank of New York Mellon Corp. and Chicago’s Northern Trust Corp. were also finalists for the non-U.S. equity index mandate. Northern Trust was also a finalist to handle the emerging markets investment. The banks didn’t immediately return calls for comment. To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

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State Pension Plans Face $1 TRILLION Shortfall: Pew Center

February 19, 2010

HARRISBURG, Pa. ( BY MARK SCOLFORO, AP) — States may be forced to reduce benefits, raise taxes or slash government services to address a $1 trillion funding shortfall in public sector retirement benefits, according to a new study that warns of even more debilitating costs if immediate action isn’t taken. The Pew Center on the States released a survey Thursday of state-administered pension plans, retiree health care and other post-employment benefits in all 50 states that blamed a decade’s worth of policy decisions for leaving them shortchanged. The result for some states will be “high annual costs that come with significant unfunded liabilities, lower bond ratings, less money available for services, higher taxes and the specter of worsening problems in the future,” the study said. The cost of the trillion-dollar shortfall, which will be paid over the coming decades, is about $8,800 for each American household. The study did not include many city, county and municipal pension plans, which are thought to have similar underfunding. “We have a significant problem now, but it’s a problem that can be solved by taking relatively modest steps,” said Susan K. Urahn, the center’s managing director. “If they don’t do anything, if they wait, eventually they will have an unmanageable crisis on their hands.” As of 2008, states had $2.4 trillion to meet $3.4 trillion in promised pension, health care and other post-retirement benefits, according to the report. The true gap may even be wider, because the study did not account for the full impact of investment losses in late 2008, during the stock market downturn, and because many plans employ multiyear smoothing techniques to lessen the effect of a single year’s losses. But more recent stock market returns could help – on Wednesday, for example, Pennsylvania’s $47 billion public school pension plan reported it had earned about 12 percent on investments in the 2009 calendar year. Pew deemed 16 states solid performers in how they fund pensions, 15 needing improvement and 19 considered to be facing serious concerns. “Meanwhile, more and more baby boomers in state and local government are nearing retirement, and many will live longer than earlier generations – meaning that if states do not get a handle on the costs of post-employment benefits now, the problem likely will get far worse, with states facing debilitating costs,” the study said. The exploding financial burden could be a bitter pill for taxpayers, many of whom will not be collecting similar pensions or other benefits when they retire, said David Kline with the California Taxpayers’ Association. About one in five private sector workers have traditional defined benefit pensions, compared with about 90 percent of public-sector employees – including some that do not get Social Security. “Taxpayers in the future will be paying for people who worked decades before they may have even lived in the area or begun paying taxes, because the obligation for these benefits is just snowballing,” Kline said. The study graded states on how well they have managed employees’ retirement benefits. Florida, Idaho, New York, North Carolina and Wisconsin began the current recession with fully funded pension systems, while eight states have left more than one-third of their pension liability unfunded. Illinois was rated the most troubled pension system during the study period, with a 54 percent funding level and a total liability of more than $54 billion. In Pennsylvania, a series of decisions by the Legislature and governor have shielded taxpayers from much of the pain for the past decade, but costs of less than $1 billion a year now is projected to climb to about $6 billion annually in the coming three years. The report said policy makers have exacerbated the problem by expanding benefits, relying on overly optimistic assumptions about investment returns and failing to sufficient fund the programs. “Even though the actuaries tell the states what they should be doing, the states feel free to ignore that,” said Olivia Mitchell, director of the Pension Research Council at the University of Pennsylvania’s Wharton School. “So putting some teeth behind the requirements is really the problem.” Pew calculated a $587 billion national cost for current and future retiree health care and other nonpension retirement benefits, with only about 5 percent of that amount funded as of 2008. The cost of health care and the number of retirees are both on the rise, adding to the pressure on states. The study found that 15 states made some legislative changes to their state-run systems last year, 12 did so in 2008 and 11 in 2007. About a third of states had formal efforts to study potential reforms under way last year. “Pension plans work when they are allowed to work, and part of that dynamic is that sometimes adjustments have to be made,” said Keith Brainard, research director with the National Association of State Retirement Administrators. “It’s important not to take away decent retirement benefits for some of the few people that have them.” Pew said states should consider changes that have proven to be effective and politically viable. Among them: setting minimum contribution levels that are actuarially sound, sharing some of the investment risk with employees, cutting benefits, increasing the minimum retirement age, making employees pay more into the system and providing more robust oversight and investment rules. Mitchell said many states have constitutional prohibitions against lowering employee pension benefits, but health care programs can more easily be altered. READ the study: The_Trillion_Dollar_Gap_final –

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Wisconsin Commits $27.5 Million to Real Estate Fund of Funds

January 2, 2010

billion Wisconsin State Investment Board has made a $27.5 million investment in the Core Plus Real Estate Fund Q, which is structured by the pension fund as a convertible preferred equity investment. The commingled fund of funds investment is expected to

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Wisconsin Commits $27.5 Million to Real Estate Fund of Funds

January 2, 2010

billion Wisconsin State Investment Board has made a $27.5 million investment in the Core Plus Real Estate Fund Q, which is structured by the pension fund as a convertible preferred equity investment. The commingled fund of funds investment is expected to

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Pension Funds Eliminating Equities to Add $40 Billion of Corporate Bonds

December 3, 2009

By Bryan Keogh and John Detrixhe Dec. 3 (Bloomberg) — J.C. Penney Co. , the third-largest U.S. department-store chain, is dumping stocks from its retirement plans and gradually boosting bonds to 100 percent of investments from 20 percent as federal requirements to plug pension gaps take effect. The Plano, Texas-based retailer promised to “eliminate” uncertainty for shareholders caused by underfunded pensions, and will shift some of the money into investment-grade bonds, increasing fixed-income assets to the highest level in the plan’s history, J.C. Penney spokeswoman Darcie Brossart said. J.C. Penney has plenty of company. General Motors Co. and Goodrich Corp. have also been buying debt as the U.S. pushes retirement pools to cut riskier assets after losses jeopardized some funds. JPMorgan Chase & Co. says fixed-income holdings will rise 10 percent in the next few years, or about $40 billion of corporate debt. The new money is flowing into investment-grade bonds, which may be overheating after returning 21 percent this year, according to Cabot Money Management. “We’re seeing more plans leaning toward corporate bonds than has been the case historically,” said Mark Ruloff , the director of asset allocation at Arlington, Virginia-based consulting firm Watson Wyatt Worldwide Inc., which surveyed funds in August on their strategies. “It’s adding a new slate of buyers that weren’t in the market before.” Pension funds are increasing allocations of investment- grade debt to the highest level since the 1970s, when federal rules created a “bias” toward equities, as the U.S. mandates that plans set targets to fully fund worker obligations, Ruloff said. Competing for Debt Demand from retirement plans is competing with mutual funds and public pensions for corporate debt, even as prices may not be justified by the economic outlook or profits, said William Larkin , who oversees $500 million at Cabot Money Management. Investment-grade bonds have returned 21 percent this year, including reinvested interest, the most for a comparable period since 1985, according to Merrill Lynch & Co. index data. Cash flowing into the market has allowed companies to borrow a record $1.18 trillion this year, Bloomberg data show. Investment-grade securities are rated at least Baa3 at Moody’s Investors Service and BBB- by Standard & Poor’s. “I’m seeing a lot of ugly issuers out there,” said Larkin, a Salem, Massachusetts-based money manager. “Someone’s buying them, and they’re very, very expensive.” Auto, Airline Losses Congress passed the Pension Protection Act of 2006 after losses in the auto and airline industries threatened to saddle the government-run Pension Benefit Guaranty Corp. with “significant” liabilities, according to JPMorgan. Companies in the S&P 500 Index had about $1.1 trillion of assets in their pensions at the end of 2008, compared with $1.4 trillion of liabilities, according to JPMorgan. After last year’s 38 percent plunge in the S&P 500 Index, the worst since 1937, the plans were underfunded by about 22 percent. The Pension Protection Act of 2006 encourages managers to shift to corporate bonds in two ways. The act discounts liabilities based on high-rated investment-grade debt, providing an incentive to put assets in similar investments. The rules also require plans to ensure they are fully funded, providing benchmarks and penalties along the way and requiring plans be frozen if the assets fall below 60 percent of the value of future liabilities. ‘Game Changer’ For J.C. Penney, with about 150,000 participants in its primary pension plan, the rules are a “game changer,” Chief Financial Officer Robert Cavanaugh told analysts and investors on a June 18 conference call. “At the end of the day, it’s real easy,” he said. “Do you have enough cash to protect your associates’ retirement?” Corporate plans traditionally allocated about 60 percent of their assets to equities, 30 percent to fixed-income securities and 10 percent to alternatives such as private equity and real estate, said Joseph Rosalie, principal in the human capital practice at Deloitte Consulting LLP in New York. J.C. Penney is aiming for a 75 percent fixed-income allocation by 2014 to 2017, depending on how quickly the stock market recovers from the recession , according to the company. In June, the fund allocated 70 percent of its assets to equities, 20 percent to fixed-income and 10 percent to real estate. High-quality corporate bonds will make up an increasing share of the fixed-income portfolio over time and currently make up a “meaningful component,” Brossart said in an e-mail. “J.C. Penney is taking it to an extreme,” Rosalie said. ‘Blackjack Table’ With the S&P 500 up 23 percent this year, corporate pension funds may resist switching, said Rosalie, who expects allocations to be split evenly between equities and bonds in coming years. “When do you get off the blackjack table?” he said. “How do I walk away from equities when I know the market’s got to return?” Pensions were lured to the corporate market earlier this year after yields rose to the highest on record relative to Treasuries, said Michael Schlachter , who advises retirement funds as a managing director at Santa Monica, California-based Wilshire Associates Inc. After widening to 6.03 percentage points in January, so- called spreads have narrowed to 2.19 percentage points, about the lowest since January 2008, according to Merrill Lynch index data. The market’s 21 percent return this year compares with losses of 6.82 percent in all of 2008, the worst on record. ‘Extreme Market Conditions’ “It was a shift born solely of extreme market conditions,” Schlachter said. “Corporate spreads have not been super compelling like they have been over the past six to nine months.” Goodrich , the largest maker of aircraft landing gear, began shifting to investment-grade bonds from Treasuries earlier this year, Chief Financial Officer Scott Kuechle told analysts on Nov. 7. Goodrich’s U.S. plan was underfunded by 29 percent as of last Dec. 31, with about $2.4 billion of assets covering $3.4 billion of expected liabilities. “That was pretty well-timed in the beginning of this year,” he said. The Pension Benefit Guaranty Corp. , which takes over failed private funds, insuring the plans of more than 44 million Americans, is moving away from equities, according to spokesman Jeffrey Speicher. As of Sept. 30, the PBGC, which isn’t covered by the Pension Protection Act, allocated 60 percent of its about $70 billion in assets to cash and fixed-income securities and 37 percent to equities. GM’s asset management unit began employing a liability- driven investment approach in 2003 and moved about 20 percent of its U.S. fund’s assets to fixed income from equities in late 2006, limiting losses from last year’s market plunge, Julie Gibson, a spokeswoman for GM, said in an e-mail. “This reallocation served us well last year, when the pension lost around 11 percent, much less than a lot of firms with greater equities exposure,” she said. To contact the reporters on this story: Bryan Keogh in London at bkeogh4@bloomberg.net ; John Detrixhe in New York at jdetrixhe1@bloomberg.net

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CalPERS Considers Showing Blackrock The Door

November 26, 2009

The WSJ is reporting that CalPERS is considering dropping Blackrock as an investment advisor to the pension fund after a disastrous year. Amongst the investments Blackrock steered CalPERS into was the Stuyvesant Town/Peter Cooper Village deal in NY Here is the original:  CalPERS Considers Showing Blackrock The Door

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Transurban Rejects $6 Billion Offer From Canada Pension Funds; Shares Jump

November 5, 2009

By Sarah McDonald and Nichola Saminather Nov. 5 (Bloomberg) — Transurban Group , Australia’s biggest toll road operator, rejected an unsolicited A$6.8 billion ($6.2 billion) takeover offer from Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan. The cash and stock offer valued Transurban shares at A$5.25 each, 20 percent more than yesterday’s closing price , the Canadian funds said in a statement today. Melbourne-based Transurban said the offer was “incomplete” and it is willing to engage on “bona fide proposals.” Transurban jumped 19 percent in Sydney as Canada Pension and Ontario Teachers, with $190 billion of assets, said they will seek discussions on the proposal. The two funds, with a combined 28 percent stake in Transurban according to Bloomberg data, are seeking to buy infrastructure after losing on stock investments last year. “They’re already a big shareholder in Transurban, and they understand the assets very well,” said Mark Freeman , chief investment officer at Australian Foundation Investment Co. , Transurban’s fifth-largest holder according to Bloomberg data. “The revenues are fairly secure and reasonably predictable.” When asked whether AFIC would sell its holding, Freeman said it would assess offers and that “our starting proposition is that we’re very comfortable with our investment and we’re long-term holders.” Pocahontas, Hills Transurban owns toll roads including the Pocahontas 895 in Virginia and the Hills M2 in New South Wales, Australia’s most populous state, where the population is increasing by 1.6 percent a year, according to the nation’s statistics bureau. Investors are seeking transport-related assets as a way to bet on an economic recovery. Warren Buffett’s Berkshire Hathaway Inc. agreed this week to pay $26 billion for the 77.4 percent of railroad Burlington Northern Santa Fe Corp. it didn’t own. Ontario Teachers’ in August raised its stake in Maple Leaf Sports and Entertainment, owner of the Toronto Maple Leafs and Toronto Raptors sports teams. Canada Pension spent A$1.64 billion in June to buy Macquarie Communications Infrastructure Group, an investor in radio transmission towers, raising its initial offer by 20 percent to win shareholder approval. ‘Willing to Engage’ Transurban’s board “remains willing to engage on bona fide proposals which provide appropriate value and certainty to security holders,” it said today. The company is trading at a price-to-book ratio of 1.9 times, according to Bloomberg data. Macquarie Infrastructure Group , which owns stakes in toll roads in six countries, has a price-to-book ratio of 0.7 times. Transurban shares added 85 Australian cents to close at A$5.24 in Sydney. They peaked at A$8.56 in May 2007. The benchmark S&P/ASX 200 Index fell 0.7 percent. “The market had missed the value, that was pretty obvious,” said Andrew Chambers , an analyst at Austock Group Ltd. in Melbourne. We wouldn’t support any takeover at less than A$5.80 a share.’’ De-listing Transurban “would offer the Canadian’s significant potential management cost savings,” he said. Transurban’s head of investor relations Henry Byrne declined to comment beyond the statement. Ontario Teachers spokeswoman Deborah Allan and Canada Pension Plan spokeswoman May Chong didn’t immediately respond to telephone messages left after hours. Existing Stake Transurban is already Ontario Teachers’ largest investment in a listed company in Australia, and third biggest stock investment worldwide, according to the pension fund’s latest annual report . The fund sold a stake in Macquarie Infrastructure Group , an Australian company that owns toll-road stakes in six countries, for A$342.6 million on Oct. 28, it disclosed in a regulatory filing. Ontario Teachers held C$87.4 billion ($82 billion) in net assets at Dec. 31 last year, according to its Web site . Canada Pension Plan had a C$120 billion dollar investment portfolio at June 30. Transurban posted a loss of A$16.1 million for the year ended June 30, according to a company statement issued Aug. 26. The company’s assets include the 22-kilometer (14 miles) CityLink highway in Melbourne, which handled an average of 675,113 vehicles a day in the three months ended September, according to an Oct. 12 statement. The company also owns half of the Westlink M7 in Sydney, used by some 126,405 vehicles daily. In the U.S., Transurban is part of a group developing high occupancy toll lanes on the Capital Beltway around Washington. The company is in talks on a similar project for a highway linking the U.S. capital to Virginia. To contact the reporters on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net .

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CalPERS documents show more fees paid to Alfred Villalobos (Los Angeles Times)

November 4, 2009

Private-equity firms paid the former CalPERS board member nearly $18 million more than the $53 million previously disclosed for helping them get CalPERS investment business. Fees paid by private-equity investment firms to a former California Public Employees’ Retirement System board member have ballooned to more than $70 million in new disclosures released by the pension fund, known as CalPERS. Go here to see the original:  CalPERS documents show more fees paid to Alfred Villalobos (Los Angeles Times)

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New Mexico CIO quits amid pay-to-play inquiry

October 22, 2009

A member of the pension said Gary Bland had been found to have pressured investment firms to hire certain placement agents.

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New York Comptroller DiNapoli Bans Campaign Donations From Money Managers

September 23, 2009

By Martin Z. Braun Sept. 23 (Bloomberg) — New York State Comptroller Thomas DiNapoli , the sole trustee of the $116.5 billion state pension fund, signed an executive order forbidding the fund from doing business with money managers who contribute to candidates for the office. DiNapoli, a Democrat who’s running for re-election next year, said the step was needed to restore public confidence in the pension fund, which has been rocked by allegations of kickbacks. The order, which applies to donations to incumbents as well, takes effect in 45 days, DiNapoli said today in a conference call from Albany. “Pay-to-play has no place in the management of public pension funds,” he said. DiNapoli’s move parallels a July proposal by the U.S. Securities and Exchange Commission to bar firms from managing a fund’s assets for two years if its executives, agents or family members gave money to an elected official involved in awarding contracts. DiNapoli told reporters that New York didn’t want to wait for the commission to adopt the proposal. The SEC and New York Attorney General Andrew Cuomo are investigating whether investment managers made illegal payments to middlemen and campaign donations to secure business with the fund, the third-largest of its kind. Hank Morris , a political adviser to former state Comptroller Alan Hevesi , a Democrat, was charged with soliciting millions of dollars of kickbacks and contributions from firms managing state money. Hevesi hasn’t been charged. Morris has denied wrongdoing. Besides Morris, investigators have charged five others in the probe of New York’s pension fund, and two have pleaded guilty. Cuomo Proposal Cuomo, who proposed a public pension “Code of Conduct,” said he was pleased by DiNapoli’s action. The attorney general’s proposal would limit campaign contributions and ban the use of third-party intermediaries to solicit investments. DiNapoli previously banned business with firms that use middlemen. “The state comptroller’s action today means our pay-to- play reforms will now govern the pension fund for the state, as well as those of New York City, and the New York State Teachers pension fund,” Cuomo, a Democrat, said in a statement. DiNapoli’s donation ban doesn’t apply to those seeking other statewide offices, such as governor and attorney general. The comptroller said he supported public financing of campaigns. “You need to replace private money in politics with public money,” DiNapoli said. California’s public employees’ and teachers’ pension funds are the two largest in the U.S. To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net

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CPPIB Sterling To Pay 257M For Livingston

September 10, 2009

Canada Pension Plan Investment Board and Sterling Partners will acquire Livingston International Income Fund for about 257 million

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Truell’s Pension Corp. Seeks 2010 Public Offering as Plan Deficits Swell

August 18, 2009

By Kevin Crowley Aug. 18 (Bloomberg) — Pension Corp. LLP, the British insurer of pension fund payouts started by Edmund Truell , is considering an initial public offering next year as pension plan deficits widen to their largest on record. “The amount of capital required to solve the U.K.’s pension problem is just gargantuan, and you can only begin to get that sort of money from public markets,” Truell, 46, said in a telephone interview. The share sale “will be next year rather than this year.” Truell started Pension Corp. in 2006, raising 900 million pounds ($1.5 billion) from investors including Swiss Reinsurance Co. , J.C. Flowers & Co. and Royal Bank of Scotland Group Plc . The firm manages 5 billion pounds of assets and plans to raise the money to insure more liabilities from pension funds seeking to secure future payouts for their members. About 87 percent of the U.K.’s 7,400 final salary pension plans are in deficit following the financial crisis, according to the Pension Protection Fund , a government-backed insurance program. “The bulk-purchase annuity market is going to continue to be a good market because companies want to get their pension funds off their balance sheet,” said Trevor Moss , a London- based analyst at MF Global Securities Ltd. who tracks insurers. Pension liabilities add “enormous volatility to their balance sheet and profit and loss accounts, so they’re all going to find ways to take that risk away.” Companies including Cable & Wireless Plc , RSA Insurance Group Plc and Thorn Ltd. have insured the retirement payouts of their pension fund members in the last year to reduce their exposure to volatile investment returns and the risk of former employees living longer than expected. Pension Deficits Swell Truell founded Pension Corp. after 18 years working for Duke Street Capital, which he helped start as part of Hambros Plc in 1988. Guernsey, Channel Islands-based Pension Corp. was the second-biggest insurer of pension plan liabilities last year behind Legal & General Group Plc , which, with Prudential Plc , has been the largest insurer in the market for almost 20 years. Shortfalls of the U.K.’s 100 biggest publicly traded companies more than doubled to a record 96 billion pounds last month from a year earlier, according to London-based actuary Lane Clark & Peacock LLP . BP Plc , Europe’s second-largest oil company, said in June it would close its final salary pension plan to new U.K. workers, and lender Barclays Plc has asked 18,000 employees forgo up similar benefits. Half of British companies with defined benefit pension plans expect to close them to all employees by 2012, Watson Wyatt Worldwide Inc. said in a survey published yesterday. Pressure on Trustees “More schemes closing to future accrual puts them into the back bucket from the employers’ point of view,” said Paul Belok , a London-based actuary at Aon Consulting Ltd. Once a plan is closed companies “will really want to sever the link. The only way of doing that is in the bulk annuity market.” Pressure from pension trustees to secure members’ future payouts is likely to encourage companies to transfer as much as 20 billion pounds a year in retirement liabilities over each of the next 15 years to firms such as Pension Corp., Legal & General , and Goldman Sachs Group Inc. -owned Rothesay Life , Belok said. About 8 billion pounds of assets were moved in 2008, according to Aon. The amount of pension liabilities transferred dropped to 1.5 billion pounds in the first half of 2009. Rising defaults on corporate bonds, which typically back annuity payments, at the beginning of this year slowed dealmaking, Belok said. Transactions may resume in the second half as the bond market stabilizes, he added. ‘Not Enough Capacity’ More insurers like Pension Corp. will have to raise capital if they wish to meet a long-term rise in demand for bulk annuities, according to Guy Coughlan , managing director of JPMorgan Chase & Co.’s pension advisory group. “There’s not enough capacity in the global insurance and reinsurance industry to transfer the longevity risk of corporate pension plans in the U.K. alone,” he said. “It’s an overwhelming problem that you can’t solve without bringing multiples of the current capital that exist in the insurance industry.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net .

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