Tuesday, July 22, 2008

Note to PSP: Where's Overlord Capital when you need them?

Looks like the Public Sector Pension Plan (PSP) lost a cool billion on the Asset Backed Commercial Paper (ABCP) meltdown.

Obviously, they weren't sufficiently wise to realize that ABCP was a virtual ponzi scheme.....buying long term assets with short term paper on the presumption that the short term paper could rollover based on the greater fool theory of the ABCP secondary market. Maybe they needed Overlord Capital to hold their hands.

These guys at PSP were the first out of the gate after Halloween 2006 to buy grossly undervalued Thunder Energy Trust......with their partner Overlord Capital. Perfect name for what’s going on here.

PSP manages the retirement assets of the 370,000 federal civil servants......who were the very people who gave a special carve out from the income trust tax for pension funds....their own pension fund.....that’s called self dealing and not Tax Fairness. Maybe the Tax Fairness Plan should be renamed the Tax Self Dealing Plan. Do you suppose the NDP would have still supported it?

Meanwhile how does PSP owning Thunder Energy as a private trust and not pay Flaherty's 31.5% income trust tax deal with alleged tax leakage? It doesn’t. By definition, it can’t. Meanwhile, why no growth constraints for Thunder when held by PSP and yet growth constraints when owned by the public? Makes zero sense........to all except Canada’s Main Stream Misleadia. They seem to like to ignore these gross inequities that underlie Flaherty's so called Tax Fairness Plan

Now we know why Flaherty is so personally interested in the ABCP market.....he has a vested interest:

Sean Silcoff, Financial Post Published: Monday, July 21, 2008

MONTREAL -- One of Canada's largest public pension fund managers, PSP Investments, has taken a $920-million, or 2.3%, hit to the value of its holdings due to the global credit crunch, revealing for the first time its exposure to Canada's frozen non-bank asset-backed commercial paper (ABCP) market.

But while the writedowns dragged the overall results of PSP -- which manages pension assets on behalf of the federal public service, Canadian Forces and Royal Canadian Mounted Police -- into negative territory, the fund actually performed relatively well, a pensions expert says.

"Certainly PSP got caught out ... and that's not good," said Janet Rabovsky, practice leader, investment consulting, with Watson Wyatt. But PSP's loss of 0.3% for the year ending March 31, down from an 11.3% gain the previous year, beat the average pension fund return of -0.9% over the period. "It's not great, but it's certainly relatively not too bad," Ms. Rabovsky said, adding PSP benefited from better-than-average returns in real estate and private equity and its higher exposure than other large pension funds to well-performing Canadian equities.

In its annual report, PSP, which had $38.9-billion in assets at its year-end, revealed for the first time it held close to $2-billion worth of ABCP, making it one of the top investors in the asset class before it was frozen last August. Observers have speculated PSP was one of the largest players in the $35-billion market, as it is a key participant in a salvage effort to restructure the ABCP into long-term notes.

PSP said it has written down its ABCP by $450-million, or 23%. That is more than the 15% markdown the largest ABCP investor, the Caisse de dépôt et placement du Québec, took to its ABCP, though that might reflect the worsening state of the markets between the Caisse's Dec. 31, 2007 year end and PSP's fiscal year-end.

But PSP had another unwelcome surprise in its report: It also held $1.4-billion worth of "collateralized debt obligations," another opaque investment class that has suffered steep losses since credit markets headed south last summer. Of that, PSP has written down its holdings by 33.6%, or $470-million.

CEO Gordon Fyfe said in the report PSP "expects, over time, to recover the unrealized losses related to [the CDOs] if they are held to maturity."

Meanwhile, the writedowns will have little effect on PSP, an eight-year-old Crown Corporation, which will benefit from positive cash inflows from contributions through 2030.

The report shows Mr. Fyfe earned $1.3-million for the year, down 26% from the previous year. That was primarily affected by a $500,000 drop in the amount of his short-term incentive pay.

1 comment:

Dr Mike said...

Calling Al Rosen , calling Al Rosen

Ponzi scheme alert ponzi scheme alert.

Where is Al when you really need him--he was quick in his so-called determination that income trusts were ponzi schemes.

Why so slow now??

Dr Mike Popovich