Thursday, April 2, 2009

Imagine if Teachers' massive losses had been caused by Harper, as ours were?


Ontario Teachers’ Pension Plan experienced a massive meltdown in their assets under the management of Jim Leech, the same hypocrite who applauded Flaherty’s income trust tax on the basis that he could easily exempt himself from it at the flick of a switch, courtesy of Flaherty's desire to buy peace with the pension funds, while at the same time screwing the little guys saving for retirement in their RRSPs.

Hypocrite, because a year earlier under the Goodale round, Teachers' was up in arms saying they didn't want tax policies that were discriminatory.....yeah.....only the ones that were discriminatory against them, but everybody else be damned, at which point that lofty "principle" about discrmination is tossed out the window a year later under the Flaherty round and Teachers' got a tax policy that benefiited them, but was descriminatory to the little guy.

The little guy was only ever a convenient foil that Teachers' latched onto for their own advancement in the Goodale round, only to be cast off upon Teachers' achieving its goal in the Flaherty round. Meanwhile, look out below little guy. It's been good using you.

This most recent failure on the part of Jim Leech occurred on the heels of Teachers’ walking from the BCE deal/fiasco of their creation, the failure of which triggered a $1.2 billion reverse break fee payable by Teachers' to BCE and Teachers’, and Teachers' being a controlling shareholder in Listeriosis Inc., which also goes by the name of Maple Leaf Foods.

Where do they find these people? Oh yeah, Jim Leech received his training as the number 2 guy at the failed Unicorp, which blew up in the go-go 80’s.

Under Jim Leech’s investment prowess, Ontario Teachers’ lost a whopping $21 billion last year. This may sound huge, but it’s only 60% of the losses that income trust investors incurred because of Harper’s fraudulent betrayal.

Ask yourself, how raving mad and justifiably angry would Jim Leech, Dalton McGuinty and Ontario Teachers’ be if this massive loss of theirs was the result of a direct act of government, rather than the act of the marketplace and their own investment outcomes, and an act of the Harper government that was predicated on a falsehood used to rationalize that injurious act of government? Instead, these are the very people who are responsible for OUR retirement losses.....Harper, McGuinty, Jim Leech and Teachers’, since they all conspired to bring this income trust tax into being. It was a collaborative effort. Meanwhile Flaherty gave Teachers’ plan beneficiaries the benefit of pension income splitting, but not us. This is called the Tax “Fairness” Plan? The year is 1984. Gross inequities are branded by the Truth Ministry as "fairness". Teachers' publicly applauds policies that are grossly discriminatory to other investors saving for retirement as wholly acceptable after campaigning vigorously against policies that are discriminatory? With deceits such as this in the world of finance, it's no wonder we are experiencing a global market meltdown, as lies and contradictions such as these can't be suspended in disbelief forever:

Ontario Teachers' changes tack after 18% drop
Karen Mazurkewich, Financial Post Published: Thursday, April 02, 2009

Jim Leech, president and chief executive of the Ontario Teachers' Pension Plan.Courtesy of OTPPJim Leech, president and chief executive of the Ontario Teachers' Pension Plan.

This was not the way he would have liked to begin his tenure as president and chief executive of Ontario Teachers' Pension Plan, but if there is one lesson Jim Leech says he can take away from posting the worst returns in the history of OTPP is that it "makes you more humble."

After eight straight years in the top quarter of Canadian pension plans, OTPP announced that the pension plan lost $21.1-billion of its asset base, which represents a negative 18% rate-of-return for the year ending Dec. 30, 2008. The fund's total assets have dropped from $108.5-billion to $87.4-billion.

The median return for the large Canadian pension plans was a negative 18.4% in 2008, which means the star managers at OTPP are now running in the middle of the pack.

"It's not what either of us expected," said Mr. Leech, who along with Neil Petroff, chief investment officer, faced journalists and took it on the chin. "It hurts to fall off the horse," he added.

In losing such a large chunk of its assets, OTPP has erased four years of investment gains. Mr. Leech did praise Mr. Petroff for "keeping people focused during the noise." And he added if there is one consolation it's the fact that Canadian pension funds by far have out performed their U.S. and U.K. counterparts.

Whereas OTPP's lost 19.4% of its assets, U.S. heavyweights such as the California Public Employees' Retirement System (CalPERS) which saw its assets shaved by 33%. OTPP also outperformed the Caisse de dépôt et placement du Québec which reported a record 25% loss of its asset base.

The biggest bite out of the OTPP apple came from its equities portfolio which posted a $15.1-billion loss, which represents a negative 23.2% return. But that was expected after the fall market crash and even beat its benchmark of negative 26.4%.

The unexpected $6.7-billion hole the fund is now digging out of is the collapse of its fixed income asset class, which saw a negative return of 43.6%, due largely to losses racked up by products like credit default swaps.

OTPP is "substantially reducing" its exposure to these products, according to Mr. Petroff. "It made us a lot of money (in previous years), but the market has changed and we have to adapt," he said.

OTPP started shifting into more conventional fixed-income strategies in January, 2008. As a result, the team managed to reduce some of its exposure. "[Mr. Petroff] saved billions for doing that as quickly as he did," said Mr. Leech. OTPP's reliance on external hedge funds has also been reduced. In 2007, OTPP had investments in 200 hedge funds; today they are only in 50.

OTPP recorded a modest drop of 4% in its real estate portfolio -- which is one of the toughest portfolios to value. In fact, there is a significant discrepancy among the real estate portfolios within pension plans.

For example, the Caisse de dépôt took a 22% write down and OMERS recorded a 6% increase. Mr. Leech said the fund took "great rigor" with its mark-to market writedown.

As a result of its overall poor returns, OTPP announced a shift in its asset-mix policy, giving greater weight to inflation sensitive investments such as infrastructure. This portfolio will grow from 33% to 45% of its overall assets at the expense of equities and fixed income.

With such a fundamental shift in asset allocation, OTPP has signalled it will be looking to make some big plays -- most likely in infrastructure.

Despite the hit to its balance sheet, Mr. Petroff said OTPP still has "tremendous amount of firepower," and has "innovative ways to fund transactions." One way to raise cash, he said, might be to issue debt.

The CPPIB announced it would raise between $2-billion to $5-billion in commercial paper and bonds, and OTPP might follow suit.

This setback of 2008 only adds to the pension fund's existing blues. OTPP is facing a huge solvency deficit of $19.5-billion in part due to the low interest rate, which has reduced bond yields from 4.5% return plus inflation in the early 1990s, to 1.6% today.

10 comments:

Hurting Hard in Ontariooooouch said...

Duh? How much is this going to cost me--me the provincial taxpayer who is not a member of any defined benefits provincial government pension?

Duh? How much is $19 billion divided by ther 6 million people who actually pay taxes in Ouchario! (See http://www.cra-arc.gc.ca/gncy/stts/gb06/pst/ntrm/pdf/table5-eng.pdf for more info.)

Answer: $3,300 per taxpayer.

That's a lot of hurt caused by one man. Of course he had a lot of help. Jim Flaherty, Stevie Joe Harper, Jocko Mints, Gorgeous Greg, Angelo at MangleLife, etc.

Anonymous said...

Guys that are posting huge negative returns in pension fund are now talking about getting back on their feet by issuing debt!?

Take a look at what happened to the market after it came back in 1930 and you don't want to be a retiring teacher........ever. But Jimmy will get his gold plated exit package for f*cking it all up.

Neville

Anonymous said...

Hurting Hard in Ontariooooouch:

You think like me!

Next time you see them, please give my best to Jim Flaherty, Stevie Joe Harper, Jocko Mints, Gorgeous Greg, and especially Angelo at MangleLife, etc.

Brent Fullard

CAITI said...

Neville:

I saw that!

Knowing that we are perfect as managers and it was the market that was wrong, we will leverage up our meager returns with some debt!

A friend of mine who used to work at Tecahers', told me that the Caisse's position on ABCP wasn't meant as a place to park short term money, but rather was intended as a long term stream of income derived from the (presumed) "spread". As such, ABCP was nothing more that the Caisse's first foray at borrowing to buy, and earn a levered return.

Why in the world are "lenders" becoming "borrowers" when we are told that "neither a borrower or lender be", so these master of the universe decide they want to be both!?!

Brent Fullard

Anonymous said...

And now you've got that savvy investor Sabia running the Caisse. Stop the madness I want to get off! Wait'll the pensioners find out that the debt always gets paid first.

Neville

Sent wirelessly from my BlackBerry device on the Bell network.

CAITI said...

Neville:

Do you think that might have been one of Sabia's "take-aways" from his BCE SNAFU? Situation Normal All...

Brent Fullard

Anonymous said...

Jim Leech: "Read my lips, BCE will close"

Hornby

Anonymous said...

Brent:

SNAFU? Sabia's Take-away?

Well I'm not sure?

Everyone says he's a really smart guy and he probably is, but he's got the old greed monkey big time.

He's obviously trying to get it off his back or do some kind of penance by foregoing bonuses and pensions and so on.

Or maybe he just figures the markets are going to be shite for the next couple of years, so he's not really giving much up anyway or maybe he has a wife who just wants him out of the house.

I could go either way on that.

Neville

Sent wirelessly from my BlackBerry device on the Bell network.

Dr Mike said...

So what has been the result of all of this "dinking" around by Flaherty & his jerk cronies??

Tits-up for the little guy.

Again.

Dr Mike.

Anonymous said...

Below is the top-cut of a story related to OTPP's massive losses (of $20 billion). Would these losses have occurred if Teachers had applied its famous governance standards to themselves?

But they did not, and so they have become victims of what Jean Paul Sartre called 'mauvaise foi', "bad faith". Metaphysically bad faith involves treating oneself as an inert object -- as something beyond the reach of one's own will and judgement.

As my Irish grandmother philosopher would say "If your shit don't stink, you don't know who you are."

Louis

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From: http://business.theglobeandmail.com/servlet/story/RTGAM.20090403.wrteachersactivist02/BNStory/Business/home

Are Teachers' days as governance cop numbered?

The pension plan, long a leading voice on boardroom issues, has sharply cut its Canadian holdings - and its say over reform