Saturday, April 4, 2009

Teachers' pension plan loses $19 billion in 2008

Yup: $19 billion loss at Teachers’, that sure sounds like an 18% meltdown to me.....exactly like income trusts investors, however with two notable exceptions:

(1) 18% of Teachers’ assets equals $19 billion, whereas 18% of trust investors assets equaled $35 billion

(2) Teachers’ lost their money for reasons strictly of their own doing. Trust investors lost their money for reasons strictly of Harper, Flaherty and the corrupt Mark Carney’s doing

Teachers made the mistake of trusting their own judgment. We made the mistake of trusting our fiduciary representatives in government. That’s somewhat of an argument in terms don’t you think, if you can’t trust your fiduciary representatives in government, given that the definition of fiduciary is “ someone in a position of trust”?

Maybe we should drive that message home to MPs by redefining their role as Fiduciary Members of Parliament. That way, we could refer to them as my F’ing MP. A term that is already in common usage, for all the wrong reasons.

Alternatively we could come up a name that would allow us to use the acronym for our elected representatives of NFG?

That would certainly apply very well to all the members of the NDP. All of whom have proven themselves to be completely NFG, including their new Finance Critic, Thomas Mulcair, from whom I anticipated good things, after I debriefed him in length on the phone after he called me looking for the “dirt” on Mark Carney. Tomas proved to be good study as he prepared himself in advance of the Finance Committee hearings on Mark Carmey’s appointment as Governor of the Bank Of Canada , in that he confronted the evasive Mark Carney about whether Carney’s income trust tax had served its intended goal in light of all the takeovers of trusts that it had spawned. Tomas cited the example of Abu Dhabi buying Prime West, which I told Tomas over the phone was one of the two book ends of this policy’s absurdity. The other was the LBO of BCE, but Tomas shied away from that. Coming from Montreal, Tomas is no doubt cozy with all the top political salons on Montreal, such a BCE and Power Corporation, where political favours are bought and sold, in much the same way as a cap and trade system.

Tomas Mulcair......where are you?.....have you lost your interest in the truth?.......Carney never asked your question. Since when did you start taking no for an answer.....from a ex Goldman Sach’s bureaucrat with an obvious ax to grind? You never call me any more. Is that because you no longer have a personal need to use me? Or did you simply lose my phone number, in which case let’s get re-aquainted at 647 505-2224. You are missing out on some real damning material to make you look smart and Harper look like the corrupt and incompetent pawn that he is.

Teachers' pension plan loses $19 billion in 2008

Managers to pare back equities as investments post record 18% loss
Apr 03, 2009
James Daw
Toronto Star

The Ontario Teachers' Pension Plan lost $19 billion in 2008, missing investment performance benchmarks and erasing three years of superior returns.

The annual loss was about average for large pension funds in Canada at 18 per cent, but Teachers' own benchmark was a 9.6 per cent loss. Chastened executives revealed yesterday the fund's first failure in many years to beat investment market returns and most other pension funds reduced assets by an extra $8.8 billion.

`"It hurts to fall off a horse, but you have got to pick yourself up and say: `What did we learn?'," fund president James Leech told reporters. "If it looks like a bubble then it is a bubble and try to prepare yourself.''

The extra loss cost more money than recent sharp increases in payroll deductions will ever raise. But a representative said teacher unions remain confident the fund managers will learn from their mistakes and secure the benefits of 173,000 teachers and 111,000 retirees.

"These are challenging times," said Joe Lamoureux, president of the Ontario Teachers' Federation, the body that deals with the province to decide contribution rates and benefit levels. He said the federation is confident investments will rise in value as the world comes out of recession and inflation protection will not have to be reduced.

Leech said investment managers realize they could have done more to guard the fund, even amid a global collapse in asset values.

Net assets fell to $87.4 billion from $108.5 billion, due to the combination of investment losses and a $1.9 billion gap between annual contributions and the cost of benefits.

Counting the value of future contributions, the plan has about $5.90 for each $7 of pension promises. But the fund will spread last year's losses over four years. As a result, it has reported it was short only $2.5 billion compared with obligations of $140 billion.

Investment managers avoided the full extent of stock-market losses, but lost $6.7 billion, or 43.6 per cent, on the fund's fixed-income portfolio when they could have had a 12 per cent gain.

The managers were betting that exotic hedge funds, securities backed by commercial mortgages and credit-default swaps would produce higher returns than government and corporate bonds.

"This strategy was working as expected, surpassing market benchmarks significantly for several years running but was fundamentally affected by the credit crisis that began in 2007," according to an annual report released yesterday.

"We starting unwinding these exposures (selling) when the subprime mortgage crisis emerged in late 2007, but could not completely get out of these investments before the credit markets closed."

The fund has moved to a more conservative investment stance, with less invested in stock markets and more in inflation-sensitive investments like real estate, infrastructure, timberland and commodities.

Board chair Eileen Mercier says in the annual report that "no system of risk management could have forecast the extent of last year's market rout" but a senior management committee will deliver more frequent risk reports.

Leech and four other executives saw their total compensation for 2008 cut by 48 per cent as a result of the losses.

A larger group of managers saw their pay cut by $27 million.


Dr Mike said...

When I was in university I used to work at a welding shop in the summers--one of the guys I worked with had the nickname NFG--when I started the job the first summer , I had no idea what that term meant as I was fresh from the "sticks".

Didn`t take me long to figure out for myself that the guy was dangerous , incompetent & you couldn`t trust him.

Sounds suspiciously like our "new" Conservative gov`t.

Dr Mike

PS--How long does it take for that monicker "new" to become really old??

Answer--just 9 months.

Kephalos said...

Canadians really are different.

In the USA, if you lose $18 billion of equity, pension or otherwise, there will be a huge uproar and the loosing of hounds and attack dogs.

In Canada, if you cause or participate in an $18 billion loss or $35 billion fraud, your career moves onwards and upwards... certainly no worse than sideways but you may have to forego stock options from a erstwhile employer.

Canadians really are different, eh?

Anonymous said...

Probably the most egregious example in Canada of the Taxpayer bailing out the comparatively wealthy Public Sector is the Ontario Teachers' Pension Plan. In 2006 after the Fund generated 11% investment returns, besides matching the employee contributions of $310 Million to the Fund, taxpayers bolstered the unfunded liability with $740 Million. The year before it was $708 Million. For 2007, $797 Million. For 2008, $809 Million and for 2009, Jack Minz guesstimated this December past, $1.1 Billion.

So what if the working teachers make higher contributions to the fund? The Public Sector cabal simply increases their wages to cover the increased contributions. Ontario High School teachers have had their contributions raised from 8% to 11%. But their pays are being increased 3% a year for the next four years. The first 3% covers their contribution increase forever, The taxpayer contributes the pay increase and a matching 3% increase of the employer's contribution because employees of a branch of government are considered to be the taxpayer's employees, there are no budget constraints and the Public Sector cohort (co-conspirators) legislate that everyone else must keep them affluent.