Tuesday, March 2, 2010

OMERS poised to continue the Harper induced rip-off of public income trust investors

What kind of fraud for a tax policy that goes by the name of The Tax Fairness Plan would double tax retirement income in RRSPs but not the very same investments in pension funds? This is known as a tax arbitrage and OMERs has and will continue to exploit this tax arb by scooping up trusts from Canadians and Ontario taxpayers at less than their true intrinsic worth, because the Harper government gave OMERs and all the pension funds a “carve out” from the 31.5% income trust tax, which flies completely in the face of why a Liberal government under St. Laurent created the RRSP in the first place.

Meanwhile the Liberal Party under Ignatieff says NOTHING and allows this rip-off to continue unabated and the principles of RRSPs created under Liberals to be defiled and returned to the world that the Liberals of the day called “invidious”.

The invidiousness is the creation of a two tiered pension system in this country under the nose of the present day Liberals from what was a one tiered pensions system created by past Liberal governments, that is being dismantled by Harper and returned to its former two tiered state without a single wimper from the present day Liberal government. This is not leadership. This is benign neglect. The 75% of Canandians without pensions are paying the price. So too are all taxpayers

OMERs has already acquired Teranet Income Fund and Golf Town Income Fund under this rip-off scheme. This has to stop, as OMERs made it very clear in late 2009 that buying more income trusts under this rip off scheme was going to be a mjor thrust of theirs in 2010, as reaffirmed in the Globe today with the comment of:

“OMERS chief financial officer Patrick Crowley said the fund reduced its holdings in public equities in early 2009 as part of a longer-term plan to shift more into private investments, including infrastructure assets, real estate and private equity holdings.”.......read buying more Teranets, Golf Towns, ete etc.

OMERS saving up for asset fire sales
Janet McFarland
00:00 EST Tuesday, Mar 02, 2010

TORONTO — With governments around the world preparing to hold yard sales to raise cash, Michael Nobrega has his piggy bank ready.

The chief executive officer of the Ontario Municipal Employees Retirement System said his fund, one of Canada's largest, has been liquidating holdings to ensure it has the cash to take advantage as the public sector sells off assets to rein in massive deficits.

"I think at some point in time, the governments have to dispose of assets," Mr. Nobrega said.

"And if we're not liquid, if we don't have the resources at hand to take advantage of that, then we would not be able to reach out for them."

The first targets could be in Ontario, where provincial government officials have confirmed they are examining the possibility of selling stakes in assets such as the Ontario Lottery and Gaming Corp., the Liquor Control Board of Ontario and electricity generation and distribution companies Ontario Hydro and Hydro One.

He would not comment on which of the Crown corporations OMERS would prefer to bid on, saying he is interested in "all the assets going."

Another anticipated seller is the British government, where Prime Minister Gordon Brown has announced a plan to sell up to $25-billion (U.S.) in government assets to cut the country's budget deficit by half over the next four years.

The largest privatization since the Thatcher era could see assets such as the English Channel rail link and the ferry port of Dover sold to global buyers.

Mr. Nobrega said other opportunities "will inevitably arise" as major countries such as the United States and Japan accumulate "unsustainable" debts that exceed more than 100 per cent of their gross domestic products.

Most government deals would be done with a consortium of investors because the assets are so large, he added.

"They'll be either outright sales or partnerships with governments," he said.

OMERS, which invests pension assets for municipal government employees, yesterday reported a 10.6-per-cent return on its investments in 2009, a turnaround from a loss of 15.3 per cent in 2008.

The fund's asset base grew by $4.3-billion to $47.8-billion at Dec. 31.

The fund is the second major pension plan to report its 2009 financial results.

Last week, the Caisse de dépôt et placement du Québec reported a 10-per-cent gain on its investments last year.

Both funds lag the median 15.5-per-cent return posted by large Canadian pension funds in 2009, according to a survey by RBC Dexia Investor Services Ltd.

OMERS chief financial officer Patrick Crowley said the fund reduced its holdings in public equities in early 2009 as part of a longer-term plan to shift more into private investments, including infrastructure assets, real estate and private equity holdings.

The fund currently has 61 per cent of its assets in public debt and equity markets and 39 per cent in private holdings, but plans to reduce the public component to 53 per cent in the next few years.

While most of the fund's asset classes posted better returns in 2009, the real estate division - Oxford Properties Group - saw returns fall to 1.3 per cent from 6.7 per cent in 2008.

Mr. Crowley said the decline was due to a writedown in asset values on hotel and industrial properties because of mark-to-market accounting rules.

OMERS also said its pension fund deficit grew last year to $1.5-billion at Dec. 31 from $279-million at the end of 2008 because pension obligations grew at a greater pace than investment returns.

Mr. Nobrega said some of the deficit will be made up through investment returns.

However, he said it is up to OMERS's sponsors to decide whether to also increase member contributions or change the plan's design to deal with any remaining shortfall.

1 comment:

Dr Mike said...

At least now we know how Jim Flaherty bamboozled the provinces & the territories into supporting the Tax fairness Plan.

Allowing the government run pension funds to bulk-up on cheap income trusts & generating tax free income was just too much to pass-up.

Thank you everyone as only the small investor became the chump in this deal.

Dr Mike Popovich

PS---Happy jack Layton deserves an honorable mention for leaving us twisting in the wind just to give his union pension fund participants a leg-up.