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Canadian Pensions Surge Ahead?
Ten days ago, CNW reported, RBC Dexia survey: Canadian Pensions Surge Ahead of Pre-Crisis Levels (HT: Bruce):
Strength
in Canadian equities have helped Canadian pension plans surge ahead of
their pre-financial crisis levels of 2008, according to a survey just
released by RBC Dexia Investor Services, which maintains the industry's
most comprehensive universe of Canadian pension plans and money
managers.
Within the $340 billion RBC Dexia universe, pension assets earned 4.3 per cent in the quarter ending December 2010, improving the full year performance to 10.4 per cent, making this a second consecutive year of double digit returns.
Despite the volatility in the global markets during the past ten years,
Canadian pension plans have achieved an average annualized return of
5.4 per cent. "What the last decade has taught us is that
diversification and disciplined investing is key over the long run,"
noted Fay Coroneos, Global Head of Risk & Investment Analytics for
RBC Dexia.
Canadian equity
markets flourished as nine out of ten TSX sectors experienced double
digit annual gains. Even though Canadian Pension plans underperformed
the index by 0.4, "it was encouraging to see strong returns not only in
energy and materials but also in industrials and the consumer
discretionary sectors" added Coroneos.
Foreign equities
increased 6.3 per cent over one year. "Returns were muted by the
soaring loonie, which gained significantly against the US dollar and
was one of the best performers among major world currencies," reported
Coroneos. The MSCI World index in local currency increased 10.0 per
cent for the year, but was reduced to 5.9 per cent when translated into
Canadian dollars.
For the year, domestic bond holdings within
Canadian pension plans advanced 7.8 per cent, surpassing the DEX
Universe index by 1.1 per cent. "Long-term bonds, with maturity of over
ten years, continue to dominate short-term and mid-term bonds in
2010," said Coroneos.
"The
growing focus on asset-liability matching has resulted in pension plans
shifting into the longer end of the yield spectrum, increasing demand
for long-term bonds. In light of this, we believe a governance
structure which includes the use of a liability-based benchmark will be
of great interest for pension plans in 2011."
The
growing focus on asset-liability matching has increased pensions'
demand for long bonds. Meanwhile, Canadian pensions enjoyed the benefits
of a strong Canadian stock market. I was surprised to read nine out of
ten TSX sectors experienced double digit annual gains in 2010. That
"beta boost" helped Canadian pensions surge ahead from pre-crisis
levels.
And On Monday the S&P/TSX composite index jumped 114.41 points to 13,551.99 led by energy as political unrest in Egypt raised worries about a disruption in oil supplies and pushed crude prices higher:
Crude
has surged almost eight per cent over the last two sessions on worries
that the Suez Canal, a key route for oil tankers and cargo ships, may
be closed and that the unrest could spread.
“The market doesn’t know quite what to make of it,” said John Stephenson, portfolio manager at First Asset Funds.
“I
think energy and financials are moving higher (because) Canada is a
safe haven and commodities is a store of value. If there’s some problem
with oil, it may be good for Canadian producers, Canada’s stock index
but it’s not good for the U.S. economy broadly.”
The energy sector rose 2.74 per cent as Cenovus Energy shares gained $1.24 to C$34.60 while Suncor Energy (TSX: SU) climbed $1.42 to $41.46.
Imperial Oil Ltd. (TSX: IMO)
reported that its net income increased 50 per cent in the fourth
quarter to $799 million, or 94 cents per share. That’s up from $534
million, or 64 cents per share, a year earlier on higher oil prices and
improved operations and Imperial shares rose $1.95 to $44.65.
There
is increasing talk of Canada as a "safe haven". I'm not so convinced
but global investors are buying up Canadian assets and the Canadian
dollar. Just how much of this is speculative flow and how much of it
based on fundamentals is very hard to ascertain, but there is no reason
to believe the uptrend won't continue. In fact, I wouldn't be surprised
to see the S&P/TSX make new highs in 2011. If it does, Canadian
pensions will continue riding the beta wave higher.
But even if Canadian pensions ride the beta wave higher, they're not out
of the woods because liabilities grew faster than assets. It was last
April that the Certified General Accountants Association of Canada (CGA) said that Canadian pension funding deficits have risen from $160 billion in 2003 to an estimated $350 billion in 2008 and continue to grow. Moreover, the CGA said that the number of defined benefit pension schemes that are in deficit has
doubled over the past five years to stand at 92% of the total, making
retirement prospects bleak unless changes were made. Other experts are also sounding the alarm on pension deficits. So all this talk of "surging ahead" should be put in proper context.
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Anyone have some input on my question?
the quoted CNW article is worthless.
" Despite the volatility in the global markets during the past ten years, Canadian pension plans have achieved an average annualized return of 5.4 per cent. "What the last decade has taught us is that diversification and disciplined investing is key over the long run," noted Fay Coroneos, Global Head of Risk & Investment Analytics for RBC Dexia.
Why do they bother quoting someone who a) has bad grammar (diversification and discipline are key, not is) and b) just spouts portfolio theory. In the very next sentence they tell us the real story:
"Canadian equity markets flourished as nine out of ten TSX sectors experienced double digit annual gains."
It sounds like that's where the gain came from. Not being diversified, or disciplined, but because everything went up.
Canada's no safe haven, the only reason we didn't crash with the US is because we have oil and minerals that we are selling. When those are gone, we'll be broke and polluted.
Trchnically if he is treating diversification and discipline as a unitary concept then singular is necessary. The long and short of it is that the author may be correct. Tortured? No....we dont torture in the usa.
Those pensions better go to cash soon and get out of equities or they are going to get sucker punch number #2 a' la' Fall 2008.
Who do you think footed the bill for the GS, Citi, J.P. Morgan Chase, AIG profits, bonuses, and bailouts back then? Pensions, 401K's, A's, B's, and individual savers paid.
If the Canadian pensions chase yield in the equities markets they are the moth to the flame for Wall Street and will get BURNED again.
Hi,
I have a question about investment strategy on the short side in Canada for a US resident. Is there anything Canadas markets offer similar ES S&P 500 futures contracts? I hate ETFs, they track poorly over time if your trying to catch a big move over time. Things I like about ES for US markets is is pretty liquid compared to other contracts, it has tax advantages and it usually tracks within 5 points of the S&P, and offers a great deal of leverage to use or not use. Thanks for anyone willing to share. I do have access to trade in foreign markets if that helps. Specific tickers, contract names, and explanation would be appreciated.
http://www.businessinsider.com/bloomberg-lambasts-teacher-seniority-warn...
The Meredith Whitney Effect Has Its Most Violent Week Yet"For his Chart Of The Week, Nomura's George Goncalves looks at bond fund flows, and points out that muni fund outflows for the week ended January 19th, were the largest yet."
http://www.businessinsider.com/muni-fund-outflows-week-ended-january-19-...
And don't forget. Genius is a rising market. Anybody no matter how foolish who invested in commodity based economies has done well recently, and may continue to do well, who knows?
well since United States pensions have NOT surged ahead, that can not be good news for that ponzi scam
US pensions HAVE surged ahead - it's just that they have a really long way to come back.
I don't know that I can trust a printed article that doesn't know the difference between "percent" and "per cent". I bet that Jeopardy computer would fail such a test just as bad as the author and editor did.
I read a Bloomberg article yesterday that the Government of Singapore is the single largest investor in Citi, although this information is not publicly available.
All these sovereign wealth, pension and all the rest public funds that chase returns with public money seem not to understand that gains are only the product of losses. They did not invest in trees that produced anything, as if money did grow on trees instead of investing in public works projects or something tangible. It would be more productive for society for them to invest these funds by playing the slots as these 10% returns, be they real or paper, have to paid by someone because they were not in large part "earned" by Adam Smith's definition of the term.
Taking from the public to invest against the public in a shell game of IPO-Bankruptcy-IPO or Issue-Reverse-Issue, et al., is a root cause of the mess we are in and instead of addressing it we applaud and encourage it to our own demise.
wow. I can usually tell when someone has a thorough knowedge of Adam Smith versus a superficial knowledge, but your statement threw me. Can you explain to me why you think these returns are not "earned" or perhaps why they are extractive or rent seeking, and are you talking about citi in particular or stock market investments in general.
I believe what he's referring to is that the returns you get investing in financial markets must come from someone else's pocket, because it is a zero-sum game. It would be very different if pension funds actually invested in industry, infrastructure, agriculture, research and development, etc. You know, things that can make stuff and not just push numbers around.
If you close a losing trade on a stock, isn't it a bit silly if the party on the other end is your pension fund? How absurd is that?
Phew! Thank fucking god. The Canadian pensions clawed back a fraction of what they need to be quasi-solvent.
I'll be able to finally get a good nights sleep.
My apologies for being brain dead tonight. I added a paragraph to temper my enthusiastic comment.
Short Canada.
............SELL
I am Canadian. There is about to be a housing correction if not crash soon. Everyone and their mother has a $250K house. And what the US market does, we do. 2008 was no different. The only thing that has ramped up our market is oil/PM's. Thanks Ben!
See more at my blog
http://silvergoldsilver.blogspot.com/
I have bank troubles already. i walked in today, and
they kept asking why I need to take out 5k...what a Joke.
I am getting nervous that this collapse is going to come quickly.
Here is an interesting economic report for 2011. I have been following these guys for a while and they are good.
Check out their latest report here ==> http://bit.ly/hjE236