Leo Kolivakis's blog

After reading all about our "solid Canadian pension system" in the mainstream media, I decided to quit Pension Pulse. What's the point? If Mercer says we are among the best pension systems in the world, then there is nothing to worry about, right? Wrong.

All U.S., Canadian and global public pension plans should disclose dealings with placement agents on their websites. Moreover, regulators should ban firms from using middlemen. For every one good placement agent, there are a hundred corrupt fools looking to line their pockets.

Yes folks, in due time, all that wealth will trickle down to the peasants who have to work for a living. Just be patient. Oh, you're hungry now? Facing a tough Christmas? Don't worry, those good Samaritans at Goldman Sachs are considering a billion dollar donation to charity. God bless their golden hearts. We need more good bankers like them.

While portable alpha is theoretically appealing - beta is cheap so swap into equity and bond indexes and use the cash to invest in hedge funds that produce alpha - in practice it can turn out to be a nightmare, especially during a liquidity crisis.

More risk? More complexity? What are investors and trustees to do? Let me share some comments with you. The financial engineers are working hard to "tame risk" but in my experience when everyone is rushing to play the same game, they all knowingly (or inadvertently) add to systemic risk.

The global pension crisis is a major concern. The uptrend in equities in Q3 boosted pension returns in Canada and elsewhere, but this will do little to address long-term concerns on the sustainability of pensions. After losing 31% in their last fiscal year, Ohio fund's annual report detailed how long it would now take for its investments to put the fund back on track. Officials simply said: "Infinity."

Will the next asset bubble come sooner than we think? Will it be in cleantech? Biotech? Nanotech? Infrastructure? Oil? Gold? Bonds? BRIC economies? Or will the next bubble be Canada? Yes, Canada! Nobody really knows, but big bets are being placed by some very big funds. The only thing I know is the world is awash with liquidity, a bubble is forming and we won't know about it until it's too late.

Let me repeat what I stated last August. AIMCo is lucky to have Leo de Bever as their new CEO. The politicians in Alberta should give him a chance to prove himself. I am confident he will succeed in building a great team and add long-term value to the funds he's been entrusted to manage.

Forget fundamentals. Hedge fund flows, investment banking flows, sovereign wealth fund flows, pension flows, and retail speculation will drive equities and other risk assets much higher. How long can it last? Remember the famous quote from John Maynard Keynes: "The market can stay irrational longer than you can stay solvent."

Unlike those employees at Simmons who lost their jobs, private equity pension fund managers and the GPs they invest and co-invest with are sleeping easy, counting the millions they collect in bonuses and fees as they profit by loading up the debt of companies they acquire.

Keep an eye on what is going on in modern Greece, because I can assure you that it's a reflection of what is going on across the world. The level of angst is unprecedented and politicians better quit the rhetoric and start putting citizens first.

Back in early March, Steve Leuthold told investors to "buy stocks now or you'll regret it". He was absolutely right then and I think he's right now. Forget retesting the March lows, the stock market is heading higher. He is now calling for the Standard & Poor’s 500 Index to jump to 1,350 next year as the economy recovers from the worst contraction since the Great Depression.

Back in August, CPP Investment Board (CPPIB) announced that it has entered into a joint venture with Cyrela Commercial Properties S.A. Empreendimentos e Participações, GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation, to invest up to US$250 million for the development, acquisition and management of institutional-quality commercial properties in Brazil. That appears to have been a very wise decision.

A year after the financial disaster of 2008, the search is on for investing’s winners and for its casualties. There are surprisingly few of either.

Let me just say that the IMF's Global Financial Stability Report is an excellent document that every serious money manager needs to read carefully. It provides an outstanding overview of global financial system. I went through it today and concluded that global financial risks have subsided but banks are by no means out of the woods. The semiannual report struck me as one of cautious optimism.