Home to Many Large DB Funds, Canada Reforms Pensions

The actions would ban underfunded plans from taking employer holidays, among other proposed reforms.

(October 29, 2009) – Canada, home to many of the world’s largest defined benefit pension funds, has announced plans to reform its national pension system.


Conservative Party Finance Minister Jim Flaherty announced reforms Tuesday that would prohibit pension fund sponsors from taking funding holidays unless the fund has a 5% buffer between assets and liabilities; that pensions must be fully funded upon termination; and that funds can now overfund their plans by 25%.

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Previously, Canadian pensions only had to be funded 80% upon termination, and current laws limit overfunding to 10%, the reasoning being that this protects the federal balance sheet, as pension contributions are tax-exempt and thus overpayment leads to less income for the federal government.


Less than 10% of Canadian pension plans are regulated by the federal government, and thus Flaherty has announced in Parliament that a working group of the country’s provinces and territories has been created to deal with the issue.



To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

Former CalPERS CIO Defends Illiquid Investment Strategy

 

Russell Read, the fund’s CIO from 2006 until 2008, defends moves he and the fund made into commodities, emerging markets, and private equity.

 

(October 29, 2009) – A former chief investment officer at the California Public Employees’ Retirement System (CalPERS) is defending past actions that took the $200 billion fund into alternatives.

 


Russell Read, in an interview with Reuters, is publicly defending what some claim was an overreliance on risky and illiquid asset classes when compared to fixed income.

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That saw the pension giant move into commodities, infrastructure, and emerging markets. Read, who led the fund’s investment team from 2006 to 2008, also is hitting back at those who disagree with his increased reliance upon private equity vehicles.

 


In defending his choice to move into international markets on a greater scale, he also made comments regarding the American investment consultant community. “The consultant community definitely—particularly Wilshire, you heard it with Michael—instinctively looks at a U.S.-centric stocks and bonds portfolio as a low-risk portfolio,” he told Reuters. “Most investors, in contrast, look at that as a concentrated risk portfolio.”
Read now leads green investment firm C Change Investments.



To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

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