December 2020

16Dec

US. Stock Market Gains Help Pension Funding Levels: Pension and Group Annuity Update

Corporate bond interest rates fell a little in November, but the stock market did well, and that helped make the finances of big U.S. corporate pension plans look better, according to Milliman Inc. Zorast Wadia and Charles Clark, analysts at the Seattle-based actuarial consulting firm, found that the 100 large corporate pension plans they track reported a $272 billion combined deficit in November on $1.98 trillion in pension benefits obligations, compared with a $284 billion deficit on $1.915 trillion...

December 16, 2020
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10Dec

Aging China Must Work Longer and Invest Smarter

China is getting older. That means the Chinese people will have to work longer. But deeper reforms will also be necessary to ensure income growth doesn’t stagnate. Read also Asset management CEO arrested in Taiwan pension fund scandal The world’s most populous country has begun aging rapidly over the past decade, but the pace is going to pick up even more as tens of millions reach retirement age. The working population—people between the ages of 15 and 59—will drop by...

December 10, 2020
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09Dec

Pension funds increasingly require ESG compliance; here’s why they should look to Africa

The Scottish Widows Fund recently announced that it will dump £440m of company holdings that fail its Environmental, Social, and Governance (ESG) tests. Being one of the most far-reaching exclusions policies adopted by a major UK pensions provider to date, it’s important to take note of this action. And as pension funds and asset managers across the world face increasing pressure to protect client portfolios from the risks of climate change, others will follow. Read also South Africa. Sustainability...

December 9, 2020
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09Dec

Is There a Place for ETFs in Retirement Plans?

Millennials favor exchange-traded funds (ETFs) more than other generations, according to a report by Charles Schwab about trends in retirement plan self-directed brokerage accounts (SDBAs). Millennials are a considerable portion of the U.S. workforce, The low cost of ETFs is often cited as a positive feature of the funds. Yet, even as retirement plan fees are driven down and have been the subject of much litigation, ETFs have not been widely accepted by defined contribution (DC) plan sponsors. Tom Skrobe,...

December 9, 2020
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08Dec

The Consequences of Long-Term State Pension Underperformance

The financial health of state pension plans has worsened and advisors should avoid municipal bonds from certain issuers. Each year Cliffwater LLC prepares an annual report on the financial condition of state pension plans over time. This year’s report covers 66 state pension plans and almost $3 trillion in assets. Following is a summary of some of the key highlights of the report, which covers the 19 fiscal years ending June 2019: Following the great bull market of the...

December 8, 2020
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07Dec

For institutional investors, ETFs can make meeting liquidity needs easier

Liquidity is never far from the minds of institutional asset owners but the importance of having a comprehensive liquidity plan came into sharp relief during the pandemic-induced spike in market volatility earlier this year. When stock prices plummeted in February and March, the asset allocation of many institutional portfolios fell out of synch with policy benchmarks, with asset owners finding themselves significantly underweight equity and overweight fixed income. That would have been the perfect time to rebalance, but an...

December 7, 2020
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07Dec

Exxon Under Pressure From New Activist Fund

Exxon Mobil Corp. is facing the threat of a proxy fight from a newcomer activist investor with a sustainability bent that wants the beleaguered energy giant to act faster to remake itself. Engine No. 1 LLC, an investment firm launched by Chris James last week, is preparing to send a letter to Exxon ’s board urging the Irving, Texas-based company to focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend. The letter, a...

December 7, 2020
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04Dec

Why a Canadian Pension Fund Performs Better Than Yours

Over the period from 2004 through 2018, Canadian pension funds outperformed their international peers in asset performance and liability hedging, according to a research paper that says a key to this success is a three-pronged business model that would have boosted the returns of US and other pensions had they used the same tactics. The three-pillar business model consists of managing assets in-house to reduce costs, redeploying resources to investment teams for each asset class, and funneling capital toward...

December 4, 2020
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02Dec

Latin American private pensions fuel cross-border demand: report

The research puts total AuM for the four administradoras de fondos de pensiones (AFP/Afore) systems at $574bn at the close of 2019. Including Brazil's complementary pension system, which also had a positive year, total regional AuM stands at $1.05trn. Flows into the AFP/Afore pension managers in Chile, Mexico, Colombia, and Peru reflect a gradual upward trend that mimics increasing formality in labor markets and higher salaries. The inflows are also among the most reliable in Latin America. While cross-border...

December 2, 2020
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November 2020

30Nov

Canadian pension funds, insurers seeking private debt face shrinking pool of lower-risk firms

Canadian pension funds and insurers are facing a shrinking universe of higher-quality private debt investments to lift returns in a low-yield world, as the coronavirus pandemic has crushed many businesses, while banks maintain lending to better ones. The tightening supply of this high-yielding credit comes as many Canadian institutional investors have been accelerating their exposure to the private debt. Private credit is issued primarily by closely held companies, offering a premium over corporate bonds due to fewer disclosures and...

November 30, 2020
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