CalPERS investigates fees; US bank in court over pension charges; UK pensioners face tough 2010; Credit Suisse targets Japanese pension funds
CalPERS investigates placement fees United States public pension fund the California Public Employees' Retirement System (CalPERS) in October announced it was launching a special review of fees paid by its external money managers and their related activities.
CalPERS' decision to investigate the investment process was sparked by the discovery that Arvco Financial Ventures - a placement agent firm headed by former CalPERS board member Al Villalobos - had earned more than US$50 million ($54 million) in fees in a five-year period.
"The placement agent industry has been a focus of state authorities and the Securities and Exchange Commission over the last year, and we believe it prudent to conduct a full review of the matters related to these recent disclosures to us," CalPERS chief executive Anne Stausboll said.
In May, CalPERS adopted a policy of asking funds that had received its capital in the past to disclose details about their use of placement agents.
California takes bank to court over pension charges Seeking to recover more than US$200 million ($216.98 million) in alleged illegal overcharges and penalties, California Attorney General Jerry Brown has filed suit against State Street Bank and Trust for committing "unconscionable fraud" against California's two largest pension funds, the California Public Employees' Retirement System (CalPERS) and California State Teachers' Retirement System (CalSTRS).
The suit, originally filed under seal in 2008 and unsealed by a Sacramento superior court judge on October 20, contends that Boston-based State Street illegally overcharged CalPERS and CalSTRS for the costs of executing foreign currency trades since 2001.
"Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California's public pension funds," Brown said.
State Street has denied any allegations of wrongdoing.
UK pensioners to be hit hard in 2010 United Kingdom pensioners will face a gap in the rise of living costs and pension income next year as UK pension schemes are likely to use the negative retail price index (-1.4 per cent a year through September 2009) as a benchmark for pension increases in 2010, according to London-based human resources consulting group Hewitt Associates.
While UK pension schemes are expected to maintain payments at current levels, the Office of National Statistics said pensioners had faced the costs of "real" inflation over the past two years of 5.4 per cent a year.
Based on this, a typical single pensioner currently receiving a pension of £12,800 ($22,812) a year will have had an effective yearly cost increase of £1420 ($2530) while their income only rose by £525 ($936).
"For those that rely on their private pension as a key contributor to their income, no pension increase will be a huge blow," Hewitt Associates pension consultant Lynda Whitney said.
One less bidder for new UK pension scheme Just three bidders remain in the race to run the United Kingdom's new national retirement scheme, with Danish public pension fund, ATP, pulling out in September.
Logica UK, Great-West Retirement Services and India-based Tata Consultancy Services are left in the running to manage the scheme, known as personal accounts. It is aimed at the estimated 10 million middle and low-income workers in the UK who rely solely on state pensions, considered one of the lowest in Europe.
While the UK Department for Work & Pensions has stressed the scheme is to complement existing pensions, with employers' contributions starting low - a mere 1 per cent when the scheme launches in 2012 - there are concerns smaller employers in particular may switch to a lower-cost option. The scheme will not be fully in place until 2016 when those contributions should rise to 3 per cent.
According to the Association of Consulting Actuaries, around 41 per cent of smaller British firms (250 employees or less) would consider replacing their existing schemes with the low-cost personal accounts.
JPMorgan wins trio of UK pension mandates JPMorgan Chase Bank's Worldwide Securities Services (JP WSS) business announced three separate new mandates from United Kingdom pension funds in October.
The custody and fund administration arm of the United States investment bank, which has US$13.7 trillion ($14.8 trillion) in assets under custody globally and US$3.7 trillion ($4 trillion) in funds under administration, was appointed as custodian to management consultant PA's £410 million ($730.68 million) pension scheme to support its recent appointment of fiduciary manager BlackRock.
Separately, JP WSS picked up a mandate for Blackwell's £115 million ($204.95 million) pension, while the London Borough of Camden appointed JP WSS as sole global custodian of its pension assets after a review by pension consultant Hymans Robertson. JP WSS had previously shared custody of Camden's £670 million ($1.19 billion) of assets.
Brazil funds to sell Treasury debt Brazilian pension funds may sell up to 70 billion reais ($44.2 billion) of government bonds, as tumbling Brazilian interest rates impact on returns for the country's 455 billion reais ($287.3 billion) pension fund industry, Bloomberg has reported.
Bloomberg reported Brazilian regulators had lifted limits on investing in non-fixed income assets, according to SulAmerica Investimentos. Investments are likely to switch to hedge funds, corporate bonds, stocks and private equity over the next three years.
Canadian pension funds more upbeat Stable credit markets and a recovering equity market have helped boost Canadian pension fund returns for the third quarter, according to a survey published by RBC Dexia Investor Services.
RBC Dexia, which maintains a C$310 billion ($318.98 billion) universe of Canadian pension plans, said its funds grew by 7.2 per cent in the quarter ending 30 September 2009, boosting year-to-date returns to 14.3 per cent.
RBC Dexia director of advisory services Don Mc Dougall said the pension plans recouped all of last year's underperformance and outpaced the DEC Universe Index by 2.6 per cent over the first nine months of the year.
"Two solid back-to-back quarters doesn't necessarily make a recovery, but it's good to see some positive momentum," McDougall said.
Domestic stocks were the top performers with a 10.6 per cent rise in the quarter and they are up 29.6 per cent year to date, while Canadian bonds increased by 3.4 per cent for the quarter and are up 8.2 per cent for the year to date.
Credit Suisse targets Japan's pension funds Credit Suisse, which sold off its Japanese asset management arm in June to Aberdeen Asset Management, will offer alternative investments via its Japanese brokerage unit to attract some of Japan's estimated US$800 billion ($922 billion) in pension money, Bloomberg has reported.
Tokyo-based Credit Suisse Securities won approval from Japan's Financial Services Agency to act as an investment manager.
Earlier this month, IFA ran a story on Bill Shorten's comments regarding the government's proposed Future of Financial Advice (FOFA) reforms.... read more »
