Largest pension fund considers dumping active management

Largest pension fund considers dumping active management

CalPERS’ review keeps pressure on from passive funds

By Jason Kephart

Mar 19, 2013 @ 1:35 pm (Updated 3:46 pm) EST

In the latest sign of the apocalypse for active management, the largest pension fund in the United States is mulling a move to an all-passive portfolio.

The California Public Employees Retirement System’s investment committee is evaluating whether the fees it pays its active managers are worth it or if paying less fees for passive management will lead to better long-term results, according to sister publication Pensions & Investments.

The pension fund, commonly referred to as CalPERS, oversees about $255 billion in assets, more than half of which already is invested in passive strategies.

The critique of active management is part of a review of the fund’s investment beliefs, which began yesterday, P&I said.

At the heart of the review of active management is whether taking the trouble to pick the right managers is worth it. Read more of this post

Canada Pension Plan Investment Board (CPPIB) laments dearth of investments for pension funds’ ‘patient capital’; “How can we think and act long term when the world around us is caught up in this ‘myopia of the moment’?

CPPIB laments dearth of investments for pension funds’ ‘patient capital’

19 March 2013

Author: Jonathan Williams

GLOBAL – The short-termist focus of governments and investors is creating problems for pension funds to invest their “patient capital”, the head of the CAD172bn (€130bn) Canada Pension Plan Investment Board (CPPIB) has said.

Mark Wiseman, chief executive and president of CPPIB, said the focus on the short term – due to shorter election cycles, quarterly profit reports and a “revolving door” of chief executives within listed companies – was causing problems, and that there was a need for longer-term thinking.

During a speech to the Canadian Australian Chamber of Commerce in Sydney, he asked: “How can we think and act long term when the world around us is caught up in this ‘myopia of the moment’?

“All market participants – be they investors or governments – desperately need a long-term lens,” he added. “While we may discuss practical, actionable items for reform, I am convinced that, unless we first address this short-term, structural paradigm, we will fail to create a policy environment that supports fundamental and lasting change.” Read more of this post

Malaysian PM Najib Sees Early Achievement of Mahathir Vision: Southeast Asia

Najib Sees Early Achievement of Mahathir Vision: Southeast Asia

Malaysian Prime Minister Najib Razak said the nation may reach high-income status two years ahead of target, as he seeks to convince voters of his economic achievements before elections due within weeks.

Gross national income could rise to $15,000 per capita in 2018, earlier than a target of 2020, Najib said in a televised speech late yesterday. The measure has increased 49 percent since 2009, to $9,970 last year, the government estimates. Najib also pledged to give annual cash handouts to low-wage earners.

“The time has come for Malaysians to make a decision and I hope you make the right choice,” said Najib, 59, without indicating when the election will be held. He must dissolve parliament by April 28 and hold a vote by the end of June.

Najib, who inherited a country in recession when he replaced Abdullah Ahmad Badawi as leader in 2009, is focusing voters on his efforts to boost investment and improve incomes as he seeks a popular mandate for the first time. The ruling National Front coalition won the last election in 2008 by its narrowest margin in more than five decades, prompting Abdullah to hand over the leadership mid-term. Read more of this post

Leveraged Asian Investors May Spur Bond Price Slump: Barclays

Leveraged Asian Investors May Spur Bond Price Slump: Barclays

Wealthy Asian investors who’ve borrowed against their houses to buy bonds may find themselves among forced sellers if interest rates rise, spurring a price slump in vulnerable securities, according to Barclays Plc.

U.S. dollar-denominated notes sold by more than 20 companies including Olam International Ltd. and Henderson Land Development Co. are some of those most exposed if private bank clients move money out of the fixed-income market, Barclays said in a research note dated March 14. Private banks hold 15 percent to 20 percent of total corporate bonds in Asia and as much as 30 percent of high-yield, or junk, notes.

Low borrowing costs have been one of the main factors driving the strong demand for Asia credit and many high net worth investors went further into debt to buy the securities, according to the report. In the past six months, equities have generated solid returns while credit has lagged, creating a risk fund flows will rotate out of bonds in a quest for higher returns and compound the price slump.

“U.S. rates are already beginning to rise, albeit gradually, and leveraged lending could be scaled back if risk committees begin to focus on the quality of such lending,” according to analysts led by Krishna Hegde, Barclays’ Singapore- based head of Asia credit research. Furthermore, any sharp or sustained sell-off in Treasuries would impact bond prices and raise borrowing costs. Considering most private bank investors don’t hedge rates, “this is an important risk factor,” they wrote. Read more of this post

Incheon named World’s Best Airport for eighth time; The process of departure takes only 19 minutes and arrival 12 minutes, far quicker than the global standard of 69 minutes and 45 minutes.

Wednesday, Mar 13, 2013

Mr Hong-Yeol Choi, VP Marketing at Incheon International Airport (left) receives the World’s Best Airport Award from Mr Edward Plaisted, Chairman of SKYTRAX (right), during the World Airport Awards held at Passenger Terminal EXPO in Vienna.

By Lee Ji-yoon
The Korea Herald/Asia News Network
Wednesday, Mar 13, 2013

KOREA – Incheon International Airport said Tuesday it won the World’s Best Airport title again this year for the eighth consecutive time.

The non-profit Airport Council International conducted a survey of 350,000 passengers over the past year and Incheon Airport earned the highest scores in service quality.

The airport also topped two other categories – best airport in Asia-Pacific and best among those with 25-40 million users annually.

It is unprecedented for an airport to win the industry’s top honour eight times, officials said. Read more of this post

China’s Tallest Tower Builder Assures Quality Amid Sand Scandal

China’s Tallest Tower Builder Assures Quality Amid Sand Scandal

China State Construction Engineering Corp. (601668), which is building the country’s tallest tower, said materials used in all its projects meet quality standard as the southern city of Shenzhen conducted inspections on builders.

Samples from buildings, including the 660-meter Ping An Finance Center due to be completed in 2015, were tested, according to Shenzhen’s Housing and Construction Bureau. The industrywide inspection in the city last week followed a China Central Television newscast on March 14 that investigated the use of substandard concrete by some developers in Shenzhen that used low-quality sea sand instead of river sand. Read more of this post

Singapore’s property trusts, the second-best performers in Asia in the past year, may have to diversify funding sources as they aren’t prepared for an “interest rate shock,” according to Fitch Ratings.

Singapore REITs to Vary Funds on Interest Rates: Southeast Asia

Singapore’s property trusts, the second-best performers in Asia in the past year, may have to diversify funding sources as they aren’t prepared for an “interest rate shock,” according to Fitch Ratings.

The city’s real estate investment trusts or REITs have been increasing short-term debt with record-low interest rates, according to Johann Kenny, director of corporates at Fitch. They face refinancing risks when borrowing costs rise, and may be pushed to sell assets or shares to boost their funding, he said.

“Singapore REITs are not really well equipped to withstand an interest rate shock,” Kenny said in a phone interview from Sydney yesterday. “When a rating agency looks at a company, we look at the long-run average through the cycle of the interest rate environment and we don’t see the current low interest rates as a sustainable model from a macro-economic perspective.”

Singapore REITs, the biggest fundraisers in the city’s initial public offering market in the past year, had relied on short-term debt to reflect the length of commercial leases, Kenny said. Their funding costs in the past six years don’t reflect the challenges in a “normalized” interest rate scenario, he said. Read more of this post

Indian gold funds are shrinking as investors in the biggest bullion- consuming nation follow billionaire George Soros in pulling money from products backed by the precious metal.

India Gold ETF Sales Mimic Soros as Goldman More Bearish

Indian gold funds are shrinking for the first time since June as investors in the biggest bullion- consuming nation follow billionaire George Soros in pulling money from products backed by the precious metal.

Exchange-traded funds in gold saw outflows of 80 million rupees ($1.5 million), data from the Association of Mutual Funds in India show. Investments in sovereign-debt funds rose by 4.46 billion rupees, the sixth straight month of inflows. Gold prices in India have slid 4.3 percent this year, while rupee bonds returned 2.7 percent, the second-highest gains in Asia.

“Globally we are seeing a decelerating gold trend, and overweight investors will be adjusting asset allocations,” Lakshmi Iyer, Mumbai-based head of fixed income and products at Kotak Mahindra Asset Management Co., which oversees about $6 billion of assets, said in a March 14 telephone interview. “We should see some interest-rate easing over the next two or three quarters,” encouraging people to seek capital gains in bonds, she added.

Soros cut his holdings in SPDR Gold Trust, the largest exchange-traded gold product, by 55 percent last quarter, and Goldman Sachs Group Inc. predicts the metal’s 12-year rally will end as a U.S. economic recovery gathers momentum. The Reserve Bank of India will lower its benchmark repurchase rate to 7.50 percent from 7.75 percent today, according to 30 of 35 economists in a Bloomberg survey. Five predict no change. Read more of this post

Delhi needs to sell the idea of the market; Indians say their country ‘grows at night while the government sleeps’, writes Gurcharan Das

March 18, 2013 7:01 pm

Delhi needs to sell the idea of the market

By Gurcharan Das

Indians say their country ‘grows at night while the government sleeps’, writes Gurcharan Das

When the Indian government presented its budget last month, the people were expecting giveaways, subsidies and bribes for votes. But it turned out to be a surprisingly responsible settlement that capped the fiscal deficit at 4.8 per cent of economic output. It was a sensible budget, but it will not get India growing again.

Meanwhile, the day before the budget, Sugata Mitra, a researcher at Newcastle University, won the TED (Technology, Entertainment and Design conference) prize of $1m to run Schools in the Cloud from India. The scheme aims to empower teachers and parents towards self-directed learning by children.

To Indians, the contrast between the budget and the prize confirms their perception of the country’s “bottom-up” success, driven by people, in contrast to China’s “top-down” success, induced by state investment. Prosperity is spreading, despite appalling governance in the world’s biggest democracy. Read more of this post

As Crop Prices Surge, Investment Firms and Farmers Vie for Land

March 18, 2013

As Crop Prices Surge, Investment Firms and Farmers Vie for Land

By JULIE CRESWELL

From the potato fields of Michigan to the high prairies of Kansas, farmers are receiving record prices for their land — but economists and banking regulators warn that this boom, like so many before it, could end badly.

Across the American heartland, farmland prices are soaring. In places like Waco, Neb., and Chickasaw County, Iowa, where the boom-and-bust cycle of farming reaches deep into the psyche, some families are selling the land that they have worked for generations, to cash in while they can.

Behind the rush is the age-old driver of farm booms: high crop prices. Corn, in particular, has been soaring, reflecting demand overseas and, domestically, for ethanol. High prices mean good profits for farmers, and many are using their growing incomes to bid for land. Sensing opportunity, investment firms are buying, too. David Taylor, of Oskaloosa, Kan., said he was saddened to sell his family’s farm but that the prices were too good to resist. Four generations had planted corn and soybeans on the 146-acre spread. But after living through the Midwest farm crisis of the 1980s, when land values plunged, and realizing that his children would not follow in his footsteps, he sold the farm at auction in December.

“I bawled like a baby,” Mr. Taylor, 59, said. His crop-producing fields sold for $10,100 an acre. Read more of this post