The world’s biggest pension fund is being criticized for high risk:
Japan’s Government Pension Investment Fund will probably post a 4.4 trillion yen ($43 billion) loss in the April-June quarter, according to calculations by Yohei Iwao, executive director of the institutional equities division at Morgan Stanley MUFG Securities Co. That follows what he estimates was a 5 trillion yen decline in the fiscal year ended March 31, which would amount to the worst performance since fiscal 2009 when the fund lost 9.7 trillion yen.
The calculations come amid criticism the government has put the public’s pension money at risk after the fund known as the whale for the size of its assets increased its equity allocations in 2014. That’s prompted the main opposition party to pledge GPIF will move investments back into safer ones in its manifesto ahead of elections this month.
…
GPIF likely held about 43 percent of its portfolio in domestic bonds at the end of June, higher than its target of 35 percent for the asset, he said. Japanese stocks probably accounted for 22 percent, while international equities made up 22 percent, Iwao said. He estimates foreign debt stood at 14 percent. GPIF’s target for equities is 25 percent each, and 15 percent for international bonds.
It is interesting that the fund has a much more conservative asset mix than the Canada Pension Plan!
Brexit’s implications are far-reaching:
Realtors in Toronto and Vancouver are pitching Canadian cities as relatively safe property havens now that London, for years one of the world’s leading targets of foreign capital, suddenly looks a lot riskier. Blame it on Brexit.
“Brexit’s good for us, not for them,” said Anita Springate-Renaud, owner of Engel & Völkers’ brokerage in Toronto, who expects to field calls from clients seeking to redirect their investments. “We are a safe bet.”
If Springate-Renaud is right, there may be heightened demand from moneyed clients for homes and condos as well as office towers in two of Canada’s hottest real estate markets, which already have seen prices soar from an influx of foreign money.
…
Royal LePage is advising clients that Brexit is likely to cause the Bank of Canada to hold interest rates lower for longer, which will stoke demand in the residential market, said Adil Dinani, a Vancouver agent for the unit of Brookfield Real Estate Services Inc.Any additional trickle of demand into Vancouver and Toronto could prove a headache for Canadian policy makers seeking to damp record high home prices. In recent weeks, the International Monetary Fund, Organization of Economic Cooperation and Development, and Bank of Canada have all flagged the increasing risk of a potential correction.
“It’s something we’re going to have to talk about because there are concerns about overheating,” said Royal LePage’s Dinani. “We’ll likely see more capital inflows into these cities, so what is that going to look like? Are there going to be policy tools put in place to protect the market from further increases?”
And there may be some money on the way!
Standard Life Investments suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund on Monday after Britain’s vote to leave the European Union triggered a surge in redemptions.
The fund, which invests in a mix of prime commercial real estate assets, was halted at midday and the decision will be reviewed every 28 days, the Edinburgh, Scotland-based fund manager said in a statement. Standard Life adjusted the value of the underlying assets by 5 percent last week.
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Investors are pulling money as industry commentators warn that London office values could fall by as much as 20 percent within three years of the country leaving the European Union. [Hargreaves Lansdown analyst Laith] Khalaf estimated that about 25 billion pounds is invested in property sector funds by U.K. investors, including those that invest in stocks.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2897 % | 1,656.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2897 % | 3,025.7 |
| Floater | 4.93 % | 4.69 % | 91,539 | 16.09 | 4 | 0.2897 % | 1,743.7 |
| OpRet | 4.86 % | -0.90 % | 39,430 | 0.08 | 1 | -0.0792 % | 2,840.3 |
| SplitShare | 5.14 % | 5.63 % | 94,138 | 4.62 | 5 | 0.0162 % | 3,350.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0162 % | 2,614.5 |
| Perpetual-Premium | 5.50 % | -8.21 % | 80,702 | 0.09 | 12 | 0.0163 % | 2,651.5 |
| Perpetual-Discount | 5.33 % | 5.35 % | 102,798 | 14.85 | 26 | 0.1649 % | 2,767.8 |
| FixedReset | 5.13 % | 4.43 % | 151,992 | 7.19 | 88 | 0.0232 % | 1,974.0 |
| Deemed-Retractible | 5.07 % | 5.21 % | 129,441 | 4.89 | 33 | 0.2933 % | 2,730.7 |
| FloatingReset | 2.99 % | 4.98 % | 34,659 | 5.16 | 11 | -0.4699 % | 2,093.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BNS.PR.A | FloatingReset | -1.70 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.51 Bid-YTW : 4.45 % |
| BNS.PR.Y | FixedReset | -1.51 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.61 Bid-YTW : 6.39 % |
| TRP.PR.H | FloatingReset | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 10.00 Evaluated at bid price : 10.00 Bid-YTW : 4.45 % |
| CU.PR.I | FixedReset | -1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.76 % |
| BIP.PR.A | FixedReset | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 5.49 % |
| TRP.PR.B | FixedReset | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 11.34 Evaluated at bid price : 11.34 Bid-YTW : 4.22 % |
| PWF.PR.S | Perpetual-Discount | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 22.67 Evaluated at bid price : 23.00 Bid-YTW : 5.29 % |
| TRP.PR.C | FixedReset | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 12.05 Evaluated at bid price : 12.05 Bid-YTW : 4.44 % |
| GWO.PR.R | Deemed-Retractible | 1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.13 Bid-YTW : 5.97 % |
| TRP.PR.A | FixedReset | 1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 4.57 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| HSE.PR.A | FixedReset | 175,236 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-07-04 Maturity Price : 11.50 Evaluated at bid price : 11.50 Bid-YTW : 5.08 % |
| NA.PR.A | FixedReset | 74,665 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-08-15 Maturity Price : 25.00 Evaluated at bid price : 25.88 Bid-YTW : 4.72 % |
| MFC.PR.J | FixedReset | 65,850 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.59 Bid-YTW : 7.53 % |
| TD.PF.G | FixedReset | 44,408 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 4.08 % |
| RY.PR.R | FixedReset | 42,048 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.85 Bid-YTW : 3.77 % |
| RY.PR.Q | FixedReset | 41,332 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-24 Maturity Price : 25.00 Evaluated at bid price : 26.67 Bid-YTW : 4.14 % |
| There were 5 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.T | FixedReset | Quote: 20.36 – 21.02 Spot Rate : 0.6600 Average : 0.4914 YTW SCENARIO |
| BMO.PR.M | FixedReset | Quote: 22.96 – 23.46 Spot Rate : 0.5000 Average : 0.3415 YTW SCENARIO |
| BNS.PR.A | FloatingReset | Quote: 22.51 – 22.92 Spot Rate : 0.4100 Average : 0.2558 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 14.01 – 14.55 Spot Rate : 0.5400 Average : 0.3878 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 25.86 – 26.49 Spot Rate : 0.6300 Average : 0.4784 YTW SCENARIO |
| MFC.PR.H | FixedReset | Quote: 21.21 – 21.65 Spot Rate : 0.4400 Average : 0.2888 YTW SCENARIO |