I have long worried that the craze for alternative investments by pension funds and insurance companies was going to lead to trouble. Here’s an example from Dallas:
Dallas police and firefighters are withdrawing hundreds of millions from their retirement plan following a series of investment blunders, heightening the risk that a major U.S. pension fund could run out of money.
The revolt by members of the $2.27 billion Dallas Police and Fire Pension Fund offers an extreme case of what can happen when a pension wagers on lucrative returns to cover funding shortfalls.
…
A series of aggressive real-estate bets from Hawaii to Paris and a conflict over the value of those properties triggered more than $500 million in losses, leaving the fund with enough to pay just 45% of future benefits. Officials are warning the pension could go broke by 2027.
…
For 10 years, Dallas has had the highest percentage of assets in real estate of any of the about 150 plans tracked by the Public Plans Database. Pension officials traveled as far as Australia and Abu Dhabi to scope out prospective investments, according to a 2008 newsletter.The strategy appeared to be working, with Dallas returns often beating national medians. But that success received scrutiny in 2013 when the Dallas Morning News reported that many properties hadn’t been appraised for years. Instead, certain holdings were valued based on their purchase price and in some cases by also adding development and operating expenses, said Chief Financial Officer Summer Loveland, who joined the fund in November 2013.
This revaluation loss leads one to wonder what will happen to this speculation:
While Chinese home buyers have sent prices soaring from Vancouver to Sydney, in this corner of Southeast Asia it’s China’s developers that are swamping the market, pushing prices lower with a glut of hundreds of thousands of new homes. They’re betting that the city of Johor Bahru, bordering Singapore, will eventually become the next Shenzhen.
“These Chinese players build by the thousands at one go, and they scare the hell out of everybody,” said Siva Shanker, head of investments at Axis-REIT Managers Bhd. and a former president of the Malaysian Institute of Estate Agents. “God only knows who is going to buy all these units, and when it’s completed, the bigger question is, who is going to stay in them?”
…
Developers have a pipeline of more than 350,000 private homes planned or under construction in Johor state, according to data from Malaysia’s National Property Information Centre. That’s more than all the privately built homes in Singapore. Forest City could add another 160,000 over its 30-year construction period, according to Bloomberg estimates, based on the projected population.“Land is plentiful and cheap,” said Alan Cheong, senior director of research & consultancy at Savills Singapore. “But buyers don’t understand how real estate values play out when there is no shortage of land.”
Meanwhile, the TMX – acquired by the banks to extend their hegemony over the Canadian financial system in a transaction blessed by the regulators in exchange for extra payments to the regulators – continued to demonstrate its permanent free pass from the competition board:
The Competition Bureau has closed its investigation into TMX Group, concluding that owner of the Toronto Stock Exchange likely did not violate the Competition Act in the operation of its market data business.
Last year, TMX rival Aequitas Innovations Inc. complained to the Bureau about what it maintained was “anti-competitive conduct” from TMX Group in relation to its market data product. At the time, Aequitas was attempting to build out its own competing data product. Aequitas alleged that agreements between TMX and investment dealers prevented the sharing of private data without the consent of TMX Group.
Even though the Competition Bureau found in its investigation that this was indeed the case, there were other factors that had little to do with TMX, that made it difficult for Aequitas to launch a competing product, including dealers themselves having reservations about working with Aequitas. One such reservation was over the confidentiality of private market data, according to the Bureau’s statement.
The statement from the Bureau essentially states that it is the Bureau’s job to pick winners and they have picked their friends:
Abuse of dominance occurs when a dominant firm or group of firms in a market engages in a practice of anti-competitive acts, with the result that competition has been or is likely to be prevented or lessened substantially. The Bureau’s investigation focused on the last part of the abuse of dominance test – namely, whether the contractual clauses imposed by TMX Group were likely to substantially prevent competition in a market. Specifically, the Bureau examined whether sufficient future competition from the CMV would be likely to materialize in the absence of TMX Group’s alleged anti-competitive conduct.
Evidence obtained by the Bureau indicated that in order for the CMV to effectively compete with the current sources of indicative market data in Canada, Aequitas required a substantial volume of private market data from investment dealers. Accordingly, the Bureau considered whether there was compelling evidence that Aequitas would likely be able to obtain such a volume of private market data from investment dealers absent TMX Group’s contractual clauses. The Bureau found that:
- •the level of interest among investment dealers in Aequitas’ proposed CMV product varied considerably;
- •investment dealers had a number of concerns with respect to the CMV, including with respect to the confidentiality of private market data, and it was unlikely that Aequitas would be able to address these concerns within a reasonable period of time; and
- •Aequitas had not obtained credible commitments from investment dealers to provide their private market data absent TMX Group’s contractual clauses. Moreover, it was unlikely that Aequitas would be able to obtain such commitments within a reasonable period of time given the preliminary status of negotiations between Aequitas and investment dealers.
Taken together, this evidence suggested that, even absent TMX Group’s contractual clauses, it was unlikely that Aequitas would be able to obtain a sufficient volume of private market data from investment dealers to develop a sufficiently competitive product.
It’s all very simple, isn’t it? Abuse of dominance is restraint of trade. If there’s no trade to restrain because it’s been snuffed out in the planning stages, then there can be no abuse of dominance. QED.
| 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 | -0.2724 % | 1,742.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2724 % | 3,183.8 |
| Floater | 4.30 % | 4.49 % | 48,252 | 16.39 | 4 | -0.2724 % | 1,834.8 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0199 % | 2,906.8 |
| SplitShare | 4.86 % | 4.28 % | 49,387 | 2.03 | 6 | -0.0199 % | 3,471.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0199 % | 2,708.5 |
| Perpetual-Premium | 5.44 % | 5.06 % | 79,947 | 14.43 | 23 | 0.1607 % | 2,659.2 |
| Perpetual-Discount | 5.38 % | 5.37 % | 92,306 | 14.88 | 15 | 0.1129 % | 2,786.5 |
| FixedReset | 4.92 % | 4.63 % | 203,842 | 6.82 | 95 | 0.3518 % | 2,073.5 |
| Deemed-Retractible | 5.12 % | 5.29 % | 135,567 | 1.96 | 32 | 0.2443 % | 2,761.3 |
| FloatingReset | 2.88 % | 3.60 % | 40,516 | 4.87 | 12 | 0.2168 % | 2,306.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CU.PR.C | FixedReset | -2.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 4.47 % |
| W.PR.M | FixedReset | -1.06 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : 5.14 % |
| BAM.PR.K | Floater | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 10.59 Evaluated at bid price : 10.59 Bid-YTW : 4.52 % |
| FTS.PR.K | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 17.45 Evaluated at bid price : 17.45 Bid-YTW : 4.53 % |
| HSE.PR.E | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 5.38 % |
| SLF.PR.H | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.50 Bid-YTW : 9.01 % |
| MFC.PR.I | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.35 Bid-YTW : 6.88 % |
| MFC.PR.B | Deemed-Retractible | 1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.36 Bid-YTW : 6.30 % |
| MFC.PR.M | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.67 Bid-YTW : 7.81 % |
| MFC.PR.N | FixedReset | 1.19 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.71 Bid-YTW : 7.70 % |
| GWO.PR.N | FixedReset | 1.28 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.47 Bid-YTW : 10.98 % |
| MFC.PR.C | Deemed-Retractible | 1.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.58 Bid-YTW : 6.68 % |
| TRP.PR.D | FixedReset | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 4.90 % |
| PWF.PR.P | FixedReset | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 13.71 Evaluated at bid price : 13.71 Bid-YTW : 4.63 % |
| RY.PR.J | FixedReset | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 20.32 Evaluated at bid price : 20.32 Bid-YTW : 4.57 % |
| TRP.PR.C | FixedReset | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 13.15 Evaluated at bid price : 13.15 Bid-YTW : 4.72 % |
| IFC.PR.D | FloatingReset | 1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.30 Bid-YTW : 6.95 % |
| HSE.PR.C | FixedReset | 1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 5.32 % |
| IAG.PR.G | FixedReset | 1.70 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.35 Bid-YTW : 7.02 % |
| TRP.PR.G | FixedReset | 2.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 4.85 % |
| RY.PR.M | FixedReset | 2.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 19.91 Evaluated at bid price : 19.91 Bid-YTW : 4.54 % |
| SLF.PR.J | FloatingReset | 2.38 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.77 Bid-YTW : 10.20 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.K | FixedReset | 1,943,523 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 23.06 Evaluated at bid price : 24.80 Bid-YTW : 4.86 % |
| BAM.PF.I | FixedReset | 450,641 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 23.09 Evaluated at bid price : 24.86 Bid-YTW : 4.77 % |
| TD.PF.H | FixedReset | 303,700 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.42 Bid-YTW : 4.59 % |
| TRP.PR.D | FixedReset | 255,837 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 4.90 % |
| TRP.PR.E | FixedReset | 142,308 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-11-21 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 4.82 % |
| BNS.PR.N | Deemed-Retractible | 66,300 | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-01-27 Maturity Price : 25.00 Evaluated at bid price : 25.19 Bid-YTW : 2.74 % |
| There were 41 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| W.PR.K | FixedReset | Quote: 25.30 – 25.99 Spot Rate : 0.6900 Average : 0.4921 YTW SCENARIO |
| PWF.PR.G | Perpetual-Premium | Quote: 25.41 – 25.71 Spot Rate : 0.3000 Average : 0.1901 YTW SCENARIO |
| TRP.PR.F | FloatingReset | Quote: 14.72 – 14.99 Spot Rate : 0.2700 Average : 0.1930 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 14.21 – 14.57 Spot Rate : 0.3600 Average : 0.2884 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 12.05 – 12.35 Spot Rate : 0.3000 Average : 0.2292 YTW SCENARIO |
| PWF.PR.I | Perpetual-Premium | Quote: 25.43 – 25.67 Spot Rate : 0.2400 Average : 0.1701 YTW SCENARIO |