Bank goes 50bps, first sign of possible pause | Page 5 | General financial discussion | Discussion forum

What more should OTPP say beyond https://www.otpp.com/en-ca/about-us/news-and-insights/2022/ontario-teachers--statement-on-ftx/ Do you want them to disclose who they might have fired due to this debacle?

I suspect it wasn't just swept under the rug internally. There would be some internal debate over what the TVG is doing, how it got itself into this pickle, and how it is performing overall with its aggregate investments.

Ultimately OTPP is responsible to its members where I think the pain is shared 50-50 between contributors and the taxpayer (equal contributions I think. Time to move on me thinks.

We lament the Ontario Teachers Pension Fund US$95MM crypto loss, it did report a total return of 1.2% in 1H2022.

Meanwhile, the Caisse de dépôt et placement du Québec lost $33.6B in the same period (7.9% on its portfolio), including their US$150MM crypto wipeout.

Good explanation why governments decision to scrap RRBs is based on a fallacy: https://financialpost.com/fp-finance/veteran-pension-fund-manager-freeland-ending-real-return-bonds-not-legitimate

Bill said
I believe there was a time when the Ontario gov't (taxpayers) "guaranteed" the teachers' pensions, I think that's gone now, maybe someone else knows more about this.

Also if for some reason the world economy crashed and CPP fund cratered I'd guess the gov't (taxpayers) would get involved. That's the way I took the comments anyway.

Pension payments are usually obligations of the sponsor/employer and not of the pension fund. The pension fund helps backstop those payments as the sponsor or employer may run into financial distress later.

According the CPP Act section 108, CPP pension is actually paid by the Government of Canada out of a Canada Pension Plan Account in the Consolidated Revenue Fund.

The CPP investment fund helps the federal government make those CPP payments. Ideally, the fund would reimburse the federal government for the CPP pension payments.

That's correct.

The Ontario teachers' pension is set up a bit differently but not materially different.

Under the Teachers' Pension Act, R.S.O. 1990, the pension fund pays out the pensions (section 14), not the Ontario government.

However, subsection 5(3) requires the province to make up any shortfall the following year unless otherwise agreed:

Deficiency
5(3) If in a year the amount of cash and assets capable of sale in the pension fund is insufficient to meet the payments out of the fund in the year after the sale of the assets capable of sale, the Minister of Finance shall pay from the Consolidated Revenue Fund an amount sufficient to make up the deficiency. R.S.O. 1990, c. T.1, s. 5 (3); 1993, c. 39, s. 3 (1).

Limitation
5(4) Subsection (3) ceases to apply if an agreement mentioned in subsection 11 (1) is in force. R.S.O. 1990, c. T.1, s. 5 (4).

With assets over $240 billion, it would take world economic collapse for the Teachers' Plan to run out of money in a year, in which case those Ontario dollars would be worth diddly.

Even if it got to that point over years, the circumstances and result would be the same.

TommyT said

Teachers can also hedge themselves as the Teachers Pension fund leaves a lot to be desired. They live in a dream world where they think everything will stay rigged forever. One day when the U.S. stock market ponzi finally implodes 80+ percent back down to fair market value reality will hit the pension holders.  

How do you think teachers can provide a hedge for themselves?

Size matters, a lot.
You neglect to name the British pensions to which you refer.
Ontario Teachers' pension plan is 18th largest in the WORLD.
https://www.visualcapitalist.com/worlds-100-biggest-pension-funds/ There are almost no British plans on this list of 100 largest pension plans.

Size allows for greater diversity of investments and less risk with each one. That's why I prefer the pension plans to do the investing, not me.

I can think of pension plans right here in Ontario that are not doing well at all. I know of one that is being regularly supplemented from general revenues by the employer, and it's still underfunded by about 20% even when markets strong. It's quite small and may well be poorly managed. (By the way, fund managers are evaluated on overall performance of the fund, not individual investments.) Teachers' plan has been funded beyond liabilities for quite a few years.

Frankly, I don't think you know very much about how pension plans work but you sure do have opinions. I won't be responding to any more of them on this topic. Not worth my time.

Loonie said
…
Frankly, I don't think you know very much about how pension plans work but you sure do have opinions. I won't be responding to any more of them on this topic. Not worth my time.

I agree with that. There was a lack of understanding about how pensions plans work and a lack of understanding of what happened in UK.

In the UK, apparently some pension plans were, ironically, trying to hedge against sudden movements in interest rates using “liability driven investment” schemes (LDI). The LDI schemes required the pension plans to supply long-term UK government bonds as collateral for the pension plans' side of the derivative contract.

When UK interest rates spiked after that infamous budget with unfunded tax cuts, the value of those long-term UK government bonds dropped and triggered margin calls to the pension funds. Some of them had challenges raising the needed cash unexpectedly that quickly.

The Guardian (Septemger 28, 2022): What is the Bank of England doing in bid to stabilise UK economy? has the details.

Had they not hedged, they would not have had a problem that required Bank of England help.