As the head of CPP Investments, the organization that invests the Canada Pension Plan Fund in the best interests of millions of Canadians, I spend a lot of my time thinking about long-term risks that could affect the safety of our investments, risk in relation to opportunity, and the potential risks we can’t foresee that spring up suddenly.

The COVID-19 pandemic currently roiling markets worldwide falls squarely in that last category. While the possibility for widespread contagion is ever present, a few short months ago it was still a theoretical risk. No longer.

This coronavirus presents a serious challenge to communities and people everywhere and is forcing profound changes in our daily lives.

At CPP Investments, we’re taking all precautions to prevent community spread and are encouraging others to do the same. We’ve stopped all non-essential travel, enabled our employees to work from home, and are doing our part to maintain essential services to Canadians.

For us, that means continuing to help protect the Canada Pension Plan, which is the base layer of retirement savings for most Canadians. Canadians are focused, as they should be, on keeping their families healthy. We remain focused on safeguarding the financial health of the CPP Fund. I can assure you that, even in the aftermath of the stock market declines in recent days, the sustainability of your CPP Fund remains secure.

In the coming months, many businesses, will experience levels of stress they have not seen in years – or in fact, may have never seen. We take a long-term view. We have weathered crises before, and we know that heightened stress makes it ever more important to keep our focus on the long term.

Our job is to deliver strong financial performance for multiple generations. That’s why we evaluate every investment we make on its ability to generate returns for decades, not on the likelihood of an up or down price movement in the next quarter.

Of course, we will continue to stress test our portfolio, looking at investment outcomes under a variety of extreme scenarios so we can be confident that, whatever happens over the coming weeks and months, the necessary funds will always be available for CPP benefits payments.

With this long-term view, we pursue an active, long-term investing strategy. Starting most crucially with diversification, both in where and how we invest. We invest across sectors, strategies and markets that span the globe. This diversification ensures our access to the best opportunities, reduces risk from overexposure to any one market or asset class, and lets us buy and hold when others can be distracted by short-term volatility.

Another critical strength is our size, soundness and governance structure, which allows us to navigate market volatility unlike many other investors. We’ve weathered through trouble before, not allowing short-term drops to distract us from focusing on long-term gains. During the Global Financial Crisis, the CPP Fund lost 18.8% in value in one year, but just six years later the CPP Fund’s investments gained 18.3% in one year alone. What matters is our performance over a much longer horizon. Our 10-year performance, reported in December, was well over 10%.

Over the past 21 years, we’ve grown the CPP Fund from $36.9 billion to $420.4 billion; and the most recent report by the Chief Actuary of Canada, released in December 2019, states the Fund continues to be sustainable for more than 75 years. This performance was made possible by the diverse skills, deep expertise, and network of relationships we’ve built over the years.

We don’t yet know the full impact of COVID-19. It will continue to affect the global economy and like other global investors, we will not be immune. We believe strongly, however, that our long-term investing view, our deep bench of talent and expertise, and our highly-diversified portfolio will continue to serve the Canadians who depend on us for the safety of their retirements. To all 20 million Canadians who participate in the CPP – it is with kindness to one another and confidence in the systems in place, like the CPP, that we will endure.

Although the markets are changing quickly due to the impacts of coronavirus, the OPSEU Pension Trust is a long-term investor and its overall investment strategy hasn’t changed, says James Davis, the fund’s chief investment officer.

The plan’s portfolio was constructed to be resilient and withstand events similar to what’s happening in today’s markets, he says, noting the portfolio is broken down into three sections: risk mitigation, return seeking and liability hedging.

“The liability-hedge portfolio, which is comprised mostly of bonds is doing very well,” says Davis. “The risk-mitigation portfolio is doing even better because there we’ve got exposure not only to bonds but to [trend strategies] and also to defensive currencies and we have some gold in that portfolio as well . . .The return-seeking portfolio, on the other hand, of course, has more exposure to risk. You need to take that exposure to risk in order to earn the returns to pay pensions. And that is the part of the portfolio that is experiencing drawdown at the moment.”

That said, since the OPTrust is a relatively mature pension plan, its portfolio has been designed with the objective of earning the return required to pay pensions at the lowest risk possible, so its risk exposure is low.

However, while the plan is in a good position, some worrisome things are playing out in the market, he adds, noting correlations that are a reflection of illiquidity.

“The markets, at this point in time, are experiencing something not dissimilar to 2008, and central bankers are doing what they can to unclog the plumbing. But I think that, coupled with a lot of quantitative strategies that are essentially position-sized on the basis of volatility, as volatility has risen, they’ve had to unwind some of those positions and that has added to the illiquidity in the market because there’s simply not enough buyers and too many sellers.”

The OPTrust, in particular, is quite flush with liquidity because it set its investment strategy up with this in mind. “Now, with markets in the state that they’re in, opportunities are presenting themselves on a daily basis and we have the ability to provide liquidity to the markets and take advantage of some of those opportunities.”

But Davis does acknowledge that the plan isn’t a market-timer, adding he doesn’t know when the bottom will be hit. “We’ve looked at bear markets since 1900 and what we’ve seen now is not as bad as it can be and it’s certainly too short to call an end to it. So we have to be mindful that this can get worse before it gets better.”

At times like this, it’s important for plan sponsors to stay focused on the amount of risk they’re taking and avoid excessive risk, says Davis, though with interest rates falling over the last several years, central banks have been pushing investors out on the risk curve.

As a result, investors have used leverage to achieve higher rates of return because risk premia have been relatively low.

“I think that’s what’s causing some of the stress in the markets, but I believe being a long-term investor puts us in a really good position,” he says. “And being able to think long term like pension plans can and being able to provide liquidity to the market is a real advantage. That’s really what the Canadian model has been able to do over the past couple of decades.”

Man who scored big wins during the 2008 financial crisis says the stock market could be ‘near a bottom’ if U.S. gets a coronavirus recovery plan - MarketWatch https://t.co/VjWsR1RBcq

— Leo Kolivakis (@PensionPulse) March 24, 2020

Dow rebounds more than 11% in best day since 1933 as Congress nears coronavirus stimulus deal https://t.co/tdvrYLYcao

— Leo Kolivakis (@PensionPulse) March 24, 2020

Why Trump's call to restart the economy in April is being derided as 'totally nuts'https://t.co/FcaAOe8RdU via @YahooFinance

— Leo Kolivakis (@PensionPulse) March 24, 2020

Bill Gates: US missed its chance to avoid coronavirus shutdown https://t.co/wVDgthQxBh

— Leo Kolivakis (@PensionPulse) March 24, 2020

“It’s very tough to say to people, ‘Hey keep going to restaurants, go buy new houses, ignore that pile of bodies over in the corner, we want you to keep spending because there’s some politician that thinks GDP growth is what counts,’” Gates said. “It’s hard to tell people during an epidemic … that they should go about things knowing their activity is spreading this disease.”

Coronavirus may have infected half of UK population — Oxford study | Financial Times https://t.co/dLaagHl9Tn

— Leo Kolivakis (@PensionPulse) March 24, 2020

This could be true but it doesn’t change the fact that the hospital systems were overwhelmed in China and Italy because a much larger fraction of cases (10% ) than the flu need hospitalization across the age spectrum (it’s not just the mortality rate) and from those that need hospitalization because they need oxygen, you have no idea who will progress to death vs improve.

If this is true, the good news is that after a few months a large fraction of the population will be immune (i.e. the herd immunity) but you still have to go through a lot of pain in the first few months and flattening the curve makes the most sense to give everyone a chance at a ventilator. I think the authors acknowledge this.

No proof until large scale serologic studies are completed.

Stay safe.

Norway’s sovereign wealth fund, the world’s largest, named a London-based hedge fund manager as its new chief executive on Thursday and said it had lost $124 billion this year as stock markets tanked due to the coronavirus pandemic.

Norwegian-born Nicolai Tangen, until now chief executive of AKO Capital, which he established in 2005, will take the helm in September, succeeding Yngve Slyngstad who announced his resignation last year.

“Tangen has built up one of Europe’s leading investment firms and has delivered very good financial results as an international investment manager,” Norwegian central bank Governor Oeystein Olsen said while announcing the appointment.

“He has extensive experience with equity management, which is the fund’s largest asset class,” Olsen told a news conference in Oslo.

The AKO Capital partnership has around 70 employees, managing around $16.4 billion, according to its own website.

By contrast, the Norwegian wealth fund is worth $930 billion - though that is down from $1.17 trillion in early February, before stock markets fell.

The wealth fund has huge market influence because it owns in region of 1.5% of the world’s listed shares. However it has seen the limit of its clout this year as the pandemic has wrought havoc.

Its investment portfolio dropped 16.2%, all but erasing the 20% gains made last year, while its stock market portfolio - its main asset class - has lost 22.8% of its value, it said.

The wealth fund, a unit of the central bank, is formally known as Norges Bank Investment Management. It invests the proceeds of Norway’s oil and gas industry in foreign stocks, bonds and real estate.

LIKE JOINING MAN UNITED

“This is not only a dream job, this is my boyhood dream job,” said Tangen via video link from London, comparing it to fellow Norwegian Ole Gunnar Solskjaer taking the job of manager at English Premier League soccer club Manchester United.

Asked what was his motivation for taking on the job given that he would be earning less money, Tangen told Reuters: “It is clearly not the money even though the salary is a very good leadership salary in Norway.”

“As a Norwegian this is a huge thing,” he said in a phone interview from London. “It is a huge honor to be asked and it is a huge responsibility to safeguard the capital of the country and the wealth of future generations.”

He declined to comment on the coronavirus outbreak, saying Slyngstad remained CEO until he took over in September.

Tangen will move back to Norway, where he is perhaps best known for donating a collection of modern art to his home town of Kristiansand, which plans to house it in a converted grain silo.

Norwegian business magazine Kapital last year estimated Tangen’s net worth to be 5.5 billion Norwegian crowns ($519 million). He could face the prospect of paying annual wealth taxes of 60-70 million crowns, likely far exceeding the salary from his new position.

Outgoing CEO Slyngstad earned 6.7 million crowns last year. He is stepping down after 12 years on the job, during which the fund’s value rose sharply thanks to rising stock markets and solid income from Norway’s energy sector.

We are long-term, patient and responsible investors, taking stakes in high quality, listed companies with outstanding managers. We have a rigorous, proprietary research-driven investment process.

By these means, we aim to achieve returns that materially outperform the market with lower volatility. Using estimates as at 24 March 2020, our European long-short fund has compounded at three times the rate of the market (9.9% versus the market 3.1%) since its inception nearly 15 years ago. Additionally, our European long-only fund has outperformed the market by more than 4% per annum (9.8% versus the market 5.5%). As at February 2020, we had generated more than $8.6bn in profits for our clients across all AKO funds.

Private equity eyes coronavirus-struck industries: ‘They have been waiting for this’ https://t.co/MVKMqrCfUQ

— Leo Kolivakis (@PensionPulse) March 25, 2020

The Gulf's sovereign wealth funds seen losing $300 billion from oil collapse and a coronavirus recession https://t.co/GT3DaqIQaw via @markets

— Leo Kolivakis (@PensionPulse) March 26, 2020

Getting crushed in this market? One look at Warren Buffett’s portfolio and you might feel a lot better about yours https://t.co/Q1faaS3VTc

— Leo Kolivakis (@PensionPulse) March 26, 2020

Man who called 1987 crash says ‘be careful not to mythologize’ coronavirus into a ‘pandemic Godzilla,’ predicts stocks will rebound in a few months https://t.co/b5nr7hmEp5

— MarketWatch (@MarketWatch) March 26, 2020

Stocks in Asia set to rise as Dow sees largest 3-day surge in almost 90 years https://t.co/BWEBSPqx54

— CNBC (@CNBC) March 26, 2020

Jobless claims soar past 3 million as coronavirus sends Americans to the unemployment line https://t.co/271kP5y9KS

— Leo Kolivakis (@PensionPulse) March 26, 2020

“There will be a very significant drop back in unemployment when the number of new coronavirus infections fall and the economy begins to reopen, but it won’t reverse all of these losses,” Capital Economics’ Ashworth said. “The unemployment rate could remain elevated for years.”

Private Equity Boss Slams Corona Shutdown https://t.co/ytcOvdEMYQ

— Leo Kolivakis (@PensionPulse) March 26, 2020

The 60-year-old Dibelius, who began his career as a surgeon, appeared to be an adherent of the herd immunity strategy. This involves allowing parts of society who would likely suffer mild illness from the virus to become immune.

«I'm more afraid of the collective shutdown of the economy and social welfare, conducted with nearly no discussion and with the argument of morality, than I am of the virus itself,» Dibelius said. «I'd rather have a flu than I would a broken economy.»

Almost half New York City’s coronavirus patients are under 45 https://t.co/pVxcpRx9ye

— Leo Kolivakis (@PensionPulse) March 25, 2020

Bill Gates on coronavirus: We need an 'extreme shutdown' of 6 to 10 weeks https://t.co/V33EMD0EYK via @YahooFinance

— Leo Kolivakis (@PensionPulse) March 26, 2020

“You don’t make the timeline. The virus makes the timeline,” says Dr. Anthony Fauci on when coronavirus restrictions could be lifted. “...You have got to go with what the situation on the ground is... you need the data.” https://t.co/L2SlTmOJ6Zpic.twitter.com/jMem16dOdM

— Cuomo Prime Time (@CuomoPrimeTime) March 26, 2020

When the S&P 500 closed at a record high on February 19, Canada’s major pension plans, with more than a quarter of their investments in stocks, were in a comfortable position in spite of the looming coronavirus pandemic.

Five weeks later, Canada’s 10 largest pension funds — upon which millions of Canadians are relying for retirement—have lost an estimated $104 billion, according to an analysis by The Logic.

But not all pensions are created equal, and while some—including the country’s largest, the Canada Pension Plan Investment Board (CPPIB)—have high exposure to public markets, others have managed to mostly skirt the crash that has seen the S&P 500 lose roughly US$8 trillion this year.

Canada’s 10 largest pension funds have an average of 27 per cent of their assets invested in the public markets, based on an analysis of each firm’s disclosed asset allocation when last reporting their finances. With a combined $1.7 trillion in assets, they have more than $500 billion invested in public equity markets.

It’s not just public equity that can impact the health of pensions. They are also vulnerable to swings in other asset classes, such as fixed income, private equity, real estate and infrastructure, areas that have also taken a hit in the crisis. Mortgage applications in the U.S. dropped 29.4 per cent last week and capital from seed-stage funding has decreased about 22 per cent globally since January. Currency fluctuations are also a risk, particularly the Canadian-to-U.S.-dollar exchange, which has dropped about 30 per cent since its 2011 high.

While all 10 funds are long-term investors with diversified portfolios, some are more susceptible to market swings than others.

British Columbia Investment Management Corporation (BCI), which manages funds for over 2.3 million people, is the most exposed to public equity, which represents 41 per cent of its $153.4 billion in assets. Asked to comment on The Logic’s estimate it has lost about $8.5 billion in public equities since it last reported, external communications manager Ben O’Hara-Byrne said the fund was looking for long-term returns.

“BCI had been anticipating and prepared for a market downturn by defensively positioning and diversifying our clients’ portfolios,” said O’Hara-Byrne.

CPPIB had $140.8 billion invested in public equity as of Dec. 31, 2019, or about 27 per cent of its portfolio. It declined to share how much it had in public equity after the market drop. “The Fund is not immune to occasional, severe drops in the value of stocks. Indeed, of course, the current situation is impacting the Fund,” said Michel Leduc, global head of communications.

“The Fund is demonstrating significant resilience relative to much sharper drops observed in public equity markets globally.”

The Caisse de dépôt et placement du Québec has the second-largest dollar amount invested in public equity: $116.9 billion, representing 34 per cent of its assets.

“The world and the markets are obviously facing challenging times,” said Maxime Chagnon, head of global media relations. “We are monitoring our portfolio and various asset classes very closely in this exceptional situation.”

Not all of the big 10 pension funds are so exposed to public equity. The Ontario Teachers’ Pension Plan’s public equity holdings comprised just 10 per cent of its assets, according to its most recent financial report. Asked for comment, Teachers’ said that its 2019 results will be reported next week.

“Teachers’ is a more mature plan when you compare it to their peers. Their population is older. Their pensioner-to-active ratio is shrinking. They’re very much looking to manage risk within a different tolerance,” said Andrew Whale, a principal at consulting firm Mercer Canada.

OPTrust, which manages a defined benefit plan for over 96,000 public-sector workers in Ontario, had the least exposure to public equity, at just six per cent.

“Many pension plans around the world tend to have an over-concentration to the equity risk factor. We are very focused on trying to deliver on our pension promise with the lowest risk possible,” James Davis, OPTrust’s chief investment officer, told The Logic, adding that its portfolio is fully funded.

The Alberta Investment Management Corporation’s (AIMCo) public equity holdings made up $41.5 billion when it last reported for the year ended March 31, 2019—36 per cent of the pension’s total holdings. AIMCo said it would report more recent numbers in mid-April.

“The recent volatility in investment markets and decline in economic activity as a result of the COVID-19 pandemic is truly unprecedented,” said Dénes Németh, AIMCo’s corporate communication director.

“This has created significant challenges for institutional investment, but adherence to prudent management of our clients’ portfolios, coupled with the long-term investment horizon of our clients and a broadly diversified portfolio both in terms of asset classes and geographies, will allow our clients to weather the market downturn, as we have on their behalf in the past.”

In recent years, Canada’s top pension plans have been widely heralded as global leaders for both their stability and rapid increase in assets. In 2017, the World Bank Group commissioned a report on Canadian pensions to help pension funds in emerging economies model their systems. In November 2019, five Canadian pension funds were ranked among the top 100 global asset managers.

“Canada’s major pensions really are world-class,” said Whale. “They’re set up to report for decades to come, and are set up to get through this kind of short-term volatility.”

“It’s a big loss for such a short period of time. The major pensions are being hammered from all sides right now. Public equities are dropping at the same time government bond yields are at an all time low,” said Whale.

Mercer Canada’s pension health index ended February at 103 per cent, which means pensions were slightly overfunded, with more money than obligations. That’s dropped to 88 per cent as of March 20.

That’s light years ahead of the U.S., whose largest fund, the California Public Employees’ Retirement System (CalPERS), has a funding ratio of 70.1 percent, according to the Center for Retirement Research. CalPERS reported last week that it had lost about US$67 billion in market value since January.

When a pension is underfunded, one of three things can happen: employers, workers or both can make more contributions; the pensions can cut benefits; or the fund can earn a higher return on its remaining investments.

For funds that aren’t over-leveraged in public equities, this is a time that can also create value.

“I think taking the opportunity to add modestly to our equity holdings now is the right thing to do,” said OPTrust’s Davis. “But we’re looking at it across all asset classes. And so, my private markets teams have a lot of dry powder, as well, and they’re in a position to be able to add as opportunities present themselves.”

I've repeatedly said that Norway has a giant beta problem. Beta is great on the way up, like last year when Norway's Fund soared 20%, but it really bites you hard on the way down, like Q1 2020 which will be one of the worst the Fund ever experiences (we shall see, it's not over yet).

Let me be more specific, Norway takes on too much public equity risk which exposes the fund to too much volatility. Who cares? It has a long-term focus and can absorb all this volatility.

True, but it can and should do a lot more to deliver more consistent and higher risk-adjusted returns over the long run.

Let me give you an example. Look at CPPIB's asset mix as at March 31, 2019:

Even though it's a year old, it hasn't changed much. Just like Norway's Fund, the CPP Fund also takes equity risk, lots of it, but it spreads it more evenly between private (24%) and public equities (33%).

More importantly, it invests and co-invests with top private equity partners all over the world, ensuring great long-term performance and significantly reducing its fee drag.

It also invests in infrastructure, real estate and private debt all over the world, further diversifying its portfolio.

Now, don't get me wrong, CPPIB and other Canadian pensions aren't immune to what is going on out there with this pandemic. Private equity, real estate and infrastructure investments are getting hit too.

For example, CPPIB owns 50% of Highway 407 and it will take a hit from the fact that this toll road won't generate the toll revenue over the next few months. OTPP owns major stakes in European airports, it too will get hit on these infrastructure investments over the short run.

Longer term, however, these investments will generate significant cash flows and even if they are marked down temporarily, they will bounce back.

The same thing for real estate and private equity investments. Of course they aren't immune and even if they're not marked to market, they too will experience significant losses, but over the long run, they will bounce back.

Over the past 21 years, we’ve grown the CPP Fund from $36.9 billion to $420.4 billion; and the most recent report by the Chief Actuary of Canada, released in December 2019, states the Fund continues to be sustainable for more than 75 years. This performance was made possible by the diverse skills, deep expertise, and network of relationships we’ve built over the years.

We don’t yet know the full impact of COVID-19. It will continue to affect the global economy and like other global investors, we will not be immune.We believe strongly, however, that our long-term investing view, our deep bench of talent and expertise, and our highly-diversified portfolio will continue to serve the Canadians who depend on us for the safety of their retirements. To all 20 million Canadians who participate in the CPP – it is with kindness to one another and confidence in the systems in place, like the CPP, that we will endure.

Today, the Bank is launching two new programs.

First, the Commercial Paper Purchase Program (CPPP) will help to alleviate strains in short-term funding markets and thereby preserve a key source of funding for businesses. Details of the program will be available on the Bank’s web site.

Second, to address strains in the Government of Canada debt market and to enhance the effectiveness of all other actions taken so far, the Bank will begin acquiring Government of Canada securities in the secondary market. Purchases will begin with a minimum of $5 billion per week, across the yield curve. The program will be adjusted as conditions warrant, but will continue until the economic recovery is well underway. The Bank’s balance sheet will expand as a result of these purchases.

The coronavirus crisis has punished the blameless across the world this year. That includes investors who did the supposed “right thing,” by keeping a balanced portfolio to fund long-term gains, just as the experts advise.

As the stock-market cascaded to its recent lows this month, the traditional portfolio of 60% stocks and 40% bonds suffered a greater than 20% decline from its peak value, for only the fourth time since World War II.

At last Monday’s low, this standard retirement allocation, as represented by the Vanguard Balanced Index Fund, was 22% off its peak Feb. 19 value – driven mostly of course by the 30% tumble in equity indexes that bonds only partially buffered. In fact, near the worst of the stock sell-off bonds were not offsetting the losses by rallying, as everything but cash was liquidated.

Upon request, Ritholtz Wealth Management research director Michael Batnick went back in history to track each time the 60/40 portfolio had taken at least a 20% hit. Such a decline struck initially at only the following points since 1945 (using month-end data for 60% S&P 500 and 40% five-year Treasuries): August 1974, September 2002 and January 2009.

The fact that the 60/40 autopilot approach has only retreated by 20% on a monthly basis four times in 75 years is itself a testament to the smoothing effects of offsetting equity-fixed income interplay.

What happened next after the prior 20% setbacks? Those months were all within months of the trough of major bear markets, though in each case the ultimate low for the stock indexes was still to come.

Batnick calculates that in those three instances in 1974, 2002 and 2009, it took between 10 and 20 months for this portfolio to recover back to its peak level.

An investor who kept to the disciplined approach and rebalanced holdings back to the 60/40 asset split at the end of the month when a 20% decline was first registered would have been positioned for attractive returns in subsequent years.

In those three instances, the average annual total return from the 60/40 portfolio was close to 12% over the following five years. That’s a healthy advantage over the very long-term average yearly return of around 9% for this asset allocation.

This is perhaps comforting, if not terribly surprising. Any investment discipline that triggers a move to take advantage of steep underperformance in one asset classes tends to be rewarded over time. And rebalancing after big declines in a blended-asset portfolio has generally been about buying nasty breaks in stock indexes.

Is 60/40 stance broken?

On a more opportunistic, shorter-term basis, strategist Terry Gardner of C.J. Lawrence last week noted that simply buying the S&P 500 the last three times it’s dropped 25% from a peak (1987, 2001 and 2008), as it did this month, has always led to positive returns over the next year – even though in none of those instances did the minus-25% level represent the ultimate low for stocks. Those returns one year out were 20% after 1987, 2.5% after 2001 and 18% after 2008.

Are there reasons to be skeptical that holding fast to the 60/40 stance this time will not fare as well as in past decades? Some investment professionals have discussed for some time that the essential premise of the 60/40 mix has been challenged due to extremely low bond yields that leave far less room for bonds to appreciate in an economic slowdown or crisis, mitigating their value as ballast to stocks.

Goldman Sachs strategists last week sounded a cautious note on this front last week with regard to the present market skid. “In addition to the sharper-than-normal equity correction, diversification in 60/40 portfolios has been less good,” the firm said. “With bond yields at all-time lows now and close to the effective lower bound, there is little space for most [developed-market] bonds to buffer equity drawdowns.”

Stretching deeper into history, skeptics might note the 60/40 portfolio carried a 20% loss for longer stretches in the 1930s, when stocks stayed deep underwater during the entire Great Depression.

So perhaps the traditional asset mix will get less help over time from bond yields squeezing lower in tough times (barring a move to negative yields, which would create a whole other set of issues). Still, bonds can still serve the role as cushion against equity losses.

Rebalancing aided the bounce?

The entire issue of rebalancing is hardly just an academic issue. The impulse from pension funds and automated asset-allocation vehicles to shift hundreds of billions in assets from fixed-income to stocks was detailed by strategists across Wall Street and was at least one significant driver of the surge in the S&P 500 into Thursday’s close.

The S&P 500 at its low point last week was underperforming the Barclays Aggregate Bond Index by some 30 percentage points year to date. Bespoke Investment Group notes that this effectively turned a 60/40 portfolio into a 55/45 mix, requiring one of the bigger rebalancing moves in years.

Of course, to the extent that this mechanical reallocation is timed to the quarter’s end, it means one short-term tailwind for the rebound rally has just about abated, as the market bounce leaves the indexes less stretched and investors have celebrated fresh trillions of dollars in support from the Federal Reserve and Congress.

Strategist Tony Dwyer of Canaccord Genuity, who’s been waiting for a retest of last week’s low to get more aggressively positioned, noted Friday, “Over coming days, the market will not be as oversold, the pension rebalancing will be done, and the bulk of monetary and fiscal stimulus will have been announced.”

While those factors could present a test of the immediate resilience of the market’s attempted comeback, they don’t much alter the case for long-term investors to take what the market has served up with its swift retrenchment this month.

What it would take for the Fed to start buying stocks during coronavirus crisis https://t.co/XKeNzAF4Gg

— Leo Kolivakis (@PensionPulse) March 30, 2020

“One of the questions asked most frequently is, isn’t the Fed out of ammunition? No, they still have plenty of tricks in their bag. Moving into further purchases of risk assets is one of the things they could do,” said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments.

Mortgage bankers warn Fed purchases of mortgages unbalanced market, forcing margin calls https://t.co/RBlcnqNz1e

— Leo Kolivakis (@PensionPulse) March 30, 2020

In its letter to regulators, the MBA said:  “The dramatic price volatility in the market for agency mortgage-backed securities [MBS] over the past week is leading to broker-dealer margin calls on mortgage lenders’ hedge positions that are unsustainable for many such lenders.”

The letter went on to say, “Margin calls on mortgage lenders reached staggering and unprecedented levels by the end of the week. For a significant number of lenders, many of which are well-capitalized, these margin calls are eroding their working capital and threatening their ability to continue to operate.”

'The Government has helped everyone – apart from us pensioners'https://t.co/AiZ4ZOI7oa

— Leo Kolivakis (@PensionPulse) March 30, 2020

That article was cherry-picking the peak to trough move, which always makes things seem more extreme.

I find it surprising that markets are not down more. A 60/40 portfolio would be up over 5% from Jan 1, 2019, despite the fact that we are now in something between a recession and depression.

As I said in my email last week, I think there is a lot more downside and that the world in the future will look very different and will certainly be less profitable and less about maximizing shareholder returns. So I don't see how markets will go back to a 20+ multiple. 

I think that the big Canadian pension plans will be fine, they are well managed and came into this situation in very good financial shape. However this is going to be a disaster for US states and municipal plans. It was just a matter of time for many of them as their pension plans were so poorly funded, even when using completely unrealistic return expectation. 

Now these governments are having to pile on debt to bail out their economies. This may give them political cover to break their pension promises.

One thing that could hurt Canadian pension plans is longer term effects of the coronavirus on the assets they own. Two things come to mind - real estate and some types of infrastructure. This crisis may just hasten the demise of the retail sector and commercial office space. For example, OTPP owns about 17% of Macerich which is a publicly traded US REIT. It is down 92% from the end of 2015. The office sector has been booming in some parts of Canada but that may change if companies decide to take less space in the future as they find that employees can work efficiently from home.

Airports and toll roads are taking a HUGE hit in the short term. Will traffic volumes come all the way back? Did anyone do a worst case scenario for Hwy 407 that saw traffic down 90% for a month or more? These assets may need equity injections to stay viable, and their long term valuations may shrink as globablization reverses and the flight volumes at airports decreases.

I also think that long term equity markets will do less well due to (1) lower long term earnings, and (2) lower P/E multiples. Taxes are going to have to go up to pay for these bailouts and that will have to come from somewhere. Companies, and society, will now focus more on resiliency than efficiency which will hurt profits. Will the Eurozone survive this crisis? And this crisis is showing us that there are a lot of unseen risks in the world and you can't be pricing markets for perfection at a 20 P/E multiple. That just won't work over the long run.

The other risk that I am worried about in the long term is inflation. How are governments going to pay back all of the debt being issued? Do they inflate their way out of this problem?

I have more questions than answers but I think the future will look very different than the last 25 years, and I think we are going back to valuation ratios that we saw from 1880-1995 rather than what we have seen for the last 25 years. And note that we are STILL at high ratios in the US - to get to a P/E10 ratio of 10 markets have to fall by another 50%+. I don't think that will happen but I don't think we are going to see a snap back to an S&P500 of 3300 any time soon.

If you haven't already heard this I suggest you listen to this Recode/Decode podcast featuring Chamath Palihapitiya from last week (click here or here to listen to it).

‘Don’t be a hero’: Why some market watchers are reluctant to call a bottom despite big rally for stocks | Financial Post https://t.co/nOkWiy2yCe

— Leo Kolivakis (@PensionPulse) March 29, 2020

The Hedge Fund Bailout Worked: Citadel, Millennium And Point72 Recover Most Of Their March Losses | Zero Hedge https://t.co/XptVkGnUsz

— Leo Kolivakis (@PensionPulse) March 30, 2020

Hedge Fund News: Pierre Andurand Oil Fund Surges 57.5% in March - Bloomberg https://t.co/56xDTnO8iJ

— Leo Kolivakis (@PensionPulse) March 30, 2020

1. Chronically underfunded US state and municipal pensions which are on the brink of collapse
2. And a generation of people retiring who are condemned to pension poverty

Dr Fauci warns up to 200,000 Americans could die from coronavirus https://t.co/M7frSqiqqc

— The Independent (@Independent) March 29, 2020

Go here and enter state of New York at the top and you can see they predict peak count of daily deaths in ~9 days. You can compare to other states which are mostly 3-4 weeks away for peak daily deaths. New York is woefully short of beds in the hospitals and ICU…..the worst shortage numbers I have seen for any state at this site. They are and will continue to be triaging ventilators - that means if you need one at the same time as someone else, there will be rationing based on chances of survival (so older subjects with co-morbidities will be let go). New England is generally in a lot of trouble because density of population and lack of beds/ventilators. Florida is OK…... California needs some ventilators, not beds. In general, densely populated states are in worse shape than less densely populated states.

Simple DIY masks could help flatten the curve. We should all wear them in public. https://t.co/8AoLZYsA7f

— Leo Kolivakis (@PensionPulse) March 30, 2020

The Ontario Teachers' Pension Plan (OTPP) just released its 2019 results, gaining 10.4% for the year as net assets reach $207.4 billion at year-end 2019:

Ontario Teachers’ Pension Plan Board (Ontario Teachers’) today announced a total-fund net return of 10.4% for the year. Net assets reached $207.4 billion as of December 31, 2019, a $16.3 billion increase from December 31, 2018. Ontario Teachers’ earned $20.2 billion in investment income in 2019, the most in the organization’s history.

“Ontario Teachers’ diversified, high-quality portfolio achieved a total-fund net return of 10.4% and our net assets reached $207.4 billion to end the year,” said Jo Taylor, President and Chief Executive Officer. “The investment world since then has changed dramatically due to COVID-19, which is having an impact on all of our activities. We are highly focused on the wellbeing of our members and employees, and our team has demonstrated remarkable agility as we adapt the way we work while maintaining our high levels of service.”

As of January 1, 2020, the plan was fully funded using prudent assumptions for a seventh consecutive year, with 100% inflation protection being provided on all pensions.

As at December 31, 2019, Ontario Teachers’ has had an annualized total-fund net return of 9.7% since inception. The five- and ten-year net returns, also as at December 31, 2019, were 7.8% and 9.8%, respectively.

“Each of our asset classes achieved positive returns during the year, showing the value of a well-constructed and diversified portfolio. We had particularly strong returns in equities and fixed income,” said Ziad Hindo, Chief Investment Officer. “This year was a transformational year, with a number of significant transactions conducted globally, the launch of Teachers’ Innovation Platform to invest in disruptive technology, and the creation of Koru, an incubator that partners with our portfolio companies to design and build new digital businesses.”

As often is the case in years when public equity markets have exceptional returns, Ontario Teachers’ diversified portfolio trailed its benchmark. Strong returns in private assets did not keep up with robust public equity markets, many of which were up more than 20% during the year. In 2019, Ontario Teachers’ underperformed its benchmark by 1.8% or $2.7 billion.

Total fund local return was 12.8%. Ontario Teachers’ invests in dozens of global currencies and in more than 50 countries but reports its assets and liabilities in Canadian dollars. In 2019, currency had a negative 1.8% impact on the total fund, resulting in a loss of $3.5 billion. The currency loss was mainly driven by the appreciation of the Canadian dollar relative to various global currencies, particularly the U.S. dollar.

About Ontario Teachers’

The Ontario Teachers' Pension Plan Board (Ontario Teachers') is the administrator of Canada's largest single-profession pension plan, with $207.4 billion in net assets (all figures at December 31, 2019). It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.7% since the plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario's 329,000 active and retired teachers. For more information, visit otpp.com and follow us on Twitter @OtppInfo.

It is a prodigious time to step into the role of CEO at Ontario Teachers', as we celebrate our 30th year of successfully delivering a secure retirement to plan members. As its fourth CEO, I am honoured to be trusted with this important position, and grateful to have benefitted from the accumulated wisdom of those who have held the job previously. This is particularly true of our past CEO, Ron Mock, who gave strong guidance to me and shared reflections on how best to shape Ontario Teachers’ future priorities. Each CEO of Ontario Teachers’ has focused on specific areas during their tenure. This initially included setting up the right governance model to invest and deliver the necessary returns, and then managing through market fluctuations and a global financial crisis. For my role today, there are some challenging dynamics around funding cash flows, member demographics, a low-growth environment, climate change, highly competitive investment markets and now the COVID-19 pandemic.

I plan to focus on three key areas:

• Growth and International. Assets are growing significantly, and we will have a large amount of capital to manage in a competitive environment. It will be crucial to find the right opportunities, and to expand our international footprint into the right territories.
• Partnerships and Relationships. This has been one of our key strengths, involving the thoughtful selection of partners who we can learn from, and who value what we bring to the table. This extends to the huge importance placed on working with our stakeholders to deepen these relationships.
• Talent and Culture. Ontario Teachers’ has to look far into the future, ensuring it has the right skills in place. This means encouraging our agility in thinking and decision making, developing talent and integrating inclusion and diversity at all levels.

Growing assets, expanding our international footprint

I have set the challenge to colleagues to build a strategy to grow the plan’s assets under management to $300 billion by the end of 2030. Investing this capital in a low-interest and lower-growth environment will require the team to have a bold and ambitious mindset. In 2019, we were able to design a clear international road map for our investment activities and identify where we needed to build execution capabilities. The expected outcome of this effort will be to rebalance our portfolio and returns more evenly between North America and the rest of the world.

The value of local expertise can’t be overstated, which is something I can attest to, having formerly led both Ontario Teachers’ London and Hong Kong offices. Careful consideration has been given to the value of having another office in Asia-Pacific, and given the uncertainties and challenges in Hong Kong, it is the right time for us to open a Singapore office, which we currently expect to be operational in the third quarter of this year. Latin America also remains an important region, and we will be exploring models to enhance our local execution capabilities there.

Selective partnerships and deeper relationships

Ontario Teachers’ is distinct from most other investors in the way it approaches partnerships. This is because our model is highly focused with a select number of partners that we choose to work with. This allows us to be an active, value-added partner in each situation. Whether working with professional fund investors, corporates or family offices, Ontario Teachers’ looks to take an active role. Our very careful approach to asset and partner selection means a preference for working with aligned investors and management teams where mutual value is placed on one another’s skills, knowledge and expertise.

Our other important stakeholders include members, sponsors and regulators. Last year, Ontario Teachers’ attained the rank of number one globally for member service, and received very high member satisfaction scores. Our team is still looking to build on these strong results, and is actively working to anticipate the future needs of our membership. Ontario Teachers’ will continue to work closely with the plan’s sponsors and regulators to ensure transparency and collaboration, and to bring value to those relationships wherever possible.

Agility, diversity and opportunity

Having a high-functioning team means encouraging agility in our thinking and decision making. The board has decisively supported this goal in many ways. One meaningful development is giving more delegated authority for investment decisions to the executive team. At the same time, we are pushing ourselves to have the right balance between building consensus while still maintaining agile decision making and appropriate accountability. A subset of this will be to evolve more of a “test and learn” culture designed to stimulate innovation.

Developing internal talent is of huge importance, and last year there were 46 promotions to senior positions. Giving employees a great experience means investing in a learning culture and better onboarding programs. Ontario Teachers’ is also investing in mobility that allows our people to gain international experience and develop new skills. The health and performance of the plan depends on finding diverse voices and then ensuring that they are heard. This is a priority in our new recruitment efforts. Ontario Teachers’ has also made significant progress on the diversity of the boards of our private, controlled investee companies. In 2020 and beyond, our focus will include reviewing the retention and progression of our senior women as a measure of the progress that we are making in this regard.

In conclusion

We are fortunate to have a very clear mandate, which is to serve current and retired teachers in the province of Ontario. It provides us with a laser focus in these uncertain times, in which COVID-19 is dramatically impacting the financial markets and all of our activities. We continue to have rigorous processes in place, shaped by robust governance and risk frameworks, and a team dedicated to serving the needs of our members. By sticking to our fundamentals, including strong liquidity, aligned partnerships and excellent talent, I am confident we will continue to deliver on our goals of first-class service and retirement security for our members over the long term.

How did Ontario Teachers’ asset classes perform this year?

We saw positive returns across our asset classes in 2019, showing the benefit of a diversified portfolio including a mix of public and private assets. We saw particularly strong returns in equities and fixed income.

Ontario Teachers’ made several investments in technology companies this year – why the increased focus in this area?

Technology is an area with a lot of potential for us. The opportunity set is large, and with the growth of cleantech, artificial intelligence, healthcare and other areas, we expect it to continue to grow in the coming years.

Accordingly, 2019 was a transformational year for Ontario Teachers’. We launched Koru, an incubator that partners with our portfolio companies to create, test and build scalable new digital businesses, and Teachers’ Innovation Platform (TIP), which focuses on late-stage venture and growth equity investments in disruptive technology.

We’ve already seen TIP investments in everything from digital healthcare to space exploration and smart infrastructure, while Koru is generating new ventures in sectors including healthcare, utilities and transportation. It’s great to see how both have hit the ground running.

A low interest rate environment is especially hard on pension funds. How will you continue to make your return targets if rates stay low?

Low interest rates are a reality for all investors – today and for the foreseeable future. Our main defence against low interest rates is solid portfolio construction with a focus on diversification and risk management.It is important to note that we are investing from a position of strength with a funded ratio of 103%, meaning that we can prudently manage through this period without the need for undue aggressiveness.

Our skilled global investing teams are focused on deal origination, execution and strong asset management and value creation, which positions us well to navigate any challenging investment periods.

It has been a tumultuous year around the world, with trade wars intensifying. Is now the time to be investing more outside of Canada?

Being global is more important than ever – it’s an essential element of us being able to meet our long-term investment objectives. We monitor short-term trends and pressures, but our long-term view is that the bulk of future global growth will come from outside of North America, which means we must look abroad for investment opportunities.

Many stakeholders have been vocal about wanting Ontario Teachers’ to do more on climate change. What are you doing in this area to protect the plan’s long-term sustainability?

Climate change is a major area of focus. Our approach has four strategic elements: invest in climate-smart opportunities, integrate climate into our investment process, engage with companies and use our influence to catalyze change.

One example of how we’ve been doing this is our investment in Cubico Sustainable Investments: a global renewable energy platform that invests in wind and solar electricity generation. Since Ontario Teachers’ first invested in Cubico in 2015, the company has grown from 19 facilities located in seven countries to 87 assets in different stages of development located in 12 countries in the Americas, Europe and Australia.

While I’m proud of our progress with portfolio companies such as Cubico, we are not content to stand still. We constantly evolve our practices with the long-term sustainability of the plan in mind.

What is the one thing you would want to tell members about their plan?

We’re operating in a challenging economic environment and many of the challenges we face today are uncharted. How we deal with this uncertainty is by having the right talent, strategy and risk management practices in place, with our focus fixed on achieving the returns needed to ensure that the plan remains sustainable over the long term.

The Caisse de depot et placement du Quebec (CDPQ) is stepping up with some cash to help Quebec companies that have been impacted by the COVID-19 crisis.

The CDPQ is offering $4 billion for companies in the province and giving an additional $300,000 as a philanthropic and community donation.

.@LaCDPQ joins the collective effort during the COVID-19 crisis. https://t.co/s6CEcbzE3Ipic.twitter.com/wbdcFSsIOT

— CDPQ (@LaCDPQ) March 30, 2020

“This support is intended to complement the various initiatives that other financial institutions, Quebec institutional investors and the governments of Quebec and Canada have announced,” reads a Monday news release from the CDPQ.

Companies must have been profitable before the COVID-19 outbreak and shut down all non-essential business, have a promising growth outlook, and be seeking financing of over $5 million, according to the release.

The company is also freezing all leaders’ salaries for 2020, and postponing compensation for CDPQ leaders to the third quarter.

“The envelope announced today, and the personalized advice that our teams provide to portfolio companies, represent important contributions to Quebec's economy in these difficult but temporary circumstances,” said Caisse president and CEO Charles Emond.

Those companies wanting to request funds can do so at the CPDQ website.

The $300,000 donation will be split between the following organizations:

• Centraide of Greater Montreal's Emergency Fund, dedicated to the most vulnerable people;
• Canadian Red Cross, for its community support services;
• Little Brothers, who especially work with the elderly in need;
• Tel-jeunes, which supports young people and parents with free and confidential professional counselling services;
• Alloprof, which provides valuable educational support services for parents.

With the world facing an unprecedented crisis related to COVID-19, Caisse de dépôt et placement du Québec (CDPQ) joins the collective effort with the announcement of various initiatives.

An envelope dedicated to Québec companies

As an investor, CDPQ is creating a $4-billion envelope to support Québec companies temporarily impacted by COVID-19. This support is intended to complement the various initiatives that other financial institutions, Québec institutional investors and the governments of Québec and Canada have announced.

The funds will be used to address the specific liquidity needs of companies, whether or not in CDPQ’s portfolio, that meet certain criteria, including having been profitable before the COVID-19 crisis, having a promising growth outlook in their sector and seeking financing of over $5 million. Eligible companies will be able to use these investments to weather this turbulent period until the economy recovers and support and advance their recovery plans once the crisis is over.

In addition, as it does every day with its portfolio companies, CDPQ will continue to deploy the financial and operational expertise of its teams to help the selected companies in developing innovative and structuring financial solutions. These solutions could include various financial instruments based on companies’ needs in the current conditions.

“It’s essential for CDPQ to join the collective effort during the COVID-19 crisis. The envelope announced today, and the personalized advice that our teams provide to portfolio companies, represent important contributions to Québec’s economy in these difficult but temporary circumstances. This initiative is a good example of our two-fold mission to meet the needs of our depositors and support Québec’s companies and economy,” said Charles Emond, President and Chief Executive Officer of CDPQ.

Companies that wish to request financing are invited to fill out the form at www.cdpq.com/en/form-covid-19. After CDPQ receives the form, companies will quickly be contacted by telephone to obtain further information and assess the request.

In addition, all CDPQ teams, in Québec and around the world, are currently mobilized and continue to manage Quebecers savings with rigour in these unique times.

“The world and the markets are facing a major health and economic crisis. We’re closely monitoring our portfolio and the various asset classes through the COVID-19 crisis. As a long-term investor, we have built a diversified portfolio that is designed to generate returns that meet our depositors’ needs over the long term. While not immune to the economic consequences of this historic pandemic, CDPQ is solidly positioned, even after what happened in recent weeks on the markets, as we have the liquidity necessary to weather the current storm and what may come in the future. We have a fair amount of flexibility; we are able to clearly identify risks, and therefore take cautious and progressive action when the time is right to seize the opportunities that such conditions may have to offer,” added Mr. Emond.

Philanthropic and community donation

CDPQ also wishes to support the numerous organizations that directly address the basic needs of the most vulnerable people, as these organizations are currently facing significant challenges. To provide support and help them maintain essential services or expand their reach, CDPQ is donating $300,000, to be divided among five organizations:

• Centraide of Greater Montreal’s Emergency Fund, dedicated to the most vulnerable people;
• Canadian Red Cross, for its Community Support Services;
• Little Brothers, who especially work with the elderly in need;
• Tel-jeunes, which supports young people and parents with free and confidential professional counselling services;
• Alloprof, which provides valuable educational support services for parents.

Salary freeze and postponed variable compensation

Given current economic conditions, CDPQ has decided to freeze the salaries of all leaders in the organization and its subsidiaries.

The payment of variable compensation to CDPQ leaders for 2019, which takes into account the solid results of the last five years and forms part of their total compensation, as is standard in the financial industry, will be postponed until the third quarter of 2020. This measure also applies to our subsidiaries’ leaders.

In addition, the members of the Executive Committee have decided to postpone and co-invest the maximum variable compensation possible for a period of three years, i.e. until 2022, as of January 1, 2020. These postponed amounts will rise and fall in tandem with CDPQ’s returns, clearly demonstrating their trust and commitment to executing the organization’s mission and their full solidarity with what our depositors are experiencing in these extraordinary times.

ABOUT CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC

Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at December 31, 2019, it held CAD 340.1 billion in net assets. As one of the largest pension fund in Canada, CDPQ invests globally in financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.

In Premier François Legault's public briefing on the coronavirus situation in Quebec as of April 1, he announced what the government has done in the past few weeks and will continue to do in upcoming weeks. Legault said that he has asked Quebec health officials to release, as soon as possible, the most probable scenario for what Quebec will be seeing in relation to COVID-19 in upcoming weeks. And, he announced that, as we reach the first day of April 2020, the most recent confirmed number of cases of COVID-19 in Quebec is now a total of 4,611.

The good news of the day is that there have been no additional people put into intensive care since March 31.

Among other good news, Legault shared with us that the province has managed to free 6,000 beds for anyone who gets hospitalized due to the novel coronavirus. Although he believes we will not need this many. Legault reassured us that we are prepared for this fight, but that we cannot give up.

He reminded us that Quebec is one of the places that test the most for COVID-19 in the world.

Legault also stressed that under no circumstance should you go visit anyone older than 70 for the time being. "It is a matter of life and death," Legault said.

The coronavirus crisis is still unfolding, but it’s not too soon to think about lasting financial impact and how to limit the fallout. One major financial crisis that may hit later this year or early in 2021 is the ever-looming collapse in state and local employee pension funds. Although the problem has been growing for decades, the virus may have been the event that pushed it over the edge.

Declines in the financial markets may have cost the funds as much as $1 trillionin assets, or about 25% of their total, according to Moody’s Investors Service. That would bring the aggregate funding ratio—value of assets divided by actuarial value of liabilities—from 52% based on the last report by the Census Bureau down to perhaps 37%. Markets may recover, of course, but they may not. The latest aggregate numbers we have are from 2017, and for most individual funds data is available only as of mid-2018. Asset returns are usually smoothed so it could be four or five years until the full effect of the virus is reported officially.

But it’s not aggregate numbers or official reports that will trigger a crisis. It’s the big funds in the worst shape. My back-of-the-envelope calculations suggest Connecticut could be looking at a 28% funded percentage if the numbers were available now, Kentucky 25%, New Jersey 24% and Illinois 20%.

Those figures rely on optimistic assumptions about healthcare cost increases and discount rates; the true numbers are probably worse. The important statistic is more objective: how many years’ benefits do the pension assets represent? That could be no more than about four years in Illinois if true numbers were public today, five in New Jersey and Kentucky, six in Connecticut.

All benefits for active employees, plus all benefits for everyone in the near future, will have to come from employee or state contributions. But states will be strapped for cash, and looking to cut contributions, not raise them. Employees will be unwilling to contribute more since there’s little likelihood they’ll ever see that money again, especially as post-2008 reforms have denied many of them the gold-plated benefits that employees with more seniority enjoy.

Taxpayers? The least willing of the bunch. Creditors? The states need to keep borrowing money, so they have to appease creditors. Some of the money will come via defaults or restructuring of state and local debts, but this is its own crisis, and it won’t fill the gap. The federal government? Maybe, but not for full payments. A more likely scenario would be absorbing retirees into Social Security and Medicare at sharply reduced benefit levels—and those programs face similar problems as state and local plans.

It’s true that 48 states have constitutional or other legal protections for pension benefits. These will improve union bargaining power, but it won’t squeeze anywhere near the full amounts promised. Courts will both unwilling and unable to force governments to hand over money the governments don’t have and can’t get.

Will deaths tied to the Covid-19 pandemic save the day? After all, deaths will likely be concentrated among retired employees getting benefits rather than active employees paying contributions. Moreover, active employees who succumb to the virus will be replaced. If we exclude Hollywood disaster scenarios, the highest projections are U.S. death rates doubling in 2020 and remaining 2.5% higher thereafter. Using the age distribution of coronavirus deaths for which information is available, that could cause liabilities to fall by about half the amount that assets fell. But in that scenario assets would probably fall much farther. It’s hard to come up with a scenario in which additional coronavirus deaths improve pension funded ratios.

Will these events trigger Illinois or some other state to default? It’s plausible. Will that cause other states and municipalities to follow? That’s likely, mainly because creditors will stop lending to states with big unfunded pension liabilities. Will that provide the cover for every state except maybe Utah and Wisconsin from seizing the opportunity to renege on promises? I’d bet on that as well.

What we do today is start treating pensions as an issue that must be addressed rather than a can to be kicked down the road. Admit that promises to employees will not be kept, and start figuring out how to direct the cuts to where they will do the least harm: younger workers with more time to prepare and richer workers with more ability to pay. Collecting the maximum contributions possible, but in realistic forms employees can count on rather than unreliable promises about future. Releasing timely and complete data on assets and cash flows.

The basic terms of the fix are obvious. Pension payments will be capped, probably at something like the Social Security maximum of $3,011 per month for someone who retires at age 65. Tax the benefits, again probably like the rules for Social Security (50% of benefits for single filers with total income between $25,000 and $34,000, 85% of benefits for higher income individuals). Make healthcare plans more Medicare-like, with lower provider payments. Employee contributions to be directed either to Social Security/Medicare or individual retirement accounts rather than underwriting payments to retired workers.

This will provoke fierce fights. First to accept the inevitable and second to set the precise terms. How will police officers be treated versus teachers versus Division of Motor Vehicle clerks? Will all state and local plans be put in one bucket, or will employees from more prudent states do better than employees from profligate ones? How will scarce funds be directed to pensions versus health benefits? How much will taxpayers and creditors kick in? These fights will take place in legislatures, courtrooms and union elections. It won’t be pretty or fun. But the sooner we admit the problem and start to solve it, the sooner it’s behind us.

U.S. public pension plans are facing investment losses approaching $1 trillion because of the economic fallout from the coronavirus, according to a report from Moody's Investors Service.

The losses could exacerbate the pension liability challenges that many state and local governments are already facing. Plus, the economic setback is reducing revenue levels and threatening the ability of municipal governments to afford these higher pension costs.

U.S. public plans are generally on pace for an average investment loss of about 21% for the fiscal year ending June 30, Moody's estimates.

"Without a dramatic bounce back of investment markets, 2020 pension investment losses will mark a significant turning point where the downside exposure of some state and local governments' credit quality to pension risk comes to fruition because of already heightened liabilities and lower capacity to defer costs," said Tom Aaron, vice president at Moody's, in a news release announcing the report.

"The credit impact from 2020 pension investment losses will depend on many factors, including the ultimate magnitude of asset declines, the unique funding and cash flow position of governments' pension systems, and their ability to absorb cost hikes in their budgets while continuing to provide services and pay debt service," Mr. Aaron added.

Reflecting an annual investment return target in the range of 6% to 7.5%, plan assets are heavily allocated to equities and alternatives.

Falling market interest rates are also increasing adjusted net pension liabilities. On average, adjusted net pension liabilities are generally on pace to rise by nearly 50%. Investment losses are pushing down the value of pension assets and falling interest rates are pushing up adjusted net pension liabilities further by causing the market value of total pension liabilities to rise, the report said.

If steep investment losses are not reversed, the annual costs that governments face to keep up with their unfunded liabilities will spike, the report stated. The cost for governments to make the minimum contributions required to prevent unfunded liabilities from growing is likely to rise nearly 60% in fiscal 2021. If governments' revenue performance also deteriorates, then pension affordability ratios will get significantly worse for some plans due to the combination of increased costs and decreased revenue.

Moody's based its estimates on a sample of 56 large U.S. public pension plans.

I think that the big Canadian pension plans will be fine, they are well managed and came into this situation in very good financial shape. However this is going to be a disaster for US states and municipal plans. It was just a matter of time for many of them as their pension plans were so poorly funded, even when using completely unrealistic return expectation. 

Now these governments are having to pile on debt to bail out their economies. This may give them political cover to break their pension promises.

One thing that could hurt Canadian pension plans is longer term effects of the coronavirus on the assets they own. Two things come to mind - real estate and some types of infrastructure. This crisis may just hasten the demise of the retail sector and commercial office space. For example, OTPP owns about 17% of Macerich which is a publicly traded US REIT. It is down 92% from the end of 2015. The office sector has been booming in some parts of Canada but that may change if companies decide to take less space in the future as they find that employees can work efficiently from home.

Airports and toll roads are taking a HUGE hit in the short term. Will traffic volumes come all the way back? Did anyone do a worst case scenario for Hwy 407 that saw traffic down 90% for a month or more? These assets may need equity injections to stay viable, and their long term valuations may shrink as globablization reverses and the flight volumes at airports decreases.

I also think that long term equity markets will do less well due to (1) lower long term earnings, and (2) lower P/E multiples. Taxes are going to have to go up to pay for these bailouts and that will have to come from somewhere. Companies, and society, will now focus more on resiliency than efficiency which will hurt profits. Will the Eurozone survive this crisis? And this crisis is showing us that there are a lot of unseen risks in the world and you can't be pricing markets for perfection at a 20 P/E multiple. That just won't work over the long run.

The other risk that I am worried about in the long term is inflation. How are governments going to pay back all of the debt being issued? Do they inflate their way out of this problem?

I have more questions than answers but I think the future will look very different than the last 25 years, and I think we are going back to valuation ratios that we saw from 1880-1995 rather than what we have seen for the last 25 years. And note that we are STILL at high ratios in the US - to get to a P/E10 ratio of 10 markets have to fall by another 50%+. I don't think that will happen but I don't think we are going to see a snap back to an S&P500 of 3300 any time soon.

If you haven't already heard this I suggest you listen to this Recode/Decode podcast featuring Chamath Palihapitiya from last week (click here or here to listen to it).

Knowing the difference between defined benefit and defined contribution is the key to understanding the fiasco occurring in the pension world.

Jim Leech on “Retirement: What you don’t know will Bankrupt you.”

Get 3 months access for $1 now: https://t.co/GXPyC55H57pic.twitter.com/sTiJxtwph0

— Real Vision (@realvision) February 14, 2020

Want to know the difference between a successful and unsuccessful pension fund? The successful one’s don’t include politicians.

Jim Leech on “Retirement: What you don’t know will Bankrupt you.”

Get 3 months access for $1: https://t.co/IfIIQEHF2npic.twitter.com/ZDrnQ2GeDF

— Real Vision (@realvision) February 15, 2020

How did retirement accounts become a threat to U.S. state budgets, when only 13% of the population has a public pension? After decades of underfunding, could lagging pensions lead to a tipping point that has massive ripple effects?

“Reversal of Fortune” premiering Feb. 21st. pic.twitter.com/GrBTlKSXuE

— Real Vision (@realvision) February 20, 2020

"It can be anything from paving roads to other services, and that will have effects on everyone. When you run out of all options, the only other option is to go to Uncle Sam and say, hey, we need a massive bailout on our pension system. We can't do anything about it, and we're contractually obligated to meet those pension payments. It will bail these pensions out not because they're particularly worried about pensions and retirees, they will bail them out because they want to bail out Wall Street, private equity funds and hedge funds and make sure that they get money in perpetuity over the long run so that they can grow richer and richer and pay these politicians more and more money for their campaigns. I am being cynical, but that's the reality of the situation, but notice, they will never change anything structurally."

We are heading for a pensions apartheid @AJEnglishhttps://t.co/J7NzViW4cL

— Leo Kolivakis (@PensionPulse) April 2, 2020

Brace for the deepest recession on record, advises Bank of America https://t.co/6pTdnzGy53

— MarketWatch (@MarketWatch) April 2, 2020

Stocks fell on Friday to end another volatile week of trading, pressured by a spike in coronavirus-related deaths in New York while investors digested a dismal U.S. jobs report.

The Dow Jones Industrial Average slid 360.91 points, or 1.7%, to 21,052.53. The S&P 500 dropped 1.5% to 2,488.65. The Nasdaq Composite also pulled back 1.5% to close at 7,373.08.

Wall Street posted its third weekly decline in four. The Dow lost 2.7% this week while the S&P 500 fell 2.1%. The Nasdaq ended the week down 1.7%.

New York Gov. Andrew Cuomo said deaths in the state rose by 562 in 24 hours to more than 2,900 for the biggest increase to date. Cuomo added the curve of confirmed cases “continues to go up,” noting there are now over 100,000 cases in New York state.

“This still feels like something we’re heading into, not heading out of,” said Brian Nick, chief investment strategist at Nuveen. “We can see the light behind us, but not ahead of us.”

“The upside scenario is disappearing very quickly and the base case is getting worse,” said Nick.

There have been more than 261,000 confirmed infections in the United States and more than 6,600 deaths from COVID-19, according to data from Johns Hopkins University. Globally, more than 1 million cases have been confirmed.

Massive job losses in the US

U.S. payrolls fell by 701,000 in March, marking the worst jobs report since 2009, while the unemployment rate jumped to 4.4%. However, the report failed to capture the full extent of the ongoing economic blow from the coronavirus outbreak. On Thursday, the Labor Department said jobless claims jumped by a record of 6.6 million for the week of March 27.

“Today’s nonfarm payrolls data confirms what we’ve already known: the U.S. economy was doing well before COVID-19′s impact was felt, and COVID-19′s impact has been severe,” said Lauren Goodwin, multi-asset portfolio strategist at New York Life Investments. “Job losses will continue to surge as the national shutdown strengthens its hold on the U.S. economy.”

American Express, UnitedHealth and IBM fell more than 3% each to lead the Dow lower. Some of those losses were offset by Walmart, which turned around to close 0.7% higher after a report said the company’s sales have jumped 20% in the past month. Utilities and financials led the S&P 500 lower, falling 3.6% and 2.3%, respectively.

Stocks got a slight boost earlier in the day as oil rose 12%, adding to its biggest one-day rally on record. West Texas Intermediate futures soared 24% on Thursday for their best day ever, lifting the major stock indexes. The Dow and S&P 500 gained more than 2% on Thursday.

“Trends have now been sideways for US and European equities for the last seven trading sessions, despite the massive swings,” said Mark Newton, managing member at Newton Advisors, in a note. “Gains have consolidated, but have not given way to much weakness that is sufficient to expect an immediate test of low.”

Both the Dow and S&P 500 remain more than 26% below their respective all-time highs set in February as jitters over the spread of COVID-19 foster volatile trading on Wall Street.

Wall Street’s main indexes fell on Friday as the coronavirus abruptly ended a record U.S. job growth streak of 113 months, leaving little doubt that the economy is in a recession.

And even the loss of 701,000 jobs that Labor Department data showed for March did not completely capture the economic carnage. The survey considered data only until mid-March, before widespread U.S. lockdowns put more people out of work.

The worldwide spread of the virus has forced billions of people to stay indoors and pushed entire sectors to the brink of collapse, triggering mass layoffs and dramatic steps by companies to raise cash.

While relatively flat volatility indexes suggested that investors getting used to market swings, Mike Turvey, TD Ameritrade’s institutional senior trading strategist sees institutional investors taking a shorter term view with many still very cautious ahead of the weekend market close.

“This is not like December 2018. We’re not likely to see a V shaped recovery because we haven’t even begun to really tackle the main issue behind why this is happening. That’s still an ongoing process. It’s going to take time,” said Turvey.

“Everybody’s outlook has changed to very short term. The reality is that a lot of things happen over the weekend and a lot of people don’t want that exposure.”

The S&P 500 was down about 27% from its mid-February record high, or over $7 trillion in market value, and economists have cut their forecasts for U.S. GDP, with Morgan Stanley now predicting a 38% contraction in the second quarter.

At 3:00PM ET, the Dow Jones Industrial Average fell 365.26 points, or 1.71%, to 21,048.18, the S&P 500 lost 43.38 points, or 1.72%, to 2,483.52 and the Nasdaq Composite dropped 135.09 points, or 1.8%, to 7,352.22.

However the CBOE market volatility index , also known as Wall Street’s fear gauge fell 1.9 points. And while the small cap Russell 2000 index was down 4% on the day the Russell volatility index was essentially flat on the day.

“You have to interpret it as a small positive. You don’t see the same reach for protection,” said TD Ameritrade’s Turvey. “The market is accepting the fact we’re going to have these 3-4% swings on a regular basis.”

Of the S&P 500’s 11 major sectors utilities and financials were the biggest laggards with declines of more than 3%.

Walt Disney Co shares fell 3% after it said it would furlough some U.S. employees this month, while sources said luxury retailer Neiman Marcus was stepping up preparations to seek bankruptcy protection.

Analysts expect corporate profits to fall in the upcoming earnings season, but some strategists said that actual numbers will likely be given little importance.

“There’s really very little that you can take away from (earnings) other than some insights to actually how are these businesses set up to weather the pandemic and where will they be once it begins to show signs of passing,” Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

Raytheon Technologies Corp, formed by the merger of United Technologies and Raytheon Co, shed 10.2% as it pulled its 2020 outlook for its aerospace units.

CORONAVIRUS LATEST: https://t.co/etcOszB4rW

— U.S. death toll tops 6,000.
— New York City morgues running out of space.
— Queen Elizabeth to address pandemic in rare broadcast.
— Florida-bound cruise ship confirms 12 cases.
— U.S. slashes 700,000 jobs in March.

— ABC News (@ABC) April 3, 2020

"New York City doesn’t have enough ventilators for next week, Mayor de Blasio says"https://t.co/x4hnaVjd7f

— Leo Kolivakis (@PensionPulse) April 3, 2020

"WHO says ‘more and more’ young people are dying from the coronavirus"https://t.co/qNXgL7GQdg

— Leo Kolivakis (@PensionPulse) April 3, 2020

"US weekly jobless claims double to 6.6 million"https://t.co/VhwrnPXWgS

— Leo Kolivakis (@PensionPulse) April 2, 2020

Here are the industries suffering the biggest job losses from @CNBChttps://t.co/FLVgSwaxwx

— Leo Kolivakis (@PensionPulse) April 3, 2020

"Another figure in the jobs report paints an even gloomier picture of the coronavirus damage"https://t.co/ILj4zMgP0E

— Leo Kolivakis (@PensionPulse) April 3, 2020

The soaring U.S. unemployment rate could approach Great Depression-era levels https://t.co/zYY88i4WtW

— MarketWatch (@MarketWatch) April 3, 2020

Coronavirus job losses 'way worse than anything we saw in the Great Depression:' Economist https://t.co/X66yqnVMD3 via @YahooFinance

— Leo Kolivakis (@PensionPulse) April 4, 2020

The government’s survey of establishments painted a grim picture of the U.S. employment situation through early March, but its poll of households was far worse.

The household survey, which asks individual residents how many people are working there, showed a stunning drop of 2,987,000 workers for the month.

That compares with the nonfarm payrolls decline of 701,000 reported in the establishment survey and gives another perspective to just how bad the situation has gotten since the economy has all but shut down to protect against the coronavirus spread.

When releasing its headline nonfarm payroll numbers, the government focuses on the establishment survey as it captures a larger sample size and is considered less volatile than the household count. The establishment survey captures about 145,000 businesses and work sites, while its counterpart focuses on 60,000 eligible households and includes agricultural workers.

Both use the week up to the 12th of the month for sampling, which in this case was before the worst of the job losses began.

The Labor Department uses the household survey to calculate the headline unemployment rate, which jumped from 3.5% to 4.4%.

In the March survey, the household survey’s numbers are stunning.

They show a decline of employment from 158,759,000 in February to 155,772,000 in March. That came amid a drop of 1.6 million in the civilian labor force and a 1.1 percentage point tumble in the employment-population ratio to 60%. The labor force participation rate contracted 0.7 percentage point to 62.7%. Those counted as not in the labor force rose nearly 1.8 million to 96.8 million.

Other numbers showed a 1.2 million increase in job losers or those who completed temporary jobs. Those unemployed for less than five weeks surged by 1.5 million while those at work part time for economic reasons jumped by more than 1.4 million.

Brace for the deepest recession on record, advises Bank of America https://t.co/6pTdnzGy53

— MarketWatch (@MarketWatch) April 2, 2020

El-Erian: Stocks could still go back down to new coronavirus lows https://t.co/bmZUFY2Egt

— Leo Kolivakis (@PensionPulse) April 3, 2020

Gundlach: Stocks Will Drop Below The March Lows | Zero Hedge https://t.co/7VEQaY9Dbb

— Leo Kolivakis (@PensionPulse) April 1, 2020

"Bank of America says 58,000 small businesses have asked for $6 billion in loans since 9 a.m."https://t.co/PxydMepdrm

— Leo Kolivakis (@PensionPulse) April 3, 2020

• Economists will take center stage again, not cheerleading Wall Street analysts/ strategists. 
• Earnings visibility will be the name of the game, not conjured up earnings, real earnings.

He thinks the economy could begin to show signs of life in the fourth quarter of this year — but until that starts to show up somewhere in the markets or economic data, he prefers putting on trades that profit from extreme volatility and downside.

Yahoo Finance highlights a call such as this because, well, McDonald has been dead right so far. Moreover, April has lived up to its billing in the early going as potentially lethal to stocks because of dreadful economic data nobody on Wall Street has ever seen before.

Dow 15,000 very likely as coronavirus pandemic hits U.S. economy: strategist https://t.co/2bv3ZA3S9W via @YahooFinance

— Leo Kolivakis (@PensionPulse) April 3, 2020

The Relationship Between Earnings & Bear Marketshttps://t.co/RJUtzj5HK6pic.twitter.com/Py18dGrWHT

— Ben Carlson (@awealthofcs) April 3, 2020

Equities Take a Stroll Through Wonderland, Awaiting “Herd Immunity.” https://t.co/jLboqzsnAO

— Leo Kolivakis (@PensionPulse) April 3, 2020

He talked to Trump last week — now this billionaire investor is warning about taking ‘undue risk’ in the market https://t.co/IpeGaDtkPJ

— Leo Kolivakis (@PensionPulse) April 1, 2020

Every American should wear a face mask to defeat Covid-19 https://t.co/1DpE9i5Qgn via @statnews

— Leo Kolivakis (@PensionPulse) April 3, 2020

BCG vaccine: US scientists link BCG vaccination with fewer coronavirus cases, Indian scientists hopeful but cautious - The Economic Times https://t.co/SBkecvBMWn

— Leo Kolivakis (@PensionPulse) April 3, 2020

"It sounds great and easy to deploy but these are all ecologic studies (correlation patterns at a global level and not based on individual level data) which definitely would need randomized trial evidence even if correlations are strong. There are typically many other factors that could explain such correlations. For example, the high correlation between vaccination proportions and low mortality from SARS 1 and 2 could be a reporting issue if same countries do to track disease incidence and cause of death to the same degree. BCG vaccinations tend to be widespread in countries where the provision of health care is not optimal given TB is still endemic.

From a biologic perspective, one would have to assume that TB and this virus have some epitopes in common and the antibodies against TB induced by the BCG vaccine provide some cross immunity with coronaviruses that was previously not suspected/known. It sounds good but I don’t know how often cross immunity has been documented between viruses and bacteria. "

Pierre Andurand is an oil trader known for making big bets. His Andurand Capital hedge funds were coming off two straight years of losses, but in February Andurand wagered the coronavirus would shake up the oil market and he started to short oil aggressively.

With the price of Brent crude crashing below $23 in March, Andurand’s hedge funds performed incredibly well. His Andurand Commodities Discretionary Enhanced Fund soared by 152.9% in March and returned 122.2% in the first three months for 2020. The Andurand Commodities Fund rose by 63.7% last month and has returned 53.1% in 2020. Andurand Capital’s assets, which were about $1 billion a year ago, are roughly split between the two funds.

Efforts across the globe to deal with COVID-19 have sent the global economy into a tailspin and financial markets along with it. But some hedge funds shined in March, trading around the market volatility as they were designed to do even as many of their traders worked from home. There were, however, hedge funds that struggled mightily as the Standard & Poor’s 500 index plunged in March and finished the first quarter of the year down 19.6%, including dividends.

Boaz Weinstein’s Deutsche Bank proprietary trading operation suffered big losses during the 2008 financial crisis, but in the most challenging market since that time, Weinstein’s $2 billion hedge fund operation did very well. Weinstein’s main Saba hedge fund returned 72% net of fees in the first three months of 2020. Another big winner was Eric Cole, whose Warlander Asset Management hedge fund shorted corporate credits and municipal bonds in March, fueling a 30% first-quarter return.

Some stock-picking hedge fund manages did get hit hard in March. Billionaire Larry Robbins’ flagship Glenview Capital hedge fund fell by –30.47% in the first three months of 2020. Other stock pickers, like billionaire Dan Loeb, saw their funds have losses, but nevertheless have outperformed the stock market. Loeb’s main hedge fund has lost 16% in 2020. On the other hand, billionaire Bill Ackman famously hedged his portfolio against the virus in early March and his Pershing Square Holdings returned 3.3% in the first quarter.

Prominent macro hedge funds, which tend to bet on currencies, interest rates and commodities, seemed to hold their own amid the market upheaval. Billionaire Alan Howard’s main Brevan Howard hedge fund was up 23% in the first quarter of 2020. Andrew Law’s Caxton Global Investment macro hedge fund was up 7.2% for the year as of March 27, 2020, according to an HSBC survey of hedge funds.

But not all macro hedge fund strategies did well amid the coronavirus shock. Robert Gibbins’ Autonomy Capital was down 20% in March. Ray Dalio’s Bridgewater Associates, the biggest hedge fund firm in the world, saw its main hedge fund lose about 16% in March, meaning it returned –23% in the first three months of 2020. “The novel coronavirus is a pandemic that came on fast and hit us at the worst possible moment because we had a long tilt in our positions,” Dalio wrote to his investors in March.

The big multimanager hedge funds seemed to hold their own while markets were being rocked in March, but even for them it was a wild ride. Billionaire Ken Griffin’s main Citadel hedge fund is up about 6% for 2020, according to Bloomberg News. Balyasny Asset Management’s Atlas Enhanced flagship was up 4.75% in the first quarter, while ExodusPoint was up 1.2% for the year. Billionaire Israel Englander’s Millennium Management and billionaire Steve Cohen’s Point72 Asset Management are both about flat for 2020.

Some quantitative traders did experience problems in March. Billionaire Jim Simons’ Renaissance Institutional Equities Fund was down 14.4% in the first quarter of 2020, as well as his Renaissance Institutional Diversified Alpha Fund was down 10.5% over the same period. Both still outperformed the U.S. stock market. The Renaissance Institutional Diversified Global Equities Fund was down 10% in the first quarter. David Harding’s big computer-driven hedge fund lost 12.9% in the first quarter. But even among computer-driven hedge funds there were some standouts. Leda Braga’s Systematica BlueTrend fund, for example, was up 9.4% for the year as of March 27, 2020.

‘The worst is behind us’ — the most attractive risk-reward in years means it is time to buy stocks, Morgan Stanley says - MarketWatch https://t.co/5kO3wfFtF3

— Leo Kolivakis (@PensionPulse) April 7, 2020

The number of U.S. homeowners with mortgages who have stopped making payments is surging. The total number of loans in forbearance grew to 2.66% as of April 1, from 0.25% a month earlier. https://t.co/EfNFADwCHp

— Lisa Abramowicz (@lisaabramowicz1) April 7, 2020

Goldman analyst who predicted the coronavirus would kill the bull market says ‘risk to the downside is greater’ despite Dow’s recent rally - MarketWatch https://t.co/di19EJqzQs

— Leo Kolivakis (@PensionPulse) April 7, 2020

"Fade The Rip": BofA Warns "Bear Market Far From Over Unless We Escape A Recession" | Zero Hedge https://t.co/G1Zigw9QOL

— Leo Kolivakis (@PensionPulse) April 7, 2020

U.S. stocks are staging a remarkable two-day rally, but many analysts are calling the recent run a rally within a bear market https://t.co/yoVyFrPLQj

— The Wall Street Journal (@WSJ) April 7, 2020

Investor who predicted the start of the 2009 bull market: Beware of a double bottom https://t.co/wxqg5E6fON

— Leo Kolivakis (@PensionPulse) April 7, 2020

$SPY Putting this powerful bear market rally into proper context, it was an incredible short squeeze but it’s coming to an end as we approach the 100-week moving average on the S&P 500 ETF (SPY): pic.twitter.com/uSbH7EC9Gg

— Leo Kolivakis (@PensionPulse) April 7, 2020

When you're running billions in a long-only concentrated portfolio like that and the beta winds are blowing your way, well, if you're lucky, it's not hard to beat the S&P 500.

But if you look at Hohn's long-term performance, that's where things get interesting because he has consistently delivered great results and his investors have profited greatly over the years. That's not something a lot of hedge funds can boast about.

In fact, Chris Hohn's TCI Fund Management and Stephen Mandel's Lone Pine Capital led hedge fund gains last year, respectively returning $8.4 billion and $7.3 billion to clients in 2019.

Still, I'm not going to lie, activist funds and L/S funds make me nervous, I've seen plenty of superstars get killed over the years or run into serious trouble. Lest we all forget, legendary value investor Bill Miller beat the S&P 500 for 15 years in a row (through 2005) before running into a very cold streak where he underperformed for years and still hasn't recovered.

As far as the hedge fund industry and which are the top hedge funds, I stand by my comments, right now I put Citadel ahead of the pack in terms of delivering great risk-adjusted alpha in all market environments, but there's no doubt, TCI Fund Management was the world's most profitable hedge fund last year and it has also delivered great returns over the years taking very concentrated long-only positions.

The Children’s Investment Fund lost about 19% during the month, the worst since it started in 2004, according to people with knowledge of the matter. The decline pushed the fund’s first-quarter loss to about 23%, the people said, asking not to be identified because the information is private.

Alberta Investment Management Corporation (AIMCo) announced today its financial results for the year ended December 31, 2019. On behalf of its 30 Alberta-based pension, endowment and government fund clients, AIMCo earned a total fund return of 10.6% net of all fees, representing approximately $11.5 billion in net investment income, with assets under management reaching $118.8 billion. The annualized total fund returns over four and ten years were 7.0% and 8.2%, respectively.

“As institutional investors we understand that even well-diversified portfolios are bound to deliver more favourable returns in some years compared to others,” said Kevin Uebelein, Chief Executive Officer. “While over the long-term, we are proud that AIMCo has earned its clients strong value-added investment performance across all asset classes — beating the benchmark in ten of the past twelve years at the total fund level — we acknowledge that in the short-term we have not met our clients’ expectations.”

“Despite all asset classes earning strong absolute returns, some did not outperform their respective market benchmarks in 2019,” added Chief Investment Officer Dale MacMaster. “Illiquid assets, for instance, which have consistently posted strong returns over the past few years, experienced more modest performance last year. On the public equities side, for active managers like AIMCo, it was a challenging year — the market was very narrow, with fewer stocks and fewer sectors exceeding their benchmarks. Remaining patient while being willing to innovate will ultimately serve our clients well, especially in this current investment climate.”

For the one-year period ending December 31, 2019, AIMCo’s total fund return is 0.5% below that of its benchmark. On a four- and ten-year basis, AIMCo continues to demonstrate strong value add, outperforming its benchmark by 0.5% and 0.8% for each period respectively.

While 2019 held its own challenges, 2020 is unparalleled with the global economic impact of COVID-19 and an oil price war causing virtually all asset values to be significantly repriced and investment markets to enter a period of sudden and unprecedented volatility. In extreme markets such as this one, where so many asset classes decline together, the typical benefits of portfolio diversification will be diminished in the short-term.

“Our team is responding decisively in an effort to protect our clients’ liquidity and assets in the near- and medium-term, while still identifying longer-term investment opportunities that will come out of these challenging market circumstances.” said Uebelein. “We know the impacts to their portfolios during these times of market uncertainty will be significant, and we are committed to accountability and full transparency to our clients as we navigate these conditions together.”

Detailed performance information will be available in AIMCo’s Annual Report to be released in June 2020

ABOUT ALBERTA INVESTMENT MANAGEMENT CORPORATION (AIMCO)

AIMCo is one of Canada’s largest and most diversified institutional investment managers with $118.8 billion of assets under management, as at December 31, 2019. The organization’s mandate is to maximize risk adjusted net investment returns in a manner responsive to the needs and expectations of its 30 Alberta-based pension, endowment, government, and specialty fund clients. Balanced fund pension and endowment clients account for $100.0 billion of assets under management, and are most representative of AIMCo’s overall performance, as they utilize the full range of the organization’s asset and style capabilities. Government and specialty fund clients account for $18.8 billion of assets under management, and largely rely on AIMCo for its expertise in managing fixed income assets and for liquidity management. Established as a Crown corporation on January 1, 2008, AIMCo is operationally independent — operating on commercial principles and at arms length from the Government of Alberta — yet strategically aligned with the Province as shareholder. The organization is committed to the highest standards of corporate governance including an independent, highly-qualified and diverse Board of Directors that draws on global experience to provide meaningful guidance and oversight to the organization.

For more information please visit www.aimco.ca

• "Last year was a great year to invest. There were trade issues but growth was decent and interest rates were accommodative. Every asset class performed well, you couldn't go wrong. "
• Nonetheless, even though Public Equities performed well, "the market was even more narrow than in 2018". Dale told me "five stocks -- Apple, Amazon, Facebook, Google and Microsoft --  accounted for 17% of the gains in the S&P 500, adding 3% to the overall return."
• In Private Markets, returns came down. Real Estate went from 12% in 2018 to 4% in 2019. Private Equity went from 20% in 2018 to 4.5% in 2019. And Infrastructure went from 12% in 2018 to 4.4% in 2019. 
• Dale told me the PE strategy shifted five years ago, they are still ramping up fund investments and co-investments "which is why our program is more volatile than more mature PE programs of our peers, we still have J-curve effects." The PE program is only $3 billion and growing.
• He said in private equity, they focus on middle market funds where they can be a more influential/ larger partner. However, he did admit that middle market funds have more operational and key man risks and require more due diligence since they lack the size and depth of larger funds. ("we make sure carry is distributed across the organization”).

• Going into 2020, he said valuations were high but not stretched, things looked good, the economy was strong, and then all hell broke loose.
• He said he's going to retire soon and "in the last 12 years, I've seen two 1 in 100 year events." 
• "Initially it looked like SARS, we thought it would be a V-shaped recovery, and then as it got a lot worse, the bottom in equities fell out, stocks collapsed, the VIX spiked to levels not seen since 1929 or 1987, and even bond volatility exploded. Hedge funds, ETFs, mutual funds, risk parity funds all exacerbated volatility."
• He said: "It became evident it would be a U-shaped or Nike swoosh shaped recovery, and now with the unprecedented monetary and fiscal stimulus, it looks like a V-shaped recovery but who knows. The world has changed, people are adapting, working remotely, home schooling their kids, practicing isolation and social distancing, it's a whole new world."
• I sensed Dale was cautiously optimistic. "In 2008, the financial system was going to implode, the Fed took its time to ramp up QE. Now, the Fed and other central banks have responded more forcefully and quickly and governments have also responded quickly on the fiscal front. It's the 2008 playbook on steroids. We are dealing with a pandemic, governments have closed economies for health reasons, they will eventually open them up again -- 50, 60 or 70% -- and we will recover. Of course, some sectors will recover more quickly than others as people assess the health risks of flying, going to restaurants, etc. But I see millennials going out once the lockdown is eased. "
• He said central banks and governments "don't care about the size of their balance sheet". The US economy was $21 trillion before this happened and "they already spent $2 trillion and will spend another $2 trillion in May." 
• He added "central banks are providing liquidity and programs buying up troubled spots in credit markets" like high yield, CLOs, and covenant-lite and uni-tranche loans which were experiencing difficulties before this occurred.

• There are real challenges in real estate. "Malls are closed, most tenants aren't paying their rent (except for anchor ones) and many won't survive and will likely file for bankruptcy."
• He said multi-family and industrial are doing alright and will likely continue to do well.
• I told him that I see many companies will likely stop leasing expensive real estate office space in downtown cores after this pandemic and keep people working remotely. He admitted "behaviors will change" and said a lot of things need to be revisited, like open office space.
• He said unlike 2008, "today we are making private markets more regularly and conservatively."
• He expects vintage 2020 to be a great year for private equity, "just like 2008".

1. "Ensuring our employees are safe and working well remotely."
2. "Ensuring we meet all our liquidity needs (collateral commitments and private market ones).
3.  "Triaging assets"
4. "Assessing opportunities in credit markets, listed real estate and infrastructure, REITs, and other potential distressed listed securities they can co-invest with their partners."

Stocks rose sharply on Thursday, wrapping up a big week of gains, after the Federal Reserve detailed a bevy of programs to support the economy during the shutdowns from the coronavirus pandemic.

The S&P 500 gained 1.5% to close at 2,789.82 while the Dow Jones Industrial Average advanced 285.80 points, or 1.2%, to 23,719.37. The Nasdaq Composite closed 0.8% higher at 8,153.58. The U.S. stock market will be closed Friday due to Good Friday.

For the week, the S&P 500 surged 12.1%. That was its biggest one-week gain since 1974, when it rallied more than 14%. The Nasdaq had its best week since 2009, jumping 10.6%. The Dow soared more than 12% for one of its biggest weekly gains on record.

“It’s been a strong week in equities and probably for good reason,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “Many stocks were widely considered to be in oversold, and then you’ve got policy assistance that’s in motion at the Fed and in fiscal policy.”

“That’s clearly helping sentiment, but we still find it difficult to get overly bullish when the duration of COVID-19 remains unknown,” Sandven added.

The Fed announced a slew of programs, including loans geared towards small and medium sized businesses, that will total up to $2.3 trillion. The central bank also gave more details on its plans to buy investment-grade and now even junk bonds.

“This Fed is the most aggressive Fed. They do not want to be known as the reason why we went into a depression,” CNBC’s Jim Cramer said on “Squawk Box” on Thursday. “I’m very impressed. The Fed is on its game and this is what is needed because we got to fight off a depression, we got to get America open for business.”

Thursday’s announcement was enough to outweigh another massive jump in weekly jobless claims. More than 6 million Americans filed for unemployment benefits last week. Economists expected an increase of 5 million. The latest data built on the record-shattering prior two readings of 6.6 million and 3.3 million.

Virus outlook improves

Wall Street’s weekly surge came amid increasing hope that the situation around the coronavirus was improving. In recent days, the number of new daily confirmed cases has dropped globally and in the U.S. New York state has also reported a decline in its virus-related hospitalization rate.

Treasury Secretary Steven Mnuchin also told CNBC on Thursday the U.S. economy could be re-opened in May. He noted the department was doing “everything necessary that American companies and American workers can be open for business and that they have the liquidity that they need to operate their business in the interim.”

But some believe that stocks are now getting ahead of themselves and investors should exercise caution.

“I think this is kind of buy the rumor and potentially we sell the news when reality sets in of what we are going to see what’s on the other side,” billionaire investor Mark Cuban said Wednesday on CNBC’s “Closing Bell.”

“I think people are naturally optimistic right now in terms of the market. I just don’t think they’re really factoring in what we’re going to see on the other side,” he added.

JPMorgan Chase jumped nearly 9% to lead the Dow higher on Thursday. Dow Inc gained 5.1% while Goldman Sachs advanced 4.1%. Financials were the best-performing sector in the S&P 500, gaining more than 5%.

After Thursday’s rally, the Dow is up more than 27% from its March closing low, but still down 16.9% this year.

“The stock market is at a very uncertain point now. The impact of the coronavirus on future earnings is yet to be determined. We aren’t out of the woods,” said Nancy Davis, chief investment officer at Quadratic Capital.

U.S. junk bonds rallied the most since 1998 after the Federal Reserve’s historic move to begin buying some of the speculative-grade corporate debt.

The extra yield investors demand to own the securities instead of Treasuries narrowed 86 basis points Thursday to 785 basis points, the lowest level since March 13, according to the Bloomberg Barclays U.S. Corporate High-Yield index.

The Fed’s announcement that it would buy a limited amount of recently downgraded junk debt gave the market its biggest boost since spreads surged to distressed levels last month amid a pandemic that has shut down large parts of the economy. Average yields on the debt fell by almost a percentage point to 8.48%, index data show.

Spreads had reached 1,100 basis points on March 23, the widest level since the global financial crisis.

To keep credit flowing, the central bank is expanding a corporate bond-buying program to include debt that was investment-grade as of March 22 but later downgraded to a rating of no lower than BB-, the third-highest junk grade.

In doing so, the Fed is essentially opening up its balance sheet to potentially hundreds of billions of dollars worth of notes that are expected to fall into speculative grade in the coming months as the impact of the pandemic hits corporate cash flows.

The Fed can also buy exchange-traded funds that track speculative-grade debt. Those funds surged the most in a decade following the announcement. All together, the programs will support as much as $850 billion in credit.

The number of people traveling by plane has dropped by about 96%, according to metrics reviewed by CNN. On Wednesday, TSA screened just shy of 95,000 people, a dramatic drop from the 2.3 million who passed through checkpoints on the equivalent day in 2019. https://t.co/GA3UhuH9pY

— CNN (@CNN) April 9, 2020

• The psychological effects of this pandemic are widespread. Even when governments reopen economies, it won't be business as usual, many small businesses are going to go bankrupt.
• The rally from March lows was all liquidity driven but there's trouble ahead as earnings will crater and the earnings yield will fall to zero.
• There's not enough fear out there, the buy-the-dip mentality still rules the day. 
• The weakest companies going into this crisis are the ones that got a lifeline from the response to the pandemic.We are wtinessing the zombification/ Japanification of our economy.
• The bailouts and latest Fed measures once again benefit the financial elite and will exacerbate inequality even more.

“Even if the economy starts to re-open in mid-May, more than 20 million Americans will have lost their job with the economy likely having contracted around 13% peak-to-trough, more than three times deeper than the global financial crisis.” https://t.co/rCQkj6FOqV

— Lisa Abramowicz (@lisaabramowicz1) April 10, 2020

“I’ve read the plans to reopen the economy. They’re scary.” https://t.co/0T331qATqz via @voxdotcom

— Leo Kolivakis (@PensionPulse) April 10, 2020

Coronavirus: low antibody levels raise questions about reinfection risk | South China Morning Post https://t.co/RbnyPNgBog

— Leo Kolivakis (@PensionPulse) April 10, 2020

Ray Dalio: ‘We’re Heading Into A Great Depression’ https://t.co/122lQM2BCX

— Leo Kolivakis (@PensionPulse) April 10, 2020

Sure glad I closed out all my equity shorts below 19,000 on the DJIA. Equally glad I put a few back on the last couple of days. If the Fed bails out everyone no one actually gets bailed out. Think about it.

— Jeffrey Gundlach (@TruthGundlach) April 9, 2020

"Chamath Palihapitiya: US shouldn’t bail out hedge funds, billionaires during coronavirus pandemic"https://t.co/bYSw3uRZGM

— Leo Kolivakis (@PensionPulse) April 9, 2020

Chanos Says ‘Outraged’ Private Equity Giants Want Taxpayer Aid - Bloomberg https://t.co/HLaFn62dTb

— Leo Kolivakis (@PensionPulse) April 10, 2020

Julie Segal of Institutional Investor reports on the inside story of CalPERS’ untimely tail-hedge unwind:

The California Public Employees’ Retirement System had unfortunate timing.

When markets crashed in March, CalPERS missed a payout of more than $1 billion after cutting its crash-hedging program as part of a cost-curtailment effort and because of a lack of understanding of how tail hedges work, according to sources familiar with the situation.

CalPERS was paying about 5 basis points, or 0.05 percent, for the externally managed part of a tail-risk insurance program that protected about $5 billion in assets. In October 2019, as investors worried about the inevitable end of the longest bull market ever, the pension plan decided to end the hedging initiative because it was too costly.

Universa Investments ran the largest portion of the mandate, while LongTail Alpha of Newport Beach, CA, managed another portion. CalPERS gave them the standard 90 days to unwind their positions.

Nassim Taleb, who wrote the popular book The Black Swan in 2007, advises Universa. That firm had disposed of CalPERS positions by January. LongTail’s hedge was in the unwinding process between January 1 and March 31 and may have generated a final distribution of around $150 million to $175 million. Universa and LongTail declined to comment.

CalPERS’ chief investment officer Ben Meng, who came aboard in January 2019, stands by the decision.

“We terminated explicit tail-risk hedging options strategies because of their high cost, lack of scalability, and the fact that there are better alternatives available to CalPERS,” Meng told Institutional Investor Thursday.

“At times like this, we need to strongly resist ‘resulting bias’ — looking at recent results and then using those results to judge the merits of a decision,” Meng cautioned. “We are a long-term investor. For the size and complexity of our portfolio, we need to think differently.”

Tail-risk hedging programs are similar to life insurance. With tail hedges, like any insurance policy, investors pay a small amount each year — a sunk cost — for a large potential payout if the event that is being insured against occurs. This was the crux of the problem at CalPERS, according to sources. There was a lack of understanding of that cost and thinking of it as a management fee of sorts. CalPERS “benchmarked” the tail-hedge program to the generic benchmark for the fund itself. It did not have a customized benchmark, so the 5 basis points just became another cost for CalPERS.

This isn’t the way tail hedges should be assessed, according to Universa, one of the former external managers. “Risk mitigation performance must of course be measured by its ‘portfolio effect’ — specifically, the impact it has on the compound annual growth rate (CAGR) of the entire portfolio whose risk it is trying to mitigate,” the firm told clients in a recent letter obtained by II.

For example, Universa recommends a hypothetical portfolio of a 3.33 percent allocation to its tail-risk product, coupled with a 96.67 percent position to the Standard & Poor’s 500 stock index, a proxy the firm uses for the systematic risk being mitigated.

In the month of March 2020, the hypothetical portfolio showed a compound annual growth rate of 0.4 percent. In March, the S&P 500 stock index lost 26.2 percent at its lowest point, and closed the month down 12.4 percent. For the year to date, Universa’s hypothetical portfolio had a CAGR of 16.2 percent, versus the S&P 500’s 4.5 percent. The model has produced a CAGR of 11.5 percent since March 2008 inception.

According to one source, CalPERS’ tail-hedge program “may have been swept up in a purge of many inefficient active manager programs. But the program was never meant to be under the mandate for these other programs. By design, it loses a little bit of money during good times with a huge benefit during a severe drawdown in equities.”

CalPERS’ decision to establish a crash-insurance policy goes back to 2016 under previous CIO Ted Eliopoulos. The pension system was trying to be cautious as it was still smarting from the global financial crisis, and started evaluating different tail risk managers that year. By August 2017, CalPERS hired Universa and LongTail Alpha. It set up a smaller in-house program to run related strategies, and planned to reassess the program every three to six months to see if it would meet expectations.

The initiative got a few tests, including the market selloff in February 2018, which it passed. CalPERS continued to increase its allocation. Then in the fall of 2019, with a new leader in place, CalPERS cut the program.

Bloomberg also posted a story on how CalPERS missed a $1 billion payday by scrapping a market hedge and of course, naked capitalism was all over it (Yves loves posting negative comments on CalPERS).

I recently covered pandemic hedge fund winners and losers and stated the following:

[...] Yahoo Finance reports that Universa Investments posted an astonishing year-to-date return of more than 4,000% in March following “one of the scariest months on record,” even as the firm issued a stark warning about a still-overinflated market:

Universa Investments posted an astonishing year-to-date return of more than 4,000% in March following “one of the scariest months on record,” even as the firm issued a stark warning about a still-overinflated market. https://t.co/AA6qPEYqk7

— Leo Kolivakis (@PensionPulse) April 8, 2020

You'll recall, I covered Mark Spitznagel's tail risk fund in mid-February when I went over the crash of 2020. Talk about delivering some real tail risk! (he will never produce such spectacular returns ever again in his life and his returns inception to date are less than stellar).

• Ben Meng is right, they are not scalable strategies 
• They were hemorrhaging money for over a decade as markets melted up
• Since inception, most of them have delivered very lousy returns and charged hefty fees for doing so
• There is a "resulting bias" and it looks like a dumb move now but for a pension fund the size of CalPERS, with hundreds of billions under management and a long investment horizon, maybe they felt focusing on tail-risk strategies wasn't worth their attention, and I think this makes sense.

$QQQ Posted this on Stocktwits. All big hedge funds are LONG the Nasdaq (QQQs). I am getting ready to short this sucker, just waiting for it to stall...this is the ULTIMATE sucker rally! pic.twitter.com/0bXcPHufAO

— Leo Kolivakis (@PensionPulse) April 14, 2020

In the competition for a federal bailout, venture capital won the first round. Now, private equity is fighting back — and winning.

The first round was the $350 billion Paycheck Protection Program, which provides forgivable loans of up to 2.5 times companies’ monthly payroll. The program is limited to businesses with no more than 500 employees, and it specifically excludes financial firms.

Businesses are flocking to the program, but the Small Business Administration initially barred most companies that are funded by venture and P.E. firms. The administration’s affiliate rule lumps together businesses with common controlling shareholders, so all of a firm’s majority-owned businesses count toward the employee limit. Private equity has lobbied vociferously for a waiver, but the government has not granted one.

For most venture-backed companies, the problem is not majority ownership, but that the affiliate rule covers companies where an investor has “negative control” rights, like the ability to veto board decisions. Faced with forgoing a potential government grant or losing control rights, venture firms have rushed to eliminate these rights. Their extensive banking relationships also make them more attractive to lenders than unfamiliar mom and pop businesses.

This only remaining issue for venture firms is a moral one: Do they really need these loans? After all, V.C. and P.E. funds have nearly $1.5 trillion in uncalled capital, otherwise known as dry powder. The number of venture-backed companies that refused to participate in the program is unknown, but anecdotally there are some.

The second round of bailout wrangling is where private equity is coming out on top.

Apollo successfully lobbied for another Fed program — the $100 billion Term Asset-Backed Securities Loan Facility — to purchase a wider range of investment-grade securities, particularly the mortgage-backed and commercial real estate debt popular among many P.E. firms. The need for this is obvious: If landlords don’t get paid (however politically popular that is) there are mass disruptions to the economy. P.E. firms can also get in on the Fed’s $600 billion Main Street Business Lending Program for midsize companies.

There’s widespread criticism of bailing out P.E. funds. But whatever you think about this, public pensions are dependent on private equity investments for returns, and their portfolio companies employ millions. Frankly, the industry is too politically savvy to let these critical arguments stand in the way.

I would expect the next round of stimulus to be even more friendly to private equity. Unlike venture funds, P.E. financiers do not have the same moral misgivings about lobbying aggressively for federal assistance.

Wait, what? Hedge funds may be able to claim bailout money intended to help cash-strapped small businesses.https://t.co/hh8OYwV05D

— MarketWatch (@MarketWatch) April 15, 2020

Yes it does. It is just as vital, and probably more, to the economy as first-line borrowers (banks).

The problem is another, once you get used to the notion that someone will save you in difficult times, your mindset gets spoiled.

I would like to quote Mr. Henry Kravis: "A real entrepreneur is somebody who has no safety net underneath them".

Great quote, Kravis is right, a real entrepreneur is somebody who has no safety net underneath them. But as we see now, a pandemic can destroy even the best entrepreneurs. The best will rebuild but they need assistance. My problem with PE funds and hedge funds looking for a public bailout is it exposes how utterly unprepared they were for a major downturn. For years, they borrowed cheaply thanks to the Fed and were incentivized to take risks they normally wouldn’t take and now the chicken has come home to roost.

Moody’s estimated that public pension investment losses were nearing $1 trillion in March. https://t.co/g2ayPiTXx0

— Lisa Abramowicz (@lisaabramowicz1) April 15, 2020

The chart below illustrates why it is that the government must ensure that bear markets never happen. There is too much at stake to end the "casino economy" when people’s net worth is so crazily hitched to the stock market. Question is – at what cost?? pic.twitter.com/abaXPwFvBD

— David Rosenberg (@EconguyRosie) April 14, 2020

Is there any other answer besides no? Most PE firms lever up their acquisitions to unsustainable levels and pay themselves massive dividends and management fees. And the taxpayer is now being asked for help? That, my friend, is the definition of chutzpah!

Bail out is for the economy to kickstart and prevent a meltdown. If the equity is of pension origins then a yes, otherwise go to the back of the queue. Same goes for rent seeking organisations.

The effects of COVID-19 are being felt across every aspect of our economy and lives. What are the leaders of Canada's public pension funds doing to ensure that our retirement savings are safe in these unprecedented times?

Join Canadian Club Toronto on Thursday April 16th for a virtual discussion with our expert panel of pensions fund leaders featuring Blake Hutcheson (OMERS), Jane Rowe (Ontario Teachers' Pension Plan), and Kevin Uebelein (Alberta Investment Management Corp.), moderated by global investment manager and business executive, Mark Wiseman. The panel will dive deep into the challenges they are facing in our current environment, how they are pivoting to protect their portfolios, and the threats and opportunities that may emerge for Canadian public pension plans during this crisis.

This virtual event is free of charge. All you need to access the event is to register.

Ziad hindo, Chief Investment Officer of the Ontario Teachers' Pension Plan Board (Ontario Teachers') today announced that Jane Rowe, currently Executive Managing Director and head of the Equities department, will take on the new role of Vice-Chair, Investments, effective October 1, 2020.

Continuing to report to Mr. Hindo, Ms. Rowe will hold an advisory role with respect to Ontario Teachers’ investments. She will provide advice and counsel on the US portfolio including Cadillac Fairview investment activities, mentor senior employees, liaise with alumni and support the build of our alumni network, represent Ontario Teachers’ at external speaking engagements and on portfolio company boards, and continue to sponsor Pride and diversity and inclusion initiatives.

“Over the past decade, Jane has brought a distinctive and exceptional perspective to the table. She is an accomplished investor and team builder with the ability to inspire and develop our future leaders,” said Mr. Hindo. “The role she is taking on next will allow us to benefit in new ways from the special set of skills she has developed over her career.”

Ms. Rowe joined Ontario Teachers’ as head of private equity in 2010. Her mandate was subsequently expanded to include high-conviction equities, public or near-public company investments intended to generate superior financial returns. Under her leadership, net assets managed by the Equities team have grown from $11 billion to $47 billion, with an annualized rate of return before administrative costs of 18.5% as at December 31, 2019. The team’s portfolio includes more than 60 private companies, significant investments in public companies, and relationships with more than 30 private equity funds.

“I am proud of our team, the portfolio that we have built, and what we’ve accomplished together over the past decade for the plan and its members,” said Ms. Rowe. “I look forward to working with the investment leadership team, taking a broad perspective to help position our private asset portfolio and the investment teams for the future.”

Ms. Rowe will continue to sit on boards associated with Cadillac Fairview, Ontario Teachers’ wholly-owned real-estate subsidiary, and Camelot Group PLC, the operator of the UK National Lottery. A search is underway for a new head of Equities and an announcement will be made when this is finalized.

Caisse de dépôt et placement du Québec (CDPQ) announced today some appointments and changes to its organizational structure to maximize the expertise of its teams to be well positioned to face global economic challenges.

“At the beginning of the year, it was clear that the challenges of the next decade would be very different from the last decade’s challenges. Since then, in only a few weeks, the world as we know it has transformed. It’s even more important to have increased agility in our decision-making processes and closer coordination in all aspects of strategy and managing our assets,” said Charles Emond, President and Chief Executive Officer of CDPQ. “With these appointments and changes to our structure, we can fully leverage the talent of our people. Regrouping our teams within strong business units will increase our efficiency and ability to seize more opportunities.”

First, Macky Tall is appointed Head of Real Assets and Private Equity, a new investment business unit that is home to key asset classes for CDPQ, created to increase the organization’s impact in those sectors. Through his various roles, Mr. Tall has built strong and lasting connections with CDPQ’s business partners. His track record includes achievements such as globally positioning our infrastructure activities and strengthening our operational expertise in Liquid Markets. In his new position, he will be responsible for the International Private Equity, Infrastructure and Financing Solutions teams, as well as for CPDQ Infra, where he remains President and Chief Executive Officer. Leadership of these teams remains unchanged. Mr. Tall is also appointed Chairman of the Board of Directors of Ivanhoé Cambridge, which will provide him with a broad perspective on our real assets activities, including real estate, where the portfolio’s repositioning is already well underway under the leadership of Nathalie Palladitcheff, President and Chief Executive Officer of the real estate subsidiary.

As a result of these changes, a search process to recruit a replacement for Mr. Tall as Head of Liquid Markets has been launched. Mr. Tall will fill the position in the interim with the support of the teams in place.

In addition, in Liquid Markets, Helen Beck is appointed Executive Vice-President and Head of Equity Markets. As the leader of this portfolio, Ms. Beck has overseen equity market activities in recent years, demonstrating solid expertise in portfolio management and the capacity to stay the course through various cycles. Ms. Beck will join the Executive Committee and report to the new Head of Liquid Markets.

Kim Thomassin, who was serving as Executive Vice-President, Legal Affairs and Secretariat, is appointed Executive Vice-President and Head of Québec Investments and Stewardship Investing. Ms. Thomassin possesses extensive knowledge of Québec’s businesses and a vast network, she is recognized for her command of the files she works on and for her negotiating skills. Her role includes responsibility for the Québec Private Equity teams as well as Espace CDPQ. In addition, Ms. Thomassin will continue to oversee the Stewardship Investing team, whose mandate is anchored to the heart of CDPQ’s mission.

Lastly, Chief Economist Martin Coiteux’s mandate is expanded. Mr. Coiteux, who is recognized for his deep understanding of the global economy and sharp analytical skills, takes responsibility for the Global Strategy team. His integrated team will develop the main pillars of the strategy in close collaboration with the Executive Committee and various CDPQ teams.

Macky Tall, the new Head of Liquid Markets, Kim Thomassin and Martin Coiteux will all report to the President and Chief Executive Officer. These appointments are effective immediately.

Stocks surged on Friday after a report said a Gilead Sciences drug showed some effectiveness in treating the coronavirus, giving investors some hope there could be a treatment solution that helps the country reopen faster from the widespread shutdowns that have plunged the economy into a recession.

The Dow Jones Industrial Average rallied 704.81 points, or 3%, to 24,242.49. It was the Dow’s first close above 24,000 since March 10. The S&P 500 closed 2.7% higher, at 2,874.56 while the Nasdaq Composite advanced 1.4% to 8,650.14. er, at 2,874.56 while the Nasdaq Composite advanced 1.4% to 8,650.14. (Click here for the latest market news.)

Boeing shares jumped 14.7% after the airplane maker said it would resume production in the Seattle area as early as April 20. The company also said Friday it would resume operations in the Philadelphia area.

“It’s far too early to signal the all clear, but what this demonstrates is that coronavirus is a health problem that requires a health solution,” said Michael Arone, chief investment strategist at State Street Global Advisors, about the prospects of a coronavirus treatment. “If we can develop a health solution, I think at least from a market perspective, things will rebound pretty quickly.”

Friday’s gain led the S&P 500 to its first back-to-back weekly gains since early February and propelled it above its 50-day moving average. The broader market index climbed 3% for the week while the Dow gained 2.2%. The Nasdaq advanced 6.1% week to date. Through Friday’s close, the major averages were all up more than 25% from their late-March lows.

Gilead shares jumped 9.7% after STAT news reported that a Chicago hospital treating coronavirus patients with remdesivir in a trial were recovering rapidly from severe symptoms. The publication cited a video it obtained where the trial results were discussed.

“An effective treatment is a huge deal and would create a path to open the economy and resume normal ‘social activities’ way sooner than a vaccine,” said Tom Lee, head of research at Fundstrat Global Advisors. “A treatment is safer and more scalable because it is only given to people who need to be treated.”

Other studies have shown remdesivir to be an effective treatment against the coronavirus. However, they have been smaller in scale. Gilead itself also cautioned that anecdotal reports are not enough to determine yet whether the drug will be an effective treatment.

Still, CNBC’s Jim Cramer said the drug could give the economy a “fighting chance.”

“Remdesivir sounds like something that can get people out of hospitals quickly,” Cramer said in a tweet Thursday. “That allows our economy to have a fighting chance..I think that remdesivir would cut the morbidity ... which would change how quickly we can open... and what we can do.”

Investors trimmed positions in work-from-home plays such as Amazon, Netflix and Walmart. Amazon dipped 1.4% while Netflix fell 3.7%. Walmart slid 0.2%. Still, Amazon and Netflix closed up more than 14% for the week while Walmart gained 8.5%.

Market comeback

Stocks tumbled from record highs in February into a bear market a month later as the spread of the coronavirus roiled market sentiment and the economic outlook. More than 2 million cases have been confirmed worldwide, including over 650,000 in the U.S., according to Johns Hopkins University. Governments urged people to stay home, effectively shutting down the global economy.

But the stock market has rallied since March 23 as new coronavirus cases in the U.S. and globally showed signs of plateauing. President Donald Trump said Thursday that “our experts say the curve has flattened and the peak … is behind us.”

He also issued guidelines to open up parts of the U.S. Thursday night, which identifies the circumstances necessary for areas of the country to allow employees to start returning to work. The decision to lift restrictions will ultimately be made by state governors.

The S&P 500 has jumped more than 30% from its March 23 intraday low while the Dow has gained 33.1% in that time.

To be sure, the outbreak has already dealt a massive blow to the economy. In four weeks, about 22 million Americans have lost their jobs. Retail sales posted last month their biggest fall on record.

Investors have said that news of an effective treatment or vaccine would be needed for stocks to mount a sustainable comeback.

“If it is effective in keeping someone from contracting the virus or, more likely, simply reduces its severity, that would be a game-changer and [would] allow the economy to restart both more quickly and more fully,” said Jim Paulsen, chief investment strategist at The Leuthold Group, about the Remdesivir trial report.

Good summary of the new study on exposure to #COVID19 in Santa Clara and its limitations. In the end, likely to be case that nationally, 2-5% of the population will have been exposed to covid. Multiple studies and experts are coalescing around that range. https://t.co/eF0p0bK0Bc

— Scott Gottlieb, MD (@ScottGottliebMD) April 17, 2020

The buyers’ “In Fed We Trust” mantra is not the worst idea out there. Underlying it, though, is an inflation “success”. The economy is obviously producing less, and the Government is spraying money everywhere. Ever hear of “supply and demand”?

— Jeffrey Gundlach (@TruthGundlach) April 18, 2020

Data from investor Howard Marks shows why there may be another drop in stocks https://t.co/Uh2ONfdAYY

— Leo Kolivakis (@PensionPulse) April 14, 2020

Guggenheim CIO Sees S&P500 Falling As Low As 1,200 | Zero Hedge https://t.co/DsKGYj3SSQ

— Leo Kolivakis (@PensionPulse) April 17, 2020

Stocks vulnerable to a 20% downdraft, investor Peter Boockvar warns https://t.co/EXWZUu3mJm

— Leo Kolivakis (@PensionPulse) April 17, 2020

Alphabet CEO tells employees the company will slow hiring, investments https://t.co/slthj6k3FB

— Leo Kolivakis (@PensionPulse) April 16, 2020

Jim Simons' Legendary Medallion Fund Up 36% In 2020, Expects More Volatility Ahead | Zero Hedge https://t.co/grgj2TWi8T

— Leo Kolivakis (@PensionPulse) April 17, 2020

22 Million Jobless Claims In 1 Month: Last 4 Weeks Erase All Jobs Created Since The Great Recession | Zero Hedge https://t.co/7Ze3jTBpEM

— Leo Kolivakis (@PensionPulse) April 16, 2020

Fed Beige Book says economy contracted 'sharply and abruptly' due to coronavirus https://t.co/tuT1ny3msr

— Leo Kolivakis (@PensionPulse) April 15, 2020

The economic data is even worse than Wall Street feared: 'The economy is clearly in ruins here'https://t.co/QSC3d4M2kd

— Leo Kolivakis (@PensionPulse) April 15, 2020

Lacy Hunt: "A recovery in business activity will occur and may appear to be V shaped but will be at a much lower GDP level than the 2019 measure of activity. In other words, the economy will stagger, not march forward."https://t.co/nYY2LYtIHBpic.twitter.com/gvy4euRqFr

— Leo Kolivakis (@PensionPulse) April 13, 2020

Mental Health and the Covid-19 Pandemic | NEJM https://t.co/7GiuCu74Tb

— Leo Kolivakis (@PensionPulse) April 15, 2020

Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan Board (OTPP) have completed the tender offer period to purchase 40% of the shares of Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. (IDEAL) (BMV: IDEAL B-1).

The acquired shares will be transferred to CPPIB and OTPP on April 17 and the tender offer will formally settle on April 23.

CPPIB will own a 23.7% interest in IDEAL and OTPP will own a 16.3% stake. The current majority owners of IDEAL’s outstanding shares will continue to hold a majority shareholding in the company.

IDEAL is a sizable and important investment that provides exposure to existing and future infrastructure projects throughout Mexico. IDEAL’s portfolio includes 18 infrastructure concessions in Mexico (13 toll roads, three logistics terminals and two wastewater treatment plants), as well as an electronic toll collection service business and an operations business. IDEAL, Ontario Teachers’ and CPP Investments are already partners in the Arco Norte and Pacifico Sur toll roads.

As part of the arrangement, CPPIB and OTPP together with IDEAL will form an infrastructure investment trust known locally in Mexico as a FIBRA-E (Fideicomiso de Inversión en Energía e Infraestructura). The FIBRA-E structure was introduced in Mexico in 2015 to encourage private-sector investment in infrastructure projects.

The FIBRA-E will subsequently be funded by IDEAL, CPPIB and OTPP. FIBRA-E will be managed by a subsidiary of IDEAL and purchase partial stakes in four of IDEAL’s toll roads: Arco Norte, Chamapa – La Venta, Toluca Bypass and Tijuana – Tecate.

CPPIB and OTPP intend to reduce its stakes to minorities in the FIBRA-E following a secondary offering to other investors.

Canada Pension Plan Investment Board (“CPP Investments”) and Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”) today announced the completion of the tender offer period to purchase 40% of the shares of Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. (BMV:IDEAL B-1, “IDEAL”). This step concludes the shareholders’ acceptance of the offer of affiliates of Ontario Teachers’ and CPP Investments to purchase the shares of IDEAL.

In accordance with Mexican law, the acquired shares will be transferred to CPP Investments and Ontario Teachers’ on April 17 and the tender offer will formally settle on April 23.

The acquisition, which was first announced in November 2019, follows a tender offer in the Mexican stock exchange on March 18 for shares in IDEAL at MXN$43.96 per share. CPP Investments will own a 23.7% interest in IDEAL alongside a 16.3% stake owned by Ontario Teachers’. The current majority owners of IDEAL’s outstanding shares will continue to hold a majority shareholding in the company.

IDEAL is a sizable and important investment that provides exposure to existing and future infrastructure projects throughout Mexico. IDEAL’s portfolio includes 18 infrastructure concessions in Mexico (13 toll roads, three logistics terminals and two wastewater treatment plants), as well as an electronic toll collection service business and an operations business. IDEAL, Ontario Teachers’ and CPP Investments are already partners in the Arco Norte and Pacifico Sur toll roads.

As part of the arrangement, a subsidiary of IDEAL will form an infrastructure investment trust known locally in Mexico as a FIBRA-E (Fideicomiso de Inversión en Energía e Infraestructura). This FIBRA-E is subject to certain transaction steps and filings that are yet to be finalized. The FIBRA-E will subsequently be funded by IDEAL, CPP Investments and Ontario Teachers’, through certain affiliates. This is expected to occur before the end of April. The FIBRA-E structure was introduced in Mexico in 2015 to encourage private-sector investment in infrastructure projects.

As previously announced, the FIBRA-E will be managed by a subsidiary of IDEAL and purchase partial stakes in four of IDEAL’s toll roads: Arco Norte, Chamapa – La Venta, Toluca Bypass and Tijuana – Tecate. Following the completion of this funding, a secondary offering led by CPP Investments and Ontario Teachers’, through certain affiliates, will reduce their ownership to minority positions, while also introducing other investors.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits in the best interests of 20 million contributors and beneficiaries. In order to build diversified portfolios of assets, investments in public equities, private equities, real estate, infrastructure and fixed income instruments are made by CPP Investments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2019, the CPP Fund totalled C$420.4 billion. For more information about CPP Investments, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

About IDEAL

IDEAL is an independent publicly traded company listed on the Mexican Stock Exchange (IDEALB1.MX). IDEAL engages in the development, promotion, operation and administration of infrastructure projects in Mexico and Latin America. IDEAL is one of the largest infrastructure companies in Latin America, with 18 infrastructure concessions in different sectors, including toll roads, water and logistics terminals.

About Ontario Teachers’

The Ontario Teachers’ Pension Plan Board (Ontario Teachers’) is the administrator of Canada’s largest single-profession pension plan, with $207.4 billion in net assets (all figures at December 31, 2019). It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.7% since the plan’s founding in 1990. Ontario Teachers’ is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario’s 329,000 active and retired teachers. For more information, visit otpp.com and follow us on Twitter @OtppInfo.

Banco de Mexico reduced the benchmark rate by 50 basis points to a three-year low of 6% at an unscheduled meeting on Tuesday. Officials had already surprised markets with a half-percentage point cut on March 20.

The decision to repeat an unscheduled rate reduction by one of the world’s most hawkish central banks reflects the uncertainty surrounding the Mexican economy. Economists forecast gross domestic product will contract 5% this year, with some top banks predicting a fall of as much as 9%.

“Considering the risks resulting from the COVID-19 pandemic for inflation, economic activity and financial markets, major challenges arise for monetary policy and for the economy in general,” the statement read. “The negative effects on domestic economic activity resulting from the pandemic may lead to an important contraction of economic activity.”

Calgary and Edmonton, Alberta; Montréal, Québec (March 31, 2020) – AltaGas Canada Inc. (“ACI”) (TSX: ACI), the Public Sector Pension Investment Board (“PSP Investments”) and the Alberta Teachers’ Retirement Fund Board (“ATRF”) are pleased to announce the completion today of the acquisition of all of the 30,000,000 common shares of ACI (“Common Shares”) by PSPIB Cycle Investments Inc. (the “Purchaser”), a wholly-owned subsidiary of TriSummit Cycle Holding Inc. (“Holdco”), in an all-cash transaction pursuant to a plan of arrangement (the “Arrangement”) under Section 192 of the Canada Business Corporations Act (the “CBCA”). The Purchaser acquired each Common Share for $33.50, for total consideration of $1.005 billion.

Mr. Jared Green, ACI's President and Chief Executive Officer, commented:

“We are excited to have this transaction close and to have the support of both PSP Investments and ATRF as we move forward with the execution of our strategy. We have numerous growth opportunities in front of us and a solid financial footing to be able to deliver on them.”

With the Arrangement now complete, the Common Shares will be delisted from the Toronto Stock Exchange in the coming days.

Corporate Name Change

In connection with the completion of the Arrangement, ACI’s name will be changed to TriSummit Utilities Inc.

TriSummit Utilities Inc. will remain incorporated under the CBCA, with its headquarters located in Calgary, Alberta. While TriSummit Utilities Inc. will not have its securities listed on any stock exchange, it will continue to be a reporting issuer under applicable Canadian securities laws because its public debt remains outstanding.

“Changing our name to TriSummit Utilities Inc. is a reflection of the next step for our organization while providing acknowledgment to our three utilities which are the foundation of our company,” added Mr. Green. “Most importantly, we will continue to deliver the same safe, reliable and affordable service to our customers while continuing the strong relationships we have built with our regulators.”

Board of Directors

David W. Cornhill, Gregory A. Aarssen, Judith Athaide, Amit Chakma, William J. Demcoe and Jared Green will continue as Directors of ACI following completion of the Arrangement and Mr. Cornhill will remain as Chair of the Board. All of ACI’s officers will continue in their positions.

Mr. David Cornhill, ACI’s Chair of the Board, commented:

“On behalf of the Board, I would like to extend my sincere thanks and best wishes to Corine Bushfield, who has resigned from ACI’s Board of Directors. I am pleased to see good continuity with the Board of Directors and Management and welcome the new Directors. Finally, I would like to congratulate the team at ACI, PSP Investments and ATRF on the completion of the Arrangement, which I believe is a positive outcome for all stakeholders.”

In connection with the completion of the Arrangement, ACI also announces the following four new Directors: Dietz Kellmann, Samuel Langleben, Patrick Chabot and Jason Munsch.

Dietz Kellmann is the President and Chief Operating Officer of Global Remediation Technology, and President of DCLK Consulting Corp. Dietz also serves as a Director of Doyon Utilities, LLC. He holds a Bachelor of Arts (Honours) in Economics from the University of Western Ontario, a Master of Arts in Economics from the University of Western Ontario, and a Master of Business Administration from Simon Fraser University. He is a member of the Institute of Corporate Directors.

Sam Langleben is a Director, Infrastructure Investments, at PSP Investments. He holds a Masters in International Energy Policy Management from Columbia University’s School of International & Public Affairs, and a Bachelor of Commerce from McGill University.

Patrick Chabot is a Director, Infrastructure Investments, at PSP Investments. He is a CFA Charterholder and holds a Master of Science in Finance and a Bachelor of Business Administration from Laval University.

Jason Munsch is Head of Infrastructure at ATRF. He is a CFA Charterholder, holds an ICD.D designation, a Master of Business Administration from the University of Calgary and a Bachelor of Commerce from the University of Alberta.

Details regarding the Arrangement are set out in ACI’s management information circular and proxy statement dated November 19, 2019, a copy of which can be found under ACI’s profile on SEDAR at www.sedar.com.

The purpose of the Arrangement was to enable the Purchaser to acquire 100% of the Common Shares. Immediately prior to the completion of the Arrangement, neither the Purchaser nor Holdco directly or indirectly owned any securities of ACI.

SitusAMC, the leading provider of services and technology supporting the real estate finance industry, today announced that The Public Sector Pension Investment Board (PSP Investments) has made a strategic investment in the firm. PSP Investments joins Stone Point Capital, who remains the largest shareholder in SitusAMC. Additional shares are held by SitusAMC’s management team.

“We are thrilled to partner with PSP Investments as we look to transform the real estate finance industry,” said Michael Franco, CEO of SitusAMC. “Having long-term capital partners such as PSP Investments and Stone Point Capital will be a driving force for our company through market cycles as we continue to help our clients identify and capture opportunities across the entire lifecycle of their commercial and residential real estate activity.”

“SitusAMC has a bold vision for their industry, supported by a proven leadership team, a strong operational foundation, and world-class services and technology offerings. We look forward to supporting the team, alongside Stone Point, in its next phase of growth,” said Martin Longchamps, Managing Director, Private Equity, PSP Investments.

Chuck Davis, CEO of Stone Point Capital, added, “We are pleased to be partnering with PSP Investments and look forward to working alongside them to support the long-term growth and development of SitusAMC.”

About SitusAMC

SitusAMC (www.situsamc.com) is the leading independent provider of advisory, strategic outsourcing, talent and technology solutions to the commercial and residential real estate finance industry. The firm helps clients realize opportunities in their real estate businesses through industry-leading services and innovative technologies that drive operational efficiency, increase business effectiveness, and improve market agility across the entire lifecycle of their global real estate activity.

RefleXion Medical, a therapeutic oncology company pioneering the use of biology-guided radiotherapy (BgRT) for all stages of cancer, today announced the close of a $100 million equity financing led by Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension investment managers that focuses on long-term investments with partners demonstrating strong value orientation strategies.

“RefleXion’s bold vision for the future of cancer care stands to completely reshape how physicians think about treating patients with stage 4 cancer,” said Loïc Julé, managing director, Global Investment Partnerships Portfolio, PSP Investments.“This is exactly the mindset of companies we strive to build long-term relationships with. We are thrilled to support RefleXion during this next phase of their growth as they ramp up market and clinical adoption of this groundbreaking technology.”

RefleXion’s existing investors, TPG’s The Rise Fund, KCK Group, Sofinnova Partners, Venrock, T. Rowe Price, and global pharmaceutical leaders, Pfizer Ventures and Johnson & Johnson Innovation, JJDC Inc., all participated in the round. BofA Securities and Morgan Stanley & Co., LLC acted as placement agents for the company.

“This new influx of capital continues our momentum initiated first by FDA clearance of the RefleXion™ X1 platform last month, then quickly followed by the close of our first system order at one of the world’s leading cancer centers,” said Todd Powell, president and CEO of RefleXion. “The support of this top-tier investment syndicate enables us to further scale operations around commercializing the X1 platform.

“Moreover, these funds allow us to validate the practical implications of using BgRT on a daily basis as we transform radiotherapy from early-stage cancer treatment to an option for patients with all stages of cancer,” continued Powell.

The RefleXion X1 machine with BgRT is designed to overcome the technical limitations that currently restrict radiotherapy to one or two tumors. When available, RefleXion will scale BgRT to treat all visible tumors, even those that move rapidly due to bodily functions such as breathing or digestion, in the same treatment session.
RefleXion recently announced FDA clearance for stereotactic body radiotherapy (SBRT), stereotactic radiosurgery (SRS) and intensity modulated radiotherapy (IMRT), and its first clinical and commercial client.

About RefleXion Medical

RefleXion is a privately-held company developing the first biology-guided radiotherapy system, a significant change in strategy from single tumor therapy to the ability to one day treat multiple tumors in the same treatment session in cancers that have metastasized. Currently, the RefleXion X1 machine is cleared for the delivery of stereotactic body radiotherapy (SBRT), stereotactic radiosurgery (SRS) and intensity modulated radiotherapy (IMRT). The company is also developing BgRT, which incorporates positron-emission tomography (PET) imaging data to enable tumors to continuously signal their location. The BgRT technology will synchronize these data with the linear accelerator to direct radiotherapy to tumors with subsecond latency.

We thank law enforcement members and first responders who stepped in to ensure the community’s safety and well-being in Portapique, Nova Scotia. We acknowledge their unwavering dedication and we honour the strength and resilience of the people of Nova Scotia. pic.twitter.com/fI5PmijWhb

— InvestPSP (@InvestPSP) April 20, 2020