Friday, October 27, 2006

Public Pension Parnerships

David Dodge , Governor of the Bank of Canada has a new definition for P3's, Public Private Partnerships, well actually he has said this many times before. His definition of P3's for investment purposes is Public Pension Partnerships. That is he wants to see government access workers pension funds to pay for infrastructure.

On the long-term structural issues facing Ontario, Dodge said it was critical the province improve efficiency and productivity by investing in infrastructure and human capital.

He threw his support behind public-private partnerships as way for Ontario to dig its way out of an infrastructure crunch.

''There is evidence from other countries that public-private partnerships can both increase the efficiency of investments and support their financing,'' Dodge said.

''Now is the right time to encourage partnerships between the government of Ontario and private providers, given the climate of low nominal interest rates and the presence of large pension funds that searching for these kinds of investment opportunities.''

As I have said here before the liquidity of institutional pension funds, such as the Canada Pension Plan, Ontario Teachers Fund, the largest such source of capital in Canada, and OMERS, as well as the building trades pension funds are not private but actually another form of public funding. In otherwords Public Private is a misnomer, it should be called Public Pension Partnerships. The working class again funds itself, through low wages, taxes and then finally with our pensions.

Private capital on the other hand wants to make its profits faster so it will not invest in infrastructure. Instead it turns to creating tax shelters such as Income Trusts. So the State turns to social capital for its financing instead, as do businesses that are in need of restructuring but want to avoid a hedge fund takeover, which inevitabley ends when they are cannibalized and sold off.

CPP to assume active role with $5-billion fund

The relationship portfolio will eventually consist of about a half-dozen companies and be part of the $57-billion in stocks run by Donald Raymond, CPP's senior vice-president for public market investments. Mr. Raymond is a former Canadian air force pilot who joined the money manager in 2001 from Goldman Sachs & Co. The new head of relationship investing is expected to receive a pay package similar to the $864,000 that Mr. Raymond was awarded last year.

The move to activism — CPP executives prefer to call it “pro-active engagement” — takes the CPP fund down a path blazed by many U.S. public sector funds and the Ontario Teachers Pension Plan. The $96-billion Teachers fund has been making such investments for the past 15 years, using in-house expertise to earn superior long-term returns.

Teachers now has between $3-billion and $4-billion of its money committed to this area, said Brian Gibson, a senior vice-president at the pension fund.

Value investors typically target companies they feel are undervalued, and wait for the price to appreciate. Activist investors target much the same companies, but once they understand what they believe to be reason for the underperformance, they work on a plan to correct it.

Pension funds that currently are complaining that they have no shareholder say in companies they invest in turn deny their own investors, you and me, any say in their internal affairs and investment policies. Pot, kettle, black.

The powerful Ontario Teachers Pension Plan is asking Goldcorp Inc. to give shareholders a vote on its $6.7-billion (U.S.) takeover of Glamis Gold Ltd., giving credence to a court challenge by the company's founder and largest shareholder.

As Robert McEwen's request for a court order imposing a Goldcorp shareholder vote was being heard in Ontario Superior Court, Teachers executives were meeting with the company's chief executive officer, Ian Telfer, just a few blocks away.

The pension plan, which owned about 2.3 million Goldcorp shares or about half a per cent of the company's outstanding float at year end, said the transaction's significant share dilution is well beyond the level where shareholder input should be sought. “It's hard to imagine how you can issue 67 per cent of your shares and say nothing has changed,” said Teachers senior vice-president, Brian Gibson, in an interview. “That's pretty significant and we believe shareholders should be consulted,” he added.

What we need is a socail policy on public pensions that allows those of us who are the investors and owners of these funds to have a say in how and where they invest.

Capital and Social Europe
Robin Blackburn, NLR 34, July-August 2005, pp. 87-112
The social funds would also be as much about producing wealth as distributing it. In a continent where stock exchanges are already of greatly increased importance, the social funds could help to protect productive enterprises from ‘financialization’, promote socially responsible business objectives and assert a degree of popular control over the accumulation process. The network of pension funds would have significant power in corporate affairs, both because of its shares and its investment policies. The fund network could develop its own cadre of financial specialists and would have reason to assist the tax authorities in monitoring and enforcing fiscal regulations.


Social Insecurity The Phony Pension Crisis

Pension Plunder

Is Delphi the Oracle of things to come?

Labour Is Capital

Pension Free China

Kids Are Commodities

Workers vs Worker

Air Canada Profits From Bankruptcy

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