Wednesday, July 05, 2023

WORKERS CAPITAL
Chicago Pension Debt Rises to $35 Billion as Mayor Hunts for Fix

Shruti Date Singh
Mon, July 3, 2023



(Bloomberg) -- Chicago’s pension burden climbed last year after the city’s retirement funds lost money due to volatile markets, deepening the long-standing fiscal woes for new Mayor Brandon Johnson.

The net pension liability across the city’s four retirement funds rose about 5% to $35.4 billion as of Dec. 31 from $33.7 billion a year earlier, according to Chicago’s annual financial report posted to the city’s website.

The amount the city owes to its four pensions that pay benefits to retired firefighters, police officers, municipal workers and laborers increased “due to the short-term impact of the global market volatility on recognized investment income,” the report said. The city’s four funds range from about 19% to about 40% funded, according to the report. That’s far short of other municipal plans: around the US, funding ratios for the largest public pensions average above 70%.


“While the city still faces several long-term structural challenges, we are charting a better path forward for the city’s finances,” Johnson said in a June 30 letter attached to the report, “that will protect working families and develop actionable solutions to meet the city’s obligations to workers, retirees, and taxpayers.”

Decades of chronic underfunding helped balloon Chicago’s pension liability, weighing on the city’s budget and credit ratings. Recent state-mandated contribution increases helped the city earn rating upgrades in the last year, including one from Moody’s Investors Service in November that allowed it to shed its one junk rating.

Johnson, who took office in May, has set up a pension working group that is charged with finding sustainable solutions to the long-term challenge.

Spokespeople for the city didn’t respond to a request for comment.

Bloomberg Businessweek


Australia’s Top Pension Looks to Spend Cash Pile as Rates Bite

Amy Bainbridge
Tue, July 4, 2023


(Bloomberg) -- AustralianSuper, the nation’s largest pension fund, is preparing for an “opportunity rich” environment in global markets as high interest rates weigh heavier on asset prices.

The fund, which has seen assets under management surge to A$300 billion ($200 billion) thanks to rising inflows, has “a very large amount of money” to spend, Chief Investment Officer Mark Delaney said in an interview. Around 20% of its holdings are in cash and fixed income, one of the highest combined allocations yet, he said.

“We’re hopeful that there’ll be good opportunities emerging over the next two to three years as the effective high interest rates feed through to the economy,” said Delaney. “And we’ve got funding available to take advantage of it.”

AustralianSuper has started to redeploy some its cash into fixed interest, said Delaney, who told Bloomberg in March that he favored buying more bonds as a ballast against the coming economic downturn. The investment chief said on Wednesday that he’d be eyeing other opportunities in fixed interest, stocks, private equity, infrastructure and property “as they arise”.

The fund recently embarked on a hiring spree in New York and London, with a focus on recruiting staff across its private equity, private debt and infrastructure units.

A $185 Billion Australian Fund Ramps Up New York, London Hiring

AustralianSuper on Wednesday posted an 8.2% return for its main balanced fund for the fiscal year through June, largely thanks to strong growth in global equity markets. One of the rare weak performers was property, which has suffered from writedowns of up to 10% mainly in office towers, said Delaney. That included the fund’s stake in the massive King’s Cross redevelopment in London.

The fund’s closest rival, A$240 billion Australian Retirement Trust, this week told Blooomberg its office valuations were down as much as 20%, while A$73 billion pension fund Cbus has written down some real estate by as much as 10%, according to press reports last week.

Delaney said the fund’s core outlook was that the impact of high interest rates will “slow economic activity materially.”

“We’re starting to warehouse or build up cash with the idea that we can deploy that into other investments as pricing gets better over the next two to three years,” said Delaney.

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