CANADA - The pensions industry has been urged to always remember fundamental investment principles such as transparency, as losses from Canadian non-bank asset backed commercial paper (ABCP) become clearer.
August Cruikshanks, director of research for Hewitt in Canada, told Global Pensions: "In some cases, investment managers have written down about 10% as a provision for illiquidity and/or market value deterioration when a market opens."
One of the worst affected pension funds, the $38bn PSP Investments, which manages the retirement assets of the public service, armed forces and Royal Canadian Mounted Police, was forced to write down $450m of its $1.9bn (23%) investment in non-bank ABCP.
Cruikshanks said the non-bank backed ABCP was subject to less stringent liquidity controls than bank-backed ABCP, which contributed to the balance sheet impact when the market collapsed.
PSP Investments declined to comment on its non-bank ABCP investments "other than what is disclosed in [the] annual report".
The $155.4bn Caisse de dépôt et placement du Québec admitted it had written down $1.9bn of its total $12.6bn of non-bank ABCP, but added the Canadian ABCP crisis was liquidity - rather than credit - based.
It said the total exposure of Canadian ABCP to sub-prime assets was only about 7%.
The Ontario Teachers' Pension Plan said it had a "limited exposure to non-bank ABCP" and added it too did not comment on individual investments outside of year end reporting.
Cruikshanks said: "It is in times like these where the industry is reminded about the importance of fundamental investment principles such as transparency and truly understanding the investment and the range of potential risks that come with it."
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.