The C$2.5bn (£1.2bn) City of Montreal Pension fund is considering investing in emerging market bonds (Brady bonds) for the first time.
Additionally, the fund is currently in engaged in an asset allocation study and as a result will change its asset mix to include small cap international equities at 4%. Large cap international equities will make up 14% of the fund, bringing its exposure to global equities to 18%.
The fund’s controller Johnny Quigley said that the fund will appoint managers for its C$420m (£190m) global equities mandate at the end of May. The fund intended to make a decision at the end of April but a study conducted by consultants Brockhouse & Cooper reported no clear choice between the shortlisted candidates. Quigley did not reveal the reason behind the delay.
Brady bonds are securities that have resulted from the exchange of commercial bank loans, sometimes defaulted loans, into new bonds. The goal of that exchange is to reduce and restructure the debt of those less developed countries (LDCs) that have reformed their economic policies to the point where they can achieve economic growth and make timely payments on their (now reduced) debt obligations.
The bonds are named after former US Treasury Secretary Nicholas Brady, who in late 1988 created the debt reduction plan for LDCs that resulted in the bonds' creation.
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