by Andrew Sheen 4 August 2008
CANADA - The pensions industry has been
urged to always remember fundamental investment principles such as
transparency, as losses from Canadian nonbank asset backed commercial
paper (ABCP) become clearer.
The CAN$35bn (US$34.2bn) non-bank ABCP
market has hit major Canadian pension funds with several billion dollars
of write-downs following the freezing of the market, pending
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
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
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."