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Kept in the dark on crisis, union says

Pension managers told us nothing, PSAC charges

John Greenwood


Saturday, April 05, 2008


NAV Canada, an air traffic control services provider, is understood to have only about $100,000 of frozen assets in its pension fund.


Despite the spectre of billions of dollars of losses that might be suffered by its members, the largest public service-sector union in Canada says the managers of its pension funds have kept it in the dark about the asset-backed commercial paper crisis.

The Public Service Alliance of Canada has 165,000 members across Canada, mostly in the federal government. Member pension plans are handled by several major institutions, some of which hold significant quantities of seized-up ABCP, such as PSP Investments, believed to be the second-biggest institutional owner of the illiquid notes.

In an e-mail obtained by the Financial Post, James Infantino, the union officer responsible for monitoring pensions, complained that "to date, there has been absolutely no consultation [with the union] concerning this most serious situation."

The e-mail was sent to Brian Hunter, the head of a group of retail noteholders that is lobbying to get its money back.

PSAC was forced to turn to Mr. Hunter after failing to get an explanation of the crisis from its pension fund managers.

"When [Mr. Infantino] sent me that email, he said he didn't know anything about this," Mr. Hunter said. "That's how bad it was. They should be able to ask what were these money managers doing and what happened here."

The union members' pensions are overseen by a several asset managers, including PSP Investments, Canada Post Corporation Pension Plan and NAV Canada Pension Plan. Those managers are also part of an investors' committee overseeing the restructuring of the stalled ABCP market.

PSP Investments is one of the main pension managers for federal government employees.

A spokeswoman for PSP declined to discuss the matter. "We never comment on our investments," said Anne-Marie Laurendeau. Like many pension managers, PSP provides financial updates to its members just once a year, most recently in December. But the information covered only the fiscal year ended March 31, 2007, which predates the ABCP meltdown.

PSP has never revealed the size of its ABCP investment, but insiders put the figure at about $5-billion. The biggest holder is the Caisse de depot et placement du Quebec, with about $13.2-billion.

NAV Canada, an air traffic control services provider, is understood to have an immaterial amount of frozen notes in its pension fund, about $100,000.

The $35-billion third-party ABCP market ground to a halt eight months ago after issuers were unable to roll over maturing notes and banks that had agreed to provide emergency liquidity declined to step in. A plan to restructure the market proposed by a group led by the Caisse is be put before noteholders at the end of the month.

But now retail investors led by Mr. Hunter are threatening to band together to vote against it unless they get their money back. Insiders predict the big institutions backing the restructuring will meet their demands if only because of the potential losses if the plan fails.

The good news for PSAC members is that most of their pensions are guaranteed. Even if their pension plan ends up footing the bill for a deal with Mr. Hunter's group, the federal government will step in and cover any losses they might suffer, according to union officials.

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