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This Pension is on Fire

The Dallas Police & Fire Pension (DPFP) is on fire. The pension is responsible for covering the retirement needs of around 10,000 police and firefighters.

smoke

The plan is in chaos and is on the verge of collapse. The plan’s board and the City of Dallas are in talks about benefit cuts and/or tax increases to save the plan from failure. DFPF even lost its first chief investment officer James A. Perry who exited on July 22, 2016 to take on a job at Maples Fund Services. Perry was hired in August 2015 to try to turn the ship around. In an August 11, 2016 article in the Dallas Morning News, Jim Aulbaugh, a battalion chief for Dallas Fire-Rescue stated in an interview that the pension was, “a sinking ship that can’t be saved.”

In response to the potential insolvency, police officers in Dallas are retiring even faster, some choosing for full cash withdrawals versus monthly distributions.

What Happened?

After the dot-com bust, many pensions like DPFP, even giants like the California Public Employees’ Retirement System (CalPERS), went head-over-heels for real estate. It wasn’t just investing in core office buildings in city centers, pensions were speculatively investing in land, apartments, and other forms of opportunistic real estate. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, December 15, 2017

Gaw Capital Sells Cross Tower Shanghai Building

Hong Kong-based Gaw Capital Partners has agreed to sell the Cross Tower, a 24-storey commercial building in Shanghai, to World Union Investment Management, for 2.66 billion RMB (US$ 402 million). The tower is located in the Huangpu district.

RDIF Portfolio Company Geopharm Plans to Increase Insulin Production

Russia-based Geopharm is a portfolio company of the Russian Direct Investment Fund (RDIF). Geopharm signed a special investment agreement with the City of St. Petersburg, Russia. Geopharm plans to invest more than 3.3 billion rubles in building a complex to meet insulin production demands.

Norway’s KLP to Exclude Companies with Oil Sands Extraction via Revenue Threshold

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NZ Super Resumes Government Contributions

The New Zealand Superannuation Fund (NZ Super) has resumed receiving contributions from the New Zealand government in the face of rising obligations as an increasing proportion of the country’s population approaches retirement. According to a statement released by the fund’s managing Board of Guardians, the government plans on investing US$ 5.3 billion into NZ Super between now and June of 2022, with the first payment scheduled for December 15, 2017.

Policymakers believe the resumption of government contributions, which were halted in July of 2009, is expected to ease the burden on the country’s current taxpayers and future generations. Withdrawals from NZ Super are expected to peak in 2078, at which point the fund will be covering 12.8% of New Zealand’s pension obligations. The new wave of contributions will initially be invested in passive, low cost equity and bond investments, according to Catherine Savage, Chair of the Guardians.

Recent Performance & Leadership Change

NZ Super has enjoyed one of its best annual performances since its founding in 2001, with a reported return of 20.7% before tax for a 12-month trailing period ended June 30, 2017, up 5 billion NZD (US$ 3.6 billion) compared to 2016. NZ Super generated 21.85% annual return in its global equities, developed market portfolio, according to its 2017 annual report.

NZ Super faces a changing of leadership in the coming year with the exit of chief executive Adrian Orr, who will leave the Fund officially in March of 2018 to serve a five-year term as Governor of the Reserve Bank of New Zealand. Mr. Orr has earned a spot numerous times in the Sovereign Wealth Fund Institute’s Public Investor 100 annual ranking over the years, most recently in 2017 at #3.

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iZettle Raises US$ 47 Million in Series E, Prepares for 2018 Listing

Card transaction platform iZettle AB has raised another US$ 47 million in Series E funding, this time with new backing from Sweden’s AP4 and early-stage venture capital firm Dawn Capital. Previous investors in the Stockholm-based payments business include American Express, MasterCard, Intel, and Spain’s Santander Group. With US$ 235 million in equity to date, iZettle is quickly approaching an estimated valuation of US$ 1 billion.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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