When urban rail systems have never turned a profit. The private Los Vegas monorail comes to mind. If I was a pension holder I would wanna run these guys out on the next train.
http://www.pionline.com/article/20160422/ONLINE/160429948/quebecs-caisse-commits-c3-billion-to-build-light-rail-system
CandOforprogress2 When urban rail systems have never turned a profit. The private Los Vegas monorail comes to mind. If I was a pension holder I would wanna run these guys out on the next train. http://www.pionline.com/article/20160422/ONLINE/160429948/quebecs-caisse-commits-c3-billion-to-build-light-rail-system
As of Dec. 31, Caisse managed C$248 billion in Quebec provincial and municipal pension and other assets, of which 5% is in infrastructure.
Not exactly betting the ranch....
Never too old to have a happy childhood!
Without reading the deal itself, which this report makes no attempt to explain, it is impossible to make any conclusion about the 'goodness' of the deal from a business standpoint. If it is a loan backed by first position in project earnings AND backed up by government guarantees then I would be OK. If common stock then the fund managers should be shot forthwith.
Mac
Politicaly connected Canadian Public Unions managers raiding there own pensions for a Labour Party pet project of dubious public benifit? Gee this sounds like the great state of Mass USA.
CandOforprogress2If I was a pension holder I would wanna run these guys out on the next train.
If you were a pension holder, you might well recognize that you'd benefit from the expanded light-rail system, and (not to be excessively snarky or overly cynical) that the quicker the system is expanded the more likely you'll be to live to ride it.
As noted, a little over 1/100 the invested share capital is not that much for a project with the long-term utility of the expanded light rail, and there is probably a case to be made for 'enlightened social use' of some percentage of the funds under management. On the other hand, I'd be surprised if the opportunity cost of the $3B invested here, in terms of added 'stakeholder value', is not significant, even in this market, and it would not be out of line for some kinds of activist investor to complain or take action based on that perception.
YES, It IS a misuse of Pension Funds. Especially 3.5 B worth. Pension Funds are supposed to be safe and fluid. An investor with a desire to gamble might do it, but what transit scheme is rated A let alone AAA. It is a loosing proposition.
Had I that amount of money, THAT I DID NOT NEED, then I might take the gamble, IF I SAW a clear way to a suitable return. Even then, I would not buy the bonds, I would buy the Railroad.
ROAR
The Route of the Broadway Lion The Largest Subway Layout in North Dakota.
Here there be cats. LIONS with CAMERAS
BroadwayLion YES, It IS a misuse of Pension Funds. Especially 3.5 B worth. Pension Funds are supposed to be safe and fluid. An investor with a desire to gamble might do it, but what transit scheme is rated A let alone AAA. It is a loosing proposition. Had I that amount of money, THAT I DID NOT NEED, then I might take the gamble, IF I SAW a clear way to a suitable return. Even then, I would not buy the bonds, I would buy the Railroad. ROAR
Successful investors see opportunity (that comes to fruition) where others only see risk and doom.
Part of investing, at the levels institutions invest, is facilitating social and/or enviornmental changes in the elements of society in which they are investing - when they do it right they get mega returns, when they do it wrong, they are out part of what they invested. As institutional investors they have to be pragmatic in that not all investments are winners short term and/or long term. Seeking only short term reward is sure path to stagnating businesses and society - not all plans come to conclusion in the short term.
Incorrect, and I can point out several reasons just off the top of my head: as has been proven in every case of light rail development since San Diego started the new wave, what you will get from an extension is increased development of the land around the light rail extension in the following ways, follow along if you can. Areas are opened up for redevelopment, which brings in either new business in retail or other sectors, housing is also redeveloped along the same corridor, the new/improved business and housing increase the tax base for the city, etc., etc.. As for your statement about transit schemes being rated A or AAA, I think you'd be surprised at how many actually do receive AAA ratings from the credit rating bureaus(almost all municipal bonds receive such ratings, even after the financial disasters that caused some cities to declare bankruptcy).
P.S. - Keep in mind also that this is CANADA we're talking about, not the U.S., so you aren't really comparing apples to apples(financial laws would have to be identical in both countries to do so, and I don't know what Canada's are but I'm pretty sure they don't match ours).
There are fewer and fewer places for a very large public fund to invest their money these days. Most of the opportunities that are paying interest at or above inflation have credit ratings at or just above junk bond ratings. For example US Government Bonds are paying about 0.5% interest while the inflation rate is above 1%, effectively you are paying the US Government to hold your money. The situation is similar but more extreme with Switzerland, you must pay them 0.5% to buy their bonds and that doesn't take into account inflation.
Of course they could buy a mattress company so that they have a place to stuff their money into rather than investing it.
The U.S. 10 Year Treasury Note closed yesterday at 1.45 per cent.
The median yield on a 30 year AAA U.S. corporate bond was 3.54 per cent at market close yesterday.
The median yield on a 30 year AAA U.S. municipal bond was 3.31 per cent at market close yesterday.
Most of the nation's well managed pension funds (public and private), as well as its major university endowment funds, invest a portion of their monies in common stocks.
Most of the fund managers rely on a broad based index fund for their common stock investments, which they may buy or create depending on staff skill levels. The probability of losing money in a common stock index fund over the long haul, i.e. more than 20 years, is very low.
Rio Grande Valley, CFI,CFII
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