Financial Repression Authority with Leo Kolivakis
Special Guest: Leo Kolivakis, is an independent senior pension and investment analyst having worked on both the buy and sell-side. He has researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de He has also consulted to the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system. Leo Kolivakis is editor and publisher the PensionPulse.blogspot.com
Leo Kolivakis brings a unique perspective to Pensions having worked on both the Buy & Sell side as a Pension Plan analyst.
Titanic Global Battle
Kolivakis sees a titanic battle going on around the world between Inflation & Deflation with the world shifting due to demographics, private / public debt problems and a global jobs crisis. As a result he sees bond yields falling because it is resulting in no inflation. "The bond market is rightly concerned about tight fiscal policy and austerity in a world of low growth, low inflation (possibly deflation) for a prolonged period of time". "I am more worried about what is going on in China .. if you have a boom-bust scenario in China, the potential to import deflation (ie through lower goods prices, currency devaluation etc) is a significant concern".
Pensions in Peril
"I believe there is a Private and Public Pension Crisis in America that needs to be openly discussed by US citizens & politicians. The private savings crisis in America shows the median 401K balance is under $20,000 and somewhere around $76,000 for people 60-65 years of age. That is definitely not enough money to retire comfortably for the rest of your life!"
"In the private sector where corporations are cutting defined benefit programs and going to low cost defined contribution plans, there is another crisis happening." People are being forced to take on the responsibility of pension investment management decisions.
"Individuals are now caring the risk of their retirement!"
"What people don't realize is the shift to Defined Contributions is very deflationary. People simply don't spend as much as they do on Defined Benefits when they have known fixed incomes."
"There is a huge problem with the Public Pension Funds in the United States. The problem focuses around the governance model. It is all wrong! They have way too much political interference. They don't have proper pension fund plan managers that can take internal actions, lower the costs of the funds and ... match assets with liabilities"
"The US needs to consider privatizing Social Security and creating independent investment boards."
"What is going on in the US right now is you have a lot of investment consulting shops that are typically forcing these public pension funds to invest in very high fee, high risk private equity / hedge funds. That is fine for the Private Equity Funds and Hedge Funds but it is not in the best interest of these public pension funds. I don't think it is. As a matter of fact I know it is not!"
"The US really needs to reform its Public Pension Plans. To introduce shared risk models so that the risk of the plan is shared between the stakeholders (i.e. the employees), the government and the pension. They need to reform the governance so they start to pay the pension plan managers properly to manage more and more of the assets internally".
"Pension Investments Are Fueling Inequality! The migration of Pension Plans to Alternative Investments such as Private Equity / Hedge Funds are contributing to the growth in Inequality"
- DEFINED BENEFITS - A massive underfunding problem between $7 - $10T
- CONTRIBUTORY BENEFITS - Median 401K Levels of $18,400 are 'orders of magnitude' short,
- SELF FUNDING - IRA and Roth Plans are not earning the levels of income required for retirement. Market draw-downs have seriously impaired long term growth,
- SAVINGS RATES - Falling Real Disposable Income is increasingly limiting already extremely low personal savings rates.