Assets of major public pension funds fell 8.5% in third quarter

News that the UK did manage to eke out a little growth will give George Osborne some respite in the build up to his Budget following last week’s decision by Moody’s credit rating agency to strip the country of its prized AAA status. In its second estimate of GDP for the final three months of last year, the Office for National Statistics revealed that it had revised its growth calculations for earlier in 2012.

By James Kwak In the wake of the Detroit bankruptcy, Paul Krugman has a post pooh-poohing concerns about public pensions. His conclusion: “Nationwide, governments are underfunding their pensions by around 3 percent of $850 billion, or around $25 billion a year. A $25 billion shortfall in a $16 trillion economy. We’re doomed!” (Yes, that’s sarcasm.)

Public revolts by shareholders are uncommon in Canada and no major company has ever suffered the ignominy of losing a say-on-pay vote. That could change Wednesday.

Alan Brochstein, CFA submits: I may be a little early discussing this at the end of August, but I believe that pension funds will be buying stock over the the next few months.

Kid Dynamite submits: I've been saying for a while now that if we want to reduce the risk of future crisis, the key is to reduce the leverage in the financial system. The State of Wisconsin, however, clearly didn't get the memo.

Ravi Nagarajan submits:In the late 1990s, pension funds decided that it would be a good idea to purchase stocks near the peak of the technology bubble. Strike one. In the mid 2000s, the idea was to join the private equity and hedge fund wave sweeping over Wall Street just in time for the 2008 financial crisis. Strike two.

It was one small step and, as a result, Canadian pension funds were slightly more solvent at the end of 2012 than they were one year earlier. The small step was a one per cent improvement in the median pension solvency funded ratio – or the ratio of the market value of plan assets to liabilities. Two factors, contributions by the company’s sponsoring the plans and a strong equity market, helped the improvement in the solvency funded ratio while continued low interest rates helped worsen the ratio.