Monday, November 5, 2012

Comparing investment returns WA & BC - REPLAY

First published June 18, 2012 (Click on the label bcIMC for more information:

My earlier article pointed out the vast difference in overhead costs for government investment agencies in British Columbia and Washington State. One of our readers asked:
"How did our group do compared to the Washington [State] group. Is our investment strategy so much better they deserve more money?"
A quick review of agency reports provides the information that follows:

Victoria, B.C., July 26, 2011
"British Columbia Investment Management Corporation (bcIMC) today announced that it recorded a one-year annual return of 10.8 per cent, net of fees, for combined pension plans in the 2011 fiscal year. This exceeds a combined benchmark of 9.7 per cent and provides over $685 million in additional value, net of all investment management fees."
Message from the Chair, Washington State Investment Board, 2011, page 6
"...Now, after enduring the world’s most daunting financial crisis in recent history, I find myself once again reporting remarkable results for the CTF, which ended FY 2011 with a 21.1 percent rate of return. That is just two basis points shy of the high watermark of four years ago when this country was on the brink of nose diving into a pit of economic decline, loss, volatility, and uncertainty..."
Ouch! Apparently spending three times as much on senior executives does not guarantee better results.

Here is a list of bcIMC investments valued over $100 million as at March 31, 2011. These represent a little less than half of bcIMC's complete portfolio. Apparently, there is little regard for making ethical investments. Among other questionable choices, you'll find British American Tobacco, a company that boasts of selling its products in 180 markets around the world.

Mar 2011 Investments Over $100 m
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16 comments:

  1. Would be interesting to see Washington State investment portfolio.

    ReplyDelete
  2. Is it merely coincidence or is there a connection between donations received by the BC Liberal Party and bcIMC holding hundreds of million in stock and bonds issued by those companies?

    For example, I was surprised by the amounts donated by Canadian Natural Resources and their former CEO and large shareholder Allan Markin. He's given $260,000 through his own name and numbered companies. Canadian Natural Resources gave at least $99,000 more.

    At Mar 2011, bcIMC held almost half a billion in Canadian Natural Resources stock.

    Coincidence? We'll never know for sure.

    ReplyDelete
    Replies
    1. Add Murray Edwards, Markin's replacement as Chair of the Calgary company. He's a Liberal donor too.

      Delete
    2. Thanks Anonymous 12:02. Edwards is also associated with PennWest, another Calgary company. They've given the LIberals $50k and bcIMC held $100 million in PennWest shares.

      Delete
  3. If the Washington investment group continue to outperform those at BCIMC, their portfolio will be exceeding ours in time. Maybe, as indicated in your post, they have a free hand to invest where they feel they can get the best returns without Go'vt interference (read: BC Lib Party).

    ReplyDelete
  4. Wow! 21-plus percent. I could retire today!!

    Where do I sign up!

    Great pair of articles Norm. I have noted your comparisons with Washington State in past posts and it continues to show we are way out of whack!

    I suspect those WA executives don't feel hard done by.

    Persey

    ReplyDelete
  5. Norm,

    While I enjoy you blog, I think you may want to recheck your facts with respect to the BCIMC. In the comments above you state:

    "Is it merely coincidence or is there a connection between donations received by the BC Liberal Party and bcIMC holding hundreds of million in stock and bonds issued by those companies?

    For example, I was surprised by the amounts donated by Canadian Natural Resources and their former CEO and large shareholder Allan Markin. He's given $260,000 through his own name and numbered companies. Canadian Natural Resources gave at least $99,000 more.

    At Mar 2011, bcIMC held almost half a billion in Canadian Natural Resources stock.

    Coincidence? We'll never know for sure."

    The problem with this suggestion is that it implies that politics is driving BCIMC investment decisions.

    BCIMC executives are apolitical bureaucrats, largely drawn from the investment world and their investment decisions are made subject to their fiduciary responsibilities to their beneficiaries....in this case public sector pension plan (read unionized) members. If they make ill-advised investment decisions that don't benefit their beneficiaries then they are in serious trouble.

    The Board of the BCIMC is appointed by plan members and the province (4 from the plans, 3 from the province via the Minister of Finance). Directors are statutorily prohibited by section 20(5)the Public Sector Pension Plan Act from interfering with investment decisions. So if you are implying that the board is influencing decisions for political purposes, then you are suggesting that they are explicitly breaking the law.

    Thought this might help.

    ReplyDelete
  6. It struck me that you were not placing much stock in the statutes governing the organization, and if that is your contention, that's fair enough. I simply thought I should point it out.

    ReplyDelete
    Replies
    1. I'll be writing more about the subject soon.

      Delete
  7. As Anonymous June 21, 2012 7:48 AM points out - the BCIMC is accountable to its clients and all the pension plan members in BC.

    ReplyDelete
    Replies
    1. So you expect there is no correlation between bcIMC holding large blocks of equity in specific companies and the BC Liberal Party receiving large donations from the same corporations?

      Delete
  8. In addition to the $103 million investment in British American Telecom, bcIMC has $73 million invested in Philip Morris International. This according to last inventory of investments made public by bcIMC.

    ReplyDelete
  9. Sure lots invested in oil companies. Did they miss any?

    ReplyDelete
  10. Looking through the annual report of the BC investment group, I can't find any statement of the returns realized in the recent year. They say, "it was another year of upheaval, uncertainty, and disappointment in global financial markets."

    Maybe a statement of ROI for the recent year is hidden somewhere in the almost 100 pages of the BCIMC annual report but I'm betting the news is not good news, despite big raises given the bosses. If they had good news, it would not be hard to find.

    ReplyDelete
  11. CIBC is right up there. I believe they contributed $186,000 to the Liberals. I can't remember the exact figure but it is on the Elections BC website. I wrote to the CIBC head office about this...and their less than above board involvement with the BC Rail sale (including above industry standard interest rates they negotiated). Not much of an answer. I am in the middle of changing banks. Too bad, been with them since I was 7 years old.

    ReplyDelete

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