Tuesday, July 22, 2008

Federal pension fund hurt by writedowns

The pension fund that invests the money intended to provide for the retirement of federal employees, the military and RCMP, has taken a $920-million charge to account for faltering financial investments in the 2008 financial year.

The Public Sector Pension Investment Board's annual report released Tuesday said the writedowns caused it to report a negative return for the year ended March 31, 2008.

The fund said it wrote down $450 million of its $1.97 billion in asset-backed commercial paper, and $470 million of its $1.4 billion in collateralized debt obligations, a financial asset based on a portfolio of fixed income investments.

But the report said "the possibility of recovering the nominal investment value in a subsequent period is probable if general credit conditions improve."

The effect of the writedowns was to reduce the return for the year by 2.4 percentage points, to -0.3 per cent.

The fund was worth $39 billion at March 31, up from $35 billion at the end of fiscal 2007.

It gets about $4 billion a year in contributions from members and the federal government.

There is a plan working its way through the Ontario courts that is intended to enable smaller investors to recover the full value of their asset-backed commercial paper, and bigger investors to get replacement investments.

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