15 Sep 07    A Suspicious Disappearance, NYT, Editorial
27 Aug 07   Pension Managers Rethink Their Love of Hedge Funds, WSJ, Craig Karmin
26 Aug 07   Pension funds demand money back, Sunday Telegraph, Helen Power
4 April 07   N.J. Pension Fund Endangered by Diverted Billions, NYT, MARY WILLIAMS WALSH
26 Jan 07   EU Court: No State obligations in Insolvency Cases, Daily Telegraph
19 Aug 06   KING OF THE ZOMBIES, mailonsunday
8 Aug 06   Public Pension Plans Face Billions in Shortages, NYT, Mary Williams Walsh
27 April 06   Watchdog warns on risky pensions, BBC News
4 April 06   The Future of Pensions, Downing St 'split' over pensions, BBC News
31 March 06   Shocks Seen in New Math for Pensions, NYT, Mary Williams Walsh
12 March 06   Do the Math For Lost Pensions, Washington Post, Albert B. Crenshaw
1 mars 06   Réformons enfin le système!, LE TEMPS, Ernst Brugger
1 mars 06   Les fonds de pension étrangers peuvent inspirer la Suisse, LT, Jean-Fabrice della Volpe
26 Feb 06   What is the yield curve telling us?, telegraph.co.uk, Roger Bootle
22. Feb 06   Swiss banks groan under weight of assets, nzz.ch, Swissinfo
21 fév 06   Acelor: les fonds spéculatifs entrent en scène, lefigaro.fr, Anne-Laure Julien
19 Feb 06   How States Are Aiming to Keep Dollars Out of Sudan, NYT, Carla Fried
28. Jan 06    Terminmarkt boomt - Kreditderivate boomen, Handelsblatt, Andrea Cünnen
28. Jan 06    Der Markt - Eine Anlageklasse für sich, HB
19 Jan 06   Market turmoil deals further blow to pension funds, The Guardian, Ashley Seager et al.
18 Jan 06   Gilts bubble savages pensions, www.ft.com, Philip Coggan et al.
18 Jan 06   Uphill struggle for pension funds to close deficits, www.ft.com, Philip Coggan et al.
18 Jan06   S.E.C. to Require More Disclosure on Executive Pay, NYT, Stephen Labaton
17 Jan 06   The SEC's Test, Washington Post, John Pierpont
17 Jan 06   Hermes takes BT into commodities, www.ft.com,  Kate Burgess
9 Jan 06   More Companies Ending Promises for Retirement, NYT, Mary Williams Walsh
7 Jan 06   Five Officials in San Diego Are Indicted Over Pensions, NYT, John M. Broder
26 Dec 05   Huge Rise Looms for Health Care in City's Budget, NYT, Mary Williams Walsh et al.
20 Dec 06   Rentokil mothballs pension scheme, BBC News
12 Dec 05   Measures to Tackle Chinese Pension Fund Deficit, caijing 148, Ren Bo
30 Nov 05   State pension age 'to rise to 68', BBC News,
 27 Nov 05   Pension Officers Putting Billions Into Hedge Funds, NYT, Riva D. Atlas et al.
24 Nov 05   Pension reform: What other countries do, BBC News, Steve Schifferes
23 Nov 05   How the pensions crisis evolved, Do we need to work longer?, BBC News, Julian Knight
9 mars 98   Titanic hélvétique - home made, ASDI, Anton Keller

  La situation est grave.  Sur notre Titanic hélvétique l'air de bal et de casino est mélangée avec une certaine fatigue et un sens de fatalité chez des décideurs.  Ceci a permit aux seigneurs du nouveau ordre mondial et leurs apologistes de s'installer, à l'abordage, au pont de commandement abandonné par l'équipage qui, en rafflant les canots de sauvetage, ont abandonné les passagers à leur sort.  Le deuxième pilier de la prévoyance sociale, un monstre hors contrôle, est devenu l'instrument clé de ces pirates modernes: dans sa conception actuelle, l'assurance sur la prévoyance professionnelle permet tous les magouilles et met en danger non seulement sa propre base mais aussi celui de l’AVS et du troisième pilier.  Or, une prévoyance sociale fiable dépend d'une saine structure économique, sociale et politique enracinée dans des petits et moyens entreprises gérées avec une vision à longe terme, des principes éthiques et des institutions qui ont fait leurs preuves.  En effet, des acteurs majeurs de notre système bancaire se sont engagés dans une folle course aveugle aux profits maximalisés à courte terme.  Ceci met en péril nos forces productrices, notamment la volonté et la capacité de nos jeunes de sortir de leur coquille, de reconnaître la chimère de la gratuité - étatique ou privée - et de s’investir dans notre société par une formation professionelle extravertie et adaptée.  En négligeant leurs propres racines, en changeant abusivement les règles du jeu, et en rappelant avant terme leurs crédits, une nouvelle génération de faux porteurs du drapeau suisse nettoie ainsi leurs bilans, tout en forçant des milliers de PMEs sains et profitables de choisir entre mettre les clés sous le paillasson ou se réfugier dans les bras d'une nouvelle mafia.

Comment sommes-nous arrivés là?  Est-ce une fatalité inéluctable?  Est-ce qu'il y a encore un pilot dans l'avion?  Et si non, où est le "Fähnlein der Sieben Aufrechten" derrière lequel nous pourrions nous rassembler pour arrêter ce train au désastre avec les moyens du bord - avant qu’il emprunte le viaduc qui, visiblement, n’est pas encore ou plus en place?

1.  Avec l’introduction de l'assurance obligatoire sur la prévoyance professionnelle (LPP) en 1985, une masse des fonds toujours plus importante (1994 env. 275 milliards francs) chasse des titres de placement sûr qui par leur nombre restreint deviennent de plus en plus chers.  Avant 1985, pour assurer la sécurité des fonds de pension, les dirigeants étaient autorisés d’effectuer seulement des "placements en père de famille" (obligations suisse, lettres de gages, etc.).  Déjà dans son message au Parlement sur le LPP de 1975, le Conseil Fédéral a ouvert une brèche pour des placements spéculatifs des fonds de pensions; s'il avait des soucis sur les effets pervers que ces gigantesques fonds pouvaient avoir sur la bourse et le marché des crédits, il les gardait pour lui-même.  Par contre, il se préoccupait du problème de la capacité limité du marché suisse d’offrir des placements adéquates - et rentables - pour ce flot d’argent.

A l’époque, seulement quelques voix rarissimes, comme les parlementaires Brunner et Jauslin (qui finalement ont payé avec la perte de leurs sièges pour avoir sonné l’alarme), ont questionné la sagesse de laisser libre cours à de tels monstres financiers qui ne pouvaient pas manquer de fausser les courses dans la bourse.  Dans l’art.71 LPP on lit donc:

"Les institutions de prévoyance administreront leur fortune de manière à garantir la sécurité des placements, un rendement raisonnable, une répartition appropriée des risques et la couverture des besoins prévisibles de liquidités."

 a) le critère de la dimension d’une entreprise (art.50 al.2; ce qui, en pratique, a amené les dirigeants des fonds à considérer une entreprise comme sûr qu’à partir d’une certaine dimension, éliminant ainsi la plupart des PMUs du champ de placement),

b) l'obligation de poursuivre un rendement conforme au marché  (art.51; ce qui, en négligeant la sécurité, a encouragé un cours au profit à court terme), et

c) l’autorisation des placements dans des instruments dérivatifs  (art.56a; ce qui a davantage encore engendré une atmosphère de casino, ces placements figurant parmi les plus risqués, comme le démontre les cas récents: Barings, Rinderknecht, SBS, UBS).

1. que la nouvelle UBS serait le produit d'un inceste économique - sans que les avantages normalement associés avec une fructification étrangère pourraient être réalisés; en tant que telle, ses dimensions poseraient problème, autant plus que ses nouvelles orientations et vocations étrangères ne correspondraient guère aux traditions et la culture bancaire suisse et, de toute évidence, seraient même incompatible avec les institutions et l’environnement économique, sociale et politique qui prévaut en Suisse;

2. que de tels buts de rendement favorisent des stratégies, politiques et décisions qui sont risquées  et entraînent l’amputation des organes vitaux (personnel qualifié) qui nourrissaient les pratiques suivies avec succès jusqu’à maintenant;  et

3.  que l’actuel management de l’UBS semble avoir ignoré jusqu’au début janvier 1998 les 15,85% p.a. rendement moyenne (dividende et droits) pour la période 1980-1997 (réponse officielle du 12 janvier 1988 que le département des études économiques de l’UBS à fourni à un actionnaire qui posait le question fin 1997; ainsi on peut se demander si d’autres actionnaires, dans leurs critiques du management, n’étaient pas „right for the wrong reasons").

Les radiations et implications des actuels UBS et SBS à l'intérieur et à l’extérieure indiquent en tout cas des approches alternatifs.  Primo, les règles et innovations de la place financière suisse ne sont pas sans influence sur les grands marchés étrangers.Secondo, en matière fiscale, on a pu constater des effets inattendus des déviations suisses des principes et des innovations de taxation irréfléchi (p.ex. tax militaire). Terzo,nos lois concernant le deuxième pilier furent l’inspiration pour des pratiques dommageables des grands fonds de pensions étrangers.  Nous portons donc une certaine co-responsabilité pour des développements néfastes ici et là.

En mettant le doigt sur les vraies causes des dérapages en cours et en agissant en conséquence aussi vis-à-vis ce projet de fusion, nous avons enfin une occasion de nous décharger de cette co-responsabilité d’une façon bénéfique pour les deux cotés.  Car le choque ainsi provoqué devrait aussi arrêter cette folle course au gigantisme malsaine et exposer l’absurdité économique de créer des entités de plus en plus concentrés (sur des agendas cachées, voir notre site spéciale: www.solami.com/a$UBS.htm ).

Justement en matière de concurrence, le législateur suisse a stipulé que „La présente loi a pour but d’empêcher les conséquences nuisibles d’ordre économiques ou social imputables aux cartels et aux autres restrictions à la concurrence et de promouvoir ainsi la concurrence dans l’intérêt d’une économie de marché fondée sur un régime libérale." (art.1 LCart).  Soucieux de la concurrence à l’intérieure des différents secteurs de l’économie, il n’entendait jamais instaurer ou protéger une compétition au profit. ou de favoriser la mentalité du casino.  S’il avait eu la moindre indication à quel point la Suisse serait suivi dans cette course mal considérée - bourse gonflée, fusionitis, manie de performance à courte terme, négligence de sécurité, etc. - il n’aurait jamais emprunté cette voie.  Jusqu’à nouvel ordre, il appartient alors aux acteurs de veiller - par leurs paroles, actes et inactions - à ce que l’économie du marché garde bien sa fonctionnalité et qu’elle reste libérale.

3.  Les banquiers "worth their salt" (qui méritent leur salaire) le sont parcequ’ils connaissent leur métier et respectent les limites à ne pas dépasser pour maintenir la santé économique.  Ils n’exploitent pas des lacunes juridiques sur le dos de la substance.  Il ne suivent pas - comme quelques greenhorns - le dernier guru de passage, ni se laissent aveugler par quelconque aberration de la doctrine qui risquerait de provoquer davantage d’interventions des autorités ou juges étrangers dans nos affaires.  En tant que fiduciaire conscient de leurs nobles traditions, rôles et obligations, ils ne manquent d’agir sans autre dans le sens du législateur et, le cas échéant, de se substituer même à lui, comme indiqué ci-dessus (en paraphrasant l’art.1 CC).  Toute action ou inaction contraire à ces notions traditionnelles du bon sens ne peut pas servir nos intérêts; il contribuera à un affaiblissement, à une menace existentielle non seulement de la banque mais de l’économie et de la place financière suisse toute entière.  Sur notre site Internet - www.solami.com - quelques banquiers genevois prévoyants sont mentionnés.  Néanmoins, cela ne suffit pas pour assurer les mesures qui s’imposent sur le plan politique et juridique et qui doivent être prises dans des délais extrêmement courts.  Les autres quatre porteurs du drapeau des justes - dont l'écrivain Zurichois Gottfried Keller nous a déja raconté le siècle dernier - sont alors invités de se présenter rapidement.

    Faced with growing numbers of retirees, pension plans are pouring billions into hedge funds, the secretive and lightly regulated investment partnerships that once managed money only for wealthy investors.
     The plans and other large institutions are expected to invest as much as $300 billion in hedge funds by 2008, up from just $5 billion a decade ago, according to a study by the Bank of New York and Casey, Quirk & Associates, a consulting firm. Pension funds account for roughly 40 percent of all institutional money.
     This month, the investment council that oversees the New Jersey state employees pension fund said it would put some of its money into hedge funds for the first time, investing $600 million over the next several months. While most pension plans have modest stakes in hedge funds, others have invested more than 20 percent of their assets. Weyerhaeuser, the paper company, has 39 percent of its pension fund's assets in hedge funds. In Congress, there has been a push for amendments that would
make it easier for hedge funds to manage even more pension money, without having to comply with the federal law that governs company pensions.
     Pension officials who have been shaken by market downturns and persistent deficits are attracted by hedge funds' promise of richer, or more consistent, returns. But the trend has caused some consultants and academics to voice cautions. They question whether hedge funds, with risks that are hard to measure, are appropriate for pension funds, whose sole purpose, by law, is to pay out predetermined benefits to retired workers.
     Those benefits are considered so crucial that they are guaranteed: corporate pension failures are covered by the Pension Benefit Guaranty Corporation, a federal agency, while pension failures by state and local governments are covered by taxpayers. Given that the benefits are paid out on a set schedule, critics wonder whether it makes sense to rely on investments whose returns are hard to predict, managed by private partnerships that disclose little about their operations and charge some of the highest fees on Wall Street.
     "It's very inappropriate when the company is offering a pension plan that is guaranteed by the federal government," said Zvi Bodie, a professor of finance and economics at Boston University who is enthusiastic about hedge funds in other contexts.
     Hedge funds make large, sophisticated investments based on the premise that by swimming outside the currents of the markets, often betting against conventional wisdom, they can outperform other investments. Hedge funds became famous in the 1990's, when managers like Michael Steinhardt and George Soros made huge swashbuckling bets that sometimes produced returns of 30 percent or more.
     More recently, hedge funds have made headlines when they ran into trouble: Long-Term Capital Management, a hedge fund whose principals included two Nobel Prize-winning economists, nearly collapsed in 1998; and this summer, Bayou Group, a $450 million hedge fund based in Connecticut, shut down after most of its money disappeared. Its two officers have pleaded guilty to fraud charges. Hedge funds have traditionally been only for wealthy, sophisticated investors so regulators have not monitored them as they have stocks or mutual funds, although they are starting to do so.
     The news of splashy gains and scandals may not paint an accurate picture of a business that in many ways has become more conservative as a result of the flood of pension fund money. To attract that money, many hedge fund managers emphasize stability.
     Among pension fund managers, however, "the whole mentality has changed," said Jane Buchan, chief executive of Pacific Alternative Asset Management, which manages $7.5 billion in funds that invest in hedge funds, primarily for large pension funds. "They are saying, we need returns and we will be aggressive about getting them. They just don't want any downturns."
     One of the first pensions to start working with hedge funds is also the nation's biggest corporate pension fund, the $90 billion General Motors fund. It started with a small test investment in 1999 and increased it to about $2 billion in 2003, said Jerry Dubrowski, a G.M. spokesman.
     The company is using hedge funds, along with other unconventional investments, in hopes of getting something close to stock market returns without the market's volatility, Mr. Dubrowski said. To pay out the $6.5 billion G.M. owes to its retirees each year, the pension fund must produce annual returns of a little more than 7 percent. Otherwise, G.M. will have to dip into the fund's principal. At current interest rates, G.M. cannot get those returns with bond investments, and if it tries to juice returns by betting on the stock market, it will have to cope with market swings.
     "It's really not helpful to have that up-10, down-10" performance, Mr. Dubrowski said. "You want a return that allows you to cover the benefits payments without attacking the capital." It is that kind of consistency some pension mangers are seeking. "We are looking for consistently positive returns rather than the absolute highest returns," said Robert Hunkeler, manager of International Paper's $6.8 billion pension plan, which has been invested in hedge funds for around five years.
     Most pension funds have modest stakes of less than 5 percent, according to a recent J. P. Morgan survey. Verizon has 3 to 4 percent of its portfolio invested with hedge funds, and is considering adding to its investment, said William F. Heitmann, senior vice president for finance.
     Some pension fund managers say that diversifying away from stocks through a modest stake in hedge funds is reasonable, especially as hedge funds offer the promise of returns not linked to stock market performance. In 2000, for example, when the Standard & Poor's 500-stock index fell 9 percent, hedge funds rose 5 percent, according to Hedge Fund Research.
     The New Jersey state pension fund's investment of $600 million represents less than 1 percent of its assets, but it hopes eventually to raise the figure to $3 billion as part of a plan to diversify its portfolio, said Orin Kramer, the chairman of the oversight board.
     The New Jersey fund has been wrestling with a $30 billion shortfall, after the stock market bubble burst five years ago. "In recent years, conventional stock investments haven't worked," said Mr. Kramer, who is also a hedge fund manager. He said that in general it is good to diversify no matter what the market does.
     Other pension plan managers are far more aggressive. Eli Lilly has about 20 percent in hedge funds and the Pennsylvania state employees' pension fund has 22 percent. Weyerhaeuser's big position has significant benefits for the company. Accounting rules let companies factor expected pension returns into their operating income; Weyerhaeuser's hedge-fund-laden portfolio allows it to claim expected annual returns of 9.5 percent. By comparison, the 100 largest companies that sponsor pension funds predicted last year that their average long-term returns would be 8.5 percent, according to Milliman Inc., an
actuarial firm.
     For Weyerhaeuser, each 0.5 percent increase in the expected rate of return is worth an additional $21 million to the company's pretax income this year, according to S.E.C. filings. Weyerhaeuser did not respond to phone inquiries about its hedge fund investments, but said in S.E.C. filings that its actual pension investment returns more than justify its assumption of 9.5 percent.
     Hedge fund investors place a lot of trust in the funds' managers, giving them great flexibility in how they produce returns. The managers do not need to give investors specifics about trading activities, and there are no daily updates on the value of investors' holdings as there are with mutual funds.
     Employees of G.M., Verizon or International Paper, who are involuntary hedge-fund investors through their participation in pension plans, will not find any reference to the funds in those companies' annual reports. In their footnotes, these and other companies drop hints that a sophisticated investor might recognize as a reference to hedge funds, but they do not give the particulars. International Paper's description of its pension asset allocation, for example, breaks it down into "equity securities," "debt securities," "real estate" and "other."
     Some companies and governments, like Pennsylvania, make the argument that hedge funds are not really an asset class at all, but an "asset management tool" that does not have to be disclosed as part of the fund's allocation to stocks or bonds.
     That lack of disclosure has some regulators and pension specialists worried. Labor Department officials, who regulate pension funds, declined to discuss the hedge fund phenomenon, but referred to a 1996 letter the department wrote to the United States comptroller of the currency.
     The letter said that the Labor Department still expected pension officials to exercise prudence when investing in derivatives, a form of trading in which hedge funds often engage. The letter also said pension officials were responsible for understanding and fully vetting their hedge fund investments, and measuring how they might perform - and how they might affect the pension fund - under a variety of conditions.
     Susan M. Mangiero, author of "Risk Management," a textbook for pension officials, said she had come across pension executives who had not done that level of analysis. Some did not even know they had derivatives in their portfolios, she said. "A lot of well-intentioned people don't know they don't know," she said.
     In Washington, despite concerns over the health of the nation's pension system, there has been little discussion of pension plans' growing use of nontraditional investments.
     Even as Congress has been working to shore up the pension system and strengthen the Pension Benefit Guaranty Corporation, a provision to relax the pension law for hedge funds has been proposed. The provision would raise the limit on how much pension money a hedge fund can handle before it is deemed a fiduciary under the pension law, which would require it to be more prudent and careful than is required under securities law and would bar some trades entirely. The provision was added to a broad pension bill in the House shortly before the Committee on Education and the Workforce approved the legislation.
     Currently a financial institution becomes a pension fiduciary when more than 25 percent of its assets consist of pension money; the bill would raise that to 50 percent. The House bill would also change the definition of "plan assets," so that only corporate pension money would be counted, not pension money from government plans or foreign plans.
     These two changes are not in the counterpart Senate pension bill that was recently approved, but they could be added soon during efforts to reconcile the House and Senate bills.  Wall Street's interest in overcoming these legal barriers shows the allure of pension money, which tends to stick with an investment strategy and is far less likely to fly out the door when the markets turn bad. "Pension money is the stickiest form of capital," Mr. Kramer of the New Jersey pension fund noted.
     But the surge of pension money is coming at a time when the returns of many hedge funds have not been as strong as in past years, raising questions about whether pensions are arriving at the party late. Hedge funds actually lost money in four of the first ten months of this year, although they still had an overall average return of 5.7 percent.
     Those returns easily beat the stock market: the S.& P. 500 index was up 1 percent in the same period. But as they continue to attract money, hedge funds may start to more closely mimic the performance of plain old stocks and bonds.
     "There is no such thing as a free lunch," said Frank Partnoy, a professor at the University of San Diego law school and a former trader at Morgan Stanley whose clients once included large pension funds. "And even if there were, nobody is offering it to pension funds."

    When the Metropolitan Transportation Authority proposed making new workers chip in more to its pension fund than current workers do, it was enough to send the union out on strike and bring the nation's largest mass-transit system to a halt for three days.
    But the cost of pensions may look paltry next to that of another benefit soon to hit New York and most other states and cities: the health care promised to retired teachers, judges, firefighters, bus drivers and other former employees, which must be figured under a new accounting formula.
    The city currently provides free health insurance to its retirees, their spouses and dependent children. The state is almost as generous, promising to pay, depending on the date of hire, 90 to 100 percent of the cost for individual retirees, and 82 to 86 percent for retiree families.
    Those bills - $911 million this year for city retirees and $859 million for state retirees out of a total city and state budget of $156.6 billion - may seem affordable now. But the New York governments, like most other public agencies across the country, have been calculating the costs in a way that sharply understates their price tag over time. Although governments will not have to come up with the cash immediately, failure to find a way to finance the yearly total will eventually hurt their ability to borrow money affordably.
    When the numbers are added up under new accounting rules scheduled to go into effect at the end of 2006, New York City's annual expense for retiree health care is expected to at least quintuple, experts say, approaching and maybe surpassing $5 billion, for exactly the same benefits the retirees get today. The number will grow because the city must start including the value of all the benefits earned in a given year, even those that will not be paid until future years.
    Some actuaries say the new yearly amount could be as high as $10 billion. The increases for the state could be equally startling. Most other states and cities also offer health benefits to retirees, and will also be affected by the accounting change. "It's not likely that New York City has a way to fund current costs, its pension obligation and fund retiree health care without raising taxes or cutting services," said Jan Lazar, an independent consultant specializing in city retirement finances. "These are huge numbers, not a one-time cost."
    The pay-as-you-go accounting method that New York now uses greatly understates the full obligation taxpayers have incurred because it does not include any benefits to be paid in the future. Most other state and local governments that offer significant health benefits to retirees use the same method and will also have to bring newer, larger numbers onto their books in the next two or three years. The increases will vary from place to place, but New York is expected to be at the high end because it offers richer benefits than many other cities and has many police officers, firefighters and sanitation workers who can retire with full pension at age 50.
    At the transit talks, pensions were pulled off the table in the end, and the final settlement is likely to reflect an increased health care payment by current workers, not retirees. But even though New York was pushed to a standstill over proposed changes in transit workers' pensions, virtually no one in government, outside of a tiny group of experts, is talking publicly about the far more daunting bill for citywide retiree health insurance.
    The total value of the pensions promised is probably bigger, but money has already been set aside to pay the pensions, to a significant degree. For retiree health care, nothing stands behind those promises except the expectation that taxes will be raised enough in the future to cover them.
    At last count, the city's biggest pension fund - the one for about 300,000 workers not covered by police, firefighter, teacher or school workers plans - said it had $42 billion set aside in trust for the $42.2 billion it owed. No money at all has been set aside for that same group of city employees' post-retirement health care.
    Determining the correct amount will be "a tremendous undertaking," a city official said, adding that rapid changes in the overall health care environment, including the Medicare and Medicaid programs, make it extremely difficult to see what future costs will be.  No one really knows what the total health care obligation is for the 836,000 people already retired or now working for the city and state, much less who will pay for it. Neither side in the transit dispute, for example, has publicly mentioned retiree health care.
    A small group of city officials has been quietly working for months, gathering data on the dozens of city retiree health plans, large and small, but the process is not expected to be complete for months.
    Meanwhile, a handful of other states and cities have already done the same calculations. If their results are any guide, New York City and the state could ultimately find that they have each promised their retirees health care worth tens of billions of dollars. The transportation authority, a state entity whose retiree health care costs are partially borne by New York City, could find that it has already promised more than $5 billion worth of benefits to its current and future retirees.
    At the moment, the transportation authority is spending about $380 million a year on health care for its unionized workers. That covers both active workers and retirees; while a precise breakdown does not exist, citywide demographics suggest that about $165 million of that may be for retirees.
    Once the new accounting rule is in force, the transportation authority may find itself scrounging for 5 to 10 times that amount every year, $825 million to $1.6 billion, if an accounting rule of thumb devised by one of the chief credit rating firms, Fitch Ratings, holds up. By the time anybody knows for sure, the authority will probably be halfway through the union contract it is still struggling to complete.
    To find the money, the authority will have to turn to "higher fares, less service, or more pressure on the city government to fork over subsidies," said Robert A. Kurtter, an analyst with Moody's Investors Service who monitors New York's finances. The city's retirement system, meanwhile, will be struggling with the same problem on a much larger scale.
    The city has been offering free health care to its retirees for decades. In the private sector, companies that once offered health insurance for retirees began to stop doing so in the 1990's, for a number of reasons, including accounting rule changes like those now coming into effect for states and cities. Today, only 38 percent of companies with more than 200 workers offer retiree health insurance, according to the Citizens Budget Commission, a group that analyzes city and state finances.
    An even smaller number of companies, 9 percent, pay any part of the premiums that can be used to buy optional supplements to Medicare for retirees over 65. New York City and the state both pay the full cost of Medicare supplements for their retirees. "They've stuck with that, although the rest of the world has changed," said Charles M. Brecher, research director of the Citizens Budget Commission and a professor of public and health administration at New York University's Wagner School of Public Service.
    While the private sector was curtailing retiree benefits, New York City and the state have been preserving and even expanding benefits in bargaining with their unions. Both sides focused mainly on the current cost of the benefits. No one was paying much attention to the deferred cost of the benefits that would come due once current workers retired. Meanwhile, health costs resumed rising at double-digit rates, and a large share of the public work force began to reach retirement age. Currently, the city administers a big health plan for its workers and retirees and contributes to dozens of smaller retiree health plans that are run by individual unions and supplement the city's coverage.
    The calculations are now being done, privately, because of the accounting rule change. In 2004 the Governmental Accounting Standards Board, a nonprofit body that writes accounting rules for governments, issued a new standard for retiree medical plans. It roughly follows a similar standard issued in 1994 for public pension plans.
    But rather than requiring local governments to finance their retiree medical plans, the rule simply requires them to lay out a theoretical financing framework, then report how they are dealing with it. Localities that create trust funds will get certain financial rewards. Localities that do not put money behind their promises risk being punished by falling credit ratings. When a city's credit rating falls, it becomes harder and more expensive to issue bonds or otherwise borrow money.
    Municipal bond analysts at Moody's and Standard & Poor's said they were taking a wait-and-see stance. "How the city addresses the burden is another question - by reducing the benefit or funding the cost, or allowing this liability to mount," said Mr. Kurtter, of Moody's. If the amount grows, "at some point it will create a credit issue," he said. Mr. Kurtter said city officials have acknowledged privately that the amounts will be large, "in the billions, they say."
    Labor officials say that even though the change is just a new way of accounting, not a price increase in the conventional sense, they fear that putting a number on the city's promises for future retiree health care will lead to sticker shock and renewed calls to cut benefits. "There's a lot of fear that this kind of disclosure will reignite the whole battle of who assumes retiree health costs," said Randi Weingarten, the president of the United Federation of Teachers and the chairwoman of the Municipal Labor Committee. "Even though it should be a data point, it will be used as a hammer."

Michael Cooper contributed reporting for this article.

    LOS ANGELES, Jan. 6 - San Diego's legal and financial troubles deepened on Friday as a federal grand jury handed up fraud and conspiracy indictments against five current and former officials of the city's pension system.
    The charges centered on a 2002 decision by the 13-member San Diego City Employees' Retirement System to enact a plan to increase significantly the pension benefits of city employees, including all the defendants, while failing to provide sufficient money to keep the pension fund solvent.
    Federal prosecutors said the five defendants had conspired to hide the details of the proposal from other members of the pension board as part of a scheme to enrich themselves and cover up the financial danger to the pension system posed by the plan. The decision helped to push the city to the brink of bankruptcy and led to the resignation of Mayor Dick Murphy last spring. The San Diego retirement system now has a deficit of at least $1.4 billion, and the city is unable to borrow in the capital markets.
    The local United States attorney, Carol Lam, said the five pension fund officials had violated their obligations to city retirees and the taxpaying public. "The defendants had a duty to act in the best interest of the city retirement system," Ms. Lam said in a statement accompanying release of the indictments. "They breached that duty by engaging in self-dealing, ignoring conflicts of interest and exploiting their positions to the detriment of the retirement system."
    In addition to the pension fund scandal, San Diego has been rocked in the past two years by a political corruption case involving three City Council members, and Representative Randy Cunningham's sudden resignation from Congress in November, when he pleaded guilty to bribery charges.
    Federal and local prosecutors said Friday that their investigations were continuing. The Securities and Exchange Commission and the F.B.I. have been examining city finances for more than two years. Those newly indicted are Ronald Saathoff, Cathy Lexin and Teresa Webster, former San Diego retirement fund trustees; Lawrence Grissom, the system's former administrator; and Loraine Chapin, its current general counsel. They are expected in court next week to enter pleas.
    The three former trustees are already under indictment on state conflict-of-interest charges arising from the pension debacle, and civil charges are pending against them and Mr. Grissom. All have denied any wrongdoing, as has Ms. Chapin, contending that their jobs with the pension fund required them to act on matters that would naturally affect their own benefits.
    Mr. Saathoff is president of the San Diego firefighters' union and served as a labor representative on the pension board for 20 years. Ms. Lexin, a nonvoting member of the pension board, was the city's human resources director and a lead negotiator with city employee unions, including Mr. Saathoff's. Ms. Webster, also a nonvoting member of the board, was San Diego's assistant auditor and comptroller.
    As a result of the 2002 vote, the indictment alleges, Mr. Saathoff's pension benefits were to rise by more than $25,000 a year. The benefits of the four other defendants would also have been enhanced, but the indictment does not specify by how much.
    As they were concealing the benefits they were to receive from the proposal, the defendants also pushed a plan to permit the pension fund to operate at a substantial deficit, allowing the city to avoid payment of as much as $100 million, the indictment says. The City Council approved the pension plan shortly after it was adopted by the board.
    Michael Aguirre, the San Diego city attorney, has brought civil charges against all of the defendants except Ms. Chapin. He said the federal indictment confirmed what his own investigation had found: that the accused had concealed various side deals that would enrich themselves and bankrupt the pension system. "The result was the largest financial catastrophe in the history of San Diego," Mr. Aguirre said.

    The death knell for the traditional company pension has been tolling for some time now. Companies in ailing industries like steel, airlines and auto parts have thrown themselves into bankruptcy and turned over their ruined pension plans to the federal government.
    Now, with the recent announcements of pension freezes by some of the cream of corporate America - Verizon, Lockheed Martin, Motorola and, just last week, I.B.M. - the bell is tolling even louder. Even strong, stable companies with the means to operate a pension plan are facing longer worker lifespans, looming regulatory and accounting changes and, most important, heightened global competition. Some are deciding they either cannot, or will not, keep making the decades-long promises that a pension plan involves. I.B.M. was once a standard-bearer for corporate America's compact with its workers, paying for medical expenses, country clubs and lavish Christmas parties for the children. It also rewarded long-serving employees with a guaranteed monthly stipend from retirement until death.
    Most of those perks have long since been scaled back at I.B.M. and elsewhere, but the pension freeze is the latest sign that today's workers are, to a much greater extent, on their own. Companies now emphasize 401(k) plans, which leave workers responsible for ensuring that they have adequate funds for retirement and expose them to the vagaries of the financial markets.  "I.B.M. has, over the last couple of generations, defined an employer's responsibility to its employees," said Peter Capelli, a professor of management at the Wharton School of Business at the University of Pennsylvania. "It paved the way for this kind of swap of loyalty for security."
    Mr. Capelli called the switch from a pension plan to a 401(k) program "the most visible manifestation of the shifting of risk onto employees." He added: "People just have to deal with a lot more risk in their lives, because all these things that used to be more or less assured - a job, health care, a pension - are now variable."
    I.B.M. said it is discontinuing its pension plan for competitive reasons, and that it plans to set up an unusually rich 401(k) plan as a replacement. The company is also trying to protect its own financial health and avoid the fate of companies like General Motors that have been burdened by pension costs. Freezing the pension plan can reduce the impact of external forces like interest-rate changes, which have made the plan cost much more than expected. "It's the prudent, responsible thing to do right now," said J. Randall MacDonald, I.B.M.'s senior vice president for human resources. He said the new plan would "far exceed any average benchmark" in its attractiveness.
    Pension advocates said they were dismayed that rich and powerful companies like I.B.M. and Verizon would abandon traditional pensions. "With Verizon, we're talking about a company at the top of its game," said Karen Friedman, director of policy studies for the Pension Rights Center, an advocacy group in Washington. "They have a huge profit. Their C.E.O. has given himself a huge compensation package. And then they're saying, 'In order to compete, sorry, we have to freeze the pensions.' If companies freeze the pensions, what are employees left with?"
    Verizon's chief executive, Ivan Seidenberg, said in December that his company's decision to freeze its pension plan for about 50,000 management employees would make the company more competitive, and also "provide employees a transition to a retirement plan more in line with current trends, allowing employees to have greater accountability in managing their own finances and for companies to offer greater portability through personal savings accounts."

    In a pension freeze, the company stops the growth of its employees' retirement benefits, which normally build up with each additional year of service. When they retire, the employees will still receive the benefits they earned before the freeze. Like I.B.M., Verizon said it would replace its frozen pension plan with a 401(k) plan, also known as a defined-contribution plan. This means the sponsoring employer creates individual savings accounts for workers, withholds money from their paychecks for them to contribute, and sometimes matches some portion of the contributions. But the participating employees are responsible for choosing an investment strategy. Traditional pensions are backed by a government guarantee; defined-contribution plans are not.
    Precisely how many companies have frozen their pension plans is not known. Data collected by the government are old and imperfect, and companies do not always publicize the freezes. But the trend appears to be accelerating. As recently as 2003, most of the plans that had been frozen were small ones, with less than 100 participants, according to the Pension Benefit Guaranty Corporation, which insures traditional pensions. The freezes happened most often in troubled industries like steel and textiles, the guarantor found.
    Only a year ago, when I.B.M. decided to close its pension plan to new employees, it said it was "still committed to defined-benefit pensions." But now the company has given its imprimatur to the exodus from traditional pensions. Its pension fund, the third largest behind General Motors and General Electric, is a pace-setter. Industry surveys suggest that more big, healthy companies will do what I.B.M. did this year and next. "There's a little bit of a herd mentality," said Syl Schieber, director of research for Watson Wyatt Worldwide, a large consulting firm that surveyed the nation's 1,000 largest companies and reported a sharp increase in the number of pension freezes in 2004 and 2005. The thinking grows out of boardroom relationships, he said, where leaders of large companies compare notes and discuss strategy.
    Another factor appears to be impatience with long-running efforts by Congress to tighten the pension rules, Mr. Schieber said. Congress has been struggling for three years with the problem of how to make sure companies measure their pension promises accurately - a key to making sure they set aside enough money to make good. But it is likely to be costly for some companies to reserve enough money to meet the new rules, and they - and some unions - have lobbied hard to keep the existing rules intact, or even to weaken them. So far, consensus has eluded the lawmakers. "If Congress will not do its job and clarify the regulatory environment, then I think more and more companies will come to the conclusion that, given everything else that they've got to face, this just isn't the way to go," Mr. Schieber said of the traditional pension route.
    Defined-benefit pensions proliferated after World War II and reached their peak in the late 1970's, when about 62 percent of all active workers were covered solely by such plans, according to the Employee Benefit Research Institute, a Washington organization financed by companies and unions. A slow, steady erosion then began, and by 1997, only 13 percent of workers had a pension plan as their sole retirement benefit. The percentage has held steady in the years since then. The growth of defined-contribution plans has mirrored the disappearance of pension plans. In 1979, 16 percent of active workers had a defined contribution plan and no pension, but by 2004 the number had grown to 62 percent.
    For many workers, the movement away from traditional pensions is going to be difficult. Already there are signs that people are retiring later, or taking other jobs to support themselves in old age. Participation in a pension plan is involuntary, but most 401(k) plans let employees decide whether to contribute any money - or none at all. Research shows that many people fail to put money into their retirement accounts, or invest it poorly once it is there.
    Even skillful 401(k) investors can be badly tripped up if the markets tumble just at the time they were planning to retire. Mr. Schieber of Watson Wyatt ran scenarios of what would happen to a hypothetical man who went to work at 25, put 6 percent of his pay into a 401(k) account every year for 40 years, retired at 65, then withdrew his account balance and used it to buy an annuity, a financial product that, like a pension, pays a lifelong monthly stipend. He found that if the man turned 65 in 2000 he would have enough 401(k) savings to buy an annuity that paid 134 percent of his pre-retirement income. But if he turned 65 in 2003, his 401(k) savings would only buy an annuity rich enough to replace 57 percent of his pre-retirement income.
    When a company switches from a pension plan to a 401(k) plan, the transition is hardest on the older workers. That is because they lose their final years in the pension plan - often the years when they would have built up the biggest part of their benefit. They then start from zero in the new retirement plan. Jack VanDerhei, an actuary who is a fellow at the Employee Benefit Research Institute, offered a hypothetical example. If a man joins a firm at 40, works 15 years, and is making $80,000 a year by age 55, he might expect to have built up a pension worth $16,305 a year by that time, Mr. VanDerhei said. If he keeps on working under the same pension plan, that benefit will have increased to $27,175 a year when he retires at 65.
    But if instead when the man turns 55 his company freezes the pension plan and sets up a 401(k) plan, the man will get just the $16,305 a year, plus whatever he is able to amass in the 401(k). It will take both discipline and investment skill to reach the equivalent of the old pension payments in just ten years, Mr. VanDerhei said. For women, the challenge is even tougher. They have longer life expectancies, so they have to pay more than men if they buy annuities in the open market. It turns out the traditional, pooled pension offered them a perk they did not even know they had.

    Hermes Pensions Management, which is owned by and manages the BT pension scheme, the UK’s largest, is investing £1bn of the BT fund’s £34bn of assets in commodities. The investment, representing 3 per cent of scheme assets, is the largest single allocation to commodities by a UK pension fund and is designed to improve returns while reducing volatility.
     The move comes as pressure rises on UK pension funds to find surer ways of funding their long-term promises to pensioners and to plug widening gaps between their assets and liabilities. The BT pension fund deficit was £2.1bn when last reported in 2002.
     James Walsh, head of strategy and alternatives at Hermes, said: “It has become evident that schemes should not rely on bonds and equities alone to deliver consistent returns.” Several European and US retirement funds have increased their investment in commodities. ABP, Europe’s largest pension fund, has been investing in commodities since 2001 and they now represent about 3 per cent of its €190bn (£130bn) assets.
     Mr Walsh said the investment was part of a strategic allocation to diversify risk in equities rather than a bet on rising commodities prices. “Over the past 50 years commodities and equities have provided similar real returns at 5.2 per cent a year (compared to bonds at 1.5 per cent). However, the correlation of the performance especially over the longer term, has been quite different – with commodities stronger for instance in inflationary periods,” he said.  Initially, the Hermes Commodity Index Fund will be passively managed to track the Goldman Sachs Commodities Light Index.

    Morgan, who dominated Wall Street a hundred years ago, famously doubted the stability of companies that paid their top executive more than 20 times what the lowliest employee got. Business norms have since undergone a revolution, with the median chief executive in a survey of 2,000 large companies pocketing $2.5 million in 2004, up from $1 million five years earlier. Some of these packages may be justified as rewards for strong performance. But others amount to a cash-grab at the expense of shareholders, many of them unsuspecting owners of mutual fund shares and 401(k) retirement plans. One recent study identified 60 underwhelming companies that lost $769 billion in market value in the five years ending in 2004. Their top five executives pocketed more than $12 billion over this period, meaning that they averaged more than $8 million each per year.
    The challenge of disciplining bosses' pay must fall to the bosses' bosses: company shareholders and the boards of directors that represent them. But this isn't going to happen unless, at a minimum, bosses' pay is disclosed accurately. Today the Securities and Exchange Commission will unveil a proposal to improve transparency. If the proposal survives the SEC's sometimes rancorous rulemaking process, companies will be required to report the total compensation for five top executives, including stock-option grants, perks and retirement promises.
    The question is whether the SEC's proposal will go as far as it should, especially on retirement compensation. At present, firms are not required to disclose the value of defined-benefit pension promises to executives, so reports of bosses' pay generally leave these out. But the value of these promises can be enormous. When Franklin D. Raines was pushed out of the top job at Fannie Mae in 2004, he left with an annual pension of $1.4 million for as long as he or his wife lives. Pension promises generally account for almost a third of a chief executive's total career compensation, according to Harvard's Lucian A. Bebchuk.
    The SEC's five commissioners have been debating the details of their proposal. They apparently want better pension disclosure, but not the sort that would count most. What shareholders need is an honest estimate of the cost of future pension payments, expressed in today's money: Thus a promise of a $1 million pension has to be multiplied by the number of years the executive can be expected to collect, then discounted to reflect the fact that the payments will be made in the future. According to an SEC spokesman, the commissioners may be content merely to require firms to disclose what the boss stands to collect after retirement. But that doesn't tell shareholders how much the boss is costing them today.
    The SEC hasn't revamped rules on executive pay since the early 1990s, and its new chairman, Christopher Cox, deserves credit for tackling the issue. But if he stops short on pensions, he will be missing one-third of executives' compensation. Moreover, that third is especially troubling, because it tends not to be linked to executive performance. And of course that third is bound to grow rapidly if it is allowed to remain murky while other forms of compensation are dragged into the light.

© 2006 The Washington Post Company

    WASHINGTON, Jan. 17 - The Securities and Exchange Commission voted unanimously on Tuesday to overhaul the way companies report their pay packages for senior executives, a move that is expected to lead to greater disclosure but not to any significant decline in executive compensation.
    The proposal - the biggest change in this area in more than a dozen years - is the first major rule suggested by the commission's new chairman, Christopher Cox. S.E.C. officials said it would be adopted in a few months, after a few details were sorted out. It is expected to go into force for the 2007 proxy season. The move comes after a series of corporate scandals at the New York Stock Exchange and Tyco International, among others, that drew criticism over excessive pay.
    In 1992, when the five-member commission first addressed executive pay issues, it sought to require greater disclosure as an antidote to excessive pay. But in the intervening years, many boards have come up with partly or completely hidden benefits for top executives, ranging from paying their taxes to allowing use of corporate jets for personal reasons. "Simply put, our rules are out of date," Mr. Cox said at a commission meeting. But Mr. Cox emphasized that the agency did not intend to produce rules that forced changes in executive pay scales, but to make them more apparent to investors. "It's about wage clarity, not wage controls," he said. "By improving the total mix of information available to the marketplace, we can help shareholders and compensation committees of boards of directors to assess the information themselves, and reach their own conclusions."
    In recent years the commission has said that several companies, including General Electric and the Walt Disney Company, failed to adequately describe significant payments and benefits to top executives. Just as the accounting scandals prompted Congress and the regulators to adopt rules to invigorate audit committees of directors, the proposal on executive pay is meant to prompt compensation committees to be more exacting.
    At the same time, large institutional investors, like pension funds, have been raising more questions about the compensation of executives at companies where they own stock. The pay of the average worker remained almost flat at $27,000 from 1990 to 2004, adjusted for inflation, while average chief executive pay has risen from $2.82 million to $11.8 million, a ratio of more than 400 to 1, according to the Institute for Policy Studies and a group, United for a Fair Economy, which has been critical of the disparity between the pay of senior executives and lower-ranking employees.
    The proposed rules would for the first time require public companies to provide a figure for total compensation, including significant perks, stock options and retirement benefits for the chief executive, the chief financial officer and three other top-paid officers, as well as all directors.
    It is intended to prod companies into providing greater justification for pay packages, retirement plans, severance agreements and so-called golden parachutes - large payments to executives when control of a company changes hands. And it would require companies to place a precise dollar value on grants of stock options and restricted stock.
    Many companies now do little more than provide legal boilerplate to justify the pay packages.
    But the plan fell short of calls by some institutional investors to give a greater voice to shareholders in setting some pay packages. And it proposed to loosen at least one area of disclosure by raising the threshold to $120,000 for reporting a business transaction between a company and an executive or relative. Such disclosures are now required for transactions of $60,000 or more.
    Experts hailed the proposal for leading to greater transparency, saying that it would end up showing many hidden benefits given to top executives - particularly the value of stock options, pension plans and a wide assortment of perks - that are now either not disclosed or obscured. But they acknowledged that the changes, while they may encourage reining in some perks, would not lead to a decline in the rapidly growing pay packages of top executives at many public companies. "The positive effect will be that on the margin - and it is an important margin - there will be a new so-called outrage constraint," said Lucian A. Bebchuk, the director of the corporate governance program at Harvard Law School, who has documented how executive pay is often hidden and has far outpaced compensation for other employees. "The caveat is that even though there is an outrage constraint, shareholders have very limited power to do anything about it."
    Professor Bebchuk said that once what he has called the stealth compensation - pension and retirement plans in particular - became public, the disparities between the top and bottom of a company would be even greater. His research has found, for instance, that at the companies in the Standard & Poor's 500 with pension plans, the median actuarial value for pensions given to chief executives is about $15 million, or about a third of the overall total compensation.
    B. Espen Eckbo, director of the corporate governance center at the Tuck School of Business at Dartmouth, said the new rules would give institutional investors more ammunition to use to scrutinize boards and management. "There will be criticism; there will be second-guessing," said Professor Eckbo, speaking in part from his experience as an adviser to the Norwegian Petroleum Fund, a large pension fund. Still, he said, "forcing people to explain what they are doing can't be bad."
    Once the commission publishes the proposal, it will entertain comments for 60 days before voting on a final rule. Agency officials are preparing for a spirited debate over the best way to value options: some business groups have already complained that the proposal would unfairly overvalue options by giving them a full value at the time they are granted, while some institutional investors have urged the commission not to permit companies to undervalue them.
    The Business Roundtable, which represents chief executives from many of the nation's largest companies, issued a statement generally supporting the commission's proposal, although it cautioned that it wanted to examine the details. The statement, by the group's president, John J. Castellani, also asked the agency not to require companies to calculate stock options in a way that overvalues them. "Our goal is to effectively balance the goal of providing shareholders with timely disclosure of accurate and complete compensation information with the need to prevent strategic company information from being revealed to competitors and damaging a company," he said.
    Ira Kay, a compensation consultant at Watson Wyatt Worldwide, a human resources consulting firm, said company directors now found themselves caught between highly marketable executives, who could often command huge packages, and more active institutional investors seeking greater accountability. "Boards are caught balancing the interests of the executives and the shareholders," he said. "It's a difficult balancing act."

· Jitters send gilt yields to their lowest for 50 years
· Treasury under pressure to issue debt to ease panic
Market turmoil deals further blow to pension funds
Ashley Seager and Larry Elliott

    Pension funds are facing the same torment as the luckless Sisyphus from the Greek fables. He was condemned to push a ball up a steep hill, only to see it roll back down as soon as it reached the top. They are finding that, no matter what they do to try to close their deficits, the gilts market simply makes the problem worse again.
    The difficulty is pension fund liabilities are increasingly calculated using the yield on long-dated conventional or index-linked gilts. Every time funds buy gilts to match liabilities, yields fall and deficits rise again. The result is that rising equity markets, which ought to have rescued the pension fund industry, have not solved the deficit problem. Moyeen Islam, of Barclays Capital, says: “Funds that had relied on the rally in equities alone to improve their funding positions have found themselves pretty close to where they were at the start of 2005, and, effectively, have seen no benefit at all from 2005’s bull market in equity.”
    Changes in the pension regulatory system have made the situation worse. Companies face a risk-based levy, based in part on the health of their pension funds, from the Pension Protection Fund, the government-sponsored lifeboat set up to pick up some of the bill for retirement benefits when companies with a pension fund deficit go bust. In addition, companies making takeovers have been required by the Pensions Regulator to make payments to shore up deficits. The regulator has indicated pension deficits should be closed over 10 years. The result is deficits have turned from a long-term problem into a more immediate difficulty.
    Dawid Konotey-Ahulu, head of insurance and pensions solutions group at Merrill Lynch, says: “The Pensions Regulator has made it abundantly clear that sponsors have to fund mark-to-market deficits over a shorter time-frame than they had anticipated. In return for funding those deficits, finance directors also want to see their pension funds reduce their exposure to interest rates and inflation.” Hence there is an incentive to buy either long-dated gilts, both conventional and index-linked, or derivatives with the same hedging effect.
    With pension funds chasing a small amount of index-linked and long-dated conventional gilts, the result has been a sharp rise in prices and fall in yields. Nick Horsfall, senior in-vestment consultant at Watson Wyatt, the consultants, says the 0.5 percentage point drop in yields represents “a 7.5 to 10 per cent increase in liabilities over the past two months on average across UK plc”. Mr Konotey-Ahulu says a company with a £1bn pension fund, 60 per cent of which is invested in equities, and a 20 per cent deficit would have seen its deficit increase by £22m, or 11 per cent, on the basis of Tuesday’s market movements alone. In terms of equity markets, the equivalent move in the FTSE 100 index would have been a 260-point, or 5 per cent, one-day fall.
    Pension funds do not always buy index-linked bonds in the market directly; they are also trying tohedge their liabilities with inflationswaps, a kind of derivative. Watson Wyatt says it is seeing 10 times the demand for these products than a year ago. The situation has prompted growing calls in the market for the Debt Management Office, which borrows on behalf of the government, to intervene and issue emergency supplies of long-dated and inflation-linked paper to improve the liquidity in the market.
    Last May the DMO reintroduced the 50-year conventional gilt into the market after a pause of more than 40 years. Last September it launched the world’s first 50-year inflation-linked bond. There are now £7.1bn of 50-year conventional gilts and a total of £1.97bn in 50-year index-linked gilts. The DMO is poised to issue £650m of 50-year index-linked gilts on Tuesday. Helen Roberts, head of government bonds at F&C Asset Management, said: “The market is getting very frothy, it is boiling over. If liquidity worsens from here, the DMO is obliged to do something.”
    However, some investors believe such a move is not appropriate. David Scam-mell, director of fixed in-come at Schroders, is among them. “It would alleviate the pressure short term, but it does nothing to address the real problem which is pension fund demand at the long end,” he says.
    Even more drastic solutions have been suggested. Willem Buiter, an erstwhile member of the Bank of England’s monetary policy committee and now a professor at the London School of Economics, suggested in a letter to the Financial Times on Monday that the government should refinance most of the outstanding stock of government debt with long-dated, index-linked issues.
    Either this would push real yields higher, easing the plight of pension funds, or it would allow the government to finance its debt more cheaply, at great benefit to the taxpayer. “You can do it gradually or you can do it all overnight,” he said yesterday. He suggested that even refinancing the £55bn-£60bn of debt he estimated came due each year with longer-dated index-linked gilts could help ease the supply pressures.

Additional reporting by Joanna Chung

     The health of pension funds is being savaged by what investors describe as a bubble in the gilt market: pension deficits of FTSE 350 companies have increased by £20bn this month, according to Mercer Investment Consulting, thanks to a dramatic fall in the real yield on long-dated gilts. Lane Clark and Peacock, the actuarial group, estimates that the same factor has increased FTSE 100 pension fund liabilities by about £35bn since June 2005.
    The sudden rise in the price of index-linked government bonds this week, which has taken yields at the long-dated end to record lows, has had the same effect on pension deficits as would a 260-point, or 5 per cent, fall in the FTSE 100 index, says Dawid Konotey-Ahulu, head of insurance and pensions solutions at Merrill Lynch.
    The problem has led investors and traders to lobby government to issue more long-dated bonds to quench the thirst for gilts. A meeting with the Treasury is scheduled for two weeks’ time.

Uphill struggle for pension funds to close deficits
    Furthermore, the increase in deficits may be distorting company decisions. “It is diverting company cash away from business investment into pension contributions, which will reduce future economic output,” says Jeremy Toner, fixed-income portfolio manager at Investec Asset Management.
    The problem for pension funds is that their liabilities are calculated using a discount rate based on bond yields. As real yields fall, liabilities increase. The result has been a vicious cycle in which pension funds buy index-linked gilts to match their liabilities, forcing real yields lower and causing pension funds to buy more gilts.
    What makes matters worse is that long-dated index-linked issues are very small in relation to the size of the pension fund industry. The whole 50-year index-linked issue, for example, is worth less than £2bn. “An entire industry is being valued on the back of an illiquid market,” said one investor.
    Tuesday’s fall in yields, which took the real yield on the 2055 issue from 0.59 per cent to 0.48 per cent, was one of the biggest one-day drops recorded. Yields touched 0.38 per cent yesterday before recovering. The gilt yielded 1.1 per cent when it was issued in September. The plunge has also been driven by some hedge funds, which had bet on yields falling no further, being forced to cover their positions. “There was some serious dislocation in the market [in the morning],” said John Wraith, head of rates strategy at RBS Global Banking & Markets.
    Investors such as Mr Toner are describing the market as a “bubble”, while Chris Fellingham of Merrill Lynch Investment Managers talked of a “crisis” that required greater issuance from the government to push yields higher. Market participants are understood to be lobbying the Debt Management Office, the body responsible for government issuance, to increase the amount of long-dated index-linked gilts; a consultation meeting with the Treasury is due on February 1.
    The sudden fall in real yields seems to be related to the introduction of a risk-based levy by the Pension Protection Fund, set up by the government to protect the retirement rights of workers in companies that go bust. The levy will be partly based on the size of the pension fund’s deficit. The PPF requires companies to give details of their deficit position by March 31, and there may be a scramble to buy index-linked gilts before that deadline.

Der Markt für Kreditderivate wächst rasant. Die wichtigsten Instrumente sind Credit Default Swaps (CDS). Sie sind eine Art Ausfallversicherung auf Anleihen oder auch Kredite, mit der sich die Risiken handeln lassen, ohne dass die zu Grunde liegenden Referenzobligationen den Besitzer wechseln. Knapp zwei Drittel der Geschäfte entfallen auf Unternehmensrisiken, die von den Ratingagenturen mit Noten innerhalb des Investment-Grade eingestuft werden, womit der Schuldner als solide gilt.

CDS sind bilaterale Kontrakte, die sich auf ein bestimmtes Kreditrisiko (zum Beispiel Anleihen von Daimler-Chrysler) beziehen. Während der Laufzeit des Kontrakts verpflichtet sich der Sicherungsgeber (Risikokäufer), einen etwaigen wirtschaftlichen Verlust in der Referenzobligation bei Eintritt eines Kreditereignisses gegenüber dem Sicherungsnehmer (Risikoverkäufer) zu kompensieren. Als Kreditereignisse gelten üblicherweise vor allem Insolvenz oder Zahlungsverzug des Schuldners. Tritt ein solches juristisch vordefiniertes Kreditereignis ein, so liefert der Sicherungsnehmer eine entsprechende Referenzobligation an den Sicherungsgeber und erhält im Gegenzug dafür den Nennwert erstattet. Alternativ kann auch auf die Lieferung verzichtet werden und die Entschädigung komplett in bar gezahlt werden. Für diese Absicherung zahlt der Sicherungsnehmer eine Prämie an den Sicherungsgeber.

In diesem Jahr pendeln die Risikoaufschläge (Spreads) von CDS – gemessen am I-Traxx-Europe-Index – zwischen 0,36 und 0,38 Prozentpunkten und sind damit sehr niedrig, ähnlich wie die Risikoaufschläge von Unternehmensanleihen. Die meisten Experten fürchten, dass die Spreads in diesem Jahr steigen werden. Der I-Traxx-Europe-Index bildet die 125 liquidesten Credit Default Swaps europäischer Unternehmen ab. Es gibt verschiedene I-Traxx-Indizes, die Investoren aktiv handeln können.  „Die Indizes haben die Transparenz und Liquidität des Marktes enorm erhöht“, sagt Regier. Meist reagierten die CDS und die Indizes viel schneller auf bestimmte Ereignisse als die Unternehmensanleihen. „Zudem sind die Umsätze bei Kreditderivaten deutlich höher als bei den Anleihen selbst“, betont Michael Zaiser, Stratege für Kredite und Derivate bei der Hypo-Vereinsbank (HVB).

Besonders aktiv am CDS-Markt sind Banken, gefolgt von Versicherern. Auch Hedge-Fonds und herkömmliche Investmentgesellschaften gehören zu den Marktteilnehmern. Deutsche Fonds dürfen Kreditderivate erst seit gut zwei Jahren einsetzen. Dafür müssen sie nachweisen, dass sie die Risiken messen und überwachen können. „Dabei hapert es noch an der Umsetzung, weshalb deutsche Fonds CDS nur vereinzelt einsetzen“, sagt Zaiser. Er geht aber davon aus, dass sich die deutschen Fonds in den nächsten zwei Jahren stärker auf CDS konzentrieren werden. „Das wird dem Markt noch weiteren Schub geben“, meint der Stratege.

Erfunden wurden die Credit Default Swaps in den neunziger Jahren von Banken, vornehmlich, um die Bücher von Kreditrisiken zu entlasten. Heute nutzen die Handelsabteilungen der Banken wie auch die anderen Akteure die Derivate auch, um bei steigenden Spreads Gewinne zu machen. „Bei herkömmlichen Anleihen kann man in der Erwartung steigender Risikoaufschläge einzelner Bonds nur besser als der Markt abschneiden, wenn man die Anleihen nicht im Portfolio hat“, erklärt Klaus Oster, Leiter des Kreditresearchs bei der Fondsgesellschaft Deka Investment: „Im CDS-Markt kann man dagegen durch den Kauf von Sicherung direkt von steigenden Spreads profitieren.“

Außerdem gilt das größere Anlageuniversum im Derivatemarkt als Vorteil. Mit den CDS lassen sich Kreditrisiken auf alle Laufzeiten nachbilden, auch wenn es keine entsprechenden Anleihen gibt. „Das führt auch dazu, dass sich die Risiken über die einheitlichen CDS besser vergleichen lassen als über Anleihen, die in Laufzeit und Ausstattung stärker variieren“, sagt Oster. „Hinzu kommt die Hebelwirkung, weil sich Risiko handeln lässt, ohne dass Anleihen ge- oder verkauft werden müssen.“

Die Hebelwirkung wird jedoch auch kritisiert, genau wie die Tatsache, dass nicht nachvollziehbar wird, wer welche Derivate hält, so dass ein Systemrisiko entsteht. Gefahren sehen etwa die Bank für Internationalen Zahlungsausgleich (BIZ) und nationale Aufsichtsbehörden auch dadurch, dass es bei der Abwicklung der Derivategeschäfte zu Verzögerungen kommt, was bei tatsächlichen „Credit Events“ die Turbulenzen an den Finanzmärkten verstärken könnte. JP-Morgan-Fachmann Regier hält dagegen, dass es der Stabilisierung des Finanzsystems diene, wenn die Risiken breit gestreut seien: „Außerdem entwickeln die Marktteilnehmer die Risikomodelle und die Abwicklung weiter, so dass das systemische Risiko stetig abnimmt.“

Credit Default Swaps (CDS) sind die bedeutendsten und liquidesten Kreditderivate. CDS machen Kreditrisiken handelbar – unabhängig von den zu Grunde liegenden Anleihen oder Krediten. Wer die Sicherung kauft, muss dafür eine Prämie bezahlen. Der Markt entstand in den 90er-Jahren und hat zum Teil pro Jahr Wachstumsraten von über 100 Prozent. Derzeit sind weltweit CDS-Kontrakte über 12,4 Billionen Dollar am Markt. Die Teilnehmer Erfunden wurden die CDS in den 90er-Jahren von Banken. Inzwischen sind auch viele Versicherer auf dem Markt aktiv, ebenso wie Hedge-Fonds, Investmentgesellschaften und Unternehmen.

Die Folgeprodukte

CDS sind die Grundlage für viele andere derivative Produkte, zum Beispiel synthetische Asset Backed Securities, bei denen Kreditrisiken übertragen und als Wertpapiere an den Markt gebracht werden.

THE latest American initiatives to put pressure on the government of Sudan are centered many thousands of miles away from its capital, Khartoum. A handful of state legislatures in the United States have passed laws that bar their public pension funds from investing in companies with ties to Sudan, which has been accused of extensive human rights abuses in a long-running civil war.

The United States State Department has also labeled Sudan a state sponsor of terrorism.

While a 1997 executive order by President Bill Clinton bars American companies from conducting business in Sudan — except for a few technical exceptions, like a humanitarian mission — foreign businesses do not fall under that restriction. But in this age of global asset allocation, it is not uncommon for investors in the United States to have a link to Sudan through foreign stock holdings. Such foreign holdings would be the most affected by the recent state legislation.

The New Jersey Legislature passed a law in August that requires its public pension funds to divest itself of holdings in businesses that have equity stakes, including investments, facilities or employees, in Sudan. A similar law went into effect in Illinois last month, requiring its pension funds to be fully divested of any company with a Sudan tie by July. Oregon has also passed such a law for its public investment funds, while Louisiana has approved legislation that permits, but does not require, its public funds to shed investments linked to Sudan.

In December, the biggest public pension hammer, the California Public Employees Retirement Plan, or Calpers, took aim at three companies in which it has invested. The Calpers board voted 9 to 2 to call for the companies, ABB, Alcatel and Siemens, to cease business operations in Sudan.

A Calpers spokesman said that "our board believes that an engagement process with the companies is the best avenue if we are going to effect some change." Last week, Calpers reported that the three companies would not sever their Sudan ties; Calpers is considering its next step.

Phil Angelides, the California state treasurer and a Calpers board member, says he is prepared to pursue divestment if those companies do not pull out of Sudan. "The U.S. government has told Americans to have no business in Sudan," he said, "so why should California invest in companies that are supporting the regime?"

Spokesmen for the three companies say that leaving Sudan would do more harm than good. Ron Popper, a spokesman for ABB, for example, said the company had sought comment from many individuals and organizations within Sudan. "We have unanimously heard one message: do not withdraw because the country needs international investment," Mr. Popper said.

The states have left it to their money managers to figure out who belongs on the divestment list. Money managers have relied on private research firms that scour publicly available documents, trade journals and news accounts, and that conduct independent research to compile databases of companies involved in Sudan. Among the firms providing this research are KLD Research and Analytics, Institutional Shareholder Services and the Conflict Securities Advisory Group.

For example, KLD started its Sudan Compliance Service last November. Noel Friedman, managing director of KLD, said that 124 companies were currently on its Sudan list, including eight American businesses that he declined to name.

The lists, however, are far from definitive. Some companies that appear on them declare that they do no business in Sudan, and for at least one, 3M, the involvement was described by the company as aiding the United Nations. A spokesman at 3M said the United Nations bought 3M's Scotchshield Ultra Safety and Security Film, used to protect windows.

Steven Schoenfeld, chief investment strategist for quantitative investments at Northern Trust, is responsible for determining the companies his firm will exclude from the six "Sudan free" index funds it has started for institutional clients, including the State of Illinois. More than $8 billion of Illinois pension money has already moved into the six portfolios.

Mr. Schoenfeld's goal is to track closely the performance of traditional indexes even after he has removed stocks with ties to Sudan. He says his fund that tracks the MSCI EAFE index, a popular benchmark for developed countries across Europe and Asia, as well as Australia, will pose his biggest challenge. He said that more than 25 companies, representing more than 9 percent of the index's market capitalization, could be booted from the fund.

Among the big names that could be dropped from the portfolio are Royal Dutch Shell, which represents more than 2 percent of the EAFE index; Total, the French energy giant, about 1.5 percent; Toyota, about 1 percent; and Siemens of Germany and Ericsson of Sweden, both about 0.5 percent.

The six Northern Trust funds are to complete Sudan divestment by the summer.

While Sudan has been in a two-decades-long civil war that has claimed thousands of lives through fighting and famine, the state initiatives picked up momentum after Colin L. Powell, then the secretary of state, said in late 2004 that the United States viewed violence in the Darfur region of western Sudan as genocide.

Agreement over the gravity of the situation in Sudan has not meant a united push for divestiture. It stalled in the Arizona Legislature and didn't get far in Maryland. William C. Thompson, the New York City comptroller, has identified 24 stocks in the city pension system's holdings in which the parent company has some operations in Sudan. A spokesman for Mr. Thompson said his preferred course — echoing the stance of Calpers and others — was discussion with those companies, not divestment.

Mutual funds that call themselves socially responsible routinely screen out companies that they regard as having poor records on humanitarian issues and thus have generally avoided investing in companies with Sudan ties. But Julie Gorte, director of social research at Calvert Investments, which specializes in socially responsible funds, says she can still appreciate the complexity of the issue.

"You have to ask yourself what your goal is with divestment," she said. "What's there if the government falls? Is there a government there that will take over and be better? If the companies that pull out provide money, goods and services, is there an understanding that will make the people poorer in the short run?"

Before the states' recent push, there were other moves to exert pressure. In 2002, Talisman Energy of Canada decided to end its Sudan investment after American investors steeply discounted its stock. In 2000, many college endowments and public pension funds, including Calpers, did not participate in the initial public offering of PetroChina, a subsidiary of the China National Petroleum Company, because of PetroChina's involvement in oil extraction from Sudan.

THE nation's largest mutual fund companies have remained on the sidelines so far. A spokesman for Vanguard said it was "taking an 'analyze and see' approach before making any broad policy changes to either our internally or externally managed funds," while a spokesman for Fidelity said the Sudan issue was not currently a concern.

The $9 million Bull Moose Growth fund, which calls itself a "terror free" fund, is an exception. The investment manager relies on a database, maintained by the Conflict Securities Advisory Group, that tracks public companies with business ties to countries designated as state sponsors of terrorism; about 450 companies are listed in Conflict Securities' global security risk monitor, including about 120 with ties to Sudan. The fund's gain of 12.8 percent in 2005 was more than double that of the Standard & Poor's 500-stock index.

    DEPUIS le début du raid boursier de Mittal Steel sur Arcelor le 27 janvier dernier, environ un quart des actions du sidérurgiste européen a changé de mains. Comme dans toute OPA, les fonds spéculatifs sont entrés dans le jeu, à l'image d'Atticus qui presse aujourd'hui la direction d'Arcelor de négocier avec son assaillant pour obtenir un meilleur prix. La réponse n'a pas tardé : le conseil d'administration, qui rejeté à l'unanimité l'offre de Mittal Steel, répondra par lettre à ce minoritaire mécontent. Ensuite, à partir du 28 janvier, le président du groupe, Guy Dollé, rencontrera Atticus s'il le souhaite, au même titre que deux
cents autres grands investisseurs pour tenter de les convaincre de conserver leurs actions.
     Derrière ce fonds spéculatif américain réputé pour son activisme auprès des sociétés cotées, se cache en réalité Nathaniel Rothschild. Issu de la branche britannique de la célèbre famille, ce jeune loup de la finance, âgé d'une trentaine d'années, codirige l'affaire avec son fondateur Timothy Barakett et son vice-président David Slager. Créé il y a dix ans, Atticus gère actuellement plus de 10 milliards de dollars, investis dans de grands groupes cotés. La participation que le fonds détient dans le deuxième producteur mondial de cuivre, l'américain Phelps Dodge, représente la ligne la plus importante de son portefeuille, soit plus de 600 millions de dollars. L'énergie dans son ensemble est l'un de ses secteurs de prédilection, mais il est également présent au capital du producteur de biens de consommation Procter & Gamble.

La Deutsche Börse et Euronext harcelés
     En Europe, Atticus s'est illustré dernièrement dans les dossiers Deutsche Börse et Euronext. Dans les deux cas, il a agi parallèlement à un autre fonds spéculatif, The Children's Investement Fund (TCI), deux fois plus petit que lui en taille d'actifs et reversant une partie de ses gains à des oeuvres caritatives.
     Au printemps dernier, avec près de 20% du capital de Deutsche Börse en leur possession, Atticus et TCI sont ainsi parvenus à leurs fins : la Bourse de Francfort a abandonné son projet de fusion avec le London Stock Exchange, distribué un superdividende à ses actionnaires et changé de direction. Aujourd'hui, ces mêmes fonds revendiquent près de 20% d'Euronext, la plate-forme boursière commune à Paris, Amsterdam, Bruxelles et Lisbonne, et l'incitent fortement à se rapprocher de Deutsche Börse.
     A chaque fois, leur technique est la même. Atticus ou TCI expriment au management de la société visée leur divergence sur l'utilisation des profits et réclament des dividendes et des rachats d'actions. En 2005, Phelps Dodge a ainsi restitué au marché 1,5 milliard de dollars, Deutsche Börse 450 millions d'euros, tandis qu'Euronext envisage de distribuer prochainement un dividende exceptionnel.
     Reste qu'aujourd'hui, avec seulement 1,3% du capital d'Arcelor en main et un droit luxembourgeois inexistant, la marge de manoeuvre d'Atticus semble pour l'instant assez limitée. Atticus, qui demande au groupe sidérurgiste de revoir sa position sur l'offre de Mittal Steel, s'est déjà illustré dans plusieurs affaires en Europe.

    Assets administered in Switzerland shot up by more than a quarter last year, reaching SFr4.3 trillion ($3.3 trillion), ten times the gross domestic product.
      Statistics from the central bank revealed that Switzerland's financial centre is in robust health, and attracting record levels of foreign money. The value of assets belonging to foreigners grew by 29.8 per cent to SFr2.6 trillion by the end of 2005, said the Swiss National Bank (SNB). Assets owned by domestic investors rose 20.3 per cent to SFr1.8 trillion. The sums dwarf Switzerland's GDP of SFr433.36 billion. Foreign customers now account for almost 60 per cent of assets administered by Swiss-based financial institutions, said the SNB in its monthly statistical bulletin for February 2006. This was 1.9 per cent more than in 2004 and also a new record for the country.

Institutional investors
    Among those pouring money into assets looked after in Switzerland are institutional investors overseas, such as pension funds. Their holdings account for 55.5 per cent of those belonging to foreign customers, as compared with 49.6 per cent a year earlier.
     The SNB started publishing monthly statistics of assets administered in Switzerland in 2000, when stock prices peaked. What is not clear is whether the recent increase is down to a recovery in the financial markets, or an influx of new money. Money held in savings accounts and investment accounts rose 16 per cent to SFr1.2 billion, while fiduciaries handled SF389 billion worth of assets last year, a rise of 22 per cent. Added together, Swiss banks handled SFr5.931 trillion last year.

The yield curve is not a subject which normally lights up the nation's breakfast tables. But now it is of special relevance. Once you rephrase the matter as "why long-term interest rates are so low in relation to short-term rates" the relevance should become clear, particularly for those grappling with the problems of pension underfunding or those contemplating retirement on today's low annuity rates.

Market wisdom
    In practice, as our chart shows, the yield curve is of different shape in different countries. So what is it telling us? In America, an inverted relationship between 3-month and 10 year interest rates has correctly predicted every post-war recession and this measure has given only one false reading. It is inverted now. So is a recession on the way?
    Despite the yield curve's record, we must beware of attributing mystical significance to what is, after all, a market construct. The curve is surely not telling us anything about forces which will be unleashed on the economy as a result of the relation of short and long rates. I know of no one, individual or corporate, whose decisions on anything important for the real economy are likely to be materially influenced by this factor.
    If the yield curve has predictive power, it is because it reflects the views on the future of interest rates of participants in the market and that will be a reflection of their views of the economy. In the US, the yield curve is kinked.
    I read this as telling us that the market fears a sharp economic adjustment, perhaps encompassing a recession, once the current period of rate rises is over. This will require lower interest rates. But further out on the curve there is also a substantial downward influence from overseas buying of Treasury bonds. Nevertheless, it is striking that very long rates are about the same as very short rates.
    The reason for the upward slope in both the euro zone and Japan is that short-term interest rates are on the up from abnormally low levels. This means that investors in long-term bonds need a premium over current short-term interest rates to compensate them for the fact that future short-term rates will be higher.
    The UK case is different. The market thinks that in a year's time, short-term rates will be about the same as they are today. So why the downward slope out to 50 years? Sometimes the weight of money which market prices reflect is not so much the result of a careful view of the future as of sheer fear or institutional quirks.
    That is the case in the UK now. Having decided, late in the day, that their pension liabilities are bond-like in nature and that it was taking on a huge risk to hold equities against these bond-like liabilities, the pension funds have piled into bonds even at yields which you would have thought were bound to give poor returns.
    Thus, the structural imbalance of supply and demand at the long-end has overwhelmed rational consideration of the most likely course of future short rates; but the structural imbalance has completely flipped over from the direction presumed in conventional interest rate theory, that is to say, at the long end there is now a preponderance of investors seeking income security, thereby wanting to hold long fixed-rate assets. Meanwhile, although government borrowing remains strong, companies are strangely reluctant to borrow large sums at interest rates fixed for long periods.

Time to act?
    There may well be good reasons to be worried about the UK economy and good reasons to fear that last year's economic slowdown may be extended. I don't even rule out the recession risk in the UK. But to my mind these reasons do not include the shape of the yield curve.
    Nevertheless, the current shape of the yield curve is significant. With long rates so low, surely the authorities should substantially alter the balance of their new funding heavily towards the long end, or even issue long debt to redeem existing short debt. They have a once in a lifetime opportunity to reduce the cost of government funding.
    And the higher long yields which would result from this process would serve to alleviate some of the pressure on pension funds and thereby on their sponsoring companies and also bring some relief to all those about to retire, facing these wincingly low annuity rates. Why don't they do it?
    Search me. It is yet another example of public sector failure. So the UK yield curve is telling us something - although not in the Mystic Meg mould. In fact it is telling us three things: that the investing institutions are being sheep-like; would-be corporate borrowers are being excessively cautious; and the authorities are being complacent and supine in not taking advantage for the public good.

    En Suisse, la majorité des caisses de pension privilégie toujours une approche traditionnelle des investissements basée sur les indices, principalement d'actions et d'obligations, alors que certaines de leurs consœurs européennes sont plus radicales: elles abandonnent des stratégies d'investissement traditionnelles auxquelles elles ne croient plus, rationalisent leur gestion, convaincues qu'elles pourront ainsi mieux contribuer à la réalisation de leurs obligations de prévoyance.
    Voici ce que proposent certains fonds de pension européens: aux Pays-Bas, PGGM, la caisse de pension aux 72 milliards d'euros, abandonne l'approche conventionnelle basée sur les classes d'actifs et décline sa stratégie d'investissement en catégories: celles liées aux risques de marché, celles actives et les stratégies alternatives, avec un horizon d'investissement très long, introduisant opportunément de nouvelles catégories tout en vérifiant leur adéquation avec le profil de risque global du portefeuille. PGGM concrétise ainsi une stratégie d'investissement qui depuis dix ans donne des résultats impressionnants.
    En Grande-Bretagne, Schroders, qui gère et conseille plus de 600 caisses de pension, a décidé pour sa propre caisse de pension d'investir dans les dérivés et dans un large éventail d'investissements alternatifs comme les hedge funds, l'immobilier, le private equity et les matières premières. Les actions ne représenteront désormais qu'une part minime dans l'allocation d'actifs alors que traditionnellement elles représentent l'essentiel du portefeuille des caisses en Grande-Bretagne. La volatilité des actions et la difficulté à l'intégrer dans une stratégie d'investissement de très long terme visant à garantir les engagements de prévoyance, aboutit à reconsidérer la suprématie quasi dogmatique que les investissements en actions avaient su imposer dans la gestion institutionnelle.
    Aux Pays-Bas et en Grande-Bretagne, le fonds de pension d'Unilever crée Univest qui regroupe au sein d'un FCP luxembourgeois l'ensemble des actifs des caisses de pension du groupe avec une sélection «best in class» de gérants de fonds. L'objectif est de rationaliser l'«asset management», diminuer le risque global et actionner des économies d'échelle.
    Enfin, aux Pays-Bas, le fonds de pension de Philips cède la gestion de ses 16 milliards à Merrill Lynch Investment Management, pour anticiper une réforme législative mais surtout bénéficier d'un service sur mesure avec plus de cohésion et de professionnalisme vis-à-vis des besoins spécifiques.

Le système de prévoyance vieillesse doit subir de profonds changements pour qu'il soit durable.
Des mesures peuvent lui permettre de perdurer les 30 à 50 prochaines années.

    Même si le système à trois piliers de la prévoyance vieillesse suisse bénéficie, à juste titre, d'une excellente réputation internationale, il n'en est pas moins en danger, tout particulièrement en raison des profonds changements démographiques qui se profilent. Des réformes prises à temps devraient lui permettre de perdurer efficacement dans les 30 à 50 prochaines années. Tout comme ses voisins à l'étranger, la population suisse a une espérance de vie qui ne cesse d'augmenter.

Deux actifs pour un retraité
    Ces profondes modifications démographiques pèsent de plus en plus sur le système de prévoyance vieillesse nationale, dans la mesure où de moins en moins d'actifs doivent prendre en charge de plus en plus de retraités. Alors que la relation entre les actifs et les retraités était en 1950 de 6:1, le quotient actuel est de 4:1 et, selon les prévisions, il n'y aurait plus que deux actifs pour un retraité en 2040.
    La mise en place d'une réforme s'impose donc de toute urgence! Néanmoins, la question est de savoir comment refondre la prévoyance vieillesse de manière à assurer son financement durable dans les 40-50 prochaines années tout en assumant les objectifs sociaux, c'est-à-dire en garantissant la solidarité intra et intergénérations.

Remaniement des trois piliers
    Navos propose de remanier l'actuel système à 3 piliers et de l'accompagner d'importantes mesures de politique économique. Conformément au mandat constitutionnel, le but du 1er pilier est d'assurer les besoins vitaux pour tous au moment de la retraite, ce que l'AVS n'est déjà plus en mesure de garantir actuellement. C'est pourquoi les rentes devront être portées de 24000 à 30000 francs par an. De conception uniforme, elles permettront alors de réduire considérablement les frais administratifs.
    L'assurance invalidité AI, dont le déficit énorme est financé par l'AVS, devra être découplée et fonctionner de manière autonome, si nous ne voulons pas que le fonds de compensation de l'AVS soit épuisé dans trois ou quatre ans environ.
    Le 2e pilier devra être allégé et ne verser des rentes qu'à partir du revenu annuel soumis au 1er pilier (c'est-à-dire à partir de 24000-30000 francs) jusqu'à concurrence d'un montant maximum de 90000 francs environ, ce qui permettra à c