The University of Toronto pension and endowment fund is looking to put an end to aggressive investing strategies and reorganize its management structure after posting a loss of $1.5 billion—or 30%—on its assets during 2008.
University president David Naylor is heeding the advice of a blue-ribbon panel which calls for a reassessment of risk and return targets. In a letter to faculty and staff, he said that University of Toronto Asset Management (UTAM)—set up in 2000 to increase returns by following the example of large U.S. universities and endowments—has “not achieved its mission.”
The panel recommends that the asset manager be put under the university’s direct control and that its exposure to risky investments such as hedge funds and private equity “be scaled back significantly.”
“The university administration for its part needs to take careful stock of its current return targets and the risks associated with those targets,” he said.
Naylor also outlined changes to the oversight of the pension funds, including a new board of directors comprising senior university staff. UTAM’s leader will become the university’s chief investment officer and will report directly to the president.
• • •
Hedge funds pose minimal risk to markets: FSA
The common perception since the outbreak of the global financial crisis that hedge funds pose a high level of risk to financial markets is untrue, according to the U.K.’s Financial Services Authority (FSA).
The regulator’s survey of 50 of the largest FSA registered investment managers with over $300 billion of assets under management (AUM) finds that hedge funds present a low level of credit counterparty exposure and leverage, and that the overall leverage footprint of the hedge funds surveyed was relatively small.
Fixed income arbitrage and credit long/short funds—the two most highly leveraged strategies—together accounted for less than 10% of the total AUM polled. Further, derivative exposure was minimal compared with the Bank of International Settlements’ estimates of market size.
The maximum potential credit exposure any one bank had to any one hedge fund surveyed was less than US$500 million.
“While these are large numbers, they are manageable in the context of the overall credit risks and capital requirements of the surveyed banks,” reads the report.
• • •
CanDeal launches fixed income pricing app
Online debt securities trading platform CanDeal has launched a real-time, mobile pricing application for benchmark Government Bond and Treasury Bill issues.
CanDeal Mobile provides aggregated pricing data from Canada’s primary dealers in a variety of security views, including bid and ask price, bid and ask yield as well as the change from the previous day’s close.
“We are very pleased to bring this innovative value add service to our client base,” says Jayson Horner, co-founder, president and CEO of CanDeal. “In the fast paced world of institutional fixed income trading where anywhere, anytime information is vital to its participants, we have developed a tool for professionals to keep in touch with the market at all times.”