This two day event, held in Toronto, has just ended. It was a subdued gathering compared to similar events several years ago when capital markets were more sanguine. The bloodied financial system and subsequent economic consternation has left investment professionals bewildered and chastened. This is quite significant when considering few stadiums could accommodate their collective egos in better times.
The presentations were good. Even mine, I am told! But most surprising was the attention attendees paid to the messages from sessions titled: Critical issues facing pension funds for the next year/Global economic crisis and its impacts on investment and risk management decisions. In better times, one can't tell portfolio managers anything. They are gods in bull markets! Today, gods in training.
The double barreled kick off speakers were Dwight Duncan, Finance Minister, Ontario followed by Iris Evans, Finance Minister, Alberta. We were reminded why we all should live in Alberta. One could conclude from this small sample of two people that there seems to be some intelligent life among politicians in that province.
Big public sector pension money was represented. Ontario and Alberta Teachers Pension funds, Hospitals of Ontario Pension Plan, OMERS, OPSEU, and others. Folks were in shock that their well constructed portfolios designed for diversification all took a bath. "Correlations all rose" they complained. The tools failed, VaR failed, alternatives failed, leveraged and inverse ETFs disappointed and the only way back is if the markets float funds into solvency. In other words, their is no resolution.
Everyone shuffled through the sessions looking for answers finding solace only in group commiseration.
The best hope for salvation was mentioned several times but usually out of context. It was as if nobody wanted to admit they were spooked by volatility and that it was too early after the disaster to face the perpetrator. Consultants failed to boost spirits with predictions of a long and uncertain road back. (Check this space in the future for more about the "answer").
The only bright event was the announcement that the Bank of Montreal had listed four exchange traded funds on the TSX Thursday. Their first. This is important because it marks a validation of this lower cost alternative to mutual funds. The mutual fund industry was only muddling along in Canada until 1990 when the banks entered the market that they now dominate, and validated that product. How many other banks will follow suit by January 2010?