UWO Pension Restricts Redemptions

The turmoil in asset-backed commercial paper knocked Bay Street on its ear in August and now, three months later, it has re-emerged on Main Street as pensioners and individual investors start to feel the pain.
Because of holdings of illiquid ABCP, the pension fund for employees of the University of Western Ontario has restricted redemptions on some of its funds while the pension fund for 35,000 current and former employees of co-ops and credit unions may be forced to take similar steps.
"We informed our members as soon as we could," said Louise Koza, a director of Western's human resources department, adding that so far people have been "understanding."
The London, Ont.-based institution administers a $1.2-billion pension plan for 6,300 faculty and staff. As a defined contribution plan, members have a choice of funds to invest in. Five have exposure to illiquid ABCP and, as a result, the plan administrator has opted to hold back funds -- ranging from 0.84% to 16.87% -- in effect, limiting the amount of cash that members can withdraw.
"The market has made it difficult for one of our fund managers to sell its ABCP holdings," Western said in a recent note to pensioners. "As a result, temporary restrictions on the redemption of some of these assets are being put in place."
A majority of the university's retirees are invested in at least one affected fund, according to Ms. Koza. Under the restrictions, members who withdraw cash will be given units in a new fund created to hold the illiquid ABCP and whose value will depend on the success of a proposal to restructure the market.
From The Financial Post