Bonds buoy WCB investments in turbulent times

As the Liberals' Eric Fairclough tells it, the Yukon Workers' Compensation Health and Safety Board lost $20 million in the past year through risky and possibly illegal investments.

As the Liberals’ Eric Fairclough tells it, the Yukon Workers’ Compensation Health and Safety Board lost $20 million in the past year through risky and possibly illegal investments.

But only parts of this tangle of allegations are true, says Mark Hill, spokesman for the board.

True: the board changed its investment policies in June of 2007.

Also true: the board’s investments saw $19.7 million in unrealized losses in 2008.

What’s false is to suggest that the board’s decision to put 2.5 per cent of its portfolio into BBB bonds resulted in these losses, said Hill.

Quite the contrary.

“Actually, that’s the part that made money,” said Hill.

As the value of stock market investments plummeted in 2008, the board’s bond investments were the only part of its portfolio to generate returns. Altogether, the board’s mixture of A and BBB bonds earned about $5 million in 2008, offsetting some of the hurt caused by slumping stock prices and resulting in a net loss of about $15 million, or 10.7 per cent.

This hurts, but it could have been far worse. The board ranked among the top quartile of fund managers, said Hill.

And these losses won’t be realized unless the board was forced to cash out its investments.

This shouldn’t happen. The board remains fully funded, which means workers shouldn’t worry about the security of their benefits, said Hill.

Then there’s the question of whether the board was allowed to make changes to its investment policy.

To do so, it needed cabinet approval. This is formally recorded as an order in council.

No such order exists.

Nevertheless, cabinet approved the board’s new investment policies in June of 2007, said Hill. “We have an e-mail with the minutes,” he said.

The board plans to make changes so that such lapses don’t happen again, said Hill.

Contact John Thompson at

johnt@yukon-news.com.