News Archives - July / August 2010
Tuesday, August 31, 2010
CPPIB Ends Magna Challenge
The Canada Pension Plan Investment Board will give up its challenge of Magna International Inc.’s plans to collapse its dual-class share structure and pay Frank Stronach nearly $1 billion. It made the decision after its appeal was rejected by the Divisional Court of Ontario. In its decision, the court said it was satisfied the lower court’s decision met the two-prong criteria for such a plan of arrangement as set out by the precedent BCE decision, namely that it was for a valid business purpose and that it was fair and balanced in its approach.
Draft Tax Proposals Released
The Federal Department of Finance has released a consultation draft of legislative tax proposals to implement certain measures of Budget 2010, says a GH&A 'Pension & Benefits Tax Alert.' Measures in relation to pensions and benefits within the consultation draft may be of interest to employers include new rollover provisions permit direct transfer of amounts from a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF), or a registered pension plan (RPP) to a registered disability savings plan (RDSP) on death of an annuitant or member occurring after March 3, 2010, a new section 144.1 is proposed to be added to the Income Tax Act in respect of employee life and health trusts, with consequential changes to other sections in the act, and changes to rules applicable to employee stock options. The consultation draft can be accessed at http://www.fin.gc.ca
Reforms Need Additional Work
The Association of Canadian Pension Management (ACPM) welcomes the McGuinty government's announcement to proceed with the second phase of reforms to the Ontario Pension Benefits Act, building on the recommendations of the Arthurs Report. However, Scott Perkin, ACPM president, says "While this second phase of reform announcements contains some much needed improvements to the current legislation, additional work is needed to provide clarity to the proposals.” As well, a better legislative environment is needed to encourage the formation of new Defined Benefit plans.
Monday, August 30, 2010
The Transamerica Center for Retirement Studies (California) has revealed a gap between employers and employees in understanding the fees involved in their Defined Contribution pension plans, says a ‘Buck Exchange.’ However, while the survey was based in the U.S. and was focused on employee awareness of 401(k) fees, it says there might be some surprises in store for Canadian plan sponsors. The survey found most workers (68 per cent) agree that they do not know as much as they should about retirement investing. Meanwhile, plan sponsors believe that their employees are receiving the right information to make decisions about the plan. From a Canadian capital accumulation plan perspective, there is a very good chance that plan members don’t understand what they’re paying for, or why. As a result, employers face a dilemma: whose responsibility is it to educate members – the service provider, the plan sponsor, or the plan member? And, it’s clear that if this lack of understanding is ignored, then, given increasing litigation over adequate retirement planning, companies are taking a risk.
The Alberta Investment Management Corp and KingSett Capital are buying the remaining half of the Summit industrial property fund from ING Group, which says it’s withdrawing from real estate to focus on banking and insurance. Summit was a publicly traded real-estate investment trust until it was bought by the Australian arm of the ING Group. It owns about 400 industrial properties in or near large cities in Canada. ING will also sell ING Real Estate Canada – which had managed Summit – to KingSett and AIMCo.
Australian highway operator Intoll Group is backing a friendly takeover bid by the Canada Pension Plan Investment Board (CPPIB). Intoll also owns a minority stake in Toronto’s 407 electronic toll highway. The directors of Intoll have unanimously recommended security holders approve the deal because Intoll securities have been widely undervalued.
The Kitchener-Frame case decision should give some comfort to Ontario employers, says Fasken Martineau’s ‘The HR Space.’ The decision means the loss of an employee's opportunity to earn further service credit because of a closure does not automatically trigger severance pay. Rather, an employer is entitled to examine the commuted value of the employees' pension benefits provided as a result of supplemental and bridging benefits against those that would have been earned in the normal course of events. In the case, the union representing employees obtained generous pension benefits for some employees, including bridging and supplementary benefits upon plant closure. The employer argued that these benefits constituted an "actuarially unreduced pension benefit" reflecting their service credits. In the court’s view, the employees were not entitled to statutory severance pay.
Aon Consulting has made a number of appointments across Canada. Steve Vesque, Caroline Asselin, and Samia Jarjoura are consultants in the employee benefits outsourcing practice. Jason Malone is a vice-president and Francis-Olivier Gravel is a consultant in the retirement practice. Richard Côte is a consultant in the health and benefits practice. Cathy McKnight is a senior consultant in the human capital practice.
Cost containment strategies and the use of return on investment (ROI) metrics to assess plans and benefits program elements will be among the areas examined at the ‘Benefits Summit 2010.’ The event will also see three Conference Board of Canada research reports presented. These provide a comprehensive view of benefits trends and best practices, including how to use wellness programs to reduce costs and attract talent. It takes place October 27 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/conf/
The current state of deal flow and what it takes to create deal flow now will be the focus of the ‘Creating Deal Flow: Ready, Set, Go ... But Where Do We Go from Here??’ session at the ‘12th Annual Canadian Summit Private Equity.’ Panelists for the session are Mark Borkowski, president, Mercantile Mergers & Acquisitions Corporation; Mark R. McQueen, president and chief executive officer, Wellington Financial LP; and Carlo von Schroeter, managing partner, WestView Capital Partners. Theme of the summit is ‘Transformation of the Landscape.’ It takes place November 15 in Toronto, ON. For more information, visit www.insightinfo.com/privateequity
October Interest Rate Assumptions
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including October 2010 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains six worksheets:
- Commuted Values – 2009 Basis
- Commuted Values – 2005 Basis
- Commuted Values – 1993 Basis
- Marital Breakdown – CSOP 4300 (May 2009)
- Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
- Minimum Interest on Employee Required Contributions (including the 12-month average rates)
Friday, August 27, 2010
An Ontario Superior Court judge erred in his decision to approve Magna International Inc.’s plan to collapse its dual-class share structure and pay out nearly $1 billion to founder Frank Stronach. Lawyers representing the Canada Pension Plan Investment Board, the Alberta Investment Management Corp., and the Ontario Teachers’ Pension Plan said Justice J.H. Wilton-Siegel placed too much weight on the outcome of a shareholder vote and the increase in the value of the company’s stock in approving the deal. They argued before Divisional Court of Ontario that he should have given greater scrutiny to the transaction itself, including weighing the cost to common shareholders versus the potential benefits to Stronach. Magna management, however, says the deal simplifies its share structure and eliminates the traditional 30 per cent discount its shares have carried relative to its peers. Justice Wilton-Siegel’s decision noted that the appreciation of company’s shares since the deal was announced has already offset the impact of their dilution. In addition, he noted that Magna’s shareholders voted 75 per cent in favour of the deal in July, and that those who oppose the plan have had ample time to sell their stock since, and at a premium.
Canadian employers are cautiously optimistic about economic recovery in 2011 and an increasing number of organizations are projecting salary increases in 2011, says Towers Watson Data Services’ ‘2010/2011 Salary Budget Survey Report.’ The survey found 98 per cent project salary increases for 2011, up from 95 per cent in 2010 and 70 per cent who actually gave increases in 2009. It also found within organizations that plan to grant increases, average salary increases are projected to be higher than those budgeted for 2010. Base salaries are expected to rise next year by an average of 3.1 per cent for executives; three per cent for management; 2.9 per cent for professional/technical and administrative/support groups; and three per cent for the hourly group. More organizations are expected to adjust salary range midpoints in 2011 versus organizations that already adjusted or plan to adjust salary range midpoints in 2010.
The Standard Life Assurance Company of Canada group benefits marketing efforts earned two Awards of Excellence in the 2010 Insurance and Financial Communicators Association (I.F.C.A.) Annual Awards Competition. This program recognizes excellence in marketing and communications creativity, design, and writing in the North American insurance and financial services industry. It earned awards for its ‘Welcome kits,’ educational brochures that provides customized information to group savings and retirement plan members to ensure they start on the right foot and stay on track throughout their retirement planning; and the ‘Summary of Pension Legislation in Canada,’ a document for group retirement plans sponsors to help them understand the main requirements of Canada's federal and provincial pension legislation that may apply to their plans.
Compensation leaders of best practice organizations will explain how they will adjust compensation strategy as the economy returns to growth at the Conference Board of Canada’s ‘Compensation Outlook 2010.’ Sessions will also look at refining rewards to ensure they attract and retain key talent and deriving real value from compensation strategies. It takes place October 26 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/conf/
Cancer Care Environment Examined
Suzanne Lepage, a private health plan strategist, will provide an understanding of how government and private coverage shifts will impact patient access for cancer care in Canada at a CPBI Ontario breakfast session. She will also describe the increasingly complex environment for cancer treatment in Canada. Andrea Roth, assistant vice-president, business development, direct distribution, Sun Life Financial, will describe how critical insurance works, common features found in CI products, and the types of costs it can cover. It takes place September 17 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca/
Thursday, August 26, 2010
The Healthcare of Ontario Pension Plan (HOOPP) welcomes the Ontario’s plan to remove the solvency funding requirement for certain large, multi-employer (MEPP) Defined Benefit pension plans. “We’re very pleased that the proposed changes for the solvency funding rules – which create an artificial level of volatility for Defined Benefit pension plans – are being considered for jointly sponsored pension plans,” says John Crocker, president and chief executive officer. Solvency funding rules pose a simple question – if the pension plan was to stop operations today, would it have enough money to pay every member and retiree their benefit. This type of funding test doesn’t make sense for large, jointly sponsored DB plans with secure long-term funding, explains Crocker.
The Canadian Pension Plan Investment Board has teamed up with Australia’s Future Fund to contribute A$750 million in financing to the restructured retail property fund managed by Colonial First State Global Asset Management. The retail-focused fund has a $1.1-billion portfolio consisting of nine shopping centres across Australia. The CPPIB and Future Fund were approached as potential investors after the retail property fund reached the end of its life with its existing institutional investors. Their financing will extend the life of the fund for another eight years. The retail fund, which will be renamed the CFSGAM Property Retail Partnership, will be operated by Colonial, but CPPIB and Future Fund will control any major decisions.
Just 16 per cent of multi-national companies feel their existing benefit plan governance structures are sufficient to meet current and anticipated future needs, says research from Mercer. The survey found more than three-quarters (77 per cent) are seeking to make changes that facilitate better management of risk globally, while many are planning or considering changes to elements of their governance frameworks to ensure that they deliver on objectives. Roughly half of respondents indicated that better or timelier information is needed across various plan management activities such as design, funding, and investment, with 30 per cent planning changes to their reporting structures.
OSFI Looks For Comments
The Office of the Superintendent of Financial Institutions (OSFI) has issued a draft guide for Defined Benefit asset transfers. The guide sets out the general principles and requirements that should be satisfied to obtain permission to transfer DB assets from a federally regulated pension plan to another pension plan. It replaces the ‘Instruction Guide for Asset Transfers between Defined Benefit Pension Plans’ that was issued in July 2005. Comments on the draft, which can be found at http://www.osfi-bsif.gc.ca/, can be made up to September 30 to Sylvia Bartlett at (613) 990-7856 or firstname.lastname@example.org
Sun Life Financial earned two of its four 2010 Insurance and Financial Communications Association (I.F.C.A.) Annual Awards Competition Best of Show awards for group initiatives. The ‘Making Life Brighter for You’ campaign was a web-based contest designed to get feedback from its group benefits and group retirement plan members. The ‘SunAdvantage my savings’ promotional material was used to introduce and promote the product and the value it offers to advisors, plan members, and plan sponsors. The awards recognize the best in marketing and communications creativity, design, and writing in the insurance and financial services industries.‘Are MEPPs in your Future?’ will be the focus of a session at the ‘2010 ACPM National Conference.’ Terry Duggan, of the BC Maritime Employers Association, and Roy Stuart, of Hewitt, will explain how MEPPs work and their advantages and disadvantages compared to other types of pension plans. They will also explore how they could be more broadly used and what MEPPs of the future could look like. It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/
Wednesday, August 25, 2010
Ontario will propose a package of reforms this fall it says will help strengthen Ontarians' pensions. This set of reforms would address almost 40 recommendations from the Expert Commission on Pensions and means the government's reforms to date will have responded to about two-thirds of the 142 recommendations in the expert commission's report. This round would strengthen pension funding rules by requiring sustainable funding of promised benefits and tougher funding standards for benefit improvements. They also clarify pension surplus rules and provide a dispute resolution process to allow members, retirees, and sponsors to reach agreements on how surplus should be shared on wind up.
The UK state pension age needs to rise to 72 in 20 years' time to keep the cost to the government at the same level as in 1981, says the Pensions Policy Institute think tank in its submission to the government consultation on pensions reform. As well, people would need at least 10 years' notice of a policy change in order to adjust their retirement plans. Its submission concludes that to stay at the level seen in 2010, the state pension age would need to go up by six months to 66.5 by 2030. To keep it at levels seen in 2000, the state pension age must increase to 68 by 2030.
Sceptre Investment Counsel Limited common shareholders have voted 99.8 per cent in favour of an arrangement which will see it combined with Fiera Capital Inc. The arrangement would create Fiera Sceptre, a publicly traded, independent money manager with approximately $30 billion in assets under management.
David Dibben is head of global fund products for RBC Dexia Investor Services has appointed. Based in London, UK, he was most recently with HSBC Global Asset Management as chief operating officer of its global fund ranges.
‘National Pension Reform: Are We There Yet?’ is the title of a Manitoba CPBI Council breakfast seminar. Keith Ambachtsheer, president and founder of KPA Advisory Services Ltd., and director of the Torman International Centre of Pension Management, Rotman School of Management, University of Toronto, will share his perspectives on where we have been, where we are today, and what the final destination may look like. It takes place September 16 in Winnipeg, MB. For more information, visit http://www.cpbi-icra.ca‘Managing Benefits Costs, Fraud, and Abuse’ will be the focus of a session at the ‘2010 CPBI Ontario Regional Conference.’ Ed Sherratt, of Sun Life Financial, will focus on recent health and dental trends, developments in technology and other industry innovations, and, finally, on how benefits provider can bring added value to plans and plan members. It takes place October 4 to 6 in Niagara-on-the-Lake, ON. For more information, visit http://www.cpbi-icra.ca/
Tuesday, August 24, 2010
The number of elderly Canadians is growing and concern about the future of Canada's healthcare system appears to be growing in lockstep, says the Canadian Medical Association’s ‘2010 Report Card on Health Care in Canada. "This year's report card definitely shows that young adults are bracing for increased healthcare costs in the future," says CMA President Anne Doig. "We know that as people age they use the healthcare system more. This report card is a clear signal that Canadians want a clear dialogue on the tough issues, and they want it now." The report card found 80 per cent of Canadians are worried that the quality of healthcare will decline due to strains caused by the aging baby boomer generation and 79 per cent are worried the system will not be able to offer the same level of coverage it does now as more baby boomers reach retirement age.
UK DB Down To 15
Only 15 UK companies in the FTSE 250 still offer final salary benefits to a large number of employees, says Pension Capital Strategies. It says only 144 companies in the FTSE 250 have any Defined Benefit pension scheme at all, with 86 still providing more than a handful of current employees with DB benefits. Of these 86 firms, only 15 are still offering DB benefits to a significant number of employees. These companies are defined as those incurring ongoing DB service costs that are greater than five per cent of total payroll. Charles Cowling, its managing director, says they are “firmly of the view that the next two years will see the death of the overwhelming majority of further provision in private sector final salary pension schemes."
The Pension Benefit Guaranty Corporation (PBGC) expects to spend $2.3 billion over the next 10 years to provide benefits to U.S. employees in its multi-employer program. This is about five times as much as it has spent over the past 30 years as this section of its insurance scheme has not been in trouble before. Its multi-employer program had, until 2002, been in surplus. The single-employer program has been in a deficit for some time. At its year-end in September 2009, the deficit was $21.1 billion.‘Boosting Effective Governance – Ideas to Improve Your Governance Effectiveness’ will be the topic of a session at the International Foundation’s ‘Annual Canadian Employee Benefits Conference.’ Darcey-Lynn Marc, president, Marc & Associates Inc., will look at areas such as what is governance and why does it matter and analyzing the cost of good governance and bad governance. It takes place November 21 to 24 in San Diego, CA. For more information, visit http://www.ifebp.org
Monday, August 23, 2010
Pension funds are being urged to follow the lead of CalPERS and Utah Retirement Systems in pushing hedge fund managers to explain and justify their fee structures. Research house Lipper says the two per cent management and 20 per cent performance fees charged by hedge funds have long been contentious among many investors. In early 2009, CalPERS asked more than 30 managers to improve their terms, including fees. Around the same time, Utah's pension fund requested ‘claw-back' arrangements, allowing investors to recoup charges paid to funds that subsequently underperformed. Ed Moisson, head of consulting at Lipper, says says the EU's upcoming Alternative Investment Fund Managers directive has not tackled fees fully enough. As a result, Lipper set out 10 issues trustees should ask managers. They include ‘What is the performance fee rate, and does this apply to total returns, or just net returns above a benchmark?’ and ‘Is there a fixed hurdle rate or other benchmark, above which performance fees can be collected?’
Sixty per cent of retirement plan participants want more personalized and effective communications, especially using current technologies such as Web sites, proactive e-mails, mobile, or on-demand videos, says the 2nd annual ‘DC Participant Experience Study’ by Mathew Greenwald & Associates and KK & Company. It says participants want help and providers’ and sponsors’ efforts will work best if they make it as easy as possible for participants. It also found almost 80 per cent of participants are interested in proactive analysis and messaging that recommends how they could improve their retirement plan savings.
‘Absolute Return Strategies versus Global Equity’ will be the focus of a discussion at the ‘CPBI 2010 Western Regional Conference – Conquering New Peaks.’ Mark Bandola, vice-president, Franklin Templeton Investments; and Chris Arnott, investment director, head of investment specialists, Standard Life Investments Inc.; will address the question many pension plans have about revisiting their asset mix after a decade of significant market corrections. This session aims to explore the benefits of investing in global equities and absolute return strategies. It takes place October 27 to 29 in Banff, AB. For more information, visit http://www.cpbi-icra.ca/
Friday, August 20, 2010
The Caisse de depot et placements du Quebec’s assets grew 2.33 per cent to $135.8 billion in the first half of 2010 and it added $4.1 billion of value during the period ended June 30. The 2.33 per cent average return of the depositor funds compared to a negative 0.74 per cent for its overall portfolio’s benchmark index. The four main factors behind the $4.1 billion additional value were the 14.7 per cent return in its private equity portfolio, a six per cent return in its fixed income portfolios, a 10.1 per cent return from large investments in its infrastructure portfolio, and a proactive underweight in equity portfolios.
Avista Capital Partners, a private equity firm, and Ontario Teachers’ Pension Plan, through its private investor department, Teachers’ Private Capital, will acquire INC Research, Inc. from an investor group led by Crosspoint Venture Partners and Adams Street Partners. INC Research is a privately-held, therapeutically focused global contract research organization with expertise in managing late stage clinical development programs.
State Street Corporation has enhanced its risk analytics and servicing tools for institutional investors. The new offerings include portfolio reallocation tools, economic stress tests, and expanded investment coverage. These new capabilities are fully integrated into its ‘Investment Analytics Dashboard.’ It has also added new performance and compliance functionality for easy access to graphical and comprehensive information.
Denis Berthiaume is senior vice-president and general manager, wealth management and life and health insurance, at Desjardins Group. Previously, he was senior vice-president, retail markets, for a major international financial institution. This marks a return to the firm for Berthiaume as he spent 10 years with Desjardins Financial Security.
‘How Social Innovators Are Breaking Boundaries, Shaking Up Traditional Business Models and Achieving Results’ will be the focus of a session at the ‘8th Annual Summit on Corporate Social Responsibility.’ Panelists will be Dr. Rafi Hofstein, president and CEO of MaRS Innovation; Chris Jarvis, owner and co-founder of Realized Worth/3BL Media; and David Labistour, CEO, Mountain Equipment Co-op. Organized by Canadian Business for Social Responsibility, it takes place October 21 in Toronto, ON. For more information, visit http://www.cbsr.ca/summit
The ‘Fund Manager Showcase’ will be a part of the ‘World Alternative Investment Summit Canada 2010. Presenting fund companies include Arrow Hedge Partners Inc., Man Investments, Marret Asset Management Inc., JCClark, and Artemis Investment Management. It takes place September 13 to 15 in Niagara Falls, ON. For more information, visit www.waisc.com
Thursday, August 19, 2010
The Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan, and the British Columbia Investment Management Corp. will appeal an Ontario Superior Court ruling approving Magna’s plan to buy out founder Frank Stronach’s controlling shares for $863 million in cash and stock. The B.C. pension fund says it “remains of the view that the arrangement is unfair and unreasonable, and disproportionately favours the Stronach Trust at the expense” of Magna’s other shareholders. The pension funds believe eliminating the dual-class structure – which allows Stronach to control Magna through his multiple-voting shares despite owning less than one per cent of its equity – would be good for the company. However, they oppose the cost. Magna’s lawyers are seeking a hearing before the Ontario Divisional Court as early as next week to beat an August 31 deadline set by Stronach.
that the number of companies that froze salaries dropped dramatically from 31 per cent in 2009 to six per cent in 2010. Only two per cent of organizations are projecting an all-employee salary freeze for 2011. Aon’s projections indicate that salary increase budgets will be approximately three per cent of payroll in 2011 while the Mercer survey predicts pay increases of 2.9 per cent for 2011.
People with Defined Contribution pension schemes tend to be "overly optimistic" about meeting their retirement targets, says research from Towers Watson. It says fiduciaries would do well to adopt a more "outcome-focused" governance approach to DC in order to help people achieve better pension outcomes. The research found that most UK workers would like to retire between 55 and 60 years of age, but most are realistic enough to know that is unlikely and will instead aim to retire between 60 and 65. The report also found the average UK employee expects to need a pension of around 65 per cent of his salary before retirement – close to the two-thirds of final salary that has historically been targeted by Defined Benefit schemes. However, it revealed variations around this average – approximately 13 per cent expect to need less than half their final salary, while 25 per cent expect to need around half their final salary and 27 per cent expect to need a retirement income of at least 80 per cent.
Wednesday, August 18, 2010
Institutional investors are a bit less bearish on the outlook for the global economy and corporate earnings, says the BofA Merrill Lynch ‘Survey of Fund Managers.’ It shows that a net five per cent of respondents predicting that the global economy will improve in the next year, a slightly brighter outlook than the July survey, which found a net 12 per cent predicting the world economy would deteriorate. It also reports a drop in investors’ appetite for U.S. and Japanese equities, but a recovery in demand for Eurozone equities. A net 14 per cent of asset allocators are underweight U.S. equities, compared to seven per cent overweight in July. A net 27 per cent were underweight Japanese equities in August, compared to a net seven per cent in June. Now, 11 per cent are overweight eurozone equities, up from a net 10 per cent underweight a month earlier.
Exchange-traded funds (ETFs) will gain an even stronger market foothold because of increased adviser-driven demand for asset diversity and flexibility in the managed account space, says the Cerulli Associates report ‘Managed Accounts: Asset Manager Distribution Roadmap.’ The most significant changes to the managed accounts landscape have been in the composition of assets across vehicle types and the mix of assets across program types. The asset shift is indicative of advisors’ moving away from packaged advice programs and toward those with more flexible portfolio construction (investment selection and asset allocation.Addressing health and dental issues early will be the focus of a Connex Health session. Kevin West, vice-president at Innomar Strategies Inc., will provide information on the costs to employers of managing co-morbidities associated with obesity and will demonstrate the return on investment of assisting employees who are morbidly obese. Dr. David Kogon, a dentist and consultant to the private health and dental sector, will speak about dental claims trends, as well as current practices and recommendations on prevention and treatment that can help design a cost effective plan. It takes place September 16 in Burlington, ON. For more information, visit https://www.connexhc.com/uploads
Tuesday, August 17, 2010
Infrastructure investors believe their fund managers' interests are poorly aligned with their own, says research by Preqin. Its survey found almost three-quarters (73 per cent) of these investors believe manager interests are poorly aligned with theirs and 72 per cent believe management fees and fund carry structure are specific areas of concern as the industry continues to recover from the economic downturn. However, 70 per cent intend to invest in infrastructure over the next 12 months, an increase from the 40 per cent that stated an intention in a similar survey conducted in October 2009. More than half (52 per cent) of investors believe that the private equity fund model will continue to be used in the infrastructure sector, but that it needs adapting to fit the long-term nature of infrastructure investments.
Hedge funds enjoyed their highest returns in four months in July, says Dow Jones Credit Suisse Hedge Fund Index. The index rose 1.59 per cent in July, pushing the year to date gain to 2.22 per cent. Eight of the 10 strategies it tracks were also up during the month, led by emerging markets, up 3.5 per cent, and long/short equity which gained 2.5 per cent. Dedicated short strategies and managed futures were the two categories posting negative monthly returns. Year to date, fixed income arbitrage is the leading strategy, up almost seven per cent, followed by convertible arbitrage and global macro strategies.
Women are more likely to say they can’t afford to save more, while men feel they save enough already, says a Bank of Nova Scotia. It found 69 per cent of women (compared to 57 per cent of men) say they can’t afford to save more while 29 per cent of men (compared to 19 per cent of women) believe they save enough already. While both sexes say they feel much better when they have a safety net of savings (94 per cent for men, 95 per cent for women), men (71 per cent) are more likely to have a plan in place to achieve their saving goals compared to women (64 per cent).Outsourcing benefits administration will be the focus of the ‘CPBI 2010 Ontario regional Conference.’ Employers from three different industries with different demographics who have made a decision to use a third-party provider to administer their benefits program will discuss what motivated them to make this decision, the range of services outsourced, and the advantages and challenges that resulted. It takes place October 4 to 6 in Niagara-on-the-Lake, ON. For more information, visit http://www.cpbi-icra.ca/
Monday, August 16, 2010
Canadians who work with financial advisors have substantially higher levels of investable assets than non-advised Canadians, says a report by the Investment Funds Institute of Canada. ‘The Value of Advice’ also shows they invest in securities with more potential for growth. The report analyzes a variety of independent, third-party research on the role that financial advice plays in the Canadian retirement savings system. Its research found that advisors effectively help individuals choose the right vehicles, plans, and investment mixes to optimize outcomes for their unique circumstances. In the report, IFIC argues that the Canadian public policy debate about retirement savings has demonstrated a lack of understanding and appreciation of the value that advice brings to investors.
To enable organizations to gain a better understanding of how their benefit programs compare to those of competitors for key talent, Hewitt Associates has launched ‘Benefit SpecSelect.’ It is a Web-based tool that provides employers with access to comprehensive information in areas such as healthcare (medical, prescription drugs, dental, vision, hearing, and post-retirement medical); retirement income (Defined Benefit and Defined Contribution); and disability (short-term and long-term). Its database currently houses the details of benefit programs at more than 400 major Canadian organizations. Employers that provide their own program information and pay an annual fee can access the online information. This enables them to determine what particular competitors offer; compare their programs to others in the same industry, geographic area, or with the same number of employees; and gain access to prevalence data. The choice of comparator groups rests entirely with the subscriber.
Overall employee engagement at work – knowing what to do and wanting to do it – remains low these days, with U.S. employees, says Sibson Consulting's ‘2009 Rewards of Work’ study. It also found the highest correlations to employee engagement are employee feelings about affiliation with the employer and the content of a person's work. The top four measures with the highest correlation to engagement were organizational support of the employee, understanding of performance management, trust in management, and performance management effectiveness. It also says employers should pay particular attention to millennials, a segment that was less satisfied, less engaged, and more likely to leave than any other age group. "Particularly disturbing," says David Insler, senior vice president and one of the authors of the survey, "is that although 69 per cent of those surveyed know what to do, not all of those want to do it. Employers need to provide strong leadership in strengthening employee engagement. They can do this through clear leadership direction, improved communications, support and feedback to employees, setting a high performance bar, and rewarding top performers accordingly."
Friday, August 13, 2010
Franklin Templeton LifeSmart Portfolios – a target date product with risk overlay options – will be made available to Manulife Financial’s Canadian group retirement clients who are interested in adding a target date fund to their retirement programs. LifeSmart Portfolios combine the benefits of target date, target risk, and active portfolio management to provide a simplified investment process for plan sponsors and their plan members. The target date product will be available September 1.
Hedge funds are quickly regaining some of the clout they lost in U.S. fixed income markets during the market meltdown, says the Greenwich Associates' ‘2010 U.S. Fixed Income Investors Study.’ It shows that while overall U.S. fixed income trading volume declined from 2009 to 2010, hedge fund trading volumes jumped some 36 per cent among a matched sample of institutions. Such growth demonstrates that although hedge funds are far from the dominant force they were in 2006/2007, they remain key players in U.S. fixed income markets. At their pre-crisis peak, hedge funds were generating 29 per cent of all U.S. fixed income trading volume. By 2009 that share had declined to just 12 per cent. This year, hedge funds generated 19 per cent.
GE Asset Management (GEAM) has been awarded a $150 million China A-share investment quota by China’s State Administration of Foreign Exchange. The quota is the second of its kind received by GEAM, augmenting a $200 million allocation received in 2007 which the firm has invested on behalf of institutional investors through dedicated China A-share strategies. GEAM received its Qualified Foreign Institutional Investor designation, allowing it to invest in China’s local A-share equity market in 2006.
Greg Hurst has established Greg Hurst & Associates Ltd. (GH&A). Its immediate business focus will be on the delivery of consulting services and advice in respect of legislative and regulatory changes that apply to registered pension plans, group retirement investment and savings plans (such as group RRSPs), and similar employee benefit plan arrangements in respect of Goods and Services Tax (GST) and Harmonized Sales Tax (HST). To do so, it has partnered with Millson Parker Chartered Accountants. It has also partnered with the Humber College Centre for Employee Benefits to create a one-day course for plan sponsors, plan administrators, and industry practitioners on the GST/HST requirements that apply to pension and other employee benefit programs. A ‘Harmonized Sales Tax & GST FAQ For Pension Plans And Other Employee Benefit Arrangements’ can be found at www.bpmmagazine.com
Andrew J. Kavouras is head of clients and business development at Presima. Most recently, he was managing director for SAM – Sustainable Asset Management. He has provided consultancy in the field of sustainable and responsible investment strategies to institutional investors in North America, Europe, and Asia-Pacific. He has also held executive roles with Fidelity Investments and the Caisse de dépôt et placement du Québec.
Thursday, August 12, 2010
The CPP Fund ended the first quarter of fiscal 2011 at $129.7 billion compared to $127.6 billion at the end of fiscal 2010, on March 31, 2010. The $2.1 billion increase in assets after operating expenses was the result of contributions, which totaled $3.8 billion in the first quarter, offset by an investment return of negative 1.3 per cent, or negative $1.7 billion. The investment result was primarily due to the decline in public equity markets, and this was reflected in CPPIB’s public markets investment portfolio. As global financial stimulus efforts tapered off and concern about economic conditions in Europe increased, many public equity market indices dropped significantly in the three-month period ended June 30, 2010. For example, the S&P 500 fell by 11.9 per cent and the TSX was down 6.2 per cent. For the five-year period ended June 30, 2010, the CPP Fund has generated an annualized investment rate of return of three per cent or $13.8 billion of investment income. For the 10-year period ended June 30, 2010, the fund has generated $36.6 billion in investment income, reflecting an annualized rate of return of 5.1 per cent.
T. Rowe Price has become one of the latest signatories to the United Nations Principles for Responsible Investment. The firm joins other major U.S. asset managers such as JPMorgan Asset Management, Legg Mason Asset Management, Northern Trust Global Investments, and Russell Investments in signing the PRI. It also becomes one of the 429 asset manager signatories among the 789 signatories in total. Founded in 1937, it has $391.1 billion in assets under management.
Venture capital activity in Canada increased at a measured pace in the first half of 2010, though related slowdowns have continued to hamper growth in the market, says the CVCA – Canada's Venture Capital & Private Equity Association. Several positive developments in the first half of the year have contributed to optimism, including increases in dollars invested, both on a per company and overall basis, with the gaps between Canada and the United States narrowing. However, VC fundraising continues to pose a challenge, the Canadian market continues to be outpaced by the U.S. market by a factor of 35 and investment levels are still down significantly from only three years ago. Venture capital activity grew in the second quarter of 2010, with $334 million invested in total, nationwide, or 57 per cent more than the $213 million invested the year before.
Hedge fund providers are set for a bumper year as one-third of institutional investors have plans to increase allocations to the asset class, says a survey by Preqin. It found 29 per cent planned to increase their hedge fund holdings in the next 12 months, while 56 per cent planned to keep allocations at the same level. Just 15 per cent plan to reduce their hedge fund investments. Nearly one-quarter (23 per cent) of respondents plan to appoint new hedge fund managers to run their allocations. Long/short equity and global macro are the most favoured hedge fund strategies, with institutional investors seeking to invest in the most liquid opportunities.http://www.prmia.org/events/
Wednesday, August 11, 2010
The Department of Finance’s draft legislation proposing changes that alter rules for the Harmonized Sales Tax (HST) concerning ‘place of supply’ will require multi-jurisdictional pension plans, deferred profit sharing plans, and benefit plans to carry out an annual GST/HST self-assessment, says Morneau Sobeco’s ‘News & Views.’ As well, the proposals that will impact capital accumulation plans concerning investment funds held are complex and might expose the ultimate unitholders who are members or beneficiaries in non-HST provinces to HST expenses. In computing the tax applicable to a plan under the Excise Tax Act, the location of the plan’s members will be considered. A plan that has members in multiple provinces that include at least one province that charges HST will be subject to HST. As well, a multi-jurisdictional plan might face different HST rates for each province. Typically, a service provider to a plan is required to charge GST or HST based on the location of the plan administrator or trustee that makes the purchase. As a result, depending on the location of members, a plan might underpay or overpay sales tax.
The Ontario Teachers' Pension Plan (Teachers') is selling 3.4 million voting common shares and 10.3 million non-voting common shares of Maple Leaf Foods Inc. (MFI) as well as 2.2 million warrants exercisable into voting common shares of MFI to a fund managed by West Face Capital Inc. The sale reduces the fund's beneficial ownership and control of securities of MFI will be reduced from approximately 36.27 per cent to 25.23 per cent.
For institutional investors and asset managers, there is no safe haven in an uncertain investment environment, says Christian Elsmark, managing director, head of global institutional business, at Scottish Widows Investment Partnership Limited. While historic rules of thumbs are being questioned (such as what is the acceptable asset class correlations and what is a reasonable tracking error against benchmarks for active managers), he says an appropriate investment strategy must still be determined by how they view their fiduciary responsibilities and whether they clearly understand the drivers of risk and return of all their investments. Any prudent investor must give careful consideration not merely to the quantitative analysis of risk, but the potential sources of any such risks. For instance, when investing in direct real estate, the key question for investors seeking to increase their non-domestic exposure is how to take into account the risk profiles associated with the diversification benefits obtainable across sector, grade, and location. He is speaking on investors’ fiduciary responsibilities and the need to improve the debate on active asset allocation and risk management practices for consistent performance at the marcus evans 'Nordic Pensions & Investments Summit 2010,' October 27 to 29 in Stockholm, Sweden.
Halfway through the 2010 year, private equity buyouts of Canadian companies continued at a measured pace, with a strong showing on the international side, says CVCA – Canada's Venture Capital & Private Equity Association. Canadian investors are also becoming more active, with more dollars invested both domestically and abroad. Canada’s buyout industry investment levels increased slightly in the second quarter as the industry showed signs of recovering from the global economic slowdown. There were 54 completed and pending buyout transactions in Canada in the first half of 2010, 23 of which had disclosed values totaling of US$1.71 billion. This compares to 52 completed and pending buyout transactions in Canada in the first half of 2009, 26 of which had disclosed values of US$0.9 billion. This represents a 91 per cent increase in investment levels as compared to a year ago. Growth in Canada, however, lagged that of the rest of the world. Worldwide, dollars invested in private equity buyouts have more than doubled over the same period past year, while such activity in the United States has tripled.
Warren Bell is executive vice-president and chief human resources at OMERS. Prior to joining OMERS, he held a variety of senior management positions in human resources over his 25-year career at TD Bank Financial Group. Most recently, he was senior vice-president, corporate human resources.
Nadi Naderi is senior vice-president, strategic accounts management, at AGF Investments Inc. She has more than 22 years of experience managing both retail and institutional clients within the investment management industry. She will be responsible for business development and client service focusing on head-office relationships and strategic partnerships.
Suzanne Lepage, a private health plan strategist, will help sponsors gain an understanding of how government and private coverage shifts will impact patient access and why Canadians need to prepare themselves for the financial burden of a cancer diagnosis at a CPBI Ontario region breakfast session. ‘Potential Solution to the Emerging Changes in Cancer Treatment’ will also feature Andrea Roth, of Sun Life Financial, who will describe how critical illness insurance works. It takes place September 17 in Toronto, ON. For more information, visit www.cpbi-icra.ca
The opportunities and challenges facing institutional investors of the emerging ‘two-speed’ world will be the focus of a Mercer investment forum for institutional investors and asset managers. The current environment raises questions as to how institutional investors should change and adapt their strategies to be successful. The forum will attempt to look at some of the latest developments to integrate emerging best practice in climate risk control, in a practical way, into institutional investment arrangements. It takes place September 28 and 29 in Toronto, ON. For more information, visit www.mercer.com/IFtoronto
Tuesday, August 10, 2010
Private plans in Quebec are prohibited from adopting the same drug cost control approach as the RAMQ, says Aon. In fact, private plans are obligated to reimburse an original drug at a minimum of 68 per cent of the amount claimed, even if the generic drug is sold to the pharmacist at a maximum of 25 per cent of the price of the original. The Quebec government intends to require manufacturers of generic drugs to sell their products at a maximum of 25 per cent of the price of the original drugs. Unless the government amends the act with respect to the minimum reimbursement of 68 per cent imposed by the rules governing the RGAM, and unless private plans introduce appropriate control measures, the benefits for private plans of reducing the cost of generic drugs to 25 per cent will be negligible compared to those enjoyed by the RAMQ.
Isabelle Hudon is president, Sun Life Financial for Quebec. She brings more than 20 years of experience on the Quebec business scene to the company. Most recently, she was president of Marketel. Previously, she was president and chief executive officer of the Board of Trade of Metropolitan Montreal.
‘Prudence in Pension Administration – An Increased Focus’ will be examined at the International Foundation of Employee Benefit Plans ‘43rd Annual Canadian Employee Benefits Conference.’ Lynda Ellis, senior manager, pension policy, at the Financial Services Commission of Ontario, will provide an overview of the latest published material. It takes place November 21 to 24 in San Diego, CA. For more information, visit http://www.ifebp.org/pdf/edprog/cacfull.pdf
Effective accountability for pension management will be among the areas examined at the ‘Essential Skills for Pension Committee Members’ session. Taking place November 22 to 24 in Toronto, ON, it will also look at managing pension asset in a risk control framework and a union perspective on pension committees. For more information, visit www.federatedpress.com
Monday, August 9, 2010
The Canadian Commercial Workers Industry Pension Plan may be forced to cut retirement benefits to its members, says a report in the Toronto Star. In a letter to its active members, Canada’s biggest multi-employer pension plan reportedly says future benefits could drop 50 per cent if some employers don’t agree to negotiate adequate contributions in new contracts or in special bargaining. It says in Ontario, contributions need to be hiked by up to 40 cents an hour per worker by September 1 to maintain current levels for future benefits. Without the increase, employees at some companies could face a 50 per cent reduction in their future benefits. The plan has assets of more than $1.58 billion and provides benefits to about 20,000 retired union members and their spouses. It also has 130,000 active members working at more than 300 employers and another 150,000 deferred or inactive members.
OSFI has issued some additional questions and answers on the impact of the recently adopted regulations which include changes to the funding rules. It has an FAQ at http://www.osfi-bsif.gc.ca/. Questions range from “Will smoothing of assets be allowed under the new funding rules?” to “Do the requirements allowing for contribution holidays change as a result of the new rules’ implementation?”
John W. Thompson is chief financial officer at RBC Dexia Investor Services. Previously, he held senior roles with CIBC, where he led the financial management and transformation of a number of major business units in the U.S. and Asia Pacific regions. He was also responsible for the performance measurement and business operations of its largest customer-facing business unit, Retail Markets.
Richard Bookstaber, a Wall Street insider who predicted the current economic meltdown, will be a featured speaker at the ‘World Alternative Investment Summit Canada (WAISC) 2010.’ Recently named a senior advisor to the SEC, he is the author of ‘A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation,’ a book that pinpointed the market weaknesses that spun out of control to create today’s financial crisis. It takes place September 13 to 15 in Niagara Falls, ON. For more information, visit www.waisc.com
Monitoring DC Investment Options Examined
Cheryl Shea, manager of pensions at CP Rail, will present ‘A Case Study in Investment Manager Selection and Oversight for DC Pensions’ at the ‘CPBI 2010 Western Regional Conference – Conquering New Peaks.’ In the session, she will review how Canadian Pacific Railway has gone about the selection and monitoring of investment options for its DC pension plan. It takes place October 27 to 29 in Banff, Alberta. For more information, visit http://www.cpbi-icra.ca/
Friday, August 6, 2010
Demographics are likely to have a large negative influence on global housing prices and by extension, financial asset prices, over the next 40 years, says a working paper by the Monetary and Economic Department of the Bank for International Settlements. It examined real house price data from 22 advanced economies including Canada between 1970 and 2009 and found that demographic factors affect real house prices significantly. As a result, it predicts that the expected aging of populations in advanced economies will lower real house prices substantially over the next 40 years. However, it cautions that real house prices are affected by other factors which could well compensate for the aging population. The impact of aging on financial assets is similar to housing, says the paper, but it might arise earlier, although it could be weaker. It points out these asset price declines suggest that private and public pension systems are very similarly challenged by aging as public pay-as-you-go systems will not find enough net contributors, while private pension funds will not find enough buyers for their accumulated assets.
Institutional trading volume in fixed income soared in Canada in the past 12 months while slowing in the United States as investors, both domestic and foreign, directed new assets into Canadian bonds and global dealers that had retreated from the Canadian market during the global crisis returned in force, says a report from Greenwich Associates. Overall Canadian fixed income volume on a matched sample basis increased 42 per cent from 2009 to 2010 – a level of growth that included a 60 per cent increase in cash bond trading volumes. The spike in Canadian fixed income trading volume was driven by a surge in the trading of government bonds. Among a matched sample of 80 of Canada's largest institutions, trading volume in government bonds increased 93 per cent from 2009 to 2010 and trading volumes in provincial bonds increased 50 per cent. Growth was also particularly impressive in Canadian mortgage bonds. Although these products make up only a small part of the overall Canadian fixed income market, institutional trading volume in mortgage bonds quadrupled from 2009 to 2010.
Claymore Investments, Inc. has launched a China ETF. It seeks investment results that correspond generally to the total return (before fees and expenses) of the AlphaShares China All-Cap Index, a broadly diversified Chinese equity index invested in publicly-traded companies based in mainland China. Unlike other major China equity indices, it is diversified across all sectors and market capitalization of the Chinese economy and is less concentrated with a maximum weight of 35 per cent to any sector and five per cent to any stock. China is the leading driver of global GDP growth today and has recently surpassed Japan to become the second largest economy in the world. However, Canadian investors have less than two per cent of their portfolios invested in China.
David Finnie is vice-president, investment finance – compliance, analytics, and performance; and Tony Kalvik is vice-president, investment finance – systems and data; at the Ontario Teachers' Pension Plan (Teachers’). Finnie joins Teachers’ with more than 20 years experience in enterprise risk and capital management and was, most recently, a partner at RSD Solutions. Kalvik joins Teachers’ from PricewaterhouseCoopers where he was vice-president, banking and capital markets.Dr. John Sloan, of the University of British Columbia, will examine the interaction between Canada’s elderly population and the medical system at the 31st annual ‘Retirement Planning Association of Canada (RPAC)’ conference. Other sessions will cover topics such as innovations in housing for the older population, avoiding family feuds in estate planning, and maintaining good mental and physical health in the later years. It takes place October 1 to 3 in Toronto, ON. For more information, visit www.retirementplanners.ca
Thursday, August 5, 2010
Equity funds in Canada had their best monthly performance of the year in July, spurred by a strong rebound in financial services stocks following hints that upcoming banking regulations may not be as strict as anticipated, says Morningstar Canada. All but two of the 24 fund indices that track equity fund categories had positive returns for the month, with most of them gaining more than three per cent, says its preliminary performance data. Financials were the main drivers of returns for funds in the European equity category, which posted the best return among all fund indices with a 7.8 per cent gain. Financial services sector funds had the second-strongest return gaining 6.3 per cent.
Nearly a third of FTSE 100 companies are paying "insufficient attention" to their pension risks, says LCP’s 17th annual ‘Accounting for Pensions’ report. It says 32 companies in the FTSE100 neither made reference to pension risk nor reported having taken any steps to reduce it in their 2009 accounts. Four of those have liabilities worth more than 20 per cent of their market capitalisation. The report says it is "surprising" companies with Defined Benefit schemes had made no reference to pension risks at all, particularly considering the "inherent riskiness" of the schemes.
Current U.S. pension accounting standards cloud true economics by including a ‘funny money’ component in pension earnings, presenting a fundamental obstacle to CFOs in pursuing rational risk management, says a report from Oliver Wyman Financial Services and Mercer. ‘Funny Money: The increasing irrelevance of pension earnings’ estimates that this earnings component amounts to approximately $18 billion, or four per cent of reported earnings, at S&P 500 companies. It argues that reported pension earnings are becoming increasingly irrelevant, as the underlying economics become more transparent.
The Canada Pension Plan Investment Board has set up a joint venture with Hammerson to acquire a $291 million city of London office block. The block was acquired from German fund Union Investment. CPPIB will have a 70 per cent share in the joint venture, while Hammerson, Britain's third-largest publicly traded real estate company, will manage the asset on its behalf. The building comprises 260,000 square feet of high quality offices, retail ,and ancillary accommodation over eight floors. The principal occupier is Lloyds TSB Bank, with the remainder of the building let to seven other tenants including Milbank Tweed Hadley & McCloy and JC Flowers.
Ontario Teachers’ Pension Fund has purchased shares of Transocean Ltd., the oil rig contractor involved in the explosion that led to the oil spill in the Gulf of Mexico, considered one of the worst environmental disasters in the history of the U.S. Transocean’s shares have collapsed more than 40 per cent from its $92.3 high prior to the April 20 accident. Teachers has a 1.7 per cent equity stake in the firm. While it may face lawsuits over the spill, Teachers’ seems to be betting that the market will go up for oil and that Transocean is big enough to deal with those liabilities.
Wednesday, August 4, 2010
The Russell Canada Index had a 7.3 per cent return for the month of July 2010, bouncing back from the -10.1 per cent return for the second quarter of 2010. Despite this growth, the Canadian benchmark underperformed the Russell Global ex-Canada Index which jumped 8.1 per cent for the month of July. While both indexes showed large cap stocks outperformed small caps for the month of July, the Russell Global ex-Canada Index outperformed the Russell Canada Index at all cap tiers for the month of July 2010.
Other than compensation and promotions, retirement benefits are the next greatest factor keeping affluent employees loyal to a company, says the Merrill Lynch ‘Affluent Insights Quarterly.’ Significantly more respondents chose retirement benefits than having a good boss (45 per cent), a convenient commute (31 per cent), or the option of flex time (30 per cent). Comparable to the importance they assign to retirement benefits, affluent employees also cite healthcare benefits (58 per cent) among top reasons for staying with their employer. However, respondents believe more could be done by their employer, mainly providing affluent employees with access to financial education or advice services.
The most common communication vehicles organizations use to engage employees and foster productivity are e-mail (83 per cent) and an organization's intranet (75 per cent), says a survey by the International Association of Business Communicators (IABC) Research Foundation and Buck Consultants, A Xerox Company. However, the survey also found nearly half of employers currently communicate through Facebook, instant messaging, and Twitter. The second ‘Employee Engagement Survey’ found slight increases in the use of social media tools and more of them say they have established internal and external policies for appropriate workplace use of social media.
Wendy Poirier, health and group benefits leader, Towers Watson, will lead a discussion on ‘The New Drug Landscape’ at the CPBI 2010 Western Regional Conference – ‘Conquering New Peaks.’ She and a number of key stakeholders will be speaking from the perspectives of the plan member, pharmacy, pharmaceutical industry, and private sector on coping with drug cost increases as a result of cost-shifting from the public to private sector, the introduction of more expensive pharmaceutical/biologic products, and the aging population. It takes place October 27 to 29 in Banff, AB. For more information, visit http://www.cpbi-icra.ca/
Tuesday, August 3, 2010
Canadians have been paying close attention to Europe over the past few months as a catalyst for market volatility, says the Russell ‘Financial Health Index.’ It says investor uncertainty has stemmed from the potential impact of Greece’s debt situation on the global economy. “Investors’ confidence in their financial health declined to the lowest levels since the benchmark was established in early 2008,” says Fred Pinto, managing director of distribution services at Russell Investments Canada Limited. The index decreased in the second quarter of 2010 to the lowest level recorded to-date of 47 points (higher points indicate greater financial optimism). “These results reflect the anxiety and much less positive mood of some investors as the market has reacted to economic indicators and global factors, such as the situation in southern Europe,” explains Pinto.
The 200 largest Defined Benefit schemes in the UK cut their funding shortfall by £26 billion between June and July, says Aon Consulting, prompting it to warn that, under the switch to consumer price index (CPI) linking, around half of schemes could find themselves in accounting surpluses. It says the changes to the aggregate accounting deficit was a result of rising corporate bond yields, as well as a healthy equity market. Scheme deficits are now at their lowest level since the end of October last year. Accounting surplus, if the change to CPI increases is able to be applied in full, could prove problematic in the near future. If the legislation remains unchanged, pension schemes will, as of April 2011, no longer be able to transfer funds out of the scheme back to the employer.
Funding DB Plans Examined
Jay Mann, of CN, and Michael Peters, of the Financial Institutions Commission, will discuss ‘Funding DB Plans in Today’s World’ at the 2010 Association of Canadian Pension Management National Conference. They will look at key issues in pension plan funding as well as the expected guidelines arising from a CAPSA consultation paper. It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/national.aspx
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including September 2010 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains six worksheets:
- Commuted Values – 2009 Basis
- Commuted Values – 2005 Basis
- Commuted Values – 1993 Basis
- Marital Breakdown – CSOP 4300 (May 2009)
- Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
- Minimum Interest on Employee Required Contributions (including the 12 month average rates)
Friday, July 30, 2010
Immediate gratification may be one reason Canadians are procrastinating when it comes to retirement planning, says a report from the BMO Retirement Institute. ‘Retirement Planning: Can I Get Back To You On That?’ explores the psychology and competing priorities that stand in the way of effectively saving for retirement and finds a disconnect between Canadians’ beliefs and behaviours. In addition to placing less value on a reward in the future than a benefit in the present, often encouraging procrastination, it says 36 per cent stated that they are overwhelmed by too much information and this has been an obstacle to their retirement saving plans.
Younger adults, aged 25-34, are already concerned about having enough money to see them through retirement, says an Ipsos survey. Likely in response to these retirement concerns, the research also suggests that this generation would be particularly receptive to alternative contribution options within employer sponsored 401(k) plans. With an expectation that they will be retired for 23 years on average, four in 10 young adults (37 per cent) think it is unlikely that they will even be able to cover basic monthly expenses throughout retirement. Additionally, just one quarter (26 per cent) feels that they have enough information and resources to help them plan for retirement. The research finds that young adults are interested in alternative approaches to investing for retirement such as using annuities for 401(k) investing and low-cost exchange traded funds (ETFs).
U.S. institutional investment plan sponsors experienced a reversal of fortune in the second quarter of 2010, with a median loss of 4.7 per cent after four consecutive quarters of positive performance, says data in the Northern Trust Universe. "The second quarter for investment program sponsors was a reminder that success can be unpredictable, even when the economy is improving," says William Frieske, senior performance consultant, investment risk and analytical services. The median return for corporate pension plans was -5.0 per cent and public pension funds experienced a median return of -5.7 per cent for the quarter. For one-year returns, corporate pensions were up 14.8 per cent, and public funds gained 13.8 per cent.
Tri Fit has partnered with LifeMark Health to conduct flu clinics and biometric screening services in the workplace. These confidential services are available across Canada and provided by registered nurses. Individual counseling is provided to employees based on the results.
Developing an employee intranet to enhance benefits communication will be a session at the Strategy Institute’s ‘Communicating Compensation & Benefits.’ Sessions will also look at communicating the rewards program brand to employees and communicating compensation, pension, and benefits changes. It takes place November 29 and 30 in Toronto, ON. For more information, visit www.federatedpress.com
Thursday, July 29, 2010
Modern Portfolio Theory (MPT), while called into question during the financial crisis, remains deeply relevant, says State Street’s ‘Rethinking Asset Allocation,’ the latest in its ‘Vision Focus’ series. However, it should be updated with new techniques that take advantage of the vast computational and information aggregation capabilities available in contemporary financial markets. The central concept of MPT – the balancing of risk and return assumptions – is arguably more relevant than ever. Risk management has moved to centre stage and managing tail risk (the risk of non-normal returns) may emerge as a new frontier of asset allocation best practice. Investors have various methods of optimization at their disposal, including classic mean-variance. But, with increased incidence of outlier events, they may want to consider full-scale optimization. That said, managing for tail risk with sophisticated overlays and hedges can be expensive, so investors, in a sense, may be forced to optimize their use of optimization.
Pacific Equity Partners is purchasing CIBC Mellon Trust Company's issuer services business (stock transfer and employee share purchase plan) through PEP's portfolio company, Canadian Stock Transfer Company Inc. With $5 billion of assets under management, PEP has made significant investments in businesses with specialist operations in share registry services, superannuation administration, and investor relations. PEP has formed a network of strategic partnerships under Link Market Services which has expanded beyond Australia into global markets such as India, South Africa, the United Kingdom, the United States, and, now, Canada.
Harry Markopolous, the Madoff Whistleblower, will be a featured speaker at the ninth annual ‘World Alternative Investment Summit Canada.’ His book, ‘No One Would Listen,’ details the 10-year quest he and his team undertook to prevent the biggest financial disaster of the 21st century. He spent nine years trying in vain to alert the U.S. Securities and Exchange Commission to the Bernie Madoff scheme. It takes place September 13 to 15 in Niagara Falls, ON. For more information, visit www.waaisc.com
‘Emerging Trends Impacting Workplace’ will be one of the topics examined at the ‘Health Work & Wellness Conference 2010.’ Karen Seward, executive vice-president, marketing and business development, at shepell*fgi, will examine the issue. It takes place September 29 to October 2 in Vancouver, BC. For more information, www.healthworkandwellness.com
Wednesday, July 28, 2010
The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) is calling on the TMX Group Inc. to do more to manage the conflicts of interest that arise from the fact that it both profits from the business of listing companies and regulates that listings function. In a report, it examines the way seven other exchanges have dealt with these conflicts, including the New York Stock Exchange and Nasdaq in the United States, along with markets in the UK, Japan, Hong Kong, Australia, and Scandinavia. The report concludes that those exchanges have all implemented measures to deal with these conflicts, including corporate governance policies, changes to organizational structures, and other corporate policies and procedures.
The Quebec government has announced its intention to increase the premium rates for the Quebec Parental Insurance Plan (QPIP) by 6.25 per cent effective January 1, 2011, says a Towers Watson ‘Client Alert.’ The proposed increase is necessary to ensure that, by 2012, contributions will be sufficient to cover QPIP’s costs. Employers are encouraged to provide feedback to the government on the implications of this cost increase for their organizations and their employees during the consultation period before the proposed new rates are approved. The proposed premium rate increase means the maximum annual premiums will be 45 per cent higher next year than they were when the QPIP was introduced less than five years ago.
Pension funds, endowments, and mutual funds are spending more on stocks than at any time since the start of the bull market, says a Citigroup survey. Institutions made equities 68 per cent of their holdings in July, up from 63 per cent in April. This is the highest level in 15 months. The survey found pension funds, endowments, hedge funds, and mutual funds say they're preparing for a rally. Fifty-four per cent said U.S. equities may gain 10 per cent to 20 per cent, compared with 50 per cent in the previous reading.
Longevity risk is the second-most important risk factor for pension fund sponsors and trustees, but it is also the least understood, says a MetLife Assurance survey. Its ‘UK Pension Risk Behaviour Index’ showed most respondents acknowledged they had failed to manage longevity risk effectively. It says the survey clearly showed that pension scheme sponsors and trustees were "struggling" to manage longevity risk. Part of the problem may be a lack of understanding of the options available to better manage this risk, such as ensuring actuarially sound adjustments for early retirement, encouraging later retirement, and exchanging higher fixed benefits as a substitute for indexation.
Risk management methods now in vogue among corporate Defined Benefit plan executives don't deliver what they promise, says a report from J.P. Morgan Asset Management. Three of the most popular risk-management approaches used by many corporate plans – long duration fixed income allocation, synthetic duration extension, and dynamic asset allocation – don't provide enough protection in controlling downside pension contribution and expense risks when used separately, it says. Instead, they should use a three-in-one approach that combines the strategies.
Investor confidence rose 4.8 points to 96 from June’s revised reading of 91.2, says the State Street Investor Confidence Index for July 2010. Confidence increased in North America, gaining 5.4 points to 99.9 from June’s revised reading of 94.5. Among European investors, confidence rose 2.4 points from 97.6 to 100.0 and, in Asia, confidence ticked up 2.1 points from 102.4 to 104.5.
Mitch S. Frazer, a partner at Torys LLP, and William Kyle, senior vice-president, group retirement services, at the Great-West Life Assurance Company, will be among the featured speakers at the ‘29th Annual ISCEBS Employee Benefits Symposium.’ Frazer will present a legislative update focusing on recent court cases, regulations, and proposed legislation that will affect Canadian plans. Kyle will look at the strength of CAPs in Canada’s retirement market. It takes place October 3 to 6 in Charlotte, NC. For more information, visit www.iscebs.org/symposium
What Canadian asset managers need to know about Bermuda as the offshore jurisdiction of choice will be the focus of a Hedge Fund Hotel seminar. It will look into the practical considerations which asset managers must address when establishing a Bermuda vehicle. Speakers will include Thomas Caldwell, chairman and CEO of Caldwell Financial Ltd., and Greg Wojciechowski, CEO of the BSX. It takes place September 16 in Toronto, ON. For more information, visit www.hfhto.com
Tuesday, July 27, 2010
Home equity can represent a double-digit boost to retirement income for those that are mortgage free, says a Statistics Canada study. It says that by retirement age, 75 per cent of households are homeowners and, of those, 74 per cent own their homes without a mortgage. Looking at data from the ‘2006 Survey of Household Spending’ and the 2006 Census, the study estimates that when the value of home ownership was taken into account for households headed by individuals in the age group 60 to 69, it increased incomes by $5,500 or 10 per cent. For households headed by those in the age group 70 and over, incomes rose by $5,400 or 12 per cent.
The 3.2 million participants in Defined Contribution plans The Vanguard Group recordkeeps ended 2009 in relatively good retirement shape despite the economic downturn. Its ‘How America Saves 2010’ report says many participants in 2009 experienced higher account balances, traded minimally in response to market volatility, increasingly diversified their assets through automatic investment programs, and protected their retirement nest egg when they left their employer. The average account balance at the end of 2009 was $69,000, up 23 per cent from year-end 2008.
CPPIB Buying Tomkins
Pinafore Acquisitions Ltd., a company jointly owned by Onex Corp. and the Canada Pension Plan Investment Board, is buying Tomkins PLC. Tomkins is a manufacturer of products for industrial, automotive, and building products markets around the world. It has 25,000 employees in 25 countries.
Balanced pooled funds in the UK ended their run of positive quarters with a negative return of -8.9 per cent for the second quarter, says BNY Mellon Asset Servicing’s quarterly pooled fund survey. This is the first negative quarter that it has recorded since the first quarter of 2009. However, the 12-month median return still remains positive at 18.6 per cent. In the second quarter, 2010 returns were negative for all the major equity sectors.
Monday, July 26, 2010
Quebec will pay for the cost of treatments related to assisted procreation for all women of childbearing age, regardless of their marital status or sexual orientation, says a Mercer ‘Client Alert.’ All costs related to assisted procreation activities – including the extraction of sperm and ova, in vitro fertilization, and the transfer of embryos – will be covered by the Quebec Health Insurance Plan. This legislative modification is expected to increase the cost of drug coverage for most employers with employees in Quebec. Some employers may also wish to extend this new coverage to employees in other provinces thereby further increasing costs. The purpose of this legislation is to regulate medical practice in this area and protect the safety of mothers and their children born of assisted procreation; namely by restricting the number of embryos implanted at the same time.
Despite 1,000 points drops in both the TSX and the Dow Jones Industrial Average between the beginning of May and the end of June, a double dip in the economy is unlikely, says Standard Life Investments. While the fiscal developments in Europe and the slowing of the U.S. economy clearly present downside risks, especially now that the home buyers tax credit in the US has expired, it says this is unlikely because investors should expect the resolution of the European bank credit/liquidity issues, confirmation that the U.S. economy is growing even after manufacturers have replenished their inventories so it is not just an inventory-led recovery, and the ability of U.S. consumers to access credit and they have a willingness to use it to ease downward pressure on the economy.
Liability Driven Investment (LDI) strategies can go a long way towards solving the funding volatility issue at Canadian pension funds, says Duncan Burrill, secretary/treasurer at the CBC pension board of trustees. While it is no magic bullet, LDI does help reduce surplus volatility and deal with cash flow issues that may arise as it gives a pension plan assets a similar interest rate sensitivity to its liabilities. This makes life more stable for the sponsor and helps them deal with the longer term pension payment cash flow issues that may occur. He is speaking at the marcus evans ‘Canadian Institutional Investment Summit 2010’ taking place in Ottawa, ON, October 18 to 20.http://www.cpbi-icra.ca/
Friday, July 23, 2010
Canadians are bullish about investment markets and global opportunities in particular, says national research from Franklin Templeton Investments Corp. Of Canadians surveyed who expressed an opinion, 54 per cent expect stock markets to rise, while only 19 per cent believe markets will fall. Emerging international markets such as Brazil and China were identified by 61 per cent as presenting the greatest investment opportunities in the next decade. The global sentiment reflects the bias of Canada's major institutional investors. For example, publicly-listed global equities make up 78 per cent of the Canada Pension Plan's equity portfolio, says Don Reed, president and chief executive officer.
Faltering global equity markets contributed to a decline in pension assets in the June quarter, says a survey by RBC Dexia Investor Services. The decline in the second quarter comes after four consecutive quarters of positive returns. Canadian pension plans lost 3.2 per cent in the three months ending June 30, 2010, erasing first quarter gains while bringing year-to-date results into negative territory at 1.4 per cent. Non-Canadian equities were the hardest hit asset class, dropping 8.3 per cent in the quarter while only outperforming the MSCI World Index by 0.2 per cent. Exchange rates were a key factor as the MSCI World Index fell by 11.2 per cent in local currency terms, but a weaker Canadian dollar against most major currencies helped soften the blow for unhedged pensions.
There is a looming shortfall of retirement income for lower middle and middle class Canadians, says a research paper by the University of Calgary’s Haskayne School of Business. ‘Should Government Facilitate Voluntary Pension Plans?’ calls on regulators to carefully consider the role of government in providing a new way for Canadians to save for retirement. It examines the benefits of creating a regulated Voluntary Pension Plan (VPP) that would allow earners and employers to contribute to a large, co-mingled investment pool. The VPP would face the same regulation as employer sponsored pensions, but would bring the benefits of being able to invest in a wider variety of instruments to a wider audience, thereby mitigating risk. It argues that the CPP and other programs provide adequate retirement income for low income earners and that high income earners use the opportunities they are afforded under the current system to save and invest adequately for retirement. However, those in the middle do not have sufficient disposable income to adequately save enough to provide a middle class retirement.
Canadian investors tend to have a strong home bias, which leads to a high concentration of exposure to commodities, says Lisa Myers, lead manager of the Templeton Growth Fund, Ltd. Speaking at its annual ‘Investment Outlook and Opportunities Forum,’ she said advisors should help clients understand the importance of diversifying their equity holdings. “With that kind of concentration and correlation of the Canadian market and dollar to commodities so reliant on other countries, can we as Canadian investors afford to have such concentrated exposure?” said Myers. She sees strong investment opportunities in the U.S., Europe, and emerging markets with stocks in the U.S. and Europe trading at a 30 per cent to 35 per cent discount to their historic price-to-earnings averages. Emerging market are around their historical averages, but have the potential for much stronger and consistent future growth.
Homewood Acquires Human Solutions
Homewood Corporation has acquired Human Solutions International Inc., a Vancouver, BC-based provider of employee assistance programs. It will be integrated with Homewood Employee Health to form a new business – Homewood Human Solutions. Edgardo Pérez, Homewood’s chief executive officer and president, says “the acquisition of Human Solutions will provide Homewood with a broadened client base, expanded product lines and services, and a larger network of professionals for out-patient and after-care services.” Human Solutions has more than 1,200 corporate clients in Canada.
A recovery of the global economy could take longer than expected and investors would be prudent to protect their portfolios from deflationary risks in the near term, says Stephen Lingard, co-lead manager of Franklin Templeton’s Quotential Program. He told its annual ‘Investment Outlook and Opportunities Forum’ that central banks are not likely to raise interest rates aggressively in the next three to six months and rates could essentially stay lower for longer. In some markets, deflation is more of a concern than inflation. While inflation will eventually return, he said it could take years.
An Ontario Divisional Court has upheld an arbitrator’s decision that exempts employers who have accepted the financial responsibility of providing equal or better benefits to their employees from making severance payments, says a Heenan Blaikie ‘Pension Pulse.’ It was reviewing an arbitration award concerning entitlement to severance pay under the Ontario Employment Standards Act, 2000, for Kitchener Frame employees who retired with unreduced pension benefits. When it closed, the union had negotiated generous plant closure benefits for its members, including special early retirement provisions, supplementary bridge benefits equivalent to the amount of Old Age Security benefits payable from age 65, and an early retirement allowance. The issue was whether employees who retired on pension as part of the closure were entitled to severance pay under the ESA. In comparing the commuted value of the pension benefits earned by the Kitchener Frame employees, the arbitrator found that the benefits upon plant closure were actuarially unreduced. Therefore, the employees were not entitled to severance benefits under the ESA.
Dividends Can Enhance Returns
Stocks market gains could be limited this year, so investors should look to dividend-paying stocks to enhance their returns, says Juliette John, lead manager of the Bissett Canadian Dividend Fund. She told Franklin Templeton’s annual ‘Investment Outlook and Opportunities Forum’ that dividend-paying stocks could substantially improve a portfolio’s total returns in the long run. Over time, she said stocks of companies that pay dividends tend to outperform those that don’t. This is due, in part, to their more stable conservative business models and discipline in how they allocate capital.
Sun Life Financial has concluded a two-month campaign to educate clients about the benefits of reducing paper use in the claims process. Between May 3 and June 27, more than 50,000 group benefits plan members registered for direct deposit and paperless claim statements. To date, nearly 600,000 Canadians are registered for paperless claim statements with their group benefits plan. In recognition of the plan members who registered for paperless claim statements during the campaign, it has partnered with Tree Canada, a charitable, not-for-profit organization that provides education, technical assistance, resources, and financial support to plant and care for trees. It is donating $1 for every plan member that registered during the campaign. This will fund the planting and maintenance of 12,580 new trees.
Thursday, July 22, 2010
Employers are more confident than workers or labour representatives in the ability of employees to understand health and safety policies, says the Conference Board of Canada’s ‘What You Don’t Know Can Hurt You: Literacy’s Impact on Workplace Health and Safety’ survey. “This gap in perception creates the potential for accidents in the workplace to occur. Because employers are confident in their workers’ literacy levels, they are less likely to see the need for training to upgrade employees’ knowledge and understanding of health and safety practices,” says Alison Campbell, principal research associate. Many employers create manuals and other documents to set out health and safety practices, but relying on written materials leaves organizations open to the risk that their employees may not be able to read and understand them. “Without even realizing it, some individuals with low literacy skills put themselves, their co-workers and the public at risk,” says Campbell.
Gold prices could top $1,500 per ounce by the end of this year, says Nick Barisheff, president and CEO of Bullion Management Group Inc. Speaking at an event it co-hosted with mine development company Sage Gold Inc., he said the recent rise in gold prices has been fuelled by investors around the world who have lost confidence in the financial system and are increasingly turning to gold as a safe haven. Contributing to its appeal as is the fact that it’s a hard commodity in an environment where governments are printing paper currencies at an accelerating pace. Also putting upward pressure on the price of gold is that production reached a peak in 2001 and it has been on a downward trend since.
The CPP Investment Board will go to court if Magna International Inc. gets shareholder approval for a $1.1-billion deal with founder Frank Stronach. It intends to oppose the transaction at the Ontario Superior Court, if a routine fairness hearing on the matter takes place following Friday’s shareholder vote. CPPIB will vote against the proposal, but doesn’t have enough shares to sway the decision by itself. Magna wants to compensate Stronach and his family trust for relinquishing their voting control of the publicly traded company. Under the plan, Stronach would receive $300 million in cash, $120 million in consulting fees over the next four years, nine-million single-vote shares of Magna, and control over a new joint venture focused on electric vehicles. A number of Canadian pension managers, including CPPIB, have objected to the premium that Stronach will receive.
Infrastructure managers raised $6.7 billion from global investors in the first quarter, the highest level of fundraising since 2008. However, overall deal flow is still at its lowest level since 2006, says research by Preqin. This is the fourth consecutive quarter-on-quarter increase. Despite the rebound in flows, deal activity remained low. Unlisted infrastructure managers reported completing 23 deals, down from 71 deals just two quarters ago and the lowest number since the start of 2006. Europe was the most active region with 10 deals completed; North America followed with seven; Asia, three; South America, two and Australasia, one.
limited to – investment strategy, regulation, trading, risk management, risk measurement, and manager selection. Papers must be submitted to AIMA Canada, by September 30. For more information, visit www.aima-canada.org
Wednesday, July 21, 2010
Hewitt Associates is acquiring EnnisKnupp in a move it says will boost its investment consulting capabilities in the U.S. and support its global growth plans. Once this transaction is complete, Hewitt will have nearly $3 trillion in assets under advisement. EnnisKnupp has been in investment consulting services for almost 30 years and is an established large pension fund franchise in both the public and private markets in the U.S.
Both investment management fees (IMFs) and monthly per member fees (which may be applicable if a plan is a Defined Contribution plan administered by an insurance company) may have the Harmonized Sales Tax (HST) applied to them, says a Proteus ‘Pension Update.’ The HST on IMFs will have the effect of further decreasing the fund’s unit value. Fund companies will calculate the amount of HST to apply dependent on either the province of registration for the plan sponsor or a blended rate depending on the provincial distribution of members. The HST is now in effect in Ontario, British Columbia, New Brunswick, Nova Scotia, and Newfoundland and Labrador.
U.S. regulatory reform means changes for the credit rating business, including exposing it to new liabilities, says Fitch Ratings. It says that under the U.S. reform provisions, issuers will have to get its permission to include ratings in registration statements or prospectuses. However, it fears that this would expose the firm to new liability. The Canadian Securities Administrators has proposed its own new regulatory regime which would require rating agencies to adopt a code of conduct in line with international standards and establish certain policies and procedures, but it does not seek to impose greater civil liability upon them.
Most people understood that the economic slowdown – combined with the implosion of the banking/investment community – would have a negative impact upon their pensions, as evidenced by double digit percentage losses commonplace in pension funds investment for 2008-2009. However, this is, in reality, only half the problem in the ongoing pension fund crisis says Ryan ALM of New York, an asset/liability management firm. It says current FASB/GASB accounting rules permit assets to be smoothed out over a defined period of time which tends to overvalue assets under the current financial climate, plus undervalues liabilities significantly. As a result, many pension trustees were told that their funds were fully funded when, in fact, they had deep deficits. This led to inappropriate asset allocation and benefit and contribution decisions.
Tuesday, July 20, 2010
Hedge funds should no longer be seen as just an alternative asset class and UK pension funds should consider long/short equity managers as part of their overall equity allocation, says Hewitt Associates. It says the step to include long/short equity is a natural progression from, and complement to, unconstrained active equity management. Since hedge funds have an extra degree of freedom to use shorts, this can add value, especially in volatile and bear markets. During the credit crisis, it says the hedge fund industry was hit by significant redemptions from many private investors. This experience underscored the importance of having a professional client base such as pension funds and they, in turn, became increasingly aware of the value hedge funds can add to their portfolios.
Onex Corp. and the Canada Pension Plan Investment Board are joining forces on the proposed takeover of a British manufacturing and engineering company. While they have not launched a formal bid, they have proposed a deal for Tomkins PLC.Laurence Waring is vice-president, investments, at the Local Authorities Pension Plan in Alberta. He has extensive experience in the field of investment management, most recently with his own consulting firm Waring Advisory Services, Inc. Previously, he was director, investments for the Universities Academic Pension Plan and director, external fund management, for the government of Alberta’s finance department. Beth Spark is vice-president, policy and research. She was formerly the human resources advisor for pensions at the city of Calgary and has done pension consulting and policy work for the Alberta Pensions Services Corporation, ATB Financial, the Universities Academic Pension Plan, and the Special Forces Pension Plan.
Monday, July 19, 2010
A growing number of hedge fund investors now prefer to allocate funds directly into the asset class, says research by Preqin. It found 35 per cent favoured direct allocation, despite most institutional investors having started out with exposure to fund of funds. The survey found 64 per cent of investors gained initial exposure to the asset class through a multi-manager vehicle but only 36 per cent of respondents still invested solely through funds of hedge funds. Most investors had moved out of fund of funds following the financial crisis, with 80 per cent of funds making the switch during or after 2008.
Graydon Watters, of the Financial Education Institute of Canada; and Hugh Kerr, of the ACPM’s advocacy and government relations committee, will discuss ‘Will Canadians be Ready for Retirement?’ at the ‘2010 ACPM National Conference.’ This session will examine two approaches to bridge the gap between plan member expectations and the reality that their saving patterns spell. One approach will look at the opportunities financial education provides, while another will present case studies in plan design changes to address behavioural obstacles to saving. It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/national.aspx
Friday, July 16, 2010
The Financial Services Commission of Ontario (FSCO) has a new policy on the management and retention of pension records by the administrator, says a Blakes ‘Alert.’ The policy is of broad application, covering all Ontario-registered pension plans, regardless of size or type. It is primarily intended to provide plan administrators with information on their obligations and responsibilities related to the management and retention of pension plan records. It also provides the administrator with practical guidelines and instructions on prudent record-keeping practices. While of primary interest to sponsors and administrators of plans registered with FSCO, the Ontario Records Policy may also provide useful guidance for sponsors and administrators of plans registered with other pension regulators who have not issued records retention policies.
The ACPM is looking for nominations for this year’s ‘Award for Exceptional Volunteerism.’ It honours an individual for their outstanding contribution in helping ACPM to reach its goals and is presented at its national conference in September. The 2009 winner of this award was Andrew Harrison, of Borden Ladner Gervais LLP. Nominations must be made ACPM members who can find more information at http://www.acpm.com/default.aspx. Deadline for nominations is August 31.
The use of target-date funds is more likely among participants who are younger, have lower account balances, and have shorter tenure at their current job, says a study by the Employee Benefit Research Institute. It says this is because new workers are the most likely to be automatically enrolled in their employer’s 401(k) plan, with a TDF often being the default option. The study focuses on 401(k) participants who were in plans that offered TDFs in 2007 to see whether they remained in TDFs, moved out of TDFs, or moved into TDFs if they were not already using them. Of those participants having an allocation to TDFs in 2007, 93.9 per cent still had some of their account balance allocated to TDFs in 2008. Nearly 10 per cent of participants who were in a plan in 2007 that offered TDFs but did not use them in 2007 were using them in 2008.
Jovian Capital Corporation and its subsidiary AlphaPro Management Inc., the manager of the Horizons AlphaPro exchange traded funds, have launched an actively managed corporate bond ETF – the Horizons AlphaPro Corporate Bond ETF. The investment objective of the Corporate Bond ETF is to seek long-term moderate capital growth and generate high income. It will invest primarily in a portfolio of debt securities of Canadian and U.S. companies, directly or through investments in securities of other investment funds, including exchange trade funds.Claude Paquette is director, Defined Benefit administration, at Buck Consultants. He has more than 10 years of consulting experience with major consulting firms in the area of retirement benefits and has a particular expertise on pension administration matters.
Thursday, July 15, 2010
The Ontario Teachers' Pension Plan (Teachers') has applied for leave to intervene before the Supreme Court of Canada over the proposed Canadian Securities Act. In materials filed with its motion for leave to intervene, Teachers' says while it understands the factors which impact the integrity and credibility of the Canadian capital markets, “effective regulation ought to be considered both from a legislative and policy perspective and from an operational effectiveness and cost perspective.” In its 2008 submission to the Hockin panel, it set out its concerns regarding the existing passport system which endeavours to harmonize provincial policy and regulation. While acknowledging that the passport system had somewhat reduced complexity and costs, Teachers' noted the passport system has failed to lead to consistency in policy and legislation and has, therefore, continued to create unnecessary costs and inefficiencies in the regulatory process. The Supreme Court is expected to hear arguments in early 2011 about the constitutionality of the proposed act to establish a national regulator.
Interest payments on projected debt levels could starve economies in the developed world of savings needed for growth, says Francis Scotland, director of global macro research at Brandywine Global Investment Management. Speaking at Legg Mason Canada’s ‘Global Investment Forum,’ he said in the UK, for example, interest payments on debt could reach 25 per cent of GDP by 2040, while savings will be less than 15 per cent. When all of a countries savings are needed to repay national debt, there is now growth. This kind of “debt trap” could turn into sovereign insolvency. However, the “tipping point” is unknown. Japan, for example, has been in a “debt trap” for 20 years and for the past 12 years its nominal GDP has been falling while the bond rate moves sideways. Typically when GDP is falling, interest rates fall, stimulating the economy. However, this has not taken place in Japan and the only reason its economy has survived is the high personal savings rate. While he doesn’t know what the end point is, “when it comes, it will be bad.”
Plan sponsors, pension committees and boards of trustees, and actuaries will need to prepare themselves for greater involvement in the actuarial valuation process as a result of revisions to the Standards of Practice covering the valuation of pension plans, says a Morneau Sobeco ‘News and Views.’ It says plan sponsors can, for example, expect to see increased emphasis on disclosure such as disclosure of rationales for methods used and method changes. Plan sponsors are also likely to become more involved in the valuation process as the terms of the actuary’s engagement by the plan sponsor can factor into the valuation’s preparation to a much greater degree than under the current standards. The changes will become effective December 31.
The Canada Pension Plan Investment Board has made an conditional offer to Intoll Group, the Australian company that owns a stake in the Highway 407 toll road north of Toronto, ON. If the deal goes through, Intoll would be made private, becoming the CPPIB's largest direct investment. This proposal is non-binding and the decision to make a formal proposal could be made in a few weeks.
Ivanhoe Cambridge, the real estate arm of the Caisse de depot et placement du Quebec, and Oxford Properties Group, a division of Ontario Municipal Employees Retirement System (OMERS), have decided to break up a 10-year mall ownership partnership. The two jointly own six shopping malls across Canada. When the process is complete, OMERS will have total ownership of malls in Newmarket, ON, and Calgary, AB, and Ivanhoe will own malls in Quebec City, QC, Newmarket, ON, Oshawa, ON, and Vancouver, BC. The decision was made, in part, as a result of the capital crunch in 2009 which prompted both to decide to rebalance their interests.
The Empire Life Insurance Company has made two new segregated funds available in Class Plus, its guaranteed minimum withdrawal benefit feature within its segregated funds product. The balanced funds combine its flagship equity fund with core fixed income exposure for diversification. It launched Class Plus in October 2008 in response to the growing demand for a solution that provides growth potential and guaranteed retirement income for life.Robert Breckon is senior advisor with knowledge and expertise in the health and life sciences industry at Teachers' Private Capital, the private equity department of the Ontario Teachers' Pension Plan. He has 30 years of merger and acquisition, corporate development, and operating experience in the global health and life sciences sector, most recently as senior vice-president, strategy and corporate development, at MDS Inc. Olivia Steedman is vice-president, infrastructure, at the Ontario Teachers’ Pension Plan. She joined Teachers’ in 2002 from PricewaterhouseCoopers, where she was assistant vice-president in the project finance and privatization group.
Wednesday, July 14, 2010
The Canada Pension Plan’s reserve fund was one of the best-performing funds in terms of investment returns during the 2005-09 boom-and-bust period, says a report by the Organization for Economic Cooperation. The CPP, which had one of the highest exposures to equity investments in the OECD, was a top performer in the analysis of after-inflation returns for 13 selected OECD countries over the 2005-2009 period. The average annual return was 3.8 per cent, second only to Poland’s four per cent. While the CPP had one of the highest exposures to equities in the plans analyzed, other national public pension plans with even higher equity exposure were among the poorest performers. For example, Ireland – with only about five per cent of pension reserves in fixed income – had an average annual loss 0.6 per cent over the period. As a result, it says further study is needed to draw conclusions about how greater exposure to inherently-riskier equity markets affects public systems.
Institutional investors have turned bearish in their outlook for the global economy and corporate earnings, says the latest edition of the BofA Merrill Lynch ‘Survey of Fund Managers.’ It found 12 per cent of respondents predict the global economy will deteriorate in the next 12 months, the first negative forecast since February 2009. Four per cent expect corporate profits to worsen in the coming year, which is also the first negative outlook in more than a year. With this gloomier outlook, investors’ risk appetite has dipped and they are moving into cash and reducing exposure to cyclical stocks. Cash now comprises 4.4 per cent of an average portfolio, up from 4.1 per cent in May.
Nearly one-third of Canadians do not have a savings plan in place, says a Scotiabank survey. Only 55 per cent of people surveyed told pollsters they save on a regular basis and nearly one-in-five Canadians don’t have any savings at all. As well, one-quarter of Canadians live day-to-day and don’t think about saving money. Many said they would like to save more, but there are too many competing demands for their money.
The Ontario Teachers' Pension Plan (Teachers') still intends to vote against Magna's proposed transaction to eliminate the company's multiple-voting shares. It says that the additional disclosure provided by Magna in its revised proxy-circular issued does not provide any further assurance that the proposal is fair to subordinate voting shareholders. Teachers' believes that the cost of the proposed transaction is unprecedented and excessive at a 1,800 per cent premium to the controlling shareholder. Moreover, if successful, the proposed transaction will eventually establish the same dual-class structure for the electric car (E-Car) venture that Magna is trying to eliminate through this transaction.
Industrial Alliance Insurance and Financial Services Inc. was chosen by AkzoNobel Canada to manage the pension plans for some 2,300 Canadian employees working in the paint and chemical product sector. The agreement includes Defined Contribution registered pension plans (RPP-DC), registered retirement savings plans (RRSP), and non-registered plans. Éric Gagnon, manager of global compensation, says the range of products and services offered was adapted to its brand image, allowing its employees to identify with it and to make it their own pension plan.
Of the 95 per cent of organizations that buy, provide, or both buy and provide outsourced services and functions, fewer than half are able to effectively manage risk of outsourced projects, says a study by ESI International. It found with nearly two-thirds of organizations spending up to half of their budgets on outsourcing, there is a need to refine risk management capabilities in order to positively impact bottom line performance. As well, organizations indicated shortfalls in effectively using requirements management and development, a critical area for managing outsourcing risk with 75 per cent of organizations not always clearly defining requirements of outsourced projects.
Wayne Millar is assistant vice-president, product development, group benefits, at Sun Life Financial. He is accountable for the innovation, development and execution of the group benefits business product and solutions strategy. In group retirement services, Nadia Darwish is vice-president, client relationships and business development; Kate Nazar is assistant vice-president, client relationships; and Jennifer Katzsch is regional director, client relationships. Darwish joined the firm in 1999, Nazar joined in April, and Katzsch has been at the company since 2000.
Jeff Davis is vice-president and associate general counsel at the Ontario Teachers’ Pension Plan (Teachers’). Responsible for providing legal advice and representation in the management of the pension fund, he joined Teachers’ in 2004 and was, most recently, senior legal counsel, investments.
Rob Lewis is a senior consultant in the Toronto, ON, office of Hewitt Associates. He is not new to the firm. His consulting career spans more than two decades, with the last 16 years spent in HR consulting, including 10 years with Hewitt in Boston.
Tuesday, July 13, 2010
Aon Corporation and Hewitt Associates, Inc. have approved a definitive agreement under which Hewitt will merge with a subsidiary of Aon. Following the close of the transaction, Aon intends to integrate Hewitt with Aon Consulting, its consulting and outsourcing operations, and operate the segment globally under the newly-created Aon Hewitt brand. Aon believes the combination of Aon and Hewitt creates a global leader in human capital solutions, benefiting clients, associates, and stockholders in several ways including providing significant cross-sell opportunities to leverage Hewitt’s predominantly large corporate client base with Aon’s predominantly middle market client base.
Mutual fund, hedge fund, and private equity managers fear the impact of inflation and are skeptical about commercial real estate, says a survey by RBC Capital Markets. It says the debate on inflation versus deflation rages on, with 45 per cent of respondents saying that inflation poses a greater threat to portfolio performance than deflation (chosen by 34 per cent). Sixty per cent expect inflation to be higher over the coming year. The respondents also expressed skepticism about commercial real estate, with 46 per cent saying that commercial real estate risk is higher this year than last. Just one-quarter (24 per cent) plan to increase their allocation to commercial real estate in the coming year.
Pension fund allocations to alternative assets have increased almost three-fold over the past 10 years, says Towers Watson research. Its analysis shows allocations to these asset classes have continued to rise and now account for 17 per cent of all pension fund assets globally, up from six per cent 10 years ago. Real estate managers account for around 52 per cent of assets, down from 58 per cent in 2008. Private equity fund of funds have grown to 21 per cent from 20 per cent in 2008 and fund of hedge funds have held steady at 13 per cent. Infrastructure is at 12 per cent, up from nine per cent in 2008. The majority (51 per cent) of alternative assets managed on behalf of pension funds are invested in North America, while a third are invested in Europe and nine per cent in Asia-Pacific.
Defined Contribution plan participants who utilized automatic rebalancing and automatic deferral increase during the recent market downturns realized greater account balance increases, says an analysis of Mercer’s database. Data from October 2008 through April 2010 shows the average account balance increase for all participants was 34 per cent, while the average increase for participants deferring into their plan and who made a deferral increase was 43 per cent. Participants who used the automatic rebalancing feature saw an average increase of 47 per cent during this time period. Deferring participants who utilized automatic deferral increase and automatic rebalancing saw an average account balance increase of 60 per cent. Given these results, Mercer believes plan sponsors should ensure that their plan designs encourage positive saving behaviours by offering tools that automatically rebalance investment portfolios and increase deferral rates.
William (Bill) R. C. Tresham is chief operating officer at the Caisse de dépôt et placement du Québec’s real estate subsidiary – SITQ. Most recently, he was partner and chief operating officer at Callahan Capital Partners, a private equity real estate company based in Chicago, IL. Prior to that, he was with Trizec Properties, Inc. in Montreal, QC, and Chicago.The CAIA Canada Chapter is holding a session designed to provide an introduction and insight into Canadian and international investment into private and public real estate opportunities (including real estate hedge funds). Presenters at the ‘CAIA Canada Real Estate Round-Up’ are Laler C. DeCosta, director, client portfolio manager, Invesco; Peter Cuthbert, vice-president, real estate, at Standard Life Investments; and J.T. Straub, senior vice-president, institutional clients, ING Clarion. It takes place July 22 in Toronto, ON. For more information, contact email@example.com
Monday, July 12, 2010
British Columbia will reduce the price of generic prescription drugs to 35 per cent of the brand price. The move comes as a result of an agreement between the government and the B.C. Pharmacy Association and the Canadian Association of Chain Drug Stores. Generic drug prices in B.C. average about 65 per cent of the brand-name cost. The new prices in B.C. will apply only to drugs covered by PharmaCare, but will also be available to employee and union drug plans and customers who pay for drugs out of pocket. The deal will also increase dispensing fees for pharmacists to help them cover the decline in revenue from the reduced prices.
Institutional investment managers have moderated their expectations for global growth, says a quarterly survey by Northern Trust Global Advisors (NTGA), with two-thirds of those surveyed expecting sovereign debt concerns about Portugal, Italy, Ireland, Greece, and Spain to weigh on global markets for the next six months or longer. In a significant shift from the prior four quarters, 75 per cent of those surveyed anticipate that global growth will remain the same or decelerate, while 25 per cent still expect growth to accelerate. Institutional managers are less concerned about the prospect of inflation or rising interest rates. Managers are also increasingly optimistic about market valuations. For the first time since the second quarter of 2009, the majority of managers (62 per cent) stated that the U.S. equity market, as measured by the S&P 500 Index, is undervalued. Select areas of international markets are also seen to be attractive with 40 per cent of managers now believing that emerging market equities are undervalued.
Canadian employers are focused on reigning in prescription drug costs and educating their employees, says a survey by the International Foundation of Employee Benefit Plans. “Prescription drug costs are a leading reason for healthcare cost inflation and employers are actively combating drug cost increases,” says Sally Natchek, senior director of research. “At this point, it seems inevitable that drug prices will be overhauled in Canada, most likely through the efforts of both provinces and private employers.” Compared to 2009, Canadian employers in 2010 are more apt to promote the use of generic drugs, place limits on specialty or biotech drugs, and use high-amount claims pooling, lowest-cost alternatives, the process of prior authorization or utilization management, pharmacy benefit managers, and step therapy/therapeutic substitution. Nearly half of all employers (48 per cent) are informing employees of the costs of filling prescriptions in an effort to make employees smarter consumers. The aging population continues to be viewed as a top driver of the increases in prescription drug costs. The increase in specialty drug use, government cost shifting as well as drug company profits also are named by employers as significant cost drivers.
Friday, July 9, 2010
To help abate continually rising group healthcare plan costs, Canadian employers are implementing wellness programs, says a survey by the International Foundation of Employee Benefit Plans. “Employers are struggling with rising health plan costs and are adopting additional measures such as wellness programs to improve employees’ health and better control costs,” says Sally Natchek, senior director of research. “In just one year’s time, there has been a rapid increase in the number of employers embracing wellness programs.” In fact, the proportion of employers offering wellness initiatives rose nearly 20 per cent, from 61 per cent of employers in 2009 to 78 per cent in 2010. In addition, nearly one in five organizations currently not offering wellness initiatives anticipate doing so in the future. The most prevalent wellness initiatives include flu shot programs (71 per cent), complementary and alternative medicine (52 per cent), and smoking cessation programs (48 per cent).
Changes to the federal Pension Benefits Standards Regulations which set out quantitative limits on how pension funds invest have been adopted by all provinces except Quebec and New Brunswick, says a Fasken Martineau ‘Bulletin.’ The changes include the elimination of the limits placed on the portion of pension fund assets that could be invested in any one parcel of real property or Canadian resource property. As well, the 10 per cent rule prohibiting the investment of more than 10 per cent of the book value of a fund’s assets in one person or a group of associated persons or affiliated corporations has been modified to 10 per cent of market value. It says, however, the changes will not automatically apply to some pension plans registered provincially. For plans subject to Ontario regulation, for example, most of the federal changes will not apply until amendments are made to the Ontario pension regulations.
Employers understand the detrimental effects stress is having on their organizations and are responding with multiple strategies to help workers cope, says a survey by Buck Consultants, A Xerox Company. 'Stress in the Workplace' identifies the areas most affected by stress and the strategies employed by organizations to reduce stress for their workers. Workplace issues highly affected by stress are healthcare costs, absenteeism, and workplace safety. The survey found 66 per cent of employers implementing at least four programs intended to reduce stress. Twenty-two per cent have established eight or more programs and some make more than 10 programs available to their workers. Only seven per cent of survey respondents do not have any stress reduction strategies in place.
The Ontario Teachers' Pension Plan (Teachers') has closed its acquisition of Camelot Group Ltd., which has an exclusive licence to operate the UK national lottery. The acquisition was made by Teachers' long-term equities department, which focuses on direct investments that have steady cash flow and growth potential over a long-term horizon.
Thursday, July 8, 2010
Fears that long-term disability benefits may encouraged prolonged absences can be mitigated by using modified work programs, says Fasken Martineau’s ‘The HR Space.’ Under these programs, employees return to work part-time for as much as their disability permits. This facilitates the employee's early return to work and gradual return to full-time hours. As well, there is a lot of flexibility in how this practice can be integrated into a workplace. Depending on the circumstances, an employee could start with one or two days of work every week, or partial days, or both. Typically, the hours of work increase over time. It is also common to begin with light duties and increase the work requirements over time.
Immigrants can help to rescue Canada from a long-term slowdown in economic growth, but only if immigration policies are modernized, says the Conference Board of Canada. The July-August 2010 edition of its ‘Policy Options’ says the recession gave employers only temporary relief from workforce shortages. However, job creation has resumed in recent months and the looming retirement of baby boomers will only erode the labour supply in the longer term. Canada’s unemployment rate is expected to fall below eight per cent by the end of 2010, but it could fall to as low as six per cent in the years to come as the economy recovers and the large cohort of baby boomers leave the workforce. If Canada is to increasingly rely on immigrants as a source of labour, it needs a modernized, integrated, and well-managed immigration policy which increases the weight given to economic factors, recognizes the importance of skills-based immigration to address Canada’s labour market needs; and improves foreign credential recognition.
The European Commission is calling for public consultation on how the EU can best support national efforts to ensure an "adequate, sustainable, and safe" pension system. Its ‘Green Paper’ says the current number of retired people in Europe, compared with those financing their pensions, was set to double by 2060. The paper on pensions aims to address issues such as ensuring adequate incomes in retirement, making sure pension systems are sustainable in the long term, and achieving the right balance between work and retirement.
Philippe Ithurbide is head of global research, strategy, and analysis at Amundi. He was previously an overlay strategies manager at the Caisse de Depot et Placement du Quebec.
Wednesday, July 7, 2010
Jittery stock markets and drops in federal bond yields hurt the financial health of Canadian pension plans in the second quarter of 2010, says the Mercer ‘Pension Health Index.’ It stood at 67 per cent on June 30, down seven per cent over the quarter. “Long-term federal bond yields dropped 40 basis points, ending the quarter at their lowest level since the ‘flight to quality’ of December 2008,” says Scott Clausen, retirement, risk, and finance professional leader for Canada. “This resulted in higher pension liabilities measured on a solvency basis, decreasing the index by about five per cent.” A typical balanced portfolio would have returned -1.4 per cent for the first half of 2010 and -2.7 per cent for the quarter. This return does not capture any impact from active management of any of the assets.
The Canada Pension Plan Investment Board will invest $250 million into Laricina Energy, a privately-held company which is looking to establish its first commercial oilsands production in Alberta later this year. CPPIB will acquire 17 per cent of the company ahead of an expected initial public offering IPO in 2011.The fund owns shares of oilsands companies through its public arm, but this is the first oilsands investment through its private investing division.
OMERS Contribution Rate Rises
The Ontario Municipal Employees Retirement System will increase its contribution rate in an attempt to tackle its growing pension deficit. Its Sponsor Corporation has approved an average increase of one per cent for employers and employees over the next three years. The $47.8 billion fund had a $1.5 billion deficit at the end of 2009, an amount expected to rise when $5 billion of losses from the 2008 market downturn are factored in.
Hastings Heads Citibank
John Hastings is country officer and chairman and CEO of Citibank Canada. He has been with Citi in Canada for more than 25 years in numerous roles. Most recently, he was managing director and head of its institutional clients group in Canada.
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including August 2010 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains six worksheets:
- Commuted Values – 2009 Basis
- Commuted Values – 2005 Basis
- Commuted Values – 1993 Basis
- Marital Breakdown – CSOP 4300 (May 2009)
- Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
- Minimum Interest on Employee Required Contributions (including the 12-month average rates)
Tuesday, July 6, 2010
The European commission is proposing that retirement ages in the 27 nations should rise automatically in line with rising life expectancy. Where currently there are four people of working age for every one over 65, this number will be cut in half by 2060, making state pensions harder and harder to afford, a commission paper says. The need for a fairer pan-European pensions solution was underscored during the recent Greek financial crisis. Critics of a bail-out for the country asked why Germans who work well into their 60s should be paying for Greeks to retire at 50. France, Britain, and several other European countries have already announced moves to raise the pensionable age later in the century, but the commission wants to make such moves automatic.
Hewitt Associates in the UK has launched a service offering its global pension fund clients access to long-term sustainability themes. It will focus on three specific themes – water, agriculture, and renewable energy – and will include funds which invest across a range of sustainability themes along with other sectors such as education and health. Its manager research team will identify fund managers who are leaders in their chosen niche, offering strong medium and long-term performance records in excess of five per cent per annum ahead of the global equity indices.
Desjardins Group is acquiring the savings and loan portfolios of Groupe Promutuel and will become the investment and banking services manager for Groupe Promutuel members and clients. Promutuel clients seeking banking and investment products will be referred to a Desjardins branch.
Monday, July 5, 2010
Russell Investments has added 110 Canadian stocks to the Russell Global Index as part of an annual process to maintain accurate equity benchmarks. As a result, the Russell Global Index now includes 475 Canadian stocks that represent more than $1.55 trillion in market capitalization. This figure increased 22 per cent from $1.27 trillion at this time last year. In addition, Canada now ranks as the fourth largest in terms of the number of stocks in the index, following only the United States, Japan, and India.
Northern Trust has migrated the investment operations for Hermes Fund Managers, a multi-boutique asset manager offering investment solutions to institutional clients globally, to the Northern Trust platform. With the migration complete, Northern Trust provides it with a range of back- and middle-office services for portfolios.
The likelihood of receiving an annuity and/or pension income increases with age, until the oldest age group (those age 80 and over), where the data show a lower percentage receiving annuity and/or pension income, says a study by the Employee Benefit Research Institute. Since 1975, the percentage of individuals age 80 and over receiving annuity and/or pension income has been increasing, from 17.7 per cent in 1975 to 37.3 per cent in 2008. In addition, the study says that although only 16.6 per cent of persons ages 50 to 60 in 2008 were receiving annuity and/or pension income, those recipients had mean and median incomes that were greater than those received by persons over age 60.
Friday, July 2, 2010
The Ontario Teachers' Pension Plan opposes the shareholder rights plan adopted by the board of directors of Maple Leaf Foods Inc. "We will vote against the rights plan if it is put to a shareholder vote," says Neil Petroff, executive vice-president, investments. "In the meantime, we are considering all other options open to us with respect to challenging the adoption of this rights plan which prevents us from exercising our legal rights as shareholders. We are also considering all of our options with respect to our Maple Leaf Foods shareholdings." Teachers' is converting 11.7 million non-voting common shares into 11.7 voting common shares. With this share conversion, Teachers' will own 37.9 million common voting shares representing 29.98 per cent of the outstanding common voting shares. Teachers' will continue to own 10.3 million non-voting common shares and warrants exercisable into 2.2 million voting common shares. As a result, Teachers' beneficially owns 36.27 per cent of the voting common shares, calculated on a partially-diluted basis.
Many Canadian organizations are offering programs to help employees better balance workplace and personal demands on their time, says a survey by Hewitt Associates. At the majority of employers surveyed, flexible work hours, telecommuting, extra paid time off for personal reasons, education leave, and job sharing are the norm for some or all of their salaried full-time employees. Some organizations also offer a compressed work week, sabbaticals, and paid time off for volunteer work. The organizations who responded reported that only one-third of their employees stick to working the regular full-time work week of between 35 and 40 hours. Forty-five per cent work one to five hours extra a week, 23 per cent work five to 10 hours more, and one per cent work 10 to 15 additional hours.
Active managers, on average, generated positive alpha in bull markets and negative alpha in bear markets over the past 30 years, says a study by FundQuest. ‘When Active Management Shines vs. Passive: Examining Real Alpha in 5 Full Market Cycles Over the Past 30 Years’ compares the potential/historical benefits of active versus index-based passive portfolio management in 73 categories of investments. However, while investors often use excess returns to measure if a manager has added value compared to a benchmark, it uses alpha as a more appropriate measurement of a manager’s relative performance after adjusting for risk. Some of the study’s findings are surprising. For example, conventional wisdom is that the small- and mid-cap U.S. equity markets are less efficient, providing active managers with ample opportunity to generate alpha. However, the study indicates that it has become more challenging for portfolio managers to identify opportunities within this market segment, perhaps due to the additional resources investment firms have dedicated to their research coverage of these categories. While opportunities remain in this space, the study suggests that additional due diligence may be required to identify the best active managers in these categories.
A ‘radical finance manifesto’ from the London School of Economics' Paul Woolley Centre for the Study of Capital Market Dysfunctionality is recommending that annual portfolio turnover should be capped at 30 per cent, investments should be limited to publicly traded securities, and investment in alternative strategies such as hedge funds and private equity, as well as all structured or synthetic products should be avoided. It called on the world's biggest pension funds to adopt the manifesto's 10-point action plan, aimed at making the world a safer place for long-term investors. The principal target of the manifesto is financial ‘agents’ managing money for pension fund ‘principals’ and the academic proponents of the efficient-market hypothesis who enable them. It suggests the efficient-market hypothesis' central flaw might be its failure to examine and understand the relationship between pension clients and those agents, with the latter's superior information allowing them to reap the lion's share of benefits from the pension money flooding into opaque strategies such as hedge funds and private equity.
Rob Ferguson, vice-president, product and client service, global securities lending, and Robert Chiuch, vice-president, head of trading, global securities lending, will share cross-functional responsibilities for CIBC Mellon's global securities lending division. Ferguson has 20 years of experience in securities lending. He joined CIBC Mellon at the company's inception in 1996, coming from a securities lending software vendor. Chiuch has 22 years of financial industry experience, including 21 years in securities lending. He joined CIBC Mellon at the company's formation in 1996, holding progressive roles within the securities lending group.
Judy Erickson, Teck Resources Ltd., and Dr. Jim Tomkins, of the University of Regina, will explain how they have adapted their Defined Benefit pension plans to the new realities in the session ‘Deal or New Deal’ at the ‘2010 ACPM National Conference.’ They will look topics such as how they have addressed the issue of sharing costs and risks with plan members and how their new arrangements performed in the latest market cycle? It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/national.aspx
A unique new online publication, Private Wealth Canada, is now available at www.privatewealthcanada.ca. The website is dedicated to providing financial and lifestyle planning information for senior executives at companies across Canada. The national news source will feature a wide range of content to help executives and business owners manage their wealth and estates; keep abreast of developments on essential services from banks, trust companies, and investment managers; and meet their personal lifestyle needs in areas such as vacation planning.