News Archives - July / August 2011
Wednesday, August 31, 2011
Sales Grew 132.5 Per Cent
Desjardins Financial Security's group retirement savings sales grew by 132.5 per cent, totalling $378.8 million in the first six months of 2011. In group insurance, the volume of premiums from groups and businesses and plans offered in financial institutions, including the Desjardins caisses, stood at $1,232.8 million for the first half of 2011, compared with $1,148.1 million for the same period in 2010. Group and business insurance sales totalled $117.6 million, compared with $82.8 million on June 30, 2010, for an increase of 42 per cent. "We're proud to pursue our expansion coast-to-coast backed by such solid results since the start of the year," says Denis Berthiaume, senior vice-president and general manager of wealth management and life and health insurance, Desjardins Group, and chief operating officer of Desjardins Financial Security. "We continue to differentiate ourselves in the Canadian marketplace with our excellent products and services, while maintaining strict management practices. We rank among Canada's leading providers of life and health insurance and financial services, and we are working hard to maintain our strong standing in the marketplace."
Plan Administration Made Easier
Equitable Life of Canada is making plan administration easier for group benefit plan administrators with Single Screen Enrolment (SSE). SSE is pre-customized to specific plan designs and only asks for the benefit information, options, and individual plan member selections required to administer each client’s unique group benefits plan. It will also prevent incomplete or missing information by identifying to the plan administrator any information not entered, or improperly entered. It also creates efficiency by allowing plan administrators (through written permission from the plan member) to easily sign their employees up for value-added features such as direct deposit of claims payments and electronic explanation of benefits.
Private Equity Allocation Interest Grows
Pension schemes in Europe are looking to increase allocations to private equity, but want greater transparency, reporting, and risk management from providers, says a survey by SEI and Greenwich Associates. ‘The Logic of Fund Flows’ found 26 per cent of investors plan to increase their private equity mandates in the next year. However, they ranked portfolio transparency, fees, and quality of reporting and communications as very important factors in the selection process, alongside traditional criteria such as investment philosophy and performance. It also found the range of private equity mandates is also growing. More than 80 per cent had put funds into venture capital, leveraged buyouts, growth capital, distressed investments, and mezzanine capital.
Client Experience Enhanced
Northern Trust has enhanced the client experience for users of the Investment Risk and Analytical Services (IRAS) tools on its multi-faceted web portal, Passport. Designed to provide clients with more optimal access to the risk and analytical tools needed to make investment decisions, the new IRAS Dashboard provides a richer client experience with more customizable features, faster performance, and integration of both ex post analytics and ex ante risk services. It allows clients to select from hundreds of industry measurements of daily and monthly portfolio performance, attribution, risk measures, and key characteristics utilizing the available chart and table templates.
More Allocated To Alternatives
U.S. institutional investors expect to continue allocating more to alternative strategies, while long-only active equity and fixed income strategies could see considerable churn, says a survey by Keefe, Bruyette & Woods. It found close to 40 per cent of respondents are looking to increase allocations to hedge funds and commodities and more than 30 per cent are looking to add to their real estate, infrastructure, and energy investments. However, the report suggested the prevailing low interest rate environment was not providing a noticeable boost for active equity strategies. As a whole, allocations to fixed income might be poised to fall modestly, but growing allocations to higher-return bond strategies would mitigate the impact on bond managers, it says.
Russell Expands Dollar Hedged Series
Russell Investments Canada Limited is expanding its US Dollar Hedged Series offering – a series for investors who have U.S. dollars but want to maintain exposure to Canadian and international asset classes, without having to worry about the movements between the U.S. and Canadian dollar. “With volatile markets, investors may increasingly look for conservative investments without the added risk of currency implications,” says David Feather, president and chief executive officer. This series provides a solution for investors who have U.S. dollars but want the flexibility to invest in Canadian and international securities. It also provides a currency hedged solution for business owners doing business with the U.S.
North American Confidence Declines
Investor confidence declined to 89.6 in August, down 12.9 points from July's revised reading of 102.5, says the State Street ‘Investor Confidence Index’ for August 2011. The most significant decline was exhibited by North American investors with confidence decreasing to 88.6, down 13.9 points from July's revised level of 102.5. Declines were more muted elsewhere with the European index sliding 4.6 points to 90.5, down from July's revised reading of 95.1. Amongst Asian investors, confidence decreased 0.6 points from July's revised level of 95.8 to 95.2. Diminished growth expectations, the downgrade of the U.S. sovereign debt rating, and continued difficulties around European sovereign financing, all combined to cause institutional investors to reduce their allocations to risky assets.
Kennedy Leads Health Strategies
Michael Kennedy is a vice-president and the new national lead for health strategies and solutions, part of the Canadian health and benefits practice at Aon Hewitt. Based in Calgary, AB, he will work with clients across Canada to diagnose current issues and opportunities related to employee and organizational health and to design and implement health programs aligned with business priorities.
Tuesday, August 30, 2011
Consent Benefits Clarified
The Office of the Superintendent of Financial Institutions (OSFI) has issued a policy advisory to provide further details on its expectations with respect to consent benefits. Some pension plans offer benefits that are subject to the administrator’s consent, such as unreduced early retirement benefits. In certain cases, however, OSFI has found that, despite provisions in the plan text that state that a benefit is subject to consent, in practice these benefits may not be genuinely subject to consent. In order to be considered a consent benefit, an administrator, in its fiduciary role, must have the discretion to grant or deny the benefit. Where an administrator does not have such discretion, the benefit is not a consent benefit, but rather a promised pension benefit that must be funded. In determining whether an administrator truly has discretion to grant or deny a benefit, documents or agreements outside the terms of the plan may be relevant and must be considered along with the plan terms. In addition, where any such documents or agreements require that a pension benefit be granted, or otherwise promise a pension benefit payable from the pension fund, they should be appropriately reflected in the terms of the plan. Administrators have a responsibility to ensure all promised benefits that are to be paid from the pension fund are clearly identified and described in the plan text.
bcIMC Building To Gold Standard
British Columbia Investment Management Corporation (bcIMC) has plans for the construction of a ‘Triple A’ office tower to be built to the LEED Gold standard in downtown Vancouver, BC. Designed specifically for office tenants in Vancouver, its flexible architectural and mechanical design will enable businesses, both large and small, to reduce space and save on operating costs. The project will accommodate approximately 2,500 occupants. It will include 365,000 square feet of office space and 35,000 square feet of retail space. It will be completed in the spring of 2015. The first confirmed tenant of the office tower is McCarthy Tétrault, a Canadian law firm.
Leo Promotes Investment Products
Pat Leo is director, institutional business development, for Sun Life Global Investments. In this role, he will promote its products to both group retirement savings and client solutions. Previously, he was with Sun Life Financial’s group retirement services where he was an investment solutions executive.
U.S. Pension Crisis Examined
Topics to be covered at the ‘2011 Global Alpha Forum’ include the crisis facing U.S. state pension funds, the readiness of Wall Street to counter cyber attacks, corporate governance, consultants who focus on alternative allocations, and assessing and mitigating risk. It takes place September 22 to 23 in Greenwich, CT. For more information, visit www.GlobalAlphaForum.com
Charest Speaks At IFIC
Yvon Charest, president and CEO of Industrial Alliance Insurance & Financial Services Inc.; and Blake Goldring, chairman and CEO of AGF Investments Inc.; will be among the speakers at the Investment Funds Institute of Canada’s ‘2011 Annual Conference.’ It takes place October 14 in Toronto, ON. For more information, visit https://www.ific.ca/Content/Content.aspx?id=6642
Program Helps With Smoking Cessation
Connex Health is presenting a workshop designed to help employers with smoking cessation programs. It includes sessions on medications, the quitting process, online support from Smokers' Helpline, nutrition, and fitness while quitting. It takes place October 4 in Burlington, ON. For more information, visit https://www.connexhc.com/
Monday, August 29, 2011
Employers Have Been Slow To Act
Employers have been slow to take action to manage drug costs for a number of reasons, says Denise Balch, president of Connex Health. In a response to Helen Stevenson’s recent report 'An End to Blank Cheques,' she says employers have been reluctant to adopt all but the most traditional solutions. Reasons for this include the complexity of solutions, the feeling of entitlement about healthcare, and the fact that benefits are not seen a priority by senior executives. The article, ‘Employers Depend On Traditional Solutions,’ is available at this link
Standard Life Earns Awards
The Standard Life Assurance Company of Canada will receive eight Insurance and Financial Communicators Association (IFCA) awards at the ‘2011 Annual Awards Competition’ in October. This program recognizes excellence in marketing and communications creativity, design, and writing in the North American insurance and financial services industry. It won a Best of Show Award, an Award of Excellence, and six honourable mentions.
Doing Business Outside Canada Discussed
The 3rd session in AIMA Canada's ‘New and Emerging Managers’ series, ‘Doing Business Outside Canada,’ will be of interest to managers thinking about establishing funds or distribution outside of Canada, with a focus on the United States and offshore. Legal, tax, and accounting professionals from Canada, the United States, and the Cayman Islands will try to help navigate the regulatory, tax, and operational realities of going across the border. It takes place September 15 in Toronto, ON. For more information, call 416-453-0111 or eMail email@example.com
Looking Beyond Borders Examined
‘Why do quant investors need to look beyond borders?’ will be the focus of ‘Quant Invest Canada 2011.’ It will examine areas such as how the convergence of developed markets affects Canadian investors and the impact of emerging market performance. It takes place October 17 to 19 in Toronto, ON. For more information, visit
Friday, August 26, 2011
Pensions Turning To Alternatives
An SEI ‘Quick Poll’ has found a significant increase in the percentage of pension portfolios investing in alternatives when compared to the previous three years of polling. This year, nearly eight out of 10 (78 per cent) pension executives reported their organization had some allocation to alternatives in the pension portfolio, compared to 51 per cent in 2008, 53 per cent in 2009, and 65 per cent in 2010. However, while more plans in 2011 appear to be using alternative investments, allocations greater than 10 per cent of the overall portfolio appear to have decreased in the past year. In 2010, 77 per cent of respondents with more than $300 million in pension assets allocated at least 10 per cent of the portfolio to alternatives, compared to only 42 per cent of pensions of the same size this year.
Institutions Adjusting Portfolios
Institutions have made a massive portfolio readjustment the past five years, moving from equities to alternative assets and long-duration bonds for liability-driven investing, says eVestment Alliance. In all four years, managers in its database reported redemptions of $181 billion by institutions from growth strategies, or 14 per cent of the category’s managed assets at year-end 2006. As well, another $8 billion of net outflows from growth strategies took place in 2011’s first quarter. Institutions have been disappointed with growth strategies because, when measured from the perspective of market cycles, their performance has not been distinctive versus value approaches.
Sun Earns Communicator Awards
Sun Life Financial has earned awards at both the 2011 Insurance & Financial Communicators Association Annual Awards Competition and the 2011 Insurance Marketing and Communications Association Showcase Awards. In total, it received 25 creative marketing and communications awards for initiatives in both Canada and the United States. "We're honoured to receive recognition on behalf of our clients and distributors in this year's annual IFCA and IMCA awards competitions," says Mary De Paoli, senior vice-president and chief marketing officer, Sun Life Financial. "Clear, creative, and memorable communications are at the heart of any successful project, and it's what helps us provide clients and their advisors with the information they need to make the right financial decisions."
Engaging Employers Examined
‘What Makes a ‘Best Employer’/Highly Engaged Organization?’ will be the focus of a CPBI Manitoba region session. Diane Panting, a vice-president at Aon Hewitt, will examine some of the key findings from hundreds of Canadian organizations that have participated in the ‘Best Employers in Canada’and ‘Best Small & Medium Employers’ in Canadastudies over the last dozen years. It takes place September 15 in Winnipeg, MB. For more information, contact at Joan Turnbull 667-5027 or firstname.lastname@example.org
Thursday, August 25, 2011
NBIMC Tops Return Objectives
The New Brunswick Investment Management Corporation (NBIMC) had 10.42 per cent gross rate of return for the 2010-2011 fiscal year bringing its long-term annualized return since its inception in 1996 to 6.75 per cent. Its annualized real return (after adjusting for inflation) since inception is now 4.74 per cent. Net assets under management increased to $9.096 billion from $8.341 billion in the prior year. This increase in assets resulted from $853 million in net investment earnings, $155 million in special funding payments from the plans’ sponsor, and net pension payouts of $253 million. It manages retirement savings for more than 50,000 public servants, teachers, and provincial judges.
CDHP Growth Slows
Consumer Driven Health Plans (CDHPs) in the U.S. experienced continued growth this year, although at a slower rate than in 2009 and 2010, says preliminary results from the ‘2011 United Benefit Advisors Health Plan Survey.’ CDHPs grew at a rate of 13.9 per cent this past year (about two-thirds of the 2010 rate) to 22.9 per cent of plans offered, and cover more employees (17.3 per cent) than Health Maintenance Organization (HMO) plans (11.9 per cent). Employers continue to offset the higher out-of-pocket costs of CDHPs by offering employees a health reimbursement arrangement (HRA) or a health savings account (HSA) and contributing funds. It found the average employer contribution to an HRA was $1,656 (up from $1,481 in 2010) for a single employee and $3,198 for a family (up from $2,857 in 2010).
Ontario Leads Accessibility Push
The Ontario government is leading the provinces in its push for accessibility for people with disabilities, a ratio which is estimated to rise to one in five people by 2025, says Fasken Martineau’s ‘HR Space.’ In accordance with a regulation under the ‘Accessibility for Ontarians with Disabilities Act’ (AODA), employers will be required to make their workplaces barrier-free for customers and employees. Although the AODA came into force in 2005, the regulations dealing with employment have just been introduced. Employers will be required to provide accommodation for applicants with disabilities in the recruitment process. After hiring, the employer must provide the successful candidate with its accommodation policies and consult with the employee to provide accessible formats and communication supports to allow disabled employees to perform their jobs. While Ontario is the first province to introduce this type of legislation, it is widely believed that other provinces will soon implement similar standards as accessibility becomes an increasingly prevalent concern across Canada.
Lack Of Co-ordination Hurts Eurozone
A key factor contributing to Europe’s debt crisis was the eurozone’s lack of fiscal co-ordination, says Sherry Cooper, chief economist at BMO Financial Group. Speaking in a conference call about the ongoing financial crisis in Europe, she said “The fundamental flaw, in my view, in the construction of the eurozone is the absence of a co-ordination mechanism for fiscal policy. The time has come to revise the architecture of the eurozone towards deeper fiscal integration.” In particular, Cooper calls for the establishment of a single authority that can issue euro bonds and co-ordinate fiscal policy.
Teachers' Elected To Hall Of Fame
Teachers’ Private Capital has been elected the Private Equity Hall of Fame in recognition of its exemplary and enduring contributions to venture capital, buyout and related private equity disciplines. Dow Jones Private Equity Analyst selected Teachers’ for its distinguished and consistent track record in investing in private equity. It will receive the award at an induction ceremony to be held at the 18th annual ‘Private Equity Analyst Conference’ in September 27 in New York, NY.
Employers May Prefer To Pay Fines
Nearly one of every 10 midsized or big employers expects to stop offering health coverage to workers once federal insurance exchanges start in 2014, says a survey from Towers Watson. It also found that an additional 20 per cent of the companies are unsure about what they will do. While employer-sponsored health insurance has long been the backbone of the nation's health insurance system, some employers, especially retailers or those offering low wages, feel they will be better off paying fines and taxes rather than continuing to provide benefits which take up a growing portion of their budget every year. The exchanges, which were devised under the healthcare overhaul, may offer an alternative for their workers as they aim to provide a marketplace for people to buy insurance that can be subsidized by the government based on income levels.
Wednesday, August 24, 2011
Pension Contribution Trend Reversing
A trend that for decades saw pension funds receiving more money from new contributions than they needed to spend on benefit payments is starting to reverse, says Aon Hewitt’s ‘Radar.’ Citing research in the ‘Rotman International Journal of Pension Management,’ it says, as a result, two problems have emerged. One is ‘contract incompleteness,’ whereby incurred losses are carried forward to future generations instead of being fully assumed by the current generation. The second is ‘contract unfairness’ which sees younger workers paying full contributions to ensure current retirees in an underfunded plan receive full benefits. To address these problems, mature DB plans need to be redesigned around four key principles ‒ hard individual entitlements, soft individual entitlements, soft positive collective entitlements, and soft negative collective entitlements. By choosing an appropriate mix of these four design principles, a new form of pension contract can be constructed that balances participant needs and economic realities.
DB Plan Accounting Changes Coming
The Canadian Accounting Standards Board (AcSB) is proposing changes for Defined Benefit plans, says an Eckler ‘Special Notice.’ Under the section on employee future benefitswhich applies to private entities and not-for-profit organizations, the AcSB is proposing the immediate recognition on the balance sheet of the full amount of the accrued benefit obligation. As well, it is calling for a remeasurement component similar to IAS 19. However, whereas the revised version of IAS 19 requires these remeasurements to be recognized in OCI, the AcSB is proposing their recognition in income. It is also calling for the use of the discount rate to determine the expected return on assets component of pension expense, eliminating the use of an expected return on assets assumption. The AcSB is also proposing that plan assets and the accrued benefit obligation be measured as at the balance sheet date, instead of at a date up to three months prior to the balance sheet date; and that administration costs for the management of plan assets be deducted from the return on plan assets. An exposure draft is expected later this year.
Vanguard Bringing ETFs To Canada
Vanguard Investments Canada Inc. has filed a preliminary prospectus with Canadian securities regulators for its first suite of Canadian-domiciled exchange-traded funds (ETFs). The line-up of six funds includes equity and bond ETFs. Vanguard Investments Canada Inc. will be the manager of the ETFs and The Vanguard Group, Inc. will provide portfolio management services to the ETFs. Vanguard has more than $168 billion in ETF assets and has ETFs listed on exchanges in the U.S., Mexico, and Australia.
NASAA Warns About Distressed Real Estate
Investment offerings involving distressed real estate have been on the rise following the collapse of the real estate bubble and the North American Securities Administrators Association has included these on its annual list of financial products and practices that can trap unwary investors. Many of the cons try to take advantage of investor worries about economic uncertainty and volatile stock markets. Headline-related investor complaints reported by state and provincial securities regulators include questionable claims related to gold and alternative energy as well as distressed real estate investing. It is also worried about so-called ‘mirror trading,’ which are automated trading programs that mimic the trades of other skilled or knowledgeable traders. NASAA also cites concerns with both legitimate private placements that are risky and fraudulent offerings.
Plan Would Break Up McGraw-Hill
Jana Partners LLC and Ontario Teachers’ Pension Plan want to break up McGraw-Hill Cos. In a shareholder proposal, they have presented a plan to separate the company into four units ‒ S&P, the S&P index business, information and media, and education. Jana and Ontario Teachers’ together own a 5.2 per cent stake. The plan is an effort to boost shareholder value.
Crocker At 18
Doug Crocker is chairman of the advisory board at 18 Asset Management. He was a founder, chief risk officer, and co-head of the investment team at Highstreet Asset Management prior to his retirement in 2008.
Drug Update On Agenda
Suzanne Lepage, private health plan strategist at Suzanne Lepage Consulting, will provide an update on Canadian prescription drugs at the International Foundation of Employee Benefit Plans’ ‘30th Annual ISCEBS Employee Benefits Symposium.’ In other Canadian sessions, Martin Chung, assistant vice-president, strategic health management, Equitable Life Insurance Company of Canada; will look at what is driving health management strategies in Canada and Neil Craig, senior pension consultant, Stevenson & Hunt, will discuss pension reform. It takes place October 2 to 5 in San Antonio, TX. For more information, visit www.iscebs.org/symposium
Tuesday, August 23, 2011
Final Version Released
The International Accounting Standards Board (IAS B) has released its final version of changes to its accounting standard IAS 19 ‒ Employee Benefits, says an Eckler ‘Special Notice.’ As expected, the changes will force plan sponsors to recognize, on their balance sheet, the funded status of Defined Benefit pension plans and post-retirement plans through the immediate recognition of all changes in obligations and assets. Also included are enhancements to the presentation and disclosure of DB costs. These changes impact all organizations that sponsor a DB pension and/or post-retirement plan and that report under the International Financial Reporting Standards (IFRSs). The effective date is for financial periods beginning on or after January 1, 2013, although earlier adoption is permitted.
Inflation Relationship Not Substantial
Gold has experienced a dramatic run up in price recently and attracted increasing interest in potential investment, says a Rogerscasey`s editorial board brief. ‘Gold: For Rings and Kings or Portfolios and Pensioners,’ says, however, gold prices do not appear to have any substantial relationship to actual inflation. They rose during the inflationary period of the late ’70s, “but when one looks at most recent times and at the even small bouts of inflation in the late ’80s, especially if one discounts some of the run up resulting from the newly found float of prices, it is hard to draw any conclusion based upon the data.” When it comes to market results, good markets are bad for gold and bad markets are good for gold. Yet, even that is not conclusive as during 1980 when gold peaked, markets were up more than 25 per cent. In 2003, gold was up and the S&P also was up 25 per cent and in 2010 markets were up nicely and so was gold. The other shoe, it says, is deflation which many have said is another period when gold prices should rise. However, while that did hold true in 2009, this is only one data point and that “is pretty flimsy historical evidence.”
Plans Add Inflation-protection
Forty-six per cent of Defined Contribution plans surveyed by Mercer offer TIPS or inflation-protection strategies involving multiple asset classes as investment options or plan to do so. It says another 10 per cent intend to offer those options sometime within the next year. Of DC plans that offer inflation-protection strategies, TIPS was the most popular option at 24 per cent, followed by multiple asset classes ‒ such as a combination of TIPS, commodities, natural resources, and REITs ‒ at 12 per cent. DC plans with $1 billion or more in assets were most likely to offer inflation-protection, at 66 per cent, while those with $250 million or less were least likely at 37 per cent.
Appetite For Infrastructure Strong
Institutional investors are showing a strong appetite for infrastructure, with almost three-quarters seeking to make further investments in the asset class within the next 12 months, says a survey from Preqin. It says institutional investors are more eager to invest in infrastructure this year than in 2010, when most cited management fees, carry structures, liquidity, limited partners/general partners interaction, and hurdle rate as the main barriers for such investments. The current infrastructure fundraising market remains highly competitive, although issue such as the interaction with general partners does concern institutional investors.
Legal Update Offered
Hugh Wright, a partner at McInnes Cooper; Mark Zigler, managing partner for Koskie Minsky LLP; and Murray Campbell, a partner at Lawson Lundell LLP; will look at ‘Legal and Legislative Developments Across Canada’ at the International Foundation of Employee Benefit Plans’ ‘44th Annual Canadian Employee Benefits Conference.’ The session will offer insight on proposed and recently passed legislation and regulations affecting pension and health and welfare benefit plans. Other sessions will look at the future for employment-based health insurance in North America and the case for target benefit pension plans. For more information, visit www.ifebp.org/canannual
Monday, August 22, 2011
Standard Of Accountability Growing
The Ontario government’s proposed requirement for pension plans registered under the Pension Benefits Act to file Statements of Investment Policies and Procedures (SIP&P) with the regulator and disclose whether or not their SIP&P addresses environmental, social, or governance (ESG) factors reflects a growing global standard of accountability, says research from Mercer. If passed, Ontario would be the first jurisdiction in Canada to require plan administrators to expressly disclose this information. It says many countries have already taken similar steps. For example, the UK Pensions Act 2000 requires trustees of occupational pension plans to disclose their policy on ESG considerations as part of their Statement of Investments Principles. Similar legislation has been enacted in France, Germany, Belgium, Sweden, and Australia. Further, this initiative is expected to progress independently of the outcome of the provincial Ontario elections in the fall. While uncertainty exists around if and at what point this provision may become law, plan administrators and fiduciaries should consider this issue (and associated disclosure) and be prepared to respond to questions from beneficiaries and/or regulators.
Caisse Looks Abroad
The Caisse de dépôt et placement du Québec will look to Asia and Latin America to generate returns in a turbulent market and weak growth environment, says Michael Sabia, its chief executive, after the Caisse reported a return on depositor funds of 3.6 per cent for the first six months of 2011. The Caisse reported that its assets grew to $157.9 billion for the first half of this year, up $6.2 billion year over year. By comparison, net assets at the same point a year earlier were $151.7 billion. Its overall portfolio return for the last two years ended June 30, 2011, is 14 per cent per year, outperforming the benchmark portfolio return by 2.7 per cent per year.
Gold/Suit Ratio Holds True
Sionna Investment Managers’ ‘Gold-to-Decent-Suit Ratio’ continues to hold true. Its research shows the cost for an ounce of gold in 1967 was $35, exactly the same price as a decent suit from Eaton’s, a prominent Canadian retailer at the time. In 1975, gold weighed in at $100 an ounce, a 1:1 ratio with a decent suit from Eaton’s during the same year. In 2009, the price of an ounce of gold in Canada soared to $950, or the price of a decent suit at leading tailors during the same 12 months. “The long-held rule in the marketplace is that an ounce of gold, historically, has been able to buy a decent suit. But then again, it may depend on where you shop,” says Mel Mariampillai, a portfolio manager who is part of the investment team that helped develop the concept.
Stable Economy Would Increase Flows
Relatively stable global economy could mean increased capital flows into the real estate markets of Europe and the U.S., says a Deloitte report. 'Commercial Real Estate Outlook: Top Five Issues in 2011' says this is likely to fuel investments in the U.S. and Europe, although Asia Pacific may experience a modest tempering of activity. It pointed out that a widespread recovery in the market was unlikely without the help of non-trophy assets. Lending to non-trophy assets needs to resume and refinancing options increase if such assets are to attract more buyers, it says.
Friday, August 19, 2011
Recession Fears Drive Stocks Down
Stocks dropped again Thursday amid speculation that European banks lack sufficient capital and growing signs the economy is slowing. The Dow Jones industrial average closed down 419.63, or 3.68 per cent, at 10,990.58; the S&P 500 fell 53.24, or 4.46 per cent, ending at 1,140.65; and the Nasdaq composite closed down 131.05, or 5.22 per cent, at 2,380.43. In Europe, the STOXX Europe 600 index lost 4.8 per cent in its worst plunge since March 2009 and Germany's DAX index slid 5.8 per cent, the most since 2008. The market may have been reacting to Morgan Stanley cutting its forecast for global economic growth this year to 3.9 per cent from 4.2 per cent, citing insufficient policy response to Europe's debt crisis and weakening confidence. As well, U.S. initial jobless claims climbed by 9,000 to 408,000 in the week ended August 13.
Oxford Acquiring MTCC
Pension Benefit Payment Ruling Overturned
The Court of Appeal of Québec has overturned a decision of the Superior Court that had ordered an employer to pay pension benefits based only on an alleged practice and without proper written documentation to that effect, says a Fasken Martineau ‘The HR Space.’ In ‘Canadian Jewish Congress v. Polger,’ the pension benefits were deemed to be gratuitous payments only, not required to be paid to all departing employees by virtue of policy or practice. The claimants had argued that the employer had an unwritten policy of supplementing its employees' pension plan either by making special contributions to their pension fund or by paying them additional pensions upon retirement. The Court of Appeal overturned the trial decision as it did not agree that the evidence supported there being a binding policy or practice that would warrant the payment of pensions. In its view, all that the evidence showed was that gratuitous payments in a variety of forms were made over the years to a certain number of employees upon request only and following a decision by the board of directors or by management on a case-by-case basis. Although the Court of Appeal's decision comes as a relief to employers who may on a case-by-case basis offer more generous benefits to certain employees, employers must protect themselves when they do so. In such cases, employers across the country must make it clear that such benefits are paid on a gratuitous basis only and not commit themselves to providing those benefits in the future.
Global Oversight Trend Starting
The increasing visibility of retirement and benefit programs at senior levels within multi-national companies has started a trend towards global oversight, says Mercer's ‘Global Benefits Governance Survey.’ It found 80 per cent of multi-national firms are amending their frameworks to improve financial risk management and monitor global volatility. It says as multi-national companies often have fewer resources available on the ground to manage these programs locally and fewer headquarters' resources available to oversee them centrally, the importance of having a robust global governance framework is greater today than it has ever been. This framework includes both the structure and the supporting processes needed to achieve the desired level of central oversight and frequently include written policies on design, funding, and investment; clear delegation of authorit;, assignment of responsibility related to benefit programs; and a defined approach to monitoring and mitigating risks.
New Market Comes To Canada
Goldman Sachs Group Inc. is creating yet another stock market in Canada. It will bring its SIGMA X system to Canada. A so-called ‘dark pool,’ it lets buyers and sellers anonymously trade stocks that are listed on the Toronto Stock Exchange using pure price/time priority. The matching engine resides in a third-party Toronto, ON, data centre and subscribers can access SIGMA X Canada via direct FIX connectivity or a variety of EMS/OMS vendor providers.
ETF Assets To Near $5 Trillion
Global ETF assets under management are expected to grow as much as $4.7 trillion by the end of 2015, says a report by McKinsey & Co. ‘The Second Act Begins for ETFs’ projects that the next phase of growth will be characterized by growing competition, an increase in active ETFs, globalization of the ETF marketplace, and new competitive models. It notes that assets under management of exchange-traded products ‒ covering ETFs, exchange-traded commodities, and exchange traded notes ‒ have grown 31 per cent from 2000 to 2010, compared with assets under management growth of roughly five to six per cent for mutual funds during the same time period.
Pensions And Politics Views Sought
The fourth of six mini-surveys being provided through an exclusive partnership between ACPM and Benefits and Pensions Monitor is looking for feedback on ‘Pensions and Politics.’ By taking just a few minutes to answer the brief questions, your name will be entered into a draw for a chance to win a registration to attend Canada's premier pension event, the ACPM National Conference, this September in St. John's NL. Click on the link that follows to access the ‘Pensions and Politics’ survey ‒ http://www.surveymonkey.com/s/LHML85WACPMBPM4
Thursday, August 18, 2011
Investors Going Back To Basics
Institutional investors will return to the basics over the next 10 years, says a report from McKinsey & Co. It predicts investors will move away from a focus on beating benchmarks and maximizing alpha regardless of market conditions to one that emphasizes meeting fundamental investment objectives. ‘The Best of Times and the Worst of Times for Institutional Investors’ found that among the major shifts investors need to make in order to adapt to the new market landscape is to adopt a more forward-looking investment approach involving more communication with managers on their objectives and strategies.
Tailored Benefits Create Advantage
Companies that tailor their pension benefits to respond to the cuts in public finances occurring across the world will trim costs and give themselves an advantage in the war for talent, says Mercer’s ‘Annual Benefits around the World’ report. It says reform of state pension and health and welfare systems in many countries is creating "significant challenges" for multi-national companies looking to manage the cost, risk, and competitiveness of employee benefit program. Reforms, prompted by an aging population and the increasing cost of providing adequate retirement income and health services, are gathering pace in a number of countries including France, the UK, Australia, Canada, and the U.S. It says there is a greater appreciation among employees of the value and security of their benefits after two years of economic uncertainty and pay restraint.
Cash Payments Now Taxable
Cash payments received by an employee or retiree on or after January 1, 2012, upon cancellation of a private health services plan (PHSP) will be taxable employment income, says a Hicks Morley ‘FTR Now.’ It says the Canada Revenue Agency previously considered these lump sum amounts as advance reimbursements of medical expenses. As a result, they were non-taxable. However, CRA has identified that where an employee or retiree does not subsequently incur medical expenses following receipt of the payment, the payment cannot be in the nature of an advance reimbursement. It is on this basis that CRA has determined that the lump sum amount should be taxed upon receipt. However, when the employee or retiree does subsequently incur a medical expense, that employee or retiree can claim a medical expense tax credit. CRA's new position does not affect employers who became insolvent before 2012. In those cases, provided the insolvency occurred prior to 2012, the payment of amounts to former employees and retirees in lieu of benefits coverage under a PHSP will not be taxable even if they are paid in 2012 or later.
Desjardins Earns Marketing Awards
Desjardins Financial Security won 11 awards in the Insurance and Financial Communicators Association (IFCA) annual awards competition. For the eighth consecutive year, the life and health insurance arm of Desjardins Group was acknowledged for its accomplishments in communications, marketing and advertising. It won five awards of excellence, three best-of-show awards, and three honourable mentions. A group retirement savings participant statement earned an award of excellence.
Taller Moves To Mackenzie
Phil Taller is vice-president, investments, Mackenzie Financial Corporation (Mackenzie Investments). He is part of the growth team where he will contribute his expertise in U.S. equity investing.
Previously, he was a portfolio manager at Bluewater Investment Management, a sub-advisor to Mackenzie.
Linking Design To Health
‘Linking Plan Design and Employee Health ‒ Part I’ will be the focus on a Connex Health session. A panel including Allan Smofsky, of Workplace Health Strategists, and Steve Semelman, of Gemini Pharmaceutical Consultants, will look at how plan sponsors can take advantage of innovations in services and technology to improve health outcomes and reduce overall costs. It takes place September 15 in Burlington, ON. For more information, visit www.connexhc.com
Menzies Speaks At Summit
Ted Menzies,Canada's finance minister of State and the minister responsible for pensions, has been added to the program at the ‘WorldPensionSummit.’ He will discuss new developments in pensions in Canada. It takes place November 2 to 4 in Amsterdam, The Netherlands. For more information, visit http://www.worldpensionsummit.com/
Wednesday, August 17, 2011
Complexity Of Linkages Neglected
Our understanding of the links between the financial sector and the rest of the economy needs to improve, says a report from the C.D. Howe Institute. ‘When Nightmares Become Real: Modelling Linkages between the Financial Sector and the Real Economy in the Aftermath of the Financial Crisis’ says that the complexity of these linkages have been neglected in the models typically used to guide monetary policy. The question is how to remedy deficiencies in policymakers’ economic models of the world, so that they can be used with confidence in guiding policy. While considerable progress is being made in modelling the complexities of the linkages between the financial sector and the real economy (the goods and services sectors), the economic models that central bankers use to do so remain stylized and do not cope well with shocks such as those of 2007-08. Policymakers need a range of models that complement each other and to use them circumspectly and with full understanding of their limitations. For the study click here
Tax Fairness Measures Needed
The federal government needs to introduce measures in next year’s budget that increase tax fairness and enhance investment choices for Canadians who are saving for retirement, says the Investment Funds Institute of Canada. In its pre-budget submission to the House of Commons Standing Committee on Finance, it offers input on the framework guiding the government’s proposed pooled registered pension plans and calls for changes to the rules pertaining to sales taxes and registered retirement savings plans. In the submission, IFIC says it supports the government’s proposed PRPP concept, which would allow small businesses, employees and self-employed workers to set up low-cost pension plans through private sector financial institutions. However, the PRPP framework should follow the patterns and rules of RRSPs, with some minor adaptations of pension rules to allow for locked-in provisions and employer contributions. It also wants the federal government to address the “unfair, non-neutral, and administratively complicated application of the goods and services tax (GST) and harmonized sales tax (HST) by applying a single, equitable, low federal-provincial rate of sales tax to management, advisory, and administrative services provided to funds consistent with the treatment of other investment products.
Deal-making Gains Traction In Canada
Deal‐making in Canada’s buyout and other private equity (PE) market gained considerable traction in the second quarter of 2011 with especially substantial growth in dollar flows, the highest since the final quarter of 2008, says CVCA ‒ Canada's Venture Capital & Private Equity Association. Control‐stake acquisitions, minority investments, and other PE deals totalled 49 between April and June, up 40 per cent from the year before. In addition, disclosed disbursements in this period hit $5.7 billion, which actually surpasses amounts invested during 2010 as a whole. Consequently, at the end of the first half of 2011, 97 buyout‐PE deals had been announced or closed in the domestic market, with disclosed values totalling $7.7 billion.
European DC Set To Grow
The corporate Defined Contribution market in Europe is set to grow by 11.5 per cent per year to 2014, says research by Cerulli. It says while DC plans have become more sophisticated and offer a wider range of investment options and/or solutions that are better targeted to savers' needs, more work still needs to be done. It found a lot of recent attention has focused on the default fund, where the vast majority (80 per cent) of savers will end up. Key developments in this area include lifestyling, dynamic asset allocation, absolute return strategies, target-date funds, and a move away from passive investment.
U.S Institutions Using TCA
Transaction cost analysis (TCA) is increasingly being integrated into the institutional investment process as a means of assessing and improving trade performance, says Greenwich Associates. In 2011, 35 per cent of the institutions participating in its U.S. Equity Study said their compliance departments used TCA systems to ensure best execution. Almost 40 per cent of the institutions use TCA systems to assess broker performance on internal trading desks, 38 per cent said they employ TCA to identify outlier or problem trades, and 37 per cent use TCA to measure active trading results against a benchmark. The study results suggest that although institutions still harbour some serious concerns about the shortcomings of existing TCA systems, they are beginning to expand the role the TCA process plays within their organizations.
Hill Moves To OMERS
Rodney Hill is executive vice-president and chief auditor with the OMERS Enterprise Senior Leadership Team. The chief auditor provides an independent, objective, and constructive assessment of the efficiency, effectiveness, and integrity of internal financial and operating controls across the enterprise. He previously spent more than 20 years at PwC (PricewaterhouseCoopers).
Tuesday, August 16, 2011
DB Plans On Rollercoaster
Current stock market instability and falling bond yields underscore the risk Defined Benefit pension plan sponsors are assuming if they don’t have measures in place to minimize that risk, says Aon Hewitt. A ‘perfect storm’ of declining equity markets combined with diminishing bond yields is increasing plan funding deficits, which may well require additional sponsor contributions to these plans. This time last year, the aggregated funded ratio of Canadian DB plans was 87 per cent on an accounting basis. That figure steadily improved and on July 25, 2011, it sat at 97 per cent. However, between July 25 and August 12, pension plans truly have been on a rollercoaster. At one point (August 8), pension plans sat as low as 85 per cent, wiping out the gains – and more – from last year. The volatility seen in accounting positions has been huge, with daily swings of more than two per cent happening on several business days in August. “Assuming some risk is common in building retirement funds,” says Tom Ault, a vice-president with Aon Hewitt in Vancouver, BC. “Plans can experience losses, but we all assume we will be able to make up those losses over time and accept that risk. However, when it comes to DB plans, the risk for plan sponsors can often be very one-sided. They are exposed to the additional contribution requirements that can be caused by a market downturn, but often benefit little from plan surpluses.”
GM Funds Retiree Healthcare Trust
General Motors of Canada will eliminate its current retiree healthcare plan and contribute $2.535 billion to a trust fund for retiree healthcare costs. The creation of the trust was a condition of the $10.8 billion bail out by the federal and Ontario governments of General Motors in 2008 after the company filed for bankruptcy protection. The creation of the trust means retiree medical benefits, including dental and vision care, will be paid by the fund, not GM Canada.
Canadian venture capital (VC) market activity made no further advances on growth in previous quarters in the second quarter of 2011, says CVCA ‒ Canada's Venture Capital & Private Equity Association. In fact, it registered a slight drop in dollar flows as venture capital invested totalled $328 million in the second quarter, down two per cent from $335 million invested the year before. Deal-making in Canada nonetheless showed a moderate increase during the first half of 2011. Disbursement levels reached $686 million at the end of June, or 10 per cent more than the $626 million invested in the first half in 2010, while the number of VC-backed companies totalled 234, an increase of 13 per cent. Like the first quarter of the year, international deal activity of Canadian funds moved at a slower pace in the second quarter. To date this year, funds have directed $105 million to opportunities abroad, down 40 per cent from the same time in 2010.
Partnership Works On HST
DuCharme, McMillen & Associates, Inc. has partnered with Greg Hurst & Associates Ltd. to deliver a combination of sales tax and pension expertise to Canadian pension and employee benefit plans. The introduction of HST in Ontario and British Columbia has resulted in a new set of highly complex sales tax rules that affect any pension or employee benefit plan administered funded under a trust arrangement with either a board of trustees or a corporate custodial trustee. As a result, there is widespread confusion and non-compliance among organizations with affected pension and employee benefit plans. Greg Hurst, managing director and founder of GH&A, says “every registered pension plan affected by the new rules will be eligible for a rebate of a portion of the GST/HST paid by the plan.”
Trade Instruction Deadlines Enhanced
J.P. Morgan Worldwide Securities Services has enhanced the trade instruction deadlines for its global custody clients. Its global custody business has improved more than 2,100 deadlines in more than 80 markets, providing market-leading cut-off times in the majority of those markets. As a result, its clients now have greater flexibility in instructing trades. Bringing trade instruction deadlines closer to market deadlines allows more time for pre-matching and identification of potential settlement issues. The vast majority of enhancements are to instructions transmitted electronically as clients’ electronic trade instructions can move freely between global operating sites in the United States, United Kingdom, India, and Australia.
Monday, August 15, 2011
Vanguard Could Force Lower Fees
Vanguard’s arrival in to Canada will force made at home account companies to lower fees, says Moody’s Investor’s Service. With $1.7 trillion in properties worldwide, its low-cost model will put price pressure on Canada’s widespread mutual account players, says Moody’s Inform ‘Vanguard in Canada is Negative for Incumbent Asset Managers.’ It says the made at home account marketplace is dominated by 10 players ‒ the five large banks as well as IGM Financial Inc., Fidelity Investments Canada, Dynamic Funds, AGF Investments Inc., and Franklin Templeton. It cites data from Morningstar which shows Canada’s equity account MERs are more than twice that of the U.S.
Desjardins Purchases MGIF
Desjardins Financial Security has purchased Jovian Capital Corporation’s mutual fund dealer subsidiary MGI Financial Inc. Founded in 1968, MGIF is a national organization committed to helping Canadian investors achieve financial security and peace of mind by providing professional advice and flexible financial solutions. A network of branches and associate offices stretch from B.C. to the Maritimes. The Jovian group of companies (AlphaPro Management Inc., BetaPro Management Inc., Hahn Investment Stewards & Company Inc., Horizons Exchange Traded Funds Inc., JovInvestment Management Inc., Leon Frazer & Associates Inc., MGI Financial Inc., MGI Securities Inc., MGI Securities (USA) Inc., and T.E. Wealth) manages approximately $13.5 billion of client assets.
DC Pot Growth Simply Contributions
Many Defined Contribution pension pots may be worth no more than their cash contributions over the last five years, says a report from PwC. It says a 40-year-old worker who had been saving five per cent of his gross salary for the last five years could find the current value of his pot roughly equal to that, and potentially even less following charges levied by the scheme. However, it warns against pulling out of these investments or crystallizing savings at the wrong time. Instead, it recommends deferring retirement decisions until the markets recover and, for those farther from retirement, making additional contributions.
Short Selling Legitimate Practice
The Alternative Investment Management Association (AIMA), the global hedge fund association, does not think temporary short selling bans introduced by France, Italy, Belgium, and Spain will help the current market situation. It says past experience has shown that bans on short selling do not prevent market falls and, indeed, can exacerbate volatility. Independent academic research also supports this conclusion. AIMA CEO Andrew Baker says “Short-selling is a legitimate market practice which helps capital markets function effectively. It contributes to efficient price discovery, increases market liquidity, facilitates hedging and other risk management activities, and can possibly help mitigate market bubbles.”
Hybrid Plan Could Save Billions
California state and local governments could save billions of dollars a year by moving to a hybrid retirement plan similar to one used by the federal government, says a study by the California Foundation for Fiscal Responsibility. It found the savings could be even greater if public employees who take early retirement contributed up to half the cost of their retiree healthcare premiums. The report looked at potential savings if state and local governments reduced guaranteed pension benefits by half and replaced them with a system similar to the 401(k) plans prevalent in the private sector.
Friday, August 12, 2011
Private Equity Boosts Results
The CPP Fund ended the first quarter of fiscal 2012 on June 30, with net assets of $153.2 billion, an increase of $5 billion from the previous quarter ended March 31. The increase in net assets this quarter resulted from $1.3 billion of investment income, generated primarily from private assets in the portfolio, and $3.8 billion in excess CPP contributions. The investment income for the quarter represents a 0.9 per cent return. “Results for the quarter demonstrate our long-term global investment strategy in action, including initiatives to further enhance the CPP Fund’s holdings in private market investments,” says David Denison, president and CEO. “While major equity indices were down this quarter, the fund’s private equity holdings and real estate portfolio helped deliver positive results overall.”
Pensions Behind M&A Activity
Canadian merger and acquisition activity rose notably in the second quarter and pension funds were a big part of it, says Crosbie & Co. Inc., an investment banking firm. It says there were 280 transactions announced in the quarter for a total value of $51.2 billion. This represents a 19 per cent increase in M&A activity and a 74 per cent increase in aggregate transaction value compared to the prior quarter. The quarter ranked as the second strongest quarter by transaction value in almost four years, second only to the fourth quarter of 2010 ($57 billion). The significant gain in transaction value was driven by mega deals (transactions more than $1 billion) and strong activity by financial sponsors. Pension funds were involved in nine of the 12 transactions announced in the quarter. The Canada Pension Plan Investment Board led the way with six announcements, including four acquisitions of interests in shopping malls in the U.S., Germany, and Australia and an industrial property in Hong Kong. Onex Corp. led private equity activity with three deals announced in the quarter.
Smoking Program Upgraded
Morneau Shepell Ltd., under the Shepell-fgi brand, is upgrading its Stop Smoking Centre to help employees kick the smoking habit. This online component of its Smoking Cessation services now provides users with a more interactive experience and equips them with tips, tools, and a support network of healthcare professionals and peers, available 24/7/365. Smoking Cessation services are offered as part of its Employee Assistance Program (EAP).
Desjardins In Infrastructure Partnership
Regime de rentes du Mouvement Desjardins has acquired a 50 per cent economic interest in an infrastructure limited partnership managed by Connor, Clark & Lunn Infrastructure. The primary investment is an equity interest in the Harrison Hydro Project, a150 MW operating run-of-river hydro project located in British Columbia. Connor, Clark & Lunn Infrastructure will continue to manage the partnership on behalf of its investors.
UK Actuary Fees Examined
Actuaries are more competitive when assessing fee structures for smaller schemes in the UK, says a survey of fees charged for core services by Kim Gubler Consulting. Examining the fees levied at small, medium-sized, and large schemes for routine pension fund tasks such as conducting a triennial or annual valuation, it found that competitive advantage dropped away when contracts were tendered by the largest pension schemes. Considering the price of all costs it surveyed, including corporate actuarial valuations and ones conducted ad hoc, it found that large schemes were particularly vulnerable to steep differences in fees, with the most expensive firm being nearly three times more expensive than the lowest charging firm and 37 per cent more than the average.
Mavroudis Now President
George Mavroudis is president and CEO of Guardian Capital Group Ltd. He fills the vacancies created by the passing of John Christodoulou, the firm’s long-serving chairman and CEO. Mavroudis has been a senior executive of Guardian since 2005 and has been president since January 2009.
Thursday, August 11, 2011
Market Slides Resume
After recovering Tuesday on news that the U.S. Federal Reserve would keep borrowing costs at an all-time low and was prepared to use a range of tools to bolster the economy, stock markets declined again Wednesday on continued fears about Europe's sovereign debt crisis ‒ including rumours that France, the second-biggest economy in the euro zone, was facing a credit downgrade. The Dow Jones industrial average closed down 519.83, or 4.62 per cent, at 10,719.94; the S&P 500 fell 51.77, or 4.42 per cent, ending at 1,120.76; and the Nasdaq composite closed down 101.47, or 4.09 per cent, at 2,381.05. The Dow had risen four per cent and S&P 500 4.7 per cent on Tuesday. The S&P 500 has fallen 16 per cent from this year's high on April 29. Although the speculation and rumours about a French downgrade were denied, French banks are widely exposed to European debt, and it, along with Germany, would bear the brunt of another bailout of Europe’s weaker economies. The S&P/TSX was up 89.63, bucking the trend, as did markets in Asia. However, the Nikkei average had fallen 1.7 per cent to 8,888.30 in trading this morning, while the broader Topix shed 1.2 per cent to 767.05.
Active Managers Beat Benchmark
Active managers in Canada found it easier to beat the benchmark in the second quarter of 2011 with 68 per cent ahead, up from 39 per cent in the first quarter and the highest level since the first quarter of 2010, says Russell’s ‘Active Manager’ report. Overall, it was a difficult market environment with the S&P/TSX Composite declining 5.2 per cent in the second quarter as the three largest sectors ‒ Energy, Materials and Financials ‒ all fell. However, active managers benefited from the strength in the top-performing Telecommunications sector which increased 8.9 per cent in the second quarter. The quarter was also favourable for value and growth managers, with 67 per cent of growth managers and 66 per cent of value managers beating the benchmark. That was up from 22 per cent of growth managers and 59 per cent of value managers in the first quarter of 2011.
BMO Expands With Acquisition
BMO is expanding its institutional retirement services commitment in North America with the acquisition of Milwaukee, WI-based Marshall & Ilsley Corporation. BMO Group Retirement Services (BMO GRS), operating in Canada under Joan Johannson, will join the new BMO Institutional Trust Services (BMO ITS) which, including the U.S. institutional business, represents more than $72 billion in assets under administration and custodial services. BMO’s Private Client Group will oversee the combined operations of BMO ITS in the U.S. and Canada. With the acquisition, BMO ITS, led by James Cahn, becomes one of the few group retirement service providers owned by a major international financial institutions to offer services in both Canada and the United States, allowing the bank to exponentially grow this strategic market segment in each nation. The acquisition gives it the ability to leverage the services, resources, and expertise of its colleagues in the U.S., while delivering the Canadian solutions and expertise its clients have come to trust.
DC Plans 2015 Better-suited To Help
The Defined Contribution plans of 2015 will be better-suited to help participants achieve a successful retirement, says Diversified Investment Advisors’ ‘Prescience 2015: Expert Opinions on the Future of Retirement Plans.’ It says automatic enrolment, now available in 50 per cent to 60 per cent of large plans, will be available in nearly three-in-four plans. Automatic escalation, available in one-quarter of plans today, will be available in 43 per cent of plans. Not only will automatic enrolment be more common, but Qualified Automatic Contribution Arrangement (QACA) safe harbors will be better-aligned with the contribution levels required to reach sufficient levels of income replacement in the absence of a Defined Benefit plan. Twenty-two per cent of plans will offer a managed account as a QDIA and slightly more than one-quarter of plans will offer retirement income guarantees of some sort.
S&P Downgrade Not Major Event
The Standard & Poor’s (S&P) one-level rating downgrade of the United States long-term debt is not a major event in and of itself, says a Brandes ‘Commentary.’ However, it says we are obviously in a period in which concerns are rising about global economic growth ‒ the potential for a ‘double dip’ ‒ and the downgrade adds to those worries. It says there are reasons why it disagrees with short-term negative overreactions. It says the Federal Reserve has already provided guidance that the rating cut will not affect how it rates the riskiness on bank reserves for U.S. banks. As well, it is very unlikely that foreign bank regulators will require increased capital based on the AA+ rating alone since the U.S. Treasury market is still the deepest and most liquid bond market in the world. It is also sceptical that wide spread forced selling of Treasuries will be necessary as institutions such as insurance companies, mutual funds, and money market funds will still have latitude to hold Treasuries despite S&P’s rating.
De Freitas At Williamson Group
Wednesday, August 10, 2011
Rout Crisis In Confidence
Monday’s market rout was largely a crisis in confidence, says a TD Economics report. But with the traditional policy responses to such a crisis proving ineffective or unavailable, the risk is that the economy slides back into recession, it warns. It says that the S&P downgrade of the U.S. sovereign debt rating was not a big deal, as the U.S. government is solvent and the risk of default remains negligible. But the market didn’t share that confidence, leading to a massive selloff. TD now says that market reaction “can only be interpreted as a crisis in confidence” over the ability of governments to deal with their fiscal problems and in the sustainability of the economic recovery. “The financial turmoil runs the risk of negatively impacting the psyche of consumers and businesses,” it adds, noting that this could make a renewed recession a self-fulfilling prophecy.
Government Bonds Surge In U.S.
A 10 per cent increase in U.S. fixed income trading volume last year was driven mainly by a surge in institutional trading of government bonds, says Greenwich Associates. Fixed income assets under management by U.S. institutions experienced an even more dramatic increase, expanding by approximately 30 per cent to nearly $6 trillion. Trading volume in U.S. treasuries increased almost 60 per cent from 2010 to 2011. Significant increases in government bond trading volume were reported by institutions of all sizes and types. As a result of these and other shifts in trading volume, government bonds now represent about 21 per cent of the U.S. fixed income market in terms of trading volume, up from 18 per cent in 2010, and rates products as a whole, including interest rate derivatives and mortgage-backed pass-through securities, now make up nearly 80 per cent of the U.S. fixed income market.
Canadian ETF Assets Decline
Assets under management in Canada’s exchange traded fund industry declined slightly in the month of July, with Canadian equity funds suffering the greatest declines, says data from BlackRock Asset Management Canada Limited. Its ‘July 2011 ETF Landscape Report’ shows that Canada’s 200 ETFs represented $39.2 billion in assets under management in July, down one per cent from last month. Canadian equity ETFs experienced the greatest market retraction, with $327 million in new outflows, representing a 4.1 per cent drop. The decline coincided with a 2.5 per cent dip in the S&P/TSX composite index during the month of July. Commodity ETFs also experienced a drop in assets, declining by $106 million, or 4.9 per cent. Fixed income funds enjoyed the greatest gains during the month of July, with assets under management growing by $368 million, or 5.3 per cent.
Event Looks At Employee Engagement
Richard Beed, vice-president, human resources, at TELUS; and Tracey Lapointe, vice-president, human resources, at Glaxo Smith Kline; will be among the featured speakers at the ‘2nd Internal Branding & Employee Engagement Canada Conference.’ The marcus evans event takes place October 17 and 18 in Toronto, ON. For more information, visit http://www.marcusevans.com/marcusevans-conferences-events.asp
Tuesday, August 9, 2011
Markets Plunge Again
Asian stock markets plunged this morning as investors around the world sold riskier assets in fear that political leaders are failing to tackle debt crises in Europe and the United States. Major indexes across the region fell between four and nine per cent, following a drop of more than six per cent on Wall Street Monday, the first trading session since the historic downgrade of the United States’ AAA credit rating by Standard & Poor’s. The flight-to-safety lifted gold to a new record high ‒ $1,742 an ounce ‒ and lifted Japanese government bonds and, ironically, U.S. Treasuries, the asset directly affected by the downgrade. While the U.S. downgrade Friday prompted a loss of confidence, investors are also concerned about data suggesting the U.S. economy is stalling and China’s inflation rate which could curb its ability to stimulate demand to offset a global slowdown.
Agreement On Benefits Signed
Canada and Brazil have signed a trade agreement on social security between the two countries. It co-ordinates pensions, disability, and survivor benefits between the two countries making the benefits available to Brazilians and Canadians who have lived or worked in the other country. The agreement is also meant to cut costs to businesses operating bilaterally. Canadian companies operating in Brazil will only be required to make Canada Pension Plan contributions for Canadian employees sent to Brazil, instead of making Brazilian social security contributions. The same applies to Brazilian companies operating in Canada.
B.C. Tax Could Model QST
British Columbia’s return to a provincial sales tax could be modeled on the Québec Sales Tax (QST), says Greg Hurst, of Greg Hurst & Associates Ltd. The QST is a provincial sales tax harmonized with the GST rules and administered by the province, which also collects the GST on behalf of the federal government. If this model is followed, a new B.C. provincial sales tax would still be a ‘value-added tax’ (VAT) and would allow businesses to benefit in much the same way as they do under the HST, in particular, organizations that also do business outside of B.C. who would have to maintain both B.C. and federal sales tax registrations and reporting. For consumers, implementing the Québec model in B.C. could allow low income credits to be retained and the province would have more control in determining point-of-sale rebates on provincial sales taxes.
Action Needed To Limit Leakage
Putting limits on loans and encouraging retirees to leave assets in Defined Contribution plans are among the suggestions for addressing DC plan leakage, says a report by the Defined Contribution Institutional Investment Association. Leakage factors in DC plans can be a drain on retirement income over time, says its ‘Plug The Drain’ report. It calls on legislators and plan executives to share responsibility for restraining leakage, the early withdrawal of assets for non-retirement purposes.
Danish Funds Socially Active
More than half of Denmark's pensions industry now uses active share ownership methods to sway companies falling afoul of ethical investment guidelines, with only two per cent reacting by simply offloading problem stocks, says research from the Danish Insurance Association. It also found that practically the whole of the sector – 99.1 per cent – have now established their own socially responsible investment (SRI) guidelines. Back in 2009, 79 per cent had such a strategy in place, while in 2008, that figure was just 66 per cent. On active share ownership, 54 per cent of the pensions sector used these methods to settle ethical investment conflicts, up from 39 per cent in 2009, when the proportion was down from 2008’s 45 per cent. Guidelines set out by the UN are behind most of the pension funds' published SRI strategies. In the Danish pensions sector, 97.8 per cent of the market had signed either the UN PRI or the UN Global Compact, or both.
Draft Terms Developed
New Brunswick officials have developed draft terms of reference for a review to ensure public pension plans are sustainable and protected, says Deputy Minister of Finance Mike Ferguson. And they hope to present these to cabinet before the end of the month. "We are working on the terms of reference and that work is ongoing, but we haven't gotten it in front of government for approval," he says. "It's complex work and there are several potential options with different pros and cons that need to be considered." Given that pension results have been volatile and that they are a liability on government books, the public pension plan review is "an important thing to get done," he says.
Pension System Solutions Examined
With a variety of options available for pension coverage in Canada, the CPBI’s ‘2011 Atlantic Regional Conference’ will look at private sector options such as Pooled Registered Pension Plans and the enhancement of the Canada Pension Plan. Graham Steele, Nova Scotia’s minister of finance; Ken Georgetti, president, of the Canadian Labour Congress; Leanne Hachey, vice-president, Atlantic, for the Canadian Federation of Independent Business; and Frank Swedlove, president of the Canadian Life and Health Insurance Association; will examine these and other options as well as their impact on employers and employees. Theme of the conference is ‘Recipe for Renewal.’ It takes place September 14 to 16 in Charlottetown, PEI. For more information, visit www.cpbi-icra.ca
Monday, August 8, 2011
Employers Focus On Retirement Solutions
Retirement income solutions have garnered significant attention in the marketplace and more U.S. employers are focusing on these services, says an Aon Hewitt survey. The ‘Trends & Experience in Defined Contribution’ plans survey found more than a quarter of plans (29 per cent) now provide or promote some form of retirement income solutions, either inside or outside their plan. Facilitation of annuities outside the plan is offered by 18 per cent of plans, while 15 per cent of companies report an in-plan solution. DC-only plans are more likely to provide in-plan solutions (19 per cent) than companies with both a DC and a DB plan (13 per cent). Additionally, nearly three-quarters of plans provide online modeling tools to help employees understand what they can spend each year in retirement.
Funds Offer Alternatives To Fixed Income
Aviva Investors has launched four open-ended real estate funds aimed at underfunded UK pension schemes scouting alternatives to fixed income. The specialist funds focus on social housing, ground rent, student assets, and commercial assets. Two further funds to be launched later this year will complete a series designed to match long-term liabilities with higher returns than those currently offered by bonds.
Reverse Stress Testing Examined
‘Reverse Stress Testing’ will be the focus of a session at the ‘10th Annual World Alternative Investment Summit Canada 2011.’ Ron Papanek, executive director, alternative investments business, MSCI, will explain how managers can identify the hidden risks in their portfolio and what top hedge fund managers are doing to stress test their portfolios. It takes place September 19 to 21 in Niagara Falls, ON. For more information, visit www.waisc.com
Session Looks At Infrastructure
‘Infrastructure Investing: An opportunity for plans of all sizes’ will be the focus of a panel discussion at the Association of Canadian Pension Management's National Conference. Alain Carrier, CPP Investment Board; and George So, of Kindle Capital Management Inc.; will explore what infrastructure is, the pros and pitfalls of investing in this asset class, and the various ways by which plans of all sizes can achieve exposure in their portfolio. It takes place September 13 to 16 in St. John’s.NL. For more information, visit www.acpm-acarr.com
Friday, August 5, 2011
Fear Drives Markets Down
Global stock markets tumbled this morning as a result of fears the U.S. may be heading back into recession and that Europe’s debt crisis is worsening. In Europe, major markets fell, adding to losses Thursday. London’s FTSE 100 declined 3.5 per cent to 5,393.14 and Germany’s DAX shed 3.8 per cent to 6,172.00. France’s CAC-40 lost 2.5 per cent to 3,238.80. Japan’s Nikkei 225 stock average slid 3.7 per cent to 9,299.88 and Hong Kong’s Hang Seng was down 4.6 per cent to 20,877.74. China’s Shanghai Composite Index lost 2.2 per cent to 2,626.42. At the close Thursday, the S&P/TSX composite index was down 3.4 per cent. The tumble follows the biggest one-day points decline on Wall Street since the 2008 financial crisis. The Dow closed Thursday down 512.76 points, at 11,383.68, the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 per cent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 per cent. The lack of agreement in Europe about debt and how to stabilize the euro and anticipation that the U.S. Federal Reserve will launch a new stimulus effort are being cited as the major reasons for the decline.
Pension Deficits Shrink
Pension deficits are shrinking, but funding challenges remain, says a report from rating agency DBRS Ltd. Its annual pension study reports that market and regulatory forces are contributing to the elimination of pension deficits. On the surface, Defined Benefit pensions appear to be significantly underfunded with 45 per cent of the plans it reviewed less than 80 per cent funded. However, the health of pension plans is actually stronger today than it was following the 2001 dot-com crash. This strength is attributable to significant employer contributions over the last decade, driven largely by regulatory reform. It notes that these contributions have helped replenish plan assets and counter-acted the impact of volatile capital market returns and increasing benefits. It reports that, while plan assets plummeted more than 25 per cent in 2008, since then assets have recovered close to the pre-crisis level. Moreover, the funding gap is almost entirely due to multi-generational low discount rates, a key actuarial assumption used in determining plan obligations. These low discount rates may overstate the pension obligations, thereby exacerbating the funding gap.
Aggregate Deficit Increased
The aggregate deficit in pension plans sponsored by S&P 1500 companies increased by $74 billion during July, from a deficit of approximately $231 billion as of June 30, 2011, to $305 billion as of July 31, says Mercer. This deficit corresponds to an aggregate funded ratio of 83 per cent as of July 31, compared to a funded ratio of 86 per cent at June 30, 2011, and 81 per cent at December 31, 2010. The decline in funded status was driven by a two per cent drop in equities, partially offset by a fall in yields on high quality corporate bonds during the month.
Appetite For Commodities Picks Up
Appetite for commodities has picked up in recent months and UK pension schemes are expected to allocate considerably more to the asset class in future, says Hermes, a UK fund manager. It says the commodities market has shown encouraging signs of growth and that pension schemes would do well to increase direct investment in the asset class. Traditionally, commodities present several positive aspects for pension funds, as they are less correlated to other asset classes, offer good protection against inflation, and can provide a high return on investment similar to equities.
Sun Tapping Into Voluntary Market
Sun Life Financial Inc. plans to make significant investments in the United States as it senses opportunity in recently announced U.S. spending cuts and a shift in benefit responsibilities from employers to individuals. It has announced a five-year plan to ramp up its coverage in the U.S. voluntary insurance market, which it believes makes up about one-third of the group benefits market. The sector is especially hot right now as a faltering economy has cash-strapped businesses searching for ways to cut expenses. Voluntary health and other benefit plans are sold at the work site, but at no expense to the employer as employees choose whether to opt for a payroll deduction in exchange for coverage.
ACPM, Benefits and Pensions Monitor Survey On PRPPs
ACPM and BPM have entered into an exclusive partnership to survey the pensions and benefits industry on a variety of topics. This is your opportunity to provide feedback and have your views impact the survey results. This is the third of six mini-surveys. It will only take two or three minutes to provide us with your feedback on Pooled Registered Pension Plans (PRPPs). By taking just a few minutes to answer the brief questions, your name will be entered into a draw for your chance to win a complimentary registration to attend Canada's premier pension event, the ACPM National Conference, this September in St. John's, NL. Please click on the link to access the survey:
Emerging Markets Offer Opportunities
There have been few periods in the past with as many opportunities in emerging markets as there are today, says Karim Abdel-Motaal, GLG's co-head of emerging markets. Speaking at Man Investments Canada’s ‘Emerging Markets – Fact, Fiction and Hype’ session, he said the world is filled with interesting investment opportunities because it is “filled with mayhem.” Every three months it seems, he said there is blow-up going back to the crises in countries such as Greece and Ireland right up the current discussions over raising the debt ceiling in the U.S. In fact, in today’s environment, he suggested the U.S. might be the world biggest emerging market. In the emerging markets themselves, the concerns about inflation are not just because of rising food and gasoline prices. The money supply is increasing and while banks are increasing interest rates, it is not happening fast enough to contain the problem of emerging market equities not performing well.
CPPIB Invests In U.S. Apartments
As more Americans become renters as a result of demographic shifts and the fallout from the U.S. housing crisis, the CPP Investment Board is moving into the U.S. apartment business. It is investing five high-end buildings in Los Angeles, CA; Washington, DC; and New York, NY. The investments are part of its real estate strategy to acquire or develop high-quality, long-term assets in core, high barrier to entry markets. It expects that the rental housing sector in the U.S. is set to boom and demand is expected to outstrip supply, leading to higher rents.
Teachers’ Sells Water Holding
The Ontario Teachers' Pension Plan Board plans to sell its holdings in UK water company Northumbrian Water Group. The water company, which is currently 26.8 per cent owned by the pension fund, said it would recommend that shareholders accept a takeover Cheung Kong Holding. Teachers’ bought a 25 per cent stake in the water company back in 2005 as part of its plan to invest in regulated utility companies.
Alternative Hires Increased
Institutional hires in the U.S. in alternative investments increased in the first two quarters of 2011 at the expense of domestic active equity and fixed income, says a report by Eager, Davis & Holmes, an investment management consultant. Its ‘Tracker Hiring Analytics Database’ found alternative investments comprised 42 per cent of placements in 2011's first two quarters compared to a 37 per cent average over the past six years. There were 501 alternative investment placements in the first half of 2011, totaling $28.5 billion. Over the same period, there were just 152 U.S. equity placements worth $6 billion and 106 U.S. fixed income appointments totaling $11.4 billion.
Equities Post Negative Returns
For a third consecutive month, most equity funds in Canada posted negative returns in July, as the debt crisis afflicting Europe and now the United States continued to shake stock markets around the world, says preliminary performance data from Morningstar Canada.. Only seven of its 24 Canada fund indices’ that track equity categories posted gains for the month. The best-performing fund index was the one that measures the Precious Metals Equity category, which gained 4.6 per cent in July. Also among the top performers were the fund indices that track Asian equity funds as these funds benefited from the yen's sharp increase relative to the Canadian dollar. The worst performer among all fund indices in July was Financial Services Equity, which lost 5.3 per cent.
Auto Escalation Increases Contribution Rates
Defined Contribution plans in the U.S. with combined automatic enrolment and automatic escalation have higher contribution rates than those with auto enrolment alone. However, self-enrolled participants have higher contribution rates than either group, says research from Mercer. It found that the average contribution rate for participants who were automatically enrolled was 3.5 per cent. The rate rose to 4.4 per cent when auto enrolment and auto escalation were combined. Yet, the average contribution rate for self-enrolled participants was 8.5 per cent.
Dupont Moves To Northleaf
Daniel Dupont is a managing director for Northleaf Capital Partners. Based in its London, UK, office, he will contribute to expanding its private equity and infrastructure programs and advancing the firm's business development activities globally. He joins Northleaf following more than a decade at Coller Capital, where he led deal sourcing and investment execution for primary and secondary private equity investments globally, as well as business development activities with a focus on Europe, Canada, and Asia. He previously held senior positions in the private equity group at the Caisse de Dépôt et Placement du Québec and the National Bank of Canada.
Wednesday, August 3, 2011
Landscape Being Rapidly Altered
A robust Canadian fixed income market is attracting sell-side investment at such a furious pace that a historically stable competitive landscape is being rapidly altered and the group of Big Five Canadian fixed income dealers could be on its way to expanding to a Big Six, says Greenwich Associates. Canadian fixed income volume increased approximately 12 per cent from 2010 to 2011 after surging 42 per cent the prior year. That consistent growth helped sustain an inflow of investments from both domestic and foreign financial service firms. Foreign firms are looking to capitalize on Canada's fixed income boom by meeting institutions' growing demand for non-domestic investments. As they work to bring their global platforms to Canadian investors, banks from the United States and Europe are opening or expanding offices in Toronto and hiring aggressively. The Big Five Canadian bond dealers saw their aggregate market share eroded by the continuing efforts of their lower-ranked competitors, ceding 1.8 percentage points of market share to the rest of the market.
Base Pay Increasing 3.1 Per Cent
Canadian employers project average base pay increases of 3.1 per cent for 2012, says preliminary compensation planning data from Mercer’s ‘Compensation Planning Survey.’ Employers report they awarded pay increases of three per cent in 2011. This is up from the 2.7 per cent awarded in 2010 and the two per cent awarded in 2009. Its ‘What’s Working’ survey of employee views on work showed that employees consider base pay the most important part of their employment deal by a wide margin, but only 53 per cent say they are satisfied with their base pay. Slightly more (58 per cent) feel they are paid fairly given their performance and contribution to the organization.
Absence Management Becoming Fully-integrated
Companies are looking to develop fully-integrated absence management programs, says Aon Hewitt’s absence management report. The survey of 200 U.S. employers revealed that 79 per cent of organizations have fully or partially integrated their leave of absence administration with non-occupational disability programs (salary continuation, short term-disability, long-term disability), while 69 per cent have fully or partially integrated with occupational disability/workers’ compensation programs. The reasons integration is important to a successful absence management program include compliance, enhanced data and reporting, better outcomes, and improved employer experience.
Canadians Feel Unsettled
Ongoing market volatility and global unrest continue to leave Canadians feeling unsettled about retirement, says the Russell ‘Financial Health Index.’ In fact, second quarter results show a strong decline in financial health, to the lowest level since the inception of the online tool in late 2008. Two factors stood out as key concerns for Canadians about retirement, and had a noteworthy increase over last quarter ‒ having a reliable source of income and having sufficient income to cover essentials. To a lesser extent, three other factors also contributed to the decline of the index this quarter ‒ leaving assets/inheritance to beneficiaries, maximizing tax efficiency of investments, and having reliable, trustworthy advice.
Tuesday, August 2, 2011
Teachers’ Buys Stake In McGraw-Hill
Jana Partners, an activist hedge fund, has teamed up with the Ontario Teachers Pension Plan Board to buy a 5.2 per cent stake in textbook publisher McGraw-Hill Cos. McGraw-Hill owns the financial ratings agency Standard & Poor's, educational publisher McGraw-Hill Education, Platts energy information services, and J.D. Power and Associates. Jana says in a securities filing that it has already been in discussion with McGraw-Hill management about its business, strategy, and future plans.
Fortune 100 Dropping DB
The number of Fortune 100 companies that offer a Defined Benefit plan to new salaried employees continues to fall, while the number offering only Defined Contribution plans continues to increase, says a study by Towers Watson. As of May 31, 30 per cent of Fortune 100 companies offered a DB plan to new salaried employees, down from 37 per cent at the end of 2010, 43 per cent in 2009, 47 per cent in 2008, and 83 per cent as recently as 2002. Employers are phasing out both traditional pension plans and hybrid plans such as cash balance plans, which legally are DB plans that combine elements of DB and DC plans. It found 70 per cent of Fortune 100 firms offered only DC plans to new salaried employees, up from 63 per cent in 2010, 57 per cent in 2009, and 53 per cent in 2008. As recently as 1998, just 10 per cent of Fortune 100 companies offered only a DC plan to new salaried employees.
Participants Unhappy With Target-date Funds
Despite the growth in popularity of target-date funds, only 22 per cent of participants say they are very satisfied with the investment, says research by Dimensional Fund Advisors. Excluding participants who were ‘very satisfied,' the survey asked the other respondents the reasons for their response. Forty-nine per cent said their target-date fund's rate of return was poor or lower than other investments. When asked if they would recommend target-date funds to a friend, colleague or family member, 16 per cent of participants said they were unlikely to do so and 43 per cent said they were neutral. Another 32 per cent said they were somewhat likely and 10 per cent said they were very likely. In the plan sponsor survey, 63 per cent of plan executives said they were either very concerned or somewhat concerned about how target-date fund losses from 2008 would affect participants who were close to retirement.
Fourth Quarter Of Positive Results
U.S. institutional investment plan sponsors in the Northern Trust Universe had their fourth consecutive quarter of positive results in the second quarter of 2011, with plans gaining 1.2 per cent at the median, says the Northern Trust Universe. “The gains keep coming for U.S. plan sponsors, and while results were modest for the quarter, the median plan had strong double-digit returns over the past year,” says William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “Many public funds gained more than 20 per cent in the 12 months ending June 30, the end of the fiscal year for those public employee pension plans.” In the second quarter, corporate pension plans had a median return of 1.4 per cent, while public funds returned 1.3 per cent. Public funds led the way in 12-month returns, gaining 22.2 per cent at the median. The median one-year return was 20.8 per cent for corporate pensions.
App Processes Payroll On The Go
iPhone and iPad users can now download Ceridian Canada Ltd.’s Powerpay Web Mobile app. Powerpay Web is Ceridian’s flexible payroll solution that enables small businesses to process their payroll online. The app gives clients the ability to review and then submit their payroll figures directly from their smartphone. Later this summer, an updated edition of this app will be released that provides further functionality such as the ability to add and edit employee profiles and quickly enter time information. If a manager is at off-site meetings or travelling for business, the app will ensure all employees – full time, part time, or occasional – are paid correctly and on time.
China Considering 401k Approach
China is considering launching a new retirement savings program similar to U.S. 401k plans. It hopes the scheme will help attract more long-term investors to the securities market and protect individual wealth from the effects of inflation, says the Shanghai Securities News. The 401k scheme in the U.S. allows employers to help workers save for retirement by reducing their taxable income while they are working. However, there would be difficulties launching 401k plans in China as it would require reforms in the country's economic and political institutions by the central government.
Pension Advisory Group Acquired
Pacific Life Insurance Co. has acquired JPMorgan Chase's U.S. pension advisory group. The business provides investment and risk-management services to corporations, pension plans, and other institutional investors. The business will be known as Pacific Global Advisors.
Lynde Heads Brandes
Carol Lynde is president, Brandes Investment Partners & Co. She will be responsible for the overall strategic direction and management of its operations in Canada. She will maintain her current role of chief operating officer. Oliver Murray is managing director, portfolio management and client services. He will be responsible for client service, sales, and marketing, globally. He will continue to serve as chief executive officer for the Canadian operation.
August Interest Rate Assumptions
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including August 2011 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:
• Commuted Values February 2011 CIA
• Marital Breakdown ‒ CSOP 4300, May 2009
• Annuity Proxy for Solvency Calculations for Non-Indexed & Fully-Indexed Pensions
• Minimum Interest on Employee Required Contributions
• HISTORICAL ‒ Commuted Values 2009 Basis (Now Frozen)
• HISTORICAL ‒ Commuted Values 2005 Basis (Now Frozen)
• HISTORICAL ‒ Commuted Values 1993 Basis (Now Frozen)
Friday, July 29, 2011
PSP Return Tops 14 Per Cent
The Public Sector Pension Investment Board (PSP Investments) had an investment return of 14.5 per cent for the fiscal year ended March 31, 2011. The overall performance for the year was driven primarily by strong results in public market equity portfolios as well as in private equity and in real estate. The fiscal year 2011 investment return exceeds the policy portfolio return of 12.7 per cent by 1.8 per cent and follows on the heels of the 21.5 per cent total return recorded in fiscal 2010. Consolidated net assets increased by $11.7 billion, or 25 per cent, to a record level of $58 billion. During fiscal year 2011, PSP Investments generated net income from operations of $6.9 billion and received $4.8 billion in net contributions.
Links Found Between Sustainability And Shareholder Value
A study by Sustainalytics has found strong links between sustainability performance and shareholder value for companies in the mining sector. ‘Sustainability and Materiality in the Natural Resource Sector: Mining' ’looks at whether environmental and social practices impact competitiveness for companies within the mining sector. The study finds that effective management in four key areas of sustainability was positively linked to shareholder value ‒ responsible community relations, employee and labour relations, environmental operations, and climate change.
Cash Best Tail-risk Strategy
Giving investment managers leeway to move into cash when markets become pricey is the best tail-risk strategy available, says James Montier, a London-based portfolio manager with GMO LLC. In a white paper, he contends that institutional investors seeking black swan protection now may be looking for returns in all the wrong places. Calling cash “a severely underappreciated tail-risk hedge,” he says in the hands of skilled managers it offers the most organic solution to the thorny issue of when investors should add such protection and at what cost.
Neutral Interest Rate Difficult To Determine
While the Bank of Canada expects the Canadian economy to return to full employment by the middle of 2012, its critics have stressed the need to raise interest rates to a ‘neutral’ value by then to keep inflation stable. However, defining this neutral level, normally associated with full employment, is a bit of a smoke and mirrors game, says a report from the C.D. Howe Institute. In ‘Natural Hazards: Some Pitfalls on the Path to a Neutral Interest Rate,’ David Laidler, a monetary economist, questions the theoretical concept of the ‘natural interest rate’ that underlies the idea that there is a well-determined and stable neutral value for market rates. He notes that much discussion of this natural rate "presumes, first, that such a value is grounded in the basic structure of the Canadian economy and, second, that this structure is stable over time, so that the neutral interest rate can be inferred from past data." Today's monetary policy models treat the Canadian economy as if its output was only one thing and its people all alike in their economic decision-making. In the real world, spending decisions depend on expected returns in specific lines of business, which are diverse and variable over time, and economic fundamentals are not their only determinants. "The neutral interest rate's value is hence extremely difficult to estimate, making other policy indicators highly relevant," says Laidler.
Members Unaware Of DB Plan Workings
The majority of corporate Defined Benefit pension plan participants don’t know much about their plans, says a survey by Fidelity Investments. It found about 71 per cent of those participants were not aware of how their plan worked, with 31 per cent not aware of how their vesting schedule works and 27 per cent unaware of the age at which they can begin to receive payments. Over half of those surveyed are counting on pension benefits to help pay for living expenses during their retirement.
Future Of Employment-based Health Insurance Examined
The future for employment-based health insurance in North America and the lessons learned for pension fund investing in the last decade will be among the topics covered at the International Foundation of Employee Benefit Plans’ ‘44th Annual Canadian Employee Benefits Conference.’ Featured speakers include Douglas Porter, an economist at BMO Capital Markets, who will provide an economic and financial outlook for Canada and Malcolm P. Hamilton, partner at Mercer Ltd., who will discuss the fate and security of pension plans in Canada. It takes place September 11 to 14 in Vancouver, BC. For more information, visit www.ifebp.org/canannual
Thursday, July 28, 2011
CFIB Warns Of Looming Pension Crisis
Canada’s public pension system isn’t fair or sustainable, says the Canadian Federation of Independent Business (CFIB) which is launching a campaign to highlight what it calls a looming pension crisis. It says the nation’s public sector workers, which account for about 20 per cent of the working population, get pension benefits that those in the private sector can only dream of. The trouble is the government can’t pay for them. “Our major objective is to warn Canadians of the looming pension crisis,” says Dan Kelly, senior vice-president of legal affairs. “We only have a few years to try to get this back on track to ensure the costs of public pensions are more reasonable before civil servants in Canada face the same fate as the U.S.” The CFIB is not asking for earned pensions to be taken away or existing plans to be gutted. “What we are saying is that we should be taking away some of the excesses and making sure they are paying fair contributions,” he says. “New civil servants should be on a more reasonable track similar to the rest of the country.”
OMERS Makes Acquisition
OMERS Private Equity, the private equity arm of the OMERS Worldwide group of companies, has signed a definitive agreement to acquire V.Group Ltd. from Exponent Private Equity. V.Group is the global market leader in outsourced ship management and a leading player in crew provision and related marine services. The company manages the running and maintenance of more than700 vessels on behalf of its customers and provides a variety of related services to these and other third party vessels. V.Group operates across 34 countries via its international network of 70 offices.
Balanced Funds Have Positive Results
Balanced pooled funds in the UK have continued to record positive results and in the second quarter of 2011 achieved a return of 1.3 per cent, says statistics released by BNY Mellon Asset Servicing. It shows balanced funds have achieved positive returns in each of the last four quarters, meaning that over the last year these funds returned 19.2 per cent. UK equity pooled fund managers also provided positive results over the quarter and returned 1.8 per cent.
Common Sense Gets Stefanelli
Jason R. Stefanelli is managing director, institutional services, at Common Sense Investment Management. With more than 15 years of experience in the investment management industry, he will be responsible for bringing its specialized resources and tailored alternative investment strategies to institutional investors across Canada. Previously, he was a managing director with Janus/INTECH and served for five years as vice-president, business development, with Wellington Management Company, LLP.
Baker Joins Kennedy
Nikki Baker is a compliance analyst at Kennedy Capital Management, Inc. She will contribute to the ongoing development and implementation of the firm’s compliance and risk management programs. She is also responsible for completing a variety of regulatory and compliance reports, as well as the periodic testing of compliance-related policies, procedures, and controls. Previously, she was with Scottrade.
Wednesday, July 27, 2011
Teachers’ Acquiring Parking Company
The Ontario Teachers' Pension Plan (Teachers') has entered into an agreement for the acquisition of Babcock & Brown Gates Parking Investments LLC (BBGPI), which includes Imperial Parking Corporation (Impark), one of the largest parking management companies in North America. Impark, headquartered in Vancouver, BC, currently leases or manages more than 2,000 parking locations, consisting of more than 400,000 parking spaces, in more than 25 markets throughout Canada and the United States. BBGPI, a joint venture between Gates Group Capital Partners, a Cleveland, OH-based private equity firm, and London-based Global Partners Fund, acquired Impark in 2006. The transaction, which is expected to close in 2011 and is subject to regulatory approval, was led by Teachers' long-term equities group, which is focused on direct investments that have steady cash flow and growth potential over a long-term horizon and a low to moderate level of risk.
Investor Confidence Up Very Slightly
Investor confidence rose very slightly in July to 101.1, up 2.2 points from June’s revised level of 98.9., says the State Street ‘Investor Confidence Index for July 2011.’ Confidence declined marginally among North American investors, whose reading fell 1.3 points to 99.2 from June’s revised level of 100.5. A similar decline was recorded for Asian investors, with the reading there falling 2.1 from June’s revised level of 92.2 to 90.1. After a weak spell in recent months, European investor confidence continued to increase, rising 10.5 points to 98.1 from June’s level of 87.6. Looking regionally, it seems that European investors took to heart the European Monetary Union announcements that could prompt an orderly resolution of peripheral debt concerns. In the U.S. and Asia, these positive European developments had much more muted impacts on portfolios, with the overall mood remaining cautious, especially around the U.S. debt ceiling and credit rating.
Retiree Benefits Can Be Cut
Benefits for about 3,000 Maytag Corp. retirees can be changed by Whirlpool to bring them in line with current employees as a result of a U.S. federal judge's ruling. At issue in the case was the union's argument that Maytag agreed to vest retiree medical benefits and promised benefits for the lifetime of each retiree and their dependents. The court said the union failed to present evidence the company agreed to vest medical benefits of retirees. Maytag retirees had received 100 per cent coverage with no out-of-pocket expenses or deductibles. Under the Whirlpool plan, retirees under age 64 pay $237 a month per person with a $500 deductible. They then pay 20 per cent of their medical expenses up to $3,500. Retirees over age 65 pay nearly $50 a month with a $500 deductible and then pay 20 per cent of their expenses Whirlpool purchased Maytag in 2006.
QPIP Premiums Increasing
The Quebec government wants to increase the premium rates for the Quebec Parental Insurance Plan (QPIP) by four per cent effective January 1, 2012, says a Towers Watson Advisory. The proposed increase is necessary to fund the accumulated deficit under the plan. The government has indicated that although the current premium rates would have been sufficient to cover QPIP’s costs in 2012, the proposed increase is required to fund the accumulated deficit by 2018. Since 2006, premium rates have been raised every year. QPIP came into effect January 1, 2006, replacing federal Employment Insurance (EI) pregnancy and parental benefits for Quebec residents. Employers are invited 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. Written comments should be submitted by August 5 to the President and Director General of the Conseil de gestion de l'assurance parentale, Geneviève Bouchard, 1122, Grand-Allée West, 1st floor, Ste. 104, Québec (Québec) G1S 1E5.
Tuesday, July 26, 2011
Assets Return To Pre-2007 Levels
Assets in the pension funds of OECD countries reached $19.13 trillion at the end of 2010, up from $19.07 trillion at the end of 2007, says an Organisation for Economic Co-Operation and Development report. ‘Pension Markets in Focus’ shows assets have mostly returned to pre-2007 levels in local currency terms, while in U.S. dollar terms, assets at the end of 2010 surpassed 2007 amounts. Only six OECD countries have not seen assets recover in local currency terms. Those are Belgium where assets are 10 per cent lower than in 2007; Ireland, 13 per cent; Japan, eight per cent; Portugal, 12 per cent; and Spain and the U.S. both down by three per cent. On average, pension funds returned 2.7 per cent in real terms in 2010. The best performing funds were in New Zealand (10.3 per cent), Chile (10 per cent), Finland (8.9 per cent), Canada (8.5 per cent), and Poland (7.7 per cent).
OMERS Buys Rehab Provider
OMERS Private Equity, the private equity arm of the OMERS Worldwide group of companies, has partnered with existing management to purchase Accelerated Holdings, LLC from affiliates of private equity firm Gryphon Investors. Founded in 1989 and headquartered in Chicago, IL, Accelerated is a provider of traditional and specialty outpatient physical rehabilitation services. As of May 31, 2011, it operates a network of 223 clinics across eight states in the U.S. Midwest and Arizona.
Career Development Best Reward
When it comes to reward fairness, it’s neither total pay nor salary increases that have the biggest impact on employees’ perceptions of fairness, says a research report by WorldatWork, Hay Group, and Loyola University Chicago professor of human resources, Dow Scott. ‘Reward Fairness: Slippery Slope or Manageable Terrain?’ says career development opportunities have the greatest impact. The research report also identified the top three criteria that impact reward fairness ‒ individual performance, work responsibilities, and overall organization performance. Items that did not rank as highly include team/department performance, seniority/tenure with the organization, time in job, and the potential of the individual employee. When asked what works particularly well in improving the perceptions of reward fairness in organizations, respondents overwhelmingly identified effective reward communications, followed by external benchmarking, reward strategy and design, and non-financial recognition programs.
Advisors’ Role To Grow
As the retirement plan industry comes of age and enters a period of relative calm following a period characterized by tumultuous economic, socio-cultural, and regulatory change, the growing role of retirement advisors will be one of the most noteworthy changes the industry will see over the next five years, says Diversified’s ‘Prescience 2015: Expert Opinions on the Future of Retirement Plans.’ It says the need for ongoing holistic service from a third party is leading many plan sponsors to opt for a professional retirement plan advisor that services plans on a fee or retainer basis.As well, professional retirement plan advisors will be influential in provider searches. Among plan sponsors switching providers, 35 per cent will use the services of a professional retirement plan advisor. However, only 10 per cent of plan sponsors will actually change service providers annually through 2015, while more than one-third of plan sponsors will perform due diligence on their service provider and 17 per cent will add or replace at least one investment option.
Craig Examines Pension Reform
Neil Craig, senior pension consultant at Stevenson & Hunt, will discuss ‘Pension Reform: What’s in It for Me?’ at the ‘30th Annual ISCEBS Employee Benefits Symposium.’ In another session, Martin Chung, assistant vice-president, strategic health management, at Equitable Life Insurance Company of Canada, will examine ‘What’s Driving Health Management Strategies in Canada? What’s Working?’. The event is a partnership between the ISCEBS (International Society of Certified Employee Benefit Specialists) and the International Foundation of Employee Benefit Plans. It takes place October 2 to 5 in San Antonio, TX. For more information, visit www.iscebs.org/symposium
Monday, July 25, 2011
Nortel Benefits Slashed
Nortel retirees’ pension benefits will be reduced until legal issues over the sale of company assets can be settled. The company’s pension plan has a shortfall of about $1.5 billion between the assets in the fund and what it owes retirees, says Morneau Shepell, the administrator appointed last October to wind up the fund. It says payments were reduced to a level the funds can afford until further claims have been settled. The worst affected will be former workers in provinces outside of Ontario who will see a 43 per cent drop in benefits from August. Retirees in Ontario, where plans are not indexed, will see a 25 per cent drop in benefits. However, they will also get a further top up through the province’s Pension Benefit Guarantee Fund. The company filed for bankruptcy in 2009 leaving the pensions, health, and other benefits for 20,000 pensioners across Canada in doubt. Nortel recently received $4.5 billion from the sale of its patents to tech giants including Apple and Research in Motion. That money was added to proceeds from the sale of other assets, a total of $7.5 billion, that’s currently under lock and key until legal claims over the assets are settled. The money needs to be split between claimants in Canada, the U.K., and the U.S. and the various parties have been unable to reach an agreement over who gets what. The Canadian pension plans have filed a $1.5 billion legal claim on the cash.
PRPP Proposal A ‘Lemon’
The Canadian Labour Congress believes the federal government’s proposal for a Pooled Retirement Pension Plan (PRPP) “sounds like they’re trying to sell us a lemon.” Ken Georgetti, CLC president, was commenting on the announcement of the Conservative government’s plans to push ahead with its PRPP proposal, including a cross-country blitz to promote the scheme, while not being able to offer any details about how the plan will work. The government says the “PRPP experiment is the solution to the country’s looming retirement income crisis, but can’t offer any specifics about how or if it will actually work. What’s the point of offering more Canadians access to imaginary or yet-to-be-invented workplace pension plans without any guarantee those plans will deliver improved retirement income security?”, says Georgetti. He says Canadians are unlikely to opt into any workplace pension plan that comes with no guarantee that employers will buy-in, no guarantee that savings will be protected against inflation or future market turmoil, and no guarantee that the management fees charged by private sector brokers won’t bleed away future earnings.
SRI Growing At Faster Pace
Sustainable and socially responsible investing (SRI) in the U.S. has continued to grow at a faster pace than the broader universe of conventional investment assets under professional management, says the Social Investment Forum (SIF). An Aon Hewitt ‘Radar’ says the SIF reports that at the start of 2010, professionally managed assets following SRI strategies stood at $3.07 trillion, a rise of more than 380 per cent from $639 billion in 1995. Over the same period, the broader universe of assets under professional management increased only 260 per cent from $7 trillion to $25.2 trillion. During the most recent financial crisis, from 2007 to 2010, the overall universe of professionally managed assets has remained roughly flat while SRI assets have enjoyed healthy growth. With $2.3 trillion in assets involved in SRI strategies, institutional investors dominated the SRI universe, in part because of legislative mandates. New products and fund styles also drove growth in ESG investment vehicles, especially among ETFs and alternative investment funds such as social venture capital, double- and triple-bottom-line private equity, and responsible property funds.
Hedge Funds Struggled In June
Hedge funds continued to struggle in June as volatile market movements created a difficult trading environment, says the ‘Manon the Month’ report from Man Investments. The Greek debt story and unexpected policy interventions such as the release of strategic oil reserves added uncertainty and led to a general decrease in gross exposures across the industry. Managed futures losses generally came after emerging trends reversed sharply, although managers with large fixed income allocation saw smaller losses as bond markets continued to trend upwards. Relative value and event driven styles were also held back by falls in both equity and credit markets.
Pyramis Launching Cash Services Business
Pyramis Global Advisors has launched a global institutional cash services business. It will offer a suite of international money market and cash management solutions in some of the world’s major currencies. These offerings will be designed to meet the needs of global institutional clients such as corporate and public Defined Benefit plans and sovereign wealth funds.
Caisse Invests In Cirque
The Caisse de dépôt et placement du Québec and Constellation Growth Capital, a division of Highbridge Principal Strategies, have partnered with Cirque du Soleil to produce the two latest Cirque du Soleil shows ‒ Zarkana, playing at the Radio City Music Hall in New York City, NY; and IRIS, at the Kodak Theatre in Los Angeles, CA. The $104 million vehicle formed by the three partners is investing in high quality entertainment with international appeal.
Friday, July 22, 2011
Canadians Believe In Emerging Markets
Canadians believe the emerging markets – in particular Asian nations such as China and India – represent the best investment opportunities, says research from Franklin Templeton Investments Corp. It found a significant proportion of Canadians (38 per cent) think emerging markets represent the greatest investment opportunity over the next decade. Canada placed second (25 per cent) followed by developed international markets such as the United Kingdom, Germany, and Japan (six per cent). The United States was chosen by only three per cent of respondents. Within the emerging markets, 45 per cent of Canadians who currently have investments picked Asia (including East, South, and South East Asia) as the region showing the greatest promise. Unfortunately, few Canadians are taking full advantage of the emerging markets opportunity within their investment portfolios, says Don Reed, president and chief investment officer of Franklin Templeton Investments Corp. At its ‘’Annual Investment Forum,’ he said dollars invested in emerging market equities account for only 2.3 per cent of the value of equity funds owned by Canadians. In comparison, emerging market equities account for 9.6 per cent of all equities held by the Canada Pension Plan Investment Board, more than four times as much as Canadian retail investors.
RAMQ Revises Drug Plan Parameters
The Régie de l'assurance maladie du Québec (RAMQ) has revised the financial parameters of the basic drug plan for residents whose protection it provides, says a Mercer ‘Client Alert.’ This revision resulted in a surprising decrease in premiums for the 12-month period commencing July 1, 2011. However, it says maintaining the maximum contribution will not provide private benefit plans with any cost reductions as has been the case with previous years. As well, for other drug coverages, particularly those of active employees, the reduced prices for generic drugs purchased by beneficiaries of the public plan will not necessarily translate into savings for participants in private plans. Constraints on prices charged by pharmacists under the code of ethics of pharmacists, which makes reference to fair and reasonable fees for pharmaceutical services, and under the terms of insurance contracts, which make reference to reasonable and customary prices, are not sufficient to prevent cost shifting to participants of private plans. As a result, the ‘Client Alert’ says this is a good time to review the parameters of private group plans to ensure they remain aligned with corporate objectives in respect to scope of coverage and cost containment.
Greece May Offer Opportunities
While troubled Greece is in danger of defaulting on its government debt, it’s possible that its stock market could perform better as it recovers from extreme undervaluation, says Martin Cobb, executive vice-president of Templeton Global Equity Group and lead manager of the Templeton Global Smaller Companies Fund. He told the ‘Franklin Templeton Annual Investment Forum’ that opportunities are often found in countries where the mood is gloomy. In fact, even if he had the foresight to pick the countries with the fastest economic growth rates in the world next year, those might not be the ones with the best stock market performance. “The stock market is a discounting mechanism and optimism is often reflected in the stock prices in anticipation of events,” he says.
Fixed Income Advances Erased
Faltering global equity markets largely erased fixed income advances during the June quarter, says a survey by RBC Dexia Investor Services. It says within its universe, Canadian pension assets rose 0.2 per cent in the three months ending June 2011, nudging year-to-date performance to 2.2 per cent. “Concerns over the resilience of the U.S. recovery and the European debt crisis sparked a correction-like pull back, but a late quarter rebound softened the blow.” says Don McDougall, director of advisory services. Canadian equity was the hardest hit asset class in the quarter as the S&P TSX Composite index dropped 5.2 per cent, wiping out nearly all March quarter gains. However, foreign stocks remained in positive territory thanks to active management as Canadian plans gained 0.1 per cent in the quarter against a 0.3 per cent drop in the MSCI World index. Bonds provided needed support, earning 2.8 per cent in the quarter despite a late June sell-off.
America Still Largest Economy
America is not to be counted out, says Conrad Herrmann, lead manager, Franklin Flex Cap Growth Fund. Speaking at the ‘Franklin Templeton Investment Forum,’ he noted it is still the world’s largest economy and trading nation. As well, it has one of the most affluent consumer bases in the world and the U.S. entrepreneurial spirit is alive and will continue to thrive. He also noted that there is an opportunity every 40 years in the U.S. markets as steep downturns ‒ such as the one in 2009 ‒ take place and are followed by rallies which take the markets to new highs.
Latin America Attracts Investors
Latin America is attracting more private equity investments from institutions, says the Emerging Markets Private Equity Association’s ‘Local Pension Capital in Latin America.’ It says a combination of favourable regulatory changes, demographic shifts, and strong economic fundamentals is luring institutional investors. Institutional assets in Latin America grew at 20 per cent compounded annually over the past three years, with aggregate pension assets having reached about $638 billion in Brazil, Mexico, Chile, Peru, and Colombia.
Money Pours Into Hedge Funds
Despite volatile negative performance, investors poured $29.5 billion into hedge funds in the second quarter, an increase of 1.1 per cent on a quarter-to-quarter basis, says Hedge Fund Research. For the six months ended June 30, net inflows to hedge funds totalled $62 billion, the highest half-year inflows since the second half of 2007, when net asset inflows were $75 billion. In comparison, net inflows in 2010 totalled $55.5 billion. Hedge fund assets now stand at a record $2.044 trillion.
CPPIB Invests In London Office Market
Grosvenor Fund Management and the Canada Pension Plan Investment Board (CPPIB) have formed a joint venture partnership to invest up to £200 million in London’s West End office market over the next two years. CPPIB will invest £190 million in this UK venture and Grosvenor Fund Management will invest £10 million and lead asset sourcing and management activities. The strategy is to invest in value-added office opportunities.
Ivanhoe Cambridge Shifts Structure
Ivanhoe Cambridge will shift from an organizational structure based on asset categories (shopping centres, offices, multi-residential buildings, and other buildings) to one based on its core business activities ‒ investment and real estate management. This reorganization is part of a business strategy that began in the spring of 2011 with the consolidation of its subsidiaries, SITQ and Ivanhoe Cambridge. As a result, the following executive appointments have been made. Kim McInnes is president of global operations, responsible for all operational, development, and asset management activities as well as for the human resources and legal affairs sectors. William Tresham is president, global investments, and is responsible for all investment activities including strategy, portfolio management, research, and capital allocation. Sylvain Fortier, president, residential, will continue to develop the new multi-residential sector.
Thursday, July 21, 2011
Conservatives Taking Easy Route
The Conservative government is opting for pension reform that will ensure that banks and insurance companies reap the maximum benefit while Canadian workers continue to get left behind, says Judy Sgro, Liberal critic for seniors and pension. “After promising pension reform for four years, the Conservatives have decided to go the easy route and just let investment fund managers offer a new type of savings plan to workers,” she says. “The basic idea behind the Conservative’s pooled pension plan is to create another vehicle that will allow banks to chip away at the nest eggs of Canadians with their high management fees.” She points to Australia which introduced a superannuation system similar to the Conservative’s Registered Pooled Pension Plan proposal in 1997. A recent study published in the Rotman International Journal of Pension Management found that total assets in the system have grown substantially through contributions, but net earnings from investments were relatively low. Despite the presumed role of competition, the investment performance of the system continued to be restrained by high fees and costs. “I think the Conservatives just want to be able to tax the high management fees of these pooled pensions with the GST or HST which they wouldn’t be able to do to a voluntary supplemental CPP,” says Sgro. “They've decided to fill the coffers in Ottawa in order to fight the deficit they created rather than fuel the retirement dreams of their constituents.”
Ontario’s amendments on the division of pension assets on the breakdown of a spousal relationship have been proclaimed and will come into force January 1, says a Mercer ‘Communiqué.’ Under the new rules a pension entitlement will continue to be a family asset for purposes of determining net family property. However, the value of the entitlement and of the pension available for division between separated spouses from a registered pension plan must be determined by the plan administrator. It will remain optional for the parties to divide pension at source. However, a division at source will be strictly controlled. Unless the pension is already in pay when the parties separate, a division at source must be settled by an immediate lump sum transfer from the pension plan. Valuation and division will be standardized and plan administrators will be entitled to rely on the information provided to them in approved application forms.
Investors Leery Of Europe
Investors are increasingly leery of Europe, but the global economic outlook remains positive, says the BofA Merrill Lynch ‘Survey of Fund Managers for July.’ It found that a net 19 per cent of global fund managers and asset allocators believe that the global economy will strengthen in the next 12 months. This number has grown for two successive months from a net 10 per cent in May. However, growing fears over sovereign debt have pushed European economic pessimism to its highest level since the depths of the credit crisis. Nearly two-thirds of investors identified EU sovereign debt funding as the number one tail risk (up from 43 per cent in June). European investors have also sharply reduced positions across many sectors, particularly banks. A net 57 per cent of investors from Europe is now underweight banks (versus 33 per cent in June).
Financial industry rating firm Brendan Wood International has announced its list of ‘TopGun Portfolio Managers’ investing in Canadian equities. The 50 so-called ‘TopGuns’ from buy-side were selected based on ratings by sell-side analysts who considered their depth of inquiry, insight, and knowledge of the Canadian market and sectors. RBC Asset Management has six money managers on the list and the Caisse de Dépôt et placement du Québec, CI Investments, Connor, Clark & Lunn, and Sentry Investments each had four. The list is: RBC Asset Management ‒ Chris Beer, Stuart Kedwell, Jennifer McClelland, Marcello Montanari, Doug Raymond, and Brahm Spilfogel; Caisse de Dépôt et placement du Québec ‒ Jéan-Fréderic Bérard, Philippe Dumont, Jean-François Jolicoeur, and François Lebel; CI Investments ‒ Stephane Champagne, Hoa Hong, Scott Vali, and Malcolm White; Connor, Clark & Lunn ‒ Gary Baker, Mark Bridges, John Novak, and Steven Vertes; Sentry Investments ‒ Mason Granger, Laura Lau, Kevin MacLean, and Dennis Mitchell; AGF Management ‒ Bob Lyon, Ani Markova, and Hugh McCauley; Phillips Hager & North ‒ Scott Lysakowski, Doug Stadelman, and Andrew Sweeney; Aurion Capital Management ‒ Craig MacAdam and Robert Decker; Goodman & Company Investment Counsel ‒ Oscar Belaiche and Robert Cohen; TD Asset Management ‒ Ari Levy and John Smolinski; Bissett Investment Management ‒ Tim Caulfield; BMO Asset Management ‒ Mark Serdan; CPP Investment Board ‒ Margot Naudie; Fiera Sceptre Inc ‒ Carole Berthiaume; First Asset Management, Inc. ‒ John Stephenson; Gluskin Sheff +Associates ‒ Jeannine LiChong; GMP Investment Management ‒ Keith McLean; Guardian Capital ‒ John Priestman; Intact Investment Management Inc. ‒ Vincent Paquet; Investors Group ‒ Chris Holden; Leith Wheeler Investment Counsel ‒ David Jiles; Mackenzie Investments ‒ Benoit Gervais; Scotia Asset Management ‒ Shane Jones; Selexia Investment Management ‒ Claude Boulos; Sprott Asset Management Inc. ‒ Charles Oliver; and UBS Global Asset Management ‒ Stephen Bonnyman
Taggart Looks At Social Media
‘Can You Hear Me Now? Plan Sponsors, Plan Members, and How Social Media Can Connect the Two’ will be the focus of a session at the ‘CPBI 2011 Atlantic Regional Conference.’ Jacqueline Taggart, of Towers Watson, will examine the practical use of social media and the potential for adding it to the mix of plan sponsor communications in the landscape of Canadian pension and benefits program administration. Theme of the conference is ‘Recipe for Renewal.’ It takes place September 14 to16 in Charlottettown, PEI. For more information, visit http://www.cpbi-icra.ca/
Wednesday, July 20, 2011
Teachers’ Swaps Airports
The Ontario Teachers' Pension Plan (Teachers') will exchange its interest in Sydney Airport along with a cash payment with MAp Airports for its interests in Brussels Airport and Copenhagen Airport. The transaction will result in Teachers' Infrastructure Group adding to its current airport holdings with ownership of 39 per cent of Brussels Airport and 30 per cent of Copenhagen Airport. Teachers' Infrastructure Group's other airport investments are Birmingham Airport and Bristol Airport, which are jointly controlled alongside other shareholders.
Short Window To Challenge
A federal court decision in Canada (Attorney General) v. Aéroport de Québec inc. serves as a reminder to employers that there may only be a relatively short window of time to challenge decisions rendered by pension regulators, says an ‘Osler Pensions & Benefits Newsletter.’ It says failure to act within that period can prevent an employer from successfully challenging a decision at a later time regardless of the merits of the claim. This case involves a pension plan sponsored by Aéroport de Québec that was terminated in 2008. While examining the wind-up documentation, the Office of the Superintendent of Financial Institutions (OSFI) concluded that the employer had failed to exercise an appropriate level of diligence and care in connection with the investment of the plan assets. When the employer did not file an application for a judicial review of this direction and it then failed to pay the amount as directed, the attorney general filed an application with the federal court for enforcement of the direction. At first glance, the result may seem somewhat harsh for the plan sponsor as it was basically prevented from defending its investment strategy for what may seem to be a fairly procedural point. However, the result is not necessarily surprising given the applicable provisions of the PBSA.
End Of QE2 Not ‘Earth Shattering’
The end of QE2 is not “earth shattering news,” says Ryan Dembinsky, of Rogerscasey. In the paper ‘Bidding Adieu to QE2,’ he says although the Federal Reserve’s second round of quantitative easing (QE2) wound down at the end of June, the debate continues with regard to the effectiveness of this controversial support mechanism and what will happen to financial markets without a massive built-in buyer of Treasury debt. QE2 injected a massive amount of liquidity into the system, which in turn served as a support for risk assets. Without the Fed as a major asset buyer and provider of liquidity, the question remains as to what will happen to risk asset prices, interest rates, and ultimately economic growth. However, since both the Fed’s intentions and the timeframe for the program’s end have been entirely transparent, “we do not expect any overwhelming short-term impacts.” Over the course of the next 12 months, the retraction of the excess liquidity and economic stimulation that QE2 provided will introduce higher volatility to risk assets and interest rates, reduced market liquidity, and a hindrance on economic growth.
Quebec CPBI Sets Date For Conference
‘Prendre le contrôle en zone de turbulence’ is the theme of the ‘CPBI Quebec Regional Conference, 2011.’ It takes place September 12 to 14 in Gatineau, QC. For more information, visit http://www.cpbi-icra.ca/
Tuesday, July 19, 2011
PRPP Consultations Planned
The federal government will consult with Canadians on proposed reforms to Canada’s retirement savings system. Before the government moves forward with the introduction of Pooled Registered Pension Plans, it will seek feedback from stakeholders and the general public. As well, Ted Menzies, minister of finance, will meet with provincial and territorial finance ministers across Canada over the summer to discuss the details of the framework in advance of the next finance ministers’ meeting. PRPPs would allow small businesses, employees, and self-employed workers to set up low-cost pension plans through private sector financial institutions.
OPTrust Exceeds Benchmarks
The OPSEU Pension Trust (OPTrust) had investment results of 13.9 per cent for 2010, outperforming its 10.9 per cent benchmark and significantly exceeding its funding target of 6.75 per cent. Total investment earnings were $1.53 billion, up from $1.35 billion in 2009, and net assets available for benefits rose to $13.3 billion at year-end. Its performance in 2010 built upon the continued broad-based recovery in global investment markets. Each of OPTrust's major portfolios achieved double-digit returns with public equity, real estate, and infrastructure portfolios accounting for more than 90 per cent of outperformance relative to its benchmark portfolio.
Dimensional Personalizes Approach
Dimensional Fund Advisors is personalizing individual managed accounts that make employee investment decisions for them and it will nag them if they aren't saving enough. The program has already gone through a pilot program in Europe and OBS Financial Services Inc. will pilot it in the U.S. to its client base of institutional clients this year. The plan addresses shortcomings in traditional Defined Contribution plans. It takes in personal details about participants, from age, gender, and marital status to how much they put away in 401(k) accounts and what they can expect to get from Social Security. The firm uses that information to determine a retirement-income target and make the appropriate investment allocations. When participants log in to their account, they see their income target and get a report card on whether they are saving enough.
Man Acquires Remaining Exposures
Man Group will acquire the remaining exposure to the estates of bankrupt Lehman Brothers from funds managed by its institutional asset management subsidiary, GLG Partners. It says the transactions will remove the remaining uncertainty from funds with residual claims against the Lehman estates to the benefit of both existing and new investors. In this way, Man can use its resources productively to provide clarity for fund investors and the opportunity to grow assets in the affected funds more quickly.
Companies are quickly changing pension packages for FTSE 100 executives, says the ‘LCP Executive Pensions Survey 2011.’ It shows that FTSE 100 companies are offering executives a cash supplement instead of a pension scheme. New executives are likely to be offered a cash supplement instead of a company sponsored pension scheme as cash is more flexible and allows executives to make pension contributions within the limits of the UK government’s £50,000 ceiling on tax relievable pension contributions. A cash supplement is typically 25 per cent of basic salary whereas the cost of a pension provided from a final salary pension scheme would normally be much higher, averaging 60 per cent of basic salary for executives.
Risk Aversion Solidifies
Institutional investment managers solidified a trend toward risk aversion in the second quarter of 2011 amid negative economic news, but nearly three-quarters had positive views on the outlook for job growth and a majority expect corporate earnings to continue growing in the short term, says a survey by Northern Trust. In the second quarter of 2011, it found 42 per cent of managers surveyed said they were more risk-averse than they were one quarter ago. That is up from 36 per cent in the first quarter and sustains an increasing trend that began in the third quarter of 2010, when just eight per cent of managers reported being more risk-averse than they were in the prior quarter.
HR, Payroll Go Mobile
ADP has launched a free mobile application for client locations utilizing Apple, Android, or Blackberry mobile devices. The ADP Mobile Solutions application gives employees a comprehensive view of their HR and payroll data including pay statements, 401K and retirement savings, access to corporate directories, and the ability to log into their timesheets. The applications target the fast growing mobile workforce, expected to top one billion in 2011.
Monday, July 18, 2011
Teachers’ Bid Successful
The Ontario Teachers' Pension Plan (Teachers') has increased its stakes in two Chilean water utilities after making successful bids in government-held auctions. With the completion of the auction process by CORFO, a Chilean government agency, the controlling group led by Teachers' increased its ownership in Essbio S.A. to 89.6 per cent from 51.1 per cent and now holds 94.2 per cent of Esval S.A., up from 69.8 per cent. Teachers' has been a significant investor in the utilities, which operate the infrastructure that treats and delivers clean drinking water, takes away waste water, and treats sewage, since 2007. CORFO retains a five per cent stake in Essbio and Esval, enabling it to veto issues such as water rights transfers and utilities concessions.
CIBC Acquires Stake In American Century
CIBC will acquire a 41 per cent equity interest in American Century Investments, a U.S. asset management company with $112 billion under management. It is purchasing the minority interest held by JP Morgan Chase & Co. pursuant to a shareholder agreement using a pre-determined valuation methodology conducted by an independent third party. "This investment will build on our strong franchise in Canada and provide CIBC an additional platform for growth in asset management internationally," Gerry McCaughey, CIBC president and chief executive officer. "It is aligned with our risk appetite and provides attractive fee-based income, geographic diversification, and revenue synergies within our asset management business." The acquisition also expands the products available to CIBC's institutional and retail customers by providing access to American Century Investments' equity and fixed income capabilities.
Smaller Manager Group Created
The Alternative Investment Management Association (AIMA) has created the AIMA Smaller Managers’ Group. The members of the group comprise AIMA manager member firms in Europe with $250 million or less in assets under management. The group is expected to meet on a regular basis to discuss issues of common concern including regulatory matters, sound practices, due diligence, interactions with service providers, and business pressures. Andrew Baker, AIMA CEO, says “It is well-documented that smaller managers in general have faced considerable challenges since the financial crisis. But smaller managers are an important source of innovation and fresh ideas. Even today’s giants of the industry started out small.”
U.S. Funded Status Rises
The funded status of the typical U.S. corporate pension plan rose to 88.5 per cent in June, says monthly statistics published by BNY Mellon Asset Management. It says the 0.8 percentage point increase follows assets falling less than liabilities last month. Plan liabilities fell an average of 2.1 per cent and the Aa corporate discount rate increased by 19 basis points from 5.3 per cent to 5.53 per cent. Assets fell an average 1.1 per cent, indicating declines in U.S. and global equities. “The June results reversed some of the losses that pension funds sustained in May,” says Peter Austin, executive director of BNY Mellon Pension Services. “However, the volatility in equity returns in recent months reflects the fragility of the global markets. The risk of further deterioration in asset values complicates the decision-making of plan sponsors.”
Friday, July 15, 2011
Six Elements Emphasized
Today’s post-crisis environment fund selection will emphasize six critical operational and risk management elements ‒ investment strategy and performance, portfolio liquidity, portfolio transparency, reconsideration of pricing and lockup periods, operational due diligence, and the independence of custodians and administrators, says a ‘Vision Report’ from State Street Corporation. ‘Hedge Funds: Rebuilding on a New Foundation’ examines the re-emergence of the hedge fund industry and the new dynamic between investors, hedge funds, and hedge fund administrators that has emerged to address sweeping regulatory changes and investor demands for enhanced fund transparency, liquidity, and efficiency. It says across the alternative investment industry, institutional investors are driving the evolution of all investment channels from direct hedge fund investment and funds of funds to managed accounts and other structures. Improved investor sentiment and positive inflows suggest reviving confidence across the board.” As well, the report suggests that escalating client demand for operational control and transparency is driving funds to outsource many responsibilities to administrators experienced in all asset types and investment strategies. “By hiring administrators to assume a range of services ‒ including data management, asset class coverage, and portfolio risk analysis ‒ fund managers can concentrate on generating alpha and distributing investment products.”
Vehicle Benefits Continue
A majority of organizations (89 per cent) continue to offer some type of vehicle benefit to employees, says the WorldatWork ‘Vehicle-Related Benefits Survey.’ It says the top three vehicle benefits offered are fuel or mileage reimbursement (72 per cent), car allowance (65 per cent), and providing a company-owned automobile (53 per cent). It also shows the impact of fuel costs on an organization’s vehicle-related benefits program is considerably less in 2011 compared to 2008, when this survey was first conducted. Record-high fuel prices have had little or no effect on vehicle benefit programs in 2011, with only 13 per cent of companies considering or implementing changes to make the programs less generous, compared to 2008 when 78 per cent of companies either considered or implemented such changes.
Desjardins Ranked Number One
The group retirement savings division of Desjardins Financial Security (DFS), a subsidiary of Desjardins Group specializing in life and health insurance and retirement savings, has been ranked number one in overall Defined Contribution pension asset growth in the Fraser Group's ‘Pension Universe Report.’ When comparing its year-over-year client portfolio growth, the division moved into first place among small, medium, and large businesses. As a result, the group retirement savings division has seen a 20.4 per cent increase in its asset growth. The division ranks first in DC pensions and DPSP products and second in RRSP and TFSA products. This recognition comes after DFS implemented its accelerated growth plan, which refocused its business and marketing strategy.
Mallaby Examines Hedge Fund Future
Sebastian Mallaby, the Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations and author of ‘More Money Than God: Hedge Funds and the Making of a New Elite,’ will examine the history and future of hedge funds at the ‘World Alternative Investment Summit Canada 2011.’ He will explain why the future of finance lies in the history of a misunderstood financial vehicle. The 10th annual summit takes place September 19 to 21 in Niagara Falls, ON. For more information, visit www.waisc.com
Thursday, July 14, 2011
Pension Funds May Damage System
Pension funds could end up damaging the global financial system if they switch asset allocations in response to pressures to manage their risks, says the Bank for International Settlements (BIS). Its working group on the global financial system expressed doubts about the ability of pension funds to maintain a long-term investor perspective given prospective volatility of financial statements under international accounting rules and regulatory mandates on scheme risks. These "systemic implications" pressure plans to focus on liability-driven investment strategies. This, in turn, could alter their traditional role as global providers of long-term risk capital. A partial retreat of institutional investors from the long-term and/or illiquid segment of the credit market could reduce the private and social benefits this sector generates through long-term investing and the extent to which it mitigates the pro-cyclicality of the financial system.
Funds Still In Crisis Mode
Pension funds are still in crisis mode and still driven by fear and macroeconomic myopia, says Standard Life Investments (SLI). It points to their continued preference for identifiable asset pairs – emerging versus developed, core versus peripheral – as evidence of this. The result in the first half of this year has been to strengthen the correlation across countries, assets, and sectors as emotion influenced short-term investor behaviour. However, for long-term investors, it says the herding instinct presented a significant opportunity to exploit a multi-speed market. Its report says "differentiation is likely to be rewarded over the next couple of years as investors start to recognize the multi-speed nature of the 'new normal' environment.”
CPPIB Acquiring Kinetic
A consortium comprised of funds advised by Apax Partners, together with controlled affiliates of Canada Pension Plan Investment Board (CPPIB) and the Public Sector Pension Investment Board, will acquire Kinetic Concepts, Inc., a U.S.-based medical device company focused on the design, manufacture, marketing, and service of therapies and products for the wound care, tissue regeneration, and therapeutic support system markets. In 2010, it reported revenues of $2 billion. The consortium plans to work actively with management to further invest in the global medical products sector to expand the company’s core business, develop innovative products, and extend into new geographies where significant opportunities exist.
CIBC Mellon Provides ETF Solutions
CIBC Mellon has been selected to provide a suite of asset servicing solutions for Invesco's recently-launched TSX-listed PowerShares exchange-traded funds. It will deliver custody and fund administration services, with BNY Mellon providing performance and risk analytics. Its ETF solution includes indicative NAV production, automated basket creation and redemption features, and a designated broker interface offering flexible, end-to-end automation of the order process. CIBC Mellon currently services five of the eight ETF sponsors in Canada.
Smoking Cessation Program Planned
Peter Zawadzki, of Pharmasave, will examine ‘The Process of Quitting’ at a Connex Health one-day smoking cessation workshop. He will discuss the process of quitting and the role medications can play in helping individuals be successful. Other speakers will review the free services available on the phone, online, and through text messaging that are available to help employees quit successfully and the importance of making lifestyle changes that will improve an employee’s chance of successfully quitting. The program developed by Connex has had success rates of up to 55 per cent of participants who reported back that they had quit smoking. This is higher than the 30 per cent standard for smoking cessation programs. It takes place August 11 in Burlington, ON. For more information, visit www.connexhc.com
Wednesday, July 13, 2011
Teachers’ In Chilean Auction
The Ontario Teachers' Pension Plan (Teachers') will participate in an auction for stakes in two Chilean water utilities in which it currently owns majority positions. The current members of the controlling group in Essbio S.A. and Esval S.A. intend to purchase all of the shares being offered by CORFO, a Chilean government agency. Teachers' currently owns approximately 51.1 per cent of Essbio and 69.8 per cent of Esval and is a member of the controlling group. After the conclusion of the auction process, the government of Chile will retain a five per cent stake in each of the utilities, enabling it to veto issues such as water rights transfers and utilities concessions. The utilities operate the infrastructure that treats and delivers clean drinking water, takes away wastewater, and treats sewage.
Emerging Markets Best Opportunity
Canadians believe China, India, and other emerging markets present the best investment opportunities in the current market environment, says a survey by Franklin Templeton Investments Corp. It found 38 per cent see emerging markets as the greatest investment opportunity over the next decade. A quarter of respondents identified Canada as the market with the best opportunities. Canadians are less confident about the prospects in other developed markets. Just six per cent see opportunities in Britain, Germany, and Japan, and only three per cent in the United States.
Boomers Fail To Deliver
Baby boomers planned to put more money away for retirement in 2011 as the year started. However, a CIBC poll halfway through the year shows many don’t feel they are delivering on their savings goals. Almost one-third of respondents aged 45 to 64 felt they were doing a poor job of building their savings so far in 2011, including 17 per cent who rated their progress as ‘very poor.’ Less than half of boomers believe they are making good progress in building their savings so far in 2011. “While boomers have taken the important first step of identifying retirement as their top financial priority, some don’t feel confident about the progress they have made when it comes to building their savings so far in 2011,” says Christina Kramer, executive vice-president, retail distribution and channel strategy.
Two Join CPPIB
Eric M. Wetlaufer is senior vice-president, public market investments, and Michel R. Leduc is senior vice-president, communications and stakeholder relations, at the CPP Investment Board (CPPIB). Most recently, Wetlaufer was the group chief investment officer, international, at Fidelity Management & Research and previously was a co-founder and partner of Oxhead Capital Management. Leduc has more than 20 years of experience in the areas of public policy, corporate communications, social responsibility, and branding. Most recently, he was vice-president, public and corporate affairs, at Sun Life Financial.
Healthy Workplace Examined
Attendees at the ‘2011 Health Work & Wellness Conference’ will learn how healthy workplaces are becoming a business imperative in Canada's private and public sectors. The event features keynote speakers, Roy Spence and John DeHart. Spence is chairman and CEO of GSD&M Idea City, co-founder and CEO of The Purpose Institute, and co-author of ‘It's Not What You Sell, it's What You Stand For: Why Every Extraordinary Business is Driven by Purpose.’ DeHart co-founded Nurse Next Door, a healthcare franchise system with more than 40 locations across Canada. It takes place October 4 to 6 in Toronto, ON. For more information, visit www.healthworkandwellness.com
Allan Speaks At Bond Event
Barry Allan, founder and chief executive officer at Marret Asset Management Inc., and Geoff Marshall, vice-president, portfolio management, at CI Investments Canada, are among the featured speakers at the ‘High Yield Bond Conference.’ It takes place September 20 and 21 in Toronto, ON. For more information, visit www.euromoneyseminars.com/chyb
Tuesday, July 12, 2011
Real Estate Allocations Boosted
Pension funds are opting out of infrastructure and boosting their allocations to real estate amid continuing concerns over leverage and fund concentration, says the Towers Watson annual ‘Global Alternatives Survey.’ It found a 16 billion increase to $952 billion in alternative assets under management in 2010. Real estate remains the most attractive alternative for pension schemes, accounting for 55 per cent of assets. Private equity funds of funds came next, followed by infrastructure, funds of hedge funds, and commodities. Of the top 100 managers, 44 had real estate, compared to 11 with infrastructure. However, the top five managers have 71 per cent of all pension fund infrastructure assets, making it the most concentrated asset class.
Gold Can Benefit Portfolios
Higher allocations to gold could benefit portfolios in both inflationary and deflationary scenarios, says a study by Oxford Economics. 'The impact of inflation and deflation on the case for gold' says that gold performs relatively well compared with other assets in a high-inflation scenario as well as in a deflationary period. Because of its lack of correlation with other financial assets, the report shows that gold has an important role to play in stabilizing the value of a portfolio, even where the conservative assumption of a modest negative real annual return is made. As well, gold offers protection against extreme events such as high inflation and financial market distress.
TMX Select Launched
TMX Group Inc. has launched trading on TMX Select, its alternative equities trading system. The ATS offers participants additional execution and liquidity seeking opportunities through a differentiated marketplace and pricing model. It features a ‘symmetrical pricing’ model, in which both liquidity seekers and providers are charged the same fee.
Ambachtsheer Earns Lifetime Award
Jane Ambachtsheer, partner and global head of Mercer's Responsible Investment business, has been chosen as the honourary recipient of the Social Investment Organization's ‘2011 Canadian SRI Lifetime Achievement Award.’ The award recognizes those committed to the promotion of ESG (Environmental, Social, Governance) in the Canadian investment space. Through this award, the SIO is recognizing Ambachtsheer’s leadership and commitment to the industry, in addition to her professionalism, passion, and the quality of her work. She established Mercer’s global RI practice in 2004, the first of its kind in a global consulting organization.
Monday, July 11, 2011
Pension Plans Suffer Losses
Stock market declines and lower bond yields caused many Canadian pension plans to suffer losses in the second quarter of 2011, ending an upward trend that lasted for three consecutive quarters, says the Mercer ‘Pension Health Index.’ It stood at 71 per cent as of June 30, down four per cent over the quarter. A typical balanced portfolio would have returned 1.8 per cent for the first half of 2011 and -0.2 per cent for the second quarter. The S&P/TSX composite index gained 0.2 per cent for the first six months of the year and declined by 5.1 per cent during the second quarter. Suffering the greatest losses during the first half of 2011 were information technology stocks, which plunged 30.8 per cent.
Income Bond Fund Launched
RBC Global Asset Management has launched the BlueBay Global Monthly Income Bond Fund, sub-advised by BlueBay Asset Management. The fund is available for purchase by individual and institutional investors in Canada. It invests primarily in global high yield debt, emerging market government and corporate debt securities, and global convertible bonds. Acquired by RBC in 2010, BlueBay Asset Management is a UK-based specialist manager of fixed income credit, offering long-only and alternative products across the major sub-asset classes of emerging markets, high yield, loans, convertibles, and investment grade bonds.
PRPPs May Benefit Employers
Hasty implementation of a complex Pooled Registered Pension Plan program may end up being costly and ineffective, benefiting the plan sponsors rather than the intended target Canadian savers, says Gerry Wahl, managing director of CompehensivePensionGovernance. In the article ‘Pooled Registered Pension Plans – Who Really Benefits?’ at http://www.bpmmagazine.comWahl_BPMJune11.pdf he says from an employer perspective, there is a very compelling reason to add a PRPP or convert an existing DC plan to a PRPP. “Given fiduciary responsibilities and risk inherent in administering a DC plan, why would sponsors not jump at an opportunity to transfer their DC plans to the PRPP?” he asks. While they appear to be intended for smaller organizations (employed members) or the self-employed (individual members), there are no proposed restrictions in terms of size of the organization, nor does it appear that employers already offering DC plans are precluded from transferring their DC plans to a PRPP.
Hazell Heads North America
Deborah Hazell is regional head of North America for HSBC Global Asset Management. Based in New York, she will oversee operations in the U.S., Canada, and Bermuda. She was previously with Fischer Francis Trees & Watts where she was president and chief executive.
DeBortoli Joins Eckler
Karen DeBortoli is director of pension and benefits research at Eckler. She will provide its consultants and clients with the knowledge they need to adapt to relevant changes in legislation. Prior to joining the firm, she worked for another international consulting firm as well as a law firm that specialized in pension and benefits law.
Friday, July 8, 2011
Waring Reacquires Galileo
Galileo Global Equity Advisors Inc. has reached an agreement with Northland Bancorp Inc. to reacquire majority ownership of Galileo Equity Advisors Inc., a company founded by Michael Waring, in 2000. The Galileo Global Equity Advisors organization includes the Galileo mutual funds which are represented across Canada by independent financial advisors as well as investment advisory and portfolio management services for institutional clients including pension funds, high net worth individuals, corporations, and trusts. Waring says "Galileo's strength has always been its ability to do independent research and analysis so we can build effective portfolios, one investment at a time. This disciplined approach will continue as we grow and prosper in the future."
Fixed Income ETF Assets Increase
Canadian fixed income exchange traded funds experienced eight per cent growth in assets under management in the second quarter of 2011, including $633 million in net new assets. However, Canadian equity ETFs experienced an eight per cent retraction in assets under management and $691 million in net outflows, says information compiled by the iShares ETF business at BlackRock Asset Management Canada Ltd. ETF assets under management overall dropped in the second quarter, partly resulting from significant weakness in the equity markets. For example, the S&P/TSX Composite Index returned -5.1 per cent in the second quarter. Total assets under management of Canadian ETFs were $39.7 billion in the second quarter, compared to $41.4 billion in assets under management in the first quarter, representing a drop of four per cent. Twenty-four new ETFs have been introduced in the second quarter bringing the total number of ETFs introduced in Canada since the beginning of 2011 to 41.
Managers Adjusting Glide Paths
More than half of all target date fund managers have made glide path adjustments, compared with just over a third two years ago, says a survey by Callan Associates. It found 58 per cent of target date fund managers changed glide paths, up from 34.5 per cent in 2009. The most noteworthy change involved the incorporation of inflation sensitive assets into the glide path fund line-up with the majority maintaining exposure to a combination of TIPS; U.S., international, and global REITs; commodities; and/or diversified real estate. Allocations to inflation-sensitive securities and other diversifiers remain generally modest. Fund managers also are trying to diversify within asset classes and to reduce volatility by adding, or increasing exposure to, investments in international or emerging markets as well as in mortgage funds, global bonds, and senior loans.
Program Looks At Securities Lending
The Canadian Securities Lending Association has selected FinTuition as its partner in launching its new education initiative. CASLA and FinTuition will offer a one-day course designed to give attendees an introductory overview of securities lending. The ‘Introduction to Securities Lending’ course is designed to help participants build a general understanding of the securities lending business, its practices, and its procedures. The course is also intended to provide a more comprehensive introduction for those with a high level understanding of the subject, but would like more detail on what securities lending is, its role in the capital markets, and the best practices for market participants.
Thursday, July 7, 2011
OMERS Contribution Rate Increased
The Ontario Municipal Employees Retirement System will increase its contribution rate in 2012 as part of the OMERS Sponsors Corporation plan to return to full funding. The plan calls for yearly rate hikes for three years to 2013. Employer and employee contribution rates will increase by about one per cent each. In 2010, the plan had a funding shortfall of $4.5 billion. Contribution rates will be adjusted once the plan is again fully funded.
Caisse Acquires Montreal Apartments
The Caisse de dépôt et placement du Québec’s real estate group has made its first residential revenue property acquisition in that province. The residential apartment division of Ivanhoe Cambridge purchased a 1,000-unit apartment complex in Montreal, QC, from Canapen Group. The residential apartment division was created in April when the Caisse consolidated its shopping centre, office, and residential real estate subsidiaries under the Ivanhoe Cambridge banner. The Caisse already owned a residential building in Toronto, ON, as well as a number of apartments outside of Canada, mostly in New York City.
U.S. Pension Funding Ratios Drop
Pension funding ratios in the U.S. fell approximately two per cent in the second quarter of 2011, says Legal & General Investment Management America (LGIMA). Its ‘Pension Fiscal Fitness Monitor,’ a quarterly estimate of the change in health of a typical U.S. corporate Defined Benefit pension plan, says that the decrease in funded status was preceded by three positive quarters totaling over 17 per cent in funding ratio gains. The decrease in funding ratios came primarily from a decrease in liability discount rates. Equity markets were volatile intra-quarter, but ended the period flat on mixed economic news and political uncertainly. At the same time, bond yields fell resulting in pension discount rates decreasing 10 basis points from 5.8 to 5.7 per cent, increasing the present value of a typical pension liability profile by approximately two per cent.
Private Equity Real Estate Shows Increase
The $11.2 billion raised by private equity real estate funds in the second quarter of 2011 was the largest total since the third quarter of 2010, says Preqin, an alternative assets data provider. This is an increase on the $8.9 billion which was raised in the first quarter of the year. However, fundraising is still below the levels seen in 2006-2007. Funds with a primary focus on North America raised the most capital, with 10 such funds receiving aggregate commitments of $8.6 billion. There are currently 435 private equity real estate funds in the market.
Ferland Moves To Mercer
Martine Ferland is head of the retirement, risk, and finance business for Europe, the Middle East, and Africa for Mercer. She was previously retirement business leader for Canada at Towers Watson. Prior to that she spent 13 years in a variety of roles with Towers Perrin in North America, including two years with leadership responsibilities for its retirement business in Asia-Pacific.
Wednesday, July 6, 2011
AIMCo Wants Borrowing Rules Relaxed
The Alberta Investment Management Corp. (AIMCo) wants to able to borrow money for future investments as its current inability to do so is contributing to lower returns. Alberta’s pension regulations prevent it from borrowing money for anything other than real estate. This means its sum total of borrowed funds amount to only one or two per cent, well below the roughly 50 per cent at, for example, Ontario Teachers’ Pension Plan. Its annual report says it posted an 8.2-per-cent return on its investments for the year ended March 31. That’s down from 12 per cent the prior year. The $70 billion fund oversees retirement income for more than 300,000 active and retired public sector employees in Alberta.
Benefits and Pensions Monitor, ACPM Announce Survey Partnership
Benefits and Pensions Monitor and the Association of Canadian Pension Management (ACPM) have entered into an exclusive partnership to survey the pensions and benefits industry on a variety of topics ranging from social media use to investment choice and plan design. This is your opportunity to provide feedback and have your views impact the survey results. The first of six mini-surveys will be emailed July 7 with others following throughout the summer. Take a few minutes to submit your feedback and have a chance to win a complimentary registration to attend the ACPM National Conference this September in St. John's, NL. Survey results will be discussed at the ACPM conference and in greater detail in an upcoming issue of Benefits and Pensions Monitor.
Modest Expansion Best Option
A modest expansion of the Canadian and Quebec Pension Plans (CPP/QPP) would be the best option to provide future retirees with sufficient retirement income to maintain their standard of living into retirement, says a study by the Institute for Research on Public Policy (IRPP). In his study ‘A New Pension Plan for Canadians: Assessing the Options,’ author Keith Horner says when various plan features and effects into account, “it appears that the greatest benefits to participants and to the economy would come from the introduction of a national DB plan, such as an enrichment of the CPP/QPP, provided that the scale of the new plan leaves most participants with room for individual choice in the level and timing of their saving.” Voluntary DC plans could also play a useful role as supplements to a national DB plan of modest scale. These plans could be sponsored by provincial governments and administered by arm’s length bodies. Alternatively, they could be administered by existing larger RPPs, as proposed by the Ontario Expert Commission on Pensions, or by financial institutions, as proposed for PRPPs. “The key point is that they be large enough in scale and low enough in cost that they provide a clear advantage over the current options available to small employers and their employees, and to the self-employed,” he says. The study can be found at www.irpp.org
Target Date Design Examined
Is the conceptual design behind Target Date Funds sufficiently robust to warrant the claim of being “the” ideal solution for defined contribution retirement plans? In the Buck Consultant’s white paper ‘Rethinking Target Date Funds – No Magic Formula,’ Andrea Malagoli, director of its compensation practice, makes the case for a complete and consistent framework to vet the risk-and-return proposition of TDFs. In particular, financial operators and regulators should re-examine the existing TDF solutions and encourage more accurate disclosure of the expected risks and returns of each product in a manner consistent with rigorous analysis based on commonly accepted financial theory and realistic empirical market evidence.
Ceridian Launches Mobile Payroll App
Ceridian Canada Ltd. has launched a mobile payroll app for Canadian small businesses. Powerpay Web is a flexible payroll solution that enables small businesses to process their payroll online from any location and at any time. Shelley Ng, vice-president, product management, says “senior managers and payroll managers, especially in small businesses, often have many competing priorities that can regularly take them off-site. This app lets them review and submit their payroll directly from their smartphone. Whether they are waiting for a plane, on their way to an off-site meeting, or even at their cottage, they can easily ensure their payroll is processed correctly and on time.” The Blackberry app is now available with the iPhone app coming within the next few weeks.
Equity Allocation Reductions Planned
Occupational pension trustees in the UK plan to reduce their allocations to equities in the next year, says a survey by the Pension Corporation. ‘The Future of Pension Funds 2011’ found 73 per cent of trustees plan to reduce their allocation to equities. It also shows 22 per cent expect to receive company assets, such as property, in lieu of cash contributions to help fund their deficit while 55 per cent may increase sponsor contributions by more than 10 per cent after the next valuation and 11 per cent looking at contributions in excess of 20 per cent. Nearly half (47 per cent) say tackling a deficit is their top priority and more than half (58 per cent) are confident of being fully funded within 10 years.
Berthiaume Now COO
Denis Berthiaume is COO of Desjardins Financial Security. This new role is in addition to his current position as senior vice-president and general manager, wealth management and life and health insurance for Desjardins Group, a position he has held since September 2010.
Templeton Adds Two
Julie Caron is vice-president, business development, institutional investment services, at Franklin Templeton Investments. She is responsible for business development in Quebec and Atlantic Canada. She has more than 14 years of experience in the financial services industry. Dean Liotta is vice-president, institutional investment services. He is responsible for the investment servicing of its institutional clients. He has more than 13 years of experience in the financial services industry.
Giguère Moves To McLean Budden
Jean-Philippe Giguère is vice-president at McLean Budden. In this new role, he will support its ongoing efforts to help institutional clients implement strategies to manage risk and maintain the financial integrity of their pension plans. He brings an actuarial background to his role, having focused on liability driven investing, asset management, and risk budgeting prior to joining the firm.
Tuesday, July 5, 2011
U.S. Economy No Concern
More than seven-in-10 investment managers have no concern at all and feel that the U.S. economy continues to move in the right direction despite the scheduled June 30 conclusion of the latest round of Quantitative Easing, says a ‘Russell Investment Manager Outlook.’ In fact, the U.S. is now the most favoured equity market, with 62 per cent of managers bullish and just 12 per cent bearish. In stark contrast, the quarterly survey found that Canadian equities fell from favour with investment managers, as bullish sentiment dropped dramatically, from 68 per cent to 43 per cent in the second quarter and bearish managers more than doubled to 20 per cent. This is due, in part, to investment managers’ sentiments which are moving towards areas with less perceived risk, including U.S. equities and the bond markets. With 88 per cent of managers saying Canadian equities are now fairly valued, many may feel that now is a good time to take some profits off the table.
IGCC Joins Bond Standards Board
Australia’s Investor Group on Climate Change (IGCC) is joining the International Climate Bond Standards Board. The board is supervising a program to provide investors and governments an easy way to assess the integrity of environmental claims for green bonds. Nathan Fabian, IGCC CEO, says "The transition to a low-carbon economy requires a wide range of energy and infrastructure investments. We are concerned that the investments being made are the right ones. Climate Bonds Standards will provide a simple tool for investors to screen the opportunities that come before them.” The IGCC represents institutional investors with total funds under management of approximately $600 billion.
Connor Named President
Dean A. Connor is president of Sun Life Financial Inc. Currently its chief operating officer, he will work with Donald A. Stewart, chief executive officer, who will retire on November 30. Connor joined the company in 2006 and has held several key leadership positions.
July Interest Rate Assumptions
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including July 2011 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:
• Commuted Values Feb 2011 CIA
• Marital Breakdown ‒ CSOP 4300, May 2009
• Annuity Proxy for Solvency Calculations for Non-Indexed & Fully-Indexed Pensions
• Minimum Interest on Employee Required Contributions
• HISTORICAL ‒ Commuted Values, 2009 Basis (Now Frozen)
• HISTORICAL ‒ Commuted Values, 2005 Basis (Now Frozen)
• HISTORICAL ‒ Commuted Values, 1993 Basis (Now Frozen)
Monday, July 4, 2011
Minimum Contributions Keep Plans Well-funded
Minimum contribution payments dictated by law is one of six reasons some U.S. public pension systems remain well-funded, says a study on the long-term viability of Defined Benefit plans by the National Institute on Retirement Security. 'Lessons from Well-Funded Public Pensions: An Analysis of Six Plans that Weathered the Financial Storm' argues that the pooled nature of DB funds offers a cost-effective alternative for governments to provide pensions, estimating it amounts to half the price of a Defined Contribution arrangement. The funds examined ‒ which included the Teacher Retirement System of Texas and the New York State Teachers' Retirement System ‒ also offered modest indexation or opted instead for ad hoc cost of living adjustments, similar to the model of conditional indexation applied in the Netherlands. A further reason for the relative health of the half dozen pension funds examined has been the avoidance of sudden increases in pensions by extending the period used to calculate the final average salary (FAS), often set at three years.
Paying Off Bills Top Priority
Fewer 401(k) plan participants are listing saving for retirement as a priority, says a survey by J.P. Morgan Retirement Plan Services. It found that 17 per cent listed retirement as their first priority in 2010 compared with 27 per cent in 2009 and 44 per cent in 2007. The top priority in 2010 was paying monthly bills as a result of the economy. The research also found a disconnect between participants acknowledging responsibility for increasing retirement savings and doing something about it. It found 91 per cent took responsibility for retirement rather than relying on government, their employer, or Social Security. Yet, when asked what they would do with an unexpected windfall of $5,000, they said saving for retirement placed fourth behind paying off credit cards, saving for an emergency fund, and paying monthly bills.
Changes Need Additional Review
Institutional investors should review information that goes beyond the typical scorecard they use to gauge the success of changing the asset allocation of a portfolio or switching asset managers, says a study from Mellon Transition Management. The study urges investors to break down the components of the implementation shortfall cost and focus on the implicit costs of their transitions. The explicit costs include spreads, commissions, taxes, and fees incurred in selling the securities in the old portfolio and buying the securities in the new one. Implicit costs include the market impact of the trades and the price movements of the securities during the transition period. A successful transition minimizes the impact of the implicit costs, it says.
CPPIB Invests In Hong Kong
The Canadian Pension Plan Investment Board has acquired 50 per cent of the shares in Hong Kong Interlink, an industrial facility under development. The Goodman Hong Kong Logistics Fund will own the other half of the project which is scheduled for completion this January. This is the CPPIB’s first direct investment in Hong Kong real estate, it is part of its strategy of acquiring assets that can deliver stable returns over the long term.
Paul Joins Caisse
Maarika Paul is senior vice-president and chief financial officer for the Caisse de dépôt et placement du Québec. A chartered accountant, she worked at BCE from 1994 until 2011 in a number of senior financial management positions. Previously, she was with KPMG.