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Friday, July 30, 2010
Less Value Placed On Retirement
Immediate gratification may be one reason Canadians are procrastinating when it comes to retirement planning, says a report from the BMO Retirement Institute. ‘Retirement Planning: Can I Get Back To You On That?’ explores the psychology and competing priorities that stand in the way of effectively saving for retirement and finds a disconnect between Canadians’ beliefs and behaviours. In addition to placing less value on a reward in the future than a benefit in the present, often encouraging procrastination, it says 36 per cent stated that they are overwhelmed by too much information and this has been an obstacle to their retirement saving plans.
Young Adults Concerned About Retirement
Younger adults, aged 25-34, are already concerned about having enough money to see them through retirement, says an Ipsos survey. Likely in response to these retirement concerns, the research also suggests that this generation would be particularly receptive to alternative contribution options within employer sponsored 401(k) plans. With an expectation that they will be retired for 23 years on average, four in 10 young adults (37 per cent) think it is unlikely that they will even be able to cover basic monthly expenses throughout retirement. Additionally, just one quarter (26 per cent) feels that they have enough information and resources to help them plan for retirement. The research finds that young adults are interested in alternative approaches to investing for retirement such as using annuities for 401(k) investing and low-cost exchange traded funds (ETFs).
Institutions’ Fortunes Reverse
U.S. institutional investment plan sponsors experienced a reversal of fortune in the second quarter of 2010, with a median loss of 4.7 per cent after four consecutive quarters of positive performance, says data in the Northern Trust Universe. "The second quarter for investment program sponsors was a reminder that success can be unpredictable, even when the economy is improving," says William Frieske, senior performance consultant, investment risk and analytical services. The median return for corporate pension plans was -5.0 per cent and public pension funds experienced a median return of -5.7 per cent for the quarter. For one-year returns, corporate pensions were up 14.8 per cent, and public funds gained 13.8 per cent.
Tri Fit Partners With LifeMark Health
Tri Fit has partnered with LifeMark Health to conduct flu clinics and biometric screening services in the workplace. These confidential services are available across Canada and provided by registered nurses. Individual counseling is provided to employees based on the results.
Use Intranet To Enhance Communication
Developing an employee intranet to enhance benefits communication will be a session at the Strategy Institute’s ‘Communicating Compensation & Benefits.’ Sessions will also look at communicating the rewards program brand to employees and communicating compensation, pension, and benefits changes. It takes place November 29 and 30 in Toronto, ON. For more information, visit www.federatedpress.com
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Thursday, July 29, 2010
Modern Portfolio Theory (MPT), while called into question during the financial crisis, remains deeply relevant, says State Street’s ‘Rethinking Asset Allocation,’ the latest in its ‘Vision Focus’ series. However, it should be updated with new techniques that take advantage of the vast computational and information aggregation capabilities available in contemporary financial markets. The central concept of MPT – the balancing of risk and return assumptions – is arguably more relevant than ever. Risk management has moved to centre stage and managing tail risk (the risk of non-normal returns) may emerge as a new frontier of asset allocation best practice. Investors have various methods of optimization at their disposal, including classic mean-variance. But, with increased incidence of outlier events, they may want to consider full-scale optimization. That said, managing for tail risk with sophisticated overlays and hedges can be expensive, so investors, in a sense, may be forced to optimize their use of optimization.
Pacific Equity Partners is purchasing CIBC Mellon Trust Company's issuer services business (stock transfer and employee share purchase plan) through PEP's portfolio company, Canadian Stock Transfer Company Inc. With $5 billion of assets under management, PEP has made significant investments in businesses with specialist operations in share registry services, superannuation administration, and investor relations. PEP has formed a network of strategic partnerships under Link Market Services which has expanded beyond Australia into global markets such as India, South Africa, the United Kingdom, the United States, and, now, Canada.
Markopolous Details Madoff Quest
Harry Markopolous, the Madoff Whistleblower, will be a featured speaker at the ninth annual ‘World Alternative Investment Summit Canada.’ His book, ‘No One Would Listen,’ details the 10-year quest he and his team undertook to prevent the biggest financial disaster of the 21st century. He spent nine years trying in vain to alert the U.S. Securities and Exchange Commission to the Bernie Madoff scheme. It takes place September 13 to 15 in Niagara Falls, ON. For more information, visit www.waaisc.com
Seward Looks At Emerging Trends
‘Emerging Trends Impacting Workplace’ will be one of the topics examined at the ‘Health Work & Wellness Conference 2010.’ Karen Seward, executive vice-president, marketing and business development, at shepell*fgi, will examine the issue. It takes place September 29 to October 2 in Vancouver, BC. For more information, www.healthworkandwellness.com
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Wednesday, July 28, 2010
The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) is calling on the TMX Group Inc. to do more to manage the conflicts of interest that arise from the fact that it both profits from the business of listing companies and regulates that listings function. In a report, it examines the way seven other exchanges have dealt with these conflicts, including the New York Stock Exchange and Nasdaq in the United States, along with markets in the UK, Japan, Hong Kong, Australia, and Scandinavia. The report concludes that those exchanges have all implemented measures to deal with these conflicts, including corporate governance policies, changes to organizational structures, and other corporate policies and procedures.
The Quebec government has announced its intention to increase the premium rates for the Quebec Parental Insurance Plan (QPIP) by 6.25 per cent effective January 1, 2011, says a Towers Watson ‘Client Alert.’ The proposed increase is necessary to ensure that, by 2012, contributions will be sufficient to cover QPIP’s costs. Employers are encouraged to provide feedback to the government on the implications of this cost increase for their organizations and their employees during the consultation period before the proposed new rates are approved. The proposed premium rate increase means the maximum annual premiums will be 45 per cent higher next year than they were when the QPIP was introduced less than five years ago.
Pension funds, endowments, and mutual funds are spending more on stocks than at any time since the start of the bull market, says a Citigroup survey. Institutions made equities 68 per cent of their holdings in July, up from 63 per cent in April. This is the highest level in 15 months. The survey found pension funds, endowments, hedge funds, and mutual funds say they're preparing for a rally. Fifty-four per cent said U.S. equities may gain 10 per cent to 20 per cent, compared with 50 per cent in the previous reading.
Longevity Risk Least Understood
Longevity risk is the second-most important risk factor for pension fund sponsors and trustees, but it is also the least understood, says a MetLife Assurance survey. Its ‘UK Pension Risk Behaviour Index’ showed most respondents acknowledged they had failed to manage longevity risk effectively. It says the survey clearly showed that pension scheme sponsors and trustees were "struggling" to manage longevity risk. Part of the problem may be a lack of understanding of the options available to better manage this risk, such as ensuring actuarially sound adjustments for early retirement, encouraging later retirement, and exchanging higher fixed benefits as a substitute for indexation.
Risk Management Fails To Deliver
Risk management methods now in vogue among corporate Defined Benefit plan executives don't deliver what they promise, says a report from J.P. Morgan Asset Management. Three of the most popular risk-management approaches used by many corporate plans – long duration fixed income allocation, synthetic duration extension, and dynamic asset allocation – don't provide enough protection in controlling downside pension contribution and expense risks when used separately, it says. Instead, they should use a three-in-one approach that combines the strategies.
Investor Confidence Up In June
Investor confidence rose 4.8 points to 96 from June’s revised reading of 91.2, says the State Street Investor Confidence Index for July 2010. Confidence increased in North America, gaining 5.4 points to 99.9 from June’s revised reading of 94.5. Among European investors, confidence rose 2.4 points from 97.6 to 100.0 and, in Asia, confidence ticked up 2.1 points from 102.4 to 104.5.
Frazer, Kyle Speak At Symposium
Mitch S. Frazer, a partner at Torys LLP, and William Kyle, senior vice-president, group retirement services, at the Great-West Life Assurance Company, will be among the featured speakers at the ‘29th Annual ISCEBS Employee Benefits Symposium.’ Frazer will present a legislative update focusing on recent court cases, regulations, and proposed legislation that will affect Canadian plans. Kyle will look at the strength of CAPs in Canada’s retirement market. It takes place October 3 to 6 in Charlotte, NC. For more information, visit www.iscebs.org/symposium
Using Bermuda As Jurisdiction Examined
What Canadian asset managers need to know about Bermuda as the offshore jurisdiction of choice will be the focus of a Hedge Fund Hotel seminar. It will look into the practical considerations which asset managers must address when establishing a Bermuda vehicle. Speakers will include Thomas Caldwell, chairman and CEO of Caldwell Financial Ltd., and Greg Wojciechowski, CEO of the BSX. It takes place September 16 in Toronto, ON. For more information, visit www.hfhto.com
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Tuesday, July 27, 2010
Home Equity Boosts Retirement Income
Home equity can represent a double-digit boost to retirement income for those that are mortgage free, says a Statistics Canada study. It says that by retirement age, 75 per cent of households are homeowners and, of those, 74 per cent own their homes without a mortgage. Looking at data from the ‘2006 Survey of Household Spending’ and the 2006 Census, the study estimates that when the value of home ownership was taken into account for households headed by individuals in the age group 60 to 69, it increased incomes by $5,500 or 10 per cent. For households headed by those in the age group 70 and over, incomes rose by $5,400 or 12 per cent.
The 3.2 million participants in Defined Contribution plans The Vanguard Group recordkeeps ended 2009 in relatively good retirement shape despite the economic downturn. Its ‘How America Saves 2010’ report says many participants in 2009 experienced higher account balances, traded minimally in response to market volatility, increasingly diversified their assets through automatic investment programs, and protected their retirement nest egg when they left their employer. The average account balance at the end of 2009 was $69,000, up 23 per cent from year-end 2008.
CPPIB Buying Tomkins
Pinafore Acquisitions Ltd., a company jointly owned by Onex Corp. and the Canada Pension Plan Investment Board, is buying Tomkins PLC. Tomkins is a manufacturer of products for industrial, automotive, and building products markets around the world. It has 25,000 employees in 25 countries.
Positive Run Ends For UK Funds
Balanced pooled funds in the UK ended their run of positive quarters with a negative return of -8.9 per cent for the second quarter, says BNY Mellon Asset Servicing’s quarterly pooled fund survey. This is the first negative quarter that it has recorded since the first quarter of 2009. However, the 12-month median return still remains positive at 18.6 per cent. In the second quarter, 2010 returns were negative for all the major equity sectors.
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Monday, July 26, 2010
Quebec Pays For Assisted Procreation
Quebec will pay for the cost of treatments related to assisted procreation for all women of childbearing age, regardless of their marital status or sexual orientation, says a Mercer ‘Client Alert.’ All costs related to assisted procreation activities – including the extraction of sperm and ova, in vitro fertilization, and the transfer of embryos – will be covered by the Quebec Health Insurance Plan. This legislative modification is expected to increase the cost of drug coverage for most employers with employees in Quebec. Some employers may also wish to extend this new coverage to employees in other provinces thereby further increasing costs. The purpose of this legislation is to regulate medical practice in this area and protect the safety of mothers and their children born of assisted procreation; namely by restricting the number of embryos implanted at the same time.
Despite 1,000 points drops in both the TSX and the Dow Jones Industrial Average between the beginning of May and the end of June, a double dip in the economy is unlikely, says Standard Life Investments. While the fiscal developments in Europe and the slowing of the U.S. economy clearly present downside risks, especially now that the home buyers tax credit in the US has expired, it says this is unlikely because investors should expect the resolution of the European bank credit/liquidity issues, confirmation that the U.S. economy is growing even after manufacturers have replenished their inventories so it is not just an inventory-led recovery, and the ability of U.S. consumers to access credit and they have a willingness to use it to ease downward pressure on the economy.
LDI Helps Reduce Surplus Volatility
Liability Driven Investment (LDI) strategies can go a long way towards solving the funding volatility issue at Canadian pension funds, says Duncan Burrill, secretary/treasurer at the CBC pension board of trustees. While it is no magic bullet, LDI does help reduce surplus volatility and deal with cash flow issues that may arise as it gives a pension plan assets a similar interest rate sensitivity to its liabilities. This makes life more stable for the sponsor and helps them deal with the longer term pension payment cash flow issues that may occur. He is speaking at the marcus evans ‘Canadian Institutional Investment Summit 2010’ taking place in Ottawa, ON, October 18 to 20.
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Friday, July 23, 2010
Canadians Bullish On Global Opportunities
Canadians are bullish about investment markets and global opportunities in particular, says national research from Franklin Templeton Investments Corp. Of Canadians surveyed who expressed an opinion, 54 per cent expect stock markets to rise, while only 19 per cent believe markets will fall. Emerging international markets such as Brazil and China were identified by 61 per cent as presenting the greatest investment opportunities in the next decade. The global sentiment reflects the bias of Canada's major institutional investors. For example, publicly-listed global equities make up 78 per cent of the Canada Pension Plan's equity portfolio, says Don Reed, president and chief executive officer.
Global Market Decline Hurts Pensions
Faltering global equity markets contributed to a decline in pension assets in the June quarter, says a survey by RBC Dexia Investor Services. The decline in the second quarter comes after four consecutive quarters of positive returns. Canadian pension plans lost 3.2 per cent in the three months ending June 30, 2010, erasing first quarter gains while bringing year-to-date results into negative territory at 1.4 per cent. Non-Canadian equities were the hardest hit asset class, dropping 8.3 per cent in the quarter while only outperforming the MSCI World Index by 0.2 per cent. Exchange rates were a key factor as the MSCI World Index fell by 11.2 per cent in local currency terms, but a weaker Canadian dollar against most major currencies helped soften the blow for unhedged pensions.
There is a looming shortfall of retirement income for lower middle and middle class Canadians, says a research paper by the University of Calgary’s Haskayne School of Business. ‘Should Government Facilitate Voluntary Pension Plans?’ calls on regulators to carefully consider the role of government in providing a new way for Canadians to save for retirement. It examines the benefits of creating a regulated Voluntary Pension Plan (VPP) that would allow earners and employers to contribute to a large, co-mingled investment pool. The VPP would face the same regulation as employer sponsored pensions, but would bring the benefits of being able to invest in a wider variety of instruments to a wider audience, thereby mitigating risk. It argues that the CPP and other programs provide adequate retirement income for low income earners and that high income earners use the opportunities they are afforded under the current system to save and invest adequately for retirement. However, those in the middle do not have sufficient disposable income to adequately save enough to provide a middle class retirement.
Canadian investors tend to have a strong home bias, which leads to a high concentration of exposure to commodities, says Lisa Myers, lead manager of the Templeton Growth Fund, Ltd. Speaking at its annual ‘Investment Outlook and Opportunities Forum,’ she said advisors should help clients understand the importance of diversifying their equity holdings. “With that kind of concentration and correlation of the Canadian market and dollar to commodities so reliant on other countries, can we as Canadian investors afford to have such concentrated exposure?” said Myers. She sees strong investment opportunities in the U.S., Europe, and emerging markets with stocks in the U.S. and Europe trading at a 30 per cent to 35 per cent discount to their historic price-to-earnings averages. Emerging market are around their historical averages, but have the potential for much stronger and consistent future growth.
Homewood Acquires Human Solutions
Homewood Corporation has acquired Human Solutions International Inc., a Vancouver, BC-based provider of employee assistance programs. It will be integrated with Homewood Employee Health to form a new business – Homewood Human Solutions. Edgardo Pérez, Homewood’s chief executive officer and president, says “the acquisition of Human Solutions will provide Homewood with a broadened client base, expanded product lines and services, and a larger network of professionals for out-patient and after-care services.” Human Solutions has more than 1,200 corporate clients in Canada.
A recovery of the global economy could take longer than expected and investors would be prudent to protect their portfolios from deflationary risks in the near term, says Stephen Lingard, co-lead manager of Franklin Templeton’s Quotential Program. He told its annual ‘Investment Outlook and Opportunities Forum’ that central banks are not likely to raise interest rates aggressively in the next three to six months and rates could essentially stay lower for longer. In some markets, deflation is more of a concern than inflation. While inflation will eventually return, he said it could take years.
Decision Exempts Employers From Severance
An Ontario Divisional Court has upheld an arbitrator’s decision that exempts employers who have accepted the financial responsibility of providing equal or better benefits to their employees from making severance payments, says a Heenan Blaikie ‘Pension Pulse.’ It was reviewing an arbitration award concerning entitlement to severance pay under the Ontario Employment Standards Act, 2000, for Kitchener Frame employees who retired with unreduced pension benefits. When it closed, the union had negotiated generous plant closure benefits for its members, including special early retirement provisions, supplementary bridge benefits equivalent to the amount of Old Age Security benefits payable from age 65, and an early retirement allowance. The issue was whether employees who retired on pension as part of the closure were entitled to severance pay under the ESA. In comparing the commuted value of the pension benefits earned by the Kitchener Frame employees, the arbitrator found that the benefits upon plant closure were actuarially unreduced. Therefore, the employees were not entitled to severance benefits under the ESA.
Dividends Can Enhance Returns
Stocks market gains could be limited this year, so investors should look to dividend-paying stocks to enhance their returns, says Juliette John, lead manager of the Bissett Canadian Dividend Fund. She told Franklin Templeton’s annual ‘Investment Outlook and Opportunities Forum’ that dividend-paying stocks could substantially improve a portfolio’s total returns in the long run. Over time, she said stocks of companies that pay dividends tend to outperform those that don’t. This is due, in part, to their more stable conservative business models and discipline in how they allocate capital.
Sun Life Financial has concluded a two-month campaign to educate clients about the benefits of reducing paper use in the claims process. Between May 3 and June 27, more than 50,000 group benefits plan members registered for direct deposit and paperless claim statements. To date, nearly 600,000 Canadians are registered for paperless claim statements with their group benefits plan. In recognition of the plan members who registered for paperless claim statements during the campaign, it has partnered with Tree Canada, a charitable, not-for-profit organization that provides education, technical assistance, resources, and financial support to plant and care for trees. It is donating $1 for every plan member that registered during the campaign. This will fund the planting and maintenance of 12,580 new trees.
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Thursday, July 22, 2010
Employers are more confident than workers or labour representatives in the ability of employees to understand health and safety policies, says the Conference Board of Canada’s ‘What You Don’t Know Can Hurt You: Literacy’s Impact on Workplace Health and Safety’ survey. “This gap in perception creates the potential for accidents in the workplace to occur. Because employers are confident in their workers’ literacy levels, they are less likely to see the need for training to upgrade employees’ knowledge and understanding of health and safety practices,” says Alison Campbell, principal research associate. Many employers create manuals and other documents to set out health and safety practices, but relying on written materials leaves organizations open to the risk that their employees may not be able to read and understand them. “Without even realizing it, some individuals with low literacy skills put themselves, their co-workers and the public at risk,” says Campbell.
Gold prices could top $1,500 per ounce by the end of this year, says Nick Barisheff, president and CEO of Bullion Management Group Inc. Speaking at an event it co-hosted with mine development company Sage Gold Inc., he said the recent rise in gold prices has been fuelled by investors around the world who have lost confidence in the financial system and are increasingly turning to gold as a safe haven. Contributing to its appeal as is the fact that it’s a hard commodity in an environment where governments are printing paper currencies at an accelerating pace. Also putting upward pressure on the price of gold is that production reached a peak in 2001 and it has been on a downward trend since.
The CPP Investment Board will go to court if Magna International Inc. gets shareholder approval for a $1.1-billion deal with founder Frank Stronach. It intends to oppose the transaction at the Ontario Superior Court, if a routine fairness hearing on the matter takes place following Friday’s shareholder vote. CPPIB will vote against the proposal, but doesn’t have enough shares to sway the decision by itself. Magna wants to compensate Stronach and his family trust for relinquishing their voting control of the publicly traded company. Under the plan, Stronach would receive $300 million in cash, $120 million in consulting fees over the next four years, nine-million single-vote shares of Magna, and control over a new joint venture focused on electric vehicles. A number of Canadian pension managers, including CPPIB, have objected to the premium that Stronach will receive.
Infrastructure Activity Rallies
Infrastructure managers raised $6.7 billion from global investors in the first quarter, the highest level of fundraising since 2008. However, overall deal flow is still at its lowest level since 2006, says research by Preqin. This is the fourth consecutive quarter-on-quarter increase. Despite the rebound in flows, deal activity remained low. Unlisted infrastructure managers reported completing 23 deals, down from 71 deals just two quarters ago and the lowest number since the start of 2006. Europe was the most active region with 10 deals completed; North America followed with seven; Asia, three; South America, two and Australasia, one.
Submissions Wanted For AIMA Award
‘The 6th Annual AIMA Canada – Hillsdale Research Award’ is now open for submission. The award is open to academics, students, and practitioners who are either residents of Canada or Canadian citizens living abroad. Topics may include – but are notlimited to – investment strategy, regulation, trading, risk management, risk measurement, and manager selection. Papers must be submitted to AIMA Canada, by September 30. For more information, visit www.aima-canada.org
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Wednesday, July 21, 2010
Hewitt Associates is acquiring EnnisKnupp in a move it says will boost its investment consulting capabilities in the U.S. and support its global growth plans. Once this transaction is complete, Hewitt will have nearly $3 trillion in assets under advisement. EnnisKnupp has been in investment consulting services for almost 30 years and is an established large pension fund franchise in both the public and private markets in the U.S.
Both investment management fees (IMFs) and monthly per member fees (which may be applicable if a plan is a Defined Contribution plan administered by an insurance company) may have the Harmonized Sales Tax (HST) applied to them, says a Proteus ‘Pension Update.’ The HST on IMFs will have the effect of further decreasing the fund’s unit value. Fund companies will calculate the amount of HST to apply dependent on either the province of registration for the plan sponsor or a blended rate depending on the provincial distribution of members. The HST is now in effect in Ontario, British Columbia, New Brunswick, Nova Scotia, and Newfoundland and Labrador.
Reform Exposes Ratings Business
U.S. regulatory reform means changes for the credit rating business, including exposing it to new liabilities, says Fitch Ratings. It says that under the U.S. reform provisions, issuers will have to get its permission to include ratings in registration statements or prospectuses. However, it fears that this would expose the firm to new liability. The Canadian Securities Administrators has proposed its own new regulatory regime which would require rating agencies to adopt a code of conduct in line with international standards and establish certain policies and procedures, but it does not seek to impose greater civil liability upon them.
Funded Ratio Method Leads To Bad Decisions
Most people understood that the economic slowdown – combined with the implosion of the banking/investment community – would have a negative impact upon their pensions, as evidenced by double digit percentage losses commonplace in pension funds investment for 2008-2009. However, this is, in reality, only half the problem in the ongoing pension fund crisis says Ryan ALM of New York, an asset/liability management firm. It says current FASB/GASB accounting rules permit assets to be smoothed out over a defined period of time which tends to overvalue assets under the current financial climate, plus undervalues liabilities significantly. As a result, many pension trustees were told that their funds were fully funded when, in fact, they had deep deficits. This led to inappropriate asset allocation and benefit and contribution decisions.
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Tuesday, July 20, 2010
Hedge Funds No Longer Alternatives
Hedge funds should no longer be seen as just an alternative asset class and UK pension funds should consider long/short equity managers as part of their overall equity allocation, says Hewitt Associates. It says the step to include long/short equity is a natural progression from, and complement to, unconstrained active equity management. Since hedge funds have an extra degree of freedom to use shorts, this can add value, especially in volatile and bear markets. During the credit crisis, it says the hedge fund industry was hit by significant redemptions from many private investors. This experience underscored the importance of having a professional client base such as pension funds and they, in turn, became increasingly aware of the value hedge funds can add to their portfolios.
Onex Corp. and the Canada Pension Plan Investment Board are joining forces on the proposed takeover of a British manufacturing and engineering company. While they have not launched a formal bid, they have proposed a deal for Tomkins PLC.
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Monday, July 19, 2010
Investors Prefer Direct Investment
A growing number of hedge fund investors now prefer to allocate funds directly into the asset class, says research by Preqin. It found 35 per cent favoured direct allocation, despite most institutional investors having started out with exposure to fund of funds. The survey found 64 per cent of investors gained initial exposure to the asset class through a multi-manager vehicle but only 36 per cent of respondents still invested solely through funds of hedge funds. Most investors had moved out of fund of funds following the financial crisis, with 80 per cent of funds making the switch during or after 2008.
Readiness For Retirement Discussed
Graydon Watters, of the Financial Education Institute of Canada; and Hugh Kerr, of the ACPM’s advocacy and government relations committee, will discuss ‘Will Canadians be Ready for Retirement?’ at the ‘2010 ACPM National Conference.’ This session will examine two approaches to bridge the gap between plan member expectations and the reality that their saving patterns spell. One approach will look at the opportunities financial education provides, while another will present case studies in plan design changes to address behavioural obstacles to saving. It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/national.aspx
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Friday, July 16, 2010
The Financial Services Commission of Ontario (FSCO) has a new policy on the management and retention of pension records by the administrator, says a Blakes ‘Alert.’ The policy is of broad application, covering all Ontario-registered pension plans, regardless of size or type. It is primarily intended to provide plan administrators with information on their obligations and responsibilities related to the management and retention of pension plan records. It also provides the administrator with practical guidelines and instructions on prudent record-keeping practices. While of primary interest to sponsors and administrators of plans registered with FSCO, the Ontario Records Policy may also provide useful guidance for sponsors and administrators of plans registered with other pension regulators who have not issued records retention policies.
The ACPM is looking for nominations for this year’s ‘Award for Exceptional Volunteerism.’ It honours an individual for their outstanding contribution in helping ACPM to reach its goals and is presented at its national conference in September. The 2009 winner of this award was Andrew Harrison, of Borden Ladner Gervais LLP. Nominations must be made ACPM members who can find more information at http://www.acpm.com/default.aspx. Deadline for nominations is August 31.
The use of target-date funds is more likely among participants who are younger, have lower account balances, and have shorter tenure at their current job, says a study by the Employee Benefit Research Institute. It says this is because new workers are the most likely to be automatically enrolled in their employer’s 401(k) plan, with a TDF often being the default option. The study focuses on 401(k) participants who were in plans that offered TDFs in 2007 to see whether they remained in TDFs, moved out of TDFs, or moved into TDFs if they were not already using them. Of those participants having an allocation to TDFs in 2007, 93.9 per cent still had some of their account balance allocated to TDFs in 2008. Nearly 10 per cent of participants who were in a plan in 2007 that offered TDFs but did not use them in 2007 were using them in 2008.
Jovian Capital Corporation and its subsidiary AlphaPro Management Inc., the manager of the Horizons AlphaPro exchange traded funds, have launched an actively managed corporate bond ETF – the Horizons AlphaPro Corporate Bond ETF. The investment objective of the Corporate Bond ETF is to seek long-term moderate capital growth and generate high income. It will invest primarily in a portfolio of debt securities of Canadian and U.S. companies, directly or through investments in securities of other investment funds, including exchange trade funds.
Paquette Directs DB Administration
Claude Paquette is director, Defined Benefit administration, at Buck Consultants. He has more than 10 years of consulting experience with major consulting firms in the area of retirement benefits and has a particular expertise on pension administration matters.---------------------------------------------------------
Thursday, July 15, 2010
Teachers’ Intervening On Securities Act
The Ontario Teachers' Pension Plan (Teachers') has applied for leave to intervene before the Supreme Court of Canada over the proposed Canadian Securities Act. In materials filed with its motion for leave to intervene, Teachers' says while it understands the factors which impact the integrity and credibility of the Canadian capital markets, “effective regulation ought to be considered both from a legislative and policy perspective and from an operational effectiveness and cost perspective.” In its 2008 submission to the Hockin panel, it set out its concerns regarding the existing passport system which endeavours to harmonize provincial policy and regulation. While acknowledging that the passport system had somewhat reduced complexity and costs, Teachers' noted the passport system has failed to lead to consistency in policy and legislation and has, therefore, continued to create unnecessary costs and inefficiencies in the regulatory process. The Supreme Court is expected to hear arguments in early 2011 about the constitutionality of the proposed act to establish a national regulator.
Interest payments on projected debt levels could starve economies in the developed world of savings needed for growth, says Francis Scotland, director of global macro research at Brandywine Global Investment Management. Speaking at Legg Mason Canada’s ‘Global Investment Forum,’ he said in the UK, for example, interest payments on debt could reach 25 per cent of GDP by 2040, while savings will be less than 15 per cent. When all of a countries savings are needed to repay national debt, there is now growth. This kind of “debt trap” could turn into sovereign insolvency. However, the “tipping point” is unknown. Japan, for example, has been in a “debt trap” for 20 years and for the past 12 years its nominal GDP has been falling while the bond rate moves sideways. Typically when GDP is falling, interest rates fall, stimulating the economy. However, this has not taken place in Japan and the only reason its economy has survived is the high personal savings rate. While he doesn’t know what the end point is, “when it comes, it will be bad.”
Revisions Make Sponsors More Involved
Plan sponsors, pension committees and boards of trustees, and actuaries will need to prepare themselves for greater involvement in the actuarial valuation process as a result of revisions to the Standards of Practice covering the valuation of pension plans, says a Morneau Sobeco ‘News and Views.’ It says plan sponsors can, for example, expect to see increased emphasis on disclosure such as disclosure of rationales for methods used and method changes. Plan sponsors are also likely to become more involved in the valuation process as the terms of the actuary’s engagement by the plan sponsor can factor into the valuation’s preparation to a much greater degree than under the current standards. The changes will become effective December 31.
CPPIB Makes Offer On 407 Owner
The Canada Pension Plan Investment Board has made an conditional offer to Intoll Group, the Australian company that owns a stake in the Highway 407 toll road north of Toronto, ON. If the deal goes through, Intoll would be made private, becoming the CPPIB's largest direct investment. This proposal is non-binding and the decision to make a formal proposal could be made in a few weeks.
Ivanhoe Cambridge, the real estate arm of the Caisse de depot et placement du Quebec, and Oxford Properties Group, a division of Ontario Municipal Employees Retirement System (OMERS), have decided to break up a 10-year mall ownership partnership. The two jointly own six shopping malls across Canada. When the process is complete, OMERS will have total ownership of malls in Newmarket, ON, and Calgary, AB, and Ivanhoe will own malls in Quebec City, QC, Newmarket, ON, Oshawa, ON, and Vancouver, BC. The decision was made, in part, as a result of the capital crunch in 2009 which prompted both to decide to rebalance their interests.
The Empire Life Insurance Company has made two new segregated funds available in Class Plus, its guaranteed minimum withdrawal benefit feature within its segregated funds product. The balanced funds combine its flagship equity fund with core fixed income exposure for diversification. It launched Class Plus in October 2008 in response to the growing demand for a solution that provides growth potential and guaranteed retirement income for life.
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Wednesday, July 14, 2010
The Canada Pension Plan’s reserve fund was one of the best-performing funds in terms of investment returns during the 2005-09 boom-and-bust period, says a report by the Organization for Economic Cooperation. The CPP, which had one of the highest exposures to equity investments in the OECD, was a top performer in the analysis of after-inflation returns for 13 selected OECD countries over the 2005-2009 period. The average annual return was 3.8 per cent, second only to Poland’s four per cent. While the CPP had one of the highest exposures to equities in the plans analyzed, other national public pension plans with even higher equity exposure were among the poorest performers. For example, Ireland – with only about five per cent of pension reserves in fixed income – had an average annual loss 0.6 per cent over the period. As a result, it says further study is needed to draw conclusions about how greater exposure to inherently-riskier equity markets affects public systems.
Institutional Investors Bearish
Institutional investors have turned bearish in their outlook for the global economy and corporate earnings, says the latest edition of the BofA Merrill Lynch ‘Survey of Fund Managers.’ It found 12 per cent of respondents predict the global economy will deteriorate in the next 12 months, the first negative forecast since February 2009. Four per cent expect corporate profits to worsen in the coming year, which is also the first negative outlook in more than a year. With this gloomier outlook, investors’ risk appetite has dipped and they are moving into cash and reducing exposure to cyclical stocks. Cash now comprises 4.4 per cent of an average portfolio, up from 4.1 per cent in May.
Nearly one-third of Canadians do not have a savings plan in place, says a Scotiabank survey. Only 55 per cent of people surveyed told pollsters they save on a regular basis and nearly one-in-five Canadians don’t have any savings at all. As well, one-quarter of Canadians live day-to-day and don’t think about saving money. Many said they would like to save more, but there are too many competing demands for their money.
The Ontario Teachers' Pension Plan (Teachers') still intends to vote against Magna's proposed transaction to eliminate the company's multiple-voting shares. It says that the additional disclosure provided by Magna in its revised proxy-circular issued does not provide any further assurance that the proposal is fair to subordinate voting shareholders. Teachers' believes that the cost of the proposed transaction is unprecedented and excessive at a 1,800 per cent premium to the controlling shareholder. Moreover, if successful, the proposed transaction will eventually establish the same dual-class structure for the electric car (E-Car) venture that Magna is trying to eliminate through this transaction.
AkzoNobel Selects Industrial Alliance
Industrial Alliance Insurance and Financial Services Inc. was chosen by AkzoNobel Canada to manage the pension plans for some 2,300 Canadian employees working in the paint and chemical product sector. The agreement includes Defined Contribution registered pension plans (RPP-DC), registered retirement savings plans (RRSP), and non-registered plans. Éric Gagnon, manager of global compensation, says the range of products and services offered was adapted to its brand image, allowing its employees to identify with it and to make it their own pension plan.
Organizations Not Managing Outsourcing Risk
Of the 95 per cent of organizations that buy, provide, or both buy and provide outsourced services and functions, fewer than half are able to effectively manage risk of outsourced projects, says a study by ESI International. It found with nearly two-thirds of organizations spending up to half of their budgets on outsourcing, there is a need to refine risk management capabilities in order to positively impact bottom line performance. As well, organizations indicated shortfalls in effectively using requirements management and development, a critical area for managing outsourcing risk with 75 per cent of organizations not always clearly defining requirements of outsourced projects.
Wayne Millar is assistant vice-president, product development, group benefits, at Sun Life Financial. He is accountable for the innovation, development and execution of the group benefits business product and solutions strategy. In group retirement services, Nadia Darwish is vice-president, client relationships and business development; Kate Nazar is assistant vice-president, client relationships; and Jennifer Katzsch is regional director, client relationships. Darwish joined the firm in 1999, Nazar joined in April, and Katzsch has been at the company since 2000.
Davis Teachers’ Vice-president
Jeff Davis is vice-president and associate general counsel at the Ontario Teachers’ Pension Plan (Teachers’). Responsible for providing legal advice and representation in the management of the pension fund, he joined Teachers’ in 2004 and was, most recently, senior legal counsel, investments.
Lewis Senior Consultant In Toronto
Rob Lewis is a senior consultant in the Toronto, ON, office of Hewitt Associates. He is not new to the firm. His consulting career spans more than two decades, with the last 16 years spent in HR consulting, including 10 years with Hewitt in Boston.
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Tuesday, July 13, 2010
Aon Corporation and Hewitt Associates, Inc. have approved a definitive agreement under which Hewitt will merge with a subsidiary of Aon. Following the close of the transaction, Aon intends to integrate Hewitt with Aon Consulting, its consulting and outsourcing operations, and operate the segment globally under the newly-created Aon Hewitt brand. Aon believes the combination of Aon and Hewitt creates a global leader in human capital solutions, benefiting clients, associates, and stockholders in several ways including providing significant cross-sell opportunities to leverage Hewitt’s predominantly large corporate client base with Aon’s predominantly middle market client base.
Mutual fund, hedge fund, and private equity managers fear the impact of inflation and are skeptical about commercial real estate, says a survey by RBC Capital Markets. It says the debate on inflation versus deflation rages on, with 45 per cent of respondents saying that inflation poses a greater threat to portfolio performance than deflation (chosen by 34 per cent). Sixty per cent expect inflation to be higher over the coming year. The respondents also expressed skepticism about commercial real estate, with 46 per cent saying that commercial real estate risk is higher this year than last. Just one-quarter (24 per cent) plan to increase their allocation to commercial real estate in the coming year.
Allocations To Alternatives Grow
Pension fund allocations to alternative assets have increased almost three-fold over the past 10 years, says Towers Watson research. Its analysis shows allocations to these asset classes have continued to rise and now account for 17 per cent of all pension fund assets globally, up from six per cent 10 years ago. Real estate managers account for around 52 per cent of assets, down from 58 per cent in 2008. Private equity fund of funds have grown to 21 per cent from 20 per cent in 2008 and fund of hedge funds have held steady at 13 per cent. Infrastructure is at 12 per cent, up from nine per cent in 2008. The majority (51 per cent) of alternative assets managed on behalf of pension funds are invested in North America, while a third are invested in Europe and nine per cent in Asia-Pacific.
Auto Features Increased Balances
Defined Contribution plan participants who utilized automatic rebalancing and automatic deferral increase during the recent market downturns realized greater account balance increases, says an analysis of Mercer’s database. Data from October 2008 through April 2010 shows the average account balance increase for all participants was 34 per cent, while the average increase for participants deferring into their plan and who made a deferral increase was 43 per cent. Participants who used the automatic rebalancing feature saw an average increase of 47 per cent during this time period. Deferring participants who utilized automatic deferral increase and automatic rebalancing saw an average account balance increase of 60 per cent. Given these results, Mercer believes plan sponsors should ensure that their plan designs encourage positive saving behaviours by offering tools that automatically rebalance investment portfolios and increase deferral rates.
William (Bill) R. C. Tresham is chief operating officer at the Caisse de dépôt et placement du Québec’s real estate subsidiary – SITQ. Most recently, he was partner and chief operating officer at Callahan Capital Partners, a private equity real estate company based in Chicago, IL. Prior to that, he was with Trizec Properties, Inc. in Montreal, QC, and Chicago.
Real Estate Opportunities Examined
The CAIA Canada Chapter is holding a session designed to provide an introduction and insight into Canadian and international investment into private and public real estate opportunities (including real estate hedge funds). Presenters at the ‘CAIA Canada Real Estate Round-Up’ are Laler C. DeCosta, director, client portfolio manager, Invesco; Peter Cuthbert, vice-president, real estate, at Standard Life Investments; and J.T. Straub, senior vice-president, institutional clients, ING Clarion. It takes place July 22 in Toronto, ON. For more information, contact canada@caia.org---------------------------------------------------------
Monday, July 12, 2010
British Columbia will reduce the price of generic prescription drugs to 35 per cent of the brand price. The move comes as a result of an agreement between the government and the B.C. Pharmacy Association and the Canadian Association of Chain Drug Stores. Generic drug prices in B.C. average about 65 per cent of the brand-name cost. The new prices in B.C. will apply only to drugs covered by PharmaCare, but will also be available to employee and union drug plans and customers who pay for drugs out of pocket. The deal will also increase dispensing fees for pharmacists to help them cover the decline in revenue from the reduced prices.
Managers Moderate Expectations
Institutional investment managers have moderated their expectations for global growth, says a quarterly survey by Northern Trust Global Advisors (NTGA), with two-thirds of those surveyed expecting sovereign debt concerns about Portugal, Italy, Ireland, Greece, and Spain to weigh on global markets for the next six months or longer. In a significant shift from the prior four quarters, 75 per cent of those surveyed anticipate that global growth will remain the same or decelerate, while 25 per cent still expect growth to accelerate. Institutional managers are less concerned about the prospect of inflation or rising interest rates. Managers are also increasingly optimistic about market valuations. For the first time since the second quarter of 2009, the majority of managers (62 per cent) stated that the U.S. equity market, as measured by the S&P 500 Index, is undervalued. Select areas of international markets are also seen to be attractive with 40 per cent of managers now believing that emerging market equities are undervalued.
Canadian employers are focused on reigning in prescription drug costs and educating their employees, says a survey by the International Foundation of Employee Benefit Plans. “Prescription drug costs are a leading reason for healthcare cost inflation and employers are actively combating drug cost increases,” says Sally Natchek, senior director of research. “At this point, it seems inevitable that drug prices will be overhauled in Canada, most likely through the efforts of both provinces and private employers.” Compared to 2009, Canadian employers in 2010 are more apt to promote the use of generic drugs, place limits on specialty or biotech drugs, and use high-amount claims pooling, lowest-cost alternatives, the process of prior authorization or utilization management, pharmacy benefit managers, and step therapy/therapeutic substitution. Nearly half of all employers (48 per cent) are informing employees of the costs of filling prescriptions in an effort to make employees smarter consumers. The aging population continues to be viewed as a top driver of the increases in prescription drug costs. The increase in specialty drug use, government cost shifting as well as drug company profits also are named by employers as significant cost drivers.
Lepage Looks at Cancer Cost Burden
Suzanne Lepage, a private health plan strategist, will help sponsors gain an understanding of how government and private coverage shifts will impact patient access and why Canadians need to prepare themselves for the financial burden of a cancer diagnosis at a CPBI Ontario region breakfast session. ‘Potential Solution to the Emerging Changes in Cancer Treatment’ will also feature Andrea Roth, of Sun Life Financial, who will describe how critical illness insurance works. It takes place July 20 in Toronto, ON. For more information, visit www.cpbi-icra.ca
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Friday, July 9, 2010
Employers Implementing Wellness Programs
To help abate continually rising group healthcare plan costs, Canadian employers are implementing wellness programs, says a survey by the International Foundation of Employee Benefit Plans. “Employers are struggling with rising health plan costs and are adopting additional measures such as wellness programs to improve employees’ health and better control costs,” says Sally Natchek, senior director of research. “In just one year’s time, there has been a rapid increase in the number of employers embracing wellness programs.” In fact, the proportion of employers offering wellness initiatives rose nearly 20 per cent, from 61 per cent of employers in 2009 to 78 per cent in 2010. In addition, nearly one in five organizations currently not offering wellness initiatives anticipate doing so in the future. The most prevalent wellness initiatives include flu shot programs (71 per cent), complementary and alternative medicine (52 per cent), and smoking cessation programs (48 per cent).
Changes Adopted By Most Provinces
Changes to the federal Pension Benefits Standards Regulations which set out quantitative limits on how pension funds invest have been adopted by all provinces except Quebec and New Brunswick, says a Fasken Martineau ‘Bulletin.’ The changes include the elimination of the limits placed on the portion of pension fund assets that could be invested in any one parcel of real property or Canadian resource property. As well, the 10 per cent rule prohibiting the investment of more than 10 per cent of the book value of a fund’s assets in one person or a group of associated persons or affiliated corporations has been modified to 10 per cent of market value. It says, however, the changes will not automatically apply to some pension plans registered provincially. For plans subject to Ontario regulation, for example, most of the federal changes will not apply until amendments are made to the Ontario pension regulations.
Employers understand the detrimental effects stress is having on their organizations and are responding with multiple strategies to help workers cope, says a survey by Buck Consultants, A Xerox Company. 'Stress in the Workplace' identifies the areas most affected by stress and the strategies employed by organizations to reduce stress for their workers. Workplace issues highly affected by stress are healthcare costs, absenteeism, and workplace safety. The survey found 66 per cent of employers implementing at least four programs intended to reduce stress. Twenty-two per cent have established eight or more programs and some make more than 10 programs available to their workers. Only seven per cent of survey respondents do not have any stress reduction strategies in place.
The Ontario Teachers' Pension Plan (Teachers') has closed its acquisition of Camelot Group Ltd., which has an exclusive licence to operate the UK national lottery. The acquisition was made by Teachers' long-term equities department, which focuses on direct investments that have steady cash flow and growth potential over a long-term horizon.
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Thursday, July 8, 2010
Modified Plans Help Return To Work
Fears that long-term disability benefits may encouraged prolonged absences can be mitigated by using modified work programs, says Fasken Martineau’s ‘The HR Space.’ Under these programs, employees return to work part-time for as much as their disability permits. This facilitates the employee's early return to work and gradual return to full-time hours. As well, there is a lot of flexibility in how this practice can be integrated into a workplace. Depending on the circumstances, an employee could start with one or two days of work every week, or partial days, or both. Typically, the hours of work increase over time. It is also common to begin with light duties and increase the work requirements over time.
Modernized Immigration Policies Needed
Immigrants can help to rescue Canada from a long-term slowdown in economic growth, but only if immigration policies are modernized, says the Conference Board of Canada. The July-August 2010 edition of its ‘Policy Options’ says the recession gave employers only temporary relief from workforce shortages. However, job creation has resumed in recent months and the looming retirement of baby boomers will only erode the labour supply in the longer term. Canada’s unemployment rate is expected to fall below eight per cent by the end of 2010, but it could fall to as low as six per cent in the years to come as the economy recovers and the large cohort of baby boomers leave the workforce. If Canada is to increasingly rely on immigrants as a source of labour, it needs a modernized, integrated, and well-managed immigration policy which increases the weight given to economic factors, recognizes the importance of skills-based immigration to address Canada’s labour market needs; and improves foreign credential recognition.
Commission Releases Green Paper
The European Commission is calling for public consultation on how the EU can best support national efforts to ensure an "adequate, sustainable, and safe" pension system. Its ‘Green Paper’ says the current number of retired people in Europe, compared with those financing their pensions, was set to double by 2060. The paper on pensions aims to address issues such as ensuring adequate incomes in retirement, making sure pension systems are sustainable in the long term, and achieving the right balance between work and retirement.
Philippe Ithurbide is head of global research, strategy, and analysis at Amundi. He was previously an overlay strategies manager at the Caisse de Depot et Placement du Quebec.
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Wednesday, July 7, 2010
Jittery stock markets and drops in federal bond yields hurt the financial health of Canadian pension plans in the second quarter of 2010, says the Mercer ‘Pension Health Index.’ It stood at 67 per cent on June 30, down seven per cent over the quarter. “Long-term federal bond yields dropped 40 basis points, ending the quarter at their lowest level since the ‘flight to quality’ of December 2008,” says Scott Clausen, retirement, risk, and finance professional leader for Canada. “This resulted in higher pension liabilities measured on a solvency basis, decreasing the index by about five per cent.” A typical balanced portfolio would have returned -1.4 per cent for the first half of 2010 and -2.7 per cent for the quarter. This return does not capture any impact from active management of any of the assets.
The Canada Pension Plan Investment Board will invest $250 million into Laricina Energy, a privately-held company which is looking to establish its first commercial oilsands production in Alberta later this year. CPPIB will acquire 17 per cent of the company ahead of an expected initial public offering IPO in 2011.The fund owns shares of oilsands companies through its public arm, but this is the first oilsands investment through its private investing division.
OMERS Contribution Rate Rises
The Ontario Municipal Employees Retirement System will increase its contribution rate in an attempt to tackle its growing pension deficit. Its Sponsor Corporation has approved an average increase of one per cent for employers and employees over the next three years. The $47.8 billion fund had a $1.5 billion deficit at the end of 2009, an amount expected to rise when $5 billion of losses from the 2008 market downturn are factored in.
Hastings Heads Citibank
John Hastings is country officer and chairman and CEO of Citibank Canada. He has been with Citi in Canada for more than 25 years in numerous roles. Most recently, he was managing director and head of its institutional clients group in Canada.
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 2010 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains six worksheets:
- Commuted Values – 2009 Basis
- Commuted Values – 2005 Basis
- Commuted Values – 1993 Basis
- Marital Breakdown – CSOP 4300 (May 2009)
- Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
- Minimum Interest on Employee Required Contributions (including the 12-month average rates)
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Tuesday, July 6, 2010
Hike Retirement Age Automatically
The European commission is proposing that retirement ages in the 27 nations should rise automatically in line with rising life expectancy. Where currently there are four people of working age for every one over 65, this number will be cut in half by 2060, making state pensions harder and harder to afford, a commission paper says. The need for a fairer pan-European pensions solution was underscored during the recent Greek financial crisis. Critics of a bail-out for the country asked why Germans who work well into their 60s should be paying for Greeks to retire at 50. France, Britain, and several other European countries have already announced moves to raise the pensionable age later in the century, but the commission wants to make such moves automatic.
Hewitt Offers Access To Sustainability
Hewitt Associates in the UK has launched a service offering its global pension fund clients access to long-term sustainability themes. It will focus on three specific themes – water, agriculture, and renewable energy – and will include funds which invest across a range of sustainability themes along with other sectors such as education and health. Its manager research team will identify fund managers who are leaders in their chosen niche, offering strong medium and long-term performance records in excess of five per cent per annum ahead of the global equity indices.
Desjardins Partners With Promutuel
Desjardins Group is acquiring the savings and loan portfolios of Groupe Promutuel and will become the investment and banking services manager for Groupe Promutuel members and clients. Promutuel clients seeking banking and investment products will be referred to a Desjardins branch.
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Monday, July 5, 2010
Russell Investments has added 110 Canadian stocks to the Russell Global Index as part of an annual process to maintain accurate equity benchmarks. As a result, the Russell Global Index now includes 475 Canadian stocks that represent more than $1.55 trillion in market capitalization. This figure increased 22 per cent from $1.27 trillion at this time last year. In addition, Canada now ranks as the fourth largest in terms of the number of stocks in the index, following only the United States, Japan, and India.
Northern Trust has migrated the investment operations for Hermes Fund Managers, a multi-boutique asset manager offering investment solutions to institutional clients globally, to the Northern Trust platform. With the migration complete, Northern Trust provides it with a range of back- and middle-office services for portfolios.
The likelihood of receiving an annuity and/or pension income increases with age, until the oldest age group (those age 80 and over), where the data show a lower percentage receiving annuity and/or pension income, says a study by the Employee Benefit Research Institute. Since 1975, the percentage of individuals age 80 and over receiving annuity and/or pension income has been increasing, from 17.7 per cent in 1975 to 37.3 per cent in 2008. In addition, the study says that although only 16.6 per cent of persons ages 50 to 60 in 2008 were receiving annuity and/or pension income, those recipients had mean and median incomes that were greater than those received by persons over age 60.
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Friday, July 2, 2010
Teachers’ Opposes Shareholder Rights Plan
The Ontario Teachers' Pension Plan opposes the shareholder rights plan adopted by the board of directors of Maple Leaf Foods Inc. "We will vote against the rights plan if it is put to a shareholder vote," says Neil Petroff, executive vice-president, investments. "In the meantime, we are considering all other options open to us with respect to challenging the adoption of this rights plan which prevents us from exercising our legal rights as shareholders. We are also considering all of our options with respect to our Maple Leaf Foods shareholdings." Teachers' is converting 11.7 million non-voting common shares into 11.7 voting common shares. With this share conversion, Teachers' will own 37.9 million common voting shares representing 29.98 per cent of the outstanding common voting shares. Teachers' will continue to own 10.3 million non-voting common shares and warrants exercisable into 2.2 million voting common shares. As a result, Teachers' beneficially owns 36.27 per cent of the voting common shares, calculated on a partially-diluted basis.
Employers Help Workers Get Life Balance
Many Canadian organizations are offering programs to help employees better balance workplace and personal demands on their time, says a survey by Hewitt Associates. At the majority of employers surveyed, flexible work hours, telecommuting, extra paid time off for personal reasons, education leave, and job sharing are the norm for some or all of their salaried full-time employees. Some organizations also offer a compressed work week, sabbaticals, and paid time off for volunteer work. The organizations who responded reported that only one-third of their employees stick to working the regular full-time work week of between 35 and 40 hours. Forty-five per cent work one to five hours extra a week, 23 per cent work five to 10 hours more, and one per cent work 10 to 15 additional hours.
Active Managers Positive In Bull Markets
Active managers, on average, generated positive alpha in bull markets and negative alpha in bear markets over the past 30 years, says a study by FundQuest. ‘When Active Management Shines vs. Passive: Examining Real Alpha in 5 Full Market Cycles Over the Past 30 Years’ compares the potential/historical benefits of active versus index-based passive portfolio management in 73 categories of investments. However, while investors often use excess returns to measure if a manager has added value compared to a benchmark, it uses alpha as a more appropriate measurement of a manager’s relative performance after adjusting for risk. Some of the study’s findings are surprising. For example, conventional wisdom is that the small- and mid-cap U.S. equity markets are less efficient, providing active managers with ample opportunity to generate alpha. However, the study indicates that it has become more challenging for portfolio managers to identify opportunities within this market segment, perhaps due to the additional resources investment firms have dedicated to their research coverage of these categories. While opportunities remain in this space, the study suggests that additional due diligence may be required to identify the best active managers in these categories.
‘Manifesto’ Calls For Turnover Cap
A ‘radical finance manifesto’ from the London School of Economics' Paul Woolley Centre for the Study of Capital Market Dysfunctionality is recommending that annual portfolio turnover should be capped at 30 per cent, investments should be limited to publicly traded securities, and investment in alternative strategies such as hedge funds and private equity, as well as all structured or synthetic products should be avoided. It called on the world's biggest pension funds to adopt the manifesto's 10-point action plan, aimed at making the world a safer place for long-term investors. The principal target of the manifesto is financial ‘agents’ managing money for pension fund ‘principals’ and the academic proponents of the efficient-market hypothesis who enable them. It suggests the efficient-market hypothesis' central flaw might be its failure to examine and understand the relationship between pension clients and those agents, with the latter's superior information allowing them to reap the lion's share of benefits from the pension money flooding into opaque strategies such as hedge funds and private equity.
Rob Ferguson, vice-president, product and client service, global securities lending, and Robert Chiuch, vice-president, head of trading, global securities lending, will share cross-functional responsibilities for CIBC Mellon's global securities lending division. Ferguson has 20 years of experience in securities lending. He joined CIBC Mellon at the company's inception in 1996, coming from a securities lending software vendor. Chiuch has 22 years of financial industry experience, including 21 years in securities lending. He joined CIBC Mellon at the company's formation in 1996, holding progressive roles within the securities lending group.
Adaptation Of DB Plans Examined
Judy Erickson, Teck Resources Ltd., and Dr. Jim Tomkins, of the University of Regina, will explain how they have adapted their Defined Benefit pension plans to the new realities in the session ‘Deal or New Deal’ at the ‘2010 ACPM National Conference.’ They will look topics such as how they have addressed the issue of sharing costs and risks with plan members and how their new arrangements performed in the latest market cycle? It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/national.aspx
Private Wealth Canada Now Available
A unique new online publication, Private Wealth Canada, is now available at www.privatewealthcanada.ca. The website is dedicated to providing financial and lifestyle planning information for senior executives at companies across Canada. The national news source will feature a wide range of content to help executives and business owners manage their wealth and estates; keep abreast of developments on essential services from banks, trust companies, and investment managers; and meet their personal lifestyle needs in areas such as vacation planning.
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Wednesday, June 30, 2010
The Régie de l'assurance maladie du Québec (RAMQ) has revised the financial parameters of the basic drug plan to reflect the rising costs of the plan attributable to persons for whom coverage is provided by RAMQ, says Mercer News. The maximum premium for those persons insured under the basic drug plan is $600 per year, up from $585. The monthly deductible for persons covered by RAMQ is $16, up from $14.95. In private plans, all deductibles, irrespective of their form, are taken into account in applying the maximum contribution. The maximum contribution is equal to the total of the deductible and coinsurance paid by the insured. For private group plans, the maximum contribution is applied on an annual basis and the corresponding annual amount is $963 as opposed to $954 prior to July 1, 2010. While the increase to the maximum contribution may translate into a slight reduction in private drug plan costs, the impact will be negligible.
Decision Could Reduce MEPP Payouts
The Financial Services Commission of Ontario (FSCO) has registered an amendment to an Ontario-registered multi-employer pension plan allowing it to reduce payouts to members who terminate and withdraw their pension benefits when the plan is under-funded, says an Eckler ‘Special Notice.’ The reduction is permanent, with no requirement to pay the balance at a later date, thereby protecting the financial health of the plan for active and retired members. To implement the amendment, the pension plan has followed FSCO’s new policy on commuted value transfers (introduced in 2009), which advises that the plan administrator should monitor the plan’s transfer ratio on a quarterly basis. Its acceptance of this innovative approach to termination benefits has broad implications for all Ontario multi-employer pension plans.
Signs of slower growth, fallout from the Greek government debt crisis, and the Gulf oil spill have put a damper on the outlook for equities in many regions, says Russell Canada’s ‘Investment Manager Outlook.’ However, Canada continues to enjoy most-favoured equity market status, with the number of bullish managers declining slightly from 69 per cent to 63 per cent. The number of bears rose from nine per cent to 19 per cent. Currently, only one-in-10 investment managers believe the Canadian market is overvalued. In terms of what risks might impact Canadian equities in the next 12 months, nearly half of investment managers cited geopolitical activity – everything from oil spills and government debt crises to military conflicts – as the greatest risk facing Canadian stocks.
Cross-border Fund Vehicle Established
Northern Trust has established the Common Contractual Fund as a platform that will allow investment managers to offer proprietary investment strategies in a cross-border fund vehicle designed to appeal to large institutional investors. The Irish-domiciled fund, a vehicle established under the European Union's ‘Undertaking for Collective Investment in Transferable Securities’ directive, will help investment managers gain access to the European market through a fund that also protects the tax status of the underlying institutional investors.
Claymore Investments, Inc. has launched an Inverse 10 Year Government Bond ETF. It has been designed to replicate the inverse (opposite) of the daily total return before fees, expenses, and transaction costs of the 10 -year government of Canada bond on a non-leveraged basis. Som Seif, president and CEO, says it “is a tool for investors who are looking to hedge against potential effects of rising interest rates, without necessarily having to sell their current bond investments.”
James Slater is managing director and chief operating officer for global securities lending at BNY Mellon Asset Servicing. In this newly-created position, he will provide strategic direction for core securities lending functions including securities trading and product development. He has 20 years of experience in the financial services industry and was, most recently, senior vice-president at CIBC Mellon. He will continue to provide strategic direction to CIBC Mellon's securities lending program.
Benefits Over Next Decade Examined
‘Benefits Over The Coming Decade’ will be examined at the ‘2010 CPBI Western Regional Conference.’ Dr. Jack Mintz, Palmer chair in public policy at the University of Calgary, will present his views for the development of pensions and benefits over the next decade. It takes place October 27 to 29 in Banff, AB. Theme of the conference is ‘Conquering New Peaks.’ For more information, visit http://www.cpbi-icra.ca/
Private Wealth Canada Now Available
A unique new online publication, Private Wealth Canada, is now available at www.privatewealthcanada.ca. The website is dedicated to providing financial and lifestyle planning information for senior executives at companies across Canada. The national news source will feature a wide range of content to help executives and business owners manage their wealth and estates; keep abreast of developments on essential services from banks, trust companies, and investment managers; and meet their personal lifestyle needs in areas such as vacation planning.
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Tuesday, June 29, 2010
The Caisse de depot's SITQ real estate subsidiary is selling its portfolio management company Presima Inc. to NabInvest, the investment arm of National Australia Bank, which says the acquisition fits into its strategy to build a global portfolio of boutique investment managers. National Australia Bank is one of the largest financial institutions in the world, with extensive operations in Britain, North America, and New Zealand. Presima has developed a presence in Australia though relationships with large pension funds and investment consultants.
The loss of Bear Stearns, Lehman Brothers and Merrill Lynch from the ranks of independent competitors in U.S. equity research gave a boost to smaller providers, including mid-sized and regional brokers, sector specialists, and independent research providers. However, Greenwich Associates' ‘2010 U.S. Equity Analysts Study’ says the integration of these research franchises into other large organizations also aided the businesses of the remaining bulge bracket brokers who, as a group, captured a significant portion of the business freed up by market dislocations during the global crisis. The bulge bracket has been steadily ceding "vote" in equity research to smaller competitors since 2008. As recently as 2008, bulge bracket firms captured 73.1 per cent of the research vote in U.S. equities. In 2009 that share fell to 68.5 per cent and in 2010 it dropped to 64.1 per cent. Meanwhile, the share of analysts' research vote captured by mid-sized broker-dealers, regional firms, and sector specialists increased from 23.9 per cent in 2008 to 32.4 per cent in 2010.
How benefits outsourcing has evolved over the last 20 years will be the focus of a session at the ‘2010 CPBI Ontario Regional Conference.’ JF Potvin, outsourcing principal of Hewitt Associates, will also highlight the latest trends and future developments. It takes place October 4 to 6 in Niagara-on-the-Lake, ON. For more information, visit http://www.cpbi-icra.ca/
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Monday, June 28, 2010
The Department of Finance has finalized regulations relating to federally regulated private pension plans which enhance protection for plan members, reduce funding volatility, and modernize the rules for investments by pension funds. Under the amendments, a new standard that uses average – rather than current – solvency ratios will be used to determine minimum funding requirements, softening the impact of short-term market fluctuations on solvency funding requirements. The changes will limit contribution holidays unless the solvency ratio exceeds full funding plus a five per cent of solvency liabilities. The regulations offer a modernized investment framework that removes the limits on the amounts pension plans can invest in resource and real property investments.
Workers with health problems are most likely to retire before reaching the age of 65, whereas the exit rate from the labour force is consistently lower for healthy workers without chronic conditions, says Statistics Canada. About 35 per cent of full-time workers between the ages of 40 and 52 in 1994/1995 who reported poor or fair health, had left work by 2006/2007 when they were at most 64 years of age. About 24 per cent of workers who had been diagnosed with three or more chronic conditions had also left work during this 12-year period. However, among workers who reported excellent or very good health and did not have chronic conditions, just 16 per cent had left the workforce during this period.
The Ontario Securities Commission decision that Magna must amend its circular with more robust and relevant disclosure before it can proceed with a shareholder vote sends a clear message to corporate boards that if they do not stand up for shareholder rights, close public scrutiny will follow, says the Ontario Teachers' Pension Plan (Teachers'). Teachers' maintains that controlling shareholders should not be permitted to extract outrageous premiums from a company under the guise of normalizing its governance structure and opposes such transactions. The Ontario Teachers' Pension Plan participated in a group of six Canadian shareholders that made submissions for the OSC hearing into Magna's proposed transaction.
Private Wealth Canada Now Available
A unique new online publication, Private Wealth Canada, is now available at www.privatewealthcanada.ca. The website is dedicated to providing financial and lifestyle planning information for senior executives at companies across Canada. The national news source will feature a wide range of content to help executives and business owners manage their wealth and estates; keep abreast of developments on essential services from banks, trust companies, and investment managers; and meet their personal lifestyle needs in areas such as vacation planning.
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Friday, June 25, 2010
UK balanced pooled funds posted a month-on-month negative return for May 2010 with a median of -4.5 per cent, says BNY Mellon Asset Servicing. The one-year return which stood at 29.4 per cent in the previous month fell to 20.8 per cent. Over the three-year period to May 2010, the return was -1.0 per cent per annum. The five and 10-year returns provided positive returns, however with 6.3 per cent per annum and 2.7 per cent per annum respectively. Active UK equity managers returned -6.2 per cent for May 2010 matching its index. The one-year return came in positive at 22.5 per cent and only just underperformed its index which returned 22.9 per cent. The three-year return was negative at -4.5 per cent per annum which again matched its index. The five and 10-year returns were both positive with 5.3 per cent per annum and two per cent per annum respectively.
In light of the government's proposed changes to the funding rules for Defined Benefit pension plans, OSFI will extend the regular deadline of June 30, 2010, for year-end 2009 actuarial reports. The new deadline, which will be announced as soon as possible, will be no earlier than mid-September 2010.
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Thursday, June 24, 2010
Canada has a potentially ‘elegant approach’ to pension reform now on the table, says Keith Ambachtsheer, K.P.A Advisory Services LTD. He told the ‘CPBI FORUM 2010’ session ‘The State of Retirement Savings and Pensions in Canada’ that the idea that came out of the federal/provincial pension reform meeting in Prince Edward Island to increase CPP benefits and change regulations to allow the private sector to move in and provide pension coverage solutions could be the route to go. He asked why it has to be either one or the other, why can’t it be both? Malcolm Hamilton, of Mercer, said while retirement saving is important, it should not become a national obsession. In fact, with young couples, imposing forced retirement saving could mean they have to chose between saving for retirement and having a family which could, over the long term, have a more serious impact on the country. Robert Brown, a University of Waterloo professor, said the coverage issue may not be as serious as some think. Part of the problem is that the labour force is growing faster than pension coverage as more women enter the workforce. However, this means that in most households, one of the wage earners does have an employer pension plan.
If plan members are unhappy with their retirement savings when they retire, the plan sponsor will be the natural one to blame, says Janice Holman, a principal at Eckler Ltd. In the session ‘Capital Accumulation Plans (CAPs) – Managing the Risks on Plan Exit’ at ‘CPBI FORUM 2010,’ she said this is why Defined Contribution pension plan sponsors must understand the risk associated with these plans. These risks can range from a lack of member knowledge about the plan to a sponsor’s failure to have them sign a waiver when employees chose not to join the plan. Managing these risks requires lifestyle planning, education, financial planning, simple communication, and competitive pricing.
It’s better to have no governance plan that to have a plan and not follow it, says Ronald A. Pink, of Pink Breen Larkin. Speaking on ‘The Emerging Pension and Benefit Landscape from a Governance Perspective’ at ‘CPBI FORUM 2010,’ he said governance plans are trouble – if you have one you have to follow it and you can’t get rid of it. As an advocate of target benefit pension plans as a solution to the pension coverage issue in Canada, he said good governance is the key to the success of these plans. If they are not managed properly, there will be problems, especially in this day and age where pension plans are going to be sued for failing to follow their governance practices.
Algorithmics Acquires VIPitech
Algorithmics has acquired VIPitech, an actuarial software solution with broad financial modeling capabilities, from Towers Watson. The acquisition is part of its’ overall corporate strategy to grow its portfolio of risk-aware business applications that support client decision-making and business growth strategies. It is getting VIPitech’s software solutions, intellectual property, infrastructure and team.
Tompkins Leads Regulatory Affairs
Julie Tompkins is vice-president, regulatory affairs and corporate communications, at the Empire Life Insurance Company. As a member of the strategic leadership team, she will be responsible for leading the company’s regulatory and industry affairs, corporate communications, and community investment and relations programs and activities. Since joining the company in 1998 with a background in broadcast media, public relations, and marketing, she has held progressively senior management roles in both marketing and communications, most recently as director, corporate communications and ombudsman.
Changes In Cancer Treatment Discussed
‘Potential Solutions to the Emerging Changes in Cancer Treatment’ will be the focus of a CPBI Ontario session. Suzanne Lepage, a private health plan strategist, will examine how government and private coverage shifts will impact patient access and why Canadians need to prepare themselves for the financial burden of a cancer diagnosis. Andrea Roth, assistant vice-president, business development, direct distribution, Sun Life Financial, will look at how critical illness insurance works, common features in these products, and the types of costs it can cover. It takes place July 20 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca/
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Wednesday, June 23, 2010
Philosophy Everything In Benefits Design
What we do going forward will be different and bring long-term savings when it comes to ‘Controlling The Cost of Prescription Drugs,’ says Barbara Martinez, of Mercer. Speaking at the ‘CPBI FORUM 2010,’ she said, however, sponsors need to remember philosophy is everything in benefits design. Sponsors need to know what they want to achieve and what they want to pay. For example, do they want a plan which is designed to help them compete better for employees? As well, when it comes to plan design, they need to know the demographics of their workforce, the cost of the plan, and the cost drivers. These means they need to know what is going on the industry and they need someone to help them negotiate the best deal for their plan. Once these are in place, their plan design should also call for performance management and benchmarks which will require them to monitor data. Finally, they will need to communicate with their employees in new ways to make them appreciate their plans.
Reform Requires More Than Lip Service
Canada's federal and provincial governments must heed the expectations of Canadians for meaningful improvements to public pension plans, says the United Steelworkers (USW) union. "Our federal and provincial governments are finally acknowledging the need to expand the Canada Pension Plan," says Ken Neumann, its national director for Canada. "It is now incumbent on our political leaders to follow through with significant pension reform that will ensure retirement security for Canadians." He says minor improvements, implemented over the long term, will do little to address Canada's pension crisis. As well, "Canadians deserve more than lip service. They want genuine reform to ensure they will not spend their retirement years in poverty." The USW is a key partner in the Canadian Labour Congress campaign to double Canada Pension Plan payouts. It also proposes an immediate 15 per cent increase to Guaranteed Income Supplement benefits.
De-risking Hampered By Funding Status
Pension plans are currently so far under the water that they are unable to do what they need to do to de-risk, says David Service, of Towers Watson. In the session ‘The Times Are a Changing’ at the ‘CPBI FORUM 2010,’ he said, however, moving to dynamic asset allocation may help them get to where they need to be. Under this de-risking process, they decrease the pension risk as funding levels increase. These changes are built into the plan design with triggers in place to prompt the necessary changes. Eventually, plans should get to a point where they are sustainable and be in a position where they can, for example, use practices such as buying annuities to create more cost certainty for the sponsor.
Less Liquid Strategies Benefit From Shift
Less liquid strategies and asset classes are poised to be the main beneficiaries of a continued shift in global institutional investor allocations, says bfinance’s ‘Pension Funds & Insurance Asset Allocation Survey.’ The leading beneficiary is infrastructure with 16 per cent of respondents indicating they will increase their allocation. This is set to rise over a three-year period with 30 per cent indicating their intention to increase their allocation. Property and private equity are also favoured asset classes for the short and medium term with 20 per cent and 10 per cent intending to increase allocations over the next six months. Over three years, nine per cent of investors indicate their intention to increase their allocation to property while 19 per cent plan to increase their allocation to private equity. Equities appear to be out of favour with investors planning a 17 per cent decrease over the next six months and 37 per cent over three years.
Management Undergoing Evolution
Asset management is undergoing an evolution which will see traditional long-only managers converging with alternative investment managers, says Eric Bushell, chief investment officer, Signature Global Advisors, CI Investments. In a session titled ‘Hedge Fund Implosion’ at the ‘CPBI FORUM 2010,’ he said indications of this can be seen in some of the changes taking place in each area. Alternative managers are increasing their transparency, restricting the amount of leverage they use, increasing their liquidity, and using third parties for valuations. Long-only managers are looking at their performance fees, importing alternative strategies into their portfolios, and making their mandates more flexible by removing constraints on style and market cap. Many of these changes are a result of increased regulatory reform arising from the recent financial crisis, he said.
OMERS Invests In Future Economy
Stichting Pensioenfonds ABP, of the Netherlands, and the Ontario Municipal Employees Retirement System have launched INKEF Capital, a joint initiative to invest in start-ups in the knowledge economy of the future. They plan to invest almost $250 million over the next five years. The investment vehicle will target early-stage companies in areas such as technology transfer offices of universities, informal investors, regional funds, and spinoffs of new technologies by existing companies. INKEF is the acronym for ‘Investing in the Knowledge Economy of the Future.’
Funds Assessing Risk Relative To Liabilities
More pension funds are assessing their risk relative to their liabilities, says Jim Cole, of Phillips Hager & North. He outlined this and a number of other trends in the ‘CPBI FORUM 2010’ session ‘Investing For Your Liabilities.’ He said there is also a trend towards reducing risk through strategic policies such as increasing allocations to fixed income. Risk exposures are also being adjusted by reducing interest rate risk and reducing exposure to equities as well as adding alternative investments. This shift into hedge funds is not just about moving to hedge funds, he said. Funds are turning to absolute return strategies and adding real assets such as real estate and infrastructure.
Poirier Appointed To Committee
Claude Poirier, president of the Canadian Association of Professional Employees, has been appointed to the Public Service Pension Advisory Committee. The committee's mandate is to review matters and make recommendations related to the administration, benefit design, and funding under the Public Service Pension Plan. Poirier began a three-year term as president of the association in 2009.
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Tuesday, June 22, 2010
Investors Re-commit To Alternatives
Institutional investors across the world – including pension funds, endowments, foundations, and insurance providers – expect to re-commit to alternative investments despite the market stresses experienced during 2008 and 2009, says Russell Investments’ ninth global survey on alternative investing. It found institutional investors expecting (on average) an increase of over a third (from 14 per cent to 19 per cent) in their allocation to alternatives over the next two to three years. Real estate, private equity, and hedge funds remain the preferred alternative types, although commodities and infrastructure are expected to make meaningful gains, albeit from their current low allocations.
Drug Utilization Should Be Reviewed
The best way to determine the impact of the Ontario government regulations on generic drug pricing is to review current drug utilization trends and costs, says a Krieger + Associates ‘News Bulletin.’ It says while some are speculating a reduction of up to five per cent in drug plan costs, the amount by which a plan will be affected is dependent on factors such as current drug usage and the percentage of the employee population in Ontario. However, if a plan does not use a drug card, it may be more difficult to obtain specific data about the plan.
Brian Kremer is managing director of sales for Arrow Hedge Partners Inc. He will share the responsibility for developing and servicing investment advisors in the Ontario region and provide wholesale coverage to professional advisors in Quebec and in Atlantic Canada. He has been working in the investment fund industry, holding senior sales roles, since 1997.
Entrepreneurs Share Perspectives
Successful entrepreneurs will share their perspectives on dealing with private equity and venture capital investors at a CVCA breakfast. Razor Suleman, founder and CEO, I Love Rewards; Anthony Lacavera, chairman, Globalive; and Stuart Lombard, president and CEO, ecobee; will discuss challenges they have faced, as well as opportunities they have been able to capitalize on to grow their respective companies to where they are today and what the future holds. It takes place July 6 in Toronto, ON. For more information, visit http://www.cvca.ca/
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Monday, June 21, 2010
UK Firms Lack Communications Policies
More than 60 per cent of UK firms either don’t have a communications policy for their Defined Contribution schemes or do not document it, says a Mercer survey. It found that 68 per cent of survey participants rated "limited member understanding" as one of the greatest challenges currently faced by DC plans and nearly 90 per cent want to improve member education and understanding in the next 12 to 24 months. The survey also found that 34 per cent of sponsors have no formal objectives for their DC plan and 46 per cent have no defined success measures.
BP Dividend Decision Has Minimal Impact
Pension savers in the UK need not worry too much about their retirement savings funds following BP's decision to suspend dividends for a year, says the National Association of Pension Funds (NAPF). The long protracted method of saving into a pensions scheme should cushion the decrease in funds following BP's announcement. Joanne Segars, chief executive at NAPF, says "We estimate that BP accounts for around 1.5 per cent of a typical pension fund portfolio, so the damage done by the fall in the share price and the dividend decision is not material to the provision of pensions in the UK." As well, she said the company's reasons for cutting back on dividends this year were valid in light of the significant costs that will be incurred to clean up the oil spillage in the Gulf of Mexico.
Dutch Firms Have Positive Impact
Twenty Dutch multi-nationals have made a positive impact on more than 8.2 million people in developing countries, says the ‘2010 Business Impact Report.’ The Sustainalytics and NCDO study shows that the private sector plays a larger than expected role in contributing to the Millennium Development Goals (MDGs). It revealed that these companies contributed to the MDGs through job creation and commercial activities as well as community involvement. The study also says that commercial initiatives have a significant impact on alleviating poverty, more so than community investment activities alone. Approximately 2.5 million people benefited from business activities versus 607,000 from community investments.
Hofer Heads New Client Development
Erika Hofer is director and head of new client development for Citi Private Bank in Canada. Based in Toronto, ON, she was, most recently, a director and private banker with UBS in Toronto, having joined UBS predecessor firm, Swiss Bank Corporation, in 1997. Prior to that, she was a member of the Toronto Real Estate Board.
Focus Put On Pension Administration
‘Prudence in Pension Administration – An Increased Focus’ will be the focus of a session at the ‘43rd Annual Canadian Employee Benefits Conference.’ Joan S. Tanaka, president of Prudent Benefits Administration Services, Inc., will provide an overview of the latest published material, the implications for the administrator, and the impact on the operations of the pension plan and the pension fund. It takes place November 21 to 24 in San Diego, CA. For more information, visit www.ifebp.org
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Friday, June 18, 2010
Framework Values And Measures Liquidity
An RBC Dexia paper has introduced a new framework for valuing and measuring liquidity, while reflecting the specific liquidity needs of the institution concerned. The paper provides insights into the notion of liquidity against the backdrop of the liquidity constraints faced by asset managers. It says while classical VaR (Value at Risk) measures may provide useful indications of portfolio risk in liquid markets, the recent crisis showed that they do not address risk in the presence of less than perfect market liquidity or portfolio liquidity constraints. So while regulators currently call for VaR measures as part of a robust overall risk management process, there is a desire from the industry to further refine this measure. The paper brings all these concepts together and defines an approach to value portfolios based on the external liquidity of the portfolio constituents and the internal constraints to which the portfolio owner is subject.
Investors cannot simply rely on the manager or custodian to execute FX trades efficiently, says the Russell Research report ‘Are your FX fees too high?’ It says too often the lack of attention has led to uncompetitive execution which has had a material impact on costs for investors. Best practice dictates that all investment decisions should be reviewed periodically and FX execution is no exception. Such a review would help investors to understand and better control costs, and may help them to consider more cost-effective solutions. It would also help to close the responsibility gap which is common today.
John Solursh, partner emeritus in the pension and employee benefits group at Blake, Cassels & Graydon LLP, has been awarded the Ontario Bar Association's ‘Award for Excellence in Pensions and Benefits Law.’ It recognizes his distinguished career and contributions to the development of pension law in Canada. He is also chair of the Financial Services Commission of Ontario and the Financial Services Tribunal and chair of the Canadian Institute of Actuaries' Actuarial Standards Oversight Council. He also served on the executive of the Canadian Bar Association (Ontario) pension and benefits section, as a member of the legal advisory committee to the Pension Commission of Ontario, and on the executive of the International Pension and Employee Benefits Lawyers Association. Cited in The Canadian Legal Lexpert Directory 2008 as a leading practitioner in pensions and employee benefits law, he is also listed as the only Canadian lawyer specializing in the pension and benefits area in the Guide to the World's Leading Labour and Employment Lawyers.
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Thursday, June 17, 2010
Sceptre Investment Counsel Limited and Fiera Capital, Inc. have signed a definitive agreement to merge the two companies. The new company, Fiera Sceptre, is a publicly traded, independent money manager with $30 billion in assets under management. It also becomes a full service, multi-product investment firms, offering clients equity and fixed income management as well as in asset allocation and alternative investments. Jean-Guy Desjardins, controlling shareholder of Fiera, will become chairman, chief executive officer and chief investment officer of Fiera Sceptre. Fiera president and chief operating officer Sylvain Brosseau will become president and chief operating officer of the combined firm. David Pennycook, currently president and interim chief executive officer of Sceptre, will become vice-chairman and executive vice-president.
Sovereign Acquirers Look For Profit
Cross border acquisition activity involving government controlled acquirers over the past 20 years is substantial and growing. However, despite fears about their motivation, the only motivation behind these acquisitions seems to be profit, says G. Andrew Karolyi, professor of finance and global business alumni chair in asset management at the Johnson Graduate School of Management, Cornell University. Speaking at the Dimensional Investment Forum on ‘Sovereign Acquirers: A New Force in Global Markets,’ he said his study of sovereign acquirers looks at whether the motives and the consequences of such deals are different from those of corporate acquirers. It found while there is significant cross-country variation in country led acquisitions, it is difficult to explain much of it and it is also hard to distinguish differences in target firm characteristics.
Although the trend in expected increase of prescription drug costs has slowed in 2010, drug cost inflation remains the highest of all of the health costs and future drug costs remain a top concern for employers, says the ‘Buck Health Care Trend Survey.’ Overall, the results of this year’s survey show that health benefit costs are continuing to increase at rates that well exceed the cost inflation on most other business expenses. It says the good news is that many of the expensive blockbuster drugs are losing their patent protection in the next few years, opening the door to lower-cost generics. Provinces are also beginning to address the excessive margins in the retail pricing of generic drugs, with Alberta and Ontario introducing legislation to lower the price of generic drugs for all residents. On the other hand, there is the growing issue of catastrophic drugs (drugs that cost in excess of $10,000 per patient per year in Canada). While the incidence is still relatively low, many of these drugs have an annual cost of between $20,000 and $500,000 for just one patient, and are being used to treat chronic conditions. As well, the number of high-cost biologic drugs being covered by private plans is increasing.
Rebalancing Can’t Overcome Spikes
Risk based rebalancing can help reduce portfolio rebalancing during persistent times of volatility, but cannot protect portfolios when markets spike, says James L. Davis, vice-president, Dimensional Fund Advisors. In a research update, he told its ‘Investment Forum’ that they are currently looking at managed volatility strategies. They have had a number of clients in recent years who, considering what has happened over the last couple of years, believe it doesn’t make sense to have target allocations which remain fixed, when the level of risk is not going to remain fixed. He said they are not talking about forecasting returns, they are talking about managing the risk they are incurring. While there are a number of ways to approach this, he said they tend to use a market based approach to risk such as risk based rebalancing. Preliminary results of their study suggest this is an appropriate action.
Amundi, a new international group in asset management, has established business in Canada. Formed by combining the asset management expertise from major banking groups Crédit Agricole and Société Générale, the new entity ranks among the top 10 worldwide players. The decision to merge was based on a desire to compete with the top managers in the world, says Laurent Bertiau, deputy head of the institutional investment division in charge of marketing and development. In Canada, it will provide an alternative to U.S.-based managers in all global assets classes including fixed income, emerging markets, and absolute return products. Louis Fortin is president and managing director of Amundi Canada inc.
Countries such as India and China which were feared to take over the world, don’t seem to be doing so if you look at their recent returns, says Robert T. Deere, investment director, senior portfolio manager, and vice-president, Dimensional Fund Advisors. At its ‘Investment Forum,’ he questioned the overwhelming propensity of people to invest in emerging markets because over the long term they expect better returns. He expects to see only normal returns from these markets over the next couple of years. The best opportunities for returns, he said, appear to be in value and small cap investing.
John Staric is the pension and benefits advisor to the Professional Institute of the Public Service of Canada, a bargaining agent for more than 57,000 public service professionals. He provides professional and technical expertise on pensions and benefits to members, management, and elected officials.
Fund managers and investors from across Canada will hear Canadian managers presenting on their funds and discussing current topics within Canada's alternative investment arena at the Hedge Fund Hotel’s ‘5th Investors Meet Canadian Fund Managers Forum.’ The forum will conclude with the ‘3rd Hedge Funds Award Gala!’ which recognizes the achievement of up-and-coming hedge funds. It takes place October 5 in Toronto. For more information, visit http://www.hfhto.com/
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Wednesday, June 16, 2010
Real Estate Securities Offer Benefits
The ongoing credit crisis and the volatility it has generated have served to emphasize the benefits real estate securities offer to investors, says Matthew Hoult, chief investment officer, global real estate, at BNP Paribas Investment Partners. Speaking at its Information Breakfast Meeting, ‘Built to last ... the case for real estate securities,’ he said these benefits include high liquidity, price transparency, diversification potential, duration and inflation hedging characteristics, and low transaction costs. Looking ahead, he said the market opportunities are that listed companies look reasonably valued, profitability has improved, and portfolio write-downs have taken place. As well, property markets are improving which is helping to boost portfolio values. As well, credit is more widely available for listed companies and equity raising is restoring balance sheet health. There are, however, some macro risks. The credit crisis has moved into sovereign debt territory and while the economic recovery has gathered pace, inflation could lie ahead.
Michael Jantzi, CEO and founder of Jantzi-Sustainalytics is the inaugural winner of the Social Investment Organization’s first ‘Lifetime Achievement Award for Responsible Investing.’ The founder of Jantzi Research, he has been active in the social investment field since 1990. A Canadian thought leader on social investment and corporate social responsibility issues, he contributes articles about social investment and related topics to publications throughout the country and was co-author of ‘The 50 Best Ethical Stocks for Canadians: High Value Investing.’ In June 2001, he was the recipient of an Ethics in Action Award in recognition of his significant contribution to corporate social responsibility and social investment in Canada.
Canada’s holistic three-pillar approach to retirement savings must be maintained, says Towers Watson. In a response to the end of the federal/provincial meetings on Canada’s pension crisis, it says there are a number of issues that must form part of the discussion around the reform of Canada’s pension system. Maintaining the three pillars – the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) systems, the Canada Pension Plan (CPP)/Quebec Pension Plan (QPP), and private savings including Registered Pension Plans (RPP) – must start, it says, with taking steps to reinforce the weakest pillar, RPPs. However, the appropriate role of government-sponsored plans in retirement savings must also be considered, as should the broader impact of possible changes to Canada’s system of bankruptcy priorities to protect employee pension plans.
Disclosure Of Social Practices Recommended
York University’s Jay and Barbara Hennick Centre for Business and Law and Jantzi-Sustainalytics have submitted recommendations to the Ontario Minister of Finance on how the Ontario Securities Commission (OSC) can begin to improve corporations’ disclosure of their social practices. The report, ‘Corporate Social Reporting Initiative,’ addresses the reasons and scope for and the regulation of corporate social reporting, which applies to topics such as human and labour rights, employee health and safety, local community development, and product safety. It recommends that the OSC clarify existing disclosure obligations to indicate the need to consider the materiality of social issues to investors’ decisions and long-term corporate performance. It also wants the OSC to facilitate continued dialogue among relevant stakeholders in order to support a shift toward more standardized metrics and reporting in this area.
The hedge fund industry’s assets should surpass the $1.9 trillion record it reached in mid-2008, as early as this year, says Casey Quirk & Associates. The rebound in assets, which shrank to $1.4 trillion at the end of 2008, is being driven by inflows from U.S. institutional investors, particularly pension funds. U.S. investors will add about $400 billion to hedge funds before 2013, when assets will reach $3 trillion. It says institutional investors are no longer looking at hedge funds as specialized investments and are instead incorporating them into their stock and bond allocations, helping to boost infows.
The French will have to work two years longer before retiring under proposed reforms to bring France's pensions budget out of a deficit. Under the plan, the minimum retirement age will be lifted gradually to 62 in 2018 from 60 at present. As well, people would have to work at least 41.5 years by 2020 to be entitled to a full pension at 62, against 40.5 years now. However, even with the change, France will still have one of the earliest legal retirement ages in the developed world. Germany plans to raise its retirement age to 67, while Britain and Italy are standardizing at 65. France’s pay-as-you-go pension system is forecast to register a $39 billion deficit in 2010.
Fournier Heads Caisse Real Estate
Daniel Fournier will become executive vice-president, real estate, and president, real estate group, at the Caisse de dépôt et placement du Québec as of July 19. Already part of the Caisse real estate team, he was previously executive vice-president and chief investment officer at Caisse subsidiary SITQ.---------------------------------------------------------
Tuesday, June 15, 2010
DB Sponsors Say Progress On Reform Insufficient
More than 90 per cent of Defined Benefit plan sponsors believe that the federal and provincial governments are not making sufficient progress on pension reform, says an RBC Dexia Investor Services’ survey. The second ‘RBC Dexia Pension Quick Poll’ found respondents were vocal about the lack of a consistent approach in aligning the interests of plan members and plan sponsors. However, through the financial turmoil of 2008 and 2009 and, more recently, the sovereign debt crisis, plan sponsors remain focused on the many different types of risk they have to deal with on a day-today basis. Liquidity risk topped the list with 96 per cent of respondents indicating that this risk was still of high importance or had become even more relevant and important. Shortfall risk ranked as a close second with 92 per cent identifying this as having the same importance or more importance. Respondents' perspectives on interest rate risk and counterparty risk was also significant with 91 per cent and 89 per cent, respectively, identifying these as being important – seemingly, a reflection of their increased use of derivatives to hedge risk.
Frontier Markets Offer Opportunity
Frontier markets offer a profit opportunity because the growth rate of their small and medium enterprises is expected be higher than that of large entities in their economies and global companies, says Gerhard Pries, president of the Sarona Group. He told the ‘IAMFI Investor Network’ meeting, co-hosted by the Social Investment Organization and Sarona Asset Management, that a rapidly growing middle class in these countries is putting upward pressure on the need for housing, food, transportation, and energy. As result, these economies are growing twice as fast ands developed economies and, since the mid to late 1960s, their GDP growth has, on average, outperformed that of the U.S. and Europe.
CLHIA Welcomes Improved Access
The Canadian Life and Health Insurance Association (CLHIA) is welcoming the decision arising from the meeting of Ministers of Finance to improve access to workplace-based retirement savings programs by expanding participation in multi-employer pension plans. Adjustments to tax and pension rules would make group pensions less complicated and costly to administer for small businesses and the self-employed, making pensions at the workplace more available to many working Canadians, it says. "We need to build on the strengths of Canada's retirement savings system by improving access to workplace-based savings vehicles," says Frank Swedlove, CLHIA president.
Canadians Unprepared For Retirement
Almost half of pre-retired Canadians above the age of 45 are not fully prepared for a comfortable retirement, says a Canadian Institute of Actuaries survey. It found only 45 per cent of pre-retirees are confident in their financial future, one in five say they will never fully retire; and just eight per cent are ‘very prepared’ for retirement. It also found that while approximately half have every intention of planning for life after work, a similar number are not seeking financial advice of any kind, whether it is from a bank, a specialist adviser, a relative, or even a book. "It is interesting – and alarming – that despite the best of intentions and a clear understanding of the risks of not being adequately prepared, too many pre-retired Canadians have yet to take action to protect themselves financially for the future," says Robert Howard, CIA president.
Microfinance Attractive Opportunity
Microfinance presents an attractive opportunity for investors for a variety of reasons, says Scott Budde, managing director, global science and community investing for TIAA CREF. Speaking at the ‘IAMFI Investor Network’ meeting, co-hosted by the Social Investment Organization and Sarona Asset Management, he said they provide a global focus, have a long-term investment horizon, and fill the dual role of providing financial returns and having a social impact. Funding for microfinance comes from local and international sources and is used by microfinance institutions to provide products and services such as loans, savings, insurance, and remittances to low-income clients in developing economies. Total investment in the microfinance sector has reached about $35 billion, but an additional $265 billion is needed to provide financial services to the world’s 1.5 billion working poor.
UK DB Being Axed
Almost every Defined Benefit plan in the UK has plans to reduce or axe current provisions in the future, says a PricewaterhouseCoopers survey. Just six per cent of 179 employers said they expect to maintain DB schemes in their current form. This comes despite 87 per cent of employers admitting their employees would not have saved enough for their retirement.
Almost half of employed Canadians (47 per cent) identify themselves as ‘very’ or ‘somewhat’ vacation deprived, the highest reported level in four years, says the eighth annual ‘Expedia.ca Vacation Deprivation’ survey. It found 24 per cent are not taking all of their vacation time, giving back an average of 2.17 unused vacation days to their employer. This translates into nearly 36.5 million unused days in Canada overall and an overwhelming $6.02 billion in wages handed back to employers. They say there are a variety of reasons why they wouldn't use them all, including work is their life and they're too busy to get away and their significant other is unable to get away from their job. Work-related concerns even cause interruptions to vacations that are already planned. One-third of Canadians say they've checked their work messages while on vacation and one-quarter have even cancelled or postponed vacation plans in the past because of work.
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Monday, June 14, 2010
Flaherty, Duncan Have Reform Plan
The federal government and Ontario are both proposing to expand the Canada Pension Plan and relax rules for financial institutions to let them offer pension plans to self-employed people, small business, and anyone not covered by a corporate plan. In a letter to his provincial counterparts, Finance Minister Jim Flaherty set out his vision for pension reform which shares a view offered by Ontario finance minister, Dwight Duncan. Flaherty wants a modest, phased-in, and fully funded enhancement to CPP benefits complemented by changes to federal tax rules and federal and provincial modifications for pension standards to allow banks and insurance companies the flexibility to offer low-cost pension plans to multiple employers, all types of employees, and the self-employed. Ontario wants to see regulatory changes that would encourage financial institutions to offer low-cost retirement options to the self-employed and small businesses. Duncan plans to proceed in the fall regardless of what the provinces decide.
The Association of Canadian Pension Management (ACPM) has released its five-point plan towards improving retirement income coverage in Canada. The plan calls on governments to remove barriers to group coverage; ensure Defined Benefit plans continue as viable options for coverage; enable more innovations; promote simplicity in administration; and increase incentives to save. Scott Perkin, ACPM president, “This is a comprehensive plan that requires all five points to be implemented to ensure that every Canadian, including the self-employed and those employed in small businesses, have the saving options that work best for them and their families.”
Insurance Industry Questions Changing
With boomers on the cusp of retirement, their impact on the insurance industry and financial planning is evident in the products that have been developed and the questions that need to be answered, says Kevin Dougherty, president, Sun Life Financial Canada. “Thinking back 15 or 20 years ago, the insurance industry was all about answering the question ‘What if I die?’ – have I provided security for my family. Today, the question for many baby boomers is ‘What if I live?’ – will I have enough money to live comfortably in retirement and am I confident I have financial security that will last my lifetime,” says Dougherty. Noting a number of circumstances that have created a perfect storm around financial security – economic shocks, healthcare concerns, pension reform questions and increasing life spans – a number of solutions have been put forth by the industry, including creation of a registered health savings plan (RHSP) and pension reform. “These are easy changes to make to regulations. And no doubt they would serve to improve the financial security of Canadians immediately without hindering our ability to improve government programs,” says Dougherty. “Living longer should not be a burden. Instead this should be an opportunity for us to step up to the challenges of making financial security a reality.”
Financially Healthy Retirement Within Reach
A financially healthy retirement is well within reach for most Canadians, says Russell Investments Canada Limited. However, its report, ‘Spending patterns in retirement,’ says factors such as income level, marital status, age, and retirement date must be taken into account and planned for. It found, on average, more than 50 per cent of retirement income comes from government transfers. However, these government transfers are generally not sufficient to cover all of the essentials of retirement. They provide 70 per cent coverage for the average retiree and 39 per cent for higher-income retirees. For retirees with annual incomes of $35,200, more than $27,100 of that cash flow was needed to pay for yearly essential expenses.
Best Buy Canada has expanded its benefits coverage to include a top-up of 75 per cent for 17 weeks for mothers who give birth. The move is to assist in making the adjustments required as families welcome their new family members. The benefits are part of a range of flexible benefits offered to Future Shop, Best Buy, Geek Squad, and Connect Pro full-time store, distribution centre, and head office employees and their families.
CPAS Systems Inc. has opened a regional office in Los Angeles, CA. It says the Marina del Rey office will enable it to better serve its growing client base in California and support its expansion on the west coast. A large percentage of its business today is being done in the U.S. and in California in particular
Birrell Returns To Hedge Fund Hotel
Rodney Birrell, of The Wine Investment Fund, will return for another Hedge Fund Hotel 'After the Close' session. He will give a brief presentation about the fund and speak generally about investing in fine wines and how this alternative asset class differs from ‘mainstream’ hedge funds. It takes place June 15 in Toronto, ON. For more information, visit http://www.hfhto.com/
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Friday, June 11, 2010
Canadians Face Inadequate Income In Retirement
A growing number of Canadians will not have an ‘adequate’ income level in retirement, resulting in a lower standard of living for many seniors over the next four decades, unless pension reform is pursued, says a report from TD Economics. However, this future deterioration in the state of retirees' standard of living is due, in large part, to the way in which Canadians have accumulated their personal savings since the mid-1990s. Individuals have been saving less out of their pay cheques and have increasingly relied on asset returns – such as the value of their home – to build up their personal wealth. In order to acquire these assets, individuals have increasingly borrowed money to finance their purchases, lifting personal debt levels to a record high. Looking ahead, the low savings rates, combined with modest and volatile asset returns and higher debt service costs, will hamper wealth accumulation.
Domestic Equity Trading Contracts
Canadian institutions' domestic equity trading business is unlikely to meet volume expectations in 2010, says Greenwich Associates' ‘2010 Canadian Equity Investors Study.’ The report shows that the total amount of projected commissions paid by Canadian institutions to brokers on trades of domestic stocks contracted by 18 per cent to a final tally of approximately $690 million for the 12 months ending February 2010. Although the lack of growth in the institutional commission pool is indicative of slower than expected trading activity, it also reflects the continued erosion of average brokerage commission rates. This year, Canadian institutions report paying an average "all-in" blended commission rate of 2.46 cents-per-share, down from 2.66 cents in 2009.
Bill C-9’s requirement for annual valuations with a high threshold for exemption from annual filings, combined with the regulations calling for the averaging of solvency ratios and a five per cent solvency margin for contribution holidays, would seem to afford plan members additional security and limit wide fluctuations in the employer's solvency funding requirements, says a Fogler, Rubinoff ‘Pension Alert.’ However, there may be a concern as to the additional burden on Defined Benefit plans, particularly smaller plans where the cost of an actuarial valuation is significant. It can be expected that annual valuation reports would be required for most federally registered plans on the assumption that most will not have a solvency ratio of 1.25. Since most federally regulated plans tend to be large, they will be able to absorb the cost of annual valuations. If such a requirement should find its way into provincial legislation, however, it could impact smaller DB plans which are already endangered.
Court Closes Door On Mental Suffering Claims
The Ontario Court of Appeal has closed the door on employee tort claims against employers for negligent infliction of mental suffering in the workplace, says a Spectrum HR ‘Law Alert.’ Specifically, the court ruled in Piresferreira v. Ayotte that employers cannot be sued in tort for negligently inflicting mental distress on their employees. Rather, employees must make their claims for mental distress that occurred in the workplace on the basis of breach of the express or implied contract of employment that exists in every employment relationship.
Based on Ontario’s announced changes to what all Ontarians will pay for generic drugs, estimates indicate that employers will see the Ontario portion of their prescription drug plan costs drop by approximately nine per cent to 12 per cent within two years, absent other market changes, says Hewitt’s ‘Health Care Check-Up eBulletin.’ There are a number of key steps employers should take immediately to ensure the savings aren’t eroded by other market factors. For example, the exact savings for each employer will depend on the generic utilization under the plan. For plans that already use design features such as mandatory generics and managed formularies, the savings from these changes will be greater. For employers who have considered the implementation of managed drug programs in the past, the potential savings from these features are now substantially increased. All employers should re-assess the use of drug management plan design features to ensure they are maximizing the savings now available through lower-cost generic drugs.
Small Business Against Doubling CPP
Canadian small businesses are overwhelmingly opposed to a mandatory doubling of Canada Pension Plan premiums and benefits, says a Canadian Federation of Independent Business survey. “Proposals by unions to double CPP would serve as a major job killer as economists worldwide recognize that payroll taxes are a drag on job growth and economic development. With EI payroll tax premiums set to rise for the next several years beginning in 2011, an increase in CPP premiums could hamstring Canada’s economic recovery just as it begins to gain momentum,” says Catherine Swift, the federation president. “Entrepreneurs already pay double the rates of other Canadians and they would be faced with massive increases if this option is considered,” she added.
Plan Market Value Increased At Year End
The market value of employer-sponsored pension funds amounted to $920.4 billion at the end of the fourth quarter, up $22.3 billion (2.5 per cent) from the previous quarter, says Statistics Canada. This was the third consecutive quarter of growth in pension fund assets, as they rebounded from significant losses in 2008 and the first quarter of 2009. The value of these assets in the fourth quarter was 10.9 per cent higher compared with the same quarter of 2008. However, it remained 5.2 per cent below the high of $970.8 billion reached in the second quarter of 2008. Stocks and equity funds accounted for 33.9 per cent of total pension fund assets at the end of the fourth quarter, while fund assets held in bonds accounted for 35.2 per cent. Although expenditures increased, rising 14.3 per cent to $14.7 billion, net income was up for a third consecutive quarter to $16 billion. Just over six million Canadian workers are members of employer pension plans.
Canadian Western Trust Company will now offers web access to HighView Financial Group's independent mutual fund research and guided fund portfolio solutions via CWT's online query tool, CWeb. Mark Barnicutt, president and CEO of HighView, says "By combining CWT's custodial platform with our mutual fund and fee-based portfolio, our investment solutions will have a unique advantage in the marketplace." CWT has been offering retirement, trustee, and custodial solutions to financial advisors, corporations, and individuals for more than 20 years, and currently administers more than $5.8 billion of assets. HighView is a provider of independent investment fund research and investment support tools for advisors in Canada.
Denys Joins Direct Distribution
Chris Denys is vice-president, sponsored markets and finance, at Sun Life Financial Direct Distribution. With more than 14 years at the company, he is responsible for the sponsored markets business including association, affinity, and creditor business. Greg Bell is vice-president, business and market development. He brings with him 20 years experience in group retirement services. Shawn Kauth is assistant vice-president, product development. He is responsible for product development and management of the product offering.
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Thursday, June 10, 2010
Eurozone Unlikely To Fall Apart
While the Eurozone is unlikely to fall apart, discussion over its recovery from its current debt crisis is likely to last for a decade, says Craig Alexander, senior vice-president and chief economist at TD Bank Financial Group. In an economic outlook panel at the Morningstar Investment Conference, he said the motivation for creating the Eurozone was political, not economic. It was a measure to prevent future European wars. Now, with the debt crisis, the economic basis is more unstable and there is a possibility some countries may leave the group so they can have their own currency. He also dismissed proposals for a two-level Euro, saying no-one would invest in a bond issue from the troubled southern tier of Europe. As well, a country like Italy is unlikely to want to share a currency with, for example, Greece.
Engagement Designed For Institutions
Engagement as a responsible investment tool was designed to appeal to institutional investors, says Karina Litvack, head of governance and sustainable investment at F&C. Speaking at the Jantzi Sustainalytics session ‘Responsible Investing and Pensions,’ she said it came into prominence about 10 years ago and relies on the ability of institutional investors to shape corporate behaviour. Investors track the impact of company behaviour and make suggestions on how they can improve and become better and more successful companies. As a last resort, if a company fails to comply, it can be excluded from a portfolio. And, she said, more of their clients are saying if engagement with a company doesn’t work within a certain timeframe, they will divest their portfolios of these holdings. However, she said it is difficult to determine if the actions taken do, in fact, drive up the stock price because there are a number of other factors that influence stock price.
Reversion To Mean Misunderstood
A failure to understand the relationship between skill and luck is also the reason that investors do not understand reversion to the mean, says Michael J. Mauboussin, chief investment strategist at Legg Mason Capital Management and an adjunct professor at the University of Columbia Business School. Speaking at the Morningstar Investment Conference session 'Think Twice: Why Our Minds Are Prone to Investment Mistakes,' he said success is usually the result of a combination of skill and luck and great success the result of skill and great luck. However, this means that over time good returns tend to migrate down to the average and bad returns migrate up to the average. The fact that even institutional investors do not understand the relationship between skill and luck and reversion to the mean is revealed by studies on performance by managers hired and fired by plan sponsors. Typically managers are hired when they deliver outperformance and fired when they underperform. However, within two years of being hired or fired, managers who were fired outperform those who were hired.
Access To Funds Undermines Retirement Saving
Government proposals to look into early access to pension savings undermine efforts to encourage people to save for retirement, says Mercer. Its research across 11 major national pension systems in its Melbourne Global Pensions Index found that early access hindered efforts to provide sustainable and adequate pension provision in Canada, Chile, China, Netherlands, and the United States. Bruce Rigby, its global retirement strategist, says allowing members’ early access to their accumulated savings can have an appealing short term impact and satisfy a range of needs. However, in countries where this occurs, these payments are rarely paid back in full. “Financial responsibility to care for these people then falls back onto the state and taxpayers. Early access often means the fundamental goal of ensuring financial self-sufficiency in old age becomes much more difficult.”
Economic Activity Based On People
More than anything else economic activity is based on the activity of people and the more people there are, the more active an economy, says Terry Carr, vice-president and managing director, fixed income, at MFC Global Investment Management. He told a Morningstar Investment Conference session on 'The Search for Yield' that this is one reason why emerging markets' share of global GDP has grown from 21 per cent in 1995 to 26 per cent in 2007. Most global population growth is taking place in less developed countries as population growth in developed countries is basically flat-lined. The prospects of further economic growth in emerging markets is also promising because right now they have young populations. As their populations age and enter the labour force, activity in these economies should increase even more.
Only 40 per cent of active mutual funds in the Canadian Equity category were able to outperform the S&P/TSX Composite Index during the first quarter of 2010, says the Standard & Poor’s Index Versus Active Fund Scorecard (SPIVA) for Canada. Similar results were seen in the Canadian Small/Mid Cap Equity category of mutual funds when compared against the performance of the S&P/TSX Completion Index. In the first quarter of 2010, actively managed funds in the Canadian Equity category underperformed the S&P/TSX Composite Index when examining both equal- and asset-weighted returns. However, active funds fared better across some of the other fund categories. On both an equal- and asset-weighted basis, active funds outperformed their benchmarks in the categories of U.S. Equity and Canadian Focused Equity.
Interest In Infrastructure Growing
Interest in infrastructure from pension funds and other institutional investors is increasing, mainly due to the sector's potential to deliver long-term, predictable, often inflation-linked cash flows, and the ability to put large amounts of capital to work, says a bfinance survey. Its survey of large infrastructure investors found respondents expect either the same or higher returns from their infrastructure investments compared with three years ago, with 67 per cent now expecting returns of 10 to 15 per cent net of fees per annum. However, they are finding debt is more difficult to access than equity and that the broad definition of infrastructure – which can mean anything from investment in toll roads, regulated utilities, or social infrastructure to airports or greenfield renewable energy projects – can make it difficult for investors to understand the underlying risks they are actually exposed to.
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Wednesday, June 9, 2010
Performance May Give China Excuse
Weak performance in the eurozone is unlikely to drag down the U.S. or Chinese economies. However, Wilber L. Ross, chairman and CEO of WL Ross & Co. and chairman of Invesco Private Capital, told the Invesco Investment Forum that this may give China an excuse to maintain its currency peg. He said Europe is ‘so socialist’ that change will not come easily. Other problems are that taxes account for about 40 per cent of GDP and government spending accounts for about half of GDP which means increases in taxes or cutting government spending to control deficits becomes a challenge. As well, even with fiscal restraint, they will be forced to increase their deficit through 2013 and for years to come. However, he says they expect to make more distressed investments in the eurozone. However, this doesn’t include southern Europe where he says bankruptcy laws are labour friendly and not creditor friendly.
DC Members Need Default Strategies
Defined Contribution members risk dramatic fluctuations in retirement income unless they adopt default strategies that reduce the impact of market shocks, says an Organisation for Economic Co-operation and Development working paper. It says similar strategies should become the default for individuals who make no active investment choice. ‘Assessing Default Investment Strategies in Defined Contribution Pension Plans’ found strategies with low exposure to equities (less than 10 per cent) and those with high exposure to equities (more than 80 per cent) generally proved inefficient. However, lifecycle strategies that have constant exposure to risky assets during most of the accumulation period, switching to bonds in the last decade before retirement, produced adequate results, providing higher expected benefits for a given level of risk than other lifecycle strategies. The OECD paper also found lifecycle strategies perform better than fixed portfolio strategies when the contribution period is short, for example 20 years. Longer contribution periods reduce the benefit impact of lifecycle strategies.
Growth Opportunity Well-underpinned
The long-term growth opportunity in emerging markets is well-underpinned by demographics, says Douglas Gooding, head of client portfolio management for Invesco Global Strategies. Speaking at the Invesco Investment Forum, he said investors should view these markets differently now because they are no longer driven by ripple effects from the U.S. economy or commodities. In fact, the recent financial crisis was a good test for the resilience of emerging markets economies. The share of total consumption by emerging markets consumers has been rising steadily in recent years and personal consumption exceeded spending in the U.S. for the first time in 2008. As well, their banks are in outstanding shape and do not have to take on risk to ensure growth.
Hedge funds lost an average of 2.7 per cent through May 27, says the ‘HFRX Global Hedge Fund’ index, as the sovereign debt crisis in Europe triggered declines in stocks, the euro, and commodities and the gap in yields between U.S. short-term and long-term debt narrowed. The drop marked the biggest decline since November 2008 when hedge funds lost three per cent in the wake of Lehman Brothers Holdings Inc.’s bankruptcy two months earlier.
Senior Secured Loans Sweet Spot
Senior secured loans may be the sweet spot for fixed income beta allocation, says Jan Friedli, head of global (ex-U.S.) investment grade fixed income for Invesco Fixed Income. He told the Invesco Investment Forum that there are a number of reasons for this. Global government short/long rates are at historic lows which means investors have to take on more duration risk to capture higher yield. As well, deleveraging could impart some limits on increases in rates. With credit spreads much tighter, but not at all time tights, and the backdrop of extended low short rates/deleveraging supporting tighter spreads, he says this makes senior secured loans – such as corporate debt and short-term floating rate instruments – attractive. Plus, if rates do rise this will add to their returns.
Canadians Have More Confidence
Canadian CFA charterholders have more confidence and trust in the effectiveness of their own financial system and capital markets than other countries feel about their own markets, says the CFA Institute’s ‘2010 Canadian FMI Index’ report. It gauges CFA charterholders’ perceptions of the state of ethics and integrity in six different countries around the world and how these perceptions change over time. Those in Canada have steadily become more assured of the soundness of their system after watching other markets suffer far worse damages as a result of the global financial crisis. As well, perceptions of the ethical behavior of financial professionals improved over last year. However, the scores reflect disparity among the categories with pension fund managers receiving the highest rating and hedge fund managers receiving the lowest.
Evan McCordick is managing director of Cordiant. He will oversee investor relations and, as a member of the management committee, he will be involved in the screening of investments and the development and implementation of corporate strategy. Previously, he was a founding partner and managing director of IBIS Capital Management, a captive financial advisory group to a large multi-sector private conglomerate with investments in insurance, banking, energy, and real estate.
Kathy Seliga is vice-president, actuarial, responsible for the strategic direction of the actuarial aspects of the group benefits business at Sun Life Financial. She has more than 15 years at the company. Greg Davis is vice-president, finance, for group benefits which he joined in 2007. He is responsible for the accounting and financial aspects of the group benefits business.
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Tuesday, June 8, 2010
European Funds Diversify Into Riskier Assets
European pension funds are continuing to diversify into riskier assets, says bfinance. Its survey found interest in private markets is likely to increase in the short to mid-term and fixed income will also benefit as investors decrease their allocation to equities over the short to medium term. About 16 per cent of respondents say they will increase their allocation to infrastructure in the following six months and, over three years, 30 per cent of investors intend to increase their infrastructure allocation. Property and private equity are also popular over the short and medium term with 20 per cent and 10 per cent of investors aiming to boost allocations respectively over the next six months. In contrast, investors are planning a 17 per cent and 37 per cent decrease in allocating to equities over the next six months and three years respectively.
Teachers’ Group Acquiring SonicWALL
An investor group including the Ontario Teachers' Pension Plan (OTPP) is set to acquire IT solutions provider SonicWALL. The buyers are led by U.S. private equity firm Thoma Bravo. Teacher’s is participating with its private investment arm Teachers' Private Capital. This is the latest in a series of private equity investments made by Teachers’. In April, it acquired U.S. aluminum container manufacturer Exal Group, while in March it bought UK's national lottery operator Camelot.
Commissions paid by institutional investors to brokers on trades of U.S. equities are falling far short of projections to this point in 2010, says Greenwich Associates' ‘U.S. Equity Investors Study.’ The amount of brokerage commissions paid by U.S. institutions on trades of domestic equities decreased 13 per cent to an estimated $12.1 billion from the first quarter in 2009 to the same period in 2010. Contributing to the decline in average commission rates over the past 12 months has been the continued drive among U.S. institutions to shift trading volume to electronic systems. U.S. institutions executed 37 per cent of domestic equity trading volume through electronic single-stock trades in 2009/2010, up from 36 per cent the prior year. Among larger commission accounts, the proportion of trading executed electronically reached 44 per cent of volume.
Funds Need Protection Against Risk
Doubts over whether BP will pay out the next quarterly dividend have underlined the need for pension funds to protect against future financial risk, says FairPensions, a group lobbying for UK pension funds and managers to adopt responsible investment practices. Duncan Exley, director of campaigns at FairPensions, says its “refusal to confirm its ability to pay its next quarterly dividend, and the implications this will have for UK pension funds, highlight the potential for this crisis to damage UK savings and the need for investors to put in place measures to guard against such risks in the future." Its research on pension funds and fund managers shows recognition of the financial risks of 'extra-financial issues' was usually unmatched by practice on the part of pension funds and their fund managers. "From oil leaks to irresponsible lending, environmental, social, and corporate governance issues have a history of precipitating crises that damage our economy and our investments. We urge investors to put in place measures to ensure these issues are monitored and managed so the next crisis is less likely to affect us all," he says.
Nomura Launches Fixes Income Fund
Nomura has launched a fixed income fund offering institutional investors absolute returns through interest rate markets. IRIS is an interest rate positioning index which adjusts in changing market and economic conditions using macroeconomic and quantitative indicators. The index implements long or short positions across the interest rate curves of six markets using liquid fixed income instruments – money-markets futures, bond futures and interest rate swaps – through more than 40 trading positions.
Howard Moves To Ogilvy Renault
Evan Howard is a partner in the employment and labour group at Ogilvy Renault. He has almost 15 years of experience in all aspects of pensions and benefits law. He also regularly advises on the pension and benefits aspects of domestic and international corporate transactions, mergers, financings, insolvencies, and restructurings. He was recognized by ‘The Best Lawyers in Canada 2010: Employee Benefits Law.’
SRI Leaders Discuss Innovation
Leaders from the Canadian socially responsible investment industry will explore how innovation is changing the face of socially responsible investment (SRI) and how SRI is revolutionizing conventional investment at this year’s ‘Canadian Responsible Investment Conference.’ Organized by the Social Investment Organization, it features more than 30 speakers from across Canada and around the world talking about cleantech, oilsands issues, public attitudes, advisor/client relationships, divestment versus engagement, and innovations in environmental-social-governance (ESG) research and investment management. This year's theme is ‘Responsible investment: Building sustainable capital through innovation.’ It takes place June 14 to 16 in Toronto, ON. For more information, visit www.socialinvestment.ca
Summit Looks At Benefits Research
The ‘Benefits Summit 2010’ will capitalize on three 2010 Conference Board of Canada research reports as the foundation for discussion. The reports look at benchmarking and cost control – getting the best possible value from benefit spending; health and wellness – ensuring your competitors don’t offer more to employees; and disability and sick leave management – producing the best possible results for your employees and your organization. It takes place October 27 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/conf/10-0189/default.aspx
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Monday, June 7, 2010
Manitoba is now permitting a one-time transfer of funds from pension plans, says the Hewitt ‘Monitor.’ A prescribed transfer for this purpose is a once in a lifetime withdrawal by an individual age 55 or older of up to 50 per cent of the balance in a LIF, LRIF, and, if permitted, pension plan to a prescribed RRIF that is not locked-in.
Breakthrough Made In Tax Treatment
Unequal tax treatment of foreign pension funds in the EU took a step closer to being eradicated. ABP, a civil service pension fund, says it has made a “breakthrough” with the Norwegian government which returned a dividend tax paid by ABP. ABP has now claimed €60m in dividend tax payments from several countries, including Sweden, Denmark, Germany, Austria, France, Italy, Spain, and Portugal. As well, the European Commission (EC) is taking Germany to the European Court of Justice (ECJ) over its existing dividend tax legislation, which it says discriminates against overseas pension funds.
Currency Market Relationships Examined
The complex relationships driving the currency markets today and in the future as well as some of the tools that can be used to manage currency risk and to potentially generate excess returns will be examined at a plenary session at the 2010 ACPM National Conference. In ‘Your Investments Have Currency,’ Louis-Vincent Gave, GaveKal (Hong Kong), and Michel Malo, University of Toronto Asset Management, will provide information to help plan sponsors as they write their investment policies and formulate investment strategies. It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/
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Friday, June 4, 2010
Due Diligence Focuses On Fraud
Too much diligence into hedge funds is now focused on detecting fraud, says Christopher Addy, president and chief executive officer at Castle Hall Alternatives. Speaking at the CIBC Mellon Presentation Series, ‘Hedge fund investing today,’ he said since the Madoff affair, most due diligence is aimed at preventing funds from investing in another one of these schemes. However, frauds happen in other areas of financial markets and will likely happen again, he said. The best measure to avoid it is by carrying out proper due diligence into, for example, the quality of the managers.
Canadian organizations generally do not track employee absenteeism well, even though rates – already high by international standards – are on the rise, says a Conference Board of Canada’s survey of employer-sponsored benefits, ‘Beyond Benefits II: Disability Plans and Absence Management in Canadian Workplaces.’ “Absenteeism rates reached their highest point in several years in 2008/09. The implications of absenteeism for organizations are significant – both in terms of lost wages and productivity, and in the potential to substantially reduce costs through better management of their programs,” says Karla Thorpe, associate director, compensation and industrial relations. The first step to controlling absenteeism is to measure rates and direct costs. Organizations have traditionally focused on watching their long-term disability programs more closely than sick leave or short-term disability programs. Yet, the survey found that an average of nine per cent of full-time employees were on short-term disability in 2008. The direct cost of absenteeism averaged 2.6 per cent of payroll in these organizations in 2008.
The Ontario Teachers' Pension Plan will vote against Magna's proposed transaction to eliminate the company's multiple-voting shares. Teachers' believes Magna International's proposal to eliminate the company's dual-class share structure is fundamentally unfair to the company's subordinate voting shareholders. It also raises larger governance questions as to whether the board of directors has fulfilled its duty, as well as the purpose and benefits to shareholders of dual-class share structures. "We support the principle of one share, one vote; however, we will vote against the proposed transaction and we won't support dual share collapses at any company that look like this," says Wayne Kozun, senior vice-president, public equities.
Journal Examines Tomorrow’s Fund
‘Building Tomorrow’s Pension Fund’ is the focus of the spring 2010 issue of the Rotman International Journal of Pension Management. It examines both the need for better performing pension funds and the key features that define tomorrow’s pension fund with 10 articles from leading pension practitioners and academics. "Conversations are growing about the features of tomorrow’s pension fund and the need for better performing funds," says Keith Ambachtsheer, director of Rotman ICPM and an adjunct professor of finance at the Rotman School. “Turning retirement savings into pension payments should create value and not destroy it. Many large pension funds do not operate this way and ultimately, millions of workers and retirees have been affected.”
Peister Heads Green Shield Board
Sherry Peister is chair of the board of Directors of Green Shield Canada. She became a member of the board in 1997 and has served as vice-chair since 2007. She is a consultant pharmacist involved in pharmacy practice enhancement and has an active practice in an independent community pharmacy.
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Thursday, June 3, 2010
Government Ending Prisoner Pensions
The federal government has introduce legislation that will cut Old Age Security and Income Supplement payments to prisoners above the age of 65. The issue of prisoner pensions was raised when it was revealed last month that convicted serial killer Clifford Olson, 70, was receiving $1,100 a month in old age benefits. If passed, the changes would affect 400 inmates in federal prisons and 600 more in provincial system.
BMO Group Retirement Services (BMO GRS) has enhanced its LifeGARD program with a suite of new employee benefits – Group Banking services – provided across Canada through the Bank of Montreal’s branch banking network. Now, plan sponsors can offer both group retirement savings programs and a line up of banking services and personal loans with the advantage of group buying power. As part of this program, plan members will enjoy important savings on their every day banking, personal loans, and personal savings as an added layer of benefits beyond the group retirement savings program.
All the fund indices that track either equity or balanced fund categories posted losses in May, as the month marked the return of volatility levels not seen in financial markets since the depths of the credit crisis in early 2009, says Morningstar Canada’s preliminary performance data. With the eurozone remaining a major source of global instability, other equity markets also retrenched in the month, it says. “Joint efforts by European finance ministers, the European Central Bank, and International Monetary Fund served to shore up financial aid and help stave off the risks of sovereign default,” says Neal Brandon, fund analyst. “However, investors remained wary that the focus on subsequent austerity measures would largely subdue any prospects for regional growth.”
The significant volatility in the equity and bond markets since the beginning of May has had a detrimental impact on the accounting positions of Canadian Defined Benefit positions, says Hewitt Associates. The aggregate funded ratio of Canadian DB pension plans decreased from 99 per cent at the beginning of May to a low of 92 per cent at close of business on May 20 before recovering somewhat to 94 per cent by May 28. This increased volatility comes at a time when plan sponsors are focusing on the final stages of the transition to International Financial Reporting Standards, which will mean the funding position of the plan (and the inherent volatility) will sit directly on the sponsor’s balance sheet.
Sarona Asset Management has become a signatory to the United Nations Principles for Responsible Investment (UN-PRI) and joined the Investors Council of the Global Impact Investment Network (GIIN). Both the UN-PRI and the GIIN are organizations working to bring social and environmental standards to the investment industry. The UN-PRI, set in motion barely five years ago by the Secretary-General of the United Nations, now has more than 750 signatories, each of which is committed to following ever more rigorous standards in caring for the environment, benefiting people, and governing their business with integrity and transparency. The GIIN seeks to give structure to the ever growing impact investment industry. Sarona has been an impact investment firm since its inception almost 60 years ago.
Vikram Aggarwal is senior associate in the investment consulting research team at bfinance. He will be responsible for conducting and overseeing searches in real estate and infrastructure. He previously worked in the real estate and infrastructure private equity arm of HSBC.
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Wednesday, June 2, 2010
The Investment Funds Institute of Canada (IFIC) has highlighted pension reform and financial literacy as key concerns in its submission to the Financial Services Commission of Ontario regarding FSCO’s proposed ‘2010 Statement of Priorities.’ FSCO identified pension regulatory services as a key focus area and noted its support for the development of harmonized regulatory solutions. IFIC encourages FSCO to work with the Ontario government to continue to implement improvements that ease the regulatory burden for retirement savings vehicles and encourage their use. IFIC also looks forward to receiving information related to FSCO’s proposed pension reforms and welcomes the opportunity to participate in any related consultations. While FSCO did not make specific reference to financial literacy in its proposed statement, IFIC believes that raising the level of financial literacy of the population would be a big step towards meeting FSCO’s mandate, which is to provide regulatory services that protect the public interest and enhance public confidence in the regulated sectors.
More Health And Wellness Support Offered
Equitable Life of Canada is offering employers the ability to further support employee health and wellness. By providing access to a range of services, it hopes to address employers' needs to manage the cost and impact of workplace absenteeism. The services include a confidential and anonymous interactive, web-based mental healthcare system designed to assist family physicians and patients in the early diagnosis, treatment, and follow-up of common and potentially debilitating mental health issues; a cancer assistance program that helps reduce the physical and emotional impact that cancer places on employees and their families by ensuring medical best practices are utilized; and a full EAP program with work-life and wellness services and access to support from professional counsellors via the telephone, face-to-face sessions and online.
Hewitt Forms Pension Reform Team
Hewitt Associates has formed a Canadian pension reform team. This multi-disciplinary group of specialists has been actively involved in the pension reform process and has developed expertise that goes beyond legislative compliance to deal with upcoming changes to both federal and provincial pension legislation in a more holistic manner. The team is formed from its retirement, legal, research, communication, and administration consultants from across the country. It has been involved in reviewing and providing feedback to various pension reform task forces as their reports have been released.
Workers Lack Interest In Pensions
Fewer than a quarter of European workers are interested in their pension benefits, says the Aon Consulting European Employee Benefits Benchmark. Its survey of workers from 10 countries about pension, benefits, and general retirement issues found Britain, France, and the Netherlands are failing to foster a sufficient long-term retirement savings, with only 12 per cent of people taking an active interest in their pensions. This compares to 37 per cent in Germany, the highest in Europe. It found 16 per cent of people do not have a pension plan in place because they can't afford to make savings, 11 per cent because they never got around to it, and five per cent claim they have actively made the decision to rely on state benefits.
Swap Elimination Almost ‘Nonsensical’
A provision in a U.S. Senate bill that some fear would eliminate the use of swaps and other derivatives by Defined Benefit and Defined Contribution plans “seems just short of nonsensical,” says a Greenwich Associates report. ‘Derivatives Reform: Reducing Systemic Risk, but at What Cost?’ says the key problem with the legislative provision in the Senate’s financial regulation overhaul is that it would require derivatives brokers to act as fiduciaries in transactions with pension funds and other retirement plans. “By definition, the two sides of a swap transaction have conflicting interests,” says the report. While increased transparency and tough disclosure rules about potential conflicts of interests make sense as methods of protecting market participants, the fiduciary requirement as it currently exists in the bill seems just short of nonsensical, the report says.
‘Defined Ambition’ Concept Proposed
A ‘defined ambition’ concept should replace Defined Benefit pension plan arrangements, says Jan Tamerus, actuary director at PGGM, the provider of the healthcare scheme PFZW. He says an approach that aims at the accrual of inflation-proof pension rights, while still including risks, should be introduced as part of the necessary review of the pension contract. This should replace DB because the latter was introduced when a large body of mainly young employees contributed to the pensions of a smaller number of older colleagues. Pension funds should use forecasted longevity, structurally decreased returns, and interest, as well as moving markets, as steering instruments for contributions, indexation, and benefits. If the real cover ratio of pension funds has been less than 70 per cent during two years, pension funds should start discounting pension rights, he says. No indexation should be granted if the real cover ratio has been less than 90 per cent during five years or less than 80 per cent during three years. If these rules had been applied during the past years, it would not have been necessary for pension funds to make recovery plans, he says.
Northern Trust Enhances Monitor
Northern Trust has enhanced its ‘Hedge Fund Monitor’ solution with the addition of a compliance module designed to support the unique demands of UCITS funds-of-hedge funds. UCITS – Undertakings for Collective Investment in Transferable Securities – are a set of European Union directives that allow collective investment schemes to operate throughout the European Union on the basis of a single authorization from one member state. UCITS funds must operate within a strict regulatory framework that imposes standards on liquidity, concentration risk, transparency, and other attributes. This enhancement helps fund managers running UCITS funds-of-hedge funds to monitor their compliance.
Senior executives examine how to protect their portfolios from future inflation erosion at the Investment Management Institute’s ‘Global Markets Forum.’ Topics will include analyzing risks embedded in global portfolios, global market opportunities through 2015, and infrastructure investing options. It takes place July 11 to July 13 in Quebec City, QC. For more information, visit http://www.investmentmanagementinstitute.com/
Microfinance Investing Discussed
Microfinance investing will be the focus of an ‘IAMFI Investor Network’ meeting, co-hosted by the Social Investment Organization and Sarona Fund. The meeting a forum in which prospective investors may attend presentations by fund managers that offer impact investment opportunities in micro-, small- and medium-enterprise funds. It takes place June 14 in Toronto, ON, prior to the opening of the ‘Canadian Responsible Investment Conference 2010.’ For more information, visit http://www.iamfi.com/events.html or contact Kristina Lopez, IAMFI program associate, at klopez@iamfi.com.
AIMA Canada will recognize the launch of its Quebec committee with a reception. The group of Quebec-based alternative investment industry professionals will focus on promoting growth, education, and sound practices in the province of Quebec. It takes place June 14 in Montreal, QC. For more information, http://aima-canada.org/
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Tuesday, June 1, 2010
The insurance industry is concerned that while enhanced funding of ELHT would increase benefit security, it might mislead workers and retirees into thinking such benefits are insured, says ‘Eckler Group News.’ It says the deadline for comments on the federal proposal to amend the Income Tax Act in order to create ELHTs was April 30 and many comments focused on the ELHT tax efficiency, the greater security of fully-insured benefits, and the risks of ASO plans. The proposed legislation provides for tax deductibility of employer annual contributions to an ELHT up to the amount actually paid out by the ELHT as benefits and expenses in that year. Several respondents recommended providing such deductions to contributions based on the actuarial cost of future benefit obligations, in order to assist employers with the actual prefunding of benefits paid over longer periods. This would be particularly important for long-term disability benefits provided under administrative-services-only (ASO) plans through an ELHT.
Pensions are looming larger on the risk radar screens of UK employers, says an Aon Consulting survey. Final salary pensions are now in second place on the list of corporate risks, ranking behind only the market environment as the biggest risk facing employers. More than four out of 10 employers consider pensions to be a “very high” or “high” risk, a significant rise since the 2008 poll when only a quarter said pensions were a key business risk.
Sloan Keynote Speaker At Conference
Dr. John Sloan, of the University of British Columbia, will examine the interaction between the elderly population and the medical system at the 31st annual Retirement Planning Association of Canada (RPAC) conference. Other speakers include securities lawyer Glorianne Stromberg, actuary Patrick Longhurst, and mutual fund veteran Tom Bradley who will contribute their insights on pension and investment issues. It takes place October 1 to 3 in Toronto, ON. For more information, visit www.retirementplanners.ca
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