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July 27, 2016

Misperception Holds Back Sponsors

A potential misperception about participant support for automatic features and strategies may be holding plan sponsors back from strengthening their defined contribution plans, says a J.P. Morgan Asset Management white paper. ‘Guiding Participants from Intent to Action: 2016 Defined Contribution Plan Participant Survey Findings’ found most are still uncertain that a financially secure retirement awaits them because more immediate financial demands interfere with their ability to save for the future; many don't have a clear understanding of how to set a retirement savings goal; and most are not confident in their ability to make investment decisions. However, focusing on closing the knowledge gap is not enough. When it comes to saving and investing for retirement, another gap exists ‒ a disconnect between participant intent and action. Catherine Peterson, managing director and global head of insights programs at J.P. Morgan Asset Management, says “the most effective way for plan sponsors to help put employees on the path to a more secure retirement is to proactively place them on that path. This can be done through the use of automatic features and strategies such as automatic enrollment, automatic contribution escalation, and re-enrollment, in conjunction with a qualified default investment alternatives (QDIA), such as a target date fund.” Its research shows most participants appear to support plan features and strategies designed to offer a disciplined approach to saving, simplified investment choices, and improved asset allocation.

Fiduciary Risks Left Unaddressed

As defined contribution plan sponsors strive to improve fund lineups and participant outcomes, they are not necessarily addressing all current and future fiduciary risks to the organization, says SEI's institutional group. In ‘The Changing Landscape Requires a New Approach: A Discretionary Model for Managing Defined Contribution Plan Investments,’ it outlines how recent trends have significantly impacted the management of DC plans and suggests sponsors need to implement a better process to address the risks they face as plan fiduciaries. Factors like investment complexity, increased fee pressure, litigation, and the increased reliance on DC plans as the primary retirement savings vehicle place tremendous pressure on plan sponsors. As these pressures increase, simply choosing brand-name funds, passively managed funds, or funds provided by recordkeepers are no longer automatically safe choices.

Hedge Fund Assets Increase

Aggregate hedge fund assets increased 1.5 per cent to $2.898 trillion in the three months ended June 30, says a Hedge Fund Research analysis. Growth of total hedge fund industry assets, including hedge funds-of-funds assets, was essentially flat at 0.4 per cent in the first half of the year. Net outflows slowed in the second quarter to $8.2 billion, compared to the net $15.1 billion in outflows that occurred in the first quarter. While net asset flow was negative in the quarter for all major hedge fund strategies, investment gains were positive. Performance gains by the industry as a whole were $50.2 billion.

Gap Widens When Private Equity Used

The gap between top performing endowment portfolios and the median has been wide of late and a key indicator of better performance is a 15 per cent or greater allocation to private investments like venture capital, private equity, and distressed assets. A Cambridge Associates report, ‘The 15 per cent Frontier,’ finds that endowment portfolios with more than 15 per cent allocated to private investments have outperformed their peers consistently and for decades. For example, for the 2015 fiscal year, ended June 30, 2015, the MSCI World Index, which tracks the performances of large- and mid-cap companies across 23 developed countries, returned minus 0.32 per cent. For the same period, the median return of the endowment universe was 1.3 per cent. And if one looked only at endowments with 15 per cent or more of their assets in private investments, the median return was much better, 3.6 per cent, for fiscal year 2015. "The performance impact of substantial allocation to private investments is striking. And it's not just a recent, or occasional, phenomenon," says Philip Walton, president of Cambridge Associates. "It has been true with significant consistency over the long term, based on data we've collected since the 1970s."

White Moves To Canada Post

Angela White (CEBS) is manager, pension policy, at Canada Post. Most recently, she was manager, pension services, at the HRM Pension Plan. She previously held positions with Morneau Shepell and Mercer.

Outsourced CIO Examined

Andrew C. Smith, president and managing executive, asset management, Canada, at Northern Trust Asset Management Canada, and Joseph Gelly, managing director and head of Canada institutional at Russell Investments Canada Limited, will examine ‘The Outsourced CIO’ and the latest trends towards its customization at a Benefits and Pensions Monitor Meetings & Events session. It takes place October 11 in Toronto, ON. For information, visit

July 26, 2016

GST/HST Pension Rules Examined

Canada’s department of finance has released draft legislative and regulatory proposals relating to the Goods and Services Tax/Harmonized Sales Tax (GST/HST) for public consultation. These proposals include amendments to revise the GST/HST rules applicable to pension plans to ensure that they apply fairly and effectively to pension plans that use master trusts or master corporations and improve the clarity and effectiveness of the GST/HST rules applicable to certain pension plans and financial institutions by introducing clarifications and technical improvements to those rules. The consultation paper is at GST/HST. Comments can be sent to or the Tax Policy Branch, Department of Finance, 90 Elgin St., Ottawa, ON, K1A 0G5. Canadians are invited to provide comments on these proposals by August 31.

Argument Supports Prevention

Knowing that people in the 50-to-60 age group are shown to have the highest percentage of claims, there is a strong argument to be made for prevention, says the TELUS Health ‘2015 Drug Data Trends and National Benchmarks’ report. Well-designed wellness programs can help establish healthier behaviours within a workforce in advance of reaching their 50s. In addition, plan sponsors can find a sustainable win-win by starting to take advantage of many existing strategies that can reduce costs without having a material impact on their plan members’ experience. Mandatory generic substitution is just one example that can offer significant savings. Yet, surprisingly, even though plan optimizing strategies such as this are accessible to most, a full 70 per cent of plan sponsors made no changes to their plans and 33 per cent have no strategy for high-cost drugs. By maximizing the use of traditional drug plan management tools, as well as implementing innovative programs that manage acquisition costs and build tighter controls for high-cost drugs, plan sponsors can continue to deliver high-value, competitive plans that can be sustained, it says.

Allocation Reflects Circumstances

Asset allocation reflects the circumstances of each pension plan. That is one of six themes that emerged at Sun Life Investment Management’s ‘National Investment Roundtable.’ Surprisingly, however, there is a lack of differentiation between pension plans, despite the differences in funded status. This may be because the allocation for most pension plans focused on something close to a 50/50 split between defensive (or liability-matching) assets and growth-seeking assets. Since most pension plans look for both defense and growth, both elements play a significant role in the allocation. It’s in departures from 50/50 that pension plan circumstances and plan sponsor circumstances expressed themselves. Other themes were the challenges of today’s economic and investment environment; the importance of risk awareness and risk management; key areas of focus in a tough environment; the growing concern in defined contribution plans over decumulation; and how endowments – less constrained than defined benefit plans ‒ are responding to current challenges. The roundtable is at Investment Roundtable

Non-recordkeeper Approach Gains Popularity

Non-recordkeeper or off-platform target date funds (TDFs) continue to grow in popularity among U.S. plan sponsors, says SEI's institutional group. The second of its three-part study looking at the management of defined contribution retirement plans in the United States, it found while 90 per cent of survey respondents said they currently offer TDFs as an investment option in their plan, the use of recordkeeper TDFs and non-recordkeeper TDFs is essentially split evenly. Those plans with over $1 billion in assets are leading the way with 64 per cent offering non-recordkeeper TDFs. "The notion that nearly as many plan sponsors are using off-platform TDFs as are using recordkeeper TDFs supports a broader trend around the decoupling of asset management from recordkeeping," says Joel Lieb, director of the defined contribution advisory team. "In the past few years, regulatory agencies, such as the department of labour, have issued guidance to plan sponsors to evaluate non-recordkeeper TDFs as a potentially better option and it looks like that shift is well underway. We would expect that trend to continue as more plan sponsors build DC plan line-ups that offer traditional institutional investment options."

Plans Acquire Cubico

The Public Sector Pension Investment Board (PSP Investments) and Ontario Teachers' Pension Plan will acquire, in equal proportions, Banco Santander, S.A.'s indirect interest in global renewable energy and water infrastructure company Cubico Sustainable Investments Limited. As a result, PSP Investments and Ontario Teachers' will remain the sole ultimate shareholders of Cubico, on a 50-50 basis. Both parties are fully committed to supporting Cubico in achieving its investment mandate. Cubico was established in May 2015 and its initial portfolio included 18 wind, solar, and water infrastructure assets. Its portfolio now comprises 22 assets in operation, construction, or under development across eight countries (Brazil, Italy, Ireland, Mexico, Portugal, Spain, the United Kingdom, and Uruguay).

RioCan Buys CPPIB Interest

RioCan Real Estate Investment Trust will acquire the Canada Pension Plan Investment Board’s interest in four properties that are currently co-owned. It will purchase the CPPIB’s 50 per cent interest at an aggregate purchase price of $352 million. As a result of the purchase, RioCan will own 100 per cent of these four assets. The properties are in Surrey, BC; Edmonton and Calgary, AB; and Oakville, ON.

Jiwani Joins Eckler

Zaheed Jiwani (CFA) is a senior consultant at Eckler Ltd. For the past five years, he has been senior vice-president, client strategy, at Greystone Managed Investments Inc. Prior to that, he was with Aon Hewitt, Manulife Financial, and Mercer Investment Consulting.

Panel Looks At Global Fixed Income

Carlo DiLalla, vice-president and senior client portfolio manager, fixed income, at CIBC Asset Management; Kamyar Hazaveh, vice-president, portfolio management, and a portfolio manager with Signature Global Asset Management; and Scott Colbourne,co-chief investment officer and senior portfolio manager at Sprott Asset Management LP; will explore 'Global Fixed Income' at aBenefits and Pensions Monitor Meetings & Events session. They will discuss how Canadian plans can enter this space at a time of the acceleration of globalization and low interest rates. It takes place September 14 in Toronto, ON. For information, visit Global Fixed Income

July 25, 2016

SERP Appeal Dismissed

The Ontario Court of Appeal has dismissed an appeal over SERP benefits and litigation fees, says an Aon Hewitt ‘Radar.’ In ‘Groskopf v. Shoppers Drug Mart Inc.,’ two former employees sought to receive benefits under a supplementary pension plan (SERP) and to have the costs of their litigation paid out of the plan fund. The two employees had been terminated and were included in the partial wind up of an underlying registered pension plan. They were entitled to a number of benefits and, as a result, the administrator of the SERP took the position that the increase in benefits under the registered pension plan, as a result of grow-in rights, off-set the benefits payable under the SERP. A lower court determined that it was clear that the SERP was intended to provide a top up of benefits available under the registered pension plans and that the formula in the SERP was clear and was not ambiguous. It determined that the former employees were not entitled to receive benefits under the SERP and that they were not entitled to costs.

Employers Control Benefit Costs

Nearly two-thirds (65 per cent) of small and mid-sized U.S. employers believe they are doing all they can to control rising health benefits costs, says a survey by Hub International Limited. It shows 66 per cent are experiencing return on investment (ROI) on their health and performance initiatives, with 35 per cent reporting improved productivity and 34 per cent citing improved morale. Seventy per cent report that their strategies are controlling benefit costs. More than half (51 per cent) have implemented voluntary benefits as a cost containment strategy. However, HUB notes many are missing opportunities to leverage proven cost management strategies. Only 31 per cent are using pharmacy carve-out strategies that HUB says could save 20 per cent. Only 18 per cent are using self-funding, which could save nine per cent, and only 16 per cent are using narrow networks, which could save 17 per cent.

Smart Beta Claims Present Risks

Performance drivers and strategy design choices are among the mistaken claims about smart beta that present risks for investors, says research from the EDHEC Risk Institute. The performance driver claims include beliefs that smart beta generates alpha and anything beats cap-weighted market indices. It says investability hurdles claims include liquidity concerns that smart beta requires positions to be held in highly illiquid stocks and that smart beta necessarily leads to high turnover. And strategy design choices state a good factor index should provide a strong tilt to the desired factor, requires a sophisticated scoring approach, and needs to isolate exposure to the target factor. The research suggests that, more often than not, superficially convincing claims about smart beta strategies stand on shaky foundations. Challenging conventional wisdom by reviewing the extant academic literature and empirical evidence would lead to more balanced conclusions and a more nuanced understanding of the benefits and risks of smart beta strategies.

Brands Increase Returns

Investors would have seen a 97 per cent return between 2007 and 2015 had they invested in an index related to the brand value of companies, say Solactive, an index provider, and BrandFinance, a brand consultant and valuation specialist. This compares to the average return of 49 per cent for index funds linked to the S&P 500. They say there is a strong link between brand value and stock market performance due to a link between a company’s brand, its pricing premium, customer loyalty, and market share. As well, intangible assets – such as brand – account for 47 per cent of a company’s total global enterprise value.

Jobs, Politics Weigh On Investors

Concerns about job growth, political uncertainty, and market volatility weighed on investment managers even as positive sentiment continued to rise, says a Northern Trust Asset Management quarterly survey. It also found more managers viewed U.S. equities as overvalued and were holding above-normal levels of cash in portfolios. “The outlook on U.S economic growth, job growth, and corporate profits is still largely positive,” says Christopher Vella, chief investment officer for multi-manager solutions at Northern Trust. “However, on the margin, managers are less favourable on a number of economic and market indicators than last quarter.” On the positive side, 42 per cent of managers believe U.S. gross domestic product (GDP) growth will accelerate over the next six months, an increase from 37 per cent in the first quarter survey. Nearly 60 per cent of managers expect job growth to remain stable over the next six months. A third of managers surveyed expect interest rates to increase over the next three months, down from 40 per cent the prior quarter. Two-thirds of managers (68 per cent), expect that the Federal Reserve will raise rates only once from June through year-end.

Reviews No Longer Limited To Financial Metrics

Investors no longer limit the review of their assets to financial metrics such as revenue, profitability, or valuation, says research by Cerulli Associates. Instead, it says strong environmental, social, and governance (ESG) practices can correlate with astute business procedures and positive financial performance. "A growing percentage of asset managers proactively consider ESG factors in conjunction with financial analysis to identify risks and opportunity when investing in companies and evaluating their business practices," says Michele Giuditta, associate director at Cerulli. "Although many firms have adopted ESG principles, determining how to implement them remains a work in progress." It also shows institutional investors are taking ESG considerations seriously and making hiring decisions based on asset managers' and consultants' ESG resources and capabilities.

Martin Gets Top Rating

Martin Currie has received the highest possible award ratings in two key categories from the PRI, a world leading proponent of responsible investment. In its latest assessment, the PRI has awarded Martin Currie an ‘A+’ rating for its overall approach to responsible investment in the category of strategy and governance. It also received a further ‘A+’ rating for its integration of responsible investment methods in the PRI’s incorporation category and an ‘A’ in the active ownership category. A signatory to the PRI since 2009, Martin Currie has committed to reporting on its responsible investing activities each year. In the strategy and governance category, it was recognized for its overall approach to responsible investment; its policies, objectives, and targets; the resources the company allocates to responsible investment; and the collaboration approach taken to responsible investment and public policy-related issues.

Caisse Finances Wind Farm

The Caisse de dépôt et placement du Québec has provided $59.5-million term-loan financing in the New Richmond wind farm in Gaspésie, QC, operated by TransAlta Renewables Inc. The wind farm has a capacity of 67.8 megawatts generated by 33 wind turbines. In operation since March 2013, it is located in three different municipalities on the Gaspésie Peninsula—New Richmond, Saint-Alphonse, and Caplan. The output is sold to Hydro-Québec under a 20-year power purchase agreement.

ETFs Solidify Presence

On the heels of a record-setting year in 2015, the Canadian ETF segment continued to further solidify its presence across the Canadian investment fund landscape in 2016, says the Canadian ETF Association’s ‘Q2 Commentary.’ With just over $5.1 billion in second-quarter net creations, Canadian-listed ETFs generated net flows of $10.7 billion in the first half of the year, the highest six-month total on record. ETF assets also reached a new record high of nearly $103 billion at the end of June. Over the 12-month period ending June 2016, assets posted by ETFs grew 21.6 per cent. Fifteen of the 16 sponsors of ETFs in Canada had positive flows during the first half of 2016.

Pharmacogenetics Examined

Karen Kesteris, of Telus Health, will look at the role of pharmacogenetics in a benefits plan at the ‘CPBI 2016 Western Regional Conference.’ Other sessions will featureSébastien McMahon, senior economist at iA Financial Group, who will provide a long-term view on interest rate and economic growth, andTom Ault and Glen Oikawa, of Aon Hewitt,who will discuss pension risk and retirement trends It takes place October 5 to 7 in Whistler, BC. For information, visit

July 22, 2016

Employers Concerned About Well-being

Canadian employers are increasingly concerned for their current employees’ financial well-being and are planning to take action to help them retire in a timely manner, says a survey by Willis Towers Watson. Its ‘Canadian Retirement Plan Governance Survey’ found that a growing number of employers plan to give greater attention to benefit adequacy and retirement readiness over the next two years. Well over half (58 per cent) of those surveyed that provide a defined contribution plan as their only type of pension view their employees’ retirement benefit adequacy as a top risk today with regard to their retirement plans. To help address this risk, the vast majority of respondents in this analysis (81 per cent) expect to prioritize employee engagement and communication over the next two years. The Willis Towers Watson’s ‘DC Retirement Index’ shows that the funds required to retire at 66 at the beginning of 2014 would now be sufficient only if you retired at 69, an increase of three more working years.

PSP Investments Net Assets Grow

The Public Sector Pension Investment Board (PSP Investments) had net assets under management of $116.8 billion at the end of its 2016 fiscal year, compared to $112 billion at the end of the previous fiscal year. The total portfolio generated a return of one per cent, exceeding the policy benchmark return of 0.3 per cent, and created $900 million of value added. Over the past five fiscal years, it has recorded a compound annualized return of 8.9 per cent, compared to 7.3 per cent for the policy benchmark. "In a year characterized by high volatility and negative returns in most markets and by significant changes internally, our team has been able to provide a positive performance, both in absolute terms and against our policy benchmark return," says André Bourbonnais, its president and chief executive officer. "Most of our private market asset classes, and more particularly real estate, recorded strong returns during the year and surpassed their respective benchmarks.

Smart Beta Index Use Matures

Smart beta index use in Canada has matured to the point where large numbers of investors now consider it to be an important part of their toolkit, says Jackie O’Flanagan, head of Canada and regional director for FTSE Russell. “A clear sign of maturing smart beta use is that many Canadian investors are now looking beyond single factor indexes to multi-factor combinations,” she says. “Yet while many asset owners have increased their understanding and implementation of smart beta, continuing innovations in other asset classes and the multi-factor arena underscore the need for more information and education.” A FTSE Russell smart beta survey shows the breakdown in assets under management for survey respondents was 20 per cent for asset owners with less than $1 billion, 46 per cent between $1 billion and $10 billion, and 34 per cent with more than $10 billion in assets under management. Total assets under management for survey respondents this year is estimated at over $2 trillion.

Voting Season Most Contentious

This year’s voting season has been one of the “most contentious ever” with shareholders expressing heightened levels of discontent over executive pay, says BMO Global Asset Management. Its ‘Shareholder Spring II’ says the phrase ‘Shareholder Spring’ – first used in 2012 during a period of investor dissent at shareholder meetings – is reappearing as investors voted against executive pay resolutions at a succession of companies in Europe, particularly in the UK where shareholders have gained more influence over remuneration. This is a result of deteriorating corporate earnings, the shift in energy prices, and the continued sluggish economic outlook around the globe, it says. Pay is at the top of shareholder grievances, but it is not the sole issue. Director elections and high levels of support for shareholder proposals at underperforming companies have also been prevalent topics.

Median Return Steady

Diversified pooled fund managers posted a median return of 2.5 per cent before management fees, says the Morneau Shepell ‘Performance Universe of Pension Managers' Pooled Funds’ for the second quarter of 2016. The median year-to-date return was also 2.5 per cent. "Pension funds had a very good quarter despite market uncertainty and volatility stemming from the United Kingdom referendum on leaving the European Union," says Jean Bergeron, the partner responsible for its asset and risk management consulting team. "Canadian equities had high returns again, with the S&P TSX Index posting 5.1 per cent for the quarter and 9.84 per cent since the beginning of the year. For the most part, however, managers of Canadian equity portfolios were not able to match that performance." As well, the decline in interest rates helped bond managers to obtain a median yield of 2.84 per cent. Global and emerging markets equities also posted positive returns in the second quarter. On a solvency basis, despite good market advances, pension fund financial positions declined slightly. Since the start of the year, the solvency ratio of the average pension plan has fallen by 1.1 per cent.

Investors Stockpile Cash

Investors are stockpiling cash and exiting European and UK assets, says a Bank of America Merrill Lynch survey. The average cash balance among 160 global investors rose to 5.8 per cent in July. This was the highest level recorded by the survey since November 2001. Managers are also buying protection against stock market falls at a record rate, while taking up underweight positions in equities, especially in the Eurozone and the UK following the latter’s vote to leave the European Union (EU). Participants were net underweight to the Eurozone for the first time in three years after a collapse in sentiment. In June, allocators had a net overweight to the region of 26 per cent; by July this had fallen to a net four per cent underweight.

RPP Membership Grew

Membership in registered pension plans (RPPs) in Canada totaled 6.5 million in 2014, an increase of 72,000 or 1.2 per cent over 2013, says Statistics Canada. Membership in public sector pension plans rose 0.9 per cent to 3.2 million while the number of members in private sector plans increased 1.4 per cent to three million. The public sector accounted for 51.3 per cent of total RPP membership. The pension coverage rate, the proportion of all employees covered by an RPP, was 38.1 per cent in 2014, up slightly from 37.9 per cent the previous year. Just over 4.3 million employees were in defined benefit pension plans, down 0.5 per cent from 2013, and down 8.3 per cent from a high of 4.8 million in 1992. Defined benefit plans accounted for 70 per cent of employees belonging to an RPP in 2014, a drop from 71.2 per cent in 2013 and down from over 90 per cent in the 1980s. Membership in defined contribution plans increased 5.8 per cent in 2014 to 1.1 million, accounting for 17.5 per cent of all RPP membership. Nearly 87 per cent of members in defined contribution plans worked in the private sector. The market value of assets in RPPs totaled $1.7 trillion in 2014, up 9.9 per cent from the previous year.

Personalization Key To Maximize Value

Personalization, providing rewards, and understanding what employees want are key to maximizing value in employer-sponsored health and well-being programs, says a survey by Welltok, Inc. and the National Business Group on Health (NBGH). Most participants (81 per cent) in health and well-being programs saw a positive impact on their physical well-being and more than 60 per cent agreed or strongly agreed that including family in such programs would likely increase their participation. For those that did not participate, 37 per cent did not find them personally relevant and 20 per cent didn't know they were available. Employers were told they should provide cost effective care and emotional/personal support resources.

Yu Joins Liquidnet

Henry Yu is relationship manager as Liquidnet Canada. He will be responsible for enhancing client relationships with personalized services to complement its electronic offerings and support the sales team at the Canadian office. Most recently, he was a sales and trading specialist at Bank of America Merrill Lynch. Prior to that, he was with Credit Suisse’s equity division.

Global Fixed Income Examined

Kamyar Hazaveh, vice-president, portfolio management and portfolio manager with Signature Global Asset Management, is the newest member of the panel of experts at the Benefits and Pensions Monitor Meetings & Events 'Global Fixed Income' session. He joins Carlo DiLalla, vice-president and senior client portfolio manager, fixed income, at CIBC Asset Management, in a session which will explore how to navigate these markets, a sometimes difficult and costly exercise. However, the combination of the acceleration of globalization and low interest rates are prompting pension funds to turn their attention outward to global possibilities. It takes place September 14 in Toronto, ON. For information, visit Global Fixed Income

July 21, 2016

Median Solvency Rises

The median solvency ratio for Ontario defined benefit pension plans was 80 per cent as of June 30, up from 78 per cent as at March 31, says the Financial Services Commission of Ontario (FSCO). Its ‘Quarterly Update on Estimated Solvency Funded Status of Defined Benefit Plans in Ontario’ also shows 21 per cent of plans had a solvency ratio between 85 per cent and 100 per cent and five per cent of plans had a solvency ratio greater than 100 per cent.The two per cent increase in the estimated median solvency ratio since March 31was due to a number of factors including an investment return on the model pension fund of 3.1 per cent in the second quarter of 2016. As well, stock markets around the world tumbled on June 24, one day after the ‘Brexit’ referendum vote. In addition, bond yields fell significantly as money flowed out of equities and into bonds. By June 30 ‒ one week later ‒ the equity markets had largely recovered, although yields continued to remain depressed compared to pre-Brexit levels. FSCO says the Brexit impact serves as a timely reminder of just how sensitive pension plan solvency positions are to changes in capital market conditions, especially actual returns on invested assets and levels of long-term interest rates. However, while an on-going monitoring of the funded status is important, it should be understood that short-term fluctuations are to be expected and that pension plans are generally long-term vehicles with very long time horizons. Therefore, assessing the health of pension plans (in aggregate) requires that appropriate weight be given to both long-term and short-term measures.

Quebec Sets Stabilization Rules

The Quebec government has set out the rules for establishing the stabilization provision for defined benefit plans now that minimum solvency funding has been eliminated. Quebec is the first province to eliminate this. DB plans registered in Quebec are now required to fund a stabilization provision on a going concern basis. The final version of the regulation includes a few changes to the stabilization provision compared to the draft regulation published in April. The main changes are that the duration of the fixed income investments must be based on the benchmark index provided in the investment policy. The treatment of derivatives for the calculation of the stabilization provision has also been clarified.

Retirement Age Discussion Avoided

It is unfortunate (though understandable) that Canada’s finance ministers avoided discussion of retirement age, says aMorneau Shepell ‘News & Views.’ However, this means Canada is fast becoming an anomaly as one of the few developed countries in the world that has not increased the age for full pension under public pension schemes to 67 or 68. In fact, the matter has barely been considered yet, other than reversing a planned increase in the OAS and GIS starting age from 65 to 67. The ultimate resolution may be to stop referring to retirement at 65 as ‘normal’ and simply allow retirement any time between 60 and 75, with appropriate adjustment to pension benefits for earlier or later retirement. It says this may well be the next big pension discussion, though perhaps not for several years yet.

CDHP Members More Cost Conscious

Adults in a consumer-driven health plan (CDHP) and those in an high-deductible health plan (HDHP) were more likely than those in a traditional plan to exhibit a number of cost-conscious behaviours, says the ‘2015 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey (CEHCS).’ Specifically, they were more likely than those with traditional coverage to say that they had checked whether the plan would cover care; asked for a generic drug instead of a brand name; talked to their doctors about prescription options and costs; asked a doctor to recommend a less costly drug; talked to their doctors about other treatment options and costs; developed a budget to manage healthcare expenses; and used an online cost-tracking tool provided by the health plan. There is also some evidence that adults in a CDHP and those in an HDHP were more likely than those in a traditional plan to be engaged in their choice of health plan. Those in a CDHP were more likely than those with traditional coverage to say that they had talked to friends, family, or colleagues about the plans; attended a meeting where health plan choices were explained; and consulted with their employer’s HR staff about health plan choices. Those in an HDHP were more likely than those with traditional coverage to say that they had visited the health plan’s website to learn about their plans; talked to friends, family, or colleagues about the plans; used other websites to learn about their choices; and consulted with an insurance broker to understand their plan choices. CDHP enrollees were also more likely to take advantage of various wellness programs such as health risk assessments and health-promotion programs, as well as biometric screenings.

Managers Need To Adapt

Half of assets under management by 2030 will belong to millennials and those in the so-called ‘Generation X,’ meaning asset managers will have to adapt their offerings to suit customers’ social values, says the Association of the Luxembourg Fund Industry and Deloitte. They predict a boom in robo-advice and a change in tailored portfolios and say these will also cause a shift in marketing strategies. ‘How can Fintech facilitate fund distribution?’ also says millennials will have a more ‘do-it-yourself’ attitude to investing as over 50 per cent of investors interviewed cited a lack of trust in advisers and a belief that better performance could be obtained from self-directed investments. This is driving the next generation of investors to turn towards robo-advisers who, the report says, will manage 10 to 14 per cent of assets in the U.S. by 2025, up from the less than 0.1 per cent of the €29 trillion in assets there today.

Alternative Demand Remains Strong

The demand for alternative investments among institutional clients remains strong, says research from Cerulli Associates. ‘U.S. Alternative Products and Strategies 2016: The Multiple Roles of Alternative Investments’ says institutions remain the top client channel that managers are seeing demand for alternatives from. For the purpose of developing their alternatives business, more than 50 per cent of asset managers polled consider the institutional channel to be equally important as other channels; meanwhile, nearly one-third of managers cite it as being their most important target for alternatives. "Expectations regarding future capital market returns and the need to optimize risk-adjusted performance are the leading drivers of investors' interest in alternatives," says Michele Giuditta, an associate director at Cerulli. "With equity and bond valuations stretched, the potential diversification benefits and alpha provided by alternatives appear favourable on a relative value basis."

Administrator Checklist Outlined

The Canadian Group Insurance Brokers September mini-seminar ‘Building and Using a Plan Administrator Checklist’ is designed for those who specialize in employee benefits or that want to. Attendees will learn how to create a checklist to utilize when new cases are installed, train new plan administrators, and conduct client renewals. Information reviewed will include taxation, privacy, administration, and HR issues. It takes place September 7 in Oakville, ON. For information, visit CGIB Checklist

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