Daily News Alerts
May 24, 2013
Exposure To Alternatives Maintained
Institutional investors expect to maintain their exposure to alternative assets, such as hedge funds, says a survey from research firm Preqin. It finds that at least 80 per cent of investors in alternative assets plan to maintain, or increase, their allocations to various alternative asset classes throughout 2013. Its results show 93 per cent of real estate investors plan to either maintain or increase their exposure over the course of 2013; 59 per cent of private equity investors will maintaining their exposure with 27 per cent increasing their allocation; and 58 per cent of investors with allocations to infrastructure are looking to increase their allocation over the next 12 months. A third of investors in hedge funds plan to increase their exposure to the asset class. However, about 20 per cent plan on decreasing their allocation throughout 2013.
Teachers’ Asia Subsidiary Approved
The Ontario Teachers' Pension Plan (Asia) Limited, a subsidiary of Ontario Teachers' Pension Plan, has been granted regulatory approval by the Hong Kong Securities and Futures Commission to conduct regulated activities, including dealing in securities, advising on securities, and asset management. "I am pleased to confirm that our Asia subsidiary and its proposed responsible officers have received formal approval for these licences," says Jim Leech, president and chief executive officer of Teachers'. "Asia has long been a region of interest to Teachers'. We look forward to continuing to build relationships with local partners and exploring new direct, co-investment, and fund investment opportunities in the market." The Asia office will be located in Hong Kong and be staffed by local and Canadian equities staff from the fund's private capital and public equities departments. This office will be the fund's second major regional office. Teachers' European, Middle East, and Africa regions private capital office opened in London, UK, in 2007.
Boomers Not Working Until They Drop
Now turning 67 years old, the first set of U.S. Baby Boomers, those born in 1946, continue to be myth-busters, says a Metlife Mature Market Institute study. ‘Healthy, Retiring Rapidly and Collecting Social Security: The MetLife Report on the Oldest Boomers’ says the earliest Boomers aren't necessarily "working 'till they drop" as was predicted. More than half (52 per cent) of the 1946 Boomers are now fully retired. Of those, 17 per cent cite health reasons and 10 per cent attribute a job loss to their decision to retire. Twenty-one per cent remain employed full-time and 14 per cent are working part-time. Of these, most plan to retire fully by age 71, up from 69 in 2011. This represents a big jump since 2007 and 2008 when just 19 per cent of oldest Boomers were retired and a significant leap from the 45 per cent retired in 2011.
Article Earns IPEBLA Award
Greg Winfield and Mark Firman, of McCarty Tétrault, will receive the 2013 Tony Thurnham award for their 2011 article ‘Canadian Employee Life and Health Trusts.’ The award is given by the International Pension and Employee Benefits Lawyers Association (IPEBLA) every two years for the best article in the International Pension Lawyer Journal, as voted by the IPEBLA editor and country representatives. The award will be presented in Rome, Italy, May 28. The article is at Trust Article
Lumira Makes Deal Of Year
Lumira Capital is the recipient of CVCA’s 2013 ‘Deal of the Year’ Award for the venture capital category. Lumira Capital and a group of other institutional investors ‒ including InterWest Partners, Skyline Ventures, Delphi Ventures, and Intersouth Partners ‒ invested in KAI Pharmaceuticals. In July 2012, KAI Pharmaceuticals was acquired by Amgen Inc. On its investment, its internal rate of return was 21 per cent and the multiple of capital on its original investment was 3.9 times (current) and 4.2 times (final based on escrow release). At the time of its acquisition, KAI was a clinical-stage, biopharmaceutical company.
Connex Sessions Explore Therapies
Connex Health’s ‘Drugs, Death, And Disability: The Impact Of Life Threatening And Debilitating Diseases’ will take place in three Atlantic provinces. The sessions feature medical experts who will explore the impact of therapies on patient outcomes in their respective fields. They will discuss treatment options, the reimbursement process, and an individuals’ ability to stay at or return to work versus the cost of premature death or permanent disability. It takes place May 28 in Moncton, NB; May 29 in Dartmouth NS; and May 30 in St. John’s NL. For information, visit Drugs & Death
May 23, 2013
Caisse Cutting Back On Bonds
The Caisse de Depot et Placement du Quebec will cut its $64 billion allocation to bonds. Michael Sabia, its chief executive officer, says the fund is scaling back fixed income investments that account for 36 per cent of its $176 billion of assets under management. Canadian government bond yields have fallen to almost record lows, draining income for pension funds that have traditionally relied on fixed income to fund decades-long pension liabilities. “We are not going to exit fixed income, but we are now significantly reducing the weight of fixed income in our portfolio for a variety of reasons having to do with where we see yields over the next number of years,” he said at the Bloomberg Economic Summit. The Caisse earned 3.9 per cent from fixed income last year, compared with 13.6 per cent for private equity. It will add $10 billion to $12 billion in less-liquid investments such as private equity in the next two years.
Focus Needed On Long-term Value
Business leaders need to focus their thinking and actions on long-term value creation, say Mark Wiseman, president and CEO of the Canada Pension Plan Investment Board, and Dominic Barton, global managing director, McKinsey & Company. Announcing a joint initiative, entitled ‘Focusing Capital on the Long Term’ at the Institute of Corporate Directors annual conference, they described short-termism as a central concern in today’s global economy and discussed the pivotal role that corporate directors and institutional investors can take to foster long-term thinking and action. Recognizing that time horizons vary by industry and asset type, they introduced a new definition for long-term to set a common foundation for the initiative’s work: Long-term thinking goes beyonda product cycle, beyondthe average tenure of directors or the CEO, and beyonda typical investment cycle.
Risk In Eyes Of Beholder
How sponsors view managing the risk in their pension plans lies in the eye of the beholder, says Yvan Legris, global CEO consulting, Aon Hewitt. Speaking on the ‘Pension Conundrum: Managing Risk in a Risk-Averse World’ at the Toronto Region Board of Trade Distinguished Speaker Series, he said views on risk depend on where they are coming from. A number of factors can influence views on risk and will dictate a plan’s tolerance for risk taking. And managing pension fund risk is becoming increasing important as it can influence a company’s credit rating and ability to access capital for investment. The conundrum for sponsors is the funding status of plans is growing worse even though huge amounts of money have been injected into plans in recent years. And while there are a number of measures a sponsor can take to manage plan risk, they need to know where they are in the risk spectrum and which strategy to use at that time. And, he said, they need to keep reviewing this because it is rare that one event will cause a problem.
DB Outperformance Widened
Corporate defined benefit plans in the U.S. outperformed defined contribution plans in 2011 by the widest margin in more than 15 years, says an analysis by Towers Watson. It found DB plans had a median return of 2.74 per cent compared to a median loss of 0.22 per cent for DC plans. It is the widest margin since 1995, the first year Towers Watson analyzed returns for both plan types. The gap between DB and DC plans has narrowed over the last five years to about 39 basis points annually in favor of DB plans from 76 basis points annually since 1995. DC plans largely narrowed the gap with more than five percentage points of outperformance in 2009 due to strong equity markets. The size of a plan also has a large bearing on the gap between DB and DC plans. Among the largest one-sixth of plans, DB plans had an average 99 basis points of outperformance compared to DC plans while DC plans average 114 basis points of outperformance over DB plans among the smallest one-sixth of plans since 1995.
Real Assets Portfolio Launched
Russell Investments Canada Limited has launched a real assets portfolio for Canadian investors seeking diversification beyond traditional stocks and bonds, as well as increased exposure to potential global growth opportunities. The new portfolio complements its existing suite of multi-asset solutions by offering investors an opportunity to invest in an actively managed, one-stop diversified fund that offers exposure to investments ‒ such as infrastructure, real estate, commodities, and real return bonds ‒ that until recently had been difficult for individual investors to access. “Institutional investors have expanded their use of real assets as a source of potential yield enhancement as well as a way to diversify their portfolios,” says David Feather, president and chief executive officer, Russell Investments Canada. “Individual investors will have the opportunity to obtain similar benefits through the Russell Real Assets Portfolio.”
Insufficient Returns Greatest Risk
Fund returns insufficient to meet objectives is the greatest risk facing Canadian endowments and foundations over the next several years, says the Mercer Endowments, Foundations and Not-For-Profits survey. It reveals that 50 per cent of respondents cite this concern followed by the ability to maintain beneficiary distributions, cited by 35 per cent. “At a time when governments globally are facing fiscal restraints and economies are coping with high unemployment and slow growth, it’s clear that the endowment and foundation sector is also feeling the pressure,” says Frank Belvedere, the Mercer partner responsible for the firm’s endowment consulting practice in Canada. “This is an important and unique institutional investor segment. Long-term returns have not justified or supported historical spending and distribution levels and the sector is beginning to recognize this.” Equities remain the dominant asset class for long-term or endowed funds with an average allocation of 57 per cent followed by bonds at 33 per cent and real estate and other alternative investments totaling 10 per cent.
Human Rights Claims Rising
‘The Rise of Benefits-related Human Rights Claims’ will be examined at the 2013 CPBI Ontario Regional Conference. Terra Klinck, of Hicks Morley Hamilton Stewart Storie LLP, will review the nature of human rights claims that have been commenced relating to benefit plans and provide helpful tips for minimizing plan sponsor liability. Theme of the conference is ‘Healthy, Wealthy and Wise.’ It takes place October 2 to 4 in Muskoka, ON. For information, visit Ontario Conference
Real Estate In Portfolio Examined
‘What Real Estate is Doing in Your Portfolio: Today’s Issues and Strategies’ will be the topic of a CFA Society Toronto seminar. Simon Fairchild, of IPD North America, will discuss real estate’s emergence as an asset class, current valuations, and approaches to risk management in today’s economic environment from both a Canadian and global perspective. It takes place May 29 in Toronto, ON. For information, visit www.cfatoronto.ca
May 22, 2013
Engagement Levels Remain Low
While the economy in North America has shown steady improvement over the past year, an analysis by Aon Hewitt reveals that employers and the workforce are not yet following suit. Employee engagement levels in North America have declined to the lowest levels since 2008 and the way employees perceived their general work experience in 2012 remains unchanged from the prior year. Its ‘Global Engagement Report’ found that employee engagement in North America decreased by one percentage point to 63 per cent in 2012. The analysis also revealed some dynamic shifts in how North American employees felt overall about their work experience. While certain areas had increases in employee perception scores, others dropped. Areas with the highest increases in employee perception scores in North America include innovation, effective communication, managing performance, and pay. Areas where work experience scores worsened in 2012 include diversity, customer experiences, and business unit/division leadership. Dr. Ken Oehler, its global engagement practice leader, says "as North American organizations grapple with competing pressures ‒ demand for profitable growth, financial market volatility, political uncertainty, and global shifts in workforce demographics ‒ declining engagement levels may have negative, longer-term consequences on business performance.” The survey findings signal a call to action for leaders to make employee engagement a business imperative, he says.
IME Vendors Need Sophistication
Consolidation is one of the most significant trends in the industry, as independent medical evaluation (IME) customers are increasingly seeking out larger and more sophisticated vendors who can deliver services across Canada, says a survey by Cira Medical Services, a Canadian clinical risk manager. ‘Emerging Trends in the Independent Medical Evaluation (IME) Industry’ identifies other key trends as well. It says there is now a greater emphasis on IME service standards, including improved transparency, more rigorous quality controls, more efficient internal processes, and greater accountability. As well, IME service providers are moving toward greater collaboration with their stakeholders and, going forward, IME providers will have to increasingly utilize advanced information technology to leverage data captures and perform trending analyses to identify process improvements and cost savings. IMEs are conducted by health professionals operating through third-party companies such as Cira to provide impartial and objective medical assessments at the request of insurers, employers, or law firms.
CFA Offers Support Professional Certificate
The CFA Institute, the global association for investment professionals, has launched the Claritas Investment Certificate. The new education program provides an understanding ofhow the investment industry works and represents a new international education and ethics standard across the financial services sector. The certificate is accessible to a wide range of professionals working with investment decision-makers in functions such as operations, administration, IT, HR, marketing, sales, compliance, and customer service. It is a self-study course which requires between 80 to 100 hours of study over a six-month period. It is made up of seven modules. On successful completion of an examination, candidates will be awarded a certificate of knowledge. Registration for the certificate is at Claritas
Desjardins Sees Premiums Increase
Desjardins Financial Security, a subsidiary of Desjardins Group, recorded group premiums from groups and businesses and plans offered in financial institutions, including the Desjardins caisses, of $688.5 million for the first quarter versus $636.9 million for the same period in 2012, an increase of 8.1 per cent. Group and business insurance sales volume was $97.3 million at the end of the quarter compared to $50.4 million for the same period in 2012. In group retirement savings, sales totalled $125.1 million. The improved financial results as at March 31, 2013, compared to the same period last year, were due to more stable economic conditions since early 2013, positive claims experience, and the revision of certain actuarial assumptions, which had an impact of $29.8 million.
Benefits Issues Examined
The CPBI Atlantic Region will examine ‘Benefits Now’ and ‘Attendance Management’ at a group benefits session. Liana O’Brien, of Morneau Shepell, will talk about employers top concerns, what the industry, pharma and governments are doing to mitigate their risks and costs, and what you should be thinking about doing to manage your benefit programs in the ‘Benefits Now’ session. In the ‘Attendance Management’ portion, Alex Boucher, of Medavie Blue Cross, will offer an introduction to the drivers of absence and disability and discuss where to start in addressing these issues and bringing them under control. It takes place June 13 in Charlottetown, PEI. For information, visit Group Benefits
CTAs Focus Of Debate
‘CTAs: Discretionary v. Systematic II’ will be debated at an AIMA Canada Managed Futures Committee and CAIA Canada session. In this discussion of ‘man against machine,’ two veterans of the systematic and discretionary CTA/global macro camps ‒ Scot Billington, co-founder, Covenant Capital Management, and Frank Maeba, managing partner, Breton Hill Capital Management Inc. ‒ will explain their side and why it might be the best way to manage money (and risk). It takes placeMay 29 in Toronto. For information, visit aima-canada.org
May 21, 2013
Retirement Bad For Health
While it may provide an initial sense of relief and well-being, over the long-term, retirement is bad for your health, says a study out of the U.K. The Institute of Economic Affairs’ ‘Work Longer, Live Healthier’ suggests that retirement increases the likelihood of developing depression and at least one physical illness. It analyzed data from a survey of 11 European countries and found that when comparing older people who were still working with those who were retired, retired people were 39 per cent less likely to assess their own health as ‘very good’ or ‘excellent’; 41 per cent more likely to suffer from depression; 63 per cent more likely to have at least one physical condition; and 60 per cent more likely to be taking medication for such a condition. The study did not find any significant differences between women and men when it came to self-assessments of health, but did find the negative effect on mental and physical health was slightly higher for women. It did not examine whether the effects on health are different depending on the type of work ‒ manual labour versus office work, for example. "Old people benefit from continuing some form of paid work for longer instead of retiring entirely," it concludes.
Market Concerns Receding
Four of the biggest issues worrying markets over the past couple of years now appear to be receding, says a report from BMO Capital Markets. It suggests that the biggest concerns over the last few years have been the survival of the euro, the threat of inflation, U.S. budget deficits, and the prospect of a Canadian housing market crash. Each of these worries appears to be fading, it says. While the domestic housing market looks vulnerable to a moderate setback in the next few years after an incredible run, the trigger for something nastier is not yet apparent. And, the threat of higher interest rates seems to be steadily retreating. The European debt crisis continues to quietly move away from a front-burner issue for financial markets and inflation is hardly a threat for now. The most notable piece of economic news was the cut in U.S. deficit estimates, with this year's expected gap down by more than $200 billion to $642 billion.
Healthy Lifestyles Impact Costs
Healthy lifestyles have an impact on healthcare costs as well as on individual well-being, says a Conference Board of Canada report. ‘Paving the Road to Higher Performance: Benchmarking Provincial Health Systems’ finds that there is significant room for improvement in how Canadians take care of their own health. “The provinces that rank higher in lifestyle factors also perform better in overall health status. These findings highlight the importance of health promotion and disease prevention programs to control demand for healthcare services,” says Gabriela Prada, director, health innovation, policy, and evaluation.
Incentive Compensation Increasing
Incentive compensation in the money management industry is expected to increase 10 per cent to 15 per cent in 2013, sparked by gains in assets under management and positive net flows, says compensation consultant Johnson Associates. These gains in compensation are expected to outpace those in investment and commercial banking, where results are forecast to increase moderately, in the zero to 10 per cent range because of weak advisory activity, underperforming investment banking in Europe, and moderate commercial and retail deposits and loan growth. Compensation at individual firms will vary above and below Johnson's projections based on their performance with substantial inflows expected for superior investment performance.
Spotlight Shines On Autoimmune Arthritis
To shine the spotlight on autoimmune arthritis, a disease that affects one in every 100 Canadians and costs the Canadian economy $1.4 billion each year, Empire Life has produced a video. It tells the story of Catherine Hofstetter, a small business owner who has been prescribed a biologic drug, Humira, which costs $14,000 annually. Roughly half of arthritis patients will do well on a less expensive, traditional drug, but half require the more costly biologic in order to remain productive and pain free. As more and more people develop chronic conditions such as rheumatoid arthritis, doctors are writing more prescriptions for costly medications. Since many of these conditions last a lifetime, these drug costs can add up. Early detection and revised treatment guidelines are two of the 10 key cost drivers behind rising drug prices. "With our aging population, chronic conditions like arthritis already affect two out of five Canadians. These new breakthrough medicines can make a real difference in people's lives, but business owners need to understand the impact to their drug plans since more and more of these medicines are being developed," says Janet Jackson, vice-president of group marketing at Empire Life.
CIBC Appoints Two
Suzann Pennington is managing director and chief investment officer and Stephen Carlin is vice-president, senior portfolio manager, Canadian equities, at CIBC Global Asset Management Inc. Pennington will oversee all of its portfolio management and research efforts. Carlin was previously senior vice-president, head of equities, at Aegon Capital Management Inc.