News Archives - May 2010

Monday, May 31, 2010

Shift Work/Cancer Link Needs More Study

More study is needed to assess the link between shift work and cancer, says Kristan Aronson, professor, community health and epidemiology, Queen’s University. Speaking at the CARWH 2010 Conference on ‘Work at Night and Cancer Risk, she said the studies to date have been limited for a number of reasons. For example, the definition of shift work has varied from study to study and the amount of shift work in these studies could not be confirmed. However, she said there is evidence to suggest shift work can cause other problems such as sleep disruption and declines in vitamin D production in the body.

Wilson Chairman At Barclays

Michael Wilson is chairman and Bruce Rothney is head of Barclays Capital, Canada. Wilson will be responsible for managing its client relationships in Canada. Most recently, he was ambassador of Canada to the United States from 2006 to 2009. Rothney is responsible for broadening the Canadian franchise and the management of various business lines in the region. Most recently, he was deputy chairman of RBC Capital Markets. 

July Commuted Value Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including July 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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Friday, May 28, 2010

Confidence Lacking In U.S. Structure

Market players don’t have a great deal of confidence in the U.S. equity market structure as a result of the wake of the “flash crash” on May 6, says a survey by TABB Group. It found that barely half of the respondents have a high degree of confidence in the current market structure. The survey also found that 73 per cent do not believe market structure strongly supports an orderly market and 44 per cent believe that market structure is not a level playing field, up from 34 per cent in a 2009 survey. As well, 62 per cent of buy-side participants are now negative toward high-frequency trading (although the sell side and execution venues remain positive in their views on HFT) and there is consensus that high frequency traders should register as broker dealers.

Pennies A Week Can Double CPP

Ottawa can double benefits under the Canada Pension Plan simply by deducting a few more pennies a week for the next seven or eight years from active workers’ paycheques, says former Canadian Auto Workers president Buzz Hargrove. Speaking to CAW retirees, he also said governments can protect pensions with other measures such as legislation forcing companies to make weekly pension contributions as well as the creation of an insurance scheme design to guarantee pension payouts. Improving pension guarantees and payments would benefit organized labour in non-monetary ways. It would get people to understand what unions all about; that they’re about building a society that has a sense of fairness and as much equality as it can get,” he said.

Account-Based Plans Increasing

Account-based retirement plans for new salaried employees are increasingly replacing Defined Benefit plans at large U.S. companies, says a Towers Watson study. Account-based plans include Defined Contribution plans and hybrid pension plans, typically cash balance plans. The study found 58 companies in the Fortune 100 ranking currently offer only a DC plan to new hires, compared with 55 companies at the end of last year and 51 companies at the end of 2008. Meanwhile, 17 companies continue to offer a traditional DB plan, which represents a decline from 20 at the end of last year and 24 at the end of 2008. The analysis also shows that 25 of the 42 companies with DB plans offer hybrids such as cash balance plans. Hybrid plans reduce cost and funding volatility for employers while providing more visible benefits for employees than traditional DB plans.
 
OMERS Buying Logibec

OMERS has acquired the publicly traded company Logibec Groupe Informatique Ltee. Through its private equity arm, OMERS has agreed to make an offer to purchase all of the outstanding common shares of the software company. Logibec makes information systems for health and social services sectors.

Alternative Investment Consultants Look At Issues

‘Changing Industry Dynamics: Profiling best of breed investing’ and ‘Defined Contribution Plans: The Impact and Consequences’ will be among the topics covered at the Investment Management Institute’s ‘Summer Annual Alternative Investment Consultants Summit.’ It takes place July 21 in Greenwich, CT. For more information, visit http://www.investmentmanagementinstitute.com/

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Thursday, May 27, 2010

Disclosure Changes Significantly

Relatively few employers contributing to North American multi-employer pension plans are subject to the accounting requirements of the International Accounting Standards Board (IASB) – mostly Canadian and U.S. subsidiaries of European corporations. This will change significantly on January 1, 2011, when most Canadian enterprises will become subject to IASB accounting, says a Segal Company ‘Bulletin.’ The IASB exposure draft of proposed changes to IAS 19 leaves the basic requirements for pension expense related to participation in a multi-employer plan unchanged. However, the disclosure requirements will change significantly starting in 2013, if the proposals are adopted without change. The proposed disclosure standard calls for entities participating in Defined Benefit multi-employer plan to disclose, for example, a description of the funding arrangements, including the method used to determine the entity’s rate of contributions and any minimum funding requirements. Of particular interest is a requirement to disclose withdrawal liability, if any, even if there is no likelihood that the employer will withdraw in the foreseeable future. Withdrawal liability applies to Quebec employers who participate in Canadian multi-employer plans, unless those employers are in industries that are federally regulated.

Single Regulator Supported

The CFA Institute and the Investment Counsel Association of Canada (ICAC) have both come out in favour of the Canadian Securities Act which, if passed, would establish a national securities regulator in Canada. The CFA Institute reaffirmed the position of its Canadian members from a June 2009 survey that markets should have a single, unified securities regulator with enforceable jurisdiction. It believes that a national regulator would eliminate regulatory arbitrage and confusion, reduce costs for issuers and market participants, reduce the likelihood of inconsistent enforcement and oversight, and make regulations less burdensome and complex. The ICAC has for many years advocated the need for a national securities regulator and has actively participated in advancing the concept. The ICAC has long held the view that a Canadian securities regulator would strengthen the financial system; provide protection to investors from unfair, improper, or fraudulent practices; and reduce inefficiencies and duplication inherent in operating 13 regulatory structures.

CPPIB Looks Abroad

The Canada Pension Plan Investment Board (CPPIB) is looking abroad to find investments in government bonds, says a report from Bloomberg. It sees them as a substitute for provincials and government treasuries. The fund would likely pursue a diverse exposure to foreign debt such as sovereign bonds from large stable countries. It will maintain a strategic asset weighting of 35 per cent for fixed income.

Investor Confidence Down In May

Globally, investor confidence fell 11.2 points to 88.2 from April's revised reading of 99.4, says the State Street ‘Investor Confidence Index for May 2010.’ Declines in sentiment in North America were a key contributor, with institutional investor confidence falling five points from 103.3 to 98.3. Among European investors, confidence was also lower, falling 3.5 points from 95.7 to 92.2. In Asia, by contrast, confidence was robust, rising 6.8 points to reach 101.0. Uncertainty around the outcome of the British elections played a role early in this month’s declines, as did the market volatility exhibited by U.S. exchanges on May 6.

Kerzner Looks At Opportunities

Bob Kerzner, president and CEO of LIMRA, LOMA, and LL Global Inc.; will look at the current opportunities for growth, as well as the potential negative disruptors, and how to be prepared for whatever the future holds at the ‘LOMA Canada Annual Conference.’ It takes place June 10 in Toronto, ON. For more information, visit http://www.loma.org

Wellness Measurement Examined

‘Measuring and Benchmarking Outcomes in Healthy Workplace Wellness Programs’ will be discussed at the ‘Health Work & Wellness Conference.’ Dr. Peter Melnyk, of BioMedCom, and Allan Smofsky, an independent workplace health strategist, will discuss how awareness of employee health/well-being as a vital element of organizational sustainability and success has grown in recent years. The session will provide an overview of the goals/objectives and outcomes that are typically considered in Canadian workplace health initiatives. The conference takes place September 29 to October 2 in Vancouver, BC. For more information, visit http://healthworkandwellness.com

Employers Dealing With Obesity

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Wednesday, May 26, 2010

Fraser To Offer Cost Benchmarks

Sponsors of registered pension plans now have the opportunity benchmark their plan operating costs against plans of comparable size. Fraser Group, a Toronto based research firm, has introduced the ‘Survey on Pension Fund Expenses’ to assist sponsors of registered pension plans in determining if their plan operating costs are reasonable. The report will compare plan expenses relative to asset size and plan type. Among the expense categories in the survey are consulting fees, investment management, plan administration, and legal/audit. The target date for release of the survey report is October 2010.

RPP Membership Increases

Membership in registered pension plans (RPPs) increased 1.7 per cent in 2008 to just over six million, the first time the number of active participants has surpassed that level, says Statistics Canada. However, all the growth came from the public sector where RPP membership increased 4.3 per cent compared with a 0.7 per cent decline in the private sector. Membership in private sector plans still represents more than one-half of total RPP membership, but its share has continued to decline. In 2008, private sector plans accounted for 51 per cent of total membership, down from 52 per cent in 2007. About 4.5 million people, or 75 per cent of those with a RPP, were in a Defined Benefit pension plan. The rate of participation in these plans has declined constantly from more than 85 per cent a decade earlier. Membership in the other most frequent type of plan, Defined Contribution, remained virtually unchanged at 939,200, about 16 per cent of the total. Membership in other types of pension plans, including hybrids and combinations, accounted for almost 10 per cent of total membership. This type of membership showed high gains, increasing by 29.9 per cent to 565,400 in 2008. This growth came mainly from sponsors in the private sector who added a DC component to their DB plans for new entrants.

Sponsors Should Warn Members Of Equity Risk

Sponsors would do well to remind participants that stocks have often – but not always – outperformed less risky portfolio holdings over time, says research from Vanguard. ‘Equity risk and time: A survey of U.S. investors’ found 31 per cent of U.S. investors believe the equity market “always” does better than safer investments if held long enough. These investors are more likely to invest in the stock market generally and more likely to hold equity allocations of 60 per cent or more. During the 2008/2009 market downturn, overconfident investors were more likely to engage in market-timing behaviour (selling out of stocks entirely) or contrarian behaviour (increasing equity exposure in falling markets). It says plan sponsors need to counsel the gung-ho equity investors to give them a more realistic view of equity risk.

Early Bird Extended

The early bird registration for the CPBI Ontario Regional Conference, ‘Unique Perspectives,’ has been extended to June 15. The event will feature a range of seminars and workshops of pension, benefit, and investment issues. Some of the topics are the cost of benefits fraud, new pension regulatory views, and target date funds. It takes place October 4 to 6 in Niagara-on-the-Lake, ON. For more information, visit http://www.cpbi-icra.ca/

Impact Of Bankruptcy Examined

What exactly happens when a pension plan sponsor files for creditor protection or declares bankruptcy will be the focus on a session at the ‘2010 ACPM National Conference.’ Judy Cameron, of OSFI; Robert Ferchat, a professional corporate director; and Ian McSweeney, of Osler, Hoskin & Harcourt LLP; will look at issues such as the role of law-makers and regulators and what can be done to protect current retirees and strengthen the pension promises already made. The conference takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com

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Tuesday, May 25, 2010

Deemed Trust Claims Denied

The Ontario Superior Court of Justice has denied two trust claims by pension plan members at Indalex Holdings (BC) Ltd., says the ‘Hewitt Monitor.’ In response to the approval of a sale of assets of the company, which is under Companies' Creditors Arrangement Act (CCAA) protection, two groups brought trust claims over the Canadian sale proceeds. A group of former members of the executive pension plan sought a declaration that the wind-up liability for their plan should be subject to a deemed trust for the benefit of the plan beneficiaries. The second claim was brought by a group of unionized pension claimants whose salaried pension plan is being wound up. They sought recovery from the sale proceeds for an amount equal to the $1.8 million deficiency in their plan. However, the court ruled that at the date of the transfer of sale assets there were no amounts that were "due" or "accruing due" for the plans. Since Indalex was not required to pay any amount into the plans at that date, no deemed trust arose in respect of the remaining deficiency arising as at the date of wind-up.

Carmody Moves To Aviva

John Carmody is global strategy director for financial institutions at Aviva Investors. Based in London, he will work with sales teams globally to develop new and existing relationships with financial institutions clients and to facilitate cross-border business. Previously, he was BlackRock and UBS Global Asset Management.

Conference Looks At Compensation

Compensation leaders of best practice organizations will explain how to adjust compensation strategy as the economy returns to growth, ensure high performers continue to give their best, and refine rewards to ensure they attract and retain key talent at the Conference Board of Canada’s 'Compensation Outlook 2010.'’ Sessions will also look at deriving real value from compensation strategies and reviewing executive compensation under increased scrutiny and accountability. It takes place October 26 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/

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Friday, May 21, 2010

Chile Good Model For Quebec

Quebec should be looking to reform of its public retirement savings system based on the Chilean experience, rather than increasing the Quebec Pension Plan contributions paid by workers, says Éric Duhaime, a consultant in democratic development in a Montreal Economic Institute ‘Economic Note.’ "The best way to guarantee the future of young Quebecers' retirement savings while ensuring benefits for current retirees, as Chile has done, would be to give workers currently in the labour force the freedom to invest for their old age in their own retirement savings accounts rather than requiring them to rely on the Caisse de dépôt et placement du Québec," he says. The QPP’s financial position has become increasingly precarious because of higher life expectancies, a low birth rate, and slower-than-expected wage growth. As a result, future generations will have to pay much more than their elders for the right to receive comparable or possibly lower benefits. He says Chile was facing similar problems three decades ago. It replaced the public pension system with a system of individual capitalization and retirement savings accounts, with each worker having his own account under private sector management.

Pension Cuts Would Harm Economy

Cuts to public sector pensions would harm communities and the Canadian economy, says the Public Service Alliance of Canada. "Employees are the main contributors to their pension plan. They contribute more than 10 cents of each dollar earned," says John Gordon, PSAC’s national president, in response to recent attacks from the Canadian Federation of Independent Business (CFIB). The CFIB says the federal government is too generous in subsidizing public service pensions and it is time to start leveling the playing field with the private sector. "Public sector workers have fought hard to ensure that they will not retire in poverty," says Gordon. "We object to the idea of a race to the bottom."

Group Wants Pension Reform

Leaders of major Canadian pension organizations are urging Canada’s finance ministers to take action to improve pension coverage and costs. A group representing these plan leaders has sent a letter to Canada's ministers of finance saying that the public component of Canada's pension system is in good shape, but that the supplementary component is not serving Canadian workers as well as it could. The letter says, for example, depending on the definition used, between one-half and three-quarters of Canada’s private sector workers do not have access to collective workplace pension arrangements that are well-managed and operate at low cost. It says a supplementary plan could be delivered by existing organizations such as insurance companies or pension plans; or through a new structure under a national umbrella. Ministers are being urged to create an impartial federal-provincial task force to create a practical implementation plan within a six-month timeframe.

DB Needs Risk Sharing To Survive

If Defined Benefit pension plans are to survive, they will need more risk sharing between employers and plan members, says Elizabeth Brown, of Hicks Morley. Another possibility is that the DB promise will become a thing of the past replaced by a target benefit with no guarantees it will be there. Speaking at its ‘2010 Toronto Client Conference,’ she said while the economy is recovering from the financial crisis in 2008, DB plans are not because their problems date back prior to the crisis. A prolonged period of low interest rates, tax rules which prohibited surplus beyond a certain threshold, two decades of contribution holidays or improving employee benefits, and people living longer are among the reasons pension plans have not recovered and continue to be underfunded. And while governments across the country are wrestling with reforms to save DB pensions, she said the reality is that only eight per cent of workers in the private sector have a DB plan. Governments are acting as if they anticipate widespread use of DB plans when the reality is quite different, she said.

CPPIB Assets Grow

The Canada Pension Plan Investment Board’s funds under management grew to $127.6 billion in its most recent fiscal year. The value of the fund grew by $22.1 billion in the financial year ended March 31, 2010, over the $105.5 billion it reported for 2008-2009. Investment income for the 2009/10 financial year was $16 billion, partially reversing a year-earlier loss of $23.8 billion. The 14.9 per cent return is the third-highest rate in its 10-year history.

HSBC Launches Bond Fund

HSBC Global Asset Management (Canada) Limited has launched a global inflation linked bond pooled fund. This fund seeks to protect Canadian investors from any resurgence in inflation. Managed by Sinopia Asset Management, the quantitative specialist of HSBC Global Asset Management, it will invest in developed government inflation linked bond markets. Sinopia had more than $29.2 billion assets under management at the end of 2009.

DC Plans Need Further Refining

Defined contribution schemes across the world are more robust following the financial crisis. However, they need further refining to best meet members’ needs, says Towers Watson. It says the crisis made DC members assess their risk appetite and forced plan fiduciaries to review both investment strategies and default funds to redress the balance of risk and return. However, DC schemes still need further restructuring if they are to better serve millions of individuals worldwide who were exposed to its failings during the credit crunch.

Reports Released At Summit

The Conference Board of Canada will release three research reports at its ‘Benefits Summit 2010!’ These reports will act as the foundation for the event that promises a comprehensive view of benefits trends and best practices, including how to use wellness programs to reduce costs and attract talent. It takes place October 27 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/

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Thursday, May 20, 2010

Current Proposals May Be Disaster

Current proposals to change bankruptcy rules to protect pensions are a disaster as, if any were enacted, they would result in limited credit availability to restructuring companies, says Craig Hill, of Borden Ladner Gervais. Speaking at its ‘Pension and Benefits Law Update,’ he said lenders will change their requirements if they suspect that loans are being used for purposes such as making up pension obligations. Currently, there are three private member’s bills addressing this issue. The insolvency of businesses, he said, is not the area to address the protection of pensions in these proceedings. The other practical consideration is that while bankruptcies are under the federal government’s jurisdiction, pensions are, for the most part, a provincial responsibility.

Retired Canadians Enjoying Retirement

Retired Canadians over the age of 50 with assets of at least $100,000 are enjoying retirement, with more than half (56 per cent) saying their quality of life has improved, says the first annual ‘RBC Retirement Myths and Realities Poll.’ On the other hand, only 38 per cent of pre-retirees in this same demographic group expect life to improve after retiring, with half (50 per cent) expecting no change. When it comes to regrets, just over half of retirees (55 per cent) and 65 per cent of pre-retirees have them. Some regrets among retirees include not taking better care of themselves (13 per cent); not starting to save earlier for retirement (12 per cent); and not travelling enough (seven per cent). The main regret of pre-retirees was not starting to save earlier for retirement (18 per cent).

Benefits May Not Be Benefit

In the highest income bracket, fringe benefits may not be much of a benefit, says Eva Krasa, of Borden Ladner Gervais. In a session entitled ‘Employment Fringe Benefits: What’s Taxable and What’s Not’ at its ‘Pension and Benefits Law Update,’ she said in the case of a high income earner, the tax rate for a fringe benefit could be 50 per cent. While there is no definition of fringe benefits, they are generally any benefit provided by an employer above an employee’s cash remuneration and basic pension and group insurance benefits. Whether it is taxable or not, depends on whether the employee or employer benefits. So, while a membership to a fitness centre would be a taxable benefit, an onsite fitness centre open to all employees would not be a taxable benefit, she said.

New Regulations Could Punish Canada

New international financial regulations will unduly punish already stringently regulated Canadian institutions, says Donald Stewart, president and CEO of Sun Life Financial Inc. “It would indeed be ironic if Canada, a country which came through the financial crisis better than most, was to find itself at a disadvantage on account of new international rules originating from outside our country,” he told shareholders at the company’s annual general meeting. A variety of proposals could have a negative impact on the Canadian financial services industry, Stewart said. For example, Canadian life insurers, who already operate under a strong financial reporting system, would face challenges in adopting the new standards, which he says impact the calculation of liabilities on balance sheets and make the bottom line appear more volatile.

Litigation Linked To Communication

The quality of communications with employees may determine whether or not an employer is sued, say Christiaan Jordan and Sonia Mak, of Borden Ladner Gervais. Jordan told a session on ‘Pension Class Action Developments’ at its ‘Pension and Benefits Law Update,’ that in recent decisions where courts have ruled in favour of employee class action suits over reduction of benefits, the need was illustrated for accurate communications with respect to employee pension and benefit rights. In an earlier session entitled ‘Changes to Pension Plans: What Do You Need to Know about Managing Change,’ Mak also stressed the need for accuracy in communication of plan changes as lots of litigation in the pension context relates to the accuracy of communications material provided to employees.

Aon Makes Appointments

Aon Consulting has made a number of appointments across Canada. Anne Burpee is a vice-resident in the Canadian finance function. Tracey Manion is a consultant in the Calgary, AB, health and benefits practice. Leslie McMillan is a senior consultant in the Toronto, ON, employee benefits outsourcing practice. Jean-François Gariepy is national practice director in the Montreal, QC, retirement practice. Laura Mensch is national practice director in the Toronto, ON, benefits solutions practice. Scott Bunker is national practice director in the Toronto human capital practice. Brendan George is market director in the Western region.

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Wednesday, May 19, 2010

Coverage Problem Has Target Group

Pension coverage in Canada is a targeted problem, says Scott Perkin, president of the ACPM. Speaking on ‘ACPM Advocacy: Taking the Pension Debate Forward’ at the ACPM’s ‘Sharing Innovations: Developments in Retirement Plan Design and Communications’ session, he said the problem is the lack of coverage for the self-employed and those working at small businesses. The targeted group is one in need of assistance as low income earners’ retirement needs will be met by CPP and OAS while high income earners can look after themselves. He said the ACPM believes several large plans operating in multiple jurisdictions would provide the flexibility and choice of savings that experts contend would meet the needs of these employers and individuals. However, he said until the coverage issue is resolved, government is unlikely to proceed with pension reform.

Pension Plans Too Expensive

Almost 80 per cent of small- and medium-sized Canadian business owners respondents to a Canadian Federation of Independent Business survey do not currently offer a retirement savings plan, such as RRSPs or a Registered Pension Plan, because they are too expensive. Part of their submission to the federal government's consultations on the retirement income system, their survey, ‘Securing the Future,’ found the second most common reason is that they are too complicated to administer. This suggests that at a time when proposals for mandatory increases to payroll taxes such as CPP/QPP premiums and benefits are being put forth, many owners simply cannot afford such pension initiatives.

Balance Traditional With ‘Shiny Objects’

Plan sponsors need to balance the traditional with “shiny objects” when it comes to communicating with plan members, says Neil Murphy, director, member services communications, Ontario Teachers’ Pension Plan Board. In a presentation entitled ‘Re-thinking Plan Member Communications’ at the ACPM’s ‘Sharing Innovations: Developments in Retirement Plan Design and Communications’ session, he said traditional forms of communication still have a lot of merit and those charged with communicating with plan members need to focus on the core vehicles that work best for their plan. They shouldn’t move to “shiny objects” – social networking – until plan members show a need for it. Teachers’, for example, does not see much value in setting up Facebook accounts for 85-year-old retired teachers. The move to these can be made as they evolve naturally.

Franklin First Canadian Chair

Margaret Franklin is the first Canadian chair of the board of governors of CFA Institute, the global association for investment professionals that administers the CFA program worldwide. Franklin is the president and CEO of Kinsale Private Wealth. She has almost 20 years of financial industry experience in investment management with both institutional and private clients and has worked with global institutions including Barclays Global Investors, State Street Global Advisors, and Mercer.

Monitoring Effectiveness Needs Emphasis

Monitoring the effectiveness of the plan in delivering retirement savings should be emphasized if Defined Contribution plan members want to mitigate their concern that member savings will fall short of their retirement needs, says Ian Genno, of Towers Watson. In a session at the ACPM’s ‘Sharing Innovations: Developments in Retirement Plan Design and Communications’ session, he said inadequate savings for retirement can create a number of problems including delayed retirement and having a more modest lifestyle in retirement. As well, he said, sponsors are concerned that shortfalls in retirement savings could lead to litigation. Good communications programs can make members more engaged who appreciate their plans.

Buyout Industry Up In First Quarter

Investment and fundraising levels for Canada's buyout industry were up in the first quarter as the industry demonstrated signs of recovering from the global economic slowdown, says Canada’s Venture Capital and Private Equity Association. Canadian funds invested $415 million in Canada in the quarter while American and other foreign funds invested only $40 million, down significantly from the $381 million invested by foreign funds in the last quarter of 2009 and the $567 million invested in the first quarter of 2009. In addition to increased activity by Canadian funds at home, Canadian funds invested substantially more abroad in the quarter than in recent quarters. Canadians invested $719 million in companies abroad, which was 45 per cent of the $1.6 billion invested abroad in the entire 2009 year.

Livingston Joins STRATA

Shirley Livingston is a consultant with STRATA Benefits Consulting Inc. Previously, she was with the Winnipeg, MB, office of a major consulting firm. She has expertise in benefit plan design, cost-effective underwriting bases, and renewal analysis.

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Tuesday, May 18, 2010

Make It Easier For Employers – Iannicelli

Government needs to make it easier for employers, including small- and medium-sized enterprises, to step up to bat and do more for their employees, says Joseph Iannicelli, president and CEO of The Standard Life Assurance Company of Canada. Speaking at the Canadian Club of Toronto, he said Canadians should be given greater access to workplace retirement plans. “If every workplace with 20 employees or more was required to provide a group plan, it would ensure that 80 per cent of private sector workers have access to a group plan, compared to only about 50 per cent currently.” This could be done by allowing any employer, including self-employed workers, to participate in a single Defined Contribution plan for multiple, unrelated employers. The financial services industry also must continue to be a pivotal player in interacting with and educating the consumer, he said. It can offer fewer products with better explanations of which financial objectives are met, the degree of risk associated with the product, and a realistic analysis of what taking that risk means to the consumer.

Balance Of Interests Debatable

While the McGuinty government is attempting to balance the interests of employers and employees, whether this objective is being met is debatable with the most recent pension reforms in Ontario, says David Vincent, of Ogilvy Renault LLP. He told its ‘5th Annual Employment and Labour Law Conference’ that the most recent changes, including new grow-in rules, have received third reading and could be proclaimed as early as this summer. Once proclaimed, virtually every pension plan in the province will have to be amended. He said the changes are friendly to multi-employer and jointly sponsored plans, but they are not so friendly to single employer sponsored Defined Benefit plans, making them an endangered species. The new grow-in rules, for example, will end the procedural wrangling with FSCO over whether a partial wind-up is necessary, however, all employees who lose their jobs will be entitled to pension benefits that include any early retirement enhancements. This will add to termination costs.

Start Financial Literacy At Young Age

The federal government’s efforts to promote financial literacy would be best served by getting Canadians to change the way they behave, says the Financial Planning Standards Council. Its submission to the Task Force on Financial Literacy says financial planning is a learned behaviour and a life skill. It recommends the task force focus on strategies that will enact behaviour change by recognizing the importance of starting financial literacy early in life. This can be done by instituting compulsory learning about money and personal finance beginning in grade school.

Misalignment Of Interests Revealed By Crisis

A majority of pension funds believe misalignment of interests with their private equity managers became more apparent during the financial crisis, says a survey by IE Consulting. It found two-thirds of the schemes surveyed thought the crisis had shown certain fund mangers were acting at odds with the limited partners' – investors in private equity – interests. In addition, three-quarters of the pension funds felt that their private equity managers had tried to blame the financial crisis for their own investment mistakes. Respondents to the survey predicted the fundraising environment would become tougher and tougher, when more private equity managers struggling to raise a new fund in the next two years.

CPPIB Starts Australian Real Estate Fund

The Canada Pension Plan Investment Board (CPPIB) and one of Australia’s largest property groups have launched an Australian real estate fund. The joint venture is 80 per cent owned by the CPPIB with the remainder funded by Goodman Group. The Goodman Australia Development Fund will focus on buying a range of high quality pre-committed development opportunities. Goodman and CPPIB teamed up last year to create a joint venture to invest in logistics assets in mainland China.

Clark Forms Dunhelm

Mintz Looks At Options

Proposed options for pension reform from expert panels across the country including expanding the CPP, various forms of government-sponsored DC plans, and amending pension and tax laws to enable increased coverage under private arrangements will be examined at the Alberta ACPM Regional Council’s ‘Exclusive Lunch with Jack Mintz.’ Professor Jack Mintz, director and Palmer Chair in public policy of The School of Public Policy at the University of Calgary, is a leading thinker, researcher, and commentator on Canada's retirement income system. It takes place June 9 in Calgary, AB. For more information, visit http://www.acpm.com/

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Monday, May 17, 2010

Osteoporosis Undiagnosed

A significant portion of Canadians with osteoporosis are undiagnosed and untreated, says Dr. Maria Shapiro, associate professor in the department of family and community medicine at the University of Toronto. Speaking at the ‘Connex Health Employer Forum,’ she said one result of this is as the workforce ages, osteoporotic fractures will become more prevalent in the workplace. Currently, there are more incidents of osteoporotic fractures in women than incidents of heart attack, stroke, and breast cancer combined. In patients who are still in the workforce, these fractures can result in sick leave, loss of efficiency and productivity, and increased health claim costs.

Bill Out-of-step

A private members' bill that would mandate employers with more than 20 employees to provide a retirement savings plan is out-of-step with the provincial and federal governments' position on pension reform, says CUPE. The bill, introduced by Ontario Liberal MPP Jeff Leal, would not require employers to make contributions and workers could opt-out. However, CUPE said the bill is in conflict with a serious, pan-Canadian policy dialogue that is still underway at both federal and provincial levels and, if passed, it would seriously undermine efforts for national pension reform. CUPE is calling for an expansion to the Canada Pension Plan (CPP), an increase to the Guaranteed Income Supplement (GIS), and tougher laws to protect pension plans from bankruptcy, high-risk investments, and employer underfunding.

Arthritis Takes A Toll

Thirty-two to 50 per cent of those with rheumatoid arthritis leave the workplace within 10 years and 50 to 90 per cent leave within 30 years of the onset of the disease, says Diane Lacaille, associate professor, division of rheumatology, at the University of British Columbia. She told the ‘Connex Health Employer Forum’ that other impacts include sick leave and temporary work disability. She said European studies show that those suffering from arthritis lose 22 to 82 days a year because of the ailment. The yearly cost of work disability from arthritis and musculoskeletal disability in Canada is more than $14 billion. Employers can help, she said, by having a better understanding of the disease, encouraging good medical care, and providing a supportive environment.

Alternative Directive Flawed

If the European Union pushes through a flawed directive on alternative investment fund managers, the impact will go far beyond the hedge fund and private equity industries, says the Alternative Investment Management Association (AIMA). The warning comes ahead of votes the week on the directive in the European parliament’s economic and monetary affairs committee (ECON) and the economic and finance council meeting of European finance ministers. Andrew Baker, chief executive officer of AIMA, says the consequences would be much wider than the hedge fund and private equity industries. Real estate and infrastructure investment in Europe would also be impacted because funds in this sector would also be covered by the directive. Plus, it would ban European investors from accessing funds outside the European Union.

Engaged Workers Healthier

Engaged workers are healthier and more productive is the message delivered by Kenton Needham, of Needham HR, to the ‘Connex Health Employer Forum.’ He said, however, engagement in the workplace is lacking with only 21 per cent of employees in a recent survey saying they were engaged. Management can take a number of steps to help engage their employees. It needs to show it is sincerely interested in the well-being of its employees. As well, it must provide opportunities for workers to improve their skills and capabilities, have a reputation for being socially responsible, provide career advancement opportunities, and encourage innovative thinking. The best way to sell the message about the need to engage employees to senior management is to show employees will be more productive and health costs will decline.

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Friday, May 14, 2010

Drug Coalition Launched

Towers Watson has launched the Canadian Rx Coalition, a new way for employers to manage employee drug plans through a co-operative alliance with other Canadian plan sponsors. Membership in the Canadian Rx Coalition will give organizations control over their pharmacy benefit plans. Members of the coalition will have access to better ways to proactively manage pharmacy costs and deliver optimal care, including collaborative purchasing and much improved transparency of the deal terms available to them through their pharmacy benefits manager. In addition, step-by-step approaches for drug utilization management, disease management, formulary development, and other efforts will have a sustainable, long-term impact on overall costs, quality, and individual health outcomes.

Employers Seeking Communication Methods

Many employers are exploring new communication methods to help plan members maximize their retirement savings, says the Association of Canadian Pension Management’s ‘Education Initiative Report,’ a summary of discussions with employers across the country regarding effective retirement plan member communication. Some of the effective communication strategies outlined in the report include messaging targeted to employees at different ages/career stages; the use of media and approaches that ensure information about the program is accessible, relevant, and personalized; and measuring success of communication initiatives so that tactics can be revised if necessary. The complete report is available for download at www.acpm-acarr.com

Bond Diversification Prudent Strategy

June Commuted Value Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including June 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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Thursday, May 13, 2010

Fix Outdated Rules, Leech Says

“Times have changed, so it’s time pension rules changed too,” says Jim Leech, president and CEO of the Ontario Teachers' Pension Plan. During his Economic Club presentation, Leech said there’s no better time than now to address the outdated limitations stifling Defined Benefit adoption among employers. Specifically, he pointed to the 30 per cent maximum ownership rule, a 1932 law, which puts local pension fund managers at a major disadvantage compared to foreign funds that are able to purchase 100 per cent of a Canadian company. While the Ontario government seems willing to take on change, Leech says the federal government needs to wake up to the reality behind such limitations, which do nothing more than “cost plan members and taxpayers money.” He is hopeful, however, that government, the private sector, and labour can come together as a task force and assess all the ideas currently on the table.

Changes To Impact Administrators

Recent changes contained in the Pension Benefits Amendment Act, 2010 will give plan administrators more guidance regarding their obligations to advisory committees, says Caroline Helbronner, partner, Blake, Cassels & Graydon LLP. Speaking at Blake’s ‘Pension and Benefits Law Seminar,’ she said the act will, among other things, require plan administrators to help members who are attempting to establish an advisory committee, by distributing notices and other information. Administrators will also be obliged to provide ongoing assistance to these advisory committees once they’re established. She also noted that changes to the act will soon give administrators the authority to use electronic means to send notices, statements, and other records to all members.

Retirement Research Centre Created

The Royal Bank of Canada is partnering with the University of Waterloo to create ‘the RBC Your Future By Design Retirement Research Centre at the University of Waterloo.’
The research centre combines the university’s insights and expertise on healthy aging with RBC’s expertise in providing Canadians with financial advice and solutions to help them succeed. The centre will focus on research related to areas that influence quality of life in retirement including health, leisure, wellness, lifestyle, financial, economic, science, arts, and technology. In addition, RBC is creating an undergraduate grant program called the ‘RBC Your Future By Design Retirement Research Undergraduate Fellowship at the University of Waterloo.’ This fellowship is designed to develop expertise in full-time undergraduates interested in retirement and aging as it impacts Canadians.

Employers Running Out Of Options

Employers are frustrated and running out of options to cut healthcare costs, says Rob Crofts, vice-president, life and health, Corporate Benefit Analysts. Speaking on ‘The ROI of Workplace Wellness’ at the Medtronic of Canada Ltd. and Tri Fit ‘Diabetes Prevention in the Workplace: Sharing Best Practices Breakfast Symposium,’ he said today’s lifestyles are tomorrow’s claims as the aging demographic will lead to higher benefit plan costs. For example, on average, a 42-year-old employee will submit $1,508 in annual health claims, while a 57-year-old will submit 50 per cent more, $2,255. However, with 70 per cent of ill health preventable, he said, employer objectives will change as they realize preventing illness is less expensive than treating it.

Sudra Joins Watermark

Mehul Sudra is a consultant at Watermark Human Capital’s Calgary, AB, office. His practice involves advising clients on the design and implementation of employee group benefit programs and human capital issues. His background includes working internationally in merger and acquisition finance, private wealth management, insurance law, re-insurance law, and litigation.

Chapter Updates Pension Plans

The ISCEBS Toronto Chapter will look at target pension plans in its ‘Pension Plan Update.’ Mark Davis and Susan Deller, from Eckler Ltd., will speak about target pension plans and how they impact plan sponsors and plan members. It takes place June 16 in Toronto, ON. For more information, visit http://www.iscebs.org/

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Wednesday, May 12, 2010

Hedge Funds Likely To Outperform

Hedge funds are likely to outperform, thanks to their ability to effectively navigate volatile markets. However, Andy Stewart, president and COO at Man Investments Inc., told an AIMA Canada panel discussion that he “wouldn’t be surprised to see the market down 20 per cent from here; I wouldn’t be surprised to see it up 20 per cent from here.” Performance from fund to fund can vary drastically, he said, and with the current level of market volatility, this is even more likely to occur. “There’s going to be a huge dispersion in hedge fund returns,” making it critical to carefully select fund managers who are able to dynamically adjust their investments based on market environment.

Healthy Retirees Cost More

Public Plans Face Funding Challenges

Multi-employer and public employer Defined Benefit plans in Canada face significant funding challenges, but plan sponsors are taking steps to address these concerns and ensure the long-term viability of these plans, says a survey by the International Foundation of Employee Benefit Plans finds. To help improve the funded status of their DB plans, a large majority of survey respondents (70 per cent) report their plans took a number of actions over the last year to strengthen their financial standing. The most common approaches taken by plans include examining actuarial cost methods and assumptions (41 per cent); reviewing, and revising if necessary, investment policies (36 per cent); examining benefit formulae to determine if they can be achieved in the future (29 per cent); seeking increased contributions without a comparable increase in benefit accruals (25 per cent); and revising actuarial cost methods and assumptions (24 per cent). To further improve solvency ratios, 44 per cent of DB plan sponsors report that it is likely or very likely that additional contributions will be needed to fund pension plans in 2010.

Foreign Exchange Markets Migrate

Global foreign exchange markets continued their migration to electronic execution last year as e-trading volumes increased amid a decline in overall FX trading activity, says Greenwich Associates. Customer electronic foreign exchange trading volumes increased seven per cent from 2008 to 2009. While this growth pales in comparison to the 25 per cent expansion in 2007/2008, the fact that electronic trading systems were attracting business while the overall market was contracting suggests that market participants continue to actively shift trading volumes to the platforms from other channels.

‘(Not) Pension Reform’ Examined

Robert Brown, of the University of Waterloo, and Dr. Lisa Butler Beatty, of Appleby Personnel, will look at expanding pension coverage in Canada by drawing on the experience (including lessons learned) of other countries and the Canadian experience to date in the plenary ‘(Not) Pension Reform’ at the ‘2010 ACPM National Conference.’ They will also discuss contributions, replacement income, the roles of the employer and financial institutions, and whether the system should be mandatory, voluntary, or somewhere in between. It takes place September 14 to 17 in Whistler, BC. For more information, visit http://www.acpm.com/

McDonald Speaks At Summit

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Tuesday, May 11, 2010

Innovation Needed To Serve ETFs

There is need for innovation and efficiency in servicing exchange traded funds, says a State Street Corporation ‘Vision Focus.’ ‘ETF Servicing: Moving Forward in a Market in Motion’ says ETFs currently account for more than $1 trillion in global assets under management and remain an efficient, low-cost, transparent and tax-friendly investment tool. However, ETF sponsors are facing new challenges as the funds continue to grow rapidly in both size and type. The report suggests the use of best practices such as Web-based service platforms and flexible and highly customized client service provided by staff who share their expertise in numerous areas of fund administration, including legal, tax, and treasury services.

Organizations Offer Summer Hours

Close to half (48 per cent) of organizations who participated in an Aon Consulting Canada ‘Rapid Ready.’ While 52 per cent of respondents do not offer flexible summer hours, results indicate that among those who do, the most common practice for compressing the work week involved working an extra half to one hour each day in order to leave earlier every Friday. The survey points to a wide range of practices employers follow to compress the work week as part of their summer hour policy. Of note, 70 per cent of respondents confirmed that they do not offer any form of flexible hours throughout the year. In Canada, because summers are short, flexible work arrangements are a non-financial benefit leveraged by employers to reinforce their work/life balance philosophy and help attract and retain employees.

CPPIB Moves Into Manhattan

The CPP Investment Board has purchased minority stakes in two office properties in the heart of New York City. The properties are on Avenue of the Americas and Lexington Avenue. The Avenue of the Americas original developer, Rockefeller Group International, Inc., will retain the remaining 55 per cent ownership interest and will continue to manage and lease the property. The CPPIB has bought 45 per cent of Lexington Avenue. SL Green will manage the building. The CPPIB, which makes investments on behalf of the Canada Pension Plan, had $7.1 billion worth of real estate assets as of the end of last year. These are its first properties in Manhattan.

Session Looks At Obesity

‘Health, Wellness and Obesity’ is the topic of the next Connex Health breakfast session. Kevin West, vice-president at Innomar Strategies Inc., will provide a case study of how employers, a manufacturer, and an insurer are working in co-operation to help employees who are morbidly obese successfully address their disease. It takes place June 10 in Burlington, ON. For more information, visit www.connexhc.com

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Monday, May 10, 2010

Wait Times Greatest Weakness

The greatest weakness of Canadian healthcare remains long wait times, says the Frontier Centre for Public Policy and Health Consumer Powerhouse ‘3rd annual Euro-Canada Health Consumer Index (ECHCI).’ The index evaluates the consumer-friendliness of Canada’s healthcare system and compares Canada to 33 European countries by assessing the extent to which each national healthcare system meets the needs of healthcare users. The report shows that despite high levels of government spending, healthcare in Canada is markedly less responsive to consumers’ needs than most European countries. For the second straight year, the Netherlands finishes with the highest overall score on the ECHCI. As with most of the top-performing countries, the Netherlands promotes efficiency in healthcare delivery by allowing competition between insurers and by maintaining independence between insurers and healthcare providers. Patient rights and access to information is another weak point for Canada. Bureaucratic obstacles and long waits often make it difficult for Canadians to access a second opinion about their own medical status and patient rights are not codified in an explicit legislative guarantee.

CAPSA Seeks Comments

The Canadian Association of Pension Supervisory Authorities is seeking comment on its draft Guideline on Fund Holder Arrangements, says the ‘Hewitt Monitor.’ The draft guideline is designed to provide guidance to pension plans of all types and sizes in all jurisdictions with their fund holder arrangements; identify permitted types of fund holder agreements; specify the roles and responsibilities of key players in a pension plan with respect to fund holder arrangements; and promote compliance and consistency in establishing and maintaining pension plan fund holder arrangements. It addresses areas such as fund holder principles and responsibilities of administrators, fund holders, custodians, employers, sponsors, third-party service providers, regulators, and the Canada Revenue Agency.

CAP Members Don’t Know

“A CAP member’s greatest risk is the risk that he/she does not yet know!”, say Tony Ioanna, vice-president, DC practice, eastern region, and Ivor Krol, analyst, financial risk consulting, with Aon Consulting. In the article ‘Understanding And Managing Stakeholder Risk’ at www.bpmmagazine.com, they say the fact that plan members only enrol once in their company retirement program means that they rarely retain essential information regarding the key aspects of their plan and often forget how to stay on-top of their retirement planning. This is why the education, information, and tools that CAP sponsors provide to their plan members are extremely important.

View From Europe Discussed

‘SRI: The view from Europe’ will be examined at the ‘Canadian Summit on socially responsible investment (SRI).’ Often hailed as a model for ESG research and asset management, the session will look at whether Europe’s reputation is warranted. Lisa Hayles, senior client relationship manager at EIRIS, and Cindy Rose, head of SRI research at Aberdeen Asset Management, will discuss the matter. It takes place June 14 to 16 in Toronto, ON. For more information, visit http://www.socialinvestment.ca/

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Friday, May 7, 2010

Criticial Illness Insurance Interest Grows

A growing number of plan sponsors are looking to add critical illness insurance to their benefits plans, says Steve Foye, of Aon Consulting. Speaking at the ISCEBS Toronto Area Chapter seminar ‘Fundamentals of Pensions and Group Benefits,’ he said a recent Aon survey found almost 16 per cent of respondents planned to do so. It provides for lump sum payouts to employees who survive a critical illness for certain period of time, typically 30 days. Plans may cover three to 20 illnesses, but at a minimum include the big three – cancer, stroke, and heart attack.

Retirement Date Impacts Income

"A worker with a Defined Contribution pension plan or RRSPs, who retired on May 15, 2008, will have close to twice as much income for the rest of his life as someone who retired almost a year later," says Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada. Speaking at a meeting with Ontario Finance Minister Dwight Duncan, he cited that statistic to show how the recession has affected pensioners. He outlined the cornerstone of the union’s proposed solution to the pension crisis – a national investment pension fund that would protect Defined Benefit pension plans that are in difficulty. Bankrupt companies would have the assets of their DB plans transferred to the fund, rather than be liquidated, which reduces retirees' benefits by up to 40 per cent. The fund could be administered by investment professionals, at minimal cost to governments.

Litigation Risk Increases

A federal government proposal to allow Defined Contribution plan members to draw down their accounts in a LIF-like fashion in retirement may increase the risk of litigation, says Ross Gascho, of Fasken Martineau. Speaking at its pension reform seminar, he said while the latest round of proposed pension reforms are slanted to Defined Benefit plans, it is suggesting allowing variable benefit payments for retirees with DC plans. However, if they run out of money and no longer feel loyalty to their employer, they may turn to the courts for a solution.

Two-tier System Impacts Plans

A move to a two-tier system of healthcare could have an impact on benefits plans. Cathy Smith, of Mercer, told the ISCEBS Toronto Area Chapter seminar ‘Fundamentals of Pensions and Group Benefits’ that if employees turn to private clients to avoid long wait times at public clinics, they may look to their employer's plan to cover the cost of that treatment. She expects governments in Canada to continue to offload services and drugs to the private sector. As well, the provinces are eyeing private clinics as one way to reduce their healthcare budgets. 

Amendment Notice ‘Big Change’

A proposal to require pension plans in Ontario to advise members of plan amendments prior to registration is a "big change." Peggy McCallum, of Fasken Martineau, told its pension reform seminar that included in the provincial government's current round of pension reform is a requirement that all current, deferred, and retired plan members be advised of almost all plan amendments before they are filed for registration. In the past, she said, most sponsors have not felt it necessary to give notice to deferred and retired members about amendments impacting active members and vice versa.

CPPIB Adds U.S. Shopping Centres

The Canada Pension Plan Investment Board has acquired an interest in four U.S. shopping centres through a joint venture with Kimco Realty Corporation. It believes its association with Kimco will assist in finding substantial quality opportunities. CPPIB is looking for assets which are dominant in their markets, where there are limits on the ability to add competitive new supply and the trade area is well developed with reasonable growth prospects. The newly-acquired shopping centres were well located and anchored by strong tenants including Wal-Mart and Costco.

Group Insurance Contract Renewed

The government of Newfoundland and Labrador has renewed its group insurance contract with Desjardins Financial Security. The new agreement includes measures that will optimize each partner’s operational efficiency. As well, Desjardins will substantially increase its presence in Newfoundland in terms of both staff and services. The plan has 35,000 employees and retirees as members.

Small Cap Returns Better

A new paper by Rob Bauer, Martijn Cremers, and Rik Frehen has just been posted on the ICPM website. It extends earlier research performed by Bauer, Frehen, Lum, and Otten in the 2007 paper ‘The Performance of U.S. Pension Funds: New Insights into the Agency Costs Debate.’ Key findings in the new paper show that domestic equity investments of U.S. pension funds tend to generate abnormal returns close to zero or slightly positive, contrasting the average under-performance of mutual funds. However, small cap mandates of Defined Benefit funds have outperformed their benchmarks by about three per cent per year. It says “While large scale brings cost advantages, liquidity limitations seem to allow only smaller funds, and especially small cap mandates, to outperform their benchmarks." Both papers are at http://www.rotman.utoronto.ca/icpm/

Emerging Markets Debt At Record Inflows

Emerging markets debt is hitting record inflows as institutional investors turn to developing nations to bolster fixed income returns, says Emerging Portfolio Fund Research Inc. So far this year, emerging markets bonds have attracted $12.8 billion, about 60 per cent more than the $8 billion recorded for all of last year. This year's inflows also surpassed the previous annual record set in 2005, when emerging markets bond strategies attracted a total of $9.7 billion in assets.

Garofalo Delivers Keynote

David Garofalo, senior vice-president, finance, and chief financial officer, Agnico-Eagle Mines Ltd., will deliver a keynote address at the ‘2010 FEI Canada Conference.’ Garofalo, who is also Canada’s CFO of the Year 2009, will discuss the history, fundamentals, and re-emergence of gold. He will also provide an overview of the market for gold equities. It takes place June 9 to 11 in Victoria, BC. For more information, visit http://www.feicanada.org/

Stewart On Panel

Andy Stewart, president and chief operating officer for Man Investments Inc., will take part in AIMA Canada’s panel discussion ‘Recovering from the Equity Hangover: Prescriptions from institutional managers.’ Stewart is in charge of the company’s managed account initiatives. Other panelists are James Suglia, principal and U.S. advisory sector leader – investment management, KPMG; Darren Spencer, institutional client service and marketing group, Dorchester Capital; and Daniel MacDonald, portfolio manager of alternatives for the Ontario Teachers’ Pension Plan. It takes place May 11 in Toronto, ON. For more information, visit http://www.aima-canada.org

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Thursday, May 6, 2010

Current System Works Well

The Investment Industry Association of Canada (IIAC) says the existing retirement system works well for most Canadians. However, its submission to the Department of Finance identifies several policy measures to strengthen the calibre of the retirement system. It wants the development of a national strategy to increase financial literacy among Canadians. As well, it recommends reforming the RRSP and TFSA contribution limits to assist middle income Canadians in bolstering their retirement savings and to help alleviate the inequality between Canadians who save in RRSPs and those who have access to Defined Benefit pensions.

Stock Picker’s Market Benefits Managers

Canadian active managers continue to benefit from a stock picker’s market in 2010, although the Greece-debt situation and looming interest rate hikes are weighing in on the markets in the second quarter, says the Russell ‘Active Manager Report.’ It found 75 per cent of Canadian Large Cap active managers beat the S&P/TSX Composite Index in the first quarter of 2010, the highest level since the second quarter of 2004. The Financials sector was a key contributor in the first quarter. The S&P/TSX Composite Index returned 3.1 per cent, but 80 per cent of the return stemmed from the Financials sector. Active managers in Canada are overweight the Financial sector on average, which helped them beat the benchmark. The report also found that 81 per cent of value managers outperformed the S&P/TSX benchmark compared to 76 per cent of growth managers. 

BMO Expands Offering

As part of the ongoing enhancement to its ‘Governex’ program, BMO Group Retirement Services has expanded its open architecture platform to now offer a wide selection of BMO Mutual Funds. This initial offering provides a broad range of domestic and global investment options diversified by asset class, sector, region, and specialized mandates. This addition to its platform introduces 47 institutionally priced BMO Mutual Funds, all suitable as CAP investments. This new selection increases its overall open architecture offerings to 115 fund selections.

Stress Builds On Adult Children

As the Canadian population continues to age and live longer, many adult children are taking on the added responsibility of caring for elderly parents while managing their own family and professional obligations, a new trend that could have a significant impact on their mental health. The Desjardins Financial Security ‘National Survey on Canadian Health’ shows that they are highly stressed and their burden will increase over the next few years. Of those assisting their parents, 47 per cent said that it was a significant source of stress for them. When asked to describe the most stressful activities, the majority said managing the schedules of children and parents, taking parents to one or more health professional, and psychologically supporting their parents through illness or disability. A third went on to say they expected that the needs of their parents would increase over the coming years.

Government Proposing Use Of Average Solvency Ratios

The federal government wants to introduce a new standard for establishing minimum funding requirements on a solvency basis that will use average – rather than current – solvency ratios. An Osler ‘Pensions & Benefits Alert’ says the three solvency ratios used in the determination of the average would be based on the market value of plan assets. Past deficiencies would be consolidated annually for the purpose of establishing solvency special payments. The new standard is intended to mitigate the effects of short-term fluctuations in the value of plan assets and liabilities on solvency funding requirements due to, among other things, volatility in the equity market and changes in interest rate levels, by allowing sponsors to better manage their funding obligations. It is seen by the federal government as a better alternative to extending the amortization period for solvency deficiencies.

Pier 21 Offers Global Equity Funds

Pier 21 Asset Management Inc. has launched Canadian-domiciled pooled funds for institutional investors of all sizes. The pooled funds are complimentary global equity strategies. The Global Value Pool is sub-advised by ValueInvest Asset Management, out of Luxembourg, and the WorldWide Equity Pool is sub-advised by Carnegie Asset Management, out of Copenhagen. CIBC Mellon has been selected as custodian and record-keeper for the funds.

Outsourcing Trend Accelerates

Complex investment challenges and a rising compliance burden are accelerating the trend toward investment program outsourcing by pension plans and non-profit organizations, says Northern Trust. This is being driven by three key factors. Structural changes in the movements of global markets are dramatically influencing where and how returns are generated, resulting in a wider array of investment options and specialist asset. As well, institutional investors are having difficulty monitoring manager performance and tracking risk in complex, sophisticated programs, especially in alternative investments. Finally, market volatility, investment program complexity, and tight resources for oversight have raised the potential for a plan to stray from its policy and its mission to invest for the best interests of the beneficiaries. Its solution provides clients with access to global investment expertise, across asset classes, for a custom manager-of-managers portfolio.

Less Than Half Calculate Retirement Savings Needs

Less than half of U.S. workers (46 per cent) report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement, says the ‘2010 EBRI Retirement Confidence Survey.’ This is comparable with the percentages measured from 2003 to 2009, but is lower than the high of 53 per cent recorded in 2000 and comes at a time when workers face an increasing individual responsibility for planning for retirement. The likelihood of doing a retirement savings needs calculation increases with household income, education, and financial assets.  In addition, married workers (compared with unmarried workers), those age 35 and older (compared with those ages 25 to 34), retirement savers (compared with nonsavers), and participants in a Defined Contribution plan report trying to do a calculation more often. Instead of doing a systematic retirement needs calculation, many workers simply guess at how much they will need to accumulate.

Healthy Eating Examined

Cherilee Garofano, a holistic nutritionist, will share her views on healthy eating in the workplace at Connex Health’s ‘8th Annual Employer Forum. In her presentation, she will discuss practical solutions to good nutrition in the workplace. She will also talk about power foods and their effectiveness on targeting weight loss, stress, energy, and productivity. It takes place May 13 and 14 in Ingersoll, ON. For more information, visit www.connexhc.com

Session On Buyouts Added

A session entitled ‘Buyout – LP Perspectives on the Buyout Industry’ has been added to the program at the ‘CVCA Annual Conference.’ A panel of Derek Murphy, PSP Investments; Joe Topley, Parish Capital Advisors Europe, LLP; Susanne Forsingdal, ATP Private Equity Partners; and Stephane Dupont, UBS Global Asset Management; will provide their outlooks on the buyout industry and what to expect over the coming years. Topics addressed will include how institutional investors are evolving their thinking on asset allocations to buyout funds, which strategies and geographies are most attractive, and whether fund terms are changing. It takes place May 26 to 28 in Ottawa, ON. For more information, visit http://www.cvca.ca/

Health Researchers Deliver Keynotes

Two leading occupational health researchers will deliver keynote addresses at the biennial ‘Canadian Association for Research on Work and Health (CARWH)’ conference. Opening the conference is Katherine Lippel, Canada research chair in occupational health and safety law, University of Ottawa. She will address the invisibility of the health consequences of precarious employment – jobs that are insecure, unprotected and/or poorly paid. As well, Kristan Aronson, professor, community health and epidemiology, Queen’s University; will discuss the challenges in research on work at night and its potential link to a higher risk of breast cancer. Hosted by the Institute for Work & Health, it takes place May 28 and 29 in Toronto, ON. For more information, visit http://carwh2010.iwh.on.ca/

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Wednesday, May 5, 2010

Restrictions May Be Shelved

The federal government’s proposal to eliminate certain investment restrictions currently imposed on private pension plans is disappointing, says a Heenan Blaikie ‘Pension Pulse.’  It calls the quantitative limits now in place outmoded in a modern investment regime that places more weight on fiduciary duties and the prudent person standard.  “While many in the pension investment community had hoped that all of the quantitative limits would be eliminated, this was perhaps too much to hope for in this round of regulatory changes,” it says. There are five such investment limits on the investment of a pension fund’s assets. The government wants to eliminate limits on ownership of real estate and Canadian resource property assets. It would keep the 30 per cent of the shares of an entity that may be used to elect the directors and 10 per cent of the book value of a fund’s assets in any one entity.

Overexposure Concerns Caisse

The head of the Caisse de dépôt et placement is concerned with the overexposure of banks in offshore tax havens. A report in the Globe and Mail says Michael Sabia told a Quebec National Assembly committee hearing that if the Caisse is going to pursue investments in chartered banks, it will require answers regarding investment strategies involving offshore tax havens. He was responding to opposition questions on why the Caisse had voted against a proposal at the CIBC annual shareholders meeting that the bank produce a report describing the extent to which it was exposed to tax haven countries.

Real Estate Ready For Rebound

Real estate investment is ready for a rebound, says Colliers International’s ‘2010 Global Investor Sentiment Survey.’ It found real estate investors in Canada and abroad are finding access to financing is becoming easier and the majority of private and institutional Canadian investors plan to invest in their home countries. While Canadian investors don't believe the market has bottomed out yet, 65 per cent plan to make real estate purchases in the next year. Globally, 64 per cent of global investors have the same intentions. Activities will start to pick up in the third quarter of this year.

Corporate Wellness Returns $3.50

Corporate wellness programs are returning $3.50 for every dollar invested, says Dr. Dwight Chapin, clinic director at the High Point Wellness Centre. Speaking on ‘Developing a Corporate Wellness Program: From Theory to Practice’ at the Industrial Accident Prevention Association’s ‘Partners in Prevention 2010: Ontario Health & Safety Conference & Trade Show,’ he said this increases to $4.30 when reduced absenteeism numbers are included. Peer-viewed research on the impact of corporate wellness programs also shows that there is a 27 per cent reduction in sick leave absenteeism, a 26 per cent reduction in health costs, and a 32 per cent decline in workers’ compensation and disability claims. Where wellness once was a “nice” thing to have which was eliminated when budget cuts were needed, today it is a key strategy as businesses look to manage health costs, he said.

Modest Gains For Equities

After a relatively smooth, upward ride in March, equity funds had a very volatile month in April that, for many, ended with modest gains, says preliminary performance data from Morningstar Canada. Funds that invest in small and mid-sized companies performed better than average last month, but the clear winners were those that target the precious metals sector. Thirty-six of its 43 Canada fund indices had positive returns in April, though 22 of them gained less than one per cent.

Use Of Non-vanilla Products Declines

Around the world, the use of non-vanilla products declined in credit, equity, and interest rate derivatives last year, says Greenwich Associates. Only 31 per cent of interest rate derivatives users around the world employed strategic derivatives in 2009, down sharply from the 52 per cent of market participants using them the prior year. Within the group that did use strategic derivatives, the instruments were most commonly employed to manage debt capacity and in balance sheet restructuring/rebalancing. Notional trading volume in interest rate derivatives increased by almost 10 per cent globally last year to more than $1.8 trillion.

European Managers Under Pressure

The European asset management industry is likely to remain under pressure, due to financial market conditions, the need to restructure, and pending regulatory reforms, says Fitch Ratings. It says that it does not expect fund industry profits will return to pre-crisis levels in the short term because of slow growth in assets under management and reduced cost saving opportunities. The European asset management industry experienced a cyclical recovery in 2009 as assets under management grew by 15.6 per cent, following a sharp retreat in 2008 when they declined 23 per cent. It also says the industry will face further challenges in the shorter-term, particularly as economic uncertainty will likely weigh on asset performance and inflows in 2010.

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Tuesday, May 4, 2010

Financial Advice Ignored

The Investment Funds Institute of Canada wants the Manitoba government to recognize the importance of financial advice as it considers strategies for strengthening the retirement income system. Its submission to Manitoba’s minister of finance, ‘Mechanisms for Expanding Pension Coverage and Retirement Income Adequacy in Canada,’ says reforms should look beyond pensions to a wider array of retirement savings solutions. It says much of the debate around the retirement income system so far has been overly focused on pension plans, ignoring non-registered financial assets accumulated by Canadian households such as tax-free savings accounts and other savings outside of RRSPs. As well, financial advice has been overlooked in the debate.

IASB Would Eliminate Smoothing

Companies would have to recognize gains and losses in their Defined Benefit plans immediately instead of amortizing, or smoothing, them over an extended period of years, says the International Accounting Standards Board exposure draft of amendments to IAS 19. The proposals call for the elimination of the option of a company to defer gains and losses in the value of DB assets, or in its estimate of DB obligations. Instead, it says companies should recognize these gains and loses immediately. The exposure draft, at http://www.iasb.org, can be commented on until September 6.

Canadians More Optimistic

Positive economic indicators and stock market gains have helped Canadians feel more optimistic about their financial health of late, says the Russell Financial Health Index. It is at its highest level since the fourth quarter of 2008, up to 51.1 points from its low of 47.9 points in the third quarter of 2009. Investors who recently used the online calculator displayed less concern across almost all of the 11 potential areas of financial concern listed. Having sufficient income to cover essentials saw the greatest decrease in concern among Canadians. Investors are also less concerned about having enough income for their lifestyle, riding out Canada's economic performance, and having a reliable source of income.

GE Offers Commodities Product

GE Asset Management (GEAM) has launched its first commodities product for institutional investors. The GE Active Commodities strategy is an actively managed portfolio currently utilized as an investment allocation within the GE U.S. Pension Trust. It is an attractive investment option for those seeking to improve portfolio diversification, who want protection from unexpected inflation, and who are looking to participate in the current bullish long-term outlook for the asset class.

Denison Speaks At Conference

David F. Denison, president and chief executive officer, Canada Pension Plan Investment Board, and Henry Hu, risk director for the Securities and Exchange Commission in the U.S. are among the keynote speakers at the ‘2010 IGN Annual Conference and AGM. Theme of the event is ‘The Changing Global Balances.’ Hosted by the Ontario Teachers’ Pension Fund and the Canada Pension Plan Investment Board, ICGN is partnering with the World Economic Forum for this event. It takes place June 7 to 9 in Toronto, ON. For more information, visit http://www.icgn.org/

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Monday, May 3, 2010

Fiscal Austerity Coming For Some

Europe and the U.S. are facing fiscal austerity in their futures, says Craig Alexander, senior vice-president and chief economist for TD Bank Financial Group. The question, he told those attending TD Asset Management’s ‘7th Annual Sharing of Knowledge Learning Series,’ is whether governments will do it voluntarily or be forced into it by financial markets. Governments are facing bigger deficits because of their stimulus spending during the financial crisis. While this had a positive psychological impact, he said there are risks associated with the timing and rebalancing of fiscal and monetary policy. However, he said the recovery is real, although fragile in industrialized countries.

Complexity Lessens When Self-interest Removed

While many have written on pension reform, none has taken a position that puts the interests of the average working Canadian front and centre, says Warren Laing, CEO of Open Access. In an article now on the Benefits and Pensions Monitor website, ‘A New Bias: An Unprecedented Opportunity To Initiate True Reform,’ he says the sponsors of many substantive pieces on pension reform would argue that creating a fiduciary‑based DC model is either unnecessary or too complex. “As much as ‘easy’ and ‘right’ are seldom brothers, complexity is lessened considerably when self-interest is removed. Furthermore, it becomes difficult to argue that a fiduciary, highly skilled at investment selection and acting solely in the best interest of its plan members, is not a necessity without unveiling a bias that has little to do with the financial well being of a plan member, but has much to do with protecting a third pillar model that has led to high fees, often times inferior proprietary product offerings, the creation of ill-equipped, laymen investors, and poor disclosure.” Visit www.bpmmagazine.com to read the article.

Fund Demand Could Limit Rate Increases

Pension fund demand for long bonds could limit the extent of rising interest rates, says Kevin Le Blanc, vice-chair at TD Asset Management. Speaking at its ‘7th Annual Sharing of Knowledge Learning Series,’ he said economic forecasts and industry reports have long been predicting rate increases. And, as rates rise, pension funds will start moving in. However, their demand will put a cap on how high rates will go. He suggested that plans now on the sidelines “be ready for action” by setting up a governance structure, establishing trigger points, and committing to a manager.

Aon Establishes New Practice

Aon Consulting Canada has developed a new practice. Aon Benefits Solutions’ approach pre-tests products and services and pre-qualifies market access for the delivery of health, retirement, and lifestyle programs to employers and their employees. Its solutions are scalable to satisfy group benefit program needs for all insurance, retirement, and lifestyle needs. The practice is meant to be an extension of the client and will be the client's administration resource for claims, enrolment, and funding.

Summit Explores Innovation

‘The Canadian Summit on Socially Responsible Investment’ will explore how innovation is changing the face of socially responsible investment and how SRI is revolutionizing conventional investment. Sessions will look at cleantech, oilsands issues, public attitudes, advisor/client relationships, divestment versus engagement, and innovations in environmental social governance (ESG) research and investment management. It takes place June 14 to 16 in Toronto, ON. For more information, visit http://www.socialinvestment.ca/

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