LB_Invesco.jfif

Daily News Alerts

Consider signing up for our Daily News Alert Email to receive relevant industry news, headlines and articles delivered directly to your inbox.

August 27, 2021

ASSETS SHIFT TO REDUCE SOLVENCY RISK

The asset mix in Canadian pension plans has shifted in recent years. However, this may be due to efforts to reduce solvency risk instead of boosting returns, says a research note from the Bank of Canada. It looked at the evolution of pension portfolios between 1998 and 2018 and found that, over that time, as interest rates declined, 64 per cent of pension plans abandoned a traditional asset mix of 60 per cent stocks and 40 per cent bonds. For about one-third of the plans, this move was significant, with more than 30 per cent of total assets turned over, says the research. “In its place, they opted for portfolios with more alternative assets, such as private equity, real estate, and infrastructure, but a majority allocation in bonds,” it says. While a shift to alternative assets is often seen as a move to enhance returns, the researchers argue that managers were actually seeking to reduce their solvency risk in the face of low interest rates by opting for larger bond holdings. “The larger allocation to bonds ‒ with safer and lower returns ‒ is hard to square with reaching for yield. Instead, we argue that managing solvency risk can explain this broad shift,” it says. For plans that overhauled their portfolios, most reached 100 per cent funded status and saw their solvency ratio volatility decline by 30 per cent. In contrast, plans that kept a traditional 60/40 asset mix ran a solvency deficit in 2018.

August 27, 2021

CUPE CHALLENGES OMERS POLICY

The Canadian Union of Public Employees (CUPE) has filed a legal challenge with Ontario’s independent pension regulator over an Ontario Municipal Employees Retirement System (OMERS) policy for paramedic plan members’ access to early retirement options. It says OMERS has two classifications for its members: normal retirement age 65 (NRA 65) and normal retirement age 60 (NRA 60). NRA 65 members can retire with an unreduced pension at the age of 65 at the earliest, or after 30 years of service when the earliest retirement age is age 55. NRA 60 members can retire with an unreduced pension at age 60, or after 30 years of service and their earliest retirement age is 50.The challenge filed with the Financial Services Regulatory Authority of Ontario (FSRA) says OMERS had prohibited unions representing paramedics from negotiating earlier retirement options with employers from 2005 to 2020, despite police and firefighters in the plan already having earlier retirement options. While OMERS extended the earlier retirement option to paramedic members at the beginning of this year, CUPE says OMERS’ rules for transitioning paramedic members from NRA 65 to NRA 60 put members at risk of a reduced pension.

August 27, 2021

BUSINESSES MUST COMPLY WITH MEDICAL OFFICER

Ontario now requires businesses or organizations to operate in compliance with “any advice, recommendations and instructions” issued by the Office of the Chief Medical Officer of Health or by a medical officer of health after consultation with the Office of the Chief Medical Officer of Health, says a Hicks Morley ‘FTRNow.’ Regulation (O. Reg. 577/21) amends the ‘Rules for Areas at Step 3 and at the Roadmap Exit Step’ with respect to the establishment and implementation of vaccination policies by businesses or organizations. Specifically, it requires the business or organization to establish, implement, and ensure compliance with a COVID-19 vaccination policy or set out the precautions and procedures that the business or organization must include in its COVID-19 vaccination policy.

August 27, 2021

DELTA MAKES MARKETS JITTERY

Financial markets are going to get jittery in September amid concerns over the Delta variant, China’s regulatory attacks, and shifting monetary policies, says Nigel Green, CEO of deVere Group. This means investors should review and potentially rebalance their portfolios sooner rather than later. “History teaches us that October is tricky for stock markets having been the month in which some of the biggest market routs have begun. But this year, I believe the autumnal volatility is going to be seen earlier, with markets getting jittery in September,” he says. There are potential triggers for the expected market rout. Markets are likely to pull-back due to expected slower economic growth, which is being driven by serious worries over the Delta variant of COVID and how it could force further restrictions, impacting many sectors. In addition, much of the talked-about post lockdown pent-up demand has now burned out. Markets will also be carefully monitoring for signs of a broader regulatory crackdown on Chinese tech companies which appears to highlight its new thinking and its increasing push for control of private enterprise. Finally, markets could throw a ‘taper tantrum’ as central banks signal that their massive stimulus packages – which have supported asset prices – are fading. Despite these significant headwinds, he expects the market bull run experienced throughout 2021 to remain for the rest of the year.

August 27, 2021

CORE FIXED INCOME EXPLAINED

‘A Core Fixed Income Solution: The Long/Short Credit Strategy’ will be explained at a Benefits and Pensions Monitor Meetings & Events webinar. YTM Capital’s Karl Burnham, a portfolio manager, and Kevin Foley, managing director for institutional clients, will explain the long/short credit strategy, differentiate its aspects, and discuss its role in a portfolio. It takes place September 28. Information is at https://register.gotowebinar.com/register/8682672217370619150