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April 16, 2022

MOST STAYED HOME TO WORK

As the pandemic dragged on, the impression was that more and more Canadians were working from a beach in Antigua or a Parisian Café. However, a survey from the National Payroll Institute says the truth is most Canadians (90 per cent) continued to work from their home province throughout the pandemic. The survey also indicated that those who relocated tended not to stray too far from home, with three quarters (73 per cent) remaining in Canada and one quarter (26 per cent) in the United States. Still, “although working from anywhere isn’t prevalent yet, Canadian employers would be wise to get ahead of the curve by preparing policies and processes to offer the increasing flexibility that workers are seeking out,” says Peter Tzanetakis, president of the National Payroll Institute. “In February 2020, working from home and hybrid models were not top of mind. Today, flexibility is an expectation and key differentiator for businesses competing for talent in a limited pool. It’s not a huge leap to think that the ability to work not just from home, but from anywhere will be next.” Doing so comes with significant payroll complications for both employers and employees. Despite the relatively low prevalence of Canadians actually working from other provinces or countries, nearly one out of four replied that they considered working from abroad while keeping the same job and 39 per cent said that they would keep their current job, but live in another province or country if their employer permitted it. The survey also shows 77 per cent of respondents indicated that they would not accept any pay decrease as a trade-off for geographical freedom. And those few who are willing to sacrifice some salary are not willing to sacrifice much. Only four per cent would accept a decrease of 20 per cent or more.

April 16, 2022

REPRODUCTIVE EXPENSES COULD BE COVERED

Although costs related to the use of reproductive technologies are already eligible expenses for the purposes of the medical expense tax credit (METC), they are not available to those who need to pay the medical expenses of others in order to become a parent, says an Aon ‘Information Bulletin.’ The federal budget 2022 proposes to allow medical expenses related to a surrogate mother or a sperm, ova, or embryo donor, that are incurred in Canada for 2022 and subsequent taxation years, to be claimed under the METC. This would include costs that have been reimbursed to a surrogate for in vitro fertilization expenses and fees paid to fertility clinics and donor banks in Canada in order to obtain donor sperm and ova. Allowing these costs as eligible METC expenses is relevant for benefit plan sponsors who could begin to allow for related expense coverage in their benefits plans, including their healthcare spending accounts. This change will provide opportunities for plan sponsors to provide new avenues of conception support coverage for all employees with family aspirations.

April 16, 2022

INFLATION REMAINS PARAMOUNT CONCERN FOR BOC

The Bank of Canada (BoC) is stressing inflation risk is the paramount concern currently, says an HSBC Asset Management ‘Special Edition Canada Outlook.’ However, despite the ongoing geopolitical tension, the Canadian economy is strong and needs higher interest rates. It says the BoC expects the Canadian economy to grow with considerable momentum with a second quarter GDP projections of six per cent. As the economy returns to pre-COVID normal activities, many Canadian commodity exports will benefit from high external demand. However, amid the current elevated inflation situation and the favourable growth outlook, the BoC is concerned about the upside inflation risk and is ready to act forcefully using its policy rate if needed to return inflation to target. It raised its policy rate by 0.5 per cent last week and also signaled a faster rate normalization towards a more normal setting than the last tightening cycle (2017-2018) as elevated inflationary pressure, exacerbated by the Russia-Ukraine situation, drove already high inflation even higher and even more persistent (to average almost six per cent in its first half of 2022 projection). With the policy rate rising towards a more normal setting, which the BoC estimates in a range of two to three per cent, monetary policy will moderate domestic demand more in line with supply to ease inflationary pressure while keeping inflation expectations anchored.

April 16, 2022

PRIVATE DEBT STARTS SLOWLY

Private debt funds entered 2022 with a softer quarter compared to the same period in 2021, says Preqin’s ‘Q1 2022 Private Debt Quarterly Report.’ Global private debt funds closed in the second quarter secured $33 billion of capital through 22 funds, a softer quarter compared to the first quarter of 2021, which saw $43 billion raised by 59 funds. This trend was partially driven by significant macro risks as well as potential over allocation by some investors as 2021 was a record year for private debt fundraising.

April 16, 2022

L'AHELEC HAS NEW ROLE

Christophe L’Ahelec (CFA) is managing director, head of public markets at the University Pension Plan. He joined the plan in 2021 from the Ontario Teachers’ Pension Plan where he was senior principal ‒ external managers for Capital Markets.

April 16, 2022

PENSION PLAN INNOVATION DISCUSSED

James Pierlot, founder and CEO of Blue Pier; Alex Mazer, co-founder and co-CEO of Common Wealth Retirement; and Brian McClennon, president and CEO of Link Investment Management; will discuss ‘Disruption by Innovative Pension Plans’ at a CPBI Pacific session. They will provide some solutions and food for thought on what some plan sponsors are doing in this space. It takes place May 12. Information is at https://www.cpbi-icra.ca/Events/Details/Pacific/2022/05-12-Disruption-by-Innovative-Pension-Plans

April 14, 2022

INVESTMENT IN CANADA SUPPORTS GROWTH

In 1990, Canadian pension funds invested approximately 80 per cent of all their equities in Canada. Today, that has fallen to only one per cent of their assets in Canadian public equities with some holding more in China than they hold in Canada, says Daniel Brosseau, president of LetkoBrosseau. He told the CFA Society Toronto ‘2022 Annual Pension Conference’ session on ‘Should Canadian Pension Funds Continue to Reduce their Canadian Equity Allocations? Who Should Care?’, this trend is not unique to Canada, Canada is amongst the lowest or is the lowest in its domestic investments. There are a number of reasons for this, he said. Canadian returns have lagged U.S. returns over the last 10 years. However, over a 20-year period, the returns are the same. Over different time periods, Canadian market returns were better than those of emerging markets and all the other markets in the world, “so it’s probably not returns.” Diversification is another explanation that doesn’t hold up to scrutiny. “We’ve come to such low levels in Canada and in Canadian equities that diversification really is kind of irrelevant to either holding Canadian equities or diversifying the equities we hold,” he said. The most common reason it hears from its clients is indexing. Since Canada represents three per cent of the global equity market, Canadian pension funds invest three or four per cent in Canadian equities. However, if economic development and growth comes from investment, if Canada wants to create, fox example, high quality, well-paying jobs, investment is essential. “This is how Canada will create its future,” said Brosseau.

April 14, 2022

CDPQ NEARS GENDER TARGETS

The Caisse de dépôt et placement du Québec (CDPQ) experienced a leap from 22 per cent in 2020 to 29 per cent in 2021 in female representation among its nominee directors on the boards of its portfolio companies, nearly reaching its target of 30 per cent by 2023. Its ‘Sustainable Investing Report’ for the year ended December 31, 2021, also shows women represent 39 per cent of its executive committee and 25 per cent of its investment positions. The report sets out its tangible results obtained during the past year. It also shows in September 2021, it announced an ambitious climate strategy to achieve its net-zero objective by 2050 and strengthen its leadership in climate matters. This strategy is based on holding $54 billion in low carbon assets by 2050; achieving a 60 per cent reduction in the carbon intensity of the total portfolio by 2030 compared to 2017; creating a $10-billion transition envelope to decarbonize the heaviest-emitting sectors; and completing an exit from oil production by the end of 2022. Social achievements include the adoption of a new workplace equity, diversity, and inclusion policy to guide its actions and initiatives. “Despite mounting crises, we have remained focused on our long-term objectives. We continued investing constructive capital and creating sustainable value for our depositors and the communities where we are present locally and internationally,” says Charles Emond, president and chief executive officer of CDPQ.

April 14, 2022

PHARMACARE FACES ‘INCONVENIENT REALITY’

If the pharmacare legislation follows the advice from the Advisory Council on the Implementation of National Pharmacare to enshrine the Canada Health Act principles and national standards of pharmacare to provide for a dedicated funding arrangement, it faces an “inconvenient reality,” says Chris Bonnett, principal of H3 Consulting, in a ‘C.D. Howe Institute Intelligence Memo.’ Private payers, mostly employers, spend more than $13 billion annually for prescription drug insurance. Those plans consistently earn high levels of satisfaction from more than 23 million Canadians. However, they have become institutionalized and are almost never considered in national drug policy and program decisions. The most important problem remains, he says, in the “lack of good quality universal drug insurance. There are no precise numbers, but millions of Canadians experience drug costs that are too high relative to their incomes. Those people should be the targeted priority.” Instead, the current Liberal-NDP agreement implies a cumbersome, fully public solution “mismatched to the problem.” While inadequate drug insurance is an unsolved and growing problem for many Canadians, it is not clear if, or how quickly and completely, the Liberal-NDP agreement might solve the drug insurance problem. At the moment, it appears that a public single payer national pharmacare plan has been resurrected, with those favouring a universal mixed-payer model are largely outside the public policy tent.

April 14, 2022

QUALITY OF DATA BECOMES FOCUS

New research from quant technologies provider SigTech reveals there is a growing focus among fund managers on improving the quality of data. It found 77 per cent of managers believe that to achieve above-average returns in the future, accessing high quality data and having the technological capabilities to process it efficiently is becoming increasingly important. It says this explains why 76 per cent of fund managers surveyed expect to increase their budget for data over the next few years, with one in five (20 per cent) expecting a dramatic increase. Fixed income and equities were identified as areas where fund managers experience the most difficulty in accessing high quality data.

April 14, 2022

CAAT MAKES APPOINTMENTS

Michael Dawson (CPA, CFA, CA) is chief financial officer of the CAAT Pension Plan. Before joining the plan, he worked in senior roles at PwC Canada and BlackRock. Andrew Whale (FSA, FCIA, CFA) is vice-president, strategic risk management. Considered a Canadian expert on pension risk management, asset-liability modelling, and public sector pension plans, previously, he was a principal at Mercer. Viktoriya Mykhaylychenko is a senior policy advisor. She joined the plan in 2020 as a policy analyst. Lilach Frenkel is director, strategic risk management. She joins the plan from Aon where she was, most recently, a partner.

April 14, 2022

RESILIENCE DEVELOPMENT OUTLINED

‘Resilience and Respect in the Workplace’ will be the focus of a CPBI Southern Alberta Region session. Gallagher Benefit Services’ Farzeen Mawji, national practice leader, inclusion and diversity; Dean Schroeder, a senior practice leader and human resources consultant; and Dolly Hussey, a human resources associate; will outline the many challenges that can arise in an employee’s life that will test their resilience and discuss how employees can learn, train, and further develop the skill of being resilient. It takes place May 19. Information is at https://www.cpbi-icra.ca/Events/Details/Southern-Alberta/2022/05-19-Resilience-and-Respect-in-the-Workplace

April 13, 2022

CHINA SEEKS RETURN TO STATUS QUO

China as an economic power didn’t just show up out of nowhere, says Marko Papic, a partner and chief strategist at the Clocktower Group. Speaking at the CFA Society Toronto’s ‘2022 Annual Pension Conference’ on ‘Is China Still Investable?’, he said on the hand the U.S. as an economic power “literally shot from nowhere.” China was a global economic power for a long part of history. So when it thinks about challenging the current order, “it doesn’t see it as a challenge, it sees it as a return of the status quo,” he said. Up until 200 years ago, it was the world’s largest economy. However, he doesn’t see this becoming a Cold War between the U.S. and China. First of all, the biggest constraint to the U.S. is that its allies couldn’t care less what America thinks about China. This is because the rest of the world is pursuing their own foreign policy, independent of the U.S., “because we’re in a world where neither the U.S. or China are really powerful enough to compel their allies to follow them.”

April 13, 2022

HUMAN RIGHTS AT ESG INTERSECTION

At the intersection of the S (social) and G (governance) aspects of ESG are discussions centred around human rights in the supply chain, especially with all the news in the last couple of years around forced labour, says AIMCo’s responsible investment team. Citing S&P, it says there is legislation in the works that will increase the importance of supply chain traceability and social risk management. The U.S. is expected to continue restricting imports where concerns of forced labour exist, pushing companies to better evidence of how they are monitoring human rights in their supply chains. Another issue spanning both E (environmental) and S is the concept of a ‘just transition’ ‒ ensuring that as the world transitions to a lower carbon economy, there are plans to account for impacts on developing nations and vulnerable populations. AIMCo is an active contributor to Climate Action 100+ and the Just Transition is one of the 10 benchmarks that it discusses with companies during engagements. The trends it is watching are at Responsible Investment Trends.

April 13, 2022

VENTURE CAPITAL DISBURSEMENTS SET NEW RECORD

Canadian venture capital disbursements set a new Canadian record in 2021, raising $13.58 billion by Canadian companies from 716 financings, says the ‘Canadian Venture Capital Report’ from CPE Analytics. The record-setting Canadian VC investment pace is continuing to be driven by U.S. investors. They invested $7.6 billion in Canadian companies, accounting for 56 per cent of the total disbursements. Canadian investors contributed a 28 per cent of the total disbursements, down from pandemic-indued record high of 48 per cent. The previous worst in 2017 was 35 per cent.

April 13, 2022

INVESTORS BEARISH OVER RATE HIKES

Investors are bearish as a result of fears over the U.S. Federal Reserve’s moves to raise rates, says the Bank of America’s ‘April Global Fund Manager Survey.’ Fund managers’ expectations of global growth were at a net -71 per cent in April, down from a net -50 per cent in March and the lowest level ever in the history of the survey. A global recession tops the list as the biggest tail risk for managers at 26 per cent (previously 21 per cent in March), followed by hawkish central bank hikes at 25 per cent (previously nine per cent in March) and inflation at 21 per cent (18 per cent in March). It also shows 66 per cent expect stagflation (below-trend growth and above-trend inflation), which was up from 62 per cent in March, and represented the highest percentage since August 2008.

April 13, 2022

JOINT VENTURE DEVELOPS OFFICE SPACE IN INDIA

TATA Realty and Infrastructure Limited and the Canada Pension Plan Investment Board (CPP Investments) have announced a new joint venture to develop and own commercial office space across India. The joint venture will target stabilized and development assets, aiming to reach over INR 50 billion in assets under management. The joint venture will be seeded with two assets, Intellion Park Chennai and Intellion Edge Gurgaon, both in the national capital region of Delhi Intellion Park Chennai is a LEED platinum rated asset occupied by leading domestic and international businesses.

April 13, 2022

HONCE JOINS BURGUNDY

William Honce (CFA, CAIA) is a senior relationship manager with Burgundy Asset Management. He joins the firm from SLC Management where he was managing director, business development.

April 13, 2022

PHARMACOGENETICS BARRIERS OUTLINED

CPBI Saskatchewan will examine ‘Pharmacogenetics – Leveraging genetics to improve patient treatment and reduce spending.’ Michel Cameron, assistant director, pharmacogenomics, at Biogeniq, will explain how it can result in better patient care and cost-savings as well as outline challenges and possible barriers to implementation. It takes place May 26. Information is at https://www.cpbi-icra.ca/Events/Details/Saskatchewan/2022/05-26-Pharmacogenetics-Leveraging-genetics-to

April 13, 2022