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August 18, 2022

JAPAN STANDS OUT WITH HEALTHCARE

The standout country when it comes to exemplary healthcare services is Japan, says Radar Healthcare. Japan achieved a score of 78.5 out of 100, which was helped by a top ranking of 9.5 out of 10 when it comes to the quality of healthcare provided to residents. Despite a large population of 125.6 million people, it managed to maintain a fairly low yearly compulsory healthcare cost per person, with an average total of £3,725, a ranking of six out of 10. In second place came Germany with a score of 73.5. Hailed as the second-most progressive country in the world, its ranking was obtained thanks to a human development score of nine, which refers to how many people live long and healthy lives, have a decent standard of living, and achieve a wealth of knowledge. Australia, scoring a commendable 71.5 was third. Canada’s was only ranked sixth among countries spending the most on healthcare and 12th in number of hospitals per population. It was not ranked among the top 15 countries globally with the best quality of care (South Korea), most affordable healthcare (Luxembourg), and least affordable healthcare (Greece).

August 18, 2022

CDPQ GENERATES NEGATIVE RETURN

The Caisse de dépôt et placement du Québec (CDPQ) generated a minus 7.9 per cent return during what it terms “the worst six-month period of the last 50 years for stock and bond markets. Despite the negative number, this was still significantly above its benchmark portfolio return of minus 10.5 per cent. “The first six months of the year were very challenging. The mix of factors we faced had not been witnessed in several decades: spiking inflation that triggered rapid and sharp interest rate hikes, rare simultaneous corrections in both stock and bond markets, fears of an economic downturn, and the war in Ukraine with its many collateral effects,” says Charles Emond, president and chief executive officer of CDPQ. Despite this, its portfolio continued to clearly outperform its benchmark portfolio due to the strategy’s evolution since the pandemic started, sound asset diversification, and the quality of execution by its teams. The $28.2-billion decrease in net assets to $392 billion was due to investment results of minus $33.6 billion and $5.4 billion in net deposits.

August 18, 2022

IMPACT OF NEGATIVE SCREENING OVERSTATED

Investors who exclude sin stocks from their portfolios, hoping to hurt these companies’ valuations and access to capital, may be disappointed in the actual impact, says a paper by Robert Eccles, a visiting professor at Said Business School at Oxford University; Shiva Rajgopal, a professor at Columbia Business School; and Jing Xie, an assistant professor at Hong Kong Polytechnic University. ‘Does ESG negative screening work?’ found that negative screening for sin stocks has little effect on the firm valuations, stock prices, exits, and returns when compared to non-sin stocks of companies with similar fundamentals. “In sum, we argue that claims that negative screening hurts sin stocks are somewhat overstated,” say the authors. “The underlying empirical reality, at least since 2000, is more nuanced and complicated and depends on the research design used.”

August 18, 2022

CONSULTANT ADVICE SOUGHT ON ESG

As asset owners address increased complexity of portfolio management; incorporate environmental, social, and governance (ESG) principles into their portfolios; and mitigate ongoing market volatility, they are seeking services offered through investment consultants, says Cerulli Associates. It found 35 per cent of asset owners are likely to start using or increase their use of investment consultants and 53 per cent expect to use investment consultants over the next two years at roughly the same rate they are using them today. About 13 per cent expect to use them more often, with a significant minority (22 per cent) expecting to begin using an investment consultant for the first time. “Investment consultants provide services that go far beyond identifying investment options and conducting due diligence,” says Laura Levesque, an associate director at Cerulli. “Even smaller clients that typically did not use consulting services are likely to see value in their expertise as the markets and the investment landscape grow more complex. Re-evaluating asset allocation, portfolio risks, portfolio holdings, and capital markets expectations are topics that are expected to be discussed with investment consultants in 2022.

August 18, 2022

LEVEL OF DREAD ABATING

Investors remain bearish about the global economy, but their level of dread is abating as hopes rise and inflation and interest rate shocks begin to end, says the Bank of America’s ‘August Global Fund Manager Survey.’ It found expectations of global growth were at a net negative 67 per cent in August, up from negative 79 per cent in July, which had marked a new low in the history of the survey. A net 72 per cent of survey respondents expect global profits to decline over the next month, down from a net 79 per cent in July, which was the highest mark since October 2008. Inflation tops the list as the biggest tail risk for managers at 39 per cent (up from 33 per cent in July), followed by a global recession at 24 per cent. It shows 90 per cent expect stagflation (below-trend growth and above-trend inflation).

August 18, 2022

ONTARIO TEACHERS’ ACQUIRES HOSPITAL STAKE

The Ontario Teachers’ Pension Plan Board (Ontario Teachers’) will acquire a significant majority stake in Sahyadri Hospitals Group, a private hospital chain in the state of Maharashtra, India; from the Everstone Group. Sahyadri has eight hospitals with 900 operating beds and 300 critical-care beds. In addition, the hospital chain has plans to grow capacity by over 500 beds during the next five years. Its facilities are concentrated around the city of Pune, which is the second largest city in Maharashtra by population.

August 18, 2022

REDUCING MENTAL HEALTH LOSS DISCUSSED

‘Losses in Mental Illness Productivity and Disability Can Be Reduced’ will be examined at a Benefits and Pensions Monitor Meetings & Events session. Mark Faiz, CEO of Personalized Prescribing Inc., will quantify the losses in the workplace due to mental illness and a mitigating service (pharmacogenomics) that is proving to reduce these losses. It takes place September 13. Information is at https://register.gotowebinar.com/register/4191610329404994317

August 17, 2022

PROJECTED FUNDED STATUS IMPROVES SLIGHTLY

The projected funded ratio of defined benefit pension plans in Ontario has improved slightly, says the Financial Services Regulatory Authority of Ontario (FSRA). In general, this means during the report period, plans remained well funded. Its latest quarterly solvency report as at June 30, finds the funded positions of pension plans continue to perform at healthy levels despite a small decrease for the first time in about two years. Given the rapidly changing economic environment, it encourages plan sponsors and administrators to consider various stress tests and to continuously monitor plan risks. It says that good risk management is a key characteristic of a well-run plan and an important part of the plan administrator’s role in protecting members’ benefits. An effective framework for managing risk will assist plan administrators in keeping plan assets safe, protects the plan from adverse risks, and supports the plan in meeting its objectives. The two reports are at ‘Q2 2022 Estimated Solvency Funded Status of Defined Benefit Pension Plans in Ontario’ and ‘2021 Report on the Funding of Defined Benefit Pension Plans in Ontario.’

August 17, 2022

CHILDREN IMPACTED BY LAST TWO YEARS

LifeWorks’ monthly ‘Mental Health Index’ shows 56 per cent of Canadians report negative impacts on their children due to events over the last two years. Additionally, almost twice as many Canadians’ buying/investment decisions are influenced by the treatment they receive from their company versus how a company behaves environmentally. The index found that Canadian workers are experiencing increasing strain with an unfavourable mental health score.  The score for July is 65 points out of 100, a slight increase from June’s score of 64.1 points. Twenty-seven per cent of Canadians report their children experience anxiety about the future due to events of the last two years. Additionally, children 15 years of age and older have more anxiety about the future than the Canadian average. As well, almost twice as many Canadians’ buying/investment decisions are influenced by how a company treats its employees versus the company’s environmental behaviour. Thirty-three per cent of respondents are influenced by how a brand/company treats its employees and 15 per cent are influenced by how a brand/company responds to social justice issues.

August 17, 2022

PRE-REGISTRATION UNDERTAKING REQUIRED FOR CRYPTO PLATFORMS

The Canadian Securities Administrators (CSA) expects crypto trading platforms that continue to operate in Canada to provide a pre-registration undertaking to their principal regulator to continue operations while their application is reviewed. By giving these undertakings, it says crypto trading platforms agree to comply with terms and conditions that address investor protection concerns and are consistent with requirements currently applicable to registered platforms. The Ontario Securities Commission has published the first pre-registration undertakings, filed by Coinsquare Capital Markets Ltd. and Crypto.com.

August 17, 2022

FORMAL COMMITMENTS MADE ON NET ZERO

Globally, institutional asset owners are pledging formal commitment to net zero ‒ 43 per cent in Europe, 44 per cent in Asia, and 32 per cent in U.S. As they implement measures to achieve this commitment, they will increasingly evaluate portfolio-level metrics, says a white paper by Cerulli Associates. In ‘Net-Zero Investment,’ it says institutions’ reporting requirements have become more stringent across Europe, Asia, and the U.S. as they aim to ensure they have sufficient data to report to their stakeholders. In Europe, approximately 80 per cent of institutional investors request data on their exposure to energy transition risks and physical climate risks and 61 per cent request the carbon footprint of their portfolios. Similarly, U.S.-based asset owners increasingly plan to embed climate risk into mandates ‒ 38 per cent of firms already require climate risk reporting from managers and 34 per cent plan to within two years. In Asia, portfolio-level exposure to climate risks (69 per cent), security-level exposure to climate risk (74 per cent), and scenario testing metrics for climate change (57 per cent) will be most requested by asset owners in the next two years. Over the next 12 to 24 months, asset managers should anticipate a strong uptick in interest in measuring portfolio temperature. It says manager ability to do so currently varies by region. Measuring the carbon footprint of the portfolio, exposure to energy transition, and physical climate risks, as well as alignment to a two-degree scenario, are consistent categories managers across Europe and the U.S. are evaluating.

August 17, 2022

ECONOMY FEELS LIKE IT’S IN SLOWDOWN

It might not feel like a recession, but it feels like a slowdown, says Kristina Hooper, Invesco’s chief global market strategist. A deeper dive into the U.S. employment situation report shows that part-time jobs were a large part of the overall job creation at 384,000 which, while not an ideal jobs picture, is not terrible either. There is definitely real consumer pain; it has been reported that more Americans are skipping meals because of higher food prices. And households are racking up credit card debt, likely because they can’t afford living expenses. All that shouldn’t be a surprise given that real incomes have fallen significantly this year. This is a U.S. economy that has both significant strengths and weaknesses. So, despite the U.S. Fed’s very rapid and substantial tightening, the U.S. economy seems to be rather resilient and certainly doesn’t feel like it’s in recession ‒ at least not yet, she says. However, much of the Fed’s tightening has yet to turn up in economic data so it’s “only a matter of time before we see more signs of a slowdown in the jobs reports and elsewhere. At the risk of sounding like a broken record, the Fed’s actions will largely dictate just how significant the slowdown is,” says Hooper.

August 17, 2022

GLOBAL ETFS GATHER INFLOWS

The global ETFs industry gathered net inflows of US$42.46 billion during July, bringing year-to-date net inflows to US$505.79 billion, says ETFGI. During July 2022, assets invested globally in the ETF/ETP industry increased by 5.9 per cent, from US$8.86 trillion at the end of June to US$9.37 trillion. This marks the 38th month of consecutive net inflows. Assets of $9.37 trillion were invested in global ETFs industry at the end of July 2022.

August 17, 2022

PRIVATE EQUITY BOOTCAMP OFFERED

The CFA Society Toronto will hold a ‘Private Equity Bootcamp.’ The session will focus on the knowledge and skills needed to invest in private equity and offer advice on how to invest in it. It will be led by Steve Balaban, chief investment officer of Mink Capital. It takes place October 20 in Toronto. Information is at https://www.cfatoronto.ca/education-events/upcoming-events

August 16, 2022

ONTARIO TEACHERS’ HAS POSITIVE RETURN

The Ontario Teachers’ Pension Plan Board (Ontario Teachers’) had a total-fund net return of 1.2 per cent for the six-month period ended June 30, while the 12-month total-fund net return was 8.3 per cent. Net assets grew to $242.5 billion. “In a tumultuous time for global markets and with the highest inflation rates we have seen in decades, we were able to deliver positive returns for our members and continue to make progress towards our goal of reaching $300 billion in net assets by 2030,” says Jo Taylor, president and chief executive officer. “These results show that diversification, active management, and an agile investment approach enable us to generate returns in a wide array of investment environments and position us well to navigate through what is likely to be a challenging investment landscape over the next few years.” As at January 1, the plan was fully funded with a $17.2 billion surplus, underscoring its long-term financial health and sustainability.

August 16, 2022

FSRA SEEKS COMMENTS ON GUIDANCE

To help ensure pension plan administrators are following the provisions of the Pension Benefits Act, the Financial Services Regulatory Authority of Ontario (FSRA) is releasing its proposed plan amendments guidance for consultation. This guidance informs plan administrators of the requirements of the Pension Benefits Act applicable to the effective date of amendments, restrictions on replacing a variable indexation formula with a fixed indexation rate for benefits already earned, and notice requirements and notice waivers for adverse amendments. It invites stakeholders and the public to submit feedback until September 15. Information is at ‘Consultation on Proposed Guidance on Pension Plan Amendments.’

August 16, 2022

HEALTH COSTS EXPECTED TO RISE

U.S. employers expect health benefit cost per employee to rise 5.6 per cent on average in 2023, says Mercer’s ‘National Survey of Employer-Sponsored Health Plans 2022.’ While significantly higher than the increase of 4.4 per cent projected for 2022, the 2023 increase lags overall inflation, which is currently running at about nine per cent. Sunit Patel, Mercer’s chief actuary for health and benefits, says, “because health plans typically have multi-year contracts with healthcare providers, we haven’t felt the full effect of price inflation in health plan cost increases yet. Rather it will be phased in over the next few years as contracts come up for renewal and providers negotiate higher reimbursement levels. Employers have a small window to get out in front of sharper increases coming in 2024 from the cumulative effect of current inflationary pressures.” The projected increase of 5.6 per cent reflects changes that employers plan to make to hold down cost. If they made no changes, respondents indicated that the cost for their largest medical plan would rise by an average of seven per cent.

August 16, 2022

ECONOMY ON VERGE OF RECESSION

We are either on the edge of a recession or already tipping into it, says Jared Franz, Capital Group’s economist. He says the signals are mixed. Consumer spending rose 1.1 per cent in June, but after adjusting for inflation, it is essentially flat. Home sales are declining and inflated pandemic prices are prompting a potential and painful correction. The labour market is one of the only data points that isn’t signaling a recession right now, but experts predict a greater number of job seekers to return in the coming months, bringing up unemployment as companies reduce hiring. In terms of inflation, consumer prices are likely coming down over the next few months as the recession kicks in and demand wanes. There are many signs that inflation has peaked and the bond market is already pricing in expectations that the Fed will cut rates multiple times in 2023. This means the resulting short term volatility requires a shift to quality investments. As the market adjusts to tighter monetary policy, investors should reposition their portfolios to include investments in U.S. Treasuries and agency mortgage-backed securities, as well as opportunistic investments in corporate and emerging markets bonds where they are being compensated for the rising recession risk.

August 16, 2022

CENANOVIC JOINS PSG

Bogdan Cenanovic is managing director of PSG Equity. He will work with the team to enhance its presence in Canada. Based in Boston, MA. He was formerly at the Ontario Teachers’ Pension Plan where he served as managing director and global group sector head. PSG is a growth equity firm investing in software and technology-enabled services companies.