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News Archives - March / April 2011

Friday, April 29, 2011

Middle Class Faces Retirement Income Decline

Middle class Canadians are facing at least a 25 per cent drop in their disposable incomes when they retire, says a study by the Institute for Research on Public Policy. It says about half of middle income Canadians born between 1945 and 1970 face a sharper decline in their retirement incomes than experts previously predicted and reform proposals including expanding the Canada Pension Plan will do little to fix the problem. And it finds that under the various pension reform proposals, retirement incomes for people born from 1960 to 1965 would only improve between four to eight percentage points as these proposals would be phased in over 40 years and they would not qualify for most of the benefit. As a result, the report concludes “more much ambitious reforms than the ones being considered will be required to improve the adequacy of retirement incomes.” Middle income is defined as earning an average annual lifetime income of between $35,000 and $80,000.

Funds Need Reality Check

Pension funds need to carry out a reality check on their plans, says Cameron McNeill, managing director, Buck Consultants. Speaking at its ‘De-risking: Are You In or Are You Out?’ seminar, he said they need to realize there is risk in pension plans and determine if they are going to try and take controlled and measured risks as part of a bigger game plan. The risks plans bring to the table can have an impact on employers, unions, trustees and pension committee members, and shareholders and investment risk is the one which can have an impact on all of these parties. The challenge is plan assets can underperform if too much risk is taken and this underpins the risks a pension plan brings to the table. However, he said governance is a demonstrated way to control risk. Not only that, but derisking a pension plan may produce a better return on investment. To achieve this, they need to take an integrated approach that aligns the pension plan risk with the company’s enterprise risk management. A pension plan cannot sit in isolation, he said, it needs to be connected to the corporate entity.

Age-based Distinctions Remain Valid

Administrators and sponsors of pension and benefits plans containing age-based distinctions should take note of the Supreme Court of Canada’s decision in Withler, says a McInnes Cooper ‘Pension Law Legal Update.’ The court upheld the constitutionality of provisions in two federal public sector pension plans which reduced supplementary death benefits for each year by which the plan member had exceeded a specified age. In ruling that the reductions were not discriminatory, it emphasized the purpose of the distinctions in the context of the pension schemes as a whole. A key consideration was that the supplementary death benefits were not intended to provide a long-term income stream for older surviving spouses. However, the fact that the case made its way to Canada’s highest court indicates that legal challenges to such provisions are likely to continue, particularly as an increasing proportion of the workforce reaches retirement age and benefit costs continue to rise.

Active Managers May Have Less Risk

The idea that an index fund has less risk is absolute nonsense, says Robin Pond, senior investment and CAP consultant at Buck Global Investment Advisors. In a session at the Buck Consultants’ ‘De-risking: Are You In or Are You Out?’ seminar, he said in many cases active managers will have less risk than an index does. Controlling risk is a challenge because when you eliminate one, another pops up, something like a “whack-a-mole” game, he said. In fact, while there are a variety of definitions for risk, the best may be from former U.S. vice-president Dan Quayle who said if you don’t succeed, you run the risk of failing. “It is a good definition of pension investment risk because to the extent to which we are not going to achieve our objectives, we will fail.”

Decision Offers Cautionary Messages

Employers and plan members are, unfortunately, unaware of some of the cautionary messages of the decision of the Ontario Court of Appeal in Ault, says Priscilla H. Healy, of Fogler, Rubinoff LLP. The case resulted from a situation where members of the federal public service were persuaded to leave their employment, and transfer their employment and their pensions to a new company. The inducement for the pension transfer was a higher value than the usual commuted value on termination of employment could be transferred to the Loba pension plan. The individuals would then terminate their employment with Loba and withdraw their pension monies in cash. Unbeknownst to the plan members, the Canada Revenue Agency was concerned with reciprocal transfers of this nature, in particular with the legitimacy of this pension scheme. Ultimately, it revoked the registration of the pension plan. Unfortunately for the plaintiffs, they had left their jobs and their benefits and pension accruals. The court held the attorney-general as plan administrator and employer, the consultant, and Loba liable for damages to the plan members. As a result, employers/administrators should be aware of their vulnerability to claims of breach of fiduciary duty and/or negligent misrepresentation if they have specific knowledge of a significant risk to plan members associated with steps they are known to be taking, and remain silent.

Risk Should Be Considered In Aggregate

Multi-national companies should consider Defined Benefit balance sheet risks in aggregate, says Steven White, managing director, Buck Global Investment Advisors. In a session at Buck Consultants’ ‘De-risking: Are You In or Are You Out?’ seminar, he said many companies look at their DB plans one by one and come up with different solutions for each plan. Taking an aggregate approach when plans within a region are combined allows them to gain insight into the aggregate level of balance sheet risk. This, in turn, can lead to greater consistency of approaches to asset allocation across different regions and allows the global corporate to guide regional investment policies.

Sick Workers Still Go To Work

Two-thirds of Canadian workers typically go to work when they are sick, says a CareerBuilder Canada survey. It says workplace pressures and ‘presenteeism’ may be causing workers to go in when they are under the weather, as more than 60 per cent of workers said they feel guilty if they call in sick. With so many workers heading to work ill, they are likely passing their germs on to others. Nearly six-in-10 workers (58 per cent) said they have gotten sick from a co-worker who came to the office sick, while 21 per cent said they picked up a bug from someone who was sick on public transportation. To help encourage a healthy workplace, 12 per cent of employees said their companies provided flu shots at their office. Twenty-eight per cent said they were proactive and got a flu shot this year.

Strategy Offers Access To Resources

Canadian institutional investors considering replacing a portion of their Canadian equity allocation with a global diversified natural resources strategy now have access to the Pier 21 Global Resources Strategy. It reflects the complexity of global resources sectors and insulates against the threat of inflation, all with a guarantee that there will be zero investment management fees if the strategy doesn't outperform its benchmark. The strategy allows for participation around the world, wherever the most compelling opportunities exist.

Brodkin Moves To Alliance Bernstein

Wendy Brodkin is joining Alliance Bernstein. For the last four years, she has been at T. Rowe Price (Canada) where she was vice-president and director of business development.

Global Problems Examined At ACPM

‘Global Problems … A Local Perspective’ and ‘Emerging Opportunities and Challenges of DB Plans – Beyond the Financials for the 2011’ will be among the plenary sessions at the Association of Canadian Pension Management National Conference. This year’s conference theme is ‘It Begins Here – From Reform to Action.’ Sessions will assist delegates in formulating their organizations’ action plan in response to the multitude of recent industry reforms and developments. It takes place September 13 to 16 in St. John’s, NL. For more information, visit http://www.acpm-acarr.com/national.aspx

Summit Looks At Technology Strategies

Highlighting the best strategies and technologies adopted by end-users to address market changes and keep spending to a minimum will be among the sessions at the ‘Toronto Financial Information Summit.’ Other sessions will look at trends impacting data and technology spend and assessing the cost implications of regulatory reforms. It takes place July 7 in Toronto, ON. For more information, visit www.financialinformationsummit.com/toronto

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Thursday, April 28, 2011

Pension Funds Want Majority Voting

The British Columbia Investment Management Corp. and the Canada Pension Plan Investment Board wants shareholders in European Goldfields Ltd. to support their call for the company to adopt a policy requiring directors to tender their resignations if they do not get majority support in annual board elections. The pension funds, both active members of the Canadian Coalition for Good Governance, initially identified 12 companies which needed a majority voting policy. Nine of the 12 voluntarily agreed to implement majority voting after negotiations with shareholders, and two others agreed when the pension funds notified them that they would be submitting proxy resolutions. European Goldfields has made no recommendation to shareholders on how to vote on the proposal which will be considered at its annual meeting May 13. European Goldfields has gold reserves and operations in Turkey, Greece, and Romania.

Canadians Retire With Debt

One-third of Canadians still hold debt when they retire, says Statistics Canada. It says 17 per cent of Canadians who are 55 years and older and retired owe more than $100,000. One in four, however, owes less than $5,000, suggesting they may be carrying debt as a convenience. The analysis shows that couples tend to have less debt than divorced retirees, but those who were never married and widowers have even less debt. As well, the older Canadians get, the more likely they are to be debt free.

Women Enjoy Retirement More

Despite being less financially prepared for retirement, once retired, women are more likely to enjoy their retirement than men, says a report by the BMO Retirement Institute. It found women have traditionally faced unique challenges when planning for retirement that often result in a lower level of financial preparedness when compared to men. These include lower earnings ‒ women earn just 83 cents for every dollar earned by men and, therefore, tend to accumulate a smaller retirement nest egg; intermittent work histories ‒ women are more likely to interrupt their employment to act as family caregiver; and women are expected to live, on average, three years longer than men, putting a higher demand on household resources for basic living expenses and the need to pay for healthcare needs and long-term care. The report says women are succeeding because they are more likely to seek advice, are better at choosing an advisor, and are better able replace work with other activities.

Solution Earns Life Insurer Award

Sun Life’s ‘FastForward Claims Solutions’ has won the Insurance-Canada.ca Technology Award in the Life Insurer category. This process helps Sun Life take the ‘paper’ out of paper claims quickly, efficiently, and accurately and, at the same time, helps reduce its carbon footprint. The solution is designed to make paper claims processing entirely paperless through the use of imaging and scanning technology.

Western Unit Earns HOOPP Award

Unit 3B, General Internal Medicine, at Toronto Western Hospital, are the winners of the first-ever Healthcare of Ontario Pension Plan (HOOPP) Award for Leading Innovation in Front Line Care. The unit won the award due to its creative solution of a documentation tool issue that arose in a patient mobility program. Through teamwork and innovation, they came up with a much more user-friendly documentation tool that works not only for the patients, but for the professionals treating them. The new tool will be used in other programs at Toronto Western.

Fund Situation Improves

Diversified pooled fund managers posted a median return of 2.6 per cent before management fees for the first quarter of 2011, says Morneau Shepell Ltd.’s ‘Performance Universe of Pension Managers' Pooled Funds.’ Jean Bergeron, a partner in the asset management consulting practice says "despite the slight setback in Canadian bonds this quarter, pension funds have managed to post positive returns in the first quarter of 2011 thanks to stock market increases. Furthermore, with the rise of interest rates, the solvency liabilities decreased by approximately two per cent during this quarter.” It estimates the impact of positive returns and a decrease in the actuarial solvency liability means that the situation of an average pension fund improved by about four per cent in the first quarter of the year.

Griggs Heads OPTrust

Stephen J. Griggs is president and CEO of the OPSEU Pension Trust Board. In this role, he will assume responsibility for leading its integrated administrative and investment operations. Most recently, he was executive director of the Canadian Coalition for Good Governance.

Burron Joins AIMA

James Burron, FCIA, CAIA, is chief operating officer for AIMA Canada. He has a background of 15 years of international experience in the securities industry, including a significant background in the alternative investment industry.

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Wednesday, April 27, 2011

Reform Offers ‘Excuse’ To Change Plans

Pension reform could provide plan sponsors with an “excuse” to change their plans, says Malcolm Hamilton, of Mercer. Speaking at the ACPM Ontario council’s ‘Checking the Pulse of Pension Reform,’ he said sponsors should wait until the shape and timing of pension reform become clear. Then, they should use reform and the hype around it to improve the design delivery or communication of their retirement plans. He noted, however, that Canada now has one of the best retirement systems in the world with little or no problem for the already retired. And, he conceded that future generations may be less fortunate, in particular, if they behave foolishly. However, while the vulnerable group is private sector workers with above-average incomes, most reform is aimed ensuring that seniors have better lives than working Canadians. For example, suggestions to boost the GIS would increase the post-retirement income of those who already receive more than 100 per cent of pre-retirement income. This would reduce the senior poverty rate to zero while the poverty rate for working age Canadians is 10 per cent. As well, a proposal to double tax-free savings account limits would improves the ability of high-income Canadians to save for retirement, but, in the long term, leads to a society where young people pay all of the taxes and old people collect all of the benefits.

Drug Costs Threaten Sustainability

If drug costs continue to increase as they have, the system will no longer be sustainable, says Stephen Frank, vice-president, policy and development and health, at the Canadian Life and Health Insurance Association. Speaking at the Group Insurance Pharmaceutical Committee’s ‘Unravelling Drug Pricing’ session, he said sustainability is driving the need for change and the association is happy with the direction drug price reform has been taking. However, there are some concerns about private/public payer equity as some of the provincial reforms seem to be shifting the cost burden to private payers. He said that Canadian employers pay about 12 per cent ($21.8 billion) of total healthcare expenditure in Canada and 30 per cent ($8.9 billion) of all prescription drug costs.

Russell Launches U.S. Dollar Solution

Russell Investments Canada Limited is launching a U.S. Dollar Series of its Managed Yield Class, a fixed income solution that meets the needs of conservative investors looking for a well-diversified, tax efficient fixed income solution with built in protection from the currency fluctuations. “Many investors are wondering how to manage the volatility between the Canadian and U.S. dollars,” says David Feather, president and CEO of Russell Investments Canada Limited. This series provides the benefit of being invested in high quality Canadian assets while minimizing the currency fluctuations. The underlying asset exposure is sub-advised by three institutional fixed income managers, each with their own areas of specialization ‒ Canso Investment Counsel, Pacific Investment Management (PIMCO), and Beutel Goodman & Company.

Cost Containment Doesn’t Deal With Cause

A cost containment approach does not deal with the underlying causes of year over year increases in drug benefits costs, says Mark Ferdinand, vice-president of policy research and analysis at Rx&D. Speaking on pharmaceutical pricing at the Group Insurance Pharmaceutical Committee’s ‘Unravelling Drug Pricing’ session, he said unless the industry deals with demand, which has been rising for years, costs will keep going up. The problem is that most efforts have been made to control the supply side and while it is important, the demand side is being neglected when it comes to pharmaceuticals. Measures to control demand need to be directed at wholesalers, retailers, and doctors and include approaches such as requiring generic substitutions.

Investor Confidence Falls In April

Globally, investor confidence fell slightly by 0.3 points from a March revised reading of 97.3 to 97 in April, says the State Street Investor Confidence Index for April 2011. The confidence of North American investors declined by 3.9 points to a level of 98.4 from March’s revised reading of 102.3. In other regions, investors were more upbeat. Sentiment among Asian investors increased 2.7 points to 99.2 from the March number of 96.5. In Europe, investor confidence bounced off its recent lows, rising 6.3 points from the March level of 66.9 to settle at 73.2. “We see some generalized evidence that institutional investors have shifted into a neutral gear with the global, North American, and Asian confidence indices all hovering in the neighbourhood of 100,” says Harvard University professor Kenneth Froot, one of the developers of the index.

Cordiant Commits Mezzanine Funding

Cordiant Capital Inc. has committed a $17 million mezzanine funding towards the construction of a $214 million corn ethanol producing plant in Hungary. It says demand for renewable fuels in Europe is increasing as a result of the EU’s Renewable Energy Directive, which requires that by 2020 at least 10 per cent of energy used in transport must come from renewable sources. The new plant, Pannonia Ethanol, is expected to double Hungary’s current ethanol output level. Construction is already underway and should be completed in early 2012, when it will have a production capacity of up to 240 million liters of fuel grade ethanol per year.

Chipman Joins Granville West

Tom Chipman is a financial advisor at Granville West Group. He will work with its group retirement clients on all aspects of group retirement plans. He has been working in the financial services sector since 2003 and specializing in the group retirement field since 2007.

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Tuesday, April 26, 2011

Framework For Pension Division Set Out

Ontario has laid down the framework for a new pension division regime with Bill 133, says a Mercer ‘Communiqué.’ The Bill 133 amendments to the Family Law Act and the Pension Benefits Act (PBA) were enacted in 2009, but proclamation has been delayed pending creation of the supporting regulations. Under the new rules, a pension entitlement will continue to be a family asset for purposes of determining net family property. However, the value of the entitlement and of the pension available for division between separated spouses from a registered pension plan must be determined by the plan administrator pursuant to rules prescribed in the PBA. It will remain optional for the parties to divide pension at source, however a division at source will be strictly controlled. Unless the pension is already in pay when the parties separate, a division at source must be settled by an immediate lump sum transfer from the pension plan. An important feature of the regime is that valuation and division will be standardized and plan administrators will be entitled to rely on the information provided to them in prescribed application forms.

DC Helps With Retirement

Being eligible to participate in a Defined Contribution retirement plan at work is a key factor in whether workers will have enough money to afford basic expenses and cover uninsured medical care in retirement, says research from the nonpartisan Employee Benefit Research Institute (EBRI). It shows that the ‘at-risk’ level declines the longer workers are eligible to participate in a work-based DC plan. For example, for Gen Xer households (those born between 1965 and 1974) in the next-to-lowest income quartile, eligibility in a DC plan has a strong impact on retirement income adequacy: 58 per cent of these households eligible for DC plan participation less than one-quarter of future work years would be at risk at least 50 per cent of the time, compared with only 21 per cent for those eligible at least three-quarters of future work years.

CPBI Atlantic Runs September 14 To 16

Bill Adams, of the Boston Company, will discuss the importance of foreign content to the investment portfolio in today’s global investment market at the ‘2011 CPBI Atlantic Regional Conference.’ His talk will look at the items to take into consideration ‒ from risk to regional conflicts to currency ‒ when investing in emerging markets. Theme of this year’s event is ‘Recipe for Renewal.’ It takes place September 14 to 16 in Charlottetown, PE. For more information, visit www.cpbi-icra.ca/  

Global Benefits Focus Of Session

The International Foundation of Employee Benefit Plans’ ‘Certificate in Global Benefits Management’ is a proven source for building a strong foundation in international benefits. Attendees will gain a thorough education in global benefits management and an enhanced understanding of the differences in benefit packages offered around the world. It takes place June 6 to 10 in Chicago, IL. For more information, visit www.ifebp.org/global

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Monday, April 25, 2011

Plans Likely To Pay More

The failure to include private payers in Nova Scotia drug price reform is likely to result in higher costs for private plans, says a Mercer ‘Communiqué.’ The impact will vary, however, based on plan design differences and the pharmacy agreements in place with different benefit managers and insurers. Plan sponsors need to engage their providers and consultants in discussions to assess the potential impact and risk mitigation strategies. Plan sponsors who implement plan features that encourage good consumerism and leverage their buying power will be best placed to mitigate the impact of cost-shifting.

DC Plans Could Be Marginalized

Defined Contribution pension plans could become marginalized in the future, says Sylvain Schetagne, senior economist/researcher at the Canadian Labour Congress. Speaking At ‘2011 CPBI Saskatchewan Regional Conference’ as part of a panel debate ‘Defined Contribution Plans and the Future, he said the movement towards simplified plans such as the pooled registered pension plans (PRPPs) will take over. This would make DC plans less relevant. However, under the current PRPP proposal, employers are under no obligation to contribute to these plans. As a result, he asked "What incentive is there for employees to contribute if employers are not?" Without employer contributions, PRPPs are the same as RSPPs which "don't work," he said.

Benefits Entitlement For Over 65s Requires Revisiting Plan

One of those ripple effects of mandatory retirement across Canada is benefits entitlement, can employees over 65 be excluded from benefits? However, a Fasken Martineau ‘The HR Space’ says a handful of recent arbitration cases suggest the answer is not clear  and may depend on what has been have negotiated with union or employees. Although employers were successful in two out of three recent decisions, these decisions should not provide too much comfort for employers. They only dealt with unionized employees and were only favourable to employers when the collective agreement was clear. They do not deal with non-union employees at all. Indeed, there is virtually a complete absence of decisions by human rights tribunals or courts. Until this is dealt with, it says employers should revisit their benefits plans and seek legal advice on the specific language and content of their plans.  Further, employers may wish to investigate the cost and feasibility of providing benefits to employees over the age of 65.

Wholesale Changes Not Recommended

Wholesale changes to the way pension obligations are met are not recommended, says William B. Solomon, a consulting actuary. He told the ‘De-risking Pensions & Benefits: There is nothing new beneath the sun’ session at the ‘2011 CPBI Saskatchewan Regional Conference’ that based on his nearly 50 years of experience in the insurance and pension industry, plans should not do anything drastic or significantly different from what they have been doing. He agrees that focusing on a plans’ asset mix is crucial and that better matching of assets and liabilities is desirable. Having said that, plans cannot lose sight of the fact that asset mix accounts for approximately 90 per cent of the return that a pension plan will earn and equities have enjoyed (and, in his opinion, will continue to enjoy) a higher rate of return than fixed income investments. “With a maturing liability structure, a more cautious asset mix is in order. However, in order to achieve an acceptable rate of return based on the current market conditions, a continued heavier commitment to equities is required,” he said. “If fixed income exposure is to be increased, some form of duration-matching product or long duration fund might be the way to go.”

Constructive Dismissal Class Action Denied

In the first case of its kind, the Ontario Superior Court of Justice has denied a motion for certification of a class action for constructive dismissal on the basis that it lacked the essential element of commonality, says a Hicks Morley ‘FTR Now.’ The decision has very significant implications for employers, particularly in the context of employers' approaches to managing and implementing changes. The plaintiffs, employees at Allstate Insurance Company of Canada, had alleged that the employer's restructuring of their compensation and office environment fundamentally changed the terms of their employment, resulting in constructive dismissal and liability.  The central question for determination by the court was whether an action alleging constructive dismissal was suitable for common treatment within a class action proceeding. It found no common issue that would significantly advance the litigation for the class as an individual inquiry is at the heart of every liability issue. The decision affirms that the principles of constructive dismissal require an individual assessment that is not amenable to common treatment through the class proceedings process.

Probe Into Manulife Completed

The Ontario Securities Commission has completed its probe into the adequacy of Manulife Financial Corp.’s financial disclosure and decided not to take any action. The probe was started two years ago when the OSC sent the company an enforcement notice in 2009 saying the commission’s staff had reached a “preliminary conclusion” that Manulife had not properly disclosed the risks related to its variable annuity and segregated funds business. It decided not to seek any orders after having received information from the company and examining its current disclosures.

Caisse Consolidates Real Estate

The Caisse de dépôt et placement du Québec has consolidated its real estate subsidiaries under one banner, Ivanhoe Cambridge Group. The new group will include its real estate subsidiaries active in shopping centres and the office and residential sectors (SITQ). "With this initiative, we continue to streamline our practices to benefit even more from our clear comparative advantage in real estate: our operational expertise," says Michael Sabia, president and chief executive officer. Each subsidiary will continue to operate independently. However, corporate-oriented responsibilities ‒ such as finance, human resources, governance, and strategy ‒ will be shared.

UK Funds Shift From Equities

Over the last 10 years there has been a significant shift by UK pension funds away from equities into bonds and index-linked, says BNY Mellon Asset Servicing. Its research shows that the total percentage held in global equities has swung from 73.5 per cent to 51.4 per cent in the last decade (2000/2010), with asset allocations to UK equities falling even further, from 51 per cent to 23.7 per cent over the same period. Over the last decade the asset allocation of bonds has risen from 16.5 per cent to 26.7 per cent and index-linked have also benefited from asset reallocation increasing from five per cent to 14 per cent.

No Immediate Changes Planned

While a large number of employers expect an increase in the cost of providing benefits to employees, two-thirds are making no immediate changes to their benefit programs, says research from Deloitte and the International Society of Certified Employee Benefit Specialists (ISCEBS). Its ‘2011 Top Five Total Rewards Priorities’ indicates employees may need to take on greater health benefit cost sharing to address this strategic challenge facing organizations today. The top five priorities for 2011 are the cost of providing healthcare benefits to employees; the willingness of employees to pay an increasing portion of benefit plan coverage and to manage their own reward budget; the ability of reward programs to attract, motivate and retain talent; the ability to adjust to and comply with current and future provisions of healthcare reform legislation; and clear alignment of total rewards strategy with business strategy and brand.

Passport On Mobile Application

Northern Trust has launched a mobile version of its multi-faceted web portal, Passport. Available to institutional clients around the globe, the mobile application supports clients in their need to quickly get the information they need from custody or fund administration accounts to mitigate risk and make informed investment decisions. The application is accessible with most mobile devices that have internet service.

30th Annual Symposium Set For October

The International Foundation of Employee Benefit Plans’ ‘30th Annual Employee Benefits Symposium’ provides information on everything from healthcare reform to retirement, compensation, legal, and economic issues. It takes place October 2 to 5 in San Antonio, TX. For more information, visit http://www.ifebp.org/Education/11symp.htm

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Thursday, April 21, 2011

OMERS Quits Atomic Energy Deal

The Ontario Municipal Employees Retirement System is no longer interested in being part of a purchase with SNC-Lavalin Group Inc. of Atomic Energy of Canada Ltd. Earlier this year, it said it was interested in joining with SNC to bid on the agency. However, it pulled out in part because of concerns that the nuclear disaster in Japan would dampen the global market for nuclear reactors and because it does not share SNC-Lavalin’s strategic vision for the business.

Doubling CPP ‘Not In Cards’

Doubling the Canada Pension Plan is just "not in the cards, says Ken Krawetz, deputy premier and minister of finance for Saskatchewan. Speaking at the ‘2011 CPBI Saskatchewan Regional Conference,’ he said there is no support for this from the provinces or the federal government. Citing a Canadian Federation of Independent Businesses report, he said this would result in job losses and lower incomes. Any pension reform must consider the impact on the economy, he said. With economies everywhere slowly recovering, no actions should be taken which hinders this recovery. And, any reform will not be easy as they will require changes to provincial legislation and the income tax act. As well, they will require some sort of harmonization and, as anyone who recalls the Meech Lake Accord discussions in1987 remembers, getting the governments of Canada to agree on anything is difficult.

Plans Maintain Momentum

Healthy stock market returns helped pension plans maintain momentum in the March quarter, but inflation jitters and a stronger loonie dampened their gains, says a survey by RBC Dexia Investor Services. It found pension assets earned 2.3 per cent in the quarter ending March, bringing 12-month results to 10.8 per cent. Canadian stocks were the top performing asset class for a third successive quarter as the S&P TSX Composite index gained 5.6 per cent. Foreign equities also contributed, but currency losses on U.S. and Japanese assets muted their gains. Year-over-year, currencies had less impact on performance as the loonie's strength in relation to the U.S. dollar was more than offset by its weakness against the other major currencies.

Providers Need To Help HR Partners

Benefits providers haven't done a good enough job helping their HR partners build their case at the boardroom table, says Kevin Press, assistant vice-president, Canadian marketing, Sun Life Financial. He told the ‘2011 CPBI Saskatchewan Regional Conference’ session ‘Help Wanted: How do we promote benefit plan sponsorship in today's economy?’ that in today's economic environment the case for a proactive HR strategy needs the same level of rationalization and metrics that finance brings to the discussion. In making their case, HR needs to talk the same language as finance, not in soft terms. To do so, providers need to do the analysis and build the data that sponsors can use to make the case that aligns HR strategy to corporate objectives.

Hedge Fund Managers Confident

Hedge fund managers are more confident that institutional investors will dominate their client bases in 2011 than they were five years ago, say a survey by fund services vendor Rothstein Kass. About 72 per cent of the 313 hedge fund managers who responded to the survey in January think institutional investors will be “the dominant source of new capital in 2011,” compared to 20 per cent in the 2007 survey. Institutional investors will continue to direct their investments to larger hedge funds, said 82 per cent of respondents, while 65 per cent said hedge funds will offer special terms and share classes to institutional investors, including sovereign wealth funds.

Members Need To Know What They Have

Plan sponsors need to build awareness if they want members to understand the importance of benefits adequacy. Sharon Vanderwerff, a principal at Mercer, told the ‘Show Them the Money: Helping Plan
Members Understand Benefit Adequacy’ session at the ‘2011 CPBI Saskatchewan Regional Conference’ this starts with ensuring members know what they have and the importance of planning for retirement. Any discussion of benefits adequacy must, however, acknowledge that each member's needs are different. The tacit agreement that members need 70 per cent of their income in retirement doesn’t hold true if, for example, they still owe money on their mortgage or have plans to travel in retirement.

Conference Designed For Group Insurance Advisors

The Arete Group Insurance Advisor Conference (AGIAC) will give group insurance advisors an opportunity to share best practices and network with other advisors. Sessions will look at topics such as drug plan management. It takes place May 3 in Vancouver, BC; May 5 in Calgary, AB; and May 12 in Toronto, ON. For more information, visit www.aretehr.com

Liabilities Under Collective Agreements Examined

Pension and benefit plan liabilities under collective agreements will be one of the topics examined at Heenan Blaikie’s ‘Managing Pensions & Benefits Risks: Staying Ahead of the Curve.’ Other sessions will look at the importance of proper communications and special considerations for retirees and employees approaching retirement. It takes place April 26 in Toronto, ON. For more information, call Michelle Stultz at 416-643-6831

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Wednesday, April 20, 2011

Retirement Surprises In Store

There are surprises in store for Canadians who are expecting to retire on a date of their own choosing says the ‘2nd Annual RBC Retirement Myths & Realities’ poll. It says while the vast majority (83 per cent) of "pre-retirees" aged 50 plus believe they will retire on the date of their choice, almost half (41 per cent) of those who have already retired report that their retirement date was unplanned. The top three factors cited for early retirement are employer's request (18 per cent), health reasons (14 per cent), or reaching mandatory retirement age (six per cent). "We're finding that even Canadians who think they are well-prepared for their retirement years have not taken the unexpected into consideration," says Lee Anne Davies, head, retirement strategies. "When their job disappears suddenly, they struggle with financing the added years in retirement that they hadn't counted on." The poll also found in the past 12 months, there has been a significant rise in the number of retirees returning to the workforce because they need the income (41 per cent in 2011 compared to 32 per cent in 2010), as well as a drop in the number of Canadians retiring debt-free (56 per cent in 2011; 61 per cent in 2010).

Recognition Is Personal

Ninety-seven per cent of organizations in a Conference Board of Canada survey have an employee rewards and recognition program in place. Yet, fewer than half of the survey respondents believe their employees are satisfied with the organization’s rewards and recognition practices. Its ‘Making it Meaningful: Recognizing and Rewarding Employees in Canadian Organizations’ study found that the average annual amount spent on recognition is $175 per employee. Public sector organizations average $123 in expenditure per employee; those in the private sector spend $208 on average. “Recognition from a manager carries meaning and motivation for employees, whether or not it is accompanied by a reward,” says Karla Thorpe, associate director, compensation and industrial relations. “Organizations should keep in mind that recognition is personal, in that what motivates one employee is different from what motivates another.”

Absolute Trading Growth Ends

The steady growth in the absolute trading volumes executed through electronic systems met at least a temporary end last year, says Greenwich Associates. It says for nearly a decade, trends in electronic foreign exchange have been consistent ‒ increasing use, growing trading volumes, and an expanding electronic share of the global FX pie. While electronic trading systems continued to attract new users ‒ albeit at a slower pace than prior years ‒ and the proportion of overall FX trading volume executed via electronic transactions grew, absolute trading volumes did not. Global foreign exchange trading volume (both electronic and non-electronic) declined approximately 13 per cent from the last quarter of 2009 to the same quarter in 2010. Worldwide, the share of FX market participants trading on electronic systems increased to 62 per cent in 2010 from 61 per cent in 2009. Market participants that use eFX increased the share of their total foreign exchange trading volume executed through electronic channels to 68 per cent in 2010 from 64 per cent in 2009.

UBC Student Wins Mawer Challenge

Andrea Lobo Prabhu, a student from the University of British Columbia’s Sauder School of Business, is winner of Mawer Investment Management Ltd.’s first annual ‘Research Report Challenge.’ The challenge is an annual contest for undergraduate business school students that require them to produce a ‘buy’ research report on a publicly traded common stock from anywhere in the world that would be a good long-term investment for a well-informed investor. As the winner, he will receive a cash prize and the opportunity to spend a day with the Mawer research team.

Hedge Fund Of Fund Assets Decline

Increasingly cautious institutional investors have caused a significant decline in the number of hedge fund of funds with assets of between $2 billion and $5 billion, says a survey by Preqin. It found funds with less than $250 million in assets now account for a larger proportion of managers in the industry. It says events such as the economic downturn and the Madoff scandal had left investors cautious and this had resulted in the proportion of fund of hedge funds managers with less than $250 million in assets under management increasing from 28 per cent in early 2010 to 35 per cent in the second quarter of 2011. Overall, the mean fund of hedge funds is now $2.18 billion compared with $2.75 billion in 2010 and $4.78 billion in 2009.

Managing Tail Risk Focus Of AIMA Canada-Hillsdale Award

Alexandre Hocquard, Sunny Ng, and Nicolas Papageorgiou, of Brockhouse Cooper and HEC Montreal, are winners of the ‘2010 AIMA Canada-Hillsdale Research Award.’ The winning paper, entitled ‘A Constant Volatility Framework for Managing Tail Risk,’ presents research which suggests that strategic asset allocation based on Modern Portfolio Theory is neither a sufficient or reliable risk-management tool during crises.

Bethlenfalvy Joins Manulife

Peter Bethlenfalvy is joined senior vice-president, financial regulations, at Manulife Financial. He will be responsible for strategy and monitoring of financial regulatory systems throughout the world. Previously, he was co-president of DBRS Limited.

Chandler Heads BlackRock Real Estate

Jack Chandler is global head of real estate at BlackRock, Inc. Most recently, he served as global chief investment officer and executive chairman, Asia, for LaSalle Investment Management.

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Tuesday, April 19, 2011

Standard Life Offers Stock Option Administration

Standard Life has added stock and stock options plans administration solutions to its group savings and retirement offering to Canadian publicly listed companies: The first feature enables employees to make online withdrawals from their stock plan directly from the VIP Room, Standard Life's transactional website. The second feature allows employers to access a variety of stock option arrangements that will help their employees administer and exercise options. The integration of the new stock option plan feature is made possible through an arrangement with Buck Consultants Limited, a wholly owned subsidiary of ACS, A Xerox Company.

ESG Strategies Improve Efficiency

Environmental, social, and governance (ESG) risk optimized investment strategies can improve portfolio efficiency significantly, says research by Allianz Global Investors. It says as ESG factors are an important source of investment risk, they should be part of the investment research to minimize extreme risk. The study found the tail risk of an ESG risk neutral emerging market equity strategy defined by the MSCI Emerging Markets Index can be reduced from -64.5 p.a. to -38.8 per cent. The same is true for corporate bonds defined by the Merrill Lynch Global Broad Market Corporate Index, it added, where the tail risk ‒ measured as conditional value at risk (95 per cent) of the default strategy ‒ can be reduced from -8.1 per cent p.a. to -4.9 per cent. ESG risk factors are also important for core asset classes such as developed market equity.

LPs Seeking Emerging Markets Private Equity

Emerging markets will capture an even greater share of investor allocations to private equity as limited partnerships (LPs) aggressively seek exposure to high growth markets, says a survey by the Emerging Markets Private Equity Association (EMPEA) and Collier Capital. It found LPs expect the proportion of their PE allocations directed at emerging markets to increase from 11 to 15 per cent today to 16 to 20 per cent in two years' time. LPs have the highest return expectations for Emerging Asia PE funds, with three-quarters (78 per cent) expecting them to deliver annual net returns of 16 per cent or more.

BlackRock Launches New ETFs

BlackRock Asset Management Canada Limited has launched six new iShares Exchange-Traded Funds (ETFs). Several of these funds have been constructed to meet investor demand for income while others offer access to local and global sectors ‒ in some cases, for the first time in Canada. Mary Anne Wiley, managing director, head of iShares distribution, says the new funds “offer investors even greater opportunity to target their portfolios by sector both within and beyond our market." The funds are the S&P Global Healthcare Index Fund, the S&P/TSX Global Base Metals Index Fund, the S&P/TSX Capped Utilities Index Fund, the S&P/TSX Capped Consumer Staples Index Fund, the S&P/TSX Equity Income Index Fund, and the J.P. Morgan USD Emerging Markets Bond Index Fund.

Home Instead Earns Award

Home Instead Senior Care is the 2011 CFA Award of Excellence in Franchising Category Silver Winner for ‘Non-Traditional Franchises – Mature/Established’ by the Canadian Franchise Association. Home Instead Senior Care franchises provide companionship and non-medical care services for seniors in their own homes and in care facilities.  It was one of 12 finalists honoured and the highest ranking organization from the home care industry. This is the inaugural year for the annual Franchisees’ Choice designation.

Veld Looks At Accounting Changes

‘Accounting Changes: What Will They Mean to Your Pension Fund?’ will be the focus of a session at the International Foundation of Employee Benefit PlansCanadian Legal and Legislative Update.’ David M. Veld, of BDO Canada LLP, will speak on existing and proposed accounting changes and what a fund’s response should be. It takes place May 12 to 13 in Ottawa, ON. For more information, visit www.ifebp.org/canupdate

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Monday, April 18, 2011

Providers Sign Up For eClaims

More than 6,000 extended healthcare providers have signed up for TELUS Health Solutions’ eClaims exchange service to streamline claims and reimbursement process for their patients. Provider registration continues to grow significantly on a weekly basis and is expected to reach even higher levels with the immediate availability of a bilingual service for the extended health provider community in Quebec. Designed for use by all benefit insurers and workers compensation boards across Canada, Great-West Life is the first insurance company to offer this service to their group insurance customers and plan members.

Coalition Calls For Universal Coverage

A coalition of patient groups, researchers, doctors, and other healthcare professionals, patient service organizations, and activists, led by the Canadian Treatment Action Council (CTAC), is calling on all federal political parties to include universal drug coverage in their election platforms with a commitment to implement it. It says this will ensure equal access to life-saving and life-enhancing medicines for all Canadians, regardless of age, wage or location. Canada's patchwork of public and private drug coverage systems mean that many Canadians fall through the cracks. Louise Binder, chair of CTAC, challenges the federal parties to step up to the plate. She says: “People are essentially suffering and dying because of a lack of political will to change a broken system. It is unacceptable and a disgrace that, in Canada, many individuals spend exorbitant sums, often selling homes or going into debt, in order to pay for prescription medicines. This is just bad healthcare and bad long-term economic policy. The time has come for a universal drug plan.”

‘Set And Forget’ Abandoned

Pension schemes are abandoning "set and forget" investment strategies in favour of "anticipate and recalibrate" risk management frameworks, says Robert Gardner, chief executive at Redington. He says that pension scheme flight plans are now comprised of objectives that define the scheme's long-term strategy and clear outcomes that define the target. In the new era of risk management, favoured assets would be long term, with a high correlation to liabilities. They will also have contractual cash flows and a liquidity premium, deliver excess returns, and offer upside gain potential.

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Friday, April 15, 2011

Expanding CPP Risky

Due to its vast size, expanding the Canada Pension Plan is fraught with risks that could actually hinder the plan's performance, says a study by the Fraser Institute. “The Canada Pension Plan is already so large that any expansion of the plan will increase the risk that the manager of the plan's assets, the Canada Pension Plan Investment Board, will become more inefficient and the ability to generate positive investment returns actually decreases," says Neil Mohindra, Fraser Institute director of financial policy studies and author of ‘Should CPP Be Enhanced? An Examination from an Economies-of-Scale Perspective.’ "This risk arises from diseconomies of scale. Numerous studies examining other large investment funds have found that as asset bases increase, fund managers generally experience additional challenges that adversely affect investment performance." Rather than expanding CPP contributions and benefits, Mohindra recommends that governments should instead concentrate on improving other pillars of the Canadian retirement system, specifically individual and group RRSPs, Tax Free Savings Accounts, and registered pension plans.

Emerging Technology Brings Unparalleled Benefits

Emerging technology will enable investors to see unparalleled benefit through greater automation and capacity on demand, says a State Street Corporation ‘Vision Report.’ ‘The Evolving Role of Technology in Financial Services’ looks at the impact that next generation technology such as cloud computing is expected to have on the industry. Unlike today, the financial services industry will soon deploy increasingly sophisticated, forward-looking technology tools and analytics that will enable investors to understand and model actual precursors of performance. For example, instead of today’s simple descriptions related to risk position and market stability, investors will soon be able to see more acute and intricate insights and the actual factors that contribute to those risk positions. These factors alone, the report states, will have reverberating impacts on the habits, business processes, and decision-making of institutional investors around the globe.

Pharmacare Should Be Prefunded

The cost of provincial pharmacare is set to rise precipitously, with spending on Ontario’s drug benefit plan for seniors projected to increase from about one per cent of provincial income to a full five per cent by 2061, says a C.D. Howe Institute report. To prepare for this rising spending on drugs as baby boomers age and workforce growth slows, it recommends partial prefunding of the Ontario Drug Benefit program as the best way to put the program on a stronger and more sustainable footing.‘A Social Insurance Model for Pharmacare: Ontario’s Options for a More Sustainable, Cost-Effective Drug Program’ says with demographic pressure boosting these costs in the decades ahead, a business-as-usual approach to funding the plan presents a bleak prospect and amounts to wilfully passing an exorbitant bill on to future generations. An early increase in contributions to partially prefund future spending could contain the program’s impact on taxes later.

DC Participants Don’t Use Tools

More than three out of four Defined Contribution plan participants don’t take full advantage of savings and retirement tools available to them, says a report by Mesirow Financial. The report gauged plan executives’ assessment of participant behaviour and their plans’ structures. It found 78.5 per cent believe participants did not “take full advantage” of available savings and retirement tools. Fifty-nine per cent said they didn’t detect an increase in participants asking for assistance with their retirement accounts during “recent market volatility.”

Formulary Decisions Examined

How drug plan formulary decisions are made and the impact on your plan will be the focus of a session at Connex Health’s ‘9th Annual Employer Forum on Employee Health, Benefits and Productivity.’ Other sessions will examine the next generation of health risk assessment and measurement solutions and employee health programs that produce results. This year’s program includes a pre-conference workshop on May 11 with Merv Gilbert, of Guarding Minds @ Work, an evidence-based strategy that facilitates the protection and promotion of psychological safety and health in the workplace. The forum takes place May 11 to 13 in Niagara Falls, ON. For more information, visit https://www.connexhc.com/conferences.asp?id=3

Seminar Looks At Managing Risks

‘Managing Pensions & Benefits Risks: Staying Ahead of the Curve’ is the topic of a Heenan Blaikie ‘2011 Labour & Employment Seminar.’ It will examine significant recent developments in case law and practical strategies that employers can use to manage risks associated with modifying pension and benefits plans. It takes place April 26 in Toronto, ON. For more information, contact Michelle Stultz at 416-643-6831.

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Thursday, April 14, 2011

Benefits Can Offset Pay Concerns

Employers who do not have incentive plans, maternity leave programs, and other similar type of benefits in place should consider doing so to offset concerns about pay and as an attraction and retention tool, says Steven Osiel, vice-president, total rewards, at Pal Benefits. Speaking at the Toronto Board of Trade's Advanced Business Fundamentals series of lectures on ‘Underpaid and Happy! Understanding Employee Job Satisfaction in the Workplace,’ he said having these plans in place makes employees feel like they have something. No matter how bad the plan is, he said, you can say you have it and employees will feel happier about having. “People don’t talk about pay, but they do talk about how good their benefits are or their pension plan is,” he said. And while they don’t necessarily need to cost anything, they do need to be of value to employees. As well, the policies for these programs should be in writing and promoted so employees can appreciate the value of what they have.

HRA Identifies Health Issues

There are many reasons why an organization decides to offer a health risk assessment (HRA) to their employees, says a Connex ‘NewsLinks.’ Most organizations choose to use an HRA because they are interested in developing a health and wellness strategy and want to start by understanding employee health issues so that they can make the right program choices. However, these are not the only reasons an organization should use an HRA. For businesses experiencing escalating benefit costs, it is important to understand more about the health of the employee population as well as the culture of organization. The results may uncover employee health risks, chronic diseases, or cultural issues that can be supported through the benefit plan and workplace policies to mitigate future costs. Employers may also want to initially address employee health by helping employees identify key indicators about their own health, their home and work stressors, and encouraging them to improve them. In this case an HRA can improve awareness, determine willingness to change and preferred methods of support, and track changes over time for both the employer and the employees.

Sun Owns Buffett & Company

Sun Life Assurance Company of Canada has acquired full ownership of Buffett & Company Worksite Wellness Inc. Buffett & Company is a pioneer in evidence-based workplace wellness programs in Canada and this acquisition will significantly strengthen Sun Life’s capabilities in supporting employee and organizational health. It has held a 36 per cent stake in Buffett & Company since 2008. “Buffett & Company has a stellar reputation and we are proud to add its industry-leading capabilities to Sun Life,” says Stuart Monteith, senior vice-president, group benefits, Sun Life Financial Canada. “Health is an important issue in business today. This acquisition will put Sun Life at the forefront of the workplace wellness movement, enabling us to deliver leading edge programs and services to help employers create healthier, more productive workplaces.”

Inflation Likely In Near Future

Institutional investment managers increasingly see inflation as likely in the near future, with oil prices and market volatility also rising over the next six months, says a quarterly survey by Northern Trust.
Approximately 70 per cent of managers believe that the risk of inflation will increase over the next six months and a majority of managers (62 per cent) expect market volatility, as measured by the VIX Index, to increase over the next six months. Responses on both questions were at their highest points since the Northern Trust survey began in the third quarter of 2008. More than half of those surveyed believe that oil prices will continue to rise over the next six months, with 90 per cent of managers expressing the view that increased oil prices will negatively impact economic growth.

Infrastructure Now Distinct Asset Class

Infrastructure fund managers across Europe are focusing their investment strategies on transport and energy sectors, says a survey by Deloitte. It found most managers plan on concentrating their efforts in roads, rail, airports and ports, regulated gas, electricity, and water utility assets. Meanwhile, specialist funds will continue to lead the way on renewables and PPP/PFI infrastructure assets. Infrastructure is now clearly seen as a separate and distinct asset class within the alternatives space and private sector investment in infrastructure had grown substantially in 2011, with infrastructure funds playing a pivotal role.

Mawer Office Now Open

Mawer Investment Management has officially opened its Toronto, ON, office. Michael Mezei, its president, says the decision to open an office in Toronto was a natural one as they realized they needed to go where the clients are. He also said a key to opening the office was finding the right person to head it. The search started two years ago and resulted in Scott Campbell, a vice-president and senior institutional portfolio manager, being hired to head the Toronto office. He previously worked at Mclean Budden. Campbell is responsible for its clients in Toronto and points east. Independent, privately-owned Mawer currently manages approximately $9 billion in assets and has been managing portfolios for individual and institutional investors for more than 35 years.

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Wednesday, April 13, 2011

New Pilots Getting DC Plan

New pilots hired by Air Canada will become members of a Defined Contribution pension plan under a tentative labour agreement between the airline and the Air Canada Pilots Association. As well, pilots hired after November 1, 2010, will have a one-time opportunity to switch to the new plan. The agreement also proposes to alter the formula for early retirement, including increasing the number years of service required to qualify by five years. As well, a sliding scale will be put in place to reduce the benefits paid to retirees should the solvency deficit remain above $245 million in 2014. The agreement must still be ratified with the vote scheduled for April 15 to 27.

Investors Take On More Risk

Investors are taking on more risk, despite rising concerns over the world economy and the corporate profit outlook, says a BofA Merrill Lynch’s survey of fund managers. It investors have reduced their cash holdings and increased equity positions, most notably in global emerging markets. Average cash balances have fallen to 3.7 per cent from 4.1 per cent in March. A net 11 per cent of respondents are overweight cash, down from 18 per cent last month. Also, a net 50 per cent of asset allocators are overweight equities, up from 45 per cent a month ago. Managers are now 22 per cent overweight in emerging market stocks, up from zero per cent in March.

Pension Funds Acquire TimberWest

British Columbia Investment Management Corp. and the Public Sector Pension Investment Board in Montreal, QC, will acquire TimberWest Forest Corp., a timber and land management company. The agreement includes a 60-day period during which TimberWest can solicit other offers. However, it would pay a ‘break fee’ if it does not proceed with this deal. British Columbia IM and the PSPIB will each hold 50 per cent of TimberWest. British Columbia IM already owns a 22.5 per cent interest in TimberWest through its ownership of convertibles.

Union Issues Pension Warning

The union representing New Brunswick firefighters, correctional officers, school workers, and hospital employees says if the government is thinking about a two-tier pension plan for public sector workers, it should think again. The provincial government called for a review of public sector pensions in its recent budget, but it has not disclosed any details. A two-tier pension plan would allow current union members to keep their Defined Benefit pension plans, but new members would be enrolled in Defined-Contribution plans.

Richardson Allies With PPI

Richardson GMP Insurance Services Limited and PPI have established a strategic alliance to provide a national insurance advisory service. Under the agreement, Richardson GMP investment advisors now have access to products and services available through PPI Advisory and PPI Solutions as well as local insurance experts who work directly with clients and the in-house wealth and estate planning team. It also means Richardson GMP Insurance Services further broadens its insurance offering to include group benefit and pension capabilities and targeted solutions forbusiness owners and their employees.

Sharma At Mercer Sentinel

Arti Sharma is principal and head of business development, North America, at Mercer Sentinel Group, the operational and execution risk assessment business of Mercer LLC. She was previously senior vice-president at Thomas Murray North America Inc. where she specialized in new business development, consulting services, and institutional investor relationship management.

Group Insurance Contracts Focus Of Session

‘Challenges and Opportunities for Group Insurance Contracts’ will be examined at a Benefits Breakfast Club session. It will explore some of the developments that have taken place over the years that have influenced contract provisions, as well as the opportunities and challenges that present themselves for the future. It takes place April 14 in Mississauga, ON. For more information, visit
https://www.connexhc.com/conferences.asp?

McCallum, Hamilton Speak At ACPM Session

Peggy McCallum, of Fasken Martineau DuMoulin LLP, Malcolm Hamilton, of Mercer (Canada) Limited, and Brian Wurts, PwC, are among the featured speakers at the Association of Canadian Pension Management Ontario Regional Council’sSpring Session 2011.’ Sessions at ‘Checking the Pulse of Pension Reform’ will cover topics such as pensions in an uncertain world and the implications of HST for Ontario plan sponsors. It takes place April 26 in Toronto, ON. For more information, visit www.acpm.com

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Tuesday, April 12, 2011

Insolvent Employers Should Resign As Administrators

Employers should seriously consider resigning as pension plan administrators prior to insolvency to avoid conflicts of interest, says Kevin McElcheran, of McCarthy Tétrault LLP. Writing in its ‘e-Alert’ on the Ontario Court of Appeal’s decision in Indalex, he says the decision suggests that the fiduciary duty to plan members owed by the debtor in its capacity as administrator may require its managers to advocate the interests of the pension plan against the interests of its creditors and other stakeholders in insolvency cases. This conflict would put the managers of an insolvent debtor’s business in an impossible position. The easiest solution may be the appointment of an independent administrator. The court ruled that in the context of the Companies' Creditors Arrangement Act proceedings of Indalex, pension plan deficiency claims can have priority over security held by secured debtor-in-possession lenders. If not reversed on appeal, McElcheran says the ruling creates a potential worst case scenario for secured lenders in Ontario and could affect the availability of credit for all employers who provide Defined Benefit pension plans for their employees.

HOOPP Assets Top $35 Billion

The Healthcare of Ontario Pension Plan (HOOPP) is reporting returns of 13.68 per cent and net assets of $35.7 billion in its ‘2010 Annual Report.’ “HOOPP continues to be fully funded, providing security and peace of mind for HOOPP members and pensioners,” says John Crocker, its president and CEO. As a result, contribution rates for members and employers have not changed since 2004 and will remain the same until at least the end of 2012. On the investment side, it had returns of 17.38 per cent in Canadian equities and 16.78 per cent in U.S. equities. Canadian long bonds were up by 17.35 per cent, real return bonds were up 11.41 per cent, universe bonds were up 9.54 per cent, and corporate credit was up 1.71 per cent. HOOPP’s real estate portfolio had a solid year as well, returning 12.29 per cent. Private equity posted a 9.7 per cent return rate (approximately 16 per cent before foreign exchange impacts). The annual report is at www.hoopp.com/annualreport

Arbitrator’s Award Upheld

A Divisional Court has upheld an arbitrator’s award against the Greater Toronto Airport Authority (GTAA) for the wrongful termination of an employee who had been on sick leave, says a Hicks Morley ‘FTR Now.’ It concluded that the arbitrator’s determinations regarding his authority to award the various types of damages, as well as the actual amount of damages, were not necessarily correct, but fell within a range of reasonable outcomes. This may prove to be significant. Although arbitrators are not legally compelled to follow each other’s decisions, some arbitrators may feel less inclined to follow these conclusions on the basis that the Divisional Court only found them to be reasonable as opposed to correct. Overall, this judicial review decision clearly confirms how important it is for employers to treat employees with respect and dignity in the dismissal process, even if there is a suspicion of serious misconduct and, particularly when the facts surrounding the dismissal are related to sick leave and/or disability.

Time For Transformational Change Has Arrived

It's time for a transformational change in healthcare, says Hugh O'Neill, president and CEO of sanofi-aventis Canada. Speaking at the Canadian Club of Montreal, he said he has been trying to discuss this with healthcare stakeholders for a while now. "We see it in the media, we hear about it through friends and family, we experience it firsthand: our healthcare system is going through tough times ‒ if it is not actually in crisis," says O'Neill. "It is time for a transformational shift in Canadian healthcare, for the benefit of patients and the sustainability of our healthcare system." He believes that increased productivity and efficiency are the critical levers to keeping healthcare sustainable and providing patients with optimal care. All partners within the healthcare industry should work together to ensure science, systems, processes, negotiations and values always put patients first. In fact, governments, healthcare providers and pharmaceutical companies should each measure their success on the same basis: improved patient outcomes.

Small Businesses Benefit From Wellness Programs

High-quality employee wellness programs in small businesses improve employee health and well-being, which drives improvements in organizational outcomes such as absenteeism, healthcare costs, and disability claims, says a study by Health Enhancement Research Organization (HERO). It says this broadens the well-being impact of workplace wellness efforts beyond just large businesses. Best practices identified include increasing employee awareness of their health status, fostering personal accountability, and promoting physical activity.

STOXX Launches ESG Index Family

STOXX Limited, a provider of global index concepts, has introduced the STOXX Global ESG Leaders Index family, a series of ESG (environmental, social, governance) indices based on sustainability data provided by Sustainalytics. These equity indices are fully transparent with components selected based on a comprehensive set of sustainability ratings. This index model will allow investors to fully understand which factors determine a company’s ESG rating and their respective importance.

Nominations Open For SRI Award

Nominations are now open for the second ‘Canadian SRI Lifetime Achievement Award.’ Eugene Ellmen, SIO executive director, says the award “provides us with an opportunity to recognize and celebrate the leading lights in the Canadian SRI industry.”Suitable candidates will have made an outstanding contribution to the Canadian SRI industry in terms of leadership, commitment, initiative, innovation, collaboration, and/or impact in advancing industry growth and recognition. It will be presented June 22 at the Canadian Responsible Investment Conference in Victoria, BC. Nominations must be submitted by May 16. For more information, visit http://www.socialinvestment.ca

Benefits Summit Returns

The ‘Benefits Summit 2011’ will offer a comprehensive view of benefits trends and opportunities. It takes place October 26 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/conf/11-0116/default.aspx

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Monday, April 11, 2011

Alternatives Target Of Searches

Alternatives, emerging markets, and strategies that provide a hedge against inflation will be the targets of investment consultant searches for North American institutional investors this year, says the Casey Quirk & Associates and eVestment Alliance’s fifth annual survey of investment consultants in the U.S. and Canada. More than 80 per cent of the 55 consulting firms that responded predicted their clients will continue working to boost their non-U.S. equity exposure this year. Alternatives ‒ hedge funds, private equity, and real estate ‒ will take on a more central role in institutional portfolios, becoming the “centrepiece of active asset management moving forward,” says the report. Search activity for emerging markets equities is expected to continue picking up this year, but consultants predict an even stronger year-on-year gain for emerging markets debt.

Caisse Updates Responsible Investment Policy

The Caisse de dépôt et placement du Québec has updated its Policy on Responsible Investment, in effect since 2005. This update, which reflects the Caisse's experience and industry trends in responsible investment, is built around the key areas of environmental, social, and governance (ESG) criteria; exclusions; and shareholder engagement. ESG criteria is already entrenched in its equity markets group. However, it is enhancing the process of integrating these criteria into other asset class decision-making to improve the assessment of all investment-related risks and opportunities. The Caisse shall exclude from its portfolio securities of companies that produce anti-personnel mines and cluster bombs for non-compliance with international conventions. Its shareholder engagement activities are conducted through a proactive dialogue with companies, independently or in collaboration with investor groups, to improve the level of information available to companies in which it invests and influence their responsible business practices. The Caisse will enhance its shareholder engagement efforts with these companies by targeting specific issues recommended by a responsible investment committee.

Improvements Should Target Weak Points

Improvements to the retirement system should target the weak points in the system rather than trying to devise one solution to address the savings shortfall for all Canadians, says Jeff Aarsson, vice-president, group retirement solutions, sales and marketing, at Great-West Life. Speaking at the Conference Board of Canada’s ‘Summit on the Future of Pensions,’ he called the government’s pooled registered pension plan proposal as an effective component of an overall solution as it could extend pension coverage to small and medium sized businesses and self-employed Canadians. However, he believes any solutions need to build on the Defined Contribution infrastructure which the private sector in Canada has built over several decades.

Pictet Offers ESG Pooled Fund

Pictet Asset Management is launching a pooled fund for institutional investors in response to growing demand for environmental, social, and governance opportunities. The Environmental Opportunities fund would collect the best ideas from its four existing thematic funds ‒ water, clean energy, timber, and agriculture ‒ to offer a ‘one stop solution’ for investors.

SunGard Acquires Stratix

SunGard has acquired Stratix Consulting, a provider of IT consulting services to Canada's financial services companies. Specializing in capital markets, wealth and investment management, and insurance, Stratix Consulting has delivered IT management consulting and implementation services for customers since 1996. It will be part of SunGard's Global Services business, which combines business consulting, technology, and professional services for financial services firms, energy companies, and corporations.

SEC Rejects Wal-Mart Arguments

The Securities and Exchange Commission has rejected an attempt by Wal-Mart Stores Inc. to omit a shareholder resolution from five New York City pension funds relating to sustainability reporting in its supply chain. The SEC says it does not believe the retailer may omit the proposal from its proxy materials ahead of its annual general meeting on June 3. Wal-Mart had argued against the proposal on two grounds ‒ that it relates to ordinary business operations so it’s not appropriate for shareholder resolutions and it has already been implemented.

Conference Board Looks At Compensation Trends

Economic and compensation trend information and insights will be featured at the Conference Board of Canada’s ‘Compensation Outlook 2011.’ It takes place October 25 in Toronto, ON. For more information, visit http://www.conferenceboard.ca/conf/11-0115/default.aspx

Benefit Fundamentals Explained

A comprehensive introductory overview of pensions and group benefits will be provided at the Toronto Area Chapter of the International Society of Certified Employee Benefit Specialists’ ‘Fundamentals of Pensions and Group Benefits.’ The two full-day seminars look at group benefits the first day and group pensions the second. Participants will examine topics such as what’s involved in setting up a pension plan and what are some of the alarming trends in disability claims. It takes place May 5 and 6 in Toronto, ON. For more information, visit http://www.iscebs.org/Local

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Friday, April 8, 2011

Decision Affects Beneficiaries Rights

The Ontario Court of Appeal may have given employees of insolvent companies a better chance of collecting their pensions. In a decision in Indalex, it ruled in favour of the former staff of a failed manufacturer that was seeking to use the proceeds from the sale of the company's assets to cover shortfalls in their under-funded pension plans. In her ruling, Madam Justice Eileen Gillese said the company “knew that the plans were under-funded and that unless more funds were put into the plans, pensions would have to be reduced. Its decisions had the potential to affect the plans’ beneficiaries’ rights, “at a time when they were particularly vulnerable.” The ruling means that companies in a Companies’ Creditors Arrangement Act proceeding cannot automatically ignore an under-funded pension plan. Instead, companies will have to first make a case in court that they cannot meet their pension obligations.

Court Decision Pre-empted

The much anticipated decision of the B.C. Supreme Court in the pension case, Dawson v. Tolko Industries Ltd., was pre-empted when the parties filed a consent order dismissing the action, says SpectrumHR Law. The pension industry in Canada has been following the case closely due to its potential precedential value in the area of plan conversions and member communications. The claim arose out of a conversion by Tolko from a Defined Benefit pension plan to a Defined Contribution pension plan. The plaintiffs alleged that their DC pension benefits were less than what they would have received had they elected to remain in the DB plan and that the conduct of the defendants in preparing the written materials regarding the conversion on which the plaintiffs relied in making their decisions, constituted a breach of fiduciary duties and the standard of care. While a court decision is no longer forthcoming in the Tolko case, a similar action arising out of a plan conversion ‒ James Weldon v. Teck Metals Ltd.is currently before the B.C. Supreme Court.

Ontario Adopting Federal Rules

Ontario has amended the regulations under its Pension Benefits Act to adopt federal investment rules “as they may be amended from time to time, says an Osler ‘Pensions & Benefits Newsletter.’ This change means that Ontario registered pension plans will now be subject to the most recent amendments to the federal investment regulations and any future changes to these regulations will automatically apply to Ontario plans. The federal government amended the investment rules in June 2010 to eliminate the five per cent, 15 per cent, and 25 per cent quantitative investment limits in respect of resource and real property investments. As a result of the recent amendments to the regulations, these changes will now apply to Ontario pension plans. Administrators of Ontario plans will want to watch for any further amendments to the federal investment rules as their plans will now be directly and immediately impacted by any future changes.

Teachers’ Real Estate Returns 16.9 Per Cent

The Ontario Teachers’ Pension Plan’s real estate portfolio registered a return of 16.9 per cent, nearly double its 7.7 per cent one-year benchmark. Andrea Stephen, executive vice-president of investment at Cadillac Fairview which manages real estate investments for Ontario Teachers, cited strong markets, a high-quality portfolio, strong valuations, and good availability of capital as the chief reasons for the solid performance. Its total real estate investment stood at $16.9 billion as of end of 2010, up from $14.2 billion in 2009.

Russell Adds Frontier Markets

Russell Investments Canada Limited is adding a frontier markets mandate to its Emerging Markets Equity Pool, which is part of the Sovereign Investment Program and a new addition to the LifePoints Program. David Feather, president and CEO, says “Recent market events have made this region more attractive for long-term investors, and we believe the relatively unexplored frontier region has great potential.” Frontier markets are nations with generally lesser developed economies, who have significant growth potential such as Argentina, Bangladesh, Kuwait, Nigeria, Ukraine, and Vietnam.

ESG No Longer Niche

Investment according to environmental, social and governance (ESG) factors is no longer a niche area, says Wolfgang Engshuber, chairman of the UN Principles for Responsible Investment (PRI). Speaking at the FTSE4Good Index Series 10th anniversary, he said "ESG is not a niche anymore.” UN PRI is currently working on broadening its network across more regions, with a focus on regions where the initiative is under-represented.

Generic Drug Pricing Not Enough

‘Why Generic Drug Pricing Legislation is Not Enough’ will be the focus of a session of the Barrie Benefits Breakfast Club. Mike Sullivan, president, Cubic Health, will share the results of its research into drug claims in Canada over the past two years and the implication of findings for plan sponsors. It takes place May 24 in Barrie, ON. For more information, contact Beth Stefaniuk, bstefaniuk@blevins.ca or 705 721 9890.

Creating Value Conference Theme

‘Creating Value, Making a Difference’ is the theme of this year’s Canadian summit on socially responsible investment. The year's theme highlights the opportunities for socially responsible investors to profit from investing while contributing to positive social change and environmental sustainability. It takes place June 20 to 22 in Victoria, BC. For more information, visit http://sioconference.com/agenda/

Summit Addresses Public Fund Issues

The ‘Public Funds Summit East’ will address issues that are most critical to the investment success of senior public pension fund officers and trustees. It will cover how surplus returns should affect employee benefit plans, the processes for selection and evaluation of investment managers, and legal concerns with fund investment and management policies as well as the benefits and pitfalls of a wide variety of investment strategies. It takes place July 18 to 20 in Newport, RI. For more information, visit http://www.opalgroup.net/

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Thursday, April 7, 2011

Executives Still See DB Funding Crisis

Recent improvements in economic conditions have had virtually no impact on executives’ perception of a Defined Benefit pension plan funding crisis, says a Towers Watson survey. The survey of more than 150 Canadian pension plan sponsors indicates that just over half (51 per cent) of the private sector DB plan respondents have now converted their plans to Defined Contribution arrangements for current or future employees ‒ up from 42 per cent in 2008 ‒ and this trend shows no sign of relenting. The percentage of respondents who agree that there is a pension funding crisis has remained at historic highs since the financial downturn of 2008. The survey found that more than half of respondents (56 per cent) believe that the funding crisis will persist for the long-term compared to 34 per cent who held this view in 2008 before the onset of the recession. Ian Markham, Canadian retirement innovation leader at Towers Watson, says “This year’s survey results show that employers planning a conversion to DC are intent on doing so regardless of whether economic conditions improve or a more sponsor-friendly legislative environment appears, or even in lieu of less dramatic changes to plan design or investment strategy.”

Canadians Face Tough Choices

The amount Canadians spend on healthcare is set to rise rapidly over the next two decades and Canadians need to face up to tough choices to deal with this “spending disease,” says a C.D. Howe Institute study by David A. Dodge, former governor of the Bank of Canada, and Richard Dion, a former economist at the Bank of Canada. ‘Chronic Healthcare Spending Disease: A Macro Diagnosis and Prognosis’ examines the trajectory of total healthcare spending – public and private – in Canada and the policy choices Canadians must make in response.  Among their findings are that in the base case, healthcare spending rises from 12 per cent of GDP in 2009 to 19 per cent in 2031. In the optimistic case, with new policies and cost-reducing technologies bringing down the cost of healthcare, the rise in spending is more limited than the baseline, but significant nonetheless, because it would bring the spending ratio to over 15 per cent of GDP by 2031. As a result, Canadians must choose some combination of a sharp reduction in public services, other than healthcare; increased taxes to finance the public share of healthcare spending; increased individual spending on healthcare services currently insured by provinces, through some form of co-payment or through delisting of services that are currently publicly financed; or a degradation of publicly insured healthcare standards – longer queues and services of poorer quality. The study is at http://www.cdhowe.org/pdf/Commentary_327.pdf

Stance On Letters Of Credit Changes

Letters of credit are not a panacea for addressing onerous solvency funding rules, says Greg Hyatt, general manager, pension plan management, at Canadian Pacific. Speaking at the Conference Board of Canada’s ‘2011 Summit on the Future of Pensions: Rebuilding Pensions, Rethinking Retirement,’ he admitted he has done a 50 per cent about face on them since their usage was first proposed after the Tech Bubble burst. He said that letters of credit were suggested as a method to secure pension benefits because they addressed the issue of trapped capital and they are still an effective method to do this. However, the issue is that they do not address plan deficits. The pension obligation remains unfunded and plan deficits continue to grow with interest. As well, they require payment of letter of credit fees that are typically significantly higher at the present time than they were prior to the financial crisis. Still, he encouraged those provincial governments that do not yet permit permanent use of letters of credit in lieu of solvency funding to do so.

Solvency Improves Slightly

The solvency position of most Canadian pension plans improved slightly in the first quarter of 2011 on the back of good equity market returns and an increase in long-term federal bond yields, says the Mercer Pension Health Index. It stood at 75 per cent on March 31, up two per cent over the quarter. This improvement is before accounting for the deficiency payments being made by most plan sponsors, as required by legislation, which are significant in some cases. “Despite uncertainties abroad created by the turbulence in the Middle East and the catastrophic events in Japan, stocks performed well overall in the first quarter, with the biggest gains again being observed in the Canadian stock market,” says Yvan Breton, leader of its investment consulting business in Canada and Latin America. “The typical pension plan experienced a return on assets of about two per cent in the first three months of the year, improving the Mercer Pension Health Index by about one per cent. This return does not capture any impact from active management of any asset class.”

Active Managers Need To Find Gaps

For active assets management to make money, the gaps between traditional investments must be found, says Leo J. de Bever, chief executive officer and chief investment officer for the Alberta Investment Management Corporation. In the session ‘Aiming to Succeed Unconventionally, Surviving to Tell the Tale’ at the Conference Board of Canada’s ‘2011 Summit on the Future of Pensions: Rebuilding Pensions, Rethinking Retirement,’ he said underfunding, rising contribution rates, and mediocre market returns have put pension financing under pressure. As a result, desperation for incremental return induced an often poorly executed stampede to “alternatives.” However, a disciplined search for return in unusual places can add one per cent per year or more in the long run. Still, active return alone will not cure long-term design issues with pension plan funding and the volatility of return/risk. Pension plans cannot be “long-term investors” and insist on consistently high returns in the short run, he said.

Great-West Offers Customizable Home Page

Great-West Life Group Retirement Services has introduced a customizable member home page for‘GRS Access,’ its secure, transactional website. This latest enhancement allows plan members to personalize the information they see on thehome page. They can get a quick picture of their investment portfolio balance, both by plan and by asset class. Additionally, they can review the types of investment options they’ve chosen and compare their investment performance over time, illustrated through charts and graphs. They can also review their investments with access to fund reports.

FTSE Offers ESG Data Service

FTSE Group has launched the FTSE4Good ESG Ratings. This new data service provides a comprehensive, transparent, and objective system to measure the environmental, social, and governance (ESG) practices of more than 2,300 public companies worldwide. It was launched as a result of the increasing awareness that ESG factors are an important component in understanding corporate risks and performance and in the achievement of long-term, sustainable investment returns.

Caisse Invests In Micro-caps

The Caisse de dépôt et placement du Québec will make an additional $50 million investment in Québec publicly traded micro-cap companies. The mandate involves investments in Québec companies whose capitalization is less than $250 million. "The Caisse already has a strong presence in the stocks of companies with market capitalizations in excess of $250 million. The addition of the micro caps complements our investment exposure to publicly traded Québec companies ‒ on top of adding to the Caisse's range of financial products and investments with Québec companies," says Jean-Luc Gravel, executive vice-president, equity markets.

Campbell Joins Mawer

Scott Campbell is vice-president, senior portfolio manager, at Mawer Investment Management. He has more than 15 years of investment industry experience and will be responsible for the portfolio management and servicing of its institutional relationships in central and eastern Canada.

CPBI Looks At Wellness In Workplace

A CPBI Benefits Fundamentals session will examine wellness in the workplace. Alan Smofsky, a workplace health strategist, and Jennifer Hubbard, of the Economical Insurance Group, will explore some of the critical challenges that benefits advisors must overcome when convincing senior managers that investing in their employees’ health does result in a positive return on investment. It takes place April 14 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca/en/event_details.ch2?event_id=1027

Session Examines Credit Availability

‘Credit Availability in Canada’ will examine areas such as the availability of working capital and long term financing; the process difficulties and cost of obtaining credit; and the impact of the economy and lending conditions on small companies. The FEI Canada National Breakfast Seminar Series takes place April 12 in Toronto, ON. For more information, visit http://www.feicanada.org/events.php?eid=1144

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Wednesday, April 6, 2011

Teachers’ Facing Systemic Problems

The Ontario Teachers' Pension Plan earned the largest value-add dollar amount in its history in 2010. It ended the year with $13.3 billion in investment income, representing a 14.3 per cent rate of return, which is $4 billion above its 9.8 per cent benchmark. Net assets totalled $107.5 billion as of December 31, 2010. "Our investment team remained true to our investment fundamentals, taking appropriate risks to earn solid returns, while seeking the best diversification to meet our plan's long-term needs," says Jim Leech, its president and CEO. However, he says the plan is facing systemic funding problems. "The root cause of the $17.2 billion preliminary funding shortfall is a combination of factors: member longevity, retirement periods that exceed working years, low real interest rates which reflect lower economic growth going forward, and the maturity of the plan which now receives $1.8 billion less in contributions than it pays out annually."

China Focuses On GDP Per Capita

While China may have the second largest economy in the world, in terms of GDP per capita it ranks 99th, just ahead of Vietnam, says Don Rich, head of tactical asset allocation for Manulife Asset Management. Speaking at Euromoney’s ‘The Canada Forum’ as part of a panel discussion on ‘Canada and the International Economic Crisis,’ he said the issue with China is that the major powers expect it to act like the second largest economy in the world. To do so it would, for example, free its currency and open up its markets. However, China’s objective is to improve its GDP per capita and it has little concern about its place as a global economy. Carl Weinberg, chief economist at High Frequency Economics, took issue with a comment that China’s growth was driven by exports and that they save too much. He said that 40 per cent of China’s GDP growth comes from consumer growth in the country and when they buy consumer goods they buy those made in China. That is not surprising, he said, because “we in North American don’t want to buy our goods. We buy from China because they are better and cheaper.” And, he added, the trade imbalance that the U.S. has with China might go away if its consumers “saved more and spent less.”

Cost Benefits Yet To Be Realized

Although recent provincial legislation to force down the price of generics to consumers has taken effect in Alberta and Ontario, and several brand name blockbuster drugs such as Lipitor have recently come off patent, data is now showing that cost benefits are not being realized in the private sector, says a Connex ‘NewsLinks.’ It suggests there are a number of reasons for this. Generic drug prices for private employer plans have not hit their low yet of 25 per cent of brand which is scheduled to take effect gradually over three years. As well, there is low utilization of generics in many private plans that do not have mandatory generic substitution. Other drugs are now off patent, however, the generics are not all available yet so there will be more savings in 2011 and 2012. Finally, there have been price increases at the pharmacy counter that offset some of the lost revenue from the reduction in professional allowances long associated with generic drugs.

Warning Offered On Securitization

The future of securitization in the Canadian market is very bright as long as it sticks to its roots, says Paul Sandhu, vice-president and director at Marret Asset Management Inc. However, he warned a session on ‘Securitization in Canada: Past, Present and Future’ at Euromoney’s ‘The Canada Forum,’ that not a lot has changed since the market collapsed in 2007. He said the risk structure and compensation systems have not changed and there is still a lack of regulatory oversight. As well, there is still a conflict of interest in the way ratings agencies are paid for rating these products. “We are seeing the things that made us cautious and caused aggravation coming back,” he said.

Plan Members Want Help

A majority of workers in employer-sponsored retirement plans want help from their employers in planning for a secure retirement, with 89 per cent saying they need help allocating their investments, says a survey by the ING Retirement Research Institute. It found 86 per cent of the respondents want guidance calculating their financial needs in retirement and 84 per cent want solutions for calculating and creating retirement income. Another 52 per cent said they expect their employer to do more to educate them about retirement options and 55 per cent said they do not know how to achieve their retirement goals.

Caisse Couldn’t Reach Agreement 

The Caisse de dépôt et placement du Québec says its decision to not participate in a fourth investment fund with Accès Capital Québec is because the two parties could not reach an agreement. It says it held many discussions with Accès Capital Québec on the Caisse’s participation level and its right to oversee investments when it is the only investor. As well, there were other factors behind the decision. Luc Houle, senior vice-president, investments, says the latest Accès Capital Québec fund posted a negative return over four years, “prompting us to seek more effective governance for the Caisse to protect the interests of the institution and its depositors.” As well, the business environment has changed significantly in this area, becoming much more competitive. “Given this new business environment, we reviewed our strategy and developed a partnership with a dominant player like Desjardins, which includes a $200 million component for small Québec companies with financing needs of less than $3 million,” says Houle. Lastly, the Caisse itself is about to announce new initiatives on that front.” Since 1997, the Caisse has invested $8.5 million, $20 million and $18.5 million, respectively, in three Accès Capital Québec funds. The Caisse’s participation levels have also ranged from 50 per cent to 100 per cent, depending on the funds and partnerships.

Fidelity Picks Co-leads

Derek Young and Geoff Stein are co-leads of the Fidelity Canadian Asset Allocation team.  Young is a long-time Fidelity portfolio manager and chief investment officer of the global asset allocation group for Fidelity in the U.S. Stein is a portfolio manager and asset allocation expert.

Stockton Heads GE

Dmitri Stockton is president and CEO of GE Asset Management Incorporated. He succeeds Jay Ireland who is assuming a newly-created position within GE as president and CEO for GE Africa.
A 24-year GE veteran, Stockton was most recently president and CEO of GE Capital’s global banking unit.

Financial Summit Set For July 7

‘More competition or just more costs?’ and ‘Trends impacting data and technology spend’ will be among the areas covered at the Toronto Financial Information Summit. It takes place July 7 in Toronto, ON. For more information, visit http://emails.incisivemedia.com

Lyon Discusses Changes In Pension Act

‘Changes to the Manitoba Pension Benefits Act’ will be the topic at a Manitoba CPBI council breakfast seminar. Debbie Lyon, the superintendent of pensions of the Manitoba Pension Commission, will provide an overview of the changes to Manitoba’s pension legislation. It takes place April 21 in Winnipeg, MB. For more information, visit http://www.cpbi-icra.ca/

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Tuesday, April 5, 2011

NDP Would Double CPP

An NDP government would double Canada Pension Plan benefits, says New Democrat Leader Jack Layton. He says the CPP has long been neglected by Ottawa and this has eroded the retirement security of millions of Canadians. An NDP government would immediately work with the provinces to double CPP and QPP benefits and would allow Canadians to prop up their CPP savings with their personal income. The NDP believes that doubling CPP and QPP benefits could require a 2.5 per cent increase in payroll deductions. The NDP would also change bankruptcy laws to protect pensioners and those on long-term disability when their employer declares bankruptcy.

PRI Now Requires Fees

Signatories to the United Nations Principals for Responsible Investments (UNPRI) will now have to pay fees in order to participate. The PRI had previously relied on voluntary contributions with only a third of its 800 signatories, which combined manage $25 trillion of assets, contributing. It says mainstreaming responsible investment across all asset classes, investor types, and regions is a massive task that can only be achieved with a degree of organizational scale and staff with experience in the field. This will take considerable resources and if the PRI is to fulfill its potential, relying on voluntary contributions was not going to be sufficient.

Diabetes On The Rise

Diabetes continues to rise steadily throughout the country, says the Canadian Diabetes Association and Diabetes Québec. They joined forces to produce a report, ‘Diabetes: Canada at the Tipping Point ‒ Charting a New Path,’ which says if this virtual epidemic is not contained, Canada's healthcare system will suffer as direct and indirect health costs explode. In Québec alone, 563,000 people suffer from diabetes and another 200,000 are unaware that they have it. Nearly $3 billion dollars each year are spent in direct and indirect costs associated with the disease.

Leakage Concerns Executives

While Defined Contribution pension plan executives worry about leakage, actions to stem the early withdrawal of savings seems to be coming in a trickle, says a report from Aon Hewitt. Leakage is the early withdrawal by participants of money from their retirement accounts for uses other than retirement. It can include hardship and non-hardship withdrawals, loans that are eventually repaid, defaulted loans, and cashouts by employees who leave their jobs before retirement age and don't roll over money into another qualified plan or an individual retirement account. In the areas of cashouts, loans, and withdrawals, plan executives' actions didn't match their claims of concern, says the report. However the relative inactivity may be a result of not knowing whose problem is it and what to do about it.

Americans Retiring Later

Twenty per cent of American workers in the Employee Benefit Research Institute’s ‘2011 Retirement Confidence Survey’ say the age at which they expect to retire has increased in the past year. Statistically, this is similar to the percentage indicating they were planning to postpone retirement in 2010 (24 per cent). The poor economy (36 per cent) and a lack of faith in Social Security/government (16 per cent) are the most frequently cited reasons for postponing retirement, followed by changes in employment situation (15 per cent) and can’t afford to retire (13 per cent). The survey also says the age at which workers expect to retire is gradually rising. In 1991, half of workers planned to retire before age 65 (50 per cent), compared with 23 per cent in 2011.

Ecker Addresses Economic Club

Janet Ecker, president of the Toronto Financial Services Alliance, will discuss how the organization helps Canada sustain its global advantage at an Economic Club session. It takes place April 14 in Toronto, ON. For more information, visit www.economicclub.ca

Fabbro Provides Employer’s Perspective

Arthur Fabbro, director of total compensation at Magna International Inc., will provide ‘An Employer's Perspective on Drug Plan Design: Differences Between Canada and the U.S.’ at the PrivatePayerPulse conference. Theme of the Drug Benefit Consulting and Equilibrium Health Consulting event is ‘Drug System Reform & The Emerging Private Payer Model.’ Registration closes April 8. It takes place April 12 in Brampton, ON. For more information, contact Gordon Polk at 905-631-9788 or gpolk@drugbenefitconsulting.com

April Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including April 2011 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:
• Commuted Values February 2011 CIA
• Marital Breakdown ‒ CSOP 4300, May 2009
• Annuity Proxy for Solvency Calculations for Non-Indexed & Fully-Indexed Pensions
• Minimum Interest on Employee Required Contributions
• HISTORICAL ‒ Commuted Values: 2009 Basis (Now Frozen)
• HISTORICAL ‒ Commuted Values: 2005 Basis (Now Frozen)
• HISTORICAL ‒ Commuted Values: 1993 Basis (Now Frozen) 

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Monday, April 4, 2011

CSA Sets Out Securitization Market Rules

Canadian securities regulators are proposing new rules for the securitization market in response to vulnerabilities revealed in the financial crisis. The Canadian Securities Administrators’ new rules aim to enhance disclosure requirements and improve the transparency provided by securitized products. Regulators are also seeking to overhaul the exempt market regime for securitized products. It is proposing a framework for the regulation of securitized products that would require reporting issuers to provide investors with information on the features and risks of securitized products both at the time of distribution and on an ongoing basis. These new disclosure requirements have been designed to be consistent with international developments such as IOSCO’s disclosure principles and the U.S. Securities and Exchange Commission’s disclosure rules.

Senior Healthcare Costs Dip

Future healthcare costs for retired couples have declined for the first-time ever in Fidelity Investments’ annual estimate. It says a 65-year-old U.S. couple retiring this year will need $230,000 to pay for medical expenses throughout retirement, not including nursing home care. This represents an eight per cent decline from last year when the estimate was $250,000. Calculated by its benefits consulting business, until this year the estimate has increased an average of six per cent annually since the initial calculation of $160,000 in 2002. The decline from last year was driven by Medicare changes contained in the Patient Protection and Affordable Care Act and the Healthcare and Education Reconciliation Act, both signed into law in 2010. These changes reduced out-of -pocket expenses for prescription drugs for many seniors.

Underfunding Key Risk Issue

Defined Benefit pension plan sponsors now rank underfunding of liabilities and asset and liability mismatch as key on their risk management agenda, says the ‘2011 MetLife U.S. Pension Risk Behaviour Index.’ Specifically, when plan sponsors were asked to indicate the importance of the 18 risk factors affecting their plan, these top two risks were selected as the most important 66 per cent of the time and 60 per cent of the time, respectively. This is different from last year’s study in which sponsors placed nearly equal importance on all risks facing their plans and the 2009 study which found that plan sponsors were intently focused on the asset side of the asset‐liability equation. The third‐ and fourth‐ranked risk factors this year, asset allocation and meeting return goals, are investment‐related risks.

Canada Post Plan Exceeds Benchmark

The Canada Post pension plan’s rate of return was 10.4 per cent in 2010, exceeding its benchmark rate of return of 9.8 per cent. It ended 2010 with total net assets available for benefits of $15.376 billion, an increase of $1.8 billion from 2009. After experiencing losses in 2008 due to the global economic crisis, the plan rebounded with double-digit returns in both 2009 and 2010 to reach its highest level of assets since the plan's inception in 2000.

Conway Joins BlackRock

Edwin Conway is head of U.S. and Canadian institutional businesses for BlackRock. Previously, he was senior managing director in investor relations and business development at Blackstone.

Carmichael Examines Universal Healthcare

Dianne Carmichael, president of Best Doctors Canada Inc., will examine how business leadership can save universal healthcare at an Economic Club of Canada session. It takes place April 19 in Toronto, ON. For more information, visit www.economicclub.ca

ACPM Checks Pension Pulse

The Association of Canadian Pension Management’s Ontario regional council will check the pulse of pension reform at its Spring Session 2011.’  Topics covered include ‘Pensions in an Uncertain World’ and ‘HST and the Implications for Ontario Plan Sponsors.’ It takes place April 26 in Toronto ON. For more information, visit http://www.acpm.com/

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Friday, April 1, 2011

Pension Assets Ratio Drops

In the past 10 years, the ratio of pension assets to GDP has fallen 19 per cent in Canada, says Towers Watson’s ‘Global Pension Assets Study.’ For 2010, the proportion of pension assets to GDP in the U.S. is 104 per cent and in Australia 103 per cent. The number for Canada is 73 per cent. The study found global institutional pension fund assets in the 13 major markets increased by 12 per cent during 2010 to reach a new high of $26 trillion. All markets in the study have positive 10-year compound annual growth rate figures. Brazil has the highest growth of 15 per cent while Canada, at one per cent, was among the lowest. The U.S. and Japan remain the largest pension markets in the world, accounting for 58 per cent and 13 per cent, respectively, of total pension fund assets globally. Canada, with $1.14 trillion, ranks sixth. Australia has the highest proportion of Defined Contribution to Defined Benefit pension assets, 81 per cent to 19 per cent, while Japan and Canada are close to 100 per cent DB.

Pension Fund Restraints Contribute To Instability

Onerous constraints on pension schemes are contributing to global economic instability, says the World Economic Forum. It claims mark-to-market accounting and new solvency rules starve financial markets of long-term capital by encouraging pension funds to focus on short-term market values. Long-term institutional investors held around 50 per cent of $6 5trillion in global assets in 2009 but only 25 per cent in 2010. The short-term trend would continue the shift from Defined Benefit to Defined Contribution schemes as investment managers focus on avoiding risk rather than on generating returns. The report's steering committee includes representatives from the Ontario Teachers Pension Plan.

Crisis Refocuses Pension Plans

The financial crisis of 2008-2009 has refocused pension plans in North America, the U.K., and Northern Europe on defining and solving the risk management challenges they face in the decade ahead, says research by Pyramis Global Advisors. Respondents in the U.S., Canada, and Europe said that the top four lessons they learned from the financial crisis were the need for more downside protection (62 per cent), improved risk management (54 per cent), a better match of assets and liabilities (49 per cent), and a realization that they were less diversified than they thought (42 per cent). The top concern cited by pension plan sponsors was their current funded status (23 per cent), followed by volatility (21 per cent) ‒ either volatility of a plan’s funded status or asset volatility ‒ and a low-investment-return environment (19 per cent). In Canada, ‘solvency ratio’ was cited by 23 per cent of plans as the top concern. In the U.K. and Northern European countries, the top concern was a low-investment-return environment. The exception was the Nordic countries – Finland, Ireland, Sweden, Norway, and Denmark – which cited risk management as their top concern. 

Real Estate Sustainability Benchmark Created

Eleven of the world’s largest pension asset managers, including the Ontario Teachers Pension Plan, have joined forces to create the Global Real Estate Sustainability Benchmark. It will carry out an annual survey to scrutinize the sustainability of fund managers in the real estate industry. The goal is to simultaneously create shareholder value and reduce the sector’s substantial carbon footprint by creating more transparency in the environmental sustainability of real estate investment managers. The managers represent $1.4 trillion in assets under management.

Infrastructure Index Series Launched

FTSE Group has launched the FTSE Infrastructure Index Series (FIIS); a comprehensive and complementary set of nine indices diversified across six infrastructure sub-sectors, to reflect the market’s evolving definition of infrastructure. The FIIS enables investors to research, benchmark, and gain exposure to both physical infrastructure assets and the important networks, support, and conveyance services that underpin global infrastructure development. The new index series provides investors with balanced exposure to global infrastructure whilst reducing the risk of over-concentration in individual sectors.

Investor Confidence Grows

Globally, investor confidence rose 6.5 points from February’s revised reading of 91.8 to reach 98.3, says the ‘State Street Investor Confidence Index’ for March 2011. The increase was most pronounced among North American institutional investors, whose confidence registered at 103, 10.5 points higher than February’s revised reading of 92.5. Investor confidence also increased among Asian institutional investors, rising 8.7 points to 100.2 from February’s revised level of 91.5. It was a different story among European investors, whose risk appetite declined 15 points to 64.3, from the February level of 79.3.

Lane Speaks At CPBI Forum

Timothy Lane, deputy governor general, The Bank of Canada, is a keynote speaker at the ‘CPBI FORUM 2011.’ He will discuss ‘The Changing Face of Risk in the Global Financial System.’ The conference will provide insights into what the future holds for the industry and provides a global perspective on trends from around the world and how they may affect Canada. It takes place May 18 to 20 in Vancouver, BC. For more information, visit: http://www.cpbi-icra.ca/

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Thursday, March 31, 2011

Mental Health Advisory Board Created

The rising cost of mental health in the workplace has prompted Morneau Shepell Ltd. to establish a Mental Health Advisory Board to help advise its clients. "The advisory board is a broad-based, platform for collaboration," says Karen Seward, executive vice-president, marketing and business development. "We are looking to create innovation in employee health.” Members of the advisory board are Dr. Jean-Pierre Brun, professor in the Management Department of the Faculty of Business Administration at Université Laval in Québec City; Dr. Robert Francis, founder and chief medical officer of the Medcan Clinic in Toronto; Karen Liberman, executive director of the Mood Disorder Association in Toronto; Dr. Larry Myette, occupational medical consultant and clinical assistant professor in the Faculty of Medicine, Department of Psychiatry, at the University of British Columbia; Dr. Joti Samra, research psychologist and adjunct professor with the Faculty of Health Sciences at Simon Fraser University; and Dr. Martin Shain, principal and founder, Neighbour at Work Centre and assistant at the Dalla Lana School of Public Health, Occupational and Environmental Health Division, University of Toronto. Last fall, Shain’s report for the Mental Health Commission of Canada, ‘Tracking the Perfect Storm,’ said that employers are legally bound to maintain a psychologically safe workplace, in addition to a physically safe one. It said that such conditions as depression, anxiety, and burnout can sometimes be characterized as mental injury. The Mental Health Commission of Canada estimates that mental illness costs the Canadian economy $51 billion a year in terms of healthcare service use, lost workdays, and work disruptions.

Liberal Pension Proposals Good News

New pension proposals from federal Liberal Party Leader Michael Ignatieff are good news for workers across the country, says Patrick Dillon, business manager and secretary treasurer of the Provincial Building and Construction Trades Council of Ontario. "Today's proposals to enhance our country's public pension system are precisely what workers and their families need," says Dillon. "These measures are long overdue." Ignatieff is proposing a gradual expansion of benefits provided by the Canada Pension Plan (CPP). He is also calling for the creation of a new, voluntary Secure Retirement Option administered by the CPP that would allow workers to top up their retirement savings through a voluntary, tax-deductible savings option. To help workers left out in the cold when their employer goes bankrupt, he also committed to greater protection for those collecting long-term disability benefits and to create a Stranded Pension Agency to give Canadians a new and safe option to manage their private pensions after corporate bankruptcies.

ESG Provision May Have Profound Impact

An Ontario budget provision modeled on a 2004 provision in the UK could have a profound impact on how pension funds deal with environmental, social, and governance factors when it comes to their investments, says Dr. Matthew Kiernan, founder and chief executive of Inflection Point Capital Management. Speaking at the Legg Mason ‘Global Investment Forum,’ he said the province says it will require funds to report publically to what extent they are using ESG considerations and, and if not, why not. It’s “either comply or explain,” he said and based on the experience in the UK this should have a profound effect. Regardless what it is called ‒ ESG, SRI, or sustainable investing ‒ it is not about ethics. They are a recognition of global mega trends and a recognition that they have an impact on industries. In many cases, it comes to identifying the quality of management. For those who dismiss ESG because there are no metrics to measure it, quality of management cannot be measured either, he said, yet ultimately it is a consideration in all active investment decisions.

Emerging Markets Rise More Than BRICs

The rise of emerging markets is more than just a Brazil, Russia, India, and China (BRIC) story, says research from State Street Global Advisors’ (SSgA) active emerging markets investment team. It shows that since since January 1997 BRICs have underperformed a group of smaller countries within the emerging world. As of March 2011, non-BRIC smaller emerging market countries outperformed BRICs by 39 per cent. The smaller emerging countries consist of Chile, Colombia, Czech Republic, Egypt, Hungary, Israel, Peru, Poland, the Philippines, Thailand, and Turkey. The research also shows that with stocks trading at 11 times forward earnings, the broad emerging market asset class is not in a bubble.

Employees Want Frequent Communications

Employees have disparate preferences when it comes to benefits communications, indicating a need for a multi-faceted approach, says MetLife’s ‘9th Annual Study of Employee Benefits Trends.’ More than half (55 per cent) of all employees do not find their benefits materials to be clear and comprehensive and only about one in four is satisfied with their benefits communications. Employees say they would like to see more frequent communications, information tailored to life events, and benefits information on the internet. The study found that 42 per cent of Gen Y employees and 38 per cent of Gen X employees would be interested in accessing/receiving benefits information through social networking sites (as compared to one in 10 Baby Boomers). Similar percentages of Gen Y and Gen X employees are interested in having information available through mobile devices.

Pension Insights Offered At Summit

Insights on Defined Benefit/Defined Contribution pension plans solutions and the next generation of fiduciary management will be among the areas examined at the WorldPensionSummit. It takes place November 2 to 4 in Amsterdam, The Netherlands. For more information, visit www.worldpensionsummit.com   

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Wednesday, March 30, 2011

Ontario To Explore Innovative Pension Plans

While Ontario still supports “a modest, phased-in, fully funded” enhancement to the Canada Pension Plan, its budget says it’s exploring innovative types of pension plans in an effort to improve coverage. The government also says that it’s exploring ways to cost effectively improve workforce coverage. It believes both an enhanced CPP and innovative pension plans must be implemented to ensure that retirement savings are adequate for all Canadians. It will work with the federal government on its proposed framework for the Pooled Registered Pension Plan. “A PRPP has the potential to expand retirement plan coverage, particularly to small business employees and the self-employed. To be successful, it is critical that this plan provide a low-cost option that is simple for smaller employers and the self-employed to access. It is also critical that plan members’ interests be appropriately protected,” says the budget document. As well, Ontario is exploring the feasibility, design, and implementation of jointly governed, single-employer target benefit plans.

Ontario Wants Disclosure On Sustainability

Ontario will require pension plans to report to regulators on the sustainability of their investments to help protect pensioners and guard against systemic risk. The surprise measure unveiled in the province's annual budget will compel pension plans to disclose whether they have given consideration to environmental, social, and governance risks when investing on behalf of plan members. "This bold step will enhance Ontario's bid to become a world leader in financial services and risk management," says SEIU Capital Stewardship. SEIU Capital Stewardship oversees the pension contributions of more than 2.2-million union members who contribute to more than 70 pension plans with combined assets of more than $1.2-trillion.

New Version Of Tax Form Posted

The Canada Revenue Agency has posted a new version of Form GST494, which is based on the Excise Tax Act (ETA) which includes the proposed draft Selected Listed Financial Institutions Attribution Method (GST/HST) regulations, says Greg Hurst & Associates Ltd... This form must be used by filers responsible for reporting in respect of an SLFI, which will include trusts governed by a registered pension plan (RPP) or other employee benefit arrangement, such as a health and welfare trust. All such plans will be required to file a completed Form GST494-11 along with any required remittance of additional GST/HST payable no later than June 30, 2011, in respect of the fiscal year-ended December 31, 2010.

Belief Systems Need To Change

Investors need to change their belief systems, says Jean-François Tardif, a former lead portfolio manager for Sprott Asset Management hedge funds.  Speaking at AIMA Canada’s ‘How the Pros Hedge their Books’ session, he said the belief that markets would always go up may no longer be true. “We’re in a different world,” he said. There have never been so many issues such as the massive debt and deficit in every developed country. The U.S. deficit is so large that it has to increase revenue by 50 per cent just to break even. On top of that, there are financial woes facing Ireland, Greece, and Spain. To compensate for these problems, central banks all over the world are printing money and it’s not just the U.S., he said. “China has been printing money for years and years” and this is why its foreign reserves are so high. As a result, asset managers are facing issues and problems they have never before seen in their careers.

Benefits Objectives Remain The Same

Employers’ top three benefits objectives remain the same as last year, says MetLife’s ‘9th Annual Study of Employee Benefits Trends.’ They are controlling health and welfare benefit costs, retaining employees, and increasing employee productivity. It also found that since employee lifestyle choices contribute significantly to healthcare costs, disability costs, and productivity, the number of employers offering wellness programs continues to grow. Employers offering wellness programs climbed from 37 per cent in 2009 to 45 per cent in 2010. Nearly three out of four employers that offer wellness programs say they are effective at reducing medical costs.

Cardone Moves To Great-West

Anthony Cardone is regional vice-president, eastern region, group retirement distribution, at Great-West Life Group Retirement Services. Prior to joining Great-West, he held several senior executive positions in the group retirement with global organizations.

Kudzman Leads Financial Strategy

Susan Kudzman will lead the financial strategy group at Mercer. She was most recently executive vice-president and chief risk officer at the Caisse de dépôt et placement du Québec, where she was responsible for all facets of risk management and, at various times, client relations, investment performance measurement and analysis, and strategic planning.

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Tuesday, March 29, 2011

Schemes Should Look At Emerging Market Debt

Pension schemes must look more closely at emerging market debt as a source of investment, says a report by Aberdeen Asset Management. Its survey found only a quarter of the more than 100 UK schemes questioned allocated money toward emerging market bonds, despite predictions that emerging markets GDP will account for half of total global annual worth by 2017. The report criticized this attitude as "short sighted” as the long-term prospects for the market remain strong. About three-quarters (76 per cent) would consider emerging market debt as a tool for increased diversification. However, contrasting with the 24 per cent of schemes that invested in developing country debt, more than four-fifths allocated funding to emerging market equities. The average weighting for the latter asset class was at 5.2 per cent, more than two percentage points higher than for debt.

Caution Issued On Chasing Emerging Market Performance

Given the strong absolute and relative investment returns of the emerging markets in 2010 and subsequent torrent of cash flow to emerging market funds, Vanguard is cautioning investors against chasing performance. An article ‘Practice portion control with emerging markets’ advises investors to revisit their exposure to emerging markets and to question their reasons for holding the segment. “Emerging markets can be an important part of an overall investment portfolio, but we suggest that investors use market capitalization as a yardstick for the appropriate amount of an investment,” says Joseph H. Davis, its chief economist and a principal in Vanguard Investment strategy group. “Today, emerging markets make up 25 per cent of the international stock market, so we recommend that emerging markets represent no more than 25 per cent of an investor’s international equity holdings.” He also warned that the past strong economic growth of emerging markets may not necessarily lead to exceptional stock returns in the future as the average cross-country correlation between long-run GDP growth and long-run stock returns has been effectively zero.

Pension Assets Top $10 Trillion

U.S. Defined Benefit and Defined Contribution plans had a total of $10.15 trillion in assets as of December 31, 2011, up 9.7 per cent from 2009, says a report by Spectrem Group. DB assets gained 7.1 per cent to $5.05 trillion in 2010, while DC assets rose 12.2 per cent to $5.1 trillion. Assets in IRAs gained 12.3 per cent to $4.8 trillion.

Longevity Threat Recognized

Longevity risks are being recognized as a major threat to UK pension funds and the companies who sponsor them. And most funds are considering de-risking their liabilities over time and finding that it might be more cost efficient to de-risk by using more than one tool, says a report from Clear Path Analysis. ‘Pension De-Risking: Longevity Hedging and Buying Out’ found more than 80 per cent of its clients with liabilities between £100 million and £300 million are considering de-risking their pension funds. The methods to achieve this include combining a pensioner buy-in and an index-based longevity swap on non-retired pensioners, with some form of liability driven investment (LDI) strategy to achieve a ‘DIY buy-out.’

Lawyers Examine Life And Health Trusts

Michael Mazzuca, a partner at Koskie Minsky LLP; Anthony Devir, a partner at Osler Hoskin & Harcourt LLP; and Murray Gold, a partner at Koskie Minsky LLP; will be among the featured speakers at the International Foundation’s ‘Canadian Legal and Legislative Update.’ Mazzuca will provide a critical analysis of legislative pension changes while Devir and Gold will look at employee life and health trusts. It takes place May 12 and 13 in Ottawa, ON. For more information, visit www.ifebp.org/canupdate

Saunders Discusses Innovations

Peter Saunders, president of DirectCare Pharmacy, will discuss innovations for delivering health services and drugs to patients at the ‘2nd Annual Private Payer Pulse Conference.’ Sponsored by Drug Benefit Consulting and Equilibrium Health Consulting, the meeting theme is ‘Drug System Reform & The Emerging Private Payer Model.’ It takes place April 12 in Brampton, ON. For more information, contact Gordon Polk at 905-631-9788 or gpolk@drugbenefitconsulting.com

Crouse Looks At Secondary Care Insurance

‘Secondary Care Insurance – Is It Worth It?’ is the focus of a CPBI Atlantic region event. John W. Crouse, vice-president and national director of actuarial, pension and benefits consulting for Johnson Inc., will touch on product offerings which include LTC, CI, Travel/Trip Can, and Best Doctors and will view these in the context of the rapidly changing demographic environment. It takes place April 11 in St. John’s, NL. For more information, visit www.cpbi-icra.ca

Nachsen Top Pension And Benefits Lawyer

Gary Nachshen, a partner at Stikeman Elliott and one of Canada's premier pensions and benefits lawyers, passed away suddenly while on vacation with his family in the Turks and Caicos. Born on December 8, 1959, in Montréal, QC, he joined the Montréal office of Stikeman Elliott as a student in 1986 and joined the partnership in 1996. One year later, he relocated to the Toronto, ON, office and was named head of the pensions and benefits group. Involved over the years in the Ontario Bar Association, the Canadian Bar Association, and the International Pension & Employee Benefits Lawyers Association, he was cited in March 2011 as one of Canada's premier pensions and benefits lawyers in a directory produced by UK publisher Chambers Global and he received accolades from The ‘Best Lawyers in Canada,’ the ‘PLC Which Lawyer? Guide,’ and the ‘Lexpert/American Lawyer Guide to the Top 500 Lawyers in Canada,’ among others. He also acted in an executive and advisory role on several pensions, benefits, and tax committees in the profession. Survived by his wife Julie and his children Thomas and Emma, arrangements are now being made for a memorial service.

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Monday, March 28, 2011

Final Pension Regulations Set Out

Final regulations intended to strengthen Canada’s federally regulated private pension system have been released. Regulatory amendments to the Pension Benefits Standards Regulations, 1985, will come into force on April 1. These amendments will permit plan sponsors to secure properly structured letters of credit in lieu of making solvency payments to the pension fund, up to a limit of 15 per cent of plan assets; require the plan sponsor to fully fund pension benefits on plan termination; void any amendments to a pension plan that would reduce the solvency ratio of the pension plan if the plan’s solvency ratio would be below a ratio of 0.85; and permit sponsors, plan members, and retirees of a distressed pension plan to negotiate their own funding arrangements to facilitate a plan restructuring. “These changes are part of the government of Canada’s overall commitment to strengthen the retirement income system, which includes working with the provincial and territorial governments to implement Pooled Registered Pension Plans,” says Finance Minister Jim Flaherty.

Health Plan Contributions Down Again

Contributions from employers to workers’ account-based health plans declined for the second year in a row in 2010, says the Employee Benefit Research Institute (EBRI). The ‘2010 EBRI/MGA Consumer Engagement in Healthcare Survey’ shows that the percentage of workers who reported that their employer contributed $1,000 or more to their account-based health plan declined from 37 per cent in 2008 to 28 per cent in 2010. The study found the drop in employer contributions may have been due to the weak economy.  However, while workers with employee-only coverage responded to the decrease from employers by increasing their own personal contributions; workers with family coverage did not increase their contributions.

Pressure For Change Examined

‘The BBC: Contracts for the New Millennium’ will explore the pressure for change on group insurance contracts. Chris Bonnett, resident, H3 Consulting, will explore developments in oncology therapy and the impact on group benefit plans and David Blevins, president, Jones DesLauriers Blevins Insurance Group, and Bessie Wang, director, professional services, TELUS Health Solutions, will explore changes in the marketplace that have affected or will affect group contracts. It takes place April 14 in Mississauga, ON. For more information, visit www.connexhc.com

Conference Looks At Value Creation

‘Creating Value, Making a Difference’ is the theme of the annual Canadian summit on socially responsible investment. Sessions will look at issues for socially responsible investors including Canada's oil sands and investor engagement, development rights and aboriginal communities, practical investment solutions to the world's sustainability challenges, trends and opportunities in renewable energy investment, SRI branding, and impact investing. It takes place June 20 to 22 in Victoria, BC. For more information, visit http://sioconference.com/agenda/

Sessions Examine Caregiving

Work-life leadership circle roundtables on ‘Caregiving & Work Implications and Strategies for Employers’ will take place April 5 in Edmonton, AB, and April 7 in Toronto, ON. Both sessions will feature Sue Yeandle, director of the Centre for International Research into Care, Labour and Equalities at University of Leeds, who will share her experience with Carers UK and the Centre’s ‘Carers, Employment and Services project;’ Janet Fast, co-lead of the research on Aging, Policies and Practice research program based at the University of Alberta, who will discuss findings from the ‘Economic Costs of Care’project on the employment-related economic consequences that family/friend caregivers experience; and Donna Lero, Jarislowsky Chair in Families and Work, Centre for Families Work & Well-being at the University of Guelph, who will share preliminary results from the ‘Caregiving & Work Study’, highlighting what Canadian employers are doing to support employees with adult and elder care responsibilities. For the Edmonton session, contact kim.caskey@ualberta.ca. For the Toronto session, contact nspinks@worklifeharmony.ca.

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Friday, March 25, 2011

Study To Identify Caregiving Benchmarks

A landmark Canadian study of workplace initiatives that support employees with caregiving responsibilities is now underway. The University of Guelph Centre for Families Work & Well-beingand Work-Life Harmony Enterpriseshave joined forces to identify current, best, and emerging workplace programs, policies, and practices. The survey will identify the extent to which Canadian employers are providing or working towards the development of policies, programs, and practices that can support employed caregivers and reduce the negative consequences of balancing caregiving and work is not yet fully understood. As well, by benchmarking organizational initiatives designed to help employees manage their caregiving responsibilities and work, organizations can see how they can develop effective caregiving and work strategies. Employers who want to participate can do so in English or French at http://survey.qualtrics.com/

Buck Offering Global Research

Buck Consultants, A Xerox Company, now offers pension plan and endowment clients global research and expertise when advising on asset allocation policy and fund manager selection. The expanded investment consulting services enable clients to access a broader range of fund managers and investment strategies from around the world. Investment consulting solutions offered include customized strategies to reduce the risk of pension investments, which provides more predictable contribution forecasts; global investment manager and technical research to support clients’ needs in all regions; and a range of risk-modeling tools to support dynamic asset allocation policies for Defined Benefit pension plans.

Life Expectancy Increases By Two Months

The life expectancy estimate of 78 years and 2 months for a baby born in 2009 is two months higher than what the Centers for Disease Control and Prevention gave to a baby born in 2008. Women are still expected to outlive men, with average life expectancy at 75.5 for men and 80.5 for women. The CDC report says infant mortality rate hit a record low of 6.42 deaths per 1,000 live births, a drop of nearly three per cent from 2008. The report also shows death rates declined slightly for 10 of the 15 leading causes of death including heart disease, cancer, stroke, accidents, Alzheimer's disease, homicide, and influenza and pneumonia. However, suicide passed blood infections to become the 10th leading cause of death. Suicide rates did not change significantly, but the blood infection death rate dropped nearly two per cent. That puts suicide back in the top 10 causes of deaths for the first time since 1999. 

Hiring Asset Manager More Than Performance Game

Gaining assets from institutional investors is no longer a performance-only game, says a report from Cogent Research. Its ‘Institutional Investor Brandscape’says factors such as investment philosophy, investment performance, investment team, and risk management practices impact the decision of whether or not to work with a specific asset manager. Organizational stability, which can relate both to concrete metrics, as well as subjective perceptions of the brand, tops the list at 88 per cent. Making up the second tier of attributes are factors that fall within the realm of brand perceptions including brand reputation, recommendations from trusted advisers, and thought-leadership. Other Tier 2 consideration factors are fees/fee structure. By contrast, very few institutional investors consider third-party external ratings or product innovation as important criteria when choosing an asset manager.

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Thursday, March 24, 2011

Electronic Claims Services Enhanced

Great-West Life has enhanced its customer service capabilities with a suite of electronic claims services for group insurance customers and plan members. These eClaims services give plan members options to submit their claims – directly through their provider, online, with a card, or on paper. Dave Johnston, executive vice-president, group insurance, at Great-West Life says “Plan members are reimbursed more quickly, minimizing out-of-pocket expenses – a cornerstone of our service delivery platform. For plan sponsors, eClaims services can enhance a competitive offering to help attract and retain employees, while offering strong plan management capabilities and cost and fraud control.” The service also includes a Visa-branded employee benefits payment card. The card will reduce the need for Great-West Life group plan members to pay out-of-pocket for health services and supplies covered by their benefits plan. Cardholders can purchase covered health services and supplies from authorized providers simply by swiping their card.

Managers Favour Canadian Equities

Canadian equities remain in favour with a majority of investment managers. However, an increasing number of managers expect U.S. equities to provide growth in the second quarter, says the ‘Russell Investment Manager Outlook’for February 2011, prior to the disaster in Japan. Sadiq S. Adatia, chief investment officer of Russell Investments Canada Limited, says “Four-in-five believe the Canadian market is now fairly valued. Canadian small cap stocks, which tend to perform well during periods of economy recovery, are now favoured by exactly 50 per cent of managers with 24 per cent of managers bearish.” Given Canada’s economic resilience and strong market performance, it seems likely that investors are starting to look elsewhere for new under-valued opportunities. The U.S. may be just the place, with bullish sentiment towards U.S. equities climbing from 54 per cent to 64 per cent this quarter, and bears accounting for just 15 per cent of managers.

Knowledge Of History Can Help Investors

Investors should educate themselves on the history and pratfalls of bubbles, work on managing their emotions while making investment decisions, focus on the long term, and seek independent points of view, says research from Vanguard. In ‘Market Bubbles and Investor Psychology,’ Vanguard researcher Steve Utkus examined market bubbles ranging from the Dutch tulip bulb crisis in the 1600s to the recent mortgage crisis. He found four key psychological stages leading up to and following a bubble. In the ‘initial forecast,’ individuals make initial forecasting errors due to rational mistakes or because they judge the situation to be the same as a similar one, failing to take into consideration all of the evidence that the two situations are actually different. Then comes ‘overconfidence’ where they create excessively rosy forecasts because they tend to be overconfident and project recent positive news into the future without taking into consideration long-term information. In the ‘group transmission’ stage, decision-making biases tend to become amplified at a group level. People exhibit “groupthink” when they go along with the group rather than looking for alternatives and more information. And due to a phenomenon known as ‘group polarization,’ a group makes riskier decisions than the individuals in it would make on their own. Finally, ‘recalibration’ occurs where forecasts are deflated by actual experience, leading to a recalibration of expectations and the concurrent revisions downward. Interestingly, group polarization can work in reverse at this point, causing the group to collectively become even more risk-averse than the individual participants believe is realistic.

Hedge Fund Managers Must Change

Hedge fund managers will have to lower fees, change their business strategies, and lower their risk tolerance as pension funds increase their allocation to the asset class, says a Moody's Investors Service ‘Industry Outlook’ paper. It says the downturn and post-crisis environment resulted in structural shifts amongst several hedge fund industry stakeholders, particularly pension funds and banks. The primary rationale behind this expectation is the shift in investor sentiment in light of post-crisis economic conditions and the change in conventional wisdom away from the traditional substantial allocation to equities which has historically shaped the allocation policies of institutional investors. This shift in thinking and the need for alpha-producing strategies in addition to investors' improved understanding of alternative investments has increased the attractiveness of hedge funds versus traditional long-only investments. As well, the size of the investment pool controlled by institutional investors is so large that even a small percentage increase in allocations to hedge funds could have a profound impact. Moody's believes the shift to an institutional investor base poses several risks for the hedge fund industry. It predicts fund managers will need to increase their investor relations teams, improve reporting systems, adjust their procedures to meet client demands, adopt a more conservative risk tolerance, and lower their management and performance fees.

Nova Scotia Reviewing MLA Pensions

A retired judge will chair a three-person panel reviewing MLA pensions in Nova Scotia. House leaders from all three provincial parties have agreed that legislative members will have no part in selecting the panel or figuring out its terms of reference. Once the panel is formed, it will have six months before it must report to the legislature with recommendations. The pension plan of Nova Scotia MLAs has been criticized by many, including the Canadian Taxpayers Federation, for being too generous. The plan allows provincial politicians to begin collecting a pension after six years in office and allows veteran MLAs, those who have worked more than 15 years, to receive up to three-quarters of their salary.

Muldowney Joins CC&L

Peter Muldowney is senior vice-president, institutional strategy, at Connor, Clark & Lunn Financial Group. His role, which is new to the firm, was created with a view to helping pension plan sponsors better understand both the investment challenges they face and the portfolio management solutions that may be suitable for them.

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Wednesday, March 23, 2011

Budget Vows To Work On PRPPs

The federal government plans to continue to work with the provincial and territorial governments to implement Defined Contribution Pooled Registered Pension Plans (PRPPs) as soon as possible, says a Towers Watson ‘InfoCanada.’ This is just one of several measures outlined in the federal government budget impacting employee benefits. The government believes that PRPPs will improve the range of retirement savings options available to Canadians by providing a low-cost, well-regulated private sector retirement savings opportunity. New rules will be introduced to limit the tax deferral opportunity available under Individual Pension Plans (IPPs). A minimum payout will apply to a member’s interest in an IPP each year after the member reaches age 71. In recent years, some employers and individuals have established IPPs designed to obtain tax advantages that are not available under other deferred income plans. The Canada Revenue Agency will clarify the rules regarding the tax treatment of lump sum payments received by former employees or retirees in lieu of their right to health and dental coverage from employers who have become insolvent, so that such amounts will not be taxable.

Move To Riskier Assets Possible

With not a ton of core infrastructure assets out there and more money willing to flow into the class, it has may prompt movement into riskier asset classes, closer to the private equity realm, says Kevin Fahey, director investments, at the CAAT pension plan. Speaking on ‘Infrastructure Investing: A Closer Look’ at the ‘Infrastructure Symposium 2011,’ he said this is especially a concern with more pension plans looking at infrastructure to meet their liabilities. CAAT has infrastructure in its liability hedging bucket along with bonds. However, with the recent performance of bonds, it depends on the infrastructure to add more return. The pension fund has a 10 per cent target for its infrastructure allocation. The symposium is a collaborative event between Financial Executives International Canada, the Canadian Institute of Chartered Business Valuators, Toronto CFA Society, and Canada’s Venture Capital & Private Equity Association (CVCA).

SHARE Launching Human Rights Tools

The Shareholder Association for Research & Education (SHARE) is launching a project to help investors ensure their pension investments respect human rights. A two-year project is aimed at developing tools to assist investors in ensuring their pension investments uphold the highest standards of human rights and labour rights. The ‘Investing in Decent Work’ project will focus on the challenges investors face in identifying and addressing issues related to the use of forced labour, precarious employment, and occupational health and safety. It will undertake research into the consequences of poor labour practices and it will try and build awareness among investment decision-makers through the development of educational tools and training events. It also aims to identify best practices that will enable companies to meet widely-accepted international labour standards and to improve disclosure to help investors manage risks related to workplace issues.

Plan Savings Continued To Grow

Defined Contribution retirement plan savings for most U.S. participants continued to grow over three- and five-year periods, despite the negative impact of the financial crisis in 2008 and 2009, says a Vanguard research report on its participants. Median and average account balances for rose to $26,926 and $79,077, respectively, at the end of 2010, the highest level since it began tracking this data in 1999. Over the 2005 to 2010 period, median participant account balances rose 13 per cent. Among continuous participants, the median rise in account balances was 77 per cent, and nine out of 10 participants had higher account balances in 2010 than in 2005.  

Performance Fee Can Add Risk

A performance component in fee structures can make managers take more risk, says Mark Weisdorf, managing director and CEO of J.P. Morgan Asset Management’s infrastructure investment group. He told the ‘Infrastructure Fund Managers’ panel at the ‘Infrastructure Symposium 2011’ that with certain strategies, investors do not want managers taking more risk. However, they may be prompted to do so in order to realize the performance component of their fee. In a way, it can be incenting managers to take risk, he said. In the right strategies, a performance component is very appropriate. But, investors in low risk strategies would rather not see performance fees. The symposium is a collaborative event between Financial Executives International Canada, the Canadian Institute of Chartered Business Valuators, Toronto CFA Society, and Canada’s Venture Capital & Private Equity Association (CVCA).

Brookfield Acquires Pall Mall

Brookfield Investment Management (UK) Limited has acquired the European high yield fund management business of Pall Mall Investment Management Limited. Pall Mall is a specialized asset manager in risk overlay and quantitative strategies with approximately $2 billion in assets under management for institutional investors. It operates in London and Germany and was founded in 1998.

FTSE 100 Continue To Use DC

A large majority of FTSE 100 companies continue to use Defined Contribution plans as their main pension plan, says Towers Watson’s annual survey of FTSE 100 companies. It found 25 per cent of firms offer only DC to all employees, up from 15 per cent last year. Around 90 per cent of these companies offer a DC scheme for new employees with the rest offering different forms of Defined Benefit schemes, including career average, cash balance, hybrid, and final salary. 

Lapointe Joins GlaxoSmithKline

Tracy Lapointe is vice-president, human resources, at GlaxoSmithKline Inc. She joined firm in January 2011 from Nelnet, where she served as executive director, people services and organizational development. She has more than 20 years of progressive HR experience in a variety of industries in both Canada and the United States.

Fundamentals Program Offered

The Manitoba CPBI Council is offering a ‘Benefits Fundamentals’ program. The six-part lecture series examines the basics of employee benefits plans, benefit plan cost management, claims management, disability management, benefits communication, and emerging benefit issues. It takes place April 6, April 13, and April 20 in Winnipeg, MB. For more information, visit http://www.cpbi-icra.ca/

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Tuesday, March 22, 2011

The Benefits and Pensions Monitor Interview

Properly managed hedge funds are not as risky as many investors perceive, says Sophie Elkrief, head of fundamental alternative strategies and manager of risk arbitrage funds at Dexia Asset Management. Benefits and Pensions Monitor’s executive editor, Joe Hornyak, recently had an opportunity to talk alternative investments with Elkrief and she said hedge fund returns were not so terrible in 2008 and were much better than the equity markets and the credit markets. While there was a big problem in liquidity, that was not limited to hedge funds. However, one of the main challenges that hedge funds face going forward is that they need to re-establish trust. Investors need to believe that liquidity will be there when they need it. To read the interview, follow this link: http://www.bpmmagazine.com

Pain Takes Its Toll

Pain is taking a startling toll on Canada’s economy, says a survey conducted for the Canadian Pain Society, a coalition of health professionals and researchers. It found that moderate-to-severe chronic pain is hitting the economy where it really hurts: in lost productivity and absenteeism. In the past three months, nearly one-third of all Canadians (32 per cent) report having suffered a loss of income, booked off sick days, experienced a reduction in workplace productivity and responsibility, or even lost their jobs as a result of their pain. It also found 23 per cent of Canadians between the ages of 18 to 34 reported missing work days due to pain, more than any other age group surveyed.  A National Health Population survey estimates the direct healthcare costs for Canada at more than $6 billion per year (in year 2000 dollars) for individuals suffering from chronic pain. By 2025, these costs are expected to rise to more than $10 billion per year.

Men More Confident About Retirement Savings

Men are more likely than women to say they are very confident about several of the various financial aspects of retirement and that they will have saved enough money to live comfortably throughout their retirement, says the Employee Benefit Research Institute’s ‘21st annual Retirement Confidence Survey.’ Women are statistically as likely as men to report they are offered (43 per cent versus 49 per cent) and contribute to (34 per cent versus 39 per cent) a work place retirement savings plan. Men and women also have similar expectations for the age at which they plan to retire. Both have a median expected retirement age of 65. However, men are more apt to say they will never retire.

Pollice Joins Mercer RI Team

Ryan Pollice will join Mercer’s global responsible investment (RI) consulting business. He will be based in Toronto, ON, and work on both Canadian and global client assignments and research projects. He was previously with the United Nations Principles for Responsible Investment where he served as manager, implementation support.

Wing At Mackenzie

Gary A. Wing is executive vice-president, institutional division, at Mackenzie Global Advisors. He will lead the strategic growth and development of its integrated institutional division’s business. Most recently, he served as senior vice-president of institutional business at a leading Canadian-based investment management firm.

Panel Looks At Impact On Alternatives

A panel will discuss the impact of the financial crisis on alternative investment markets ‒ including venture capital, private equity, and hedge funds ‒ at the CAIA Canada and York University ‘European Financial Management Conference on Alternative Investments.’ The panel ‒ Keith Black, associate director of curriculum for the CAIA Association; Stephen J. Brown, David S. Loeb Professor of Finance, The Leonard N. Stern School of Business, New York University; Anish Chopra, managing director, TD Asset Management Inc.; and Andrew Metrick, deputy dean for faculty development, Theodore Nierenberg Professor of Corporate Governance, and professor of finance and faculty director, The Millstein Center for Corporate Governance, Yale University ‒ will also look at the future of alternative investments, including regulatory options. It takes place April 7 in Toronto, ON. For more information, visit http://caia.org/caia-community

Craig Discusses PRPPs

Canadian Pension Reform and Pooled Registered Pension Plans (PRPPs) will be the focus of an ISCEBS Southwestern Ontario chapter program. Neil T. Craig, senior pension consultant, Stevenson & Hunt Insurance Brokers Ltd., will outline proven strategies for PRPPs from both the employer and employee standpoint. It takes place April 12 in London, ON. For more information, visit http://www.iscebs.org/Local/

DC Investment Trends Examined

DC pension investment trends will be examined at the fourth seminar in the CPBI Ontario region ‘Pension/Investment Fundamentals’ series. Nick Iarocci, Standard Life Canada, and Todd Nelson, Towers Watson, will discuss the investment trends now emerging with DC pension providers that should make significant contributions toward mitigating the major challenges faced by DC plan sponsors and members. It takes place March 24 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca/en/event_details

Hedge Fund Risk Attitudes Studied

The new attitude towards risk at hedge funds and what investors want to know will be studied at Introduction Capital’s ‘1st Canadian Alternative Investment Forum.’ Presenters include Frank Mersch, chairman and vice-president, Front Street Capital; Barry Allan, president, Marret Asset Management; Brian Trenholm, managing partner, Salida Capital; and Dave Picton, president and CIO, Picton Mahoney. Sessions will also look at hedge fund strategies that work and don’t work and the debate over funds of hedge funds. It takes place April 7 in Toronto, ON. For more information, visit www.introcap.com

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Monday, March 21, 2011

Quebec Applauded For Leadership

The Canadian Life and Health Insurance Association (CLHIA) and the Investment Industry Association of Canada (IIAC) are congratulating the Quebec government for showing leadership in improving Quebecers' access to workplace retirement plans. The budget proposes ‘voluntary retirement savings plans’ (VRSPs), based on the pooled registered pension plan (PRPP) framework recommended by Canada's finance ministers late last year. All businesses would be required to offer VRSPs if no other workplace retirement plan is available. "VRSPs will assure all working Quebecers have access to retirement savings plans," says Frank Swedlove, CLHIA president. "VRSPs will provide a simple, low cost option to Quebecers, particularly those in small and medium sized businesses, to save for retirement through payroll deductions." Ian Russell, president and CEO of IIAC, says “the Canadian investment industry plays a key role in providing retirement savings solutions to Canadians. Our Quebec-based member firms welcome the opportunity to participate in consultations with the government to ensure the success of this new retirement initiative.”

Dark Order Books Launched

New on book dark order types are now available and integrated into the existing order books on the Toronto Stock Exchange and TSX Venture Exchange. The new non-displayed order types ‒ Dark Mid-Point and Dark Limit Orders ‒ interact and trade with both visible and other non-displayed orders. In addition to offer market participants an effective facility to minimize market impact costs and anonymously seek liquidity, the new dark orders will maximize execution opportunities by being continuously exposed to Canada's largest pool of visible orders.

Derivatives School Created

The Quebec government is creating a school for derivatives and structured finance in Montreal, QC. Announced in the provincial budget, it is intended as a centre for creating and disseminating knowledge concerning structured finance and derivatives. Michel Patry, director of HEC Montréal, says it will bring together the top experts in the field, from HEC Montréal and across Québec. “We are very proud that the institute's different partners have placed their trust in us. This will help to strengthen Montréal's position among the world's major financial centres." The Institut de la finance structurée et des instruments dérivés de Montréal will receive funding of $15 million over a 10-year period.

DiMassimo Moves To Invesco

Joe DiMassimo is senior vice-president, institutional investments, at Invesco. He has more than 20 years of experience meeting the needs of institutional clients, most recently with Addenda Capital as senior vice-president and head of sales and service, focused specifically on Defined Benefit clients.

Understanding Benefits Examined

‘Show Them the Money: Helping Plan Members Understand Benefit Adequacy’ will be discussed at the ‘2011 CPBI Saskatchewan Regional Conference.’ Sarah Charlesworth and Sharon Vanderwerff, both principals with Mercer, will take attendees on a multi-generation milestone journey of two plan members to demonstrate why it is so important for people to understand their pension benefit and the role it plays in helping provide adequate income for retirement. It takes place April 19 to 21 in Regina, SK. For more information, visit http://www.cpbi-icra.ca/

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Friday, March 18, 2011

Quebecers Will Have To Work Longer

Quebec workers will have to work longer and contribute more to the Quebec Pension Plan under measures introduced in that province’s budget. QPP contributions, paid by all employees and employers, will increase by 0.15 per cent per year over six years, beginning January 1, 2012. For someone with a $40,000 annual salary, the increase will amount to $27 in 2012. As well, workers will be penalized for retiring before age 65. Their pension benefits will be lowered, starting January 1, 2014. Someone with a $35,000 salary who retires at 60 today gets $5,843 in annual pension benefits. Someone at that salary level who retires at 60 after the changes take effect will get $5,481 or $362 less. Benefits for workers who retire after age 65 will increase with the maximum paid to employees who retire at age 70. They will get $1,382 more. The province is also working on a new tool to make it easier to save for retirement for those who do not have group pension plans at work, including the self-employed. ‘Voluntary retirement savings plans (VRSPs)’ will be managed by financial institutions such as insurance companies. All employers will be obliged to offer VRSPs, but they will not be obliged to contribute to them. As with Registered Retirement Savings Plans, contributions to VRSPs will be deductible from income and the amounts accumulated in the plans will not be taxed as long as they are not withdrawn. Quebec Finance Minister Raymond Bachand says the measures were necessary because Quebecers are living longer and retiring earlier than other Canadians. If nothing is done, Quebec's pension reserve will be depleted by 2039. With these changes, the reserve is forecast to reach $125 billion in 2039.

Recent Pension Reforms Insufficient To Sustain Systems

Recent pension reforms in developed economies aren't sufficient to deal with increasing life expectancy and people will have to work longer in future, says a study by the Organization for Economic Cooperation and Development. It says many developed economies now face the dilemma of running the risk that their pension system not be sustainable or cutting benefits to the extent where they might not be enough to live on comfortably. Countries in the OECD on average reduced the retirement age during the 1970s and 1980s until this reached a low point in 1993, when women were entitled to a pension at 61 years old and men at 62.4. Countries have since then raised the ages. Women now retire at an average of 61.8 and men at 62.9. The key problem is life expectancies are rising faster than retirement ages. Women can now expect to live an average 22.3 years after retiring compared with 17.3 years in 1960 and 21.7 in 1993. Men live 18.5 years now after retiring, compared with 13.4 in 1960 and 16.7 in 1993. Life spans after retirement are forecast to rise further in coming decades. There are three ways that governments can try to fix their pension financing, says the report. People could work longer, public pensions could target the neediest people, or people can be encouraged to save for their retirement to make up for reductions in public benefits.

Pension Claw Back May Be Difficult

New Brunswick may not be able to claw back pensions of MLAs who retired before the last election, says a co-author of a report into pensions for politicians. Jean-Claude Angers, the retired judge who co-wrote the report, said he's not sure if his recommendations can apply retroactively to politicians who are no longer sitting in the legislative assembly. He suggested that increases in MLA pensions which resulted from a wage hike in 2008 should be should be reversed. However, he admits it could be legally difficult to claw back the pensions of MLAs who have already retired as any employee, including an MLA, has the right to expect whatever compensation was in place when they were working. "The legal principle basically is that if you have vested rights, it's difficult to come back later and change them," he says.

Shum Earns Research Award

Dr. Pauline Shum is the first recipient of the Toronto CFA Society & Hillsdale ‘Canadian Investment Research Award’ for her research paper ‘The Long and Short of Leveraged ETFs: the Financial Crisis and Performance Attribution.’ The paper provides “an extremely useful framework for practitioners to use in their analysis of ETFs,” says Chris Guthrie, president and CEO, senior portfolio manager, and founding partner, of Hillsdale Investment Management Inc. Papers are judged on the potential contribution of their applied research to topics of interest related to Canadian capital markets such as portfolio management, asset valuation, and risk management.

More Public Pension Systems Using Hedge Funds

The number of public pension systems investing in hedge funds has grown by 50 per cent over the past four years, says research by Preqin. It says 295 public pension plans worldwide are now known to be allocating to hedge funds, up from 196 in 2007. The mean allocation to the asset class has also grown in the same period from 3.6 per cent to 6.6 per cent and is now one percentage point higher than the average private equity allocation of these investors. Public pension systems generally invest in hedge funds for capital preservation and portfolio diversification purposes and seek absolute returns of 6.1 per cent. Funds of hedge funds are also popular with pension funds as 80 per cent of public pension systems making their first investments into the asset class in 2010 did so through multi-manager allocations. Overall, some 70 per cent of all pension funds investing in hedge funds have funds of funds commitments in their portfolios.

Canadian Growth To Remain Strong

Recent events in Japan have added to growing concerns about the strength of the recovery, but should not push either the Canadian or global economies back into recession, says a report from CIBC World Markets. It predicts growth will remain relatively strong in Canada despite a slowing in many other countries due to rising oil prices and restraint in government spending. The report forecasts real GDP growth of four per cent in the first quarter of 2011. While it will take time before information is available to make a complete and accurate assessment of the implications of the events in Japan, including the crisis at its Fukushima Dai-ichi plant nuclear plant following last week’s massive earthquake and devastating tsunami, the report notes that the global economy was already facing increased uncertainty on a number of fronts even before the disaster. These include surging gasoline prices and restrained growth as a result of increased government fiscal restraint, particularly in the United States.

Consortium Acquires IIF Units

A Goodman Group-led consortium’s proposal to acquire all of the ordinary units in the ING Industrial Fund (IIF) has been approved by it unitholders. The acquisition is complementary to Goodman’s existing portfolio, expands the group’s customer offering, and provides opportunities to develop existing and new relationships. The transaction will contribute 61 quality industrial properties, predominantly located in Australia’s key east coast markets. It also provides Goodman with access to a significant land bank, further strengthening its development capability. Consortium partners include the Canada Pension Plan Investment Board, APG of The Netherlands, and the China Investment Corporation.

System Gives Sponsors Insight

The rating system in the OSFI Intervention Guide provides plan sponsors with insight into what types of regulatory interventions may be implemented for plans at each stage of the rating system, says a Towers Watson ‘Client Advisory.’ It says many of the risk management activities suggested by OSFI are good governance strategies and should help plan sponsors maintain a low risk rating. The guide primarily outlines a five-stage rating system that OSFI will assign to federally regulated pension plans, with possible OSFI action at each stage. The five stages correspond with the Composite Risk Ratings (CRR) where plans at low to moderate risk will on be monitored normally while those rated as permanent insolvent will likely be wound up.

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Thursday, March 17, 2011

Mandatory Retirement Of Firefighters Proposed

A private member’s motion is calling upon the Ontario government to introduce legislation allowing for the mandatory retirement of firefighters involved in fire suppression duties at age 60, says a Hicks Morley ‘FTR Now.’ While there is no indication at this time as to whether the government will propose such legislation, the motion may indicate general support in the House for legislative action. One key objective of this motion was an expressed intention to reduce the number of legal disputes that commonly arise between parties around the issue of retirement. However, it is far from certain that any proposed mandatory retirement legislation in this area, whether introduced by the government or another party, would unequivocally resolve matters. Historically, these types of legislative initiatives have generated significant legal disputes in a variety of different legal forums as employers, unions, and employees challenge the constitutional validity of government action, be it the legislation itself or its application or non-application to a particular individual in a particular case. Moreover, mandatory retirement in respect of firefighters raises a variety of complex, sector-specific issues, which may further affect related issues including training, evaluation, and safety standards in general. At this time, the government has not introduced mandatory retirement legislation in response to this motion, nor has it indicated its intention to do so.

Standards Transition Raises Concerns For Investors

Investors should be mindful when considering the financial statements of Canadian companies transitioning to International Financial Reporting Standards (IFRS) from Canadian Generally Accepted Accounting Principles (GAAP), says a study by the Certified General Accountants Association of Canada (CGA-Canada). The study notes that, in theory, ratios would be the same if there was no difference between IFRS and pre-changeover Canadian GAAP. In practice, the adoption of IFRS changes accounting figures and therefore financial ratios. The CGA-Canada recommends that investors be particularly careful in distinguishing between business performance changes caused by the changeover to IFRS and those caused by changes in business.

Teachers’ Sees Merit In Exchange Merger

The merits of the merger between the TMX Group Inc. and the London Stock Exchange Group plc outweigh any drawbacks, says the Ontario Teachers’ Pension Plan. However, it says should the merger proceed, it should remain under the control of Canadian regulatory authorities. It says it supports the merger for a number of reasons. It believes it is important to ensure that Teachers’ and other investors have access to an effective, low cost trading platform to execute both cash and derivative trades. The combined exchange operator should be able to achieve economies of scale, lowering the cost of capital and trading costs. As well, Canadian companies need to have access to greater market liquidity and low cost capital. Through the proposed merger, Canadian firms should benefit from a deeper pool of investors, attracting greater capital from Europe and the Middle East, which should lower the cost of capital and help boost share values of Canadian firms. “Today’s exchanges are no longer protected monopolies regarded as vital to the functioning of national economies. TMX became a publicly traded company in 2002 and is subject to intense competition from alternative trading systems. It risks becoming irrelevant entirely if it cannot compete in the global marketplace through a merger with other exchanges,” says Teachers’.

Transition Team Has Strong Year

Russell Investments’ global transition management team had a strong 2010, transitioning more than $620 billion in assets throughout the year. Demand for its services grew as institutional investors across the world expressed strong interest in the independent fiduciary model, interim portfolio management approach, and expertise in fixed income transitions. “We expect to see increased transition activity in Canada this year as plan sponsors move to implement asset allocation decisions,” says John Formusa, director of institutional investment solutions. 

Bond Management Examined

‘Advanced Investments Management’ is again being offered at the Wharton School by the International Foundation of Employee Benefit Plans. Sessions will look at advanced bond management, risk-and-return analysis of equity and real estate investments, and private equity and venture capital. It takes place September 12 to 15 in Philadelphia, PA. A refresher workshop in core investment concepts is being offered in advance of the program on September 11. For more information, visit http://www.ifebp.org/Education

Pharmacy Environment Changing

How the pharmacy environment is changing will be the focus of a session at Connex Health’s ‘Employer Forum on Benefits and Workplace Health.’ Dennis Darby, chief executive officer of the Ontario Pharmacists' Association, will discuss changes to the compensation model, the patient experience, and the new services that will be available from pharmacy because of legislative changes in several provinces. It takes place May 11 to 13 in Niagara Falls, ON. For more information, visit www.connexhc.com

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Wednesday, March 16, 2011

Pension Plan Savings Increased

The value of retirement savings of Canadian workers who have employer-sponsored pension funds amounted to $997.8 billion at the end of the third quarter, up 6.8 per cent from the previous quarter, says Statistics Canada. This level exceeds the previous high of $970.8 billion reached in the second quarter of 2008. Pension fund revenues fell 9.1 per cent in the third quarter. Despite a 21.2 per cent increase in profits from the sale of securities, lower pension contributions and investment income resulted in revenues falling to $22 billion at the end of the third quarter. In addition, expenditures declined 22.1 per cent in the third quarter to $13.4 billion, principally the result of reduced losses on the sale of securities. Net income increased 23.1 per cent to $8.5 billion.

NB Legislature Advised To Cut Pensions

Members of the New Brunswick legislature are being called on to reduce a pension increase that they gave themselves in 2008. A report from a panel asked to review the matter says the changes in 2008 resulted in millions of dollars of added debt and substantial increases in the annual expenses related to the pension plan. Politicians then voted to increase their salaries to $85,000 from about $45,000 while ending allowances worth about $35,000. However, since pensions are based on salaries, the change nearly doubled pensions to $30,000 a year after eight years of service. The report recommends dropping that to $20,000 and capping the pension at 75 per cent of annual salary for long-serving members.

Intolerance For Poor Governance Grows

Institutional shareholders are showing a growing intolerance for poor governance practices, says the  ‘10th annual Canadian Key Proxy Vote Survey.’ They are also more willing to tell the public how they are fulfilling their duty to vote in their clients’ interests. Over the last five years, the proportion of survey respondents publicly disclosing their voting record has grown from 11 per in 2005 to 42 per cent. “We hear a lot of talk about increasing shareholder activism in Canada,” says Laura O’Neill, SHARE’s director of law and policy, “and this survey delivers solid evidence that leading investment managers are using their voting power to push back against poor governance and undue deference to management.”

Cordiant Backs Iraq Phone Network

Cordiant Capital Inc. has committed $50 million to fund the expansion of Iraq’s mobile phone network. Mobile penetration in Iraq is estimated at just 77 per cent, lagging far behind most of its neighbouring countries where penetration rates are virtually 100 per cent. The loan is part of a $400 million long-term financing for Zain Iraq, the country’s largest mobile phone operator, to improve access to network coverage for remote populations. A reliable telecommunication service is instrumental to the growth of Iraq’s economy as it seeks to diversify itself outside of the oil and gas sector. Zain Iraq is a subsidiary of the Kuwaiti Mobile Telecommunications Company K.S.C.

Climate Bond Initiative Counting Down

The Climate Bonds Initiative is counting down to the world’s first Climate Bond issuance ‒ worth a quarter of a billion US dollars ‒ with the release of the draft Compliance Standards that will assure the environmental integrity of bonds issued to fund low carbon projects. The first version of the standard will apply to wind energy. The standards break new ground by providing independently verified assurance to institutional investors that the proceeds of such bonds are being used to build the low carbon economy and will not be diverted for other purposes. The Climate Bonds Initiative also announced that the first wind energy Standard-compliant Climate Bond issuance is expected to be launched in May.

Caisse Puts Money Into Québec

The Caisse de dépôt et placement du Québec has increased its investments in publicly traded Québec companies by more than $800 million. "When it comes to investing in Québec, the Caisse has an undeniable comparative advantage vis-à-vis its peers: close long-term relationships with the vast majority of companies and an excellent knowledge of the challenges they are facing," says Jean-Luc Gravel, executive vice-president, equity markets. "This comparative advantage has led us to target the Québec market, which holds many promising companies, to generate returns while contributing to Québec's economic development. We believe the two go hand in hand." As well, one of the priorities at the Caisse is to assist Quebec companies with great growth potential here and abroad by sharing its expertise and resources with them.

Pessimism Grows Over Comfortable Retirement

In a sign that Americans are recognizing the realities they face about their chances for a comfortable retirement, the Employee Benefit Research Institute’s ‘2011 Retirement Confidence Survey (RCS)’ finds workers are more pessimistic than at any time in the two decades the survey has been conducted. More than a quarter (27 per cent) of workers now say they are “not at all confident” about retirement, up five percentage points from the level measured just one year ago. Reinforcing that trend, the percentage of workers saying they are “very confident” of a comfortable retirement ties with 2009 at 13 per cent—the lowest rate ever measured by the RCS.

Speakers Set For Pension Summit

Lazlo Andor, an EU commissioner, Erry Stoové, of the International Social Security Association (ISSA); and Edward Whitehorse, of the OECD, are among the featured speakers at the ‘WorldPensionSummit.’ The eventtakes place November 2 to 4 in Amsterdam, The Netherlands. For more information, visit www.worldpensionsummit.com

Hamilton Speaks At ACPM Session

‘Checking the Pulse of Pension Reform’ is the focus of the Association of Canadian Pension Management’s Ontario Regional Council’s ‘ACPM Spring Session 2011.’ Malcolm Hamilton and other actuarial, tax, and legal experts will address a roadmap for pension design changes, the future of pension products, and HST in pension plans. It takes place April 26 in Toronto, ON. For more information, visit http://www.acpm.com/

Program Looks At International Investing

Global financial markets, mechanics of international diversification, and developed market equities will be among the areas examined at the International Foundation of Employee Benefit Plans’ ‘International Investing and Emerging Markets.’ It takes place July 25 to 27 in San Francisco, CA. For more information, visit http://www.ifebp.org/Education

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Tuesday, March 15, 2011

Employers Unaware Of Rebates

Employers that sponsor registered pension plans are still largely unaware of the new GST/HST pension plan rebate provisions that were included with legislation changes implemented by the federal government which included the implementation of Harmonized Sales Tax (HST) in Ontario and British Columbia, says Greg Hurst, managing director of Greg Hurst & Associates Ltd. He estimates that the average pension plan rebate will be approximately $25,000, with up to $300 million of total GST/HST rebates available for such plans. “Most of the information available on GST/HST issues for pension plans has focused on the pain associated with administrative complexities that face certain plans, rather than the gain offered by the extension of the pension plan rebate,” says Hurst. “As a result, many pension plan administrators may in fact miss the opportunity to claim their rebate entitlements, unless they become pro-active in their approach to their GST/HST issues.” For additional information, contact ghurst@greghurst.ca

High Participation Impacts Automatic Enrolment

Among Defined Contribution plans that don’t offer automatic enrolment, 65per cent say it is “very unlikely” they would offer this option in the next 12 months, says a survey by the Defined Contribution Institutional Investment Association. Another 19 per cent said it was “somewhat unlikely” they would offer automatic enrolment. The primary reason plan executives don’t offer automatic enrolment is an already-high participation rate by employees. Another top reason for not offering auto enrolment was the feeling by plan executives that automatic enrolment was “too paternalistic” and that employees would be upset by it. Employers offering Defined Benefit plans and those that do not offer company matches in DC plans are less likely to offer auto enrolment.

Flexible Work Offers Benefits

Almost nine in 10 (88 per cent) of Canadian companies now offer their staff some form of flexible working, says a global research report from Regus. The majority of those same companies are finding that flexible working has significant benefits including reduced overhead expenses, improved staff productivity, and better work-life balance. Additionally, 66 per cent of Canadian companies believe flexible working costs less than fixed office working. However, the survey shows that trust remains a major hurdle for many companies offering flexible working as 45 per cent only offer this privilege to senior staff.

Caisse Using Quebec Index

The Caisse de dépôt et placement du Québec has integrated the new National Bank Quebec Index, dedicated exclusively to Québec-based companies, into its reference index for the Canadian equity portfolio. The latter is now considered much more representative of the composition of the portfolio and better reflects Québec's weight in the Canadian economy, which is about 20 per cent, compared with the S&P/TSX weighting of approximately 10 per cent. The reference index for the Canadian equity portfolio will be based for 90 per cent on the S&P/TSX index and 10 per cent on the National Bank Quebec Index.

Portfolio Concepts Explained

The International Foundation of Employee Benefit Plans ‘Portfolio Concepts and Management’ program at the Wharton School lays the groundwork for the basic principles of portfolio theory and investment performance measurement, offering the practical tools and experiences needed to make better investment management decisions. It looks at areas including monetary policy and financial markets, fundamentals of valuation, and performance evaluation. It is intended for those who have little experience with investment-related course work. It takes place May 23 to 26 in Philadelphia, PA. For more information, visit http://www.ifebp.org/Education/CertificatePrograms

Solomon Discusses Plan De-risking

‘De-risking Pensions & Benefits: There is nothing new beneath the sun’ will be a topic at the CPBI Saskatchewan Regional Conference, ‘Growth & Opportunity.’ William B. Solomon, a consulting actuary, will provide a brief history of the evolution of pension plans in Canada from the time of group annuities to the present and then look at the current array of products designed to ‘de-risk’ pension plans. It will draw parallels between those products and products of the past. It takes place April 19 to 21 in Regina, SK. Register before March 22 to take advantage of the early bird registration fee. For more information, visit http://www.cpbi-icra.ca/

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Monday, March 14, 2011

Guarantee Scheme Could Mitigate Limitations

A national pension benefit guarantee scheme to insure benefits against a shortfall in pension assets in the event of the plan sponsor’s insolvency, if carefully designed, could mitigate the limitations of current plan funding regulations and the poor communication of these limitations to plan members, says a study by a University of British Columbia Faculty of Law associates professor. In a study for the Institute for Research on Public Policy on pensions, insolvency, funding rules, and insurance, Ronald B. Davis recommends first reforming the funding and governance of pensions to make explicit some risks and conflicts within pension plans that current regulations hide from stakeholders’ view. These reforms would have to promote target-benefit plans in order to clarify the ‘pension deal’ for plan members; support joint sponsor and member governance of pension plans; and enable small pension plans to use larger plans’ expertise and cost structure. He also suggests holding a royal commission on employer-based pensions to foster public discussion of these plans’ structure and value among regulators, sponsors, members, and retirees.

Plans Back Exchange Merger

Major Canadian pension plans are in favour of the proposed merger between TMX Group Inc. and the London Stock Exchange Group PLC, says a report in the Globe and Mail. It says pension officials believe its merits, such as higher trading efficiency, outweigh its drawbacks. Michael Nobrega, OMERS chief executive officer, has publically stated expressed his own view that the government should not block the deal. The merger of the London Stock Exchange and the TMX Group would create the global stock market leader for mining, energy, and cleantech stocks, and the top exchange by sheer number of listings. The two would have 6,700 listings with a market value of $5.8 trillion. The merger is expected to be completed in the second half of 2011 if the approvals are received.

Teachers' May Sell MLSE Share

The Ontario Teachers' Pension Plan will explore the possibility of selling its 66 per cent majority share of Maple Leaf Sports and Entertainment. However, it says in a statement it will be making no further public comment on the matter. The decision to sell its holding in MLSE follows several inquiries about buying the sports company over the past few months by foreign and domestic firms which are believed to have suggested they would pay a premium. Teachers is seeking for $1.5 billion for its stake. However, construction magnate Larry Tanenbaum owns 20.5 per cent of MLSE and will have the opportunity to match the highest bid. TD Capital holds the remaining 13.5 per cent stake in MLSE.

Manulife Offers Real Estate Funds

Manulife Real Estate, the real estate arm of Manulife Financial, is forming a new Real Estate Funds platform and launching a Canadian Real Estate Funds offering. The funds provide accredited investors with an opportunity to participate in a strategy that targets a steady flow of income and long-term capital growth through investments in Canadian commercial real estate. The funds will be offered to institutional investors through Manulife Asset Management, the global asset management arm of Manulife Financial, bringing further diversification to its comprehensive asset management solutions.

Screening Most Popular Wellness Offering

The most common offerings among those with a wellness program are screening and treatment initiatives such as health screenings (76 per cent), flu shot programs (73 per cent), smoking cessation programs (67 per cent), and health risk assessments (62 per cent), says an International Foundation of Employee Benefit Plans (IFEBP) poll. The ‘Value-Based Health Care Baseline Benchmarking Survey: Multiemployer and Public Employer Plans’ found among 51 per cent of all multiemployer funds and 80 per cent of public employers offer wellness initiatives. The presence of disease management programs varies by sector. More than 63 per cent of public employers offer disease management programs compared to 39 per cent multiemployer funds.

Momentum Drives DC Activity

Defined Contribution participant transfer activity in the fourth quarter of last year may have been driven to some extent by momentum market timing, says the ‘Callan DC Index.’ As an example, it noted that small cap stock funds performed well during the quarter and also witnessed some of the heaviest inflows by participants, while weak performers such as fixed income and stable value experienced equally sizable outflows.

HSBC Offers Sharia Services

HSBC Securities Services and HSBC Amanah have rolled out a sharia-compliant securities service. HSBC Amanah Securities Services will be offered globally to Islamic investment managers and traditional investment managers managing Islamic funds. It will provide sharia-compliant fund accounting and administration, global custody, transfer agency, banking, and treasury services in 17 markets in the Middle East, Asia-Pacific, Europe, and the Americas.

FTSE Changes Good Index

FTSE Group has changed the FTSE4Good Index Series. South Korea and Israel have been added to the universe. As a result, 11 South Korean and eight Israeli companies have been identified as meeting the inclusion criteria and will be entering the index series. In addition to the South Korean and Israeli companies entering the index series, a further 54 companies will also be added. The companies span a number of countries including Denmark, France, Germany, Italy, Japan, Portugal, Singapore, Spain, Sweden, Switzerland, UK, and the USA. More than 300 companies have been deleted from the FTSE4Good Series over the years for not keeping pace with the rising standards required. 

Unique Canadian Issues Highlighted

Designed to appeal to institutional investors and financial advisors who are interested in disciplined, risk-controlled investing and strategies in Canada, the ‘10th Annual Canada Cup of Investment Management’ highlights issues that are unique to the Canadian marketplace, while also exposing the region to the latest investment trends and strategies taking place in the U.S. and beyond. Speakers include Kenneth R. French, director, head of investment policy and director of investment strategy, Dimensional Fund Advisors; and Deborah Fuhr, managing director, global head of ETF research and implementation strategy, at Blackrock. It takes place June 7 and 8 in Toronto, ON. For more information, visit http://www.imn.org/Conference/

Kedrosky Speaks At Forum

Paul Kedrosky ‒ an investor, CNBC regular, and the editor of ‘Infectious Greed,’ a global financial blog ‒ will address the ‘Next Wave’ of the economic world and how it will impact the benefits and pensions industry at CPBI FORUM 2011. Other forum sessions will look at ‘The Next Wave in the Future of Index Investment’ and ‘Best Practices in LDI.’ It takes place May 18 to 20 in Vancouver, BC. For more information, visit http://www.cpbi-icra.ca/

Bonnett Explores Oncology Therapy

Chris Bonnett, president, H3 Consulting, will explore developments in oncology therapy and the impact on group benefit plans at the ‘The BBC: Contracts for the New Millennium’ session. He will explore some of the developments that have taken place over the years that have influenced contract provisions, as well as the opportunities and challenges that present themselves for the future. It takes place March 24 in Kitchener, ON. For more information, visit www.connexhc.com

Challenges Facing HIR Managers Discussed

‘When Retirement Isn’t on the Horizon – Challenges for Employees and HR Managers’ will be examined at the ‘26th Fasken Forum ‒ Labour, Employment, Human Rights, Pensions & Benefits Conference.’ It will also feature a year in review session which looks at areas such as pension reform and a break-out session on alternative work arrangements. It takes place April 1 in Toronto, ON. For more information, visit http://www.fasken.com/events/

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Friday, March 11, 2011

Reform Requires Principles

Towers Watson suggests there are four ‘guiding principles’ to developing a national retirement income system. It says Canadian officials have proposed a private sector pension solution to expanding the Canadian Pension Plan system because they lack the necessary support from the provinces for a more substantial government effort. And while one of the selling points for the Pooled Registered Pension Plans (PRPPs) proposal is the expectation of lower administrative costs than many pension plans offered by employers, this will be difficult to achieve without a consistent national regulatory framework for such programs, which will require more co-ordination from the provinces than has been seen to date, it says. As a result, it suggests that reform should target those in need of increased retirement savings – middle income earners; the costs of reform should be sustainable; and affordable to taxpayers, employers, and governments; reform should limit concentration of investment and other risks; and reform should maintain an appropriate balance between individual and government responsibility for individual savings and ensure an appropriate level of individual choice.

Economy Ends Year On High Note

On the back of solid net exports in the final quarter of 2010, Canada's economy finished the year on a high note recording stronger than expected gains, says an ‘RBC Economic Outlook.’ The biggest support for the economy came from net exports which added a full 4.5 percentage points to the quarterly growth rate. Continued consumer spending also played a vital role in driving overall GDP, marking the fastest increase in spending since late 2007. RBC expects real GDP to increase at 3.2 per cent in 2011 as U.S. demand for Canadian exports increases. Growth in 2012 is forecast to rise by 3.1 per cent.

Reducing Benefits Doesn’t Violate Charter

The Supreme Court of Canada says that the reducing supplemental death benefits based on age does not violate the equality rights of the Charter of Rights, says a ‘Spectrum HR Law Update.’ In its decision on an appeal of Withler versus Canada (Attorney General), it held that elements of pension benefit schemes must be considered in the context of the scheme as a whole and supplemental death benefits are one part of a broad-based scheme addressing the competing interests of employees at different stages of their lives.  It said their purpose with respect to older employees is as financial assistance for last illness and death and not as a long-term income stream.

Hedge Fund Inflows To Quadruple

Inflows into hedge funds likely will quadruple in 2011 to $210 billion which will push industry assets up about 10 per cent to $2.5 trillion as of year-end, says the ninth annual ‘Deutsche Bank Alternative Investment Survey.’ Part of the reason for the predicted increase in both inflows and assets is because 72 per cent of pension fund executives who participated in the survey and more than half of their consultants intend to increase the size of their internal hedge fund teams in 2011. About 82 per cent of investment consultants expect that their institutional clients will increase their hedge fund allocations this year.

OMERS Plans Infrastructure Alliance

OMERS will launch a $20 billion infrastructure investment alliance by the end of the year and up to four-fifths of its assets will be allocated toward European projects. Jacques Demers, president and chief executive of OMERS Strategic Investments, told the National Association of Pension Funds Investment Conference that discussions have been ongoing for the last 15 months. The proposals are for a global co-investment alliance to pursue large scale infrastructure assets. Partners in the U.S. and Western Europe would be able to access OMERS infrastructure expertise and its team through a shared platform.

CPPIB Funding AWAS Expansion

The Canada Pension Plan Investment Board will provide at least $266 million to help fund expansion at AWAS, a Dublin, Ireland-based aircraft leasing firm. CPPIB already owns 16 per cent of AWAS and the investment will increase its stake to 25 per cent. Its stake could increase beyond 25 per cent because it has committed a further $200 million that AWAS could draw on at a later date. This investment in AWAS is part of $529 million that is being provided by a group of investors to fund the aircraft leasing company's expansion plans. Private equity firm Terra Firma is providing $246 million and will hold a 60 per cent stake in the company. Other investors will provide another $17 million and take a 15 per cent stake in the company. AWAS has a fleet of more than 200 commercial aircraft on lease to more than 90 customers in approximately 45 countries.

AIMA Examines Hedging Techniques

AIMA Canada is presenting a session on ‘How the Pros Hedge their Books.’ A panel of Howard Atkinson, president, Horizons ETFs Inc; Mike MacBain, co-founder of East Coast Capital Management; and Jean-François Tardif, former lead portfolio manager for the Sprott Opportunities Hedge Fund LP, Sprott Opportunities RSP Fund, and Sprott Opportunities Offshore Fund; will examine simple hedging techniques available to both retail and institutional portfolios and comment on hedging equity exposure, hedging fixed income in a rising rate environment, and the use of ETF’s to hedge market risk. It takes place March 29 in Toronto, ON. For more information, visit http://aima-canada.org

Spinks Discusses Work-Life Quality

Nora Spinks, president of Work-Life Harmony Enterprises, will discuss ‘Re-defining Success – Achieve Work-Life Quality’ at the next Employee Assistance Program Association of Toronto (EAPAT) session. She will discuss topics such as how EAP providers, wellness experts, and HR professionals, managers, and leaders can balance behaviours and harmony habits and the appropriate policies, programs, protocols, and practices to create healthy, productive organizations. It takes place April 21 in Toronto, ON. For more information, visit www.eapat.org

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Thursday, March 10, 2011

Rate Expectations Preventing Action

Interest rate expectations may be preventing Defined Benefit pension plan sponsors from extending the duration of their fixed income assets to address their funding concerns, says the Pyramis Global Advisors 'Extending Duration: An Ounce of Prevention' whitepaper. It says that from a risk management perspective, a majority of private sector DB pension plans are currently exposed to a duration gap where the duration of liabilities is greater than the duration of assets. Simply put, this means that a change in the level of interest rates will have a greater impact on the value of plan liabilities than on the value of plan assets. One expedient for reducing this exposure is to extend the duration of the pension fund’s fixed income assets. Yet many of these same plan sponsors are reluctant to implement such a duration extension strategy in the current interest rate environment because they expect that interest rates will rise in the relatively near future.

Court Finds Government Liable

An Ontario Court of Appeal has upheld a lower court decision that an actuary and the federal government are liable for a get-rich-quick scheme under which federal government employees resigned from employment and were hired by a company set up by an actuary in order to be entitled to a higher pension transfer value from the federal Public Service Superannuation Plan, says a Heenan Blaikie “Pensions & Benefits e-Blast. The federal government had concerns about the scheme, as did the Canada Revenue Agency. And the CRA eventually revoked the registration of the pension plan set up by the actuary. As a result of the revocation of the pension plan, the pension transfers were not permitted. Consequently, the employees who had resigned their positions with the federal government were left without employment and without the amount of pension monies they expected to receive, on the basis of advice from both the federal government and the actuary. A lower court decided in favour of the employees and apportioned liability 80 per cent on the part of the federal government and 20 per cent on the part of the actuary. The court of appeal agreed with the findings of the lower court, but changed the apportionment of liability to 60 per cent on the part of the federal government and 40 per cent on the part of the actuary. The court held that as an employer and a pension plan administrator, the federal government had a duty of care toward the employees. It held that the federal government had misrepresented the availability of the reciprocal transfer as a legitimate option.

Marriage Breakdown Regulations Released

The Ontario government has released draft regulations regarding the division of pension assets on marriage breakdown, says an Eckler ‘Special Notice.’ The new regulations will require administrators to provide a new type of calculation when a member (or their spouse) requests a statement of benefits; adjust their systems and create processes to handle the new type of calculation; update administration manuals to ensure compliance with the new regulations; and prepare communication materials that meet the requirements (utilizing yet-to-be-released forms). Plan administrators are advised to begin planning now for changes that will likely be implemented later this year.

Care Needed With Vaccines

Plan sponsors need to be careful when it comes to the wording about vaccine coverage in their plan documents. Speaking at Green Shield Canada’s ‘Toronto Benefit Forum,’ Sal Cimino, director of pharmacy services, said when it came to vaccines, plan language used to say that they were either in or out. However, many of vaccines coming to market today are for treatment, not prevention. For example, most of the research today, he said, is on vaccines for cancer treatment and they are costly. This means plans that just refer to vaccines could be in trouble. Knowing what you want to do with your drug plan will help you determine how to handle vaccines. For example, exotic travel vaccines may not be appropriate if employee travel is basically for vacations. But, it could be necessary if exotic travel is part of the job.

Book Helps Teachers With Personal Finances

A new book takes direct aim at improving financial literacy by helping Ontario teachers with their personal finances. ‘Wealth Ed: Money Management for Ontario Teachers’ is a financial resource created specifically to help members of the Ontario education community with their finances. "Financial literacy is not a subject for everyone, but everyone has an interest in their own money matters," says John Waldron, author of the book. "Learning about money management is more effective when you can apply the learning directly to your own personal circumstances." He says teachers need to learn about and plan their finances beyond just the pension.

Crestpoint Provides Direct Access To Real Estate

Connor, Clark & Lunn Financial Group has formed a business dedicated to providing institutional and high net worth investors with direct access to Canadian commercial real estate assets. Crestpoint Real Estate provides direct access on either a pooled or segregated account basis. Mike Freund, co-CEO of CC&L, says “For several years now, industry consultants have highlighted the trend towards increasing demand for alternative investments like private equity, infrastructure, and real estate.” It is being headed Kevin Leon, who will serve as president and chief investment officer.

Generics May Be More Expensive

Plan sponsors looking to control drug costs in their benefit plans can’t be slaves to generics, says Steve Moffatt, senior vice-president, sales and marketing, at Green Shield Canada. Speaking at its ‘Toronto Benefit Forum,’ he said a lot of the focus when it came to controlling drug costs was on generics and plan sponsors seem to be getting the message as over the last five years spending on generics has moved from 41 per cent of drug claims to 49 per cent. However, in Canada, in some cases the brand name drugs are less expensive than the generics and sponsors need to look for the lowest cost alternatives, he said.

Verrilli Joins STYLUS

Matteo Verrilli is vice-president, co-portfolio manager of funds, and a senior member of the investment committee at STYLUS Asset Management. He was previously a senior vice-president at CPMS.

C.D. Howe Looks At Healthcare Initiative

The C.D. Howe Institute is launching a new healthcare policy initiative ‒ ‘Chronic Health Care Spending Disease: A Macro Diagnosis And Prognosis.’ It takes place April 6 in Toronto, ON. Report authors David Dodge, senior advisor, and Richard Dion, senior business advisor, at Bennett Jones will discuss the startling trajectory of Canadian healthcare spending over the next two decades, the consequences of public and private financing, and the difficult choices Canadians may have to make. For more information, visit http://www.cdhowe.org/pdf/

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Wednesday, March 9, 2011

FSCO Looking For Framework Feedback

Ontario’s pension regulator wants feedback on its proposed broad-based framework for the risk-based regulation of pension plans in Ontario. The Financial Services Commission of Ontario (FSCO) says that the purpose of introducing this framework is to improve its overall effectiveness at monitoring key pension risks, to ensure it takes the appropriate regulatory response to address risk situations, and to better protect the interests of plan beneficiaries. It also aims to address, in part, the recommendations from the Ontario Expert Commission on Pensions concerning FSCO. The core of the framework is a ‘Regulatory Response Model’ which includes a trigger mechanism. The trigger mechanism and assessment process are focused on five risk areas ‒ funding risk; investment risk; administration risk; governance risk; and sponsor/industry risk. Once a plan is judged to pose a high risk, FSCO will closely examine the circumstances of the plan before deciding on the appropriate regulatory actions. The deadline for submissions on the paper is April 7. For more information, visit http://www.fsco.gov.on.ca

Office-holder Earnings Not Pensionable

Attendance and per diem fees paid to persons holding an office were not pensionable for purposes of the Canada Pension Plan, as the amounts received in any year could not have been known in advance is the result of two recent court cases – Real Estate Council of Alberta versus the Minister of National Revenue and Her Majesty the Queen in Right of Ontario versus the Minister of National Revenue. A Hicks Morley ‘FTR Now’ says the Tax Court of Canada decisions call into question whether certain amounts paid to board members, council members, and other office-holders should be treated as pensionable earnings and subject to CPP contributions. Based on the court’s reasoning in both cases, office-holders whose earnings are not fixed and not reasonably ascertainable in advance (because they are based on attendance at meetings or for providing services that cannot reasonably be known in advance) will not be considered engaged in pensionable employment and no CPP deductions should be made from their remuneration. However, as both decisions are under appeal, the treatment of such earnings for CPP purposes is not yet settled.

Program Improves Pension Board Effectiveness

A new program aimed at improving and enhancing board effectiveness and governance of pension funds ‒ as well as other investment institutions such as national reserve funds, sovereign wealth funds, and endowment funds ‒ has been developed by the Rotman International Centre for Pension Management and Rotman Executive Programs, both at the University of Toronto's Rotman School of Management. The ‘Board Effectiveness Program For Pension and Other Long-Horizon Investment Institutions’ is aimed at trustee and board members from Rotman Centre research partners as well as other major long-horizon investment institutions around the world. "Not surprisingly, the governance and management of pension and other long-horizon institutions has become increasingly complex as many have grown into financial giants, servicing the investment and administration needs of their many beneficiaries," says Keith Ambachtsheer, director of the Rotman Centre and academic director of the new governance program. "There is evidence suggesting many governing boards and managements are struggling to keep up with the implications of this growing complexity. The program will provide the tools needed for directors to address key strategic issues of their organizations including providing an opportunity to build an international network for dialogue amongst themselves." For more information, visit www.rotman.utoronto.ca/icpm

Derivatives Threat To Markets

CFA Institute member respondents in eight out of the 16 largest markets say that derivatives are the most serious issue facing global markets. The ‘CFA Institute Financial Market Integrity Outlook Survey’ found members worldwide feel that improved enforcement of existing laws and regulation (31 per cent) and improved regulation and oversight of global systemic risk (23 per cent) are the most needed regulatory/industry actions to help improve global market trust and integrity.

Canadians Less Optimistic About Retirement

Canadians have become less optimistic about retirement as the recovery from the global recession continues. The average Canadian expects to retire at age 68, says the Sun Life Financial’s ‘2011 Canadian Unretirement Index.’ That's three years later than respondents reported in the same study a year ago.
The downturn has had the most significant impact on the retirement expectations among those earning less than $50,000 per year. They're less confident about how prepared they are for retirement, and they expect to retire later ‒ at age 70 on average ‒ as a result. Canadians who earn more than $100,000 expect, on average, to retire at the traditional age of 65. Income is also a factor when it comes to retirement activities. Those with incomes of more than $100,000 are inclined to cite personal fulfillment for continuing to work while many of those making less than $50,000 per year (68 per cent) say a main reason for working past age 65 is to earn enough money to pay for basic living expenses.

NuVista Shares Acquired

The Ontario Teachers' Pension Plan Board has completed the acquisition of an additional 3.5 million common shares of NuVista Energy Ltd. by way of private placement pursuant to a share purchase agreement among the company, Teachers', and Franklin Templeton Investments Corp., as portfolio manager for various funds and assets. Teachers' has acquired NuVista's common shares for investment purposes only.

CIBC Mellon Selected By Auto Sector Trust

CIBC Mellon Global Securities Services Company has been selected to provide custody and accounting services to the Auto Sector Retiree Health Care Trust. The Auto Sector Retiree Health Care Trust provides healthcare benefits for eligible retirees within Canada's auto sector and their surviving spouses and dependents. It was formed to enable the delivery of benefits in a more tax-effective manner and to simultaneously provide a greater degree of security in the provision of healthcare benefits to retirees in the future. The establishment of an independent healthcare trust was a condition of government financial assistance provided to Canadian automakers to assist with their restructuring resulting from the crisis in the auto industry in 2008/09.

Network Matrix Available

Towers Watson has unveiled its ‘2011 Multinational Pooling Network Matrix.’ The matrix provides a listing of the eight key multinational pooling networks, their affiliated insurers across 160 countries, and the offshore capabilities for each. For each country, it has listed only insurers that can provide local admitted policies and products.

Lewis Examines Governance

Gord Lewis, vice-president, Proteus Performance, will examine governance issues at a Federated Press session. It will examine key governance issues that pension fund sponsors are currently grappling with, and the decision-making process involved in devising and assessing an effective governance plan. It takes place May 10 to 12 in Toronto, ON. For more information, visit http://www.federatedpress.com

Infrastructure Focus Of Symposium

The ‘Infrastructure Symposium 2011’ will provide an overview of how to participate in this rapidly expanding asset class. Speakers will also address global opportunities and how to access them. It takes place March 22 in Toronto, ON; with live video broadcasts into Montreal, QC; London, ON; Winnipeg, MB; Regina, SK; Calgary and Edmonton, AB; and Vancouver, BC. It is a collaborative event between Financial Executives International Canada, the Canadian Institute of Chartered Business Valuators, the Toronto CFA Society, and Canada’s Venture Capital & Private Equity Association. For more information, visit http://www.feicanada.org/page/events

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Tuesday, March 8, 2011

Court Denies RRSP Claim

The Court of Queen’s Bench of Alberta has denied a claim against the Royal Bank of Canada for failing to forward interest payments to a client for five years, saying the client should have discovered the error. In the suit, an RBC customer alleged that the bank acted in breach of trust as it failed to properly configure an RRSP mortgage on his home. As a result, it failed to forward interest payments to him for approximately five years. The client set up a RRSP mortgage on a home he was purchasing in 2002. However, neither side realized that the RRSP mortgage was improperly configured until June 2007, when the client contacted RBC regarding the portability of the mortgage to a new home. At that point, RBC discovered that no RRSP mortgage had ever existed. The court noted that the bank couldn’t establish how this happened, it blamed a combination of the nature of self-directed RRSP accounts at the bank, a communication failure by the RBC mortgage professionals, and a group of corporate bodies not communicating with each other. However, it also said the client apparently didn’t notice either, although it should have been apparent from his account statements. The court found that he ought to have known, at least by October 2003 and, therefore, his claim was barred by the two-year limitation period that applies to civil suits.

China Should Allow More Pension Fund Investment

China should allow pension funds to invest more money in domestic stock markets as the nation’s economic development fuels companies’ demand for financing, says the assistant to the chairman of the China Securities Regulatory Commission.  Zhu Congjiu says China needs a better plan to direct more capital into the market. As a result, the securities regulator aims to make the approval process for corporate bond sales and follow-on stock offerings easier. More than 300 companies raised a record $70.7 billion from IPOs in Shanghai and Shenzhen.

Collateral Tracking Service Launched

State Street Corporation has launched a ‘Collateral Tracking’ service that helps asset managers and owners accurately assess and manage counterparty risk.  Clients can now receive up-to-date reporting on the location and status of all collateral movements regardless of where the assets are held. This service expands the traditional core custody function of acting on direction from the asset manager to move collateral, including cash or securities, in and out of an account. The enhanced service automates a previously manual process, which required asset owners to contact each broker or investment manager individually to determine the outstanding collateral at any point in time.

Economic Uncertainty Hurts Confidence

Economic uncertainty and market volatility have contributed to lower levels of investing confidence and generally more conservative investing behaviour among participants. Among women in particular, says a MassMutual retirement services division survey, confidence in investment decisions and the stock market is much lower than for men and the gap is widening. The survey also indicates that anxiety about having adequate savings to retire is increasing. Participants of both genders are also becoming more conservative in terms of their investing behaviour. Among participants who made a change in their approach to investing in the last 12 months, 61.7 per cent became more conservative compared to 38.3 per cent who became more aggressive.

Psycho Social Environment In Workplace Examined

How to address the psycho social environment in the workplace and drug plan formulary decisions and the impact on plans will be among the topics addressed at this year’s Connex Health ‘Employer Forum.' It takes place May 11 to 13 in Niagara Falls, ON. For more information, visit: www.connexhc.com

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Monday, March 7, 2011

Plan Deficit Decreases

The aggregate deficit in pension plans sponsored by S&P 1500 companies decreased during February from approximately $270 billion as of January 31, 2011, to $256 billion as of February 28, 2011, says Mercer. It says the deficit corresponds to an aggregate funded ratio of 85 per cent as of February 28, compared to a funded ratio of 81 per cent at December 31, 2010. Funded status improved for the sixth straight month after hitting a deficit of $500 billion at the end of August 2010. The improvement in February was due primarily to positive equity market returns, with the S&P 500 index gaining more than three per cent for the month.

HOOPP Building Earns Green Award

AeroCentre V, a recently completed, 226,000 square foot. Mississauga, ON, office featuring many high-end environmental touches, has won a prestigious Real Estate Excellence (REX) Award in the Green Award of the Year category. "We’re very pleased to see our building win this award," says Michael Catford, HOOPP’s vice-president, real estate. "We at HOOPP feel it’s very important to develop buildings that are environmentally sound – since a healthier building will help attract and retain more tenants." The HOOPP-owned building, home to PepsiCo, is unique in many ways. First, it is an example of a suburban infill project since it was built on already developed land. Through the use of natural light, the building uses 50 per cent less energy than a conventional building. In addition, the building has windows that can be opened and closed.

Certificate Course Provides Foundation

The ‘Certificate in Canadian Benefit Plans,’ formerly known as the ‘Concepts and Practices of Canadian Benefits,’ is now part of the International Foundation of Employee Benefit Plan’s Certificate Series program. The program is designed to provide a solid foundation in employee benefit and human resource practices in Canada. It takes August 15 to 17 in Niagara Falls, ON. For more information, visit www.ifebp.org

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Friday, March 4, 2011

CAPSA Releases Draft Guidelines

The Canadian Association of Pension Supervisory Authorities (CAPSA) has released drafts of the Pension Plan Prudent Investment Practices Guideline; its companion document, the Self-Assessment Questionnaire on Prudent Investment Practices; and the Pension Plan Funding Policy Guideline, says a Blakes Bulletin: Pension & Employee Benefits. TheDraft Guideline on Pension Plan Prudent Investment Practices and Self-Assessment Questionnaire is intended to provide guidance to plan administrators on how to demonstrate prudence in the investment of pension plan assets. The Draft Guideline on Pension Plan Funding Policy is intended to provide guidance on the development and adoption of funding policies. CAPSA is accepting comments on the draft guidelines and the self-assessment questionnaire until June 1.

OMERS Earns Dealmaker Award

OMERS Private Equity, the private equity investment arm of the OMERS Worldwide group of companies, with Société générale de financement du Québec, is a 2010 winner of the Canadian Dealmakers program. The Dealmakers Mid Market Private Equity Award was presented to OPE and SGF for their acquisition of Logibec Groupe Informatique Ltée in July 2010. The awards honour Canadian organizations and individuals who have made a significant contribution to the merger and acquisition market through measures including innovation, growth, establishment of best practices, and value creation.
In 2010, OMERS and SGF purchased a majority stake in Logibec. Founded in 1982 and headquartered in Montreal, QC, Logibec is among the fastest-growing North American companies specializing in information systems for the health and social services sector.

HOOPP Buys London Complex

The Healthcare of Ontario Pension Plan (HOOPP), along with partners The Minto Group and KingSett Canadian Real Estate Income Fund LP, have acquired a 13-building apartment complex and shopping mall collectively known as Cherryhill Village in London, ON. "This is a very major transaction for HOOPP and our partners," says Michael Catford, its vice-president, real estate. "It includes 2,326 apartment units, the shopping mall, and an office building." HOOPP has an ownership position in more than 150 properties across Canada and late last year announced its first-ever deal in the United Kingdom.

De-risking Solution Launched

PwC has launched a bulk de-risking solution for UK employers sponsoring Defined Benefit schemes. The solution – known as a total pension increase exchange (TPIE) – offers deferred members over 55 a transfer value that converts straight away into an early retirement pension members can draw from immediately. This could be significantly higher than the initial pension and the lump sum they would receive from the original scheme.

March Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including March 2011 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:
•  Commuted Values February 2011 CIA
•  Marital Breakdown: CSOP 4300 ‒ May 2009
•  Annuity Proxy for Solvency Calculations for Non-Indexed & Fully-Indexed Pensions
•  Minimum Interest on Employee Required Contributions
•  HISTORICAL: Commuted Values ‒ 2009 Basis (Now Frozen)
•  HISTORICAL: Commuted Values ‒ 2005 Basis (Now Frozen)
• HISTORICAL: Commuted Values ‒ 1993 Basis (Now Frozen)

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Thursday, March 3, 2011

Thorough Analysis Protects Portfolios

Thorough credit analysis will protect portfolios going forward, says Heather Mason-Wood, vice-president, Canso Investment Counsel Ltd. She says “the great credit rating debate” in the United States may create a situation where funds themselves would be responsible for weighing the credit quality of securities because the U.S. has been moving towards removing references to them in legislation and public disclosure. The thought is that if bond managers cannot be "prudent" by relying on credit ratings, they might take the time to analyze and understand the creditworthiness of issues they are buying. She says they believe credit ratings are extremely poor predictors of credit risk and default. Canso President John Carswell’s advice, she says, is to not trust them and “always do your own credit work.”

Bigger Plans Perform Better

Research from the Rotman International Journal of Pension Management shows the largest DB plans outperform smaller plans by up to 50 basis points per year on a risk-adjusted basis, says Aon Hewitt’s ‘The Monitor.’ Up to one-half of these gains arise from cost savings related to internal management where costs are at least three times lower than under external management. Most of the superior returns come from increased allocations by larger plans to alternative investments. In their private equity and real estate portfolios, large plans have both lower costs and higher gross returns, yielding up to six per cent per year improvement in net returns. However, poor governance reduces overall plan returns and attenuates scale economies.

Rebate Sharing Has Fiduciary Issues

There are fiduciary issues arising in relation to pension rebate sharing, says Greg Hurst, of Greg Hurst & Associates. Speaking at a CPBI Roundtable on ‘Taxing Matters: GST/HST For Pension Plans and Other Employee Benefit Programs,’ he said the issue is fairness for employers relative to ‘deemed supply’ rules versus cost of administration borne by the trust. Pension rebates apply to all trusteed RPPs and RPPs administered by a pension corporation. And the deemed supply is a new tax, he says, not new tax policy. It came about after General Motors Canada Limited challenged the former policy over denial of a $900,000 claim for input tax credits relating to pension plan ‘deemed supply.’ The courts ruled in GM’s favour and the department of finance response was new legislation. Hurst says one solution to the fiduciary issue is for employers to charge all employer costs and collect GST/HST from the pension entity and then leave the rebate with the pension entity.

Customized Advice Makes Plans Reasonable

Advice customized to pre-retiree situations can help them make more reasonable plans, says a study by the Center for Retirement Research at Boston College. It found that after receiving advice on the trade-off between working longer, saving more, and decreased retirement consumption, more than 40 per cent decided to save more and/or work longer. About 25 per cent reduced their planned increase in working years, which the study found to be an appropriate response because these respondents were overestimating the number of additional work years needed to counteract their financial losses. 

Managers Bullish On Equities

Fund managers are bullish about the prospects for public equities and emerging markets in 2011, but have bearish views about nominal government bonds, says a Towers Watson survey. Managers also believe low central bank rates and mild inflation will continue to stimulate economic growth, helping to avoid a double dip recession and feed the global recovery. It highlights two main risks to avoid, namely the likelihood of sovereign debt default in the Euro zone and continuing economic stagnation in Japan. In addition, there is a consensus on the continuing West/East divide theme, with managers expecting increasing competitiveness from emerging economies and persistent boom conditions in China, while most Western economies have a slow economic recovery.

Pro-democracy Uprisings Boost Energy

Funds that invest in energy producers profited from events in Egypt and Tunisia, according to results of the 44 Morningstar Canada fund indices. “Fears that the violence surrounding pro-democracy uprisings would spread to major oil producers were fully realized in Libya, a significant oil exporter to Europe,” says Salman Ahmed, a fund analyst. As a result, the natural resources equity index gained 5.1 per cent for the third-best ranking among all indices. Also boosted by the energy sector, equity markets in Canada fared better than most. Five of the 10 best-performing indices focus on Canadian stocks. Strong performances in the financials sector also boosted the Canadian equity market.

Trustee Primer Published

The Research Foundation of CFA Institute has published ‘A Primer for Investment Trustees,’ a comprehensive discussion of a range of issues relevant to investment trustees. It covers areas such as governance, investment objectives, investment risk tolerance, and ethics. It can be downloaded for free at http://www.cfapubs.org/loi/rf

Conference Theme 'Growth & Opportunity’

The ‘2011 CPBI Saskatchewan Regional Conference’ has been built around the theme ‘Growth & Opportunity.’ Educational sessions will offer in-depth information on the latest developments and opportunities created by pension reform, new trends in employee benefits, and economic and demographic growth. It takes place April 19 to 21 in Regina, SK. For more information, visit http://www.cpbi-icra.ca/

Sustainable Investing In Emerging Markets Examined

The annual ‘Sustainable Emerging Markets’ conference provides an opportunity to gain insights into sustainable investments in 'tomorrow's' biggest markets. The conference will allow market players to assess the risk/return and sustainability of investment instruments in emerging markets. It takes place May 24 and 25 in London, UK. For more information, visit www.c5-online.com/SEM 

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Wednesday, March 2, 2011

Guideline Sets Out Principles

The Canadian Association of Pension Supervisory Authorities (CAPSA) has released a guideline on fund holder arrangements. Guideline No. 5 defines key players in fund holder arrangements, establishes fund holder principles, and outlines the responsibilities of employers, plan sponsors, plan administrators, fund holders, custodians, third-party service providers, pension regulators, and the Canada Revenue Agency, says Spectrum HR Law. Individuals or groups performing any of these roles should review and become familiar with the guideline. While CAPSA guidelines do not have the force of law, they are intended to promote good governance practices and to clarify aspects of pension administration in Canada. The guidelines may also be looked on favourably by the courts as providing guidance on industry best practices. In addition to Guideline No. 5, CAPSA released a table summarizing the legislative provisions across Canadian jurisdictions relating to plan administration, standard of care and fiduciary responsibilities, fund holder duties, and a number of other related issues.

OHIP Proposes Coverage Changes

The Ontario Ministry of Health and Long-Term Care is proposing several cuts to Ontario Health Insurance Plan (OHIP)-paid services, says an Eckler ‘GroupNews.’ The proposed cuts would restrict coverage for computed tomography colonoscopy, CT cardiac angiography, and for routine pre-operative testing (ECG and chest X-ray) prior to certain procedures such as colonoscopy, cystoscopy, carpal tunnel release, and arthroscopic surgery. Approvals would be restricted for out-of-country coverage if an identical or equivalent service is performed in Ontario by an available Ontario doctor who can perform that service within their scope of practice. Coverage would be removed for sinus ultrasound tests to view facial sinus cavities of patients with chronic sinusitis. Eckler says the impact of these cuts on private plans is dependent on whether or not such plans automatically accept the liability for services offloaded by the provincial plan. As such, private plan sponsors may wish to review their programs to determine if such testing will be covered by their plan.

PRPP Consultations Planned

The federal government is holding focused consultations with key stakeholders and industry groups on its proposed pooled registered pension plan, says a Heenan Blaikie ‘Pension Pulse.’ While the basic framework of the PRPP is sound in principle, there are many details that need to be identified and examined. Some of these are who, besides insurance companies, trust companies, and banks will be eligible to administer the plans; the nature and extent of plan administrator fiduciary responsibilities and the responsibilities of the employer; and the harmonized of rules, regardless which jurisdiction in which an employer or an employee is located. If the fee savings are significant and if an employer’s responsibilities and potential liability are decreased as compared to current retirement plans on the market, the PRPP may become an attractive vehicle not just for employers that do not sponsor another retirement plan, but also for employers that sponsor other plans and that consider migrating to the PRPP, it says.

OMERS Works With SNC-Lavalin

The Ontario Municipal Employees Retirement System is working with SNC-Lavalin Group Inc. on a bid for part of Atomic Energy of Canada Ltd., says Michael Nobrega, its chief executive. However, he says if the deal does go through, it would only involve the commercial services which provide knowledge-based services to the industry. He noted OMERS is already a very large customer of AECL and relies on it for a lot of commercial services.

No Exemption For Pension Funds

Pension funds should not be exempted from new rules governing derivatives, says a report for the EU’s economic affairs committee. The report, by Werner Langen, the man in charge of steering the legislation through the European parliament, starts the process of
overhauling derivatives regulation in the EU. It dismisses arguments that certain sectors should be exempted from the regulation. However, while it says pension funds should not benefit from a general exemption, a “lesser obligation” of bilateral clearing “could be envisaged.” It also rejects a proposal to allow 'interoperability,' arrangements between clearing houses whereby traders can choose where their trades are cleared. These arrangements could lead to a "build-up of systemic risk" and that they should be tackled in separate legislation. As well, rules on derivatives should govern only privately held contracts rather than all types of derivatives as some European member states had demanded. In fact, it recommends keeping to the original commission proposal which limits the scope of the rules to over-the-counter (OTC) derivatives.

Oncology Therapy Examined

‘Contracts for the New Millennium’ will be the focus of the next Benefits Breakfast Club session. Chris Bonnett, president of H3 Consulting, will explore developments in oncology therapy and the impact on group benefit plans. The session will also explore changes in the marketplace that have affected group contracts and how plan sponsors and their advisors can respond. It takes place March 24 in Kitchener, ON. For more information, visit www.connexhc.com

CPP Changes Discussed

The increased penalties for starting to receive CPP benefits prior to age 65, the elimination of the ‘work cessation’ test, and calculation of the new ‘post-retirement benefits’ for individuals who are receiving CPP benefits, but are continuing to contribute to CPP will be among the areas addressed at a CPBI Manitoba region session. Featured speaker at ‘Changes to the Canada Pension Plan’ is Todd Sigurdson, a specialist in tax and estate planning for the Investors Group. It takes place March 17 in Winnipeg, MB. For more information, visit http://www.cpbi-icra.ca/

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Tuesday, March 1, 2011

Plans Should Also Run PRPPs

The federal government should allow some of Canada’s big pension funds to administer the proposed pooled registered pension plans (PRPPs), says Michael Nobrega, chief executive officer of the Ontario Municipal Employees Retirement System. He told a media briefing currently the PRPP proposal says they will be administered by regulated financial institutions. “Right now, it’s insurance companies and the banks,” says Nobrega. “I would suspect that the federal government would be wise to include a broader range of providers other than simply the banks and insurance companies, because the pension funds do have the muscle and investment systems to do it.”

IFRS Impacts Pension Plans

The adoption of International Financial Reporting Standards (IFRS) may have an impact on the financial reporting or the valuation of pension plan assets, says Sonia T. Mak, of Borden Ladner Gervais. Effective January 1, the Canadian Generally Accepted Accounting Principles (GAAP) were replaced by the IFRS for the financial reporting of certain entities in respect of financial years commencing on or after January 1, 2011. As a result, proper financial reporting regarding pension plan assets may require the joint efforts of, and co-ordination between, accountants, the plan actuary, and a pension lawyer. For example, she says, the section dealing with the measurement of a Defined Benefit asset, which is the value of economic benefits available in the form of a refund of surplus or a reduction in future contributions (such as contribution holidays) requires legal analysis of an entity’s entitlement to surplus and contribution holiday, the plan actuary’s determination of the existence and the amount of surplus, and the accountant’s expertise in the proper reporting of such entitlement.

OMERS Net Assets Rise

Net assets for the OMERS pension fund rose to $53.3 billion as of December 31, 2010, up from $47.8 billion the year before. The total rate of return in 2010 was 12.01 per cent, compared to 10.6 per cent in 2009. The plan’s growth in net assets for 2009 and 2010 combined was $9.9 billion. However, like many other pension plans, OMERS continues to face a funding shortfall caused by the 2008 global economic downturn. The plan’s 2010 funding deficit was $4.5 billion versus $1.5 billion a year earlier. Actuarial assumptions indicate OMERS requires an investment return of 6.5 per cent annually to keep assets and liabilities in balance. That rate of return, combined with temporary contribution increases and benefit reductions, will see the plan return to surplus in 2025. “Based on our asset mix policy and active investment strategy, we believe we can generate average returns of seven per cent to 11 per cent annually over the next five years. Doing so would return the plan to surplus between 2015 and 2020 – five to 10 years ahead of schedule,” says Patrick Crowley, its chief financial officer.

Canada Good Place To Invest

Canadians turning their focus to building up their financial assets would be wise to invest their money at home, says a report from CIBC World Markets Inc. The report notes that with bonds in what looks to be a longer-term bear market, investors will be looking to equities to bulk up their retirement nest eggs with Canadian stocks likely to produce the best returns. Unlike the U.S. and Europe, government debt and subsequent fiscal belt-tightening will not be as a big a drag on the economy in Canada. It says the rising inflation concerns in the emerging markets economies that are threatening to bring about higher interest rates to slow growth are also not as much of a concern here.

New Version Of Portal Offered

Northern Trust has deployed a new version of its multi-faceted web portal, Passport, enhanced to address the specialized needs of institutional investors to quickly access and effectively analyze their investment information. The new passport provides an intuitive experience that eases collaboration and data integration across Northern Trust’s global operating platform for asset servicing and asset management. The new design includes a task-focused layout utilizing ‘drag and drop’ capabilities to customize the user experience; ‘type-ahead’ search functionality for more precise retrieval of data, such as portfolio statements or asset list; and visual graphics to enable clients to quickly locate the templates needed.

Desjardins Keeps It Plain And Simple

Desjardins Financial Security has launched a new employee communication and education program. ‘your way, plain and simple’ is a tool to help plan sponsors measure employee engagement and get employees more involved in their retirement plan. Customized specifically for each employer, the program delivers information that is tailored to the financial needs of their employees and addresses employees' concerns at different life stages. Karrina Dusablon, education director, group retirement division, says "We measure the program's success with continuous engagement level measurements throughout the life of the program. We can then adjust the flow of information and support when necessary. It's important that the employee remain enticed, encouraged, and engaged ‒ what we call the E3 approach ‒ which means that the participant is supported all the way to retirement."

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