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News Archives - November / December 2011

Thursday, December 22, 2011

Small Plans Move To Fixed Income

Small pension sponsors trended away from equities and into fixed income investments while large sponsors shifted toward alternatives such as infrastructure and real estate, says Towers Watson's 'Top 2011 Trends in Pension Plans.' It also saw more Canadian Pension Plan sponsors shifting from Defined Benefit plans to Defined Contribution plans and this trend shows no signs of changing. Its research indicates that just over half (51 per cent) of the private sector DB plan respondents had converted their plans to DC arrangements for current or future employees and that more than half of respondents (56 per cent) believe that the funding crisis will persist for the long-term.


Global Deleveraging Will Continue

Global deleveraging will continue through 2012, says Russell Investments' '2012 Global Outlook,' as "it took three decades for the developed economies to borrow too much money and it will take years to pay it back." However, it forecasts that investors can expect to see modest levels of recovery and growth overall, driven by Asia and the U.S. The report points specifically to four themes that will have the greatest impact on markets and asset returns in 2012. It says global deleveraging will continue to be the backdrop for economics, finance, and politics for 2012; the key risk to improved market sentiment in 2012 is the Euro; a square-root-sign-shaped U.S. economic recovery will continue; and the Chinese/Asian engine of growth will have a modestly, positive effect. A highest-probability scenario is that the two engines of the Chinese and U.S. economies will ignite and drive global growth. Assuming this is the case, and if Europe can stabilize the deepening sovereign debt crisis, this will result in a notable positive for risk assets.

Manulife Acquires Three Properties

Manulife Real Estate has acquired real estate assets totaling $555 million in the core real estate markets of Toronto, ON; San Diego, CA; and the New York, NY, city metropolitan area. "Each of these properties is of the highest quality, are extremely well leased with strong tenant rosters, and in absolutely superb locations ‒ all the key characteristics of successful real estate investments," says Ted Willcocks, global head of asset management. The three properties are Toronto's York Mills Centre, a four-building office complex which was acquired from Ivanhoé Cambridge; Seaview Corporate Center, a four-building office complex in San Diego acquired from Pacific Office Properties and Angelo, Gordon & Co.; and 10 Exchange Place, a 30-storey office tower in Jersey City acquired from an investment group advised by Invesco Real Estate.

CPPIB, Caisse Take Private Placement

GENIVAR Inc. has completed an equity private placement of 6.5 million common shares. Participants in the private placement are the Canada Pension Plan Investment Board and the Caisse de dépôt et placement du Québec. Proceeds will primarily be used to repay debt and for general corporate purposes. Genivar, which was founded in Quebec City, QC, in 1959, is an engineering consultancy serving industries ranging from mining, transportation, energy and power generation to healthcare, communications, chemicals, biotech and food and beverages around the world.

PRPPs Treated Like RRSPs

It will be necessary that plan members clearly understand that their RRSP contribution room is directly affected by employer and member contributions to a Pooled Registered pension plan (PRPP), says Priscilla H. Healy, of Fogler, Rubinoff LLP. Writing in its 'Pension Alert,' she says proposed legislation amending the Income Tax Actand Regulations sets out that PRPPs will be treated for most purposes ‒ including contribution room, immediate vesting, transfer to and from retirement vehicles, and de-accumulation options ‒ like Group RRSPs,. However, members need to be advised that unlike RRSPs, PRPP accounts are locked in. The chief difference between PRPPs and RRSPs seems to be that there are no 'qualified investment' rules for the new vehicle. However, there are rules to ensure investments are diversified and to limit self-dealing.

Bosela Moves To OPTrust

Sandra Bosela is managing director with the OPTrust Private Markets Group. She will help the pension fund manager locate private equity opportunities. Previously, she was president and managing partner of Edgestone Capital Partners.

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Wednesday, December 21, 2011

HOOPP Moves To Immediate Vesting

Members of the Healthcare of Ontario Pension Plan will be able to vest in the plan without going through a two-year waiting period as of July 1, 2012. While provincial legislation on this has not yet come into effect (and there's no details yet on when it will), HOOPP is making this move "because it's the right thing for our members – and because our fully funded position permits us to make the move now," says John Crocker, its president and CEO. The two year vesting rule will apply until July 1, 2012, but all non-vested members who are actively contributing or who join HOOPP on or after July 1, 2012, will be vested immediately. If the government wants the change sooner than July, HOOPP will make the change sooner.

Short-term Sentiment Hurts Long-term

Short-term sentiment has driven markets at the expense of long-term investment thinking during a markedly volatile 2011, says HSBC Global Asset Management. But this has created what it believes to be a potentially attractive set of investment opportunities for 2012 for those with a longer-term perspective. In its global outlook for 2012, it argues that frequent rotations in sentiment in markets reflect the fact that officials have been applying a bandage approach to addressing fundamental problems ‒ acting only when faced with severe market pressure and only then delivering just enough to stem the tide in the short run. Investors are, therefore, presently focused on whether European policymakers will be able to deliver a comprehensive long-term solution to deal with the eurozone crisis. Given the risks, many investors have flocked to 'safe havens' this year, forcing the gold price to record highs and government bond yields to the lowest levels for a generation. This puts some government bonds in a position where returns may be negative when inflation is taken into account, the report notes. On this basis, its clear long-term view is that equities offer the best value in 2012 even though short-term performance is likely to remain volatile. Many companies are in solid financial shape, having applied their own austerity measures. Balance sheet strength in turn supports the outlook for ongoing growth in dividends paid out to investors.

PRPPs Need Proper Analysis

Only if time is spent upfront in doing proper analysis will Pooled Registered Pension Plans (PRPPs) stand any chance in being an integral part of the Canadian retirement wealth accumulation landscape, says Paul Owens, former CEO of the CAAT Pension Plan. Writing in 'AlternativChronicle' (www. AlternativChronicle.com), he says there are several questions Canadians and retirement income policy-makers must address in order to determine whether PRPPs are the proper tool. Among these questions are why is the proportion of taxpayers contributing to RRSPs decreasing; will PRPPs result in a growth in retirement wealth accumulation coverage or will they simply shift funds from pension plans, RRSPs, and TSFA to what is being portrayed as a low-cost, professionally managed investment vehicle; and how will 'low cost investment management' be defined and monitored. He says the answers to those questions will go a long way in determining the type of retirement savings environment that will dominate the Canadian markets over the next 25 years.

Discount Rates Conservative

Defined Benefit plan sponsors are being more conservative when setting the discount rate with the high-end of the range being more than 65 basis points (bps) lower than last year and the low end falling only 47 bps, says Jonathan Waite, director, investment management advice and chief actuary for SEI's institutional group. Its annual research study on pension accounting indicates there was a growing consensus in selecting discount rates last year. The research shows a 140 basis point range of discount rates used for 2010 pension disclosure, a 21 basis point decrease in range from 2009. Based on this analysis, and assuming no change during December 2011, plans with a December 31 measurement date should consider decreasing their discount rates, it says.

Wellness Offers Financial Gains

Small businesses should be particularly attracted to the financial gains that can be realized through a well thought-out health and wellness strategy, says a Connex 'NewsLinks.' It says in small businesses the extra costs of doing business that are related to absenteeism, low productivity, and other chronic disease and health-related costs cannot be as easily absorbed as they are in larger organizations. However, although there are tangible benefits, small businesses often assume that a wellness program is too expensive to adopt and forego the idea altogether. Some become resourceful and seek help from public health units and not-for-profit organizations to develop their wellness strategy. While this is one approach, there are limited resources for employee wellness within public health units and this can hold small businesses back from achieving the maximum gain. However, successful and measurable health and wellness need not cost a fortune, it says. Simple, low cost programs combined with a commitment to track some basic measurements are all that is required. Fruit baskets, internal activity challenges, self-screening digital blood pressure programs, healthy recipe contests, and other activities can produce culture and behaviour changes and deliver measurable results.

Caisse Invests In TELECON

Capital régional et coopératif Desjardins and the Caisse de dépôt et placement du Québec have invested $60 million in TELECON Group, a Québec pioneer in external and internal telecommunication networks. This investment, under which Capital régional et coopératif Desjardins and the Caisse become the principal shareholders of TELECON Group, enables the company to accelerate its growth plan. This transaction arises from the agreement entered into in 2010 between Desjardins and the Caisse to support successful Québec companies in executing their projects. To date, close to $160 million has been jointly invested by the partners.

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Tuesday, December 20, 2011

Investors Will Return To U.S. Equities

The U.S economy has outperformed that of most developed nations and Patrick Kaser, managing director and portfolio manager with Brandywine Global Investment Management, LLC, expects this to result in investors turning back to U.S. equities next year. Speaking at the Legg Mason Canada Inc. 'Global Investment Forum' on the 'Case for U.S. Equities,' he said an opportunity may be setting up to invest in U.S. equities. Markets are showing an intriguing correlation between stock and index movements with the current period yielding the highest correction since the inception of the S&P 500. In fact, the correlation is higher than the Great Depression, the rampant inflation of the 1970s, the stock market crash of 1987, and even the most recent financial crisis. He said this suggests 80 per cent of a stock's movement can be explained by a stock market index rallying or declining with only 20 per cent due to unique fundamental characteristics of a company. Another opportunity may result from the fact equity managers fear being left behind if a rally transpires.

'Glimmer Of Hope For 2013'

Next year "will still be a difficult year on a global economic and financial scale, but a glimmer of hope is emerging for 2013," says François Dupuis, vice-president and chief economist of the Desjardins Group economic studies team. In 2011, the sovereign debt crisis in the euro zone worsened until it eclipsed all other large financial, economic, and political problems elsewhere in the world. However, as the economic situation deteriorates rapidly in Europe, Canada will take slow but steady steps forward. Still, the U.S. economy's weakness will give Canadian exports some trouble. As well, international exports of goods and services will be the Achilles heel for Québec and Ontario, given the weak U.S. economy, the euro zone recession, and the precarious situation elsewhere in the world.

Lower Fees Possible

Europe's intermediary distributors of investment funds ‒ as well as their clients ‒ can expect roll outs of new products and potentially lower fees as investment managers fight to attract and retain assets in a challenging global investment market, says Greenwich Associates' '2011 European Intermediary Distribution' study. It reveals that investment managers are feeling the need to revise their product offerings and, in some cases, their fee structures, in an effort to remain competitive and relevant to customers at a time when market volatility is driving fund outflows and prompting many retail investors to hold onto their cash. It also found distributors expect to see increased asset flows into alternative and thematic funds and some gearing up for a rapid pickup in exchange-traded fund (ETF) sales.

Provinces Can Increase Access To Retirement Plans

Provincial governments have an opportunity to help increase access to workplace retirement savings plans for millions of Canadians, says Sue Reibel, senior vice-president of Manulife Financial's group retirement solutions. "The federal government's PRPP legislation is a big step towards improving the options many Canadians have to save for retirement," she says.  However, since pension and employment standards fall largely into provincial jurisdiction, each provincial government will need to determine how PRPPs are implemented and managed. "The decisions provincial governments make about how to implement and manage PRPPs within their own jurisdiction will be just as important as the details of the federal government's legislation," says Reibel.

Guay Heading Standard Life

Charles Guay will become president and chief executive officer of Standard Life Canada. He joins it from National Bank of Canada where he is currently senior vice-president ‒ strategies, marketing, and investment solutions, wealth management; and president and chief executive officer of National Bank Securities. He will replace Joseph Iannicelli who announced in May 2011 that he is stepping down as CEO as of February 2012.

Wellness Implementation Discussed

'Real Life Employer Journeys: Designing & Implementing a Successful Wellness Program' is the topic of the next Employee Assistance Program Association of Toronto (EAPAT) session. It features Jo-Anne Bassett, occupational health nurse at Hydro One, and Tina Laughlan, wellness and safety consultant at American Express Canada. They will share their own successes, challenges, and perspectives in building a winning business case in support of wellness, vendor partner selection, and what activities worked and what didn't. It takes place January 19 in Toronto, ON. For more information, visit www.eapat.org

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Monday, December 19, 2011

CFIB Against CPP Doubling

The Canadian Federation of Independent Business (CFIB) is urging many governments to drop their calls for an increase to Canada Pension Plan (CPP) premiums. "With ongoing hikes in employment insurance premiums and many workers' compensation levies as well as provincial minimum wages, small employers cannot afford another increase in mandatory payroll taxes," says Dan Kelly, CFIB's senior vice-president of legislative affairs. Its research shows that the Canadian Labour Congress proposal to double CPP benefits would kill 1.2 million person years of employment in the short term. To address the need for additional retirement savings options for small business owners, the self-employed and their employees, CFIB supports federal legislation for Pooled Registered Pension Plans (PRPPs). "This new vehicle should be allowed to work before any contemplation is given to other costly approaches," Kelly says.

BCIMC Joins Sino-Forest Lawsuit

The British Columbia Investment Management Corp. (BCIMC) has joined a proposed class action lawsuit seeking millions in compensation from Sino-Forest Corp., its management, directors, auditors, and a number of Bay Street firms that helped the forestry firm raise capital from investors. BCIMC is the largest single investor to commence legal action against Sino-Forest with about 1.5 million shares. Sino-Forest, which was once the most valuable forestry company listed on the Toronto Stock Exchange, had a market value of more than $6 billion before fraud allegations caused the stock to collapse.

Gold Pullback Healthy

Gold will continue rising in value over the coming years for one reason: the primary buyers are purchasing physical gold for wealth preservation and there simply isn't enough physical gold to satisfy their appetites, says Nick Barisheff, president and CEO of Bullion Management Group Inc. In the article 'Gold's Healthy Pullbacks On Long Road To $10,000' at http://bpmmagazine.com/articles/GoldsHealthyPullbacks.html, he says the recent pullback was by no means the bursting of the gold bubble. "Bubbles are characterized by months of extended exuberance and consistently higher highs ‒ not the $200 and $300 corrections we've seen in the past few weeks. Such pullbacks are healthy as they indicate gold has much, much farther to go," he says.

Submission Deadline Nears

The deadline for submissions for the '2011 AIMA Canada Research Award' isDecember 31. The award, now in its seventh year, recognizes outstanding Canadian research pertaining to any aspect of alternative investments. It is open to academics, students, and practitioners who are either residents of Canada or Canadian citizens living abroad. Topics may include, but are not limited to, investment strategy, regulation, trading, risk management, risk measurement, and manager selection. For more information, www.aima-canada.org


Wellness Initiatives Examined

The 'Canadian Health and Wellness Innovations Conference' will offer innovative strategies for wellness initiatives as well as best practices for managing health and welfare plan benefits. The International Foundation of Employee Benefit Plans event takes place February 5 to 8 in Savannah, GA. For more information, visit www.ifebp.org/canadahealth

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Friday, December 16, 2011

PRPP Design Flawed

The federal government's design for Pooled Registered Pension Plans (PRPPs) has flaws that need fixing to meet the needs of Canadians without a workplace pension plan, says a report by the C.D. Howe Institute. In 'Saving Pooled Registered Pension Plans: It's Up To the Provinces,' authors Keith Ambachtsheer, director of the Rotman International Centre for Pension Management, University of Toronto; and Edward Waitzer, professor at Osgoode Hall Law School and the Schulich School of Business, director of the Hennick Centre for Business and Law, York University, and senior partner of Stikeman Elliott LLP; say that in its current form, the design blueprint will fall short of its primary objective ‒ to ensure that the majority of Canadians who do not have a workplace pension will have access to a well-regulated, low-cost, private-sector capital accumulation plan. In its current form, the design for PRPPs does not address key policy challenges posed by Canada's pension coverage problem, say the authors. While the goal is maximizing PRPP participation, voluntary employer PRPP participation, as envisioned in the bill, will result in minimal actual PRPP uptake. As well, a well-designed default option design for participants is crucial, yet the design is virtually silent on this important question. Finally, fiduciary oversight is also essential, but the bill leaves oversight to current, cumbersome regulatory processes.

HR Can Contribute

Looking ahead, organizations should consider where they are in the HR transformation process so that they can develop and hone HR capabilities that enable business strategy rather than just supporting the business, says the Deloitte report 'Global Business Driven HR Transformation: The Journey Continues.' It discusses critical HR transformation areas including global HR operating model and governance; the impact of cloud, social, mobile, and workforce analytics on HR; and HR shared services and outsourcing. "While HR transformation is still a developing area that most companies have yet to achieve, HR can help to enable organizations to address today's business imperatives and prepare for tomorrow's," says Jason Geller, principal, Deloitte Consulting LLP and global and U.S. human resources. "From growth to globalization, cost pressure reduction to talent attraction, risk management to merger and acquisition support, transforming how HR works in your organization can contribute invaluably."

Euro Unlikely To Collapse

If the crisis in Europe worsens, foreign investors would likely be unable to liquidate their euro-denominated holdings quickly, says Amundi's December issue of 'Cross Asset Investment Strategy.' It asks the question 'has the euro become a currency that is too big to fail?' However, barring an extreme scenario in which all the countries in the Eurozone return to their national currencies, the Euro is unlikely to collapse. The euro (like the US dollar) is, in fact, a currency that international investors cannot suddenly abandon because no other financial market has the capacity to quickly absorb the demand for assets which would result. While the U.S. dollar remains the dominant currency of the international monetary system, the Fed's propensity for money printing is prompting investors to question the status of the greenback as a reserve currency. The euro – the second global currency of importance in international trade – ended up becoming the preferred investment currency by default. While the pressure on the euro could certainly increase in the near term, especially if the sovereign debt crisis worsens, it says, the sell pressure on the single currency will be presumably limited.


Widget Shows Personal Rate Of Return

Great-West Life group retirement and savings plan members can now access a personal rate of return widget to help assess their progress towards achieving retirement income readiness. The latest enhancement to 'GRS Access' – the company's secure, transactional website for retirement plan members – this new widget (a kind of 'mini-app') provides plan members with a quick picture of their personal rate of return, from the date of their first contribution to their group retirement and savings plan(s), as well as one-, three-, five- and 10-year time periods. It calculates plan members' personal rate of return using the internal rate of return method (also referred to as the dollar-weighted return). The distinguishing characteristic of the calculation is that, rather than 'estimating' a rate of return based on the starting and ending values and total deposits and withdrawals made, it takes into account the timing and amount of such deposits and withdrawals, factors that do have an effect on the rate of return. This provides members with a personal rate of return that reflects their actual investment behaviour.

Canadians More Optimistic About Markets

While CFA members from across the globe remain pessimistic about the prospects for capital markets in the coming year, Canadian CFA members are markedly more positive on Canada's economic outlook, says the 'CFA Institute 2012 Global Market Sentiment Survey.' It says comparing Canadian predictions for domestic and global markets, 88 per cent predict the local economy will expand or stay the same in 2012 while only 11 per cent predict local economic contraction. At the same time 32 per cent predict contraction for the wider global economy. Though Canadians are optimistic about the local economy, 57 per cent of Canadian respondents cited weak economic conditions as the biggest potential risk to local capital markets in 2012. As well, globally, 59 per cent of respondents predict that asset classes other than equities will be top performers in 2012. This number was even higher among Canadian respondents, at 64 per cent. However, U.S. respondents are more bullish, with a majority predicting global equity markets to be top performers.

Sun Life Offering New Drug Plan

Sun Life Financial will work with Reformulary Group Incorporated to develop a new drug plan for employers. Reformulary Group has developed a formulary designed to deliver the most effective medications for the best value for employer-sponsored drug plans. The list is being developed based on advice from an independent expert committee, which evaluates prescription drugs on their clinical and cost-effectiveness. By spring 2012, plan sponsors who have their group benefits with Sun Life will have access to this drug plan that provides comprehensive reimbursement for prescription drugs, many at lower prices.

Real Estate Fund Venture Launched

Fiera Sceptre Inc. and Axia Investments Inc. have created a joint venture to offer national real estate fund vehicles and segregated account management services to investors. Fiera Properties Limited will be headed by Stuart Lazier, who has been appointed president and chief executive officer. Catherine Ann Marshall, who has close to 20 years of experience in the real estate industry, has also joined the company as vice-president.

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Thursday, December 15, 2011

PRPP Legislative Changes Proposed

The federal government has released for consultation a package of draft legislative proposals for changes to the Income Tax Act and the Income Tax Regulations to accommodate Pooled Registered Pension Plans (PRPPs), says Mark Newton, of Heenan Blaikie LLP. The proposed tax rules for PRPPs will apply to both federally and provincially regulated PRPPs and will operate alongside the Pooled Registered Pension Plans Act. For example, they set out that there will be no employer-employee relationship required for participation in a PRPP. As well, contributions to a PRPP made by employers, employees, and self-employed individuals will generally be deductible for tax purposes. All PRPP contributions for a year made by and on behalf of a PRPP member will be limited to the member's available RRSP contribution limit for the year. PRPPs will also have no "qualified investment." Instead, some general rules will apply to ensure that investments are reasonably diversified and do not present risks of self-dealing.

Plan Would Trim Pensions

Nova Scotia politicians would see their pensions trimmed under legislation being proposed by the provincial government. The proposed legislation is the same as made in a report from a three-member independent panel appointed by the legislature's speaker. Currently, provincial politicians earn a pension of five per cent of their annual salary for every year they serve, up to a maximum of 75 per cent after 15 years. If passed, the accrual rate would fall to 3.5 per cent over 20 years, which would drop the maximum pension a politician can earn to 70 per cent of their salary.

Effort Needed To Improve Pensions

The "next big thing" in social policy will be ensuring retirees have enough to live on, says John Crocker, outgoing president and CEO of the Healthcare of Ontario Pension Plan. Crocker, who is ending his 30-year career in pension investments and 10-year term as HOOPP CEO on December 31, says efforts should be made to improve workplace pension plans by boosting the number of Defined Benefit plans, rather than focusing on introducing cheaper alternatives. "With pensions, the less you pay in, the less you get out – it's a simple as that," he says. In Australia, he says, a nation-wide switch away from DB plans has led to widespread senior poverty. "Half of Australian seniors live below the poverty line, and two-thirds run out of pension income by age 75. Is that what we want here?" he asks. "When you're designing a retirement plan, you should start by looking at what you want to get out of it – what you need for an adequate retirement. That's the beauty of DB. You know in advance what you'll get out of it. Not many people in other types of plans realize that you need to save $500,000 to provide yourself with an annual pension of $25,000, but that's the reality. We owe it to people to help them get there – we need to make workplace pensions better, not worse."

Impact Investment In Infancy

The market for impact investing remains small, but it's growing, says a report from J.P. Morgan and the Global Impact Investing Network. It found that investors believe the niche is "in its infancy and growing." They indicate that they are planning to invest almost US$4 billion over the next year, and expect that impact investments will come to comprise five to 10 per cent of portfolios over the next 10 years, ranging from five per cent for institutions to 10 per cent for high net worth investors. Impact investment is investing in projects that aim to make a positive social impact along with a financial return.

CPP Contribution Rules Changing

Significant changes to the Canada Pension Plan (CPP) this January will affect both employees and self-employed workers ages 60 to 70.  Under the changes, all workers ages 60 to 65 will be required to make CPP contributions, even if they are receiving a CPP or QPP retirement pension. Workers who are 65 to 70 years of age, and who are receiving a CPP or QPP retirement pension, will be required to contribute unless they have elected to stop their CPP contributions.

Banyan Improves Access

Banyan Work Health Solutions Inc. has launched a new referral program for Sun Life Financial. This arrangement provides Sun Life's existing absence and disability management group benefits clients with access to an occupational claims management service that will further enhance their plans. Some of the services offered will include supporting and facilitating an early, safe, and sustainable return-to-work; providing support to ensure the employee limits time from work as a result of a work related injury/illness; and reviewing and filing accident report forms with Workers' Compensation Boards (WCB) on the employer's behalf, and following up with the WCBs to ensure proper and timely management of the claim file.

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Wednesday, December 14, 2011

Pension Experts Call For Hike In CPP

A group of leading experts on pension reform in Canada is urging Canada's finance ministers to commit to expanding the Canada Pension Plan as the best means available to provide retirement security for Canadians. "We urge the finance ministers to expand the Canada Pension Plan. The CPP offers an already existing administrative structure and framework to improve retirement benefits for working Canadians at relatively low cost." The six pension experts who have signed the letter are: Bob Baldwin, an expert adviser for the Ontario Expert Commission on Pensions; Bernard Dussault, former chief actuary of the Canada Pension Plan; Keith Horner, a pension consultant and a federal former Finance Department official; Jonathan Rhys Kesselman, who holds the Canada Research Chair in Public Finance at Simon Fraser University; Monica Townson, an economic consultant working in the field of social policy who served on the Pension Commission of Ontario; and Michael Wolfson,  Canada Research Chair in Population Health Modelling/Populomics at the University of Ottawa. The six warn that, "A growing body of research indicates that many Canadians likely have inadequate savings to maintain standards of living in retirement" and "prompt action is warranted."

Pension Obligations More Than Reported

The federal government's unfunded liabilities for its employee pension plans total $227 billion, far more than reported, says a report by the C.D. Howe Institute. In 'Ottawa's Pension Gap: The Growing and Under-reported Cost of Federal Employee Pensions,' authors Alexandre Laurin and William Robson find that, using fair-value accounting like private sector plans which value assets and liabilities using current market prices and interest rates, Ottawa's unfunded employee pension obligations are $80 billion more than reported in the Public Accounts. Ottawa arrives at the reported figure for its obligations, says Robson, by discounting the future payments using notional interest rates. Both of the interest rates used are well above anything currently available on any asset that matches the plans' obligations. The authors recommend three types of reforms to address the problem: a revamping of the benefit structure of public sector, Defined Benefit plans; increasing the tax-deferred saving room available to the rest of the population; and ensuring that actual money is flowing into the public sector plans to match their pay-out promises.

Low Growth Expected

Global investors are expecting another year of low growth and low inflation, says a BofA Merrill Lynch's fund manager survey. The survey of institutional investors indicates that almost two-thirds predict 2012 will be a year of below-trend growth and below-trend inflation. It says that investors are responding to the weak outlook with a preference for U.S. and emerging market equities, while the negative stance towards the eurozone hardens. "Investors are slightly more optimistic about equities but retain a defensive approach, so that means reduced European exposure and a preference for counter-cyclical stocks," says Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research.

Market Value Of Funds Slips

The market value of Canadian employer-sponsored pension funds totalled $1.08 trillion at the end of the second quarter, down 0.1 per cent from the previous quarter, says Statistics Canada. Pension fund investments in bonds increased in value 2.2 per cent in the second quarter to $384.7 billion, but this gain was offset by a 3.4 per cent drop in the value of stocks. Revenues in the second quarter declined eight per cent to $27.5 billion, while expenditures rose 32.9 per cent to $17.1 billion as a result of increased losses on the sale of securities. Employer and employee contributions in the second quarter increased 7.5 per cent to $11.1 billion. Benefits paid to retirees increased 5.4 per cent to $10.8 billion.

Managers Need To Make Adjustments

Investment managers will have to "make adjustments" to meet investors' demands if they are to capitalize on increased appetite for real estate when new regulations – such as the Alternative Investment Fund Managers (AIFM) directive – come into play, says a study from State Street. Those fund managers to survive recent waves of consolidation will also have to decide whether to invest in new reporting frameworks demanded by investors. It says the alternatives are to outsource reporting or to keep administrative costs down by teaming up with other fund managers to compete for business. The report also identified a divergence of interest and influence that could, in future, create friction among investors in shared commingled real estate vehicles. Large institutional investors coming to a fund with seed capital are likely to negotiate lower fees than subsequent investors, says the report.

Alternative Alpha Will Get Harder To Find

Private equity and hedge funds will find it harder to beat the market going forward than they have in the past, says a study by J.P. Morgan Asset Management. The study projects that median returns on PE during the next 10 to 15 years will match that of a midcap long-only stock portfolio, while the median hedge fund will underperform that portfolio. During the next decade and a half, the study projects that returns for such equities will return to their historical norms of 10 per cent. Investors may have to do even more due diligence because the study also finds that the dispersion of manager returns is significantly wider in the alternative strategies arena than in traditional asset classes.

EZClaim Comes To iPhone

Equitable Life of Canada has introduced a health and dental claims mobile app for the iPhone and iPad2. EZClaim satisfies the growing use of smartphones and tablets. A Canadian Wireless Telecommunications Association study shows 61 per cent of male smartphone owners and 55 per cent of female smartphone owners have downloaded a mobile app. Equitable had previously released a BlackBerry smartphone mobile app and online capabilities for electronic claims submission.

Pension Fund Adds To RONA Holdings

The Caisse de dépôt et placement du Québec has acquired ownership and control of more than two million common shares of RONA inc. This represents approximately 1.53 per cent of RONA's currently outstanding common shares. Prior to this acquisition, the Caisse held 11.3 million common shares of RONA. Following the acquisition, the number of common shares held by the Caisse will be 13.3 million or 10.17 per cent of the common shares outstanding.

Ontario Introduces Caregiver Leave

The Ontario government has introduced Bill 30, the 'Family Caregiver Leave Act' (Employment Standards Amendment), 2011. A McCarthy Tetrault 'e-Alert' says, if passed, the bill would amend the 'Employment Standards Act, 2000'to permit employees to take an unpaid leave of absence of up to eight weeks in order to provide care or support to a sick family member. The proposed family caregiver leave is drafted in very similar language to other unpaid leaves of absence recently passed by the government.

Commitment To Chinese Venture Increased

Goodman Group and the Canada Pension Plan Investment Board (CPPIB) have increased their equity commitment in the 80/20 joint venture, Goodman China Logistics Holding. The additional capital increases the combined equity commitment to the GCLH joint venture to a total of $500 million, of which 80 per cent is represented by CPPIB. The joint venture was initially formed by Goodman and CPPIB in August 2009 to own and develop logistics assets in Mainland China. In addition, the joint venture has signed a five-year facility with Credit Agricole Corporate and Investment Bank and ING Bank N.V. Both the increased equity commitment and bank facility will be used to drive new opportunities in mainland China.

Retirement Dream Differs From Reality

Retired Canadians are living lifestyles that are worlds apart from how nearly retired Canadians think they'll be spending their retirement years, says the '2011 RBC Retirement Myths & Realities Poll.' It found almost three-quarters (74 per cent) of the nearly retired (age 50 and over) think they'll spend their days travelling ‒ an increase of two per cent from last year. In reality, only 58 per cent of actual retirees spend their time away from home, down one per cent from 2010. As for becoming ' snowbirds' (wintering in the south and spending warmer weather months in Canada), the number of nearly retired with this expectation has risen to 30 per cent from 28 per cent. In reality, the number of retirees who actually flock south each winter has declined, dropping to 14 per cent this year from 17 per cent in 2010.  

Tsagarelis Joins Core Equity Team

John Tsagarelis (CFA) is portfolio manager for the newly-formed Canadian core equity team at Manulife Asset Management. Previously, he was a consultant at Hillsdale Investment Management and also spent time as a senior portfolio manager at CPP Investment Board where he co-managed a global long/short real return strategy.

Sneller Focuses On Opportunities

Richard Sneller, of Baillie Gifford, will discuss the trajectory and implications of China's economic development, focusing on some of the popular misconceptions as well as the resulting opportunities for investors at the CPBI Ontario region's '7th Annual Pension Investment Forecast.' Joining him at the 'Venturing Into Uncharted Territories' event are Eric Bushnell, of Signature Global Advisors (CI Investments Inc.), who will discuss the recent behaviour of global capital markets; Jesper Alsing, ValueInvest Asset Management (Pier 21 Asset Management), who will comment on the benefits of fundamental research and discipline when searching for real opportunities;  and Paul Summerville, of the Centre for Global Studies (University of Victoria); who will offer a vision of how the unfolding economic, political, and cultural forces may impact the global capital markets in 2012 and beyond. It takes place January 17 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca/

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Tuesday, December 13, 2011

Sun Life Closes Some U.S. Product Sales

Sun Life Financial Inc. will close its domestic U.S. variable annuity and individual life products to new sales effective December 30. Dean A. Connor, president and chief executive officer, says the decision to discontinue sales in these two lines of business is based on unfavourable product economics which, due to ongoing shifts in capital markets and regulatory requirements, no longer enhance shareholder value. Instead, to achieve growth in the U.S., it will focus on increasing sales in its employee benefits business and will expand its presence in the voluntary benefits segment. The decision to stop selling variable annuity and individual life products in the U.S. will not impact existing customers and their policies. The company will continue to provide service to its policyholders, while focusing on the profitability, capital efficiency, and risk management of the in-force business.

Online Service Added To EAP

The Employee Assistance Program Shepell•fgi brand has launched an online service where users can now confidentially identify their concerns, learn about suggested EAP support services, and choose both the service and how it will be delivered to suit their needs, lifestyle, and learning preference. Available through its workhealthlife.com site, Online Access allows users to learn more about EAP services and allows them to request help on a range of issues including health, family, work, financial, relationship, and legal support. With just a few clicks, the EAP support service request is initiated and completed without the need to speak with a representative. It also assists in identifying emergency issues and immediately and confidentially redirects users to a care access centre for prompt support. Manager-accessed services and training remain available offline.

AGF Launches EM Debt Mandate

AGF Investments Inc. has launched an emerging markets debt mandate to provide institutional investors with further access to the long-term growth potential of emerging markets. The mandate will invest in the three main emerging market bond categories – EM local rates (EM sovereign), EM external debt (EM sovereign), and EM corporate credit – plus actively managed EM currency. Active currency management is a key focus and this approach offers investors a way to participate in and benefit from emerging market currency appreciation.

Desjardins Program Now Mobile

Desjardins Financial Security's communication and education program 'your way, plain and simple' is now mobile. Accessible from any smart phone or computer, it enables plan members to see if they're saving enough for retirement. It also demonstrates how current spending habits impact the ability to save for the future.For those who are not on target, an easy to apply action plan is displayed that helps adjust current spending habits in order to achieve goals. This tool can also be shared on social media so anyone can try it out.

Chapter Takes In Hockey Game

The London Chapter of the CPBI Ontario region is taking in a hockey game as its '4th Annual Networking Event.' Featuring a London Knights versus Kitchener Rangers Ontario Hockey League game, the evening of sport and networking includes a seat in a premium suite for the game, appetizers and snacks, and a complementary beverage. CPBI members and non-members are welcome to attend. It takes place January 25 in London, ON. For more information, visit http://www.cpbi-icra.ca/

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Monday, December 12, 2011

Sun Life Offers Longevity Solution

Sun Life Financial has introduced a solution designed to lessen life expectancy risk for companies that offer Defined Benefit pension plans to employees. Longevity insurance provides plan sponsors with protection from the extra pension costs that arise if their plan members live longer than expected ‒ something that is a growing phenomenon. "From a company perspective, longevity insurance reduces cash and earnings volatility, allowing management to focus its time and attention on running its core business," says Brent Simmons, senior managing director, Defined Benefit solutions, group retirement services. "From a public policy and pensioner perspective, risk is transferred to a highly regulated insurance company, so plan members receive additional protection for their pensions." The introduction of longevity insurance completes a suite of products and services it offers to de-risk pension plans for employers. Other solutions include annuity buy-outs, annuity buy-ins, and customized liability-driven investment (LDI) portfolios.

More Plans Adopting LDI

The number of pension plans adopting liability-driven investing (LDI) strategies has increased significantly since last year, says SEI's annual 'Global Quick Poll.' It found 63 per cent of surveyed pension executives now employ an LDI investment approach – the highest outcome in the poll's five year history and more than triple that of 2007 (20 per cent). "The ongoing funded status volatility of pensions has placed increased pressure on organizations to make investment decisions that match the assets to the plan's liabilities," says Jonathan Waite, director, investment management advice, and chief actuary of its institutional group. "The volatility has also created a significant need for active LDI and de-risking strategies that can regularly monitor market changes and key trigger points." The global poll collected information from pension executives in the United States, Canada, Netherlands, and United Kingdom.

Rogers And Bell Acquire MLSE

The Ontario Teachers' Pension Plan will sell its 79.53 per cent stake in Maple Leaf Sports and Entertainment (MLSE) to Rogers Communications Inc. and BCE Inc.. Earlier this month, Teachers, one of the country's biggest pension plans with assets of more than $107.5 billion, indicated it was pulling its stake off the market. MLSE owns the Toronto Maple Leafs NHL team, the Raptors of the NBA, Toronto FC of Major League Soccer, the Marlies of the American Hockey League, the Air Canada Centre, two speciality television channels, and condominium development Maple Leaf Square.

Gelsheimer Developing Solutions

Philip Gelsheimer is vice-president, investment solutions, at BNP Paribas Investment Partners. He has more than 20 years of investment industry experience and has been a member of its Canadian team for more than 12 years. In this new role, he will develop investment solutions for Canadian institutional clients and distribution partners.

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Friday, December 9, 2011

Canadians Put Same Into RRSPs

More than two-thirds of Canadians will be contributing the same amount or more to their RRSP this year versus last, says a poll by BMO Financial Group. Despite a challenging market environment in 2011, more than one-third (37 per cent) of respondents have made or are planning on making a contribution to their and/or their spouse's RRSP before the February 29, 2012, deadline. Of those who are not making a contribution this year or are contributing less than last year, 38 per cent said they have other expenses, while 20 per cent said they do not have enough money to match or exceed last year's contribution. Last year, Canadians contributed an average of $4,700 to their RRSPs. The survey also found that 71 per cent of Canadians are concerned about the performance of their RRSP, given the current state of the economy and volatility of the financial markets.

Global Equity Tops Searches

Global equity, global balanced, and emerging markets were the market segments enjoying the strongest search trends by institutional clients in November, says eVestment Alliance's investment products database. This reflects a trend from the first nine months of the year as these three segments pulled in net flows of $30 billion, $40 billion, and $33 billion, respectively. Fixed income had inflows, led by global fixed income, at $33.5 billion and U.S. fixed income at $20 billion. Amid the economic uncertainties surrounding Europe, EAFE fixed income pulled in only $1.7 billion in net flows.

Website, Contact Centre Open

Express Scripts Canada's Online Prescription Manager Website and a Member Contact Centre are now available. Both are intended to help facilitate delivery to plan members of its expanded pharmacy benefit management service and home delivery of maintenance prescription medications through its pharmacy. They allow plan members to take an active role in the management of their prescription drug benefit, as well as for their covered family members.

High Yield Bonds Tempt Investors

High yield bonds are becoming a very tempting proposition to a wide range of institutional investors as they try to pacify their portfolio volatility, says a report from Clear Path Analysis. The 'Investing in High Yield Bonds' report says the market shake up has caused a move away from traditional government bonds as investors are keen to look at alternative ways to spread their risk. It also reveals that the current global economic situation is driving the trend in increasing the popularity of alternative asset classes. Current conditions have meant that Treasury bonds remain low whereas high yield bonds have climbed from their sub seven per cent yield lows and the outlook for this market investment is once again beginning to look promising for new investors.

Caisse Part Of ALT Investment

The Caisse de depot et placement du Quebec is part of group of major private investors and institutional investors involved with Groupe Germain's plans to add eight Canadian hotels under the banner ALT. "This injection of more than $80 million in equity capital allows us to continue our expansion in Canada," say Christiane and Jean-Yves Germain. The group also includes La Capitale Financial Group and Industrial Alliance.


TD Strategy Reaches Milestone


TD Low Volatility Equity strategies managed by TD Asset Management Inc. (TDAM) have achieved a major milestone, attracting more than $1 billion in assets from investors. Robin Lacey, vice-chair, TDAM, says that "The TD Low Volatility Equity strategies enable investors to participate in the full return potential of Canadian and international equity markets with as much as 30 per cent less risk." To see the full announcement, visit http://www.bpmmagazine.com/announcement_TD.html

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Thursday, December 8, 2011

Failure To Hike CPP Could Be Costly

Failing to adequately address Canada's growing pension deficit could end up costing the federal government in the future, says a report from the Canadian Centre for Policy Alternatives. It says failing to enrich the Canada Pension Plan will result in more retiring Canadians falling into poverty and requiring government assistance under the guaranteed income supplement program. The estimate is that one-third of the baby boom generation will not have enough income for retirement so they may be claiming the guaranteed income supplement which comes out of government tax revenues. In place of expanding the CPP, Ottawa last month tabled legislation for Pooled Registered Pension Plans which would allow small firms to offer their employees a voluntary vehicle to build up pension equity. However, Monica Townson, a pension expert with the centre, says the PRPPs don't fit any of the requirements of a pension plan. They don't guarantee benefits since they depend on market performance, don't adjust for inflation, and are completely voluntary, meaning employers don't have to contribute and employees don't have to participate.
 

Director Compensation Rises Significantly

Compensation for directors of publicly traded Canadian corporations rose significantly between 2008 and 2010, says the Conference Board of Canada's '2011 Canadian Directors' Compensation and Board Practices'report. And it expects this trend to continue. The average total compensation paid to outside directors for their regular board service is $112,651 per individual, a substantial increase from $84,452 in 2008. Eighty per cent of firms have adjusted director compensation since 2008. Directors are expected to increase the time commitment to their duties, assume additional responsibilities for oversight, and take on greater personal liability. If workloads and expectations continue to rise, it is almost certain that director compensation will also continue to escalate at a rapid rate. The survey shows that large companies (defined as firms with more than $2 billion in annual revenue) and medium-sized firms ($150 million to $2 billion in revenue) paid their directors similar amounts. Total average compensation in large firms was $128,171; directors of medium-sized firms averaged $124,851. Small firms (under $150 million in revenue) recorded an average of $70,648 in total compensation per director.

AIMA Canada Looks At Benchmarks

John Ilkiw, of Pharos Consulting and formerly senior vice-president of the CPP Investment Board, and Bill Moriarty, CEO of UTAM, were featured speakers at the first in a series of luncheon events hosted by AIMA Canada entitled 'Benchmarks: Cornerstones of Millstones?' The session focused on new ideas emerging about benchmarks, including alternatives, and how they can be expanded or limited to meet financial objectives. Ilkiw discussed the evolution and application of the Reference Portfolio concept, noting that "long-term success depends on distinguishing between market and active risk rewards." Moriarty discussed the bridge between the Reference Portfolio and the U.S. Endowment Model from a Canadian perspective.  He concluded by observing that the current environment will "likely present challenges for those expecting portfolios comprised solely of traditional assets to deliver returns matching their current expectations."

AGF Earns Eagle Award

AGF Management Limited has earned the Eagle Investment Systems LLC 'Innovation Award,' an honour given to clients for achievement in product innovation. The award was made at the 2011 Eagle Client Conference. AGF won the award due to its creative use of the Eagle platform including the generation of more than 500 fund fact sheets to support the Ontario Securities Commission's point of sale regulations across all of its multi-class funds. These documents are generated and automatically pushed to the AGF website using the Eagle platform. AGF provides investment management services to advisor, institutional, and high-net-worth clients from its offices across Canada and subsidiaries around the world. It has approximately $50 billion in assets under management.

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Wednesday, December 7, 2011

PRT Possible DB Solution

Ailing Defined Benefit pension plans could be rescued by insured pension risk transfer (PRT) solutions, says a report by Dietrich & Associates, Inc. 'Pension Risk Transfer Solutions: Adding Guarantees to the Defined Benefit Fixed Income Conversation' says while the benefits of PRT solutions are clear to professionals who have experience working with these institutional insurance products, they are not part of the broader pension investment conversation which relies on more traditional market valued (non‐guaranteed) investment products. PRT solutions come in many different shapes and sizes, but all employ financial guarantees backed by the large, well-capitalized life insurance companies. Since the PRT structure can be customized to employ an optimal mix of covered guaranteed cash flows (based upon investment and funding objectives), pension sponsors have a compelling alternative to traditional fixed income mutual or collective funds.

DC Plan Performance Slips

The average U.S. Defined Contribution plan returned -11.45 per cent in the third quarter of 2011, says the Callan DC index, which tracks net asset flows and DC plan performance. The DC index performance trailed that of the average Defined Benefit plan, which had a quarterly return of -7.08 per cent. The DC drop was driven by poor domestic equity returns, but the index still topped the average 2030 target date fund, which had a return of -12.71 per cent for the quarter ended September 30.

Teachers' Invests In Fashion Brand

U.S. fashion brand Michael Kors intends to list on the New York Stock Exchange through an IPO, planning to raise up to $792.3 million by offering 41.7 million shares on behalf of existing shareholders for between $17 to $19 a share. The announcement revealed the Ontario Teachers' Pension Plan as one of the company's primary shareholders, cutting its stake from seven per cent to 6.9 per cent. Revenue for the brand was $803.3 million in the 2011 fiscal year.

Canadian Heads International Foundation

Richard Lyall, president of the RESCON Residential Construction Council of Ontario and the Metropolitan Toronto Apartment Builders Association in Vaughan, ON, is president and chair of the International Foundation of Employee Benefit Plans' 2012 executive committee.  Canadian sector representative is David N. Harvey, president and CEO of Benefit Plan Administrators Ltd. in Mississauga, ON. The International Foundation of Employee Benefit Plans is a non-profit educational association serving the employee benefits and compensation industry in the United States and Canada.

Mature Workforce Summit Registration Opens

Registration for the Workplace Institute's 'Summit on the Mature Workforce' is now open. It features leaders in the fields of talent management, public policy, pensions, strategy design, workplace culture, and knowledge who will lead seminars and workshops on the best older workforce practices available. It takes place February 6 to 8 in Calgary, AB. For more information, visit http://www.workplaceinstitute.org/summit-on-the-mature-workforce/

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Tuesday, December 6, 2011

Sabia Denies Political Motivations

Michael Sabia, president and chief executive officer of the Caisse de dépôt et placement du Québec, categorically denies any desire to get involved in political debate. In response to the coverage by the Journal de Montréal, he says he is simply interested in ideas likely to contribute to Québec's economic development, an inherent part of the Caisse's mandate. "Given the great importance we attach to promoting Québec's economic development, it is clear that we consider all thoughtful insight regarding entrepreneurship, the importance of infrastructure, development of natural resources, or any other key projects relevant to Québec's economy, interesting and worthy of discussion in a public forum," says Sabia, adding that suggesting this is a political statement would simply be inappropriate.

Worb Buys Out Pal

Michael Worb, president and CEO of Pal Benefits, has acquired Joseph Pal's interest in Pal. The consulting firm says the ownership change is in keeping with its strategic succession planning. Pal will assume a role as special consultant.

Funding Deficit Falls For  S&P Companies

S&P 1500 companies' Defined Benefit pension plans had an aggregate funding ratio of 78 per cent in November, up from 75 per cent in October, says Mercer. The overall funding deficit fell to $391 million as November 30, down from $471 billion the previous month. The increase in funding ratio was driven by an increase in yields on high-quality corporate bonds, as well as an equity market that mostly recovered from earlier losses in the month, with a final loss for November of 0.2 per cent. November was the second consecutive month with a funding ratio increase.

Centre Expands Into U.S.

The Retirement Education Centre Inc. is expanding into the United States. The company's education programs have been Americanized for the U.S. marketplace and will be marketed and delivered by the Chicago, IL-based firm of Jonamay Lambert & Associates, which specializes in business and leadership coaching and mentoring. Av Lieberman, president of The Retirement Education Centre Inc., says "More than ever in Canada, we see employees face the difficult task of managing important, and often stressful, transitions in their lives without tools or guidance. Our programs help people through their life transitions and mitigate any fear and anxiety they may have. And now, expanding our mandate into the U.S. where no such programs currently exist, is truly a privilege and an exciting time for the company."

Owens Heads West

Paul Owens is deputy superintendent of pensions for the province of Alberta. A senior executive with more than 20 years of demonstrated strategic leadership in public and private sector pension plan management, he is currently a member of the Provincial Judges Pension Board at the province of Ontario and the investment advisory committee at Archdiocese of Toronto. He was formerly the plan manager and CEO at the CAAT Pension Plan.

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Monday, December 5, 2011

CPP May Be Required From Disability Benefits

Proposed amendments to the Canada Pension Plan (CPP) as part of the federal budget bill, Bill C-13, would, if passed, require employers to deduct CPP contributions on employer-paid disability benefits, says a Mercer 'Communiqué.' And it could reverse the Federal Court of Appeal's decision in Toronto Transit Commission v. Canada (National Revenue). In the court case, it determined that CPP contributions did not have to be made under a long-term disability plan that was not insured, but instead paid by the TTC. The court based its decision on its interpretation of the CPP which limited the requirement to make CPP contributions to remuneration that was for active employment. The amendments to the CPP will change the relevant provisions to be similar to the broader language under the EI Act. This will reverse the TTC decision since the court in TTC did not challenge the decisions requiring EI premium deductions on employer funded disability benefits. The 'Communiqué' says there are, generally, two methods to pay for benefits under an employer-funded disability plan. Either the employer directly pays the benefits or an insurance company or other third-party administrator pays the benefits under an administrative services only (ASO) agreement. Employers already have had to deduct EI premiums for such plans. When the CPP amendments are in force, employers will also have to deduct CPP contributions. However, employers still do not have to make CPP and EI deductions under a trust that meets CRA guidelines or under an insurance policy.

Caisse Subsidiary Linked To Renault Regeneration

A development subsidiary of the Caisse de dépôt et placement du Québec is to invest in a major office development linked to the former Renault factory site regeneration on the edge of Paris, France.  Ivanhoé Cambridge will invest an undisclosed amount in the Petra project to be built by U.S. sustainable developer Hine.

RRSP Contributors Shrink, Contributions Increase

Just under six million tax filers contributed to registered retirement savings plans (RRSPs) in 2010, a slight decline of 0.2 per cent from 2009, says Statistics Canada. Their total contributions, however, increased 2.6 per cent to $33.9 billion. Regionally, the highest percentage increases in the number of contributors occurred in Yukon (+4.4 per cent) and in Saskatchewan (+3.3 per cent). In absolute numbers, the largest gain was in Quebec, where the number of contributors increased by 9,220.
Contributions increased in every province and territory. The largest increases occurred in Nunavut (+8.8 per cent) and Yukon (+8.0 per cent). The smallest increase was in Prince Edward Island (+0.1 per cent). Almost 93 per cent of tax filers were eligible to contribute to an RRSP for the 2010 tax year, the same proportion as in 2009. Of this group of eligible tax filers, 26 per cent actually made contributions, unchanged from 2009. The $33.9 billion in total RRSP contributions in 2010 represented about 5.1 per cent of the total room available to eligible tax filers, down from 5.4 per cent in 2009.

Leroux Earns Visionary Award

The leading global organization for women on boards, WomenCorporateDirectors (WCD), has named Monique F. Leroux, Desjardins Group's chair of the board, president, and CEO, as a winner of a '2012 WCD Visionary Awards.' Leroux earned her award for leadership and governance of a private company. This award recognizes outstanding leadership of a chief executive, chair, or director of a high-performing privately-held company which has exhibited innovation, engagement in the community, a good governance system and process, and be respected within the given industry and field. She has held her current position since March 2008 and has been a member of its senior management since 2001.

Risk Management Rewards Greater Than Ever

The rewards for effective risk management are greater than ever and it's time for institutional investors the overhaul the approach to risk management, says Bruce Curwood, director, investment strategy, at Russell Investments. In his article 'Risk Management: Head Winds And Tail Winds' now posted at www.bpmmagazine.com, he says this is the perfect time to talk risk management because the memory of the roller coaster that was the global financial crisis is fresh, yet markets have recovered significantly from their March 2009 lows. The article is at http://www.bpmmagazine.com/ monitor_online_exclusive /02_print/ Curwood_BPMNov11.pdf

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Friday, December 2, 2011

Indalex Going To Supreme Court

The Supreme Court of Canada has agreed to hear an appeal of the decision of the Ontario Court of Appeal (OCA) in 'Indalex Limited,' says a news release from McCarthy Tétrault LLP. It says according to many commentators, the lower court's decision in Indalex turns accepted law on the priority of debtor-in-possession (DIP) and working capital security on its head and introduces new concerns for employers about how to properly discharge their conflicting duties under corporate law and under pension law. The Supreme Court's decision to hear the appeal reflects the broader national implications of the case. The OCA decision provided that, in some cases, pension funding obligations can rank ahead of DIP security and security on working capital assets of the employer. The decision also tacitly suggests that employers should relinquish administration of a plan when insolvency is clearly in sight. The decision to hear the appeal is hopeful news for employers and lenders. However, until a final decision is rendered, lenders should continue to take steps to preserve their usual rights under credit agreements (including for DIP financing).

Healthcare Spending Tops $200 Billion

Total healthcare spending in Canada is expected to total $200.5 billion in 2011, equal to $5,800 per Canadian, says an Eckler 'Group-News.' Citing data from the Canadian Institute of Health Information's 'National Health Expenditure Trends, 1975 to 2011,' it says the pace of healthcare spending growth is actually slowing, from an average of 7.4 per cent between 1998 and 2008 to four per cent between 2010 and 2011. However, healthcare spending is still increasing at a greater rate than both inflation and population growth, and is expected to reach an estimated 11.6 per cent of Canada's GDP this year.

Personalized Funds Improve Outcomes

Personalized risk-based target date funds would improve investment outcomes for the 80 per cent of Canadians who are not members of a public sector pension plan, says PŮR Investing Inc. Its research paper, 'What DC Plan Members Really Want,' published in the 'Rotman International Journal of Pension Management,' says RRSP investors, DC plan participants, and those considering the proposed Pooled Registered Pension Plan program can benefit. "Obviously individuals and their employers have to fund the plan rather than taxpayers, and there aren't any guarantees. However, simply targeting a level of replacement income and having professionals managing their investments would be welcomed by many who are currently required to do it themselves," says Mark Yamada, president and CEO of PŮR Investing Inc. and the paper's co-author. It also switches the target date funds to risk-based from age based using a "dynamic glide path strategy." This strategy assumes less risk if progress relative to the goal is ahead of target and more risk if one needs to catch up.

Canadians Put As Much In RRSPs

Most Canadians say they plan to keep investing at least as much in RRSPs as they did last year, despite recent volatility in North American and global stock markets, says an Investors Group poll. Eight-of-10 (83 per cent) say they will increase or match their 2010 RRSP contribution. That's up slightly from the 79 per cent of Canadians who reported similar intentions last year. Three-quarters (76 per cent) say they have an RRSP or plan to open one in the coming year. That's similar to the 74 per cent last year. Among those who say they don't plan to invest, concern about stock market volatility remains near last year's level. Ten per cent said concern about the stock market was the reason they have decided not to invest this year compared to nine per cent last year.

Program Supports Employees On Disability

Employers looking to enhance their group insurance plans and manage the rising costs associated with it now have a solution. 'Contact 360°, developed by Desjardins Financial Security (DFS), helps improve employers' ability to promote health at the workplace and to support employees on disability leave. Nathalie Laporte, vice-president of product development and marketing, group and business insurance, at DFS, says it "is a service offer that enhances employers' ability to promote health at work and better manage disabilities. From the moment that the insurance contract is signed, the employer is assigned a claims specialist and a rehabilitation specialist in disability management and prevention. This gives us an opportunity to know the company better and ensures that every employee on disability recovers and makes a safe and lasting return to work." Specialized training is also available for managers on subjects including mental health and absenteeism. Companies interested in organizing prevention activities ‒ such as vaccination clinics, anti-smoking campaigns, or blood pressure screenings ‒ can receive referrals to external providers with experience in these areas.  


HOOPP Acquires Land Near Airport

The Healthcare of Ontario Pension Plan has acquired a 33-acre property near Pearson International Airport in Mississauga, ON, and is planning to develop more than 1.1 million square feet of office space and 75,000 square feet of commercial space. Real estate is essential to HOOPP's ability to deliver pension benefits to the 260,000 working and retired nurses, x-ray technicians, dietary aides and other healthcare workers who depend on it, says John Crocker, president and CEO. "Real estate provides steady income – much like the pensions we provide," he says. "It's a natural fit to our portfolio." HOOPP will work to high LEED-gold standards on the new development. "There's no question that people want healthier buildings – and that's the direction HOOPP will continue to head," says Lisa Lafave, senior portfolio manager. HOOPP also received gold LEED status for its AeroCentre V development located nearby.

December Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including December 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, December 1, 2011

Guidelines Assist Plan Administrators

The Canadian Association of Pension Supervisory Authorities' 'Guideline No. 6: Pension Plan Prudent Investment Practices Guideline' can assist plan administrators in meeting their fiduciary duties with respect to the investment of a plan's assets, says a Borden Ladner Gervais 'Pension Alert.' It elaborates on concepts such as 'prudent investment principles' and discusses these in terms of investment objectives, risk tolerances, asset allocation, investment selection, and due diligence. The companion self-assessment questionnaire, largely modeled on the prudent investment principles described in the guideline, contains questions and considerations that plan administrators can use to evaluate their practices. While the guideline and questionnaire are guidelines and not legal requirements, they should assist administrators in deciding how to select, report, and monitor investments for Defined Benefit and Defined Contribution pension plans.

Green Shield Website More Accessible

Green Shield Canada has unveiled its new website that ‒ unique to the industry ‒ offers free online accessibility technology.  "We developed our new website as part of a whole new look because we want people to know that we're not a typical health and dental benefits carrier. We're different … we're a compelling alternative, so we've updated our look to more accurately represent what we're all about," says Steve Bradie, president and CEO. The new website reflects its focus on innovation and using technology to enhance the experience for everyone with its 'eSSENTIAL Accessibility.' This online technology acts as a virtual wheelchair for websites by enabling visitors with a range of disabilities such as difficulty typing, moving a mouse, and reading web pages to access assistive technology. To see this feature in action, visit greenshield.ca

Events May Trigger Violation

Stable value investors should be aware of a few notable changes brought on by a combination of an underlying structural change and recent economic stress, says a Towers Watson white paper. 'Assessing Stable-Value Strategies: What Plan Sponsors Should Consider' says investors should pay attention to limited wrap capacity; tighter investment guidelines; higher fees; and the potential for an increasing interest rate scenario. Stable value has long been a popular investment option in Defined Contribution plans as they can provide principal preservation, benefit responsiveness, liquidity, and consistently higher returns compared with money market options with a similar risk profile. However, some events may trigger a violation of the wrap agreements and cause a potential market-value adjustment.

Blogging About Investment Environment

Many equate blogs with foodies, avid travelers, and fashion enthusiasts, but now even economists are maintaining blogs to share their views on market outlooks and economic and finance issues. William De Vijlder, CIO of strategy and partners at BNP Paribas Investment Partners, has been writing his blog, 'Williams World' bi-monthly since 2008. His posts are read by clients, colleagues, and journalists, and are available in English, French, and Dutch, and soon will be translated into Czech and Russian. He talks about his blog at William De Vijlder's Blog: Interactive Comment on the Investment Environment

Connor Heads Sun Life Financial

Dean A. Connor is president and chief executive officer at Sun Life Financial. He joined the firm in 2006 as executive vice-president and, most recently, was president overseeing its Canadian and UK operations, MFS, marketing, human resources, information technology, and other shared business services. He previously spent 28 years at Mercer Human Resource Consulting.

SHARE Offers Bootcamp

The Shareholder Foundation for Education and Research (SHARE) 'Pension Bootcamp' session is an introduction to pension issues and terminology. It takes place March 1 in Vancouver, BC. For more information, visit http://www.share.ca/courses-conferences/

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Wednesday, November 30, 2011

Fiduciary Responsibility Forgotten

While part of the reason pension plans today are facing funding problems today is the low interest rates, the real problem is the industry has forgotten what it means to be responsible as a fiduciary, says Mark Barnicutt, president and co-founder of HighView Financial Group. Speaking at the Canadian Western Trust and HighView 'Investment Fiduciary Education Series' session 'Getting Back To The Basics,' he said this is due in part to the desire for returns which has caused the culture of the industry to shift. It is now focused on seeking returns, not managing risk. As well, he said not enough people are properly trained to profile clients to determine their objectives and risk tolerance. One solution is fiduciary management where organizations treat their assets as if they were an asset management firm. It is an approach that is growing rapidly in the U.S. and Europe. Fiduciary managers' responsibilities include asset-liability matching, risk and return analysis, portfolio construction, strategic risk management, investment manager selection and oversight, and organizing investment committees which they then report to. These fiduciary managers don't have products and they are not coming in and doing a manager search and disappearing for 18 months, it is an ongoing relationship where the manager acts as chief investment officer for the fund.

Portfolio Reduces Plan Volatility

Morneau Shepell Ltd. has developed a risk management portfolio, designed to reduce volatility in the financial position of pension plans. "We believe plan sponsors will welcome this innovative approach that seeks to reduce fluctuations in a plan's financial position, while maintaining expected long-term returns," says Patrick De Roy, partner and national leader of the risk management practice for Morneau Shepell. He says the traditional pension plan portfolio is heavily invested in equities with a large mismatch between plan assets and liabilities. The risk management portfolio is based on an investment policy with a target asset allocation different from that of the traditional portfolio. The objective is to reduce risk by better matching liabilities and investing in alternative strategies that generate returns less correlated with equity markets.

Standard Life Sharpens Strategic Focus

The Standard Life Assurance Company of Canada is making changes to its group and retail offering in order to continue sharpening its strategic focus on the long-term savings and investment market. Effective January 1, Standard Life will stop selling its individual life insurance and critical illness products, but will continue to service its in-force block of life insurance business. It will continue to include life insurance coverage in its group benefits offering. Employers can also now add socially responsible investment (SRI) funds to investment options for any of its group savings and retirement plan. The Meritas SRI funds in Standard Life's offering is in response to research indicating that interest in ethical investing by retail investors is on the rise and that investors want to know more about the social and environmental performance of companies in their investment portfolios.

Investor Confidence Up In November

Global investor confidence increased to 97.2 in November, up two points from October's revised reading of 95.2 for the State Street 'Investor Confidence Index.' In October, the gains in the global index originated in North American and Europe. In November, North American investor confidence increased 4.7 points to 95.2 from October's revised reading of 90.5, while confidence among European institutional investors rose 5.4 points from October's revised level of 96.1 to 101.5. "This month was a case of 'two steps forward, one step back' as strong reallocations to risk in late October and early November gave way to some pull-back from risky assets in the middle part of November," says Harvard University professor Kenneth Froot, one of the developers of the index. "To a large degree the ebb and flow was driven by persistent doubts about the way forward for European policy makers. At 97.2, global investor confidence is close to its three-year median, signaling that investors are adopting a wait-and-see attitude at this midway point of the fourth quarter."

Crestpoint Buys Properties

Crestpoint Real Estate Investments Ltd. has acquired two properties with a combined value exceeding $12 million. The first property is an 18,567 square foot freestanding Shoppers Drug Mart located in the retail commercial centre of Parksville, BC. The second property is Buro Plus, an 11 acre site located in Laval, QC. This is a 172,000 square foot state of the art Class 'A' distribution facility. Crestpoint, a business dedicated to providing institutional and high net-worth investors with direct access to commercial real estate assets in Canada, was launched earlier this year. Since then, it has acquired seven properties with total approximate value of $100 million. It is part of Connor, Clark & Lunn Financial Group.

SHARE Holds Pension Forum

Union leaders, pension trustees, pension advisory committee members, and pension activists along with investment managers, public policy makers, and leading international thinkers will discuss and debate key issues and challenges surrounding pension plan governance, funding, and investment issues at the Shareholder Foundation for Education and Research (SHARE) 'BC Pension Forum.' It takes place in Vancouver, BC; March 2. For more information, visit http://www.share.ca/courses-conferences/

Tickets For Ball Now On Sale

Tickets are now on sale for the CPBI Ontario region's '2012 CPBI Benefit Ball.' Theme of the event to raise money for the Crohn's and Colitis Foundation of Canada is the 'Medieval Faire.' To date, the event has raised $450,000 for research and education on the disease. It takes place February 9 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca

FEI Seeks CFO Of Year

FEI Canada is looking for nominations for Canada's 'CFO of the Year' Award. Now in its 10th year, the award recognizes the quality, insight, direction, and leadership of the country's best financial leaders. Candidates from any business sector may be nominated by CEOs, corporate directors, financial analysts, and other senior executives. Deadline for nominations is December 16. They can be made online at www.cfoy.ca. The award will be presented at a black tie gala May 3 in Toronto, ON.

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Tuesday, November 29, 2011

App Developed For Submitting Claims

Equitable Life of Canada has developed a Mobile App for BlackBerry for submitting health and dental claims. EZClaim reduces potential mail delays and the chances of having to decipher hand writing or smudged faxes. "We want to provide our plan members choice in how they submit their health and dental claims to us," says Karen Mason, senior vice-president, group. "More and more of our plan members are using smartphones and the introduction of EZClaim was in direct response to this trend."

CP Using Note For Pension Prepayment

Canadian Pacific Railway is commencing an offering of senior unsecured notes in the United States to fund a voluntary prepayment in 2011 to the company's Canadian Defined Benefit pension plan. The issue size of the offering and its maturity, interest rate, and net proceeds have not yet been determined. CP believes that the transactions will be a tax efficient means for the company to reduce the volatility in DB pension plan funding requirements and provide greater flexibility to direct future cash from operations to infrastructure investments. The net impact of the debt offering and the voluntary prepayment of the pension contribution are expected to be accretive to earnings.

Health Benefit Enhanced

The Empire Life Insurance Company has enhanced its Vital Assist Health Benefit, a critical illness product that provides financial assistance to employees diagnosed with a serious illness. Business owners can now choose among three different levels of coverage for employees ‒ $10,000, $20,000, or $30,000. It consists of a lump sum payment and a medical expense benefit. Vital Assist Health Benefit is an optional benefit offered by Empire Life through its BeneFit and 20Plus group benefits products.

Access To Health Services Navigator Expanded

Manulife Financial has expanded access to Health Service Navigator to thousands more Canadians who hold health insurance and critical illness insurance through Affinity Markets. Offered at no additional cost to Affinity policyholders, Health Service Navigator provides users with health news and tools to assist them in navigating the Canadian healthcare system. Policyholders can access a wide range of services including help in finding a family doctor or specialist; access to a health screening guide; determining expenses covered by provincial health plans; and a health and drug library. It also allows policyholders, where appropriate, the opportunity to seek expert medical second opinions from 'world-class' institutions including the Mayo Clinic, Children's Hospital of Boston, and UCLA Healthcare. Manulife Financial initially introduced Health Service Navigator through its group benefits division in 2007.

HR Decisions Evidence-based

When it comes to managing people, a handful of leading-edge global companies are breaking new ground by using evidence-based change to make critical talent management decisions to help their organizations achieve greater success and create a more engaging work environment, say Ravin Jesuthasan, of Towers Watson, and John Boudreau, of the University of Southern California. The authors of 'Transformative HR: How Great Companies Use Evidence-Based Change for Sustainable Advantage' were presenting at the '2011 Top Employer Summit.' They said by adopting five principles of evidence-based change organizations can make better people decisions that lead to a sustainable competitive advantage. The five principles of evidence-based change are logic-driven analytics, segmentation, risk leverage, integration and synergy, and optimization.

CPPIB Provides Commitment

Teine Energy Ltd. has completed an equity line commitment of up to $100 million with the Canada Pension Plan Investment Board (CPPIB). It will use the funds to accelerate the development of its Viking oil drilling inventory and to fund the acquisition of 52 net sections of prospective Viking oil rights from Baytex Energy Corp. In addition, it will retire its obligations under the existing convertible debenture held by CPPIB Credit Investments Inc. through the issuance of $104 million of preferred shares to CPPIB.

Miron Responsible For Repositioning

Pierre Miron is executive vice-president, operations and information technology, and member of the executive committee at the Caisse de dépôt et placement du Québec. He will be responsible for continuing the significant repositioning work carried out over the past two years by the operations and information technology teams. Prior to joining the Caisse, he held various management positions with CGI Group.


Three Named Vice-president

Shihab Zubair, CFA, is a vice-president at Burgundy Asset Management Ltd., leading the firm's institutional effort in Canada. Before joining Burgundy, he held the position of vice-president at Hartford Investments. Joseph Rooney, CFA, is a vice-president and member of the firm's U.S. client group. Previously he was with Altamira Investment Services as a financial advisor. Robert Sankey, CFA, is vice-president and director of research. He joined the firm in 2005 and has been a part of its investment team as a research analyst, specializing in Canadian equities. Prior to that, he was with Russell/Mellon Analytical Services.


Key Issues Examined

Key issues of pension law and their implications will be the focus of the 'Osgoode Certificate in Pension Law' program. Comprised of six one-day modules spread over six weeks, it is taught by acknowledged experts in the pension field and was devised to provide a comprehensive review and analysis of the major areas of pension law and practice. For more information, visit http://www.osgoodepd.ca/cle/2011-2012Fiscal/2011_pension_cert/index.html

SHARE Offers Governance Courses

SHARE will hold its 'Pension Investment and Governance Courses' in Harrison Hot Springs, BC; during the Canadian Labour Congress Winter School. The courses are interactive and hands-on, providing the practical knowledge and skills required to serve plan members' best interests and covering key topics including pension fundamentals, investment strategies, fiduciary duties, shareholder engagement, and plan governance. Both the basic and intermediate courses will run from January 23 to 27. For more information, visit http://www.share.ca/courses-conferences//

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Monday, November 28, 2011

OMERS Wants To Administer PRPPs

Canadian financial institutions are concerned about a bid by the Ontario Municipal Employees Retirement System to administer Pooled Registered Pension Plans (PRPPs), says a report from Bloomberg Businessweek. The proposed federal legislation for PRPPs doesn't set out which institutions will manage them, but the sense is that it will be financial institutions. However, it does require these funds come with a low cost and OMERS believes it can satisfy that requirement. The financial institutions, says the report, contend that public pension funds such as OMERS do not meet the capital requirements of the financial institutions and banks. As well, they are not covered by the same regulations including tax rules.

Teachers' Keeping Leafs

The Ontario Teachers' Pension Plan is maintaining its ownership stake in Maple Leaf Sports and Entertainment (MLSE). Following various unsolicited expressions of interest in MLSE, Teachers' and its advisors began a process in March of this year to review its ownership stake in the company.  Teachers' has concluded this eight-month process with the decision to maintain its stake in MLSE, which has been and continues to be a very successful investment. With the acquisition in September of TD Capital Group's 13.46 per cent minority stake, Teachers' now owns 79.53 per cent of MLSE.

CAPSA Sets Out Funding Policy Guideline

Plan sponsors and administrators of Defined Benefit plans will need to consider when is the best time to formally adopt and communicate a funding policy and will need to carefully consider the contents of such a policy, taking into account not only the Funding Policy Guideline, but also the description of any legal obligations or responsibilities before communicating the policy to plan members and other stakeholder groups, says a Blakes 'Bulletin.' The Canadian Association of Pension Supervisory Authorities (CAPSA) has released 'CAPSA Guideline No. 6 Pension Plan Prudent Investment Practices Guideline' (the Prudent Investment Practices Guideline), a companion 'Self-Assessment Questionnaire on Prudent Investment Practices' (the Self-Assessment Questionnaire), and 'CAPSA Guideline No. 7 Pension Plan Funding Policy Guideline' (the Funding Policy Guideline). The guidelines and the Self-Assessment Questionnaire are the final versions of the draft documents that CAPSA had initially released on March 1, 2011. They are intended to indicate the expectation of the various pension regulators respecting the adoption of prudent investment practices and funding policies.

Metals Help With Diversification

Gold, silver, and platinum have singularly outperformed several major widely accepted investment indexes over the last 10 years, yet many client portfolios completely ignore this asset category, says a report from Catalyst Equity Research Inc. And this is despite the fact that investment professionals have a fiduciary responsibility to meet liabilities for the pension plans and future retirement needs of their clients by managing funds in a responsible and competent manner. Robin Cornwell, the founder and principal shareholder of Catalyst, says the traditional view of portfolio management is that stocks, bonds, and cash are sufficient to achieve diversification. "Post-modern, efficient frontier portfolios are optimal in both the sense that they offer maximum expected return for some given level of risk and minimal risk for some given level of expected return. Typically, portfolios that comprise the efficient frontier are the ones most highly diversified."

Climate Bonds Initiative Standard Approved

The Climate Bonds Initiative has released the final approved text of the prototype Climate Bond Standard. The standard will be a screening tool for investors and governments to support investment in delivering a low carbon economy. Bonds complying with the standard will be certified as 'Climate Bonds,' a mark that assures their contribution to the delivery of a low carbon economy. In its first iteration, the released version lists wind energy investments currently eligible with an expansion to solar energy and other renewable energy investments to follow in the coming months.

OSFI Looks For Topics

For the past two years, OSFI has held a 'Pension Industry Forum' in Toronto, ON. These forums have focused on recent legislative changes and their impact on plan administration, as well as OSFI's supervisory activities and expectations related to private pension plans. It expects to host a third forum in February 2012 and invites external stakeholders to provide topics they would like to see discussed. Suggested topics may be directed to information@osfi-bsif.gc.ca.

Infrastructure Debt Fund Established

Stonebridge Financial Corporation has established an Infrastructure Debt Fund. It will be a closed-end fund offered only to accredited investors, comprised primarily of Canadian pension funds with long-term investment horizons, dedicated to making private debt investments in Canadian infrastructure projects.  Investments will take the form of long-term, fixed rate, senior debt financing for the construction and operation of infrastructure and energy assets, including the emerging municipal infrastructure project sector. The fund was developed in co-operation with PBI Actuarial Consultants Ltd. and with the support of PPP Canada Inc.

Funds Seeking Increased Exposure

Pension funds are increasingly seeking to increase exposure to emerging market sovereign bonds at a time when credit ratings remain under pressure in developed countries, says First State Investment. However, emerging countries could also be impacted by the crisis in Europe and the U.S. The investment case for emerging market sovereign debt will continue to strengthen as these nations are now in a much stronger position to service their debt obligations than the world's advanced economies. The level of debt in advanced economies is expected to reach 100 per cent of GDP this year. In emerging markets, the average debt-to-GDP ratio currently stands at around 34 per cent. Still, emerging markets are not immune to occasional contagion, which was why emerging market bonds sold off in September on heightened market nervousness about Greece, Italy, and the European banking sector.

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Friday, November 25, 2011

PRPPs Unlikely To Solve Coverage Issue

Ian Markham, Canadian retirement innovation leader at Towers Watson, is not optimistic that the federal government proposal for Pooled Registered Pension Plans (PRPPs) will do much to solve the pension fund coverage issue in Canada. At a session entitled 'Plan Member Perspectives ‒ What Do Your Employees Think?' at the ACPM Ontario Regional Council's 'impACT 2011: From Family Law to Funding – Key Concerns for Plan Sponsors in Ontario,' he said only about 28 per cent of employees in the private sector currently belong to an employer-sponsored pension plan, with 15 per cent in Defined Benefit, eight per cent in Defined Contribution, and five per cent in mixed plans. However, PRPPs are not the solution as he does not see them as being that attractive to employees. For example, the proposed legislation says they will be locked in until retirement. That denies employees the opportunity to pay down mortgages or retire debt which they can currently do if they have their own registered retirement savings plan or belong to a group registered retirement savings plan which are not locked in. If anything, he suspects most PRPP activity will be from employers moving their Defined Contribution plans to PRPPs. And there is a message in this to employers, he said. Mandatory pension plans are coming if they fail to take action to provide pension plans to their employees which provide adequate retirement savings.

New Brunswick Takes $245 Million Hit

The New Brunswick government's pension funds have lost $245 million in the markets so far this year, says mid-year performance results from the New Brunswick Investment Management Corporation. The plans for the province's public servants, teachers, and judges lost an average of 2.7 per cent of their value between April 1 and September 30 as stock markets across the world plunged, says John Sinclair, its president and chief executive officer. The corporation has nearly $4 billion invested directly in Canadian, U.S., and other international stock markets, which lost about 20 per cent of their value over the spring and summer months. It operates at arms' length from the provincial government, providing investment management services for the province's pension plans which cover more than 50,000 current employees and retirees.

Extra Contributions Good Idea Now

Defined Benefit pension plan sponsors may want to consider making additional contributions to their underfunded plans now, says Andrew Hamilton, of Aon Hewitt. He told the session 'Pension Plan Funding – Are we having fun yet?' at the ACPM Ontario Regional Council's 'impACT 2011: From Family Law to Funding – Key Concerns for Plan Sponsors in Ontario' that companies are doing well now and sitting on record amounts of cash. Besides the benefits of a tax deduction for these extra contributions, there are a number of other considerations. Reaching an 85 per cent solvency funding ratio would take them past the threshold for annual valuations. As well, they could avoid the need to use letters of credit (once they are in place) to cover shortfalls as they can be expensive. Plus, given the current interest rate environment, there is little chance plans will be moving into surplus positions, minimizing the risk of these extra contributions becoming trapped capital.

CVCA Members Optimistic

There is a sense of optimism among those in Canada's private equity and venture capital industry, says a survey of CVCA members by CVCA ‒ Canada's Venture Capital & Private Equity Association and McCarthy Tétrault LLP. It found 80 per cent of the respondents say the investment pace over the next six months will be consistent with, or more active than, the previous six months. The investment focus will be on new investments over the next six months, rather than investing in existing portfolio companies or follow-on transactions. "These survey results demonstrate that venture capital and private equity funds see great opportunity in these turbulent times," says Gregory Smith, CVCA president and managing director of Brookfield Financial. "It is particularly encouraging to see the optimistic view of investing in Canada that emerges. Canada's attractiveness as an investment destination for venture capital and private equity is a competitive advantage for our member funds and for the country as a whole, given the central role the industry plays in fostering innovation and company growth."

Sponsors Should Keep Records

Despite new rules for the division of pension assets coming into force in Ontario on January 1, plan sponsors need to keep all records for marital splits that take place before then, says Anne Slivinskas, director, pension law and policy group, at the Ontario Teachers' Pension Plan. In a session on 'Family Law ‒ New Rules for Pensions' at the ACPM Ontario Regional Council's ' 'impACT 2011: From Family Law to Funding – Key Concerns for Plan Sponsors in Ontario,' she said all orders, awards, and contracts made after January 1 fall under the new rules. However, changes made to orders, awards, and contracts reached before the end of the year fall under the old rules. If these are being changed after the new rules come into effect, the old rules can probably used if the change is merely a "tweak." But, if the old agreement is, for example, silent on equalization, an agreement on this after January 1 would be considered a new agreement and the new rules would apply. The division of pension asset rules on marital breakdown were designed to simplify the valuation of the pension asset. One significant change is that a lump sum must be paid immediately to a spouse once agreement is reached on the division of these assets. Under the old rules, payment required a triggering event such as the member's retirement, termination, or death.

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Thursday, November 24, 2011

Precise Wording Needed In Documents

Plan sponsors must use precise wording in their plan documents to avoid legal consequences. Caroline Helbronner, of Blake, Cassels & Graydon, told the 'Recent Developments in Pension and Employee Benefits Law' seminar that the case of Gustavson v. TimberWest re-affirms this. The claimant was a retired employee who was asked to take early retirement and, subsequently, the claimant signed a letter which specified the terms of his early retirement. The letter stipulated that he and his dependants would be entitled to "basic medical, extended healthcare, and dental benefits." While it gave the company the right to amend or discontinue any plan benefits, the benefits to which the claimant was entitled could not become substantially less than those outlined in the letter. When a subsequent purchaser decided to remove extra-provincial medical coverage from the benefits it offered to retirees, the claimant argued it was not entitled to remove this benefit. While the company argued that the term "basic" applied to all benefits, the court rejected this argument, ruling in favour of the claimant. Helbronner said this re-affirms the need for employers to be very precise in the language they use when dealing with employee benefits.

CPPIB Counter-cyclical Investor

The CPP Investment Board is discovering it is counter-cyclical when it comes to private investments, says Jim Fasano, vice-president and head of principal investing at the board. In the presentation 'Investing and Exiting in Turbulent Times' at the 'CVCA Professional Development Series 2011,' he said it has difficulties winning on price when times are good. As a result, he expects it will face challenging times over the 12 months. He said there will be a lot of supply as LBO sponsors are sitting on about $500 billion of available capital and there are a lot of sponsors looking to exit. As a result, the conditions are right for a spike in activity. However, while people are going to be incented to get deals done, he believes the returns will not be that great.

Consent Concerns May Be Unfounded

Concerns about requiring employee consent if an employer adds auto-escalation features to a voluntary Defined Contribution pension plan may be unfounded, says Abdul-Basit Khan, of Blake, Cassels & Graydon. He told the ' Practical Solutions To Common Administrator Problems' session at its 'Recent Developments in Pension and Employee Benefits Law' seminar that it may only require negative consent from current employees. As long as employees have been properly notified of the change, with efforts made to follow up and ensure each employee is aware of the new feature, employers should be able to proceed without written consent. Employees can always come back later and opt out if they wish. However, if there is no opt out permitted, this must be conveyed to the employees before any auto-escalation feature is put in place, he said. As well, if the plan is mandatory, employers may need to be prepared to terminate employees who do not want to participate, unless other arrangements can be made.

Alternative Returns Overstated

For corporate pension plans, the potential diversification benefits from investing in alternative investments may be overstated, says a report from the Center for Retirement Research at Boston College. It examined the determinants and consequences of corporate pension plan investments in hedge funds and private equity and found plans with alternative investments earn higher returns in the pre-crisis period, but also perform more poorly during the crisis period. The report says "overall, there seems to be very little evidence that plans with allocations to alternative assets weathered the market crisis better than their peers who invested only in 'traditional' stocks and bonds. If anything, the evidence indicates that they performed slightly worse."

PRPPs Haven't Arrived Yet

It appears that only corporations will be allowed to be administrators of Pooled Registered Pension Plans (PRPPs), says Elizabeth Boyd, of Blake, Cassels & Graydon. In an update on PRPPs at its  'Recent Developments in Pension and Employee Benefits Law' seminar, she said these administrators, probably financial institutions, must meet certain conditions to receive a licence from OSFI. As well, they must administer these plans as the trustee for members, yet will only benefit from any safe harbour on member self-directed investments if certain requirements are met. However, it is premature to believe PRPPs have arrived in Canada. She said each of the provinces must now pass comparable legislation and the Canada Revenue Agency needs to revise tax rules to accommodate them.

Long-term Approach Used To De-risk

OMERS Ventures is taking a long-term approach to de-risk against current market uncertainty, says John Ruffolo, CEO of OMERS Ventures and head of knowledge investing, OMERS Strategic Investments. He told the 'Investing in Uncertain Market Conditions' at the 'CVCA Professional Development Series 2011' that it is looking for great innovative disruptive companies and investing in them at a very early stage. However, when they place their bets, they are not looking for an early exit. Instead, they want to work together with the company and if market conditions force it to pivot ‒ and this happens 99 per cent of the time ‒ and they like the direction the company is heading in, they will stay with it until maturity. This means current market conditions do not impact their investment decisions because they are spreading them out over the long term.

Insurance May Exclude Pension Plans

Directors' and officers' insurance policies often have an exclusion clause for pension and benefit plans, says Jeremy Forgie, of Blake, Cassels & Graydon. In a session on 'Fiduciary Risk Management Decision-making ‒ Issues and Answers' at its 'Recent Developments in Pension and Employee Benefits Law,' he said fiduciary liability insurance provides protection for organizations and individuals responsible for the governance, management, and administration of pension and benefit plans. This coverage can extend to a wide range of fiduciaries including the employer, plan sponsor, plan administrator, officers and directors, the pension committee, a trustee or custodian, an investment manager, and other internal consultants or advisors, including actuaries and lawyers. The coverage provided is very similar to that of directors' and officers' insurance in that it covers losses incurred as a result of wrongful acts. However, the differences between the two types of insurance reflect the fact that fiduciary liability insurance relates to the specific duties and liabilities associated with being a fiduciary. Consequently, the definition of wrongful acts in a fiduciary liability insurance policy generally concentrates on the violation of responsibilities, obligations, or duties imposed by statute or the common law on fiduciaries, and any negligent errors or omissions that occur in the administration of a pension plan. Similarly for losses, the coverage resembles that of directors' and officers' insurance, except that it often excludes benefits due under a plan and losses associated with plan asset reversion or contribution holidays. It can also exclude coverage for issues such as disputes over ownership of pension surplus and the failure to fund, remit, or collect contributions owed to a plan.

Accessibility Must For Ontarians

Things such as goods and services, employment, transportation, information, or buildings often exclude the 15 per cent of the population that has some type of disability. On January 1, 2012, private sector businesses will be responsible for providing accessible customer service as an obligation of the Accessibility Standards for Customer Service, the first of five standards created under the Accessibility for Ontarians with Disabilities Act (AODA). The different requirements for large (50 or more employees) and small (less than 49) organizations, recruitment policies, and accommodation plans were discussed at the 'Labour, Employment, and Human Rights Group Seminar' presented by Fasken Martineau.

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Wednesday, November 23, 2011

Canada Remains Bright Spot

Canada remains a relative bright spot in the developed world, says Eric Lascelles, chief economist at RBC Global Asset Management. However, it is also suffering an economic slowdown due to inadequate foreign demand created by financial crises elsewhere, he told the 'Economic Direction for Canadian, U.S., and Global Economics' session at the Portfolio Management Association of Canada's '2011 Annual Meeting and Conference.' He said the fiscal policy challenges facing the U.S. and Europe are not likely to end soon. The U.S. is not likely to deal with its debt problems until 2013, after the elections next year. Europe remains the most serious problem and should keep risk aversion elevated and markets jittery. However, he said European policy-makers are using the cover of market uncertainty to respond to the crises.

FSCO Posts Regulation Framework

FSCO's risk-based regulation framework for pensions has now been posted on its website. The purpose of the framework is to improve its overall effectiveness in its monitoring of key pension risks and to ensure appropriate regulatory response is taken by FSCO to address risk situations, thereby better protecting the interests of pension 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 says it will closely examine the circumstances of the plan before deciding on the appropriate regulatory actions, which may include prosecution under the Pension Benefits Act.

Compensation System Will Create More Crises

Stock-based compensation for senior executives has created a system which will produce more financial bubbles and crises, says Roger Martin, dean of the Rotman School of Management at the University of Toronto. Speaking on 'Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL' at the Portfolio Management Association of Canada's '2011 Annual Meeting and Conference,' he said since this was first introduced in the mid-1970s as a means to align management interests with those of shareholders, senior executives have moved from managing their companies to managing expectations. As a result, they may resort to extreme measures to meet expectations or, since expectations cannot go up forever, tank performance to bring expectations down.

ETFs As PRPPs?

Exchange traded funds (ETFs) could satisfy the low-cost requirement of the federal government's Pooled Registered Pension Plan proposal, says Rajiv Silgardo, co-CEO of BMO Global Asset Management. The PRPP proposal calls for a low fee structure to help members of these plans save more for retirement and to encourage them to save for retirement. Silgardo, speaking at BMO Group Retirement Services' 'ETFs ‒ The New Trend In Institutional Investing,' said ETFs create portfolios that are a "truly optimal" combination of return, risk, and low cost. He said not only are institutional investors making better use of ETFs for a variety of reasons, but consultants are warming to them as well. BMO offers a series of ETFs that are designed as lifecycle funds which meet the needs of Defined Contribution pension plan members.

DB Plans Continue To Dominate

Defined Benefit pension plans dominate the pension landscape in Canada and will continue to do so, says Andrew McCollum, a principal at Greenwich Associates. He told a session on 'Canadian Institutional Fund Trends' at the Portfolio Management Association of Canada's '2011 Annual Meeting and Conference' that assets in Defined Contribution plans now account for only seven per cent of the total pension assets under management. This could reach 12 per cent over the next decade. He also noted that it took more than 25 years in the U.S. for DC assets to pass DB so it appears that DB will dominate for some time.

Advice Still Necessary

The federal government's introduction of Pooled Registered Pension Plans (PRPPs) is a good first step to helping Canadians be better prepared for retirement, says Advocis, The Financial Advisors Association of Canada. However, the next step is to ensure that individual members of a PRPP have access to financial advice. Greg Pollock, its president and CEO, says "with the introduction of PRPPs, smaller businesses and self-employed Canadians will have the opportunity to be better prepared for their retirement." However, participation in a PRPP does not negate the need for individual financial advice. "Advocis believes that professional financial advice would improve financial outcomes for the majority of Canadians and that includes those Canadians who will be participating in pooled funds," he says. "Financial advisors can lend their support and expertise to ensure PRPPs achieve their objective of preparing Canadians financially for the kind of retirement they want."

Investors Urged To Stay Calm

Canada's top portfolio management firms are actively encouraging investors to stay calm in a sea market volatility and negative world economic events, says a survey of members by the Portfolio Management Association of Canada. Katie Walmsley, president of PMAC, says its members are urging their clients to remain calm. However, they are also urging their clients to adjust their portfolios to manage the risk in their portfolios and to adjust their expectations for long-term returns. Market volatility, negative world economic events, and provincial differentiations in regulatory policies are the top concerns identified in the survey.

Forecast Looks At Opportunities And Perils

'What are the opportunities and perils to face investors in 2012?' will be answered at the CPBI Ontario region's '2012 Pension Investment Forecast.' Eric Bushell, of Signature Global Advisors; Jesper Alsing, ValueInvest Asset Management; Paul Summerville, Centre for Global Studies; and a speaker to be determined from Baillie Gifford will examine issues such as the opportunities and risks investors should pay attention to, adequate tactical asset allocation for pension plans in 2012, and the importance of ignoring the distractions and escape the pitfalls of the herd mentality. It takes place January 17 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca

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Tuesday, November 22, 2011

Incentive Pay Encourages Health Program Participation

While incentive pay to encourage participation in health and productivity programs is a common practice in the U.S., the number of organizations implementing this strategy in Canada is on the rise, says a new survey from Towers Watson. Its '2011/2012 Staying@Work' survey shows a quarter (26 per cent) of Canadian employers are planning to offer some type of financial reward in 2012 to individuals who participate in their health management programs, from the 13 per cent who currently do so. Wendy Poirier, health and group benefits leader, says "we are seeing employers increasingly realize the importance that health and productivity programs can play in their efforts to control healthcare costs and maintain a productive workforce. While the outcomes of any one tactic can't be guaranteed, high effectiveness companies with thoughtful multi-faceted programs are reaping clear returns on their investments in workforce health." In 2011, health and productivity costs as a percentage of payroll totaled just over 17 per cent in Canada, up from 12.6 per cent in 2009.  Organizations with effective health and productivity practices are achieving significantly better business outcomes. Their benefits include a lower average turnover rate and fewer unplanned absences.

CRA Scrutinizes Taxable Benefits

The Canada Revenue Agency is increasing the level of audit scrutiny on taxable benefits received by employees, says a Borden Ladner Gervais LLP 'Tax Law Bulletin.' While the dollar amounts on individual items for each employee may be relatively small, the aggregate amounts for all employees of a business can be quite substantial and the CRA is becoming increasingly active in auditing businesses to ensure that all benefits enjoyed by an employee which might potentially fall within the tax net are taxed accordingly. CRA is also no longer willing to allow employers to make a payment to the CRA to resolve situations in which taxable benefits enjoyed by employees had been under-reported. Instead, the CRA will insist on re-assessing individual employees (or groups of employees) for taxes and interest (and potentially penalties) on amounts that constitute taxable benefits, a potential HR disaster for employers. Among the benefit-related issues most commonly re-assessed are unreported bonuses, commissions and incidental cash payments, motor vehicle benefits, and independent contractors determined to be employees instead.

UK Engulfed In Funding Crisis

UK pension plan sponsors remain engulfed in a funding crisis so severe that strategic questions about how to close funding gaps and otherwise limit sponsor organizations' exposure to volatile pension related costs and risks are dominating the attention of fund executives and corporate CFOs, says Greenwich Associates' '2011 United Kingdom Investment Management Study.' As a result, half of UK corporate plan sponsors are now employing an investment consultant specifically to advise their corporate CFOs about pension issues. The study found more Defined Benefit plans continue to close to new employees, leaving just 18 per cent of schemes open, and 28 per cent of all plans have now closed to future accruals. As well, almost 10 per cent of plans intend to offer enhanced transfer value incentives to participants in the next two to three years to encourage movement into Defined Contribution structures. Corporate plans see managing funding volatility as their top priority and with de-risking programs. Many corporate plans are seeking to de-risk their portfolios by rotating out of equities ‒ principally domestic equities ‒ and into fixed income and alternative assets. Last year, UK DB corporate plan sponsors reduced allocations to domestic equities to just 13.6 per cent of total assets from 15.8 per cent in 2010. Many of the assets freed up have flowed into passive fixed income, which increased to 15.2 per cent of total assets from 11.8 per cent, and into 'other' asset categories including liability driven investment strategies which increased to 11.1 per cent in 2011 from just 8.5 per cent in 2010.

More Can Participate In Pension Plans

The Canadian Federation of Independent Business (CFIB) and the Canadian Chamber of Commerce believe the  federal government's Pooled Registered Pension Plan (PRPP) will allow more employees, employers, and the self-employed to participate in pension plans. The CFIB is urging all provinces to design provincial legislation that mirrors the federal government's PRPP framework as opposed to advocating tax increases, such as a mandatory CPP premium hike, when Canadians can least afford it. CFIB data shows that even modest CPP increases will be detrimental to the economy, employment, and wages. "For every one percentage point increase in CPP premiums beyond the current 9.9 per cent rate, it would cost 220,000 person-years of employment and force wages down roughly 2.5 per cent in the long run," says Dan Kelly, CFIB senior vice-president, legislative affairs. The chamber says many of its members are welcoming the ability to provide some sort of pension plan to their members enabling them to compete for talent with larger organizations.


Smyth Joins Venture Capital Arm

Derek Smyth is managing director of OMERS Ventures, the pension's fund venture capital arm. Previously, he co-managed venture capital funds at Edgestone Capital Partners.

Rolnick Looks At Challenges Of Sustainability

Mark Rolnick, product director, pharmaceutical benefits, at Sun Life Financial; will address the challenges of sustainability that both government and private plans face at the Benefits Breakfast Club's 'The Evolving Roles Of Provincial And Private Coverage.' He will discuss tactics that are currently being used to control drug spending as well as plan member perspectives on plan design changes. The session also features Chris Bonnett, president of H3 Consulting, who will examine the employer role in funding health-related expenditures. It takes place November 24 in Mississauga, ON. For more information, visit www.connexhc.com

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Monday, November 21, 2011

Access To Surplus Restricted

Nova Scotia's Bill 96, the 'Pension Benefits Act (PBA),' could significantly restrict the ability of employers to access surplus, either while the plan is ongoing or on termination, says an Eckler 'Special Notice.' It provides that the entitlement of the employer and others to surplus under the plan must generally be set out in the documents that create and support the pension plan. In addition,
a plan that is silent on the issue of surplus withdrawals while the plan is ongoing is deemed to prohibit withdrawals of surplus accrued after January 1, 1988, and a plan that does not provide for the payment of surplus funds to the employer on plan wind-up is deemed to require that surplus accrued after January 1, 1988, be distributed proportionally among plan members, former members, retired members, and other persons entitled to payments under the plan on wind-up. In the case of successor pension plans, it provides that an employer will not be entitled to receive surplus on a full or partial wind-up unless the documents that create and support both the original and the successor plan provide for payment of surplus to the employer.

Mental Stress Terms Changing

Employers who have taken comfort from the fact that most provincial workers' compensation agencies provide benefits for workplace mental stress only in very limited circumstances may be facing a change, says a Fasken Martineau 'The HR Space.' It says that the B.C. government has introduced legislation that, if passed, will expand workers' compensation coverage for mental stress claims. Under 'Bill 14 – 2011 Workers' Compensation Amendment Act, 2011,' the requirement that the mental stress be an acute reaction to a sudden and unexpected traumatic event arising out of and in the course of the worker's employment will be eliminated. In its place, a worker would have to demonstrate that the mental stress is a reaction to one or more traumatic events arising out of and in the course of the worker's employment or a significant work-related stressor, or a cumulative series of significant work-related stressors, arising out of and in the course of the worker's employment. These amendments would change the landscape in that a B.C. worker would only have to show that one or a combination of traumatic events has occurred without reference to an acute reaction to a sudden and unexpected traumatic event. As well, an entirely new sub-category of mental stress would be created in B.C. If a worker could show that mental stress is a reaction to a significant work-related stressor, or a cumulative series of significant work-related stressors, arising out of and in the course of the worker's employment, the worker could obtain mental stress compensation.

PRPP Plan Applauded

The Association of Canadian Pension Management (ACPM) and the Canadian Life and Health Insurance Association are both applauding the federal government for moving ahead and tabling Pooled Registered Pension Plan (PRPP) legislation as a means of expanding the range of retirement savings options currently available to Canadians. "Canadians need innovative, accessible, broad-based savings options to help them reach their retirement savings goals. PRPPs, harmonized across all provinces, have the potential to achieve the economies of scale necessary to provide significant advantages to Canadians," says Christopher Brown, ACPM president. Frank Swedlove, president of the CLHIA, says "This is great news for Canadian workers. Millions of Canadians don't have a pension plan at work, especially those working for small and medium-sized businesses, and the self-employed. PRPPs will give them the opportunity to save in the workplace for their retirement through low-cost plans previously only available to large businesses. And they will be attractive to employers because they cut out almost all of the administrative burden and costs that employers often associate with pension plans."

Electronic Delivery Set Out

The Canadian Securities Administrators has adopted amendments to 'National Policy (NP) 11-201 Delivery of Documents by Electronic Means.' The amended policy will replace the current NP 11-201 and will come into force on November 18, 2011, when it will be renamed 'National Policy 11-201 Electronic Delivery of Documents.' In Québec, it will replace 'Notice 11-201 related to the Delivery of Documents by Electronic Means.' NP 11-201 explains how Canadian securities legislation obligations for the delivery of documents may be satisfied by electronic means.

bcIMC, Bentall Kennedy Move To Second Phase

British Columbia Investment Management Corporation (bcIMC) and Bentall Kennedy (Canada) LP will construct a 25,600 square foot office building on Fultz Boulevard in Winnipeg, MB. The building completes the second phase of a four-phase development at the West Fort Garry Business Park, which already includes an existing 92,692 square foot office building that will be occupied in early 2012. The tenant of the second office building is Stuart Olson Dominion Construction, one of western Canada's largest construction management and general contracting firms. Occupancy is scheduled for October 2012.

Deer Isle Represents Sarona

Deer Isle Capital will represent Sarona Asset Management's offerings in North America. Sarona is a private equity investor, investing in small and mid-market companies in frontier markets. It invests in sectors such as housing, agribusiness, education, financial services, healthcare, information, and communications technology and renewable energy. Its funds have more than $180 million in assets under management in emerging and developing country markets around the world. Deer Isle is an advisory firm that focuses on growth and catalyst capital which has advised and/or raised more than $5 billion in international assets with a focus on emerging markets since its founding in 2007.

Knowledge On Social Media Tools Grows

A majority of companies worldwide say they are becoming more knowledgeable about the use of social media tools to connect with and keep their workforces informed, says Towers Watson. Its '2011 Change and Communication ROI Study' shows companies plan to increase their use of social media tools over the next 12 months though many question their cost effectiveness. The biannual study also found that companies with the best communication programs enhance the communication skills of their leaders and managers and continuously evaluate performance.

GIPS Standards Changed

This year, key changes have taken effect in regards to Global Investment Performance Standards (GIPS). Bruce Feibel, author of 'Investment Performance Measurement' and co-author of 'Complying with the Global Investment Performance Standards,'outlined changes in policies and procedures for achieving and maintaining GIPS compliance at the 'The Importance of Performance Measurement' seminar hosted by CIBC Mellon. They include, eliminating the use of carve-outs, revaluing portfolios at the time of large cash flows, valuing portfolios on the last business day of each month, and providing documentation and tracking mechanisms on error corrections.

Call Goes Out For Entries

AIMA Canada is calling for entries for its 2011 research award. The award recognizes outstanding Canadian research pertaining to any aspect of alternative investments. The award is open to academics, students, and practitioners who are either residents of Canada or Canadian citizens living abroad. Topics may include, but are not limited to, investment strategy, regulation, trading, risk management, risk measurement, and manager selection. For further information, visit www.aima-canada.org. The deadline for submissions is December 31.


Three Join Toronto Office

Sandra Moroz is associate director, customer relations; Toms Lokmanis is investment specialist; and Maria Amoroso is a senior financial education specialist at Industrial Alliance's Toronto, ON, group savings and retirement sales and service office. Moroz will have the responsibility for the implementation of and the servicing of all clients in Ontario and Western Canada. Lokmanis will be responsible for supporting business development managers in new investment only sales and for servicing investment only and CAP clients in Ontario and Western Canada. Amoroso will service clients in Ontario.

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Friday, November 18, 2011

PRPP Legislation Introduced

The federal government has introduced legislation to create its new retirement savings vehicle ‒ pooled registered pension plans (PRPPs). The proposed plans are intended to fill the gap between traditional employer-sponsored pension plans and private savings plans such as RRSPs. They will provide a new Defined Contribution plan option for employers, particularly small businesses and the self-employed, who currently don't have access to workplace pensions. In addition to the federal legislation, the provinces will also need to introduce their own enabling legislation. As well, new federal tax rules for PRPPs need to be developed which will apply to both federally and provincially regulated plans.

Quebec Workers Have Less Mental Illness

Fewer Quebec workers have experienced a mental health-related illness than Canadian workers as a whole, but are less comfortable sharing their mental health issue with colleagues, says a Conference Board of Canada survey. 'Building Mentally Healthy Workplaces: Perspectives of Canadian Workers and Front-Line Managers' found 29 per cent of Quebec workers have experienced a mental health-related illness, compared to 32 per cent for Canada. However, while 28 per cent of Canadians are comfortable sharing their mental health issue with colleagues, in Quebec the figure is only 21 per cent. "These findings show the need for increased education and communication to combat the stigma, misinformation, and apprehension surrounding mental health in the workplace," says Claudine Ducharme, director, health solutions consulting services, for Morneau Shepell. "Employers must create a psychologically safe and healthy workplace. A good place to start is with a strong, demonstrated, and visible commitment by senior management that can identify problems, make the assessment, and control psychological hazards and risks."

Nova Scotia Moves On With Pension Reform

Nova Scotia has moved forward with the next phase of pension reform, introducing a new pension benefits act and releasing a further discussion document on proposed regulations that will be enacted under this act, says a McInnes Cooper 'Legal Update.' These reforms will affect all pension plans registered in Nova Scotia and parts of these reforms will affect all plans registered outside of the province with Nova Scotia members. Similar to the approach taken in Ontario, the Nova Scotia government is proposing to move away from the one size fits all funding model and appears poised to establish different funding requirements for different categories of Defined Benefit pension plans. For example, more lenient funding rules would apply to Jointly Sponsored Pension Plans (JSPPs), Specified Multi-Employer Pension Plans (SMEPPs), and Target Benefit Plans. Pension plan sponsors and administrators should review the act and the discussion document to determine their impact, ensuring that any issues are brought forward as part of the consultation process.  The draft regulations will be posted on the Department of Labour and Advanced Education website during the week of December 7 and interested stakeholders are invited to comment on both the discussion document that is currently posted and the draft funding regulations to be posted then.

Workers Focus On Money Needed In Retirement

Workers are increasingly focused on how much money they'll need to retire, not when they will retire, says a survey by Wells Fargo & Co. In fact, it found 25 per cent of the respondents say they'll need to work until at least age 80 because they will not have enough money to retire comfortably. Even those who plan on retiring expect they may continue working in some capacity for a variety of reasons including the need to work to afford things they want or to maintain their lifestyle. It found 76 per cent of workers believe it's more important to have a specific amount saved before retirement, regardless of age.

White Paper Calls For Pension Reform

The European Commission's  'White Paper on Pensions' will encourage member states to implement pension reforms by providing financial support and extend the working life of employees by urging the abolition of mandatory retirement ages. A draft of the report obtained by Investment & Pensions Europe (IPE) shows that member states wishing to receive expertise from other countries or international organizations would receive financial support for the implementation of pension reforms and new retirement policies. The commission insists on the need to support later retirement age and will present a recommendation in early 2013 to restrict access to early retirement schemes by abolishing mandatory retirement ages.

Fortune 1000 Firms Freeze DB

More than 40 per cent of Fortune 1000 companies that have Defined Benefit pension plans have frozen at least one such plan, says analysis by Towers Watson. That 40.6 per cent is up from 2010 when 35.5 per cent had frozen at least one DB plan. Employers have frozen their plans for a variety of reasons including cutting retirement plan costs and reducing the volatility of required contributions.

AIMA Explores Benchmarks

AIMA Canada will explore some of the new ideas emerging about benchmarks in a series of events called 'Benchmarks: Cornerstones or Millstones?' The next session will feature John Ilkiw, of Pharos Consulting and a former senior vice-president of the CPP Investment Board, who will discuss the evolution and application of the reference portfolio concept. As well, Bill Moriarty, CEO of UTAM, will talk about the bridge between the reference portfolio and the U.S. endowment model from a Canadian perspective. It takes place December 7 in Toronto, ON. For more information, contact Jovine Chan at 416-453-0111 or jchan@aima-canada.org

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Thursday, November 17, 2011

Statements Improve Awareness

Employers that use total rewards statements believe they are effective at helping to improve employees' awareness of the value of their benefits, as well as to retain and engage them, says a survey by Aon Hewitt. Its '2011 Canadian Talent Survey' shows 32 per cent of respondents provide annual total rewards statements to their employees and 81 per cent believe they improve employee awareness of the value of their benefits. As well, 74 per cent believe they help increase employee engagement and 72 per cent say they play a role in their attraction and retention efforts. "Total rewards statements can be extremely useful in helping employees gain a complete understanding of their total compensation," says Diane McElroy, a senior vice-president. "However, the 'next generation' of statements goes beyond sharing information to driving action, enabling employees to make the best possible use of the programs available to them."

Investors Seek Refuge From Eurozone

Institutional investors are increasingly seeking refuge from the eurozone in U.S. and emerging market equities, says a BofA Merrill Lynch survey of fund managers. It found that fund managers have slightly increased their exposure to equities generally since October's survey and a net five per cent is now underweight equities, down from seven per cent a month ago. The proportion of investors overweight U.S. equities rose sharply to a net 20 per cent, from a net six per cent in October. Additionally, global emerging markets are now being overweighted by a net 27 per cent of investors, up from a net nine per cent last month. The eurozone remains the least popular region, but the proportion of investors underweight eurozone equities ticked down just one percentage point to a net 30 per cent.

AllianceBernstein Appoints State Street

State Street Corporation has been appointed by global asset manager AllianceBernstein L.P. to provide investment operations outsourcing services covering more than $300 billion in client assets. It will provide a range of services including trade settlement, portfolio administration and reconciliation, derivative operations, client reporting, and performance measurement for AllianceBernstein's institutional accounts. Its relationship with AllianceBernstein and funds it sponsors dates back to 1978.

Compensation Levels Staying Flat

Compensation levels for investment professionals in 2011 are expected to be flat to modestly higher than those reported in 2010, says a report released jointly by Greenwich Associates and Johnson Associates. Within traditional asset management organizations, compensation for 2011 is projected to be flat from 2010 levels to five per cent lower for equity professionals and flat to five per cent higher in fixed income. Within hedge funds, year-end compensation is expected to vary widely based on company performance for both equity and fixed income professionals, with some down and others flat or up versus 2010.

Impact Of Major Illness Significant

Nine out of 10 Canadians anticipate a financial impact if they were to experience a major or chronic illness, with more than half (53 per cent) saying that impact would be significant or perhaps permanent, says the second annual 'Sun Life Canadian Health Index.' Despite these high awareness levels, only 58 per cent of Canadians are either preparing or are currently prepared financially in case they get sick. And only eight per cent of Canadians have a written financial plan that includes insurance and risk management ‒ two elements that address the economic impact that could come with a major health issue. "Canadians' understanding of the connections between health and personal finances are hard-earned," says Kevin Strain, senior vice-president, individual insurance and investments. "We found the majority of Canadians have either personally experienced or have had someone close to them suffer a serious health issue. However, fewer than one in five say they had evaluated or re-visited their finances following the experience."

Caisse Buys Colonial Shares

The Caisse de dépôt et placement du Québec has entered into definitive agreements with ConocoPhillips to purchase its 16.55 per cent interest in Colonial Pipeline Company and Colonial Ventures LLC. Colonial Pipeline is the largest refined petroleum products pipeline in the United States. It extends more than 8,800 kilometres between the Gulf of Mexico and the Northeastern U.S. and transports the equivalent of 2.3 million barrels per day.

Strata Acquires McCoy

Strata Benefits is expanding as a result of its acquisition of McCoy Solutions.  Located in Lumsden, SK, the group benefits business of McCoy will be rolled into STRATA's operations.  Roanna McCoy will join STRATA as a consultant and Margareta Wiebe will join it as an administrative assistant.  In addition to this location, STRATA operates out of Saskatoon, SK; and Winnipeg MB.

MFS McLean Created

McLean Budden and MFS Investment Management have closed a transaction to create a new investment management subsidiary of MFS, called MFS McLean Budden. This makes McLean Budden a wholly-owned subsidiary of MFS. The new entity is based in Toronto, ON; and has offices in Montreal, QC; and Vancouver, BC. It manages more than $30.4 billion in assets on behalf of pension, foundation and endowment, private wealth, and mutual fund clients. The chief executive officer and chairman of MFS McLean Budden is Martin Beaulieu, a vice-chairman of MFS and previously its head of global distribution.

Epstein Joins CEM

Jonathan Epstein is director, U.S. Territory, for CEM Benchmarking Inc. He will be responsible for the marketing and product development efforts within the Defined Contribution space for CEM's benchmarking services.  Prior to joining CEM, he held positions with ICMA ‒ Retirement Corporation and Associated Trust Company, both U.S.-based corporations.

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Wednesday, November 16, 2011

ESG Factors May Not Fit Model

Integrating environmental, social, and governance (ESG) into the investment process with a mainstream model may not be ideal, says Michael Jantzi, chief executive of Sustainalytics. Speaking at a TBLI conference, he said while investors could measure certain ESG criteria such as carbon emissions, other issues such as indigenous rights are more difficult to define and quantify. Since integrating ESG starts with a mainstream model, changes may be necessary to accommodate areas which do not fit easily into the model.

Express Scripts Now Pharmacy

Express Scripts Canada, a provider of health benefits management services in Canada, has been granted a licence to operate a pharmacy in Ontario by the Ontario College of Pharmacists. Express Scripts Pharmacy Ontario Ltd. is an integral component of Express Scripts Canada's newly-announced business model – an expanded pharmacy benefit management service, which includes home delivery of maintenance prescription medications. With an understanding of the patient's benefits plan, the pharmacy will help the patient and their physician to make more informed decisions which will reduce the cost of drug therapies to the patient – and to the companies and organizations which provide the health benefits plan. The license is effective immediately.

DC Sponsors More Confident In Target Date

Defined Contribution plan sponsors have a higher level of confidence in their target-date fund knowledge and offerings compared to a year ago, says a survey by Janus Capital Group, Inc. However, despite this sense of confidence, it found a significant percentage of sponsors who seem to be unaware or unconcerned about areas that could present real fiduciary risk. Half of all plan sponsors are 'not at all concerned' about litigation regarding target-date glide paths, yet more than 50 per cent were not sure what their fund's glide path is. Almost 80 per cent of all plans are either not, or not sure, if they are monitoring the duration of their target-date funds' fixed income allocation. Nearly 40 per cent of plans that have both target-date funds and an investment policy statement (IPS) do not include language in the IPS pertaining to target-date funds and their underlying funds.

VC Market Makes Gains

After a comparatively slow first half of 2011, venture capital (VC) market activity in Canada made gains in the third quarter, with particularly substantial year-over-year growth in dollars invested, says a report by CVCA Canada's Venture Capital & Private Equity Association and research partner Thomson Reuters. Canadian VCs invested $388 million between July and September, up 51 per cent from the same time in 2010. This occurred following two quarters of more moderate trend lines in the domestic VC market, especially as compared to activity in the United States. As a result of the third quarter activity, Canadian VC deal-making dollar flows totaled $1.1 billion at the end of September, up 30 per cent from the $882 million invested during the first nine months of 2010. Canadian technology sectors benefited from higher levels of VC activity with $177 million invested, up 31 per cent from the year before, while the life sciences sectors secured $106 million, up 83 per cent.

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Tuesday, November 15, 2011

Express Scripts Expands PBM Service

Express Scripts Canada, a provider of health benefits management services in Canada, is introducing a new business model that will enable it to offer companies and organizations that provide health benefits to their employees the opportunity to better control the costs of the prescription drug benefit, while offering the potential to improve health outcomes to thousands of Canadians. The model is based on an expanded pharmacy benefit management (PBM) service and home-delivery pharmacy and is designed to complement existing drug benefit programs provided to plan sponsors by insurance companies and third-party benefits administrators. "Given past and current trends of rapidly rising costs to maintain health benefits programs, as an industry, we need to improve the way Canadians can access safe, affordable prescription drugs," says Michael Biskey, its president. "To better control rising costs, plan sponsors and insurance carriers need an integrated solution, such as our expanded pharmacy benefit management service, that enables them to more effectively manage their drug benefits. The service will launch January 3, 2012.

Action Needed Now To Engage Younger Workers

U.S. companies must act now to engage younger workers in employer-sponsored Defined Contribution plans if up-and-coming generations are to have a realistic chance of achieving a financially secure retirement, says a study from Northern Trust. 'The Path Forward: Engaging the Younger Employee in DC Plan Participation,' the second instalment of Northern Trust's research series on the future of DC plans, notes that workers under age 35 are likely to be more dependent on DC plans for their retirement savings than previous generations as the future appears less certain for both Defined Benefit pension plans and Social Security. As a result, the report argues, the time has come for employers to direct time and resources specifically to the approximately 61.5 million workers who are under age 35. Employers should focus on this group of younger workers for two reasons," says Bob Browne, its chief investment officer. "First, this is a generation of workers for whom company-sponsored DC and 401(k) plans represent the primary and, in many cases, the only vehicle for retirement savings. Second, these young workers still have time to make and implement choices that will have a meaningful, positive effect on their financial situation later in life."

Sandvik Developing Global Strategy

Sandvik AB will develop a global pension risk management strategy in more than 15 countries, including Canada. The global engineering group, headquartered in Sweden, will use Mercer to provide multiple global actuarial, pensions, and benefits services for more than 40,000 employees internationally. As well as developing the global pension risk management strategy, Mercer will also act as Defined Benefits administrator in four large markets (Canada, Germany, the UK, and the U.S.), will manage the organization's benefits globally, and will support the firm's initial phases for a global Defined Contribution scheme management.


Bermuda, Toronto Connected

'Jurisdiction Opportunities and the Impact of the TIEA' and 'Three Verticals of Success: Asset Management, Captive Insurance and Islamic Finance: Assessing the Mutual Opportunities' will be examined at the 'Building Ties Between Toronto and Bermuda' session. The half-day information event is intended to build on the existing ties and to build new business opportunities. It takes place November 17 in Toronto, ON. For more information, visit www.hfhto.com

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Monday, November 14, 2011

Integra Represents Analytic

Integra Capital Limited will represent Analytic Investors, LLC's global and U.S. low volatility equity strategies in the Canadian institutional market. Integra will launch pooled fund investment vehicles incorporating these strategies to provide institutional investors access to Analytic's capabilities and skill sets. Analytic is an industry leader and pioneer in the provision of low volatility investing strategies. Low volatility equity strategies are designed to have significantly lower volatility than the broad market yet still capture the equity risk premium over the long term. Its approach is an actively managed, highly liquid, and long only process.

De-risking Key Feature Of Landscape

More European firms are seeking to de-risk their pension plans, says research by J.P. Morgan Asset Management. Its white paper says de-risking has become a key feature of the pension landscape. However, it finds that plan sponsors that seek to de-risk pension plans entirely are "dreaming an impossible dream." Strategies such as tax arbitrage are not feasible in a low yield, low liquidity environment. Similarly, arguments in favour of de-risking, such as agency costs and "creative accounting," can actually end by increasing overall risks.

Clients Positive Towards Gold, Some Bonds

Schroders' intermediary clients from Europe, the Middle East, and Latin America have positive sentiment towards certain government bonds and gold. Its research reveals almost half believe that German, UK, and U.S. bonds will yield between two to four per cent in five years' time and 31 per cent believe the same bonds will yield four to six per cent. Attitudes towards gold are optimistic with almost 40 per cent believing that the gold price will reach at least $2,000 per ounce in two years.

Americans Adopting HSAs

U.S. employers and consumers alike are adopting Health Savings Accounts (HSAs) as a viable way to manage their healthcare costs without compromising care, says the '2011 Employer and Account Holder Surveys' from ACS, A Xerox Company, conducted by Buck Consultants. They show a majority of small employers (77 per cent) believe that high deductible health plans (HDHP) with an HSA are key in controlling healthcare costs. Additionally, more than half (56 per cent) of account holders have found that their HSA-qualified plan provides an affordable healthcare option. The surveys show that HSAs put consumers in the driver's seat when it comes to managing their health services and care. Individuals perceive that they consume medical services at approximately the same rate, but are shopping for care more than before.

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Friday, November 11, 2011

Market Decline Hurts CPP

The Canada Pension Plan Fund had a 0.8 per cent loss on its investments in the three months ending in September. The CPP Investment Board says assets totaled $152.3 billion at the end of the quarter. The $0.9 billion decrease from the previous quarter resulted from an investment loss of $1.2 billion, which was partially offset by CPP contributions of $0.4 billion. The loss compared with a decline in major stock indices of 11 per cent on average during the period. The fund has grown by $4.1 billion since March 31 as a result of $100 million in investment income, a 0.1 per cent rate of return, and contributions of $4.2 billion. Over the last five years, the fund has had an annualized rate of return of 3.1 per cent.

Europeans Increase Use Of Options And Swaps

European institutional investors are planning to increase their use of structured over-the-counter (OTC) equity options and swaps in the coming year, says a survey by Greenwich Associates. Its  'European Equity Derivatives' study shows 60 per cent of European institutions are seeking to step up their use of equity options over the next 12 months, while 30 per cent are expecting to increase their use of equity swaps. Jay Bennett, consultant at Greenwich Associates, says "Since these products have now been fully integrated into the equity investment process, trading activity in options and swaps is largely determined by the same macro trends influencing market activity in cash equities."

Bond Investors Provided With Forum

The newly-established Canadian Bond Investors' Association (CBIA) will hold its inaugural meeting November 29 in Toronto, ON. The new association has been formed to provide a forum for discussion and a voice for fixed income investors in Canada. Membership is open to fixed income institutional investors such as pension funds, insurance companies, and independent investment counsels.  In addition to its primary objective of being an advocate for positive change in the Canadian bond market, the CBIA will be a source of market information and expertise for fixed income investors. For more information, visit www.bondinvestors.ca

Mixed Results For Pooled Funds

Results were mixed for balanced pooled funds in the UK during the third quarter of 2011 with equity funds struggling and bonds performing well, says BNY Mellon Asset Servicing. Against this backdrop of market uncertainty, balanced pooled funds returned -12 per cent during the quarter. This swing into the red has impacted the one-year period to September 30 as any gains made in the previous three quarters were wiped out with balanced funds returning -4.2 per cent.

Collateral Balance Monitored

Northern Trust has launched Collateral Balance Reporting, an automated solution that allows custody clients to monitor the amount, location, and status of collateral, including counterparty exposures, on a global basis. It leverages Northern Trust's enhanced straight-through processing environment for client collateral on its global operating platform. Instructions for collateral, whether active or passive or pledged by the client or a broker, are electronically conveyed, processed, and reported to clients on a real-time basis. Client reports identify the securities used as collateral, total amounts of collateral pledged or received, types of transaction for which the collateral is used, and all counterparties.

Barbara, Dowdall Move Up

Rob Barbara is a senior vice-president at Burgundy Asset Management Ltd. He joined the firm in 2002 and was appointed managing director of Beaujolais, a division of Burgundy, in 2004. Greg Dowdall is vice-president at Burgundy and managing director of Beaujolais. Before joining the firm in 2009, he spent eight years with Phillips, Hager & North.

Connecting Health To Bottom Line

The '2012 Employers Forum on Employee Health, Benefits, and Productivity' will take place April 18 to 20 in Niagara Falls, ON. Discussions include mental health, provincial and private coverage, and cancer care. For more information, visit www.connexhc.com

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Thursday, November 10, 2011

Fixed Income Worries Europeans

European institutional investors are increasingly worrying about achieving returns on their fixed income investments, yet the majority still seek to maintain or increase allocations to the asset class before year-end, says a survey by JP Morgan Asset Management. It says the low-rate environment represents the main source of concern, with 22 per cent of institutional investors saying this could pose a serious threat to their fixed income returns. In addition, 19 per cent say sovereign or political risk was a concern, while another 19 per cent are worried about managing portfolio risk. The majority of investors expect annualized returns of zero to four per cent per annum over three years. In spite of these concerns, 73 per cent are still planning to maintain or increase their allocation to fixed income before the end of this year.

Funds Want To Increase Real Estate

Pension funds are looking to increase their real estate investments, particularly in low-risk core real estate, as allocations to the asset class approach their targets, says Preqin. Currently, the average real estate allocation remains eight per cent, which is short of the 9.3 per cent long-term target. It says 82 per cent of all institutional investors and 65 per cent of private sector pension funds are interested in core real estate funds as they seek to add more low-risk investments. Private real estate funds remain most popular, with nearly 81 per cent of investors preferring them over two other categories – direct real estate (57 per cent) and listed real estate (33 per cent).

Gwin Joins OMERS Ventures

Howard Gwin is managing director of OMERS Ventures, the venture capital investment arm of the OMERS pension plan. He will be responsible for helping it identify and partner with high-growth companies it can finance from the early stages right through to sale or initial public offering. He has experience in every major software industry segment, including a managing director role at a Silicon Valley venture capital firm and as president at Solect Technology Group.

Financial Literary Forum Comes To Toronto

The Investment Funds Institute of Canada's 'Annual Financial Literacy Forum' brings together individuals who share an interest in providing Canadians with the information and knowledge necessary to navigate through their financial lives. This year's event will discuss global developments in the area of financial literacy, as well as behavioural economics as to why we make certain investing choices. It will take place November 22 in Toronto, ON. For more information, visit http://www.cvent.com

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Wednesday, November 9, 2011

Healthcare Trust Finalized

An independent trust fund that will cover the costs of supplementary healthcare benefits for retirees from General Motors Canada has been finalized. The 'Auto Sector Retiree Healthcare Trust' was negotiated as part of the government-supported restructuring of General Motors in the spring of 2009. Following two years of legal implementation and consultation with GM retirees, the trust has now been approved by the Ontario Court of Justice and will take effect. This system has been in place providing supplementary healthcare benefits for retired workers at Chrysler Canada since the beginning of this year. Supplementary health benefits (including prescription drug coverage, dental, and vision care) will now be provided to the estimated 32,000 Canadian retirees of GM by the independent trust fund, instead of by the company. GM Canada will pay a total of more than $2.5 billion into the fund over the next seven years, beginning with an initial contribution of $1 billion. The funds contributed by GM, plus investment income earned on those assets, will be used to fund retiree health benefits (including benefits for existing workers at GM, after they retire).

Emerging Markets Story Changes

If China and India are going to account for 25 per cent of the global economy in 10 years, why not get into them now, says Andrew Barker, senior portfolio manager at Artio Global Investors. Speaking at its 'Global Economy: Structural Clarity/Policy Uncertainty' presentation, he said 10 years ago the story in emerging markets was in their exports to developed markets. Now they are starting to focus on domestic consumption which means they are no longer as linked or co-related. In terms of investing in the developed world, he suggested investors look for companies that have recognized this shift in the emerging world and have strategies for a changing global economy. Part of the reason for the change is that U.S. consumers are of decreasing importance globally. In fact, companies that depend on U.S. consumption for their earnings should be avoided, he said. Another issue is that the U.S. has not come to grips with solving its problems. Politicians are treating it as a normal cyclical downturn, and it is isn't. Traditional methods for solving these issues such as stimulus programs no longer work because the money ends up leaving the country and doing more for the economy of Asia than that of the U.S.

AIMCo Part Of Chilean Electrical Deal

The Alberta Investment Management Corporation (AIMCo) will acquire Morgan Stanley Infrastructure Partners' 50 per cent interest in Inversiones Grupo Saesa Limitada, a regulated electricity transmission and distribution company in Chile. Leo de Bever, AIMCo CEO, says "We believe that through investments in core infrastructure like transmission and distribution, AIMCo can contribute to the ongoing growth story in Chile alongside our existing investment in Autopista Central." Grupo SAESA is the second largest electricity distributor in Chile and is comprised of seven subsidiaries primarily involved in electricity distribution and transmission. The company delivers electricity to 16 per cent of Chile's population. The company owns and operates more than 53,500 kilometres of distribution and transmission lines and serves approximately 700,000 customers. The other owner is the Ontario Teachers' Pension Plan.

Desjardins Launches Personal Finance Index

Desjardins Group has instituted the first-ever Canadian index of responsible personal finances. This index was inspired by the definition of financial literacy developed by the federal government's financial task force in June 2009. It's an original and comprehensive yardstick that provides a complete assessment of the public's ability to manage their personal finances, covering the two basic dimensions of knowledge and behaviour. It features an online self-evaluation tool to help individuals assess and improve their personal finance management skills and develop responsible habits.

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Tuesday, November 8, 2011

Awareness Growing On ESG

Awareness among institutional investors of Environmental, Social, and Governance investing (ESG) has grown in the last 12 months and 82 per cent of fund managers now believe that ESG issues are an important consideration when choosing new investments, says a report from Clear Path Analysis. The data reveals that 75 per cent of those following SRI principles see value in considerations such as managing reputation and country risk – specifically within frontier markets. With rapid economic growth, maturing capital markets, evolving political and regulatory frameworks, and youthful demographics within those markets attracting increased attention from global institutional investors keen to deploy funds, investors want higher transparency standards and believe an SRI investment approach can help to achieve this. Still, 43 per cent remain unclear about the links between ESG and profits in the short- to medium-term. The 'Environmental Social and Governance Investing' report says investment managers sometimes believe, wrongly, that ESG investing is merely just another top-down, board driven set of constraints and can offer no intrinsic value to their investment approach.

Investment Guidelines 'Odd'

CAPSA's draft prudent investment practices guideline is, like other recent initiatives, a little "reaching and, perhaps, odd," says Greg Winfield, a partner in the pensions, benefits, and executive compensation group at McCarthy Tetrault. He told the 'Investment Policies In Detail' session at its 'First Annual Pension Seminar' that the new investment policy advances some thoughts in line with Statements of Investment Policies and Procedures (SIPPs), which he called among the very best parts of the late 1980s' reforms, but not a lot. And, it risks confusing issues in the minds of some stakeholders. He also wonders why an administrator would prefer to have investment issues contained in two documents, which may conflict, when one will suffice. Fortunately, the policy will be optional and all or some of the issues may be included in a plan's SIPP.

Greek Pension System Worst

The Greek pension system is the worst in the world because of its acute sovereign debt and overly generous promises, while Australia has the most sustainable system, says Allianz Global Investors' 'Pensions Sustainability Index (PSI).' It analyzed the current and future prospects of national pension systems in 44 countries around the world. Greece was ranked the worst despite pension reforms initiated as conditions of austerity packages issued by the International Monetary Fund (IMF) and the European Central Bank (ECB). India, China, and Thailand also show the greatest need for pension reform, primarily due to extremely low coverage. Australia's two-tier system of lean public and highly-developed funded pensions puts it under the least pressure to reform. Australia is followed in order by Sweden, Denmark, New Zealand, and the Netherlands.

Policies Attempt To Counter Minimum Contribution Trend

Funding policies appear to be an attempt to counter the trend towards minimum Defined Benefit pension plan contributions, says Lorraine Allard, a partner in the tax group at McCarthy Tetrault. Speaking on 'Defined Benefit vs. Defined Contribution: The Pros And Cons Of Each From A Legal Perspective' at its 'First Annual Pension Seminar, she said, however, while both FSCO and OSFI will require the funds they regulate to have these policies, there is no statutory requirement to have these documents. She called the CAPSA guideline unclear as it requires employers to draft these policies even though it is the administrator who governs the plan. And it does not articulate its purpose except to say that it is meant to establish a framework for taking into account relevant factors where listed. And, by requiring that a summary of the policy be circulated to plan members, except where it is counter to a company's commercial interest, it is providing a road map for legal actions against pension plan sponsors.

Qualifying Investors Need To Identify Themselves

Sponsors of pension plans and other employee benefit plans may need to identify themselves as qualifying investors before November 15, says Greg Hurst & Associates. It says the Canada Revenue Agency has revised GST/HST Notice No. 259. As a result, investment plans are no longer required to request such information from qualifying investors as the revised draft regulations now impose the onus on the qualifying investor to self-identify and report to the investment plan. A qualifying investor is an investment plan other than a distributed investment plan that is not a qualifying small investment plan for the purposes of Part 1 of the draft SLFI regulations; is an SLFI or member of an affiliated group where the members hold units of the investment plan with a total value of $10,000,000 or more; or where any member is an SLFI. For more information, visit www.greghurst.ca

Good Governance Requires Clear Objectives

Good governance policies should have clearly stated objectives with defined roles and responsibilities, says Randy Bauslaugh, a partner in the pensions, benefits, and executive compensation group at McCarthy Tetrault. Speaking at its 'First Annual Pension Seminar' on 'Developing Useful Governance Policies,' he said there is a direct link between the quality of governance and organizational performance. He called governance a decision-making process and these policies should be user-friendly, up-to-date, and outline procedures and reference other relevant policies. They should also reflect the culture of an organization.

Men Make Investment Decisions

Men make all or most (65 per cent) of their household's financial decisions without input from anyone else, says 'The Future of Retirement: Why family matters,' a global study of attitudes to retirement and financial planning from HSBC. In Canada, when planning for retirement, about half of all men (49 per cent) and women (54 per cent) say they share responsibility for making decisions. However, the gap widens when it comes to men (34 per cent) and women (24 per cent) who say they take, or are given, sole responsibility for these decisions.

Certificate Offered In Pension Law

Key issues of pension issues and their implications will be the focus of the 'Osgoode Certificate in Pension Law' program. Comprised of six one-day modules spread over six weeks, it is taught by acknowledged experts in the pension field and was devised to provide a comprehensive review and analysis of the major areas of pension law and practice. For more information, visit http://www.osgoodepd.ca/cle/2011-2012Fiscal/2011_pension_cert/index.html

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Monday, November 7, 2011

Russell Turns To Sustainalytics

Russell Investments has appointed Sustainalytics to provide stock-level environmental, social, and governance (ESG) information to support analysis of its funds and client portfolios. With consideration of ESG issues on the rise, this will enable Russell to develop its investment services for clients all over the world who seek greater ESG integration in their portfolios. Sustainalytics evaluates and analyses companies on a range of ESG metrics using targeted sector-specific ESG indicators. The analysis is supported by data gathered through a variety of primary and secondary sources and specialized third-party data providers.

Funding Deficit Decreases

The deficit facing S&P 1500 pension plans decreased by $41 billion during October from $512 billion to $471 billion, says Mercer. This gives them a funded ratio of 75 per cent as of October 31, compared to a funded ratio of 72 per cent at September 30, 2011, and 81 per cent at December 31, 2010.  It was the largest one-month improvement since September 2010, when the funded ratio improved four per cent. The increase was due primarily to an 11 per cent gain in equities, although this was partially offset by the continued decrease in yields on high quality corporate bonds during October.

401(k) Matches Restored

Most U.S. employers who suspended their 401(k) plan matching contributions during the recent economic downturn have now restored them, says Towers Watson. Its study shows of those that had suspended their 401(k) matching contributions, 75 per cent have now restored them. Among those employers, 74 per cent reinstated the matching contributions to their previous level, while 23 per cent restored them at a lower rate and three per cent restored their contributions but at a higher rate.

Event Raises $250,000

More than 200 Canadian hedge fund industry professionals and supporters gathered for the eighth annual 'Open Your Hearts to the Children Gala.' The fundraising evening organized by Hedge Funds Care Canada raised more than $250,000 for the prevention and treatment of child abuse. This is the highest amount ever raised by Hedge Funds Care Canada and brings the amount the event has raised to more than $1.4 million. All of the funds are distributed through grants to community-based organizations devoted to preventing child abuse.

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Friday, November 4, 2011

Biologics Promise Healthier Future

Biologics promise a healthier future for many Canadians. However, they will create a challenge for plan sponsors and insurers in dealing with how to pay for them, says a Morneau Shepell 'Vision.' 'The Promise of Biologics: A Dilemma for Benefit Plan Sponsors' says many approaches exist to mitigate the cost impact and it is important to deal with this issue on a proactive basis while the cost implications are still manageable. And lower cost generic biologics in the future is unlikely as the production is much more complicated than for traditional 'small molecule' drugs and the end product is equally more complex. Subtle differences in the source materials, manufacturing process, equipment, or facilities can result in significant and unexpected changes in the final product relative to the original biologic. Even when a product is biologically similar to the original biologic, one can expect differences in efficacy and side effects. As a result, it is generally not possible to duplicate the original biologic to create a generic.

Panel Calls For Lower Pensions

A three-member panel is calling for measures that would result in a reduction in the pensions of the 52 members of the Nova Scotia legislature. Led by retired provincial Supreme Court Judge David Gruchy, it recommends that legislature members should serve 20 years ‒ up from 15 years ‒ before becoming eligible to receive a full pension. It also recommends that the earliest age at which a retired member can collect any pension be raised to 50 years of age from 45. And it wants the amount of pension a politician earns for each year of service cut to 3.5 per cent of salary from five per cent for every year they serve in public office.

Pooled Plan Offered For 15 Years

While the government of Canada is currently examining the feasibility of implementing a Pooled Registered Pension Plan, Assumption Life says it has had the same concept for more than 15 years. It says its 'Multi-employer Pension Plan,' which is now available in New Brunswick and Nova Scotia, is a Defined Contribution plan specifically designed to allow small and medium-size businesses with an easy way to offer a pension plan to their employees. By grouping many companies together in one plan, the administrative costs normally associated with the implementation and management of a pension plan are reduced.

Plans Review Manager Fees

Close to half of pension plans review the fees they pay their money managers annually, up from 31 per cent two years before, says the Callan Investment Institute '2011 Investment Management Fee Survey.' The survey shows sponsors negotiating fees with 42 per cent of their new managers and 14 per cent of existing managers. Compared to the previous survey two years ago, the latest results showed mostly incremental changes, with asset class segments attracting inflows seeing incremental fee gains of one to three basis points. In addition, the median fee for broad core fixed income mandates fell between 2004 and 2009 from 34 basis points to 25 basis points and then rebounded over the past two years to 27 basis points. For alternatives strategies, the latest figures show real estate related fees increasing, but hedge fund-of-funds fees declining over the past two years.

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Thursday, November 3, 2011

Challenging Quarter For Active Managers

The active management environment in the third quarter of 2011 was one of the most challenging on record, says Russell's 'Active Manager Report.' Only 40 per cent of large cap Canadian equity investment managers beat the benchmark, down from 68 per cent in the second quarter – a dramatic decrease. "Bottom-up stock fundamentals did not seem to matter in the quarter, as macro concerns such as the on-going debt crisis in Europe, dominated," says Kathleen Wylie, senior research analyst. "As well, we observed a significant spike in the correlations of stocks and when that happens it is very challenging for active managers to add value. There were few places to hide when 74 per cent of the stocks in the index declined in the quarter. For many investment managers, benchmark-relative performance in the quarter was their worst on record."

Wellness Delivered To Employees

The trend is clear. More employers are delivering or planning to deliver health and wellness programs to employees, says a Connex 'NEWSLink.' It says, however, if employers want to know that these financial investments will be money well spent, they need a comprehensive strategy with clear goals, specific objectives, and a platform from which to develop, target, and evaluate programs. To be successful, it says it is critical to understand the current diseases driving benefit and productivity costs, the health and lifestyle practices of employees that put them at risk for future disease and disability, and the corporate culture and psychosocial environment. Once a baseline is established through an assessment process, a plan, with a specific goal and objectives, can be developed that will detail the programs to deliver, how to deliver them, and how to promote and evaluate them.

Maximum Set At $50,100

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2012 will be $50,100, up from $48,300 in 2011, says the Canada Revenue Agency. The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada. Contributors who earn more than $50,100 in 2012 are not required or permitted to make additional contributions to the CPP. The basic exemption amount for 2012 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP. The employee and employer contribution rates for 2012 will remain unchanged at 4.95 per cent and the self-employed contribution rate stays at 9.9 per cent.

Funding Perfect Storm Discussed

'From Family Law to Funding Key Concerns for Plan Sponsors in Ontario' is the focus of the ACPM Ontario region's 'impACT 2011.' Topics examined include best practices for Defined Benefit and Defined Contribution plan administrators and actions plan sponsors and administrators should consider in what appears to be another perfect storm affecting pension plan funding. It takes place November 24 in Toronto, ON. For more information, visit http://www.acpm.com

Seminar Examines Legal Risks

'A Co-ordinated Strategy to Manage your HR Legal Risks featuring the Misadventures of Mr. Lumpy' will be presented at Spectrum HR Law LLP seminars in Calgary, AB; and Vancouver, BC. It discusses the various human resources legal issues that can arise in an organization resulting from difficulties with a senior employee. Topics will include pension and SERP division on marriage breakdown and pension plan governance issues. It takes place November 23 in Calgary, AB; and November 29 in Vancouver, BC. For more information, visit http://spectrumhrlaw.com

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Wednesday, November 2, 2011

New Brunswick Amends Spousal Rights

Significant changes to the New Brunswick Pension Benefits Act affecting spousal rights will apply to all pension plans registered in New Brunswick or that have members employed in that province, says a Mercer 'Communiqué.' The changes relate to definitions of qualifying spousal relationships for pension purposes, spousal priority rules, and re-determination of pensions for certain same sex spouses. The 'Communiqué' says the revised requirements for establishing a qualifying common-law relationship and the clearer spousal priority rule are very positive changes. The old rules were a source of confusion and, in many cases, conflict. While no deadline has yet been imposed for formal plan amendments, pension plan sponsors should consider making amendments to reflect the changes. In the meantime, plan administrators should administer their plans in accordance with the revised spousal definitions immediately and should begin using the updated versions of the relevant prescribed forms.

Morneau Offers New 'My EAP'

Morneau Shepell Ltd. has a new version of 'My EAP' that offers instant and unlimited access to online, employee assistance program (EAP) expert support resources. The launch of My EAP version 1.2 for iPad and Android devices allows the general public access to assistance with their work, health, and life, while they're on-the-go. It makes use of Shepell•fgi's online information centre and connects users to expert articles on health and wellness, LifeSpeak On Demand videos, and secure confidential e-counselling. 

Apotex Launches Generic PPI

Apotex Inc. has launched Apo-Esomeprazole, a generic version of AstraZeneca's Nexium, a gastric proton pump inhibitor (PPI). With initial launches to the provinces of Québec, Nova Scotia, New Brunswick, and Ontario, Apotex has now released product to the remainder of the Canadian market. The brand product costs the public and private healthcare budgets close to $300 million per year.
Apotex is the only generic pharmaceutical company to have successfully litigated the Nexium patents, bringing the first generic alternative to market eight years prior to all patents expiring. With this latest victory, its legal efforts are estimated to deliver a cumulative savings of $6.5 billion to Canada's healthcare system.

AIMCo Calls For Better Directors

The Alberta Investment Management Corp. (AIMCo) is demanding that Viterra Inc. find directors who can better guide the company's aspirations to make deals. In a statement, AIMCo, which is Viterra's largest shareholder with more than 17 per cent of  shares, says the board lacks the "required skills and experience to meet the company's leadership needs as a growing international agribusiness." AIMCo wants directors with expertise in international finance and valuations, as well as the global agricultural industry, so they can help the company make acquisitions. Viterra is in a variety of food-related businesses such as selling seed and fertilizer, handling and processing grain, and providing animal feed.

Neal Moves To Manulife

Adam Neal is Canadian head of sales and relationship management for Manulife Asset Management. In this newly-created role, he will manage the team responsible for expanding the company's foothold in the Canadian institutional marketplace and for further strengthening relationships with the organization's institutional and affiliated clients. He was previously with Pyramis Global Advisors where he was responsible for institutional investment management sales focused on the Defined Benefit, foundation, and endowment marketplace in Ontario and Western Canada.

Pension Ponzi Examined

'Pension Ponzi: Canada's Public Sector Problem' will be the focus of a Fraser Institute session. Bill Tufts, a pension expert and author,' will discuss how governments at all levels have refused to face up to the power of the public sector unions about the overly generous pension schemes which are woefully underfunded. It takes place November 23 in Toronto, ON. For more information, visit www.fraserinstitute.org  

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Tuesday, November 1, 2011

Pension Wealth Nears $2.3 Trillion

The continuing overall improvement in financial markets and, in particular, the recovery of Canadian equity markets in 2010, drove pension wealth to nearly $2.3 trillion at year end, says Statistics Canada. The total value of pension assets in Canada increased 9.8 per cent in 2010, following a 15.7 per cent advance the year before. Assets in individual registered saving plans and employer-based pension plans combined accounted for 92.3 per cent of total pension wealth in 2010. Social security plans made up the remainder.

Uncertainty Only Certainty

Uncertainty continues to be the only certainty in the financial markets these days and the results of the 'Russell Financial Health Index' remain at low levels comparable to those seen in early 2010, an indication that Canadians are still concerned about volatility in the markets and the overall economy. For the third quarter of 2011, the index ‒ an online calculator that gauges the overall financial health of Canadian investors ‒ stood at 47.47, slightly lower than the same timeframe last year and approaching the lowest levels since the benchmark was established in early 2008. Of note this quarter was the fact that two of the 14 indicators surveyed were at an all-time high since the inception of the survey in 2008 as key concerns for Canadians about their financial health in retirement. Interestingly, these were life factors rather than financial factors. They were children and aging parents needing help and the financial impact of the death of a spouse.

TMX Enters Support Agreement

TMX Group Inc. and Maple Group Acquisition Corporation have entered into a support agreement in respect of Maple's proposed acquisition of all of the outstanding TMX Group shares. The TMX Group Board is unanimously recommending that shareholders accept and tender their shares to the Maple offer and vote in favour of the second-step arrangement transaction. In making its determinations, the board took into account a number of factors including the value of the transaction to TMX Group shareholders as well as the expected benefits of the Maple transaction to TMX Group and Canadian capital markets participants and other stakeholders.

Sponsors Lose Nine Per Cent

U.S. institutional investment plan sponsors lost nine per cent at the median in the third quarter of 2011, ending a streak of four consecutive quarters with positive results, says the 'Northern Trust Universe.' "Institutional plan sponsors endured another tough third quarter, with weak equity returns driving the losses," says William Frieske, senior performance consultant, investment risk and analytical services. "Based on observations over the last 15 years, our database has shown that the third quarter has historically been the lowest performing quarter during the calendar year. For example, public funds have had an average median loss of 0.7 per cent in the third quarter over the last 15 years. That compares to average gains of almost five per cent in the fourth quarter, 0.8 per cent in the first quarter, and 3.1 per cent in the second quarter for those funds during the same respective period." In 2011, corporate ERISA pension plans had the strongest third-quarter performance of all segments, with a loss of 7.5 per cent at the median. These plans benefited from higher allocations to fixed income than the public funds and foundations and endowments segments, which tallied losses of nine per cent each at the median.

KCI Shareholders Approve Offer

Shareholders of Kinetic Concepts, Inc. have approved an offer from a consortium comprised of investment funds advised by Apax Partners together with controlled affiliates of the Canada Pension Plan Investment Board and the Public Sector Pension Investment Board. KCI is a U.S.-based medical device company focused on the design, manufacture, marketing, and service of therapies and products for the wound care, tissue regeneration, and therapeutic support system markets. In 2010, KCI reported revenues of $2 billion. The consortium plans to work actively in partnership with the management of KCI to help expand the company's core businesses, invest in innovative new products, and extend into new geographies where significant opportunities exist.

Fraser Joins Brandes

Scott Fraser is regional director for Southwest Ontario at Brandes Investment Partners & Co. He has more than 15 years of industry experience and was most recently a regional sales manager at a Canadian investment firm.

Super Bowl Of Indexing Heads To Arizona

Information Management Network's 16th annual Super Bowl of Indexing conference will take place December 4 to 7 in Phoenix, Arizona. The event attracts indexing and investment leaders looking for knowledge and insights on risk management, emerging market equity, asset allocation, and managing volatility. For more information, visit www.imn.org

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