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News Archives - April / May 2009

Friday, May 29, 2009

Cutting Benefits Hurts Morale

Cutting spending on health benefits could be detrimental to employee morale and productivity, says a sanofi-aventis survey. It says health benefits may be even more important during economic downturns since financial concerns take a toll on employee stress levels. Nearly one-third of the health benefit plan members surveyed agreed that stress in their home or personal life made them physically ill in the past year and 38 per cent said the same regarding workplace stress. The survey also found Canadians value their health benefit plans more than cash. More than half of respondents said they would choose their plan over $15,000 in cash and 45 per cent would choose their plan over $20,000.

Executives Lose Performance Bonuses

Four top executives at the Canada Pension Plan Investment Board had their total compensation drop 31 per cent last year after the fund's board of directors decided not to award the personal performance portion of their annual bonuses. The decision affects its chief executive officer and three senior vice-presidents. Their annual bonuses and long-term incentives are not calculated based on annual returns, but on a rolling four-year average of the fund's performance. As a result, the compensation reported for fiscal 2009 was based in part on the positive returns in 2006 and 2007 and the losses in 2008 and 2009. The fund earned 15.5 per cent in 2006 and 12.9 per cent in 2007. However, it lost 0.3 per cent in 2008 and 18.6 in 2009. The board believes the four-year compensation model is the best way to reward its executives because the CPPIB wants to encourage a long-term investment focus. As a result, for the next three years the losses in fiscal 2009 will affect their pay levels.

Pension Reform Defining Issue

Pension reform will be the defining issue of the next decade, says Jim Leech, chief executive of the Ontario Teachers' Pension Plan. Speaking at the Empire Club of Canada, he said a confluence of two major forces is occurring – “boomers who are retiring … and are used to getting their way … with the worst economic crisis in the lifetime of the majority of Canadians.” As a result, a “very public debate has emerged. It is a debate addressing retirement security, pension affordability, realistic contribution and benefit levels, social responsibility, retirement ages … in other words: our future.” Leech is also troubled by the decline of Defined Benefit plans in the private sector. He blames short-sighted tax rules and court decisions. These prevent sponsors from saving enough in good times by making the DB model unaffordable for sponsors in bad times. He also blames “weak-kneed management who, out of expediency, promised unrealistic levels of future benefits in order to dampen salary demands."

Private Equity Reconfiguring

The private equity industry in Canada and globally will undergo a fundamental reconfiguration as it emerges from the financial crisis, says a report from McKinsey & Company Canada. It notes that PE deal volume hit a five-year low in 2008, with global buyout activity plunging 70 per cent to US$170 billion from 2007. Canada fared slightly better than the global average, but still saw volume fall 45 per cent in 2008. Capital managed by Canadian PE funds in 2008 was estimated to be $84.7 billion, up from $79.5 billion in 2007. Buyout and other PE funds captured most of the new dollars, managing $58.4 billion in 2008, up 23 per cent from the year before. The report says that the current challenging environment is not expected to materially improve in 2009, setting the stage for another difficult year.

Pressure Grows For Engagement

Pension funds are likely to come under growing pressure to be more engaged shareholders, says a report from Watson Wyatt. In ‘No Action No Option,’ it examines how pension funds trustees are challenged by the task of active share ownership and the actions they can take to fulfill their obligations to be more accountable in a more demanding regime. As well, it says greater scrutiny by governments on corporate governance failures and their role in the collapse of the financial system, is putting pension funds under pressure to be more active investors.

Target-date Funds Need Diversification

Plan sponsors have to diversify their target-date fund lineups as a whole and make sure each target-date offering has the proper internal diversification, says a Janus Capital Group study. ‘The Burden of Good Intentions: Opportunities and Challenges for Target-Date Funds’ says "As diversification and transparency become watchwords in a post-Pension Protection Act world reeling from a global financial crisis, plan sponsors not only need to maintain a diversified plan menu, they also must ensure a proper level of diversification among managers within their target-date fund lineup." It found four central issues with how target-date funds are being used. Many participants do not understand what they are or how to properly use them; target-date fund holders show a propensity for overdiversifying; they select target-date funds for the year they expect to leave the company instead of the year in which they intend to retire; and they believe these funds offer pension-like income guarantees.

Morningstar Rates Target-date Funds

Morningstar Inc. is launching ratings and detailed reports on target-date funds. The research and reports will help inform investors about the funds which have become the default investment in many employer offered 401(k) plans. The reports will evaluate the fund managers, the parent company offering the fund, performance, the fund's holdings, and its price. They have been criticized for losing significant value as the stock market deteriorated last year even though they were sold as safe investments for retirement. The top performing 2010 fund lost just 3.6 per cent last year, while the worst was down 41 per cent, illustrating the wide variance in investment strategies used.

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Thursday, May 28, 2009

Harmonization On Brink Of Breakthrough

Canada could be on the brink of a breakthrough in terms of harmonized pension rules, says Harry Arthurs, chair of the Ontario Expert Commission On Pensions. In a session entitled ‘Keep the Home Fires Earning: Is Harmonization of the Canadian Pension Review Initiatives Possible?’, he joined Chris Brown, co-chair Alberta/BC Expert Panel On Pension Standards; and Dick Crawford, a member of the Nova Scotia Pension Review Panel; to discuss the results of the reviews of the four provinces’ pension standards legislation. Arthurs said given the differences in the economies of each province in Canada, there is no “one-size-fits-all” solution to pension legislation. However, he said in many cases the differences between different sets of rules are minor arbitrary details which can be easily fixed. Brown called the three reports a collection of ideas which could provide a starting point for discussion on harmonization. However, he is encouraged by the decision of the Canadian finance ministers to form a group to examine pension issues. Crawford noted that the Nova Scotia report calls for the use of a ‘Passport’ system which would see pension legislation from the home province of employers apply to members working in Nova Scotia.

DB Future Explored

The future of Defined Benefit pension plans is not easy to pinpoint, says J. David Vincent, senior partner with Ogilvy Renault LLP. He was discussing his predictions at the ‘4th Annual Ogilvy Renault Employment Law Conference.’ Although it’s believed DB plans are quickly becoming extinct, Vincent discussed how DB plans currently are well-established among unionized, government, and the largest employers. However, he says single employer pension plans (SEPPs) will continue their decline, while the future of multi-employer pension plans (MEPPs) looks more promising because of their joint governance and sharing of risk.

Québec Sets Out Funding Relief Measures

Québec has issued a draft regulation that will provide additional funding relief to Defined Benefit pension plans registered in that province, says a Mercer ‘Communiqué.’ Under the draft regulation, the funding relief measures will apply starting with the first complete actuarial valuation having an effective date after December 30, 2008 and generally ending at the end of a plan’s first fiscal year beginning after December 31, 2010. The draft regulation includes three funding relief measures. They are plan asset smoothing over a maximum period of five years; consolidation of solvency deficiencies, other than those related to an amendment made after December 30, 2008, on the first valuation covered under the relief measures; and the extension of amortization period from five to 10 years for the new solvency deficiency. The funding relief measures affect only the solvency valuation and employers may implement one or several of the relief measures by providing written instructions to the pension committee. For multi-employer pension plans, the instructions must be given by the person or body empowered to amend the plan. Submissions may be made to the government on the draft regulations by June 20.

Analysis Of Innovative Benefits Necessary

Both plan sponsors and providers should analyze new and innovative benefits in the context of healthcare, insurance, and other applicable legislation and related case law, says Michael Wolpert, of Osler, Hoskin & Harcourt LLP. Speaking at CPBI Forum 2009 on ‘Innovative Benefits to Complement an Overburdened Healthcare System,’ he said, however, the legislation and case law are province specific. Issues to be considered when introducing and implementing innovative benefit plans to complement an existing provincial healthcare framework include how the benefit plan interacts with provincial healthcare legislation and whether there are any prohibitions or restrictions. Ultimately, he said, legal certainty is still difficult to achieve.

S&P Offers Shariah Index

Standard & Poor's is launching a Canadian Shariah stock index. The index can be used as a benchmark or model for funds created to invest in Canada in a manner that is compliant with Islamic law. It includes the biggest stocks in Canada that Islamic investors are allowed to invest in. This means investment management companies, banks, pork producers, entertainment companies, and gambling enterprises are excluded. As a result, almost 80 per cent of the index is comprised of energy and mining companies.

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Wednesday, May 27, 2009

Canadians Can Work And Collect CPP

Starting in 2012, Canadians will be able to work and draw on their Canada Pension Plan benefits at the same time. Individuals will be able to draw CPP benefits as early as age 60 without leaving their jobs or reducing their hours. Currently, Canadians can retire at 60 and collect reduced CPP benefits. Someone retiring at age 60 has a reduction of 30 per cent. However, they are required to leave their jobs and remain out of work for at least two months. Under the new plan, the reduction for someone who retires at age 60 would be 36 per cent. It will also allow those who work past 65 to make contributions to the federal plan and boost the benefits received. Individuals who wait until age 70 to collect CPP would see their benefits boosted by up to 42 per cent.

Retirees Face Risks

Retirees want a regular income for life, protection of their standard of living, and funding to cover their healthcare needs, says Joan Johannson, president and managing director of Integra Group Retirement Services. However, she told the CPBI Forum 2009 session ‘Retirement Transitions: Balancing the Books & Retiree Needs’ that retirees face a number of risks. These include longevity and inflation. For example, there is a 94 per cent chance that one partner in a relationship will reach age 80 and a 63 per cent that one will reach age 90. In terms of inflation, at three per cent inflation, $100 in groceries today will cost $181 in 20 years and $243 in 30 years. Citing Janice Holman, a principal at Eckler Ltd., she said “with today’s shifting demographics, sponsors concerned with meeting their fiduciary obligations and effectively managing their workforce now see retirement planning as an indispensable business tool.”

Tougher Accountability For Caisse

Quebec Finance Minister Raymond Bachand is rejecting calls for a public inquiry into the Caisse de dépôt et placement's $40 billion in losses last year. Instead, he is proposing that tougher accountability rules be put in place. These rules include requiring the head of the Caisse to appear before a National Assembly committee to explain the pension fund's annual financial results every year. As well, it will be required to table a report on risk management and explain the strategies leading to the type of investments it was undertaking. Next year, the Caisse will also be required to table clear explanations as to the pension fund's compensation and bonuses package for money managers and other employees. The Parti Québécois demanded a public inquiry into why the Caisse continued to buy the ABCP at the end of July and beginning of August 2007, when it had clearly been warned about the high risks involved in making such an investment.

Prudent Stewardship Returning

Gerald Cooper-Key expects to see a return to prudent stewardship of investment funds. Speaking at CPBI Forum 2009, the honourary chairperson and portfolio manager at Mawer Investment Management Ltd. sees a number of changes going forward. These include a return by the banking industry to the model that existed 20 years ago when they were profitable, but followed prudent lending practices. As well, he expects investors will be gun-shy for some time and there will be less investment in products that investors do not understand. Ratings agencies, to recover their credibility, will take a harsher position with their gradings. All of these will contribute to the return to prudent stewardship, he said.

DC Plans Gaining Ground

In 2006, Defined Benefit pension plans remained the predominant type of employer-sponsored plan, but another type of plan has been gaining ground since 1991, especially in the private sector, says Statistics Canada. In 1991, Defined Contribution plans covered 14 per cent of members in private sector plans. By 2006, this proportion had nearly doubled to 27 per cent . During this time span, DC private pension plans added 381,900 members. The situation was much different in the public sector. Membership in DC plans increased slightly, but they remained a small minority.

Private Equity Prospects Improving

Despite its recent performance, things are looking up for private equity, says Stewart Hay, of SL Capital. Speaking on ‘Private Equity Investments in a Global Community’ at CPBI Forum 2009, he said the recent crisis has eliminated weaker managers, leaving behind those who have shown they can make money. As well, there are enhanced buying opportunities making this a time to make a lot of money from private equity. The last nine months have been a difficult time, he said, with activity down and, for example, values in the mid-market 83 per cent lower. Since they are being forced to hold on to assets longer, distributions to investors are down making it harder for managers to raise funds.

Institutions Must Move Beyond Peer Comparison

Institutional investors must move beyond peer group comparison, says Dino Bourdos, managing director of TD Asset Management. Speaking on 'Liability Driven Investment: Reducing Pension Plan Surplus Risk Without Compromising Returns' at the CPBI Forum 2009, he said with LDI an increasingly important element in risk budgeting, there are a number of strategies pension funds can use to reduce risk created by exposure to equities. These include minimum variance portfolios, option overlay strategies, and portable alpha. However, plans considering using these strategies have to get past being concerned about doing something which their peers are not doing. Instead, they need to understand the risk of their plans and decide on the best strategies they can use to mitigate these risks.

Work-Life Balance Should Matter

Work-Life balance should matter to business, says Dr. Taylor Alexander, of the Canadian Mental Health Association. In a session entitled ‘Work-Life Balance: A Shared Responsibility’ at CPBI Forum 2009, he said the current imbalance hurts the bottom line for businesses. Burnout costs Canadian businesses $12 billion a year and the cost of not addressing mental health issues in the workplace can be seven per cent of payroll. In 1991, he said one in 10 Canadians worked more than 50 hours a week. By 2004, this was one in four and the increased workload was also being impacted as more Canadians are, facing other demands such as, for example, providing eldercare. As a result of this overload, Canadians are 2.9 times more likely to say their health is fair or poor, 2.6 times more likely to have sought care from a mental health professional, and 1.9 times more likely to have spent $300 or more on prescription medicine in the past year. Strategies that can improve work-life balance include aligning the employee population with the business strategy and making workplace accommodations such as flexible scheduling and modifying job duties.

Derivatives Processing Strengthened

Northern Trust has strengthened its global platform for over-the-counter (OTC) derivatives processing through an agreement with Markit, a financial information services company. Markit will provide trade confirmation and position reconciliation services through its Trade Manager, PortRec, and Valuations Manager platforms in addition to independent portfolio valuations. Northern Trust expects to roll out these services in the second and third quarter this year.

Face-to-face Not Always Feasible

Traditional face-to-face education is not feasible for many employers, says Michelle Oram, product manager at Manulife Financial. Speaking on 'Leveraging technology to promote good plan governance' at the Tech Showcase at CPBI Forum 2009, she said technology is changing the way plan sponsors reach their members. It can be used to reach people in different ways. For example, members can access plan information when and where they wish. As well, complex topics can be broken down into smaller pieces to enhance learning and varied presentations can be used to appeal to different learning styles.

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Tuesday, May 26, 2009

Ottawa Loans Not For GM Pensions

While Ottawa has agreed to give billions in loans to General Motors of Canada Ltd. if it comes up with a suitable restructuring plan by June 1, federal Industry Minister Tony Clement insists the money cannot go towards its underfunded pension plan. He is implying that the pension plan will be the responsibility of the Ontario government. A tentative labour agreement between GM and the Canadian Auto Workers union has seen the company agree to give up its special status under Ontario law that has allowed it to underfund its pension plan since the 1990s. It will begin topping it up immediately. Ontario, however, says there won't be an agreement on who will be responsible for covering the plan's shortfall until a final restructuring plan is presented. GM Canada's pension shortfall is approximately $7 billion.

Group Critical Illness Insurance Evolves

Sun Life Financial is giving all insured plan members access to the Best Doctors services through their group critical illness insurance plans. Using its database of 50,000 doctors from around the world, Best Doctors is a confidential service that connects the insured member and their treating physician with medical specialists to help verify the diagnosis and treatment options – without them ever having to leave their home. Best Doctors assigns a member advocate, a dedicated registered nurse, to support the member throughout the process. In addition, the member advocate can customize a healthcare navigation program through Best Doctors 360°. Best Doctors is a confidential service that is available to insured plan members, their spouses, and their dependent children.

Economic Landscape Changing

The economic landscape over the next decade will see a return to inflation in the U.S., a Canadian dollar above par, a solid run for stocks and resource prices, and the emergence of Asian consumer spending, says a CIBC World Markets Inc. economic outlook report. The report expects financial markets and the economy could be moody and unpredictable early on, but ultimately, grow and mature. It notes that while equities have plenty of room for a longer term rally over the next 10 years, investors will have to steer their portfolios to align with a very different mix of growth, both in North America and globally. Greater consumer spending from regions that had been running outsized savings rates over the past decade, particularly China and the oil-exporting economies, will pick up the economic slack from lower U.S. spending. In fact, a fall in the savings rate in the developing world could add far more to global consumption spending than will be lost in the adjustment to a higher savings rate in the U.S., Canada, and the rest of the OECD. The key driver in this will be a drop in the value of the overinflated U.S. greenback.

Plan Sponsors Confused

Pension plan sponsors may be more confused now than ever with markets, says Sam Wiseman, chief investment officer of Wise Capital Management. In the ‘Exclusive Online’ article ‘What’s Driving The Markets?’, he says in recent years they thought global diversification was the way to go and most searches in recent years were for overseas managers. Yet, Canada turned out to be the place to be. Again, this is true year-to-date in Canada. By asset class, equities fell beyond expectations and will likely recover beyond expectations. The worst performing stocks and drivers will become the best.

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Monday, May 25, 2009

Teachers’ Sells BCE Stake

The Ontario Teachers' Pension Plan has sold most of its four per cent stake in BCE Inc., says a report in the Globe and Mail. At the end of 2008, BCE – at 50.8 million shares – was the largest holding in Teachers' $88 billion portfolio. However, this had fallen to 39.8 million shares as of March 31. The sale marks the end of a relationship which at one point saw Teachers’ attempt to buyout BCE. That fell apart a week before it was scheduled to close when accounting firm KPMG refused to sign off on an opinion that the company would be solvent after the takeover.

Catch-up Payments Approach May Change

Canada Revenue Agency’s Registered Plans Directorate (RPD) is considering allowing lump sum catch-up payments for missed pension benefits without its prior approval, says the pension group at Borden Ladner Gervais LLP. In particular, RPD is considering allowing the payments, provided that the particular registered pension plan provides RPD with a report setting out certain specified details regarding the catch-up payments made from the pension plan during a calendar year. In cases where there has been a delay in commencing payment for plan members beyond age 69 or 71 (depending on the terms of the plan, and the years in question), RPD will continue to require a written request for its approval. The new process, once implemented, will reduce the administrative burden for pension plan administrators and eliminate the delay in making the catch-up payment to the member. RPD is looking for comments from the pension industry. Comments should be sent to RPD prior to May 29, 2009, by email to rpd/dre@cra-arc.gc.ca

Sticking To Rebalancing Still Makes Sense

The severity of current market conditions may mean that, in some cases, adhering to your rebalancing policy may simply not be feasible due to liquidity, cash flow, or collateral constraints, says Michael Thomas, chief investment officer at Russell Implementation Services. In the ‘Exclusive Online’ article ‘Rebalancing in a Crisis,’ he says dramatic and ongoing declines in the equity markets across the globe caused some to question whether adhering to their policy portfolios and rebalancing rules still make sense. In general, Russell advocates sticking to one's policy targets and continuing to follow existing rebalancing rules as long as this remains feasible. Investment principles and historical lessons support this approach, however it is during periods of market stress and uncertainty that these policies become particularly important.

Money Left In Plans

A large number of people let the money in their 401(k) plans languish after they lose their jobs or simply choose to cash out their retirement accounts once they're terminated, says a report by The Charles Schwab Corp. It found 43 per cent of the 401(k) assets belonging to participants who were terminated from their jobs in the first quarter of 2008 are still sitting in their former employers' plans. The remaining assets had largely been rolled over into individual retirement accounts, or had been taken as cash distributions. Additionally, 75 per cent of terminated workers that moved money out of their former employers' 401(k) plans have rolled these assets into IRAs, while another 14 per cent requested cash. Only seven per cent of these terminated workers rolled their 401(k) assets over into a retirement plan at a new employer.

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Friday, May 22, 2009

CPP Could Improve Pensions

Expanding the Canada Pension Plan in some way was the consensus of an expert panel discussing ‘The Impact of the Current Financial Crisis on the Pension World: What Can Be Done?' at an Economic Club of Canada luncheon. Panelists Susan Eng – vice-president, advocacy, CARP; Ken Georgetti – president, Canadian Labour Congress; and Michael Hale – president, Canadian Institute of Actuaries; all concurred that the CPP was a model for how pensions can be provided to Canadian workers. While Hale and Eng suggested that it be expanded to enable employers and employees to participate, Georgetti said the benefit it pays out should be increased.

Pay Tied To Performance

Scotia Capital will tie bankers’ pay to long-term performance, says a report in the National Post. It says the investment banking arm of the Bank of Nova Scotia’s new compensation plan will put more emphasis on deferred compensation, which will be paid out after three years.

Funds Must Change Policies

Climbing out of the hole of pension plan underfunding will require changes to funding, investment, and benefits policy, says Paul Purcell, of Barclays Global Investors. Speaking at a special breakfast seminar ‘Beyond the Winter of Discontent,’ he said plan sponsors will have to put more money into their plans. Some are already making changes to benefits policies by eliminating early retirement provisions and linking inflation protection to investment returns. The task for pension funds is to find ways to generate returns with less risk. This may require the use of a three-layer framework utilizing liability hedging and alpha and beta diversification.

CPP Fund Shrinks

The CPP Fund shrank by $17.2 billion to $105.5 billion in the fiscal year ended March 31. This reflects an investment return of negative 18.6 per cent amid the turmoil in global financial markets. The loss on investments totalled $23.6 billion in fiscal 2009, partly offset by $6.6 billion in contributions from employers and workers. The return of the fund in 2009 essentially matched the fund’s market-based benchmark, adding one basis point above the benchmark return of negative 18.63 per cent. The primary factor affecting the fund’s performance was the sharp decline in global public equity values during the course of the fiscal year. Worsening global economic fundamentals also resulted in lower valuations across the fund’s private equity and real estate holdings.

Time To Evaluate Risks

At this point in the financial crisis, it is a good time to evaluate the risks of further negative returns against the risk of missing out on positive returns, Vince De Martel, of Barclays Global Investors, told a special breakfast seminar ‘Beyond the Winter of Discontent.’ He said the issue is where to invest at the moment. Low risk assets seem priced for perfection and risk is more realistically priced. However, significant downside potential looms. Still, he said investment decisions should still remain driven by tolerance for risk and ability to time the market.

Companies Embrace Web 2.0

Despite their relative newness, companies are embracing Web 2.0 technologies for internal communications and as part of their overall technology mix, says a survey by Watson Wyatt. Its ‘2009 HR Technology Trends Survey’ found that since the economic downturn began, 72 per cent of employers have increased their use of the intranet and 61 per cent have increased their use of eMail to communicate with employees. Employers are also using newer tools such as social networking tools, blogs, and webcasts. One-third (32 per cent) have increased their use of webcasts; 13 per cent have increased their use of social networking tools; and 12 per cent have increased their use of blogs for communication.

Executives Delay Retirement

Deflated retirement savings accounts may be causing global executives to re-evaluate how long they stay in the workforce, says The Korn/Ferry Institute’s ‘Executive Quiz.’ It reveals that a majority – 52 per cent – of executives plan to retire at age 64 or higher, a jump of eight per cent compared with results collected in 2004 when it last surveyed executives about retirement plans. Regardless of retirement age, the survey results reveal that the majority (63 per cent) of executives are planning to work later in life than they expected just three years ago. Only 25 per cent have not changed their retirement expectations recently. When asked if their company provides adequate retirement benefits, 53 per cent said ‘no,’ 39 per cent said ‘,’yes and a surprising eight per cent said they were not sure of their company's retirement program.

Manager Of Future Needs Size

The alpha manager of the future will have the size and resources to have operational resources and scale as well as multiple levels of financing, matched to the assets they are holding, says Jonathan Morgan, of Barclays Global Investors. Speaking at its special breakfast seminar ‘Beyond the Winter of Discontent,’ he said since there is a finite amount of capital that the alpha generating industry can handle, investors need to find firms which can generate alpha and provide diversification. This was especially important during this financial crisis where the correlation between alpha generators, such as hedge funds, with equities was more than 75 per cent.

Feature Assesses Impact Of Gates

Northern Trust has enhanced its offering to Funds of Hedge Funds clients with a feature that enables FoHF managers to assess the impact of gates on their liquidity, in real time. Gates are set up by hedge fund managers to limit redemptions from the fund, preventing a run on the fund, which could have a negative impact on operations as the manager may be forced to sell off positions to generate cash to meet redemptions. This feature enables the Hedge Fund Monitor to incorporate all such gating terms into the liquidity calculations, so FoHF automatically know how much and when they can access cash from their underlying hedge fund investments, in a manner fully integrated with core fund administration and custody records.

Thomson Manulife’s CIO

Warren A. Thomson is chief investment officer of Manulife Financial Corporation.  In this capacity, he oversees the world-wide investment operations managed on behalf of the company's general fund and external clients. Assets under management include fixed income and equity securities and alternative assets such as real estate, timber land, agricultural land, and oil and gas properties.

Kvisle Speaks At FEI

Keynote speakers such as Hal Kvisle, president and CEO, TransCanada Corporation; Robert Blain, chief financial officer, Cirque du Soleil; and Sergio Marchionne, chief executive officer, Fiat Group; will be featured at the Financial Executives International Canada 2009 annual conference. The annual conference attracts more than 300 senior financial executives who come together to explore best practices, innovative solutions, and tools for success. It takes place May 28 and 29 in Montreal, QC. For more information, visit http://www.feicanada.org

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Thursday, May 21, 2009

Fund Managers Increasingly Bullish

Global fund managers are increasingly bullish on both the prospects for economic recovery and a rebound in corporate profits, says the latest Merrill Lynch fund manager survey. Its May survey found that a majority of investors are now predicting that the world economy will improve in the next 12 months. Respondents remain underweight on equities, but they are more popular than in recent surveys, especially cyclical sectors that are expected to perform best in a recovery. Investors have also moved to a net underweight position in bonds for the first time since last August. Additionally, the survey found that many fund managers are rushing to emerging markets, as investor optimism on China’s economy is higher than at any point in the past six years.

Canadians Thinking Long-term

Employees who invest in their company’s group retirement and savings plans are paying more attention to their investments than ever before, says Sun Life Financial’s ‘InSight,’ a research report that provides information on issues that are relevant to the Canadian group retirement services industry. Although the recent economic downturn had many plan members contacting their plan providers looking for general education and investment advice, members were not moving their money any more than they were a year ago. For the most part, members were holding steady and not making emotional decisions. It also shows that plan members in their 50s appeared to be the most engaged in terms of investment inquiries, but they also seemed to be the most comfortable using the web to find their answers. The report found that four times as many members in their 50s used plan member services websites as those in their 20s.

Pension Plan Funded Status Better

In April, overall pension plan funded status improved, says Watson Wyatt’s ‘eUpdate.’ And, it shows that global equity markets continued to exhibit high levels of volatility, however, this time on the upside. Equity returns ranged from +10 to +15 per cent for the month. The impact of the economic crisis in the private equity and real estate markets was finally seen this month, delayed by a lag in reporting. Due to the significant weight given to these asset classes, the asset return for the average LDI fund was considerably weakened, leading to an overall negative return for the month. Concurrently, interest rates on longer-term treasuries and swaps increased, decreasing the value of liabilities. This in turn improved the funded status of pension plans on a non-regulatory basis.

Shell Discussing Pay With Shareholders

Royal Dutch Shell Plc will discuss the rejection of an executive pay package after performance targets were missed with shareholders. Its remuneration report was voted down with 59.42 per cent of shareholders opposed at shareholder meetings. Its remuneration committee had decided to award bonuses to executive directors even though they missed performance targets. The UK’s Pensions Investment Research Consultants Ltd. and investors including Standard Life Investment Ltd. had urged Shell shareholders to vote down the pay proposal after performance targets weren’t met.

Desjardins Opens Vancouver Office

Desjardins Financial Security has opened a group retirement savings sales office in Vancouver, BC. The new branch represents its ongoing commitment to growing its business across Canada, particularly in the west. Dorothy Chin, education advisor and sales support, will be the first to work from this new location. Additional sales and support staff will join her in the following months to provide a full range of financial products and services to clients and business partners.

Gillis Heads Pension Practice

Paul Gillis is senior vice-president in charge of EFG Canada’s pension and investment Consulting practice. He will have responsibility for leading the growth and service of Defined Contribution and institutional investment clients across Canada. Most recently, he spent 14 years in senior business development and client service roles at a leading Canadian pension carrier.

Session Takes Care Of Business

‘Taking Care of Business’ will be the focus of a keynote address by Ian Percy, an organizational psychologist and author, at the ‘13th Annual Health Work & Wellness Conference 2009.’ He will discuss how to break out of restraints and learn to claim the unlimited power available to businesses. It takes place September 30 to October 3 in Gatineau, QC. For more information, visit http://conferences.healthworkandwellness.com/

Drug Plan Management Examined

Michael P. Sullivan, president of Cubic Health Benefits, will share ideas on how to actively manage drug plans outside of the traditional coinsurance/deductible/formulary model at the next ‘Benefits Breakfast Club’ session. His talk on ‘What Your Drug Plan is Paying For and Managing It’ takes place June 4 in Burlington, ON. For more information, visit www.connexhc.com

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Wednesday, May 20, 2009

Dutch Model Advocated

Canada should follow The Netherlands in creating a pension system that combines elements of Defined Contribution plans with Defined Benefit funds, says Jim Leech, chief executive officer of the Ontario Teachers’ Pension Plan. In a speech to the Canadian Club of Ottawa, he said there will never be a better time than now to undertake pension reform in the country. “The time for pension myopia is long past. We need our leaders to make decisions beyond the next political term, the next employment contracts, the next labour negotiation.” The economic storm clouds that started in 2007, turned to recession in 2008, and continue today have made discussions like this possible, he said, as everyone – governments, corporations, labour – has seen the damage done to pension and other investment accounts. The Dutch system sets guaranteed pensions to a career-average compensation level, rather than a top-five-year average level, and without indexation. Employees then can purchase additional credits through a DC overlay if they wish.

Caisse Denies Charges

The financial statements of the Caisse de dépôt et placement du Québec are accurate and it is denying allegations made in a forthcoming book. The book by Mario Pelletier, ‘La Caisse dans tous ses états,’ suggests its results and financial statements have been subject to accounting manipulation to improve results in subsequent years. The Caisse has informed Quebec’s Auditor General of allegations made in the book. It says all of its investments are evaluated through a rigorous, audited process and its financial statements are prepared according to Canada’s generally accepted accounting principles (GAAP). The Caisse’s cumulative annual financial statements and the annual statements for specialized portfolios and depositors’ funds are audited by the Auditor General of Quebec. As well, when calculating returns, the Caisse complies with the Global Investment Performance Standards established by the Investment Performance Standards Policy Group and obtains a report from an independent auditor for this purpose.

Experience Requirement Reintroduced

The Human Resources Professionals Association (HRPA) has reintroduced a requirement of three years of experience in human resources at a professional level as a prerequisite for attainment of the Certified Human Resources Professional designation (CHRP) in Ontario. Human resources experience at a professional level refers to work activities where an individual exercises direct responsibility and accountability for the strategy, design, implementation, or co-ordination of one or more human resources functional areas for an extended period of time with limited or minimal supervision. While this requirement takes effect immediately, CHRP candidates who have successfully completed either the Comprehensive Provincial Exam (CPE) or the National Knowledge Exam (NKE) that replaced the CPE in 2003, have the choice of taking the National Professional Practice Assessment exam (NPPA) or applying to have their experience assessed by HRPA’s Certification Committee. Following the October 2009 and May 2010 sittings, the NPPA will be replaced by a mandatory experience assessment by HRPA’s Certification Committee.

Parliamentary Debate Returns 

‘Be It Resolved That Hedge Funds Are Dead’ will be the topic at AIMA Canada’s annual parliamentary debate luncheon. Debating in favour of the resolution is Tom Bradley, president and founder of Steadyhand Investment Funds. Taking the opposite view is Toreigh Stuart, chief executive officer of Man Investments. It takes place June 9 in Toronto, ON. For more information, visit http://www.aima-canada.org

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Tuesday, May 19, 2009

Pension Fund Issue ‘Too Complex’

Fixing GM’s pension fund is "too complex" to be achieved during the current talks to save the auto manufacturer, says Charlotte Yates, dean of social sciences at McMaster University. Speaking to CTV Newsnet, she said she doesn’t think the pension issue can be solved at the bargaining table. “It's just too large, it involves too much money and it's too complex.” There is a $7 billon shortfall in the company's pension fund due, in part, to provincial government changes to corporate regulations in the 1990s that allowed GM to under-fund its pension fund. As a result, the union is saying this is partly a government-created problem. However, the federal government says Ontario is responsible for settling the pension issue, but the province says that the problem is part of GM Canada's overall financial troubles and should be solved with the federal restructuring package.

U.S. Recession Ending

Key evidence suggests the U.S. recession is ending and the global and Canadian economies are likely close behind, says RBC DS ‘The Harbour Group: Market Note.’ It says three key U.S. indicators point in this direction. The Institute of Supply Management manufacturing index, weekly initial jobless claims, and the Chicago Fed's national activity index all suggest that the U.S. recession will end by June 2009. These indicators have very good track records of turning around just before the recession ends. However, the uneven economic recovery implies an improving, but volatile, path for financial markets and investors are likely to feel like they are on a roller coaster ride.

Database Provides HR Benchmarks

As companies seek ways to reduce labour costs while improving productivity and performance, many are struggling to find meaningful data and insights to support their human capital decisions. To help close this gap, Towers Perrin, is launching a global Human Capital Metrics Database. This database will provide benchmarks and metrics in such areas as talent, rewards, and the HR function, as well as industry-specific productivity measures such as sales per square foot for retailers and premiums per employee for insurers. It will focus on four key areas – human capital productivity, talent management, total labour costs, and HR function performance.

Goldring Now COO

Judy Goldring is executive vice-president and becomes chief operating officer at AGF Management Limited. She is responsible for a number of the investment management firm's shared services including legal and compliance, human resources, operations, and information technology. Lina Bowden is senior vice-president in charge of product management and development, as well as product marketing. She was formerly with Highstreet Asset Management where she was responsible for ensuring a high level of client service to its institutional and foundation clients.

Caldwell Added To Podium

Thomas S. Caldwell, chairman and CEO of Caldwell Financial Ltd., will be a keynote speaker at the ‘5th Annual FPL Canadian Electronic Trading Conference.’ He will speak on what needs to be done to enhance the competitiveness of corporate Canada. It takes place June 1 and 2 in Toronto, ON. For more information, visit eTradingCanada.ca

Forum Looks At Financial Literacy

IFIC's ‘Financial Literacy Forum’ will investigate what the real issues are and how the financial services industry is working to address them in Canada and throughout the world. The speakers include various industry experts including Pat Bowles, BC Securities Commission; Casey Cosgrove, SEDI; and Connie Karlsson, TD Bank. It takes place June 10 in Toronto, ON. For more information, visit https://www.ific.ca/

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Friday, May 15, 2009

Plans Should Offer Security

Even though employers are moving away from insuring the benefit of Defined Benefit pension plans, they still should offer some degree of benefit security, says Emily Kessler, of the Society of Actuaries. Speaking at the ACPM Ontario Regional Council’s ‘2009 Spring Session: Future Directions for Retirement Security,’ she said the shift to Defined Contribution plans is moving plan members away from an insurance type of plan to an investment plan. In fact, members of U.S. DC plans even refer to these plans as investments, not retirement savings. One reason for the shift is that employers are making decisions about their pension plans to reduce their risk. However, she said this may not be in the best interests of plan members. Some degree of insurance is needed to provide plan members with some security and some protection against bad investments.

DC Sponsors Change Product Offerings

A May 2009 survey by the International Foundation of Employee Benefit Plans (IFEBP) shows that 13 per cent of Defined Contribution plan sponsors in the U.S. have changed their investment product offerings as a result of the financial crisis. This is almost double the seven per cent who reported doing so six months earlier. Of those who have implemented changes, 21 per cent added more low risk investment choices, 18 per cent increased diversification, 16 per cent added lifecycle (target-date) funds or money market funds, and 15 per cent added government-backed options. The poll also found 16 per cent of DC plan sponsors reduced or eliminated employer matches as a result of the economic situation.

Affordable DB Plan Possible

An affordable Defined Benefit pension plan can be designed and is, in fact, in use for the University of British Columbia staff pension plan, says Barry Gros, of Aon Consulting. The UBC plan evolved over time and today offers a fixed contribution rate for both the employer and the plan members. However, while the goal is to ensure the benefit promise is not reduced, in the affordable plan there is a benefit affordability test which can be used to adjust the benefit if necessary. Another advantage, he told the ACPM Ontario Regional Council’s ‘2009 Spring Session: Future Directions for Retirement Security’ session, is that this approach offers a viable alternative to a conversion to a Defined Contribution plan which may be more acceptable to employees.

Judge Rejects Retiree Request

A U.S. bankruptcy judge has denied a request from a group representing Chrysler LLC's retired white collar workers to appoint an official retiree committee to take part in the automaker's bankruptcy proceedings. U.S. Judge Arthur Gonzales said that any decisions regarding the future of retiree benefits ultimately will be made by the automaker's new owners and as a result there isn't much point in the retirees group negotiating with Chrysler now. Attorneys for the National Chrysler Retirement Organization claimed that responsibility for the group's healthcare benefits might not be transferred to the new company expected to be created by the proposed sale of the vast majority of Chrysler's assets to a group controlled by Italy's Fiat Group SpA. As a result, they argued that the group had the right to form a committee to negotiate with Chrysler during the bankruptcy process in an attempt to protect those benefits.

More Focus On Retirement Vision Needed

Financial status isn’t the most important concern for retirees today, says Av Lieberman of The Retirement Education Centre Inc. Instead, “the need for life structure” is most critical for those facing the realities of the “new” retirement – which may now include working part-time, going back to school, or starting a new business. At an International Society of Certified Employee Benefit Specialists (ISCEBS) ‘Fundamentals of Pensions’ seminar, Lieberman discussed the importance of first developing a clear vision of the life retirees want after work, before trying to figure out how much of a pension is needed. Retirement planning today does not concentrate enough on that vision, he says, and should focus more on how retirees will, in fact, spend their time, what will keep them motivated, and how they will react to not having a job?

Allocation Mindset Must Change

Defined Benefit pension plan sponsors need to get away from 60 per cent equity/40 per cent bond mindset, says Peter Muldowney, of Sun Life Financial. In a presentation to the ACPM Ontario Regional Council’s ‘2009 Spring Session: Future Directions for Retirement Security,’ he said this thinking represents a focus on investment management, not risk management. This means the asset/liability mismatch was misunderstood. While return could appear be improving on a percentage basis, the dollar growth risk of the plan is being overlooked. This is compounded by organizational risk as pension committees that meet three or four times a year are unable to make quick decisions when necessary. Going forward, he said plans must be designed which have equities as the foundation and overlays of other investments to take away risk.

Equity Markets Suffer Losses

Mercer’s first quarter ‘2009 Defined Contribution Universe Summary’ found losses in all equity markets during the period. The balanced asset class, using a benchmark of 60 per cent S&P 500/40 per cent Barclays Capital Aggregate Bond Indices, posted a 6.5 per cent loss. International equity markets, as measured by the MSCI EAFE Index, lost 13.9 per cent during the period. Its data showed the international equity asset class underperformed U.S. equities for the quarter by 290 basis points. Global equities lost 11.9 per cent for the quarter and outperformed international equities by 200 basis points. Growth funds outperformed value funds during the first quarter, as the median large cap growth fund posted a loss of 4.7 per cent compared to a loss of 12.9 per cent for the median large cap value fund.

Monitoring Managers Critical

Guaranteed minimum withdrawal benefit programs provide plan sponsors with an opportunity to provide plan members with more than retirement savings, says Nadia Savva, of Manulife Financial. Speaking at the ACPM Ontario Regional Council’s ‘2009 Spring Session: Future Directions for Retirement Security,’ she said they can create a foundation of guaranteed income for life in retirement. A relatively new product, they have grown from $1.6 billion in assets to $8.1 billion in assets in just two years. However, the product does come with some challenges. Sponsors must educate their members to understand the fine print to ensure they realize the guaranteed benefit.

Investment Policy Statement Essential 

It’s not a pension’s end return that’s most important, but how exactly investment managers achieve that return, said Patricia Tiralongo, of TD Asset Management Inc. Tiralongo discussed the importance of properly selecting and monitoring investment managers at an International Society of Certified Employee Benefit Specialists (ISCEBS) ‘Fundamentals of Pensions’ seminar. A thorough investment policy statement is a critical tool that helps structure efficient pension management, she says. Through consistent performance reviews, plan sponsors should make sure investment managers adhere to the investment policy and to any applicable legislation. Sponsors should also keep a close watch on investment managers' organizational and leadership structure, as such changes can significantly impact pension performance and end results.

Costs Draw Attention To Benefits

The increased costs of post-retirement benefits have been drawing more attention to them, says Ken Cooke, of Towers Perrin. Plan sponsors are currently reviewing these obligations which can cost up to $23,000 a year for a 72-year-old retiree. They are also looking beyond traditional benefit reductions and demanding innovative practical solutions. These include restricting or eliminating coverage for new hires and active employees and buying out the obligation. However, regardless the approach, he told the ACPM Ontario Regional Council’s ‘2009 Spring Session: Future Directions for Retirement Security,’ any approach requires careful consideration of the legal issues and may require significant implementation efforts.

Plan Determines Asset Mix

The asset mix of a plan member’s Defined Contribution pension plan should be based on a financial plan, not an assumed tolerance for risk, says Warren MacKenzie, of Second Opinion. He told the ACPM Ontario Regional Council’s ‘2009 Spring Session: Future Directions for Retirement Security’ session that there is no reason for a plan member to take a more risky position than necessary just because they are less risk averse. In most cases, he said low MER index funds and exchange traded funds are the only tools a plan member needs to save for retirement. However, they do need to know how to use those tools.

Aurion Adds Pair

Gregory Plant is director, client service and marketing, and Christopher Wright is vice-president, business development, at Aurion Capital. Plant has more than 10 years’ experience in the investment industry. After an initial period at the Law Society of Upper Canada, he worked in marketing for a major investment distribution firm and a private capital company and then worked on assignment for a leading North American wealth management firm assisting in branding, marketing, and product positioning. Wright has 25 years’ experience in the investment industry with more than 18 years at one of Canada’s leading institutional fund managers followed by a leadership role at a major, privately-held multinational firm with a major presence in Canada.

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Thursday, May 14, 2009

Broader Dialogue Needed

Ontario’s finance minister wants to put pensions on the national agenda. Speaking at the ‘Blakes Seminar: Recent Developments in Pension and Employee Benefits Law,’ Dwight Duncan said that pensions will be on the agenda for the first time since 1981 when finance ministers from across the country meet this month. With only one-third of Ontario workers in a pension plan, and that number shrinking, he said a broader dialogue is needed on pension coverage and adequacy. Pensions will become one of the most debated issues for governments over the next 10 to 15 years, he said, and whether or not we have the right policies to help Canadians prepare for retirement needs to be asked.

U.S. Sponsors Change DB Plans

U.S. Defined Benefit pension plan sponsors are making plan changes in the face of the continuing economic downturn, says a May 2009 survey by the International Foundation of Employee Benefit Plans (IFEBP). It found that 42 per cent of sponsors changed their strategic asset allocation, more than double the 20 per cent who reported having done so in a poll six months earlier. The most common changes are increasing fixed income assets (37 per cent), reducing U.S. equity allocations (17 per cent), and increasing alternative fund investments (13 per cent). Some 27 per cent have discontinued offering pension benefits for all or some employees and 21 per cent have closed their plan to new participants. Respondents from the corporate sector are the most likely to have implemented these changes with 40 per cent reporting they had discontinued offerings to some or all employees and 34 per cent stating they had closed their plan to new participants.

CAAM Builds Presence

Crédit Agricole Asset Management Group (CAAM Group), the world's 11th largest asset management company with assets under management of $ 752.5 billion, is continuing to build on its presence in Canada by expanding in Quebec, Ontario, British Columbia, and Alberta. Louis Fortin will head its Canadian subsidiary, CAAM Canada, as president and managing director. Previously, he was vice-president and director, senior relationship manager, at TD Asset Management. It has expertise in international bonds, credit, emerging and global equities, active foreign exchange management, and absolute performance.

Solvency Needs More Than Temporary Solutions

Solvency funding relief is a serious problem which needs more than temporary solutions, says Jeremy Forgie, of Blakes. Speaking at its ‘Recent Developments in Pension and Employee Benefits Law’ seminar, he said while several jurisdictions including Ontario and the federal government have proposed temporary measures, action needs to be taken quickly to help plan sponsors use these proposals. They need to know whether to file a valuation for December 1, 2008; whether to use asset smoothing rules for solvency valuation; whether to pursue the option of an extended amortization schedule; and to set out their intentions with respect to plan amendments when solvency relief is in effect. However, he noted, as yet, they have not seen the final federal legislation or the draft legislation from Ontario. 

UK Firm Hedges Longevity Risk

Babcock International, a UK engineering firm, has in principle secured a deal to hedge some of its pensions longevity risk through the market’s first longevity swap. Once the deal is completed, Credit Suisse will be the counterparty to deliver a longevity swap on two of the firm’s Defined Benefit pension schemes. The schemes will receive fixed payments in exchange for the actual value of pensions due to members, irrespective of how long members and their dependents actually live. This means should the members live longer than expected, Credit Suisse will be required to continue paying the benefits. However, it will reap the benefits should the members die earlier than assumed.

DC Conversion Most Complicated

With plan sponsors looking for ways to reduce pension costs, the conversion from a Defined Benefit to a Defined Contribution plan is the most complicated and has the most legal risk, says Jeffrey P. Sommers, of Blakes. In a presentation entitled ‘Weathering the Economic Storm: Options for Changing Pension Plan Design’ at its ‘Recent Developments in Pension and Employee Benefits Law’ seminar, he said for sponsors contemplating that move, the easiest and least risky approach is to have existing members stay in the DB plan and put all new hires into the DC plan. However, the best cost benefits can be achieved by freezing the DB plan and moving all members into the DC plan for future service.

CEO Financial Fortunes Drop

Chief executive officers at many of the U.S.’s largest corporations saw portions of their financial fortunes drop sharply last year as the financial crisis and slumping stock market resulted in smaller annual bonus payouts, diminished ownership values, and reduced value for equity holdings, says an analysis of proxy statements by Watson Wyatt. CEOs experienced an aggregate decrease of $13.4 billion in levels of realizable pay (measured by annual bonuses paid plus value of company ownership plus value of outstanding equity awards) in 2008. The typical CEO saw a decline of $39 million or 53 per cent in value for the year, with a drop in annual bonuses alone of 30 per cent. The CEOs in the financial industry companies, the largest industry group in the analysis, collectively lost more than $3.1 billion in value, largely driven by decreases in the value of company ownership due to stock price declines in 2008.

CIBC Mellon Custodian For Mental Health Commission Of Canada

CIBC Mellon is custodian for the Mental Health Commission of Canada. "The appointment of our first custodian was a crucial decision for us. We were looking for an asset servicing provider with proven expertise in the Canadian marketplace to safeguard our important research funds," says John Stokdijk, chief financial officer. The Mental Health Commission of Canada is working toward an integrated mental health system for Canadians living with mental illness.

Aegon Chooses Algo Risk

AEGON has chosen Algorithmics and SecondFloor’s Algo Risk as its replicating portfolio technology. Algo Risk is a high performance market risk and capital management solution. AEGON will use it to create replicating portfolios for its assets and liabilities as part of a risk management and risk reporting infrastructure.

Brookfield Adds van den Thillart

Leo van den Thillart is managing partner for private institutional equity at Brookfield Asset Management. He was previously global co-head of the private funds group at Bear Stearns and prior to that spent a decade as vice-chairman of Crane Capital Associates, a private equity firm he helped co-found.

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Wednesday, May 13, 2009

Caisse Thought Paper Identical

Caisse de dépôt et placement du Québec money managers believed there was no difference between non-bank asset back commercial paper and similar products backed by the major banks, says Claude Bergeron, a senior executive. Speaking to the Quebec National Assembly's public finance committee which is looking into its $40-billion loss in 2008, he said they made no distinction between paper issued by third-parties and paper backed by the chartered banks as both shared identical triple-A credit ratings. However, when the market for non-bank ABCP froze in August 2007, it learned the liquidity guarantees on the non-bank paper were far from secure and only applied in narrow circumstances. That left it holding $13 billion, 40 per cent of the total amount issued in Canada, in the suddenly toxic paper. The Caisse has changed its criteria for such investments and now requires ratings from at least two agencies. Non-bank ABCP was rated by only one. As well, a new process is in place for approving investments in new products.

Additional Monitoring Will Help

Fixing financial industry regulation is easy if you have perfect market information and can expect a fundamental change in human nature, says Julie Dickson, superintendent of the Office of the Superintendent of Financial Institutions. In a speech to the Asian Banker Summit in Beijing, China, she said failing that there is a growing consensus that one step must be to strengthen the macroprudential orientation of regulation. “This means that you need to focus on the financial strength of individual institutions, as well as the system as a whole.” Dickson thinks additional monitoring, combined with financial stability being added to mandates of regulators and central bankers, will help. “It will cause everyone to spend more time assessing such risks. It means that financial stability will get focus and will require a weighing against other policy goals, such as home ownership. This did not really happen prior to the crisis,” she said.

Sponsors Need To Make Changes

Plan sponsors must be ready to make changes, says Michael Biskey, president of ESI Canada. In his state of affairs address at its ‘Outcomes Conference,’ he said. The private sector cannot rely on the public sector to establish fair and reasonable pricing for drugs. While the public sector has been able to negotiate lower prices for drugs resulting in significant savings, this has resulted in increased fees and higher mark-ups for the private sector. The difference in price can mean the private sector is paying seven per cent more for brand name drugs and 43 per cent more for generics. He said the opportunity exists for the private sector to drive drug costs improvements, but it will require significant changes to plans.

Northland Acquires Galileo

Northland Bancorp Inc. has acquired a controlling interest of Galileo Global Equity Advisors Inc. Waring will continue to serve as president and chief investment officer of Galileo. Northland Bancorp is a Calgary-based private equity boutique committed to expanding into the financial services industry.

Generic Drugs Keep Cost Increase Down

While the drug spend is up again, the percentage increase is slowing due, in part, to a record high generic fill rate, says Cory Cowan, manager, product development, at ESI Canada. Speaking at its ‘Outcomes Conference’ on ‘Drug Trend Highlights,’ he warned, however, that specialty drug spending is growing at a faster rate due to a greater number of specialty drugs and more high cost claimants. Currently, the 18.2 per cent of the population who have expenses of more than $1,000 per year account for 72.2 per cent of the drug spend. These are people who have chronic conditions such as a RA/Crohn’s disease, multiple sclerosis, diabetes, high blood pressure, and high cholesterol.  By 2018, he estimates the annual drug cost per claimant will be $1,185 compared to the current $698.

Insurance Leaves With Member

Employees leaving a Sun Life Financial group benefits plan now have peace of mind when it comes to their group life insurance. With its ‘My Life Choice,’ departing plan members can apply for the same amount of group life insurance coverage they had in place under their group benefits plan – up to $1 million – at affordable group rates. This annually-renewable term life insurance is available within 31 days of leaving a group plan. Instead of a full medical exam, employees leaving their group plan will only be asked a few health questions to qualify for coverage. ‘My Life Choice’ is part of a suite of products that makes it easier for members leaving a group plan to take their coverage with them, the insurer says. Plan members may also choose to maintain their optional critical illness insurance and extended healthcare and dental coverage plans or transfer their retirement savings from their employer plan to a personal plan.

Dental Plans Behind Times

The way dental plans are set up can make the industry better, says Dr. Richard Beyers, a dental consultant. Speaking at ESI Canada’s ‘Outcomes Conference’ on ‘Dental Trends, Today and Tomorrow,’ he said, however, dental plans have not changed in 40 years and dentistry has become about business, not healthcare. As a result, dentists are able to get around the system. For example, he said 20 per cent of the population account for about 80 per cent of the tooth decay. Most of those without tooth decay are members of employer dental plans, yet claims for treatment of these conditions continues to go up. The failure to design plans to meet the needs of today is leading to abuses of the system as dentists are using billing codes to charge for services not presently covered.

DC Offered To New Hires

For the first time, the majority of Fortune 100 companies now offer new salaried employees only a Defined Contribution pension plan, such as a 401(k), says an analysis by Watson Wyatt. It found 55 companies in the Fortune 100 offer only DC plans to new hires, a jump from 46 at the end of 2007.  Among those companies still offering DB plans, 22 have traditional plans and 23 offer hybrids such as cash balance plans.

Venture Capital Activity Down

Activity in Canada’s venture capital market continued to fall in the first quarter of 2009, consistent with the slowdown that was apparent throughout 2008, says a statistical report by the CVCA-Canada’s Venture Capital & Private Equity Association. Across the country, a total of $275 million was invested, down 25 per cent from the $367 million invested during the same period one year ago. In fact, first quarter activity was, in dollar terms, the lowest reported on a quarterly basis in close to six years when it was $255 million in the second quarter of 2003. In addition, the number of domestic firms securing venture funding was also reduced. Between January and March, 102 companies were financed, down from the 136 companies financed the year before. The CVCA has proposed a commercialization support program to help address these venture industry trends and to increase the availability of venture capital for high-growth small businesses.

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Tuesday, May 12, 2009

Substance Abusers More Accident Prone

Substance abusers are three times more likely than someone who doesn’t abuse drugs and alcohol to have an accident on the job, says Dr. Graeme Magor, an occupational health physician and certified health physician. In an article in Cowan’s Benefits and Retirement Consulting Division’s ‘May 2009 Employee Benefits Bulletin,’ he says the long-term effects of alcohol and drug abuse can be damaging to an employee’s career, life, family, and employer. Workplace costs could include reduced productivity at work, time missed for medical appointments, increased disability and health benefit costs, and the costs of in-patient treatment programs. And these substance abuse costs can add up. Statistics for 2002 from the Canadian Centre on Substance Abuse show Canadian employers paid an estimated $24.3 billion in indirect costs such as productivity losses. Substance abuse overall cost the Canadian economy nearly $40 billion in 2002, double the $18.45 billion in 1992.

Bundling May Have Run Course

The move toward bundling of Defined Benefit plan services may have run its course, says a Chatham Partners survey. ‘The Long March: Strategies to Accelerate Growth in the Retirement Outsourcing Market’ shows only six per cent of U.S. plan sponsors with unbundled DB plans intend to bundle any of their plan's DB services in the next two years, compared to 14 per cent in 2005. It also reveals that the retirement outsourcing market has not turned the corner toward a period of rapid adoption of bundling. However, bundled retirement outsourcing growth opportunities remain for retirement plan providers willing to refine their marketing, sales, and product development efforts to align with plan sponsors' evolving needs.

Deficits Shrink In April

Plan deficits were smaller for the second successive month in April, says Mercer. It says the funded status of pension plans of S&P 1500 companies improved by $48 billion in April, following a $158-billion improvement in March. This puts the estimated aggregate deficit of pension plans sponsored by S&P 1500 companies at $167 billion at the end of April, down from $215 billion at the end of March and $409 billion at the end of December 2008. The aggregate funded status was 87 per cent at the end of April, up from 83 per cent at the end of March.

FTSE Companies Move To Bonds

FTSE 100-listed companies are reducing their pension liability risk by re-weighting assets by an average seven per cent to bonds, says a study by Pension Capital Strategies. For the 2007/08 year, it found the asset allocation to fixed income for most FTSE company pension funds increased in the last financial year from 40 per cent to 47 per cent, on average. This is the largest 12-month shift in investments for more than 20 years, according to the report.

Author Redefines Healthcare

The author of the book ‘Redefining Health Care: Creating Value-Based Competition on Results’ will be the featured speaker at the Rotman School of Management’s next ‘Health Sector Strategy Speaker Series @ Rotman.’ Prof. Michael E. Porter, Bishop William Lawrence University professor at Harvard University, will present a lecture based on the book. In this lecture, he will reveal the underlying-and largely overlooked causes of the problems in the health sector and provide a powerful prescription for change. It takes place June 11 in Toronto, ON. For more information, visit www.rotman.utoronto.ca/events

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Monday, May 11, 2009

Retirement Insecurity Risk Higher For Women

Women have a higher risk for retirement insecurity than men, says research from the National Institute on Retirement Security (NIRS). Its ‘Issue Brief’ says that a woman with a salary of $50,000 must save $1,000 more per year than her male counterpart to achieve equitable retirement income because of her longer life expectancy. Yet, according to a 2007 study, full-time female workers made just 76.2 per cent of their male counterparts' wages – meaning less money for savings. It also suggests that Defined Benefit pension plans provide benefits and protections that are especially important for women. It says that risk can be reduced by ensuring women have the combination of a traditional pension, supplemental 401(k)-type individual savings, and Social Security.

Improved Performance Still Negative

The performance of institutional investors' portfolios improved during the first quarter of 2009. However, all categories were still in negative territory, says the Wilshire Trust Universe Comparison Service (TUCS). Foundations and endowments saw the best median quarterly returns at minus 4.78 per cent, with an annual return of minus 25.71 per cent. The median performance of corporate pension plans was minus 26 per cent for the year and minus 6.31 per cent for the quarter, while public pension funds median performance was minus 25.93 per cent for the year and minus 5.92 per cent for the first quarter.

Strategies Changing To Cut Volatility

Many U.S. companies with frozen pensions intend to make investment strategy changes to cut corporate pension expense volatility, says an Aon Consulting survey. Its poll of more than 70 U.S. organizations, with a cumulative total of frozen pension plan assets of more than $50 billion, found that 81 per cent are planning to change their investment strategy in the near future. Some 35 per cent are looking to hedge significant risks, while 27 per cent plan to change investments to reflect the shorter investment horizon to termination, and 19 per cent plan to move to a more liability-driven investment strategy.

Knight Leads UBS In Canada

Paul Knight is chairman and CEO of UBS Canada. He joined SG Warburg (a predecessor firm to today’s UBS) in London in 1994. During his 15-year career, he has been the head of the industrials team in Europe, the Middle East, and Africa; head of Latin American investment banking; and co-head of Americas metals and mining team.

Financial Crisis And Pension World Discussed

‘The Impact of the Current Financial Crisis on the Pension World: What Can Be Done?’ will be the focus of the next Economic Club of Canada session. Panelists Susan Eng – vice-president, advocacy, CARP; Ken Georgetti – president, Canadian Labour Congress; and Michael Hale – president, Canadian Institute of Actuaries; will examine if, despite the adverse effect of the financial crisis, this is the perfect opportunity to improve the retirement income system in Canada. They will also discuss the threats and opportunities in Canada’s pension system. It takes place May 21 in Toronto, ON. For more information, visit www.economicclub.ca

Panelists Discuss Pension Reports

The ‘Changing Currents of the retirement income world will be the theme of the Association of Canadian Pension Management’s ‘2009 National Conference.’ Among the featured sessions will be an examination of the various pension reports released in recent months. Panelists Serge Charbonneau, Morneau Sobeco; Randy Bauslaugh, of Blake, Cassels & Graydon LLP; and Caroline Drouin, of CN; will analyze the reaction from the pension industry and comment on the expected reaction from governments. The conference takes place September 15 to 18 in Montréal, QC. For more information, visit http://www.acpm-acarr.com

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Friday, May 8, 2009

Attack Starts To Take Pensions Away

A Quebec Superior Court ruling that allows AbitibiBowater to escape its responsibilities to worker pensions is "the first salvo in a larger attack to take away workers' pensions," says Dave Coles, president of the Communications, Energy and Paperworkers Union. He called on the federal government to “take steps immediately to address shortfalls in the private pension system." The company won approval for an order under the Companies' Creditors Arrangement Act (CCAA) to suspend pension payments towards its unfounded liabilities for workers. However, Coles said "Failure to make pension payments will only make a company's unfunded liability grow, setting the stage for larger pension plan deficits.” Gaétan Ménard, secretary-treasurer of the union, said "There is something seriously wrong with a system that puts workers' pensions in the same category as banks and hedge fund credit."

Opportunity Now To Move Into Corporate Credit

The pillars of active fixed income investing are based on independent credit research, says Robert Pemberton, managing director and head of the fundamental active fixed income team at TD Asset Management. Speaking on ‘Corporate Credit – Here, There and Everywhere?’ at its ‘6th Annual Sharing of Knowledge Learning Series,’ he said the opportunity is “now” to move into corporate credit as investors are currently being compensated for the risk taken. Currently the yield is just under six per cent compared to federal yields of just over two per cent. This means the spread is about 300 basis points. He estimates that about half of that spread is due to liquidity.

Search Activity Slowing Down

Search activity for investment managers globally is slowing down, says Mercer’s ‘2008 Global Manager Search Trends’ report. During 2008, it advised on 676 manager searches across the world, representing $93 billion in assets placed. The number of Canadian equity searches, however, increased in 2008 from 32 to 38. They were overshadowed by the increase in amounts placed in non-domestic equity mandates, jumping from $1.8 billion to $2.7 billion in 2008. On the alternatives side, activity increased, with the most popular strategy being infrastructure, where a doubling of search activity was observed in 2008. The most notable decreases in search activity were seen in the UK, Continental Europe, and Australia where funds focused on strategy issues rather than manager changes and structures.

LDI Helps Reduce Equity Risk

Institutional investors must move beyond peer group comparison, says Kevin LeBlanc, vice-chair of TD Asset Management. Speaking on ‘How to Improve Risk Budgeting Updating Liability Driven Investing and Related Strategies,’ he said too often LDI strategies focus on managing interest rate risk. However, strategies such as minimum variance portfolios, option overlay strategies, and portable alpha can help reduce the risk of equities in a portfolio. These can be used to reduce the volatility of a portfolio.

Shareholders Get Executive Compensation Vote  

Industrial Alliance Insurance and Financial Services Inc. shareholders will be given a non-binding, advisory vote on executive compensation at next year's annual meeting. "The board of directors is pleased to give shareholders the chance to register their views on all elements of executive compensation," says John LeBoutillier, chairman of the board. "Although the company already follows the best practices for compensation and compensation disclosure, good governance continues to evolve and Industrial Alliance's board is pleased to allow shareholders to express their point of view on questions important to company operations."

Different Metrics Advocated

Algorithmics is advocating different metrics for different components of liquidity risk. In its submission to the Basel Committee on Banking Supervision’s consultative paper ‘Proposed enhancements to the Basel II Framework,’ it has focused on liquidity risk and the techniques necessary to effectively understand and manage the three specific risk components which are embedded within the broader category of liquidity risk. Whilst strongly endorsing the committee’s overall view that the strengthening of supervision is necessary, Algorithmics takes it a step further in suggesting that liquidity risk needs to be considered at a more granular level and should be split into its component parts – funding, market, and contingency riskand then calculated using the risk measures which are most appropriate for each component As well, a more extensive analysis of model risk is required to enable allocation of risk capital according to the complexity of the pricing models. Finally, it says leverage caps should not be set uniformly for all banks. They should be dependent on the size of the institution.

Streamlining IT Helps HR Cut Costs

By reviewing their function’s technology footprint and finding ways to streamline IT processes, HR departments can help their organizations cut costs, find efficiencies, and support worker productivity in the current economic environment, says Watson Wyatt. It offers three ways employers can use HR technology to manage the economic downturn more efficiently. They are optimizing HR operational and service delivery effectiveness, reviewing and benchmarking outsourced vendor contracts, and leveraging Web 2.0 technologies to create a ‘consumer-grade’ experience.

AIMA Publishes Fund Of Fund Practices Guide

The Alternative Investment Management Association (AIMA) has published the world’s first global ‘Guide to Sound Practices for Funds of Hedge Funds Managers.’ The guide was developed by some of the world’s leading funds of hedge funds practitioners. It focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest, and other operational issues.

Evolution Of Exchanges Examined

The ‘Evolution of Exchanges and ATS’s in a Global, Multi-Asset, Competitive Environment – Who is Benefiting?’ will be the focus of a session at the ‘2009 FPL Canadian Electronic Trading Conference.’ Set for June 1 and 2 in Toronto, ON, this year’s theme is ‘Achieving Best Execution, Risk Mitigation and Operational Efficiency in a Complex World.’ The ‘Evolution of Exchanges’ session will address questions such as ‘are the changes underway leading to sustainable business models for exchanges and ATS’s?’ Panelists include Chris Pickles, head of marketing – investment banking and global accounts, BT Global Services; Bruce Goldberg, chief marketing officer, ISE; Glenn Goucher, senior vice-president of financial markets, TMX; Jos Schmitt, CEO, Alpha Trading Systems; and Yann L’Huillier, CIO, Turquoise. For more information, visit http://www.etradingcanada.ca/program.html

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Thursday, May 7, 2009

Crisis Has Unique Characteristics

Yvon Charest, president and CEO of Industrial Alliance Insurance and Financial Services Inc., believes the current financial crisis has several unique characteristics. Speaking at the company's annual general meeting, he said it started as a traditional bubble in the United States real estate market, transformed into a financial crisis, changed into an economic crisis, and then became, in certain respects, a value crisis. “As such, it caused us to call into question our beliefs, our doctrines, and our ways of doing things.” The crisis was, to a certain point, unpredictable as the majority of experts and qualified leaders, including those in charge of the economy, didn't see it coming, even if all the ingredients that led to the crisis were set into place under their very eyes. To prevent another crisis such as the one we're experiencing from happening again, he suggests that governments make a concerted action to supervise financial institutions on an international level, so that poorly-regulated institutions in one country do not "contaminate" other countries.

Investors Must Understand Strategy

Sometimes, the best investment decision is the one not to make the investment, says Mark Purdy, of Arrow Hedge Partners. Speaking at the AIMA Canada session ‘Bullet-Proofing Your Business in the Post-Madoff World,’ he said one key to investing in hedge funds and other alternatives is to “make sure you understand what you are investing in” because evaluating a hedge fund manager is very different from evaluating other managers. Investors need to understand the strategy, the people involved in the fund, and the operational side of the business. Not only do they need to determine if the business is viable, but there needs to be confidence about the people running the business and its providers. He suggested that investors might have taken a different approach to Bernie Madoff’s funds if they had simply checked out his auditor who reportedly had been telling people for years it did not do audits.

Some IPPs Under Attack

Canada Revenue is attacking Individual Pension Plans (IPPs) set up by individuals who have retired and transferred their pension funds out of large or public sector plans, says Eva M. Krasa, of Borden Ladner Gervais. Speaking at its ‘Pension and Benefits Law Update,’ she said these individuals are incorporating a business and becoming employees of the business to protect their pension assets from taxation. However, Canada Revenue is threatening to deregulate these plans on the grounds that there is no bona fide employment relationship and that the primary purpose of the IPP is to receive the transfer of funds from the former plan instead of providing retirement benefits. She said revocation of the registration of an IPP results in onerous tax consequences and could create issue for service providers such as trustees.

RBC Dexia Launches Pooled Survey

RBC Dexia Investor Services has launched a quarterly Pooled Fund Survey, presenting comparative return information for individual pooled funds available within Canada. It can be used by plan sponsors as well as asset managers to evaluate the performance of individual pooled funds according to their mandates, peers, and benchmarks. The majority of leading pooled fund managers are contributors to this independent survey, with some 70 firms, covering more than 600 funds, segmented into 15 unique mandates. The inaugural survey is available now on http://www.rbcdexia.com/

Executive Pay Needs To Change

A majority of directors who serve on corporate boards believe that the executive pay programs of U.S. companies need to change as a result of the financial crisis, says a survey by Watson Wyatt. Nearly two-thirds (63 per cent) of outside directors said they believe American companies should modify their executive compensation programs to adapt to new economic realities. Additionally, most directors (68 per cent) are not concerned or only slightly to moderately concerned about the retention of high-performing executives. Further reinforcing this point, 70 per cent of directors expect executive pay opportunity to decline over the next two years. More than a third (34 per cent) said their companies had already reduced salary, target bonus, and/or long-term incentive award levels. Six per cent plan to make those changes in the next six months and another 48 per cent are considering making them.

Canada Index Outgains Ex-Canada

The Russell Global ex-Canada Index reflected a 12.5 per cent gain for April, while the Russell Canada Index showed an increase of 14.3 per cent for the month. Combined, these two indexes offer Canadian investors a seamless picture of the global equity opportunity set, covering 98 of total global market capitalization. The Russell Global ex-Canada Index and its subsets – including growth, value, mega, large, mid, and small cap – were introduced recently as part of its comprehensive family of global indexes.

Hunter Heads Canadian Equities

Heather Hunter is head of Canadian equities for Invesco Ltd.’s institutional business in Canada. She will focus on building its Canadian equity capabilities in the Defined Benefit and Defined Contribution pension channels. Prior to joining Invesco Trimark in 1999, she was a vice-president at Ontario Teachers' Pension Plan Board, where she was responsible for building the equity investment platform and transforming the investment portfolio to include equities.

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Wednesday, May 6, 2009

Canadians Need Forced Saving For Retirement

Canadians should be forced to save more for retirement, says Don Drummond, Toronto Dominion chief economist. He says many Canadians are unaware of how little their retirement investments will yield, so the federal government should consider a new mandatory savings plan that goes beyond the payouts of the Canada Pension Plan. Reform options could include enriching incentives for private sector savings or increasing contributions to CPP so that it yields more for retirees. The situation has arisen because traditional Defined Benefit pension plans in the private sector are disappearing as companies cut costs and the performance of Defined Contribution plans depends on the success of investments.

Pension Plans Have Too Much Risk

Pension plans are investing with far too much risk, says Malcolm Hamilton, of Mercer. Speaking at the Toronto CFA Society conference on pension plans, he said they have become reckless in the investment risks they take. Pension funds are increasing their exposure to equities and alternative investments at the same time as the typical plan lost 25 per cent in 2008. The volatile market environment last year should be a wake-up call for funds to reduce their exposure to risk, he said. However, “there’s probably never been a less opportune time to de-risk than today.”

Plans Must Reduce Risk Exposure

If pensions don’t voluntarily reduce their exposure to risk, regulators could step in, says David Gordon, deputy superintendent of pensions at the Financial Services Commission of Ontario. The events of the past year have prompted the regulatory organization to increase monitoring of pensions’ risk, he told the Toronto CFA Society conference on pension plans. As well, the Canadian Association of Pension Supervisory Authorities has established a working group to examine the industry and publish a new set of guidelines on investment and funding policies. It is set to release guidelines for public consultation at some point in 2010.

Buyout Industry Slowed Down

Investment and fund-raising data for the buyout industry points to a slowdown in activity in Canada, comparable to the global slowdown in the buyout industry in the quarter, says Canada’s Venture Capital and Private Equity Association. “It is not surprising that the buyout industry’s investment and fundraising levels have subsided in the first quarter,” says Gregory Smith, president of the CVCA. “The worldwide economic turmoil that began in the fourth quarter of 2008 continued in the first quarter of 2009 and our industry, in common with most economic sectors, has not been immune from its effects.” There were 18 completed and pending buyout transactions in Canada in the first quarter, 10 of which had a disclosed value of $0.6 billion, compared to 22 such transactions in Canada in the fourth quarter. In the first quarter of 2008, there were 33 completed and pending deals, nine of which had a disclosed value of $2.4 billion.

CI Launches Institutional Division

CI Investments Inc. has launched CI Institutional Asset Management, a division focused exclusively on the institutional investment marketplace. It unites CI's existing institutional distribution business with KBSH Capital Management. Its clients account for approximately $8 billion in assets under management at CI. The move is part of CI's strategy to devote more resources to marketing its investment managers to institutional investors and expanding its share of this market.

Care For Seniors Will Impact Workplace

As more working Boomers are forced to care for their parents, the impact on the workplace can be profound, says Paul Hogan, chief executive officer of Home Instead Senior Care. In an article for Benefits and Pensions Monitor’s Online Exclusive, ‘Is Senior Care The New Child Care?,’ he says with five million seniors, and soon to be 10 million seniors, the aging Canadian population will have a profound impact on employers. As employees take time off or are distracted by the care needs of their parents, lost productivity will be a challenge for most businesses which may not be prepared for the future shock these demographic shifts will bring. http://www.bpmmagazine.com/

International Managers Have Successful Quarter

International managers had a successful first quarter relative to the MSCI EAFE Index, as the median manager in InterSec’s EAFE Plus universe returned minus 12.5 per cent, adding 140 basis points over the benchmark. Despite the extreme losses endured in the markets over the past six months, 62 per cent of managers were able to add value to the MSCI EAFE benchmark return. In the first quarter of 2009, growth managers provided the strongest returns on a median level after two consecutive quarters of value outperformance. The median growth manager returned minus 11.2 per cent for the quarter, outperforming the median value manager by 250 basis points. In fact, 86 per cent of growth managers outperformed the median value manager for the quarter.

Shareholders Express Their Rage

The first annual shareholder meetings after a year of stock market and economic trauma are bringing more trauma to company boards, says online governance monthly ‘Boardroom INSIDER.’ Shareholders are aiming their rage at boards as never before, often brushing aside traditional board powers. For example, at Bank of America's annual meeting, Board chair/CEO Ken Lewis was stripped of his chairmanship in an unprecedented shareholder vote. Another area where angry investors have usurped boards is in setting CEO pay with more ‘Say on Pay’ resolutions that allow a shareholder vote endorsing pay policies. ‘Say on Pay’ has already passed at Apple, Pfizer, and Valero.

Murti Moves To Teachers’

Madhav Murti is vice-president, business process management, at the Ontario Teachers’ Pension Plan (Teachers’). He joins Teachers’ from PricewaterhouseCoopers where he was vice-president, global sourcing advisory group. He has almost 20 years of global operational and consulting experience, having previously held positions in finance, strategy, and business management at Capgemini, Ernst & Young ,and PepsiCo.

June Commuted Value Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including June 2009 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:

Restructuring Challenges Examined

‘Restructuring in a Difficult Economy’ will be the topic at the next Employee Assistance Program Association of Toronto (EAPAT) session. Eric D’Amours, of Towers Perrin, will look at the way that mergers and acquisitions are conducted in the context of this down economy and discuss how the risk related to employee engagement may impact the success of a transaction. It takes place May 28 in Toronto, ON. For more information, visit www.eapat.org

CEBS Offers Fundamentals Sessions

The Toronto Area Chapter of the International Society of Certified Employee Benefit Specialists ‘Fundamentals of Pensions and Group Benefits’ will feature two days of sessions on pension and benefits. Sessions on pension will feature Wayne Murphy, of The PBAS Group, who will provide an introduction to social programs and private plans. Janis Cooper, of Towers Perrin, will discuss setting up a pension plan. Benefits sessions will feature Yun-Suk Kang, of Aon Consulting, who will examine life insurance and Joyce Strasbourg, of Morneau Sobeco, who will present a program entitled ‘Underwriting 101.’ It takes place May 11 and 12 in Toronto, ON. For more information, visit http://www.iscebs.org/

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Tuesday, May 5, 2009

Negotiated Benefit Cannot Be Rescinded

A Quebec Superior Court has ruled that AbitibiBowater Inc. had no right to unilaterally rescind pension benefit improvements as they had been negotiated in a collective agreement. Abitibi claimed that since it was going into bankruptcy, it could not cover the cost of a negotiated pension improvement which would enhance pension payouts to allow for early retirement at 57 instead of 58 for employees with 20 years of continuous service. Abitibi does not plan to appeal the judge's ruling, but expects to proceed with a submission to the provincial regulators in Quebec and Ontario over the amendment.

Air Canada Discussing Funding Solution

Air Canada is in ongoing discussions with its Canadian-based unions to find a funding solution which would allow the airline to maintain its Defined Benefit pension plans. It is seeking support from its unions for a moratorium and other conditions on funding its pension deficit so it can establish financial certainty over the next several years. Its objective is to maintain its current DB plans without restructuring the pension benefit formula. Its proposal does not contemplate a transition of its plans to a Defined Contribution plan design.

Restructuring Proposals Impediment To Reform

The restructuring proposals in Ontario’s ‘A Fine Balance: Report of the Expert Commission on Pensions’ and the priority to be given them are not only extraneous to the important legislative issues that need resolution, but also potentially an impediment, says Priscilla H. Healy, of Fogler, Rubinoff LLP. In an article for Benefits and Pensions Monitor’s Online Exclusive,’ she says the Ontario report is strongly committed to its restructuring proposals. However, ‘Pension Reform In Ontario: Shuffling The Deck Chairs’ says in the report’s message as to implementation of its recommendations, there is a disturbing sentence: "In the Commission's view, priority should be given to putting in place appropriate agencies and officials to carry the work forward." The proposed restructuring will do nothing to increase pension coverage in the private sector, she says and reforms in the pension regulatory structure will distract and divert from the legislative amendments that could be made that will genuinely help the pension industry. To see the article, click here http://www.bpmmagazine.com/

Manulife Improves Health eLinks

Manulife has launched a major enhancement to its Health eLinks online health resource. The web portal is designed to provide group benefits plan members across Canada with access to an online health library and a health risk assessment, among other online tools. Through a partnership with MediResource Inc., it will be able to provide new services and features to both plan members and sponsors. MediResource Inc. is a provider of Canadian health information, decision support tools, and developer of online health technologies, as well as an operator of consumer health portals. The partnership has allowed Manulife to broaden the online assessment to include health risk factors that are affecting productivity and benefit costs for employers today.

Site Helps With Economic Worries

Eight out of 10 Canadians are worried about the economy, with many people (38 per cent) more concerned about how the recession will impact others than themselves, says a survey for Sun Life Financial. The unease around the economy also has many Canadians rethinking their spending habits with two-thirds of respondents indicating that they have reduced their spending in some way with 27 per cent ensuring that they are spending less. To help Canadians make sense of what’s happening in the world around them, Sun Life Financial has launched Today’s economy, a website with resources available for people seeking help with market volatility, stress, and job loss. The site goes beyond financial matters to discuss health and well-being through a section on coping with stress – a key factor in maintaining good health. The site also has tips about reducing day-to-day spending, advice about dealing with job loss, and information related to investing in a volatile market.

Marret Files Prospectus

Marret Asset Management Inc. has filed a preliminary prospectus for Marret High Yield Strategies Fund with the securities regulatory authorities of all of the Canadian provinces. The fund will obtain exposure to a portfolio focused primarily on high yield debt securities. It was developed in recognition of the need for investment strategies focused on preserving capital in market downturns and participating fully in rising markets.

Drug Plan Cost Saving Examined

‘What Your Drug Plan is Paying For and How to Manage It’ is the topic of the next Benefits Breakfast Club meeting. Michael P. Sullivan, president of Cubic Health, will discuss immediate opportunities for savings within existing drug plan design; how actively managing drug plans can yield savings moving forward; and integrating absence, STD, and/or LTD data with drug plan data to determine leading indicators and plan measurements. It takes place June 4 in Burlington, ON. For more information, visit http://www.connexhc.com/

Executive Compensation Examined

Robert Levasseur and Elaine Fabiano, of Watson Wyatt, will examine ‘Executive Compensation Trends in a Turbulent Market’ at the HRPA’s ‘2009 Compensation Conference: Trends in Compensation.’ The one-day conference provides up-to-date information on current trends and projections for compensation, benefits, and total rewards in today’s competitive talent market. Emerging trends in compensation design and delivery including common and diverging themes in the public, private, and not-for-profit sectors will be discussed. It takes place May 28 in Toronto, ON. For more information, visit http://www.hrpa.ca/

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Monday, May 4, 2009

VEBA Comes To Canada

The Canadian Auto Workers and Chrysler have agreed to establish a Canadian healthcare trust (HCT) to provide fund retiree pension and health benefits, says ‘Eckler Group News.’ The HCT initiative is similar to U.S. Voluntary Employee Beneficiary Associations (VEBA), where they are funded on a tax-free basis. The detailed framework for the Canadian HCT is to be developed in the next month.

No Consensus To Be Found

PAICR Canada hoped to find ‘consensus’ among Canadian investment firms in the rules they use to provide data to consultants and data providers. However, in many cases its Data Study of the Institutional Investment Industry found that respondents were interpreting questions differently, and no consensus could be drawn. It did identify some trends and themes which do lend themselves to a starting point for designing best practices in consultant database responses. These include were a requestor is only asking for a retail/institutional split, include foundations and sub-advisory as ‘institutional.’ Retail should only include individuals. When determining how many clients a firm has, they should count only client relationships, not accounts. The same is true for clients gained/lost. Clients should only be counted as a gained/lost if it is a brand new client relationship or a 100 per cent lost relationship for a firm.

Canadians Worried About Jobs

They’re stressed, anxious, worried about their jobs, says the ‘Desjardins Financial Security National Health Survey.’ It found a significant number of workers in Canada feel they have lost control of their lives as the economic recession grinds on, unemployment numbers rise, and financial security appears to be evaporating. The study found that one-third of those surveyed say they are more stressed now than a year ago. About 30 per cent of employees across Canada are experiencing anxiety, losing sleep, and/or suffering from headaches, muscle aches, and other physical tension – symptoms which often precede more serious problems. Among their worries, three of the most stressful aspects of their lives are associated with their employment – money, workload, and job security. For example, employees appear to be working longer hours as 54 per cent feel the current recession is having an impact on their work/life balance. As well, 43 per cent are now concerned about losing their jobs. For more on the survey results, visit www.healthiscool.ca


Employers Need To Consider Flu Issues

The confirmation that the contagion, ‘Swine Flu,’ is present in Canada, raises potential issues about the rights and responsibilities of both employers and employees, says ‘Labour & Employment Law In the News’ from Heenan Blaikie. Based on past experiences with similar public health issues, most notably SARS, it is prudent for employers to consider the issues and take reasonable steps now. It says employers are under a duty to ensure the safety of employees. Generally speaking, this duty requires employers to take reasonable steps to ensure that employees are safe and that the workplace is reasonably safe. As such, employers may wish to increase the safeguards in place at the workplace to reduce the risk that an employee may contract the virus at work. Such steps would include providing employees with antiseptic cleanser; ensuring that the workplace is kept clean and free of germs to the extent reasonably possible; and reminding employees of the need to wash their hands regularly, and to cover their mouth when sneezing or coughing.

Clay Finlay Winding Down

Clay Finlay, an international equity boutique, will be wound down over the coming months and its $1.8 billion of assets will be returned to clients, says the firm’s parent company, Old Mutual Asset Management. An investment consultant was brought in as its CEO in 2007 to revive the company that had been suffering through a period of underperformance. However, the capital market and economic environment have resulted in the decision to discontinue operations.

Recession Hiking Health Benefit Costs

Health benefit cost had risen by about six per cent for four consecutive years and U.S. employers expected a similar increase in 2009. However, a Mercer survey finds that employers now foresee an increase of 7.4 per cent in 2009, due to the recession. A recession cost spike can be driven by stress-related illnesses, laid-off workers using benefits before their coverage ends, and employees who anticipate changes in benefits. Employers are gearing up to bring their average cost increase down to 5.2 per cent in 2010, which would be the lowest annual increase in health benefit cost since 1997.

Sweatman Pacific Region Volunteer

Scott Sweatman, an associate counsel at Blake, Cassels & Graydon, LLP, is the Pacific region CPBI Volunteer of the Year. He first became involved with CPBI as a young lawyer and has been a member for more than 15 years. After serving on the Pacific region council for a number of years, he became a member of the CPBI national board of directors and, ultimately, board chair in 2003/2005.

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Friday, May 1, 2009

Caisse Beefs Up Risk Management

The Caisse de dépôt et placement du Québec is making organizational changes to simplify its structure, improve its overall effectiveness, and manage risk more effectively. It has made risk management its top priority and Susan Kudzman becomes chief risk officer. Specialist positions have been created which will be incorporated into the teams in each of the main investment areas. The number of employees in this unit will double, with the addition of about 20 permanent positions. Responsibility for depositor relations will now be assumed by a separate executive vice-presidency with Bernard Morency, previously management adviser in the executive vice-presidency, depositors and risks, appointed executive vice-president, depositors’ accounts management and strategic initiatives. In the wake of the global financial crisis, many investment operations have been affected by a drop in activity, notably hedge funds. The Caisse has decided to combine all investment operations involving liquid markets into two executive vice-presidencies – equity markets and fixed income and currencies. The position of executive vice-president, hedge funds, has been abolished and the staff has been reduced. The funds of hedge funds management team has been folded into the private equity group. The position of executive vice-president and chief strategist has also been abolished. Over all, the changes involve the abolition of 55 positions, but also see the creation of 24 positions, mainly in risk management.   

Providing Psychologically Safe Workplace More Pressing

The duty to provide a psychologically safe workplace is even more pressing during challenging economic times, says Martin Shain, senior researcher at the Centre for Addiction and Mental Health. Speaking at the Connex Health/IHPM Employer Forum, he said there are additional, but avoidable, problems which increase the risk of employees suffering from a mental injury. These include increased information failure when employees are not involved in decisions where they have a legitimate interest. Employers must create psychologically safe workplaces because minds, like bodies, need protection. However, they also face increased threats of legal action from employees who claim that conditions in the workplace are responsible for their mental conditions.

Employers Need Flu Plan

The recent outbreak of influenza A in Mexico and its spread to Canada has many employers wondering how they should prepare for a possible pandemic and what, if anything, they should be telling employees. Even though Canadian cases are so far mild, organizations without a plan for dealing with serious health threats should act quickly to develop a strategy or face possible business interruption, says Hewitt Associates. With no contingencies in place, organizations may find ‘business as usual’ challenging if a large number of employees fall ill or stay home to care for sick family members. Most pandemic plans contain information regarding educating employees about preventing the spread of infectious diseases, providing advice on personal emergency preparedness, cross-training for essentials positions, and communicating potential business impacts to stakeholders.

Healthy Workplace More Than Wellness

A healthy workplace is more than wellness, says Stan Murray, director of healthy workplace programs for the National Quality Institute. In a presentation at the Connex Health/IHPM Employer Forum, he said the goal should be to have healthy employees making a contribution to a healthy workplace. This may require a change in culture where senior leaders are engaged. It should also be integrated with business planning where the wellness of people is considered in every company decision.

SRI Consolidates Market Share

Socially responsible investment has consolidated its market share in Canada over the past two years, says a study by the Social Investment Organization (SIO). The ‘Canadian Socially Responsible Investment Review’ estimates total SRI assets in Canada in 2008 at $609.23 billion. This represents a 21 per cent increase from $503.61 billion in 2006. The estimated share of total assets under management in Canada is 19.9 per cent, comparable to the share in 2006 of 19.5 per cent. The findings include $555.06 billion in assets invested according to Broad SRI strategies, which are primarily based on a fiduciary analysis of the risk and return characteristics of environmental, social, and governance issues. The increase from $446.22 billion two years earlier reflects asset growth by pension funds with existing responsible investment policies as well as a small increase in the number of pension plans and endowments with responsible investment policies.

Solution Provides Research And Analysis

Desjardins Financial Security has launched Foresight, a group retirement savings/investment solution that combines flexible and tailored group retirement savings solutions with Morningstar's independent expertise in investment research and analysis. Each fund in a Foresight portfolio is carefully researched, selected, and monitored by Morningstar. This is the first program of its kind in Canada and is truly a turnkey solution for small- to medium-sized businesses. “Foresight is ideal for retirement plan sponsors and their employee participants because it provides accurate research and information about their funds. In this market, this type of investor information is empowering and reassuring,” says Gil McGowan, regional vice president of group retirement sales and development.

Wellness Measurement Too Limited

The information derived from wellness program measurements are often too limited and inflexible to be used when making strategic decisions, says Leah van Ooyen, manager of Connex Health. However, it is now offering a database service to fill the gap in wellness program measurement. Speaking at the Connex Health/IHPM Employer Forum, she said these programs need to be measured for a number of reasons. These include enabling an employer to improve the cost effectiveness of these programs and to maintain momentum towards its goals. Its database allows the evaluation in changes in health risk and status over time, plus a comparison of the results from both the participants and non-participants.

HR Performers Honoured

The Human Resources Institute of Alberta has honoured three top performers in the HR field with ‘2009 Celebrating Excellence Awards’ at the 2009 Alberta HR Conference. The annual awards are presented to HR professionals for outstanding contributions to the HR profession and to their respective workplaces. Mason Meyers, human resources director for Globex Foreign Exchange Corporation, received the ‘2009 Rising Star Award.’ It is awarded to an HRIA member in the first five years of his or her career who demonstrates great promise as a future leader in the Alberta HR community. Mason created a formal HR department and established policies and procedures that will benefit both Globex and its employees over the long term. The Strathcona County Leadership Team took home the ‘2009 Award of Excellence’ for its people and talent development program. The award is given to an individual, group, or team that plays a key role in driving performance and reputation of an organization, is a catalyst for organization-wide change, and serves as a trusted advisor on organizational strategy. Allan McCalder earned the ‘HRIA Distinguished Career Award.’ In his current position as human resources manager with Strathcona County, McCalder has made significant contributions in the areas of talent development and health and safety.

Dobson Heads CAAT

Derek Dobson is chief executive officer and plan manager of Ontario’s Colleges of Applied Arts and Technology Pension Plan. For the past three years, he has served as executive administrator (CEO) of TEIBAS Ltd., the Toronto Electrical Industry Benefit Administrative Services. Prior to that, he spent six years in a senior capacity at HOOPP, the Hospitals of Ontario Pension Plan, in the actuarial services, pension policy, and risk management areas.  

Fifield Now CFO

Anita Fifield is chief financial officer at SEAMARK Asset Management Ltd. She has been with the company since 2003, most recently as controller.

Hollihan CPBI Volunteer Of Year

Joan Hollihan, a principal at Mercer (Canada) Limited, is the Southern Alberta region CPBI Volunteer of the Year. A CPBI member for more than 15 years, she has chaired and co-chaired several committees and was the chair of the regional council in 2004. Most recently, she was co-chair of the program committee for the ‘2009 Forum’ which takes place May 25 to 27 in Calgary, AB.

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Thursday, April 30, 2009

Finance Minister Rejects Calls For Bonus Denial

Federal Finance Minister Jim Flaherty is rejecting calls that he should deny bonuses to executives who manage investments for the Canada Pension Plan. MPs from all three parties say the bonuses should not be paid because of its losses in the past fiscal year. It has lost 13.7 per cent, or $13.8-billion, in the first nine months of the year. Flaherty says he doesn't think it's his job to tell the executives running the Canada Pension Plan how much they should be paid. As well, he said the CPP investment board has done a relatively good job, given the circumstances of the global economy in the past year.

Lower Fees Ahead For Managers

Lower fees due to a fall in assets under management and shifts in asset allocation to lower risk investments are just two of the ways asset managers will feel the “prolonged” impact of the economic crisis, says Dushyant Shahrawat, senior research director, investment management, at Tower Group. Speaking on the ‘Current State of the Securities & Investments Business’ at a CIBC Mellon session, he said risk management has become a big deal because the subprime crisis “exposed a colossal failure in the industry’s risk management methodologies, measures, and policies.” For example, financial innovation got out of control and current risk processes couldn’t handle complex instruments. As well, common sense risk measures and practices were ignored amid market rise and greed.

Small Cap Managers Beat Large Cap

For the first time since the second quarter of 2007, Canadian small cap managers fared better than large cap managers, says Russell’s ‘Active Manager Report.’ The median small cap manager’s return was down one per cent compared to the 2.7 per cent decline for the median large cap manager in the first quarter of 2009.  Only 36 per cent of large cap Canadian equity active managers beat the S&P/TSX Composite Index in the first quarter of 2009, which was down from 72 per cent in the fourth quarter and 65 per cent in the third. However, it was a better start to the year than in 2008 when less than 20 per cent of active managers beat the benchmark. Small cap managers tended to have larger weights in the materials and information technology sectors compared to large cap managers and that helped their relative performance in the first quarter since those two sectors outperformed.

Dark Pools Offer Anonymity

Dark pools are attractive because they offer possible price improvement, minimized impact, and anonymity, says Craig Viani, managing director, electronic trading,BNY ConvergEx Group. In his presentation ‘Grey’s Anatomy: The Structure of Light and Dark Markets in U.S. Equity Trading’ at a CIBC Mellon session, he said the purpose of dark pools is to continuously match orders that pass though a broker’s electronic trading technologies. Currently, eight per cent of the U.S. equities market trades across 40+ ‘dark’ pools. And, the U.S. equity market is likely to continue to trend toward the diversity and speed dark pools offer.

Gains Come From Fixed Income

Despite strong returns in March, only 28 per cent of the pooled funds in the Morningstar Canada database managed to post positive returns for the quarter, with most gains in the fixed income categories. Its summary of institutional pooled fund performance in Canada showed more than 98 per cent of Canadian pooled funds were up in March. Notably, more than half of the equity funds tracked by Morningstar gained seven per cent or more. However, these results weren't enough to overcome the losses suffered by most funds in the quarter's first two months. As a result, 87 per cent of equity funds and 89 per cent of balanced funds posted losses for the quarter. However, the damage was much less severe compared to the previous quarter.

Investors View Risk Differently

Recent events in the global economic landscape have led to dramatic changes in financial markets worldwide and investors now view risk very differently, says Rob Goldwasser, managing director, global markets, at The Bank of New York Mellon.  Speaking at a CIBC Mellon session on ‘Derivative Counterparty Risk – Current Trends and Remedies, he said factors that have recently impacted both equities and interest rates include increased volatility, central bank action to avert a global credit crisis and recession, future expectations of growth and unemployment, and a flight to safety in government debt. However, sophisticated investors understand that derivatives don’t make or lose money, people do, and as such their popularity continues to grow as a useful investment tool to help increase returns and reduce risk. Recent themes in the equity and interest rate derivative space focus on hedging tail risk (extreme and rapid price movements) and establishing long positions with limited downside.

TD Adopts Sustainable Policy

TD Asset Management has adopted a sustainable investing policy across its operations in Canada and the United States. "Some time ago, we designed the TD Asset Management Global Sustainability Strategy, a global equity approach that invests in companies that contribute to the world's future sustainability," says Barbara Palk, its president. "Where environmental, social, and corporate governance factors are key drivers of financial value for that Global Sustainability Strategy, they should be part of our analysis for all our investment mandates. Our sustainable investing policy lays out our approach, and builds on our long history of promoting good governance at the companies in which we invest." The policy is available at http://www.tdam.com/

Smolkin Moves To Humber

Sheryl Smolkin is product development and marketing consultant for the Centre for Employee Benefits at Humber College Institute of Technology & Advanced Learning. More recently the editor of a benefits magazine, she spent 18 years as director of Watson Wyatt's Canadian Research & Information Centre. She will help bring its existing programs to a broader cross-section of HR and benefits professionals across the country, as well as develop new offerings.

Johannson Explores Needs Of Retirees

How plan sponsors can handle both the needs of the employer and those of their retiring members will be the focus of a workshop at CPBI FORUM 2009. Joan Johannson, president and managing director, at Integra GRS, will explore alternative solutions and provide governance insight. It takes place May 25 to 27 in Calgary, AB. For more information, visit http://www.cpbi-icra.ca/

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Wednesday, April 29, 2009

Executives Asked To Forego Bonuses

Executives at the Canada Pension Plan Investment Board (CPPIB) are being asked to forego their bonuses this year. At a House of Commons finance committee hearing, members of all three parties called for the action. MPs cited the fund’s poor performance this year. For the nine months to the end of March, it was down 13.7 per cent. For the fiscal year ended March 31, 2008, the five senior executives at the board earned approximately $11-million in performance pay and bonuses.

Notice Goes Out On RAF

The federal Office of the Superintendent of Financial Institutions (OSFI) has sent a notice to its stakeholders about its ‘Risk Assessment Framework’ (RAF) for federally regulated private pension plans, says Mark Newton, of Heenan Blaikie. The RAF consists of an overview document and guidance notes on topics such as actuarial and asset management significant activity. The purpose of the RAF is to strengthen and focus OSFI's efforts at identifying pension plans it considers at risk and to intervene in cases it considers appropriate. The impetus behind this is to better fulfill its mandate to protect the rights and interests of members of federally regulated pension plans. The RAF is intended to support early detection of risk and swifter response through communication with plan sponsors and taking appropriate remedial actions. It can be found at: http://www.osfi-bsif.gc.ca/

Flu May Delay Recovery

If the Swine Flu turns into a pandemic that lasts for a few months it could push out The Harbour Group’s projected date for the economy to hit bottom from November of this year into very early 2010, says John W. Johnston, chief strategist for The Harbour Group at RBC Dominion Securities Inc. He says the fallout from these episodes on economies and markets is usually temporary. However, at this juncture, it is seen as a risk which emphasizes the need to remain cautious. The risks from this flu outbreak underscore the fact that the economy is in the early stages of this process, with additional volatility and weakness in asset prices still a possibility.

Mercer Splits Investment Research

Mercer is splitting out its investment manager research into individual asset class ‘boutiques,’ in a bid to provide its pension consulting clients with more specialist investment manager data. The firm will initially create separate fixed income, equity, bond, real estate, and alternative investment research teams to deliver primarily larger clients whose “complex strategies require a high level of detailed knowledge.”

Daimler Pays Into Chrysler Pension

Daimler AG will pay $600 million into Chrysler LLC’s pension plan over the next two years as part of an exchange of the 19.9 per cent of the U.S.-based automaker the German company still owns to Cerberus Capital Management. As well, Daimler’s previous pension guaranty of $1 billion with the Pension Benefit Guaranty Corp. (PBGC) for Chrysler pension plans will be reduced to $200 million. That guaranty will remain in effect until August 2012, in accord with the term of Daimler’s previous agreement with the PBGC. The agreement will end Daimler’s obligations to Chrysler.

Claymore Has Bullion Fund

Claymore Investments, Inc. has announced the Claymore Gold Bullion Trust. Its investment objective is to replicate the performance of the price of gold bullion, less the fund’s expenses and fees. It will invest in holdings of pure, unencumbered gold bullion giving investors the ability to invest in gold bullion without the associated inconvenience and other costs typical of direct gold bullion investment.

Corner CPBI Alberta Volunteer

Peggy Corner, director, benefit information services at the Alberta Teachers' Retirement Fund, is the CPBI Volunteer of the Year for the Alberta region. A CPBI member for more than 15 years, she has been an essential part of the Alberta council where her involvement has ranged from stints as secretary to sponsorship and vice-chair. She also served on CPBI Board of Directors from 2005 to 2007.

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Tuesday, April 28, 2009

Canadian Securities Lending Association Formed

CIBC Mellon, Northern Trust, RBC Dexia, and State Street Corporation have formed the Canadian Securities Lending Association (CASLA) to advocate on behalf of all securities lending market participants in Canada. It seeks to enhance the public’s understanding of securities lending, encourage the adoption of best practices, and work with regulators and other industry associations to ensure an efficient and secure marketplace. CASLA will advocate for the common interests of securities lending market participants, including custodian banks, beneficial owners, asset managers, and broker-dealers. The four founding companies account for more than 90 per cent of the Canadian securities lending market. In securities lending transactions, beneficial owners such as mutual funds, pension funds, and other institutional investors lend securities to borrowers often through intermediaries such as custodian banks. The securities lending market in Canada has been active for several years. At year-end 2008, the Canadian industry had $886 billion available for lending and $119 billion on loan.

Teralys Capital Fund Created

The Caisse de dépôt et placement du Québec, the Solidarity Fund QFL, and the Québec government have created the Teralys Capital Fund which will finance private venture capital funds that invest in technology companies in sectors that include life sciences, information technology, and clean technology. The creation of the fund is an initiative of the Caisse and the Solidarity Fund QFL which are each contributing $250 million. The Québec government is contributing $200 million through Investissement Québec. The fund will also solicit other institutional and private investors to raise an additional $125 million, for a total objective of $825 million. Québec has more than 9,000 technology companies with almost 220,000 employees and annual revenues of $26.5 billion.

Fixed Income Data Source Created

Eight of Canada's primary dealers have formed CANMarket Data to be a source for fixed income data. They have signed a multi-year agreement with the objective of providing the most complete, independent, and accurate dataset ever assembled for Canadian bond and money market securities. The data will be made available through a wide array of market data vendors and other sources. Participants include Casgrain & Company Limited, Desjardins Securities, HSBC Canada, Laurentian Bank Securities, Merrill Lynch Canada, National Bank Financial, RBC Capital Markets, and TD Securities.

RBC Providing Medical Travel Insurance

RBC Insurance will provide stand-alone group emergency medical travel insurance to employees of Quikcard group benefits customers. Established in 1989, Quikcard is a group benefits solutions provider to more than 4,500 small and medium sized companies across Canada. Quikcard customers will have access to multilingual assistance, a network of health providers, and comprehensive coverage for emergency hospital and medical costs, and co-ordination of upfront payment of all eligible medical bills and related costs.

Retirement Assets Down 22 Per Cent

Retirement plan assets in the U.S. collapsed in value 22 per cent to $14 trillion in 2008, says the Investment Company Institute's (ICI) annual ‘Investment Company Fact Book.’ All types of retirement assets declined in value in 2008. Private sector Defined Benefit plan assets fell 27 per cent; state and local government employee retirement plan assets fell 27 per cent; employer-sponsored Defined Contribution plan assets fell 22 per cent; individual retirement accounts (IRAs) fell 24 per cent; and annuity reserves outside of retirement plans fell 15 per cent. It also shows that 70 per cent of U.S. households report that they had employer-sponsored retirement plans, IRAs, or both in May 2008.

Romanow Saskatchewan’s CPBI Volunteer

Marg Romanow, benefits officer with the Saskatchewan Union of Nurses, is the CPBI Volunteer of the Year for Saskatchewan. A CPBI member since 1994, she has served faithfully on the Saskatchewan Regional Council for many years. She has fulfilled a number of roles during her tenure including secretary, vice-chair, and chair of the regional council in 2001-02. She was the national representative for Saskatchewan from 2003 to 2005.

Canadian Benefits Concepts Examined

‘Concepts and Practices of Canadian Benefits for Canadian and U.S. Corporations’ will be examined at an International Foundation of Employee Benefits Plan conference June 15 to 17 in Toronto, ON. Sessions will feature Marie Sonnenberg, executive director, Merit Open Shop Contractors Association, who will discuss standard employer plans for life, health, and dental benefits; and Thomas Holloway, president, Equitus Consulting, Inc., who will present on Canadian drug benefit practices. For more information, visit http://www.ifebp.org/

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Monday, April 27, 2009

Auto Workers To Contribute To Pensions

Unionized auto workers will make direct contributions to their own pensions in Canada for the first time. An agreement reached with Chrysler Canada Inc. will be extended to cover the other two auto makers. Newly-hired Canadian workers will contribute $1 for every hour worked. The direct costs of pensions for existing employees will still be carried by the companies as the union argued workers traded higher wage increases or improvements in benefits for pension payments by the companies.  

Safe Harbour Not Practical

The Joint Forum of Financial Regulators has decided not to include safe harbour provisions in its Capital Accumulation Plan Guidelines. It has completed its review of the guidelines that were published in May 2004 and says the majority of responses from plan sponsors and service providers indicated no changes were needed, although there was some support for a safe harbour provision. It discussed whether changes to the guidelines should be made to accommodate a safe harbour provision and concluded it would not be practical to consider safe harbours in the context of guidelines and it concluded that no changes to the guidelines are needed. However, the Joint Forum will establish a standing committee to monitor and address issues that may arise in the future in relation to CAPs.

Morningstar Acquires C.P.M.S.

Morningstar has acquired the equity research and data business of C.P.M.S. Computerized Portfolio Management Services Inc. Founded in 1984, C.P.M.S. tracks fundamental equity data for approximately 4,000 securities in the United States and Canada as well as tracks and provides brokerage earnings estimates for Canadian equities. Its equity research and data business has more than 500 clients throughout the United States and Canada, including institutional money managers, pension funds, endowment managers, and investment advisors. This acquisition allows Morningstar to offer C.P.M.S.' software platform, the Equity Market Service, which integrates fundamental and earnings estimate data to generate a wide range of applications.

Management Completes Buy-out

bfinance has completed a management buy-out which sees management, led by CEO and founder David Vafai, end up with 100 per cent of the equity in the company. The transaction, funded by BMS Finance, also provided an exit for venture capital funders, The Carlyle Group and Net Partners, whose stake in the business dates back to the company’s inception 10 years ago. Founded in 1999, bfinance is an independent financial services consultancy which focuses on the search and selection of investment managers.  It has clients in more than 20 countries and operations in London, Paris, Munich, Milan, Montreal, and Toronto. 

Clunie CPBI Manitoba Volunteer Of Year

Pat Clunie, director and HR business partner for MTS Allstream, is the CPBI Manitoba Region volunteer of the year. A member of the CPBI since 2001, she has been a member of the Manitoba regional council since 2003 and served both as treasurer and national board representative.

AIMA Looks At Bullet-proofing Businesses

‘Bullet-proofing Your Business in the Post-Madoff World’ will be the topic at the next AIMA Canada luncheon. A panel of experts – Mark Purdy, of Arrow Hedge Partners; Don Lefresne, of RBC Global Private Banking; and Judy Long, of the Investment Industry Regulatory Organization of Canada; will discuss key aspects of due diligence from the standpoint of investment advisors and investment firms. It takes place May 6 in Toronto, ON. For more information, visit http://www.aima-canada.org

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Friday, April 24, 2009

Caisse Defends Rise In Risk

The Caisse de depot et placement du Quebec is defending the dramatic rise in its risk portfolio in 2008, saying fund managers everywhere were facing extreme market volatility. "In 2008, overall risk to the portfolio increased as a result of extreme market volatility, which was observed in all fund managers," the Caisse said in a statement. The active risk of its portfolio had climbed to 4.4 per cent at December 31, following a decision to reduce its exposure to equity markets and increase its investment in bonds, "with the goal of lowering overall risk, not increasing it." It lost $39.8 billion in 2008, a quarter of its overall holdings, and blamed the meltdown in global financial markets.

Uncovering Credit Crisis Patterns

Financial crises in Sweden and Japan during the ’90s allow us to better understand the pattern behind our current predicament, says Adrian Hussey, of Northwater Capital Management. Hussey spoke at an Alternative Investment Management Association (AIMA) Canada luncheon, ‘Credit Crisis: Getting here and getting out of here.’ What led up to the credit crisis, and others throughout history, is a period of credit deregulation/re-regulation; followed by credit expansion fueling an asset boom in equities and real estate; a trigger that sets up a burst in asset markets and then a banking crisis. To deal with the crisis, Hussey said it’s important to continue to provide liquidity at critical junctures, guided consolidations of weaker institutions with stronger ones, and to directly or indirectly recapitalize failed institutions.

Global Turbulence Hurts Plans

Canadian pension plans continued to suffer from the turbulence in the global equity markets in the first quarter, says a survey by RBC Dexia Investor Services. Pension assets shrank another 2.5 per cent, bringing 12-month losses to 16.3 per cent. "Six of the last seven quarters have been negative, with stock markets again testing historic lows," says Don McDougall, director of advisory services. However, he says March finished strong and April is also looking up.

Reducing Contributions ‘Adverse Amendment’

Employers that sponsor Defined Contribution pension plans will want to consider the impact of the financial crisis on the operation of their plans, says a Morneau Sobeco ‘NEWS & VIEWS.’ However, it may not be as easy as reducing contributions or making any other form of “adverse amendment” as many jurisdictions require that employees receive advance notice. It says it is better to communicate reductions as far in advance as possible to avoid the possibility of an employee alleging constructive dismissal. Under a DC plan, the Canada Revenue Agency requires that the employer contribute a minimum of one per cent of earnings. Therefore, it is not possible to end employer contributions without a pension plan wind up. However, it may be possible to close the plan to new hires.

Only Collapse Threatens Pensions

General Motors of Canada Ltd.'s employees and retirees will only lose their pensions if the auto company collapses, Michael Bryant, Ontario’s economic development minister. That, however, is unlikely to happen, he says. Retirees will continue to collect their full pension benefits if the company's parent, General Motors Corp., files for court protection under the U.S. Bankruptcy Code and the Companies' Creditors Arrangement Act in Canada as no Canadian judge has ever ordered a company operating under CCAA protection to abandon its obligations to pensioners, says Bryant. The question of whether retirees receive their full pension benefits will be determined through negotiations between GM Canada management and the Canadian Auto Workers. 

Sixth Straight Loss For Investors

U.S. institutional investment plan sponsors recorded a sixth straight quarter of losses in the period ending March 31, but ended the quarter on a positive note, says the Northern Trust Universe. “Even though the first quarter returns were among the lowest on record, the strong market rise in March helped all three types of plans – corporate pension, public fund, and foundation and endowment – improve their results compared to recent quarters,” says William Frieske, performance consultant, Northern Trust Investment Risk & Analytical Services. The Standard & Poor’s 500 Index, a gauge of U.S. stocks, gained 8.8 per cent in March, its strongest month since October 2002. Corporate pension plans posted a median return of -6.6 per cent in the first quarter, while public funds were slightly better at -6.3 per cent.

TDAM Offers Sustainability Fund

TDAM USA Inc. has launched a mutual fund for institutional investors. The TDAM Global Sustainability Fund offers a combination of companies recognized for their leading approaches to building sustainable businesses, as well as companies that are developing solutions for today's environmental problems. The fund seeks to achieve long-term capital appreciation by investing primarily in equity securities.

Institutional Assets Down 42 Per Cent

Institutional total asset losses, which include outflows and investment returns, proved extensive in 2008, plunging 42 per cent to $2 trillion, says Callan Associates’ ‘2008 Style, Trend, Analysis and Research’ report. Equities sustained the greatest outflows at more than $130 billion for institutional investors. Market declines left many investors out of compliance within their asset allocation targets, which led to an increase in rebalancing. As a result, nearly half of the 2008 outflows took place in the fourth quarter, forcing many plans to raise funds to meet their benefit payments by tapping their most liquid investments.

Consolidating Administration Top Priority

A majority (59 per cent) of U.S. corporations with multinational operations consider consolidating all benefits administration onto a common platform to be one of their top priorities, says MetLife’s ‘Managing Global Benefits: Challenges and Opportunities’ report. The report recognizes that as U.S. companies continue to expand globally, they are being challenged to develop benefits programs for their international workforce that are not only competitive in local communities around the world, but also cost-effective to implement and manage in a wide number of countries. The report reveals that global benefits decision-makers also consider multinational pooling to be a top-of-mind solution to help manage multinational benefits.

Parliament Rejects Use Of Tax Dollars

The European Parliament has voted against using taxpayers' money to plug a $40 million hole in the members' pension fund. Instead, the pension fund will make up the shortfall by raising the retirement age from 60 to 63, scrapping an option allowing early retirement on a reduced pension, and stopping an option to take out a quarter of pension rights in a lump sum. As well, the voluntary fund will stop taking on new members in July.

401(k) Major Source Of Income

401(k) plan are mentioned most frequently by workers as being the major source of income in retirement, followed by Social Security and a traditional pension, says EBRI’s ‘2009 Retirement Confidence Survey.’ Forty-two per cent of workers expect an employer-sponsored retirement savings plan to be a major source of income in retirement. Almost a third of workers expect Social Security (32 per cent) and a pension (28 per cent) to be major sources of retirement income. It also found workers who have saved for retirement are more likely than non-savers to expect major retirement income from work-place savings, pensions, and IRAs.  Conversely, non-savers are more likely to say Social Security and employment will be major sources of retirement income.

Mak Ontario’s Volunteer

Sonia T. Mak is the CPBI Ontario region’s Volunteer of the Year. A lawyer by profession, she is a partner of Borden Ladner Gervais LLP, specializing in pension and benefits law. As a member of the CPBI since 2002, she has served as a member of the program and fundamentals committees, chair of the CPBI Benefit Ball committee in 2006 and 2008, and chair of the Ontario regional council this past year.

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Thursday, April 23, 2009

University Plans Could Merge

The Ontario government is urging universities in the province to merge their pension assets, says a report in the Globe and Mail. It believes the move could cut costs and provide them with extra investment clout. Ontario has 15 universities with some form of Defined Benefit plans with a total of more than $13 billion in assets. However, like most DB plans, they have suffered losses as a result of the financial crisis and estimates are that pension requirements could total about seven per cent of university budgets. The province proposed legislation in its recent budget to give the Ontario Teachers Pension Plan the ability to also manage pension assets for smaller funds and Michael Nobrega, chief executive office of OMERS, said this week that OMERS would also be willing to manage funds for other plans. Universities could, however, create their own separate organization.

Losses Extend To First Quarter

Canadian pension plans continued to suffer from the turbulence in the global equity markets in the first quarter of 2009, says a survey by RBC Dexia Investor Services. It found pension assets shrank another 2.5 per cent in the quarter ending March 31, bringing 12-month losses to 16.3 per cent. In the first three months, global equity was the worst performing asset class, losing 9.3 per cent, despite outpacing the MSCI World Index by 0.9 per cent. Canadian stocks fared better, dropping only two per cent in the quarter, as strengthening commodity shares cushioned the fall. Thanks to a late March rally, domestic bonds earned 1.6 per cent for the quarter, ahead of the DEX Universe.

European Funds Shift From Equities

European pension funds continue to shift away from equities into fixed income and alternatives, with closed pension funds doing so at a faster pace, says a Mercer survey. Its ‘2009 European asset allocation survey’ shows that in the U.K., Europe’s largest pension market, the average equity allocation fell to 54 per cent in 2009 from 58 per cent last year. Irish pension funds reduced their average equity holding to 60 per cent from 67 per cent during the same period, while Dutch pension funds cut their stock holdings to an average 32 per cent from 28 per cent. However, Spain’s pension executives increased their average equity holdings to 32 per cent from 28 per cent. The shift away from equity is particularly significant among closed schemes where, in the U.K., for example, closed funds allocated an average of 47 per cent in corporate and government bonds, compared to 37 per cent for open funds. In Ireland, closed funds reported an average of 38 per cent in bonds versus 29 per cent for open funds.

Reorienting Investments Alters Tradeoff

Reorienting a pension plan's investments around liabilities alters the risk-reward tradeoff that underlies fundamental asset allocation decisions, says research from Russell Investments. The process it is suggesting represents "a dynamic approach to strategic asset allocation that ties pension fund investing policy to changes in liabilities and a plan's funded status." For an increasing number of U.S. Defined Benefit plans – most notably frozen plans and others with low benefit accrual rates – the expected benefit of an equity-oriented investment strategy reduces as funded status improves. The formalization of dynamic asset allocation allows pension plans to automate the fine-tuning of their investment policies more timely than in the past and as their circumstances change by placing liabilities and funded status at the core of all pension plan investment decisions.

Diversified Managers Down 2.2 Per Cent

Diversified pooled fund managers posted a median return of -2.2 per cent before management fees, says Morneau Sobeco’s ‘Performance Universe of Pension Managers’ Pooled Funds’ for the first quarter of 2009. Jean Bergeron, a principal in the asset management consulting practice, says “the pension plans’ situation stabilized somewhat in the first quarter of the year mainly because of the stock market rebound that we experienced in March. However, pension plans’ financial positions will probably continue to be difficult for quite sometime.” On average, pension fund managers added value when their performance is compared to the benchmark portfolio. In fact, the managers’ median return of -2.2 per cent was 0.3 per cent higher than the -2.5 per cent return of benchmark portfolios used by many pension funds.

Fee Disclosure Supported

The American Society of Pension Professionals & Actuaries (ASPPA), the Council of Independent Recordkeepers (CIKR), and the National Association of Independent Retirement Plan Advisors (NAIRPA) are putting their full support behind legislation introduced in Congress that would require 401(k) plan service providers to disclose all fees and expenses charged to 401(k) plans and plan participants.  Testimony before the House Committee on Education and Labor Subcommittee on Health, Employment, Labor, and Pensions revealed that both plan sponsors and plan participants in 401(k) plans should have clear, uniform, and useful information about fees they are paying to make informed decisions about how to invest their retirement savings plan contributions because the costs of plan services are being shifted to participants through the investment management fees charged on the proprietary investment alternatives. Uniform fee disclosure is the only way business owners can effectively evaluate retirement plans and choose the one they will offer their employees. 

Gregory Atlantic Volunteer

Sherry Lee Gregory, director of relationship management at RBC Dexia Investor Services, is volunteer of the year for the CPBI Atlantic region. A CPBI member for more than 15 years, she co-chaired both the first Atlantic Regional Conference and the 2005 national conference in Newfoundland. She has also served as a national board representative for the Atlantic region, as vice-chairperson in 2003-04, and as chair of the board of directors in 2005-06.

Chai And Broley With Guardian

Greg Chai is vice-president, client service, and will be part of the institutional client service team at Guardian Capital LP. His past 16 years in the investment management industry include client service roles at both Barclays Global Investors and Frank Russell Canada. Robert Broley is a senior vice-president with primary responsibilities for all institutional business development activities including coverage of Canadian and U.S. public and private pension plans, endowments, and foundations. He has spent the past several years in a similar role with JanusINTECH Institutional Asset Management.

Summit Exploring SRI

With the headlines full of economic uncertainty, the ‘Canadian Summit on socially responsible investment’ will explore how socially responsible investment (SRI) is responding to current market volatility. Sessions on climate change, green investing, community investing, retail markets, and institutional investment will provide insight and hope for how SRI can point a way forward through the current market turmoil. It takes place June 7 to 9 in Winnipeg, MB. For more information, visit http://www.socialinvestment.ca/event.htm

Minister Speaks At Forum

Margarett Best, Ontario minister of health promotion, and Martin Shain, senior scientist, at the Centre for Addiction and Mental Health, will be among the featured speakers at the ‘2009 7th Annual Employer Wellness Forum.’ Set for April 30 to May 1 in Niagara-on-the-Lake, ON,, its theme this year is ‘Effective Programming on any Budget.’ For more information, visit http://www.connexhc.com/

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Wednesday, April 22, 2009

Pension Reform Window Open

The pension reform window in Canada is now open, says Keith Ambachtsheer, director of the Rotman International Centre for Pension Management, and there is an opportunity for major change. The challenge is, however, to make sure it is change that is wanted, not merely what we get. Speaking at the Conference Board of Canada’s ‘2009 Summit on the Future of Pensions: From Crisis to Sustainability,’ he said the last 18 months have clearly shown the flaws in Defined Contribution and Defined Benefit pension plans as well as registered retirement saving plans. For example, the fundamental problem with DB plans is that they represent incomplete contracts with conflicts over surplus and, now, the need for solvency funding relief. As well, the status of pensioners when a company reorganizes and the plan is not fully funded is unclear. Ultimately, he would like to see a Canada Supplementary Pension Plan created to provide pensions for middle income Canadians who have no pension coverage.

QPP Financial Situation Deteriorating

Last year’s losses at the Caisse de dépôt et placement du Québec – more than 26 per cent – could lead to a complete depletion of the QPP reserves 12 years earlier than expected, by 2037, says a C. D. Howe Institute ‘eBrief.’ In the last several years, the financial situation of the Quebec Pension Plan (QPP) has been deteriorating, a trend evidenced by the latest actuarial projections. Alexandre Laurin, senior policy analyst, says unless adjustments are made, those entering the QPP today will see a substantial increase in their contribution rate many years before they would expect to be collecting. It says to limit the required jump in contributions, the government should act quickly and ensure that refinancing costs are shared equitably between current benefit recipients and future contributors – for example, by temporarily freezing or limiting cost-of-living indexation of benefits. For the study in French, visit http://www.cdhowe.org/pdf/ebrief_78.pdf. The Annual Report of the Caisse has been tabled in the National Assembly and is now available for consultation at www.lacaisse.com

Sweatman National Volunteer Of Year

Scott Sweatman, associate counsel, Blake, Cassels & Graydon, LLP, is this year’s CPBI National Volunteer of the Year. Sweatman has been a CPBI member for more than 15 years, serving on the Pacific region council for a number of years and serving as a member of the CPBI board of directors and, ultimately, chair of the board in 2003-05. Throughout the years, he frequently volunteered to speak at conferences, breakfast sessions, conference workshops, and continuing education sessions. He recently co-chaired the Joint Expert Panel on Pension Standards in Alberta and British Columbia. He will be given the award at the CPBI FORUM 2009, May 25 to 27 in Calgary, AB.

Stakeholder Consensus Missing

There is no consensus among stakeholders in the U.S. about solutions to problems with pension funds in the U.S., says Anna M. Rappaport, senior fellow on pensions and retirement at The Conference Board Inc. Speaking at the Conference Board of Canada’s ‘2009 Summit on the Future of Pensions: From Crisis to Sustainability,’ she said she thought the financial crisis might help create a need for compromise, but, in fact, it just prompted people to become firmer in their positions. And, she said there is a limit to what we can expect people to do for themselves.

CARP Wants Universal Pension

CARP is calling for a universal pension for the nearly one in three Canadians without adequate retirement savings. Susan Eng, vice-president, advocacy, had told a House of Commons Standing Committee on Finance that a poll it conducted showed overwhelming support for a universal plan. The current CPP combined employer/employee contribution of 9.9 per cent rate provides a benefit of 25 per cent of a certain portion of pre-retirement income. However, the salary covered under the CPP is limited to the YMPE (Year's Maximum Pensionable Earnings), or $46,300, for 2009, the deemed average salary of all Canadian workers. Ultimately, over a 47-year transition period, the expanded CPP would essentially replace all existing RPPs, as it would provide a 70 per cent benefit rate through a combined employer/employee contribution rate of 19.8 per cent of salary up to YMPE and 15.4 per cent on the excess up to the RPP limit. CARP is also calling for a two-year moratorium on mandated RRIF withdrawals and unlocking of Locked-in-Funds.

Adverse Deviation Increases Difficulties

The introduction of the provision for adverse deviation will increase the difficulties currently faced by many Quebec employers in funding pension plans, says a Mercer ‘Communiqué.’ Although the provision for adverse deviation is already in the Québec Supplemental Pension Plans Act, the level of the adverse deviation and application details are new. A draft regulation, the ‘Regulation to Amend the Regulation respecting Supplemental Pension Plans,’ says the provision for adverse deviation must be calculated where it is required to determine the amount of surplus assets that may be appropriated to, for example, the payment of employer contributions or the reduction of the amount of a letter of credit. The provision will vary according to the plan’s risk profile, however, it will negatively affect the competitiveness of Québec employers as compared with employers in other provinces and countries. Comments on the draft regulation can be made in writing to the Régie des rentes du Québec before May 15, 2009.

Charbonneau Now Vice-president

David Charbonneau is vice-president, business development, group retirement savings, at Desjardins Financial Security. In his new role, he will ensure that group retirement savings assumes a leadership role within the company in terms of business development across Canada. Until recently, he was responsible for business development in the consulting market for group retirement savings at Desjardins Financial Security.

Hockin Speaks At Electronic Trading Conference

‘Stabilizing and Reinvigorating the Investment Process’ will be the topic at a session at the ‘5th Annual FPL Electronic Trading Conference.’ Tom Hockin, chair of the Expert Panel on Securities Regulation, and Randee Pavalow, head of operations and regulatory matters at Alpha Trading Systems, will provide their insights on how this can be achieved. It takes place June 1 and 2 in Toronto, ON. For more information, visit eTradingCanada.ca

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Tuesday, April 21, 2009

Nobrega Calls For Superfunds

The Ontario Municipal Employees Retirement System (OMERS) is now open for business and is actively seeking mandates to manage other pension funds' assets, says Michael Nobrega, its chief executive office. Speaking at the Conference Board of Canada’s ‘2009 Summit on the Future of Pensions: From Crisis to Sustainability,’ he said the province should mandate that all Ontario pension funds in the public and private sectors join forces to create superfunds as only giant funds with more than $100 billion in assets under management have the critical mass to invest effectively on a global scale. The province proposed legislation in its recent budget to give the Ontario Teachers Pension Plan the ability to also manage pension assets for smaller funds in an effort to encourage more fund consolidation. Nobrega said the province needs at least one other superfund that can also manage pension money for Ontario employers.

Executives Believe DB In Funding Crisis

The financial crisis has heightened Canadian executives’ concerns about both Defined Benefit and Defined Contribution pension plans, says Watson Wyatt’s sixth annual Survey of Pension Risk. The survey of chief financial officers and vice-presidents of human resources reveals that 88 per cent believe DB plans are in a widespread funding crisis. Thirty-five per cent of respondents view the current funding issues as a cyclical problem, while 53 per cent think the crisis will be long-lasting. This represents a significant shift from last year, when only 34 per cent of survey respondents said Canada was facing a long-lasting pension crisis. Despite these challenges, the number of DB plan sponsors making substantial changes to their plan designs has not increased as a result of the financial crisis. Forty-one per cent say they have no intention of converting their DB pension schemes to DC plans, compared with last year’s 42 per cent. There is also no clear indication of a shift to more conservative investment strategies. Executives cite insufficient retirement savings – due to low contributions and poor investment returns – as the most serious threat to the long-term sustainability of DC plans. Yet, most DC plan sponsors do not believe that it is their responsibility to establish and aim for a certain income replacement target for their plan members and 90 per cent expect their employer contribution levels to remain unchanged in the next three years.

Selling DB Funds Makes GAO Uneasy

The notion of financial services firms buying out Defined Benefit pension programs makes U.S. government auditors profoundly uneasy, says a U.S. Government Accountability Office (GAO) report.Proposed Plan Buyouts by Financial Firms Pose Potential Risks and Benefits’ says a pension buyout that makes economic sense may not be worth pursuing because of its potential impact on an employer's relationship with its workforce. It notes the primary target market for buyouts are sponsors of slightly underfunded, frozen plans. On the upside, it says a buyout could make participant benefits more secure and somewhat reduce the financial exposure of the Pension Benefit Guaranty Corporation. Not only that, but plan buyouts could increase the security of DB pensions by allowing weak sponsors to transfer plans to firms with a healthier financial position and capable of offering improved plan management.

Retirement Decisions Influenced

The loss of net wealth as a result of the current financial crisis is influencing individual retirement decisions, says Glen Hodgson, senior vice-president, forecasting and analysis, and chief economist for the Conference Board of Canada. Speaking at its ‘2009 Summit on the Future of Pensions: From Crisis to Sustainability,’ he said those not living in a Defined Benefit pension fund world are being forced to rethink when they will retire. He said the current crisis has created even bigger challenges for the pension industry. Many firms and funds face large pension deficits made even larger by recent financial events. Yet, how can they meet their pension liability when revenues and profits are down, he asked?

Great-West Offers Psychological Health Tool 

Great-West Life and Canadian mental health researchers have launched a new tool to help Canadian employers assess the psychological health of their workplace. ‘Guarding Minds @ Work’ provides Canadian employers with proactive, comprehensive ways to assess the psychological safety and health of their specific workplace, combined with information on appropriate solutions, and a method of measuring the effectiveness of those solutions. Employers are provided with practical, user-friendly tools to help assess their organization's psychological safety and health, and recommends pro-active action steps including an explanation of the concept of psychological safety and health and the business and some legal and health considerations on why mental health in the workplace is important.

CC&L Partners For Infrastructure Program

Connor, Clark & Lunn Infrastructure and Graham Group have launched Connor, Clark & Lunn GVest Traditional Infrastructure LP. It will enable individual investors to invest directly in basic infrastructure assets and participate in the anticipated and necessary surge in infrastructure spending. The announcement comes as Canada is set to make record investments in basic infrastructure such as roads, bridges, hospitals, and water treatment plants to stimulate the economy.

Lieberman Joins Standard Life

Anita Lieberman is vice-president, business development, group savings and retirement, for The Standard Life Assurance Company of Canada. She will be conducting business development initiatives across all Canadian markets to enhance Standard Life's position in the group savings and retirement market. She has held management positions at some of Canada's leading insurance companies during her 30-year career in the pension and retirement market.

Bourdos Examines LDI

‘Liability Driven Investment: Reducing Pension Plan Surplus Risk without Compromising Return’ will be the focus of a session at the ‘CPBI Forum 2009.’ Dino Bourdos, vice-president and director, TD Asset Management, will examine the mechanics and merits of investment concepts such as fixed income overlays and portable alpha. Set for May 25 to 27 in Calgary, AB, the theme of this year’s event is ‘Harnessing Global Energy.’  For more information, visit www.cpbi-icra.ca

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Monday, April 20, 2009

Investors Returning To Equities

Bfinance’s ‘Pension Funds & Insurance Asset Allocation Survey’ shows 46 per cent of pension funds anticipate an increase in their equity exposure while 35 per cent anticipate a drop over the next 12 months. Results also show investor preference for fixed income products will wane during the same period. Respondents also indicate a move towards greater diversification, favouring alternative asset classes such as infrastructure and private equity. Marc Godin, managing director for Canada, says, “We see that almost half of the respondents anticipate an increase in their equity exposure in the coming year which contrasts significantly with 19 per cent in our survey last October.  This change in investor sentiment may indeed reveal investors’ belief that the worst of the financial crisis is behind us.”

Phased Retirement Employer’s Decision

It is the employer’s decision whether to provide the option of phased retirement according to changes to the Pension Benefits Standards Act. The new rules say phased retirement may be offered on a case-by-case basis on varying terms. In exercising this discretion, employers must fulfill their duty of good faith, and must not discriminate in a manner prohibited under human rights laws. In terms of the phased retirement benefit, employers can offer a portion of an employee's current pension entitlement with continued accrual of pension benefits. The amount an employee receives while in phased retirement cannot exceed 60 per cent of the employee's current pension entitlement.

Cost-sharing Approaches Increasing

The recession is forcing U.S. employers to increase healthcare cost-sharing approaches, says a survey by the International Foundation of Employee Benefit Plans. While few plan sponsors (3.6 per cent) are cutting or considering cutting healthcare benefits altogether, many are ramping up their cost-sharing approaches. Thirty-five per cent of plan sponsors are increasing employee deductibles, coinsurance, or copays due to the financial crisis.  Nearly the same proportion are also increasing employee premiums. Other cost-sharing actions that plan sponsors are taking include adding consumer-driven health plans as an option (12.8 per cent), replacing a current plan with a consumer-driven plan (9.6 per cent), and instituting spousal charges (10.8 per cent).

IPPs Made Easier

Carrying dealer MRS and actuarial firm Gordon B. Lang and Associates Inc. have teamed up to make it easier for advisors to offer Individual Pension Plans (IPPs) to their clients. The Total IPP product offers a one-stop shop for advisors looking for ways to get their clients into an IPP without burdensome administration and at cost-effective rates. IPPs are a type of registered Defined Benefit pension plan that offers more tax shelter room than a traditional RRSP. Along with pre-planned retirement income, it allows for diversification of capital and creditor protection. IPPs are best suited to self-employed individuals who have incorporated a company or professionals that are employed by a corporate entity and who earn an income of at least $100,000 per year.

CAIA Acquires AllAboutAlpha.com

The Chartered Alternative Investment Analyst CAIA Association has acquired AllAboutAlpha.com. “The integration of AllAboutAlpha.com into the CAIA family is a reflection of our mandate to provide the industry with salient and topical alternative investment knowledge,” says Craig Asche, executive director of the CAIA Association. In acquiring AllAboutAlpha.com, Christopher Holt has been retained. Holt founded AllAboutAlpha.com in 2006.

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Friday, April 17, 2009

Fund Solvency Ratios Dropped

Estimated solvency ratios for federally regulated private pension plans deteriorated over the second half of 2008, says the Office of the Superintendent of Financial Institutions. Its latest solvency testing of pension plans shows that the average estimated solvency ratio of federally-regulated Defined Benefit plans at December 31, 2008 was 0.85, a decrease from 0.98 as reported in June 2008. “The deterioration in funded status was due primarily to a decrease in the value of pension plan assets, reflecting losses on equity investments,” says Superintendent Julie Dickson. “Slightly higher interest rates had a small positive impact, as higher interest rates have the effect of lowering pension plan liabilities.” OSFI had previously advised pension managers to be prepared for the effects of the current market downturn and to consider a range of longer-term scenarios, including the possibility of protracted market weakness. The private pension plans subject to OSFI regulation currently represent seven per cent of all private pension plans in Canada and approximately 12 per cent of pension assets.

Manulife Adopts ‘Say On Pay’

Manulife Financial Corporation will provide shareholders with a non-binding, advisory vote on its executive compensation policy starting at its annual meeting in 2010. "The board's initial recommendation that shareholders vote against 'Say on Pay' this year was based on the lack of support for the proposal among Manulife shareholders in 2008, as well as the views of Canadian institutional shareholders, many of whom opposed an advisory vote until just recently," says Gail Cook-Bennett, Manulife chair. "Since the release of Manulife's proxy circular, we have seen the Canadian Coalition for Good Governance come out in favour of 'Say on Pay', and have also heard from many shareholders who now support the measure, so the board decided to respond."

Americans Save Little

The total value of household’s savings and investments, excluding the value of their primary home and any Defined Benefit plans, is less than $25,000, says the 2009 Retirement Confidence Survey (RCS). Among American workers surveyed, 53 per cent reported less than $25,000 in savings with 20 per cent saying they have less than $1,000. Older workers tend to have more saved than younger workers, but overall savings levels tend to be modest. Education and income tend to be major factors in whether workers save for retirement. Moreover, married workers and those who have attempted a retirement savings needs calculation are more likely than their counterparts to have saved.

Buck Adds ‘Green’ Practice

Buck Consultants, an ACS company, has launched a green awareness consulting service that helps employers significantly impact their employees' behaviours in the office and at home. The program features monthly electronic communications, including newsletters and interactive games, as well as working with companies to appoint green co-ordinators in local offices to help develop plans and serve as points of contact for green practices. When implemented internally, it found that one-third of its employees, from entry level to principals and executives across all practice areas, made significant changes in their daily behavior including increased recycling; decreased printing; and eliminating or reducing the use of bottled water, plastic and Styrofoam cups.

Compensation Trends Examined

The latest in practical insights on how to enhance total reward programs to attract, retain, and motivate talented employees will be the focus of an HRPA conference May 28 in Toronto, ON. The ‘2009 Compensation Conference: Trends In Compensation’ conference will also look at emerging trends in compensation design and delivery including common and diverging themes in the public, private, and not-for-profit sectors. For more information, visit http://www.hrpa.ca/ODC_HRprof

Conference Looks At Governance Practices

Governance practices to increase the success, resilience, and sustainability of organizations will be the focus of the ‘2009 National Governance Conference: New Risk, Accountability and Leadership Challenges.’ Sessions will focus on issues such as avoiding risk management failures and preventing ‘group think.’ The Conference Board event is set for May 6 and 7 in Toronto, ON. For more information, visit www.conferenceboard.ca

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Thursday, April 16, 2009

Boomers Lack Retirement Information

There is a strong sentiment among Canadian Boomers that setting retirement clocks back a few years may be the best option to secure a steady income stream, says a BMO Retirement Institute research study. However, while people are accepting this notion, many may be making this decision without having all the necessary information. The study reveals that 31 per cent of Canadians who plan to retire in the next five years are considering delaying their retirement date. As well, retirees are also thinking about returning to work. For those that are considering it, 41 per cent definitely intend to return to paid work within the next year. However, these retirees and pre-retirees are making moves to bolster retirement savings by working longer without a clear understanding of their retirement income gap; the difference between how much is needed and how much is available from various sources including personal savings, employer, and government benefits, says Tina Di Vito, director, retirement strategies, BMO Financial Group.

FEI Suggests Retirees Get Plan Information

In order to further enhance benefit security and allow plan members to have a better and full understanding of the measures taken to secure their pension, FEI Canada wants changes to the PBSA that would expand the categories of members required to receive plan information to include former members and retirees where appropriate. In a presentation to the consultations on federally-regulated private pension plans, it also calls for plan sponsors to provide such information every three years rather than annually. Sponsors would also be required to establish a Statement of Funding Policy in a similar fashion to Statement of Investment Policies and Procedures. Content would, however, be limited to funding guidelines including the sponsor policy regarding contribution holidays without having to go into details or include policies for managing funding risks.

More Employers Offer Wellness

Despite the recession and recent cutbacks in some benefit programs, companies continue to add wellness and health management programs to promote healthier behaviors among their workers, says a survey by Watson Wyatt and the National Business Group on Health. It found nearly six in 10 companies (58 per cent) offer lifestyle improvement programs, up from 43 per cent in 2007, while 56 per cent offer health coaches compared with 44 per cent in 2007. The number of weight management programs is also on the rise, offered by 52 per cent of companies, up from 42 percent in 2007. Companies that offer financial incentives report significantly higher participation in lifestyle management and wellness programs.

Caregivers' Quality Of Life Poor

One in four family caregivers has no help at all and the average caregiver has been at it for four years and devotes 20 hours a week to the task, says a study by Home Instead Senior Care. It also found that 69 per cent of all the seniors being cared for are 75 years and up – a percentage that will increase as the population continues to age – and 25 per cent of the seniors live with the caregiver while 40 per cent live within eight kilometres. Many family caregivers think their quality of life is poor, and it's especially poor if the senior being cared for lives in the same household. While caregivers rated the challenges of the seniors as high, the seniors themselves didn't appear to be as concerned about these challenges, implying that the caregivers and seniors are not on the same page here.

Genton Discusses Sustaining Investments

Todd Genton, IBM Canada practice leader in financial management and an expert on finance transformation, will discuss how innovative companies are improving their cost competitiveness, while sustaining investments for their future success at FEI Canada’sNational Breakfast Seminar.’ 'Turning Crisis into Competitive Advantage – Immediate Cost Management Techniques and Strategic Innovations' takes place April 30 in Toronto, ON. Genton will provide insights into how technology solutions can result in previously untapped cost savings in both the short- and long-term. For more information, visit www.feicanada.org

Dempster Believes In Gold

Natalie Dempster, head of investment research for North America at the World Gold Council, will be one of the featured speakers at the ‘World Alternative Investment Summit Canada 2009.’ She believes gold’s investment characteristics, especially its role as a portfolio diversifier, make it an invaluable investment. The summit takes place September 14 to 16 in Niagara Falls, ON. For more information, visit www.waisc.com

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Wednesday, April 15, 2009

Half Of Sponsors Close Plans

Nearly half of U.S. Defined Benefit plan sponsors have closed those programs to new participants, says a Towers Perrin survey. However, just three per cent plan to do so in the next 18 months. More than two-thirds (69 per cent) reported they have no intention of modifying their DB plans for current participants. On the Defined Contribution  front, fewer than 10 per cent of respondents have suspended – or plan to suspend – company contributions to DC plans. As for workers, 43 per cent of respondents reported that employees were increasing loans and hardship withdrawals from DC plans, while 38 per cent noted declining overall participation in the plans.  

Hedge Fund Returns Positive

Hedge funds are starting to see positive returns and fewer redemptions, yet overall assets continue to decline, says a HedgeFund.net report. It says that estimates for March indicate investor outflows continued, but the rate of redemptions decreased for the third straight month. Nevertheless, hedge fund assets likely fell by an additional 1.01 per cent in March to US$1.724 trillion; and are now down 41 per cent from their peak in June 2008.

illnessPROTECTION.com Launches ELITE Insurance

illnessPROTECTION.com Inc. has launched ELITE U.S. Healthcare insurance. Available to Canadians only, it provides timely access to medical centres of excellence in the U.S. such as the Cleveland Clinic, Sloan-Kettering, Mayo Clinic, and Johns Hopkins in the event of any illness or injury with a wait time for treatment in Canada. It provides a second opinion, access to treatment, and a personal case co-ordinator to help patients and their families navigate through diagnosis, treatment, and recovery. There is, however, a lifetime limit of US$5 million which can be used for multiple occurrences.

Retirement Confidence Drops

A record-low 13 per cent of Americans are very confident of having enough money to live comfortably in retirement, says the Employee Benefit Research Institute’s ‘19th Annual Retirement Confidence Survey.’ Because of the economic downturn, many workers say they expect to work longer and more workers say they are planning to supplement their income in retirement by working for pay. Workers who have lost confidence over the past year about affording a comfortable retirement most often cite the recent economic uncertainty, inflation, and the cost of living as primary factors.

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Tuesday, April 14, 2009

Suspending Match Saves Money

Employers can save more than $1,500 per employee each year by suspending or cutting their 401(k) match to save money, says a Hewitt Associates study. It assumes an average employer match of $0.50 cents on the dollar, up to six per cent of pay. A typical large U.S. company could see annual savings of $25 million a year, while the average mid-sized company can save more than $10 million, and the average small company nearly $2 million annually. However, it notes that suspending the company match negatively impacts employee participation and contribution rates. Once the match is suspended, employees may reduce their own 401(k) contributions or even stop contributing to their plan entirely.

Sun Life Offers Absence Management

Sun Life Financial has introduced a suite of absence management services for plan sponsors with salary continuance plans. ‘EarlyReturns’ offers a flexible approach to absence management. In addition to case management, the product offers four complementary services to help tackle specific absence challenges. They include a return-to-work advisory service; access to a national network of health professional specialists; a chronic casual absence service that assesses situations involving high rates of chronic, cyclical, or patterned absenteeism; and absence prevention strategies.

Lawrence In Public Market Investments

Scott Lawrence is vice-president, relationship investments, in the public market investments department at the CPP Investment Board. He has more than 10 years of experience in the financial services sector and joined the board’s private investments department in 2005 as a senior principal in the infrastructure investing group. Prior to that, he was an investment professional at Onex Corporation.

Golf Event Helps Charities

The ‘7th Annual CVCA Charity Golf Classic’ will be held August 26 at Angus Glen Golf & Country Club in Markham, ON. The event consists of a luncheon networking activity, a shotgun team golf scramble, a cocktail party, and a sit down dinner with speakers and prizes. A portion of the net proceeds from the tournament will be used for not-for-profit charitable activities. For more information, visit http://www.cvca.ca/

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Monday, April 13, 2009

Regulations Do Not Provide Fresh Start

The new 10-year amortization schedule available under the 2009 regulations for sponsors of federally-regulated plans does not provide a “fresh start” for existing solvency deficits, as was the case with the 2006 regulations, says a Watson Wyatt ‘InfoFlash.’ This time, the schedule only applies to a newly identified deficiency, while any existing amortization schedules remain in place. The regulations are not yet in force as there is a 30-day period to make submissions to the Department of Finance. After that, they go to cabinet for approval.

Barclays Sells iShares

Barclays plc has sold its iShares exchange-traded fund division to CVC Capital Partners. The firm says that the deal gives it the opportunity to “maximize value through the sale of a business which represents a distinct channel for Barclays Global Investors and which now has the scale, depth of client relationships, and brand equity to continue to be successful on a standalone basis.”

Deficits Source Of Growing Concern

Investment losses from the current recession have significantly eroded the funding status of public pension plans, affecting entities from school districts, to local governments, to state governments, says an analysis by the Employee Benefit Research Institute (EBRI). Under the current accounting rules, it says underfunded public pension plan sponsors face some perverse incentives to maintain aggressive or risky investments. However, public plan sponsors are unlikely to significantly shift toward safer, but lower return investment policies, at least in the short run. As well, there is growing concern that increasing deficits in public plans will force taxpayers to make up for the shortfall.

Canada Post Down 19.3 Per Cent  

The Canada Post pension plan held total net assets of $11,709 million compared with $14,666 million the previous year, representing a decrease of $2,957 million as of December 31, 2008. It earned a rate of return of negative 19.3 per cent over the year against a benchmark return of negative 17.6 per cent. This was the first time since its inception eight years ago that its rate of return under-performed its benchmark. Fortunately, the plan was one of the few pension plans in Canada to begin 2008 with a solvency surplus, somewhat easing the impact of the financial market decline. The plan ended the year with an estimated solvency deficit of $1,190 million as of December 31, 2008. This represented a solvency funding ratio of 91 per cent, significantly better than most large Canadian pension plans.

CEBS Seminars Offer Introduction

The Toronto Area Chapter of the International Society of Certified Employee Benefit Specialists is presenting two full-day seminars geared primarily to those looking for a comprehensive introductory overview of pensions and group benefits. Set for May 11 and 12 in Toronto, ON, it will offers sessions on setting up a pension plan; alarming trends in disability claims; the role performed by insurance underwriters; and the latest wellness initiatives. For more information, visit http://www.iscebs.org/PDF/chapters/09051112_tor1.pdf

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Thursday, April 9, 2009

Government Has Responsibility To Protect Pensions

The Ontario government has a "moral and legal responsibility" to help protect the pensions of all workers in the province, and should be strengthening the provincial pension backstop, not weakening it, says Ken Lewenza, president of the Canadian Auto Workers union. In response to comments from Premier Dalton McGuinty, he says that the provincial government shares responsibility for the pension crisis at General Motors, because of a 1992 loophole (long opposed by the CAW) in the Pension Benefits Act that allows GM to fund its pension to a weaker standard than other employers. "GM's pension fund is in trouble largely because of the failure of provincial pension regulations,” he says. McGinty says that the province's Pension Benefits Guarantee Fund (PBGF) will not cover retired autoworkers in the event that their pensions were affected by a bankruptcy at General Motors Canada or other major auto companies.

Class Actions May Be Available

The class action approach which is complicated, time consuming, and expensive may now be available to pension fund members as a result of the Financial Services Tribunal’s refusal to interfere with a court approved settlement of a class proceeding that results in pension trust surplus being paid to the employer, says a Mercer ‘Communiqué.’ In Montreal Trust Company of Canada v. Superintendent of Financial Services, the Ontario Superior Court of Justice approved the settlement of a class proceeding which allowed Montreal Trust to amend the pension plan to provide for payment of surplus to it. However, the Superintendent of Financial Services (Ontario) refused consent arguing that the Settlement Order did not have the effect of validly varying the pension trust. The FST said the court had jurisdiction. The ‘Communiqué’ says it remains to be seen whether the superintendent will accept other class action settlement orders approving plan amendments regarding surplus entitlement, particularly in circumstances that do not include the same factors that contributed to the result in this case.

March  Brings Better News

March brought better news on both the asset and liability sides of the ledger, says Towers Perrin's ‘Capital Market Update.’ Equity returns were strong across the board and long corporate yields continued their recent upward trend. The net impact was a 3.5 percentage point increase in its benchmark plan’s funded ratio. While the March results bring some relief for plan sponsors, the funding gap created over the prior six months remains mostly intact. March’s 63.7 per cent funding level represents a decline of 25 percentage points over the trailing 12 months, and stands as the second-worst figure ever seen in its data series.

HSBC Launches Currency Fund

HSBC Global Asset Management has launched a global currency fund for institutional investors which aims to exploit currency market inefficiencies and imbalances. The GIF Global Currency Fund invests in a global basket of currencies and targets returns in excess of Libor. Daily liquidity is offered via a Luxembourg-based US Dollar denominated Ucits III fund, with hedged share classes available in Sterling, Euro, Yen, and Swiss Franc. Minimum investment for the institutional share class is USD1m.

Registration Opens For ACPM Golf

Registration is now open for the Annual ACPM/Ontario Regional Council Golf Tournament. It takes place May 25 at Clublinks’ Station Creek Golf Club in Gormley, ON. For more information, visit http://www.acpm.com/

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Wednesday, April 8, 2009

Depression Treatment Affected By Expenses

A troubling connection between out-of-pocket expenses for people contending with both physical illnesses and depression is affecting access to antidepressant treatment, says a study by the Centre of Addiction and Mental Health (CAMH). The study explores whether the amount of money spent on medication before a disability episode impacts medication use among workers on depression-related disability. A worker on depression-related short-term disability is less likely to fill a prescription for antidepressant medication if the worker already is paying high out-of-pocket costs for medications to treat physical disorders such as heart disease or asthma. This phenomenon may be a barrier to accessing antidepressant treatment, which could delay taking necessary medication, impacting not only a person’s recovery, but also a company’s bottom line.  Approximately one third of work-related productivity losses can be attributed to an employee being either unproductive or unable to function at full capacity because of depression.

No Decision Yet On Fair Value

The Accounting Standards Board has made no decision on whether to change fair value accounting rules in Canada. It will hold a special meeting later this month to consider whether to propose changes in the use of fair values and impairment of debt securities. The AcSB says it will make a decision on whether to propose any revisions to financial reporting standards in Canada on the use of fair values and impairment of debt securities when all of the necessary information is available to make an informed and responsible choice. The Financial Accounting Standards Board in the U.S. has already decided to loosen its fair value accounting rules. The old rules aimed at consistent reporting among comparable firms.

Claymore Launches ETFs

Claymore Investments, Inc., is launching two foreign equity based ETFs. The Broad Emerging Markets ETF has been designed to provide investors with exposure to the return and performance of an emerging markets benchmark index, such as the MSCI Emerging Markets Index, net of expenses. The ETF is currency hedged to help reduce the foreign currency exposure risk. The US Fundamental Index ETF (non-hedged) adds to its Fundamental Index ETF family and provides a compliment to the Canadian dollar hedged units of the fund. The ETF is based on the FTSE RAFI Fundamental Indexes which are non-market capitalization weighted indexes and provides exposure to the U.S. core equity markets.

AIMA Looks At Credit Crisis

‘The Credit Crisis: Getting here and getting out of here’ is the topic at the next AIMA Canada luncheon. Adrian Hussey, vice-president, research, at Northwater Capital, and Barry Allen, founding partner of Marret Asset Management, discuss the origins of the current crisis and review the historical precedents. It takes place April 23 in Toronto, ON. For more information, visit www.aima-canada.org

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Tuesday, April 7, 2009

Correlation At All-time Highs

Current three-year correlation between various asset classes are at or near their all-time highs, says David Krein, of Dow Jones Indexes. In his ‘Global Markets Insight,’ he says equities in developed ex-U.S. and emerging markets are currently 25 per cent higher correlated to the U.S. equity market. Likewise, real estate and commodities are currently two to four times higher than their historical average over the last 17+ years. He says in strong market declines such as that experienced over the last few months, asset class correlations tend to quickly jump to higher levels for a number of reasons. These include general risk aversion and preference towards capital preservation across multi-asset portfolios as well as voluntary institutional deleveraging (or involuntary via margin calls).

Status Of U.S. Plans Improve

A stock market rally and wider spreads for corporate bonds combined to improve the funding status of a typical U.S. corporate pension plan by 6.4 per cent in March, says BNY Mellon Asset Management. Assets for a typical moderate risk portfolio jumped 5.6 per cent, while liabilities fell 3.5 per cent during the month. For the year-to-date, the funding ratio for the typical plan is now up 5.7 per cent, as represented by the BNY Mellon Pension Liability Index.

Analytical Suite Capabilities Strengthened

Northern Trust has strengthened its analytical suite of capabilities with enhanced graphics of performance and risk related information on the Fundamentals Dashboard. It allows clients to understand large volumes of information and identify outliers via the use of enhanced graphics on a single client portal that is available globally. This development incorporates charting and highly customized features. Clients are then able to further analyze specific information on demand via the full breadth of analytical tools available. It is available to asset managers and institutional investors such as pension funds.

Economic Overview Planned

Patricia Croft, of Phillips Hagar & North, and Craig Alexander, of TD Bank Financial Group, will deliver a thought-provoking look at today's economic reality at this fall’s CPBI Ontario Regional Conference. Set for October 5 to 7 in Collingwood, ON, their presentation is a practical examination of the economic factors that are currently affecting the pension plan environment. The discussion will cover domestic and global economic factors such as inflation, interest rates, commodities, and currency. For more information, visit  www.cpbi-icra.ca/

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Monday, April 6, 2009

Plan Health Unsteady

The financial health of Canadian pension plans was unsteady in the first quarter, primarily due to continued volatility in stock markets, says the Mercer Pension Health Index. However, it still increased to 62 per cent, up three per cent from the beginning of the year. Canadian bond performance, as measured by the DEX Universe Bond index, returned 1.5 per cent last quarter, led by mid-term bonds which gained 2.6 per cent, followed by short term bonds (1.7 per cent), and long bonds (0.3 per cent).  Real return bonds, as measured by the RRB Overall Index, had a comparatively high performance of 4.7 per cent over the quarter. Most other major equity asset classes (excluding Emerging Markets) had negative returns in the first quarter of 2009. Canadian equity performance, as measured by the S&P/TSX Composite index, was the best performing equity asset class in Canadian dollar terms, posting a return of negative two per cent last quarter.

Target Date Funds Under Review

The U.S. Department of Labor will review target date funds to determine if they are potentially exposing investors to too much unknown equity risk. Target date funds are designed to simplify long-term investing by automatically adjusting to more conservative investments as the targeted retirement date approaches. However, given the variation in equity holdings among funds with the same targeted retirement date, participants may be unknowingly exposing their retirement savings to financial risks. The review will determine what regulatory or other guidance is necessary.

Parsons At Lincluden

Todd Parsons is vice-president, fixed income, at Lincluden Investment Management. He has more than 12 years of fixed income investment experience and was a member of MFC Global Investment Management’s Canadian Total Return team with responsibility for actively managed fixed income assets with a focus on corporate debt.

ACPM Encourages New Ideas

The ACPM’s Ontario Regional Council hopes to encourage new ideas for retirement security for plan sponsors and members at its spring session. ‘Future Directions for Retirement Security’ will focus on re-envisioning the future of pensions, re-examining the needs of retirement system stakeholders, and the next steps to develop a sustainable pension model for the 21st century. Speakers will include Christiane Bourassa, Towers Perrin; Barry Gros, Aon Consulting; and Emily Kessler, Society of Actuaries. It takes place May 14 in Toronto, ON. For more information, visit http://www.acpm.com/

de Bever Speaks At CVCA Conference

Leo de Bever, chief executive officer of Alberta Investment Management Corp.; and Michael Nobrega, president and CEO of OMERS; will be among the featured speakers at the CVCA’s Annual Conference. It takes place May 27 to 29 in Calgary, AB. For more information, visit www.cvca.ca/

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Friday, April 3, 2009

Teachers’ Suffers Negative Return

The Ontario Teachers' Pension Plan investment return for 2008 was negative 18 per cent compared to its composite benchmark return of negative 9.6 per cent. It ended the year with assets totaling $87.4 billion, compared to its record $108.5 billion level at the end of 2007. The fund's 2008 returns largely reflect its exposure to equities, non-government fixed income securities, externally managed hedge funds, and real estate – diversity that has traditionally cushioned the fund in a downturn. The current funding shortfall is $2.5 billion. However, $19.5 billion in losses have been held back in the smoothing adjustment and will be recognized over the next four years. Accordingly, the shortfall will grow unless the investment climate turns sharply positive.

OMERS Puts Report Online

OMERS has released its first-ever web-based annual report, providing both a breakdown of the 2008 annual returns and the returns of three other funds currently managed by OMERS. "2008 was a difficult year," says Michael Nobrega, OMERS president and CEO. "But our plans to grow the fund through a rebalancing of the portfolio and by inviting other pension funds to participate in our investments will stand us all in good stead in the years to come." OMERS asset mix currently sits at approximately 60 per cent public assets and 40 per cent private, a significant shift from about 80/20 just three years ago. The shift will continue as OMERS expands its global footprint and looks to dominant assets in the real estate and infrastructure sectors. As outlined in the annual report, OMERS returns in the infrastructure and real estate classes have grown despite losses in public equities. OMERS had a negative 15.3 per cent total rate of return for 2008, compared with a positive 8.7 per cent total rate of return in 2007. To see the online annual report, visit www.omers.com

Average Cost Of Depression $10,000

‘Mental Health in the Workplace,’ the largest study ever conducted of Canadian workplace mental health and depression, calculates the average cost of treatment and wage replacement to the employer to be $9,920, says ‘Eckler GroupNews.’ In the survey, only one-third of workers believed that there is awareness in their workplace of the possibility of employees having depression, anxiety, or panic disorders, and of the possibility that some of them might require a leave of absence of three months or more to deal with a mental health issue.

Firms Lack Benefits Continuation Policies

More than half (57 per cent) of respondents to a ‘Pal Benefits Flash Survey’ do not have a formal policy around benefits continuation or don’t know if they have one. This has become a critical issue because current economic conditions have increased the number of severances and layoffs. Of those that do have a formal policy around benefits continuation, 33 per cent provide benefits over and above those required by the Employment Standards Act.

Nature Of Pension Plans Changed In U.S.

Since 1980, significant changes have occurred in the kind of employment-based retirement plan that workers participate in, says an ‘EBRI Notes. Defined Benefit pension plans have declined reflecting pressures on DB plan sponsors to control costs and funding volatility, in addition to increased regulatory burdens. Meanwhile, Defined Contribution (401(k)-type) plans have grown. Overall, 67.1 per cent of workers who participated in an employment-based retirement plan considered a Defined Contribution (401(k)-type) plan as their primaryplan in 2006.’ This is up from 2003, and more than double the level found in 1988. Correspondingly, a smaller percentage of workers had a Defined Benefit pension plan as their primary plan – 30.9 per cent in 2006, compared with 46.3 per cent in 1998, and substantially lower than the 56.7 per cent level found in 1988.

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Thursday, April 2, 2009

Auto Giants Can’t Use Loans For Pensions

Interim loans by the governments of Canada and Ontario cannot be used to cover pension fund shortfalls. The two governments will advance up to $3 billion to General Motors of Canada and $1 billion for Chrysler Canada to assist the companies while they undertake additional work as part of their ongoing restructuring efforts. The loan agreement also puts limits on executive compensation to senior Canadian employees from 2008 through the term of the loan.

GTAA Offers Flexibility

Global Tactical Asset Allocation (GTAA) offers flexibility in exact product offering which makes it an interesting proposition for many portfolios, says Emiel van den Heiligenberg, chief investment officer, asset allocation and balanced solutions, for Fortis Investments. Speaking at the ‘Gaining the Benefits of Tactical Asset Allocation in a Hostile Environment,’ he said while institutional investors were well-prepared for the hostile environment that now exists, their methods of spreading the risk did not work and, in fact, made things worse because of the correlation between assets in their portfolios. If they had been using GTAA, they would have been able to overcome the weakness of traditional asset allocation as it expands the investment universe, decreases trading costs, and offers a focused approach.

Canadian Managers Becoming Bullish

Even as equity markets have yet to produce a sustained rally in the first few months of 2009, Canadian investment managers have become increasingly bullish, says the Russell ‘Investment Manager Outlook’ survey. Only one-in-10 managers believe the Canadian market is overvalued, and 70 per cent say stocks are undervalued with the energy, materials, and financial services sectors offering the most attractive prospects. In regards to the outlook for S&P/TSX sector performance, 76 per cent of the managers surveyed are bullish towards the energy sector  and only 15 per cent see more downside potential. Bullishness towards the materials sector is up from 44 per cent to 58 per cent and bullish sentiment towards the financial services sector has jumped to 61 per cent of investment managers, with less than one-in-five saying they are bearish.

Employers Move To Cut Benefit Costs

Many employers are taking action to cut their pension and benefit costs in light of the ongoing recession, says a Morneau Sobeco’s ‘60 Second Survey.’ Nearly half of the respondents with Defined Benefit pension plans say they will take action in a number of ways including winding up their plans, making plan design changes that would cap or reduce future employer costs, and taking advantage of funding relief offered by the regulators. Group life, health, and disability plans are also likely to see cutbacks including reducing benefit levels for active employees and/or retirees and asking employees or retirees to pay a greater share.

Capital Preservation Top Concern

Defined Contribution plan sponsors are most concerned with capital preservation, diversification, and inflation protection, says a survey by PIMCO. Its ‘2009 Defined Contribution Consulting Support and Trends Survey’ says consultants are helping DC plans offer investment options that focus on minimizing the risk of losses, with 61 per cent expecting plans to add Treasury or government-only money market funds. In the same vein, 61 per cent of consultants are helping evaluate DC plans' existing stable value offerings by studying the underlying manager performance. Consultants are also working with clients to assess volatility and inflation risk in their plans.

OMERS Buys Stake In Tunnel

Canadian Pacific Railway Ltd. is selling 67 per cent of its stake in the Detroit-Windsor Tunnel crossing to Borealis Infrastructure Management Ltd. Upon the conclusion of the deal, Borealis, which manages infrastructure projects for the OMERS pension fund, will own 83.5 per cent of the tunnel which links Detroit, MI, and Windsor, ON, and is reportedly the busiest rail and truck crossing in the world.

Pransky Speaks At TRG Event

Dr. George Pransky, founder of Pransky & Associates, will be the keynote speaker at the TRG Group Benefits & Pensions session ‘Focusing on Your People.’ Pranskyis an innovative psychologist who inspires audiences across North America with a powerful message about improving mental well-being. Other sessions will include a presentation of the results of TRG’s sponsor survey and an examination of managing arthritis in the workplace. It takes place April 15 in Vancouver, BC. For more information, email cnewton@trggroup.com

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Wednesday, April 1, 2009

OMERS Boss Best-paid

Employees of pension manager OMERS are the best-paid crown agency employees in Ontario, says the Ontario Ministry of Finance. The province is required by law to report the salaries of all public sector employees earning more than $100,000 in annual salary. Among crown agencies on the salary list, Michael Nobrega, president and CEO of OMERS, was the highest paid employee during the fiscal year ended March 31, 2008. Nobrega was paid $1.9 million in fiscal 2008. Patrick Crowley, OMERS CFO, was the second highest-paid employee on the list at $839,000. Four others at the pension manager were paid over $700,000.

Mental Illness Challenge Under-addressed

While 77 per cent of plan sponsors report that mental illness was an issue in their organization, 16 per cent had not taken any steps to address this challenge, says a survey by Cowan Insurance Group. “These numbers show that work needs to be done in this area,” says Teresa Norris-Lue, vice-president of benefits for Cowan. “When you consider that mental illness is expected to be the leading cause of disability by 2020, we need to be more proactive in addressing this issue and measuring results.” For organizations that have taken action, initiatives included holding training sessions for managers and HR professionals, introducing or enhancing Employee Assistance Programs for employees, and providing employee information sessions. The main reported outcomes of mental illness in the workplace included higher absenteeism rates and increased drug costs.

CPPIB Bids For Macquarie

The CPP Investment Board has made a formal offer to acquire Macquarie Communications Infrastructure Group. It is offering to purchase all of the stapled securities of Macquarie and if the offer is accepted, CPPIB will acquire Macquarie Communications’s manager, Macquarie Communications Infrastructure Management Ltd. (MCIML) by way of a separate inter-conditional offer. Macquarie Communications has three primary assets located in the United Kingdom and Australia Broadcast Australia, which is the leading broadcast transmission provider in Australia.

Contribution Holidays Limited

Ontario will not permit contribution holidays in fiscal years ending in 2010 to 2012 unless an actuarial cost certificate, based on an approximation from the last filed report, is filed annually with the Financial Services Commission of Ontario (FSCO), says a ‘Blakes Bulletin on Pension & Employee Benefits’ on the province’s budget. It says the certificate must state that the plan is in a surplus position at the start of the applicable fiscal year. The contribution holiday restriction will not apply to a pension plan which is a designated plan for the purposes of the Income Tax Act (Canada). As well, it says following the trend in other pension jurisdictions in Canada, amendments are to be made to the Pension Benefits Act that will permit, but not require, pension plans to offer phased retirement benefits to employees eligible for retirement who wish to commence receipt of a pension while remaining at work and continuing to accrue further benefits. The amendments are to complement recent amendments made to the Income Tax Act (Canada) which accommodated phased retirement.

Bermuda Contracts With Penad

Two departments of the Government of Bermuda have contracted with Penad Pension Services Limited to deliver large software installations for social security benefits administration and pension administration. The first contract is for the Department of Social Insurance (DOSI) and will enable the administration of all members of Bermuda’s social insurance system. The second contract is for a Defined Benefit administration solution for the Public Service Superannuation Fund (PSSF), covering the public employees and retirees of the government of Bermuda. Both of these systems are built upon Penad’s proprietary PX3000 software engine, which is a web-ready system that was specifically designed as a rules-based product for situations like this, where it can be localized to the specific benefit provisions and regulations of the Bermudian plans.

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