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News Archives - August / September 2008

Tuesday, September 30, 2008

Markets Dive As Bailout Fails

Worries of worsening global credit contagion and the defeat of a $700 billion U.S. bailout plan in Congress have sent financial markets into their worst panic since the 1987 Black Monday crash. The Dow Jones Industrial Average suffered its largest point drop yet – down 777.68 points – and Toronto stocks dropped 841 points. Losses in the United States easily surpassed the proposed cost of the bailout. Congressional leaders and the White House are currently trying to structure a new bailout proposal that would appease members of Congress and calm the financial markets. The proposed bailout would have allowed the government to buy bad mortgages and other deficient assets held by troubled financial institutions.

Credit Card Crisis Next?

Bad credit card debt could be the next credit crisis facing the United States, says Innovest Strategic Value Advisors. So far, credit-card ‘charge-offs’ – debts declared irrecoverable by card issuers – have been lower than in both 2001 and 2005. However, historically, after a time lag, irrecoverable credit card debt has followed mortgage charge-offs up or down and U.S. mortgage charge-offs are up eight-fold since the last quarter of 2007. It forecasts first quarter credit card charge-offs will be $18.6 billion and that the total 2009 charge-off bill will add up to $96 billion.

D’Alessandro Slams Accounting Rules

Dominic D'Alessandro, the head of Manulife Financial Corp., plans to spend his upcoming retirement crusading to expose the fallacy of fair value accounting and reporting rules that businesses are being subjected to, says a report in the Globe and Mail. He said the rules exaggerate the tendency toward greed and short-term thinking in the financial system. Fair value, or mark-to-market, accounting rules require financial institutions to place a value on many of their holdings on the last day of each financial quarter. Those values can fluctuate and lead to write-offs and losses when markets are down, even if the companies plan to hold the securities until their value rises again. When the final story of the current financial crisis is written, much of it will focus on the “perverse” reporting and accounting practices, said D’Alessandro.

Integrated Fund Earns Award

Integrated Asset Management Corp. and its managed futures arm, Integrated Managed Futures Corp., won the ‘Best New Fund Performance Award’ at the Canadian Hedge Fund Awards 2008. Their Global Diversified Fund had a return of 36.03 per cent for the year ending July 31, 2008, and a return of 37.81 per cent from inception in February of 2007. It also finished third in the ‘Best Sharpe Ratio’ category for funds with assets under management of less than $25 million and was second in the ‘Best Overall Return Category’ for funds with assets under management of less than $25 million.

Little Discusses Book

Author Bruce Little will discuss his book ‘Fixing the Future: How Canada’s Usually Fractious Governments Worked Together to Rescue the Canada Pension Plan’ October 30 in Toronto, ON. Each attendee will receive one complimentary signed first edition copy of the book. For more information, visit

Soft Dollar Summit Set

The Strategy Institute’s ‘2nd Summit on Soft Dollar Regulations and Best Execution Strategies’ takes place November 19 and 20 in Toronto, ON. The session is designed to help firms develop strategies to deal with the transition that results from new legislation set to come out this year. For more information, visit


Monday, September 29, 2008

Congress Shares Control Of Bailout Dollars

U.S. Congress and the White House have agreed on a $700 billion bailout of its ailing financial industry. The deal was reached after the Bush administration agreed to share spending controls with Congress. The plan gives the administration broad power to use taxpayer dollars to purchase devalued mortgage-related assets held by financial firms.

Appeal Sought On Marine Atlantic

An application for leave to appeal the Federal Court of Appeal’s Marine Atlantic decision has been filed with the Supreme Court of Canada, says a Heenan Blaikie ‘Labour & Employment in the News.’ The Marine Atlantic decision looks at whether the federal Pension Benefits Standards Act (PBSA) requires a distribution of proportionate surplus assets to pension plan members affected by a partial termination. The Federal Court of Appeal decided that the PBSA does not require such a distribution to affected members. The application for leave to appeal also includes whether the PBSA requires a plan wind-up at the same time as a plan termination and what the standard of review is for decisions made by the Office of the Superintendent of Financial Institutions.

Plans Designed To Accommodate Life

Employer sponsored pension plans were designed to accommodate life, says David Foote, author of the book ‘Boom, Bust & Echo.’ Speaking on ‘How Will The Baby Boomers Effect The Pension And Benefits Landscape’ at the CPBI Atlantic Region Conference, he said the realization of the need to save for retirement doesn’t occur until individuals reach their 50s when the children have left home and the mortgage payments are finished. He also challenged the conventional wisdom that the boomers are starting to retire now. He said the peak of the baby boom generation is now aged 48 and will be in the workforce for about 15 more years which suggests that a labour shortage is not that imminent. During this time, phased retirement programs need to be developed which will allow them to reduce their work week, while continuing to contribute to their plans during the time they work and collect a pension to offset their reduced income.

Capital Injection Saves Fortis

Fortis will sell its holdings in ABN Amro, the Dutch lender it bought as part of a break-up bid last year as part of a plan to save the bank. Three European governments agreed to partially nationalize the Belgo-Dutch banking and insurance group with an €11.2bn capital injection after it suffered a crisis of confidence that risked spreading to depositors. The Belgian, Dutch, and Luxembourg governments will each inject capital to buy 49 per cent of the Fortis banking subsidiaries in their countries, giving the three governments a combined stake of 30 to 40 per cent in the entire bank. Fortis' problems stem from its purchase last year of ABN AMRO with the Royal Bank of Scotland and Spain's Santander just as the credit crisis struck, slashing the value of banking assets. However, it is not required to sell ABN Amro Asset Management.

Real Assets Reduce Risk

Real assets provide risk reduction, diversification, and absolute return potential, says David G. Mather, executive vice-president, Speaking on investing in real assets at the CPBI Atlantic Region Conference, he said other advantages of investing in them include low/negative correlation to public equity and bonds; stable, predictable income; positive correlation to inflation; and potential for excess returns. Real assets include real estate, infrastructure, timber, and farmland. However, there are challenges including limited liquidity, long lock-ups, large minimum investments, and long investment horizons.

Sun Life Faces WaMu Writedown

Sun Life Financial expects to record a charge to earnings in the third quarter of 2008 as a result of its holdings in Washington Mutual (WaMu). The amount of the charge is dependent on a number of factors, including the amount of expected recoveries and actuarial cash flow testing which is performed following the close of the quarter on September 30, 2008. Sun Life Financial Inc. has bond securities with a par value of $270 million from various WaMu entities.  

Plans Adding Auto Enrollment

Following a big increase in 2006, more plans of all sizes added automatic enrollment in 2007, says The Profit Sharing/401k Council of America’s ‘51st Annual Survey of Profit Sharing and 401(k) Plans.’ More than half of large plans utilize this feature and usage by small plans doubled. The survey also found company contributions average 4.4 per cent of payroll and are highest in profit sharing plans (8.6 per cent) and lowest in 401(k) plans (3.2 per cent).

Phased Retirement Not For All

Phased retirement will not be attractive to all employees or employers, says Conrad Ferguson, of Morneau Sobeco. Speaking at the CPBI Atlantic Region Conference, he said they are better suited for employee groups with similar functions and employers with long service, aging workforces. He also said it is attractive where an employee desires to slow down, but maintain a reasonable income. However, phased retirement alone will not solve the impending labour shortage and formal phased retirement program will not work for every employer. It is one tool in a list of potential HR initiatives.

November 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 November 2008 are now available at An Excel spreadsheet on the website contains six worksheets:


Friday, September 26, 2008

Bush Proposal Changed

A bipartisan group of American lawmakers has set out its own version of the $700 billion bailout of the U.S. financial industry that makes several substantial changes to President Bush's request. However, key Republicans were still resisting the emerging agreement. The new proposal calls for the Treasury Department to make rules to prevent excessive compensation for executives whose companies benefit from the rescue. As well, it would require the government to renegotiate mortgages it acquires under the program with the aim of helping borrowers keep their homes. The group also wants a strong oversight board with authority to halt the program, a special investigator general to monitor it, and regular government audits.

Canadian Institutions Better Capitalized

Bank of Canada Governor Mark Carney says Canada's financial institutions are much better capitalized than their U.S. and global peers, but warned that the Canadian economy is not immune to the fallout from the global financial crisis. In a speech to the Canadian Club of Montreal, he said, however, several articles of faith in the financial system have been shaken – that good collateral can always be used to raise liquidity, that certain institutions are too big or interconnected to fail, and that this was merely a liquidity crisis. And while any U.S. slowdown has consequences for Canada, he said the current situation posed particular problems because the housing slump has hurt Canadian lumber exports and the fall in U.S. motor vehicle sales has affected Canada's auto sector.

Half Of U.S. Banks Could Fail

The may be the greatest credit bubble since the Great Depression of the 1930s, says Patricia Croft, vice-president and chief economist at Phillips, Hager & North Investment Management Limited. Speaking at the CPBI Atlantic Region Conference, she said before it is all over, half of the 8,000 banks in the U.S. could fail or be consolidated. She also says the 17 years spending spree in the U.S. is over and the consumers share of GDP will fall from its current level of 72 per cent to more traditional levels of 60 per cent.

WaMu Fails

One of the largest banks in the U.S. – Washington Mutual Inc. – has collapsed under the weight of its enormous bad bets on the mortgage market. The Federal Deposit Insurance Corp. seized WaMu on Thursday and then sold its banking assets to JPMorgan Chase & Co. Founded in 1889, it is by far the largest bank to fail in the country's history. Its $307 billion in assets far surpass the $40 billion of Continental Illinois National Bank which failed in 1984. JPMorgan Chase is now the second largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch.

The Price Of Life?

Is there a price on peoples' lives? Plan sponsors may end up asking themselves that question when it comes to biological and cancer drugs, says Joanne Brosseau, of Aon Consulting. Speaking on ‘The Latest on the Changing Drug Insurance Landscape’ at the CPBI Atlantic Region Conference, she said sponsors may have to look at the cost/benefit ratio of these drugs which can be very expensive. They may be looking at whether or not the drugs provide a cure, or merely a prolongation of survival. As well, she wondered to what extent will members continue to accept that significant dollars are spent to help only a few as 80 per cent of healthcare dollars are spent on 20 per cent of individuals.

Variable Compensation Attracts Key Employees

While salary increases are expected to be lower in 2009 than in 2008 for most employees, many high performers have opportunities to boost their overall earnings by more than the average 3.6 per cent increase, says research by Hewitt Associates. Organizations are relying on variable compensation – performance-related rewards that must be re-earned each year and do not increase base salary – and, in some locations and for some roles, perquisites to attract, retain, incent, and reward key employees. The supply of workers with certain skills or training – particularly engineering and information technology – is so low compared with the demand for these employees that 36 per cent of Canadian organizations make special compensation arrangements outside of base salary to attract and retain them. This additional compensation takes a variety of forms. Sign-on and/or retention bonuses and a living or housing allowance (or housing loan or subsidy) are the most frequently offered monetary arrangements, while non-monetary awards include perquisites such as a cell phone, computer, Internet hook-up, car allowance, flexible work arrangements, assistance in locating housing, and additional vacation time.

COPA Merges With ASPPA

The membership of the College of Pension Actuaries (COPA) is merging its work in the pension actuarial profession with the American Society of Pension Professionals & Actuaries (ASPPA). The group formed by this combination will be the ASPPA College of Pension Actuaries (ACOPA). ACOPA will provide a new platform catering to the specific needs of pension actuaries in the United States.


Thursday, September 25, 2008

CSA Amends Executive Pensions Disclosure Rules

To provide consistent and comprehensive executive compensation disclosure, the Canadian Securities Administrators (CSA) has adopted significant amendments to its  executive compensation disclosure rules, says a Mercer Communiqué. As the 2009 proxy season is fast approaching, companies should begin to familiarize themselves with the new disclosure rules and begin to share with their compensation committees the new retirement benefit disclosure rules. Depending on the nature of the plans in place, committees may need several sessions to understand the impact of the new rules. Strategies for communicating pension benefits with executives should also be considered because they will want to understand their pension values disclosed in the annual proxy statement. The new disclosure requirements will be effective December 31, 2008, subject to ministerial approvals.

Canada Facing Meltdown

Canada could face a meltdown similar to the one that has devastated the American economy, says Merrill Lynch Canada. Contrary to the prevailing view that Canada's housing and mortgage markets are more stable than their U.S. counterparts, it says it's only a matter of time before the ‘tipping point’ is reached and the housing and credit markets crack in Canada. In fact, it says many Canadian households are more financially over-extended than their counterparts in the United States or Britain.

Pay For Performance Declines

Fewer Canadian workplaces offered pay tied to performance between 1999 and 2005, says a Statistics Canada study. In 2005, almost 37 per cent of workplaces offered some type of performance-related pay to staff, down from 40.1 per cent in 1999. Almost a quarter of workplaces offered incentives that rewarded individuals based on their own performance in 2005, down from almost a third in 1999. Other types of performance pay, such as group incentive plans and profit sharing, increased over the same period. It also found larger workplaces were more likely to offer performance pay than smaller ones and jobs in the finance and insurance industry had the highest incidence of performance-related pay.

Companies Creative With Perks

As companies scramble to attract and retain skilled workers in a market characterized by an aging workforce and increasing labour shortages, they are becoming very creative in designing new employee perks in order to compete, says a study by the Canadian Payroll Association. It found Canadians continue to place a high value on financial protection, with group term life insurance (offered by 61 per cent of organizations) and disability benefits (42 per cent) among the most popular perks. But also at the top of the list are tuition fees (42 per cent) and professional membership dues (39 per cent).

AIMA Cautions Against Longer-term Short-selling Ban

While it strongly supports any measures put forward by regulators and policy-makers that will bring equilibrium to financial markets, AIMA believes banning short-selling of financial stocks will not, on its own, bring back investor confidence in the banking system. Phil Schmitt, of AIMA Canada, says the ban on short-selling may bring temporary relief by creating an artificial market, however, short-selling is a legitimate component of orderly financial markets, and is not to be confused with market abuse.

Retirees Will Outlive Assets

Almost three out of five new middle-class U.S. retirees will outlive their financial assets if they attempt to maintain their pre-retirement standard of living, says a study by Ernst & Young LLP on behalf of Americans for Secure Retirement. The study also finds that middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 per cent to minimize the likelihood of outliving their financial assets. Americans seven years out from retirement are even less prepared and the study estimates that they will have to reduce their standard of living by even more, an average of 37 per cent. These reductions will be necessary even when assuming that retirees can maintain the same standard of living with income equal to 59 to 71 per cent of their pre-retirement wages.

ACPM Plans impACT 2008

ACPM’s impACT 2008 will look at ‘Emerging Pension Issues: Four Easy Pieces.’ Set for November 4 in Toronto, ON, the conference will deal with managing risk in DB plans, using an enterprise risk management framework; phased retirement; practical tips on partial plan wind-ups; and a debate on unlocking retirement savings. Additional details will be released shortly.


Wednesday, September 24, 2008

FBI Looks For Fraud

The FBI is investigating the four U.S. financial institutions whose collapse helped trigger the $700 billion bailout plan, says a report from the Associated Press. It is looking at potential fraud by mortgage companies Fannie Mae and Freddie Mac, and insurer American International Group Inc. As well, Lehman Brothers Holdings Inc. is also under investigation. The inquiries will focus on the financial institutions and the individuals that ran them.

U.S. May Go Way Of Japan

The U.S. may now go the way of Japan in the 1990s, says Eric Sprott, of Sprott Asset Management. Speaking at the AIMA Canada luncheon ‘Under the Hood of Hedge Fund Strategies,’ he said they are treating this crisis the same as the Japanese did by throwing money at it. The major difference is that the Japanese economy was closed while U.S. banks are doing business around the world. However, while the Japanese crisis was started because money was being loaned to people who couldn’t pay it back, the situation now is worse because there is a lot of “toxic stuff” out there, he said.

Retirees Need Only 60 Per Cent

A survey of actual retirees shows they need only 60 per cent of their pre-retirement income, as opposed to suggestions that retirees will require 80 per cent of their pre-retirement income to maintain a comfortable lifestyle. The survey by Russell Investments Canada shows that certain living expenses tend to drop significantly during retirement as most retirees are mortgage-free and no longer incur employment costs such as daily transportation. It also found while 68 per cent of pre-retirees expect to work part-time during retirement, only 27 per cent of current retirees actually do.

Currency Fund Managers Beat Benchmark

Historically, managers of currency funds have earned excess returns, says the September/October CFA Institute Financial Analysts Journal. It says that the average excess return of the funds in the Barclay Currency Traders Index (BCTI) was positive at 25 basis points per month from 1990 to 2006. The factors that impact an index of currency-trading returns and the returns for individual currency managers are carry trading, trend following, value trading, and currency volatility. 

New Volume Record For CanDeal

CanDeal, the online marketplace for Canadian debt securities, hit a new record for weekly traded volumes and inquiries. For the week ended September 19, CanDeal inquiries surpassed $22 billion and traded volume was nearly $20 billion.

Pension Terminology Examined

The ‘4th Annual The Essential Course in Pensions: A Legal and Practical Guide for Lawyers and Other Professionals’ will take place October 14 and 15. This Osgoode Professional Development program was developed to provide a comprehensive overview of critical pension issues to the many professionals and executives whose work involves pension issues or pension-related responsibilities. Topics to be covered include pension language and terminology and the legal responsibility for those responsible for pension plans. For more information, visit


Tuesday, September 23, 2008

G-7 Commits To Support Markets

The G-7 has reaffirmed its commitment to protect the integrity of the international financial system. The group is working to facilitate liquid, smooth functioning markets to support the health of the world economy. The actions taken by the United States to enhance the stability of its financial markets and address credit concerns were strongly welcomed by the G-7. In particular, the group lauded the plan to implement a program to remove illiquid assets that are destabilizing financial institutions.

U.S. Investment Banks Leaving Business

The last large independent investment banks in the U.S. – Morgan Stanley and Goldman Sachs – will abandon their investment bank status to become bank holding companies regulated by the U.S. Federal Reserve Board. Goldman already has two active deposit taking institutions and is moving assets from a number of other businesses into GS Bank USA. With more than US$150 billion in assets, GS Bank USA will be one of the 10 largest banks in the U.S. Morgan Stanley announced that its application to become a bank holding company was approved by the Fed. It will pursue initiatives to expand the retail banking services it offers its retail clients. It already has more than three million retail accounts and $36 billion in bank deposits.

Price Determination Outstanding Question

The biggest outstanding question about the U.S. Treasury plan to purchase up to $700 billion of troubled assets is how the price of purchased assets will be determined, says a Merrill Lynch ‘MBS Research Report.’ It believes that due to the heterogeneous nature of assets, the government will need to separate them according to underlying asset type, securitization type, borrower characteristics, and structural features. While the government will not purchase assets at par, the scope of the program plus the fact that the government is unlikely to demand the same yields as private sector purchasers means that spreads are likely to tighten.

Plans Lack Funding Policies

Close to one-quarter of U.S. Defined Benefit plan sponsors fail to develop and then adhere to a formal funding policy, says an analysis by Mercer. It found that 23 per cent have implemented an explicit funding policy and another 49 per cent have an implicit funding policy. However, 51 per cent fund only the minimum amount required by law, either by default or intentionally.

Healthcare Costs Up Six Per Cent

Healthcare cost increases at U.S. companies have settled in at six per cent to seven per cent, says Hewitt Associates. In 2008, average healthcare costs increased six per cent, up from 5.3 per cent in 2007 and Hewitt is projecting a 6.4 per cent average increase for employers in 2009.

Nurse Moves To Blakes

Gary Nurse has joined the client relations and marketing team at Blake, Cassels & Graydon LLP in Toronto, ON. He was previously marketing manager with Davies Ward Phillips & Vineberg LLP.

Fundamentals Series Returns

The 2008-2009 CPBI Toronto Fundamentals Series will offer two streams, pensions and investments and benefits fundamentals. Each of these five lecture series are designed for industry newcomers who want an introduction and for those who simply need a refresher. The lectures begin in November and conclude in May. For more information, contact to request a brochure.

EAPAT Examines Multi-generations In Workplace

The Employee Assistance Program Association of Toronto (EAPAT) will offer a workshop on ‘Working with Multiple Generations Without Going Crazy.’ Set for October 30 in Toronto, ON, it will feature Nora Spinks, president of Work-Life Harmony Enterprises. She will provide up-to-date information on how to accurately interpret behaviours across generations so you can effectively manage relationships across generations, reduce intergenerational conflict, and minimize interpersonal stress. For more information, visit


Monday, September 22, 2008

U.S. Calls For Global Bailout Plans

The United States is calling on countries around the world to create bailout plans for financial institutions where needed. U.S. Treasury Secretary Henry Paulson says the Treasury's proposal to Congress for authority to spend $700 billion dollars to buy mortgage-related assets from financial institutions could serve as a blueprint for foreign authorities facing similar problems. He says the underlying weakness in the financial system is the illiquid mortgage assets that have lost value as the housing correction has proceeded. Combined with a weakening economy, this has exerted tremendous pressure on equity prices. Paulson hopes “this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.”

Manulife Looking At AIG

Manulife Financial is making a bid for parts of American International Group (AIG), says The Globe and Mail. Buying all or big parts of AIG would make Manulife one of the biggest players in the global financial services industry. AIG, the world's biggest insurer, would have failed last week if the U.S. Federal Reserve had not agreed to lend it up to $85 billion in exchange for 79.9 per cent of its equity.

Liberals Would Scrap Income Trust Tax

The federal Liberals government would scrap the tax on income trusts, if elected as the next government of Canada. That promise forms one plank in its campaign platform. They believe that scrapping the tax could restore much of the value investors lost in late 2006 when the PC government announced its plans to tax them.

ABCP Plan Ready To Start

The Pan-Canadian Investors Committee for is commencing the final steps to implement its plan to restructure $32 billion of third-party asset-backed commercial paper (ABCP). The announcement follows the Supreme Court of Canada decision to deny leave to appeal by a small group of corporate investors who had sought to challenge the Superior Court of Ontario's sanction of the committee's plan and the Ontario Court of Appeal's unanimous ruling affirming that decision. The plan calls for an exchange of existing ABCP for longer term notes. The committee expects to be in a position to commence the process for implementation of the restructuring by September 30 or shortly thereafter.

Current Market Provides Opportunities

The importance of staying invested during the current financial crisis cannot be over emphasized, says an Ecker ‘Special Notice.’ It says this is precisely this type of market that provides opportunities for managers to buy securities that have been excessively discounted based on market fear. The market will always have some negative surprises lurking in it, but it is the subsequent upside of that volatility that cannot be overlooked or missed. Key next steps for the pension fiduciary include assessing how the current market, economic, and manager-specific risks impact the risk to plan funding and benefit levels. Additionally, levels of diversification need to be assessed in all areas along with paying particular attention to any rebalancing that may be required.

OSC Halts Short Selling

The Ontario Securities Commission has issued a temporary order prohibiting short selling of securities of certain financial sector issuers that are listed on the Toronto Stock Exchange and interlisted in the United States. The order is being issued as a precautionary matter with respect to short selling of the securities of financial sector issuers subject to the U.S. Securities and Exchange Commission short-selling order. This OSC action supports similar action taken by Britain’s Financial Services Authority last week. Issuers affected are Aberdeen Asia-Pacific Income Investment Company Ltd.; Bank of Montreal; Bank of Nova Scotia; CIBC; Fairfax Financial Holdings Ltd.; Kingsway Financial Services Inc.; Manulife Financial Corp.; Quest Capital Corp.; Royal Bank of Canada; Sun Life Financial Inc.; Thomas Weisel Partners Group Inc.; TD Bank Financial Group; and Merrill Lynch & Co., Canada Ltd.

Disclosure Expectations Set Out

The Office of the Superintendent of Financial Institutions (OSFI) has set out its expectations for the enhanced disclosure of information from board trustees of negotiated contribution Defined Benefit plans (NCDB) to plan members, former members, and other beneficiaries. In a guidance note, it says while an administrator is required to administer its plan in accordance with the Pension Benefits Standards Act (PBSA) regulations, NCDB plans may be challenged to respond to funding demands in circumstances where contributions to the plan cannot be increased and are not sufficient to meet prescribed funding requirements. One option that NCDB plan boards of trustees may consider is a reduction of benefits if such reductions are permitted by the plan text and authorized by the superintendent.

Mental Health Forum Returns

The Rotman School of Management’s annual ‘Mental Health in the Workplace Forum’ will take place October 21 in Toronto, ON. This year’s topic is ‘Worried Sick: A Manager’s Guide to Anxiety in the Workplace.’ For more information, visit


Friday, September 19, 2008

Amateur Management Costs More

Is it reasonable to expect clerks, tellers, and warehouse staff to manage investments, asks Bill Turnbull, general manager, Co-operative Superannuation Society Pension Plan. Speaking at a session entitled ‘DC Plans: Educate Or Dictate’ at the ACPM’s ‘2008 Annual Conference,’ he said the typical design of a plan calls for members to assume the investment risk and to control these risks by applying ‘modern portfolio theory.’ The reality is, however, members are disinterested or disengaged and member portfolios underperform Defined Benefit pension plans by one per cent on average. He says this is because of “amateur” management and “there is very little to recommend amateur investment management over professional investment management, particularly when amateur management costs more!” 

State Street Money Market Funds Stable

State Street Corp. will not have to consolidate conduits and its money market funds are stable. In a statement, it said that it would have ample liquidity even if it needed to consolidate, as it raised $2.8 billion in equity capital in June. The financial services firm does not currently have plans to raise more capital. State Street also said that its Global Advisors' money market funds do not have any unsecured exposure to the troubled firms of American International Group Inc., Lehman Brothers Holdings Inc., Merrill Lynch & Co., Washington Mutual Inc., Wachovia Corp., and Morgan Stanley.

Great-West Has Lehman Exposure

Great-West Lifeco Inc. holds $101 million par value of fixed income securities of Lehman Brothers Holdings Inc. In addition, it has exposures to American International Group Inc. and its affiliates of $347 million in fixed income securities and derivatives. The aggregate value of these exposures represents approximately three-tenths of one per cent of its consolidated general account assets, which were more than $131 billion at June 30, 2008.

Economic Activity Shifting

A shift in economic activity is now taking place, says Benoit Durocher, executive vice-president and chief economic strategist for Addenda Capital. Speaking at a session entitled ‘The Shifting Economic Balance’ at the ACPM’s ‘2008 Annual Conference,’ he said 10 years ago he was telling clients that the U.S. was the place to be. Now, that has shifted to emerging markets as he doesn’t expect many industrialized nations to grow their GDP by more than three per cent in the foreseeable future. Developing countries are benefiting from this shift. In terms of investment opportunities, however, he said they are a good, but rocky, ride.

Index Promotes South Korea

FTSE Group has completed its annual review of country classification for its Global Equity Index Series. As a result of the review, South Korea will be promoted from Advanced Emerging to Developed status and Red Chip stocks, which are currently included in Hong Kong (a Developed market), will be moved to China (a Secondary Emerging market).

Pension Plans Still In Deficit

Company pension plans are still in deficit, as sponsors continue to take investment and interest rate risk with portfolios, says Mercer’s S&P TSX composite index. It shows company pension plans still had average funding levels of around 93 per cent in 2007, which rose from 88 per cent at the end of fiscal 2006. For the past couple years, funded ratios have improved as asset returns have outpaced liability returns and most sponsors have contributed more than the cost of new benefit accruals. It also says plan sponsors continued to take investment and interest rate risk with their pension portfolios, keeping investments in equities rather than alternatives.

Thompson Managing Business Development

Craig Thompson is manager, business development, group insurance, for the Standard Life Assurance Company of Canada. He has more than 20 years of experience with leading benefit providers across Canada. Jean-Guy Gauthier is senior manager, marketing and strategy, group insurance. He will help ensure that its products and services are aligned to its clients’ evolving needs.

CPBI Holds Annual Meeting

The Canadian Pension & Benefits Institute will hold its annual general meeting October 9 in Kelowna, BC. Members will be invited to review and comment on its Audited Financial Statement and Annual Report. To see these documents, visit

Best Doctors At ISCEBS Session 

‘The Canadian Healthcare System – Are We in Need of a Check-Up?’ is the topic for a Toronto Area Chapter of the ISCEBS breakfast session. Jason Hutton, Canadian director of business development, Best Doctors Canada, will examine the shifting landscape of the Canadian healthcare system and the key initiatives each stakeholder has in managing the best outcomes possible. It takes place October 22 in Toronto, ON. For more information, visit


Thursday, September 18, 2008

Market Volatility Driving Changes In Plan Design

Market volatility and stringent regulatory issues are reshaping how North America's pension portfolios are being managed.  More than 75 per cent of senior finance executives across Canada and the United States said they plan to focus on reducing risk in their Defined Benefit pension portfolios, rather than seek greater return on assets, says the second CFO Research Services study conducted in conjunction with Towers Perrin. More than ever, companies need to use increasingly sophisticated tools and approaches to protect their investments and ensure that pension funds deliver the benefits promised to plan participants.  When it comes to plan design, nearly half of all respondents (45 per cent) said that performance of the economy or financial markets was the biggest external contributor influencing the decision-making process in DB plan design since 2000. 

Economic Model Defective

The economic model used for Defined Benefit pension plans is defective, says Malcolm Hamilton, of Mercer (Canada) Ltd. Speaking at a session entitled ‘DB Plans: Terminal or Critical’ at the ACPM’s ‘2008 Annual Conference, he says the system promises a safe, fixed payment, but relies on using risky investment assets. And, these risks are too large and too big to hide.

AIG Shows Speed Of Change

Ninety days ago, no-one would have imagined that AIG would need to be bailed out by the U.S. government, says Gary Comerford, senior vice-president, Sun Life Financial. Speaking at an ACPM ‘2008 National Conference’ session, he called AIG a “great company.” Yet, the speed of change today is so amazing that even a great company can get itself into trouble. And, since there is a global platform for pensions today, the impact this will have will be felt around the world.

Expert Commission Report Finished    

The Ontario Expert Commission on Pensions report needs to read in its entirety before comments can be made, says Kathyrn Bush, a member of its advisory panel. Speaking at an ACPM ‘2008 Annual Conference’ session, she said while the report is complete, she is not at liberty to divulge any of its details. It is now being translated into French and will be presented to the government by the November 1 deadline. She did say it required a “balancing act” and many people may dislike it as they start reading it, but change their views when they have looked at it in its entirety. She could not say when the government would release the report to the public.

Allianz Group Using Algorithmics’ Solution

Algorithmics is working with Allianz Group on a strategic insurance risk management project that will enable Allianz to calculate its risk capital across the entire group and meet its Solvency II requirements. Algorithmics will provide a transparent and auditable way of quantifying risk types across the entire organization and shorten reporting time. The methodology of its portfolio replication enables insurers to generate a portfolio of standardized assets as a representation for their liabilities in order to calculate market risk measures on a market consistent basis, faster and more transparently than existing methods.

Chung Managing Key Accounts

Martin Chung is key account manager, healthcare sector, for Aon Consulting Worldwide in Toronto. He has been a pharmacist for more than 15 years with experience in clinical hospital pharmacy and retail pharmacy.


Wednesday, September 17, 2008

AIG Gets Emergency Loan

The U.S. government will provide an $85 billion emergency loan to rescue AIG. The Federal Reserve has determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy. It could lead to substantially higher borrowing costs and reduced household wealth. In return for the loan, the government will receive a 79.9 per cent equity stake in AIG. The problems at AIG stemmed from its insurance of mortgage-backed securities and other risky debt against default.

Barclays Buys Lehman Platform

Barclays will buy Lehman Brothers' North American investment banking platform. Barclays will initially purchase Lehman's U.S. and Canadian investment banking business, but intends to extend its interests towards Lehman assets abroad once the initial transaction receives bankruptcy court approval and closes.

Manulife Reveals Exposure

Manulife Financial Corporation’s exposure to Lehman Brothers and AIG is approximately one-half of one per cent of its $164 billion in assets. It has Lehman fixed income investments with a par value of $383 million and derivatives exposure, net of collateral, of $12 million. With AIG, it has fixed income investments with a par value of $38 million, derivatives exposure (net of collateral) of $84 million, exposure in AIG subsidiaries of $284, and other exposures of $9 million. The holdings are predominantly held in segments backing liabilities.

Court Okays Judicial Review

The Federal Court of Canada will allow a judicial review of Buschau v. Rogers. It has pointed out what the Supreme Court of Canada had already highlighted, that the actions and intention of Rogers in Buschau v. Rogers could not be ignored, says Robert D. Gibbens, of Laxton Gibbens & Company. He says the court decided the Superintendent of Financial Institution failed to appreciate the extent of its discretion and rendered a decision that was unreasonable given the evidence. It says the superintendent failed to recognize that even legitimate contribution holidays that are valid under the act can be considered illegitimate if they are used to hide an improper refusal to terminate on the part of the employer. The evidence before the superintendent included that in the past, Rogers Inc. had replaced an unco-operative actuary and trustee, had improperly amended the plan, and had improperly withdrawn funds from the plan all with the objective of getting at the plan’s surplus. This evidence, coupled with the fact that Roger had closed the plan in 1984 and had no intention to reopen the plan until the applicants filed their petition for termination, makes the superintendent’s finding unreasonable.

ACPM Conference Sells Out

The ACPM’s ‘2008 National Conference has opened in Lake Louise, AB, with a sell-out crowd of 400+. Bryan Hocking, chief executive officer, said limits on the ability of the conference facility to handle a bigger crowd kept registration numbers at the 400 level. Attendees will hear a stellar line-up of speakers on pension issue. Montreal was also revealed at the site of the 2009 conference. It will take place September 15 to 18, 2009.

Gallivan Now CEO

John Gallivan is chief executive officer of Groupworks Financial Corp. He has 25 years of insurance brokerage experience.


Tuesday, September 16, 2008

Accounting Standards Increase Volatility

Adoption of international accounting standards in January 2011 will increase the volatility of pension plans on financial statements, says Peter Gorham, of Morneau Sobeco. Speaking at a session on its ‘Compensation Trends & Projections for 2009’ survey, he said this is one challenge facing Defined Benefit pension plans going forward. He also noted that plan sponsors are now dealing with the issue of frozen DB plans. These are lingering around, he said, and taking up sponsor time and resources. He expects the interest now being shown in the outsourcing of the administration of these plans will continue to grow.

Wilson Banwell Changes Name

Wilson Banwell PROACT Human Solutions is changing its name to Human Solutions. It has also been restructured to enhance its ability to respond to the changing health and productivity needs of its customer organizations.

Sun Has Lehman Positions

Sun Life Financial Inc. holds $334 million par value of Lehman bond securities and approximately $15 million net value of Lehman derivative instruments. Most of its Lehman exposure is held in segments backing liabilities. Under Canadian accounting rules, when a bond backing liabilities is written down in value or defaults, the actuarial assumptions about the cash flows required to support the liabilities will change, resulting in a strengthening of reserves with a corresponding charge to income.

Carmichael Named Managing Director

Ted Carmichael is managing director, asset mix and capital market research, with the Ontario Municipal Employees Retirement System. He was formerly chief economist with JPMorgan Chase Canada.

Investment Forecast Returns

CPBI Ontario’s ‘4th Annual Pension Investment Forecast’ will feature some of Canada’s most influential pension plan investment professionals. Panelists include Colin Carlton, vice-president, investment research and risk management, Canada Pension Plan Investment Board; Josephine Marks, managing director, pension assets, Scotiabank; and William W. Moriarty, president and CEO, University of Toronto Asset Management Corporation. It is set for January 14, 2009, in Toronto, ON. For more information, visit

Engaging Employees By Managing Compensation

Managing compensation while keeping your employees engaged and productive in an environment of oil price and currency fluctuations, inflation fears, a U.S. election that includes talk of trade protection, and global talent and resource shortages will be the focus of the ‘2008 Compensation Outlook: Competitive Rewards and HR Innovations.’ Experts will show how to leverage rewards packages to increase retention and engagement and explain the latest strategies to improve workforce performance. It takes place October 27 in Toronto, ON. For more information, visit


Monday, September 15, 2008

Investment Banks Vanishing

Lehman Brothers is set to file for bankruptcy and the Bank of America is buying Merrill Lynch in what reports are calling ‘Black Sunday for Wall Street.’ The Federal Reserve, in an effort to prop up a U.S. financial system shaken by mortgage and credit crises, has agreed to accept stocks in exchange for cash loans and 10 of the world's biggest banks will establish a $70 billion (U.S.) emergency fund, with any one of them able to use up to a third of it. Sunday’s events followed three days of talks between bank CEOs and regulators. With Lehman and Merrill gone, it means three of the top five U.S. investment banks have disappeared in the last six months. Bear Stearns was acquired by JPMorgan last March. Major banking groups, such as Bank of America Corp. and JPMorgan Chase & Co., will become more dominant.

IFRS Catalyst For Move To LDI

The upcoming conversion to International Financial Reporting Standards (IFRS) will be a catalyst for Canadian pension plans to move their focus from total asset management to a Liability Driven Investing (LDI) platform, says an RBC Capital Markets research report. It says well over 50 per cent of pension plans adopted LDI when similar accounting rules were adopted in Europe. Market, regulatory, and accounting forces have been significant (at times overarching) driving forces in the evolution of LDI globally, particularly in Europe and more recently in the U.S. It says Canada has been fortunate as external factors have played a comparatively mild role to date, giving plan sponsors greater flexibility and time to consider alternatives and improve the funding status of their DB pension plans. However, as Canada’s transition to IFRS sits on the horizon, plan sponsors should scrutinize their approaches to surplus risk management and map out strategies for managing surplus volatility, especially because of the potential first-mover advantages due to the tight supply of long-dated hedging instruments in Canada.

Care For Sick Family Members Concerns Canadians

More than 50 per cent of Canadians are concerned about the financial impact of caring for a sick family member, says a survey for the Canadian Cancer Society. It shows more than 60 per cent of Canadians believe it is likely that they, or their spouse or partner, will be a caregiver to a sick family member in the future. With a federal election set for this fall, 59 per cent of respondents say they would be more likely to vote for a party that promises a longer period of support for Canadians who have to be absent from work to care for a gravely ill family member. A fair government program would provide up to six months of paid leave if a person had to leave work temporarily to be a caregiver to a gravely ill family member.

Borealis Starts Teranet Take-over Bid

Borealis Acquisition Corporation, a special purpose investment entity managed by Borealis Infrastructure Management Inc., has formally commenced its take-over bid for the outstanding trust units of the Teranet Income Fund. With a total value of more than $2 billion, the offer will provide Teranet unitholders with a premium of approximately 27 per cent over the volume-weighted average trading price of the trust units in the 30 days up to August 27. "We believe our offer is an attractive opportunity that unitholders will see as compelling because of the significant premium and opportunity to receive cash," says Michael Rolland, president and chief executive officer of Borealis Infrastructure which is owned by OMERS.

FTSE  Adjusts CR Index

FTSE Group will add 36 and remove 12 companies from its FTSE4Good global index series. Additions and deletions to the index are based on transparent environmental and social criteria that represent global standards of good Corporate Responsibility (CR) practices. Companies entering the index series have demonstrated meeting the full inclusion requirements, while those deleted no longer meet these standards. Toyota Motor Corporation has the largest market capitalization of those companies being added to the index series, and will re-enter after having been deleted in 2007. Other large companies entering the indices include Australian-based Westfield Corporation, First Solar and Capital One Financial Corporation from the United States, and Banco Espanol de Credito of Spain.

West Joins Addenda

Becky J. West is director, client servicing, with Addenda Capital Inc. (formerly Co-operators Investment). She will be responsible for serving clients in Ontario and Western Canada.

AIMSE Set For January

‘The Evolution of Investment Sales’ is the theme of AIMSE’s ‘16th Annual Canadian Conference,’ January 13 and 14 in Toronto, ON. The event provides a forum to network with peers as well as plan sponsors and consultants, in addition to a variety of educational sessions. For more information, visit


Friday, September 12, 2008

Canadians Will Use TFSAs

Socking money away is becoming a bigger priority for Canadians, and that trend will likely lead to a huge uptake in the Tax Free Savings Account (TFSA) plan which will be introduced in January 2009, says a CIBC World Markets report. Its ‘Consumer Watch Canada Report’ expects the TFSA market to mushroom to $115 billion by 2013 with cumulative tax savings of close to $2 billion. Changes in the economy are driving Canadians to rethink their savings habits for the first time in 20 years. An extended period of low interest rates, modest inflation, slow income growth, and soaring home prices over the last two decades made Canadians feel less pressured to save. These factors contributed to a dramatic drop in the savings rate, and greater reliance on increases in home equity to offset the savings shortfall. However, the leveling off in house prices is stripping households of one of their most important means of savings and Canadians are ready to go back to old-fashioned savings behaviour. The introduction of the TFSA will provide them with an additional tool to raise their active savings.

NHL Players Challenge Death Benefit

The National Hockey League Players' Association (NHLPA) has been filed in the Ontario Superior Court of Justice over death benefits paid by the National Hockey League Players' Pension Plan. The action relates to the calculation of the death benefit for players with service in the plan prior to July 1, 1986, and for certain NHL employees with service prior to July 1, 1994. It is the NHLPA's position the death benefit that has been paid to the widows and other beneficiaries of players who passed away before electing to take their pension was less than required by the plan and by law.

Employers Turn To Wellness

Canadian employers are turning more and more to health and wellness programs, says Joy Sloane, of Morneau Sobeco. Speaking at a session on its ‘Compensation Trends & Projections for 2009’ survey, she said the number of active employee covered by health and wellness programs will jump 16 per cent in 2009 as employers look for ways to control healthcare costs and manage disability. She said employers are still feeling anxiety about the threat of increased costs due to the introduction of new drugs and still fear that the provinces may shift more costs from public plans to private ones.

Trusteed Plans Lose Value

The retirement savings of 4.6 million Canadian workers with trusteed pension plans lost value during the first quarter of 2008, following six consecutive quarters of gains, says Statistics Canada. The market value of pension fund assets declined 0.9 per cent to $957.1 billion from $966 billion at the end of 2007. This loss reflected a decline in the price of stocks, as well as reduced income during the first quarter. The Toronto Stock Exchange closing composite index for the same period was down 4.9 per cent. Pension fund revenues declined 46.7 per cent, while expenditures rose 43.4 per cent. Revenues of $18.8 billion and expenditures of $19.8 billion resulted in a negative cash flow of $1 billion. Overall, about 5.8 million Canadian workers belong to employer pension plans. Of these, about 4.6 million are members of trusteed plans with the rest covered principally by insurance company contracts.

Institutional Portfolios Grow Amid Volatility 

Investors in stocks from the emerging markets of Eastern Europe, the Middle East, Africa, and Latin America entered 2008 with bullish expectations and were adding to their portfolios right up to the recent downturn in returns, says a report from Greenwich Associates. Among the European institutions that dominate investment in emerging Eastern Europe, the Middle East, and Africa (EEMEA), the average emerging EEMEA portfolio grew by 50 per cent from Q1 2007 to Q1 2008 – a period in which the MSCI Emerging EEMEA Index was up slightly more than 12 per cent, but was well off its prior three-year average of more than 20 per cent. Emerging market investments in Latin America come mainly from institutions in the United States. Among these investors, the average Latin American portfolio grew by nearly 30 per cent from 2007 to 2008 as returns on the MSCI Latin American Index topped 45 per cent for the period. The growth in emerging EEMEA and Latin American portfolios was driven primarily by the fact that investment performance in both regions remained strong relative to returns on developed market equities from Europe and North America.

IRA Assets Up 12.5 Per Cent

Total assets in individual retirement accounts (IRAs) in the U.S. grew 12.5 per cent in 2007, reaching a record $4.75 trillion, the fifth consecutive year of double-digit IRA growth, says a study by the Employee Benefit Research Institute. The study shows that the percentage growth last year for IRA assets was lower than the 15.6 per cent recorded in 2006. The average annual percentage increases in IRA assets during the 1990s amounted to 17.2 per cent. After the retrenchment in assets during the economic downturn from 2000 to 2002, the annual increases resumed their double-digit rise in 2003. Total IRA assets were $4.22 trillion in 2006.

OMERS Acquires Maxxam

OMERS Administration Corporation has acquired Maxxam Analytics International Corporation, Canada's largest privately owned analytical laboratory services network. Maxxam handles more than 1.5 million samples annually, on which it conducts more than eight million tests. It maintains 30 laboratory and service centre locations throughout Canada.

Bry Joins McLean Budden

Jean-Philippe Bry will cover the global financials sector for the equity research team at McLean Budden. Previously, he was with Credit Agricole Asset Management.


Thursday, September 11, 2008

DB Plans Here To Stay

Despite the increased prominence of Defined Contribution retirement vehicles and the gradual decline in popularity and subsequent stasis of the Defined Benefit plan in the 1990s, it is clear that DB plans are here to stay in North America, says research from CFO Research Services in collaboration with Towers Perrin. Its second annual research program explores senior finance executives' views on their company's DB plan. Both survey results and interviews suggest that most companies with DB plans are not interested in drastic changes, such as offloading their responsibility to third parties or closing plans for all employees and freezing benefit accruals. Instead, nearly three-quarters of finance executives say their companies will focus on limiting risk, rather than seeking returns, while maintaining their long-term commitments. They will not, however, fulfill these financial commitments at the expense of company performance.

Explicit Solutions Subject To Uncertainty

Explicit solutions to asset allocation optimizations are subject to much parameter uncertainty, says James L. Davis, vice-president in the research group at Dimensional Fund Advisors. Speaking at a session entitled ‘Country Allocations in Equity Portfolios,’ he said within-country tilts appear to have a greater impact on returns than cross-border allocations. However, it is not clear that the diversification benefits of deviating from market cap weights are reliable. A reasonable starting point, he said, is market cap or float adjusted country weights.

Canadians Unaware Of TFSAs

More than three-quarters of Canadians polled don't know what a Tax-Free Savings Account is or only have limited knowledge of it, says a survey by ING Direct. The Tax-Free Savings Account, coming in 2009, is the first tax savings vehicle the government has made available since RRSPs were introduced more than half a century ago. Of those with some or full understanding of the tax-free account, less than 70 per cent knew about the key product features, namely the $5,000 annual tax free maximum and that funds are not taxed even when withdrawn.  

Substantial Salary Increases Expected

Despite the current state of the economy – which has been marked by the credit crisis, energy cost increases, and currency fluctuations – substantial salary increases are still expected in Canada for 2009, says a Morneau Sobeco compensation trends survey. The average salary increase budget of Canadian employers for 2009 is 3.5 per cent – up from 3.3 per cent last year – or 4.1 per cent including provisions for promotional increases and special adjustments, up from 3.7 per cent last year. Again this year, the highest increases are expected in Alberta, with an average salary increase budget of 4.8 per cent or 5.6 per cent including provisions for promotional increases and special adjustments.

Guidance Needed On Alternatives

The Government Accountability Office wants the U.S. Department of Labor to provide guidance for Defined Benefit plan investments in hedge funds and private equity. It says this guidance is necessary so that fund executives understand the challenges and risks of those asset classes. It recommends that the guidance include a description of the steps funds should take to address the challenges and risks of the alternative investments while meeting their fiduciary obligations under ERISA.

ASPPA Proposes Retirement Savings Longevity Improvements

The American Society of Pension Professionals & Actuaries (ASPPA) says that increased longevity of retirement savings could help many Americans avoid outliving their retirement assets. In a presentation to a U.S. Department of Labor ERISA Advisory Council working group, Joan Gucciardi, a member of the ASPPA government affairs legislative relations committee, outlined ways to make retirement savings last longer. Recommended changes include encouraging plans to allow partial lump sums and partial annuity options and eliminating active employee access to benefits at plan termination.

European Institutions Shifting To Electronic Trading

Institutions across Europe are gearing up for a major move into electronic equity trading that will include a significant push into execution options such as crossing networks, dark pools, and algorithmic trading strategies, says Greenwich Associates’ ‘2008 European Equity Investors’ study. It reveals that institutions currently execute about two-thirds of their European equity trading volume through “high-touch” trades facilitated by broker sales-traders. The institutions participating in the study say they expect that share to drop to slightly more than 50 per cent within the next three years. By 2010, institutions expect to be executing almost 15 per cent of total European equity trading volume through algorithmic trades and more than 10 per cent through crossing networks and dark pools.

Employment-Based Health Coverage Down

Employment-based health insurance coverage for the non-elderly population (under age 65) of the United States has been on a roller coaster ride in recent years, with the trend headed downhill in recent years, but still roughly constant since 1994, says a study by the Employee Benefit Research Institute. In 2007, 62.2 per cent of the non-elderly population had employment-based health benefits, unchanged from 2006. Overall, the percentage of the non-elderly population with health insurance coverage increased slightly to 82.8 per cent in 2007. Employment-based health benefits are by far the dominant source of health insurance in the United States, providing coverage for more than 162 million people under age 65.

Fidelity Launches Historic Crisis Tool

To help investors gain perspective about uncertain markets, Fidelity Investments Canada ULC has launched four online tools that illustrate how global markets and asset classes have reacted and recovered from major upsets. The tools are part of its on-going program to support advisors and their clients during volatile markets. Available at, the interactive tools help to put market volatility in a historical context. One tool, for example, illustrates how long it took markets to recover from major incidents including the Asia Crisis, the tech meltdown, and Black Monday in 1987. 

Czyzowicz Moves To Institutional

Pierre Czyzowicz is vice-president, business development institutional, at Natcan Investment Management. He joined the firm two years ago as vice-president, investor services. He will focus on business development related to new product initiatives.

Awards Deadline Extended

The submission deadline for the Human Resources Professionals Association (HRPA) ‘HR Summit Awards’ has been extended to October 15. The HRPA plans to honour a number ofHR Heroes’ at a gala evening to be held on January 27, 2009, in Toronto, ON. Individuals will be honoured with a variety of awards for making contributions to the human resources profession. For more information, visit

Financial Technology Tools Featured

The ‘Eagle & Vendor Solution Showcase’ will offer an in-depth look at the solutions to help manage financial technology needs. The complementary event will feature a select group of vendors and service providers who will present their solutions and expertise across the investment process including trade modeling, order management and compliance, electronic trade communication and matching, security reference data, client billing, back-office outsourcing, and implementation and consulting. Sessions are set for October 15 in Toronto, ON, and October 21 in Montreal, QC. For more information, visit

Financial Statements Explained

Understanding Life Company Financial Statements’ will take place October 28 in Toronto, ON. This KPMG/LOMA Canada session is an introductory program that will provide a basic understanding of insurance, health, and reinsurance company financial statements. It will show how financial statements are used, implications of the data, and how they can impact a particular business unit. For more information, visit


Wednesday, September 10, 2008

Advice Changes Retirement Income Confidence Levels

Individuals who receive advice are more likely than others to express confidence in the adequacy of their retirement savings to maintain their standard of living in retirement, says Statistics Canada. About two-thirds of ‘near-retirees’ anticipate that their retirement income will be adequate or more than adequate to maintain their standard of living once they have left the workforce. While most Canadians approaching retirement receive advice about retirement planning and programs, almost three in 10 do not. Individuals who do not receive financial advice are less likely to expect their retirement income to be adequate. This relationship remains even when other characteristics – such as income, pension coverage, and registered retirement savings plan assets – are taken into account.

Institutions Change Fixed Income Strategies

The global credit crisis that brought the Canadian asset-backed securities market to a near standstill last year has prompted some 40 per cent of the country’s institutions to make changes to their fundamental fixed income investment strategies, says the ‘2008 Canadian Fixed Income Investors Study’ by Greenwich Associates. The companies altering their strategies are divided in their intentions. Two-thirds are upgrading the credit quality of their portfolios, about one in three are looking to unwind underperforming positions, and almost 30 per cent are shortening portfolio duration. At the same time, fully one-quarter of the Canadian institutions that are changing their fixed income investment strategies in response to the credit crisis are in the market looking to take advantage of investment opportunities in illiquid instruments, primarily investment-grade credit products.

Credit Crisis Impacts Hedge Funds

This credit crisis has had a direct impact on hedge funds, says Mustafa Saiyid, of the International Monetary Fund. Speaking on ‘Hedge Funds in the Sub-Prime Crisis: Did Market Discipline Work?’ at the ‘World Alternative Investment Summit Canada 2008,’ he said with liquidity drying up as a result of the crisis, it has been harder for hedge funds to borrow the funds they need for some strategies. While strategies that make bets across asset classes have done well, everything else has done poorly.

AIMA Announces Executive Committee

Phil Schmitt, of the Summerwood Group Inc., is chairman of AIMA Canada’s executive committee for 2008 to 2010. Deputy-chair is Eamonn McConnell, of Manna Asset Management; with Michael Burns, of McMillan LLP, legal counsel. Secretary is Andrew Doman, of Man Alternative Investment Corp.; and treasurer is Chris Pitts, PricewaterhouseCoopers.

Leclair Joins SSQ

Martin Leclair is vice-president, business development – Toronto, with SSQ Financial Group's investment and retirement practice. He is responsible for growing its presence on the Canadian investment scene.


Tuesday, September 9, 2008

Management Doesn’t Reduce Risk

Risk management doesn’t reduce risk, says Gregg Berman, co-head of RiskMetrics Group’s Risk Management unit. Speaking during a panel discussion entitled ‘Red Flags: Institutional Managers Discuss What Leads to a Negative Investment Decision at the ‘The World Alternative Investment Summit Canada 2008,’ he said risk management is understanding and managing the risk in a portfolio. One issue he has with many managers is that when they conduct stress testing to assess risks in their portfolios, they test it against historic events such as 9/11. Instead, they need to identify the real risks their portfolios face and conduct stress tests using those.

HOOPP Looks At Teranet Options

The Hospitals of Ontario Pension Plan is currently investigating its options in respect of its holdings in the Teranet Income Fund. It says its options may include negotiating with the fund to make an offer to acquire its outstanding units. HOOPP currently holds 15.9 millions units of Teranet, about 10.3 per cent of all outstanding units. Last week, it was reported that OMERS would make an offer for the trust which has an exclusive licence to run the electronic land registration system in Ontario.

European Initiative Creates Opportunity

The European regulatory initiative known as ‘UCITS’ has evolved into a “global passport” opportunity for Canadian fund managers to achieve rapid, worldwide growth in a cost-effective manner, says a report sponsored by RBC Dexia Investor Services. ‘Global Fund Distribution – Bridging New Frontiers’ shows that fund managers in the United States and Europe who have taken advantage of UCITS have benefited from rapid product development, larger client bases, and operating leverage. UCITS is a series of European Union financial regulatory initiatives dating to the mid-1980s, created to allow fund managers to operate across borders within the European Union under the same set of rules and regulations.

Process Identifies Target Date Alignment

JPMorgan Asset Management has launched ‘Target Date Navigator,’ a process to help advisors and their plan sponsor clients identify target date funds most closely aligned to a plan’s goals and participants’ savings behaviour. It categorizes funds according to their investment composition and glide path strategy, creating a map of the target date fund universe. Since not all target date funds are created equal and generally differ according to their investment time horizons and level of asset class diversification, this tool fills a void in the marketplace in determining which funds might best fit the particular needs and goals of each retirement plan.

Industrial Alliance Acquiring Sarbit

Industrial Alliance Insurance and Financial Services Inc. has entered into an agreement with Sarbit Asset Management Inc. under which it will offer to acquire all of the issued and outstanding shares of Sarbit. It has also entered into lock-up agreements with shareholders representing more than 75 per cent of the issued and outstanding shares of Sarbit. The acquisition provides Industrial Alliance with approximately $130 million in assets under management, which will be integrated with its Clarington Investments Inc. subsidiary.  

Joint Expert Panel Gets Extension

The Joint Expert Panel on Pension Standards will take six more weeks to submit its report to the governments of British Columbia and Alberta. It has been given an extension to November to submit its report to allow more time for consultations with stakeholders. The joint panel is reviewing pension standards in both provinces.

Guloien Succeeding D’Allessandra

Donald Guloien will succeed Dominic D'Alessandro as president and CEO of Manulife Financial Corp., effective May 7, 2009. D'Alessandro will retire after leading Manulife since 1994. Guloien has been with the firm for 28 years and is currently senior executive vice-president and chief investment officer, as well as chairman and CEO of MFC Global Investment Management. John DesPrez, currently senior executive vice-president, will become chief operating officer, responsible for insurance and wealth management operations in Canada, the United States, Asia, and Japan. He will remain as president and CEO of U.S. subsidiary John Hancock Financial Services in addition to assuming the COO responsibilities in May 2009.


Monday, September 8, 2008

Manulife Launches Mental Health Solutions

Manulife Financial has launched Workplace Solutions for Mental Health, a practical solution that works with an employer's existing disability and absence management programs to proactively manage mental health in the workplace. Mental illness affects both absenteeism and productivity and is a leading cause of employee disability in a work environment. Based on Manulife’s claims experience, more than 30 per cent of long-term disability claims administered on behalf of clients are related to mental illness. Workplace Solutions for Mental Health includes a website that serves as a resource centre for employees and employers seeking practical information about mental health. It highlights Manulife’s mental health tools and promotes awareness.

Few Offer Child Care Benefit

Only two per cent of Canadian employers cover child care expenses for their workers, compared with six in 10 who provide life insurance – the most popular perk – and the close to half who offer car allowances, says a survey by the Canadian Payroll Association. Employers cite the high cost of the benefit as the primary reason they do not offer it. Benefits that are offered are not just what employees want, but what employers can afford.

Institute Expands Retirement Curriculum

The Financial Education Institute of Canada has added another module to its eLearning website. The new lesson deals with questions regarding retirement financials and their risks including ‘How much do I need before I retire?’ and ‘How much can I safely withdraw each year, so I don’t run out?’ Its online curriculum now encompasses more than 32 interactive lessons on topics ranging from basic financial planning to bear market psychology. Access to the site works on a bulk subscription basis. Employers pay an annual fee to make the lessons available to their staff.

Companies Must Pay Incentives

To retain their top executives, companies and their shareholders will need to have the fortitude to pay incentives if performance targets are met, even if the results are disappointing, says Michael Thompson, a principal with Mercer human capital business. Speaking at its session on its ‘Canadian Compensation Planning Survey,’ he said companies are also looking at variety of incentives to keep and reward their top employees and senior executives. Where 10 years ago, the only incentive was stock options, today these incentives are a mixture of short- and long-term incentives based on performance. However, when setting these incentives, organizations need to have clarity around their expectations.

Guay President Of Caisse

Richard Guay is president and chief executive officer of the Caisse de dépôt et placement du Québec. He has been acting as interim CEO and has been chief investment officer since March 2006, when the position was established. He joined the Caisse in 1995 and since then has been vice-president, depositors' accounts management; executive vice-president, risk management and depositors' accounts management; and chief investment officer.

Astley Chairs CPP Board

Robert Astley will become chair of the Canada Pension Plan Investment Board, effective this October. He succeeds Gail Cook-Bennett, the board’s founding chair. Astley was appointed as a director for the board in September 2006 and is currently chair of its audit committee. He is a former president of Sun Life Financial Canada and former president and CEO of Clarica Insurance Company. During her tenure, Cook-Bennett has led the board to oversee the creation, development, and growth of the board from its early days as a passive investor to its current position as an active global investment organization.

Chandler Joins Retirement Practice

Doug Chandler has moved to Watson Wyatt’s retirement practice in Western Canada. He has been with the firm for eight years, serving clients in all aspects of pension plans and long-term financing arrangements for other post-employment benefit plans. Now based in the Calgary, AB, office, he will be responsible for providing strategic counsel to the firm’s existing clients in the areas of retirement plan design, actuarial valuations, and regulatory issues.

Holland Now Senior Vice-president

Brian Holland is senior vice-president, head of client and consulting relationships, at Guardian Capital. Since joining the firm in 1999, he has focused on client service for institutional clients. In his new role, he will be responsible for institutional client relationships and building relationships with the consulting community.

REITs Discussed In Montreal

Jean-Guy Talbot, president of Presima, will moderate a panel discussion on REITs, September 16 in Montreal, QC. Panelists at the Montreal CFA luncheon include Michael O’Brien, chief operating officer of Australia’s GPT Group, and Ian Coull, chief executive of SEGRO in the UK. They will discuss how they have managed to navigate through the turbulent waters of the past year. For more information, visit

Burnett Examines Healthcare Survey

‘The sanofi-aventis Healthcare Survey 2008’ will be the focus of a CPBI Manitoba Region breakfast September 18 in Winnipeg, MB. Chris Bonnett, president of H3 Consulting, will present and examine the results of this year’s survey. For more information, eMail

Point Of Sale Changes Not Included

When the Joint Forum of Financial Market Regulators released draft revisions to its Point of Sale proposal in June, the changes requested by IFIC members were not included. This means that the package of recommendations the Joint Forum is planning to go forward with this fall will not address the fundamental concerns raised by the industry about the mutual fund product. They will become less competitive with other investment products, face an uneven application of the proposed rule, and result in higher costs for mutual fund investors. George Aguiar, president and CEO of GP Capital Corporation, and Murray Taylor, president and CEO of Investors Group Inc., will discuss the latest Point of Sale initiatives at a luncheon on September 15 in Toronto, ON. For more information, visit

Registration For Conference Opens

Registration for the HRPA’s ‘2009 Annual Conference & Trade Show’ is now open. This year’s event will feature six world-class keynote speakers and more than 120 professional development sessions. It takes place January 28 to 30, 2009, in Toronto, ON. For more information, visit

IFRS Compliance Examined At Session

FEI Canada is sponsoring an economist conference event September 23 in Toronto, ON. ‘IFRS Compliance in Canada: Managing the Transition to 2011’ will present leading edge thinking and practice on the conversion to IFRS and what major decision-makers are doing now to get ready for conversion. For more information, visit


Friday, September 5, 2008

Employers Oppose New Pension Accounting Rules

Employers believe changes to current pension accounting standards are necessary, but most are not in favor of the changes proposed in the International Accounting Standards Board’s (IASB) preliminary views paper, says a survey by Watson Wyatt Worldwide. In the survey of 131 finance and employee benefit directors across 17 countries, most respondents said change is needed in several key areas of pension accounting. Improvements to requirements for the measurement of cash balance and similar pension plans are viewed as most necessary, with eight in 10 employers desiring change in this area. A narrower majority (56 per cent) agrees with the IASB that pension accounting should change by removing options to defer the recognition of plan gains and losses. Eighty per cent of respondents, however, do not support the IASB’s suggestion to recognize all plan experience immediately in the profit and loss (P&L) account, one of three options the IASB is considering in this area.

Teranet Expects Bidding War

The Teranet Income Fund will review any offer made to its unitholders by Borealis Infrastructure Management Inc., the infrastructure arm of the Ontario Municipal Employees Retirement System. Borealis has announced its intention to make an offer to acquire the outstanding trust units of the fund and Class B limited partnership units of Teranet Holdings Limited Partnership. Teranet has retained RBC Dominion Securities Inc. and CIBC World Markets Inc. as financial advisors. Teranet says it expects a bidding war and is now talking to potential buyers. The trust has an exclusive licence to run the electronic land registration system in Ontario. As a trust, it faces a new tax regime in 2011. Pension funds, such as OMERS, are tax exempt and have taken over a number of income trusts since the tax rule changes in 2006.

Pension Regulation Out-of-step

More than two-thirds of Canadian pension plan sponsors are dissatisfied with the current pension regulatory environment, citing rules of fragmentation across the country and inconsistent governance procedures, says a study by Aon Consulting and the Canadian Financial Executives Research Foundation (CFERF), the research institute of FEI Canada. It says, for example, while a third of survey respondents reported an interest in introducing phased retirement arrangements within the next three years, pension legislation in several provinces prevent national companies from offering these programs. The survey also showed that one in five Defined Contribution pension plan sponsors have not been active in plan governance and either do not comply with the Capital Accumulation Plans Guidelines, which were introduced by the Joint Forum of Financial Market Regulators in 2004, or are not yet aware if they are in compliance with the guidelines.

Sun Life Offering TFSAs

Sun Life Financial plans to offer its group plan sponsors a number of opportunities to take full advantage of the new Tax-Free Savings Account (TFSA). “The TFSA is the most significant incentive for Canadians to save since the introduction of Registered Retirement Savings Plans (RRSPs),” says Dean Connor, president, Sun Life Financial Canada. Starting January 1, 2009, any Canadian resident over age 18 can contribute up to $5,000 each year into a TFSA. Interest is earned tax-free and funds are accessible at any time and not taxed on withdrawal. Employers with Sun Life group plans will be able to make TFSA options available to their employees.

Financial Market Turmoil Discussed

‘Causes, Consequences, and Implications of Global Financial Market Distress’ will be the focus of an Institute for International Business at Rotman and University of Toronto’s Institute for Policy Analysis session September 17 in Toronto, ON. Paul Summerville, global bond strategist, Wellington Management (Boston), will address the turmoil in financial markets over the last 12 months and examine whether this is a symptom of larger causes whose consequences and implications speak to key economic and political challenges in the years ahead. For more information, visit

Pension Accounting Terminology Examined

Lorraine Gignac, a principal at Mercer Human Resource Consulting, will examine the principles of pension funding and accounting at the ‘4th Annual Essential Course in Pensions: A Legal and Practical Guide for Lawyers and Other Professionals.’ She will examine areas such as how to assess and advise on actuarial reports. This Osgoode Professional Development program will take place October 14 and 15 in Toronto, ON. For more information, visit


Thursday, September 4, 2008

Benefits Adequacy Top Concern For SERP Sponsors

Canadian employers who sponsor supplemental employee retirement plans (SERPs) are concerned about balancing benefit adequacy with plan costs, says a survey by Buck Consultants. ‘Moving Forward – An Overview of Supplemental Employee Retirement Plans in Canada’ examined the two types of SERPs – the ‘top-up’ arrangement and the ‘executive’ plan. A top-up plan is based on the same formula as the registered pension plan, whereas the executive plan provides separate benefits for senior executives. For both SERP designs, sponsors’ top concerns include communications, the adequacy of benefits, and the costs of the plan. Cost containment was the third most important issue for sponsors of both types of SERPs. In the past, SERPs were reserved for senior executives. In offering the top-up type arrangement, companies have now opened the plans to all employees. A significant number of plan sponsors – close to 80 per cent  – have a SERP in place for all salaried non-union employees, not just senior management.

Employers Limit Healthcare Costs

A survey by the Mercer consulting firm has found 59 per cent of U.S. companies will raise workers' deductibles, copays, or out-of-pocket spending limits in an effort to keep down rising healthcare costs in 2009. On average, it predicts healthcare costs will rise an estimated 5.7 per cent next year for both workers and their employers. The growth of healthcare costs has hovered at around six per cent since 2005.

Mellon Launches Advanced Beta Strategy

Mellon Capital Management Corporation, a quantitative investment boutique within BNY Mellon Asset Management, has launched its newest strategy as it celebrates its 25th anniversary. Advanced Beta invests in a broad range of global asset classes in an effort to enhance performance regardless of the economic environment. The strategy takes long positions in global equities, global fixed income, global inflation-linked securities, commodities, and global real estate investment trusts (REITs). While it is primarily a passive strategy, it is designed to include intelligent rebalancing to reduce exposure to equities when they are over-valued.

CanDeal Trading Tops $1.6 Trillion

CanDeal continues to set new records for online trading of debt securities in Canada. Total aggregate volume traded on CanDeal's online marketplace now exceeds $1.65 trillion and two milestones were reached this past month. Traded volume of CanDeal's original product line-up, primarily Government of Canada bonds, Canada Mortgage, and provincial bonds is now in excess of $1.5 trillion. Its newer Canadian Money Market (CAMM) platform has broken through the $100 billion barrier for traded volume.


Wednesday, September 3, 2008

Institutional Ownership Rises

U.S. institutional investors raised their aggregate ownership of the 1,000 largest U.S. corporations to an all-time high 76.4 per cent at the end of 2007, says a report by The Conference Board. Ownership of the companies by U.S. institutional investors – including pension funds, investment companies, insurance companies, banks, and foundations – is up from an average 61.4 per cent in 2000. Pension funds account for the largest block of institutional assets at $10.4 trillion, or 38.3 per cent of the institutional total of $27.1 trillion, as of year-end 2006. State, local, and other public pension funds increased their share of equity markets to 10 per cent in 2006 from 2.9 per cent in 1980. By comparison, private funds represented a smaller share in 2006 than 1980 falling to 13.6 per cent from 15.1 per cent.

Challengers Argue Releases Illegal

Corporate challengers to the $32 billion restructuring plan for the asset-backed commercial paper (ABCP) market have filed arguments with the Supreme Court of Canada, arguing the court needs to hear the case because it is of national importance, says a report in the Globe and Mail. It says the challengers are upset that the plan virtually takes away the right to sue the financial institutions that sold the paper, under the terms of legal releases. Challengers claim the releases aren't allowed under Canadian bankruptcy law and that the Ontario courts were wrong to declare the plan fair and legal. The challengers include Domtar Inc. and Jazz Air LP.

Merit-based Rewards Can Increase Bias In Workplace

Merit-based rewards and other common performance management practices used by the majority of U.S. companies today can actually increase bias and reduce equity in the workplace, says research by Professor Emilio J. Castilla, of MIT's Sloan School of Management. Such practices and policies can result in women and minorities receiving less compensation than white men despite equal scores on their performance evaluations. This can be overcome by increasing accountability and transparency in the organizational processes and routines that connect performance evaluations and wage increase decisions. The full paper is at

Perlman Leading Sales Team

Anthony Perlman is leader of Hewitt Associates’ sales team in Canada. His efforts will be focused on developing new relationships and opportunities for its consulting business. He joined the firm a year ago in a joint role where he leveraged his 18 years of benefits consulting expertise to both consult with clients and develop new business.  

Soft Dollar Rules Coming

Preparing for new soft dollars and best execution regulations will be the focus of a Canadian Securities Administrators’ conference November 19 and 20 in Toronto, ON. Speakers will come from the OSC, BC Securities Commission, TD Asset Management, Goldman Sachs, CIBC, and Guardian Capital. For more information, visit

Mansbridge Speaks At IFIC

New York Times best selling author Dr. Dan Ariely and the CBC's Peter Mansbridge will be among the featured speakers at the ‘2008 IFIC Conference.’ Set for September 23 to 25 in Toronto, ON, sessions will examine emerging trends and cutting-edge solutions in financial markets. For more information, visit

Catastrophic Coverage Examined

Claude Di Stasio, vice-president, Quebec affairs, Canadian Life and Health Insurance Association, and executive director and secretary of the Quebec Drug Insurance Pooling Corporation, will discuss if catastrophic coverage can work in Ontario at the opening session of The Benefits Breakfast Club. Di Stasio has been instrumental in setting up the program in Quebec. She will share her insights into the benefits and pitfalls of this type of provincial pooling arrangement. It takes place September 11 in Oakville, ON. For more information, visit

SHARE Studies Governance

SHARE’s Pension Investment & Governance courses will take place September 29 to October 2 in Toronto, ON. Both basic and intermediate levels are being offered. For more information,

Delong Speaks At Mature Summit

Authors David Delong (Lost Knowledge: Confronting the Threat of an Aging Workforce) and Barbara Jaworski (KAA-Boom: How to Engage the Fifty-Plus Worker and Beat the Workforce Crisis) will be among the featured speakers at this year’s ‘Summit on the Mature Workforce.’ Set for November 4 to 6 in Calgary, AB, content will focus on the theme ‘The Age-Free Workplace: A Cultural Evolution.’ For more information, visit


Tuesday, September 2, 2008

Call Centre Employees Use EAP More

Call centre employees access their employee assistance programs at a higher rate than other industries, and for a specific set of stressors related to their jobs, says a study by the Shepell-fgi research group. It has identified not just what unique job stressors call centre employees have, but the drivers to create a call centre that is engaged and healthy. It found that, when compared to other industries nationally, call centre employees accessed EAP at a seven per cent rate versus five per cent of all other industries. The findings estimate that among 100 recent hires at a call centre, 14 per cent may be experiencing high levels of stress, and 10 per cent may experience high levels of depression.

ABN AMRO Now Fortis

ABN AMRO Asset Management Canada Limited has officially changed its name to Fortis Investment Management Canada Ltd. The name change follows the acquisition of ABN AMRO Asset Management by Fortis last April. Christine Girvan will remain chief executive officer for the Canadian operation, and has also been appointed head of sales for North America.

Guidelines Offered For DC Transfers

The Office of the Superintendent of Financial Institutions (OSFI) has published a draft instruction guide for asset transfers between Defined Contribution pension plans. It has issued the draft guide to inform the pension industry of the general principles as well as more detailed requirements that OSFI will generally expect to be satisfied before granting permission to the transferring plan administrator to transfer assets from one DC pension fund to another under the Pension Benefits Standards Act, 1985.

Impact Of Mergers On Benefits Examined

‘Pensions and Employee Benefits in Mergers and Acquisitions’ will be presented by the Canadian Bar Association's National Pensions and Benefits Law Section and the Continuing Legal Education Committee November 21 and 22 in Toronto, ON. Its first event, the 1½ days of in-depth sessions will deal exclusively with pensions and benefits in the context of mergers, acquisitions, and corporate reorganizations. Topics will include changing or terminating benefits and globalization of employee benefits plans. For more information, visit

October 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 October 2008 are now available at An Excel spreadsheet on the website contains six worksheets:


Friday, August 29, 2008

Moderate Increase In LDI Use

The number of Canadian pension plans currently using LDI strategies increased moderately from 21 per cent to 27 per cent between 2007 and 2008, says an SEI Global Quick Poll. However, the poll also revealed there is still no consensus around the goals of LDI or even a specific definition. A comparison with last year’s poll demonstrates an ongoing change in how plan sponsors are defining LDI with “a portfolio designed to be risk managed with respect to liabilities (34 per cent)” and “matching duration of assets to duration of liabilities (30 per cent)” being the most popular definitions. Furthermore, poll participants continue to identify a wide range of very different goals and benchmarks for LDI strategies. In fact, more than half (57 per cent) of those polled said that increasing or maintaining funded status was the benchmark for success while less than a quarter (20 per cent) said absolute return was their goal.

Participants Embrace Automatic Saving

Plan participants are embracing automatic savings and investing tools offered by sponsors following passage of the Pension Protection Act (PPA) and Qualified Default Investment Alternative (QDIA) guidance, says an analysis by Vanguard of the more than 2,200 Defined Contribution retirement plans it administers. ‘How America Saves 2008’ shows more than 300 adopted automatic enrollment by year-end 2007 – triple the number of plans that had the feature in 2005. In 2007, plans with automatic enrollment accounted for 15 per cent of total plans, but one-third of total participants. In addition, following passage of the PPA, two-thirds of automatic enrollment plans have implemented automatic annual savings rate increases up from just one-third in 2005. Of those plans choosing a QDIA, 84 per cent selected a target-date fund and 16 per cent a balanced fund. Only four per cent of plans still use a money market or stable value fund, down from 25 per cent at year-end 2005.

Retirement Saving Views Conflicted

Generations X and Y are often conflicted between their intentions and actions when it comes to saving for retirement, says research from Fidelity. It says 55 per cent of Gen X and 44 per cent of Gen Y agree that saving for retirement is a goal, but nearly the same number (51 per cent among both generations) indicate other financial priorities prevent them from saving for retirement. Managing everyday finances, making mortgage payments, and managing credit card debt all rank higher than retirement saving as crucial goals for both generations. Around half of each generation indicated that a workplace retirement plan is their number one tool for savings outside of their banking account, yet four out of 10 are cashing out assets from their workplace savings plan when changing jobs.

Salary Increases At 3.8 Per Cent

Salary increase budgets average 3.8 per cent in 2008 across non-exempt, exempt, and executive employee categories, while salary increase budgets for non-exempt hourly employees come in lower at 3.7 per cent, says The Conference Board. For 2009, the median budget for salary increases is projected to be 3.75 per cent for both non-exempt salaried and hourly employees. The median salary increase budget projections for exempt and executive employees are higher at 3.8 per cent for exempt and 3.9 per cent for executives.

Panel Examines Hedge Fund Strategies

‘Under the Hood of Hedge Fund Strategies’ will be the topic September 23 at an AIMA Canada luncheon in Toronto, ON. Business News Network (BNN) co-anchor Amanda Lang will lead an expert panel of alternative investment fund managers including Peter Puccetti, of Goodwood Inc.; Eric Sprott, of Sprott Asset Management; and David Picton, of Picton Mahoney Asset Management. For more information, visit


Thursday, August 28, 2008

Fee Disclosure Policy Needed For DC Plans

Standardized international policy on fee disclosure would help pension plan participants become better informed consumers of Defined Contribution plan investment and administrative services, says a research paper from the Rotman International Centre for Pension Management. ‘Fee Disclosure to Pension Participants: Establishing Minimum Requirements’ uses a standardized fee disclosure model to assess the effectiveness of current disclosure requirements in Australia, Canada, Chile, Sweden, the United Kingdom, and the United States. The model shows that Sweden and Australia receive the top two rankings for disclosure effectiveness, with Canada sitting at the bottom. While the cost of greater disclosure has been raised as an issue, the cost borne by pension contributors would be at most small and there could be a reduction in costs paid due to contributors switching to lower cost funds. Each year participants in DC pension plans around the world pay billions of dollars in fees. The study is at

Telework Gains As Employee Reward

Telework has shown the most significant 12-month increase as an employee reward program in both the United States and Canada, says the ‘2008-2009 WorldatWork Salary Budget Survey.’ It says the combination of rising gas prices, leading-edge technology, and the push for work-life flexibility prompted the increase in both countries. Telework grew considerably in Canada with 25 per cent of organizations saying they offered it to employees in 2007, rising to 40 per cent this year. In the U.S., it rose from 30 per cent to 42 per cent this year. In contrast, the use of other employee rewards programs inched up only slightly in recent years, and a few even declined.

IFIC Makes Submission To Finance Committee

The House of Commons Standing Committee on Finance needs to assess preserving the beneficial tax treatment of Canadian dividends when earned inside of registered plans and allow pension income-splitting with a spouse or partner beginning at age 55 (instead of the current 65) for all registered plans, including RRIFs, says an Investment Funds Institute of Canada (IFIC) submission. Its submission also suggests that RRIF minimum withdrawal factors be eliminated or reduced.

Pay Increases Limited To 3.8 Per Cent

Due to a tightening economy and labour market, employers plan to award average base pay increases of 3.8 per cent in 2009, slightly less than the four per cent increase granted in 2008, says Mercer’s ‘2009 Canadian Compensation Planning Survey.’ Pay raises are significantly higher, however, for employees in regions with high-performing industries. Canadian employers in high-performing industries plan to grant salary increases that are about 40 per cent higher. Oil and gas and natural resources are the highest, with projected pay increases of 5.4 and 4.2 per cent respectively for 2009. In contrast, durable manufacturing and transportation are expected to award less-than-average pay raises in 2009 at 3.4 per cent.

U.S. Sets Path To IFRS

Canada's largest trading partner is following the lead of more than 110 countries worldwide with its decision to give U.S. companies the option to use International Financial Reporting Standards (IFRS), says Ernst & Young. The U.S. Securities and Exchange Commission (SEC) has unveiled its road map for U.S. companies to report their financials using IFRS. As proposed, use of IFRS would become mandatory for large accelerated filers beginning with filings for years ending on or after December 15, 2014. This latest move follows the SEC's decision earlier this year to drop the requirement for foreign companies to reconcile financial statements to U.S. generally accepted accounting principles. In Canada, IFRS conversion is set for January 1, 2011.

Fixed Income Tool Enhanced

Northern Trust’s Investment Risk and Analytical Services group has launched an enhanced version of its fixed income performance attribution analytical tool. The enhanced tool uses multiple sources and types of fixed income characteristic data to customize attribution analysis for fixed income investments. Available globally, it is aimed primarily at asset managers to help them pinpoint where performance is coming from in their portfolios’ fixed income holdings. Furthermore, the tool also helps asset owners to better judge decisions made by their chosen asset managers.

Hedge Fund Personality To Be Named

The inaugural Canadian Hedge Fund Awards will be staged September 16 at the Boiler House in Toronto, ON. To celebrate its second birthday, the Hedge Fund Hotel launched Canada's First Annual Hedge Fund Awards. There will be five awards presented by a panel of judges, including one for ‘Personality of the Year – 2008.’ For more information, visit

Activist Investing Discussed

‘Activist Investing’ will be the focus of an AIMA Canada luncheon September 16 in Toronto, ON. Co-sponsored by the Toronto CFA Society and the Goodman Institute, it will feature Eric Rosenfeld, president and CEO of Crescendo Partners and former managing director at CIBC Oppenheimer. He will provide his insight into key aspects of activist investing such as closing the value gap and increasing shareholder value and how activists pick targets. For more information, visit


Wednesday, August 27, 2008

Teachers Return To DB

Almost 80 per cent of active members of West Virginia’s Defined Contribution plan for state educational system employees have transferred their retirement savings to a state Defined Benefit plan. While 78.6 per cent (14,925, participants) made the switch, only 50.5 per cent of DC plan participants over the age of 70 moved their savings. Of those under the age of 40, 76 per cent moved into the DB plan. A state law approved early this year cleared the way for the transfer.

Employers Respond To Gas Prices

Almost one in four U.S. employers are planning to offer some of their employees the option of a four-day work week in an effort to help offset the high cost of gasoline, says Mercer’s ‘2008 Gas Price Impact SnapShot Survey. As well, 24 per cent will allow more employees to telecommute. To encourage ride-sharing, some companies offer special parking privileges for carpooling, company-funded vanpools, and van services from bus and train stations. In addition, some organizations provide prepaid gas cards for perfect attendance, gas card giveaways for top performance, and subsidies for public transportation costs.

History Supports Buy And Hold

A market recovery will develop eventually and will benefit buy-and-hold investors, says a Putnam Investments compilation of historical market data. It shows there have been 12 bear markets in the last six decades during which the markets plummeted a total of 22.4 per cent before turning around after an average of 14 months. The 12 bull markets since 1948 have lasted an average of 45 months, each growing an average of 123.9 per cent. For example, a $10,000 investment in the S&P 500 Index in 1988 would have grown to $72,932 by June 30, 2008, despite the 43 per cent downturn of 2000-2002.

China Back In Business

With the Olympic games now over, China is expected to return to the commodities markets to feed its growing economy and that should help boost commodity performance for the next several months, says Bob Tebbutt, vice-president of risk management at Peregrine Financial. Recent market uncertainty, triggered by falling demand in China, should clear up as the world’s fastest growing economy builds on the success of the Olympics and economic spin offs and returns to business as usual. Chinese authorities decided that clean air, conserving diesel fuel and gasoline, and electricity production were the priorities during the games and proceeded to close down most manufacturing within 50 miles of the event sites.

Canadian Serving On Committee

Richard Lyall, president of RESCON-Residential Construction Council of Ontario, has been elected to serve on the executive committee of the International Foundation of Employee Benefit Plans. He is currently the 2008 Canadian board chair for the International Foundation. He is the second Canadian to serve as an elected officer of the executive committee which holds authority over all programs and business affairs of the International Foundation.


Tuesday, August 26, 2008

OSFI Consolidates Policies

The Office of the Superintendent of Financial Institutions (OSFI) has issued a draft instruction guide for the preparation of actuarial reports for Defined Benefit pension plans. It consolidates policies published in the PBSA Update since 2000 and addresses other issues that have emerged since. It replaces the ‘Instructions for the Preparation of Actuarial Reports for Federally Regulated Defined Benefit Pension Plans’ that were issued in June 2000. Comments on the draft guide can be made until October 31, 2008. It can be seen at

Fees Prompt Provider Switches

Fees are the primary reason retirement Defined Contribution pension plans switch providers, says a Spectrem Group survey. ‘DC Market Needs’ says 30 per cent of DC plan executives cited costs and fees as the primary factors leading changes in providers, while 26 per cent of plan executives switched because of poor service, and 12 per cent said investment issues were the chief reason for change. Its survey in 2005 saw 45 per cent cite poor service as the top reason for change and only 18 per cent said costs were the main concern.

Final Salary Plans At Record Low

The number of final salary pension plans open to new members in the UK has dropped to a record low, says an Aon Consulting survey. It found that barely one-sixth of plans still have their doors open to new members, down from about a quarter last year, and about half five years ago. Firms cite tighter regulation, volatile market conditions, greater life expectancy, and fears over future developments in accounting for pensions for the decrease.


Monday, August 25, 2008

OSFI Comments On Commuted Value Report

While it agrees that the commuted value should reflect current financial market conditions, any mathematical model developed to estimate a market value of pension entitlements is by its nature limited and cannot be validated by actual experience, says OSFI’s submission to the Actuarial Standards Board of the Canadian Institute of Actuaries on the Commuted Value Standard for pensions. If a financial market for pensions existed, it is probable that it would behave differently in practice from any model that could be developed, as factors that are not considered in the model would come into play, it says. These factors include the credit rating of the plan sponsor backing the pension promise and the health status of the beneficiary. It also says it would have preferred a proposal that goes further to reduce volatility. However, it calls the report “a step in the right direction in recognition of the relevance of long-term averages, and not only current market conditions, in establishing the discount rate basis.”

Proposed Rules Make DC Advice Easier

The U.S. Department of Labor has proposed rules that would make it easier for participants in Defined Contribution plans and IRAs to get individual investment advice. Under the proposals, advice arrangements in participant-directed DC plans would be allowed if offered through computer models independently certified to be unbiased, or if compensation of the adviser providing one-on-one consultation doesn’t vary depending on the investments selected. To qualify as an “eligible investment advice arrangement” under the proposed rules, the advice has to rely on “generally accepted” investment theories and take into account a participant’s retirement age, risk tolerance, and investment preferences.

CalPERS Sets Infrastructure Guidelines

The California Public Employees Retirement System (CalPERS) has set its investment guidelines for investing in infrastructure. It plans to achieve an average annual investment yield of five per cent above inflation over a five-year period by investing in infrastructure assets such as transportation, energy, natural resources, utilities, water, communications, and other social support services. Its allocation to infrastructure will amount to three per cent of its total assets.


Friday, August 22, 2008

Employers Pay For Education

Almost all of Canada’s largest companies offer tuition benefits to their employees, says an Accountemps’ survey. Eighty-four per cent of senior executives interviewed said their firms do offer tuition benefits and all reported that they reimbursed employees for other forms of professional development. "Providing educational and professional development opportunities helps companies attract top performers, maximize productivity, and boost retention efforts," says Max Messmer, chairman of Accountemps.

Target-date Funds Expected To Grow

Target-date funds in the U.S. will grow to more than $1.1 trillion by 2012 from an estimated $277 billion at the end of 2008, says a report from Cerulli Associates. ‘Pension and Investment Consulting: Insight for Asset Managers in DB and DC’ says target-date funds have been the most popular choice of the three qualified default investment alternatives, bolstered by the endorsement of auto-enrollment and auto-escalation under the Pension Protection Act. Asset managers are looking to DC plan sponsors as the top target for lifecycle fund distribution, followed by investment consultants.

July Calm For Pension Funds

Watson Wyatt’s ‘Investment Brief’ says July was relatively calm compared to prior months, but did not provide any recovery in the funded status of pension plans. Major U.S. and international public equity indices fell modestly for the month and contributed to a -0.9 per cent asset return under the traditional strategy and -1.2 per cent under the LDI strategy. Interest rates rose slightly, resulting in a decrease in the market value of liabilities.

Drug Costs Trending Down

The ‘2009 Segal Health Plan Cost Trend Survey’ forecasts continued declines in cost trends for 2009, marking the sixth consecutive year of decline. Most trend rates are projected to be lower in 2009 than in 2008, but cost trends for all medical plan types are higher than inflation. It suggests projected retail prescription drug trends will continue to decline, and have fallen from a high of 19.7 per cent in 2001 for active employees to 9.8 per cent for 2009. The downward trend is due to plan sponsors turning to innovative designs and health improvement programs as vehicles for containing health plan costs. These include cost effective treatments, reducing complications from chronic disease, and lowering demand for health services. The most effective strategies include mining data to identify a plan’s cost drivers, redesigning plan provisions to eliminate barriers to care, and providing incentives to comply with recommended care for specific diseases.

CalPERS Sets Investment Ranges

The California Public Employees Retirement System (CalPERS) has formulated ranges for investing additional capital in emerging and frontier markets real estate. Its aim is to lay the groundwork for a long-term increase in the pension fund’s asset allocation to international real estate and emerging markets in particular. One of the key factors in investing in emerging markets real estate is the trading patterns of Asian countries, excluding Japan, with the United States are shrinking in importance in that part of the world. It is considering investment ranges of up to 20 per cent of total real estate investing for emerging markets and up to five per cent for frontier markets. Currently, it has 3.7 per cent of its real estate portfolio in emerging markets and 0.1 per cent in frontier markets.

HSBC Offers Canadian Dollar Fund

The HSBC Canadian Dollar Liquidity Fund, a sub-fund of HSBC Global Liquidity Funds plc, is now available for purchase internationally. The fund has an Aaa/MR1+ rating from Moody's Investors Service and a AAAm rating from Standard & Poor’s. It offers daily liquidity for companies seeking a competitive yield for their cash reserves.

State Street Launches Derivatives Platform

State Street Corporation has launched an over-the-counter (OTC) derivatives servicing platform. The OTC Hub is a global, end-to-end servicing solution that automates a number of stages in derivatives processing including customer reporting, electronic trade flow, and the reconciliation of positions and cash flows between the middle and back offices. OTC derivatives is one of the fastest growing asset classes. Since 1999, the volume of derivatives contracts has surpassed an estimated US$600 trillion, 83 per cent of which has originated in the over-the-counter (OTC) market.

HRPA Conference Looks At Keays

The ‘HRPA Annual HR Law Conference’ will take place October 22 in Toronto, ON. Three Superior Court justices and 18 employment lawyers will provide commentary and advice on Canada's evolving legal climate, including the latest developments on notable cases such as Keays vs. Honda Canada Inc. For more information, visit


Thursday, August 21, 2008

Plans Face Significant Changes

Canadian pension plans are facing three significant changes, says an ‘Eckler Special Notice.’ The Canadian Securities Administration (CSA) has revised an earlier proposal to change executive compensation disclosure requirements for public companies. Companies will be required to report information for executives based on a total compensation limit instead of a cash compensation limit, and may be required to include executives who left the company during the year. The Actuarial Standards Board (ASB) of the Canadian Institute of Actuaries is increasing the discount rates for non-indexed pensions by an amount between 0.25 per cent and 0.5 per cent and strengthening the mortality table. The Accounting Standards Board has confirmed that all publicly accountable enterprises in Canada will be required to report under International Financial Reporting Standards for year January 1, 2011. Specific provisions and effective dates are not yet finalized, but the current proposals indicate that plan sponsors should be prepared for additional work by the end of 2008 to implement these changes.

CanDeal Has Record Week

CanDeal, the global online marketplace for Canadian debt securities, had a record week on its Canadian Money Market (CAMM) platform. During the week of August 11, institutional clients executed more than 250 trades, representing nearly $3 billion of traded volume. TD Securities, Scotia Capital, and CIBC World Markets lead the way. CAMM pools the liquidity of nine leading dealers including BMO Capital Markets, CIBC World Markets, Desjardins Securities, HSBC Canada, Laurentian Bank Securities, National Bank Financial, RBC Capital Markets, Scotia Capital, and TD Securities.

Executive Pay Programs More Shareholder Friendly

A growing number of U.S. companies are making their executive pay programs, as well as portions of their executive benefit plans and severance policies, more shareholder friendly, says an analysis of 2008 company proxy statements by Watson Wyatt Worldwide. In its analysis, it found that 87 per cent now have stock ownership guidelines and requirements for executives, an increase from 75 per cent in 2007. Many companies are making or considering changes to their ‘non-core’ compensation programs. Approximately one in 10 companies changed their Supplemental Executive Retirement Plan in 2007.

Stress Costly For Employers

It costs an employer an average of $17,800 per employee as a result of productivity loss due to stress, says data collected by Wellness Checkpoint. As a risk factor, stress has twice the financial impact on an organization than that of chronic health related issues such as allergies, arthritis, asthma, back
problems, diabetes, heart disease, kidney disease, and depression combined.

Fundamentals Tool Enhanced

Northern Trust has enhanced its Fundamentals performance and risk tool by adding a dashboard application that provides institutional clients with a direct and easy view of the performance information they deem most important. The Fundamentals Dashboard includes daily and monthly analytical results and allows clients to define what is important to them. It is available to asset managers and institutional investors such as pension funds, endowments, foundations, and corporations. The first phase includes returns, characteristics, risk statistics, and market values. Later phases will add charting and further customization.


Wednesday, August 20, 2008

Mines Want To Appeal ABCP Ruling

Ivanhoe Mines will ask the Supreme Court of Canada to hear its objections to a plan to restructure Canada's asset-backed commercial paper market (ABCP). It plans to appeal the Ontario Court of Appeal decision which said the plan could go ahead. Barring appeals to the higher court, the Pan-Canadian Investors Committee's had hoped to have its plan to restructure $32 billion of third-party asset-backed commercial paper in place by September 30. Its plan calls for the issuance of new notes and the establishment of a liquid market for them.

CMA President Wants More Private Delivery

The natural next step for Canada's health system is allowing more private delivery, says the new president of the Canadian Medical Association in a report by the Globe and Mail. Robert Ouellet says this will give patients more choice and better access to care. A Montreal radiologist, he owns and operates five medical imaging clinics in suburban Montreal, QC. “Private delivery is an accepted practice everywhere in the world and it's time Canada accepted this reality,” he says.

Value Increases With Age

he more they earn and the closer they get to retirement, the more value German employees place on their supplementary pension arrangements, says a Watson Wyatt Heissmann study. Overall, employer-financed retirement provision placed fifth place behind general training courses, flexible working hours, work-specific training courses, and regular assessment talks with superiors. Self-financed retirement provision came 10th in that study. However, for both types of workplace pension, the benefits were valued more by people with higher incomes and closer to retirement. While only 10 per cent of all interviewees said they were “not interested” in employer-financed pension provision, the share of those who said they “would love to have it” increased from 56 per cent among the 20- to 30-year-olds to 62 per cent among the 51- to 60-year-olds. Only 59 per cent of Germans earning €20,000 to €30,000 a year gave pensions the highest ranking, but among those with €80,000 or more per year the figure climbs to 70 per cent.

Characteristics Of Retirement System Defined

The 2008 ‘Retirement 20/20’ conference – ‘Defining the Characteristics of the 21st Century Retirement System’ – will be held in Arlington, VA, November 17 and 18. ‘Retirement 20/20’ is a process of exploration and creation, sponsored by the Society of Actuaries’ (SOA) pension section council, to envision new retirement systems to meet the needs of the 21st century. The theme of the 2008 conference will be to explore and debate the optimal characteristics for successful retirement systems. For more information, contact or


Tuesday, August 19, 2008

Court Accepts ABCP Plan

The Ontario Superior Court has approved the Pan-Canadian Investors Committee's Plan to restructure $32 billion of third-party asset-backed commercial paper (ABCP). The court agreed with a lower court's decision in early June that the plan is fair and reasonable and meets the criteria of the Companies' Creditors Arrangement Act. The decision means that the plan can now move forward to completion and noteholders can look forward to the issuance of new notes and the establishment of a liquid market for them. Absent any further appeals, it expects the restructuring to close by September 30.

METC Complicates Matters

If the federal government’s medical expense tax credit (METC) proposals are enacted in their current form, they will considerably complicates matters for employers with private health services plans (PHSPs) that cover over-the-counter drugs (OTCs), especially those covering Quebec residents, says Watson Wyatt’s ‘InfoCanada.’ The proposals would amend the Income Tax Act to restrict drug eligibility for the METC to those medications “that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner or dentist.” This change would make OTCs, which are available without a prescription, ineligible for the METC. While it is unlikely that the Canada Revenue Agency will audit PHSPs based on their treatment of OTCs between that date and the date the legislative proposals become final, plan sponsors should prepare to comply with the new METC rules by reviewing their plan text to determine what OTCs, if any, it covers and reviewing collective agreement provisions regarding PHSPs.

CPPIB Works Out Takeover Collapse Deal

The Canada Pension Plan Investment Board (CPPIB) has worked out a deal with Auckland International Airport for costs related to the collapse of its partial takeover effort. The board had launched a legal action against Auckland International Airport Limited to recover some of its costs after the deal was blocked by the New Zealand government under the Overseas Investment Act. While its claim was for $6 million, no settlement amount has been disclosed.

Executives Need Awareness Of Immigrants

HR professionals need to promote awareness among executives that skilled immigrants are now a significant segment of the Canadian population and represent a talented labour pool. That is one of the recommendations in a White Paper from the Canadian Council of Human Resources Associations. It outlines a comprehensive action plan to enable HR professionals, businesses, and governments to maximize the potential of new Canadians. HR professionals should also build a hiring/promotion plan specifically focused on skills, train managers on diversity principles, and develop a policy that recognizes international credentials and experience or equivalencies. The White Paper is available for download at

Sectoral Using LongView

Sectoral Asset Management, a Montreal, QC-based investment advisory firm, will adopt Linedata Services’ LongView Trading order management system. Sectoral is a healthcare-focused investment advisory firm and is a partner of State Street Global Advisors. It will use LongView Trading on an application service provider model, using the system for everything from portfolio management through trading.

Cowper-Smith Moves To OMERS

Blair Cowper-Smith is executive vice-president, corporate affairs and chief legal officer, at OMERS. He was previously with McCarthy Tétrault where he was a senior partner co-heading the firm's private equity practice. He has also provided advice to OMERS on a wide range of projects, drawing on his skills in mergers and acquisitions, governance, and infrastructure.

Lake Joins Aurion

Mai Lake is a portfolio manager with the real estate team at Aurion Capital Management. She has more than 18 years of experience in all aspects of the commercial real estate industry. Most recently, she worked at a major international commercial real estate brokerage, leading a securitization process and overseeing the treasury aspects of the company. Prior to that, she worked at Borealis Capital and OMERS Realty Management Corp.

Alternative Investment Summit Attracts 400

Canadian Hedge Watch Inc., in conjunction with the Canadian Institute of Financial Planners (CIFPs) and National Bank Financial, will present its 7th annual alternative investment fund conference September 8 to 10 in Niagara Falls, ON. The ‘World Alternative Investment Summit, Canada 2008’ is expected to attract more than 400 attendees and features more than 70 expert speakers from Canada, the U.S., Europe, and Asia. Speakers will look at topics including exchange traded funds market, private equity, emerging markets, and Islamic finance. For more information, visit


Monday, August 18, 2008

Gas Prices Drive Four-day Week

High gas prices and a slack U.S. economy have prompted Chrysler LLC to propose shifting workers to four 10-hour days, says a report in the Globe and Mail. It becomes the latest to consider adopting this practice. The state of Utah and hundreds of U.S. cities have moved to the four-day week and Nova Scotia and the city of Hamilton, ON, are examining it. Chrysler is discussing the idea with the United Auto Workers and, if approved, it could start a four-day work week this fall at several American plants and, if successful, at its Brampton, Ont.

Members Moving To Fixed Income

401(k) participants moved assets out of equity into fixed income investments in July, says the Hewitt 401(k) Index. More than $692 million was shifted out of equities into fixed income asset classes during the month. In addition, $144 million was transferred out of balanced funds during the month. GIC/stable value funds were the largest recipients of the net transfers, as they have been throughout the first half of 2008. Inflows of $659 million to this asset class represented 83 per cent of the net transfers. Bond funds received 13 per cent.

Wellness Programs Reduce Healthcare Costs

Workplace wellness programs not only help reduce employers’ healthcare costs and employee absentee rates, but create more loyal and engaged employees, says a Maritz survey. Its survey found even employees who only occasionally participate in wellness programs are more satisfied with their jobs, more likely to remain with the company long term, and more likely to recommend the company as an employer to a friend or family member. It also showed a relationship between the level of participation in a wellness program and absenteeism at work. Only 14 per cent of people indicating regular, once-a-week participation in a wellness program said they took five or more sick days within the past year, whereas 23 per cent of those indicating infrequent participation and 25 per cent of those who never participate in a wellness program said they took five or more sick days in the past year.


Friday, August 15, 2008

Little Relief From Commuting

Despite high gas prices, lengthier travel times, and environmental concerns, Canadian employers are implementing only limited measures to provide employees with relief from commuting, says a survey by Hewitt Associates. Of the survey respondents, almost half offer flexible work locations or telecommuting, while 64 per cent provide flexible work hours including condensed work weeks and flexible start times. Employer feedback suggests that the main reason for providing this flexibility is employee wellness, not the high cost of gas or the environment. However, initiatives subsidies for mass transit, non-financial support for car poolers, and bike racks and change rooms for bicycle commuters are being offered by some employers to combat the high price of fuel and protect the environment.

DB Costs Less Than DC

Defined Benefit pension plans cost 46 per cent less than Defined Contribution plans because of better investment performance, lower fees, and longevity risk pooling, says a study from the U.S. National Institute on Retirement Security. It says a DB plan requires annual contributions equal to 12.5 per cent of an employee’s salary, while a DC plan would require 22.9 per cent to provide the same level of pre-retirement income replacement. DB plans are 26 per cent cheaper than DC plans because DB plan investment returns are one percentage point greater each year, owing to professional investment oversight and lower fees.

CPP Returns One Per Cent

The CPP Investment Board returned one per cent for the quarter ended June 30. Total assets are now $127.7 billion. Infrastructure investments returned 23.6 per cent; inflation-linked bonds, 9.3 per cent; international equities, 8.5 per cent; and private real estate, 8.2 per cent. Public real estate lost 24.2 per cent, while international equities lost 13.9 per cent, largely because of the Canadian dollar’s rise against the U.S. dollar. The board’s asset allocation as of June 30 was 38.4 per cent international equity, 25.8 per cent fixed income, 23.6 per cent domestic equity, 5.6 per cent real estate, four per cent inflation-linked bonds, and 2.6 per cent infrastructure. Private equity constitutes 11 per cent of total assets.

Inflation Fears Disappearing

Inflation fears among fund managers have virtually disappeared, reaching their lowest level since the downturn of late 2001, says a report from Merrill Lynch. The survey found that 18 per cent now expect global core inflation to fall in the coming 12 months. In June’s survey, 33 per cent thought inflation would rise. However, falling oil prices and growing evidence of recession have prompted them to reconsider. With the economic downturn spreading to the eurozone and certain emerging markets, investors are starting to view U.S. assets as attractive. The proportion of asset allocators overweight U.S. equities stands at 12 per cent, its highest level in more than six years.

Green Heads Institutional Services

Duane Green is now senior vice-president, institutional investment services, at Franklin Templeton Investments. Prior to joining the firm in 2004, he was a vice-president with an international insurer.

Value Investing Discussed

The ‘Future of Value Investing’ will be discussed at a Rotman School of Management session September 22 in Toronto, ON. Irwin Michael, president, I.A. Michael Investment Counsel; Richard Rooney, president and chief investment officer, Burgundy Asset Management; and Jonathan Wellum, CEO and chief investment officer, AIC; will share their expertise and views on value investing. For more information, visit


Thursday, August 14, 2008

Employee Involvement Determines Success

The success of pharmacy benefit cost management strategies depends largely on employee involvement, says a survey from Buck Consultants. The top strategic initiatives for long-term cost management cited by respondents include providing employees with tools and information, employee education, and worksite wellness and health activities. The most important clinical management steps employers are taking to control pharmacy benefit costs are disease management, care management, and smoking cessation programs. The emergence of new, very expensive specialty medications is one of the trends driving U.S. employers to review their cost management strategies.

Investors Underestimate Magnitude Of Crisis

Investors are still underestimating the magnitude of the global credit crisis, says a report from Merrill Lynch. As well, the crisis will likely result in massive consolidation among weakened financial firms. It says the credit crisis is broad, deep, and global, and it is not likely to end soon. Investors are significantly underestimating both the scope and the depth of the credit bubble and its subsequent deflation.

Investors ‘In The Dark’

A significant proportion of institutional investors are “in the dark” about certain policies and practices of broker/dealers and exchanges providing dark liquidity, says a study from Greenwich Associates. The fact that a broker/dealer or exchange calls its platform a “dark pool” does not make it dark, says the study. Some venues that market themselves as dark pools actually route orders to external destinations and systems have varying policies related to anonymity and information sharing/leakage. In addition, practices differ from system to system in terms of how volume is calculated, what types of orders are accepted, how client orders interact with proprietary orders in terms of priority, and how anti-gaming measures are enforced.

OMERS Buying Share Of Oncor

The Ontario Municipal Employees Retirement System (OMERS) is buying 10 per cent of Oncor Electric Delivery Company LLC, the largest electricity distribution and transmission system in Texas. Oncor is owned by Energy Future Holdings Corp. It has more than seven million customers in the state.

HR At Teachers’ Gets Vice-president

Marcia Mendes-d'Abreu is vice-president, human resources, at the Ontario Teachers' Pension Plan (Teachers'). Responsible for the pension plan's human resources department, she joins Teachers' from the Canadian Tire Corporation where she was vice-president, human resources, corporate and diversified businesses.

Catastrophic Coverage Examined

Claude Di Stasio, vice-president, Quebec affairs, Canadian Life and Health Insurance Association and executive director and secretary of the Quebec Drug Insurance Pooling Corporation, will address the issue of catastrophic coverage at the first session of the 16th season of The Benefits Breakfast Club. She will examine how Quebec has addressed this issue as well as the results and some of the challenges it has faced. It takes place September 11 in Oakville ON. For more information, visit


Wednesday, August 13, 2008

Canadian Pension Funds Need ‘Trills’

A GDP-linked-bond issued by the Government of Canada could help large institutional investors who need to match long-term liabilities with assets, says a C.D. Howe Institute ‘Commentary.’ ‘The Case for Trills: Giving Canadians and their Pension Funds a Stake in the Wealth of the Nation’ proposes the creation of the ‘Trill,’ so named because its coupon payment would be one-trillionth of Canada’s GDP and would be linked to movements in the GDP. Currently, a large part of pension fund assets are held in nominal fixed-coupon Government of Canada securities. These securities do not provide protection from inflation and the limited numbers of real return bonds the government issues do not provide exposure to income growth. Trills would fill this gap by providing stable, long-term cash flows.

Pension Plan Contributions Get Super-priority

Bankruptcy and Insolvency Act (BIA) amendments will provide for the priority of some un-remitted pension contributions, says the Pension Group at Borden Ladner Gervais LLP. The amendments provide that unpaid pension plan contributions are granted a super-priority charge over all of the assets of the employer where the employer is bankrupt or in receivership proceedings. This super-priority charge covers pension contribution amounts deducted from an employee's pay; amounts required from the employer under a Defined Contribution provision; and "normal cost" amounts required to be paid by the employer to the pension fund. This does not include special payments such as those required to fund a solvency deficiency, for example. In terms of the ranking of the super-priority charge, it ranks above every other claim, right, charge or security against the employer's assets except for rights of unpaid suppliers; employee source deductions (income tax, CPP, EI) which were deemed to be held in trust by an employer; and the super-priority now provided for unpaid wages in a bankruptcy or receivership.

Algorithmics Works With Hedge Fund

Algorithmics’ Algo Risk Service is in production for the risk management practice of BlueCrest Capital Management L.P. This brings together a leading provider of enterprise risk solutions and one of the top 10 largest hedge fund firms in Europe. Algo Risk Service is an outsourced portfolio construction and risk management service that will enable BlueCrest to advance its risk culture. It allows investment managers and risk managers to analyze and quantify the risks across all their portfolios.

$15,000 Needed In Retirement 

U.S. workers earning $50,000 at retirement who are trying to keep their standard of living when they retire will need to generate $15,000 annually from retirement savings, says Aon Consulting Worldwide’s ‘Replacement Ratio Study.’ It found that a worker will need to replace 81 per cent of that amount annually to continue the same standard of living. On a yearly basis, this worker may receive $25,500 from Social Security (including spousal benefits), while the remaining $15,000 needs to come from an employer retirement plan and/or the worker's own savings. The study also reveals the number of years an average person should plan for their retirement assets to last. If a married couple is comfortable with a 50 per cent chance they will not outlive their assets, they need to plan for 27 years. In terms of dollars, if a couple were earning $80,000 annually before retiring, then accumulating $420,000 from an employer retirement plan and/or their own savings by the time they retire will allow them to maintain their pre-retirement standard of living.

Credit Default Swaps Represent Threat

More than three-quarters of the institutions participating in a study by Greenwich Associates say counterparty risk in credit default swaps represents a serious threat to global financial markets. Survey respondents were divided between hedge funds, banks, and traditional long-only investors, with the majority domiciled in the United States and the remainder in Canada and Europe. Among the U.S. institutions, the proportion that sees credit default swap (CDS) counterparty risk as a serious threat to global markets approaches 85 per cent. Institutions in Europe are at least slightly more sanguine; with just more than 55 per cent describing CDS counterparty risk as a significant danger. Most believe another major financial services firm will fail as a result of the ongoing crisis in global markets and they expect it to happen sooner rather than later. Nearly 60 per cent expect to see another major financial services firm collapse within the next six months and another 15 per cent think it will happen in six to 12 months.

Darrah Lifetime Volunteer

Patrick Darrah has been awarded a Canadian Lifetime Volunteer Award by the International Foundation of Employee Benefit Plans. Darrah has been a member of the International Foundation for 35 years and first attended a Foundation educational program in 1972. He has been a speaker, moderator, committee member, and board member for the International Foundation since 1990 and was Canadian board chair in 1993 and again in 1999.

OMERS Promotes Brown

Jennifer Brown is executive vice-president and chief pension officer at OMERS. She joined OMERS in July 2001 and was appointed senior vice-president, pensions, in December 2005. She has more than 20 years of senior pension administration and policy experience across the public and private sectors.


Tuesday, August 12, 2008

Aim Trimark Now Invesco Trimark

AIM Funds Management Inc., which was carrying on business as AIM Trimark Investments, is now Invesco Trimark Ltd. The new name reinforces the bringing together of the strength of parent company Invesco's global resources. Invesco is one of the world's largest independent investment managers, with more than 5,300 employees in 13 investment centres worldwide serving clients in 100 countries.

Employers Concerned With Financial Preparation

Fewer than one in five 401(k) plan sponsors believe "most" employees will be financially prepared for retirement, says a report from Deloitte Consulting. Its ‘401(k) Benchmarking Survey: 2008 Edition’ reveals that to further prod employees to increase their retirement savings, an increasing number of employers have implemented "automatic" plan features such as auto-enrollment. The survey also documents a big jump in employers using “easy enrollment” systems such as a postcard or similarly simple authorization form provided to non-participants. In addition, for the first time, the majority of employers make employees eligible for plan participation immediately upon their hire.

Ivanhoe Purchases Brazil Shopping Centres

Ivanhoe Investments, the real estate management subsidiary of the Caisse de dépôt et placement du Québec, has boosted its position in Brazil with the purchase of four shopping centres and more than doubled its stake in a local property partner. It has bought São Marcos Real Estate Enterprises, the owner of holdings in four shopping centres in Sao Paulo and Rio de Janeiro. Ivanhoe has had a presence in Brazil since 2006 when it first took a stake in development and management firm Ancar Gestão. It has boosted its stake in that firm from 20 per cent to 50 per cent.

Crisis Interrupted Liquidity 

During the worst of the crisis last year, a significant proportion of U.S, institutions experienced either an unexpected interruption in liquidity or unanticipated risks and credit exposures in securities lending pools and short-term investment funds, and a relatively small number of institutions were forced to realize losses, says a Greenwich Associates survey of pension funds, pension funds, endowments, and foundations. It suggests that some institutions had become lax in their oversight of investment practices within these funds prior to the start of the global credit crisis in 2007. At the same time, some master trusts and custodian banks were not being sufficiently proactive in terms of communicating information about portfolio composition and performance to clients.

DB Advisors Enhances Transparency

Deutsche Bank’s global institutional asset management business, DB Advisors, is partnering with Clearwater Analytics, a provider of web-based investment portfolio reporting, to enhance the transparency of its money market fund reporting. The program will provide more analytical money fund information and create a new standard of reporting to support investor confidence in the money fund industry. Key features include the availability of risk metrics, not currently provided for money market funds, such as credit and interest rate maturity, asset-backed commercial paper sub-sector attributes, credit and liquidity enhancements, and repo collateral.

Executives Confident About Fee Disclosure

More than 75 per cent of Defined Contribution plan executives are fully confident that investment fees and administrative costs associated with their 401(k) plans have been properly disclosed, says a survey by Mercer. It found that only 25 per cent said their plan vendor has not disclosed the amount of annual revenue received from the plan’s investment managers to pay for administrative services. The U.S. Labor Department is proposing a rule that would require employers to report some of the plan fee information to plan participants on a regular basis.

Hamel Moving To CEO

René Hamel will become CEO of SSQ Financial Group as of September 12. An actuary by training, he joined the firm in 1986. Since 2001, he has been senior vice-president of group insurance.


Monday, August 11, 2008

Proposed Changes Lower Liabilities

Proposed changes to the Standard of Practice for Pension Commuted Values would lead to lower commuted values and lower solvency and wind-up liabilities for most pension plans, says a Mercer Communiqué. Plan sponsors who are concerned about increases in contribution requirements in 2009, however, should encourage Ontario, Québec, and New Brunswick to amend their legislation to recognize the new standard and ask all the regulators to permit early adoption of the new standard for solvency valuations. As well, plan sponsors should remember that the standards will be revised again in the not too distant future to incorporate the use of a generational mortality table based on Canadian mortality experience. The Actuarial Standards Board of the Canadian Institute of Actuaries exposure draft proposed changes include increasing the discount rate used to compute the commuted value of non-indexed pensions by between 25 and 50 basis points.

Corporate America Embraces Plans

Corporate America appears to be embracing 401(k)s more than ever, says a survey by the Charles Schwab Corp. It shows companies are expanding and upgrading their 401(k) programs. The poll of senior finance executives from large companies nationwide shows they feel that simply having a plan in place is not enough. It shows 87 per cent say it's important to provide employees with investment advice to help them make investment decisions. Another 55 per cent expect to devote more resources to strengthening their plans in coming years. They also believe offering a 401(k) plan enhances a company's corporate reputation and contributes to a company's long-term financial success.


Friday, August 8, 2008

Funded Status Improves

DA greater decrease in liabilities than in assets helped the typical U.S. pension plan eke out a 0.6 per cent improvement in July, says BNY Mellon Asset Management. Typical pension plan liabilities fell 1.4 per cent versus a 0.8 per cent decline for asset returns at a moderate risk portfolio. Year-to-date, funding ratios for typical pension plans have fallen three per cent.

Phillips, Hager & North Add Two

Will John is joining the fixed income team at Phillips, Hager & North in early September. He was, most recently, director, co-head U.S. government bond trading, at Barclays Capital New York. Bruce Geddes will join the fixed income team early in the fourth quarter of 2008. Previously, he was managing director, portfolio management, head of institutional quantitative fixed income and derivatives-based solutions, at TD Asset Management

Processes For Analysts Examined

Equity research and valuation techniques are the focus of a CFA Institute conference December 2 and 3 in Toronto, ON. The conference focuses on skills equity investors need to maintain an edge in the global investment environment. This year’s speakers will examine issues critical to the valuation process and provide tools that investors can use in their daily work as analysts or portfolio managers. For more information, visit

APHRM Classes Set

Fall classes for the University of Toronto's ‘Advanced Program in Human Resources Management (APHRM)’ will start September 22 at Telfer School of Management in Ottawa, ON, and October 6 at Rotman School of Management in Toronto, ON. The program helps organizations develop the HR expertise and systems needed to build competitive advantage and drive success. For more information, visit


Thursday, August 7, 2008

Commodities Hurt Fund Returns

Investment funds that have significant exposure to commodities posted sharply negative returns in July, says preliminary performance data from Morningstar Canada. The precious metals equity fund index lost 12.5 per cent for the month, which was the worst performance among the 42 Morningstar Canada fund indices. Falling energy prices also hurt sector-diversified Canadian equity funds. The Canadian equity, Canadian small/mid cap equity, and Canadian focused small/mid cap equity categories lost 6.2 per cent, 7.3 per cent, and eight per cent, respectively, for the month. Only nine fund indices had positive returns for the month. The best performer was healthcare equity, which gained 5.9 per cent.

Passive LDI Mandates Create False Sense Of Security

Structuring liability-driven investing (LDI) as passive mandates can create a false sense of security as some pension funds thinks they are risk-free, says Pimco. It says it is virtually impossible to manage passive LDI risk free and in the last 12 to 18 months such portfolios have not delivered as expected. Investment managers rely on actuarial estimates of projected actual future cash flows to analyze the risk characteristics of the liabilities and plan the LDI strategy, creating uncertainty over the actual payments. Passively replicating estimated cash flows, therefore, creates a “false sense of security.”

MacKenzie Takes Over Saxon

Mackenzie Investments will join forces with Saxon Financial Inc. through a friendly takeover supported by agreement from Saxon’s principal shareholders. Saxon Financial, a company with approximately $13 billion in assets under management at June 30, 2008, is well known for its value-style of equity investing. Its institutional and private client businesses operate under the brand name of Howson Tattersall. Saxon will operate as a sub-brand within Mackenzie and will retain its own investment management team. Richard Howson, CIO and Robert Tattersall, president and CEO, will actively lead the Howson Tattersall investment management team through 2010 and oversee their personal succession plans announced in 2005.

Masri Now With CPPIB

Joseph Masri is vice-president and head of investment risk management for the CPP Investment Board (CPPIB). Most recently, he was global head of investment risk management with Barclays Global Investors.


Wednesday, August 6, 2008

Standard Life Earns Awards

The Standard Life Assurance Company of Canada has won two awards in the 2008 Insurance and Financial Communicators Association (IFCA) annual competition. It was granted an Award of Excellence in the category ‘Community Service Materials and Campaigns’ for its annual fundraising campaign ‘Step Up for the Children with Standard Life.’ It also received an Honorable Mention in the category ‘Company Web Site (public/external)’ for its Portrait and Ideal Porfolios micro-site. Each year, the IFCA recognizes excellence in marketing and communications work from insurance and financial organizations throughout the United States and Canada.

Northern Has FAS Toolkit

Northern Trust has created a ‘FAS 157 Toolkit’ which combines automated processing and detailed reporting to surround institutional clients with solutions as they adapt to a new accounting standard related to fair value measurements and disclosures. The toolkit includes a broad range of resources to assist clients in implementing the reporting requirements of FAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

Commuted Value Assumptions For September

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including September 2008 are now available at An Excel spreadsheet on the website contains six worksheets:


Tuesday, August 5, 2008

Concern Over DB ‘Very High’

The level of concern among Defined Benefit pension plan sponsors is very high at present, says Morneau Sobeco’s ‘July 60 Second Survey.’ The survey gauges the mood among employers who sponsor pension plans with at least some DB liabilities. Almost three-quarters (74.6 per cent) of respondents are either somewhat concerned or very concerned about the financial status of their plans. The primary reason for the concern is the poor stock market performance so far this year. More than half the plan sponsors surveyed appear poised to take actions over the next 12 months to deal with the perceived problems. The most common actions have to do with the asset side of the balance sheet and involve getting into alternative investments or possibly liability-driven investing (LDI).

Workers Need To Feel Needed

First and foremost, workers want to feel they are needed if they are to be convinced to delay retirement, says a survey by the Employee Benefit Research Institute (EBRI). More than 40 per cent said they had to feel truly needed for an assignment. Other incentives that retirees rank highly include receiving a full pension while working part time, a pay increase, continuing company-subsidized health insurance at the same level as full-time workers, and receiving a partial pension while working part time.

HR Staff Ratio Drops

The median ratio of HR staff to employees served declined from 1.1 per 100 employees served in 2005 and 2006 to one in 2007 – in line with the trend during most of the preceding 10 years, says a report on the state of the human resources function by BNA. ‘HR Department Benchmarks and Analysis 2008 also shows that the median per capita budgeted expenditure for HR departments in 2007 was $1,082, only a modest increase from the $1,056 expenditure per worker in 2006. This moderating trend, however, followed significant increases over the 2005 figure of $857. As well, it has found that outsourcing of HR functions has become a widespread practice. Three out of four employers have outsourced one or more HR activities. 

Stefanelli With Private Equity Firm

Jason R. Stefanelli is senior vice-president at Constitution Capital Partners. Formerly with Wellington Management Company, he will be focused on business development and fund-raising in Canada and the United States with the private equity firm based in Boston, MA.

Attracting Talent Examined

How Canadian organizations will cultivate a high performance workforce given that there will be more jobs than young workers to fill them will be the focus of IDC Canada’s ‘Human Capital Count,’ a forum designed to leverage the latest strategies and technologies to differentiate organization and help them compete with a multi-generational workforce. Keynote speaker is Jason Averbrook, CEO and co-founder of Knowledge-Infusion. He will examine strategies and processes to attract and retain the best talent and navigating the changing landscape of HR outsourcing. It takes place September 23 in Toronto, ON. For more information, visit


Friday, August 1, 2008

Ridgewood Acquires Mulvihill Divisions

Ridgewood Capital Asset Management Inc. is acquiring the institutional and wealth management divisions of Mulvihill Capital Management Inc. Ridgewood is a newly-formed corporation controlled by John H. Simpson and Paul Meyer, currently the senior vice-president and vice-president, equities, respectively of Mulvihill. Ridgewood will provide investment counseling and portfolio management services. Mulvihill, which intends to focus its activities on its money management and structured products business, will hold a minority interest in Ridgewood.

ESG Becoming Macro Trend

The consideration of environmental, social, and governance issues into institutional investment will be one of six major macro trends over the next five years, due to sustainable performance influences and desirability, says a study by Watson Wyatt. Its ‘Defining Moments’ report says the growth of ESG investing would be predicated on four major trends – demand for big institutional funds to apply responsible investing principles, sustainability and climate change as mainstream or specialized propositions, the impact of politically motivated activism, and responsible investment becoming more personalized through Defined Contribution pensions saving. The emergence of climate change as an issue of major societal importance could be “the catalyst for change.”

Clarke Moves To Beutel, Goodman

Peter D. Clarke is senior vice-president and partner at Beutel, Goodman & Company Ltd. He brings more than 30 years experience to the asset management industry including, most recently, as managing director of the Canadian division of UBS Global Asset Management.

Members Learn Essential Skills

Understanding the pension risks facing board members will be the focus of ‘Essential Skills For Pension Committee Members.’ Set for November 12 to 14 in Toronto, ON, topics covered will include retirement income planning considerations for employees with DC pension plans and how to implementing effective performance measures. For more information, visit

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