The Canadian Source Of Employee Pension Fund Investment And Benefits Plan Management


News Archives - December 2008 / January 2009

Friday, January 30, 2009

Deemed Trust Effectiveness Unclear

The effectiveness of the deemed trust concept to protect plan members (and, indirectly, to assist OSFI to increase its limit on asset value smoothing) is not clear, says a Borden Ladner Gervais ‘Pension Alert.’ The federal budget indicated that the government will increase the current 110 per cent limit on asset value smoothing by making the amount of any funding deferral resulting from the use of asset value in excess of 110 per cent subject to a deemed trust to improve pension plan member protection. The action to be taken by the government to introduce this deemed trust concept, its nature, and its legal implications, particularly in the bankruptcy of the employer, remain to be seen. It is not clear what priority the deemed trust may have, what property the deemed trust may apply to, or whether its priority will be affected by bankruptcy or other insolvency proceedings. The Bankruptcy and Insolvency Act (Canada) contains fairly clear rules about deemed trusts and pension priorities in bankruptcy, but it is not clear how or whether the proposed new deemed trust would fit within that regime.

Clear Communication Avoids Pension Pitfalls

Clear, accurate, and concise communications with employees can help avoid pension pitfalls, says Rachel Arbour, an associate at Hicks Morley Hamilton Stewart Storie LLP. Speaking at the ‘HRPA 2009 Annual Conference & Trade Show,’ she said plan administrators should also follow their own instincts and be wary about any dealings with their plans and plan members that don’t feel right as another way to avoid pension pitfalls. The session identified the top five pension pitfalls as a failure to ensure timely member enrollment, communications errors, problems with designating beneficiaries, difficulties arising out of marriage breakdowns, and poorly planned changes to plans.

Longer Withdrawal Limit Removal Better

Removing the minimum withdrawal requirement for Registered Retirement Income Funds (RRIFs) for the next few years would be a better measure to assist seniors whose retirement savings have been battered by recent markets, says a Morneau Sobeco ‘NEWS & VIEWS.’ A previously announced measure in the federal budget lowers the minimum withdrawal for 2008 to 75 per cent of the previous 2008 RRIF minimum withdrawal amount. It would allow a person who withdrew the previous minimum to contribute the difference back to the RRIF. Normally, money cannot be contributed directly to a RRIF. The reduction in the minimum withdrawal amount is an attempt to help seniors conserve RRIF funds in a time of economic downturn. However, the reduction is for 2008 only. It does not apply for future years.

Funds Project Reduced Returns

U.S. pension funds are projecting sharply reduced investment returns from major asset classes through 2013, says research from Greenwich Associates. It found they had reduced investment returns on plan assets to an annual 7.4 per cent in 2008 from 8.2 per cent in 2007. Declines in investment returns have produced a gap between pension funds’ actuarial earnings rate and their actual expectations for returns on plan assets. The average actuarial earnings rate reported by corporate pension plans increased modestly to 8.3 per cent in 2008 from 8.2 per cent in 2007 despite the decline in expected returns for all asset classes.

Investment Managers Willing To Support Management

The Shareholder Association for Research and Education’s (SHARE) eighth annual ‘Key Proxy Vote Survey’ has found a significant increase in investment managers’ willingness to support corporate management’s recommendations at the ballot box. The survey findings are contrary to continued revelations about lax corporate oversight and its ramifications for the global economy. “In Canada, we knew there were serious problems with a negative impact on investment returns before the proxies were voted in 2008,” says Laura O’Neill, SHARE’s director of law and policy. “ABCP investments had soured and huge write-downs were being taken by companies in the financial sector. The response from private sector pension fund money managers appears to have been to require less of companies on governance.”

Manulife Offers ‘Personal Benefits’

Employers who provide benefits plans can now introduce their employees to portable life and critical illness insurance coverage through ‘Personal Benefits,’ just launched by Manulife Financial Group Benefits. With portable coverage, Manulife contracts directly with the employee which allows employees to retain their coverage, regardless of the status of their future employment. It takes on the administration and deals directly with the member from the first inquiry through to collection of premium, allowing employers to enrich their employee’s protection without increasing administration or the cost to their benefits program.


Thursday, January 29, 2009

Decrease In Contributions Possible

For federally regulated pension plan sponsors facing significant increases in pension plan deficits, eliminating the 110 per cent policy limit on asset value smoothing may result in a material decrease in contributions, says a Hewitt ‘Research Advisory.’ Currently, OSFI permits the use of a smoothed asset value to stabilize market value fluctuations over a period of up to five years for solvency and going concern funding purposes. The federal budget also provides some measure of protection to plan members through the introduction of a deemed trust on the reduction in funding resulting from the use of an asset value in excess of 110 per cent of market value. This deemed trust ensures that the amount of contributions deferred would not form part of the company's property available to creditors upon a subsequent bankruptcy.

Canadians Expect To Work Longer

Many Canadians now expect to work longer for positive reasons such as remaining mentally active and enjoyment of career, says Sun Life Financial’s Unretirement Index.’ These findings signal a departure from how Canadians have been retiring in the last few years and will have important implications for families, employers, and society. The survey found nearly half of working Canadians believe they will be working past the traditional retirement age of 65. This is in sharp contrast to the average Canadian retirement age of 61 in recent years. Nearly all of those who expect to work beyond age 65 cite one or more lifestyle reasons including remaining mentally active, enjoyment of their jobs, and the interaction with their co-workers.

Budget Disappoints CVCA

CVCA – Canada’s Venture Capital and Private Equity Association is disappointed at the absence of measures in the federal budget to improve access to venture capital for Canada’s most promising growth companies. Venture capital investment and fundraising levels have been declining for years and in the fourth quarter of 2008, venture capital investment was down 40 per cent from the same period in 2007. Further, there are increasingly fewer foreign investors coming into Canada. A key obstacle is that Canada’s international tax system deters foreign investors, thereby putting the country at a disadvantage. The budget notably failed to address Section 116, which has long been acknowledged as detrimental to foreign investment.

Pension Deficit Quadruples

Canadian Pacific Railway Ltd.'s pension shortfall nearly quadrupled to $1.6 billion in the past year. A preliminary prospectus for selling stock shows that its Defined Benefit pension plan's assets fell to $6 billion in 2008, down 20 per cent from $7.5 billion a year earlier. CPR had a $415 million pension shortfall at the end of 2007. It is forecasting pension contributions this year of between $150 million and $195 million and $295 million to $345 million in 2010. In 2008, it contributed $95 million.

Hedge Fund Fees Could Drop

The hedge fund industry will emerge stronger with the tools utilized by hedge funds accepted as part of the universe of investment strategies as a result of the current financial crisis, says Peter Rizakos, of Accelerator Capital Management Inc. Speaking at an AIMA Canada session on ‘Hedge Fund Incubation: Investing in the Future Growth of the Hedge Fund Industry,’ he noted average hedge fund returns have been far superior to long only strategies during the crisis. However, he acknowledged that the industry will contract further in 2009 and assets under management may dip below $1 trillion. This means poor performing or highly levered managers will be put out of business. As well, he says there will be fee pressure which could prompt managers to lower fees.

MEPP Liability Not Limited In Quebec

A number of employers who contribute to multi-employer pension plans in Quebec do not know that their financial liability is not limited to the contribution they undertook to pay in the collective agreement, says Martin Rochette, of Ogilvy Renault LLP. In many cases, employers were told that their financial obligations were limited to paying the contribution provided in the collective agreement. However, this is not true. In Quebec, the employer is responsible for funding Defined Benefit pension plans and the rules that apply to multi-employer pension plans are the same as those that apply to single-employer pension plans. This means that the sum of the employee and employer contributions must be sufficient to cover the current service cost and special payments for a given year.

Allan Speaks On Credit Crisis

Barry Allan, chief investment officer of Marrett Asset Management, will be the luncheon keynote speaker at Mindpath‘s ‘3rd Annual Alternative Investments for Institutional Investors Conference.’ He will examine ‘The Credit Crisis: A High Yield Portfolio Manager’s View. Added to the institutional investor discussion panel are Josephine Marks, managing director, pension assets, Scotiabank Group Treasury; and Scott Hayman, vice-president, investments, Kruger Inc. It takes place February 9 in Toronto, ON. It will feature a number of industry-leading experts in infrastructure, real estate, private equity, and hedge funds. For more information, visit

Market Meltdown And China Examined

‘Market Meltdown: Global Threat or China's Next Great Opportunity?’ will be the topic at the Fraser Institute’s ‘Weathering Market Turmoil Event Series.’ Dr. Mark Mullins, executive director of the Fraser Institute, will examine how China’s economy has not been sheltered from this crisis and how the interconnected forces that have brought China into the global economic downturn are also responsible for the unprecedented amount of prosperity in that country. It takes place February 11 in Ottawa, ON; February 12 in Montréal, QC; and February 13 in Toronto, ON. For more information, visit

Future Of Securities Regulation Discussed

‘After the Crash:  The Future of Securities Regulation’ will be the topic at an FEI Canada February National Breakfast Seminar. Panelists will discuss financial engineering, sub-prime mortgages, asset-backed commercial paper, and other structured debt products and what role they played in the crisis and why. It takes place February 25 in Toronto, ON.  For more information, visit

Money In Motion Seminars Set

The Treasury Management Association of Canada ‘Money in Motion’ seminars will look at a topics such as ‘Derivatives Demystified,’ ‘Financial Risk Management,’ and ‘Foreign Exchange’ throughout February in centres across the country. Attendees can earn continuing education and recertification credits. For more information, visit


Wednesday, January 28, 2009

Infrastructure Spending Could Help DB Plans

The federal government budget proposal to provide $12 billion in funding for infrastructure projects over the next two years could be good news for Defined Benefit pension plans, says a Watson Wyatt ‘InfoFlash.’ It says this will give these plans an opportunity to invest in assets that provide a good match to liabilities (given the relatively long-dated maturity of the asset) and a strong real return. The budget also contains additional details on the temporary solvency funding relief announced in November for federally regulated private pension plans. The budget states that the government will enable OSFI to increase the 110 per cent limit on asset value smoothing by making the additional funding deferrals that result from using an asset value in excess of 110 per cent of the market value subject to a deemed trust in favour of the pension fund. This will allow OSFI to increase the 110 per cent limit without further risking benefit security. The budget also reiterates the government’s commitment to provide permanent improvements to the federally regulated pension system as announced in the consultation document released on January 9, 2009. Public meetings are expected to be held across Canada to examine pension plan issues with consultations concluding within 90 days. It also says it will designate Tax-Free Savings Accounts (TFSAs) as a separate category of deposits insurable by the Canada Deposit Insurance Corporation (CDIC) and re-affirmed the government’s intention to allow a one-time 25 per cent reduction in mandatory RRIF withdrawals.

Industry At Inflection Point

The investment industry is at a “true inflection point,” says Saker Nusseibeh, global head of equities at Fortis Investments. Speaking on ‘The Stock Market Crash ... and the Return of Alpha," he said this is a true inflection point because the crash of 2008 was a “huge” crash, rivaling the stock market crash of 1929. As a result of what caused this crash and the crash itself, he said the industry has to change the way it invests. Going forward, he suggested that instead of trend-spotting, asset managers will have to go back to picking stocks to find alpha. Since 2003, he said it didn’t matter what stock you picked. People were playing sectors, but they were buying all the stocks in a sector and they were all moving in the same direction. Now, they will have to look at what is happening at individual companies to get alpha. This, in turn, may mean a return to plain vanilla approaches and hard work.

Marine Atlantic Inc. Selects CIBC Mellon

CIBC Mellon Global Securities Services has been selected by Marine Atlantic Inc. to provide custody, accounting, and administrative services for the company's $520 million pension fund. Marine Atlantic Inc. is a federal crown corporation that reports to parliament through the minister of transport. The corporation provides passenger and commercial marine transportation between the island of Newfoundland and the province of Nova Scotia.

Group TFSAs Now Available

Computershare Trust Company of Canada is now offering Group TFSAs for employee share purchase plans (ESPP). Share purchase plans offered within the framework of a TFSA enable employees to acquire equity and share in their company's success while tax sheltering the dividends earned and capital gains realized from their investments. Within an ESPP, employees make small deposits through payroll contributions that are normally matched at some level by the employer. The taxes that become payable on dividends and capital gains erode the earnings in an ESPP. Offering the TFSA within share purchase plans provides a tax shelter for that growth. Generally ESPPs only attract a portion of employees to invest in the company stock depending on the employer match. However, offering this tax sheltering benefit within a share purchase plan could appeal to employees and increase their participation in company plans.

Bond Demand Could Lift Credit Markets

Although new signs of economic weakness and continued distress among major banks have taken some of the steam out of a fledging rally in corporate bonds, a Greenwich Market Pulse suggests that strong institutional demand for new investment-grade corporate bond issues could provide a much-needed lift to global credit markets in the first half of 2009. More than three-quarters of the 229 institutional investors participating in the survey plan to invest in fixed income new issues in the first half of 2009 and the study results suggest that a significant number of additional investors could be drawn into the market for investment-grade credit products by current historically wide spreads. Based on the survey results, it is clear that any recovery in global bond markets in 2009 will begin with investment-grade securities. For now, however, the fragile state of global credit markets is still keeping large numbers of institutions on the sidelines. More than 20 per cent of UK institutions say they would not invest in new investment grade corporate bond issues unless spreads topped 500 bps and almost 15 per cent say they will have no appetite for new issues in the first half of 2009 at any price. In North America, one in 10 institutions say they will not participate in new investment-grade corporate bond issues in the next six months regardless of spreads.


Tuesday, January 27, 2009

Employees Using Wellness

U.S. workers are taking advantage of employer-based wellness programs in large numbers, says a Principal Financial Group report. It says 79 per cent of workers (up from 74 per cent a year ago) take advantage of educational tools and resources offered by their employer, while 77 per cent (up from 59 per cent) participate in both blood sugar and cholesterol screenings. As well, 51 per cent of respondents believe wellness benefits are successful at lowering healthcare costs.

Pension Funds Shrink

Global institutional pension fund assets in 11 major markets shrank by approximately 19 per cent during 2008, from $25 trillion to around $20 trillion, says Watson Wyatt’s ‘Global Pension Assets Study.’ The contraction is in sharp contrast to an average annual five-year growth rate to end of 2007 of 12 per cent, taking assets back to below 2005 levels. The study also reveals that the global pensions balance sheet deteriorated by around 29 per cent in 2008, reflecting the combined effects of poor-performing assets and lower government bond yields.

Sponsors Focus On Traditional Risks

Defined Benefit plan sponsors focus more on traditional risk factors than other potential plan pitfalls that are more difficult to measure, says MetLife. It found the top four risk factors received the vast majority of attention, while the bottom four items received "nearly negligible readings." For example, asset allocation (the top factor) was ranked most important 54 per cent of the time, while 13 of the remaining 18 factors were picked as most important fewer than 30 per cent of the time. Plan sponsors ranked asset allocation, meeting return goals, and underfunding of liabilities as most important. Least important include longevity risk, mortality risk, and early retirement risk.

Zelenczuk CPPIB’s CFO

Nicholas Zelenczuk is senior vice-president and chief financial officer of the CPP Investment Board. He has more than 20 years of experience in the financial services industry and was most recently senior vice-president, audit and risk management, for BCE Inc.


Monday, January 26, 2009

Dismal Year For Canadian Pensions

Canadian pension plans suffered the steepest annual decline on record as global equity markets continued to plunge in the fourth quarter of 2008, says a survey by RBC Dexia Investor Services. It shows pension assets fell seven per cent in the quarter ending December 2008, pushing 12-month losses to 15.9 per cent. "The last two quarters of 2008 were particularly brutal, but the pull-back actually started in the summer of 2007," says Don McDougall, director of advisory services. This eclipses the previous annual record set in 1974 when pension portfolios shrank by 12.7 per cent. Domestic equity was the hardest hit asset class as the S&P TSX Composite index lost 33 per cent over the year.

U.S. Institutions Suffered In 2008

Most U.S. institutional investment plan sponsors endured a dismal year in 2008, with the median plan losing a quarter of its value in the 12-month period ending December 31, 2008, says data in the Northern Trust Universe.  Its data shows that investment managers hired by plan sponsors were in line with their benchmarks, and that allocations to private equity and fixed income contributed to plan returns. Foundations & Endowments, for example, derived a relative advantage through larger allocations to private equity, which returned -5.7 per cent in 2008, compared to the U.S. equity program return of -37.5 per cent and the international equity program return of -43.2 per cent for the year. The median F&E plan had an 11 per cent allocation to private equity, while the median Corporate ERISA plan allocated less than one per cent to the asset class.

CPPIB Gets New Directors

Robert Brooks, of Oakville, ON; and Elaine McKinnon of Quispamsis, NB; have been named directors for the Canada Pension Plan Investment Board (CPPIB). Brooks was vice-chairman of the Bank of Nova Scotia prior to retiring last fall. McKinnon is chief financial officer and chief operating officer of Brovada, a Saint John-based software provider. Directors of the CPPIB are selected by the federal government, in consultation with participating provincial governments, from a list of qualified candidates provided by a joint federal-provincial nominating committee.


Stewart Hay will share his observations on fundraising for private equity in a global community at the opening session of CPBI FORUM 2009. A partner at SL Capital who is responsible for product development, marketing private equity products and client relations, Hay has worked with clients and potential investors from more than 30 different countries. He will provide a global view of the threads that bring investors together for a common purpose. FORUM runs May 25 to 27 in Calgary, AB. For more information, visit


Friday, January 23, 2009

Faster Recovery To Follow

The Bank of Canada says the current recession will be followed by a faster recovery than usual. Its ‘Monetary Policy Report Update for January’ projects Canadian GDP will decline by 1.2 per cent this year, but will rebound by 3.8 per cent in 2010. In the U.S., the Bank of Canada expects GDP to decline by 1.7 per cent in 2009, followed by a rebound in 2010. It also believes the possibility of deflation is very unlikely in Canada. The bank worries about inflation falling below its two per cent target as much as it does rates rising above the target, but it has taken aggressive monetary policy action to fight the deteriorating conditions.

Longer Life Span Impacts Pension Liabilities

Companies across the world should factor in up to $250 billion more in pension liabilities now that people live longer, says a Hewitt Associates’ report. The report notes that longer life spans could add up to 15 per cent to the current estimated pension liabilities of Defined Benefit pension plans. It says European companies, especially in the UK, recognize longevity risk more so than their counterparts in other parts of the world. UK plans, for example, typically assume five to six years additional life span compared with other countries.

U.S. Managers Cut Costs

U.S. investment managers are making radical cost cuts – on average 22 per cent – in response to plummeting asset values, says a survey by Greenwich Associates. Its ‘Competitive Challenges’ study reveals that U.S. investment managers’ portfolio assets declined in value by an average 31 per cent in 2008. Total declines on the year ranged from a low of two per cent to a high of almost 67 per cent. As a result, investment managers are projecting an average revenue decline of almost 33 per cent from 2007 levels by the end of 2009. However, instead of cutting costs in line with revenues to reach ‘normal’ profitability, most firms are trying to position themselves for a rebound in the markets and cutting less in client-facing and investment areas, effectively accepting lower margins in the short-term.

Initiative Helps Buy-side Firms

CanDeal and Charles River Development are extending a strategic initiative that integrates the Charles River Investment Management System and CanDeal marketplace to help Canadian buy-side firms address National Instrument 24-101 (NI 24-101) and other regulations by automating trade settlement. The integration creates a seamless end-to-end trade and trade processing solution that places best practices at the forefront. NI 24-101 was introduced in 2007 by the Canadian Securities Administrators as a framework for ensuring more efficient and timely settlement processing of trades.


Thursday, January 22, 2009

Mid-career Employees Value Retirement Plans

A sound retirement program will go a long way towards retaining mid-career employees, says Cindy Rynne, Toronto retirement practice director and consulting actuary with Buck Consultants. Speaking at a session on strategic directions for benefits programs, she said employers should not underestimate how much mid-career employees value their retirement plan. Since they are a significant consideration and concern for these employees, they are well worth consideration in any retention strategies, she said.

Worst Performance In 30 Years

Diversified pooled fund managers posted a median return of -8.3 per cent before management fees in the fourth quarter of 2008 and, since the beginning of the year, the median return was -16.5 per cent, says Morneau Sobeco’s ‘Performance Universe of Pension Managers’ Pooled Funds.’ Jean Bergeron, a principal in the asset management consulting practice, says “we have been monitoring pension funds returns for more than 30 years and this is by far the worst performance we have seen.” He says “not only were the results disastrous,” but a decline in government bond yields created an even bigger problem as the actuarial liability of pension funds increased far more than anticipated with the financial position of pension funds deteriorating on average by about 25 per cent in 2008 which will create substantial pressure on companies which will have to absorb the actuarial deficits. However, Bergeron notes that some temporary solvency relief measures adopted by pension regulators as well as new actuarial standards will somewhat reduce the burden on pension plan sponsors.

Fund Managers More Optimistic

Fund managers are becoming increasingly optimistic about improving economic growth and the prospects of inflation, but they remain cautious over U.S. equities and emerging Chinese markets, says Merrill Lynch’s January global fund managers survey. It found 35 per cent believe long-term interest rates will increase over the next 12 months, up 25 percentage points from December. Those predicting lower inflation dropped to 64 per cent from 82 per cent in December. Despite the optimism, however, the amount managers have in cash dropped modestly to 5.3 per cent from 5.5 per cent in December.

Lang Leads AIMA Session

Amanda Lang, co-anchor of BNN’s nightly ‘Squeeze Play’ program, will lead a panel of senior alternative investment fund managers in a discussion on how they view hedge fund investing in the current environment at an AIMA Canada luncheon February 10 in Toronto, ON. The theme is ‘Under the Hood of Hedge Fund Strategies II – Taming the Bear’ and the panelists will include Keith Balmer, of AHL-Man; Nandu Narayanan, of Trident Investment Management; and John Clark, of JC Clark. For more information, visit

Florida Opens HRPA

Richard Florida, one of the world’s leading intellectuals on economic competitiveness, demographic trends, and cultural and technological innovation, will address the importance of ‘Managing Talent in the Creative Age’ in a keynote address to open the HRPA 2009 Annual Conference & Trade Show. The three-day conference runs January 28 to January 30 in Toronto, ON. For more information, visit

Use Of Personal Information Examined

Presenters will share their experiences on the opportunities to optimize employee health while respecting confidentiality legislation and current practices at the next Connex Health session. Speakers include John Wigle, of Simpson Wigle; and Jay Mercer and John Aikman, of Practice Solutions. Topics will include the legislative requirements for confidentiality and the use of personal employee health information and how employee health information can be used. It takes place February 26 in Burlington, ON. For more information,


Wednesday, January 21, 2009

Creative Capacity Must Be Harnessed

Ontario needs to harness the creative capacity of its workforce and educate its young people so they can take jobs in a creative economy, says Roger Martin, dean of the Rotman School of Management. Speaking at a HOOPP Symposium, he said creative oriented jobs are the fastest growing sector in the economy and may become the future base for the province’s economy. However, he warned this makes pension plans more important because workers in traditional physical/routine jobs earn much less than those in creative oriented jobs. As a result, the former need the safety net of employee pensions.

Survey Uncovers Financial Crisis Reactions, Expectations

Plan sponsors are shifting attitudes in response to the financial crisis and market volatility, Watson Wyatt’s 28th Annual Survey of Economic Expectations finds. Among the most significant findings discussed during a breakfast presentation, plan sponsors will be ‘modestly more conservative’ in their investment strategy and will depend more on credit spreads and money manager skill to drive returns in 2009. On a wider scale, Patricia Croft, chief economist RBC Global Asset Management, says expect a change in attitude towards equities, with a focus on dividends/income; a bull market in bonds for now; and an increase in government intervention and financial sector regulations.

CIBC Mellon Offers TFSA Service

CIBC Mellon is offering Tax-Free Savings Account (TFSA) services to assist investment fund companies in providing TFSA options to their clients, and to permit public companies to offer TFSA selections as part of their employee share/unit purchase plans. The TFSA is a new registered account that was introduced by the federal government in the 2008 budget.

Investor Concerns Paramount

 “As legislators, regulators, board members, and other market participants reflect upon 2008 and consider the issue of senior executive compensation, investors’ concerns need to remain paramount in this difficult time,” says James Allen, director of capital markets at the CFA Institute Centre for Financial Market Integrity. He says investors will be looking at a number of issues including say on pay, compensation disclosures, pay for performance, holding periods, golden parachutes, and voting for board members. Say on Pay is perhaps the most important concern to investors. The CFA Institute Centre believes that shareowners should be able to exercise their right to cast an advisory vote on a board’s compensation decisions. Shareowners that don’t have such a right should carefully review their proxy reports and support say-on-pay proposals.

Foote With UBS

Stephen Foote is executive director, institutional business development, at UBS Global Asset Management. Most recently, he was vice-president, global head of marketing, client service and analytics, for Northwater Capital Management.  Prior to that, he was an investment consultant with Mercer Investment Consulting.

Hedge Fund Incubation Discussed

Senior investment professionals will discuss ‘Hedge Fund Incubation: Investing in the Future Growth of the Hedge Fund Industry’ at an AIMA Canada luncheon January 28 in Toronto, ON. Peter Rizakos, of Accelerator Capital Management Inc.; Tord Stallvik, of Protégé Partners; and John Massy, of Capital Z Asset Management; will discuss the outlook for the hedge fund industry and how they are participating in its growth through hedge fund incubation. For more information, visit


Tuesday, January 20, 2009

Target Benefit Plans ‘Overlooked Gem’

The Ontario Expert Commission on Pensions (OECP) sees target benefit plans as a way to “tempt employers back into offering pensions,” says an Eckler ‘Analysis.’ Calling them an “overlooked gem,” it says target benefit plans currently provide pension benefits to almost one million Ontario workers (or 43 per cent of all Ontarians covered by pension plans). Commonly known as multi-employer pension plans (MEPPs), the first target benefit plan in Canada was developed in the 1940s. The OECP recommends changing legislation to allow the implementation of plans with design, funding, and governance characteristics similar to MEPPs, in employment environments where they are not traditionally found or allowed under the current rules. The recommendations would permit sponsors of single employer pension plans to establish jointly governed target benefit pension plans.

EAFE Managers Underperform In Last Quarter

The median international equity portfolio in the InterSec Research EAFE Plus Universe returned -20.5 per cent during the fourth quarter, slightly underperforming the MSCI EAFE benchmark return of -20 per cent. The majority of this underperformance occurred in October, as the median manager outperformed the MSCI EAFE Index in both November and December. Despite the worst one-year period in the history of the index, more than half of all EAFE Plus managers outperformed the benchmark, with the median manager returning -43.2 per cent for the year ending December. 

Houle Heads Investment Operations

Dan Houle is vice-president, investment operations, for the Ontario Teachers' Pension Plan. Since joining Teachers' in 1994, he has risen through positions of increasing responsibility in the investment division's IT department, most recently as vice-president, business solutions.

Risk Management 2.0 Discussed

‘Risk Management 2.0: What’s Necessary to Restore the Health of the Financial Services Industry?’ is the topic of a January 22 ‘Finance Experts Discussion Series @ Rotman’ session. Derrell Hendrix, CEO, RISConsulting and founding partner and CEO, Karson Management (Bermuda) Limited; John Hull, Maple Financial Group chair in derivatives and risk management, professor of finance and co-director, master of finance program, Rotman School of Management, University of Toronto; and Robert (Bob) Tapscott, interim CEO, RISConsulting; will discuss the financial services industry and what companies need to do to restore stability and create a sustainable 21st century industry. It takes place in Toronto, ON. For more information, visit

Deal And Valuation Trends Discussed

‘Deal and Valuation Trends: Getting Things Done in the Current Turbulent Markets’ is the focus of a Canada's Venture Capital & Private Equity Association event February 26 in Toronto, ON. Sessions will examine areas such as how deal activity is being impacted by today’s market environment and how are private equity and venture capital firms are approaching valuation, structuring, and bridging valuation gaps that may exist between buyers and sellers. For more information, visit

Show Looks At Future Of World Of Work

‘Imagine. Innovate. Inspire’ is the theme of this year’s Health & Safety Canada 2009 Conference and Trade Show. Set for April 20 to 22 in Toronto, ON, it will look at what the future holds in the ever-changing world of work. Keynote speakers include Dr. Jill Bolte Taylor, a neuroanatomist and author of ‘My Stroke of Insight: A Brain Scientist’s Personal Journal;’ Tim Flannery, author of the ‘The Weather Makers: How We Are Changing the Climate and What it Means for Life on Earth;’ Simon Jackson, founder of Spirit Bear Youth Coalition, one of the world’s first all youth-run organizations which is developing the last intact habitat for North America’s rarest bear – the white Kermode or spirit bear on British Columbia’s central coast; and Rick Mercer, star of ‘The Rick Mercer Report.’ For more information, visit


Monday, January 19, 2009

Teachers’ Want TSX Rule Changed

The Ontario Teachers' Pension Plan wants the TSX to change regulations that will allow HudBay Minerals Inc.'s to double its share count without the approval of shareholders, says a report in the Globe and Mail. The pension fund says this kind of dilutive share issue would need majority support from shareholders if the company's primary listing were on the New York Stock Exchange, London Stock Exchange, or in almost any other jurisdiction. The TSX does not allow a company to issue more than 25 per cent of its stock to buy a privately held company without shareholder approval. However, the TSX does allow such dilution for the purchase of a publicly traded company.

UK Wants ‘Do No Harm’ Clause

UK trades union leaders, members of parliament, and pension and investment industry specialists are urging the prime minister to oblige pension funds to insert a ‘do no harm’ clause into their statement of investment principles and to sign up to the United Nations Principles of Responsible Investment. They argue the proposed responsible investment initiatives would help address the practices that contributed to the current financial crisis. In a statement, they say “Recent events have shown how the failure to hold corporate leaders to account for their decisions about risk can have a catastrophic effect on the financial system, the economy, the corporations themselves, and ultimately the well-being of members of pension schemes.” Signing the ‘do no harm’ clause would require fund managers and advisors to satisfy pension fund trustees that their investment decisions are not causing systemic harm to the global financial markets.


Friday, January 16, 2009

Canada’s Banks Stronger

Companies in Canada are benefiting from the fact that the banks upon which they rely for capital markets coverage and mergers and acquisition advisory services are in a much stronger position than those in other markets, says the Greenwich Associates ‘Canadian Investment Banking Research Study.’ “Simply put, Canada’s banks are stronger than some of their counterparts in the United States and Europe because they were not as heavily exposed to the mortgage business or structured products,” says Peter Kane, a consultant in the Toronto, ON, office. “Because their balance sheets are not as loaded down with assets of deteriorating value, the banks that Canadian companies rely on for credit, capital markets services, and M&A advice have not faced the same capitalization crisis that has brought the U.S. banking system to its knees.”

Venture Capital Drives Job Creation

“Venture capital is a key driver of job creation, economic growth, new technologies, and innovation in Canada,” says Gregory Smith, president of Canada’s Venture Capital and Private Equity Association (CVCA) and president of Macquarie Capital Funds Canada Ltd. “Yet Canada’s venture capital investment has declined relative to foreign markets in recent years – a trend that will only worsen with the downturn in the economy and credit markets.” The CVCA’s study shows the gap between venture capital investment in Canada and in the U.S. is widening. Between 2003 and the end of third quarter 2008, venture capital investment in the U.S. increased by 17 per cent.  In Canada, venture capital investment declined by 35 per cent over the same period. This disparity suggests a weakening venture capital industry in Canada which has a direct impact on the overall long-term health of the Canadian economy.

Sit Back And Wait

If it is not in the best interests of a plan sponsor to declare a partial wind-up of a pension plan, the best thing to do is sit back and wait, says Peggy McCallum, of Fasken Martineau. Speaking at its Labour, Employment and Pensions Practice Group seminar, she said there is no obligation on an employer to declare a partial wind-up. While the statutes say it is at the discretion of the superintendent to order a wind-up, not every situation requires partial wind-up. For example, a reorganization of a business may require one whereas a partial wind-up may not be necessary if a company is merely downsizing. However, she warned that the rules about partial wind-ups are not clear.

Northern Trust Implements Solution

Northern Trust has implemented an automated solution to process global syndicated bank loan transactions, providing clients with improved data integrity, increased processing speed, and enhanced reporting on these complex and unique debt instruments. Supported by Markit WSO Services, it allows for posting principal, interest, or any fees associated with incoming payment wires at the loan level, even if held by multiple accounts having uneven denominations of a loan. Clients and investment managers receive automated reconciliation, documentation, and loan maintenance for instruments such as term loans, revolvers, letters of credit, delayed draws, and bridge loans.

Entitlement On Marriage Breakdown Examined

Osgoode Professional Development's ‘Pension and Benefit Entitlements Upon Marriage Breakdown: The Legal Guide’ will take place March 11 in Toronto, ON. This program was developed to provide lawyers and other professionals with the information and guidance they need in handling the division of pension and benefits. Speakers include Peter Shena, senior vice-president, stakeholder relations and pension policy, for the Ontario Pension Board; and Karen Mostyn Kahansky, senior legal counsel, legal affairs, at EDS Canada Inc. For more information, visit

Effectively Spend Wellness Dollars

Learn how to spend your wellness dollars most effectively at this year’s ‘Employer Forum: Effective Programming on Any Budget. Set for April 29 to May 1, it takes place in Niagara-on-the-Lake, ON. For more information, visit

Legal, Legislative Update Set For Ottawa

Key strategies relating to Canadian healthcare, retirement issues, and current and proposed legislation affecting plans will be among the areas covered at the ‘Canadian Legal & Legislative Update.’ Set for May 7 and 8 in Ottawa, ON, it is especially designed for public service trustees, labour and management trustees of multi-employer plans, administrators, and professional advisors looking to keep current with the latest legislative developments. For more information, visit


Thursday, January 15, 2009

Regie To Protect Pensions

The Régie des rentes du Québec would take over the management of insolvent pension plans and guarantee retirement income for five years under legislation expected to be approved today. If the targeted pension plans have insufficient assets to cover benefits, the government will pay the required sums to make them solvent. It also gives Quebec companies 10 years rather than five years to replenish shortfalls in their plans. The market value of the assets of Quebec's private pension plans is currently 70 per cent of their total solvency liabilities. Quebec has nearly a million workers in more than 950 private company pension plans with assets worth about $100 billion.

‘Black Swan’ Would Set Back Markets

While the definition of a ‘black swan’ is something you can’t predict, plan sponsor panelists at the CPBI Ontario Region’s ‘4th Annual Pension Investment Forecast’ did warn any market recovery this year could run into problems as a result of unexpected events. Colin Carlton, vice-president, investment research and risk management, at the Canada Pension Plan Investment Board; suggested that a mistake by U.S. President-elect Barack Obama could trigger another fall in markets. And, if disillusionment sets in, it could be something trivial which triggers a setback, he said. Zev Frishman, vice-president, structured portfolios and external managers, at the Ontario Teachers’ Pension Plan; said his biggest fear is that the policy response to global credit crisis will fail resulting in dire deflationary consequences. Josephine Marks, managing director, pension assets, for Scotiabank; said the industry needs to get its head out of the sand about what caused the most recent meltdown. She warned that we cannot ignore the behavioural issues which caused it. Everyone needs to stop turning a blind eye to certain activities and accepting them because everyone else is doing it. “We, as an industry, need to stop the bad apples,” she said. 

Allocations Shift From Domestic Equities

A large proportion of Canadian plan sponsors expect to continue reducing their allocation to Canadian equities, while the market’s bias is toward increasing allocations to non-domestic equities and ‘alternatives,’ says Dev Clifford, of Greenwich Associates. Speaking at CPBI Ontario Region’s ‘4th Annual Pension Investment Forecast,’ he said there is also a growing presence of foreign/global managers in Canada who are bringing in new ideas and prompting service values to evolve. This, in turn, is resulting in new product opportunities emerging such as liability management, currency hedging, and opportunistic investments.

Superintendent Won’t Appeal Montreal Trust

The Ontario superintendent says he will not be appealing the Financial Services Tribunal (FST) which says parties to a surplus sharing agreement can rely on properly worded court orders to satisfy regulatory requirements relating to employer surplus withdrawals without the need for a supporting historical surplus ownership analysis, says Ian J.F. McSweeney, of Osler, Hoskin & Harcourt LLP. The FST had ordered the superintendent to accept a court settlement order that declared a plan amendment implementing the surplus sharing agreement to be legally valid and binding and further ordered the superintendent not to go behind the court order by doing an independent historical review of the pension plan documentation. It said a valid plan amendment provided for payment of surplus on windup to the employer and there was no need to go beyond the current documentation.

Commuted Value Impacts Contributions

Unlike many actuarial standards, the commuted value standard directly impacts participant benefits and employer contribution requirements for Defined Benefit pension plans, says a Segal ‘Bulletin.’ Consequently, it says it is important to keep the commuted value standard current. It notes the mortality change will tend to increase commuted values while the investment return change will decrease commuted values. In general, the revised standard will provide lower transfer values than the current standard would produce as of the same date.

Passive Offers Value For Money

The majority of pension funds believe they get value for money from their managers with passive equity investments with 96 per cent of respondents to a bfinance survey declaring it good or fair. Its surveys of institutional investors and asset managers from Europe, North America, and the Gulf region found that the worst performing equity class in terms of investor satisfaction is GTAA where 86 per cent feel it is poor value for money, followed by Fund of Hedge Funds where 60 per cent of respondents think it is poor value.  Among the investment managers surveyed, only 44 per cent think that fees may decrease. With regards to hedge fund and fund of hedge fund fee levels, pension funds generally feel that all fees need to be reduced. Although 55 per cent of pension funds want an unconditional reduction in base fees, a substantial proportion would be willing to accept longer lock-up periods in exchange for lower fees. 

Middle-income Earners Get Tax Breaks

Most tax breaks for 401(k) and similar Defined Contribution plans go to middle-income wage earners, says data from the American Society of Pension Professionals & Actuaries (ASPPA). This refutes the misconception that mostly wealthy Americans benefit from 401(k) plans. However, ASPPA emphasized that more needs to be done. Although more than 75 per cent of eligible middle-income wage earners enroll in DC plans, workplace retirement savings availability should be expanded and the remaining workers encouraged to save.

U.S. Employers Face $108 Billion Pension Funding Tab

U.S. employers will be required to contribute more than $108 billion into their Defined Benefit plans this year, says an analysis by Watson Wyatt, a leading global consulting firm. Although that’s roughly $16 billion less than employers would have had to contribute without the passage of a new pension funding relief law late last year, Watson Wyatt says employers will still need additional relief. Even with the enactment of the Worker, Retiree and Employer Recovery Act of 2008, both the required contribution levels in 2009 ($108.7 billion) and 2010 ($102.8 billion) will mark a significant jump from 2008 ($38 billion). Additionally, some employers that fail to meet the minimum 80 per cent funded threshold may have to contribute more.

Benefits 2009 Announced

The Canadian Pension & Benefits Institute Atlantic Region will hold ‘Benefits 2009,’ February 12 and 13 in Halifax, NS. The one-and-a-half day event will feature sessions on topics such as ‘The Evolution Of Employee Benefits,’ ‘Tax Free Savings Accounts,’ and ‘Wellness – Just Do Something Already!’ For more information, visit


Wednesday, January 14, 2009

ICAC Supports Single Regulator Proposal

The Investment Counsel Association of Canada (ICAC) is urging the federal and provincial governments to move forward “with a sense of urgency” on the proposals recommended by the Expert Panel on Securities Regulation. Its report recommends the establishment of a federal securities regulator and a single securities act for Canada. The panel also submitted a draft securities act and implementation plan with its report. The ICAC has supported the creation of a separate national regulatory system that would enable securities issuers and registrants to be registered with, and subject to, the jurisdiction of a federal regulator.

Institutional Managers Find Opportunities

A quarterly poll of investment managers conducted by Northern Trust Global Advisors (NTGA) found a silver lining at the end of a punishing year. Almost four out of five managers now believe the equity market to be undervalued. However, most managers believe that the economy is in for at least another quarter of decreasing corporate earnings before a market rebound begins. Major findings from the December survey show 78 per cent of participants believe that the S&P 500 is undervalued while just over half believe it is undervalued by more than 10 per cent. As well, managers ranked U.S. Large Cap Equity and U.S. Small Cap Equity markets as their most attractive investment opportunities and cited the healthcare, energy, and technology sectors as their preferred market segments.

OMERS Invests In BMV

OMERS Private Equity, the private equity arm of the OMERS Worldwide group of companies, has invested in low-cost wireless carrier BMV Holdings. BMV will launch value-priced wireless services during the third quarter of 2009. It plans to establish a wireless network in key urban centres in Quebec and Ontario offering customers a flat-rate wireless service with unlimited talk for $40 per month.

Japanese Plans Face Shortfall

Japanese Defined Benefit pension funds entered the tumultuous third quarter of 2008 in relatively strong position, with average funding ratios of better than 100 per cent, says Greenwich Associates’ ‘2008 Japanese Investment Management Study.’ However, an emerging shortfall between the current actuarial earnings rate and expected return on plan assets suggests serious challenges ahead. The success of Japanese plan sponsors at sustaining their funding ratios from 2007 to 2008 can be attributed in large part to their efforts over the past several years to reduce portfolio volatility and secure their plans’ overall health. As well, even before markets slid into the current damaging phase of the global financial crisis, Japanese pension plan sponsors were anticipating greater difficulties in meeting return targets.

Education Linked To Plan Participation

Workers with lower educational attainment have lower levels of retirement plan participation, says an EBRI ‘Issue Brief.’ It shows when controlling for earnings, the most highly educated workers still had the highest levels of participation in a retirement plan, but the differences with less educated workers were much smaller, particularly as earnings decreased. Workers with the least education (no high school diploma) had significantly lower levels of retirement plan participation than those with at least a high school diploma. Specifically, 50.7 per cent of those without a high school diploma and making $50,000 or more participated in a retirement plan, compared with 65 per cent of those with the same earnings and only a high school diploma and 76.1 per cent of those with a graduate or professional degree.

Pal Launches Guideline Questionnaire

Pal Benefits has launched a CAP Guidelines Online Questionnaire. Secure and protected, it allows users to complete questionnaires once and then create chronological compliance records. As well, it can identify the roles and responsibilities of sponsors, providers, and members.

Patton With HealthSource

Danny Patton is vice-president of group retirement solutions at HealthSource Plus. Previously, he held senior executive roles with Greenshield Canada and Buck Consultants. In these roles, he has been responsible for providing pension consulting leadership in plan design, funding, administration, and governance.

CPBI Celebrates Bollywood

Zaib Shaikh, a star of the television program ‘Little Mosque on the Prairie,' will be the emcee for this year’s CPBI’s Benefit Ball. Set for February 5 in Toronto, ON, the event this year celebrates Bollywood and will include an opportunity to learn Bollywood dance movements from the Indo Jazz Dancers as well as a silent auction. All proceeds go to the Crohn’s and Colitis Foundation of Canada. For more information, visit


Tuesday, January 13, 2009

Federal Finance Wants Views On Pensions

The federal finance department has released a discussion paper on improving the framework for federally regulated private pension plans. The purpose is to get the views of Canadians on issues related to the legislative framework for federally regulated Defined Benefit and Defined Contribution pension plans with the objective of making permanent changes in 2009. The plans cover areas of employment under federal jurisdiction including banking, telecommunications, and inter-provincial transportation. They currently represent seven per cent of all private pension plans in Canada, accounting for approximately 12 per cent of pension assets. Submissions will be accepted until March 16 and a series of national consultation meetings will begin in March.

Employer Costs Could Increase

To minimize their drug plan costs, employers in Alberta may wish to develop a process to encourage or require employees or retirees over age 65 to apply to the new seniors’ plan, says a Mercer ‘Communiqué.’ The changes resulting from the new pharmaceutical strategy are not expected to have a significant impact on the majority of Albertans in the workforce as most are currently not covered by government drug plans. However, the changes to the seniors’ drug plan may increase the cost of employer-sponsored plans. The impact on employer-sponsored plans will depend on the number and income level of covered employees or retirees over age 65. Early indications are the cost of employer-sponsored drug plans for Alberta-based retirees could increase five per cent to 10 per cent.

ABCP Plan Can Now Be Implemented

The Superior Court of Ontario has granted the plan implementation order for the Pan-Canadian Investors Committee’s restructuring of third-party asset-backed commercial paper. This means the plan for restructuring $32 billion of third-party ABCP can now be implemented. It is expected to close on or about January 16.

Global Fund Managers Optimistic

Fund managers globally have a generally optimistic outlook for 2009 and predict that markets in most regions will begin to recover this year, says a survey by Watson Wyatt. Its global survey indicates that the period of recovery in most markets will be protracted; the influence of hedge funds and investment banks will decline significantly while that of pension and sovereign funds will rise; and there will be continued growth in demand for alpha from investors. Furthermore, fund managers expect to see their institutional clients opting for more conservative investment strategies as well as prioritizing greater risk control as the main area for improvement in their governance.

LDI To Be Standard Practice

Liability-driven investing (LDI) will move from the contemplation stage to become standard practice for Defined Benefit pension plans across the U.S. within the next five years, says the ‘Russell Retirement Report 2009.’ It says LDI could become the foundation for U.S. pension plan investment strategies. The focus of programs will move beyond interest rate risk to incorporate other factors including credit risk, yield curve risk, and timing. 

Bomers At Aurion

Adam Bomers is director, investment research and solutions, at Aurion Capital. He brings more than a decade of financial services, investment, and client relationship experience to his new role where will direct investment research and portfolio and asset class analytics for Defined Benefit and Defined Contribution pension funds and institutional portfolios.


Monday, January 12, 2009

Economists Predict Mild Recession In Canada

Despite predictions of the worst U.S. recession in decades, Canada’s top economists and portfolio managers foresee a milder downturn for the Canadian economy. While ‘Watson Wyatt 28th Annual Survey of Economic Expectations’ anticipates the real Gross Domestic Product (GDP) growth south of the border to be -0.5 per cent  (median) in 2009, the Canadian real GDP growth is expected to hover around zero (0.1 per cent) this year. With no inflation risks on the horizon and credit markets remaining tight, survey participants expect the benchmark interest rate set by the Bank of Canada (BoC) to stay at a historically low level of 1.5 per cent with gradual interest rate increases occurring only after 2009. “Despite incredibly low interest rates, investors seeking safer assets will be attracted to government bonds and money market instruments, at least in the short term,” says Janet Rabovsky, investment consulting leader for Central Canada. “Lower interest rates are not providing any relief to pension funds. However, they will sow the seeds of an economic recovery as businesses start to invest in production and delivery in 2009, ultimately leading to some recovery in the equity market later this year.”

Canadian Pension Plans Pummelled In 2008

The financial health of Canadian pension plans plummeted in 2008, as stock markets and interest rates declined sharply. The Mercer Pension Health Index fell to 59 per cent, down 23 per cent from the beginning of the year. “Pension plans experienced substantial losses on both sides of the balance sheet, with lower long-term interest rates increasing liabilities,” says Paul Forestell, retirement professional leader at Mercer. However, he notes that for many plans, corporate financial statements at year-end 2008 will show gains in pension plan funded status over the year, despite the investment losses. As credit spreads have widened, rising corporate bond yields will result in lower disclosed pension obligations at year end.”

Barclays Appoints Kitchen

Tim Kitchen is managing director, head of investment banking, Canada, for Barclays Capital. Based in Calgary, AB, he will oversee the firm's Toronto, ON, and Calgary investment banking teams. He joined the firm from Lehman Brothers last September.

Summit Tackles Sustainability

The ‘2009 Summit on the Future of Pensions: From Crisis to Sustainability’ will explore how to manage the immediate crisis while tackling the long-term structural challenges.   Topics will include an examination of the Alberta/BC, Ontario, and Nova Scotia pension regulation reports and how major organizations are lobbying the federal government for change. It takes place April 20 and April 21 in Toronto, ON. For more information, visit

 Conference Looks At Alternatives

Mindpath‘s ‘3rd Annual Alternative Investments for Institutional Investors Conference’ takes place February 9 in Toronto, ON. It will feature a number of industry-leading experts in infrastructure, real estate, private equity, and hedge funds. Attendees will also hear from institutional investors active in these asset classes such as Anthony Lennie, director of finance with Victoria University at the University of Toronto. For more information, visit


Friday, January 9, 2009

Investment Managers Optimistic About 2009

Despite the global economic slowdown, historic market losses, and unprecedented volatility that defined 2008, investment managers are optimistic about the performance of capital markets in the year ahead, says Mercer’s ‘2009 Fearless Forecast ‘survey of Canadian and global institutional investment fund managers. Equities are expected to stage a modest recovery and rank as the most attractive asset class. Major equity markets around the world closed 2008 with astonishing losses in the range of -30 per cent to -40 per cent on a local currency basis. The majority of the managers surveyed are predicting markets will bottom-out and produce overall solid performance in 2009. On average, the managers expect Canadian and foreign equity markets will earn near 10 per cent over the course of the year. The expectation of positive returns is tempered by pessimism regarding a full market rebound. Almost all managers (just under 90 per cent) believe that it will take at least three years for the S&P/TSX to reach its former high of 15,000.

Solvency Levels At Historic Lows

Market declines caused by the global financial crisis have left the solvency of Canadian Defined Benefit pension plans at historical lows and Defined Contribution plan members with shrinking retirement savings, says an analysis by Watson Wyatt Worldwide. The pension solvency funded ratio (the ratio of market value of plan assets to plan solvency liabilities) of the typical pension plan declined 27 percentage points in 2008, dropping from 96 per cent at the beginning of the year to 69 per cent at year-end. Watson Wyatt’s Pension Barometer, which reflects the combined impact of investment performance and interest rates on the solvency funded ratio of a typical Canadian pension plan, indicates that the funded status of the typical pension plan decreased 11 percentage points in the fourth quarter alone.

Health Benefits And Retirement Plans Linked

There a correlation between health status and participation in an employment-based retirement plan, says an EBRI ‘Issue Brief which examines the level of participation in public- and private-sector employment-based pension and retirement plans. Workers with health coverage through work are also more likely to have and participate in a retirement plan through work. “Across all ages, workers with employment-based health insurance from their own employer are more than twice as likely to have a retirement plan as those without health insurance from their own employer,” says the brief, which is published by the Employee Benefit Research Institute (EBRI). Among workers ages 45 to 54 in 2007, 70.9 per cent of those with health insurance through their own employer participated in an employment-based retirement plan, compared with 29.2 per cent of those without health insurance through their own employer.

Barisheff Boosts Gold

Gold and other precious metals will outperform most other asset classes including equities, bonds, and real estate this year, says Nick Barisheff, president and CEO of Bullion Management Group Inc. In his ‘2009 Outlook,’ he says the problems continuing to negatively affect most asset classes this year will actually help gold continue its upward swing in 2009. "Precious metals have been on an upward trend for eight years and for the past five gold has been the best performing asset. Throughout the financial turmoil of the past year, gold preserved investor wealth and outperformed all other asset classes other than bonds," says Barisheff. In Canada, the metal gained 31 per cent while the Toronto Stock Exchange lost 39 per cent.

Nominations Open For OBA Award

The Ontario Bar Association Pensions & Benefits Section has established a new annual award – The OBA Award for Excellence in Pensions and Benefits Law. The award recognizes the contribution of pension and benefits lawyers both to the evolution of the law and to the industry as a whole. Nominations may only be made by a member of the OBA Pensions and Benefits Section. Nomination forms and the full terms of reference are available on at Nominations close at 5 p.m. February 9.

Siciliano Oversees Boutiques

John Siciliano is senior managing director and head of the investment boutiques at New York Life Investments. In this newly-created role, his responsibilities include oversight of external investment boutiques which deliver investment products serving institutional and retail clients. Previously, he was managing director at Grail Partners.


Thursday, January 8, 2009

Employer Entitled To Surplus

Parties to a surplus sharing agreement can rely on properly worded court orders to satisfy regulatory requirements relating to employer surplus withdrawals without the need for a supporting historical surplus ownership analysis, says Ian J.F. McSweeney, of Osler, Hoskin & Harcourt LLP. He says in the long-awaited decision of the Ontario Financial Services Tribunal (FST) in the Montreal Trust matter, FST ordered the Ontario Superintendent to accept a court settlement order that declared a plan amendment implementing the surplus sharing agreement to be legally valid and binding and further ordered the superintendent not to go behind the court order by doing an independent historical review of the pension plan documentation. It said a valid plan amendment provided for payment of surplus on windup to the employer and there was no need to go beyond the current documentation.

DB Risk Measures Inadequate

Many companies around the world have not taken adequate measures to guard against Defined Benefit pension risk, says a Hewitt Associates survey. The issue is particularly pressing in Canada, which survey results indicate has the highest proportion of DB plans open to new entrants, as compared to companies from other countries responding to the survey. Since the start of the credit crunch in the last quarter of 2007, pension plan assets on a global level have plummeted by US$4 trillion. In terms of the factors that influence a company's attitude towards managing pension risk, accounting issues dominate globally, principally in terms of the impact on the profit and loss statement. Canadian organizations, due to differences in accounting standards between Canada and the rest of the world and its solvency funding regime, are more concerned with cash funding requirements. The impact on a plan sponsor's financial resources is so significant that organizations, particularly in Canada, are moving pensions out of the realm of human resources and under the management of their finance teams.

Funding Status Drops 25 Per Cent 

The funding status of the largest U.S. companies’ pension plans dropped from a 104 per cent surplus at year-end 2007 to a 75 per cent funded level a year later, says Mercer’s latest estimate. In dollar terms, plans went from an aggregate surplus of $60 billion at the end of 2007 to an estimated aggregate deficit of $409 billion at the end of 2008 – an estimated aggregate loss of $469 billion. The aggregate funded status fell by $129 billion in December, $130 billion in November, and $110 billion in October, while the aggregate deficit for the first nine months of 2008 was $100 billion. The change will negatively impact corporate earnings in 2009, says Mercer. The decline comes from adverse trends in both equity and bond markets.

Workers Face Lump-sum Decisions

With 401(k)-type plans now dominant and ‘traditional’ pensions offering lump-sum distributions at retirement, a growing number of U.S. workers are faced with making decisions about what to do with assets they have earned in their employment-based plans when they change jobs, says the January EBRI Notes.’ After leaving a job with an employer that sponsors a retirement plan, workers have three choices for their retirement accounts – leaving the money in the plan, rolling it over to another tax-qualified savings plan, or cashing it out. The percentage of those rolling over their most recent lump-sum distribution to another tax-qualified retirement plan – thus preserving the assets for retirement – increased to 44.3 per cent through 2006, compared with 19.3 per cent of those who received their most recent distribution through 1993. Furthermore, the percentage of lump-sum recipients whose most recent distribution went entirely for consumption was 9.2 per cent for distributions received through 2006, compared with 22.7 per cent for those who received distributions through 1993.

Canadians Should Use TFSAs And RRSPs    

“Canadians should investigate how Tax-Free Savings Accounts (TFSAs) and RRSPs can fit into their financial plan,” says Rocco Taglioni, vice-president, individual wealth, Sun Life Financial Canada. And, he says if they can, they should take advantage of both. He says a TFSA, available through work or through an advisor, may be ideal for those who are saving for a big goal such as buying a home or who are using all their RRSP contribution room each year and have additional savings to invest. RRSPs are also an important savings tool for Canadians trying to supplement their retirement savings.

Marriage Break-up Impacts Retirement Plans

All aspects of an individual’s retirement plan must usually be revised when a marriage break-up occurs. This will be the focus of a Manitoba region CPBI event entitled ‘Marriage Break-up And The Collaborative law Process.’  Speakers will be Anu Osborne, Partner, a senior family law practitioner at Smith Osborne LLP; Judy Haid, a marriage and family therapist at Haid Smith Counselling; and Darryl Robinson, a financial planner specializing in personal financial planning, retirement planning, and financial education with D. Robinson & Associates. They will discuss emerging trends in collaborative law practice and outline the roles and responsibilities of the various professional practitioners involved in the process. It takes place January 15 in Winnipeg, MB. For more information, contact Dale Davidson at


Wednesday, January 7, 2009

IPO Activity Vanishes

Without a single initial public offering on Canada's senior equity exchange in the last six months, 2008 was the worst year for IPOs in the history of the annual survey of Canada's equity markets by PricewaterhouseCoopers (PwC). Its 2008 summary has revealed just 57 new issues struggled to reach Canada's equity markets in 2008, with a mere 10 registered on the TSX in the year ended December 31, 2008. There were no new IPOs on the TSX in the final six months of the year. By comparison, there were 100 IPOs on all of Canada's exchanges in 2007, with 36 new issues on the TSX. 

Integra Announces Strategic Alliance

Integra Capital Limited and Principal Global Investors have announced a strategic alliance to serve institutional clients in Canada. Through this alliance, Principal will offer separate account management services and act as a sub-adviser for a wide range of pooled fund investment strategies offered in Canada by Integra. Principal managed US$228 billion as of September 30, 2008, and offers expertise in three areas of investments – equities, fixed income, and real estate.

Target-date Funds Eliminate Extremes

Target-date funds could solve concerns by retirement plan sponsors that some participants are too aggressively invested in equities while others are invested too conservatively to reach retirement savings goals, says a study by the Vanguard Center for Retirement Research. ‘Target-Date Funds: Plan and Participant Adoption in 2007’ shows that participants who do not invest in target-date funds tend to exhibit greater extremes in their equity holdings. Fully 30 per cent of participants in the study held risky, all-equity portfolios, while 16 per cent held highly conservative, zero-equity portfolios. In contrast, the stock exposure of target-fund investors ranged generally from 40 per cent to 90 per cent, depending on their age and time to retirement.

Commuted Value Interest Rate Assumptions For February

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including February 2009 are now available at An Excel spreadsheet on the website contains six worksheets:


Tuesday, January 6, 2009

Guay Steps Down As Caisse Head

Richard Guay had decided, for personal reasons, to step down as president and chief executive officer of the Caisse de dépôt et placement du Québec. He will continue to work for the institution and will hold the position of strategic adviser to the president and chief executive officer, providing counsel on investment policy and asset allocation. Guay was appointed president and chief executive officer September 5, 2008, having been responsible for interim management of the institution since May 30, 2008. He has worked for the Caisse since 1995. The Caisse's board has recommended that the Québec government approve the appointment of Fernand Perreault as president and chief executive officer for a period of six months. René Tremblay, president and chief executive officer of Ivanhoe Cambridge, a subsidiary of the Caisse, has been appointed executive vice-president, real estate, on an interim basis, to replace Perreault.

Health Forces Retirement

Approximately one in four retired Canadians cited health issues as the main reason for their retirement, says the 19th Annual RBC RRSP Poll. However, only nine per cent of pre-retired Canadians believe that health issues will trigger them to retire. Besides health issues, qualifying for a pension (24 per cent) and company downsizing (13 per cent) were the leading factors that prompted Canadians to retire. The study also found that health is top of mind for retired Canadians. In fact, when retirees were asked to state the best gift they could receive in retirement, good health (53 per cent) ranked higher than no financial worries (30 per cent). The reverse is true for Canadians who have not yet retired, with 38 per cent ranking no financial worries over health (34 per cent) as the best gift they could give themselves in retirement.

One Of Worst Years Ever For Equities

Equity funds in Canada had one of their worst years ever in 2008. All of the Morningstar Canada Fund Indices that track either equity or balanced fund categories had negative returns for the year. For 23 of the 24 equity fund indices, the losses exceeded 20 per cent and all but four recorded their worst calendar year return in at least 25 years. The best performing equity fund indices for the year were healthcare equity (-8.4 per cent) and Japanese equity (-20 per cent), while the worst was natural resources equity (-48.5 per cent). Fixed income fund indices were the only ones able to provide positive returns in 2008. The Morningstar Global Fixed Income Fund Index posted the highest gain overall (15.6 per cent), helped by the loonie's dramatic decline, which in turn was mainly caused by plunging commodity prices.

Mercier Re-appointed

Eileen A. Mercier has been appointed to a second two-year term as chair of the Ontario Teachers' Pension Plan Board. She has more than 35 years of business experience and was first appointed to the board in 2005. From 1995 to 2003, she was president of her own management consulting firm, Finvoy Management, which specialized in financial strategy and corporate governance issues. Prior to that, she spent 25 years working for firms in the financial services, communications, integrated oil, and forest products sectors, culminating with her appointment as senior vice-president and CFO of Abitibi-Price Inc.

Nelson Crowder Passes Away   

Nelson (Jerry) Crowder passed away January 3 in his 75th year. The father of Robert J. Crowder, president of The Benefits Trust, he spent 45 years in the employee benefit consulting field.

Innes Co-founded YMG

Eric Innes, co-founder of the Yield Management Group Inc., passed away January 2. He helped form the company in 1983 to provide innovative, quantitative investment products to Canadian institutional investors. In 1997, the firm changed its name to YMG Capital Management Inc. and when it was sold to Fiera Capital Inc. in 2006, it was one of the few independent full-service, multi-product investment firms in Canada with assets under management of more than $15 billion dollars.


Monday, January 5, 2009

Groupworks Adds HealthSource Plus

Groupworks Financial Corp. has entered into a share exchange agreement with the shareholders of People Corporation, the parent of operating companies HealthSource Plus Inc. and People First HR Services Ltd. The transaction is expected to increase the company's annual revenue to approximately $20 million and strengthen its position as a consolidator of independent benefit and pension advisory firms in Canada.

Top Employers Have High Engagement

Canadian businesses with high employee engagement have a competitive advantage in their ability to weather a recession, says Hewitt Associates’ ‘Best Employers in Canada’ study. Employees who work for Canada’s best employers want to do their part to ensure their employer responds to the challenges they face in a more uncertain business climate. They are highly committed to the organization’s success and understand their role in helping to achieve business results.

Committee Gets Back-stop Facility

The Pan-Canadian Investors Committee has confirmed that an agreement has been reached with all key stakeholders, including the governments of Canada, Quebec, Ontario, and Alberta regarding the restructuring of $32 billion of third-party asset-backed commercial paper. The governments, together with certain participants in the restructuring, will provide $4.45 billion of additional margin facilities to support the proposed restructuring plan. The total margin facilities and equivalents now total $17.82 billion and $3.45 of the back-stop facility ranks senior to all other margin facilities and, in the event of margin calls, it would be last in and the first out.

Psychologically Safe Workplace Discussed At Session

‘The Psychologically Safe Workplace – Why We Need It & How We Can Get It’ will be the focus of the next Employee Assistance Program Association of Toronto (EAPAT) session. A psychologically safe workplace is one that does not permit harm to the mental health of employees in careless, negligent, or intentional ways. Dr. Martin Shain, director and founder of the Neighbour at Work Centre, will discuss the emergence of a new legal requirement across Canada to provide psychologically safe workplaces. It takes place January 22 in Toronto, ON. For more information, visit


Tuesday, December 23, 2008

Funding Standard Adds To Complexity

Some elements of the Nova Scotia Pension Review Panel’s interim position paper – reflecting its proposed pension reform recommendations to the provincial government – raise serious concerns, says a Mercer ‘Communiqué.’ It says a suggestion to create an entirely new minimum funding standard for Defined Benefit pension plans could be the source of considerably increased complexity for sponsors and inequity for plan members. The new standard would be based on the cost of ‘accrued benefits’ and is an amalgam of going concern and solvency valuations, including five years of salary projections and early retirement decrements. As well, giving advisory committees independent access to the sponsor’s advisors creates potential for conflict of interest that will almost certainly materialize. Regulatory discretion over individual plan governance arrangements may stifle the flexibility and evolution that a plan sponsor believes best serves its arrangements.

Reforms Must Recognize Voluntary Nature

Any pension reform must recognize that pension plans are voluntary arrangements that employers are prepared to abandon, says a Morneau Sobeco ‘New & Views.’ It says the Alberta/British Columbia Joint Expert Panel report recognizes the factors leading to the decline of Defined Benefit and its recommendations regarding funding requirements, surplus ownership, and plan expenses will be welcomed by employers. The panel’s support for alternative pension plan designs creates a potential for new types of plans that could offer a better sharing of risk between employers and employees through innovative combinations of DB and Defined Contribution elements. In addition, new types of DC plans could potentially offer inter-generational risk sharing so that employees’ retirement income is not as affected by the date on which they retire (an undesirable result that is underscored by the present financial crisis, for example). To view the report, click here. View the Executive Summary here.

UBS Selling Canadian-based Business

UBS is selling its Canadian-based commodities and energy business to JPMorgan Chase & Co. as part of its plan to refocus on its core securities and advisory functions. JPMorgan will acquire UBS Commodities Canada Ltd., the Canadian energy operations of UBS. However, UBS Commodities Canada will become an indirect wholly-owned subsidiary of JPMorgan which says the acquisition will allow it “to immediately expand its presence in the Canadian natural gas, power, and crude oil physical and financial markets, while further expanding its overall Canadian client franchise.”

Companies Step Up Communication

U.S. employers are stepping up their communication to workers about financial performance and solvency to help alleviate growing levels of stress and anxiety caused by the recession, says a Watson Wyatt survey. It found that 77 per cent of respondents have already sent out or are planning communication on the impact of the financial crisis. More than two-thirds (69 per cent) of these employers cited easing employee anxiety as one of the top two goals of their crisis-related internal communication, while nearly one-third (32 per cent) cited earning employees’ trust. ‘Communicating to Employees During the Current Financial Crisis’ shows that job security and company performance and solvency are at the top of employees’ concerns.

Northern Trust Named Custodian

Northern Trust has been named global custodian for the Labourers’ Pension Fund of Central and Eastern Canada. It will provide custody and related services for the $1.9 billion mandate. The Labourers’ Pension Fund of Central and Eastern Canada has more than 39,000 members and 13,000 pensioners and beneficiaries.


Monday, December 22, 2008

Saskatchewan Offers Funding Relief Options

The Saskatchewan Financial Services Commission is proposing two temporary solvency funding relief options for all Defined Benefit plans, says a ‘Hewitt Monitor.’ The first option would allow plan sponsors to elect a three-year moratorium from funding a solvency deficiency established by an actuarial valuation with a review date no earlier than December 31, 2008, and no later than December 31, 2009. Employers would be relieved from making payments in respect of the new solvency deficiency in the first three years of the five-year amortization period, while payments in years four and five would continue to be required. The second option would allow a plan sponsor to elect an extension of the amortization period from five years to 10 years for a solvency deficiency established by an actuarial valuation with a review date no earlier than December 31, 2008, and no later than December 31, 2009.

Toxic Factors Impact Recovery

It will take some time for the financial sector to completely rid itself of its toxic factors, say Desjardins Group economists. They say the recession will be fairly deep, while the recovery will be rather tepid. With Canada at the mercy of the American economy and the prices for oil and raw materials, Desjardins' economists predict that the country will have to trudge through three consecutive quarters of contraction, beginning with the last quarter of 2008. Investments are being delayed by tightening credit conditions, economic uncertainty, and low commodity prices. However, Canada can congratulate itself on not having succumbed to the profligacy of U.S. mortgage lenders. The Canadian financial system has stayed in much better health, they say.

Multi Closes On Turkish Fund

Multi Corporation, Europe’s largest retail developer, has closed on a new Turkish retail property fund. The Multi Retail Turkey fund is a real estate development platform that consists of 21 completed, under construction, or planned shopping centres throughout Turkey. The establishment of the fund creates Turkey’s largest portfolio of retail real estate assets at the same time as being the largest publicly announced private equity investment in the Turkish real estate sector in 2008. The Canada Pension Plan Investment Board is the first founding investor in Multi.


Friday, December 19, 2008

Canada To Avoid Deep Downturn

Canada will avoid a deep downturn in 2009 even at the world economy grows at its weakest level in 27 years in 2009, says the National Bank Financial Group. It predicts global growth of 1.6 per cent next year. “Even if deleveraging and forced asset sales let up in the months ahead, which is likely, we do not expect the world economy to expand by more than 1.6 per cent in 2009,” says Stefane Marion, chief economist and strategist at National Bank. In Canada, the bank expects total GDP growth of 0.7 per cent in 2008, and no growth in 2009. While a technical recession “seems inevitable,” the National Bank expects monetary policy and budget stimulus measures from Ottawa to help sustain domestic demand and prevent a recession as severe as the one of the early 1990s.

Crisis Changing Fixed Income Markets

The consequences of the current financial turmoil will shape Europe’s fixed income markets for years to come, says Greenwich Associates’ ‘2008 European Fixed Income Investors Study.’ It says when markets eventually revert back to some basic level of functionality, higher costs of capital and more stringent capital requirements will force many dealers to significantly limit their prior roles as suppliers of broad-based liquidity to individual OTC product markets. As well, attrition among hedge funds will reduce the amount of fixed income trading volume, revenue, and prime brokerage business generated by this segment of investors, thereby diminishing the clout of hedge funds in European fixed income markets. The loss of revenues from structured products will leave a hole in dealers’ strategic plans that will have to be filled with more vanilla, client-driven, agency-based business. Some lost revenues will not be coming back any time soon. In particular, the structured credit businesses that represented a big component of revenue and profit projections in dealers’ three-year strategic plans have been decimated.

Cumming Earns AIMA Award

Douglas Cumming, associate professor and Ontario research chair, York University – Schulich School of Business, has been awarded the 2008 AIMA Canada – Hillsdale Research Award. His winning paper is entitled ‘Hedge Fund Regulation and Performance.’ In his paper, he discusses the impact of hedge fund regulation on fund governance and performance. The research finds regulatory requirements in the form of restrictions on the location of key service providers and marketing channels that permit wrappers tend to be associated with worse performance and a reduction in risk. However, the reduction in risk is not sufficient to compensate for the lowering of performance.

One Quarter In Lifecycle Funds

At year-end 2007, more than seven per cent of 401(k) assets were invested in lifecycle funds and one-quarter of 401(k) participants held lifecycle funds, says an analysis by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). The analysis found that about two-thirds of 401(k) plans included lifecycle funds in their investment lineup at year-end 2007. Across all age groups, more new or recent hires invested their 401(k) assets in balanced funds, including lifecycle funds, the data shows.


Thursday, December 18, 2008

BCE Sues For Penalty

BCE Inc. is suing the Ontario Teachers' Pension Plan and its partners for the group's failure to complete its acquisition of the Bell Canada parent company. The suit is demanding the group pay the $1.2 billion penalty agreed to under the $35 billion deal. In its filing with the Quebec Superior Court, BCE says "The failure of the deal to close on December 11, 2008 was directly related to both the burden of the loan financing arranged by the defendants and a deterioration in the global market conditions, each of which was a risk borne by the defendants under the contractual agreement for the transaction." The deal collapsed after BCE failed to meet a key auditors test.

Canadians To Use TFSAs And RRSPs

Only eight per cent of Canadians who plan to open a Tax Free Savings Account (TFSA) intend to reduce their RRSP contribution, says the ‘19th Annual RBC RRSP Poll.’ Thirty per cent of those who have heard of the TFSA still plan to contribute as much money to their RRSP as well as to a TFSA, while 23 per cent plan on moving money from existing non-registered savings into a TFSA. Almost half (44 per cent) of Canadians who plan to open a TFSA, intend to use it as a vehicle for long-term retirement savings.

More Needed To Manage Pension Risk

Companies need to do a lot more to manage their pension risk and potentially weak returns during tough economic times, says a Hewitt Associates global survey. It found most plan sponsors have taken only "small and conservative steps to manage their risk at a time when careful monitoring and measurement and strong, meaningful actions should be the order of the day." It also found there are steps employers can take now that will enable them to ensure the long-term health and stability of their pension plans, as well as protect them from volatile market and economic conditions. These tools include more sophisticated investment solutions, integrated funding and investment strategies, and liability management techniques.

Motorola Freezes Pension Plans

Motorola Inc. is freezing its pension plans. The company, which blamed the recession for the moves, will permanently freeze its U.S. pension plans and temporarily suspend matching 401(k) contributions. It is keeping the benefits for employees whose pensions have already vested, but workers will not see any additional benefit accruals after March 1. It had already eliminated its pension plan for employees hired after January 1, 2005.


Wednesday, December 17, 2008

Relief Too Little, Too Late

The Ontario government’s proposed solvency relief measures may be too little, too late given the limited detail on the measures and the delay in introducing the implementing legislation until Spring 2009, says an ‘Osler Update.’ It also questions the complexities and uncertainties plan sponsors will likely face when attempting to obtain member consent if they are to avail themselves of the proposed extended amortization period from five to 10 years. The relief, if passed, would be retroactive to September 30, 2008.

Organizations Seeking Balance

Organizations are being forced to balance the desire to provide employees with post-retirement benefits and the need to control escalating costs, says Mercer’s ‘2008 Post-Retirement Trends’ survey. In the last three years, one-third of Canadian companies surveyed have made reductions to the benefits that they provide for retired employees.  Moreover, 21 per cent of companies expect to make reductions in the next three years, compared to five per cent who expect to make improvements. Mercer anticipates that the number of companies making reductions may differ significantly from the expected 21 per cent as a result of current economic conditions.

Northern Trust Enhances Capabilities

Northern Trust has enhanced the reporting capabilities for its Benefit Payment Services, which issues more than 1.3 million pension and savings plan distributions each month for institutional clients in North America. Through Passport, its multi-faceted web portal, plan sponsors can access an array of reports delivered in the format that they choose. Benefit Payment Services assists clients with managing their Defined Benefit, Defined Contribution, and non-qualified plan payments from basic needs to the most complex, including the ability to mask or suppress sensitive data.

Private Equity Symposium Returns

The Private Equity Symposium – a collaborative event between Financial Executives International Canada (FEI Canada), the Canadian Institute of Chartered Business Valuators (CICBV), Toronto CFA Society, and Canada’s Venture Capital & Private Equity Association (CVCA) – will take place March 3 in Toronto, ON. Now in its fourth year, the symposium provides an opportunity for financial executives to network with colleagues from all sides of the private equity market. Speakers will include D. Brooks Zug, senior managing director and founder, HarbourVest Partners, LLC; John Albright, managing partner, Albright Partners; and Ron Tepper, executive chairman, Fastfrate Inc. for more information, visit


Tuesday, December 16, 2008

Investment Managers Optimistic

Optimism abounds heading into 2009 as Canadian investment managers are bullish towards virtually all equity sectors, says the ‘Russell Investment Manager Outlook.’ Following the historic market volatility of October, only about one in four investment managers remain bearish towards Canadian, U.S., and international equities. “At the end of 2007, with the Loonie above par and equities setting all-time highs on the back of record commodity prices, only 28 per cent of investment managers were bullish towards Canadian equities. After all, how much higher could they go?” says Sadiq S. Adatia, chief investment officer of Russell. “Fast forward to the closing months of 2008, and the pendulum has swung the other way. Oil is below US$50, gold is dramatically lower, the Loonie is struggling, and the TSX has hit bottom. Today, many managers seem to feel there’s no way left to go but up.” When asked to predict broad Canadian equity market performance for 2009, 32 per cent of managers surveyed said they expect gains of up to 10 per cent, and 40 per cent predicted returns of 10 per cent or more. Meanwhile, only 13 per cent of managers said they expect negative returns, and 16 per cent predicted flat markets.

Sponsors Acting Proactively

Canadian plan sponsors are, for the most part, dealing proactively with the recent turmoil in the markets and are taking their fiduciary responsibilities seriously, says Aon Consulting Canada’s ‘2008 Retirement Pulse Survey.’ As evidence of a lack of complacency, it found 67 per cent of the Defined Benefit respondents indicated that they would participate in lobbying efforts to convince pension regulatory authorities to consider introducing some form of relief for the significantly increased solvency funding that will surely result from the current turmoil. Companies overwhelmingly responded that they have reviewed their Defined Contribution plan's core investment fund line-up in response to the turmoil. Almost half have conducted risk evaluation of their exposure to securities of financial firms that have experienced significant duress. Respondents have also identified strategies to encourage continued plan participation and calm the fears fuelled by plunging markets. 

Age Determines Plan Participation

Retirement plan participation in 2007 was 56.6 per cent for wage and salary workers ages 55 to 64, compared with 19.6 per cent for those ages 21 to 24, says the October 2008 ‘EBRI Issue Brief. In general, it reports, retirement plan participation increases with age and younger workers’ significantly lower likelihood of participating in a plan could be the result of having lower incomes at the start of their careers. However, when looking at workers by age across earnings, younger workers are still less likely to be retirement plan participants than older workers with the same earnings. Even for the highest earners ($50,000 or more), 49.2 per cent of those ages 21 to 24 participated in a plan, compared with 74.4 per cent of those ages 45 to 54. 

Jarvis Heads CFA 

Peter Jarvis is executive director of the Toronto CFA Society. He was formerly chief investment officer and executive vice-president, investments, at BIMCOR. Previously, he was with OMERS as vice-president, fixed income and derivatives; fixed income and alternative strategies; and then strategic research and investment risk management.


Monday, December 15, 2008

Members Move From Equities

Members of U.S. Defined Contribution plans reallocated their portfolios away from equity assets to fixed income funds in the third quarter, says the Callan ‘DC Index.’ Its total index turnover reached 1.13 per cent for the quarter ended September 30, 2008, well above the quarterly historical average of 0.78 per cent. Stable value, money market, and domestic bond funds collectively captured nearly 80 per cent of inflows. Target-date funds were the only exception to participants' flight to fixed income with an inflow of 18.6 per cent.

More Employees Get Employer Contributions

After falling between 2006 and 2007, the percentage of workers with an employer contribution to their health plan increased from 61 per cent in 2007 to 66 per cent in 2008, says the December 2008 ‘EBRI Notes.’ It also found that among workers with an employer contribution, those with employee-only coverage have seen their annual employer contributions increase. From 2006 and 2008, the percentage reporting that their employer contributed $1,000 or more to the account increased from 26 per cent to 37 per cent.

Workers Take Steps To Lower Medical Costs

Rising health costs are leading an increasing number of U.S. workers to take steps to reduce their own spending on medical care, says a survey by Watson Wyatt. With more workers suffering financially during this open enrollment period, a significantly lower number of employees (19 per cent) are willing to pay higher premiums in order to keep deductibles and copays lower and more predictable. Last year, twice as many (38 per cent) were willing to do so. In addition, two-thirds (66 per cent) of employees are taking steps to improve personal care, up four percentage points from 2007.

Revised December Commuted Value Assumptions

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


Friday, December 12, 2008

New Commuted Value Set

The Actuarial Standards Board has passed controversial changes to actuarial pension standards that will see pension holders receive a lesser amount of their holdings when they terminate employment. The new standards for pensions’ commuted values will replace those brought into place in 2005, which are set to expire next year. The new rules mean Defined Benefit pension holders that terminate employment will receive a value of holdings calculated with a discount rate 40 basis points greater than it was previously. The implications vary for pension holders depending on their age, type of plan, and interest rates. For a pension holder about to retire at age 60, the new rate would mean a reduction in value of roughly four per cent while a 40-year-old would see about 11 per cent less value.

Plan Value Rose In Second Quarter

The market value of assets held in employer-sponsored trusteed pension funds amounted to $958.9 billion at the end of the second quarter of 2008, up 0.2 per cent from the first quarter, says Statistics Canada. It was the fourth consecutive quarter in which the value of retirement savings had shown little growth prior to the current economic downturn. The second quarter increase reflects principally gains in the value of bonds, mortgages, and real estate assets. The market value of stocks, which comprised 36.3 per cent of pension fund assets, declined for the fourth quarter in a row.

Employers Contribute More

Employer contributions have increased to some health savings accounts, says the Employee Benefit Research Institute (EBRI). Its ‘2008 EBRI Consumer Engagement in Health Care Survey’ shows that employer contributions to participants’ health savings accounts increased from 2006 to 2008. Individual contributions to these accounts also increased. Health savings accounts (HSAs) became available in 2004, following the introduction of health reimbursement arrangements (HRAs) in 2001. When combined with a high-deductible health insurance plan, HSAs and HRAs form consumer-driven health plans. Employers of all sizes are increasingly focused on how to achieve high-value health care, and are examining a number of different approaches—including consumer-driven plans – that use cost-sharing incentives to engage their workers in health decisions.

Lennox Leads Group Retirement

Chris Lennox is vice-president, group retirement division, at MGI Financial Inc. (formerly known as Rice Financial Group. He is responsible for leading the Canadian group retirement operations division including all pension, retirement, and capital accumulation plan activities on behalf of its clients. Michelle Piret is senior account executive, group retirement division. She is responsible for the management of all new and existing customer relationships to ensure clients receive high quality services and leading industry expertise.


Thursday, December 11, 2008

BCE Deal Dead

The buyout of BCE Inc has collapsed after a key condition to the deal was not met. BCE was to be bought by a group including the Ontario Teachers' Pension Plan and U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity. In a statement, the buyers said they terminated the agreement because auditing firm KPMG had concluded that "a required test for the solvency opinion was not met." One of the conditions to closing the deal was a solvency opinion from a recognized valuation firm. As well, they said that under the circumstances "neither party owes a termination fee to the other." The original agreement called for the buyers to pay a $1.2 billion termination fee under certain conditions. The deal's collapse means that the banks that agreed to finance the deal – Citigroup, Deutsche Bank, Royal Bank of Scotland, and Toronto-Dominion Bank – will be relieved of their obligations.

Plans Need To Scenario Test

The recent market downturn and ongoing market volatility are strong reminders of the importance of being prepared for a wide range of potential shocks or adverse events, says a letter from OSFI to administrators of federally regulated Defined Benefit pension plans. It is encouraging administrators to understand their risk tolerances and to undertake scenario testing in order to help identify potential exposures and to take initiatives to manage risks prudently to safeguard pension benefits. Although market values used in solvency valuations will only be known at a pension plan’s year-end, particular issues for plans to consider now include estimated 2009 contribution requirements and any pension fund liquidity pressures.

Meritas Earns Fund Award

Meritas Mutual Funds’ Meritas Jantzi Social Index Fund won the Socially Responsible Investment Fund Award at the 2008 Canadian Investment Awards. “This award is an incredible honour as it is means we have been recognized for our excellence and commitment to Socially Responsible Investing (SRI) by our peers and colleagues within the investment industry,” says Gary Hawton, CEO of Meritas Mutual Funds. “It says that we have built a fund family that can produce competitive financial returns to investors while respecting their social, environmental, and ethical concerns and beliefs within their investment portfolio.”

Derivatives Leave Market In Flux 

Trading volumes of highly liquid “flow” equity derivatives surged last year in North America as hedge funds, asset managers, and other institutional investors shifted strategies in response to mounting turbulence in global equity markets, says Greenwich Associates' ‘2008 North American Equity Derivatives Research Study.’ With investors retreating to safer and better-understood instruments in the face of historic volatility, the use of structured or securitized equity products fell sharply. In the run-up to the outbreak of the current financial crisis, North American institutional investors were stepping up their use of structured securitized equity derivative products. As recently as 2006, only 20 to 25 per cent of investors used these products. By 2007, that share had jumped to more than 40 per cent. That trend reversed itself in dramatic fashion last year as only 20 per cent of North American institutional investors did any structured business with equity underlyings from 2007 to 2008 as investors reverted back to simpler, more vanilla trades. Over the past five years, equity derivatives have evolved into standard and, in many cases, essential tools for investors, including both hedge funds and cash portfolio managers.


Wednesday, December 10, 2008

MEPP Recommendations Cause For Concern

Many of the Ontario Expert Commission on Pension’s recommendations would introduce significant, new requirements for MEPPs, but most of the recommendations will not create undue burdens, says a Segal Company, Ltd. ‘Bulletin.’ Three recommendations are particular cause for concern. It says the proposed elimination of solvency funding for MEPPs is very welcome, but the accompanying text, which suggests the exemption be conditioned on MEPPs acknowledging that they are accepting greater risks by abandoning solvency funding, is troubling because it is incorrect. In fact, solvency funding has no effect on benefit security in the multi-employer environment. As well, giving the government power to require pension indexation in times of extreme inflation could result in MEPPs, which rarely use indexing, having to divert a portion of their fixed contributions from actives to retirees and the immediate vesting of accrued pension benefits would divert a portion of the contributions to those who never develop any real attachment to the industry. The PDF summary is now available HERE. For the full report click HERE.

Europeans Increased Derivatives Use

European institutional investors and banks were increasing their use of equity derivatives in the months leading up to the historic events of September and October, but it remains unclear how much of this business ultimately will be affected by the crisis among global banks. The ‘2008 Greenwich Associates European Equity Derivatives Research Study’ found European structured or securitized equity derivative products business remains heavily dependent upon the ability of private banks and some institutional clients to on-sell product to retail and high net-worth investors. The relatively lower levels of liquidity available in these products make counterparty risk a real concern for the accounts that purchase them – and those concerns have taken on new urgency with the failure and near-failure of some of the world’s largest financial services providers.

Religious Observance Does Not Require Paid Leave

The Ontario Human Rights Tribunal has ruled that employers are not required to give employees paid leave from work in order to accommodate religious observances, says a Blakes Labour & Employment Group ‘Bulletin.’ In Markovic v. Autocom Manufacturing Ltd., the tribunal considered a complaint of discrimination which alleged that the employer discriminated against the employee by refusing to provide paid leave for his observance of the Eastern Orthodox Christmas. However, the tribunal found no legal duty compelling employers to provide two paid days of religious leave to non-Western Christians to mirror the statutory holidays of Christmas Day and Good Friday. Emphasizing the traditional workplace bargain – the exchange of services for pay – it held that the duty to accommodate could be met by providing employees with options for scheduling changes that do not result in any loss of pay to the employee.

Plans Forced To Look Abroad

A lack of adequate investment opportunities is forcing Canadian pension funds to invest their capital abroad, says Michael Rolland, the president and CEO of Borealis Infrastructure. Speaking at the Toronto Forum for Global Cities, he said that pension fund capital is increasingly flowing into international projects. Rolland said they have an obligation to do a good job investing the pension fund money and if the opportunities are not in Canada, it will go anywhere in the world.

DC Statement Ranked Number One

Sun Life Financial has been ranked number one in the financial services industry by DALBAR’s ‘2008 Defined Contribution Pension Plan Trends and Best Practices,’ an independent study evaluating which company’s pension plan statements most effectively meet investors’ information needs. Incorporating direct input from plan members, sponsors, and advisors, along with international best practices, its pension plan statements have been recognized for providing clear, informative visuals and graphics, meaningful language and explanations, full disclosure of administration fees, and the ability to closely monitor investment and retirement goals.

Matheson Gets New Role

Neil Matheson is senior vice-president, investment strategy, at Standard Life Investments Inc. (SLI). In his new role, he retains his existing responsibilities and will chair the new SLI investment committee, which will oversee its investment management activities and the investment process. He joined the firm in 1989 and since that time has been given increased investment responsibilities.

Tickets On Sale For Ball

The ‘CPBI 2009 Benefit Ball’ is set for February 5 in Toronto, ON. This is a unique charitable fundraiser for professionals in the pension, benefit, and investment industries  is an opportunity to both support a worthwhile charity and at the same time recognize clients, staff, friends, and/or family by inviting them to an evening of delicious food, terrific entertainment, and great networking. This year’s theme is ‘Celebrating Bollywood’ – evoking the vibrant, colourful, and exciting world of Bollywood. For more information, call the CPBI office at 877-599-1414 or email


Tuesday, December 9, 2008

BCE Turns To PwC

BCE is seeking a second opinion on whether it will be solvent after a takeover by an Ontario Teachers' Pension Plan group. It has hired PricewaterhouseCoopers to perform valuation work in connection with its submissions to KPMG related to the solvency opinion. However, terms of the deal state that the only opinion can come from accounting firms hired by the buyers. In order for the deal to conclude by its December 11 deadline, BCE will have to convince KPMG to change its mind or the buyers to agree to abide by a solvency opinion from PwC.

Illiquid Assets Not For Fainthearted

Investing in illiquid assets can provide clear benefits – namely higher returns and diversification. However, this kind of investment is not for the fainthearted and any potential investor must make a detailed assessment of their liquidity needs beforehand, says Xavier Timmermans, head of alternatives investment specialists at Fortis Investments. Writing in the December issue of its ‘Institutional Newsletter,’ he says, however, if they get this wrong, they run the risk of not locking in the illiquidity premium (which is currently extremely attractive) or of not being able to meet their liabilities. In particular, institutions investing in illiquid assets must be certain that they will not need to access the money they have invested in the near future.

Equity Values Suppressed

The ongoing global credit crisis continued to suppress equity values in November, says Towers Perrin Capital Market Update. Meanwhile, long corporate yields declined, reversing the recent pattern of increases. The declining yields pushed up liability values and added to the impact of portfolio losses. The result was a 6.4 percentage point decline in funded ratio for the month to 72.9 per cent, the lowest funded ratio recorded in its data series, eclipsing the prior low point 74.5 per cent reached in March 2003, at the tail end of the earlier ‘perfect storm.’

Teachers’ Promotes Two

Jonathan Hausman is vice-president, alternative investments and emerging markets, and Leslie Lefebvre is vice-president, global active equities, for the Ontario Teachers' Pension Plan (Teachers'). Hausman joined Teachers' in 2004 and was most recently director, emerging markets. Lefebvre joined Teachers' in 2000 as portfolio manager and was, most recently, director, global active equities.

ATMS Programs Held In February

The International Foundation of Employee Benefit Plans is offering the Advanced Trustee Management Standards (ATMS) program this February. The ATMS program sets quality standards in pension fund and group benefit management for Canadian trustees. ATMS Part I and ATMS Part II Group Benefits take place February 6 and 7 in Victoria, BC. For more information, visit


Monday, December 8, 2008

Generic Drug Pricing: Can Canadian Plan Sponsors Save Millions?

The Competition Bureau has issued its second report on the status of Canadian generic drug price competition, ‘Benefiting from Generic Drug Competition in Canada: The Way Forward.’ The report claims that Canadian drug purchasers are failing to realize the benefits they should from generic drug price competition. It says plan sponsors will continue to pay excessive prices for generic drugs until they start acting like competitive buyers and become willing to support alternative models, such as the multi-employer purchasing collaboratives in the United States. If changes are made, it estimates that employers, employees, and individuals could save up to $600 million per year. "To achieve cost savings, plan sponsors must think strategically and be prepared to act collectively in relation to key aspects of drug plan design," says Wendy Poirier, managing principal of Towers Perrin's Canadian health and welfare practice agrees.

Economic Stagnation Looms

The current financial market disruptions will most likely be followed by global economic stagnation in 2009 and 2010, says a Moody’s Investors Service report. ‘Global Healing’ calls for a very sharp downturn in the advanced economies, with some contraction in 2009 followed by below-potential growth in 2010. It also expects emerging market economies to post growth short of their potential during the two-year period. This scenario of painful economic convalescence describes a U-shaped recovery for advanced economies, but output losses are unlikely to be recovered rapidly and elevated risk aversion will persist in credit markets for a prolonged period.

BCE Denies Reports

BCE Inc. is denying reports that the Ontario Teachers Pension Plan Board group which agreed to acquire it has made a cheaper alternative offer for a minority stake. "While it is BCE's policy not to comment on rumors or speculation, in the interest of its shareholders, BCE is confirming that no such offer has been made to the company," it said in a statement. The company says it continues to work with audit firm KPMG and the Teachers’ group to complete the full transaction. A preliminary review by auditor KPMG says the deal, which would be the biggest leveraged buyout in history, did not meet solvency requirements.

DC Members Heed Advice

Defined Contribution pension plan members heeding expert advice to stay the course during the market turmoil and are not trading and withdrawing funds in a panic, says analysis by the Vanguard Center for Retirement Research. An examination of transactions and other activities in plans it keeps records for concludes the majority of participants are not trading. Through October 31, only 15 per cent of participants made an exchange in their account.


Friday, December 5, 2008

New BCE Deal Reported

The private equity firms trying to buy BCE Inc. may instead try to acquire a minority stake in the company if the original deal falls through, as expected, says a report from Bloomberg News. A group led by Ontario Teachers’ Pension Plan had reached an agreement to acquire BCE last year. However, the future of that deal is in doubt because an auditor says it would leave the company insolvent. Closing deadline for the original deal is December 11. While no-one is commenting on this latest proposal, BCE is still working with its auditor to satisfy the closing conditions of the original deal.

Solvency Rules Offered For Unique Plans

The Alberta/BC Joint Expert Panel for Pension Standards has recognized that negotiated cost multi-employer pension plans are not Defined Contribution pension plans or Defined Benefit pension plans, says an analysis of its recommendations by Satanove & Flood Consulting Ltd. Current pension legislation treats these plans as DB plans. The panel recognized that they are different, and even gave them a new name: Specified Contribution Target Benefit plans (SCTBs). It recognized that the two sets of rules that are used to fund DB pension plans – going concern funding rules and solvency rules – are not well-suited for SCTBs. The panel devised a new set of rules, referred to as ‘going-concern-plus,’ for the valuation of these plans. Part of these rules states that liabilities should be estimated using ‘best estimate’ assumptions of future conditions, assuming the plan continues to operate as a long-term going concern. The ‘plus’ part of the rules states that a buffer should be included to absorb the impact of adverse experience such as poor investment returns. To view the report, click here. View the Executive Summary here.

Prince Talks About Pension Plan For Planet

HRH Prince Charles, the Prince of Wales, has been talking to pension funds and insurance companies about a ‘pension plan for the planet.’ Writing in the Times newspaper, Sir Nicholas Stern, author of the UK Stern Report on climate change, says the prince is convinced there is appetite among institutional investors for quality, long-term investments that could help in the fight against climate change. One suggestion, as part of his Rainforests Project, is for an international agency to raise funds by offering 15-year rainforest bonds with competitive returns. The bonds would be guaranteed by developed nations and the interest and principal could be repaid from a share of income from future carbon markets.

Panel Discusses Economic Outlook

A panel of Canada’s leading economists will share their thoughts on 2009 at an Economic Club Of Canada session January 7 in Toronto, ON. Its ‘Economic Outlook 2009’ will feature Sherry Cooper, chief economist, BMO Capital Markets; Don Drummond, chief economist, TD Bank Financial Group; Warren Jestin, chief economist, Scotiabank; Avery Shenfeld, senior economist, CIBC World Markets; and Craig Wright, chief economist, RBC Financial Group. For more information, visit


Thursday, December 4, 2008

Panel Proposes Solvency Fund

While many of the recommendations in the Alberta/British Columbia Joint Expert Panel on Pension Standards are similar to those found in the Ontario Expert Commission on Pensions report, the western group did make one significantly different recommendation, says Chris Brown, a member of the joint panel and a lawyer with Osler, Hoskin & Harcourt LLP. The Alberta/BC panel has suggested that a pension security fund be created to deal with employer contributions to satisfy solvency requirements. The fund would allow employers to make contribution to it when solvency deficiencies occur. However, when plan performance improves and they move back into surplus positions, employers could withdraw the contributions to the security fund. Ontario has recommended a longer amortization period for solvency deficiencies and the use of letters of credit. To view the report, click here. View the Executive Summary here.

Market Impacts DC Plans

The current market conditions are also having an impact on Defined Contribution pension plans, says Paul Litner, of Osler, Hoskin & Harcourt LLP. Speaking at an Osler Pensions Seminar, he said investment performance of DC plans will be down and, unlike the U.S., there is no safe harbour in Canada. He called communications the key. He said the Capital Accumulation Plan Guidelines make it clear that communication of investment information is required on an ongoing basis. While sponsors must not provide advice about individual investments, information about performance of various options and risks of investment strategies can be communicated to plan members.

Background Shows Through

Harry Arthurs’ background as a labour and administration lawyer is evident in the Ontario Expert Commission on Pensions report, says Evan Howard, of Osler, Hoskin & Harcourt LLP. He told an Osler Pensions Seminar that whenever an opportunity arose to suggest a regulatory or tribunal approach, Arthurs makes that recommendation. One example is his recommendation that the rules on surplus sharing be clarified to permit distributions based on agreement between the members and the employer regardless historic plan language. Howard says he is saying, in effect, let’s negotiate if the terms aren’t clear. The PDF summary is now available HERE. For the full report click HERE.

ACPM Reviews Panel Report

The Association of Canadian Pension Management (ACPM) is now reviewing the Alberta/British Columbia Joint Expert Panel on Pensions Standards (JEPPS) report. "Co-chairs Chris Brown and Scott Sweatman, together with their JEPPS colleagues – John Davies, Elaine Noel-Bentley, John Tackaberry, and John Gilfoyle – are to be commended for their tireless efforts addressing the difficult issues affecting the pension systems in Alberta and British Columbia", says Scott Perkin, president of the ACPM. "We encourage the government in these two provinces to initiate further discussions with stakeholders in order to advance joint pension reform in Alberta and B.C." To view the report, click here. View the Executive Summary here.

Record Swing For UK Plans

The funding deficit for the UK’s 200 largest privately sponsored pension plans improved by £38 billion in November, the largest single month rise on record, says Aon Consulting. This means plans have leapt back into a surplus of £23 billion. The change was caused by falling expectations of future inflation, from 3.2 per cent to 2.6 per cent over the month. To illustrate the volatility of UK pension this year, Aon says in the six years ending 2007, there were only been six daily swings of £10 billion or more. So far this year, there have 21 including six in eight days in October.

RBC Sets Standard For Quality

Canadian companies and institutional investors see RBC Capital Markets as setting the standard for quality among a group of domestic institutions that are closely matched in terms of corporate and investment banking capabilities, says research from Greenwich Associates. Its ‘2008 Canadian Quality Leaders Designations’ report identifies the banks that companies and institutions in Canada see as the best in 22 business categories falling into three main areas – investment/corporate banking, equities, and fixed income. The Quality Leader designation for RBC is based on almost 500 interviews with senior executives at Canadian corporates and institutions in 2008. Its research also shows that the past restraint of Canadian banks concerning many of the risk-based businesses that are the cause of the global financial meltdown has left them in a relatively strong position from which to weather the current storm.

Cardone Heads Corporate Strategy

Anthony Cardone is senior vice-president, corporate strategy, communications, and public affairs at The Standard Life Assurance Company of Canada. He will head corporate strategy for the Canadian operations, leading the development and implementation of its strategic business plan.

FORUM Registration Open

Registration is now open for CPBI FORUM 2009. Scheduled for May 25 to 27 in Calgary, AB, its program features top Canadian and international pension, benefits, and institutional investment leaders and offers advanced level learning. For more information, visit


Wednesday, December 3, 2008

Pensions Moving To Payroll Tax

Pensions may be moving from being part of total compensation packages and become a payroll tax, says Gretchen Van Riesen, interim head M&A and global head of pensions and benefits for RBC. Speaking at a CPBI Ontario region seminar on the recommendations of the Ontario Expert Commission on Pensions, she said the cost implications of satisfying some of the recommendations in the report could drive more plan sponsors away from Defined Benefit pension plans. If there is an alternative, such as a second tier to the Canada Pension Plan as proposed in the report, it could prompt employers to buy into that and get rid of the internal resource commitment they must make to DB plans.The PDF summary is now available HERE. For the full report click HERE.

Manulife Strengthens Capital Position

Manulife Financial Corporation will further strengthen its financial and capital position by issuing $2.125 billion in common equity which would raise its regulatory capital ratio to one of the highest levels in the company's history. Specifically, $1.125 billion is being sold by way of private placement to eight existing institutional investors and $1 billion to a syndicate of underwriters in a ‘bought deal’ public offering. It is expecting to lose $1.5 billion in the fourth quarter, the first time it has not earned a profit since going public in 1999.

Economists Today Know Better

While some numbers indicate things could get twice as bad as they were in the Great Depression, most economist believe that will not happen, says Kent Daniel, managing director of Goldman Sachs. He told attendees at CFA Institute’s ‘Equity Research and Valuation Techniques’ session that, for example, the cost to insure a basket of corporate bonds today is twice what it cost during the depression. However, he said a better understanding of how the economy works today will prevent many of the mistakes made during the depression, thereby decreasing the risk that things will get that bad. Still, there is a lot of fear in markets now and that is prompting people to pull their money out, he said.

Integra Links With Lyxor

Integra Capital Ltd and Lyxor Asset Management SA, a subsidiary of the French Société Générale Group, have formed a strategic alliance to serve pension funds in Canada. Under this alliance, Integra will introduce Lyxor's hedge fund platform and funds of hedge funds to Canadian registered pension plans. Lyxor manages $84 billion, specializing in alternative investments, exchange traded funds, and structured management.

Man Forms Single Unit

Man Investments is combining two of its core alternative investment management units – Glenwood Capital Investments and Man Global Strategies – into a single unit, Man Glenwood Strategies. The merger will strengthen Man’s ability to offer separately managed hedge fund of funds portfolios. The new division will be headquartered in Chicago, IL, and led by John Rowsell, who was president of Glenwood Capital. Man Glenwood Strategies will develop new style-based products and different multi-manager mixes, while continuing to manage existing strategies including managed futures and structured products.

Alternative Assets Analysis Tools Enhanced

Northern Trust has introduced new performance and analysis capabilities for clients investing in private equity, hedge funds, and other alternative assets. New features include an expanded range of resources and functions available online to meet the needs of alternative assets investors and specialized tools to assist limited partners in administering private equity portfolios. Its online performance analysis tool, Fundamentals, now provides access to internal rate of return measures and on-the-fly analysis of the funding status and growth of private markets assets, including private equity and real assets.

Graham Moves To PIMCO

Stuart Graham is president of PIMCO Canada. In this role, he will manage its Canadian business and build and strengthen relationships with clients, regulators, and industry
organizations in Canada. Most recently, he was vice-president and managing director of institutional investments at MFC Global Investment Management.

Morrison Rejoins Watson Wyatt

Dan Morrison is rejoining Watson Wyatt Worldwide as a senior consultant. Based in Calgary, AB, he will focus on expanding its Defined Contribution consulting capabilities. His pension consulting experience includes serving as actuary to two of the five largest pension plans in Canada. He has more than 25 years of pension experience, including 12 years with Watson Wyatt. 

Jack Heads HR

Barbara Jack is vice-president, human resources, at Pembina Pipeline Corporation. She has worked for the firm and its legacy companies for more than 26 years, most recently as manager, human resources.


Tuesday, December 2, 2008

Watson Wyatt Recommends Suspending Securities Lending

Watson Wyatt has recommended that its clients suspend securities lending activity where possible if they are in any doubt about their lending guidelines and arrangements. The firm asserts that the risk-reward trade-off around this activity has changed and that, in some instances, it may no longer be worthwhile. However, it also warns that suspending securities lending can crystallize a loss in some cases, which should be avoided. It identifies counter-party risk, collateral, and indemnification as the three key areas that pension funds should focus on when dealing with their lending agents, typically custodians.

Ryan Attacks Hiring 

An OMERS director is attacking the hiring of Jacques Demers as CEO of OMERS Strategic Investment. Sid Ryan, who is also the Ontario president of the Canadian Union of Public Employees (CUPE), claims the Ontario Municipal Employees Retirement System (OMERS) has lavished a multi-million dollar compensation package on a Bay Street rookie CEO under circumstances that lack transparency and due process. Ryan, who represents more than 100,000 plan members, says the decision was made in haste at a 'special' conference call meeting of the executive board instead of at the regularly scheduled board meeting in December. According to Ryan, OMERS has not learned any lessons from the Borealis fiasco which landed senior executives of OMERS Borealis in the provincial courts over executive levels of compensation. OMERS, however, notes that the hiring of Demers was a unanimous decision of the 11 board members at the meeting. Ryan did not attend.

Sponsors Lack Objective Criteria

Plan sponsors lack clear and objective criteria for selecting the most appropriate fund when evaluating target-date fund options, says a survey of financial advisers by JPMorgan Funds. Seventy-six per cent of advisers surveyed believe plan sponsors only sometimes, rarely, or never recognize the differences in glide paths among target-date funds. This means they need to spend more time educating plan sponsors on these significant differences. The biggest mistake of plan sponsors' was "focusing too much on fees and not on other factors that could affect participant outcomes," followed by "choosing a target-date fund offered by their recordkeeper without considering other options."

Seventh Version Of Governex Launched

Integra Group Retirement Services has launched the seventh version of its Governex program. Today, governance programs for CAP plans are increasingly extending beyond the traditional focus (restricted to members only) to include the transitioning of exiting employees outside of the plan. To assist plan sponsors with these initiatives, it is adding a new Member Transitions suite of services to its LifeGARD member decision support program. The first tool is an easy-to-use interactive retirement planner, designed to help members create their own personal retirement plan and map how long their investments should be able to support their desired retirement lifestyle. The Governex program was created to assist Capital Accumulation Plan (CAP) sponsors with the prudent management of their plans including their obligations pursuant to the CAP Guidelines.

Statement Earns ‘Excellent’ Rating

Manulife Financial Group Savings and Retirement Solutions (GSRS) has once again received an ‘Excellent’ rating for its year-end plan member statement, according to a study by DALBAR, a communications consulting firm. The clear display of the member's estimated retirement income was one of the leading features DALBAR identified in its review. Calculated using the member's real-time data, the estimate also shows the member's progress toward his or her specified retirement goal.

Canadian Western Bank Acquires Stake In Adroit

Canadian Western Bank has acquired a 72.5 per cent stake in Adroit Investment Management Ltd. The ownership interest in the Edmonton-based wealth management company is a strong strategic fit with Canadian Western Bank’s existing banking and trust operations. Adroit's executive management will retain a minority ownership in the company, with plans to continue pursuing growth of the business.

Commuted Value Interest Rate Assumptions For January

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including January 2009 are now available at An Excel spreadsheet on the website contains six worksheets


Monday, December 1, 2008

Joint Regulator Proposed

In order to promote and maintain harmonization, the British Columbia and Alberta governments should adopt identical pension acts in each province and work toward the establishment of a joint pension regulator for the two provinces, says the Joint Expert Panel on Pension Standards. The panel has concluded that a fundamental reform of pension legislation is necessary to improve pension standards in both provinces. Its report provides 125 recommendations on topics ranging from adopting principles-based legislation to requiring pension plans to have a governance policy. In crafting its recommendations, the panel says it has attempted to balance the disparate views and interests of plan beneficiaries and employers, and the potentially contradictory goals of improved benefit security and higher participation. Consequently, it urges all readers to view the recommendations as a package, which is intended to be taken as a whole. Interested members of the public are invited to provide feedback about the recommendations. They can be sent to Pension Standards Review, Alberta Finance and Enterprise, Room 402, 9515 - 107 Street, Edmonton, AB  T5K 2C3,, or Pension Standards Review, British Columbia Ministry of Finance, Box 9418 Stn Prov Govt, Victoria, BC  V8W 9V1,, before March 2, 2009.

Homework Needed For Clinics

Converts to the idea of workplace wellness need to consider where the education needs are the greatest, says an Eckler ‘GroupNews.’ For those who are considering inviting health practitioners into their organizations to conduct ‘clinics’ to educate plan members on various aspects of their health, doing some advance homework and laying down ground rules is key. Clinics that may be nothing more than a marketing ploy, with little regard for actual medical needs, may only unnecessarily increase plan utilization. Consideration should be given to conducting a health risk assessment to help target areas of need and finding properly accredited speakers to address plan members’ specific issues.

Demers Heads New Entity

One of Canada's leading corporate finance lawyers will head up a new entity to invest in a select portfolio of private companies that have global reach for the OMERS pension fund. Jacques Demers, a senior partner with Ogilvy Renault LLP in Toronto, ON, will start as president and chief executive officer of OMERS Strategic Investments effective January 1, 2009. He has enjoyed a career in business law over the past 32 years. He co-founded the Meighen Demers law firm in 1984 and in 2001, when the firm merged with Ogilvy Renault, he became managing partner of its Toronto office and a senior member of the firm's executive.

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