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


News Archives - February / March 2009

Tuesday, March 31, 2009

Teachers’ Wants To Help Smaller Plans

"The Ontario Government's proposed amendment to the Teachers' Pension Act represents an encouraging step forward towards pension reform for thousands of Ontarians," says Jim Leech, president and CEO of the Ontario Teachers' Pension Plan (Teachers'). The amendment was introduced as part of the Ontario government's 2009 budget. "This move would allow us to help smaller pension plans and other institutions meet their beneficiaries' needs," he says. "We could pool significantly large amounts of capital and make our resources, such as our direct investing expertise, available to manage their funds. Their beneficiaries would benefit in gaining expertise scope and scale." As well, it also could offer our pension administration services to others, a service that's rated first in the world among its peers.

Taxes Top Threat To Retirement Savings

High income and property taxes continue to be seen as top threats to Canadians’ retirement security, says research by Investors Group. High taxes are viewed with the greatest apprehension (46 per cent), outstripping concerns about inflation, currency fluctuations, poor stock market returns (39 per cent), and fear of job loss (33 per cent). The concern about high taxes is a consistent finding in a series of three polls conducted by Investors Group beginning September 2008. High income and property taxes are seen as the number one threats to retirement security, with 45 per cent of respondents citing taxes in September, dipping to 40 per cent in October, before jumping to 46 per cent in the recent survey conducted in early March.

May Commuted Value Interest Rate Assumptions

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


Monday, March 30, 2009

Solvency Relief  Measures Outlined

The federal Ministry of Finance has proposed several options to provide temporary solvency funding relief for federally regulated Defined Benefit pension plans. One option is to extend the solvency funding period by one year for deficiencies reported as of year-end between November 1, 2008, and October 31, 2009. Another option is to extend the solvency funding payment to 10 years from five. This option applies to agent Crown Corporations, plans that receive the support of at least two-thirds of members and retirees, or plans that secure the difference with a letter of credit. In addition, the new regulations would allow plans to use asset smoothing to stabilize short-term fluctuations in asset values above the 110 per cent limit.

Budget Clarifies Solvency Relief

The Ontario budget provides additional clarity on the solvency relief for Defined Benefit pension plans that the government announced in December 2008, says Evan Howard, of Osler, Hoskin & Harcourt LLP. In particular, it says a plan could extend the solvency payment schedule from five to 10 years, however, active consent is not required. Instead, employers can avail themselves of the extended solvency payment schedule if no more than one-third of the aggregate of all active and inactive members object. However, he says the budget gives no indication of when detailed regulations will be released so it remains questionable whether these proposals will be implemented in sufficient time to effectively provide the funding relief many employers are urgently seeking.

CalPERS Restructuring Hedge Fund Relationships

The California Public Employees’ Retirement System (CalPERS) intends to restructure its relationships with its hedge fund managers to achieve better alignment of interests, more control of its assets, and enhanced transparency. Instead of focusing on commingled accounts, it will move toward a focus on customized vehicles, managed accounts, and other methods to improve control of its assets. The pension fund also says fees should be based on long-term rather than short-term performance. The present model provides the possibility of a hedge fund manager realizing a 20 per cent performance fee at the end of a bonanza year. If the fund suffers a significant decline the next year, the manager could still have a large net gain at the end of the two years, but the investor may break even or even lose money. It says performance fees should be based on long-term performance and mechanisms such as delayed realizations and clawbacks can better align long-term interests of managers and investors. 

State Street Launches New Strategy

State Street Global Advisors has launched a new Canadian Alpha Edge strategy. Canadian Alpha Edge builds on its suite of Edge strategies, its version of extension strategies also widely known as ‘130/30.’ These seek to provide the best of long-only and long-short approaches. Specifically, the strategy takes short positions up to 30 per cent, which in turn fund an additional 30 per cent of long positions, thereby maintaining net market exposure at 100 per cent.


Friday, March 27, 2009

Teachers’ Could Manage Other Plans

The Ontario Teachers' Pension Plan could manage money for other pension plans and institutional investors in the public sector, says a Watson Wyatt InfoFlash. The Ontario budget says it will introduce legislation which would permit the OTPP Board to provide pension administration and investment services for smaller pension plans. This was a recommendation of the Ontario Expert Commission on Pensions. The government is also planning to commission an independent actuarial study of the Pension Benefit Guarantee Fund (PBGF) to review its financial status and stability. This could result in the establishment of an independent PBGF agency. The budget also promises that the government will work with Ottawa and the other provinces to investigate ways to increase pension coverage.

CPPIB Looks At Selling Bonds

The Canada Pension Plan Investment Board plans to sell up to $5 billion in bonds over the next two years in a bid to reduce its borrowing costs and give it the flexibility to make new investments, says a report in the Globe and Mail. The fund has an ‘AAA' credit rating which should allow it raise funds less expensively than by going directly to investors. It plans to issue commercial paper in April and follow that up with longer-term bonds.

Institutions Plan Increase To Hedge Fund Allocations

The turbulent financial markets have not caused major shifts in institutional asset allocations, says State Street’s fifth institutional investor hedge fund study. Three quarters of institutional investors said they do not plan to modify portfolio allocations. Further, while the study results indicate a moderate decline in overall allocations to hedge funds, the majority of institutions report an intention to increase or maintain current hedge fund allocations over the next 12 months. The study shows a moderate decline in overall allocations to hedge funds with institutions allocating more than five per cent of their portfolio to hedge funds decreasing from two-thirds (68 per cent) in 2007 to one half (51 per cent) in 2008. Nevertheless, most institutions intend to either increase (49 per cent) or maintain (39 per cent) their allocation to hedge funds in the next year.

Northern Trust Helps Monitor Risk in Portfolios

Northern Trust has launched a tool to make it easier for institutional clients to manage the workflow and reporting needs related to oversight of investment managers. ComplianceRADAR offers clients around the world the ability to quickly identify breaches of investment guidelines, document actions towards resolving the breaches, and run summary and detailed reports to assist clients with a variety of audit and management requirements.

Naish CFO At CIBC Mellon

Brian Naish is senior vice-president and chief financial officer at CIBC Mellon. He is responsible for CIBC Mellon’s finance function, office services, and facilities departments. Prior to joining the firm in 2004, he spent eight years with PricewaterhouseCoopers and Arthur Andersen.


Thursday, March 26, 2009

Recommendations Very Concerning

“It is hard to imagine how an office of pension promotion can successfully increase pension coverage when the underlying regulatory structure becomes even more complex and restrictive in some significant respects,” says a Mercer ‘Communiqué’ on the Nova Scotia Pension Review’s final report. While some of the report’s recommendations, such as elimination of partial wind-ups and mandatory grow-in benefits, would be welcomed by many plan sponsors, it says the development of fundamental regulatory concepts such as a passport system for regulatory jurisdiction and revised funding standard that are significantly divergent from practice and recommendations elsewhere is very concerning. This type of divergent regulation increases the complexity of administering pension plans, which is a significant contributing factor to the overall decline in pension coverage, it says.

Canadian Plans Want UK Airports

Canada's largest pension funds are attempting to reap the benefits of the breakup of Britain's biggest airport operator. A report in the Globe and Mail says The Canada Pension Plan Investment Board, the Ontario Teachers' Pension Plan, and Borealis, the infrastructure arm of the Ontario Municipal Employees Retirement System, are involved in consortiums trying to acquire Gatwick airport. Britain's Competition Commissioner has ordered BAA to sell three of its seven airports. BAA owns Heathrow and Stansted airports in London and airports in Southampton and south England as well as Edinburgh, Glasgow, and Aberdeen in Scotland. It has two years to find buyers for Gatwick, Stansted, and either Edinburgh or Glasgow.

Managers Bullish On Fixed Income

Professional money managers are more bullish for fixed income asset classes than equities for the first time in five years, says Russell Investments’ ‘The Investment Manager Outlook. It found 67 per cent of managers were bullish on corporate bonds and 61 per cent were bullish on high-yield bonds. The percentage of bullish managers decreased for all equity asset classes except emerging markets. Manager sentiment for value stocks decreased across all sizes with bullishness for U.S. large cap value dropping 19 per cent, from 61 per cent to 42 per cent.

Funds Seeking Lead Status

A group of public pension funds are seeking lead plaintiff status in a class action lawsuit against Bank of America Corp. The State Teachers Retirement System of Ohio; the Ohio Public Employees Retirement System; the Teacher Retirement System of Texas; a fund represented by PGGM Vermogensbeheer B.V., the Dutch national fund for the healthcare and social sector; and one of the largest Swedish national pension funds allege that the bank failed to disclose material information related to its acquisition of Merrill Lynch & Co. The pension funds say they lost $274 million. The California Public Employees' Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS) have also filed for lead status. Just weeks after the deal closed, it was revealed that Merrill incurred losses of more than $15 billion during the fourth quarter.

Strategies To Deal With Volatility Examined

The ‘From Surviving to Thriving Advisor Conference – Strategies for the Risk Averse, Yield Hungry Investor’ will look at strategies and products to deal with unprecedented market volatility. The Mindpath event is set for May 11 in Mississauga, ON. Among the speakers at the conference will be George Hartman, president of Market Logics, and Michael Nairne, president of Tacita Capital. For more information, visit


Wednesday, March 25, 2009

BC Introduces Amendments For New Provincial Plan

The British Columbia government is planning to create a Defined Contribution pension plan that could cover all workers in the province. It has announced amendments to its Pension Benefits Standards Act which contain technical changes that will enable B.C.’s pension standards to apply to the new private sector pension plan. Once established, the plan will operate at arm’s length from government and the amendments will come into force which is expected in 2010.

Gains From Past Five Years Wiped Out

The funded status of the largest U.S. corporate Defined Benefit retirement plans registered record losses last year, says the ‘9th Annual Milliman Pension Funding Study.’ Those losses totaled more than $300 billion in 2008, wiping out the entire gains from the preceding five years. The loss in funded status in 2008 is projected to produce an increase in pension expense for 2009 and a charge to corporate earnings in excess of $70 billion. Those losses have continued into 2009 with more than a $30 billion decrease in funded status in the first two months.  

Mercer Launches Credit Strategy

Mercer’s investment management business has launched a new long duration investment grade credit strategy to help plan sponsors seeking to reduce the funded status volatility of their pension plans. The new strategy is intended to be used in conjunction with its Liability Driven Investment (LDI) approach, which seeks to improve the correlation between pension plan assets and liabilities. The new strategy's investment performance and the present value of plan liabilities are both affected by the level and movement of corporate bond yields which are the primary drivers of the expected correlation.

Rosenberg Predicted Housing Collapse

David Rosenberg is chief economist and strategist at Gluskin Sheff + Associates Inc. He was one of the first economists to warn of a U.S. housing market collapse and the ensuing consumer and financial market meltdown. He is currently managing director, chief North American economist, of Bank of America and formerly chief North American economist of Merrill Lynch.

Astley Heads CPPIB  

Robert M. Astley is chair of the board of directors of the CPP Investment Board. He succeeds Gail Cook-Bennett who served as founding chair of the CPPIB for 10 years. He is former president of Sun Life Financial Canada and former president and CEO of Clarica Life Insurance Company. Robert L. Brooks and Elaine L. McKinnon have been appointed to the board of directors. Brooks was the vice-chair and group treasurer of the Bank of Nova Scotia before retiring. He is currently a director of Dundee Wealth. McKinnon is chief financial officer and chief operating officer of Brovada Technologies.

Health Pioneer Sought

The ‘13th Annual Health Work & Wellness Conference 2009’ is looking for a worthy recipient for this year's ‘Canadian Workplace Wellness Pioneer Award.’ The award recognizes an individual who has made a pioneering contribution to the field of organizational health. Nominations must be submitted by April 30. The conference, ‘Taking Care of Business,’ will take place September 30 to October 3 in Gatineau, QC. For more information, visit


Tuesday, March 24, 2009

Trustees Need To Improve Understanding

Trustees need to improve their understanding of discount rates, assumptions, and their sponsor’s finances to keep their plans funded during the recession, says Punter Southall, a UK consultants and actuaries group. Its first scheme funding survey found even though 60 per cent of trustees receive frequent reports from a range of actuarial sources, fewer than half recognize how the recession is actually affecting their plan’s funding level. As well, trustees need to acquire greater understanding of their sponsor’s financial position in the current economic climate.

FTSE Launches Real Estate Indices

FTSE Group has launched the FTSE EPRA/NAREIT Global Indices. Following the December 2008 expansion of the FTSE EPRA/NAREIT Global Real Estate Index Series to include emerging markets, these global indices now represent a composite of both developed and emerging subsets. The new structure of the index series better enables investors to measure listed real estate performance across all major geographies, country classifications, and property types. 

AIMA Supports Short Selling Report

“This consultation report from IOSCO’s Task Force on Short Selling is admirably sensible,” says AIMA. As the global trade body for the world’s hedge fund industry, it believes that short selling is a wholly legitimate market practice, is not abusive, and helps capital markets function more effectively. IOSCO believes that short selling plays an important role in capital markets for a variety of reasons including more efficient price discovery, mitigating price bubbles, increasing market liquidity, facilitating hedging, and other risk management activities. AIMA absolutely agrees with the task force that it would be desirable to establish a more consistent international approach to the regulation of short selling. At present, the many discrepancies worldwide create unnecessary uncertainty.

Carlin Moves To AEGON

Stephen P. Carlin is senior vice-president and head of equities at AEGON Capital Management Inc. A 25-year industry veteran, he was previously with KBSH Capital Management Inc. where, for nine years, he specialized in Canadian equity management.


Brent W. Barrie is chief executive officer at SEAMARK Asset Management Ltd. He joined SEAMARK in 2001 and has been chief operating officer since February 2008. His appointment follows the resignation of Stuart R. Raftus as president and chief executive officer.


Monday, March 23, 2009

Reform Provides Leadership Opportunity

The federal government has an excellent opportunity to play a significant leadership role in the “pension debate that is currently unfolding across this great nation,” says Scott Perkin, president of the ACPM. Speaking at the consultations on federally-regulated private pension plans session in Toronto, ON, he called for changes to other elements of the pension regulatory system over which the federal government has control. For example, he said the current 10 per cent surplus limit should be raised or eliminated so that Defined Benefit pension plans can build up sufficient reserves when investment returns are good to cover ‘rainy days’ such as those taking place now. In addition, current benefit and contribution limits under the ITA should be increased so that Canadians are allowed to save towards retirement on a tax-assisted basis at levels comparable to citizens in other G7 nations such as the U.S. and the UK.

'Critical Time' For Canadian Pensions

“This is a critical time in the Canadian pension scene,” says Ian Markham, director of pension innovation at Watson Wyatt Worldwide. Speaking at the consultations on federally-regulated private pension plans session in Toronto, ON, he said the last round of major reforms was two decades ago and much has changed since then. Although the current financial crisis has clearly dealt a significant blow to employer pension plans, he said there is a need to fix the system once and for all so that temporary measures do not have to be debated each time there is a financial crisis. As well, with pension coverage dropping, there is a need to find a way to make Defined Benefit plans more palatable to employers in the private sector because of the significant advantages they offer to employees who belong to such plans. A healthy system of private sector single employer DB plans “requires a balanced package that does not need fixing each time we have a financial crisis,” he said.

Portfolio Mix Impacts Sequential Risk

Research shows that changing to a portfolio mix of 35 per cent equities / 65 per cent fixed income can protect against sequential risk and prevent retirees from outliving their wealth, says Irshaad Ahmad, president of Russell Investments Canada Limited. “One of the biggest concerns that investors are facing this very moment is the ability of their portfolios to withstand negative portfolio returns in the five years before retirement or in the first few years of retirement when withdrawals are made,” he says. “This concern is otherwise known as sequential risk: The risk of receiving lower or negative returns early in a period when withdrawals are made from the underlying investments.” Its research found that a 35 per cent equity / 65 per cent fixed income asset mix is an effective strategy to protect against sequential risk and is able to protect against volatile down markets.

Impact On Pension Governance Examined

The impact of the current financial crisis on pension governance in Canada will be the focus of a Federated Press ‘Pension Governance’ event. Pension funds and sponsors –including the OPSEU Pension Trust, Toronto Transit Commission, and the HRM Pension Plan – will explain how they are coping with the economic crisis. It takes place June 17 to 19 in Toronto, ON. For more information, visit


Friday, March 20, 2009

Don’t Let Fox Guard Henhouse

The president of the National Union of Public and General Employees warns that you can’t let the “fox guard the henhouse” when it comes to pensions. In a ‘President’s Commentary,’ James Clancy responds to reports that CEOs of some of Canada’s largest corporations – Air Canada, CP, Bell Canada, MTS Allstream, Canadian National Railway Co., Canada Post, and Nav Canada – are urging Ottawa to ease rules on those pension plans that are federally regulated. “This 'Group of Seven' argue that ‘strict’ pension regulations are putting their companies at risk if required to immediately make enormous contributions to their pension plans to fund shortfalls,” he says. He says the union is concerned that the attention given to funding shortfalls in major workplace pension plans during the current economic crisis is being used to attack “decent workplace pensions of Canadian workers.” 

Average Worker Contributes 7.5 Per Cent

The average employee contribution to a 401(k)-type plan in 2006 was 7.5 per cent of annual earnings, says the February 2009 ‘EBRI Notes.’ Using 2006 data from the U.S. Census Bureau Survey of Income and Program Participation (SIPP) data, the latest available from SIPP on employee contributions to 401(k)-type plans, it says the average contribution has increased gradually from 6.6 per cent in 1988.  As well, the distribution of the contribution rates held basically steady from 1993 to 2006: About 45 per cent of 401(k) participants contributed five per cent or less of their salary, while the remaining participants were about equally divided between those who contributed five to 10 per cent and those who contributed 10 per cent or more.

Health Aligned To Workplace 

Aligning employee health needs and corporate goal will be the focus of ‘Health And Wellness In The Workplace.’ Set for May 28 and 29 in Toronto, ON, the Federated Press event will examine areas such as how to develop an action plan and communicate goals and incentives and finding programs the provide the most benefits to employee health and productivity. For more information, visit


Thursday, March 19, 2009

Reviews Of Pension System Usually Forgotten

The Canadian Labour Congress (CLC) is urging the federal government to “not repeat the often mediocre track record of pension reviews in the past.” In a presentation to the federal Department of Finance consultation on pension reform, it said “typically, these reviews agree our pension system needs work, that serious reforms are required, and that too many Canadians are ill-prepared for retirement. Studies are done, submitted, filed, then promptly forgotten.” It said the “tiniest of reforms are celebrated as breakthroughs, while the heavy work that would really guarantee Canadians dignity in their retirement years is left undone. Today, this defective process cannot be justified.”

Medisys Rolls Out ‘FreshStart’

Medisys Health Group is rolling out ‘FreshStart,’ an employee wellness program which compliments its existing corporate health services. It aims to help corporations decrease healthcare-related costs, increase employee productivity and job satisfaction, and enhance their corporate image by providing customized employee health guidance and ongoing support based on tangible evidence. Following the on-site health assessment, companies are provided with a de-personalized aggregate report to assist them in understanding their major risk factors. This corporate health overview enables employers to better allocate their wellness dollars to address the root causes of their problems.

DC Share Nears Half Of Assets

Total U.S. Defined Contribution assets dropped 21 per cent last year to $3.8 trillion, but the percentage of retirement assets coming from DC plans rose to an all-time high of 49 per cent, says a Spectrem Group report. The overall share of retirement assets from DC plans grew from 47 per cent in 2007. Assets in corporate 401(k) plans, which account for 71 per cent of all corporate DC assets, declined 23 per cent to $1.94 trillion. Total Defined Benefit assets were $4.03 trillion in 2008, down 27 per cent from the previous year.

Global Fund Managers Regain Confidence

Global fund managers appear to be regaining confidence in the world economy, says Merrill Lynch's monthly survey of fund managers. However, they are not yet willing to move back into the stock markets. The survey found managers were evenly split on whether the global economy will get worse or better. However, this was the first time in three years that a majority of investors did not predict lower economic growth over the next 12 months.

Barclays Starts Inflation Index

Barclays Capital has launched Barclays Capital CAD INSPIRE Index. The index allows Canadian institutional investors access to liquid inflation markets in a manner designed to mimic Canadian inflation. It is designed to provide synthetic inflation protection for institutional investors in Canada using an optimized weighted combination of liquid swap indices from the U.S., UK and Euro area. Weights are recalibrated on a monthly basis and the optimization model is designed with cost efficiency considerations in mind. It is available in 5-, 10- and 20-year maturities  and returns are expressed in local currency.

Half Considering Private Equity

Almost half (43 per cent) of institutional private equity investors would or are likely to consider buying private equity fund interests on the secondary markets, says a Preqin survey. It found 95 per cent of investors are interested in purchasing interests in buyout funds and 20 per cent are interested in venture capital funds. The survey also showed 63 per cent of investors were at or above their private equity target allocations.

Wellness Budgets Increasing

Many employers are increasing their employee wellness communications and most expect wellness budget cuts will be no greater than other cutbacks because these programs help employees cope with issues brought about by the economic downturn, says a survey by Buck Consultants. In terms of wellness budgets, 19 per cent of respondents are likely to increase spending on wellness. Another 59 per cent have experienced no budget changes, but many are nervous about the possible need to make cuts in the future. However, among those expecting cuts, 78 per cent expect them to be no larger than other corporate cutbacks.

Best Speaks At Forum

Margarett Best, Ontario’s minister of health promotion, has been added to the agenda at the Connex Health and IHPM’s ‘Employer Forum.’ Set for April 30 to May 1 in Niagara on the Lake, ON, this year’s theme is ‘Effective Programming on Any Budget.’ Best will provide a public health perspective on wellness. For more information, visit


Wednesday, March 18, 2009

FETCO Wants Pension Reform

The Federally Regulated Employers – Transportation and Communication (FETCO) organization, whose members include Telus Corp. and the Canadian Broadcasting Corp., is calling on Ottawa to ease rules on pension plans which it says are too onerous. It has submitted a consultation paper on pension reform to the Department of Finance. Last fall, federally regulated plans were given temporary relief by extending the amortization period for pension deficits to 10 years from five. New measures are being sought which would reduce the volatility in pension funding.

Employees Relying On Wellness

More than ever, people are relying on employer/employee-assistance programs (EAP) and work/life resources to help them address stresses brought on by the economy, says a Harris, Rothenberg International, LLC (HRI) report. ‘The Uncertainty and Change Report: Thriving in Our Challenging Times’ indicates that financial topics are at the forefront of employee and employer concerns. It concludes that the common thread linking nearly all programs and queries is the economy and its effect on finances. It found that calls to EAPs increased nearly 10 per cent in the past year and work/life calls have been increasingly focused on general financial assistance including information about mortgage assistance, rent subsidies, child care/adult care subsidies, and prescription assistance programs.

Mood Disorders Examined

‘The Impact of Mood Disorders in the Workplace’ will be the focus of the next Benefits Breakfast Club session. Dr. Peter Turner, a psychiatrist, will present information on the incidence, effective treatment, and challenges associated with mood disorders. Dr. Sam Ozersky, from Mensante Corporation, will examine how web-based tools can provide effective solutions. It takes place April 16  in Burlington, ON. For more information, visit


Tuesday, March 17, 2009

Americans Willing To Opt Out Of Social Security

Almost half of Americans (48 per cent) would prefer to stop paying into the Social Security system even if it meant that they would not receive these benefits once eligible, says data from the U.S. division of Sun Life Financial. Its ‘Unretirement Index’ shows workers in their 30s are most likely to favor not paying into the Social Security system, with 59 per cent responding they would rather not pay the taxes and not receive benefits. Even a significant amount of respondents who are nearing traditional retirement age would choose to stop paying Social Security taxes. One in three workers over the age of 60 said they would stop paying Social Security taxes even if it meant they would not receive any benefits.

DC Index Declines

The Callan DC Index declined 15.5 per cent in the fourth quarter for a total loss of more than 28 per cent for the year. While the DC Index results lagged that of the average corporate DB plan by more than three per cent (-12.19 per cent) for the quarter, it bested the average 2030 target date fund's performance (-20.20 per cent) by a significant margin. The index outperformed because participants’ failed to rebalance their accounts, which resulted in declining equity allocations going into the worst of the downturn. Using its capital market assumptions, the year over year reduction in equity allocation translates into 10 per cent less annualized, inflation-protected income per year in retirement.

Conference Looks At Investment Opportunities

The financial and economic events of the past two years that have profoundly changed the investment landscape will be the focus of the 2009 Morningstar Investment Conference. Set for June 10 in Toronto, ON, sessions will look at topics including investing opportunities in the financials, natural resources, and fixed income sectors.


Monday, March 16, 2009

Wrap Up Registered Plans

Registered pension plans across Canada should be wrapped up and folded into a vastly improved Canada Pension Plan for all, says the National Association of Federal Retirees. Speaking to the federal government consultations on federal pension regulations, it suggests doubling CPP premiums for every Canadian and eventually having benefits rise to 70 per cent of earnings from the current 25 per cent. The Conservative government plans to introduce pension reform legislation by the end of the year.

Rectification May Be Applied

The Ontario Superior Court of Justice says the equitable remedy of rectification may be applied to correct drafting errors in a pen­sion plan text, provided that there is convincing proof that the plan text does not reflect what was intended as the plan terms. The legal remedy of rectification is available in cases where the true intentions of a party (or parties, as the case may be) are not accurately recorded in the written instrument. The unchallenged evidence presented to the court demonstrated that words that tied pensionable service to plan membership had been unintentionally deleted in a 1992 plan amendment. In its decision in Kraft Canada Inc. v. Pitsadiotis, it ruled when the plan was amended in 1992, the words that tied pensionable service to membership in the plan were unintentionally deleted, with the result that the plan provided that pensionable service was to be calculated from the point of hire, says Jordan Fremont, of Hicks Morley. 

Hopes Pinned On Consumer-directed Plans

U.S. employers are pinning their hopes on stemming rising healthcare costs to consumer-directed health plans, which link high-deductible health insurance plans with tax-favored accounts, says the Employee Benefit Research Institute’s ‘Outlook for Consumer/Patient Engagement in Healthcare – 30 Years into the Experiment.’ In addition to the views about consumer-directed plans, it also discussed value-based insurance design in which employers attempt to tailor their health plans to balance the demonstrated value of a service against its cost. Value-based design encourages consumers to use health services when the clinical benefits exceed the cost and, at the same time, discourages the use of services when the benefits do not justify the cost.

Sabia President Of Caisse

Michael Sabia is the president and CEO of Caisse de dépôt et placement du Québec. He was president and CEO of BCE Inc. from 2002 to July 2008, after serving in other senior positions within the group. Previously, he was CFO at CN when the railway was privatized and then taken public.


Friday, March 13, 2009

Reforms Make ‘Patchwork’ System Worse

Reform proposals from four Canadian provinces will only make the “patchwork” system of pension regulation in the country worse, says David Vincent, of Ogilvy Renault. Speaking at its session on ‘Latest Pension Developments,’ he said pension reform is overdue and, given the current conditions, it is coming. However, since the proposals are taking each province in different directions, this reform will create disruption and a change in the market. The one positive out of the proposals is that they finally recognize there are different kinds of pension plans which require their own set of regulations. Most of the regulations across Canada were designed with single employer sponsored pension plans in mind.

Market Value Of Pension Assets Down

The market value of assets held in employer-sponsored pension funds fell by 8.7 per cent during the third quarter to $869 billion, the largest quarterly decline in a decade, says Statistics Canada. The decline, equivalent to $82.7 billion, was the result of a significant drop in stock prices and foreign investments. The third quarter level was well below the peak of $954.6 billion reached at the end of 2007. The market value of stocks and equity funds accounted for 34.2 per cent of total pension fund assets at the end of the third quarter, down from 38.4 per cent in the same quarter in 2007. Expenditures of $22.8 billion in the third quarter exceeded revenues of $17 billion, for a negative cash flow of $5.8 billion. This was the largest quarterly net income loss in six years and the second time in 2008 that pension funds had experienced a negative cash flow. In total, about 5.8 million Canadian workers are members of employer pension plans.

Employers Confident About Healthcare Benefits

Despite rising healthcare costs and other economic worries, a majority of large U.S. employers remain confident they will continue to offer healthcare benefits to workers 10 years from now. However, the level of confidence has slipped from last year due to economic concerns and uncertainty over the implications of potential healthcare reform, says a survey by Watson Wyatt and the National Business Group on Health. The survey found that employers do not support most of the commonly prescribed solutions to the issues that plague the healthcare system. More than two-thirds (68 per cent) are very or somewhat supportive of reforms that advance the consumer-oriented model and emphasize greater individual responsibility. Respondents are least in favor of tax policy changes that remove tax deductibility of employer premium contributions.


Thursday, March 12, 2009

Decline Expected For S&P/TSX

A rapidly deteriorating economic outlook for North America and other OECD countries will likely push the S&P/TSX composite index down to 7,000 before the massive U.S. fiscal stimulus and financial rescue package kicks in, says a report from CIBC World Markets. As a result, it has slashed its targets for both 2009 and 2010. It notes that second quarter GDP in both the U.S. and Canada is to likely to show further substantial contractions in the economy, while the banking crisis in the U.S. is likely to continue to have spillover effects on Canadian financial stock valuations. Assuming a sustained recovery in 2010, the index could rise to 11,000 by the end of next year. However, that will still leave Canadian equity valuations almost 30 per cent below their mid-2008 peak.

Executives Understand Relevancy Of Sustainability

An overwhelming majority (90 per cent) of Canadian senior financial executives consider reporting on the environmental and social impacts of their companies to be important, says a survey from PricewaterhouseCoopers LLP and the Canadian Financial Executives Research Foundation, the research institute of FEI Canada. A large proportion of responding companies (72 per cent) also claimed that their company understood which sustainability issues were most relevant to achieving their business goals. However, when asked if there was an effective strategy for managing these issues, only half of respondents reported that they had one in place.

Dealing With New Retirement Reality

With many boomers readjusting their retirement plans these days, employers need to strike a balance between retaining talented older workers and re-invigorating a workforce with new ideas, said Mary Cover, consulting actuary, at a Buck breakfast presentation. Phased retirement – which all provinces need to get on board with – is an ideal way to keep the valuable knowledge of older workers, she said, allowing them to keep working, earn more pension benefits, and collect a pension all at the same time. Other older workers, on the other hand, can still be encouraged to retire early through early retirement windows, which can feature short-term enhanced benefits, bridge benefits, and post-retirement indexation.

Sun Shareholders Get Vote On Compensation

Sun Life Financial Inc. will provide its shareholders with an advisory vote on executive compensation at annual meetings. This advisory vote, which will be non-binding, will be submitted to shareholders beginning at its annual meeting to be held in 2010.

Aggregate Funding Falls At U.S. Plans

Aggregate funding for the 100 largest U.S. pension sponsors fell by $303 billion last year, going from an $86 billion surplus at the end of 2007 to a $217 billion deficit at the end of 2008, says a Watson Wyatt analysis. However, 2008 disclosures reveals while many of these losses are due to equity declines, equity allocation targets for 2009 have not changed substantially. “Plan sponsors were hit hard with a double whammy in 2008 with severe market declines and new funding rules coming into effect,” says David Speier, senior retirement consultant. “This combination will require employers to make staggering pension contributions over the next couple of years, at a time when they can least afford them.” Pension contributions increased slightly last year, from $17.7 billion in 2007 to $18.4 billion in 2008. However, companies are expecting to make substantially larger contributions in 2009, up to more than $27.7 billion, a 50 per cent increase over 2008 cash contributions.

Kerry Case Discussed

Can a plan sponsor pay expenses from the pension fund or cross-subsidize and a discussion of the Kerry (Canada) case will be the focus of one of the sessions at the Ontario Bar Association’s ‘7th Annual Pensions and Benefits Hot Spots.’ Set for April 22 in Toronto, ON, it will also look at proposed changes to pension legislation and emerging issues in pension plan funding. For more information, visit

Menzies Speaks At Pension Summit

Ted Menzies, parliamentary secretary to Canada’s minister of finance, will take part in a panel discussion on regulatory reform of pensions at the ‘2009 Summit on the Future of Pensions: From Crisis to Sustainability.’ Set for April 20 and April 21 in Toronto, ON, its sessions will explore how to manage the immediate crisis while tackling the long-term structural challenge. For more information, visit

Real Life Wellness Examined

The next EAPAT seminar will look at ‘Real Life Employer Wellness Journeys in Difficult Economic Times.’ A panel of workplace wellness champions will share their experiences and the key components of their organizational health strategies. The panel consists of Ruth Brennan, director of human resources at Towers Perrin; Angela Kelly, manager of organizational health and wellness at Fallsview Casino Resort; and Marion Younan, manager of human resources at Canadian Bearings. It takes place March 26 in Toronto, ON. For more information, visit


Wednesday, March 11, 2009

'Retirement USA’ Rolled Out

All U.S. employers would be required to contribute to a retirement plan for their workers under a series of reform principles outlined by a group of worker advocacy and policy associations including the Pension Rights Center and the Service Employees International Union. The ‘Retirement USA’ initiative would create a retirement system that would provide workers without an employer-sponsored retirement plan enough income on top of their Social Security payments to “maintain a reasonable standard of living in retirement.” The federal government would subsidize the contributions of lower income workers under the plan, with all contributions pooled and professionally managed to minimize costs and financial risks. A government regulator would oversee the plan.

Knowledge Main Barrier

Knowledge, rather than cost, is the main barrier to the use of new portfolio optimization techniques by investment managers, says an EDHEC Risk and Asset Management Research Centre survey. It found 53.66 per cent of investment managers surveyed said their level knowledge of about portfolio construction research was keeping them from using it. It also found that 14.37 per cent believe the new techniques – such as value-at-risk, resampling, and improved covariance – don’t add significant value; 27.26 per cent say clients aren’t interested or don’t understand the techniques; and 26.36 per cent believe the techniques are costly or difficult to implement. It says practitioners think that education of investment management teams and perhaps education of clients are the steps most likely to lead to increased adoption of these techniques. 

Avoiding Shortfall Litigation Examined

The latest on current regulatory and legislative issues and protecting the organization from pension legal risks will be among the areas covered at the Federated Press ‘Pension Law & Litigation’ conference. Set for June 15 to 17 in Toronto, ON, it will also feature sessions on developing an effective pension risk management approach and avoiding litigation over pension shortfalls. For more information, visit


Tuesday, March 10, 2009

Two Factors Blamed For Caisse Performance

The bulk of the Caisse de dépôt et placement du Québec difficulties were due to events beyond his control that arose after his departure, says Henri-Paul Rousseau, its former president. In a speech to the Board of Trade of Metropolitan Montreal, he cited two major factors that contributed to its performance in 2008 – accounting rules that forced it to write down the book value of its real estate assets, even though they continue to generate strong revenue, and a currency hedging policy that he actually deemed to be more conservative than the one followed by most other pension funds. Rousseau did take “full responsibility” for the Caisse's decision to invest $13.2-billion in now highly devalued non-bank asset-backed commercial paper. However, he minimized its impact on the overall results. The $3.9 billion writedown taken in 2008 on the non-bank ABCP represented only 10 per cent of its overall losses last year. Rousseau left the Caisse in mid-2008 to take a senior job at Power Corp. of Canada. The Caisse posted a -25 per cent return in 2008, equivalent to a $39.8-billion loss.

Best Employers In 11th Year

Hewitt Associates’ annual ‘Best Employers in Canada’ study is underway for the eleventh time. This year, the study will focus on the connection between employee engagement and corporate social and environmental performance.  Hewitt has partnered with Canadian Business for Social Responsibility (CBSR) to measure the impact that corporate social responsibility activity has on employee attraction and retention, productivity, and other engagement indicators.

Hedge Funds Outperform Equity Markets

Hedge fund returns likely went down in February, says the Credit Suisse/Tremont Hedge Fund Index. However, although they far outperformed equity markets. Its estimates indicate the broad hedge fund index will finish down 0.45 per cent for February. Distressed strategies were weakest, losing an estimated 1.7 per cent in the month, whereas the dedicated short bias strategies gained about 4.1 per cent. The MSCI World Index was down 10.5 per cent in the month. The firm says that initiatives such as the U.S. economic stimulus package, bank rescue plans, and other efforts leads its research to believe markets could stabilize by mid-year and possibly lead to a tepid recovery in late 2009 or early 2010.

Settlement Working Well

The credit derivatives transaction settlement process is working well overall amid credit defaults, says a report by senior financial supervisors from seven countries, including Canada’s Office of the Superintendent of Financial Institutions. The report assesses how firms manage their credit default swap activities related to the settlement of credit derivatives transactions terminated by the occurrence of a credit event. Surveyed participants reported that recent credit events were managed in an orderly manner, with high participation rates and no major operational disruptions or liquidity problems. The survey also found that access to accurate CDS counter-party exposure data is essential to efficient credit event processing and concluded that formalizing market-wide and internal procedures will reduce the operational risk associated with auctions and help market participants address unexpected developments.

Young Turn To Target-date Funds

About 37 percent of 401(k) plan participants who were offered target-date funds had at least some fraction of their account in these funds in 2007, and this is expected to increase as the push for better diversification of 401(k) participants’ assets intensifies from plan sponsors and policymakers, says a study by the Employee Benefit Research Institute (EBRI). The Pension Protection Act of 2006 made it easier for retirement plan sponsors to automatically enroll new workers in a 401(k) plan, and target-date funds were one of the types of approved funds specified for a ‘default’ investment if the participant does not elect a choice. The study found younger workers are significantly more likely to invest in target-date funds than older workers with almost 44 percent of participants under age 30 having assets in a target-date fund, compared with 27 per cent of those 60 or older. Target-date funds are more likely to be used by those with lower incomes, little time on the job, and with few assets. As well, participants in target-date funds were less likely to have all-or-nothing equity allocations relative to those not in the funds.


Monday, March 9, 2009

GM Gets Union Deal On Benefits

The CAW has reached a tentative restructuring agreement with General Motors that will protect current pensions. Under the agreement, there will be no annual cost of living adjustments to pensions in this contract which was extended one additional year, to expire in September 2012. It also calls for an annual $1,700 special bonus payment to be diverted to help offset the cost of retiree healthcare benefits. As well, expenses for union-sponsored programs, including wellness programs, are being reduced by about one-third. Plus, significant changes are made to a range of health and non-wage benefits including a new monthly co-pay premium which will collect $30 per month from active workers and pensioners under 65, and $15 per month from pensioners over 65 and surviving spouses. Other health benefits affected by reduced caps or increased co-pays include dental, long-term care, and life insurance. The tentative agreement must be approved by a majority of the CAW members currently employed by GM in Canada and it is contingent on the company receiving government financial assistance and recommitting to a proportional Canadian manufacturing presence including specific product commitments in GM's respective plants.

Systemic Risk Needs Re-think

The IMF says that regulators worldwide need to rethink systemic risk. In new research, it concludes that both market discipline and regulations failed to keep up with financial market innovation and the buildup of leverage. Its analysis points to failures at three different levels – regulators that were not equipped to see the risk concentrations and flawed incentives behind the financial innovation boom, policymakers who failed to deal with the growing macroeconomic imbalances that contributed to the buildup of systemic risks in the financial system, and international financial institutions that failed to motivate co-operation at the international level. It also identifies five key weaknesses that need to be fixed – the scope of regulation needs to be expanded to encompass all activities that pose economy-wide risks; market discipline needs to be strengthened; procyclicality in regulation and accounting should be minimized; there needs to be greater transparency in the valuation of complex financial instruments; and central banks should strengthen their frameworks for systemic liquidity provision.

Caisse Satisfied With Moody’s Update

The Caisse de dépôt et placement du Québec is satisfied with the update issued by Moody's, which has confirmed the short- and long-term credit ratings of CDP Financial and maintained its "stable" rating outlook. Its decision was based on the Caisse's strong liquidity and low ratio of debt to the fair value of its assets as at December 31, 2008. The Caisse has taken note of the agency's comments on possible improvements to its risk management practices and will work closely with the agency to provide it with the requested information on the reasons given, namely senior management stability, the Caisse's strategy for handling the current investment climate, risk management, and the institution's independence vis-à-vis the government. 

Recession Takes Toll On Executives

The recession continues to take its toll on Canadian executive pay packages. More than 85 per cent of stock options are now underwater, and the vast majority of Canadian CEOs are seeing their long-term incentives (LTI) depreciate by more than 50 per cent, says Watson Wyatt. Most Canadian executives do not stand to gain from the stock options they currently hold. More than three-quarters (83 per cent) of the stock options granted in 2007 to CEOs in the TSX 60 were underwater as of the end of 2008. Furthermore, nearly 30 per cent of CEOs in the TSX 60 found their 2007 LTI awards underwater as of the end of 2008. A significant majority (80 per cent) of executives would see their LTI lose half the original value. Even with a 100 per cent gain by year-end 2009, more than 40 per cent of the stock options rewarded would remain underwater.   

Short Extension Funds Solution Enhanced

Northern Trust has enhanced its asset servicing solution for tax-transparent pooled vehicles to support certain short extension funds offered by investment managers. Its latest pooling innovation preserves tax benefits that allow investors to achieve increased returns from their investment strategy. It is available via three pooling vehicles – the Common Contractual Fund in Ireland; the Fonds voor Gemene Rekening in The Netherlands; and the Fonds Commun de Placement in Luxembourg.

Gold, A Safe Port?

‘Gold – A Safe Port in the Storm?’ will be the topic of a Toronto CFA session April 8 in Toronto, ON.  Speakers include David Haughton, co-head, metals and mining research, BMO Capital Markets; David Harquail, president and chief executive officer, Franco-Nevada Corp.; and Gordon Stothart, chief operating officer at IAMGold Corp. For more information, visit


Friday, March 6, 2009

Leave To Appeal Marine Atlantic Denied

The Supreme Court of Canada has denied a plan members’ application for leave to appeal the Federal Court of Appeal decision in the ‘Marine Atlantic’ case, says a Borden Ladner Gervais LLP ‘Pension Alert.’ In reaching its decision, the Federal Court of Appeal distinguished the ‘Marine Atlantic’ from the decision of the Supreme Court of Canada in ‘Monsanto’ on the basis of the difference in wording between the Ontario Pension Benefits Act and the federal legislation. Specifically, the court said the federal legislation provides that on a “partial termination” of a pension plan the rights of affected members “shall not be less than what they would have been if the whole of the plan had been terminated on the same date as the partial termination.” However, “termination” is not defined to include or require the distribution of pension assets. It says this is a positive development for sponsors of federally-regulated pension plans as it means that portions of actuarial surplus in Defined Benefit pension plans do not need to be distributed at the time of a partial termination.

Bertrand Leaving TMX

Luc Bertrand will step down as deputy chief executive officer, TMX Group, and president and chief executive officer of the Montreal Exchange Inc. effective June 30. He has served as MX's president and chief executive officer since March 2000 and was integral in establishing and growing the business into a successful derivatives exchange. Alain Miquelon will become president and chief executive officer of MX, effective July 1. He joined MX in August 2007 and is currently head of the integration project management office.  

Value Of Pension Assets Down 19 Per Cent

The value of pension assets in the 11 largest retirement markets in the world dropped 19 per cent in 2008 to $20 trillion, says a Watson Wyatt Worldwide report. Its global pensions balance sheet, which measures funding status, dropped by 29 per cent for the year. The U.S., Japan, and the U.K. remain the world’s three largest pension markets, accounting for 83 per cent of worldwide assets, collectively. It also says Defined Contribution assets had a compound annual growth rate of 7.5 per cent between 1998 and 2008, compared with 1.4 per cent for DB assets in the top seven pension markets which includes Canada. DC plans now make up 45 per cent of total retirement assets in these markets compared with 30 per cent a decade ago.

Alpstar Group Recovers Assets

Alpstar, a European credit fund specialist, has formed a ‘strategic asset recovery group’ to focus on the restructure and recovery management of distressed fixed income assets. It decided to form a dedicated group after receiving a number of requests from pension funds who needed help in restructuring their fixed income investments. It says throughout the European continent, fixed income investors, especially those in high grade, are now finding that their portfolios, on average, have fallen below investment grade – in some cases substantially so. Its group will help managers carve out and restructure these distressed assets, so that value can be captured in any recovery scenario.

Large Distributions Saved For Retirement

The larger the lump-sum distribution from an employer’s retirement plan when a worker changes jobs, the more likely it will be kept entirely in tax-qualified savings, says a report by the Employee Benefit Research Institute. It says among recipients with distributions of $1 to $499, 17 per cent rolled over their distributions exclusively to tax-qualified savings, compared with 72.4 per cent of those with distributions of $50,000 or more.

Marchese Heads Team Canada

Andrew Marchese will provide the investment leadership for Fidelity Investments’ Team Canada. He is currently portfolio manager on a number of mandates for Canadian clients. Along with his investment management responsibilities, he is continuing as director of research.


Thurday, March 5, 2009

Government Stifling Debate

Opposition parties claim the Quebec government is stifling debate on the $39.8-billion loss reported for 2008 by the Caisse de dépôt et placement du Québec after committee hearings into the pension fund's losses were cancelled. The opposition believes Quebec Premier Jean Charest knew about the Caisse's troubles last fall. As well, they say that the pension fund's problems started with changes to the Caisse governance rules adopted in December 2003 which encouraged managers to take greater risks in order to improve benefits. These changes opened the door to risky investments such as the heavy stake in asset-backed commercial paper that contributed to the Caisse's record losses. “The Caisse lost $40-billion. How much more does it have to lose to justify special committee hearings?” says Stéphane Bédard, Parti Québécois house leader.

Team Canada Comes Home

Team Canada, Fidelity Investments Canada ULC buy-side teams dedicated to researching and analyzing Canadian equities, is coming home with offices in Toronto, ON, and Montreal, QC. Founded in Boston, MA, in 1997, Team Canada is made up of 25 portfolio managers and research analysts who manage Canadian equity mutual funds that cover the spectrum of the equity sectors. “The new Canadian offices are just the latest of several new Fidelity offices around the world and are one more sign of Fidelity’s long-term commitment to the Canadian market,” says Rob Strickland, president, Fidelity Canada.

Sun Life Eyes Hartford

Sun Life Financial Inc. is reportedly in talks to purchase the units of Hartford Financial Services Group Inc. It is targeting the group and individual life and mutual fund units. Hartford recently announced it is willing to sell divisions after losing $2.7 billion in 2008.

After-hour BlackBerry Policies Needed

The growth of BlackBerrys and handheld technologies among workers is leading to serious challenges regarding overtime pay and increased stress, says Patrick Gannon at the 24th annual Fasken Forum in Toronto. Although BlackBerrys bring various benefits to the workplace, employers will continue to face lawsuits or complaints claiming overtime pay or violation of work provisions unless effective policies are applied. Firstly, Gannon says employers should weigh the advantages and disadvantages of allowing use after regular working hours to determine if they're actually required. Policies should then clearly stipulate when and under what circumstances BlackBerrys can be used. Other solutions include restricting or blocking certain remote access to worksites after hours or requiring employees to ask for permission before logging on.


Wednesday, March 4, 2009

Institutions Hold Majority Of Hedge Fund Assets

An absolute majority of all assets under management by hedge funds and funds of hedge funds globally are from institutional investors with a third of those assets from pension funds, says the Alternative Investment Management Association (AIMA). “Traditionally, high net worth individuals accounted for most of the assets under management by the hedge fund industry globally, but institutional investors have been steadily increasing in significance in recent years and we think they now account for an absolute majority of AUM,” says Tom Kehoe, research manager of AIMA.

Private Equity On Slippery Slope

In less than 15 years, global allocations to private equity by institutional investors went from $95 billion to $1.2 trillion, says Andrew Sheiner, managing director, Onex Corporation. Speaking at the ‘2009 Private Equity Symposium’ – a collaborative event between the Financial Executives International Canada, the Canadian Institute of Chartered Business Valuators, the Toronto CFA Society, and Canada’s Venture Capital & Private Equity Association, he said during that same time the return on these investments was 17 per cent, almost twice the nine per cent return of the S&P index. However, the advent of structured funds was the beginning of a “slide down a slippery slope,” he said, because it meant more private equity investors were able to use less of their own money and more leverage to complete deals. He noted, for example, banks used to hold 85 per cent of the loans they arranged. Prior to the financial crisis, this had slipped to 15 per cent. As well, private equity funds began managing more of “other people’s money” and not their own.

Pension Funds Should Accept Responsibility

Institutional investors, including pension funds, should accept some degree of responsibility for the investment practices which have cause the global economic crisis, says the UN Principles for Responsible Investment (UNPRI) Initiative. The body, which has more than 500 members – including the Canada Pension Plan Investment Board and Quebec's Caisse de dépôt et placement – says institutional investors should admit they made ‘mistakes’ in the run up to the crisis. However, they should also work together in order to improve risk management and responsible investment practices in the future. The UNPRI has released an eight-point plan to bolster responsibility among investors.

Newfoundland Using CIBC Mellon

CIBC Mellon Global Securities Services Company has been appointed by the province of Newfoundland and Labrador to provide securities lending, custody, accounting services, and performance measurement for its $6.4 billion pooled pension fund. The province created its pooled pension fund on July 1, 1980.

ACPM Examines ‘Changing Currents’

‘Changing Currents’ of the retirement income system will be the theme of the ‘2009 ACPM National Conference.’ Plenary sessions will examine topics such as the various pension reports published in the last few months and what they all mean to the pension industry while its workshops will address alternative investment strategies, plan governance, plan member education, pension plans in a corporate finance framework, the legal issues involved in determining what plan members should or should not know, and whether the proposed JEPPS ‘ABC Superfund’ is viable. It takes place September 15 to 18 in Montreal, QC. For more information, visit


Tuesday, March 3, 2009

Pay Proposal Displeasures Teachers’

The Ontario Teachers' Pension Plan will show its displeasure over a salary proposal for  BMO CEO Bill Downe by withholding its vote for the directors who sit on the board committee that sets pay, says a report in the Globe and Mail. The committee offered to pay the CEO $6.5 million in a year even though the company stock lost 27 per cent of its value last year. Downe did decline most of the money and will earn $2.4 million, however, Teachers claims the larger amount should never have been offered. Pay practices at banks have come under attack in recent weeks with shareholders of the Canadian Imperial Bank of Commerce, the National Bank of Canada, and the Royal Bank of Canada winning the right to vote on pay practices at those firms and shareholders of BMO and the Bank of Nova Scotia to vote on ‘say-on-pay’ motions.

RBC Acquires Commission Direct

RBC Capital Markets has acquired full ownership of Commission Direct Inc. (CDI), an independent provider of commission-compensated investment services for Canadian institutional investors. Prior to this transaction, RBC had a 50 per cent ownership interest in CDI. Companies such as CDI facilitate the payment of qualified independent research and brokerage obligations, commission sharing arrangements, commission recapture, transition restructures, and discount trading. The transaction gives CDI the ability to continue to offer professional investors unbiased access to qualified investment decision-making and trading services and plan administrators the ability to save money.

Savings Rate Reports Inaccurate

Reports that the softening economy and tumultuous markets are having a significant impact on participant savings rates may not be accurate, says a study by the Vanguard Center for Retirement Research. The study shows that last year 3.1 per cent of 1.3 million participants in its Defined Contribution plans stopped making contributions, up 0.7 per cent from the prior year. However, it found that, in any given year a small percentage of active participants ceases contributing and that the economic and market downturn in 2008 appears to have raised that rate only slightly. Recent surveys have suggested that a large group of households ended retirement savings programs during the market turmoil of 2008. Its data suggests that, “at least among DC plan participants, inertia remains quite powerful, so few active participants have ended their savings program.” 

Brampton Hosts Law Conference

The ‘10th Annual Ontario Employment Law Conference’ will take place June 10 in Brampton, ON. Employment law specialists from Stringer Brisbin Humphrey will examine areas of labour, employment, and human resources law. For more information, visit


Monday, March 2, 2009

Compensating Executives Appropriately

Curbing excessive executive compensation will remain a priority for Ethical Funds in 2009. Its ‘2008 Annual Report’ says it will ask that compensation be linked to positive performance on both financial and non-financial indicators. It also says that in 2009 it will devote significant effort to engage with companies operating in Alberta’s oil sands on a variety of environmental and social issues relating to land use planning, Aboriginal rights, climate change, water stewardship, and reclamation. To improve sector-wide performance and create a level playing field, it will encourage other investors to ask the same questions to broaden the scope of engagement to oil sands companies it may not hold in our funds.

Market Prices May Lead To Serious Distortions

Banks and insurers should mark their assets to market in most normal circumstances, but not amid financial crises, says a C.D. Howe Institute report. ‘Marking to Market for Financial Institutions: A Common Sense Resolution’ examines the intensifying debate over whether, in valuing assets and liabilities on financial institutions’ balance sheets, market prices provide the best available estimate of value – or if, in times of crisis, using market prices could lead to serious distortions. It says when liquidity constraints affect market prices, model‑based and historic cost valuations may provide helpful information. The rest of the time, and in particular when asset prices are low because expectations of future cash flows have fallen, mark‑to‑market accounting should be used instead. To see the study, visit

Tessier To Head Caisse Board

A former Quebec bureaucrat will be named the new chairman of the Caisse de depot et placements, says a report in Montreal La Presse. Tessier served as chief executive officer and later chairman for Gaz Metro, the largest natural gas distributor in the province. He will replace current chairman Pierre Brunet, who is leaving the Caisse after five years. The government is also reportedly looking to appoint a new president and replace up to nine of the 14 members of the agency's board whose terms are expiring. Last week, the Caisse announced it lost nearly $40 billion in 2008.

Seward Speaks At Wellness Session

‘Employee Wellness – Building A Business Case’ will feature Karen Seward, senior vice-president, business development and marketing, Shepell*fgi. Set for March 19 in Winnipeg, MB, the CPBI Manitoba Region breakfast session will explore areas such as the value health and wellness strategies can bring to an organization. Seward will also discuss the importance of helping employers to come to view health costs as an investment rather than an expense. For more information, visit

Waterman Speaks At FEI Conference

The FEI Canada Annual Conference will take place May 27 to 29 in Montreal, QC. Featured speakers include Bruce Waterman, senior vice-president, finance, and CFO, Agrium Inc. and Canada's CFO of the Year for 2008; and Hal Kvisle, president and CEO, TransCanada Corporation, and Canada's Outstanding CEO of the Year for 2008. For more information, visit


Friday, February 27, 2009

Firms Will Preserve Capital

Private equity firms will preserve capital through the beginning of 2009 and pursue only targeted opportunities in the mid-market where financing is most available, says Chris Blackwell, managing director, CIBC World Markets. Speaking at the CVCA Canada's Venture Capital & Private Equity Association ‘Deal and Valuation Trends: Getting Things Done in the Current Turbulent Markets’ conference, he said key private equity themes for 2009 include a scaling back of commitments by LPs. Factors behind this include secondary market distress with funds selling at 50 per cent to 70 per cent of NAV which is exacerbating the liquidity crunch for LPs and the number of mature LPs – including mature private equity investors such as endowments and foundations ­– which are defaulting on fund commitment and capital calls.   

Caisse Put On Credit Watch

The Caisse de dépôt et placement du Québec will work closely with Standard & Poor's after a research update placed its AAA long-term issuer credit rating on "credit watch with negative implications" for the next three months. The agency specified that it may or may not revise it downward at the end of the credit-watch period. The AAA long-term rating is the highest in Canada. The Caisse will provide the agency with information it has requested on senior management stability, its strategy for handling the current investment climate, risk management, and its independence vis-à-vis the government.

Asset Value Dropped 31 Per Cent

The typical institutional investment manager experienced a 31 per cent reduction in portfolio asset values in 2008, says research by Greenwich Associates. Its ‘2008 U.S. Investment Management Study’ reveals that the suddenness of these losses has left institutional investors stunned, and the magnitude of the declines is raising questions about asset allocation decisions, risk management practices, manager selection, and overall investment policies used by institutions in the run-up to the market events of the fourth quarter of last year. The speed and severity of the market collapse demonstrated the value of liquidity in investment portfolios and institutions might have to reconsider past attitudes toward cash holdings.

Employer Match ‘Critical Component’

The employer match in 401(k) plans is a “critical component” of pushing up participation rates, says Fidelity research. It says when the match is combined with immediate vesting when all employees are eligible for auto enrollment, the plan's participation rate can soar to as much as 89 per cent. On average, offering a company match of at least 50 per cent on every dollar of participants' contributions, up to six per cent of pay, or what equates to three per cent of the participants' salary, drives increased worker participation in plans by as much as nine per cent. The provision of a company match has the biggest impact on workers in their 30s and 40s, increasing their participation rates by nine per cent. Many companies in the U.S. are considering suspending the employer match due to the economic conditions.

Older Workers Roll Over Lump-sum Distributions

The likelihood of a lump-sum distribution from an employee’s retirement plan being rolled over increases with the age of the person receiving the distribution, says ‘January 2009 EBRI Notes.’ The highest rollover rate is among near-retirees (ages 61-64), 64 per cent of whom used their most recent retirement distribution entirely for tax-qualified savings. That compares with 34.8 per cent for those ages 21-30 when they change jobs. Workers’ future financial adequacy in retirement can be profoundly affected by whether their lump-sum distributions are cashed out and used for consumer spending, or retained in another savings vehicle.

Experts Discuss Governance Thinking

The Conference Board of Canada’s ‘2009 Western Governance’ conference will take place May 13 in Calgary, AB. The event will showcase governance practices and feature leading governance practitioners and winners and top contenders of The Conference Board of Canada/Spencer Stuart 2009 National Awards in Governance. The experts will discuss the latest thinking and best practices, and their assessment of today’s top governance challenges including avoiding risk management failures and managing executive compensation. For more information, visit

Impact Of Pension Law Examined

‘Pension Plans in a Changing Economy: Managing the Legal Risks’ will be the topic of an Osgoode Professional Development event April 20 and 21 in Toronto, ON. A special panel – ‘Pension Law Reform in Today's Challenging Economic Times: What Happens Next?’ – will assess the impact of the federal and provincial government reforms that have been implemented and/or proposed. For more information, visit

Commuted Value Interest Rate Assumptions For April

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


Thursday, February 26, 2009

Limit On Voting Equity Stakes Should Be Scrapped

Regulators should eliminate the 30 per cent rule that restricts pension funds from holding more than 30 per cent of the voting equity in a corporation, says a C.D. Howe Institute study. ‘A Matter of Voice: The Case for Abolishing the 30 percent Rule for Pension Fund Investments’ points out that pension fund managers have devised elaborate ways to effectively skirt the rule. It makes the case that it is time for regulators to enforce the rule or eliminate it entirely and give pension funds a voice commensurate with their equity stake. The three principle challenges to the 30 per cent rule are that the rule is only subject to superficial compliance as regulators have allowed companies to work around the rule, resulting in unnecessary complexity and increased transaction costs; since no other OECD jurisdiction has a similar rule, Canadian plans are at a disadvantage relative to foreign competitors when competing for a given investment; and there are governance problems that result from disaggregating ownership from control. The study is available at:

Caisse Lost 25 Per Cent

The Caisse de dépôt et placement du Québec had a 25 per cent loss on depositors' funds for the year ended December 31, 2008. This is comparably worse than the 18.5 per cent loss on the benchmark portfolio and the 18.4 per cent loss on the median return for the universe of large Canadian pension funds. The year's net investment loss of $39.8 billion has cancelled out a significant portion of the $63.2 billion of returns earned in the preceding five years. Net deposits totalled $4.6 billion and depositors' net assets declined to $120.1 billion from $155.4 billion for the year. While it attributes the global financial crisis for part of the decline, it also acknowledges that its large holdings of asset-backed commercial paper and the cost of hedging the foreign exchange risk of assets outside Canada, which increased significantly as the Canadian dollar fell, also contributed.

Negative Stress Causes Injuries

Employers who cut back on proactive investment in their employees, or human capital, during this recession may find it would have been cheaper in the long run to have adopted strategies to improve morale, reduce workplace stress, and decrease absenteeism and presenteeism, says Banyan Work Health Solutions. Employees experiencing negative stress have two to three times risk of injuries, three times the risk of back pain, two times the risk of substance abuse, two to three times the risk of conflicts, and five times the risk of certain cancers. The good news is that workplace environment and stress can be managed and strategically planned by creating a workplace culture with a supportive environment, by ensuring health and safety of the physical environment is being met, and ensuring there is a commitment to health and lifestyle practices.

Desjardins Group RRSP Numbers Up

Despite the hard economic times, Desjardins Financial Security's January 2009 RRSP campaign indicators show that its plan members contributed slightly more to their RRSPs than a year earlier and that the anticipated rush toward safer investment vehicles, such as guaranteed investment certificates, is not going to happen. In spite of the significant number of lay-offs announced at the beginning of the year and the fact that many major employers were not able to pay bonuses to their employees for the first time in many years, the percentage of RRSP contributions as compared to total contributions, which was 36 per cent in January 2008, rose to 44 per cent in January 2009.

UK Wants Pension Clawed Back

The former chief executive of Royal Bank of Scotland is being urged by the British chancellor to forgo some of his £650,000-a-year pension. If Sir Fred Goodwin does not, he may face legal action. Goodwin ran the bank until it needed a multi-billion pound taxpayer bailout. UK Financial Investments, which manages the government’s shareholding in RBS, is working with the bank’s board with the aim of “clawing back” some of the pension.

Claymore Launches Bond ETF

Claymore Investments, Inc. has launched the Claymore 1-5 Year Laddered Corporate Bond ETF. It seeks to provide a return based on the price and performance, less expenses, of the DEX 1-5 Year Laddered Corporate Bond Index. The ETF provides investors of different sizes with the opportunity to gain exposure to a diversified corporate bond portfolio, designed into five staggered (laddered) maturity levels from one year to five years, which are equally weighted. Each year, bonds will roll into a lower ladder bucket, with all bonds from shortest term bucket rebalancing out the “new” longest bucket. Each bucket will consist of approximately five or more bond positions with a minimum credit rating of ‘A’ from rating agencies.

Session Looks At Pension Division

Osgoode Professional Development's ‘Pension and Benefit Entitlements Upon Marriage Breakdown: The Legal Guide’ takes place March 11. 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. For more information, visit

New Investment Opportunities Examined

The 'CFA Institute Annual Conference' brings together investment professionals from around the world to hear industry leaders share insights on today's most critical investment issues. Experts will examine market trends, uncover new investment opportunities, and deliver practical investment advice. The conference offers 25 sessions, including presentations from Bill Miller – chairman and CIO of Legg Mason Capital Management, Inc.; Michael Lewis – best-selling author of ‘Liar's Poker’ and ‘The Blind Side: Evolution of a Game;’ and Andrew Lo – Harris & Harris Group professor of finance at MIT. Sessions will cover topics such as equity analysis, fixed income analysis, portfolio management, ethics, alternative investments, firm management, and private wealth management. It takes place April 26 to 29 in Lake Buena Vista, Fl. For more information, visit


Wednesday, February 25, 2009

Contribution Limits Need Replacement

The current contribution limits for Defined Contribution pension plans, RRSPs, and Defined Benefit pension plans should be replaced with a $1 million to $1.5 lifetime accumulation limit, says James Pierlot, of Towers Perrin. Speaking at an ISCEBS-Toronto Chapter 2009 educational benefit series session, he said this represents the amount that routinely accrues in public sector pension plans. Under his proposal, there would be no limit on annual contributions, but contributions would have to stop once the limit is reached. Excess amounts would need to be withdrawn or be subject to a penalty tax. The benefits of this approach, he said, are that it is easy to understand, equitable, and it allows for catch-up/late career retirement saving which many Canadians are forced to do.

Downturn Creating Stress

The current economic downturn can severely impact workplace productivity unless organizations help employees deal with the added stress, says a report by Shepell·fgi, which examined employee use of Employee Assistance Programs as they relate to financial issues over the past two years. ‘Financial Distress Impacts Health and Productivity’ shows the number of accesses for financial counselling and consultation are rising at a rate twice that of all other EAP services. In the second half of 2008, there was a 13 per cent higher rate of access for financial issues than in the second half of 2007, which indicates that employees are increasingly using EAPs for support and guidance. In 2008, the top financial issues for employees were debt/credit – 37.6 per cent, financial planning – 15.2 per cent, divorce/finances – 8.7 per cent, financial stress – 5.5 per cent, and bankruptcy – 5.2 per cent. Shepell·fgi data show significant increases in all five of these areas when compared to 2007.

Creststreet Turns To RBC Dexia

RBC Dexia Investor Services has been selected by Creststreet Asset Management Limited to provide custody, fund valuations, and investor recordkeeping for its onshore and offshore funds. Creststreet is a Canadian investment management firm specializing in energy investment products for institutional and affluent investors on a long and short basis.

Financial Services Premiums Higher

Financial services companies now pay the highest average premiums for directors and officers (D&O) liability insurance, surpassing rates paid by life sciences and technology firms, says a report from Carpenter Moore. This shift in D&O pricing trends accelerated in the fourth quarter of 2008 as the financial and economic crisis deepened. "Our data show that the D&O insurance market is clearly hardening for financial services companies, which have been at the centre of the economic crisis," says Lauri Floresca, senior managing director and author of the ‘Carpenter Moore D&O Benchmarking Report.’ "Given the historic correlation between market volatility and the filing of class action lawsuits, it is not surprising that this industry has faced rising premiums."

Court Rules Delphi Can Cut Off Benefits

Delphi Corp. has been given permission by a U.S. Bankruptcy Court to cut off healthcare and insurance benefits for about 15,000 white collar retirees. A Reuters news report says the court cited Delphi's need to conserve liquidity and said that the company had waited for a sufficient time before seeking to suspend the benefits. Lawyers for the salaried retirees had argued that parts of the U.S. bankruptcy code limited the ability of a debtor to modify retiree benefits. However, Delphi countered that those benefits are provided "at will" and the court ruled that the code only applied when retirees could prove they have a guaranteed right to those benefits. By cutting off white collar retirees' benefits, the company can save more than $70 million a year and take more than $1.1 billion in liabilities off its balance sheet.

AIMA Supports Full Transparency

The Alternative Investment Management Association (AIMA) will support the principle of full transparency and supervisory disclosure of systemically significant positions and risk exposures by hedge fund managers to their national regulators (the regulator of the jurisdiction in which the manager is authorized and registered to operate). This is one of a series of policy positions in the association’s new platform. Other key new strands of the platform include an aggregated short position disclosure regime to national regulators, support for new policies to reduce settlement failure (including in the area of naked short selling), and a global manager-authorization and supervision template based on the model of the UK’s FSA and a call for unified global standards for the industry.


Tuesday, February 24, 2009

Public Consultation To Start

The federal Department of Finance will begin public consultations in March on the legislative and regulatory framework for federally regulated private pension plans. “Many Canadians are concerned about the long-term viability of their pension plans,” says Finance Minister Jim Flaherty. “The government wants to hear people’s views on how we can strengthen the security of pension plan benefits and ensure that the framework is balanced and appropriate.” The consultations will augment a discussion paper on pension plans that the government released in early January. The paper covers both Defined Benefit and Defined Contribution plans that are subject to the Pension Benefits Standards Act. The consultations will begin in Ottawa on March 13. Subsequent sessions will take place in Halifax, NS; Montreal, QC; Toronto, ON; Vancouver, BC; Whitehorse, YK; Edmonton, AB; and Winnipeg, MB.

Alberta Provides Solvency Relief

Alberta has proposed a number of measures to provide solvency funding relief for registered Defined Benefit plans in the province, says Christopher A. Brown, of Osler, Hoskin & Harcourt LLP. The measures introduced include a three-year solvency moratorium for single-employer plans. Administrators of single employer plans and multi-unit plans may, at any time before 2010, apply to the superintendent for a moratorium suspending the employer’s solvency funding obligations for a three-year period from the review date of an actuarial valuation that is not before September 1, 2008, or after December 31, 2009. Where such a moratorium is granted, the plan must adopt a schedule to amortize going concern unfunded liabilities established on or after the review date to which the application relates over 10 years, and amortize previously established unfunded liabilities over the lesser of 10 years and the remainder of the original 15-year amortization period for the unfunded liability. For SMEPPs that had sought and received relief under the solvency funding moratorium introduced in 2006 and whose term ended at any time in 2008, the moratorium is automatically extended without any break until the end of 2011 on the same conditions. 

OMERS Posts Negative Return

OMERS had a negative 15.3 per cent total rate of return for 2008, compared with a positive 8.7 per cent total rate of return in 2007. In spite of the negative results in 2008, a positive average rate of return for the past five years of 6.9 per cent was realized which is in excess of OMERS five-year average funding requirement and benchmark. Net investment loss for 2008 totaled $8,013 million in 2008, compared with net investment income of $3,938 million a year earlier. “The financial crisis that devastated world markets in 2008 happens once in a lifetime” says Michael Nobrega, OMERS president and CEO. “It drove stock markets to levels not seen in many years. Global equity markets fell by 30 to 40 per cent. OMERS did not escape the downturn, though we believe we fared relatively well as a result of the performance of our fixed income, real estate, and infrastructure assets and our decision not to invest in certain high-risk financial products.”

Ford Reaches Tentative Deal On VEBA

Ford Motor Co has reached a tentative deal with the United Auto Workers union on changes to funding for retiree healthcare. The agreement could save it almost $7 billion in cash and provide a model for similar concessions at GM and Chrysler. The deal gives Ford an option to settle up to 50 per cent of payments to the Voluntary Employees Beneficiary Association, or VEBA, in stock. Previously, all payments were due in cash. It owes $13.2 billion to the VEBA trust excluding healthcare payments that it will make for retirees in 2009. All three Detroit automakers have been in negotiations with the UAW on changing the terms of their VEBA healthcare trusts under concessions that are mandated by the terms of the $17.4 billion U.S. government bailout of GM and Chrysler LLC.

Bigger Accounts Suffer More

How the recent financial market losses affect individual 401(k) account balances is strongly affected by the size of a participant's account balance, says the Employee Benefit Research Institute (EBRI). Those with low account balances relative to contributions experienced minimal investment losses that were typically more than made up by contributions. Those with less than $10,000 in account balances had an average growth of 40 per cent during 2008 since contributions had a bigger impact than investment losses. However, those with more than $200,000 in account balances had an average loss of more than 25 per cent.

Canadian Workers More Confident

Canadian workers are feeling more confident than their American neighbours about the economy, personal finances, health, employer, and government benefits, says Sun Life Financial's Canadian and American ‘Unretirement Index’ surveys. However, the picture isn't entirely rosy for workers north of the border. Almost one-third of Canadians are not at all satisfied with how much they are saving for retirement and one in 11 say they actually dipped into their retirement savings in recent months due to the economy. That's on par with the number of Americans who have withdrawn money from their retirement nest eggs. Canadians are more confident than Americans when it comes to being able to pay for healthcare costs in retirement, though neither group is fully confident. According to the surveys, 37 per cent of Canadians feel very confident that they would be able to handle medical expenses at the age they retire, compared to 23 per cent of Americans. Less than half of Canadians polled have checked to see what health or dental benefits are available to them once they retire.

Quebec Retirees Want Caisse Inquiry   

The Association québécoise des retraité(e)s des secteurs public et parapublic (AQRP), Quebec's largest independent association representing retired public employees, is demanding an inquiry into the responsibility borne by the officers who set the investment policies that led to the Caisse de dépôt et placement du Québec's expected losses for 2008. The AQRP also insists that the commission's mandate include determining whether the Caisse's use of asset-backed commercial paper (ABCP) was consistent with investment policies approved by these officers. "The Caisse de dépôt et placement's expected losses for 2008 will be of historic proportions. Along with other citizens of Quebec, retirees want to know where the responsibility for these losses lies. We believe that only a commission of inquiry can properly shed light on the situation," says Madelaine Michaud, president of the AQRP. Estimates are that the Caisse is likely to report a loss of 20 to 26 per cent for 2008.

Otsuki Developing Portfolio Designs

Ron Otsuki is vice-president, portfolio strategies, within the portfolio design and investment research department, at the CPP Investment Board. He will help to develop portfolio designs that optimize total fund performance over medium- and long-term investment horizons. Most recently, he was senior vice-president, global investment strategy, Manulife Financial.


Monday, February 23, 2009

Management Fees May Sag

Fees for institutional asset management services could sag this year, says a biennial survey by Mercer. They held steady in 2008. It says alternative strategies, with complex fee structures, should be a focus of fee negotiations this year after widespread disappointment with results for 2008. Mercer’s Asset Manager Fee Survey 2008, based on fee data for 19,000 asset management products from 3,400 investment management firms in its database, predicts only a “small decrease” in median fees for U.S. all-cap/large-cap equity commingled products.

Studying History Improves Understanding

At times like this, where one feels the futility of studying capital market history, this knowledge can help us better cope with challenging market times and improve planning, says Harry Marmer, executive vice-president, institutional investment services, Hillsdale Investment Management Inc. In an article entitled ‘Facts And Figures On Cycles And Their Implications For Institutional Investors’ at Benefits and Pensions Monitor’s website, he says every new recession and accompanying bear market presents an opportunity to study history and review the statistics of capital market cycles in order to gain some perspective on the current market environment and how to be best-positioned for the future. With market uncertainty at unprecedented levels, it is now even more imperative for investors to study capital market history to better understand how to cope with these challenging times, he says. To see the article, visit

OMERS Ranked As Best Employer

OMERS has been named as one of ‘50 Best Employers in Canada’ by Hewitt Associates. OMERS ranked 21st. “We are proud to be one of 50 Best Employers in Canada, especially since this ranking is based on what our employees say about our company,” says Irene Barone, acting senior vice-president of human resources at OMERS. “We have really seen a difference within our organization when it comes to employee engagement because our senior management team is committed to building a culture of excellence and pride in OMERS.” OMERS also ranked fourth on the list when it came to employee retention, with a turnover rate of only 4.6 per cent.

ASPPA Seeking Contribution Relief

The American Society of Pension Professionals & Actuaries (ASPPA) wants specific relief for sponsors of certain 401(k) plans who are unable to make required three per cent non-elective safe harbour contributions for the entire year due to current economic conditions. In a letter to the U.S. Department of the Treasury and the Internal Revenue Service (IRS), the ASPPA urged the IRS to issue guidance that would modify existing regulations to permit an employer to suspend the contribution under Internal Revenue Code Section 401(k)(12). Under existing regulations, employers who cannot afford to continue the three per cent non-elective safe harbour contributions to their 401(k) plans for the entire year have no other recourse than to terminate their plans.

Boukouris Developing Group Sales

John Boukouris is account executive, sales, savings for groups and businesses, at Desjardins Financial Security. He will be responsible for developing group retirement sales and services and maintaining ongoing business relationships with brokers and consulting actuaries throughout Alberta and Saskatchewan.

CPBI Adds Small Business Stream

The ‘2009 CPBI Ontario Regional Conference’ will feature a stream directed at small business for the first time. Sessions planned will look at topics such as executive retirement arrangements for the small employer, CAPs for small business, and managing group benefits risk for the small employer. It takes place October 5 to 7 in Collingwood, ON. For more information, visit


Friday, February 20, 2009

BC Announces Relief Guidelines

British Columbia has announced funding relief guidelines that will provide direction to plan sponsors seeking to apply for solvency funding relief, says a Mercer ‘Communiqué.’ However, it says the guidelines simply formalize the process for applying for this funding relief as the superintendent has always had the power to grant extensions to the solvency amortization period on a case-by-case basis. However, relative to the other jurisdictions that have announced funding relief, it says British Columbia is imposing conditions and filing requirements that appear to be much more onerous. 

RiskMetrics Acquires Innovest

RiskMetrics Group will acquire Innovest Strategic Value Advisors, an environmental and social research company. RiskMetrics, a risk management and corporate governance research advisory company, plans to combine its own environmental and social research and portfolio screening services with Innovest to create the largest concern in that specialized industry. Among its services, Innovest has investment subadvisory relationships in which it provides its portfolio screening research to investment advisers for environmental, social, and other sustainable investment funds. Matthew J. Kiernan, Innovest CEO and co-founder, will head the combined business for RiskMetrics. 

Healthcare Costs Rising Again

Healthcare costs for large employers will climb another six per cent this year, but most big companies won't react by making radical benefit changes, says a Watson Wyatt survey. Instead, they will manage expenses with consumer-directed health plans and other programs aimed at improving employee health. This marks the third straight year that healthcare costs will rise by six per cent. Healthcare costs include total claims costs and administrative expenses for these companies, most of which are self-insured.

UK DC Assets Decline

UK Defined Contribution plan assets declined by £140 billion ($200 billion) or 25 per cent in the past 17 months, says an Aon Consulting report. Its ‘DC Pension Tracker’ shows the value of British DC assets currently stands at £410 billion, down from £550 billion in September 2007. The asset loss was caused by the decline in global equity markets, with the impact hitting older workers more than younger ones. 

Switching Insurers Saves Money

Large companies in the U.S. and Europe that have switched insurers over the past two years reduced their premium rates by at least five per cent, and more than four in 10 reduced their rates by 10 per cent or more, says Greenwich Associates’ 2009 ‘Large Corporate Insurance Study.’ However, few companies actually realized these savings by switching carriers. In Europe, less than five per cent of the 519 companies participating in the study changed insurance carriers in the past two years. In the U.S., only 14 per cent of 669 participating companies switched. It says these findings reinforce the message that large companies should be conducting an annual review of all insurance coverage and providers.

Patterson Senior Vice-President

Sharon Patterson is senior vice-president, human resources, at Canadian Tire. She has more than 20 years' experience in human resources.

Pierlot Examines Pension Reform

‘Pension Reform: Have You Saved Your Million Yet?’ is the topic of an ISCEBS Toronto Chapter session February 24 in Toronto, ON. James Pierlot, of Towers Perrin, will take a look at the inequities between private and public sector pension coverage and what can be done to close the gap. As well, the reasons why Canadian pension regulation makes it difficult for many to save for their post-employment years and whether there is a need for new pension models will be examined. For more information, visit

Private Equity Issues Examined

The ‘2009 Private Equity Symposium’ will take place on March 3 in Toronto, ON, with live video-broadcasts into Halifax, NS; Montreal, QC; Ottawa, ON; Winnipeg, MB; Regina, SK; Calgary and Edmonton, AB; and Vancouver, BC. A collaborative event between CVCA – Canada’s Venture Capital & Private Equity Association, Financial Executives International Canada (FEI Canada), the Canadian Institute of Chartered Business Valuators (CICBV) and the Toronto CFA Society, the half-day symposium provides a forum to discuss critical economic and business issues impacting today’s private equity practitioners. Speakers include D. Brooks Zug, senior managing director and founder, HarbourVest Partners, LLC; Dan Glickman, managing director, GE Antares Capital; and Andrew Sheiner, managing director, Onex Corporation. For more information, visit


Thursday, February 19, 2009

GM Wants Helps With Pensions

General Motors of Canada Ltd. wants the federal and Ontario governments for help with its pension and retiree healthcare costs. Claiming that they are crippling its competitiveness, it says it needs government assistance to deal with these legacy costs. Its ratio of retirees to active workers is more than two-to-one as it has 34,000 retirees and 14,000 active employees. As well, GM Canada's pension funds were in a $4.5 billion deficit as of November 2007, before the stock market slide last year.

Engaged Employees Healthier

Highly engaged employees experience better health and overall well-being, says research carried out in conjunction with Hewitt Associates’ ‘2009 Best Employers in Canada’ study. This finding reinforces the benefits for both employers and employees of increasing employee engagement. Neil Crawford, leader of the study, says "Employees at organizations with high engagement reported better physical health, lower job stress and work overload, and greater financial security. In addition, they also believe that their employer's benefits plan contributes to their overall well-being." Better health, lower job stress, and a manageable workload translate into tangible benefits for employers, particularly in terms of lower absenteeism and reduced disability costs.

Tectonic Shift Taking Place

The future is not going to be like the present, says Dr. Thomas J. Mackell, chairman of  United Benefits and Pension Services, Inc., and former chairman of the board of directors of the Federal Reserve Bank of Richmond. Speaking at a CIBC Mellon Presentation Series ‘Industry Insights,’ he said a Tectonic shift is taking place, “the likes of which most of us have never seen in our lifetimes.” As a result, “we need to look beyond the mud we are in today” and be more creative and innovative to create a future for “our children and grandchildren. My generation is passing on a bucket of garbage and we need to turn it around.” To do so, he said asset managers will need to provide more disclosure and “speak English” to their pension fund clients. Consultants, he said, will need to stop being “risk observers” and become risk management oriented.

DC Assets Dropped In 2008

The average asset manager for Defined Contribution investments in the U.S. experienced a 23 per cent drop in assets under management in 2008, says a survey by Sway Research LLC. The decline in assets, and subsequently management fee revenue, has forced a majority of managers to cut DC investment-only sales and marketing budgets for 2009 by an average of 18 per cent. In addition, a number of strong forces make the market especially challenging in 2009. These include the rise of target-date funds, increased flows to stable value and cash portfolios, pressure on management fees, and a lack of activity in terms of changes to DC plan investment menus.

Appetite For Climate Change Information Grows

There is a growing appetite for climate change related information within the investment community and other sectors. Institutional investors, bankers, bond-rating agencies, insurance companies, investment dealers, and other stakeholders are increasingly seeking relevant information about a company's carbon footprint and the effects of climate change on company performance and prospects. In response to this growing demand, the Chartered Accountants of Canada has published ‘Building a Better MD&A – Climate Change Disclosures.’ The document will help companies provide useful information relevant to investors in particular, as well as other interested stakeholders. It can be found at

Companies Maintain Retirement Programs

Most companies do not plan to adjust their retirement program in response to the current economic downturn, says a Pal Benefits ‘Flash Survey.’ It found 80 per cent are not planning any changes to retirement programs despite the current economy. The other 20 per cent are either considering changes or are not sure whether or not to implement changes. For those contemplating changes, under consideration are decreasing the benefit, closing the plan to new participants, winding up the plan, and starting a new plan. It also found 25 per cent have made additional communication efforts such as distributing communications relating to market turbulence by email and/or hard copy and holding group communication sessions. As well, some of these companies are considering providing third-party investment advice.  

Bontis Returns To LOMA

Dr. Nick Bontis, director of the Institute for Intellectual Capital Research, is back by popular demand as a keynote speaker at LOMA Canada’s annual conference. Bontis will show how to cope with information bombardment and improve your ability to manage change by working smarter, not harder. As well, Paul Grimes, senior vice-president, individual sales, at Industrial Alliance, will explore current and emerging issues facing the Canadian financial services industry. The 2009 conference takes place June 9 in Toronto, ON. For more information, visit


Wednesday, February 18, 2009

Sponsors To Look At Liability Management Techniques

Canada’s reluctance to follow the rest of the world into Defined Benefit Pension plan closures, combined with the current financial crisis and upcoming changes to accounting rules, will make it more likely that many plan sponsors will be looking at liability management techniques to control their risk exposure in these uncertain times, says Hewitt's ‘Workplace Challenges: Canadian Solutions.’ Focusing on the results of its ‘Global Pension Risk Survey,’ the report finds it is still early for Canadian plan sponsors with respect to pension risk management – although they recognize the opportunity to learn from experiences in the UK and, to some extent, the U.S., where the practice is more common. Canada stood out as the region where plan closure to new employees was less prevalent – perhaps leaving Canadian employers more at risk to the changing financial and regulatory environment than many of their non-Canadian counterparts. Rather than close plans, Canadian respondents viewed effective asset management as the key to controlling pension risk. In particular, making the shift from an asset-only view to an integrated asset/liability perspective will be an important step in developing risk management strategies for their plans. However, nearly 40 per cent of plans had no policy for dealing with their interest rate and inflation exposures, despite the fact that they rated interest rate risk as the biggest component of their overall risk budget.

Cancer Costs Shift To Private Insurers

The funding for oral ‘take at home’ cancer drugs is being shifted from public to private insurers at a rapid rate, leaving employers and individuals to shoulder the increasing burden of cost, says the Cancer Advocacy Coalition of Canada’s ‘Annual Report Card on Cancer in Canada.’ “Employers and insurers should be made aware of the magnitude and pace of these shifts,” says Dr. Kong Khoo, a B.C. medical oncologist and lead author of the study as “expenditures for oral, take-at-home therapies now represent approximately half of the total for all cancer drugs.”

Venture Capital Activity Slows

Deal activity in the Canadian venture capital market slowed significantly in 2008 to reach its lowest level in 12 years, says Canada’s Venture Capital & Private Equity Association. Across the country, $1.3 billion was invested, a drop of 36 per cent from the $2.1 billion invested in 2007. Market activity was especially slow between October and December with $302 million in investments, which was down 43 per cent from the $526 million invested in the fourth quarter of 2007.

Sponsors Face New DC Dilemma

Defined Contribution plan sponsors who spent the past decade trying to figure out how to get employees invested in markets through 401(k) plans are now faced with the unenviable task of convincing participants why they wouldn't have been better off opting out, says Greenwich Associates' ‘U.S. Defined Contribution Pension Plan Research Study.’ As they move to automatic enrolment, companies have also been shifting default investment options from conservative money market and stable-value funds to target retirement date funds that allocate investments among a diversified set of asset classes according to the age and risk tolerances of individual participants. The result is large numbers of employees took on exposure to financial markets in general and to equity markets in particular virtually on the eve of the biggest market collapse in 70 years.

Manulife Adds To OTIP Association

Manulife Financial will provide health, dental and travel protection to members of the Ontario Teachers Insurance Plan. This administration solution complements OTIP's existing association with Manulife Financial to provide life and long-term disability protection to OTIP members. Manulife’s relationship with OTIP dates back more than 28 years and it has developed a great deal of expertise in the unique benefits needs of the educational sector.

Industrial Alliance Adds Virtual Guide

Industrial Alliance Insurance and Financial Services Inc. has launched its retirement planning service, ‘Your Interactive Virtual Guide.’ Designed for group pension plan members, the guide is an educational series of video segments with interactive elements on retirement planning. Members are helped to evaluate the amount they need to save every year and assisted in their choice of investments. All steps may be taken online, at the member's own pace.

Mercer Buys Callan

Mercer is buying Callan Associates, a U.S. consultant to major investors such as U.S. pension funds. The deal creates one of the largest investment consulting businesses in the U.S. Officials say they see the purchase as a merger of two companies as a bid to build a bigger market share within a ‘fragmented’ U.S. market.

Weston At OMERS

Robert Weston is senior vice-president, strategic co-investments, at OMERS Strategic Investments. Previously, he was a managing director at State Street Global Advisors. Weston is also a member of the editorial advisory board for Benefits and Pensions Monitor.


Tuesday, February 17, 2009

CPP Fund Down $7.9 Billion

The CPP Fund ended its fiscal third quarter with assets of $108.9 billion, compared to $117.4 billion at the end of the second quarter. Its investment return of negative 6.7 per cent, or negative $7.9 billion, for the quarter ended December 31, 2008, accounted for most of the fund’s $8.5 billion decline over the period. The primary factor affecting performance in the quarter was the sharp decline in public equity markets. In Canada the S&P/TSX dropped 23.5 per cent during the fund’s fiscal third quarter, while globally the S&P 500 declined 22.5 per cent, the FTSE was down 9.6 per cent, and the DAX and Nikkei dropped 17.5 per cent and 21.3 per cent respectively.

U.S. Funds Down 32 Per Cent

Pension funds at large U.S. companies finished 2008 with an average 32 per cent, or a total $445 billion, loss in their funded status, says Watson Wyatt. It data shows an average 2008 slide in funded position from 106 per cent at year-end 2007 to 74 per cent a year later, moving them from a $78 billion 2007 surplus to a combined $366 deficit in 2008. At the end of 2007, 46 per cent of plan sponsors had funding levels between 90 per cent and 110 per cent and only five per cent had levels between 50 per cent and 70 per cent. At the end of 2008, only five per cent of plan sponsors had funding levels between 90 per cent and 110 per cent and funding for 61 per cent will fall between 50 per cent and 70 per cent.

McLean Joins BlackRock

Murray McLean is managing director of BlackRock Institutional (Canada) Ltd. Previously, he was head of institutional investments at HSBC Investments (Canada) Limited.

HR Conference Features Fireside Chat 

The Canadian Institute’s annual ‘Winning HR Practices of the Best Employers in Canada’ conference will feature a speaking faculty of Best Employers and HR experts. The 2009 conference will feature an interactive fireside chat with three Best Employers CEOs and a think tank session on generational differences. It will also look at issues such as retention, leadership development, and employee engagement. It takes place March 31 and April 1 in Toronto, ON. For more information,


Friday, February 13, 2009

Pressure Grows On Governments To Act On Pensions

Workers are rightly worried about the fall in the value of the private pension savings and there is growing pressure on governments to act, says the Organisation for Economic Co-operation and Development’s ‘Private Pensions Outlook.’ It says policymakers need to step up action to improve the way both Defined Benefit and Defined Contribution systems are regulated. For DB plans, regulations should encourage the build-up of funding buffers in good market conditions and provide more flexibility during periods of market turmoil. Investment rules for DC plans should promote a reduction in exposure to risky assets substantially as workers age, especially in countries where such plans are a major component of retirement income.  It recommends policy actions in line with the long-term horizon of private pensions. In particular, it calls for using public safety nets to address the impact of the crisis. It also calls for structural changes in the way private pensions are managed, regulated, and promoted. The executive summary is available at

Canadian Sponsors Shifting Assets

Canadian pension plan sponsors are revisiting their portfolio management principles, reviewing their asset allocation, scrutinizing their managers more closely, and strengthening due diligence processes, says research from Greenwich Associates. However, rather than changing course, Canadian institutions are proceeding with plans to continue reducing allocations to domestic equities and to shift assets from passive and core strategies to active managers and specialists with the potential to generate alpha. As well, institutions in Canada last year continued to add to alternative asset allocations that were already larger than those reported in Europe or the U.S. As of the start of the fourth quarter, pension funds had allocated more than a quarter of their overall assets to alternative asset classes including 12.5 per cent to real estate, 6.9 per cent to private equity, and 3.6 per cent to hedge funds. They allocated an additional 2.3 per cent of assets to infrastructure and 0.6 per cent to commodities.

5.15 Per Cent Appropriate Implicit Yield

An appropriate implicit yield for individual annuity purchases is 5.15 per cent as at December 31, 2008, rather than the 4.15% indicated in the recently released guidance, says an annuity market survey by Pension Strategies Inc. This is a material difference that could reduce the retiree solvency liability in small plans by approximately seven per cent to 10 per cent. With the recent volatility in the government and corporate bond markets and the resulting effect on the annuity purchase rates, the actual spread between the implicit yield in the annuity market relative to government bond yields could vary substantially from the expected spread indicated in the guidance.  Since actuaries are required by their standard of practice to use the ‘best estimate’ assumption for estimating the annuity purchase rates at the date of the valuation, this spread difference could have material effect on the solvency valuation. The survey results can be found at: - Annuity Survey - Dec 31 2008.pdf

CIBC Mellon Custodian For ABCP Restructuring

CIBC Mellon has been appointed custodian for the $32 billion restructuring of the non-Canadian, non-bank sponsored asset-backed commercial paper (ABCP) market. In its role as custodian, it is responsible for the custody of asset pools held by the newly-created trusts including Master Asset Vehicles (MAV) I, II and III. It will ensure the safekeeping of securities and will facilitate accurate trade settlement and timely collection of entitlements, which will contribute to the protection of capital and reduction of risk to affected investors. The restructuring, which involves issuing new long-term notes to investors in exchange for their short-term paper, was developed by a group of major banks and investors with the support of the Canadian federal government.


Thursday, February 12, 2009

Dreier Faked Teachers' Notes

A New York lawyer charged with defrauding investors of $400 million allegedly attempted to sell fake corporate IOUs issued by both BCE and the Ontario Teachers' Pension Plan, says a report in the Globe and Mail. Marc Dreier allegedly impersonated a Teachers’ executive and someone from BCE in an attempt to sell the fake notes which he claimed were issued by Teachers and backed by BCE. The report says court filings allege Dreier had an accomplice in Canada who impersonated someone at Teachers to help persuade a New York hedge fund manager to buy the promissory notes and these filings also list Teachers and BCE among his "organizational victims." Both BCE and Teachers say they did not lose any money as a result of the alleged misdeeds.

OMERS Purchases Guard Resources

OMERS Strategic Investments has purchased the business of Guard Resources Ltd. (GRL). GRL has been associated with OMERS direct investments in the oil and gas sector since 1984 and currently provides management services to OMERS Energy Inc. By insourcing GRL, OMERS Energy Services LP will drive significant cost benefits, generate incremental revenue streams through administration of assets in addition to those of OMERS Energy, and ensure the availability of a dedicated team to pursue other opportunities for OMERS in the oil and gas sector in Western Canada.

Two Options To Finance Benefits

U.S. employers that offer health insurance benefits finance those benefits in one of two ways, says ‘Fast Facts from EBRI.’ It says they purchase health insurance from an insurance company (fully insured plans), or they provide health benefits directly to employees (self-insured plans). Typically, these plans differ by who assumes the insurance risk, plan characteristics, employer size, and market share. For example, in a fully insured plan, the employer pays a per-employee premium to an insurance company, and the insurance company assumes the risk of providing health coverage for insured events. In a self-insured plan, instead of purchasing health insurance from an insurance company and paying the insurer a per-employee premium, the employer acts as its own insurer.

Buyout Market Shows Resilience

Deal activity in Canada’s buyout market demonstrated continuing resilience in 2008 with a level of investment activity comparable to 2006, says a statistical report by Canada’s Venture Capital & Private Equity Association (CVCA). At the end of 2008, 112 transactions had been completed, or were pending, of which 40 had a disclosed value of US$9.1 billion. This compared with 104 transactions in 2006, of which 40 had a disclosed value of US$9.1 million. Canadian buyout funds also raised C$5.6 billion in 2008, up 22 per cent from C$4.6 billion in 2007. This growth was in sharp contrast to the U.S. buyout industry where fund-raising fell by 14 per cent over the same period.

Walter Joins Watson Wyatt

Keith E. Walter is managing consultant, Central Canada, for Watson Wyatt Worldwide. He joins the firm after a 26-year career with Manulife Financial.

Results Of Survey Released At Summit

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, with insights from pension specialists, business and labour leaders, and regulators. Set for April 20 and April 21 in Toronto, ON, it will also feature the results of this year’s Conference Board/Watson Wyatt Worldwide annual survey of chief financial officers and vice-president of human resources about pension funding, future challenges, and general confidence level. For more information, visit


Wednesday, February 11, 2009

Madoff Shows Lack Of Due Diligence

In many ways, regulation is not to blame for problems in the hedge fund industry, says Nandu Narayanan, of Trident Investment Management LLC. Speaking at AIMA Canada’s ‘Under the Hood of Hedge Fund Strategies II – Taming the Bear’ session, he said, for example, the Bernard Madoff situation shows a lack of due diligence by managers and investors in the fund. It was “an abject failure of the people that sold the fund,” not a failure of regulation,” he said. As well, most of the recent losses resulted from poor investment decisions by hedge fund managers, he said, adding that regulation cannot totally protect investors.

Board Backs Caisse Management

The board of directors of the Caisse de dépôt et placement du Québec has unanimously adopted a resolution in support of its senior management team. In a press release, the board says it “unanimously and unequivocally reaffirms its confidence” in the management team and Fernand Perreault, the interim president and chief executive officer. It also fully backs the strategy being implemented in the face of the global financial crisis and that is satisfied with the progress being made.

Experts Discuss Mental Health

With mental health is emerging as the biggest unfunded liability facing government and businesses, CPBI FORUM 2009 – Harnessing Global Energy will feature a pair of experts who will delve into the implications of the issue and provide insight on how best to address it. Bill Wilkerson, co-founder and chairman of the Global Business and Economic Roundtable on Addiction and Mental Health, will speak about mental health in the global workforce and how depression is affecting the world economy. Dr. Taylor Alexander, CEO of the Canadian Mental Health Association, will focus on the shared responsibilities of employees and employers in promoting workplace mental health. FORUM 2009 takes place May 25 to 27 in Calgary, AB. For more information, visit


Tuesday, February 10, 2009

Pension Fund Reform Critical

With economies around the world in crisis and governments working on redesign of the global financial system, the issue of pension fund reform has become critical. Yet this central plank of the world financial order is escaping scrutiny, says the Network for Sustainable Financial Markets. Its ‘Modernizing Pension Fund Legal Standards for the 21st Century’ paper says pension funds now make up a massive part of the global financial system. In the U.S., for example, institutional investors, with more than $10 trillion in pension fund assets alone, now own up to 76 per cent of the stock market. Yet, while the value of pension fund equity holdings in the United States fell by $4 trillion over the past year, the impact of pension funds and fund investment managers on the financial markets hasn't been discussed enough. The report recommends six immediate changes to pension systems in areas such as regulatory interpretation of fiduciary duty, changing investment manager incentive structures, making cost structures more transparent, and actively promoting best fund governance practices. The paper is available at

Infrastructure Generates Opportunities

Canada’s need for infrastructure will generate investment opportunities for institutional investors in the months to come, says David McFadden, of Gowling Lafleur Henderson LLP. Speaking at Mindpath’s ‘3rd Annual Alternative Investments for Institutional Investors Conference,’ he said spending on infrastructure has been neglected since the 1960s and almost 60 per cent of Canada’s infrastructure is more than 40 years old. However, the federal government and provincial governments in Canada have started to allocate significant amounts of funding to infrastructure, including $12 billion in additional funding in the 2009 federal budget. As well, governments have increasingly embraced public-private partnerships for infrastructure projects in recent years. In the past five years, 36 public-private partnerships have closed, totaling investment of $10.5 billion. With infrastructure spending for healthcare facilities, transportation, border crossings, and water and waste facilities expected to rise, the growth in this sector will provide significant opportunities for investors, he said.

DC Now Primary Retirement Plan    

U.S. workers increasingly see Defined Contribution plans (401(k)-type) as their primary retirement plan type, with about two-thirds of workers identifying these as their most important plan, says an Employee Benefit Research Institute (EBRI) study. It says as DC plans have become more important – and as Defined Benefit (pension) plans continue to fade in the private sector – it is likely that worker contributions to these plans will need to grow even faster if they expect to be able to afford to maintain their current lifestyle in retirement. Overall, 67.1 per cent of participants in a retirement plan had a DC plan as their primary plan in 2006, more than double the level found in 1988. Correspondingly, a smaller percentage of workers had a DB plan as their primary plan – 30.9 per cent in 2006, substantially lower than the 56.7 per cent level found in 1988. It also notes that less than half of all American workers participate in a retirement plan. The percentage of workers participating in a plan decreased to 44 per cent in 2006 from 48 per cent in 2003. This matched its 1998 level of 44 per cent and is within the range of the levels found in 1979 to 1993.

Investors Focus On Due Diligence

As a result of the Bernard Madoff scheme, many institutional investors are now much more focused on due diligence, says Leon Chin, of Ernst & Young LLP. Speaking at Mindpath’s ‘3rd Annual Alternative Investments for Institutional Investors Conference,’ he said the events of recent months have significantly boosted skepticism among hedge fund investors. As a result, pressure is growing for hedge funds to open their books to due diligence professionals and he expects the increased attention on hedge funds will result in greater regulation in the near future. This could include periodic reporting requirements and exams of fund operations. He also noted while significant redemptions from funds are occurring, the majority is coming from fund of funds. Pension fund investors are, for the most part, staying put, he said.


Monday, February 9, 2009

Caisse Suffers Record Loss

The Caisse de dépôt et placement du Québec lost $38 billion last year, mainly because of falling stock prices, says a report in La Presse. The 26 per cent loss in value is the largest in its 45-year history. Preliminary figures showed the value of the Caisse's holdings dropped from $155.4 billion at the start of 2008 to $120 billion by the end of the year. Members of the fund contributed an extra $3 billion during 2008. The loss brings its annual return over the past decade to four per cent. However, it needs seven per cent to meet its obligations.

HSAs Control Health Costs

Health savings accounts (HSAs) are the way for employers to control healthcare costs, says Jim Edholm, president of Business Benefits Insurance. An HSA, which is offered in combination with a high-deductible health plan, lets employees set aside tax-free savings to pay out-of-pocket medical expenses. It helps control costs two ways. It lowers premiums because of the higher deductible and lowers long-term costs because it strengthens the employees' involvement with healthcare costs and lets them share in the savings resulting from smarter healthcare shopping. An employer can save up to 40 per cent versus a standard plan.

Session Examines New Wave Of Drug Care

‘Understanding Biologics and the New Wave of Drug Care’ will be the focus at the next Group Insurance Pharmaceutical Committee (GIPC) session. Set for April 21 in Toronto, ON, it will explore biologic agents from the ground up, examine their impact on claiming patterns, and define what we can expect in the future. For more information, visit

FPL Conference Set For June 1

‘The 5th Annual FPL Canadian Electronic Trading Conference’ will take place June 1 and 2 in Toronto, ON. Sessions will examine areas such as marketplace restructuring and investment management strategy changes. For more information, visit


Friday, February 6, 2009

Teachers' Pushing Petrocan

An Ontario Teachers' Pension Plan regulatory filing with the U.S. Securities and Exchange Commission shows it has dramatically increased its stake in Petro-Canada and is pushing the company’s board and management for improved performance, says a report in the Globe and Mail. Its Petrocan holding nearly quadrupled to 16 million shares in the last three months of 2008, making it one of the fund’s 10 largest equity holdings. Teachers' has also confirmed it has “held discussions with the management and board of Petro-Canada regarding the creation of shareholder value” and the discussions are continuing.

U.S. Funding Ratios Rebound

Funding ratios at the typical U.S. corporate pension plan rebounded five percentage points in January, says BNY Mellon Asset Management. The improvement was thanks to higher corporate bond yields which drove liabilities 10.1 per cent lower. It is seeing significant interest in its longer term corporate bond strategies from pension plans that are seeking to limit the impact that a sharp fall in bond yields would have on their funded status. Assets at moderate risk pension portfolios declined 5.5 per cent lower as stock markets fell. Long-duration, high-quality corporate bond yields rose 70 basis points in January.

Ceridian Launches Wellness Coaching

Ceridian Canada Ltd. has launched a Wellness Coaching solution to the marketplace. The iCan Wellness Coaching Program provides one-on-one, long-term coaching support tailored to an individual’s specific needs, helping participants to achieve and sustain health-focused behavioural changes that may not otherwise be achievable. It includes three specific modules – iCanRelax (Stress Management), iCanQuit (Smoking Cessation) and iCanChange (Weight Management), as well as a general health module for those with broader wellness goals.

IPEBLA Set For Athens

The International Pension & Employee Benefits Lawyers Association 2009 conference will take place May 24 to 27 in Athens, Greece. Topics to be examined include ‘Socially Responsible Investments,’ ‘The Influence of Pension Funds on the World Economy,’ and ‘Individual Savings Arrangements. For more information, visit

Wilkerson Speaks At Session

‘The Impact of Mental Illness on the Workplace’ will be the topic at a Manitoba CPBI Council seminar February 19 in Winnipeg, MB. Bill Wilkerson, co-founder, chairman, and CEO of the Global Business and Economic Roundtable on Addiction and Mental Health, will discuss new and innovative guidelines for organizations in providing leadership in making the workplace a venue for prevention of the development and onset of disabilities linked to depression and anxiety. For more information, visit


Thursday, February 5, 2009

Active Managers Beat Index

Results from the latest Russell Active Manager Report show 72 per cent of large cap Canadian Equity active managers beat the S&P/TSX Composite Index in the fourth quarter of 2008, up from 65 per cent in the third quarter and the highest percentage since the second quarter of 2004. Although some market environments are more difficult than others for active managers, the data confirms that over the long run, active management does add value with large cap Canadian equity investment managers beating the benchmark by roughly 140 basis points per year over the last 10 years.

401(k) Fees Transfer Wealth 

Members of 401(k) plans with twice the balances of others may be subsidizing those with lower balances, says the Center for Retirement Research. Its ‘Issue in Brief’ notes the higher balance members do not necessarily incur twice the management cost, but they pay twice the management fee, which reduces the return credited to higher balance accounts and boosts that on lower balance accounts. It conclude that the structure of fees commonly used in 401(k) plans tends to transfer wealth among participants and can reduce the returns that participants earn on their savings as most plans charge participants a fee that is expressed as a percentage of their assets.

Global Policies Used For Retirement Plan Management

There has been a significant increase in the proportion of multinationals implementing global policies across all aspects of retirement plan management, says Mercer’s ‘Multinational Survey.’ It says this development has been driven by efforts to mitigate financial risk and volatility and shows that respondents expect the trend to continue. It also found that in line with the general move away from the provision of Defined Benefit plans, multinationals continue to limit the types of retirement plans available to new hires. Across all regions, the percentage of respondents with a stated policy of only using Defined Contribution plans for new hires has almost doubled from 31 per cent in 2004 to 61 per cent in 2008.


Wednesday, February 4, 2009

‘Passport’ Approach Needs Another Look

Morneau Sobeco wants CAPSA to take another look at adopting the ‘passport’ approach (applying the rules of the major authority to all aspects of a pension plan, including members’ rights and entitlements). In its submission to CAPSA on the proposed new multi-jurisdictional agreement, it notes that in CAPSA’s consultation document under “Rationale for a New Agreement,” it mentions that the ‘passport’ approach was considered in the 1990s, but rejected. However, Morneau Sobeco feels the reasons given for the rejection are not persuasive – that the approach “raised concerns that individual plan members’ pension entitlements would be governed by legislation of a jurisdiction other than their own.” This observation is simply a rephrasing of what the passport approach entails, not a reason for dismissing it. It notes that every province already has employees who are covered by pension legislation not of that province, federally regulated employees. It asks “if different treatment for federally employees in a given province is acceptable, why not a slight extension of that practice in the form of a passport approach applied to all employees?”

Canadian Equities Fare Better

Canadian equity active funds fared significantly better than international equity funds in the fourth quarter of 2008, says Standard & Poor’s. Its ‘Indices Versus Active Funds Scorecard’ for Canada shows that 53.2 per cent of Canadian equity active funds outperformed the S&P/TSX composite index in the fourth quarter of 2008. The findings also show that 53.7 per cent of active funds in the small/mid cap equity category beat the S&P/TSX completion index. In contrast, in the Canadian focused equity category only 25.3 per cent of active funds outperformed the blended benchmark of 50 per cent S&P/TSX composite, 25 per cent S&P 500, and 25 per cent S&P EPAC LargeMidCap Index.

Retirees Unaware Of Spending

Three-in-four retired Canadians are unaware of how much money they spent in their first year of retirement, says RBC’s ‘19th Annual RBC RRSP Poll.’ Of those who are aware, almost half (46 per cent) say it was more than expected, 12 per cent say it was less, and 42 per cent say they didn't have any expectations. Not only are the majority of Canadians unaware of how much they spent in their first year of retirement, the study found that more than one-third (39 per cent) of retired Canadians encountered costs they did not anticipate in retirement. Of those, almost half (45 per cent) encountered unanticipated home repairs or maintenance costs, 42 per cent experienced unplanned healthcare costs, and 36 per cent experienced unintended vehicle repair costs.

Pension Value Down To $25 Trillion

The total value of pension funds fell 18 per cent in 2008 to $25 trillion, the largest annual decline in global pension fund assets "for many years," says research from International Financial Services London (IFSL). Its ‘Pension Markets 2009 Report’ shows the value of global pension assets dropped from $30.4 trillion at the end of 2007 to $25 trillion at the end of 2008, the majority of which (64 per cent) were held in the USA. Pension fund returns in most countries turned negative over the year as most asset types fell in value, with an average return of -19 per cent across OECD-member countries in the first 10 months of 2008. The report stated exposure to equities had contributed to the negative returns in most countries. Australia and Canada reported the largest negative returns, 20 per cent.

Workers Encouraged To Invest Wisely

Many U.S. companies are looking for ways to lower the costs of their retirement benefits while still encouraging their workers to invest wisely for retirement, says a survey by Hewitt Associates. It found that 51 per cent currently offer automatic enrolment (up from 44 per cent in 2008). However, among the companies that do not offer the feature, only one-quarter are somewhat or very likely to add it for new hires and just 15 per cent are likely to adopt it for existing employees in 2009. Of companies not planning to add automatic enrolment, 55 per cent cited the increased cost of the employer match as the primary reason. The survey also shows that 77 per cent of employers now offer target-date funds, up from 66 per cent last year.

No DC Match Change Planned

Almost three-quarters of U.S. DC plan sponsors plan no match changes, says a Callan Associates survey. It shows one per cent planned a match decrease while 20 per cent of respondents were unsure what steps they might take by the end of 2009 regarding the match. However, plan sponsors do intend to step up communications with participants in coming months. As well, they plan to make fund/manager performance and due diligence primary areas of focus in 2009.

SAM Opening Canadian Office

SAM (Sustainable Asset Management) is bringing its sustainability investment strategies to institutional and private investors in Canada. It plans to open an office in Toronto, ON. Its Canadian operation will advise institutional investors on implementing sustainability investing for their stakeholders and provide individual investors with a select array of its strategies. Since its establishment in 1995, it has focused its activities on the development and management of sustainability investment strategies.

ITG Introduces Global Trading Capabilities

Investment Technology Group, Inc. has added global electronic trading capabilities to its Triton execution management system (EMS), enabling clients to trade among North America, Europe, and Asia Pacific markets from any location on one platform. Triton is a broker-neutral, multi-asset EMS that offers clients direct market access to numerous global liquidity sources, algorithmic strategies, and pre- and post-trade analytical tools to help achieve best execution. It enables multiple trading desks to seamlessly share, manage, and trade the same lists simultaneously across borders.

Zunn Joins Fraser Group

Heidy Zunn is a research analyst at the Fraser Group. She will be involved in the production of its annual information reports and other research activities.


Tuesday, February 3, 2009

ACPM Commends Report

The Association of Canadian Pension Management (ACPM) is commending the Nova Scotia Pension Review Panel for its report. While it will now be reviewing the content of the report, Scott Perkin, president of the ACPM, says “Chair Bill Black, together with fellow panellists Ronald Pink and Dick Crawford, are to be commended for their tireless efforts addressing the difficult issues affecting the pension systems in Nova Scotia. We encourage the government in Nova Scotia to initiate further discussions with stakeholders in order to advance joint pension reform in the province.”

Benefits Reduction Class Action Settled

The Ontario Superior Court of Justice has approved the settlement of a class action by retirees against their former employer for reducing their benefits, says a Mercer ‘Communiqué.’ The settlement in Smith, Heineman and Nother v. Labatt Brewing Company reduces benefits providing substantial cost relief to the employer, but preserves important benefits for many of the retirees. The settlement enabled the employer to save between $4.2 and $5.9 million. The class action mechanism provided retirees with a voice to allow them to negotiate with the employer and it appears that class actions may sometimes be used to avoid the worst attributes of classic, adversarial litigation. This settlement provides a useful precedent on how to deal with benefit plan changes for retirees.

LDI Strategies Outperformed

Pension funds that used so-called liability-driven investment (LDI) strategies outperformed funds with traditional asset allocations in 2008 by a significant margin, says Watson Wyatt. It says portfolios using LDI strategies had returns in the range of negative single digits to break-even, while traditional asset allocation strategies yielded 20 to 30 per cent losses or more. Typically, LDI emphasizes the use of long-duration bonds, liability hedges and asset diversification while lowering exposure to equities. The emphasis on long-term bonds and liability hedges paid off handsomely last year. The long duration bond benchmark was up more than eight per cent and interest rate swaps performed even better, with some returns in excess of 30 per cent.

SEI Has Record Sales

SEI achieved record institutional sales growth in 2008 receiving commitments for US$7.2 billion in new global institutional assets from 35 new clients, including a number in Canada. The new assets are the most ever added in one year by the company’s institutional business. Among its new Canadian clients are Cree Nation Trust, St. Lawrence Cement, CMSG East, and Ideal Roofing Inc.

Disability Managers Join Forces

Two of Canada’s disability management companies are joining forces to offer a wider array of services to companies and insurers across Canada. Banyan Work Health Solutions and Aptitude Santé have merged their operations and will now operate as Banyan Work Health Solutions with operations centered out of Montreal, QC, and Toronto, ON. The two have enjoyed a successful strategic alliance for the past two years, but believe that a merger will answer the need for a truly national full-service proactive disability management firm for insurers and employers.

Pierlot Discusses Pension Reform

James Pierlot, of Towers Perrin, will highlight points from his November 2008 C.D. Howe Institute paper ‘A Pension in Every Pot: Better Pensions for More Canadians’ at the first session of the ISCEBS Toronto Area Chapter’s 2009 educational benefit series. His paper addresses the disconnect between public and private sector pension coverage and what can be done to close the gap. It takes place February 24 in Toronto, ON. For more information, visit

March Commuted Value Interest Rate Assumptions

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


Monday, February 2, 2009

Panel Rejects ‘Safe Harbour’

To put ‘safe harbour’ rules in place for Canadian Defined Contribution pension plans would be impractical and harmfully prescriptive, says the report from the Nova Scotia Pension Review Panel. As a result ‘safe harbour’ rules should not be included in the province’s pension regulations. The U.S. has a provision for a ‘safe harbour’ which protects employers from litigation if they follow certain ‘best practices.’ However, the panel says prudent attention and action under the established investment policies for the plan should be sufficient mitigation of liability. To see the report, visit

Mavroudis Heads Guardian Capital

George Mavroudis is president of Guardian Capital Group Ltd. He has been with the company since 2005 as senior vice-president, strategic planning and development. Prior to that, he was a managing director at J.P. Morgan Asset Management and served several years with the company as a senior executive in its London, Moscow, New York, and Toronto offices.

Subscribe to Daily News Alerts

Subscribe now to receive industry news delivered to your inbox every business day.

Interactive issue now onlineSubscribe to our magazinePrivate Wealth Online