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February 20, 2018


Coalition Gives Advisors Voice

The NCBA (National Coalition of Benefit Advisors) is an effort to create a unified voice of benefit advisors. It says to protect the consumer means it must protect the advisor as the advisor is the only opposing voice to insurer goals and in protecting Canadian consumers in the benefits arena. Any matter that can run contrary to the goals of plan sponsors are of utmost importance to the new organization. Its immediate mandate is to stop G19, the Canadian Life and Health Insurance (CLHIA) guideline on compensation disclosure in group benefits and group retirement services. It doesn’t believe G19 represents disclosure appropriately. It wants to restart the disclosure discussion using a collaborative consultative model between key stakeholders at the table jointly. For more information, eMail join_ncba@ncba.ca

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Contributions To RRSPs Rise

Contributions to registered retirement savings plans (RRSPs) totalled $40.4 billion in 2016, up 3.1 per cent from 2015, says Statistics Canada. Data based on tax returns filed for 2016 show increases in contribution amounts occurred in about half of the provinces and territories, while the other half experienced a decrease in 2016. New Brunswick (8.5 per cent) and Quebec (six per cent) had the highest contribution increases. The Northwest Territories (down 4.8 per cent) and Newfoundland and Labrador (down 4.7 per cent) had the largest declines. While there was an overall increase in total RRSP contributions, the total number of contributors was down slightly. Just over 5.9 million tax filers contributed to an RRSP in 2016, down 0.9 per cent from 2015. The peak over the last decade occurred in 2007 when just under 6.3 million individuals contributed to an RRSP. Nationally, the median contribution in 2016 was $3,000, unchanged since 2013.

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Exposure To UK To Drop

A number of institutional investors have indicated they will reduce their UK exposure in the next six months, says State Street’s quarterly ‘Brexometer Index.’ The move is considered to be connected to Brexit and reflects a trend in falling sentiment towards the UK. Despite increasing optimism towards the global economy, the survey suggested that 24 per cent of the investors intended to reduce UK holdings. This marked a six per cent increase from the final quarter of 2017 and greater than the average throughout 2017. The majority (87 per cent) of institutional investors said the economic impact of Brexit would probably have an impact on their business operating model. This represented a 16 per cent increase from the third quarter of last year.

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Plans Are To Increase Hedge Fund Allocations

Half of allocators expect to increase their investments in hedge funds in 2018, says a survey by Deutsche Bank’s prime brokerage unit. Of those surveyed, 39 per cent said they will maintain their current allocation to hedge funds and 11 per cent said they will reduce it this year. In 2017, by contrast, 37 per cent of survey respondents said they intended to grow their hedge fund portfolios, 41 per cent said they would hold to their status quo, and the remainder said they would cut back their allocation. It found 56 per cent of pension fund officials intend to increase hedge fund investments, 29 per cent plan no changes, and 15 per cent will decrease the size of their portfolio.

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OMERS Add To Thames Holding

OMERS Infrastructure Management Inc., the infrastructure investment manager of OMERS, has purchased of an additional four per cent interest in Kemble Water Holdings Limited, the ultimate holding company of Thames Water Utilities Limited. Following completion of the transaction, OMERS Infrastructure will increase its overall interest in Thames Water to approximately 32 per cent.

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Bergin Joins BFL

Áine Bergin is a retirement consultant with BFL Consulting in Toronto, ON. She will be responsible for developing group retirement plan solutions to suit clients’ needs. She has 10 years’ experience in retirement consulting with Mercer Ireland where she worked with large multi-national companies going through pension change, employee education, and providing financial advice to individuals on their wealth management.

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Panel Discusses Sustainability

The CFA Society Toronto’s 10th annual ‘Spring Pension Conference’ will feature a CIO panel discussion on innovation, disruption, and sustainability and a U.S. chief economist’s view on the global economy including NAFTA. Other featured speakers will include Eleanor Marshall, vice-president, pension and benefits at BCE & Bell Canada; Diana Van Maasdijk, co-founder and executive director at Equileap; Karthik Ramanathan, senior vice-president and director of bonds at Fidelity Investments. It takes place April 5 in Toronto, ON. For information, visit CIO Panel

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February 16, 2018


Shortcomings Undermine Carbon Effort

The world’s largest banks have urgent shortcomings that threaten to undermine efforts to support the transition to a low carbon economy, says the ‘Banking on a Low Carbon Future’ report by Boston Common Asset Management. It says that despite progress in some areas and several examples of individual best practice, the sector is failing to capture the risks and opportunities of climate change. The banking sector is failing to embed climate into its core practices for climate strategy, risk management, and low carbon opportunities. It says less than half (49 per cent) of banks are implementing climate risk assessments or 2ºC scenario analysis which means decision-making on portfolio shifts is not supported by robust data. As well, despite widespread disclosure of their low carbon products and services, only 46 per cent of banks set explicit targets to promote such products/services.

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Canadians Dip Into RRSPs

Canadians continue to dip into their retirement savings to fund short-term expenses, says BMO Financial Group. Its eighth annual registered retirement savings plan (RRSP) study found 40 per cent of Canadians have made a withdrawal from their RRSP. Those who have done so have withdrawn an average of $20,952, an increase of $3,739 compared to an average of $17,213, last year. Reasons for withdrawing from their RRSPs include purchasing a home (27 per cent); helping to pay for living expenses (23 per cent); needing funds for emergencies (21 per cent), and paying off debt (20 per cent).

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Changes Proposed For PBGF

If the proposed changes to the assessment formula for the Pension Benefits Guarantee Fund (PBGF) are adopted, they would result in the elimination of some components of the current PBGF assessment structure, the addition of a new component based on a pension plan’s PBGF liabilities, and an increase in some components of the current PBGF assessment structure, says a Morneau Shepell ‘News & Views.’ The proposed changes to the PBGF assessments are related to the 50 per cent increase in the PBGF coverage limit. Components eliminated include eliminating the basic assessment of $5 per pension plan member and eliminating the current minimum pension plan assessment of $250. A new component based on a pension plan’s PBGF liabilities will see the introduction of an assessment component equal to 0.015 per cent of a plan’s PBGF liabilities. As well, the existing risk-based assessment formula will be revised to increase existing rates for each tier of the laddered three-tier, risk-based assessment formula by 50 per cent; and the plant closure permanent benefit assessment would increase from two per cent to three per cent times the liability for plant closure and permanent lay off benefits that the employer elected to exclude from solvency liabilities. As well, the maximum assessment per plan member would increase from $300 to $600. The Ontario Ministry of Finance says the proposed changes fit within the broader framework of proposed reforms to the funding rules for pension plans registered in Ontario. However, defined benefit pension plans that are registered in jurisdictions outside Ontario will also be impacted by these proposed changes to the PBFG assessments.

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Auto Features Increasing In Use

Defined contribution plans are increasing their use of automatic features and raising initial deferral rates, says a survey by the Plan Sponsor Council of America. It found 59.7 per cent of U.S. plans offered auto enrollment in 2016, the last year data were available. That represents an improvement from the 57.5 per cent in 2015 and continues a steady string of annual increases since 38.4 per cent of plans offered auto enrollment in 2009. Among plans offering auto enrollment, 73.4 per cent also offered auto escalation in 2016, up from 68.3 per cent in 2015. There has been a steady increase in plan usage of auto escalation since 2011, when 55.2 per cent offered this feature. More DC plans are setting their initial auto enrollment default rates at more than three per cent, historically the most common rate set by plan executives. In 2016, 53.5 per cent of plans exceeded the three per cent level.

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UCITS Managers Need Innovation

With fund quality and investor choice on the rise, managers entering the alternative UCITS arena need to focus on being innovative and user-friendly, says Cerulli Associates. Hedge funds, in particular, have realized that launching UCITS (Undertakings for Collective Investment in Transferable Securities Directives) versions of their strategies can increase their standing globally and in Europe. Many have entered the alternative UCITS space with great success. These new entrants, equipped with a wealth of expertise and specialist strategies, have driven up the quality and choice of UCITS funds available to investors. With major fund platform providers increasingly seeing alternative UCITS as an important revenue driver, it believes that the alternative UCITS market will continue to grow at a double-digit pace in percentage terms. Although equity long/short remains by far the most popular alternative UCITS strategy by fund number, asset growth in this strategy is stalling, with macro and multi-strategy attracting more capital.

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Great-West Contributes To Technology Start-ups

Great-West Life is contributing $300,000 over three years to the Creative Destruction Lab ‒ Toronto to help technology entrepreneurs take their ideas from the drawing board to the marketplace. Located at the University of Toronto’s Rotman School of Management, the lab works with technology start-ups promising to deliver massive improvements to economic productivity and human well-being. The nine-month program provides entrepreneurs with access to experienced industry mentors, business development support from top Rotman business students, and funding opportunities with leading venture capital firms.

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Hughes Looks At Risk

Mark Hughes, group chief risk officer at Royal Bank of Canada is the next keynote speaker at the ‘Global Risk Institute for Financial Services Speaker Series at Rotman.’ He will discuss ‘What Keeps Risk Managers Awake At Night – Yesterday, Today and Tomorrow?’. It takes place March 20 in Toronto, ON. For information, visit Risk Managers

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February 15, 2018


Hedge Fund Returns Steadier

Hedge funds have produced more consistent and steadier returns than equities or bonds over both the short term and the long term, says research by Preqin and the Alternative Investment Management Association (AIMA). They found that hedge funds have outperformed equities and bonds on a risk-adjusted basis over one-, three-, five-, and 10-year periods. They also found that the value of hedge fund performance gains in 2017 was around $250 billion. That represents the value of investment profits, net of all fees, if investors in hedge funds such as pension funds, sovereign wealth funds, and endowments withdrew their investments and crystallized those gains. Net inflows are excluded from this data. About 32 per cent of all hedge funds produced double-digit returns in 2017, up from about 23 per cent in 2016. In addition, funds that are no longer seeking external capital were found to have produced marginally better returns in 2017 than those that remain open to new investments.

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DC Lessons Learned From Across Pond

A number of lessons can be drawn out of a white paper from Eversheds Sutherland. Lessons from across the pond: DC plans in the US and the UK, which can be found at the Benefits and Pensions Monitor website, says employers and policymakers can learn from the approaches taken by their US/UK counterparts to make DC plans work more effectively. For example, mandatory auto-enrollment and re-enrollment in the UK has been a huge success in boosting participation rates in workplace pension plans to around 90 per cent for many employers. It suggests making autoenrollment more widespread in the U.S. could help to address concerns about adequacy of savings. As in many areas, when it comes to saving for retirement the U.S. and UK share a number of things in common including aging populations, undersaving for retirement, and the shift away from defined benefit plans as the primary form of workplace pension provision to the widespread use of defined contribution plans. Consequently, DC will play a crucial role in helping both nations ensure that their citizens enjoy a decent standard of living in retirement and in meeting the financial challenges posed by aging populations, it says.

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Paper On Modelling Earns Research Award

Using a combination of models to forecast the Canadian equity risk premium is superior to using regression in out of sample testing is the finding of the ‘2018 Annual CFA Society Toronto & Hillsdale Canadian Investment Research Award.’ The award-winning paper, ‘Equity Premium Predictability: Combination Forecasts versus Multivariate Regression Predictions’ was submitted by Dr. Claudia Champagne and Dr. Frank Coggins, of Sherbrooke University, and Dr. Stéphane Chrétien, of Laval University. “Their findings are robust over 66 years in Canada and contribute to the solid base of evidence supporting the use of multi-model forecasting in the design of investment strategies,” says Chris Guthrie, president and CEO of Hillsdale Investment Management Inc. To view a copy of the paper click here.

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Institutional Investors Move To Technology

Institutional investors are shifting their spending from trader pay to technology, says Greenwich Associates. Overall, buy-side trading desk budgets are expected to hold relatively flat in 2018 at $17.3 billion industry-wide. As recently as 2015, institutions were spending an average of almost 70 per cent of overall trading desk budgets on trader compensation, with the remaining approximately 30 per cent going to technology. In 2018, that allocation is expected to shift to just 60 per cent compensation and 40 per cent technology. “Although part of this year’s shift can be attributed to the effects of new MiFID II rules on research and pre-trade transparency, the more general increase in technology spending at the expense of trader compensation represents a secular trend,” says Kevin McPartland, head of Greenwich Associates market structure and technology research, and co-author of ‘Investor Spending Reaches Equilibrium ‒ For Now.’ The movement to technology spending has been most pronounced in fixed income. Initially, much of this increased spending went to gaining access to fixed-income e-Trading venues. More recently, a bigger share of this spend is being used on data and the analytics to put that data to work. Institutional investors see these investments as well worth the cost.

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Couples Don’t Talk About Pension Plans

Only half of U.S. couples who participate in their workplace retirement plan discuss their savings and investment decisions with their spouse or partner all or most of the time, says a Lincoln Financial Group survey. Younger couples do a better job of discussing this as 64 per cent of couples in their 20s discuss retirement savings and investment decisions with their spouse or partner all or most of the time. This drops to 56 per cent for those in their 30s and only 48 per cent for those 40 and over. The survey also found a disconnect between the sexes when it comes to their belief that they work with their spouse or partner to manage retirement planning for their household; 49 per cent of women say that they do, but only 37 per cent of men say the same.

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Dairy Industry Gets Investment Platform

The Caisse de dépôt et placement du Québec and Agropur Cooperative will set up a joint investment platform for businesses in the dairy industry. It will be funded by the two partners on a 50/50 basis and invest in innovative businesses specializing in dairy-related products and technologies. The focus will be on growing companies with high potential for solid financial performance which are led by a solid management team and have demonstrated that innovation is a core element of their business-model.

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Vehicle Developing Data Centres

GIC and OPTrust have formed EdgeCore Internet Real Estate, an investment vehicle that will develop, acquire, and operate data centres in North America. The investment strategy is being run by Mount Elbert Capital Partners which already manages more than $5 billion in data centre real estate and related infrastructure. It has already acquired land in Mesa, AZ, and plans to acquire land in Dallas, TX, and Reno, NV.

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FEI Focuses On Innovation

Oceans of Innovation is the theme of the ‘FEI Canada National Conference 2018.’ Keynote speakers will include Mark Barrenechea, CEO at Opentext; Stephen Liptrap, president and CEO of Morneau Shepell; Michael Rousseau, CFO of Air Canada; and Greg Blunden, CFO of Emera Energy. It takes place June 13 to 15 in Halifax, NS. For information, visit FEI Canada

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February 14, 2018


Comments Sought On Discount Rate Guidance

The Public Sector Accounting Board (PSAB) task force has now published the second invitation to comment on the discount rate guidance in Section PS 3250, says a Morneau Shepell ‘News & Views.’ Section PS 3250 does not provide specific guidance on which discount rate should be used to estimate the accrued benefit obligation. It suggests the actuarial assumptions underlying the valuation of retirement benefit liability and expense should be internally consistent. In practice, the expected return on plan assets is usually used to determine the present value of the accrued benefit obligation of benefit plans that are fully or partially funded. The entity’s cost of borrowing is usually used to determine the present value of the accrued benefit obligation of benefit plans that are unfunded. PSAB needs to consider if the discount rate guidance in Section PS 3250 is sufficient and whether the two discount rates commonly used in the public sector are appropriate and provide useful information for accounting purposes because some concerns have been raised about the current practice. It is looking for comments on alternative bases to determine the discount rate assumption. These are expected return on plan assets; expected return of an effective hedge portfolio; market yields of high-quality debt instruments; market yields of risk-free debt instruments; the entity’s cost of borrowing; or the effective settlement rate. An alternative discount rate approach could be any of these, reflecting one of three possible views: a current, average, or a projected view. Stakeholders may send their comments until March 9.

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PNC Adopts ‘PFaroe’

PNC Institutional Advisory Solutions, part of the asset management arm of the PNC Financial Services Group, Inc., has adopted RiskFirst’s ‘PFaroe’ to help structure better solutions, improve reporting efficiency, and deepen engagement with its defined benefit pension plan clients. This will help support its asset liability management offering, which has witnessed strong growth in assets under management since 2015. It will use PFaroe to work with clients in a more interactive way, assisting in evolving solutions over time. Its forecasting models will also be leveraged to evaluate the impact of implementing new investment strategies, as well as with the co-ordination and structuring of funded status-based and interest rate-based ’glide paths’. A major benefit of using PFaroe will be the ability to automate and improve the quality of reporting to clients, resulting in a better and more efficient solution.

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ETF/ETP Assets Reach Milestone

Assets invested in ETFs and ETPs listed globally broke through the US$5 trillion milestone at the end of January, says ETFGI. This was the result of a record 6.47 per cent or $313 billion increase during January, beating the prior record of $4.84 trillion set in December of 2017. During the month, they gathered net inflows of $106 billion, beating the prior record of $68.3 billion set in February 2017. Assets in equity ETFs/ETPs increased by 7.49 per cent in January, which is significantly more than the 1.73 per cent increase in fixed income ETFs/ETPs. January also marked the 48th consecutive month of net inflows into ETFs/ETPs listed globally, with $106 billion gathered during the month; 68.6 per cent more than net inflows at this point last year.

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Grenier Shares Mental Health Battle

An ‘Evening with Stéphane Grenier’ is the next session in Hansell Consulting Group’s ‘Workplace Wellness ‒ Mental Health Series.’ Grenier, author of ‘After the War,’ is a former member of the Canadian military who was undiagnosed with post-traumatic stress disorder (PTSD) and depression after many military deployments. He offers his audiences pragmatic advice designed to support workplaces in developing corporate cultures of open, non-stigmatizing approaches to mental health and well-being. It takes place February 27 in Burlington, ON. For more information visit Grenier

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February 13, 2018


Scotiabank Acquires Jarislowsky Fraser

Scotiabank is acquiring Jarislowsky Fraser, one of Canada’s leading independent investment firms. The combination of the 62-year-old Jarislowsky Fraser and Scotiabank’s asset management business creates the thirdlargest Canadian active asset manager with $166 billion in assets under management (as of December 31, 2017). Jarislowsky has more than $40 billion in assets under management on behalf of institutional and high net worth clients. Stephen A. Jarislowsky will continue his association with the business that will still carry his name and retain investment autonomy. The Jarislowsky Fraser management team will lead its existing business and its head office will remain in Montreal, QC.

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Pensioners Want Sears Dividends

A group of pensioners has served court papers in Ontario’s Superior Court of Justice, requesting the appointment of a trustee in Sears Canada’s bankruptcy proceeding who would look for more funds for its creditors. Eddie Lampert, the controlling shareholder of the bankrupt retailer and current chief executive of Sears Holdings, were “major beneficiaries” of roughly $3 billion in dividend payments since 2005 as the Canadian business crumbled in 2017, the papers say. About 16,000 former employees are now preparing for a reduction in their pensions later this year as when the company applied for protection from creditors last June, the deficit in the defined benefit pension plan was nearly $270 million. Retirees were told by an Ontario regulator late last year that they could recover (on their pension claims) as much as 81 cents on the dollar, unless other funds became available. Lampert says the dividend payments had no impact whatsoever on the Sears Canada pension plans and did not deprive the company of the cash needed to fund operations. He says the dividends paid to Sears Canada shareholders in 2012 and 2013 were largely from asset sales. 

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Lifecycle Would Help PEPPs

Participants would benefit from higher returns and lower risk if lifecycle strategies were included in the pan-European personal pension product (PEPP), says a study by the SDA Bocconi School of Management and commissioned by the European Fund and Asset Management Association. Consumer Protection and the Design of the Default Option of a pan-European Personal Pension Product’ found that lifecycle strategies, which use varied asset class mixes and adjust the risk over the course of accumulation period, were better for plan participant outcomes than bond-based products with guarantees. It shows in the period between 1969 and 2012, a majority of savers using lifecycle strategies could get a return greater than 5.9 per cent. This compares with a 3.3 per cent return achieved through life insurance products with a guarantee. The European Commission proposed in June that pension providers be allowed to distribute retirement savings products cross-border in the form of the PEPP.

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PCMA And NEMA Merge

The Private Capital Markets Association of Canada (PCMA) and the National Exempt Market Association (NEMA) have merged, creating the largest private capital markets community in Canada. The combined entity will retain the name Private Capital Markets Association of Canada (PCMA) in order to best reflect the evolution of the name of the industry in which its members operate. Initially, the PCMA’s membership base and activities were principally based in eastern Canada and NEMA’s membership base and activities were principally based in western Canada. However, as each association expanded, their respective operations have increasingly overlapped. The two associations have worked often on the same committees and advocated in parallel on numerous industry and regulatory issues.

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Witts Becomes Partner

Ashley Witts is a partner and wealth leader for Mercer’s Vancouver, BC, office. Prior to joining the firm, he held senior level roles with another major HR consulting organization where he led business development and delivery teams across multiple lines of business. He brings more than 35 years of industry expertise to his new role.

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Session Looks At Pension Plans

‘Pension Plans Level 1’ is the focus of a CPBI Quebec Region training session. It will look at responsibilities of pension committees, beneficiary designations, investment policy, and the role of custodians. It takes place March 22 and 23 in Montreal, QC. For information, visit Pension Plans

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