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January 22, 2019


IMF Lowers Growth Forecast

The International Monetary Fund has cut its forecast for world economic growth this year, citing heightened trade tensions and rising U.S. interest rates. It expects global growth this year of 3.5 per cent, down from 3.7 per cent in 2018 and from the 3.7 per cent it had forecast for 2019 back in October. The fund left its prediction for U.S. growth this year unchanged at 2.5 per cent. For Canada, its estimate for growth in 2019 was 1.9 per cent, down from a forecast in October for growth of two per cent which is still more positive than a January assessment by the Bank of Canada of 1.7 per cent this year, down from its October prediction of 2.1 per cent. The IMF expects the Chinese economy ‒ the world’s second biggest ‒ to grow 6.2 per cent this year, down from 6.6 per cent in 2018 and the slowest since 1990. The IMF says rising trade tensions pose a major risk to the world economy. Under President Donald Trump, the United States has imposed import taxes on steel, aluminum, and hundreds of Chinese products, drawing retaliation from China and other U.S. trading partners.

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OHIP+ Changes Planned

The Ontario government is changing OHIP+ effective this March by restricting it to children and youth under age 25 who are not covered by private plans, says a BMKP Law ‘Sidebar.’ The prior Ontario government implemented OHIP+ under which OHIP-insured children and youth under age 25 receive free prescription drug coverage. Effective January 1, 2018, OHIP+ became the first payer at 100 per cent of the cost for eligible drugs. This effectively removed from employer-sponsored benefit plans the cost of eligible prescription drugs for dependent children of Ontario employees. Under the proposed new OHIP+ rules, children and youth under age 25 who have a “private plan” will have no coverage under OHIP+. The proposed new rules define a “private plan” as any type of employer, group, or individual plan, program, or account that could provide coverage for any drug product regardless of whether the private plan provides coverage for the particular drug that has been prescribed; whether the private plan requires a premium, co-payment, deductible, or other expense to be paid; or whether no coverage is provided under the private plan because the annual maximum under the private plan has been reached. The proposed new rules introduce a new “either or” prescription drug coverage regime for OHIP-insured children and youth under age 25. Starting in March, if such individuals have coverage under any private plan, they must look solely to the private plan(s) for coverage. If they do not have any form of private plan coverage, they will continue to have coverage under OHIP+. The new rules will effectively reinstate dependent children prescription drug costs for Ontario employees under employer-sponsored benefit plans that provide prescription drug coverage to dependent children. The consultation period on the draft regulations ends on January 31. Comments can be submitted at OHIP+

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Successful Niches Survive Turbulence

Investment firms which have rising operating costs have found successful business niches and developed resilient and effective business models to survive the turbulence of variable and, at times, difficult market conditions, the disadvantage of limited business scale, and a structural escalation in operating costs to meet expanding rule compliance requirements and ongoing business. In his ‘President’s Letter,’ Ian C. W. Russell, president of the Investment Industry Association of Canada (IIAC), says over the past five years or so, operating costs in the investment industry have climbed steadily year-after-year, with cost increases averaging three to five per cent annually for the small and mid-sized dealers. While over 50 dealers have succumbed to amalgamation and closings since 2013, a core 70 to 80 retail and institutionally-focused dealers have survived. However, a continuation in this trend will lead to a significant consolidation in the investment industry with the corresponding damaging impact on the competitive diversity in the domestic retail marketplace and capital-raising for small and mid-sized businesses in public and private markets. The one factor on the horizon that could make a positive difference to the viability of the small dealer community is the recently announced Ontario government deregulation initiative that could translate into significant streamlining and simplification of the regulatory system in Ontario, putting a brake on the escalation in compliance costs and raising the prospect of some reduction in operating costs, he says.

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Bullishness Declines On All Asset Classes

After significant volatility in the fourth quarter of 2018, the results of the first quarter 2019 advisor and investor sentiment surveys from Horizons ETFs Management Canada Inc. suggest that Canadian advisor and investor bullishness has declined on nearly all asset classes heading into the new year. There is also a growing sentiment gap between advisors and investors. Investor outlook for the new quarter has dropped significantly compared to that of advisors. In the face of a near 10 per cent drop in the S&P/TSX 60 Index last quarter, 56 per cent of advisors have maintained their bullish outlook on Canadian equities going into 2019, quarter-over-quarter. Similarly, advisors’ expectations for U.S. equities, as represented by the S&P 500, remained extraordinarily high at 67 per cent, despite a 13.97 per cent drop in the S&P 500 last quarter. However, investors seem to think things will get worse: bullish sentiment among investors fell by 15 per cent or more for all three of the major North American indices, which includes the S&P/TSX 60, NASDAQ-100, and the S&P 500. Investors are now outright bearish on Canadian equities and divided on U.S. equities.

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Caisse Appoints Two

Martin Coiteux is chief economist and Charles Émond is executive vice-president, Québec and global strategic planning, at La Caisse de dépôt et placement du Québec. Coiteux will be responsible for providing la Caisse with the economic and business intelligence leadership required for successfully implementing its investment strategy through world-class economic analyses that will identify areas of risk and of opportunity in various international markets. For nearly 20 years, he was a professor of international economics and international management at HEC, a public university in Montreal, QC. Émond will be responsible for implementing its Québec investment strategy, which aims to strengthen the economy and foster the development of Québec companies, both locally and internationally. He worked for more than 18 years at Scotiabank, notably as head of Québec’s investment banking group, and more recently, as global head, investment banking and Canadian corporate banking.

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Climate Change Social Aspects Examined

The social aspects of climate change and artificial intelligence and responsible investment will be among the topics covered at the ‘2019 Responsible Investment Association Conference.’ Others session will look at what investors can expect from RI and sustainable development goals. It takes place April 24 and 25 in Montreal, QC. For information, visit RIA Conference

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Monthly Update Of Pension Plan Commuted Value Interest Rate Assumptions

The interest assumptions required to calculate commuted values and marriage breakdown values for an event which occurs in any month up to and including January 2019 are now available at www.an-actual-actuary.com An Excel spreadsheet on the website contains nine worksheets:

  • Commuted Values February 2011 CIA
  • Marital Breakdown: CSOP 4300 ‒ January 2012
  • Ontario (Bill 133) Prior Rates – Rates for Ontario Marital Breakdown with valuation date prior to January 1, 2012
  • Annuity Proxy for Solvency Calculations for Non-Indexed & Fully-Indexed Pensions
  • Minimum Interest on Employee Required Contributions
  • HISTORICAL Marital Breakdown: CSOP 4300 ‒ May 2009 (Now Frozen)
  • HISTORICAL: Commuted Values ‒ 2009 Basis (Now Frozen)
  • HISTORICAL: Commuted Values ‒ 2005 Basis (Now Frozen)
  • HISTORICAL: Commuted Values ‒ 1993 Basis (Now Frozen)

You can use this spreadsheet to compare the interest rates which you may have calculated and/or you can download the spreadsheet to your own computer.Another actuary has already provided a peer review of the updated rates in this spreadsheet and determined that he/she agrees with the results.

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January 21, 2019


Real Estate Markets Thriving

Set against the backdrop of a rapidly increasing world population, global GDP growth, relatively strong economies, and heightened job creation, real estate markets are thriving, says Avison Young’s ‘2019 North America, Europe, and Asia Commercial Real Estate Forecast.’ It says fundamentals continue to show great strength amidst restrained building activity, strong demand, and rising rents. Despite political headwinds such as trade disputes, Brexit, currency fluctuations, and interest rate hikes, quality real estate continues to be occupied and in demand. On the North American front, though trade was discussed ad nauseam, property markets in the U.S., Mexico, and Canada performed well in 2018. The Mexican economy has continued to exhibit resilience in a complex environment despite the volatility and uncertainty surrounding the federal-government-transition process in Mexico and other international factors. Across the Atlantic, despite a healthy property sector, the UK market remains susceptible to political risk – namely Brexit. German markets are exhibiting healthy leasing and investment demand, while a lack of product hinders stronger growth. Significant construction, industrial expansion, and sustained prices are forecasted to have positive impacts in Bucharest, Romania. Meanwhile, co-working office providers have become core occupiers in Seoul, South Korea. 

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Risk Transfer Activity Increasing

Up to 15 FTSE 100 firms will be in a position to complete risk transfer exercises for their UK defined benefit funds by 2021, says consultant Lane Clark & Peacock. Its analysis shows clear signs of an acceleration among the UK’s 100 largest companies to transfer retirement risk to insurers through full buyouts. It found that five companies either have already closed any asset shortfalls or are close to doing so, enabling them to move to full buyouts. As many as 15 firms are projected to reach or be close to affording a full buyout in the next three years with a further nine companies projected to hit this target by 2025 and 16 more by the end of 2028.

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More Of The Same Ahead

With geopolitics and populism dominating the year, 2018 saw almost all asset classes, with the exceptions of cash and government bonds, posting negative returns in 2019. Unfortunately, says Andrew Pease, global head of investment strategy at Russell Investments, 2019 could see more of the same. In the article ‘Move Over 2018’ at the Benefits and Pensions Monitor website, he says Brexit, Italy, China, Donald Trump, and the potential for recession in 2020 will all impact market performance in the months to come.

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Hedge Funds Faced Tough Month

Hedge funds faced another tough month in December 2018, with losses increasing. The Preqin ‘All-Strategies Hedge Fund’ benchmark lost 2.27 per cent, bringing the 2018 full-year losses to 3.42 per cent, the first negative year since 2011. Macro strategies hedge funds returned 0.39 per cent in December, helping to recover losses made in November (down 0.79 per cent) and bringing the 2018 return to 0.97 per cent, making this the only top-level strategy to generate a positive return for December. Notably, returns for both equity and event driven strategies fell sharply, down 3.17 per cent and 4.22 per cent in December respectively. Globally, all regions faced an adverse December. Hedge funds focused on emerging markets minimized losses (0.63 per cent), whereas those focused on North America experienced substantial losses (3.4 per cent). Hedge funds focused on the Asia-Pacific region ended 2018 with their lowest annual return (down 9.13 per cent) since 2008 when they lost 22.25 per cent.

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McCullough Joins Dynacare

Lesley McCullough is director, workplace health and wellness, at Dynacare. She joins the firm from Medavie Blue Cross where she was an account executive. Prior to that, she held similar positions with Manulife Financial and Empire Life.  

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Benefits Certificate Offered

In partnership with the HRPA, the Canadian Pension and Benefits Institute is offering ‘The HRPA Canadian Benefits Certificate Program.’ Attendees will gain an understanding of the legal and regulatory framework that applies to pension and other retirement savings plans; learn tips on best practices in plan administration and governance; and get strategies to reduce risk and liability in plan administration. It takes place April 2 to 4 in Toronto, ON. For information, visit Benefits Certificate

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January 18, 2019


Surplus Entitlement Provision Questioned

The requirement to allow annuitized members of plans with surplus sharing provisions to retain entitlement to future plan surpluses in the event of a wind-up will significantly limit the ability of pension plan sponsors to utilize annuity purchase provisions as a risk management tool, says the Pension Investment Association of Canada (PIAC). Commenting on the ‘2018 Ontario Economic Outlook and Fiscal Review,’ it says plan members whose pensions have been annuitized receive full entitlement with no ongoing exposure to the future downside risks of an under-funded plan and it is therefore unclear from a policy perspective why they should benefit from future plan surpluses. Various surplus sharing mechanisms can be employed at the time of annuitization with respect to current surplus, but should not create inter-generational issues by maintaining a claim to future plan surpluses. Moreover, it believes that this requirement will give rise to relatively complex calculations to estimate entitlements, which in many cases will represent small balances.

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Rules Catalyze Innovation

Some of the sweeping rules put in place at the start of this year by MiFID II are catalyzing innovation as traders experiment with new tools, analytics, and business models to navigate the new landscape, while others are leading to unintended consequences, says a report from Greenwich Associates. “One year into the MiFID II era, it is now possible to make informed predictions about how European markets will evolve long term under the new framework,” says Richard Johnson, vice-president of Greenwich Associates market structure and technology and author of ‘The MiFID II Trading Transformation.’ Some of the biggest changes in European markets have been triggered by MiFID II rules on transparency and best execution. Because complying with new pre- and post-trade reporting requirements when executing OTC is quite onerous, market participants have a strong incentive to shift trading toward electronic venues that naturally facilitate time-stamping and reporting. Electronic trading in interest-rate swaps has jumped from 20 per cent in 2017 to 36 per cent in 2018, with smaller but still significant gains in government bonds and investment grade credit. MiFID II transparency rules are also increasing usage of trading analytics. Transaction cost analysis (TCA), which helps traders measure performance against execution benchmarks, is now used by 95 per cent of European equity traders. Despite any bumps in the road, the changes brought on by MiFID II are creating new opportunities. “Competitive dynamics will continue to drive market structure, as we are already seeing in the emergence of new venues in equity trading and the growth of eTrading in fixed income,” says Johnson.

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Dry Power Tops $2 Trillion

Private capital dry powder – the capital available for fund managers to deploy – surpassed the $2 trillion mark to reach $2.1 trillion at the end of June 2018, says Preqin. Geographically, the majority of dry powder is still targeting North America, although that proportion has been declining in recent years. However, a steadily increasing proportion of available capital is focused on Asia. The region accounted for nine per cent of total dry powder in 2006, but in 2018 this has doubled to 18 per cent. Europe-focused dry powder, meanwhile, has remained consistent, accounting for around a quarter of total available capital. A previously diversifying spread of available capital seems to be concentrating towards private equity funds. Private equity accounted for a diminishing proportion of dry powder from 2006 to 2013 as asset classes like private debt and infrastructure grew in prominence, but this trend has reversed in the past five years. Private equity now accounts for 58 per cent of all available capital in the industry, the highest proportion seen since 2012.

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Consolidation Not Inevitable

Some believe the total number of smaller UK schemes – of which there are currently 4,000 which hold just 10 per cent of total pension scheme assets ‒ will have fallen by 75 per cent within 15 years, says Mark Davies, managing director at River and Mercantile Derivatives. The arguments for consolidation are nothing new as most are small and suffer from diseconomies of scale. However, he questions whether this is really so inevitable. “While they are undoubtedly beset by issues from all sides, the actual likelihood of either outcome occurring for any one small scheme is much lower than it might appear,” he says. Scheme numbers can only fall if they choose one of two paths: merge or move to a consolidator (or the PPF which could be seen as either). The former is extremely difficult as schemes don’t want to build multi-employer schemes. The latter is contingent on whether schemes can afford it. And while they can turn to consolidators like the superfunds, what has been overlooked is they are attractive enough for consolidators from a funding perspective. “It would be quite easy for consolidators to simply cherry-pick the most well-funded schemes and leave the rest alone,” he says. And if the real goal is to make cost savings for schemes in general and thus help them be better funded, there are other options outside of consolidation which could well come to the fore and stop this current trend in its tracks.

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iA Introduces Virtual Assistant

iA Financial Group (Industrial Alliance Insurance and Financial Services Inc.) has taken a major step in its shift to digital by introducing the iA Virtual Assistant. It allows clients to contact iA Financial Group in writing or verbally, a natural way of communicating, which helps people feel closer to and supported by the company. Although the virtual assistant is new, it can already calculate how much investors should contribute to their RRSP or estimate the amount saved when they retire. It can also locate nearby healthcare providers that comply with the company’s eligibility criteria. It can be accessed using Google Assistant on a cell phone, tablet, or via Google Home. It also learns quickly and the vision is to make it able to provide personalized information to group plan members that is adapted to their profile. It will be able to guide plan members in evaluating the options available at the various stages of their lives.

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Shift In Extremes Difficult To Predict

Part of the difficulty for asset managers and institutional investors is to work out when a shift from one extreme to another is going to occur. Some extremes hang around; others are short-lived, says Calum Mackenzie, national investment consulting leader for Aon (Canada). In the article ‘2019: A Year For Better Or Worse’ at the Benefits and Pensions Monitor website, he says the answers to four interlinked, interlocking questions will have a bearing on what sort of year 2019 will be.

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Caisse Provides Growth Capital

La Caisse de dépôt et placement du Québec will provide growth capital for Metro Supply Chain Group, a North American customized logistics services and supply chain solutions provider. It will use the proceeds from this transaction to execute its growth strategy, which targets acquisitions, developing new markets, and additional international expansion. Headquartered in Montréal, QC, it moves over $20 billion in goods each year through its logistics centres located in North America and Europe.

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Genomic Screening Examined

Developments in genetic and genomic screening and how they can target treatment to individual patients, leading to less waste and more effective outcomes will be examined at the Benefit Breakfast Club’s ‘The Value Proposition for Integrating Genetic and Genomic Screening in Benefits Plans. John Papastergiou, of Shoppers Drug Mart and an assistant professor at the University of Toronto; Jamie Clendening, medical manager at Hoffman LaRoche Canada; and Alan Birch, administrator of the Oncology Drug Access Navigators of Ontario (ODANO) and drug access facilitator at North York General Hospital; will explore the role of screening options; the impact on treatment, outcomes, and coverage; and access gaps. It takes place February 14 in Burlington, ON. For information, visit Genomic Screening

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January 17, 2019


Funding Status Signals Needed

The federal government needs to establish early-warning signals through disclosures of financial ratios relevant to the funding status of the pension plan, comparing the ratio of dollars spent on dividends, and repurchases or executive compensation to any unfunded liability in the pension plan, says Kevin Thomas, executive director at SHARE. While this would not compel any particular course of action, it would draw attention to the issue such that management should seek to improve the ratio before it becomes a reputational liability. The issue was brought to the fore most recently with the Sears Canada insolvency that put the pension savings of more than 16,000 workers at risk – despite the company having made large dividend payouts and share buybacks to reward investors prior to the insolvency, he says. SHARE proposes extending clawback provisions to allow recovery of dividends, executive compensation, and other extraordinary payments made while a company has underfunded its pension obligations. Where a corporate pension deficit is large or persistent, the Canada Business Corporations Act should be amended to restrict or reduce dividend payments, share repurchases, and variable executive and director compensation until such time as the solvency funding ratio surpasses a specified threshold.

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Solvency Accounts Get PIAC Support

The Pension Investment Association of Canada (PIAC) supports the use of solvency reserve accounts as a means to overcome the inherent procyclicality of pension funding requirements and to mitigate the asymmetries regarding the potential for trapped surplus in plans. In its comments on the federal government’s ‘Enhancing Retirement Security for Canadians’ consultation document, it says it sees no policy downside in terms of benefit security from appropriately structured SRAs and encourages the federal government to follow the lead of British Columbia, Alberta, and Quebec in terms of making these an eligible funding mechanism for federal plans. It also supports the imposition of criteria or conditions on individual companies seeking pension funding relief as part of a package of changes in an effort to preserve the ongoing viability of the business. The transfer to self-managed accounts as an alternative to a forced immediate annuitization of terminated plans in the context of an insolvency is also supported. Potential options could include transfers to self-managed accounts as proposed, but might also include ongoing participation in a non-guaranteed balanced fund or a re-profiling of the annuity payment for certain classes of retirees. All options would need to be structured to ensure they were value-neutral across different groups of retirees.

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Recession Risk Low For Canada

Despite what skittish stock markets suggest, the ‘HSBC Canada Outlook’ maintains that the risk of recession remains low over the next 12 months in Canada and the U.S. Investors are right to assume that the stock market is forward-looking, it says, but that doesn’t mean the direction of stocks definitively tells how the wider economy will perform. The noise caused by volatile returns needs to be kept in perspective and the focus put on fundamentals. It does like a lot of what it sees. Solid corporate balance sheets, low unemployment, broadly supportive interest rates, strong retail sales, and a Canadian economy that continues to grow, albeit slowly, suggest that remaining invested and staying the course is the right approach. Overall, it believes the economy will keep growing, but with periods of stock market volatility through 2019.

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Foresters Signs UNPRI

Foresters Asset Management Inc has become a signatory to the United Nations-supported Principles for Responsible Investing (UNPRI). The UNPRI is recognized as the leading global network for investors who have publicly committed to integrating environmental, social, and corporate governance (ESG) considerations into their investment practices and ownership policies. In becoming a signatory, it joins some of the world’s largest investment managers, representing more than US$82 trillion in assets under administration.

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‘Flexforce’ To Work As Seniors

Nearly two-thirds (64 per cent) of ‘Flexforce’ Canadians – a group that comprises gig workers, job jumpers, and postponed professionals ‒ anticipate needing to work into their senior years because they won’t have enough saved for retirement, says a TD survey. More specifically, nearly three-quarters of these same Canadians (72 per cent) are finding it difficult to save for retirement, while four in 10 (41 per cent) are not sure when they’ll retire given their employment situation. This leaves a large and growing group of Canadians following unconventional career paths feeling uncertain (47 per cent) and worried (34 per cent) about their future, with only a small number (11 per cent) claiming to feel secure about saving for retirement. When it comes to retirement goals, 55 per cent of Flexforce Canadians say they are not able to save as much as they need to each year to meet their goals, with over three-quarters (76 per cent) wishing they made financial contributions at an earlier age. Canadians report that the top three factors holding them back from contributing to their retirement savings include day-to-day bills and expenses (49 per cent), paying off existing debt (32 per cent), and paying for their lifestyle (27 per cent).

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iCBT Approved As Benefit

Morneau Shepell’s internet-based cognitive behavioural therapy (iCBT) program, AbilitiCBT, will now be offered to individuals as an approved paramedical benefit through several insurance companies. This type of service is typically provided by professionals outside the public health system. This launch marks the first time that Morneau Shepell will provide iCBT directly to individuals. The program delivers research-based iCBT through a digital platform that combines therapist guidance with interactive exercises and activities to improve on traditional therapy. The program focuses on changing negative thought patterns, emotional responses, and behaviours to reduce absenteeism and improve engagement, shorten return-to-work timeframes, and reduce the costs of managing employees who are living with mental health conditions.

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Harvest Completes ETF Filing

Harvest Portfolios Group Inc. has completed the initial offering of Class A Units of the Harvest Global Gold Giants Index ETF. Filed with the securities regulatory authorities in all of the Canadian provinces and territories, it is now trading on the Toronto Stock Exchange. The ETF seeks to replicate, to the extent reasonably possible and before fees and expenses, the performance of the Solactive Global Gold Giants Index TR. It primarily invests in large gold mining issuers that are listed on a regulated stock exchange in North America, Australia, or in certain European countries. It is a defensive focused ETF that targets advisors and investors who are concerned the economic cycle is in a late stage and that the U.S. dollar may weaken.

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VC Funding Reaches Record Level

The final quarter of 2018 saw nearly US$64 billion in VC (venture capital) investment globally, led by a $12.8 billion funding round to U.S.-based e-cigarette manufacturer Juul, says the KPMG Enterprise ‘Venture Pulse’ report. While every region identified in the report ‒ the U.S., Americas, Asia, and Europe ‒ saw a record high level of annual VC investment during 2018, the total number of VC deals globally declined to a six-year low of 15,299 deals during the year, compared to 17,314 in 2017 and a peak high of 20,172 in 2015. The drop in quarterly deal volume was even more stark, with the 3,048 deals seen in the fourth quarter of the year the lowest number in 25 quarters since the third quarter of 2012. It says VC activity in Canada was strong throughout 2018, with the country attracting $2.9 billion in funding over the year to achieve a new annual high.

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PSP Invests In Australian Agriculture

B.F.B. Pty Limited (BFB) has sold Proterra Investment Partners’ majority stake to the Public Sector Pension Investment Board. The transaction delivers capital to support the continued strategic development of one of Australia’s most significant and successful agriculture companies. PSP’s bid was considered the most compelling based on its offered price; its low execution risk and creditworthiness to complete the transaction; and PSP’s natural resources group’s strategic fit with BFB. The Natural Resources Group is a global agriculture investor and is already invested in Australia’s agriculture sector through partnerships with local operators in the areas of animal proteins, row crops, fresh produce, and tree nuts.

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Vanguard Founder Dies

John Clifton Bogle, founder of the Vanguard Group, passed away Wednesday. He was 89. He had legendary status in the American investment community, largely because of two achievements: He introduced the first index mutual fund for investors and he drove down costs across the mutual fund industry by ceaselessly campaigning in the interests of investors. Vanguard, the company he founded to embody his philosophy, is now one of the largest investment management firms in the world. Founded in 1975, he coined the term “The Vanguard Experiment.” It was an experiment in which mutual funds would operate at cost and independently, with their own directors, officers, and staff ‒ a radical change from the traditional mutual fund corporate structure, whereby an external management company ran a fund’s affairs on a for-profit basis.

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Certificate Pension Course Offered

In partnership with the HRPA, the Canadian Pension and Benefits Institute is offering ‘The HRPA Canadian Pension Certificate Program.’ Attendees earn certification and get a comprehensive understanding of the many components of Canadian group benefits and insight into public and private benefits programs and individual benefit types to better formulate plans and strategies. It takes place March 5 to 7 in Toronto, ON. For information, visit Pension Certificate

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January 16, 2019


Jargon Hurts DC Behaviour

While plan participants tend to highly value their employer-sponsored retirement benefits, at the same time there are common points of confusion and sub-optimal behaviour patterns that stem from the serious amount of jargon that pervades the defined contribution plan domain, says a white paper from Invesco. ‘ReDefined Contribution Plans: the defined contribution language study’ shows many participants find their retirement plan to be confusing and wish for clearer language to help them better understand their plan’s design, investment menu, and post-retirement options. At a high level, it recommends advisors and sponsors use “positive, plausible, plain-English and personal” communications. For example, telling potential plan participants that they are leaving ‘free money’ on the table is far more effective at driving behaviour change than talking about ‘projected retirement income shortfalls’ or ‘uninsured longevity risk.’ It says a well-designed and effectively emphasized employer match is one of the strongest motivators towards plan participation, which can also aid in workforce management and retention.

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2014 Tipping Point For ESG

Amundi has identified 2014 as a turning point for the positive impact of responsible investing on stock prices. ‘The alpha and beta of ESG investing’ shows between 2010 and 2013, investing along environmental, social, and governance (ESG) lines tended to penalize both passive and active investments. However, it then became a source of outperformance between 2014 and 2017 in Europe and North America. It says ESG does not impact all stocks, but tends to impact best-in-class and worst-in-class assets. Buying the best-in-class (or 20 per cent best-ranked) stocks and selling the worst-in-class (or 20 per cent worst-ranked) stocks would have generated an annualized return of 6.6 per cent in Europe between 2014 and 2017, compared to negative 1.2 per cent in the earlier period. For North America, it would be 3.3 per cent and negative 2.7 per cent, respectively.

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Leading Risks Identified

Cybersecurity, BREXIT, geopolitics, and financial market fluctuations are among chief concerns for businesses voiced by some of the UK’s leading risk experts as they look ahead to 2019. The Institute of Risk Management (IRM) says many of these align with risks identified in ‘The Global Risks Report 2019’ by the World Economic Forum. Further areas of risk concern identified by IRM risk experts were the as yet unknown effects of Brexit in the UK and the impact of technology enabled disruptive business models. “The impact of current macro trends and risks, such as cybersecurity, artificial intelligence, and Brexit in the UK will continue to put pressure on, and potentially change, entire business sectors,” says Socrates Coudounaris, IRM’s chairman. “Leaders who think critically about the future and anticipate disruption to their sectors, while building resilience and agility in their models, will be in a better position to tackle a challenging risk environment in 2019 and thrive.”

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Patient Engagement Resistance Weakening

Resistance among patients and providers towards the concept of patient engagement is gradually weakening due to the rising ubiquity of smart phones and growing uptake of digital health tools by healthcare providers, says Frost & Sullivan’s ‘ The Future of Patient Engagement 2.0 in Europe, 2018’ says this combination of factors is helping to open up the market among the younger, digitally native, demographics who are more comfortable using interactive technologies. Patient engagement is further gaining currency with digital innovations such as artificial intelligence (AI) and consumer-grade wearables entering the mainstream. As these tools collect large volumes of data, vendors have to develop a strong privacy strategy as well as demonstrate the accuracy of the tools to physicians. As well, vendors need to carefully study regional nuances, challenges, and growth opportunities in the European market to create bespoke products that will encourage its continual use.

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Supply Constraints Emerge In Real Estate

Strong performances in 2017 and 2018 have led to supply constraints amid a maturing commercial real estate cycle in Canada, says Avison Young’s ‘2019 North America, Europe and Asia Commercial Real Estate Forecast.’ Bill Argeropoulos, a principal and practice leader, research (Canada), for Avison Young, says activity is expected to remain stable in 2019 with a general supply constraint being the primary brake on property market growth. Meanwhile, occupiers and owners will have to adjust to rapid technological advances during a period of moderating economic growth. Canada’s office sector remained sound in 2018, though softness persisted in Alberta. Competition for office space, especially in downtown markets, continues to underpin the sector’s fundamentals nationwide. Office vacancy declined in almost every market, lowering the Canadian average to 11 per cent near year-end 2018. A similar story is expected in 2019 although vacancy will rise modestly to 11.3 per cent by year-end after construction nearly doubled in 2018. Overall industrial vacancy continued to decline, falling to a new record-low of 2.9 per cent near the end of 2018 and is expected to edge lower in 2019. Toronto, ON, and Vancouver, BC, posted North America’s lowest vacancy rates in 2018 and are projected to rank among the tightest three markets in 2019. Retail properties remain the most unpredictable commercial real estate assets in Canada. Retail vacancy remains in flux as a lingering result of the failures of some prominent chains, while big box chains closed underperforming locations amid the ongoing e-commerce revolution.

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KPMG Delivering Bullying Training

KPMG in Canada has joined forces with Respect Group, an organization founded by Sheldon Kennedy, a former NHL hockey player turned victims’ rights crusader, to deliver training to organizations to equip employees with the education and skills needed to prevent bullying, abuse, harassment, and discrimination (BAHD) in the workplace. Together, they will provide companies with a training curriculum that addresses the evolving needs of the #MeToo era. The curriculum begins with foundational, online ‘Respect in the Workplace’ certification for employees before shifting to customized, client-specific, on-site workshops that build awareness and knowledge, followed by ongoing ‘Lunch & Learns’ to provide employees with the skills needed to contribute to a respectful workplace.

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Women On Boards Trajectory Slows

The trajectory of global company boards achieving 30 per cent female representation has slowed, says a report by MSCI. ‘Women on Boards’ shows that the index provider’s projection will take longer to reach 30 per cent representation. This will occur in 2029 instead of 2027 as it predicted in 2015. The proportion of women holding directorships at MSCI All-Country World index companies increased to 17.9 per cent as of October 2018, compared with 17.3 per cent a year earlier. Developed market companies had 21.6 per cent female representation at the director level, up from 20.4 per cent a year earlier; while emerging markets index companies saw women hold 11.2 per cent of board of director seats, up from 10.2 per cent in 2017. More than one-fifth of firms had all-male boards and almost all of the companies had majority male boards. The majority of firms with all-male boards were based in Japan, South Korea, Taiwan, Hong Kong, and China.

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Recession Still Unexpected

A majority of investors are bearish on the economy, but a few still expect a global recession in 2019, says the Bank of America Merrill Lynch‘s monthly fund manager survey. A net 60 per cent of surveyed investors this month expect global growth to weaken over the next 12 months, up from 53 per cent the previous month. It is the worst outlook on the economy since the July 2008 survey. However, investors are saying they expect secular stagnation over the next two to three quarters rather than an outright global recession, with only 14 per cent of surveyed investors expecting that in 2019, up from nine per cent in December. The current month also has seen a collapse in inflation expectations, with just a net 19 per cent expecting the global consumer price index to rise over the next year. That number is down 18 percentage points from a net 37 per cent in December, which itself was down 33 percentage points from 70 per cent in November. A possible trade war remains the biggest tail risk for managers, with 27 per cent of respondents putting it at the top of a list of concerns, although the number is down from the 37 per cent that cited it as the biggest concern in December.

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State Street Focusing On Culture

State Street Global Advisors will focus on corporate culture as a top asset stewardship engagement priority in 2019, says Cyrus Taraporevala, its president and CEO. In a letter to the boards of public companies listed in the major global indices, he says while corporate culture as an “intangible asset” rather than a tangible one is difficult to measure and manage, “we also recognize that at a time of unprecedented business disruptions, whether in the form of technology, climate, or other exogenous shocks, a company’s ability to promote the attitudes and behaviours needed to navigate a much more challenging business terrain will be increasingly important.” Citing a report by Ernst & Young, he says an average of 52 per cent of an organization’s market value can come from intangible assets such as corporate culture. SSGA defines corporate culture as encompassing “a broad range of shared attitudes shaping the behaviours of individuals as a group across an organization,” which allows employees to identify with their employers and differentiate them from competitors.

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Compassionate Care Rider Helps Employees

RBC Insurance has launched a family compassionate care rider (FCCR) as an option for select disability plans, Its recent survey found among working Canadians, two in 10 had to take time off work to provide care for a loved one and only one in three said they could comfortably afford the loss of income if they were to take three months off work to act as a caregiver, adding significant burden to an already difficult time. To fill the gap and allow clients time off to support a terminally ill or injured child or spouse, the FCCR pays a monthly benefit and gives the insured the flexibility to take time off work entirely or work reduced hours.

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OMERS Opens Silicone Valley Office

OMERS Ventures has expanded to the U.S. through the opening of its Silicon Valley, CA, office. The OMERS Ventures office will complement the existing team headquartered in Toronto, ON. OMERS Ventures is a multi-stage, multi-sector venture capital investment arm of OMERS. The Silicon Valley presence provides a bi-coastal and international foothold for the firm to identify promising investment opportunities in emerging and leading markets. This supports a multi-year global strategy for OMERS, which opened an office in Singapore last year.

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‘Today’s Vision’ Theme Of Conference

‘Today’s Vision: Tomorrow’s Reality’ is the theme of the 2019 CPBI Saskatchewan Regional Conference.’ Featured sessions include the biggest pitfalls in investing, virtual healthcare, and post traumatic stress disorder. It takes place April 9 to 11 in Saskatoon, SK. For information, visit Today’s Vision

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