Industry News

June 22, 2017


Emerging Markets Will Drive Growth

Emerging markets will collectively drive global growth over the next decade, but investors would be wise to reconsider how they approach these markets, says PGIM, the global investment management businesses of Prudential Financial, Inc. In a white paper, ‘Emerging Markets at the Crossroads,’ it says increasingly emerging markets will be the masters of their own economic fate, making a one-size-fits-all classification of emerging markets obsolete. It suggests the export-led, externally oriented growth model that propelled emerging markets forward since the 1980s has stalled. As aging populations reduce the long-term growth potential of developed markets and the backlash against globalization and free trade continues, emerging markets will increasingly choose their own individual paths. It urges investors to embrace an active, locally informed investment approach that positions their portfolios for emerging market divergence and takes advantage of the opportunities from the increasing resilience and declining contagion risk across many emerging markets. 

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Mental Health Cost Grows Exponentially

The cost of doing nothing about mental health in the workplace grows exponentially, says Bill Hogarth, chief research and development officer, workplace productivity, at Morneau Shepell. Taking part in the panel discussion ‘A New Fame of Mind: How Mental Health is affecting your workplace’ at its ‘Solving Workplace Challenges in the Modern Economy’ session, he said the cost is not just from the individual employee’s presenteeism and absenteeism, it also includes the impact on the productivity of their co-workers who don’t know how to deal with the situation. One in five Canadians has a mental health issue with one in three seeking treatment, he said. However, organizations need to think about the 80 per cent without a problem and spend more time on the prevention piece and integrating mental health into their HR strategy. Yet, Louise Bradley, president and CEO of MHCC, said it is not always easy to “walk the talk.” Having a psychologically safe workplace requires more than ticking off the boxes and when they are all full proclaiming the workplace is safe. It is an ongoing process and organizations never reach a point where they can say “we are a healthy organization.” Dr. Lisa Couperthwaite, a clinical psychologist at CAMH, said organizations also need to ensure they can provide mental first aid. With a physical hazard, there is a first aid kit. With mental health, organizations need to have people trained to respond to the needs of employees in crisis.

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Millennials Need Guidance On Spending

Even though most U.S. Millennials (81.37 per cent) are saving for retirement, a study by Pentegra finds that many are in desperate need for guidance on how to develop good spending habits and saving strategies. It found 45.1 per cent of Millennials are contributing less than five per cent of their annual salary into a retirement savings plan. As well, 18 per cent aren’t contributing anything toward retirement. Conflicting financial priorities ‒ including rent, mortgage, and student loan bills ‒ are establishing major barriers to funding retirement. However, the study also found that spending on ‘wants’ in relation to ‘needs’ is also impeding building up savings. The report found that 31.38 per cent of respondents spent at least $75 a week on eating out including purchasing coffee. If a person spends $5 on a cup of gourmet coffee five days a week, the annual price tag for coffee alone is $1,300. In 40 years of active work, this cost jumps to $52,000. And assuming a six per cent compound annual growth rate, it ends up at $152,000.

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Contract Trend Bonus For Boomers

The trend towards more contract work gives baby boomers an opportunity to transition into retirement, says Eileen Dooley, vice-president, VF Career Management. She told the ‘A Graceful Exit: Transitioning Baby Boomers into retirement’ at Morneau Shepell’s ‘Solving Workplace Challenges in the Modern Economy’ that by taking temporary contract work, boomers can continue what they want to do in a less structured way. With companies being more conservative in hiring and wanting an easy out, having contract employee instead of permanent minimizes the risk that employers take. However, they will pay for the knowledge about their industry that someone who has been in industry for 30 years has. However, if transitioning to new career, she said Boomers should focus on what they are really good at and what they want to do, not what they don’t want to do anymore.

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Managers Face Uncertainty Over MiFID II

Six months ahead of the MiFID II (Markets in Financial Instruments Directive) implementation deadline, alternative asset managers still face uncertainty, with 34 per cent of firms undecided for example on how to pay for research, says a survey by the Alternative Investment Management Association (AIMA). Fund managers globally cited as their biggest MiFID challenges uncertainty around what the MiFID II rules mean – both their scope and substance ‒ as well as what they perceived to be a lack of clarity relating to the cost and nature of services provided by brokers. The survey showed that, among the two-thirds of alternative asset managers that have made decisions around how to pay for research, 80 per cent plan to charge investors and the remaining 20 per cent intend to absorb the costs themselves.

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Chenel President Of CFA Montréal

Frederick Chenel (CFA), vice-president, consultant relations and business development, institutional markets, at Fiera Capital has been appointed president of CFA Montréal. He has been a member of CFA Montréal’s board since 2014. He joined Fiera in 2010 from Brockhouse Cooper.

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Privacy Of Data Examined

Protecting the privacy of plan sponsor data, retirement in today’s economy, and what employers need to know about universal pharmacare will be topics at the International Foundation of Employee Benefit Plans’ ‘50th Annual Canadian Employee Benefits Conference.’ It takes place August 20 to 23 in Montreal, QC. For information, visit Canadian Conference

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June 21, 2017


Alternative Information More Important To Investors

As alternative investments become more mainstream, information about investment vehicles, underlying assets and other risk management data has become more important to investors, but best practices around transparency requirements are lagging behind the demand, says a survey by Northern Trust. ‘The Path to Transparency in Alternatives Investing’ shows degree of transparency was cited as very important by 63 per cent for alternative and 62 per cent for traditional investments, leading all other considerations. Transparency became more significant after the financial crisis, cited as the most important post-investment consideration by 21 per cent for traditional assets and 17 per cent for alternatives, compared to nine and three per cent, respectively, pre-crisis. However, there was no consensus around which department within an organization ensures that existing and potential investments are adequately transparent, with responses pointing most often to either the investment management or risk and compliance functions. “These results tell us that investment transparency is a growing priority, but asset managers and institutional investors remain unsure of how to best achieve it,” says Pete Cherecwich, president of corporate and institutional services at Northern Trust. “As alternative investing has reached the mainstream, the industry would benefit from consistent standards and stronger policies around transparency.

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CalPERS May Cutback On Private Equity

The chief investment officer of the California Public Employees’ Retirement System (CalPERS) has raised the possibility of the pension fund severely cutting its $25.9 billion private equity portfolio because issues of fee transparency by general partners are becoming a major controversy. Ted Eliopoulos told the system’s investment committee that public comments at meetings and media stories criticizing the private equity program are part of CalPERS being a public agency. However, this is taking a toll on both staff and its competitiveness in the marketplace, he says. CalPERS was thrown into a national debate about private equity fees in 2015 when officials disclosed they could not account for how much they paid in performance fees to private equity general partners. The pension fund has since started making such disclosures, but CalPERS officials admit they don’t have a handle of all fees being charged, which they blame on the private equity industry. The issue will be discussed at the $323.9 billion fund’s retreat meeting on July 17 as the system sets its asset allocation for 2018 through 2021. The private equity program is 8.1 per cent of CalPERS’ total portfolio, but has been shrinking over the last few years because the pension fund cannot find enough funds to invest in.

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League Expands Offering

League Inc. is expanding its health benefit offering across the U.S. It plans to be in the Top 10 U.S. metro areas by summer 2018. League offers a consumer-first digital platform that enables users to build the health plan that’s right for them. Features include unrestricted health and lifestyle accounts, paperless transactions, and a pay-per-use model where employers only pay for what their teams use. The company also helps employers bring health into the workplace by providing onsite services such as yoga, biometric screenings, and mental health programs.

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Caisse In Aircraft Leasing Venture

The Caisse de Depot et Placement du Quebec and GE Capital Aviation Services will create a joint aircraft leasing and financing venture. The Caisse will provide an unspecified amount of capital over the next four years to help fund the $2 billion platform, to be called Einn Volant Aircraft Leasing (EVAL). GE Capital Aviation Services will administer the platform. EVAL will acquire modern fuel-efficient aircraft from a diverse set of global airlines and lease them back to the airlines under long-term leases.

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Miadovnik Joins BMO

Cameron Miadovnik is an associate, institutional sales and service, at BMO Asset Management Inc. Most recently, he was institutional manager at AGF Management, a firm he joined in July of 2011.

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Making Money While Making Difference

Dustyn Lanz, chief operating officer of the Responsible Investment Association, will share insights on how to make money while making a difference at the ‘CPBI 2017 Ontario Regional Conference.’ Other session will examine tackling the stigma surrounding mental illness in the workplace and DC plan legal issues. Theme of the event is ‘Healthy, Wealthy and Wise.’ It takes place October 18 to 20 in Niagara Falls, ON. For information, visit CPBI Ontario

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June 20, 2017


Resources Help With ESG Integration

The Intentional Endowments Network (IEN), a non-profit peer learning network, and Cambridge Associates have created related resources for institutions struggling to integrate environmental objectives and considerations (including ESG factors) into their investment portfolios. To integrate this framework effectively, the two say institutions would do well to focus investment decision-making around three elements of their organizations and missions ‒ their purpose, priorities, and principles ‒ and to ensure their investment policies reflect those guideposts. The language of the Paris Climate Agreement provides a good framework for moving forward. “The investment risks and opportunities associated with the transition to a low-carbon economy remain salient for many long-term investors and the U.S. exit from the Paris agreement should not prevent them from integrating environmental factors into their investment decisions,” says Georges Dyer, principal of the Intentional Endowments Network.

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UK Firms Unable To Fulfill DB Obligations

FTSE 350 companies in the UK are increasingly unable to fulfill their defined benefit obligations, says an analysis by PricewaterhouseCoopers. Its pension support index shows the overall level of employer support offered to pension funds is at its lowest level since 2009. For the year ended December 31, companies achieved an aggregate 69 out of 100, down from 82 the previous year. The biggest pressure on company deficits is rising liabilities due to the fall in long-term gilt yields. Pension funds that have hedged interest rate risk were unable to cope with falling yields. For those pension funds with weak employer support or that are more mature, the index shows time is running out. These schemes need to focus on the strength of the employer, the ability to make increased contributions, and the risks attached to the investment strategy.

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UK Firms Use Passive To Cut Costs

Exactly half of UK pension schemes are aiming to cut their investment costs over the next two years, says a survey by Cerulli Associates. Its report, ‘European Institutional Dynamics 2017: Satisfying the Evolving Needs of Europe’s Asset Owners,’ says the single biggest reason for planning to reduce costs is the size of their deficits. The most popular ways to cut costs are streamlining investment processes and increasing allocations to passive funds. Currently, 40 per cent of UK schemes have a 50 per cent or greater allocation to passive funds. In fact, more than one respondent in 10 (12 per cent) has more than 90 per cent of its assets invested in passives. And the number of schemes intending to increase their allocation to passives over the next two years (37.5 per cent) is significantly higher than the number planning to decrease their allocation (8.3 per cent).

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Business Attire Relaxing

Nearly two-in-five (17 per cent) say business attire guidelines have relaxed over the last five years, compared to 12 per cent who reported a more formal dress environment, says a survey by Robert Half Finance & Accounting. It found 74 per cent of Canadian CFOs say their accounting and finance departments have a somewhat or very casual dress code. However, relaxing dress codes aren’t an excuse for employees and job seekers to wear whatever they want to work or an interview. Robert Half suggests employees look to the next rung to see what their boss and their boss’s boss wear. As well, even if they can wear jeans and T-shirts to work, ensure they’re clean and wrinkle-free. They also need to pay as much attention to their accessories and grooming as they do their clothing.

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Managed Future Use Rises

Investment in managed futures strategies is on the rise as asset owners tap into the equity risk reduction and downside protection inherent in systematic trend-following approaches, says data from eVestment LLC. Institutional investors have been putting assets into managed futures strategies, with especially strong asset gains in the early months of 2017. Net inflows in the quarter ended March 31 were $4.9 billion; total assets under management in the category, including investment gains/losses, rose 2.2 per cent from $125.8 billion as of December 31. At the current pace, net inflows into managed futures in 2017 could reach $19.7 billion, a 94 per cent increase over net inflows into the category in 2016 and the largest one-year increase since eVestment began tracking the category in 2009.

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Ontario Teachers’ Acquires Interest In CareerBuild

Affiliates of investment funds managed by affiliates of Apollo Global Management, LLC, the Ontario Teachers’ Pension Plan Board, and CareerBuilder, LLC have entered into a definitive agreement, will acquire a majority of the outstanding equity interests in CareerBuilder. Its current owners, TEGNA Inc., Tribune National Marketing Company, LLC, and McClatchy Interactive West will retain a minority interest. CareerBuilder provides global human capital solutions.

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PSP Invests In Wind Turbines

PSP Investments will acquire 8.7 million shares (approximately 9.9 per cent) of Pattern Energy stock from Pattern Development 1.0. It will co-invest $500 million in projects acquired by Pattern Energy, including investments in the Meikle wind turbines in the Peace River area of British Columbia; Mont Sainte-Marguerite in the Chaudière-Appalaches region south of Québec City, QC; and Panhandle 2 in Carson County, Texas. It will also have an indirect investment interest in Pattern Development 2.0. PSP Investments will have a direct ownership stake in Pattern Energy.

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Zagrodny Retiring

Rick Zagrodny, president of the IAM Real Estate Group, is retiring September 30. He spent 33 years with Integrated Asset Management. He will be succeeded by David Pappin, who joined the real estate group as chief operating officer a year ago.

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ACPM Looks At New Economy

‘The New Economy and Plan Design Considerations’ will be examined at the ‘2017 ACPM National Conference ‒ Mountains of Opportunity: Innovating to Reach New Heights.’ Speakers at the session will be Andrew Cash, of the Urban Worker Project; Mazen Shakeel, of Sun Life Financial; and Alex Mazer, of Common Wealth. Other sessions will look at retirement income needs, alternatives, and decumulation. It takes place September 12 to 14 in Banff, AB. For information, visit ACPM 2017

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June 19, 2017


Alternatives Face Barriers For Germans

Regulations, costs, and illiquidity are proving to be barriers for German institutions making allocations to alternative asset classes, says a survey by German rating company Telos. There was “no clear upwards trend” to more alternative asset classes among mandates issued by German institutions last year. While diversification is “a clear trend” and institutions are seeking “more specialized mandates.” the research does not see a significant increase in demand for alternatives. Around 80 per cent of the surveyed institutions are not invested in alternatives at all. Overall, roughly a quarter of investors had an exposure to private equity, but less than 10 per cent held hedge funds – similar to the numbers from previous years. Those with exposure to alternatives increased their investments in these assets to 10 per cent in 2016, compared to four per cent the year before. German institutional investors fall under different legal frameworks, some of which are more restrictive than others when it comes to investing in alternatives, especially illiquid investments.

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Rail Project Gets Federal Money

The federal government will invest $1.28 billion into a Caisse de dépôt et placement du Québec rail project that will connect the city of Montreal, QC, to its suburbs and Trudeau international airport. Not only will it make it quicker and easier for millions of Quebec residents to get around, the rail line will reduce the number of cars on the roads, helping to ease traffic and make the air cleaner. It would be the fourth largest transportation line in the world after those in Singapore, Thailand; Dubai, United Arab Emirates; and Vancouver, BC. Total cost of the project is $6 billion with most of the funding coming from the Caisse.

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Benchmark Shows Positive Returns

The Preqin All-Strategies Hedge Fund benchmark returned 0.26 per cent in May, marking the seventh consecutive month of positive returns for the industry. Overall, hedge funds have recorded just three months of losses since the start of 2016. Multi-strategy hedge funds posted the highest returns of any leading strategy, at 1.4 per cent, while relative value funds were the only leading strategy to see losses, recording -0.38 per cent for the month.

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Szczepkowski Joins Montrusco Bolton

Jason Szczepkowski (CIM) is a client servicing officer at Montrusco Bolton Investments. Most recently, he was assistant director, global client coverage, at RBC Investor & Treasury Services. He has also been with GE Asset Management and State Street Global Advisors (SSgA).

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Impact Of Technology Examined

How technology and new approaches to the business could radically change the group benefits industry in Canada in a short period of time and the impact of healthcare technology such as wearables and the internet of things (IoT) will be among the areas examined at the Benefits and Pensions Monitor Meetings & Events ‘Technology and Healthcare Plan Innovation’ half-day session. Expert speakers include Tim Clarke, owner of tc Health Consulting, and Paul Clark, chief technology officer from WorldCare International Inc. It takes place September 14 in Toronto, ON. For information, visit Technology Impact

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June 16, 2017


Aging Workers Grow In Labour Force

The labour force participation rate of Canadians aged 55 and older reached 38 per cent in 2016, up from 24 per cent in 1996 and the highest rate for this age group since the collection of comparable statistics in 1976, says Statistics Canada. Canadians aged 55 and older accounted for a record 36 per cent of the working age population in 2016. Based on population projections, this proportion is expected to increase to 40 per cent by 2026. Over this period, the participation rate for women aged 55 and older rose from 17 per cent to 32 per cent, while for men in the same age group it rose from 32 per cent to 44 per cent. The participation rate more than doubled among those aged 65 and older ‒ from six per cent in 1996 to 14 per cent in 2016.

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Women Face Lower Income

Lower retirement account balances, coupled with lower average Social Security benefits and longer life expectancies, mean that women are projected to have much lower income to sustain them throughout retirement than men, says research from Prudential. Among the challenges that women in the U.S. face when planning for retirement are longer life expectancies; the likelihood that many will be single at some point during retirement; time constraints due to roles as workers (both paid and unpaid) and caretakers; lower earnings than men; greater debt at both Millennial and pre-retirement ages than prior generations. Its data shows fully 25 per cent of women indicate that they don’t think they’ll ever be able to retire, compared to 14 per cent of men. When a significant percentage of the workforce isn’t retiring at an expected age, employees’ productivity and organizations’ ability to attract, promote, and retain new talent may be adversely impacted. Plan sponsors “increasingly have the ability to leverage data to determine when participants are facing important milestones in their lives. The ability to use data to fuel proactive engagement regarding key savings and planning opportunities can also help make closing the gap an achievable reality,” it says.

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ETF/ETP Assets Reach New High

Assets invested in ETFs/ETPs listed globally reached a new record of US$4.103 trillion at the end of May 2017, says preliminary data from ETFGI’s May 2017 global ETF and ETP industry insights report. ETFs and ETPs listed globally gathered record net inflows of US$48.26 billion in May marking the 40th consecutive month of net inflows. Year-to-date, a record US$283.91 billion in net new assets have been gathered. At this point last year, there were net inflows of US$91.45 billion. Equity ETFs/ETPs gathered the largest net inflows with US$33.09 billion, followed by fixed income ETFs/ETPs with US$13.77 billion. Commodity ETFs/ETPs experienced net outflows of US$1.22 billion.

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O’Reilly Joins CCGG Board

OPTrust President and CEO Hugh O’Reilly has been elected to the board of directors of the Canadian Coalition for Good Governance (CCGG). The CCGG promotes good governance practices within Canadian public companies and works to ensure that the regulatory environment aligns in the best interests of long-term shareholders. Its membership consists of institutional investors, including pension funds, mutual funds, and third-party money managers, who are invested in publicly listed Canadian companies. OPTrust is a long-term member of the CCGG, with executive members participating on the board and committees periodically since 2005.

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ISCEBS Social Reveals New Program

The ‘ISCEBS Toronto Chapter Summer Social’ will feature information on the new CEBS program. It has been updated with a curriculum better aligned to industry specializations in group benefits and retirement plans. Chapter leaders will be available to answer questions. It takes place June 22 in Toronto, ON. RSVP by eMail with ‘ISCEBS Toronto Social’ in the subject line to linda.bellon@conduent.com

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