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July 11, 2019


Taylor Gets Teachers’ Top Job

Jo Taylor is president and CEO of the Ontario Teachers’ Pension Plan (Ontario Teachers’), effective January 1, 2020. Currently executive managing director, global development, he will succeed Ron Mock who is retiring on December 31, 2019 after almost two decades at Ontario Teachers’. Taylor joined Ontario Teachers’ in 2012, leading Europe, Middle East ,and Africa (EMEA) operations and subsequently assuming additional responsibility for operations in Asia-Pacific, before being appointed to his present role in August 2018. He currently oversees the investment teams operating in Ontario Teachers’ international offices; setting strategy, reviewing investment proposals, managing key relationships, and optimizing the allocation of resources.

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Population Ages Faster In Cities

Population aging is taking place throughout the Americas, with the elderly expected to grow faster than the overall population between 2018 and 2025, says a report from Global Data. It says Canada already has more elderly people in its cities than it does children. In the U.S., this is expected to happen over the next 20 years. By 2025, it projects that 141 cities in Canada and the U.S. will have old age dependency ratios (the ratio of elderly to working-age people) of over 30 per cent. While rising life expectancy and declining birth rates have signalled population aging in North America for some time, the report notes that aging is also happening at a faster rate in cities in South and Central America. For instance, the firm reports that the elderly population in South and Central America is expected to grow by 33.5 per cent between 2018 and 2025, compared to 14.9 per cent in North America. The growth rate differential is attributed primarily to increases in life expectancy in South and Central America, which has risen by 22 years over the last 50 years. Low birth rates and an increasing old age population will affect social insurance, public pension, and healthcare systems thereby impairing the existing social support system and ultimately leading to long-term fiscal gap, it says. Grappling with these issues requires reforms to public pension and healthcare systems, along with policies to promote greater workforce participation by women and the elderly.

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Virtual Healthcare Offers Advantages

With average smartphone screen time increasing by 60 per cent over the past three years and 72 per cent of smartphone users currently monitoring their health through their phones, it’s not surprising that most Canadian employees want access to virtual care services to supplement in-person visits with their doctors, says Medisys Health Group’s ‘2019 Virtual Healthcare Industry Report.’ Responsible companies already provide health benefits to protect the bottom line. Each year, health-related employee absenteeism equates to an estimated $16-billion or more in direct lost revenue to Canadian employers. With people taking two to six days off per year for physician-related visits (double that figure for Canadians with kids) and each five-minute visit taking approximately two hours of time from the workplace, the financial benefits of virtual healthcare equate to thousands of dollars in savings per employee annually, thanks largely to reduced absenteeism. Ultimately, while companies are investing significant resources into providing health benefits to their workforces, there’s a major gap between what’s being offered and what employees want and need. This disparity is resulting in “companies incur(ring) millions of dollars of hidden costs due to employee turnover, loss of institutional knowledge, and temporary hiring, in addition to substantial productivity costs such as absenteeism and presenteeism,” says a Harvard Business School report. Effective virtual care has the power to remove ongoing access barriers to traditional care, reduce economic strain on the public system, dramatically improve treatment for those suffering from mental health challenges, protect the bottom line for employers, and empower Canadians to become more engaged in their health, says the Medisys report.

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Europe Sees Record Alternatives Activity

Although the macroeconomic picture for Europe has been muted in the past 24 months, the alternatives industry in the region is moving from strength to strength, says Preqin’s second annual ‘Alternatives in Europe’ report in partnership with Amundi. The report finds that 2018 has seen record activity across most alternative asset classes and Europe-based alternative asset fund managers held €1.62 trillion in assets under management (AUM) as of the end of June 2018 – up almost €300 billion in just three years. The opportunities present in Europe are apparent to investors globally. Almost half of the institutions with a preference for the region are now based in North America, with significant proportions coming from the Middle East and Asia. Hedge funds remain the largest part of the European alternatives market (€608 billion), but AUM in that industry has declined in the past 12 months, leaving private equity poised to overtake as the largest asset class in the region (€559 billion).

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TTC Pension Fund Adds Managers

Helen Pham (CFA) is manager, private markets, and Chris Pinto (CFA) is manager, public market investments, at the TTC Pension Fund Society. Both hires are new positions. Pham was most recently a senior investment analyst, private markets, at Ontario Power Generation (OPG). She will be responsible for infrastructure, real estate, private equity, and private credit. She has nine years investment experience from her roles at Hydro One and Mercer. Pinto will be primarily responsible for overseeing the fund’s public equities, fixed income, and hedge funds. He was most recently at Aon Hewitt Investment Management and served as lead portfolio manager for its Canadian OCIO business. He has over 20 years’ experience gained from roles at Aon, Northern Trust, and the Ontario Teachers’ Pension Plan.

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July 10, 2019


Employers Realizing Mental Health Risks

Canadian employers are increasingly realizing the rising individual and business risks presented by mental health issues and most are offering paramedical psychology benefits and other programs that support workplace mental health, says a survey by Aon. “While fewer than half of the employers we talked to identified mental health as a serious business risk now, a much larger proportion foresee it developing into one over the next five years,” says Kim Siddall, vice-president, health solutions, Aon. “They are already taking steps to address that developing risk. For instance, many are now isolating psychology benefit maximums from other paramedical ceilings and are covering a broader range of practitioner types, including family therapists, social workers, and clinical counsellors.” Fewer than half of employers (43 per cent) identify mental health as a “serious” business risk now, but 61 per cent anticipate it will be one in five years. A high proportion (73 per cent) of employers provide psychology maximums on a stand-alone basis, rather than lumped in under the maximum for other paramedical benefits. Arguably, that strategy demonstrates a growing recognition of mental health risk and a strengthening commitment to addressing it. The most common paramedical psychology maximum offered is in the $500 to $1,000 range. However, among financial services and tech firms, the trend is higher, with typical maximums falling with a range of $1,000 to $5,000. The top non-benefits-related supports for workplace mental health among surveyed employers are employee assistance programs (EAPs), physical health promotion, personal finance or debt counselling, addiction counselling, and self-help sessions on topics like stress or time management. Among the emerging areas of interest for mental health supports, a majority of employers identified virtual health services, tech-based behaviour awareness tools, and peer support networks (in-person and online) as considerations for the future.

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NDP Member Wants Divestment Explanation

A New Democratic Party member of federal parliament is urging the Canada Pension Plan Investment Board (CPPIB) to explain its recent divestment from two private prison companies involved in the incarceration of migrant families in the U.S. While initially CPPIB defended its decision to purchase stock in private-prison operating companies CoreCivic and GEO Group, it appears to have divested itself of the holdings. CPPIB Securities and Exchange Commission filings from May no longer list CoreCivic and GEO Group among the pension plan’s investments. Charlie Angus, the MP, wants to know whether the divestment was a “deliberate decision, or an automatic function of the passive investment program” at CPPIB. Public pension funds in the U.S. have also divested from CoreCivic and GEO Group, which have fallen under investor scrutiny as of late.

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ETF Investment Flat

Canadian ETF investment was flat in June, with strong flows into actively managed fixed income products, says a report from National Bank. Outflows last month totaled $133 million, driven by $1.45 billion in redemptions from Canadian equity funds. Fixed income ETFs drew $885 million, bringing total inflows this year for the asset class to $6 billion. Investors moved money into low-cost aggregate bond funds as well as actively managed global fixed income funds with higher fees, the report says, reflecting a “fearful sentiment” in the equity market. On the equity side, low volatility and low-cost benchmark products were in demand. “Canadian ETF investors still seem rather defensively positioned, with low-volatility and income-themed equity ETFs winning the popularity contest in June, despite the fact that strong market action worked more favourably for plain cap-weighted indices,” the report says. The report noted the defensive theme for the year with fixed income ETF flows double those of equity in the first half. Within equities, low-volatility products and those focused on real estate, healthcare, and utilities gained from January to June, while financial sector ETFs bled.

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Climate Bond Index Launched

FTSE Russell is launching an index that incorporates climate change considerations into its government bond index. The FTSE Climate Risk-Adjusted World Government Bond Index is based on FTSE’s existing global government bond index that includes investment-grade sovereign bonds from 22 developed economies. It weights each country based on its preparedness for and resilience to climate change risk. Index components are weighted by climate risk scores based on modelling developed by environmental analytics firm Beyond Ratings.

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BCI Invests In Valence

ATL Partners and British Columbia Investment Management Corporation (BCI) have acquired Valence Surface Technologies LLC, an independent aerospace surface finishing platform in North America. Existing management also invested in the company. Founded in 2013 and based in Houston, TX, the company provides surface treatments such as non-destructive testing, shot peening, chemical processing, plating, painting, and spray coating to aerospace and defense components that require complex finishing to meet engineering specifications. It currently operates eight facilities throughout the U.S. in key aerospace and defense manufacturing regions, serving over 3,000 customers and processing over 12 million individual parts annually.

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Flegg Joins T. Rowe

Jonathan Flegg (CFA) is vice-president of institutional sales at T. Rowe Price (Canada) Inc. Based in Toronto, ON, he will provide investment solutions and sales support to defined contribution consultants, brokers, and clients. Most recently, he was with CI Investments where he served as associate vice-president of asset management.

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July 9, 2019


Proposal Makes MEPs Easier

The IRS is seeking comments on a proposal that would make it easier for unrelated employers to participate in multiple employer defined contribution plans (MEPs). The proposal addresses what many consider the biggest barrier to employers joining MEPs, the risk that one employer’s non-compliance could disqualify all members. The IRS is proposing an exception to its unified plan rule, more commonly referred to as the ‘one bad apple rule’ that would allow other employers in the MEP to claim the exemption if certain conditions are met, such as the disqualifying employer being unable or unwilling to correct the problem or to provide information. The compliant employers would have to take actions to separate the assets and accounts of the disqualifying employer, under the proposed rule.

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Key Themes Outlined

Global trade tensions, private infrastructure investing, ESG investing and climate change, the credit cycle and its implications for global fixed income, select growth in emerging market equities, and liability-driven investing are key themes in Manulife Investment Management’s biannual ‘Global Intelligence’ report. “The global economy and markets continue to experience volatility and trend toward risk aversion. Despite the uncertainty and a short supply of broad-based growth, we see durable public markets opportunities in the second half of the year including global equities and emerging markets debt,” says Christopher Conkey, head of public markets at Manulife Investment Management. “At the same time, we believe investors should consider the potential benefit of longer-term investment disciplines such as liability-driven and sustainable investment strategies to ensure they are positioned in a way that may benefit their portfolios through market cycles.” Frances Donald, chief economist and head of macroeconomic strategy, says for the global economic outlook, “the fog of uncertainty has thickened.” She sees continued uncertainty as global trade tensions rise. With the escalation of a U.S. ‒ China trade war, she describes why market volatility will be front and center over the next 12 months, leading to a murky investment outlook in the short term. Emily Chew, global head of environmental, social, and governance research and integration, discusses how corporate entities, investors, and governments engage in sustainable investing as both an art and a science that should be anchored by deep climate analysis and quantifiable portfolio resilience. Daniel Janis, senior portfolio manager, says there is still room left for expansion in the credit cycle despite volatility as the risks to the corporate bond markets are mostly geopolitical in nature rather than fundamental or macroeconomic.

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Real Estate Capital Falls

Real estate capital raised by global funds fell to a five-year low to $29 billion at the end of the second quarter, from $46 billion in the first quarter and $38 billion in the second quarter of 2018, says data from Preqin. Funds focused on somewhat riskier strategies raised the most capital, with opportunistic funds gathering $10 billion in the second quarter and value-added funds raising $9 billion. Slightly more than half, 52 per cent, of real estate investors surveyed by Preqin indicated they are planning to make a single new real estate fund commitment in the next 12 months, up from 37 per cent in the second quarter of 2018. However, investors plan to commit less capital, with 54 per cent planning to commit less than $50 million, an increase from 45 per cent in the year-earlier quarter of 2018.

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Public Sector Challenges Tackled

The Canadian Public Sector Pensions and Benefits Conference tackles the unique challenges encountered by the public sector. It will feature solutions to ensure the viability of pension and health and welfare funds. It takes place September 18 to19 in Whistler, BC. For information, visit Public Sector Challenges

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July 8, 2019


Data Science Shows Promise

There’s a lot of promise in the use of data science in the investment management industry and some early successes, says Andrew Chin, chief risk officer and head of quantitative research at AB. He says they are confident that the human-plus-machine model can work and ultimately be more effective than either on its own. Most firms ‒ except for some quantitative shops ‒ are integrating the two. However, the investment management industry has to overcome hurdles to endure the coming shakeout period and survive to advance data science. Humans must be more open to machine learning and AI. Even skeptics would likely admit that these techniques are a good starting point to helping find better stocks or bonds. While there’s a long way to go before the industry truly embraces data science, “One thing is for sure: we certainly can’t ignore it altogether,” he says.

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Pension Product Benefits Asset Managers

Asset managers stand to benefit from the European commission’s proposal for a new pension product to complement public and occupational pensions, but size could be a key factor in determining where this new business goes, says Cerulli Associates. The pan-European personal pension product (PEPP) is a voluntary scheme designed to ensure adequate consumer protection while also being flexible. The PEPP regulation establishes the legal foundation for a pan-European personal pension market by ensuring standardization of core product features such as transparency requirements, investment rules, switching rights, and types of investment options. A Cerulli survey of European asset managers found that only 5.9 per cent of respondents do not believe the PEPP offers growth opportunities. When incentives are taken into account, estimates suggest that the PEPP could account for one-third of personal pension product assets under management in the EU by 2030 and that the overall market could be worth three times the €700 billion (US$788 billion) it was valued at in 2017. Passive funds are likely to be at the core of the PEPP due to the cost advantages, with active strategies and alternatives being used to add alpha or create different style tilts.

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Alternative Assets Grow

Alternative assets under administration as of December 31, 2018, totaled $10 trillion, up 18.8 per cent from the prior year, says survey from eVestment. Among different asset classes, which included private equity, hedge fund, real assets, fund of funds, and liquid alternatives, the hedge fund-of-funds segment had a particular resurgence. While hedge fund assets under administration (AUA) totaled $4.468 trillion compared with total hedge fund-of-funds assets under administration of $934 billion, median participant grew 10.99 per cent for the year ended December 31, 2019, compared with median hedge fund AUA growth of 4.13 per cent. Real assets AUA totaled $1.4 trillion with the median firm reporting growth of 20.64 per cent from the year before. Private equity and debt assets under administration totaled $3.07 trillion with the median firm reporting growth of 11.35 per cent year-over-year.

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CPPIB Sells Student Housing

The Canada Pension Plan Investment Board (CPPIB) will sell its wholly owned student accommodation business Liberty Living to the Unite Group plc (Unite Students), a public company listed on the London Stock Exchange. CPPIB will retain a 20 per cent shareholding in the combined group. On completion, the combined group will manage a total of over 73,000 beds across 173 properties in 27 UK towns and cities.

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Pair To Develop Business

Brad Moore and Gary Grondahl are directors of business development for Western Canada at ClaimsPro. They will focus on growing its business and finding opportunities to further support clients using its broad range of claims adjusting and loss services, specialty risk, and niche products. Moore joined the firm as an adjuster in 2016 while Grondahl has 25 years of business development experience.

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Food And Chronic Disease Linkages Discussed

‘No Plan Is An Island’ is the theme of the ‘2019 CPBI Atlantic Regional Conference.’ Sessions will include ‘Cut the Crap: Creating Nutritional Consciousness in the Workplace’ with Dr. Yoni Freedhoff, author of the ‘Diet Fix,’ who will explore the linkages of food with chronic disease; chronic pain, and mental health. Blair Richards, of the Halifax Port ILA/HEA, will examine the missing link between contribution levels and the benefits those contributions are expected to provide ‒ an element that isn’t often measured in terms of the adequacy of retirement income, particularly within defined contribution plan models. ‘The Psychology of Investing’ will be the focus of a talk by Darin Eddy, of the HRM Pension Plan. He will provide insight into the psychology and drivers behind making investment decisions. It takes place October 2 to 4 in Charlottetown, PE. For information, visit CPBI Atlantic

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July 5, 2019


Employers Take Steps To Support Mental Health

Employers in Canada have begun to take encouraging steps to support mental health in the workplace and will see the greatest gains with a strategy in place that addresses all stages of the mental health continuum, says Dr. Karen MacNeill, a psychologist at Copeman Healthcare. In a Telus ‘Health Benefits Hub,’ she says the “end” stage of the mental health continuum often comes to mind first when considering the impact of mental illness in the workplace, given the fact that the condition is a leading cause of short- and long-term disability claims. Moreover, both the cost and duration of disability leaves due to mental illness are generally highest. Yet it’s equally important to keep in mind that 49 per cent of depressed or anxious individuals have not sought medical care and up to two-thirds are not getting proper treatment, despite the availability of employee assistance programs in the majority of workplaces. The biggest barriers to treatment are stigma, lack of time, and long waiting lists for counselling or therapy. These individuals continue to work, at least initially, to the point that the costs of presenteeism are estimated to be three times the costs of absenteeism. During episodes of depression or anxiety, productivity can fall by more than 50 per cent per day. She says that resilience training, mindfulness, and internet-based cognitive behaviour therapy have stood the test of clinical research studies and should be considered evidence-based, proven methods to support mental health.

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Coalition Demands Improved Job Quality

A coalition of institutional investors with combined assets of more than $14 trillion is renewing its demand for companies across the world to come forward with better data on their staff and supply chain workers, with the aim improving the quality of jobs globally. Investor signatories to the Workforce Disclosure Initiative (WDI), co-ordinated by ShareAction, are asking 750 major international companies to disclose more standardized data on topics including health and safety, workers’ rights, diversity, and wage levels. Many of the world’s largest listed firms, including MasterCard, Nestlé, BHP, Toyota, HSBC, Adidas, and AT&T, have already made disclosures. Disclosers to the WDI in 2018 employ over eight million people, with millions more working in their supply chains. Many investors have drawn on WDI data to inform their company engagement, while some have started to incorporate data into stock analysis. Companies approached this year include Samsung, Walmart, Novartis, Rio Tinto, Coca Cola, Royal Bank of Canada, BP, and Siemens. Companies are selected based on their market capitalization, significance within their sector, and size of their workforce. The WDI was launched in 2017 in response to investor concerns that the quality of data from companies about workforce management is poor and inconsistent. Increasingly, investors and companies recognize the business benefits of good workforce management.

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Fiera Completes Acquisitions

Fiera Capital Corporation has completed its acquisition of all the issued and outstanding shares of Natixis Investment Managers Canada Corp. and its previously announced acquisition of Integrated Asset Management Corp. Natixis LP is based in Toronto, ON, and the value of the assets of its funds amount to approximately C$1.8 billion as at March 31, 2019. Natixis LP will continue to operate as a distinct legal entity from Fiera Capital. Natixis Corp, Natixis LP, and the Natixis Funds will be rebranded as Fiera Investments in conjunction with the closing. Fiera Capital acquired all of the outstanding common shares of Integrated.

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Navacord Acquires Benefits Consulting

Navacord Corp. acquired Edmonton, AB-based Benefits Consulting Inc., (BCI), effective July 1. Founded in 1975, BCI was one of the first benefit brokerages in Alberta and will be the dedicated benefits and retirement consulting division of Lloyd Sadd Insurance Brokers, a founding Navacord broker partner. Founded in 2014, Navacord is actively seeking to continue expansion of its group benefits and retirement consulting solution across Canada.

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Global Debt Issuance Holds Up

Global debt issuance held up in the first half, but global equity market activity dropped, says data from Refinitiv. Equity issuance fell to a three-year low in the first half, with new issue activity totalling $307.1 billion. This represented a 25 per cent decline from the same period a year ago. The volume of deals was also down 23 per cent year over year. Deal volume jumped by 39 per cent quarter over quarter and the second quarter finished as the strongest quarter in the past 12 months. On the debt side, global issuance held up much better. Global debt activity totalled $3.9 trillion during the first half, up by two per cent compared to the first half of 2018. The green bond market was particularly strong in the first half, jumping by 25 per cent from the first half of 2018 to $85.5 billion.

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CDPQ Invests In AlayaCare

The Caisse de dépôt et placement du Québec (CDPQ), Inovia Capital, and Investissement have invested in AlayaCare. It helps home and community care agencies manage all aspects of their business and operations using a single cloud-based SaaS platform. Through this platform, it improves the patient experience by facilitating client-directed care planning and by offering tools such as real-time remote monitoring; improving the caregiver experience through mobile tools that mean better preparedness for home visits and efficiency of task-management; and lower costs for organizations by streamlining billing and communications and limiting the need for expensive IT infrastructure.

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Understanding Links Examined

Cynthia Hasting-James and Susanne Cookson, from Best Life Rewarded, will speak on ‘Understanding the Links between Financial, Physical and Mental Well-Being. Catch-22 or Panacea?’ at CPBI Ontario’s ‘Links & Learn Golf Tournament.’ As program administrators, advisors, and consultants get unprecedented access to data, they will discuss the many ‘opportunities’ to mine customer trends and leverage machine learning, artificial intelligence, robo-advisors, chatbots, block chains, and social media results. It takes place July 25 in Burlington, ON. For information, visit Link & Learn

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