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November 1, 2018


CLHIA Campaign Attacks Benefits Fraud

The life and health insurance industry has stepped up its efforts in the fight against fraud by launching the ‘Fraud=Fraud’ campaign to raise the level of consumer education and awareness around health and dental benefits fraud. The Canadian Life and Health Insurance Association (CLHIA) says its goals are to help Canadians recognize fraud, understand how to avoid becoming involved in fraudulent activities, and increase awareness that fraud is a crime and, therefore, has real consequences. “Benefits fraud is far more widespread than it should be, in part because many people don’t understand that it is an actual crime,” says Stephen Frank, its president and CEO. “Most people think that, if you are caught, you would just repay the money. In fact, you could not only lose your benefits, but also your job and, in some cases, end up with a criminal record and even go to jail.” Benefits fraud occurs when an individual intentionally submits false or misleading information about the health or dental benefits they received under their employer’s benefit plan. According to a March 2018 survey conducted by Environics Research for the CLHIA, 75 per cent of Canadians incorrectly believe that the only punishment for benefits fraud is having to pay higher premiums or be forced to reimburse claim payments. Although there have been some cases where individuals did not understand that they were engaging in fraud, the industry is increasingly seeing evidence of organized crime or unscrupulous service providers getting involved and reassuring their victims that what they are doing is normal or that they are entitled to the money.

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Program Shifts Focus From Self-identifying

Employers face challenges as the world and the workplace change. However, most employee assistance programs (EAPs), which were started primarily as efforts by employers to assist employees with alcohol problems, are still focused on the treatment of those who self-identify their issues, says Rita Fridella, executive vice-president of Morneau Shepell and president of LifeWorks. Speaking at the ‘LifeWorks By Morneau Shepell’ event, she said the problem with this treatment focus is that only 10 per cent of the workplace is reached. With LifeWorks, they try to get every employee to connect. This builds workplace communities by using the desire, especially for young workers under age 35, to connect to mitigate problems. In doing so, it enables a preventive approach to their issues, dealing with them before they get serious. Communities are built where they feel they are part of something bigger than themselves. James Lee, chief design officer at LifeWorks, defined wellbeing as more than a sense of disease and infirmity. It includes physical, mental, and financial well-being as well as a connection with the workplace with the tools to get done what needs to be done. However, technology is playing a greater role. Only 15 years ago only 12 per cent of the world had internet, now over 50 per cent does and smartphones, used by 66 per cent of world population, changed everything. They “make us more productive” and have changed “how we learn, how we communicate,” he said. This means technology, with human sensitivity and a user experience that makes them want to come back, needs to be used. HR technology fails because of poor user experience, he said. Chester Elton, a workplace expert and co-author of ‘The Carrot Principle: How the Best Managers Use Recognition to Engage Their People, Retain Talent, and Accelerate Performance,’ said employee engagement is an issue. It is declining with 85 per cent of employees saying even though they are doing the job they want and in an industry they love, they are becoming are disengaged. In many cases, their manager is the source of their disengagement if they quit, it’s the manager, not the company. This means culture matters as work is no longer ‘9 to 5.’ “Work is now life and life is work” and employees can no longer leave their personal life at the door, he said. Good companies understand this and know engagement drives productivity. LifeWorks was acquired by Morneau Shepell in July. It is an employee well-being business which combines employee assistance, wellness, recognition, and incentive programs in the United States, Canada, Australia, and the United Kingdom. Its solution features an evolved employee assistance program, HR communications and community, perks and savings, rewards and recognition, and a wellness program. The ‘LifeWorks by Morneau Shepell’ session was filmed and will be available November 13 at LifeWorks

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Report Suggests Drug Cost Solutions

Plan sponsors seeking new strategies to manage drug costs should look at the Conference Board of Canada’s ‘HealthCareAware’ for some suggestions on how to do this, says an Eckler ‘GroupNews.’ The report highlights contributing factors to the final retail cost of prescription drugs, which can lead to uneven access for Canadians. These include the pharmacy markups added to the ingredient cost of a prescription medication which can vary by location; ingredient costs account for approximately three-quarters of prescription drug expenditure in Canada, while dispensing fees and markups make up the rest; and markup costs are twice as high for private drug plans as they are for public drug plans. However, when it comes to dispensing fee costs, public drug plans represent a higher proportion of Canada’s overall prescription drug expenditure than private plans, it says.

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ESG Should Be Considered, Not Mandated

The inclusion of environmental, social, and governance (ESG) factors in investment processes should be considered by institutional investors but not necessarily mandated, say CFA Institute members in Europe. It found that 85 per cent of its European respondents share this view. Further, 60 per cent of all respondents say any mandate to consider ESG factors in investment analysis should not translate into forcing the manager or investor into making an ESG investment policy.

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Alternative Investors Globalizing

Alternative assets investors are increasingly globalizing their portfolios and interest in emerging markets is growing, says Preqin. In the next five years, 46 per cent of investors plan to increase investments in China and India, while 30 per cent are planning to increase their allocations to Africa. Similarly, fund managers are increasingly looking at opportunities in emerging markets and almost half feel that emerging markets will present the best opportunities in 2023. Emerging Asia, China, India, and Africa are of particular interest, with the largest proportions of fund managers planning to increase their investments in those respective regions over the next five years.

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Retirement Confidence At Higher Level

Retirement confidence among U.S. employees and retirees vaulted in 2018 to the highest level measured by AllianceBernstein (AB) in the 13 years the investment management firm has conducted a survey of participant attitudes. It found 47 per cent said they were very confident or confident, much higher than the 32 per cent response in 2017 and well above the previous record response of 41 per cent in 2007. However, while nearly half of the respondents feel confident, that means more than half are concerned. Among the reasons cited by respondents who had low or no confidence about a comfortable retirement, 46 per cent said they needed to save more, 44 per cent said they didn’t have enough savings, and 41 per cent said Social Security won’t provide enough financial support.

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Sustainalytics Offers Sustainable Research

Sustainalytics has launched its ‘Sustainable Products Research,’ designed to identify companies that derive revenue from sustainable products and services. Investors can use this research for sustainability-themed product creation, portfolio construction and capital allocation strategies, integration of product involvement data into ESG analysis, and for client portfolio reporting. It says global initiatives such as the Paris Agreement and the Sustainable Development Goals are driving investor interest in impact investing and in allocating capital to companies that contribute to a more sustainable economy through their products and services. The research assesses the products and services of more than 10,000 companies, identifying those that derive more than five per cent of their revenue from sustainable products and services. It looks for products that are produced in a sustainable manner as well as products and services that through their use offer significant sustainability benefits.

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SSQ Invests in Fintech Fund

SSQ Insurance is investing in Portag3 Ventures II LP, the second fintech fund launched by Portag3 Ventures, a global investment platform dedicated exclusively to financial and insurance technology. It matches emerging talent and capital to create and support the ambitions of compelling fintech entrepreneurs. Strategically leveraging innovation for SSQ Insurance, it will involve identifying promising and innovative financial technology businesses in sectors as varied as personal finance, investment management, savings, life insurance, general insurance, and health insurance. It will also give SSQ the opportunity to invest directly in technology associated with its products and services as well as the potential needs of its clients.

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Actively Managed ETFs Reach New High

Actively managed ETFs and ETPs listed globally reached a new high of US$106 billion, following net inflows of US$2.96 billion and market moves during September, says ETFGI. August trends continued, with actively managed ETFs/ETPs in North America attracting net inflows, while actively managed ETFs/ETPs in Europe saw net outflows. During the month, assets invested in actively managed ETFs/ETPs listed globally increased by 1.4 per cent from $104 billion in August 2018 to $106 billion.

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Caisse Acquires Osisko Shares

la Caisse de dépôt et placement du Québec will acquire, by private placement, approximately 9.6 million common shares of Osisko Mining Inc. “This investment by la Caisse provides meaningful support for the continued development of our Windfall gold project in Québec,” says John Burzynski, president and chief executive officer of Osisko. Windfall Lake is a high-grade gold mine that was acquired by Osisko in August 2015 from by Eagle Hill Exploration. The mine is located approximately 200 kilometres northeast of the city of Val-d’Or in northern Quebec.

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Mercer Leadership Changes

Louis Gagnon is U.S. and Canada region president and Jaqui Parchment will replace him as CEO for Canada at Mercer. As region president, Gagnon will focus on driving innovation and accelerated growth in the region. Parchment will focus on driving client value and leading the go-to-market strategy in Canada, one of Mercer’s largest geographies.

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Program Goes Beyond Basics

The CPBI Saskatchewan Region’s ‘Benefits, Beyond the Basics’ program addresses in-depth aspects, current trends, and emerging issues for group benefits plans. Topics include roles and responsibilities, claims administration, flexible benefits, funding, emerging issues, and total compensation/total rewards. It takes place December 4 and 5 in Saskatoon, SK. For information, visit Benefits Basics

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October 31, 2018


Strategies Keep Pace With Global Change

The Canada Pension Plan Investment Board (CPPIB) is taking action to ensure its investing strategies keep pace with global change, says Mark Machin, its president and CEO. Speaking at the ‘Fortune Global Forum,’ he said it has created a dedicated group called ‘Thematic Investing’ which identifies sources of structural growth or disruption – including innovations in technology, business models, and demographics. The group focuses on six major themes – aging, growth in peak spenders (particularly millennials), growth in both retiree and middle-class populations in China and India, data and analytics, automobility, and energy disruption. eCommerce, which Machin calls the most significant consumer trend of the past 15 years, gets close attention since it intersects with both CPPIB’s retail real estate holdings and its more recent investments in logistics centres and delivery companies that support eTailers. To keep pace with opportunities, he said institutional investors must widen their lens on emerging markets, particularly in the Asia-Pacific region.

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PE Shareholders Work To Create Value

Private equity (PE) outperforms public markets because the shareholders work with the company to create value, says Bon French, chairman of Adams Street Partners. Speaking on ‘Global Private Equity and Debt’ at CI Institutional’s Insights Event: A Global Perspective on Private & Public Markets.’ He said it and venture capital are amongst the highest risk asset classes. In venture capital, the loss rate is 45 per cent with a 23 per cent loss rate in private equity buy outs. But these portfolios have had huge winners which make up for the losses and, on a macro level, they might be safer than public equities. There are a number of different ways to access private equity from buyouts which account for about half of these investments to secondaries where a stake acquired from existing limited partners, and growth equity that targets profitable, but still maturing companies with a significant scope for growth. He said there is a huge alignment of interest between management of the company and shareholders which explains the consistent outperformance. They consistently return 11 per cent compared to seven per cent for public markets and these returns are very stable with no cyclicality and a similar risk profile to public equities.

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Initiative Challenges Companies On Climate Lobbying

Institutional investors are challenging 55 large European companies on their approach to climate lobbying. The Church of England Pensions Board (CoEPB) and Swedish national pension fund AP7 are at the head of the initiative targeting firms including BP, Rio Tinto, and Volkswagen. They say their action aims to clarify lobbying positions by the companies in response to the recent IPCC special report that predicted the world is heading towards warming of 3°C. Each of the 55 companies is described as a high-emitter of greenhouse gasses and playing significant roles in energy-intensive sectors. Currently, the investors, with a collective $2 trillion of assets under management, are involved in an initial letter-writing campaign, but they may register shareholder resolutions. Three key financial risks identified by the group are regulatory risks if action delayed now leads to stronger regulatory interventions and higher costs later; systemic economic risks posed by climate change that introduces uncertainty and volatility into investor portfolios; and reputational and legal risks.

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Markets Still Adjusting To Post-crisis

The central theme for markets in 2018 is adjusting to the postcrisis monetary policy regime, says Eric Bushell, CIO of Signature Global Asset Management. In his ‘State of the Public Market’ address at ‘CI Institutional’s Insights Event: A Global Perspective on Private & Public Markets,’ he said exiting the crisis was done through markets using measures like quantitative easing, negative interest rates, asset purchases by central banks to reduce to volatility, and incentives to create movement into riskier assets to restore confidence. And it has worked as global growth looks good although it is slowing down. Still, investors will be living with the post crisis for a few more decades and they have to aware of and thinking about future storms to make better judgments because stability breeds instability. Changes are taking place, however. The preference for private assets is weakening public capital markets today and broker/dealers are going out of business because there is no money in research today with the buyside taking down sellside research by about 40 per cent. And the shift to passive is forcing asset managers to consolidate on the buyside globally so there are fewer doors to knock on. Still, markets aren’t totally out to lunch, he said. They are working well and making sense.

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Income Inequality Noteworthy Issue

Institutional investors are increasingly realizing that income inequality ‒ the gap in income and wealth between the very affluent and the rest of society ‒ has become one of the most noteworthy socioeconomic issues of these times, says a report from the Investment Integration Project (TIIP). Released at the GIIN Investors Forum, it says the effects for investors of a massive income gap are a negative impact on long-term investment performance; a change in the risks and opportunities that affect the universe of investment opportunities; and destabilization of the financial and social systems within which investors operate. All of these risks threaten portfolios and bottom lines, but what has been less clear is how institutional investors can manage these risks. Recognizing this challenge, some investors are turning their attention to integrating considerations related to income inequality into their investment decision-making. It identifies employee relations and the structure of labour markets; corporate tax policies and practices; and levels of CEO compensation as among the causes of the gap.

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Process For Engaging With Marketplace Needed

To maintain accurate benchmarks, it is not just important to focus on the details of index construction, but equally important to have a robust and transparent process for engaging with the marketplace, says Marina Mets, managing director, FTSE Russell Canada in the article ‘Consulting Market Stakeholders to Ensure Benchmarks Continue to be Representative’ at the Benefits and Pensions Monitor website. In equity indexes, the market capitalization of an issuer (such as large, small, or microcap) determines its relevant index eligibility. For fixed income benchmarks, a bond’s amount outstanding is one of the key characteristics used to determine index eligibility while serving as a transparent proxy for liquidity. As capital markets evolve and issuance patterns change, it is important to constantly review index eligibility thresholds to ensure the benchmark accurately reflects and tracks the market it is intended to represent.

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Population Drives Infrastructure Growth

Population and GDP are driving the growth of infrastructure and institutional investors are increasingly attracted by its long-term nature and potential for inflation projection, says David Altshuler, executive director, global relationship group, at IFM Investors. He told theGlobal Private Infrastructure’ session at ‘CI Institutional’s Insights Event: A Global Perspective on Private & Public Markets’ that it is not a homogenous asset class. There are many different flavours to access each with its own unique characteristics. Infrastructure refers to physical structures and networks that provide services that are critical to a community and economy. Typically, they are essential services with high barriers to entry and predictable cash flows. However, for investors, they are also diversifiers because of their lower risk and predictable income streams as well as lower correlations to equities and fixed income and strong inflation protection due to contracts and regulations. When looking at an infrastructure manager’s strategy, investors need to evaluate the project stage, the political risk, and the use of leverage with the underlying portfolio assets. However, investors should be aware of liquidity issues as these are long term investments. There are also political, regulatory, currency, and operational risk; higher management fees; and performance measurement can be difficult as there is no index or consensus on the best methods to determine their performance.

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Flexible Work Contributes To Economy

A predicted boom in flexible working could contribute $369 billion to the Canadian economy and $10.04 trillion to the global economy by 2030, says an analysis commissioned by Regus. It found that there will be a 59 per cent growth in the number of jobs associated with flexible workspaces by 2030 which represents 11.7 per cent of all employment in Canada. Greater levels of flexible working will save businesses money, reduce operating costs, and boost productivity, ultimately causing a ripple effect across the economy from core businesses through to supply chains. The specific benefits include higher business and personal productivity, lower overheads for office space for companies using flexible workspace, and millions of hours saved commuting. The industries in Canada projected to grow the most from flexible workspace by 2030 are professional services (21.2 per cent), business support services (20.8 per cent), public administration (17.7 per cent), and information and communication (8.9 per cent). It also found that flexible working doesn’t just benefit economies, it also helps individuals. Remote workers are almost twice as likely to say they love their job as those in the same industry working in a traditional workspace.

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Real Estate Volume Decelerating

Real estate transactions volumes have been high in recent years, but global transaction volume is decelerating from a high level, says Dr. Ivo de Wit, of CBRE Global Investment Partners, In the ‘Global Private Real Estate’ session at ‘CI Institutional’s Insights Event: A Global Perspective on Private & Public Markets,’ he said the economic growth outlook has not changed much since forecasts from mid-2017 forecasts. Growth rates should be close to average in most countries and GDP does drive real estate. However, eCommerce is having an impact on real estate, he said. It is driving a demand for large modern logistics facilities and it is putting retail space under pressure.

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ETFs Widen Lead Over Hedge Funds

Assets under management in exchange-traded funds (ETFs) and similar products stood at $4.99 trillion at the end of the second quarter, says ETFGI, widening its lead over the hedge fund industry for assets under management (AUM). The gap between them was $1.75 trillion. Asset growth in ETPs was 1.36 per cent over the quarter, while hedge funds globally grew by 0.65 per cent, ETFGI reported. Growth in assets in the ETF/ETP industry has outpaced growth in the hedge fund industry since the financial crisis in 2008.

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OPTrust Invests In Reducing Fossil Fuel Use

OPTrust has invested alongside UK-based private equity firm Three Hills Capital Partners collectively over €60 million into ACT Commodities. This is a Netherlands-based firm that specializes in trading environmental commodities related to incentive schemes focused on reducing the use of fossil fuels and emission of greenhouse gasses. This investment builds on the OPTrust’s investment experience in renewable power and green real estate. “As a long-term investor, our role is to look far ahead at not only challenges, but also opportunities that could affect our members and their retirement security,” says Hugh O’Reilly, OPTrust’s president and CEO. “The transition to a carbon-neutral economy will be increasingly disruptive and we believe this market will grow exponentially with the progressive long-term shift towards clean energy.”

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Three Have New Roles

Gillian Brown is senior managing director, capital markets, at the Ontario Teachers’ Pension Plan (Ontario Teachers’). An industry veteran with more than 20 years of experience in equity and derivatives investment management, she has held progressively senior roles since joining Ontario Teachers’ in 1995, most recently as managing director for credit, insurance linked securities, and equity products. Danilo Simonelli is managing director, alternative investments. He joined Ontario Teachers’ in 2005 and has held several key roles within the capital markets team. Most recently, he oversaw the growth and concentration of its external manager platform in support of capital markets and total fund objectives. Saurabh Rastogi is managing director, liquidity and counterparty credit risk management. He has extensive experience in treasury and liquidity management functions and is responsible for overseeing the plan’s counterparty credit risks.

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Current State Of Real Estate Covered

The CAIA Vancouver is partnering with CAASA to host the ‘2018 Real Estate Forum.’ Dr. Andrey Pavlov (SFU) and Dr. Yuming Fu (National University of Singapore) will cover the current state of the market, recent changes, and global forces shaping the industry. Professionals from QuadReal, Bentall Kennedy, and CI Investments will join the forum’s investment panel. It takes place November 22 in Vancouver, BC. For information, visit Real Estate Forum

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October 30, 2018


Initiative Supports Women Entrepreneurs

La Caisse de dépôt et placement du Québec has launched an initiative to accelerate the growth of companies owned by women. ‘Cheffes de file’ will invite selected women entrepreneurs from Québec’s various regions who distinguish themselves through their achievements and leadership and who are at the head of strong and promising companies. It will include around 50 women who are decision-makers and shareholders of companies with sales ranging from $5 to $20 million. The initiative focuses on co-development and sharing best practices among women entrepreneurs who share similar realities and objectives. The goal is to enhance their strategic thinking, allowing them to take advantage of growth levers available to them and create value within their companies. “At la Caisse, we have the strong conviction that, to generate wealth, Québec’s companies need to pursue efforts to grow and globalize and that we need even more women heading promising companies. In the last few months, we have taken the pulse of women entrepreneurs’ needs and challenges. They clearly expressed a desire to be provided with content, to have access to experts and to share best practices in order to accelerate their companies’ growth,” says Michèle Boisvert, executive vice-president, business outreach, at la Caisse.

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Largest Managers’ AUM Grew In 2017

Total assets under management (AUM) of the world’s largest 500 managers grew to US$93.8 trillion in 2017, representing a rise of 15.6 per cent on the previous year, says the latest Global 500 research from Willis Towers Watson’s Thinking Ahead Institute. In addition, the concentration of assets managed by the 20 largest managers reached the highest level since inception (in 2000) and now account for over 43 per cent of the top 500 managers’ total AUM. North America-based managers represent the majority of assets (58.1 per cent), although their share fell slightly in 2017, the first fall since 2008. European managers represent 31.8 per cent of assets managed (the UK being 7.4 per cent), Japan 4.8 per cent, and the rest of the world 5.2 per cent. Assets in each region grew in 2017. While the majority of total assets (77.6 per cent) are still managed actively, the share of passive assets has grown from 19.5 per cent to 22.4 per cent in the last five years. In 2017, passive assets grew 25 per cent. In an indication of future areas of focus, more than four out of five (81 per cent) of managers surveyed reported an increase in client interest in sustainable investing, including voting, while nearly three-quarters (74 per cent) increased resources deployed to deal with technology and big data. Nearly two-thirds of firms surveyed had increased the number of product offerings during 2017, while 60 per cent reported an increase in the level of regulatory oversight according to the research.

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Prosecution Would Curb Fraud

Protecting investors in blockchain and cryptocurrencies from fraud means the culprits need to be prosecuted, says Amber D. Scott, founder and CEO of Outlier. Speaking at the Canadian Association of Alternative Strategies & Assets and Blockchain Ambassador ‘Northern Exposure Event: AML & Blockchain,’ Charlene Cieslik, chief anti-money laundering officer at Coinsquare Canada, agreed saying Canada has nothing in place to prosecute those who commit fraud. With enough participants, blockchain itself can prevent fraud, said Jai Waterman, CTO and co-founder of Blockstation. He said the blockchain s not just one ledger keeping track of information, it is kept by everyone in the chain and updated by everyone whenever information is added. Since there needs to be consensus, even if someone tries to attack it, the information cannot be changed. One concern with blockchain and cryptocurrencies is AML (anti-money laundering). Current regulations are not that different than for other sectors of financial markets, said Cieslik, and can be “lazy” with the phrase “and cryptocurrencies” simply added to existing regulations. Those in the area need to know who they are doing with business, have a money laundering officer, and develop and follow their policies. Scott suggested firms look to the traditional banking system to find compliance or AML officers and then train them as they will have an understanding of what is needed and can learn about blockchain and cryptocurrency. Aaron Grinhaus, a lawyer and blockchain consultant, with Grinhaus Law Firm, also suggested they get good legal advice as a number of regulators are requiring information in the space and providers need to cover all the bases. Richard Carleton, CEO of the Canadian Securities Exchange, said he is excited about this space as it will create new investment products and change the process. Blockchain could eliminate a requirement that firms back transactions with money under T+2 settlement. With blockchain, these will be settled immediately, freeing up capital. Waterman said it will make audits easier and less expensive as transactions will be recorded by both vendors and customers. However, Scott warned while there are a lot of ideas out there, many are complete nonsense. The ones with merit, she said, are one which are used to build trust between parties.

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Living Longer Comes with Concerns

Of Canadians aged 55 and over, more than half report that living longer comes with increasing concerns on health and caring for the aging population, says a BMO Wealth Management report. ‘The Aging Economy: Improving with Age’ reveals that living longer has not changed the number of years spent in retirement because Canadians are extending their working years. It shows 51 per cent of respondents are concerned about the health problems and costs that come with living longer, 40 per cent are worried about becoming a burden on their families, and 47 per cent are afraid of running out of money. As well, 25 per cent were concerned about maximizing their retirement income, followed by 22 per cent who expressed concerns about outliving their savings and investments.

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USW Supports Protection Of Pensions

Members of the United Steelworkers union (USW) will spend the next two weeks on Parliament Hill in Ottawa, ON, to urge MPs from all parties to support legislation to protect workers’ pensions and benefits in cases of corporate bankruptcy and insolvency. They will also be meeting with MPs to support new legislation aimed at reforming the Companies’ Creditors Arrangement Act (CCAA) and the Bankruptcy and Insolvency Act (BIA). Bills have been introduced that would give priority to claims by workers arising out of underfunded pension plans and elimination of benefits in bankruptcy and insolvency cases. Currently, workers and retirees are considered unsecured creditors in bankruptcy and insolvency cases and they only receive pennies on the dollar for monies they are owed. “Workers and pensioners need to be treated as preferred creditors in bankruptcy cases,” says Nicolas Lapierre, USW co-ordinator in Quebec’s North Shore region. “It doesn’t make sense for banks and other financial institutions to take precedence over men and women who have worked their entire lives to earn their pensions and benefits. Politicians can make a fundamental difference in the lives of people who are being betrayed because our bankruptcy laws do not protect them.”

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Pooled Funds See Mixed Returns

Diversified pooled fund managers posted a median return of 0.4 per cent before management fees for the third quarter of 2018, says Morneau Shepell’s ‘Performance Universe of Pension Managers’ Pooled Funds.’ “Global stock markets delivered mixed returns in the third quarter with U.S. equities outperforming other major markets, with returns of 5.7 per cent in Canadian dollars for the S&P 500. It was a negative quarter for emerging market equities, returning negative 2.7 per cent in Canadian dollars, and Canadian equities, returning negative 0.6 per cent. Bond returns in Canada were also negative in the third quarter, at about negative one per cent for the market as a whole,” says Jean Bergeron, vice-president responsible for the Morneau Shepell asset and risk management consulting team. “Although asset returns were negative, the decrease in actuarial liability was larger. Pension fund financial positions on a solvency basis thus improved for the third quarter of 2018. The solvency ratio for an average pension plan has improved by about 0.5 to two per cent since the beginning of the quarter.” On average, diversified pooled fund managers obtained a median return of 0.4 per cent, during the quarter which was 0.6 per cent higher than the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) used by many pension funds return. In the third quarter of 2018, managers obtained a median return of negative 0.8 per cent on bonds (Universe mandate), which was 0.2 per cent higher than the benchmark index. During the same period, long-term bonds posted a return of negative 2.4 per cent, while the return for medium-term bonds was negative 0.8 per cent and for short-term bonds was zero. High-yield bonds posted one per cent, while real return bonds provided a negative 2.2 per cent return.

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MyAbilities Partners With Law Firm

MyAbilities, a provider of human asset management, has entered a client partnership with Gardiner Roberts LLP. Offering ergonomic solutions and risk prevention services through a digital platform, its software will serve 65 lawyers and over 150 law clerks and support staff within the organization. The software allows employers to create and organize custom job requirement profiles in a digital format.

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Crawford Launches Campaign

Crawford & Company (Canada), Inc., a provider of claims and risk management solutions, has launched a campaign to provide additional information on its human risk service solutions. Through its ‘Many Faces of Crawford’ campaign, it will focus on its employee absence management and health and safety service solutions. The division focuses solely on helping employees who are experiencing illness, injury, or disability to obtain the best course of treatment, restoring them to a healthy, back-to-work state as quickly as possible and saving the employer and employee lost time and money.

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First Block Appoints RBC As Custodian

RBC Investor & Treasury Services has been appointed custodian by First Block Capital Inc. on its new actively managed FBC Distributed Ledger Technology Adopters ETF, which launched on October 11. It will also provide fund valuation, ETF administration, and tax reporting services.

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Pontillo Leads Finance

Lucas Pontillo is executive vice-president and global chief financial officer at Fiera Capital Corporation. He will lead its finance function and drive core strategic initiatives to advance its recently announced 2022 strategic plan. In his most recent role, he was chief operating officer for Manulife Asset Management Canada. He takes over from John Valentini, who has served as the firm’s chief financial officer since September 2015. Valentini will focus on his role of president and chief executive officer of Fiera Private Alternative Investments.

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Passive Investing Views Presented

‘The Promise & Perils of Passive Investing’ will be the focus of a ‘Capital Markets Institute at Rotman Speaker Series’ session. Speakers are Susan Christoffersen, vice-dean, undergraduate and specialized programs, and William A. Downe BMO Chair in Finance at the Rotman School of Management, University of Toronto; Pedro Matos, John G. Macfarlane Family Chair and professor of business administration at the Darden School of Business, University of Virginia; Mikhail (Mike) Simutin, associate professor of finance and associate director of the International Centre for Pension Management, Rotman School of Management; and Alan Green, director and head of iShares Capital Markets at BlackRock Canada. They will present a broad unbiased view of active investing; including a summary of current research, the role for passive investing, benefits and risks of passive investing, and provide background and discussion on the validity of the common ownership issue. It takes place November 20 in Toronto, ON. For information, visit Passive Investing

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October 29, 2018


CPPIB Wants More Action On Diversity

While there’s much talk about companies bringing broader perspectives to the boardroom, the Canada Pension Plan Investment Board (CPPIB) says it’s not consistently accompanied by action. Mark Machin, its CEO, believes it’s crucial for companies “in which we invest capital to assemble boards that reflect the full range of talent available.” It is committed to urging those companies to rigorously evaluate their directors, including their gender makeup, as it believes companies with diverse boards are more likely to achieve superior financial performance. Research from Credit Suisse and Catalyst Inc. has shown that companies with higher female representation have delivered higher returns. That’s why CPPIB’s sustainable investing team this past year added board effectiveness as a fifth area of focus, joining climate change, water, human rights, and executive compensation. “The choice was natural,” he says, “since we see effective boards as critical to the sustainability of our investee companies’ value and are using our voting power to influence boards. 

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DB Plans Give Back Gains

Investment returns for Canadian defined benefit plans were flat in the third quarter, giving back gains made in the first two quarters of 2018, says data from the Northern Trust Canada Universe. “The median Canadian plan returned -0.1 per cent for the third quarter, marking the first time pension quarterly returns slipped into negative territory in 2018,” says Arti Sharma, president and CEO of Northern Trust Canada. “Global markets presented a mixed picture in the quarter, as U.S. equities reached new highs while non-U.S. equity markets lagged on the backdrop of uncertainty over the NAFTA negotiations, Europe’s political environment, U.S.-China trade tensions, and a stronger U.S. dollar. Year-to-date, Canadian pension plans returned 3.1 per cent compared to 4.4 per cent over the same period in 2017.” Canadian equities as measured by the S&P TSX Composite Index returned -0.6 per cent in the third quarter, a modest loss overall. Six of the 11 GICs sectors closed the quarter positively with healthcare stocks soaring on the strength of cannabis stocks. The Canadian fixed income market as measured by the FTSE Canada Universe lost one per cent in the third quarter. The underperformance in the Canadian bond market was attributed to duration with long-term bonds displaying weaker performance for the quarter.

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Finances Increase Stress

Canadians are experiencing increased stress levels caused by mounting financial pressures with 44 per cent believing their financial situation negatively impacts their mental health, says a survey by Capital One Canada (Capital One) and Credit Canada Debt Solutions (Credit Canada). To help Canadians address those concerns, they have announced that this year’s ‘Credit Education Week,’ taking place nationally from November 13 to 16, will focus on the theme of #MoneyMindfulness. The event will aim to educate and empower Canadians with knowledge and tools to help mitigate financial stress. The ‘#MoneyMindfulness’ survey shows 30 per cent of Canadians cite financial stress as a larger worry than their overall health. Additionally, on average, they say they spend seven hours per week worrying about their finances – meaning the average Canadian is wasting 365 hours per year. However, what’s even more concerning is that those who cite financial stress as their largest day-to-day worry spend on average 16 hours a week stressing about it, amounting to 832 hours of lost time per year. “These results demonstrate that most Canadians worry about their finances every day for about an hour, which is equivalent to the amount of time we spend eating,” says Laurie Campbell, Credit Canada’s CEO. “But worrying doesn’t solve anything. The only way to deal with financial stress is through education, sound money management, and using the financial tools that are readily available – that’s what Credit Education Week is all about.” 

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Impatience Predicts Retirement Saving

A measure of impatience is a strong predictor of retirement saving and investment in health. And while financial literacy is also correlated with accumulated retirement saving, it appears to be a weaker predictor of sensitivity to framing in investment decisions, says a pension research council working paper from the Wharton School at the University of Pennsylvania researchers used experimental evidence derived from the 2009 Chilean Encuesta de Protección Social (EPS or Social Protection Survey) to evaluate how financial literacy and impatience predict saving decisions and investment in health. The researchers administered a battery of financial literacy questions from which they developed a literacy index which can be used as a predictor of retirement saving and other key outcomes. Second, they implemented an experiment in which respondents could fill out a questionnaire immediately and hand it in for a gift card or fill it out later, mail it in, and receive a gift card for a higher amount. Those who chose to immediately turn in the gift card also had less saving. Those with higher financial literacy scores were also more likely to have higher saving accumulations. Comparing the impact of financial literacy versus choosing ‘now’ versus ‘later’ for the gift card found impatience lowers saving by as much as 2.5 points in the financial literacy score. “In other words, this provides support for the hypothesis that both financial literacy and short-run impatience play important roles in determining retirement saving, even after controlling for education and income,” it says. The results imply that it may be useful to facilitate decision-making, particularly among the less-educated, as well as to facilitate people committing to and carrying out long-term financial decisions.

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Pension Buy Back Rejected

A bid by a former Nortel Networks employee to buy back his pension at the 2011 value has been rejected by a federal court, says a Blakes’ ‘Pension Newsletter.’ In Proulx v. Canada (Attorney General), 2018 FC 761, the former employee was entitled to a lump sum payment from the Nortel pension plan. However, Nortel became insolvent and the pension money was frozen until the wind up was completed in December 2016. The employee found employment with the federal public service and was given the option to pay a sum of money into a Public Service Superannuation Plan (PSSP). He requested to buy back his Nortel pension for the PSSP, but was advised that he was not permitted to do so until he was able to surrender his Nortel pension entitlement. In November 2016, he was informed that the cost of buying back his pension had increased substantially. He asked the pension director to validate his 2011 election so he could buy back his pension at the 2011 amount, but this was refused. The court held that the buy back application failed at every precondition because an “election” was not made in 2011. In 2011, the employee had given no evidence that he was ready to purchase the buy-back. Therefore, he was only capable of making an election when his Nortel pension was released in 2016.

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Ryan Labs Signs PRI

Ryan Labs Asset Management Inc. (Ryan Labs), a Sun Life Investment Management company, has become a signatory of the Principles for Responsible Investment (PRI), an independent network of investors supported by the United Nations. The PRI is the world’s leading proponent of responsible investing and works to help its members understand the implications of environmental, social, and governance (ESG) factors when investing in new assets. It is committed to sustainable investing practices, encouraging investors to use responsible investment to enhance returns and better manage risks.

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Franklin Acquires Benefit Street

Franklin Resources, Inc., a global investment management organization operating as Franklin Templeton Investments, will acquire Benefit Street Partners L.L.C. (BSP), an alternative credit manager with approximately $26 billion in assets under management as of September 30. The acquisition will bolster its alternative offerings and expand its fixed income capabilities to include an array of alternative credit strategies, at a time when investors are increasingly allocating capital to less liquid and higher yielding credit opportunities. The percentage of institutional investors expected to allocate to alternative credit for the long term is substantial, it says. Established in 2008, BSP offers a broad spectrum of investment capabilities covering corporate performing and distressed private credit, structured credit, and commercial real estate credit.

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Blythe Joins St. Joseph’s Guelph

Laura Blythe is vice-president, people and strategy, at St. Joseph’s Health Centre Guelph. She joins the centre from the Workplace Safety and Insurance Board where she was, most recently, director of HR strategy, governance and talent programs.

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Digital Trends Discussed

The CPBI Saskatchewan Region will examine ‘Digital Trends and DC Plan Member Engagement.’ Cheryl Shea, a senior investment consultant at Mercer Canada, will discuss how plan sponsors and record keepers are using digital media to engage plan members and make it easier for them to take an active role in managing their accounts. It takes place November 14 in Saskatoon, SK. For information, visit Digital Saskatoon. It will be held November 15 in Regina. Information is at Digital Regina

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October 26, 2018


Organization Will Learn If They Are Prepared For Cannabis

The adjustment period of cannabis legalization has begun so now is the time that organizations will learn if they are prepared to handle the impact of legal recreational cannabis and its impact on the workplace, says a report by Morneau Shepell. In ‘The legalization of cannabis: impact for the workplace, it makes recommendations for a strategic approach that organizations should consider when dealing with use of the substance in the workplace in a way that ensures employee safety and avoids infringing on individual liberties. The study found that workplace demographics, such as age and gender, could play a role in determining how proactive an organization should be in addressing cannabis in the workplace. Cannabis use decreases with age; women were less likely to use than men; managers were equally likely to use cannabis when compared to employees; and use was most prevalent in British Columbia and least prevalent in Quebec. Effectively managing cannabis use in the workplace goes further than simply introducing a new policy, it requires employers to develop and implement a comprehensive cannabis strategy. The report says that employers should look beyond simply adding cannabis to existing substance policies, such as alcohol and medicinal cannabis, to focusing on communication and training as well as employee support. Considerations should include recognition that a substance abuse policy might not be appropriate for cannabis as tetrahydrocannabinol (THC) can be present in the bloodstream for long periods of time without causing impairment. As well, they should provide education and communication and align policies with the company’s accommodation approach, differentiating between medicinal and recreational cannabis use.

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Institutional Lens Focus Somewhat Narrow

The institutional investor’s lens has been somewhat narrowly focused on the tech sector itself and venture capital-backed startups, says a PGIM white paper, and it believes they “should broaden their aperture and view technological change across at least three dimensions.” These include the “macroeconomic implications” of more rapid technological change. While a boost in productivity is coming, there is an inevitable lag between technological innovation and the spread of tech-enabled productivity improvements to a wide number of firms. This lag has been exacerbated in this technology cycle by the fact that several near-term technological benefits are being captured by a few “winner take all” firms. “Industry implications” is another consideration since technological change is impacting companies far beyond the formal IT sector itself. It suggests technological disruption may pose risks to investors’ portfolios, but it also opens a new set of investment opportunities.

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Alberta Moves To Jointly Managed Plans

The announcement that Alberta public sector pension plans will be jointly managed between workers and government is great news for the health of these plans, says Marle Roberts, CUPE Alberta president, The Alberta government will introduce legislation in the fall to make public pension plans jointly trusteed, meaning they will be governed by a board of employee and employer representatives. Changes to pension plans will have to be negotiated and agreed to by both sides. Roberts said the changes mean workers will have a say over how their pensions are managed. Alberta is one of the only provinces without jointly trusteed plans. “Other provinces made this move long ago and it resulted in healthier pension plans,” she says. “Employees have skin in the game, so it makes sense to let us be a part of how the plans are managed. It’s in our interests for the plans to be healthy.”

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Financial Advisor Provides False Assurances

An overwhelming majority of Ontarians wrongly believe that the title ‘financial advisor’ is currently regulated and requires some form of accreditation, similar to lawyers, doctors, or other professionals, says a survey by Advocis, the Financial Advisors Association of Canada. With this false assurance, investors are at significant risk of not only receiving poor advice, but also falling victim to unscrupulous actors posing as legitimate advisors. Although a license is required to sell financial products in Canada, there is no minimum education requirement to provide financial advice. Yet, only 24 per cent of respondents are aware that anyone, regardless of education, training, or membership in a professional governing body, can legally call themselves a financial advisor. The research also found that younger people (ages 18 to 30) and those with lower incomes, who arguably need sound financial advice most, place the highest levels of trust in the financial advisor title. “For years, we’ve recognized the dangers that lack of title protection presents for the financial wellbeing of hard-working families seeking professional financial advice, says Advocis CEO and president, Greg Pollock. “This survey proves there is a tremendous amount of misplaced trust in the market and reinforces just how badly new regulations are needed to protect the public.” The survey shows 91 per cent of those surveyed would support the provincial government passing new legislation to regulate the title of ‘financial advisor’ and 80 per cent felt all financial advisors should be subject to a mandatory code of professional conduct.

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Perks Employees Want Not Offered

Companies today use extras to attract and retain top talent, but they may not be offering the perks employees want most. Research from Robert Half found flexible work schedules, a compressed work week, and the ability to telecommute are the most sought-after non-monetary perquisites. However, while many companies offer flexible work schedules, fewer than one in five offer shorter work weeks or remote work options. There was less of a disconnect when it came to monetary incentives: 44 per cent of employers surveyed said they offer annual or biannual bonuses to employees. Workers surveyed said bonuses were their most desired incentive (77 per cent) when considering job offers. Profit-sharing plans and sign-on bonuses are also highly sought (tied at 49 per cent), though only 33 per cent and 19 per cent of employers, respectively, offer these types of rewards. Benefits can also play a significant role in attracting and retaining talent and most companies are offering the two most wanted employee benefits: extended health insurance (88 per cent) and paid time off including vacation, sick days, and paid holidays (80 per cent).

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Administrators Have Problems With Form 7

While more than 99 per cent of plan administrators were aware of the requirement to complete Form 7 – Contribution Reporting & Monitoring Process, the Financial Services Commission of Ontario (FSCO) has found a number of problems with the quality of the reporting. As a result of this, it is reminding plan administrators to use the updated Form 7 which is available on its website; review the user guide to ensure that they understand the process, timelines, and responsibilities; resolve any issues brought to their attention by the pension fund trustee quickly and effectively; file all up-to-date plan documentation with FSCO including plan amendments, collective agreements, and contact information; and respond to inquiries and requests from FSCO by the due date. The review of 168 defined benefit and 75 defined contribution plans (DB included some combination plans) was to determine whether administrators are completing Form 7 correctly and if pension fund trustees are reporting non-remittances and/or variances.

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War For Talent Changing Total Rewards

As the war for talent in today’s tightening labour market intensifies, a majority of U.S. employers are taking steps to modernize their total rewards programs, says a survey by Willis Towers Watson. Total rewards programs typically include tools employers use to attract, retain, and engage employees including compensation, health, and wellbeing programs, retirement and financial benefits, flexible work programs, recognition programs, learning and development opportunities, and career opportunities. Its survey found less than half of employers (49 per cent) understand which total rewards offerings their current employees value. Even fewer respondents (47 per cent) know which components potential candidates value. Nearly two-thirds of employers (66 per cent) have made at least one change to their total rewards program. Of those who haven’t, two out of three are considering doing so this year, with the other third considering changes over the next three years. These changes include providing more flexibility with regard to benefits, working arrangements, career options; changes to help promote employee wellbeing over the next three years; and improved personalized communications and technology to administer benefits

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Consultation Planned On DC Climate Change

The UK’s Financial Conduct Authority (FCA) has reiterated plans to consult on climate change-related rules for contract-based defined contribution pension schemes in the first quarter of 2019. The rule changes would require independent governance committees (IGCs) to report their firms’ policies on evaluating environmental, social, and corporate governance (ESG) considerations, including climate change; how they took account of members’ ethical and other concerns; and stewardship. It also plans guidance to clarify how providers should consider financial factors – such as ESG and climate change risks and opportunities – and non-financial factors, such as responding to members’ ethical concerns when making investment decisions. (Benefits and Pensions Monitor’s November issue will feature the annual report and directory on Socially Responsible Investing and ESG).

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Five Named To Hall

Five leaders have been inducted into the ‘Investment Industry Hall of Fame.’ The five are being recognized for distinguishing themselves through their talent, leadership, and integrity in Canada’s investment industry. Ian Russell, IIAC president and CEO, says, “Each one is a trailblazer whose contributions to the industry, the country, and their communities have set them apart.” The 2018 inductees are Jean-Guy Desjardins, chair of the board and CEO at Fiera Capital Corporation; Robert (Bob) Dorrance, chairman, CEO, and president of TD Securities Inc. and group head, wholesale banking for TD Bank Group; Monique F. Leroux, former president of Desjardins Group, chair of the board at Investissement Quebec, and vice-chair of the board for Fiera Holdings Inc.; Gordon F. Cheesbrough, former chairman and CEO of Scotia Capital Inc.; and Bob Hager, founding partner of Phillips, Hager & North. Cheesbrough and Hager are being recognized posthumously.

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OTC For Bitcoin Launched

Shakepay, a platform for Canadians to buy and sell digital currencies, has launched an over-the-counter (OTC) trading desk to service high net-worth individuals, businesses, and institutions in Canada. It offers large value trading of bitcoin (BTC) and ethereum (ETH) and guarantees settlement in one business day. As a federally-licensed money service business partnered with a Schedule 1 bank, it offers trading for transactions over $50,000. Buyers and sellers of digital currency who conduct large value transactions benefit from utilizing an OTC desk as it minimizes counterparty risk and prevents slippage or price increases when trading on marketplace exchanges.

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Shen Joins CPPIB

Kelly Shen is senior managing director and chief technology and data officer at the Canada Pension Plan Investment Board (CPPIB), effective November 5. She will be responsible for accelerating its focus on technology and data infrastructure. She has over 20 years of experience in optimizing the use of data, analytics, and technology. Previously, she served as chief operating officer and executive managing director for S&P Global Ratings.

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Retirement Myths Exposed

‘Why retiring without a DB pension doesn’t have to be scary’ is the focus of a CPBI Pacific session. Author and actuary Frederick Vettese will describe five basic strategies for maximizing retirement income without increasing risk. In the process, he will also expose some basic myths about Canada’s retirement income system. It takes place November 1 in Vancouver, BC. For information, visit Retirement Myths

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