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May 6, 2021


Private Assets Make Sense

Private assets with an income growth orientation make a lot of sense in a multi-asset framework because, “ultimately you’re getting equity-like returns with fixed income like volatility, says Andrew Croll, vice-president and director, alternative investments, at TD Asset Management. Speaking at its ‘2021 Sharing of Knowledge Learning Series,’ he said it really comes down to identifying the risk and return profile of the private market exposure, and understanding how that risk can be managed in line with the investor’s objectives. Using the example of an infrastructure asset, a hydroelectric power generation facility, he said when the yield factor is broken down, there’s different elements in it ‒ credit risk, the reliability of the counterparty, duration risk, the length and timing of the cash flows, and liquidity risk. “It’s important to really understand how these different factors interact with other components of your portfolio, he said. And if a portfolio is created that has similar credit and duration profiles as a universe bond with a higher expected return, “you’re getting compensated for that liquidity.”

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Annuity Changes Go Ahead

The Liberal government is moving ahead with measures from the 2019 federal budget that stalled before they were implemented with changes related to transfers of commuted values to individual pension plans (IPPs), new annuities under registered plans, and stock option deductions for employees. Changes to the Income Tax Act will limit the benefit of the employee stock option deductions taxed effectively at the capital gains rate. The $200,000 cap was introduced in the 2019 budget. The new rules would apply to grants beginning July 1. The $200,000 limit will be based on the fair market value of the underlying shares and Canadian-controlled private corporations will not be subject to the new rules. Bill C-30 also moves forward on the advanced life deferred annuities (ALDAs) and variable payment life annuities (VPLAs) proposed in 2019. The ALDA would allow a client to move some savings out of their registered retirement accounts to an annuity deferred until age 85. Annuities purchased with registered funds generally begin at age 71. A purchase cap was set at 25 per cent of the source plan, to a maximum of $150,000. The VPLA provides payments that vary based on the investment performance of the underlying annuities fund and on the mortality experience of annuitants. Bill C-30 will also limit transfers of pensionable service into individual pension plans (IPPs). The move will make it clear that an IPP can’t be implemented simply to avoid tax on the commuted value of benefits from another defined benefit plan.

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Blindness Crisis Emerging

The emerging crisis of preventable blindness in Canada costs the country almost $33 billion a year and impacts all Canadians, says a  report commissioned by four leading vision organizations in Canada – the Canadian Council of the Blind, Fighting Blindness Canada, the Canadian Association of Optometrists, and the Canadian Ophthalmological Society. ‘The Cost of Vision Loss in Canada Report’ shows living with vision loss negatively impacts an individual’s financial health and often represents a loss of independence affecting their quality of life. As Canada’s population ages, the main drivers of vision loss are more prevalent and will increasingly impact Canada’s health system and economy. It shows 1.2 million Canadians are living with vision loss, with many facing a lack of investment in services and supports that impact them to live life to its fullest potential. This number is expected to grow to two million people by 2050, which is concerning given 75 per cent of vision loss is either reversible, preventable, or treatable if caught early. The costs of vision loss in 2019 were direct healthcare costs – $9.5 billion; indirect health care and other costs – $6.1 billion, and the cost of well-being – $17.4 billion. “The direct healthcare costs highlight the need to reduce the progression of eye diseases and vision loss through preventive health measures,” says Keith Gordon, the principal investigator of the report. “The research demonstrates that the affected individuals and their families primarily bear 65 per cent of the costs of living with vision loss.” Unfortunately, public coverage for comprehensive eye exams differs across the country. This lack of public coverage is compounded by limited vision health coverage in workplace benefits programs.

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Canadians Lack ESG Knowledge

While the majority of Canadians (65 per cent) have heard of ESG (environmental, social, and governance) investing, only 34 per cent consider themselves knowledgeable about the topic, says a survey from BMO Global Asset Management (BMO GAM). The BMO GAM survey also shows investors aged 18 to 34 are the most knowledgeable demographic at 38 per cent – seven per cent higher than those aged 35 to 54 and five per cent higher than those over the age of 55. Younger investors are also most likely to currently hold ESG investments in their portfolios at 39 per cent, compared to 31 per cent of investors over 55. As well, 32 per cent of Canadians say ESG investments could make up the majority of their portfolios in the future.

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Asset Mix Structure A Key Pillar

Asset mix analysis and manager structure review are key pillars for creating a unique portfolio, says Jafer Naqvi, vice-president and director, asset allocation, at TD Asset Management. He told its ‘2021 Sharing of Knowledge Learning Series’ that this starts with making sure it lines up with the investor’s objective which is the creation of asset assumptions for risks incurred. A key principle is the assumption must be forward looking in nature. As well, it’s important for the assumptions for risk and return to be internally consistent across all asset classes. Finally, “we don’t want to bring in a lot of model errors,” he said. And while the return assumption is important, risk assumptions are just as important, particularly when it comes to private assets.

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Markets May Face Challenging Year

While the past year has seen a dramatic rally by stock markets driven by massive monetary and fiscal stimulus, Picton Mahoney’s ‘Q2 2021 Outlook’ projects that markets may have a challenging year ahead due to potential rising interest rates and decelerating stimulus and economic growth measures. As well, the potential for significant increase in longer-term inflation, suddenly driving interest rates higher, warrants a reconsideration of this positive outlook. It says the dramatic run-up in stock prices and an extended bullish sentiment could lead to bouts of market weakness that help alleviate overbought conditions. However, pullbacks are expected to be shallow and brief, though this could change quickly depending on the global trajectory of the COVID-19 crisis.

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Russell Joins Net Zero Initiative

Russell Investments has joined the Net Zero Asset Managers Initiative, a group of 87 international asset managers committed to achieving net-zero greenhouse gas emissions by 2050 or sooner. The company says it is committed to working with an outsourced chief investment officer (OCIO) and investment clients on goals consistent with reaching net-zero emissions within 30 years or earlier for all of its assets under management (AUM). It is adding positions to its responsible investing team and establishing a global task force to develop a net-zero emissions transition plan. The plan will set interim targets and build on established practices, such as the firm’s manager research process, which includes environmental, social, and governance (ESG) scores for managers. The task force will also focus on the firm’s active ownership program with environmental stewardship and climate risk reporting as the main focus of its engagement.

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Computer Workforce Acquired

Green Shield Holdings Inc., a part of the Green Shield Canada (GSC) group of companies, has acquired Computer Workware Inc. (CWI). Throughout its history, CWI has focused on the creation and provision of employee benefits and insurance administration software solutions to leading Canadian group insurers and third-party administrators. Its flagship software solution, VO, enables clients to administer traditional, flex, and hour bank programs for group plan sponsors and members. In addition, its new iBenefits platform leverages core VO functionality to provide a fully digital-first experience for plan sponsors and plan members.

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CPP Investments Partner On French Real Estate

The Canada Pension Plan Investment Board (CPP Investments), through its real assets credit investment group, and Acofi Gestion have confirmed a business partnership to invest in middle-market real estate credit opportunities across France. The venture will be advised by Acofi Gestion and will provide borrowers with a suite of debt financing solutions, targeting medium-sized whole loans and mezzanine loans to support commercial real estate in France. The partnership will invest in higher leverage, middle-market financings against stabilized, transitional and development assets that are not currently supported by mainstream lenders and will pursue an investment strategy that is diversified in terms of instrument, asset class, and geography.

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Edgell Has New Role

Andrew Edgell is senior managing director and global head of credit investments for the Canada Pension Plan Investment Board (CPP Investments). Previously, he was managing director, head of Americas structured credit and financials.

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Drug Claims Data Examined

‘What’s hiding in drug claims data? Undetected health risks and unnecessary costs’ is the topic of a Benefits and Pensions Monitor Meetings & Events webinar on May 12. Sayeh Radpay, president, and Natalle Chan, clinical program lead, at HumanisRx, will describe how proprietary software and service like its MedMonitor uncovers medication and health risks in plan members’ prescription profiles so clinicians can adjust treatment plans to alleviate side effects, get plan members on the right medications, and even avoid trips to the emergency room. Information is at https://register.gotowebinar.com/register/8164173317381941263

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May 5, 2021


Language Impacts Behaviour

Language can have an impact on defined contribution plan participants’ overall understanding of, and behaviour towards, the plan’s investment menu, potential benefits of staying in the plan post retirement, and how best to communicate retirement income benefits, says an Invesco study. ‘Watch Your Language: Rethinking how we communicate with participants’ found participants preferred to have more control (or the perception of control), rather than less, when it came to their money. Language conveying that they have the ultimate decision-making authority over their retirement assets was consistently preferred both with participants who are highly involved with investments decisions and those who are not. As well, participants also preferred investment menu names that provided cues about the offerings. While the retirement plan industry often uses a ‘tier’ structure, this language didn’t provide any context to participants. Presenting the menu with clear and descriptive titles, like ‘do it for me’ versus tier 1, 2, or 3 resonated more strongly among participants.

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COVID Prompts Changes To Benefits

The COVID-19 pandemic has had significant implications for workplaces across the world, and employers and workers have needed to make difficult decisions benefits. A report by the International Foundation of Employee Benefit Plans ‒ ‘Impact of COVID-19 on Pensions and Benefits in Canada: Spring 2021 Update’ ‒ found of employers that offer employee and family assistance programs, 61 per cent have seen an increase in the utilization of plan services as a result of the pandemic. The average utilization rate of these services before the pandemic was nine per cent and it has now increased to 15 per cent. With prescription drug benefits about one in five (18 per cent) have extended the time allowed under prior authorization periods, followed closely by temporarily waiving premiums for some or all plan members (17 per cent). Of employers offering defined contribution pension plan withdrawals, 21 per cent report an increase in withdrawals, up substantially from the eight per cent increase observed in June 2020. Changes in DC contribution levels vary with 65 per cent of employers reporting no changes to contribution levels, five per cent reporting a greater number of changes, and five per cent reporting a smaller number of changes. At those offering defined benefit and target benefit pension plans, 27 per cent have reviewed actuarial assumptions/pension plan designs, with an additional 28 per cent considering doing so. One-quarter (25 per cent) of responding DB plans have updated their investment policies and an additional 23 per cent are considering doing so. Both actions represent substantial increases from June 2020, when 11 per cent had reviewed their actuarial assumptions/pension plan designs, and six per cent had updated their investment policies. “As the pandemic continues into another year, employers are examining their benefit offerings in order to make decisions that best support their workforce while ensuring the long-term success of their organization,” says Julie Stich, vice-president of content at the International Foundation. “It’s likely that some shifts ‒ like a more remote workforce and easier access to mental health benefits ‒ will remain in a post-pandemic world.”

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Canadians Rely On Employer Coverage

The majority (62 per cent) of Canadians with life insurance have it through their employer and over half of those rely solely on employer-provided insurance despite many needing more to cover loved ones in the event of an untimely death, says a study from PolicyMe, a digital life insurance platform. Of particular concern, it found that 53 per cent of those without additional coverage are between the ages of 30 to 50, a group most likely to have dependents and large liabilities, such as a mortgage. “We’re not saying that everyone needs to supplement their employer’s group life insurance benefit,” says Andrew Ostro, co-founder and CEO of PolicyMe. “However, it is important to stress that many Canadians are not sufficiently covered through work benefits alone. The key is for people to ask themselves if their life insurance will be enough to support their family if they pass away suddenly. Group life insurance is a valuable benefit, but it shouldn’t be viewed as a one-size-fits-all solution.”

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Case For Paying For Gene Therapies Considered

The speculation with gene therapies is whether there is a case for paying more than for conventional medicines, says Dr. Mike Drummond, professor of health economics at the University of York. On a panel at the ‘TELUS Health Annual Conference’ on ‘Gene therapy: Challenges in determining value to make reimbursement decisions; with Karen Lee, director, health economics, at the Canadian Agency for Drugs and Technologies in Health, and Joan Weir, director, health and disability policy, at the Canadian Life and Health Insurance Association Inc., he said what they like to do is look at the health gain using a quality adjusted life year equation which determines the kind of quality gain one might get from a typical end stage cancer drug. Some of the gene therapies do add a significant health gain. “Of course, the other side of the coin is the cost,” he said. Many of these therapies are significantly costly. He cited one in the U.S. where the cost is $2 million dollars for a course of therapy. “When you relate the costs to the quality, you can see the incremental cost of quality can be quite high,” he said. However, there may actually be a cost saving because the potential in gene therapy is to actually save many years of an expensive therapy. There are a number of funding models which can be used for gene therapy, said Weir. The direct payment model is basically the “one and done” model and it may be possible to negotiate a better discount if the dollars are paid upfront to the manufacturer on a quit basis. But if treatment is less effective, there is no ability to stop payment of the balance. Another option is pay-for-performance outcomes based agreements. These would allow for both the manufacturer and the insurer or public payer to assess how well that particular patient fared. And this brings with it the necessity to collect and examine real world evidence which brings up the possibility of a registry. Another approach is negotiated discounts similar to what happens today when public and private payers negotiate directly with the manufacturer on a particular drug, said Weir. Lee said one issue is the high upfront costs when it is less clear what clinical benefits might be realized over the longer term. Many of these trials are very limited so “whether these potentially curative therapies do end up being curative remains to be seen,” she said.

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Canada Life Sets Out Efforts

Canada Life has set out its efforts to improve the well-being of Canadians. Its 2020 public accountability statement, ‘For life as you know it,’ says the 170-year-old insurance and wealth provider is fostering diversity and inclusion in its workplaces and local communities in the coming year. In a year marked by significant social awareness to systemic racial injustices, it acknowledges there’s more work to do to meet the expectations of Canadians, while continuing to deliver on the promises it makes. To extend their message further, it is launching a multi-platform social media awareness campaign.

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Record Investments Flow Into ESG

Environmental, social, and governance (ESG) investments took in a record $152 billion to reach $1.6 trillion in total assets and asset managers launched a record number of ESG products, 196, last year, says a Natixis report. ‘Everyone’s on the ESG Investing Bandwagon’ shows the percentage of institutional investors that implement ESG approaches rose by 18 per cent from 2019 to 2021, while the number of fund selectors using ESG strategies rose from 65 per cent to 77 per cent over three years. One of the reasons ESG approaches are growing is that regulators are pressuring asset owners and asset managers to enact more sustainability measures. Investor demand for ESG investments is also rising. “Around the world, many countries are making great strides around sustainability by enacting regulations designed to further ESG goals,” it says. Institutional investors report a wide range of motivations for turning to ESG investing. In 2014, 48 per cent of institutional investors said ESG approaches simply served as a public relations measure. However, in 2021, 57 per cent of institutional investors said they were turning to ESG concepts to align their assets to organizational values. Perhaps more significantly, in 2015, 50 per cent of institutional investors said there was alpha to be found in ESG investing, but that has risen to 62 per cent this year.

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Iguá Wins Auction

Iguá Saneamento S.A. has won the auction for a concession in the privatization of water and sewage services from CEDAE, Rio de Janeiro’s water and sewage company. The new concession will be funded with additional capital invested into Iguá from among its current shareholders which includes the Canada Pension Plan Investment Board (CPP Investments) and the Alberta Investment Management Corporation (AIMCo), as well as debt financing. Iguá is a water and sewage service holding company currently operating 18 concessions and contracts across five Brazilian states, and providing sanitation services for more than six million people. CPP Investments will continue to hold a 46.7 per cent aggregate equity stake and AIMCo a 38.6 per cent aggregate stake in Iguá.

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Dayes Leads Private Wealth

Brian Dayes is leader of Mercer Canada’s private wealth business. In this capacity, he will lead the team in helping more Canadians develop comprehensive, research-based investment strategies to maximize returns and manage risk. He has more than 30 years of experience as a consultant, managing and developing sophisticated investment strategies across established and emerging public markets, private markets, and hedge funds.

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Pooling Framework Reviewed

In 2012, the Canadian Life and Health Insurance Association (CLHIA) announced a pooling framework focused on small employers to assist with the sustainability of private drug insurance plans facing affordability challenges from high-cost drug claims. At the CPBI Saskatchewan ‘Industry Pooling for High Cost Drugs … 2 Years and a Pandemic Later!’ session, Dan Berty, executive director of the Canadian Drug Insurance Pooling Corporation (CDIPC) will review the framework, the impact with high cost drugs, pooling results, and emerging trends. It takes place May 19. Information is at https://www.cpbi-icra.ca/Events/Details/Saskatchewan/2021/05-19-Industry-Pooling-for-High-Cost-Drugs-2

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Commuted Value Interest Rate Assumptions

The interest assumptions required to calculate commuted values and marriage breakdown values for an event which occurs in any month up to and including May 2021 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains nine worksheets:

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

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

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May 4, 2021


Uninsureds Need Access To Prescriptions

With approximately 20 per cent of the population of New Brunswick with neither public nor private drug prescription coverage, the Canadian Life and Health Insurance Association (CLHIA) says it is important to identify these individuals along with those who are underinsured and have to pay excessive out-of-pocket costs. In its comments on the New Brunswick consultation ‘Striving for Dependable Public Health Care 2021,’ it says as actions are put in place to achieve sustainability of the public drug plan, savings may be directed at providing coverage to the uninsured and underinsured. The industry believes that federal, provincial, and territorial governments and private insurers should work together to develop a standard list of medicines that all Canadians can access regardless of where they live or whether they have workplace benefits. Private insurers want to work with governments to ensure access across the country not only to this standard list of medicines, but also to high cost medicines used to treat chronic and rare diseases, it says. It recommends that all Canadians be covered through a plan offered either by an employer, union, or other professional organization or by the government. This would address access issues and ensure that Canadians with existing plans do not see their coverage reduced while also using public funds in the most efficient and effective way.

 

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Median Return Improves

The median return of the ‘BNY Mellon Canadian Master Trust Universe’ was up 0.6 per cent for the first quarter of 2021. These results mark the fourth consecutive positive quarterly median return following the initial pandemic reaction in the first quarter of 2020. The one-year median return as of March 31 was up 18.9 per cent. “We have seen lower, but positive returns through the end of the first quarter amid rising bond yields, restoration efforts from the COVID-19 pandemic and overall growing economic confidence. Canadian plan sponsors posted low, but positive results for the first quarter of the year, due to negative fixed income asset performance which was partially offset by stronger performing equities” says Catherine Thrasher, head of strategic client solutions and global risk solutions at CIBC Mellon and BNY Mellon. Among traditional asset classes, the Canadian Equity Universe median posted the highest performance, with a quarterly median return, rising 7.7 per cent. Fixed income returns were the lowest, down 5.18 per cent in the quarter.

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OCC Develops Mental Wellness Support

To mark the start of Canadian Mental Health Week, the Ontario Chamber of Commerce (OCC) is partnering with Sun Life to develop its ‘Mental Wellness in the Workplace: A Playbook for Employers.’ It will provide Ontario’s business community with the resources needed to support mental wellness in the workplace during the COVID-19 pandemic. The playbook will provide Ontario businesses with a list of resources so employers have tools at their disposal to develop mental health strategies and psychologically healthy and safe workplaces. The OCC will also prepare a summary document that includes information and resources tailored to small businesses and entrepreneurs. Both resources will be released this summer and available to employers and businesses through the OCC’s website and social media channels.

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Poor Data Disclosure Missing Link

The missing links in existing ESG (environmental, social, and governance) research are poor data disclosure by companies, inconsistent scores and ratings by third-party providers, and lack of quantification of ESG considerations in financial modeling, says a report from Procensus. ‘ESG: What Do Investors Really Care About and How Is It Changing in 2021?’ says flows into ESG funds have been a key theme in markets for a few years. However, a majority of respondents expect ESG issues to become a more important component of their investment strategy as the world moves beyond COVID-19. Issues that have become top of mind for their investment strategy versus a year ago are climate change and carbon footprint, diversity and inclusion, supply chain resiliency, and health and wellness.

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IMCO Closes Science Property Fund

The Investment Management Corporation of Ontario (IMCO) has closed its USD$325-million commitment to Breakthrough Life Science Property Fund, which aims to develop and assemble a portfolio of Class A life science properties in leading technology centres throughout the U.S. The fund’s first investment includes the proposed development of an enterprise research campus at Harvard University in Boston, MA, amidst one of the busiest biotech hubs in the world. IMCO’s commitment comes as the life sciences sector is driving unprecedented innovation to save lives and address age-related chronic ailments associated with increasing life expectancy.

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Bugeja Joins WTW

Micheal Bugeja (CEBS) is lead associate at Willis Towers Watson (WTW). Most recently, he was a senior benefits analyst at People Corporation.

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Group Retirement Revolution Examined

‘From Retirement Savings to Ultimate Wellness: a collective revolution’ will lay the groundwork for the revolution of group retirement savings and analyzes the key success factors. Featured speakers at the June 2 Benefits and Pensions Monitor Meeting & Events webinar are Gabriela Jeffrey, regional sales director, Ontario, and Julie McDermott, senior client relationship manager, at Desjardins Insurance. Information is at Registration (gotowebinar.com)

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May 3, 2021


CPP Investments Pursues Vision

CPP Investments will continue pursuing its long-standing vision to be the best investment fund of our type in the world, says John Graham, its president and CEO. He became the fifth CEO of the organization in February. Already, he says “we are the investor of choice for talent, companies, and partners in regions around the globe where we are valued not just for the size of our fund, but for the quality of our people, practices, and high standards.” On a practical level, this means it will increasingly use data to inform its decisions and counteract biases. It will also leverage data-driven insights from across its portfolio as another edge to capture the greatest possible value for its beneficiaries. Shifts in the world’s power structures and economic organization will have significant implications for investors. For example, the resurgence of populism, development of emerging markets, and the rise of China have the potential to profoundly affect the global investing environment, he says. Yet, climate change is arguably the most pressing factor affecting the investment landscape today. As the global economy moves towards net-zero, its goal is to capture the opportunities and hedge the undue risks that will arrive as society works to reduce and remove greenhouse gases from the real economy.

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UTAM Matches Pension Return

In 2020, the pension and endowment portfolios managed by the University of Toronto Asset Management Corporation (UTAM) delivered returns of 11.7 per cent and 11.6 per cent (net of all fees and expenses), respectively, in 2020 matching the reference pension portfolio return and underperforming the benchmark reference endowment portfolio return by 0.2 per cent. The UTAM annual report shows the long-term performance of the portfolios continues to be strong. Over the last 10 years, the pension portfolio has generated an annualized net return, after all fees and expenses, and the endowment has generated 8.8 per cent. These results exceeded their reference portfolio benchmarks by one per cent annualized in pension and 1.1 per cent annualized in endowment, resulting in over $500 million in cumulative value add for both combined. As at December 31, 2020, pension assets were valued at $6.3 billion; endowment assets, $3.7 billion; and short-term working assets, $3.1 billion. Total assets under management equaled  $13 billion, up from $11.4 billion at the end of 2019.

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Fintech App Use Shifts

The use of fintech apps has increased more than 61 per cent since the pandemic started last year, says James Green, deVere Group’s divisional manager of Europe. The jump comes as financial technology apps show further evidence that the way finances are managed further shifted in light of the coronavirus pandemic. “Pre-coronavirus, we were already in an exciting new era driven by the lightning pace of the digitalization of our everyday lives. “But like so many areas of our lives, the pandemic has accelerated this trend,” he says. The jump in usage of fintech apps from existing clients and a sharp increase in enquiries from potential ones, underscores that people are becoming more tech-savvy than ever. Fintech allows all clients’ personal financial services to be dealt with online and/or on their mobile devices, wherever they choose to be.

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Pillcheck Becomes Preferred Partner

The Benefits Alliance Group has selected Pillcheck as a preferred partner. Pillcheck is based on the science of pharmacogenetics (PGx) which evaluates genetic variations that can impact how individuals respond to many common prescription medications. It includes a personalized results report, a pharmacist’s review, an action plan to share with the doctor, and free updates when new medication information is available. Customers have ongoing access to their results at any time, through their personal account on a secure, regardless of employment status.

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Real Estate Fundraising Suffers

The first quarter of 2021 is continuing in much the same vein as 2020 across the real estate asset class, says Preqin. Fundraising in particular has continued to suffer as the number of funds reaching final close more than halved to 52 securing 25 per cent less capital than in the first quarter of 2020. In addition, competition for investor attention is rising with a record 1,088 funds in the market seeking a combined $338 billion as of April 2021 – highlighting protracted fundraising activity and weakness, rather than strength, following the lacklustre volumes achieved in 2020. However, larger funds are closing in the first quarter supporting the ongoing trend of capital consolidation into the largest fund managers globally. This is understandable given the significant uncertainty now facing key real estate segments like retail and office. Indeed, these two property types led the decline in deals for the first quarter 2021. Conversely, competition for industrial and logistics assets is rising with deal numbers up 14 per cent in the first quarter compared to 2020.

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Risk Management Tools Explored

‘Navigating the Road to Recovery: Do you have the pension risk management tools you need to react quickly to economic challenges?’ will be discussed at a Benefits and Pensions Monitor Meetings & Events webinar on May 6. Owais Rana, senior director, North America, at Moody’s Analytics; and Michael Carse, director, product management at Moody’s Analytics will address the trends and challenges facing Canadian pension plans, consultants, and investment managers when it comes to protecting against downside risk. It will feature realistic examples played out on Moody’s Analytics’ risk management solution for the defined benefit pensions market, the PFaroe DB platform. Information is at https://register.gotowebinar.com/register/2508156861134632719

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April 30, 2021


Scale Sought Through Consolidation

The emergence of Canadian pension consolidators and the move by some Canadian leaders to take on outside assets represents a new industry chapter that is likely to generate considerable discussion within and beyond Canada, says CIBC Mellon’s survey of 50 leading Canadian pension funds. ‘In Search of New Value: How Canadian Pension Funds are Preparing for a Post-COVID-19 Environment,’ the third instalment of the research, ‘Rise Of The Consolidators: Asset Owners As Asset Managers,’ explores how Canadian pension plans are seeking scale via consolidation and, in some cases, transforming into asset managers who compete for external mandates. Whether moving investment, pension, or operations activities out to a larger provider, or looking to grow by consolidating in assets from outside pension entities, organizations on both sides of the consolidation equation cite the same three concerns: greater scrutiny, visibility, and culture and technology challenges. “Pension plan sponsors, pension asset managers, OCIO providers, insurers and other Canadian pension industry participants are leveraging their leading talent, advanced governance models, and investment expertise as they compete in a challenging market, seek to more efficiently access scale, and above all, work to deliver better results for their stakeholders,” says Darlene Claes-Mckinnon, executive director at CIBC Mellon. “In addition to in-house expertise, many participants are engaging third-party experts for insights, advice, independent oversight, and even hands-on participation in aspects such as governance, transformational project management, complex investment and operational strategies, and plan member services.”

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Net Assets Grow For Nova Scotia Teachers

The Teachers’ Pension Plan’s net assets grew from $5.358 billion to $5.519 billion as at December 31, 2020, says the Nova Scotia Teachers’ Pension Plan Trustee Inc. (TPPTI). The funded status of the plan at the end of 2020 increased to 79 per cent on a going-concern basis, compared to 78.2 per cent at the end of 2019. At year-end 2020, the plan achieved a one-year return of +6.78 per cent, net of investment management fees. It underperformed the policy benchmark of +7.96 per cent on a net basis, and outperformed the actuarial assumed rate of return of 5.7 per cent. “Like many pension plans across the country impacted by COVID-19, we saw a sharp decline in our investment performance in the first half of 2020” says John Rogers, TPPTI chair. As at December 31, 2020, the plan’s deficit was $1.467 billion.

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DB Return Negative

Amidst an improved economic outlook – partially attributable to early phase vaccine rollouts and ongoing government support – Canadian DB pension plans posted a -0.2 per cent median return in the first quarter, says the RBC Investor & Treasury Services ‘All Plan Universe.’ The loss came on the heels of a fourth quarter 2020 return of 5.4 per cent and an annual 2020 return of 9.2 per cent. As projections pointed to higher expected growth, investors readied themselves for mounting inflationary pressure, causing bond yields to move up sharply and fixed income securities to lose ground. Fixed income assets held by pension plans posted a median return of -7.1 per cent in the quarter, compared to 1.1 per cent in the last quarter of 2020. Global equity markets continued to rally and hit new highs during this time period. For the second consecutive quarter, value stocks – pro-cyclical in nature – outperformed growth stocks. Sectors that were hit hard by the pandemic continued to recover on account of reopening optimism.

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Payroll Association Supports Financial Wellness Lab

As part of an ongoing commitment to support the financial wellness of working Canadians, the Canadian Payroll Association is supporting the launch of the Canadian Financial Wellness Lab at Western University, with a contribution of $750,000 and 12-years of proprietary survey data, totaling nearly 40,000 unique responses. The lab’s academic team will apply leading analytical approaches, including financial modelling and machine learning, to data provided by industry partners. The comprehensive and specifically Canadian nature of this data will enable the research team to gain a deeper, more detailed, and well-rounded understanding of complex topics like financial wellness and resilience.

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ESG ETFs Record Inflows

ESG (environmental, social, and governance) ETFs and ETPs listed globally gathered net inflows of US$15.08 billion during March, bringing year-to-date net inflows to a record US$55.84 billion, says ETFGI. This is much higher than the US$15.8 billion gathered at this point last year as well as the prior record of US$41.16 billion gathered in the first quarter of 2020. Total assets invested in ESG ETFs and ETPs increased by 6.9 per cent from US$231 billion at the end of February 2021 to US$246 billion.

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Drug Management Reviewed

‘A broad based review of Prescription Drug Management in Benefit Plans and the impact of COVID-19’ will be presented in a May 20 CPBI Southern Alberta session. Peter Ricci, senior pharmacist consultant at the Co-operators, will provide a practical perspective on provincial and national pharmacare, biosimilars, evidenced-based prior authorization, and how COVID has impacted claims. Information is at https://www.cpbi-icra.ca/Events/Details/Southern-Alberta/2021/05-20-A-broad-based-review-of-Prescription-Drug

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