Organizations Address Cannabis Head On
Six months ago, Canada became the first G7 nation to legalize recreational cannabis and while Canadian organizations have faced legalized cannabis head on, challenges persist. A Conference Board survey has found that three of the most important ongoing issues are: workplace accommodation for medical cannabis use while ensuring safety for all; drug testing and the equilibrium between workplace safety and the invasion of privacy; and what education should employers be responsible for and who should deliver it? “After recreational cannabis was legalized in October 2018, we wanted to understand how organizations are navigating these uncharted waters,” says Monica Haberl, a senior research associate at the Conference Board of Canada. The survey found there were still questions and unresolved issues associated with the legal use of cannabis ‒ both medical and recreational. However, most organizations have updated alcohol and drug policies and fit-for-duty protocols; believe their safety-conscious culture would mitigate the potential risks; and have clearly defined the consequences of infractions.
Trend To DC Continues
A secular shift in major developed countries is seeing more and more of a trend globally of transferring retirement savings risk to plan members by moving from defined benefit to defined contribution plans, says Matt Streeter, vice-president, defined contribution and retirement, at Franklin Templeton. Speaking on ‘Global DC Innovation Trends & their Impact for Canadians’ at the Benefits Alliance Group’s ‘2019 AGM: Powered by the Past ‒ Force for the Future,’ he said globally 53 per cent of plans are now DC. In Australia (86 per cent) and the U.S. (62 per cent), the shift is pronounced. Canada is an outlier as only 10 per cent of its plans are DC. Among the current trends, he said more auto enrolment and escalation is evident as sponsors try to help employees prepare for retirement. There is also lots of innovation from technology to support and regulation. For example, in the U.S. there are requirements for Qualified Default Investment Alternative (QDIA) as a default option. Now, dynamic QDIAs are coming to market which change as markets change. There are other aspects that sponsors can incorporate into plans to improve outcomes. One is to limit the number of investment options as fewer choices makes selecting assets easier, but still allows members to make decisions and have ownership of their plan. One thing he would like to see in Canada is the adoption of auto-enrolment. This used by a majority of UK and U.S. plans and he calls it a “sensible approach” to get employees into company pension plans.
DB Plans Taking Control Of Risk
The largest corporate defined benefit plan sponsors in the United States continued to make changes to their pension plan policies to take more control of the costs and to better manage their risks, says a report from Russell Investments. As for investment policy, the analysis finds over the last several years, the $20 billion club (the group of 20 publicly listed U.S. corporations with pension liabilities in excess of $20 billion) has been shifting from the traditional asset-only focus to an asset-liability focus. During 2018, the club shifted asset allocations significantly away from risky assets and into fixed income. On average, equity allocations were down five per cent and fixed income allocations were up five per cent, which was the highest de-risking movement in the past eight years. However, it says it’s worth keeping in mind that most plans will be under exposed to equities because of the very difficult fourth quarter in 2018. This may cause the appearance of a conscious allocation to fixed income; but, in reality, plan sponsors just haven’t rebalanced to targets. Still, plan sponsors have cited specific intent to de-risk. “The low interest rate and return environment persists and sponsors continue to focus on areas within their control, such as benefit, funding, and investment policies. By improving plan funded positions and taking steps to minimize portfolio risks, sponsors will help promote stability, reduce surprises, and place the sponsors in control of where their DB plans go,” the report says.
Virtual Care Becoming Foundational Benefit
Canada’s healthcare systems are unlikely to cover virtual healthcare any time soon, says Amr Galal, director, corporate health solutions and partnerships, at Medcan. In the session ‘The Virtual Healthcare Revolution is Now’ at the Benefits Alliance Group’s ‘2019 AGM: Powered by the Past ‒ Force for the Future,’ he said this means it is likely to become a foundational benefit in employee benefit plans and employers and providers will need to figure out how to do it. He said the U.S. is way ahead of Canada in this area as 70 per cent of employees had access to a telemedicine benefit in 2017. This is likely due to the private nature of its healthcare which means employers and employees take a more preventative approach to health as illnesses can be expensive. Virtual care can impact Canadians, he said. It can help sustain the healthcare system by giving Canadians access to virtual care for common health problems. It also provides access to care as any patient can meet with a doctor coast to coast. With virtual care, Canadians can receive on demand or scheduled some day or next day appointments with little or no wait times.
Value Stocks Appear Attractive
Currently, value stocks appear attractive from a valuation standpoint compared with expensive growth stocks, many of which have seen their prices soar to levels that aren’t justified by their intrinsic fundamentals, says the ‘HSBC Global Asset Management: Canada Outlook.’ And ultimately, patiently holding good-quality undervalued stocks long enough could see value investors smiling in the years ahead. Value investors are working through a decade-long slump, it says. After watching high-flying growth stocks, as exemplified by the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google), set the pace in equity markets for years, investors could be forgiven for losing faith in the value approach. But while history offers no guarantees of future performance, it does show us that growth investing and value investing tend to outperform each other across different time periods. There is some cause for optimism. The late 1990s dot-com bubble was the last time value stocks were out of favour. When the bubble burst, value stocks took off and outperformed growth stocks for seven years. Another point in favour of value stocks is their track record on dividend payments. They have outshone growth stocks when it comes to dividends. This may start to give investors reason to reconsider value over growth. Growth stocks almost never pay dividends and instead reinvest their earnings to expand their operations.
iA Signs PRI
iA Financial Group is now a signatory of the United Nations Principles for Responsible Investment (PRI) through its iA Investment Management (iAIM) subsidiary. The Principles for Responsible Investment (PRI) were developed by an international group of institutional investors in partnership with the United Nations Environment Programme (UNEP) Finance Initiative and the UN Global Compact. They reflect the increasing relevance of environmental, social, and corporate governance issues to investment practices. The process was convened by the United Nations Secretary-General. “We believe responsible investment is a factor of success and that incorporating environmental, social, and governance criteria is the best way to achieve responsible investment. Creating long-term value relies on a financial system that is both sustainable and economically effective,” says Michel Tremblay, executive vice‑president and chief investment officer of iA Financial Group.
Coaching Fills Chronic Disease Gap
Employers can help fill a gap in healthcare for employees with chronic diseases by adding health coaching services to their health benefits plan. To help make this happen, Health Solutions by Shoppers Drug Mart has launched a team-based health coaching program for employers that connects employees ‒ by phone or video chat ‒ with nurses, pharmacists, and/or dietitians so that they can better manage their conditions in their daily lives. More than half of Canadian adults have at least one chronic condition, which means that lifestyle changes (e.g., nutrition, physical activity) as well as daily medications can be critical for successful treatment. However, studies repeatedly show that many people struggle to maintain treatment, which ultimately can lead to a worsening of their condition and higher healthcare costs, often paid for by their employer. “The impact of chronic disease in the workplace can be invisible and is often significantly underestimated. It can have a real impact on an employee’s well-being, engagement, and productivity, which affects both the individual and the organization as a whole,” says Mark Rolnick, vice-president of payor partnerships and plan sponsor innovation at Shoppers Drug Mart. The health coaching program is a turnkey, affordable strategy for employers and their employees.
CAAT Funding Reserve Grows
The CAAT Pension Plan stands at 120 per cent funded on a going-concern basis, with a funding reserve of $2.6 billion, based on its actuarial valuation as at January 1, 2019. This is an improvement over last year’s valuation that showed the plan 118 per cent funded with a funding reserve of $2.3 billion. Based on its funding policy, its governors determined that allocating additional reserves to further strengthen benefit security is the most prudent option at this time. The valuation will be filed with the regulator in the coming weeks and by opting to file this valuation, the plan will not be required to file again before 2022. Each funding valuation includes a review of the economic and demographic assumptions used to ensure they continue to be realistic and appropriate for the plan’s risk tolerance. As a result of this review, its discount rate has been lowered to 5.5 per cent from 5.6 per cent. The discount rate reflects the asset mix, expected long-term market returns on the investment portfolio, and the plan’s risk tolerance.
Travel Coverage Serious Issue
Daily, more than eight million people travel. The number of people working internationally is currently at all-time high in U.S. and 1.6 million expats lived in Canada in 2017. This makes the issue of travel, especially for business, without a coverage a serious issues, says Janice Ogilvie, of Penmore Benefits. She told the ‘Global Mobility: Decoding Global Employee Benefits’ at the Benefits Alliance Group’s ‘2019 AGM: Powered by the Past ‒ Force for the Future’ that employers see the need to have employees work outside Canada and brought in to work in Canada. Traveling without coverage leaves them vulnerable and they could face out of pocket costs if they fall ill or are in an accident. This means employers need to understand what coverage travelling employees need, whether they are expats, inpats, rotational workers, of contractors. Since Canadians working outside the country for more than 180 days could lose healthcare coverage, she said the appropriate coverage is International Private Medical Insurance (IPMI). It is available to employees and trailing dependents regardless where they reside and includes emergency, wellness, and urgent care services, and covers pre-existing conditions. Medical evacuation can be added and it includes international employee assistance programs. Travel insurance, on the other hand, is for emergencies only. In selecting the appropriate coverage, providers need to obtain complete information from their clients so a global benefit solution can take into account the types of employees, home and host countries, compliance, contract provisions, provider networks and resources, and evacuation procedures both for medical and security reasons. Employers can justify the cost once they understand the risks and can depend on positive experiences and outcomes for their global employees and their families.
Chinese Pension Funds Could Run Out
Pension funds in China could run out before workers born in the 1980s retire, says the Chinese Academy of Social Services. To offset this widening shortfall, experts advise that other national assets, including foreign exchange reserves, can be shifted to the pension funds. Cumulative balances of pension funds for urban employees are expected to begin declining from a peak of 6.9 trillion yuan by 2027. By 2035, it’s possible that the accumulated balances will be exhausted. It also says that current balances of pension funds for 2019 are 106.29 billion yuan, but as soon as 2028 the balances may dip into a deficit of 118.13 billion yuan. In 2018, there were 249 million people in China over the age of 60, 17.9 per cent of its population. Another 167 million were over 65 years old accounting for 11.9 per cent of the population. This year, one pensioner is being supported by two workers. By 2050, this will drop to one worker for each pensioner.
Type I Diabetes Gets More Attention
While more focus on the growing epidemic of diabetes in the workplace, more attention is being put on Type I diabetes. This form is more complex than Type II, said Connie Wong, senior reimbursement consultant, integrated health solutions, diabetes, Medtronic Canada, at the Benefits Alliance Group’s ‘2019 AGM: Powered by the Past ‒ Force for the Future.’ In the session ‘Impact of Diabetes in the Workplace ‒ What Can Employers Do,’ she said 85 per cent of those with Type I are adults in the workplace. They face the challenge of managing their condition which can, for example, mean testing their blood sugar levels eight times a day. High levels (hyperglycemia) occur in 60 per cent of people with Type I diabetes while low levels (hypoglycemia) affects 20 to 60 per cent of individuals. Both can cause cognitive dysfunction and impairment. These employees may miss meetings and full days or arrive at work late or leave early. This leaves employers dealing with absences and long-term disability claims, said Ida Brass, an organizational health consultant at Great-West Life. Its records show that one per cent of new LTD claims are associated with diabetes and these cases can take up to 55 per cent longer to resolve. The average covered amount for diabetes is almost $2,900 with $1,133 for diabetes drugs. Second drug costs for conditions related to diabetes ‒ blood pressure, cholesterol, and depression ‒ account for the rest of the cost. For males 55 to 59 years old, drugs related to diabetes account for 13.5 per cent of their drug spend. For females the same ages, these drugs are 8.1 per cent of the spend. Employers do have a duty to accommodate and can so by providing standard break times, privacy to test insulin levels, and providing places where employees with Type I diabetes can rest, she said.
Poland Moving Pension Funds To Individual Accounts
Poland’s government plans to transfer all state-guaranteed private pension funds to individual retirement accounts, says Prime Minister Mateusz Morawiecki. The ruling Law and Justice (PiS) party has long planned to move the assets managed by state-guaranteed private pension funds, many of which are owned by foreign managers. It has for months been debating how best to redistribute them. With one of the lowest birth rates in the European Union, it faces a mounting burden of paying out state pensions to people who did not save enough under communism. The plan would see all the assets ‒ $43 billion ‒ managed by OFE transferred to 15.8 million individual retirement accounts. Pensions will be paid out from both the private retirement accounts and from the country’s social insurance institution.
BMO Combines Alternatives
BMO Global Asset Management has combined its private equity, real estate, and real estate securities businesses to form a global alternatives group. Combining its three alternatives groups into one structure will help meet client demand and drive its ambitions to expand globally. Kristi Mitchem, its CEO, says, “We have significant strengths in direct property investment, real estate securities, and private equity and see alternative investments as a major growth area for the business globally.”
Aon Selling Talent Businesses
Aon plc will sell its culture and engagement, leadership development and advisory. and related products and services businesses within its talent practice to Spencer Stuart, an executive search and leadership advisory firm. This represents the evolution of its portfolio to better serve clients’ emerging needs and drive profitable growth. In line with other transactions it has made, this pending sale is designed to help accelerate investments in core growth areas and improve the return on invested capital for shareholders.
McKeague Joins West Wind Aviation
ETF Liquidity Concerns Examined
The ‘ETFs Global Markets Roundtable’ will examine the use of ETFs by institutional investors. Other sessions will look at the use of ETFs as tools for asset allocation, risk management, and portfolio diversification and concerns surrounding ETF liquidity. It takes place September 24 in Toronto, ON. For information, visit ETF Roundtable
Caisse Compensation Below Median
Including incentive compensation, total compensation for employees at the Caisse de dépôt et placement du Québec in 2018 was slightly below the median of reference markets for superior performance over five years, as the annualized return was 8.4 per cent. This corresponds to $16.7 billion of value added compared to the benchmark portfolio, says its annual report for the year. It has three principles for compensation: pay for performance by offering incentive compensation aligned with the returns delivered to depositors; competitive compensation to attract, motivate, and retain employees with experience and expertise that allow it to achieve its strategic objectives; and the linking of the interests of management and depositors to focus their individual and team contributions on its long-term success. The benchmarks come from Willis Towers Watson and, for positions outside of Canada, McLagan. As well, Hugessen Consulting, which specializes in compensation in the pension fund universe, led a validation of the equitable application of the compensation program. To foster better alignment of employee interests with its long-term sustained success, a portion of total incentive compensation for management and senior professionals is deferred over a three-year period. At least 55 per cent of the total incentive compensation of senior executives must be deposited into a co-investment account for employees which strengthens the alignment of executive interests with those of depositors. This means amounts deferred in 2018 and to be disbursed in 2021 are at risk, as they vary upward or downward with its average absolute overall return for the period. This year, employees (including senior executives) deferred $35.9 million until 2021. For incentive compensation, since 2016, performance has been measured over a five-year period
Universal Life Investor Appeals
An investor in universal life policies from the insurance arm of Manulife, Industrial Alliance, and Bank of Montreal has filed an appeal against a court ruling last month that limited the investor’s strategy, but saved the insurers from what they argued was a potential collapse. The decision limited the amount that can be deposited in the investment accounts of universal life contracts dating back to the 1990s that offered guaranteed minimum interest rates. The hedge fund manager, Mosten Investment, and two related partnerships that hold the contracts, have been in a long-running battle with the insurers, arguing that the contracts allow policyholders to make unlimited deposits into the accounts. The insurers argued that the policies were not intended for investment purposes and that if they were used in that way, they could go bankrupt and damage the Canadian insurance industry. A Saskatchewan court ruled in favour of the insurance companies in a judgment issued on March 15. However, Mosten has now filed notices of appeal with the Court of Appeal in Saskatoon, SK.
Intensifying Combination Challenges Organizations
An intensifying combination of economic, social, and political issues is challenging organizations and business strategies on a global scale, says Deloitte’s 2019 Global Human Capital Trends report, ‘Leading the social enterprise: Reinvent with a human focus.’ It reveals that employee experience and engagement, learning, leadership, and talent are all factors in transformation toward the social enterprise. The social enterprise, as Deloitte defines it, is an organization whose mission combines revenue growth and profit-making with the need to respect and support its environment and stakeholder network. It says over the past year, the pressures that have driven the rise of the social enterprise have become more acute. They are forcing organizations to move beyond mission statements and philanthropy to learn to lead the social enterprise and reinvent themselves around a human focus.
Alternative Medicine Need Regulation
Alternative medicines need risk-based regulation, says a report from the C.D. Howe Institute. In ‘Regulating Alternative Medicines: Disorder in the Borderlands,’ authors Michael J. Trebilcock and Kanksha Mahadevia Ghimire recommend regulating certain popular forms of alternative medicine, especially when their use could be life-threatening to patients. In many Western countries, the use of complementary and alternative medicines ‒ such as naturopathy, homeopathy, acupuncture, traditional Chinese medicine, chiropractic medicine, osteopathy, and Western herbal medicine ‒ has been growing. In most contemporary societies, biomedicine (also referred to as Western medicine) is strictly regulated, while regulation of alternatives is inconsistent and exists in a patchwork across jurisdictions. Patients may use alternative medicines in conjunction with biomedicine, but may choose to rely solely on alternatives to biomedicine. “With use of alternative medicine increasing, a better approach to regulating certain popular alternative medicine is needed,” said Trebilcock. The central challenge for regulation is how to allow for patients’ autonomy over their own treatment, while addressing the severe information asymmetries between practitioner and patient: a situation worsened when professionals misrepresent their skills or the benefits of their services. It recommends that regulatory responses should be calibrated to the degree of risk entailed for patients, state-sanctioned forms of delegated self-regulation of certification regimes by practitioners themselves, the creation by government of an overarching advisory body – an alternative medicine advisory council, and ensuring that persons responsible are held liable for fraudulent, false, or misleading advertisements or claims or criminal liability for gross negligence.
Legal Clauses Can Be Deployed In Blockchain
Northern Trust now has the capability to deploy legal clauses as smart contracts directly from a digital legal agreement onto its private equity blockchain. The technology application on a blockchain can be deployed to other platforms, with potential for broad use in generating digital documents and applying conditions beyond legal agreements. Its application has leveraged software developed by legal-technology startup Avvoka which enables participants to negotiate, review, and digitally sign legal agreements. Northern Trust launched the first commercial blockchain solution for private equity fund administration in 2017 and was awarded four U.S. patents in 2018 for processes critical to the move from manual to digital operations in private equity. Key to this enhancement is the ability to embed code in a legal agreement which is applied to the blockchain and persists through the lifecycle of the investment. The development coincides with the recent approval in Guernsey of an amendment to existing law validating the legal effect of such smart contracts.
Real Estate Money Hits ‘New High’
The amount of money raised globally for investment in real estate last year was closing on US$200 billion which is described as a “new high,” by the organization behind the ‘Capital raising survey 2019’ – the trade bodies Anrev, Inrev, and NCREIF. In total, fund managers raised $193.7 billion of real estate investment capital which includes $185.4 billion for non-listed real estate, a 15.7 per cent rise. Of the total raised, around $91.8 billion was yet to be invested. The research found Europe strategies attracted $83.2 billion (44.8 per cent), North America strategies attracted $61.4 billion, and Asia Pacific strategies attracted $26.9 billion (14.5 per cent). More investors from North America were seen to be participating in the market: 37.3 per cent of all equity raised was from North America compared with 27.9 per cent in 2017. They were also seen to be investing comparatively more overseas.
Israel Meets Market Accessibility Level
Israel now meets the minimum market accessibility level for the FTSE World Government Bond Index (WGBI), in addition to the objective market size and credit quality criteria, says FTSE Russell’s first ‘Fixed Income Country Classification Review.’ Should these criteria continue to be met for the September 2019 review, an announcement regarding a resulting index inclusion change and the timetable for implementation will be made. The process was introduced in January and is intended to bring greater transparency to managing country inclusion to FTSE Russell global fixed income indexes. The process assigns local currency fixed rate government markets a level of zero, one, or two, with two representing the highest level of accessibility. A level of two was assigned to Israel, Hong Kong, and New Zealand; and one for the Czech Republic and South Korea. Onshore China, currently assigned a one, is being considered for a potential upgrade to a two. Nikki Stefanelli, head of fixed income index policy at FTSE Russell, says, “Index users appreciate the transparency and independence of the new process to manage index local market entry and exit. Importantly, it also helps facilitate structural changes in the markets we track by acting as a platform for us to engage with decision-makers in countries who are able to address feedback from our users.”
Half Of Millennials Saving For Retirement
More than half of millennials are saving for retirement and with the time value of money on their side, they could be better prepared than some had previously thought, says a study from LendEDU. The study of U.S. millennials found that 58 per cent are actively saving for retirement. The average amount saved so far is $26,475, but varies widely by age (millennials under 27 have $7,796 saved, those 28 to 32 have $21,375 saved, and those over 33 have an average of $39,787. Income was significantly correlated to retirement savings as only 34 per cent of millennials earning $49,000 a year or less reported actively contributing to investment accounts for retirement, compared to 77 per cent of those earning $100,000 or more annually. However, it found all income groups had saved roughly the same amount ($26,450 in the lowest income group and $26,638 in the highest).
Hedge Funds Regain Footing
After a battering in 2018, hedge funds have regained their footing with a 5.6 per cent return in the first quarter, with an especially good showing for those investing in healthcare and emerging markets, says BarclayHedge. The improved performance follows a recovery in the equities market. The Standard & Poor’s 500 was up 13 per cent for the year’s first three months. Meanwhile, the Bloomberg Barclays Aggregate, which tracks the bond market, increased 2.9 per cent for the period. Hedge funds were up for each of the three months, with an average rise of 0.67 per cent in March, a month where some of stocks’ upward momentum slowed (the S&P inched up 1.9 per cent). Through March, the top category was healthcare and biotechnology, up 13.9 per cent. Emerging markets Asian equities rose 9.6 per cent and EM global fixed income, 9.7 per cent.
Noordam Has New Role
Three-legged Stool Opens Conference
‘The Three-Legged Stool: Is It Still Standing?’ is the opening plenary at the 2019 ACPM National Conference. Frank Wiginton, of Eckler; Dr. Robert L. Brown, professor emeritus at the University of Waterloo; and Frédéric Létourneau, of National Bank; will discuss areas such as which leg of the stool could (or should) take on more or less responsibility as it relates to the retirement system and where the accountability falls if the stool is broken. Theme of this year’s event ‘Shifting Currents: Negotiating Retirement Diversity.’ Others sessions include ‘Moving from DB to DC: The Insider Perspective,’ ‘Capital Accumulation Plans: How to Balance Flexibility with Retirement Adequacy?,’ and ‘The Quest for Sustainability in Pension Plans with Contingent Benefits.’ It takes place September 10 to 12 in Vancouver, BC. For information, visit ACPM Conference
Pharmacare Threatens Drug Research
Brand-name drug companies could put off introducing new medicine in Canada and scale back research here if the country makes a major shift to cheaper generic alternatives under a national pharmacare plan, says an internal federal analysis reported by Global News. The concerns were included last year in a briefing document for federal Finance Minister Bill Morneau that explored the feasibility and costs of a pharmacare program. The analysis was created a few days before Morneau’s 2018 budget officially launched an advisory group on Canada-wide pharmacare, which the Liberals say will cut costs and improve Canadians’ access to prescription drugs. The document said more information is needed to fully understand how national pharmacare would affect drug spending in Canada and what it would mean for revenues and business operations for the domestic pharmaceutical industry. National pharmacare could influence the revenues of drug companies in several ways such as a shift in favour of more generic drugs, mass-produced after patent protections for new medications expire. While this could lower costs, it could come with a cost for patients as brand-name pharmaceutical companies may respond to a broad shift to generic drugs by delaying the introduction of new drugs in the Canadian market or by reducing the R&D activities that they undertake in the country, said the analysis.
Few Comfortable With Investing
Many Canadians are reluctant to engage in online, do-it-yourself (DIY) investing, says a TD survey. Only one in 10 people feel very comfortable investing on their own and just one-fifth of Canadians are currently DIY investors, even though half said they would like to be able to do it themselves online. It also found that many Canadians feel a high level of anxiety about investing, saying the idea makes them nervous, overwhelmed, and intimidated. There is also a widespread lack of knowledge about how to invest or trade online, or where to find educational resources to help them. “Most people have financial goals and are interested in investing, but very few seem to have a high degree of confidence in their ability to do so,” says Paul Clark, president, direct investing, and executive vice-president, TD Bank Group. “Our research found that almost 40 per cent of people who don’t feel confident have never sought out resources to learn about personal finance or investing.”
Moody’s Acquire Vigeo Eiris
Moody’s Investors Service is acquiring a majority stake in environmental, social, and governance (ESG) research and data firm Vigeo Eiris. Paris -based Vigeo Eiris will maintain its headquarters in France, continuing to operate under its existing brand and it will become an affiliate of Moody’s. It will work with Moody’s to provide investors and issuers with data, research, products, and solutions to enhance and develop the incorporation of ESG factors into investors’ strategy and operations.
Private Credit Investment Fund Launched
To complement its established closed-end private credit fund program that invests across senior and junior debt opportunities globally, Northleaf Capital Partners’ has launched a new open-ended, evergreen private credit investment fund, Northleaf Senior Private Credit (NSPC). NSPC is focused on building a highly diversified portfolio of senior secured loans to mid-market private companies in North America and Europe. Its global private credit investment program has now surpassed US$2.2 billion in private credit capital under management. A pillar of the firm’s broader US$12 billion global private markets investment business, the private credit program seeks to provide investors with diversified exposure to mid-market private credit investments and offers flexible debt financing solutions to privately held companies.
O’Reilly Named Senior Fellow
Hugh O’Reilly is a senior fellow with the C.D. Howe Institute, One of Canada’s leading pension, pension investment, and governance experts, he is the former president and chief executive officer of OPTrust. He has also served as a senior policy advisor and chief of staff to a government of Ontario cabinet minister and as a member of the TMX’s Advancing Innovation Roundtable.
Staltari Has New Role
Carmen Staltari (CFA, CAIA) is director, investments, at Willis Towers Watson. He is responsible for consulting to a wide range of institutional investors in all aspects of their investments and is business development lead for the firm’s delegated investment solution or OCIO business in Canada. He joined the firm in 2016 from a boutique investment firm where he was assistant vice-president.
Environment Requires Pension Strategy Re-thinking
With the world going through unprecedented change, disruption is impacting industries and economic sectors, in the process uprooting the conventional order and changing the corporate landscape. Looking ahead, passive investing will not cut it ‒ an increasing number of index stocks are likely to disappear in the coming years. Recognizing this, Michael Hughes, of Guardian Capital, will consider how long-term forecasting can be adapted to create a ‘future-proof’ portfolio as he and AllianceBernstein’s Christopher Marx and Neil Blundell and Peter Miller, of Invesco, examine how institutional investors should re-think investment strategies in the face of today’s challenging environment and how can they innovate with portfolio construction in order to thrive at the Benefits and Pensions Monitor Meetings & Events ‘Pension Investment Strategies’ session. It takes place May 14 in Toronto, ON. For information, visit Pension Strategies
Updated Retirement Ages Needed
It’s time for governments and Canadian workers to talk about updating retirement ages in Canada’s social security safety net, say members of the Canadian Institute of Actuaries (CIA). “Canadians are living longer than ever and many are choosing to work beyond age 65,” says John Dark, president of the CIA. “It makes sense to update our country’s retirement income programs to reflect this fact.” Full Canada Pension Plan/Quebec Pension Plan (CPP/QPP) retirement benefits are currently paid at 65 years, with early retirement and reduced benefits possible at age 60, and deferred retirement with increased benefits as late as age 70. The CIA’s proposal recommends deferring these ages to 67, 62, and 75, respectively, giving Canadians the opportunity to accrue more savings and ultimately receive higher benefits at a deferred age. Similar changes are recommended for Old Age Security (OAS), increasing the age a retiree can start to receive benefits from between 65 and 70 to between 67 and 75. Additionally, sponsors of registered pension plans would be able to set a target retirement date of age 67 instead of 65 and individuals would be able to defer receipt of their RRSP income until age 75 instead of 71. These changes mean Canadians could decide to take their retirement benefits later to receive higher lifetime retirement income. The proposal comes at a time when Canada’s population is living longer, private sector pensions are eroding, and Canada’s economy continues to run in a low interest rate environment. As well, many industries are also experiencing or expect to see labour-force shortages in the future.
Electronic Communications May Become Default
Ontario is considering further legislative changes to the Pension Benefits Act, permitting plans to use electronic communications as the default method of communication with plan members, says Eckler’s ‘Special Notice: 2019 Ontario Budget.’ In an effort to enhance digital communications in the pension and insurance sector, the budget proposes changes in addition to those made to the Pension Benefits Act in 2018 which allowed pension plan administrators to permit electronic beneficiary designations. However, its legislation will still allow plan members to choose to receive communications non-electronically if preferred. The budget also proposes amendments to the Insurance Act, clarifying that insurers in Ontario will be allowed to accept electronic beneficiary designations as well, subject to any requirements introduced by the Financial Services Regulatory Authority (FSRA). Eckler says paperless communications with pension plan members could result in significant cost reductions for plan administrators and allow for more immediate, effective communication with members. However, it could also result in additional administrative efforts to determine a member’s preferences and to ensure that electronic communications are handled in a way that secures personally identifiable information (PII), especially in eMail communications.
Attention Needed On Controllable
People who are planning for their retirement need to focus more attention on aspects of their money management they can better control and less time on the “uncontrollable” components, says Larry Rosenthal, president of Rosenthal Wealth Management. “There is no question that it is important to pay attention to growing your wealth/money to meet retirement needs, but there is an alarming and financially dangerous trend towards spending too much time in that area at a cost of completely ignoring controllable components such as asset allocation, withdrawal rates, and tax allocation,” he says. “There is nothing more financially tragic than a person who has mastered the ‘money-making’ dynamic only to find themselves in the poor house because they failed to pay diligent attention to how that EARNED money was allocated, managed, and spent.”
IMF Downgrades Growth
Global growth, already expected to be slow, has been downgraded by the International Monetary Fund (IMF). Its latest world economic outlook report forecasts global growth to slow to 3.3 per cent in 2019 from 3.6 per cent the year before. In 2020, growth is expected to return to 3.6 per cent. The growth projections for 2019 and 2020 were marked down by 0.4 and 0.1 percentage points, respectively, since the IMF’s October outlook. While growth is expected to moderate in the near term, a projected pickup is forecast in the second half of 2019 because of a buildup of policy stimulus in China, recent improvements in global financial market sentiment, less drag on growth in the euro area, and stabilizing conditions in emerging markets. The balance of risk remains to the downside, it says, as growth could weaken from an escalation in trade tensions or a sharp deterioration in market sentiment which could sour over things such as Brexit, persistently weak economic data, and prolonged fiscal uncertainty. For Canada, it forecasts 2019 growth of 1.5 per cent, half a percentage point lower than it projected in October.
ESG Movement Gains Traction
The environmental, social, and governance (ESG) movement is gaining more traction with asset owners and managers. A BNP Paribas study found that 75 per cent of owners and 62 per cent of managers held ESG funds as a quarter or more of their investments last year. That’s compared to 48 per cent and 53 per cent in 2017. The biggest barrier to using ESG wasn’t its cost, but rather a lack of tools to assess investments, the survey says.
Elegant Solutions Created
Colin Ripsman has launched Elegant Investment Solutions, Inc. – a full service boutique investment consulting firm. He brings more than 20 years of institutional investment experience, working with investment consulting firms and investment management firms. Over the years, he has worked with a broad range of defined benefit plans, multi-employer plans, defined contribution plans, foundations, and endowments. He brings expertise in the areas of governance, investment policy development, asset mix review, manager structure and search, and ongoing investment and recordkeeping monitoring. The mission of the firm is to leverage its consulting, investment management, and legal expertise to provide holistic, innovative, and cost-effective consulting solutions. For more information, visit Elegant Solutions
Cross Asset Index Launched
FTSE Russell has launched the FTSE Multi-Asset Composite Index Series. The new series is designed to provide broad measures of cross-asset market performance across a diverse selection of global regions and risk exposures. Drawing on its family of equity and fixed income global benchmarks, the series includes a wide range of indexes across major asset classes covering global, regional, and emerging markets including the U.S., Europe, and China. It was developed in response to clients who invest across asset classes and are looking for ways to measure this multi-asset performance in a consistent and accurate way.
ETFs Gather Inflows
ETFs and ETPs listed globally gathered net inflows of US$37.48 billion in March, bringing year-to-date net inflows to US$99.14 billion, says ETFGI. Assets invested in the global ETF/ETP industry finished the month up 1.42 per cent, from US$5.32 trillion at the end of February, to a record US$5.4 trillion.
Staltari Has New Role
Carmen Staltari (CFA, CAIA) is director, investments, at Willis Towers Watson. He is responsible for consulting to a wide range of institutional investors in all aspects of their investments and is business development lead for the firm’s delegated investment solution or OCIO business in Canada. He joined the firm in 2016 from a boutique investment firm where he was assistant vice-president.
HR Trends Examined
‘Trends in Human Resources’ will be examined at a CPBI Saskatchewan Region session. Caylee Stewart, senior customer success manager from Morneau Shepell will share the results of its annual ‘Trends in Human Resources’ survey including HR priorities for 2018; expected changes in compensation; and optimizing retirement plans. It takes place May 15 in Saskatoon, SK, and May 16 in Regina, SK. Information on the Saskatoon session is at Saskatoon HR. For information on the Regina event, visit Regina HR
Budget Expanding Target Benefit Framework
The Ontario government proposes to expand the target benefit framework to better enable non-union workplaces to participate, says a McCarthy Tétrault LLP ‘Insights.’ This will bring Ontario in line with other jurisdictions like Alberta and British Columbia that do not discriminate against non-union workplaces. Over the past few years, McCarthy Tétrault has worked to encourage the Ontario government to end funding rules that discriminate against non-union workplaces that wish to participate in multi-employer target benefit plans. The budget announcement confirms that the necessary changes will be made. It is a “game changer,” it says, for small and medium sized non-union workplaces that typically cannot afford to even think about a proper pension program. It is also a great opportunity for industry-wide associations to add a valuable product or service for their members. Groups such as Christian Schools International and the Canadian Bar Insurance Association feel target benefit plans can provide predictable lifetime retirement income at half the cost of the average defined contribution arrangement, but with the same cost certainty as a DC arrangement. Like plans which are fairly common in unionized workplaces, the target benefit framework would not only deliver predictable, cost certain and cost efficient retirement income for employees, but it could do it on a basis that virtually eliminates fiduciary risk and administrative burdens for employers, it says.
Employers Likely Liable If Annuity Provider Fails
With the purchase of annuities by pension plans to reduce their liabilities hitting record highs for six years in a row and likely to increase even more, the question Murray Campbell, a partner at Lawson Lundell LLP, hears most concerns what happens if the insurer becomes insolvent. He told the ‘Recent Legal Developments’ session at the 2019 Saskatchewan Regional Conference that the only case law in this area suggests employers may be liable if retiree annuity payments need to be reduced. The 1998 McLauglin v Ultramar decision was prompted by the Confederation Life insolvency proceedings. The plaintiff had retired in 1988 and Ultramar’s practice was to take the retirement benefits and purchase an individual annuity. In 1996, the liquidator informed the annuitants that their benefits needed to be reduced while the insolvency was resolved. In the court proceedings, the company argued that it was discharged from any obligation because of the annuity purchase. However, this argument was rejected on the grounds it was the company’s decision to purchase an annuity. Campbell noted that today, in three provinces – Ontario, British Columbia, and Quebec – legislation has been put in place which discharges plan administrators from responsibility when annuities are purchased. The federal government is considering similar legislation. In provinces where this has not been addressed, he suggested that plan sponsors purchase Assuris protection which provides some benefit protection in the event of an insolvency. They can also put language in their plan documentation which discharges them from obligation when an annuity is purchased. However, Campbell does not believe this provides any real protection.
PIAC Supports Approach To Plan Flexibility
The Pension Investment Association of Canada (PIAC) strongly supports the approach to plan flexibility outlined in the Proposed FY 2019-20 FSRA Priorities and Budget Consultation Document January 21, 2019 to address the changing pension environment, particularly for jointly sponsored plans and related mergers of pension assets. Enhancing relationships with larger and evolving plans would be most welcome as well, it says in a letter to the Financial Services Regulatory Authority of Ontario (FSRA). PIAC has also long been a proponent of principled-based regulation. Too often regulation becomes overly prescriptive and does not recognize the wide range of strategies that pension plans use to manage risk and sustainability. It strongly support the focus on burden reduction which will enhance efficiencies and encourage employers to create and maintain their pension plans. However, it also notes that the regulatory burden for national employers operating across multiple jurisdictions is substantial and can be a material disincentive to maintaining defined benefit plans. To this end, it encourages the FSRA to work closely in its role within CAPSA to strive for harmonization of legislation across Canada.
Understanding Needs Among Best Practices
Understanding their employees and their unique needs heads a list of best practices for employers who want to help their defined contribution pension plan members meet their retirement savings goals, says Kevin Vandolder, a partner and DC practice leader at Aon. He told ‘The State of the DC Market Place’ session at the 2019 Saskatchewan Regional Conference that other best practices include offering a broad range of education, resources, and tools; employing anchoring and defaults to drive smart behaviour; and supporting employees through retirement. However, the vast majority of members do not have an efficient retirement portfolio so they are giving up returns which is one of the reasons for the gap between what they save and what they need in retirement. One approach to remedy this is to offer policy objectives instead focusing on asset allocation. This can be done in many ways such as plan structure designed to fulfill policy objectives. Structure matters, he said, because it facilitates decisions on where to allocate funds. Other considerations include the provision of advice. Plan members who get advice, even by using target date funds, earn three percentage points more than those who do to. Custom targeting is another approach which ensures a member’s equity risk is appropriate for their targeted retirement date. The other issue is how do they spend their money down in retirement. In the U.S., longevity risk insurance is gaining popularity. Here, retirees can take a portion of their accumulated assets from the DC plan to purchase an annuity that starts paying out at a certain age, 85 for example. This allows them to spend the bulk of their retirement assets before that age and be assured an income stream after that.
Annual ‘Say On Pay’ Votes Proposed
An amendment to the Canada Business Corporations Act (CBCA) proposed in the federal government’s new budget implementation bill would require corporations incorporated under the CBCA to provide an annual ‘Say on Pay’ vote. A report from SHARE shows more than 71 per cent of companies in the TSX Composite Index have now adopted ‘Say on Pay’ votes and 52 of the TSX60 Index companies have adopted the practice. Another 52 Canadian publicly-traded companies that are not on the TSX Composite Index have adopted the practice, making a total of 220 companies in Canada. ‘Say on Pay’ votes create a critical accountability mechanism for shareholders, providing them with an opportunity to voice concerns with executive compensation practices in a focused, effective, and appropriate manner,” says Kevin Thomas, executive director at SHARE. “Adopting Say on Pay has been a way for boards to demonstrate their willingness to communicate and discuss their approach to compensation in open dialogue with shareholders, both before and after the annual vote. It provides the right balance between accountability to a company’s owners and the board’s discretion to oversee the company’s overall health and success.” While the practice is required by regulators in other jurisdictions like the U.S. and UK, its uptake in Canada has been driven by shareholder engagement. Since 2017, there has been a 6.3 per cent increase in the percentage of the TSX Composite Index and an 8.3 per cent increase in the percentage of the TSX60 Index that have adopted ‘Say on Pay’ thanks to persistent shareholder engagement by a group of Canadian institutional investors including SHARE members, the Alberta Investment Management Corporation, the British Columbia Investment Management Corporation (BCI), the Caisse de dépôt et placement du Québec (CDPQ), and the Public Sector Pension Investment Board (PSP Investments).
Asians Allocate More To ETFs
Allocations to exchange traded funds (ETFs) in Asian institutional portfolios increased sharply last year, says a Greenwich Associates Asian ETF study. It found average ETF allocations grew to 23 per cent of total assets in 2018 from 14 per cent in 2017. This growth was driven in large part by institutions’ need to reposition their portfolios amid a dismal year in Asian equities and a surge in global market volatility. Three additional trends contributed to last year’s fast growth in institutional ETF investments in Asia. The continued shift of assets from active management to index strategies created strong demand for ETFs, the vehicle of choice for index exposures for nine out of 10 study participants. Investors in bond ETFs increased allocations to the funds last year by over 50 per cent on average, to more than a quarter of total fixed income assets. Driving this shift was investors’ continued search for a reliable source of fixed income market liquidity. Smart beta ETFs are now used by 70 per cent of Asian study participants. A third of those respondents plan additional increases to factor-based ETF allocations in 2019, with a majority of those expecting to boost allocations by more than 10 per cent. These trends are expected to remain in place and push ETF investment even higher in 2019.
Gallagher Signs Diversity Pledge
J. Patrick Gallagher, Jr., chairman, president, and CEO of Gallagher, a global insurance brokerage, risk management, and consulting services firm, has signed the CEO Action for Diversity & Inclusion pledge, the largest CEO-driven commitment to advance diversity and inclusion within the workplace. By signing this commitment, the company pledges to foster an environment where diverse perspectives and experiences are welcomed and respected as cultivating a diverse and inclusive workforce facilitates community and also drives innovation and creativity. More than 600 CEOs representing the world’s leading companies and business organizations have signed the pledge.
Quebec Covering MAVIRET
AbbVie’s MAVIRET (glecaprevir/pibrentasvir) is now listed as a medication covered under Quebec’s public drug insurance plan. MAVIRET is a once-daily ribavirin-free treatment for adults with chronic hepatitis C virus (HCV) infection across all major HCV genotypes. It is an eight week, pan-genotypic treatment for patients without cirrhosis and who are new to treatment. Approximately 300,000 Canadians are infected with chronic HCV. In Quebec, the number of reported cases is 39,136; however, the total number of people living with the disease is estimated to be 70,000.
Rempel Earns Volunteer Award
Sylvia Rempel is the 2019 CPBI Saskatchewan Volunteer of the Year. She has been a CPBI member since 2004 and joined the CPBI Saskatchewan Regional Council in 2011. For the past eight years, she has contributed a great deal of time and effort ‘behind the scenes’ towards the success of CPBI Saskatchewan’s events, programming, and communications. She has served as chair of the communications committee, co-chair of the professional development programs committee, and has also served on the conference planning committee and been instrumental in researching and engaging many of the speakers and topics for its luncheons and conferences over the years. She is currently a senior benefits specialist, people and resources, at the University of Saskatchewan.
Tailoring Benefits Plans To Needs Examined
ICRA Québec will provide a session in English on how to ‘Develop a Benefits Plan Tailored to the Needs of your Business in Quebec.’ Louis-Philippe Corbeil Girard, a group insurance and annuity plans advisor at Gestion Tim Cummings, will discuss how to conceive and implement a benefits plan that fits a company culture, budget, the desired impact in terms of employer branding, and how to use a plan to get a better quality/price ratio. It takes place May 1 in Montreal, QC. For information, visit Tailoring Benefits