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October 26, 2020


Pension Benefits Must Be The Same

In order for Alberta to leave the Canada Pension Plan, it would have to ensure the benefits paid to retirees are exactly the same as those from CPP, says Dr. Jack Mintz, President’s Fellow of the School of Public Policy, University of Calgary. He told the ACPM Alberta Regional Council’s ‘The Value of a Pension’ event that the same approach is seen with the Quebec Pension Plan and it is necessary because people move between provinces. Having the same kind of benefits makes it easier to keep track of the money. However, if Alberta did leave, there is the question of what would happen to the contribution rate. Current forecasts suggest that the contribution rate would be lower. That would allow Alberta to have a little bit more of a competitive market to attract new firms as payroll taxes would be lower. Alberta is very interested in growing other sectors and “it’s exactly the right thing be thinking about terms of diversification,” he said, as having more money managed in Alberta and a bigger managerial group of professionals working in the financial sector could help actually spur the growth of the financial sector. Indeed, an Alberta pension plan could be part of the number of policies that could help grow a strategic sector like finance, he said.

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Decarbonization Target Range Set

The members of the now 30-strong UN-convened Net-Zero Asset Owner Alliance have collectively agreed the range within which their first set of concrete portfolio decarbonization targets will fall. Based on an assessment of pathways to the Intergovernmental Panel on Climate Change 1.5°C scenario, Alliance members determined that greenhouse gas emission (GHG) reductions for the period 2020 to 2025 should range from at least 16 per cent to 29 per cent from 2019. Implementation of targets within this range would represent a substantial decoupling of asset owners’ portfolio GHG emissions from the global economy. Individual Alliance members are to set their portfolio targets in the first quarter of next year.

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Employers Froze Salaries

A survey by Hays shows 71 per cent of employers froze salaries in response to the COVID-19 pandemic. And for 2021, only 19 per cent plan to boost pay greater than an annual cost-of-living adjustment, while 29 per cent are not planning on salary increases. The biggest number of employers planning no salary increases are those in Alberta (46 per cent), Quebec (33 per cent), Ontario, and British Columbia (both 23 per cent). “Employers have been battling through the greatest global downturn since the Great Depression and as we’ve seen from the country’s job numbers, they’re primarily focused on rehiring and regaining lost ground,” says Travis O’Rourke, president of Hays Canada. “It’s clear that things like raises, employee training, and wellness spending could be on the back-burner for some time.”

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Pension Funds Improve Position

Diversified pooled fund managers posted a median return of 4.4 per cent before management fees and 2.6 per cent since the beginning of the year, says Morneau Shepell’s ‘Performance Universe of Pension Managers’ Pooled Funds’ for the third quarter of 2020. The stock market rebound continued into the third quarter, most market indices showed positive returns. Jean Bergeron, partner for the Morneau Shepell Asset & Risk Management consulting team, says “The good returns obtained in the third quarter enabled pension funds to improve their financial position. However, the financial situation of the pension funds remained worse than it was at the start of the year due to the significant drop in interest rates. This drop in interest rates has caused solvency liabilities to rise significantly since the beginning of the year. We estimate that the solvency ratio of an average pension fund has fallen by around one per cent to five per cent since the beginning of the year.”

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Accelerated Rebound Coming

With much of the world facing a second wave of COVID-19, the economic recovery is slowing. But an accelerated rebound is visible at the end of the tunnel, says Andrew Grantham, CIBC Capital Markets senior economist. In ‘The Covid-19 Recession: It’s Good to Be Different,’ he says rising COVID-19 cases and easing government support mean “the North American economy will be in for a long, hard winter.” Despite that bleak sentiment, he says this recession will eventually result in a quick recovery relative to typical recessions. For example, U.S. job losses have been concentrated in certain sectors, resulting in a relatively weak multiplier effect for the economy. During the pandemic, the 15 worst sectors have made up more than half the decline in U.S. jobs since February, Grantham says. In contrast, during the 2008/09 financial crisis the hardest hit sectors constituted only one-third of total job losses in the U.S. “The concentrated nature of the missing jobs gives hope for a rapid rebound when COVID is fully behind us,” he says. Another positive factor is that government support has resulted in fewer business bankruptcies stateside relative to 2019. If that support continues in the form of a new U.S. fiscal package, “greater linkages will remain between employers and employees,” he says, and the result would be fewer permanent job losses.

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Mental Health Care Offerings Expanding

The availability of ‘Teladoc Mental Health Care’ is coming at a time when employers are expanding their offerings with nearly 40 per cent reporting they have added mental health resources. Its May survey found half of Canadian respondents reported their mental health was negatively impacted by the COVID-19 pandemic and 62 per cent of respondents reported they would be comfortable using telemedicine for mental health support. Its mental health care has licensed psychiatrists, psychologists, and therapists who are available quickly, no matter where the member lives, and allows members to have multiple sessions with the same clinician. On average, patients can wait between three to nine months to receive mental health support. With this, members have 24-7 access to the app and an average of five-day lead time to book appointments. It also offers more scheduling options and availability beyond traditional in-person visit limitations. The convenience of virtual therapy allows for secure, discreet, and confidential appointments, making treatment possible for people who feel they are more comfortable in a controlled space or with limited available time.

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FX Market Adapted On Fly

Although day-to-day aspects of the foreign exchange market have largely returned to normal, disruptions caused by the COVID-19 pandemic will have a lasting impact on market structure and functionality, says Greenwich Associates. It says the COVID-19 crisis rattled FX markets, interrupting market participants’ access not only to liquidity, but also to basic workflows that were upended by the sudden shift to working from home. “The good news is that the market structure was flexible enough to accommodate rapid changes in execution methodologies and other areas, allowing market participants to adapt on the fly,” says Ken Monahan, senior analyst for Greenwich Associates market structure and technology in ‘Ad Hoc Responses to COVID Shock Will Continue to Shape FX Market Structure.’ Among the many changes triggered by the crisis, the report highlights two important impacts ‒ a new appreciation for the value of relationships and high-quality sell-side service and support and an increase in the use of algorithms to execute trades and the shopping of orders across liquidity pools through the use of API aggregators. “On the surface these two developments seem contradictory,” he says. “In reality, both can be true at the same time. The crisis demonstrated that, in extreme volatility, market participants need both relationships they can count on and effective alternative tools for sourcing liquidity and executing trades.”

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Allocation Increasing To Renewables

UK pension funds are planning to increase allocations to renewables over the next five years, says a report from Alpha Real Capital. Nearly 70 per cent of pension fund investors in the country expect renewable energy investment to increase by 2025, while just 10 per cent expect it to fall. Alpha’s chief executive, Philip Rose, says renewable energy infrastructure has the potential to provide “predictable cash flows, significant inflation linkage, and good duration.

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Sun Life Acquires Crescent Capital

Sun Life Financial Inc. will acquire a majority stake in Crescent Capital Group LP, a global alternative credit investment manager. Crescent has approximately US$28 billion in assets under management. Crescent will form part of SLC Management, Sun Life’s alternatives asset management business. The acquisition will extend its solutions in alternative credit, which will benefit existing and prospective clients.

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Ing Joins OMERS

Leigh-Ann Ing is director, global wellness and benefits strategy,  at OMERS. Most recently, she was a principal, total health management, at Mercer.

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Maple Model Examined

‘Maple Model Investing: Inherent and Developed Advantages of the Canadian Institutional Investment Model’ is the focus of an Alternative Investment Management Association (AIMA) and Women in Finance session on October 30. A panel of Ela Karahasanoglu, head of total fund management at BCI; Heather Cooke, CIO of the Audra Group Family Office; Anastassia Kobeleva, portfolio manager, external portfolio management, capital markets and factor investing, at the Canada Pension Plan Investment Board; and Janet Rabovsky, CIO of Fairwater Capital Corporation; will discuss the evolution of the Canadian institutional investment model. Information is at https://www.aima.org/event/maple-model-investing–inherent-and-developed-advantages.html?dm_i=2LZ3,1NZ2P,6DGDL6,5NQK8,1

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October 23, 2020


Asset Transfer Consent Changing

Ontario’s Financial Service Regulatory Authority (FSRA) is changing its process for consenting to asset transfers under section 80.4 of the Pension Benefits Act (PBA). An asset transfer occurs when a single employer pension plan is converted and transferred into a jointly sponsored pension plan. Until recently, once FSRA completed its review of an asset transfer request, if the application complied with the PBA, FSRA issued a Notice of Intended Decision (NOID) before consenting to the transfer. The NOID signaled the beginning of a 30-day period in which impacted persons could contest the proposed consent by requesting a hearing before the Financial Services Tribunal (FST). If there was no request for an FST hearing within the 30-day period, FSRA issued an order consenting to the application. Effective immediately, following a 10-day notice period to impacted plan members, FSRA will provide its consent using a letter of consent. Special notice will be sent to members impacted by the proposed asset transfer inviting them to express their concerns If an applicant would prefer to proceed using the NOID process, that can be arranged by request to FSRA.

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Interest Rates Helped COVID Response

It would have been impossible for governments throughout the world to fight against COVID-19 this year if interest rates had been higher, says Darren Williams, AllianceBernstein’s director of global economic research. Speaking on ‘What COVID-19 Means for the Economic Policy Puzzle,’ he said until recently, debt had only ever gone up during wars, The norm during peacetime over the last three or four decade was for governments to be paying back debt, but that’s “obviously not been the case.” However, the reason governments have been able to get away with this rise in debt is because it has been accompanied by a decrease in interest rates. Now in some respects, that’s good news, he said. It’s the very low interest rates that have empowered governments to tackle the virus. But, there are adverse consequences as well. For example, very low interest rates interfere with the effectiveness of monetary policy and can potentially result in very adverse implications for the financial system stability over time. However, it’s actually the rise in debt which is forcing interest rates lower so it’s only through interest rates continuing to fall that governments and private sector are able to actually meet the debt servicing payments they now face. Eric Winograd, its U.S. economist, said after healthcare issues were addressed, economic policymakers responded very quickly and very aggressively to prop up financial markets with “the logic being that an economic crisis that spiraled into a financial crisis would be much more difficult to correct,” he said. Protecting good businesses from the impact of the crisis, limiting foreign spillovers, and most important of all, making sure that banks remain solvent and that confidence in the financial system didn’t exacerbate the problems were a critical part of the recovery. Now the issue is giving way for an eventual recovery. From a monetary policy perspective, the U.S. Fed is engaged in large scale quantitative easing. It has taken great pains to indicate that the quantitative easing it has undertaken is designed to support the economy, not to accommodate fiscal stimulus. The reality is that the Federal Reserve has bought most if not all of the new treasury issuance over the course of the last six months. “It looks like monetization and acts like monetization, However, we shouldn’t treat it as such, no matter how they wish to characterize it, said Winograd.

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More Incorporate ESG Into Investment Process

More investment firms are incorporating additional environmental, social, and governance (ESG) metrics into their investment processes, while also expanding the amount of resources dedicated to responsible investment, says Russell Investments’ sixth-annual ‘ESG Manager Survey.’ It finds that asset managers are increasing the extent to which they incorporate ESG-specific considerations into their investment activities with 78 per cent of managers surveyed globally now explicitly incorporating qualitative or quantitative ESG factor assessments into their investment processes (an increase of five percentage points compared to last year’s survey). Indeed, almost all regions surveyed showed progress in the extent to which ESG considerations are regularly embedded into investment processes. Canada (15 per cent), the U.S. (11 per cent), and the UK (11 per cent) show the most growth since last year’s survey. “As the fund management industry continues to embrace ESG integration, even amid pandemic-related challenges and volatility, our survey shows they are seeking better ESG information, deeper resources, broader consideration within investment processes, and clearer regulatory standards,” says Yoshie Phillips, its director of investment research – global fixed income. “At the same time, asset managers indicate they’re seeking greater clarity of the value-add from explicit ESG integration.” Governance remains the critical consideration for asset managers, with 82 per cent of respondents identifying this as the ESG factor with the most impact on their investment decisions, reflecting the importance of company management in delivering long-term enterprise value. However, environmental and social issues are becoming more pronounced in asset managers’ thinking, with this year’s survey showing a four per cent increase in the number of managers identifying environmental considerations as the factor that most impacts their investment decisions.

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Lip Service Paid To Diversity

Some asset managers are accused of “paying lip service” to gender diversity as many do not assess it as part of their investment analysis, says research from Redington. It found less than half of asset managers (47 per cent) it surveyed assessed gender diversity as part of their investment analysis when researching potential investments – despite recognizing its importance within their own firms. Just over three-quarters assessed gender diversity internally and nearly 60 per cent said gender diversity was an important contributor to their success. The data also shows that two-thirds of asset managers had less than 25 per cent female representation on their investment teams and 60 per cent did not report their gender pay gap in 2019.

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Themes Drive Allocations To ETFs

Two major themes in asset management ‒ factor-based investing and ESG ‒ are causing more institutional and wholesale investors to make asset allocations using ETFs, says Invesco. Although each has its own driver for making ETFs attractive, there could be a “helpful symbiosis” between factor investing and ESG, it said. Investors managing active factor-based strategies were, in some cases, using ETFs rather than swaps or other derivatives executed via an investment bank. The additional transparency demands about returns of new or enhanced ESG policy thresholds is one of the reasons. Investors believe that incorporating ESG in factor models could help manage short-term downside and gain greater upside over the longer term. Traditional ETFs are valued for passive factor allocations due to ease of use and pricing.

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Shift To Alternatives Helps Consultants

The ongoing shift to more opaque alternative asset classes, an area of limited in-house expertise for many institutions, may boost the business development efforts of institutional consultants, says Cerulli Associates. The investing challenges created by the persistence of ultra-low interest rates and heightened equity valuations have caused institutional investors to seek higher allocations to alternative investments and private markets. This trend is challenging consultants to build or acquire the subject matter expertise needed to evaluate new asset classes and make informed recommendations to clients. “This lack of familiarity increases the likelihood that asset owners will seek assistance in adding allocations in any of these areas,” says Robert Nelson, associate director at Cerulli. “While there is a cost to build first-rate expertise and networks in alternative asset classes and private markets, consultants that demonstrate deep knowledge of the space and offer valuable guidance to clients will be optimally positioned to defend and gain share among institutional investors.” Its research indicates that 47 per cent of consultants see great potential for new growth within this channel.

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Morneau Shepell Sets Out CSR Activities

Morneau Shepell’s second annual ‘Corporate Social Responsibility (CSR) Report’ outlines its CSR activities completed in 2019 and over the first six months of 2020, including environmental, social and governance performance and advances in areas such as employee mental health and wellbeing, sustainability initiatives, and community investments that support mental health and education. In addition to an expanded environmental policy and community-focused investments, its CSR strategy remains strongly focused on providing the services and resources that broader communities require to successfully navigate the challenges that COVID-19 has created. During this time, it has introduced an online hub of wellbeing resources, an internet-based cognitive behavioural therapy program designed to address the uniquely challenging aspects of a pandemic, and a free crisis hotline for communities affected by traumatic events such as natural disasters, fatal accidents, and mass shootings. In 2019, it established an inclusion and diversity (I&D) council and developed a strategy, which was expanded earlier this year to form an anti-racism task force. It also pledged its support for the CEO Action Pledge in the United States and the BlackNorth Initiative in Canada – two initiatives that work to meaningfully address anti-Black racism and advance diversity and inclusion in the workplace.

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Sun Life Administering MUPP

Sun Life and McGill University are joining forces to help secure the retirement of thousands of members. Sun Life, in collaboration with Normandin Beaudry, will provide administration services for the McGill University Pension Plan (MUPP). Covering approximately 10,000 members, the MUPP represents the largest pension plan for which Sun Life provides administrative services in Quebec. This is the second McGill University pension plan administered by Sun Life. The service employees union joined in 1996.

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GroupHEALTH Opens New Headquarters

GroupHEALTH Benefit Solutions celebrated the opening of its new corporate headquarters in a COVID-responsible manner. GroupHEALTH Place is located in South Surrey, BC. The building is four stories tall and boasts 55,000 square feet of office space, including state-of-the-art meeting and collaborative workspaces, along with an extensive lunch facility, five kitchenettes, a patio deck, and a fully equipped gym. The design concept is based on a journey through an ecosystem. Each floor showcases design details with a modern pallet using nature as a muse – the ocean, coast, coastal rainforest, and mountains.

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CDPQ Creates SME Diversity Fund

The Caisse de dépôt et placement du Québec (CDPQ) has created ‘Equity 253’, an investment fund aimed at increasing diversity and inclusion in growing SMEs in Québec and Canada. With a total of $250 million in funding, it will target companies leveraging diversity as a vector of development and expansion. “It has been clearly established that greater corporate diversity positively impacts innovation, risk management, productivity, and financial performance. Through this dedicated fund, we want to encourage SMEs to increase diversity in their organizations using a measurable objective so they can benefit from this additional performance lever,” says Kim Thomassin, CDPQ’s executive vice–president and head of Investments in Québec and stewardship investing. To be selected, SMEs will need to commit to diversifying their workforce so that at least 25 per cent of their boards of directors, management teams, and shareholding is comprised of people of diverse backgrounds (e.g. women, visible minorities, Indigenous peoples) in the five years following confirmation of financing. To facilitate achieving these objectives, CDPQ commits to providing the companies with operational guidance to implement and execute a customized diversity and inclusion plan.

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Weston Joins Alice Insights

Robert Weston is chief development officer of Alice Insights Inc. ‒ a technology company that uses machine learning and geophysics to forecast the financial impact of climate change for asset owners. Most recently, he was a partner at Agawa Fund Management.

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Perspectives On Economy Offered

Carl Tannenbaum, vice-president and chief economist, at Northern Trust will provide ‘Perspectives on the economy in the wake of COVID-19’ at an ACPM session on October 28. He will discuss the current global economic conditions amidst the COVID-19 pandemic and what the recovery process is expected to look like in the years to come. Information is at https://www.acpm.com/ACPM/Events/Webinar-(October-28,-2020).aspx

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October 22, 2020


Stigma Exists In Mental Illness

“Often, when talking about mental illness, one of the first thing that comes to mind is the word stigma,” says Sean Barschel, rural and northern partnership program co-ordinator for the Schizophrenia Society of Saskatchewan. Speaking at the CPBI Saskatchewan ‘Mental Health Anti-Stigma and Awareness’ session, he said stigma exists in a couple different ways ‒ internal and external. External stigma exists in the things that “we say and do to one another on a daily basis,” he said. Internal stigma exists when people who live with a mental illness start to believe some of those negative things that are being said about them, whether they’re being told such as “they’re worthless, they’re no good, and they’re lazy.” After a while, they start to believe these things, he said. Both are equally harmful as it causes individuals to withdraw from social support. The hope of the partnership program is to give everybody some new knowledge about schizophrenia and mental illnesses as well as the recovery process and how to access some of those treatment options. The Mental Health Commission of Canada says one in five Canadians are directly affected by mental illness in any given year and “the more shocking statistic” is that two-thirds of those individuals living with an illness are living in silence because of fear of rejection and judgment by other people. This stigma means out of 100 individuals, roughly 20 of them would be living with an mental illness of some kind, but only seven of them would actively be receiving the care that they need. “We believe that really needs to change,” he said.

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Contribution Reprieve Limits Ability To Run Business

While at first blush Ontario’s move to allow certain employers a reprieve in making contributions to their DB pension plans appears to be an attractive option, the details include some fairly significant limitations on how employers run their business which likely make this attractive to only those employers who are severely cash-strapped, says Gregory Winfield in a McCarthy Tétrault ‘News Alerts.’ Put succinctly, he says, the target audience is private sector employers sponsoring single-employer DB Plans. The relief available allows for deferral of payments from now through March 2021. However, there are restrictions imposed on an employer who has sought relief which include not allowing an employer to pay dividends, buy-back share capital, pay a bonus to any ‘executive,’ or increase the compensation of any executive. Before making the election to seek this relief, employers and plan administrators should review and amend, as required, any funding policy in effect for the plan to see if it permits selecting this relief. Indeed, a review of all relevant plan documents and projected cash flows (including commitments made in respect of the plan’s investments) should be undertaken before making final decisions. As well, plan sponsors should not overlook the terms and conditions of any existing financing arrangements that they may have. Specifically, careful consideration should be given to ensuring that the language in the financing agreement is sufficiently broad to permit the sponsor to avail itself of the proposed contribution holidays without triggering a breach or, worse, an event of default on the financing agreement.

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Equity REITs Outperform

Equity REITs outperformed unlisted real estate investments over a more than two-decade period, delivering higher returns for pension funds, says research from CEM Benchmarking. It shows REITs outperformed private real estate by nearly 2.7 percentage points per year on average and also provided better risk adjusted returns. Key takeaways from ‘Asset Allocation and Fund Performance of Defined Benefit Pension Funds in the United States’ include that REITs outperformed all styles of unlisted real estate. However, in spite of their high performance, REITs have the lowest allocation of any asset in the study. In 2018, they accounted for 0.78 per cent of total pension assets compared with 5.19 per cent of assets invested in private real estate.

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ESG Missing In U.S. DC Line-Ups

Though ESG investing has become more mainstream in recent years, a majority of U.S. defined contribution plan lineups do not include an offering that qualifies as an intentional sustainable fund, says research from Morningstar. ‘Do Investors Have ESG-Investing Options in Their DC Plans?’ found as of 2016, 4.5 per cent of DC plans included at least one investment offering that qualifies as an intentional sustainable fund, which are funds for which ESG (environment, social, and governance) incorporation and impact are an intentional focus of their investment process. The report says that ESG in the U.S. has become more popular since 2016 and expects that its analysis is a conservative estimate of ESG options in retirement plans given that many intentional sustainable investments have been launched since 2016.

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Vettese Updates Retirement Income Book

As COVID-19 rocks the economy in an unprecedented black swan event, retirees and those who are preparing to retire need answers to pressing questions about their financial futures. Frederick Vettese, who spent 27 years as chief actuary of Morneau Shepell and now spends most of his professional time speaking and writing about retirement issues, answers these questions in the second edition of ‘Retirement Income for Life.’ Originally published in 2018, this edition has new chapters on early retirement, retiring single, what to do when one spouse dies young, and strategies for mitigating personal financial risk in the current downturn in equities and other investment products. He also offers advice on how to plan for (and even benefit from) the coming bear market resulting from COVID-19, which will create unprecedented equity buying opportunities, possibly as early as 2021.

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Ontario Teachers’ Leads Fundraising

Singapore-based Princeton Digital Group (PDG) has entered into definitive agreement for an equity investment led by Ontario Teachers’ Pension Plan Board.  PDG is an investor, operator, and developer of data centres with presence in the key digital economies of Asia. Since its founding three years ago, it has built a portfolio of 18 data centres across four countries – China, Singapore, Indonesia, and India. The company serves hyperscalers, internet, and cloud companies as they expand across the region.

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Gariépy Joins Alternative Capital

Pierre Luc Gariépy is vice-president, client relations, at Alternative Capital Group. He joins the firm from UBS Global Asset Management where he spent the last six years as executive director.

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Agenda Set For Diversity & Inclusion Week

The agenda for the Responsible Investment Association’s ‘Diversity & Inclusion in the Investment Industry’ week October 26 to 30 is now set. The event features sessions on impact investment, shareholder engagement, and diversity and inclusion. Information is at ttps://diweek.ca

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October 21, 2020


COVID Heightens Pressures On Retirees

The widespread economic impact of COVID-19 is heightening the financial pressures which retirees face, both now and in the future. Coupled with increasing life expectancies and the rising pressure on public resources to support the health and welfare of ageing populations, the pandemic is exacerbating retirement insecurity, says the 12th annual ‘Mercer CFA Institute Global Pension Index.’ Dr David Knox, a senior partner at Mercer and lead author of the study, says: “The economic recession caused by the global health crisis has led to reduced pension contributions, lower investment returns, and higher government debt in most countries. Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement.” This makes it critical that governments reflect on the strengths and weaknesses of their systems to ensure better long-term outcomes for retirees. The impact of COVID-19 is much broader than solely the health implications; there are long-term economic effects impacting industries, interest rates, investment returns, and community confidence in the future. As a result, the provision of adequate and sustainable retirement incomes over the longer term has also changed. The level of government debt has also increased in many countries following COVID-19. This increased debt is likely to restrict the ability of future governments to support their older populations, either through pensions or through the provision of other services such as health or aged care.

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CLHIA Calls For Auto Features

The Canadian Life and Health Insurance Association (CLHIA) is calling on Ontario to allow automatic solutions in capital accumulation plans. In its submission on the province’s fall 2020 budget, it says automatic plan participation at a pre-set (or starter) contribution rate, automatic annual contribution increases, and automatic investment in a default investment option have proven to be highly effective in increasing participation in workplace savings plans and the rate of savings in several countries. However, such solutions remain rare in Canada due mainly to legislative restrictions. It says there is a significant savings shortfall and declining pension coverage for individuals at or near retirement in Ontario. This is due to multiple factors such as accommodating employees who have difficulty deciding whether to participate in their workplace pension plan. Even when employees do opt to join their workplace savings plans, many struggle with selecting the appropriate contribution level and investments for their needs. As well, many employees do not take full advantage of these plans, missing out on billions of dollars of potential matching contributions by their employers. And, increasingly, employers are concerned about the ability of their employees to retire ‘on time.’ This last point has an impact on employers who face higher premium costs for benefit programs that have more uptake from older workers; increased disability claims; higher operating costs (heightened risk of on the job injuries, impacting Workers’ Compensation premiums; and higher salaries for older versus younger workers); and succession challenges which hurt their ability to hire and train younger workers to optimize costs and productivity. It contends allowing auto solution would help resolve these issues.

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Opportunities To Reposition Real Estate Portfolios Considered

Canada’s real estate market is keeping a close eye on opportunities to reposition portfolios, says the PwC Canada and ULI’s ‘Emerging Trends in Real Estate’ report. It says the industry agrees that the impact of COVID-19 on retail and office spaces, as well as suburbanization, has accelerated the pace of change for developers, sellers, and buyers. The report also indicates that the best bets going into 2021 include warehousing and fulfillment, multi-family residential, and medical office space. With COVID-19 accelerating the already growing move to eCommerce, the demand is growing for warehousing space. Survey respondents indicated that malls with excess lands need to be re-imagined into residential or mixed-use properties and possibly using some of that space for warehousing, distribution, or fulfillment ‒ including last-mile delivery ‒ to satisfy the growing demand for online shopping. However, the uncertainty around the return-to-office process sparked divergent views from interviewees. Some predict that employees and their strong desire for social connections will result in a return to the office, while others question whether the pandemic will spark a renewed interest in suburban office development, as some employees look to work closer to home and plan more work from home in the future.

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Positive Performance Likely Regardless Election Outcome

The overall performance of risk assets is likely to be positive over the medium term (multiple months or quarters) regardless of the U.S. election outcome, says Alessio de Longis, a senior portfolio manager with the Invesco investment solutions team. While performance will be driven by more enduring drivers of market performance such as growth, fiscal, and monetary policy, the outcome of the election could have lasting consequences in terms of relative sector and regional performance for equity markets depending on future changes in fiscal and trade policy over the coming years. It says a Democratic win of the White House and Congress would deliver the potential for meaningful policy changes. Overall, the impact on equity and credit markets is likely to be positive in the medium-term, despite risks of an initial sell-off. Given the fragility of the post-COVID job and growth environment, the proposal by Democratic presidential candidate Joe Biden for higher corporate and personal income taxes is likely to be delayed and/or dampened. In addition, projected increases in infrastructure spending should support growth in the near term and provide an offset to negative impact from higher taxation. Reduced trade policy uncertainty may also benefit risk assets, as, in fact, trade policy was the largest headwind to global growth in 2019. A Biden win and a split Congress would benefit equity markets outside the U.S., particularly emerging markets which would benefit from lower trade policy uncertainty and a more diplomatic engagement by the White House on trade disputes with other countries. However, a split Congress should translate into largely unchanged fiscal policy on matters such as healthcare, infrastructure spending, minimum wage, and tax reform. Historically, policy impasse has often translated into a ‘no news is good news’ narrative, which tends to favour risk assets and dampen markets volatility. A victory by the incumbent Donald Trump and a split congress ‒ which is a continuation of the status quo ‒ should be received well by risk assets, lead to U.S. dollar strength in the near term, and re-inforce the trend of U.S. equity outperformance, especially for growth and momentum stocks. However, a continuation of the current trade policy framework is likely to be a headwind for emerging and developed market equities outside the U.S.

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Line Between Impact And ESG Less Clear

There is ongoing confusion about how impact investing and ESG (environment, social, and governance) investing overlap, say Paula Glick and Liz Simmie, of Honeytree Investment Management. This is understandable because the line between the two approaches is less clear than one might think. Traditionally, the notion of impact investing was associated with investments in smaller privately-owned or community-based enterprises looking to address specific social or environmental problems. Examples include funds that invest in early stage enterprises bringing technology to underserved populations, social housing, social impact bonds, or microfinance. Impact has always been about intentionality, investing to generate a positive, measurable social, or environmental difference. On the other hand, ESG integration is traditionally seen as the systematic analysis of environmental, social, and governance factors, alongside financial factors in security selection. Unlike impact, which was associated with private markets, ESG was initially and most often associated with the public equity space. But the concepts of impact and ESG integration collide even in the public equity space. While impact is typically associated with a particular product or service and a specific environmental or social goal, it is, broadly speaking, about achieving positive outcomes. ESG integration is used as a tool to systematically identify those companies that outperform on a broad range of environmental, social, and governance factors. This outperformance is associated with risk mitigation and higher risk-adjusted returns, but also strong stakeholder focus and the large scale impact these companies make.

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iA Adds To ATTITUDE

iA Financial Group has launched the latest generation of its ‘ATTITUDE’ portfolios, pre-built ‘life cycle’ investment solution for group retirement savings clients. Initially introduced in 2007, these portfolios are especially suitable for individuals who prefer to have professionals make their investment choices, monitor financial markets and determine their asset allocation, and how it evolves over time. They are now the default investment option in more than 80 per cent of its clients’ group retirement savings plans. The latest enhancements provide greater access to direct alternative investments, such as real estate and infrastructure, previously reserved for world-class pension plans.

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Allworth Financial Acquired

Investment funds affiliated with Lightyear Capital LLC, a New York-based private equity firm focused on financial services, and the Ontario Teachers’ Pension Plan Board have agreed to acquire wealth management firm Allworth Financial from private equity funds managed by Parthenon Capital. Founded in 1993 and based in Sacramento, CA, Allworth is a full-service independent investment and financial advisory firm that specializes in retirement planning, investment advising, tax planning and preparation, and estate planning for the mass affluent. It has grown client assets under management from $2.4 billion to approximately $10 billion since 2017. The investment will enable it to continue to build its national footprint through systematic acquisitions and multi-channel direct marketing efforts with the goal of becoming a premier wealth manager in the United States.

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Sanderson Joins Coughlin

Sarah (Ferron) Sanderson is senior employee benefits consultant at Coughlin & Associates. She joins the company from HUB International where she was a senior group insurance advisor.

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Gaudry Reports On Claims Data

Julie Gaudry, senior director, group insurance, at RBC Insurance, will report on its claims data and service utilization rates to help plan sponsors understand the pandemic’s toll on Canadians’ mental health. She will also present the latest findings from an RBC Insurance poll on how reactions to the pandemic differ and on how working Canadians are more willing to turn to virtual support as they continue to struggle with mental and financial health in 2020 and beyond. The Benefits and Pensions Monitor webinar ‘Mental Health Insights from 2020 Claims Data and Survey Results’ takes place October 27. Registration is at https://register.gotowebinar.com/register/8472293855029425166

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October 20, 2020


AuM Top $100 Trillion

Assets under management (AuM) at the world’s 500 largest asset managers exceeded $100 trillion for the first time in 2019 ‒ totaling $104.4 trillion, says Willis Towers Watson’s Thinking Ahead Institute. This represents an increase of 14.8 per cent on the previous year, when total AuM was $91.5 trillion and an almost three-fold increase from $35.2 trillion in 2000. The research confirms growing concentration among the top 20 managers whose market share increased during the period to 43 per cent of total assets, up from 38 per cent in 2000 and 29 per cent in 1995. Passively managed assets in the survey grew to $7.9 trillion in 2019, up from $4.9 trillion in 2015.

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ESG Financial Performance Mixed

While “loosely defined” metrics seem to indicate that environment, social, and governance (ESG) investing provides superior returns, “a more in-depth analysis suggests that financial performance based on ESG ratings is mixed and there is little evidence of consistent over-performance in recent years,” says an Organization for Economic Co-operation and Development (OECD). Its annual business and finance outlook focuses on the ESG factors it says are “rapidly becoming a part of mainstream finance.” While it finds ESG ratings and investment approaches constructive in concept and potentially useful in driving the disclosure of valuable information on how companies are managed and operated in reference to long-term value creation, “current market practices, from ratings to disclosures and individual metrics, present a fragmented and inconsistent view of ESG risks and performance.” Institutional investors looking to manage ESG factors often rely on external service providers of indices and ratings, but the lack of standardized reporting and low transparency in ESG rating methodologies “limit comparability and the integration of sustainability factors into the investment decision process.” It calls the wide discrepancy in ESG practices among the biggest challenges in assessing ESG performance. As well, ESG practices are often combined with other investment strategies that could include a thematic focus, which makes it difficult to determine which particular ESG approaches are successful in generating long-term value. However, these challenges “do not negate the benefits, in principle, of considering ESG criteria in the investment process” as the additional information provided “offers further valuable insights on how companies are managed and operated to support long-term investing.”

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Mail-In Ballots In Election Spotlight

Instead of hanging chads ‒ the small pieces of paper intended to be punched from a larger sheet of paper, but still remaining attached which got the spotlight in the 2000 election ‒ mail-in ballots could be the central issue this time, says a Capital Group insights into the U.S. presidential election which is heading into the final weeks. Largely due to the COVID-19 outbreak, a record 80 million Americans are expected to vote by mail in this election cycle rather than visit the polls in person. That means election officials will be processing more than twice as many postal ballots as they did during the last presidential campaign in 2016. This means unless it is a clear landslide for the republican incumbent, Donald Trump, or the Democratic challenger, Joe Biden, the outcome may not be known for days or even weeks and John Emerson, vice-chairman of Capital Group International, says high levels of market volatility would likely accompany this period of uncertainty. Moreover, Democrats are requesting mail-in ballots in much higher numbers than Republicans which could set up a scenario where election day results appear to favour Republicans and then mail-in ballots ‒ which take longer to count ‒ shift the outcome toward Democrats. Either way, court challenges are a predictable outcome, he says, and “at the end of the day, I think it’s important to keep in mind we will have a result. We will have a president, and I believe we will have a peaceful transition of power.” For long-term investors, it’s important to remember that, historically speaking, the political power structure in Washington, DC, hasn’t had much of a discernible impact on equity market returns. From 1933 to 2019, under unified and split governments, the average annual return for the Standard & Poor’s 500 Composite Index has fallen into a broad range from roughly seven to 10 per cent. “A split Congress, as we have today, appears to be the market’s favourite choice, having generated an average return of 10.4 per cent,” says Emerson.

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RCMP Women Denied Chance To Bolster Pensions

Women who enrolled in the RCMP’s job-sharing program while raising young children were unfairly denied the chance to bolster their pensions, says a ruling by the Supreme Court of Canada. It ruled in favour of three mothers who worked reduced hours on the RCMP in order to devote time to their children. They charged the RCMP pension plan breached their equality rights under the charter by denying them the chance to accrue full-time pension credit for periods when they worked reduced hours for family reasons. The three women had enrolled in a new job-sharing program, introduced in December 1997, that allowed regular RCMP members to split the duties of one full-time position. They pointed out that under the RCMP pension plan, members can accrue pensionable service during leaves of absence, such as maternity, sick, or education leaves, provided the member pays both the employer and employee contributions for the period. But members who temporarily reduce their hours of work see their pensions diminished, as they are not given the option of “buying back” full-time pension credit for the hours not worked. In its decision, the Supreme Court noted nearly all of the participants in the job-sharing program were women and most of them limited their hours of work because of child care. Justice Rosalie Abella, who wrote on behalf of the majority opinion, said “This arrangement has a disproportionate impact on women and perpetuates their historical disadvantage. It is a “clear violation” of their right to equality under the charter, she said.

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DC Sponsors Satisfied With OCIO

While the use of outsourced chief investment officers by defined contribution plan sponsors is not widespread, the sponsors that use them are satisfied and rely on them for discretion on the selection of investment strategies and hiring and firing of asset managers, says research from PGIM. Its survey found that 15 per cent of plan sponsors currently use an OCIO manager for their entire 401(k) plan. Use of OCIOs are more common for midsize plans (24 per cent) ‒ with between $250 million and $500 million in assets ‒ than larger plans (eight per cent), the survey said. The top reasons for not using an OCIO are a desire to retain control of investment decisions or because they already have this expertise internally. Of the respondents, 64 per cent do not use and have never considered using an OCIO manager.

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UTAM Supports Science-Based Targets

UTAM has joined fellow investor signatories of CDP in supporting the organization’s ‘Science-Based Targets Campaign.’ The campaign aims to accelerate the corporate sector’s adoption of science-based reduction targets for greenhouse gas (GHG) emissions. This initiative aligns well with its goal to reduce the carbon footprint of U of T’s pension and endowment portfolios by 40 per cent compared to 2017 levels by 2030. Earlier this month, global financial institutions representing nearly US$20 trillion in assets called on more than 1,800 companies that are high GHG emitters to set 1.5°C science-based emissions reduction targets and achieve net zero emissions by 2050. UTAM became a signatory to CDP (formerly known as the Carbon Disclosure Project) in 2016.

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Dementia Care Supported

A care and culture consultancy group to the Canadian health and social care sector has launched a support package focused on the delivery of long-term dementia care in the ‘new normal.’ Following high interest from its partners across Canada, Meaningful Care Matters’ ‘Covid-19 and The Butterfly Approach’ package will offer additional support through the development of resources and tools which are beyond the scope of the group’s person centred dementia model and relate specifically to the impacts of coronavirus. The package will offer various support options including risk assessment and position statements associated with regulatory compliance requirements resultant from COVID-19 and resources in recalibrating the mindset of the approach in the context of a post COVID-19 ‘norm’. It aims to empower careers to be able to create a truly person-centred environment in their homes, where people are free to be themselves.

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Maugeri Has New Role

Kimm Maugeri is human resources leader for Mercer’s Canadian leadership team. She has more than 20 years of experience in human resources with the company. Most recently, she was principal and relationship manager in its global talent and inclusion center of expertise.

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