ETFs Projected To Double
The global exchange traded fund (ETF) industry is projected to double to more than US$10 trillion over the next five years and the Canadian industry is expected to grow at a faster rate to C$400 billion by 2024, says the annual ‘ETF Outlook Report’ from BMO Global Asset Management (BMO GAM). The global ETF market hit a record high of US$4.7 trillion assets under management (AUM) at the end of the year. There were 6,483 ETFs globally, up almost 12 per cent from the previous year. The Canadian ETF market grew to C$156 billion AUM with inflows of C$20 billion. “Investors look to ETFs as an effective, transparent, low cost asset allocation tool,” says Kevin Gopaul, global head of ETFs at BMO GAM. “The diversification and trading efficiency that ETFs offer has become more important than ever as volatility has returned to global markets. The value of positioning with traditional passive ETFs and new active ETFs was evident during the market corrections in the fourth quarter.”
Health Spending Increases
At the end of 2018, total health expenditure was expected to reach $253.5 billion. This is a 4.2 per cent increase from 2017, which saw over $243 billion in health expenditures, says an Eckler ‘GroupNews,’ citing the Canadian Institute for Health Information. Total healthcare spending is $6,839 per person for the year as healthcare spending per capita has increased on average by 1.7 per cent per year since 2014 after decreasing by an average of 0.2 per cent per year between 2010 and 2014. Per capital spending is highest for seniors and infants. Spending on hospitals (28.3 per cent), drugs (15.7 per cent), and physicians (15.1 per cent) continue to represent the largest share of spending on healthcare in Canada. Out-of-pocket expenditure increased to $972 per person in 2016 from $278 in 1988, representing a 4.6 per cent annual increase, while private health insurance expenditure increased to $788 from $139 per person over the same period. In 2017, people with high drug costs ($10,000 or more) represented only 2.3 per cent of beneficiaries, but accounted for 36.6 per cent of public drug spending. The amount spent on healthcare varies by province, ranging from a high of $7,552 in Alberta to a low of $6,584 in Ontario. Eckler says with drug spending and spending on high-cost drugs for smaller numbers of individuals showing a marked increase in comparison to other areas, plan administrators and employers would be wise to review their current policies to ensure that their health benefit offerings in general and benefits related to drug spending in particular reflect the changing needs of their employees in the future.
Risky Projections Used To Calculate Liabilities
Public sector pensions are using risky projections to calculate their future liabilities, says a report from the C.D. Howe Institute. In ‘Managing Uncertainty: The Search for a Golden Discount-Rate Rule for Defined-Benefit Pensions,’ it finds that many pension plans use high discount rates that increase the risk they will have insufficient assets to meet their future obligations. Pension fund sponsors use a discount rate to determine the value of assets they must set aside today to pay for promised benefits in the future. If the rate is too high, the assets are too meagre and vice versa. The choice of discount rate can have a dramatic effect on the value of a pension plan’s liabilities and, therefore, the assets needed to meet plan obligations. In a world with no uncertainty, the discount rate would be the same as the rate of return on pension plan assets and the projection of future liabilities would be equal to the value of plan benefit payments made in future. However, pension plan assets and obligations are inherently unpredictable and their future value uncertain. As a consequence, the assets accumulated by a pension plan can differ markedly from the assets required to meet actual future payments. The study says the discount rate types are a 10-year moving average of the high-quality corporate bond yield and an inflation forecast supplemented by a constant real interest rate. Both of these rules yield average discount rates below the expected rate of return on assets, but higher than the riskless rate of interest.
ESG Investment Skyrocketing
ESG (environment, social, and governance) investing is skyrocketing globally with a growing number of investors implementing strategies that include ESG criteria of varying quality and complexity, says a report by Opimas. ‘ESG Data: Mainstream Consumption, Bigger Spending’ estimates that the responsible investment market reached $30 trillion in assets under management in 2018, up 30.4 per cent from 2016. It projects that figure will grow to $35 trillion by 2020. The report recognizes seven types of responsible investment strategies: negative or exclusionary screening, ESG integration, corporate engagement, norms-based screening, positive screening, sustainability-themed investing, and impact investing. In 2016, negative screening represented 66 per cent of responsible assets under management, while ESG integration accounted for 45 per cent. But asset managers are currently opting for more sophisticated strategies that couple exclusions of controversial industries with ESG integration and a positive or best-in-class screening approach.
OCIO Opportunity For Managers
The OCIO (outsourced chief investment) market is as an opportunity for asset managers despite increased market volatility, says research from Cerulli Associates. ‘U.S. Outsourced CIO Function 2018: Increasing Competition and Service Customization’ reports that U.S.-based OCIO assets represented more than $1 trillion in assets under management (AUM), up 12.7 per cent from the previous year, and accounted for 67 per cent of global AUM. Asset managers continue to see the OCIO business as an important component of their sales goals. The vast majority (95 per cent) of respondents report winning business through OCIO mandates and report that mandates accounted for an average of 14 per cent of their new business during the past year. Most asset managers either already have or are considering hiring dedicated OCIO distribution professionals (80 per cent), relationship managers (83 per cent), and client services resources (72 per cent). Those adding or considering adding to distribution and relationship management teams are doing so because the OCIO sales process tends to be lengthy, complex, and resource-intensive.
Assumption Partners With INTEGRIS On PPP
Assumption Life is partnering with INTEGRIS Pension Management Corp. to give business owners, franchisees, and incorporated professionals a better way of saving for their retirement. The Assumption Life PPP is a combination plan that offers both a defined contribution and a defined benefit option. It allows plan members the flexibility to choose which plan component and contribution method better fit their needs at the start of every year. It also allows members to make additional voluntary contributions on top of the amount deposited by the employer (as long as it does not exceed the maximum amount authorized by income tax regulations), making it a custom solution for each plan member.
U.S. Sponsors Adding Financial Wellbeing Programs
In the past five years, defined contribution plan sponsors in the U.S. likely to add or expand financial wellbeing programs has expanded from 30 per cent to 65 per cent, says Alight’s ‘2019 Top Topics in Retirement and Financial Wellbeing: Building on the Past, Working Toward the Future.’ The top goal for plan participants has moved from increasing savings rates to addressing workers’ broad financial wellbeing and helping them achieve retirement readiness. It shows 64 per cent of employers say their financial wellness program is more important at their organization than it was two years ago. The most common topics financial wellbeing programs cover include the basics of financial markets and simple investing, budgeting, and planning. Employers feel responsible to help their employees in areas such as saving for retirement/long-term needs, establishing an emergency fund, creating or managing a budget, saving for children’s education, helping with debt management, and paying off student loans or refinancing. The major reasons employers are offering financial wellness programs include enhancing the overall employee experience, because it is the right thing to do, and to increase employee engagement.
Doubling Fed Meetings Enhances Feedback
Doubling the number of live Fed meetings this year to eight should enhance feedback with more explicit Fed guidance and the opportunity to gauge market reactions more dynamically. It also raises the risk of missteps forcing the Fed to carefully stay on message, says Dec Mullarkey, managing director, investment strategy, at Sun Life Investment Management. Last year, the Fed raised rates at each meeting while this year it will be more nuanced and data dependent. Markets will now need to divine the more important data drivers on the Fed’s dashboard as they look to anticipate the direction of rates. As expected, the Fed did not change rates this week, he said, but the statement was surprisingly dovish. It dropped all guidance to rates gradually moving higher and boldly inserted, what they have been emphatically reminding markets for a month, that they will remain patient.
Endowment Returns Drop
U.S. educational endowments returned an average 8.2 per cent in fiscal 2018, down from the previous year’s 12.2 per cent return, says the ‘2018 NACUBO-TIAA Study of Endowments.’ It shows their 10-year annualized returns climbed to 5.8 per cent from 4.6 per cent in fiscal 2017, but they remained below the average institutional target return of 7.2 per cent. The rise in the 10-year annualized returns was mainly due to the lower returns of fiscal 2008 dropping out of the average. Returns dipped for four of five asset classes, with only alternative strategies improving to 8.3 per cent from 7.8 per cent in fiscal 2017.
RBC Provides Custody To Bridging
RBC Investor & Treasury Services, part of Royal Bank of Canada, has been appointed custodian by Bridging Finance Inc. for the assets of its income and income RSP funds. RBC will also provide fund accounting and shareholder services support. Bridging Finance is an alternative credit investment management firm and provides middle market North American companies with alternatives to the financing options offered by traditional lenders.
Canadian VC Funding Hits Record High
Funding and deals to Canadian venture-backed companies hit a record high as $3 billion was raised across 471 deals in 2018, says the MoneyTree Canada report from PwC Canada and CB Insights. Canada closed out the year strongly with a 79 per cent jump in funding to $983M in the fourth quarter, up from $548 million in the previous quarter. Activity also increased to 116 deals, up from 96 in the third quarter. Canadian venture funding (VC) funding rose for the second consecutive year.
Active ETFs Inflows Drop
Actively managed ETFs and ETPs listed globally gathered net inflows of US$628 million during December, says ETFGI. Total assets invested in the global actively managed ETF and ETP industry fell 2.39 per cent by the end of the month, from US$109 billion at the end of November to US$107 billion. However, actively managed funds in the U.S. and Canada continue to grow in popularity.
Dramatic Spread Appears Within Canadian Equity Universe
The final quarter of 2018 proved tumultuous for institutional investors. Equity markets were exceptionally volatile during the fourth quarter with a sharp decline during December. Now that the majority of asset managers have submitted their data, a dramatic spread has emerged. The Canadian Equity universe of the latest ‘GMR Institutional Performance Report’ indicates that the best one-year performance return was 2.66 per cent while the worst was minus 23.44 per cent. The one-year median of the group was minus 8.77 per cent. For more information, visit www.gmr.ca
Gagnon Leads IT Efforts
Brett Gagnon is vice-president, information technology (IT), at GroupHEALTH Benefit Solutions. Based in the company’s Surrey, BC, head office, he will oversee technology initiatives across Canada for its family of companies. He brings over 18 years of diverse IT experience in the mining, government, and financial services fields to the position. Most recently, he held a consulting role and facilitated the migration of four independent companies into one technology environment within the mining industry.
RIA Offers Views On SDG Climate Action
The Responsible Investment Association (RIA) will hold a session on ‘Investing for Climate Action to Advance the SDGs: Views from Emerging Markets.’ Featured speakers are Alexa Blain, chief operating officer at Deetken Impact; Fernando Alvarado, CEO of Honduras Renewable Energy Managers and CEO of Caribbean Renewable Energy Managers; and Sandra Kwak, CEO and founder of 10Power. They will discuss how achieving sustainable development goals (SDGs) will mean moving from climate-proofing to climate action. It takes place February 21 in Vancouver, BC. For information, visit Climate Action
Drug Coverage Reform Needed
The federal government needs to work with life and health insurers to reform prescription drug coverage in Canada to help improve patient access to the medicines they need at affordable prices, while protecting strong workplace health benefit plans and ensuring tax dollars are used wisely, says the Canadian Life and Health Insurance Association (CLHIA) in its 2019 federal budget submission. It says the industry does recognize that real problems exist in the prescription drug system today and that the time has come to take meaningful steps to make improvements for the benefit of all Canadians. However, improving the system requires more than simply “filling the gaps.” Rather, improvements must address access issues as well as the cost and financial sustainability of the system. To achieve this, federal, provincial, and territorial governments need to work collaboratively and with private insurers to meet the objectives of ensuring everyone has access to their needed medications and to address the relatively high costs faced by Canadians. One key element for any reform of the prescription drug system is protecting and enhancing existing benefit plans. It says life and health insurers work together with employers to offer access to a wide variety of prescription drugs through employer-sponsored benefit plans. Canadians value their benefit plans that provide them with access to a wide variety of health services, including prescription medicines, vision care, dental care, and mental health supports. These services both help prevent illness and contribute to overall wellness for the residents of Canada, it says.
Sense Of Stigma Declines
Despite the increase in workplace stress, research from Morneau Shepell has found a decline in the sense of stigma associated with mental health issues, demonstrating an improvement in normalizing conversation around the issue, says Paula Allen, its vice-president, research and integrative solutions. Speaking at its ‘Employers Connect: Workplace Mental Health Summit’ in conjunction with Bell’s annual ‘Let’s Talk’ campaign, she said while two thirds (67 per cent) of employees report that they would be concerned their career options would be limited if their workplace was aware of their mental health issue, the number has declined when compared to 2014 when more than three quarters (77 per cent) shared this view. Self-stigma – feeling negatively about oneself for having a mental health issue – also declined over the last five years, from 65 per cent in 2014 to 56 per cent today. The research found that employees who report suffering from high (79 per cent) and medium (68 per cent) levels of workplace stress were more likely to agree that they are worried about the impact on their careers if their workplace knew about any mental wellness issues. The research also found a correlation between workplace stress and organizational culture, she said with a reduction in as a result of changes in workplace approaches to mental health. More than two thirds of employees (67 per cent) and managers (71 per cent) agree that their organization creates an environment that supports mental wellness on the job. When compared to five years ago, a quarter of employees report better resources for mental health issues (26 per cent), support for mental wellness (25 per cent), and workplace/corporate culture (23 per cent). Taking everything about the workplace into consideration, she said two thirds of employees (68 per cent) stated that their workplace has a positive impact on their personal mental health. One of the contributing factors is an organization’s recognition of employees. The research found that employees and managers who feel their organization does not recognize or value them are significantly more likely to report high levels of workplace stress (50 per cent of employees and 55 per cent of managers), compared to those who do (21 per cent of employees and 29 per cent of managers).
Canadians Regret Retiring
More than a quarter (27 per cent) of retired Canadians regret retiring and an almost equal number (23 per cent) have tried re-entering the labour market, says a CIBC poll. It shows while 59 per cent choose to return to work for the intellectual stimulation, 50 per cent say it’s due to financial concerns. The poll also revealed that half of all Canadians would rather keep working past age 65 than retire and endure a lower standard of living. Most (78 per cent) believe that reducing their work hours or “semi-retirement” gives them the “best of both worlds.” However, betting on returning to work to help fund a retirement lifestyle is a bit of a gamble. Only a third (32 per cent) of those who tried to re-enter the labour market post retirement did so successfully at a similar pay and level. The rest were only able to enter at a lower level/pay (38 per cent) or gave up trying (30 per cent). It also shows almost half (47 per cent) of retirees stopped working earlier than they expected due to health, family obligations, or employment changes. While Canadians say 58 is the average age they plan to retire, they also say they expect to keep working in some capacity until age 62.
Auditor Report Started Mental Health Journey
Leadership support, internal resources to support programs, union communication, a shift in employee culture from disciplinary to supportive, and strong partnership with service providers are the keys to success for implementing successful mental health programs in the workplace, says Tanya Hickey, senior manager, corporate health and safety strategies, at Ontario Power Generation (OPG). Talking about ‘OPG’s Total Health Strategy’ at Morneau Shepell’s ‘Employers Connect: Workplace Mental Health Summit’ in conjunction with Bell’s annual ‘Let’s Talk’ campaign, she said its journey started with an auditor general’s report which found unfavourable results for its sick leave situation. As a result in 2014, the process started to develop a total health strategy which became a foundation to build on. One area it addressed was its employee and family assistance program (EFAP) and helping people understand it was for more than when they were in crisis. What they offered, she said, was a program to help achieve optimum health. By 2016/2017, it had introduced mental health first aid training and, over a two-year period, 2,100 employees received this training. And a key message was how the EFAP could help those with mental health issues. In fact, everything they do is tied back to the benefits of using the EFAP. Results of its efforts show a 29 per cent decrease in duration of mental health cases; a 58 per cent reduction in LTD claims and a reduction of 21 per cent in new mental health claims; an eight increase to 89 per cent in return to work; and a nine per cent increase in counselling for mental health.
CPPIB Invests In Euro Green Bond
The Canada Pension Plan Investment Board (CPPIB) has issued its first Euro denominated green bond. The sale of €1 billion in 10-year fixed-rate notes will enable CPPIB to invest further in eligible assets such as renewables, water, and real estate projects as well as diversify the fund’s investor base. Among the green bond eligible investments recently made by CPPIB is a joint venture in renewable power and offshore wind assets. In 2018, CPPIB acquired 49 per cent of Enbridge’s interests in two German offshore wind projects, alongside a 49 per cent interest in some of Enbridge’s North American onshore wind and solar assets. “The European market for green bonds is robust and gaining even more traction amid changes such as the EU’s increased targets for how much of the region’s consumed energy comes from renewable sources,” says Poul Winslow, senior managing director and global head of capital markets and factor investing. This issuance follows CPPIB’s inaugural green bond in June 2018.
Postmedia Plans Joining CAAT
Postmedia Network Inc. will merge its six defined benefit pension plans, with assets of over $500 million, with the Colleges of Applied Arts & Technology Pension Plan (CAAT Plan), effective July 1. Assuming all approvals are obtained, Postmedia will become a participating employer under the CAAT Plan on the effective date. All members of the Postmedia plans, as well as members of its defined contribution pension plan, would become members of the CAAT plan and begin accruing benefits under its DBplus provisions. DBplus is a DB pension plan with a fixed contribution rate for members, matched dollar for dollar by employers. Once this transfer of the Postmedia plans assets is completed, cash funding obligations related to the transferred plans’ deficits will be payable over a term of 10 years which is comparable to the company’s current funding expectations over that time period. The agreement remains subject to approval by the CAAT Plan board of trustees and sponsors’ committee.
Depression Hits Anyone, Any Time
Depression doesn’t have anything to do someone’s position, income, or status, says Orlando Da Silva, senior crown counsel, serious fraud office, for the Ontario Ministry of the Attorney General. He recounted his own experience of a lifetime of depression which even saw a suicide attempt at Morneau Shepell’s ‘Employers Connect: Workplace Mental Health Summit’ held in conjunction with Bell’s annual ‘Let’s Talk’ campaign. He said depression can strike anyone at any time. In his case, he has suffered from depression since childhood and as he got older would have severe bouts of it lasting up to 18 months every three or four years. In fact, he was dealing with one at that moment, he said. However, stigma kept him silent and from seeking help. However, that is not the way to do it, he said. Letting others know when an episode is taking place can help avoid the isolation depressed people want which leads to a downward spiral. The pattern of dealing with mental illness in silence needs to be broken, he said, so those suffering can tell a friend or their employer.
Commercial Consolidators Provide Security
Commercial consolidators for defined benefit pensions in the UK could provide stronger security for some members and should not be regulated out of existence, says Willis Towers Watson. In its response to the government’s consultation, which closes on February 1, it encourages the government to be much clearer about the outcomes it wants to facilitate and to work back from there to concrete policy proposals. Mark Duke, managing director at Willis Towers Watson, says, “Clearly, commercial consolidators pose new regulatory challenges. But before any new layers of regulation are imposed, we need to be clear on why and how the current legal framework is deemed inadequate.” Before agreeing to any transfer, trustees would have to be convinced that a consolidator offered a safer home for their members’ pensions and that it made sense to swap the employer covenant for a cash injection which they would not otherwise receive any time soon. The consultation paper says the government might require consolidators “to demonstrate at least a 99 per cent probability of paying or securing all members’ benefits in full.” “This is likely to involve complex modelling where model calibration could materially influence the result. Indeed, while this is not the intention, there are legitimate ways of interpreting the 99 per cent that would deliver a regime stronger than that for insurers, killing off commercial consolidation before it has the chance to take off,” he says.
Capital Intensive Model Favours Largest
There is no question that technology is becoming a bigger driver of the business and that the capital-intensive nature of this model favours the largest dealers and investors, says Greenwich Associates. Among the world’s biggest fixed income dealers, only a handful currently aspire to be leaders across all products and regions. Even among very large banks, most are responding to the new economics of the business by allocating more resources to products or markets viewed as having the best profit potential or in which they have some competitive advantage. While regional specialists and other smaller players will maintain their niches, business is increasingly concentrating in the hands of the biggest dealers ‒ a trend that will only intensify as MiFID II plays out and technology takes on a greater role. “IT costs and the need for scale in lower-margin products point toward increasing concentration of the flow businesses and specialization by dealers with more limited ability to invest in technology,” says James Borger, managing director at Greenwich Associates.
Morningstar Adds Low Carbon Index
Morningstar, Inc. has announced a group of indexes that provide diversified exposure to equities across regions and emphasize companies aligned with the transition to a low carbon economy. The low carbon risk index family uses an optimization process that targets low portfolio-level carbon risk and fossil fuel exposure. “Climate change is a significant challenge that impacts investors,” says Sanjay Arya, head of indexes at Morningstar. “This new family of indexes will empower investors to evaluate and invest in companies that are adapting to the low carbon economy and managing their businesses strategically for the long term.”
Partners Invest In Logistics
Global real estate investors Ivanhoé Cambridge, a real estate subsidiary of the Caisse de dépôt et placement du Québec, and Oxford Properties, the real estate arm of OMERS, have signed a 50-50 joint venture partnership agreement to invest in recently acquired U.S. logistics company IDI Logistics. The initial acquisition by Ivanhoé Cambridge from a Brookfield-sponsored real estate fund was completed on November 30, 2018. Based in Atlanta, GA, IDI Logistics is a developer and manager of logistics real estate in the U.S. and is a fully integrated logistics platform with a long track record of sourcing acquisitions, dispositions, and development opportunities. In its 30-year history, IDI Logistics has developed more than 100 world-class business parks and 750 warehouses totaling over 200 million square feet throughout North America. The joint venture will own the operating and development company, a portfolio of 111 quality operating assets covering 31 million square feet, 35 development projects covering 16 million square feet, and its quality landbank of 33 land parcels allowing for an additional build-out potential of 17 million square feet.
Wolpert Joins Fasken
Michael Wolpert is a partner in the pensions and benefits group at Fasken. He practices exclusively in pensions and benefits law and will provide strategic advice and counsel on legal, legislative, and regulatory issues for retirement plans, employment benefits, and related human resource matters to public and private sector clients.
Life And Disability Focus Of Session
‘Life & Disability ‒ A Claims Perspective’ is the focus of a CPBI Saskatchewan session. Roger Friesen, director of life and disability claims at Co-operators Life Insurance Company, will look at the trends behind life and disability claims and the factors that influence them. It takes place February 13 in Saskatoon, SK. Information is at Saskatoon Disability. Information on the February 14 session in Regina is at Regina Disability
Boring Is New Sexy
“Boring is the new sexy” when it comes to surviving the coming 12 months as the economy morphs into a capital spending led recession, says David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates. Speaking on ‘The Year Of The Pig (Lipstick Won’t Help)’ at an ‘Experts Speaker Series at Rotman’ session, he doesn’t expect it to a severe recession, but his big concern is “what is it going to take to get us out of it. We don’t have the traditional monetary and fiscal ammunition that we’ve had in the past.” However, from an investment standpoint, investors should just ignore the TSX and the S&P and they should not be index, ETF, or passive investors. Commodities are another asset to avoid and this makes sense because they do not do well in a recession because demand is down. Investors definitely want to have some cash on hand for variety of reasons including the fact that they will get paid for it now. In terms of bonds, high quality corporates or government bonds are places to be. And in the stock market, even in a recession high quality, strong balance sheet companies with strong dividend yield and dividend growth characteristics are worth holding and that includes the Canadian banks. He cited an article in USA Today that said now is the time to prepare for the end of the bull market. Using these assets “sets up your portfolio in the coming year by being extremely boring,” he said.
Strong Businesses Best Pension Protection
While the Association of Canadian Pension Management (ACPM) supports the federal government’s review of approaches to address the security of the pension, wage, and benefit entitlements for workers and retirees, it says it should be acknowledged that corporate sponsorship of defined benefit plans has been on a strong decline over the past two decades, with many sponsors deciding to close plans to new members, ceasing benefit accrual, or winding them up entirely. In addition, while there have been a few high profile corporate failures over the past two decades that have led to pension and benefit reductions, the occurrence of corporate failures with DB plans is fairly infrequent. The sad reality, however, is that even in the case of a corporate failure that results in a reduction in DB pensions, it suspects that the vast majority of affected members and pensioners would have been worse off had they never had a pension in the first place. For this reason, it calls for caution in creating any new significant disincentives that would push more corporations to abandon their DB plans. In ACPM’s view, one of the best protections for workers’ and retirees’ pensions is a strong employer. While a number of pension, corporate, and insolvency options can be explored, to the extent that some options end up accelerating the insolvency of the employer may not be in the ultimate best interest in the employees and retirees. Some concrete approaches here which could enhance retirement security include reserve accounts and further modernization of the pension funding framework; clarification of benefit entitlements (for example, the priority of assets on plan termination by providing greater emphasis on the base benefit); and the pooled lifetime retirement income fund option which could not only enhance the retirement security of employees and retirees from a terminating plan with an insolvent employer, but potentially even retirees who had no access to DB plans in the first place.
Workplace Stress On Rise
Workplace stress is on the rise and employees are feeling the pressure, says research from Morneau Shepell. In a survey of employees and employers across Canada, it found that more than one-third of employees report that they are more stressed now from work (35 per cent) and personal issues (36 per cent) than they were five years ago. In the workplace, one-quarter (27 per cent) of employees rated their stress from work during the last six months as high to extreme, compared to 34 per cent among people managers. One of the main contributors to stress today is an increased feeling of workplace isolation – the state of feeling alone and without friends, support, or help. Employees (64 per cent) and managers (73 per cent) reporting a high level of workplace isolation are more likely to say they also have a high level of workplace stress. This is concerning as approximately one in six employees reported a high to extreme feeling of isolation at work (15 per cent) during the previous six months, with one in four employees (23 per cent) and managers (24 per cent) reporting increased feelings of isolation at work when compared to five years ago. “In recent years, organizations have evolved to prioritize employee well-being and management of workplace stress, yet reports of stress continue to increase,” says Stephen Liptrap, its president and chief executive officer. “This is cause for concern as stress is now contributing to a decline in employees’ physical and mental well-being. In addition to mental health issues such as depression and anxiety, we found that employees suffering from high levels of workplace stress are also more likely to suffer from issues such as physical pain and sleep troubles.”
Chinese Growth Has Slowed For Decade
There was no sharp slowdown in China in the fourth quarter of 2018, says Andy Rothman, an investment strategist at Matthews Asia. Its year-on-year growth has been slowing in a consistent pattern for about a decade and several policy changes should lead to stronger activity and market sentiment in the second half of 2019. Growth wasn’t bad; sentiment was with the biggest drivers of pessimism towards China’s 2019 economy the fears that U.S. President Donald Trump would escalate the conflict beyond tariffs, Chinese President Xi Jinping’s rhetorical support of state-owned enterprises over private firms, and regulatory uncertainty. These fears are based on speculation of what might happen, rather than statistical patterns or actual changes in policy. Based on this, he predicts that sentiment is likely to improve in the second half of 2019 with the resolution to the short-term trade dispute between the U.S. and China and the end of Xi speaking in support of state-owned enterprises. He notes consumption of goods and services as a percentage of China’s GDP growth increased from 57.6 per cent in 2017 to 76.2 per cent in 2018, a jump of nearly 20 per cent; household consumption rose eight per cent year-over-year in the fourth quarter; and manufacturing capital expenditure in the quarter was up 11.6 per cent compared to a 6.6 per cent rise the previous year.
Templeton Launches Impact Fund
Franklin Templeton has acquired three social infrastructure assets, following the launch of the its social infrastructure fund (FTSIF), an impact investment fund focusing on social infrastructure investments across Europe. The assets are a justice court house in Madrid, Spain; a medical clinic in London, England; and an elderly care facility in a suburb of Milan, Italy. The investor base consists of eight European and Canadian institutional investors. “There is a widening gap between what is needed to build and maintain adequate social infrastructure and the resources available to fund these projects,” says Raymond Jacobs, managing director and portfolio manager of the fund. “Public investment alone is not sufficient to fill this gap and social infrastructure has emerged as an important, institutional-scale opportunity for private investors to align their portfolios with societal benefits and achieve competitive financial performance.”
RRSP Balances Increasing
The average amount held in RRSPs nationally is $101,155, a 21 per cent increase from 2016 ($83,635), says a BMO Financial Group study. The report also showed that Millennials continue to hold higher amounts over time, accounting for the highest percentage increase with 87 per cent since 2016 ($28,821 versus $15,377 in 2016). Accounts held by Baby Boomers saw a 30 per cent increase over the same period ($178,664 from $137,360 in 2016). “While balances typically rise due to contributions and asset appreciation, it is important to note Canadians of all generations are saving for retirement despite financial priorities and market volatility,” says Robert Armstrong, vice-president, multi asset solutions, at BMO Global Asset Management. The frequency of RRSP withdrawals has decreased by one third since 2017. However, Canadians who decide to dip into their retirement savings before age 71 are taking out larger amounts. The 2018 national average withdrawn was $25,779 compared to $20,952 in 2017.
Dashboard Framework Should Compel Providers
The UK’s proposed pension dashboard framework will only succeed if providers are compelled to provide data to the online portals, says a report commissioned by The People’s Pension. In response to the government’s consultation on pension dashboards – which aim to collate individuals’ pension data in one place – The People’s Pension has called for a legal duty to be placed on all commercial providers of dashboards to “put savers’ interests first.” The report argues that compulsion is “a necessity” as previous voluntary initiatives in other areas of financial services had been “found wanting.” It says “the experience of overseas pensions dashboards has shown that, while voluntary initiatives can eventually lead to comprehensive coverage, it can take many years to achieve this goal.” “Denmark and Sweden used a voluntary approach and, while they have now achieved full coverage, this took between 10 and 13 years. The Netherlands, Israel, and Australia all established dashboard models in roughly three or four years by using legislation requiring providers to provide data to dashboards.
Fiera Partners With EllisDon
Fiera Infrastructure Inc., an affiliate of Fiera Capital Corporation, has entered into a long-term partnership with EllisDon Capital, an affiliate of EllisDon Inc., a Canadian public-private partnership developer, constructor, and facilities service provider. The newly-formed partnership will acquire EllisDon’s interest in its existing portfolio of PPP projects and have the right of first offer over its future PPP projects for a pre-agreed period. EllisDon’s existing portfolio contains interests in 10 PPP projects that represent a diverse asset base of Canadian PPP projects geographically dispersed across four provinces and in three subsectors – social, healthcare, and transportation. Fiera’s investment in the projects will be added to its global infrastructure fund.
Eckler Acquires Financial Wellness Company
Eckler Ltd. has acquired Employee Financial Well-Being (EFW), a Canadian independent financial wellness company. Since 2011, EFW has provided financial education and training to employees across Canada. With a focus on foundational financial education and employee engagement, it has distinguished itself through its ability to enable Canadians to take realistic, actionable steps to improve their financial well-being. Eckler feels strongly that as Canadians are presented with benefits that require them to make decisions, there is a need to increase unbiased education. Helping employees reduce their financial stress and feel financially secure will lead to exponential rewards for the employer. Outcomes include decreased stress and absenteeism and increased productivity.
Alliance Membership Grows
Eric Barclay Insurance Services Inc., based in Vancouver, BC, has joined The Benefits Alliance Group. With this addition, the alliance now has 31-member firms, with more than 175 advisors. Collectively, they administer over 7,500 employee benefits plans with $1.4 billion of group insurance premium and 1,500 group retirement plans and over $3.5 billion in retirement plan assets.
Evans Gets New Role
Kimberly Evans is head of private capital fund administration in North America for Northern Trust. With 25 years of financial services experience, she will focus Northern Trust’s global capabilities on a segment of the alternatives market experiencing rapid asset growth and increased demands for transparency. She joined the firm in 2010 and has held senior management roles, including global head of client valuation reporting.
Forum Looks At Major Trends
The ‘10th Annual Alternative Investment Outlook Forum’ will feature leaders from across the industry to discuss the changing landscape of alternatives, risks, opportunities and trends. Speakers at the AIMA Canada and CAIA Canada event include Priti Shokeen, vice-president of MSCI, who will speak on ‘Big Signal Revolution: Know ‘Why’ You Own It;’ and Dr. Stephen Malinak, chief data and analytics officer, Truvalue Labs, who will discuss ‘Improving the Signal-to-Noise Ratio for AI in Investments: a case study on finding alpha in unstructured ESG data.’ It takes place February 12 in Vancouver, BC. For information, visit Alternative Trends
Charges Laid For Pension Fraud
A 60-year-old London, ON, resident, is charged with three counts of fraud over $5,000, two counts of theft over $5,000, and possession of proceeds of crime in connection with offences related to overpayment of Old Age Security (OAS), Canada Pension Plan (CPP), and Ontario Teacher’s Pension Plan benefits. The Royal Canadian Mounted Police (RCMP) London financial crime unit was working on a complaint from Employment and Social Development Canada (ESDC)/Service Canada. The investigation began in October 2017 when the RCMP was alerted by ESDC/Service Canada that a fraud had been committed. The police investigation revealed that OAS, CPP, and Teachers’ benefit payments continued long after the accused’s parents passed away and were accessed by her through a joint bank account. The accused’s parents passed away in 1993 and 2006. After her father’s passing in 2006, the accused collected in excess of $179,000 from OAS/CPP over an eight-year period (2006 to 2014), and in excess of $135,000 over a 12-year period (2006 to 2018) from Teachers’. Gladys O’Brien, a 60-year-old London resident, is charged.
Best Practices Needed To Discipline Disabled
Best practices should be in place when it comes to disciplining an employee who is known to have a mental or other disability, says the Beneplan ‘Newsletter.’ Firstly, after any incident, the employer should conduct a full investigation to establish the circumstances, determine if the behaviour or event has occurred before, if any coaching or corrective action was offered to the employee. During this time, if the employee informs the employer that their conduct was caused by a disability, the employer can ask questions and determine the facts that will then lead them onto making further enquiries on whether there’s a disability at play. If the employer determines that the conduct was caused by a disability, then disciplining the worker carries a risk of a human rights complaint or, in the unionized sector, a grievance. Once it is determined that a disability has caused the lapse or behaviour in question, the employer must consider whether they are required to accommodate the employee’s disability. This does not mean the employer is forbidden from addressing the conduct with the employee. It is well within their rights to do so, it says. Ideally a coaching conversation, accompanied by a formal reprimand letter, clearly stating that the behaviour in question is not to happen again, should be provided to the employee. The letter should also include what the employer will do to support the employee and their disability and the availability of accommodation if necessary. The risk of disciplining the employee without these steps and before fully understanding the facts of the case ‒ including the nature of the disability and considering the duty to accommodate ‒ will potentially result in a human rights complaint.
DB Consolidation Into Superfunds Coming In UK
Consolidating defined benefit funds into multi-employer arrangements, known as superfunds, will become a commonplace solution for some UK plan sponsors, says a survey by specialist advisory firm Lincoln Pensions. It found 52 per cent of respondents believe superfunds will become commonplace. However, while 46 per cent recognized consolidation as a potential endgame for funds that they might consider in the future, just 11 per cent are currently considering this option. The survey also found that any future UK superfund legislation should focus on the covenant ‒ the plan sponsor’s obligation to deliver pension benefits. The UK government is currently consulting the retirement industry about how it should facilitate a consolidation of corporate defined benefit funds in the legislation. The survey shows 60 per cent of the surveyed pension professionals said superfund legislation should focus on ensuring that the superfund covenant is stronger than the employer covenant available to the transferring pension fund.
Medcan Collaborates For Financial Solution
Wealthsimple and Medcan will collaborate for an integrated financial and personal health management solution. As part of Wealthsimple Generation, clients who deposit more than $500,000 will now have access to several benefits and privileges and receive a comprehensive health plan from Medcan with exclusive pricing. Ashim Khemani, president at Medcan, says “Financial health and personal health go hand in hand. Both take planning, proactivity, and working with trusted specialists who will provide the best guidance at the right time.”
U.S. ETF Growth Paused In 2018
Exchange-traded fund (ETF) assets increased at a compound annual growth rate of 21 per cent during the five years ended 2017, growing to $3.4 trillion before taking a pause in 2018 due to an equity market decline. However, while Cerulli Associates expects the ETF industry to continue to grow, it cautions against extrapolating from historical flows and market returns in ‘U.S. Exchange-Traded Fund Markets 2018: Innovating for the Investor.’ The rapid growth of the U.S. ETF industry appears improbable when considering the challenges associated with product-specific distribution features. Issuers rate home-office approval (90 per cent), accurately and fairly incentivizing wholesalers (90 per cent), and payment for distribution (86 per cent) as top challenges to asset growth. Furthermore, as wirehouses and broker/dealers increasingly move toward fewer, deeper relationships with their asset manager partners, product rationalization, and the culling of products available in models and on platforms will likely continue. ETFs are not exempt from these culls, which to this point have focused on products that have not accumulated significant assets or do not fit into long-term strategic holdings. Increasingly, issuers are also relying on strategic beta and actively managed ETFs for revenue generation. While fixed income managers appear willing to make their active strategies available in a transparent structure, equity managers are largely awaiting regulatory approval for additional non-transparent ETF structures.
Shaw Joins Accompass
Sherry Shaw is a vice-president in the benefits and health practice at Accompass, a division of Gallagher Benefit Services (Canada). She has 26 years of experience in the group benefits industry working primarily on large groups in both the private and public sector at one of Canada’s largest consulting firms. She brings with her knowledge of trending topics such as medical cannabis, building modernized employee experiences, wellness and mental health, pharmacogenetics, and more.
McMahon Looks At Economy
Sébastien McMahon, senior economist at iA Financial Group will look back at an eventful year in 2018 and looks ahead to what’s to come at the CPBI Atlantic’s ‘2019 Economic Forecast.’ This presentation will paint a broad picture of the global economy, the markets, and how to navigate through a tweet-infused world. It takes place February 19 in St. John’s, NL. For information, visit St. John’s Forecast. Information on the February 20 session in Halifax, NS, is at Halifax Forecast
U.S. Plans Intend To Divest
Most corporate U.S. defined benefit plans with derisking goals intend to divest all of their companies’ pension liabilities in the future, says MetLife’s ‘2019 Pension Risk Transfer Poll.’ It shows that 76 per cent of DB plans with derisking goals intend to completely divest all of their companies’ DB plan liabilities at some point in the future, with 33 per cent intending to do so in the next five years. Of the 67 per cent of plan sponsors considering a risk transfer within the next two years, 77 per cent have evaluated the financial impact of a pension risk transfer, while 74 per cent have held discussions with key stakeholders, 65 per cent have engaged in data review and cleanup, and 59 per cent have explored the solutions available in the marketplace and/or quantified the cost of a pension risk transfer. Most plans – 79 per cent – are more likely to consider an annuity buyout now that there have been several large, well-publicized instances of major corporations entering into annuity buyout deals with insurers.
Class Action Launched For Veterans
Koskie Minsky LLP has commenced a class action against the Attorney General of Canada on behalf of all veterans who were in receipt of disability pensions or disability awards between 2002 and 2010 from Veteran Affairs Canada. It alleges that the attorney general, acting through Veteran Affairs Canada, miscalculated the disability pensions and disability awards of veterans between 2002 and 2010. As a result of this error, veterans have not received the full amount of benefits they are entitled to or interest on those benefits. The claim alleges that the attorney general breached its fiduciary duties, contractual obligations, and was negligent in the administration of disability pensions and disability awards.
Differences Must Be Recognized
“There are historic differences between European and U.S. fixed income markets that must be recognized to fully understand how these markets operate, how and why they are changing, and how they can be expected to evolve from here,” says Ken Monahan, senior analyst for Greenwich Associates market structure and technology and author of ‘Understanding European Bond Markets in their Local Context.’ It shows there are several important differences including the fragmentation by issuer of the European government bond market that makes it more analogous to the U.S. municipal bond market than the U.S. Treasury market. In addition, futures play a much larger role in European government bond markets than in the U.S., trading significantly more on relative basis than the underlying bond markets. This means in Europe, where the bond markets are significantly more fragmented and where ETFs have yet to gain a comparable level of traction, innovations born in the U.S. might struggle to achieve the same level of success without accounting for regional differences.
The S&P 500 Index (SPX) is short-term overbought, so the 2,675 to 2,740 range should turn into resistance and into a short-term topping zone, says Brickell Analytics. Its report says the SPX should then stage an approximate 200-point pullback to the 2,550 to 2,450 target range. Upon completion of the pullback, the SPX will be ready to surge to a new all-time high, above the 2,940.91 September 21, 2018, high. Oil should follow a similar pattern. The 54 to 57 range in oil should turn into resistance and into a short-term topping zone. Then, oil should stage a decline to the 50 to 45 support area. Upon completion of the pullback, oil should be ready to spike to a level above the 76.90 October 3, 2018, high.
Transition Process Concerns Boomers
With working boomers beginning to leave the workforce, they have several concerns about the transition process, says a survey commissioned by Express Employment Professionals. Half (51 per cent) of working baby boomers do not think their employer has an adequate successor to replace them. While 82 per cent of boomers say they are willing to mentor the next generation of workers, a majority of boomers say they have not shared most of their knowledge with those who will replace them once they retire with only 40 per cent of boomers saying they have shared more than half of their required knowledge; 22 per cent saying they have shared half of their required knowledge; 19 per cent say they have shared less than half of their required knowledge; and 20 per cent say they have shared none of their required knowledge. Just over half (53 per cent) of working boomers do not think subsequent generations will work as hard as they have, but boomers have confidence that future generations will be prepared to take their place when they retire (except for Generation Z). It shows 84 per cent believe Generation X (ages 39 to 53) will be well prepared to replace them; 60 per cent believe millennials (ages 24 to 38) will be well prepared to replace them; and only 36 per cent believe Generation Z (ages 18 to 23) will be well prepared to replace them.
Managers Post Median Return
In the fourth quarter of 2018, diversified pooled fund managers posted a median return of negative 5.6 per cent before management fees, says Morneau Shepell’s ‘Performance Universe of Pension Managers’ Pooled Funds. For 2018 as a whole, their median return was negative 2.7 per cent. “Pension fund solvency liability was up slightly, remaining relatively stable compared to the beginning of 2018. However, given the negative returns, pension fund financial positions on a solvency basis have deteriorated. The solvency ratio for an average pension plan has fallen by about two to 3.5 per cent since the beginning of the year,” says Jean Bergeron, vice-president responsible for the Morneau Shepell Asset & Risk Management consulting team. In 2018, the return produced by diversified pooled fund managers was, on average, lower than that of the benchmark portfolio. In effect, the managers’ median return of negative 2.7 per cent was 0.4 per cent under the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) used by many pension funds.
ETF Assets Finish Down
ETFs and ETPs listed in Canada gathered net inflows of US$1.74 billion during December, bringing 2018 net inflows to US$15.69 billion, says ETFGI. Assets invested in the Canadian ETF/ETP industry finished the month down 4.6 per cent, from US$121 billion at the end of November to US$115 billion. During 2018, ETFs/ETPs listed in Canada attracted $15.69 billion in net inflows with assets hitting a record high of $131 billion in August. However, assets invested in the Canadian ETF/ETP industry decreased 1.24 per cent year-on-year.
Kesteris Moves To Express Scripts
Evolution Of AI Examined
The recent and future evolution of AI (artificial intelligence) in investment management, sustainable finance and climate risk, and the next chapter of Asia’s growth story will be among the areas explored at the CFA Society Toronto’s ‘2019 Annual Spring Pension Conference.’ It takes place March 28 in Toronto, ON. For information, visit Pension Conference