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February 12, 2020


Retirement Getting Harder To Achieve

Many Canadians aren’t adequately prepared for retirement and retirement is getting more expensive and harder to achieve, says a National Institute on Ageing (NIA) paper. Authored by Keith Ambachtsheer, senior fellow at the NIA and president of KPA Advisory Services Ltd., and Michael Nicin, executive director of the NIA, ‘Improving Canada’s Retirement Income System: A Discussion Paper for Setting Priorities,’ says, “Today, we face historically low bond yields and uncertain equity returns in the face of climate change and political turbulence across the world. This means retirement savers may not get as much help from favourable financial markets as they did in the post-World War II decades.” Along with this are projections that the total cost of long-term care in Canada will triple to $71 billion in 30 years while, at the same time, pension coverage has steadily declined and private saving is proving harder to achieve amid rising costs for housing, education, and childcare. It sets out three broad priorities: to increase pension coverage for Canadians without a pension plan; increase savings rates for middle-income earners; and increase incentives and opportunities for people to work at older ages, as life expectancy increases.

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Sea Level Rise Biggest Threat

Of all the threats to the environment from climate change, sea-level rise may be one of the most devastating and permanent, say MSCI ESG Research’s David Lunsford, its executive director and head of climate policy and strategy, and Boris Prahl, its vice-president. Without significant investment in coastal protection and adaptation, over half of covered global assets at risk could become untenable by mid-century. Even if greenhouse gas (GHG) emissions are reduced in line with the 1.5 C temperature-rise stretch goal of the Paris Agreement climate accord, the global mean sea level may rise 0.29 to 0.59 metres by the end of the century and may continue to rise into the following century. Even a modest increase in the global mean sea level of 11 centimeters could result in additional losses of $1.4 trillion per year (or 0.25 per cent of global GDP). Institutional investors may want to review their options on how they work to protect their portfolios from physical-climate risks such as exposure to coastal flooding. For example, they may engage with companies on physical/climate risk, reduce their exposure within a sector and/or a portfolio, or create climate-smart benchmarks. The one thing they cannot do about the potential risk is ignore it, they say.

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Pan-Canadian Virtual Care Approach Recommended

National standards for patient health information access and increased support to regulatory bodies to simplify physician registration and licensure processes to allow physicians to provide virtual care across provincial and territorial boundaries are among the recommendations from the Virtual Care Task Force (VCTF), a collaboration of the Canadian Medical, the Royal College of Physicians and Surgeons of Canada, and the College of Family Physicians of Canada. Its report ‒ ‘Virtual care: Recommendations for scaling up virtual medical services’ ‒ outlines 19 recommendations for creating a pan-Canadian approach to the virtualization of health services. Among the key recommendations are the development of a framework to regulate the safety and quality of virtual care services. It also calls for the establishment and incorporation of virtual care education at medical schools and continuing education for health professionals. Dr. Gigi Osler, Virtual Care Task Force co-chair for the Canadian Medical Association, says, “As the world becomes more and more technologically driven, healthcare remains one of the areas where Canada is lagging behind. We all recognize the potential of new technologies to transform the way we deliver and receive care; it’s time we were able to take more advantage of them.

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CLHIA Wants Medical Report Template

The Canadian Life and Health Insurance Association CLHIA) would like to see a ‘template’ to improve the quality of completed medical reports. In its comments to the College of Physicians and Surgeons of Ontario on ‘Third Party Reports’ and ‘Medical Expert: Reports and Testimony’ policies, it says, for instance, the order of sections (background, expertise, list of documents reviewed, etc.) from report to report should be standardized so that physicians do not submit incomplete information. It would be valuable to have some further expectations around the level of detail, otherwise the information becomes unusable to the insurer which can mean incurring further costs for more information or being left to manage a claim report containing minimal information. In most cases, the insurer may be hesitant to request another independent medical exam (IME) as this gives the impression the insurer is looking for a response that is favourable to the insurer to move the claim in a certain direction. The policy should also require the documentation of patient consent and of the report deadline agreed-to by insurer and provider. In comprehensiveness of reports, its experience is that this can vary significantly from physician to physician. Unfortunately, reports that are not comprehensive require follow-ups and addendums from the physician, causing delays in the adjudication of the claim and, ultimately, delays to starting disability income replacement payments as well as treatment and other early intervention supports that ultimately assist the plan member to return to work.

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Canadians Count On Inheritance

Nearly one quarter (23 per cent) of Canadians are counting on an inheritance as part of their long-term financial planning, says a survey for Oaken Financial. Millennials (30 per cent) and Gen Xers (24 per cent) were found to be far more likely to be counting on an inheritance than Boomers (17 per cent). But for those depending on an inheritance to help provide for their retirement, the survey results point to a possible looming retirement funding shortfall. Half (52 per cent) of those surveyed indicated that they intend to use their money to support their own retirement and 48 per cent have no plans to provide an inheritance to loved ones. In fact, at least half of respondents in all three age groups claimed they are either already spending their money or intend to spend their money in their retirement rather than leave money to provide for a family inheritance.

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OMERS Invest In German Internet

OMERS Infrastructure Management Inc. and the EQT Infrastructure IV fund will jointly acquire Deutsche Glasfaser from KKR Infrastructure and Reggeborgh. Since its establishment by Dutch investor Reggeborgh in 2011, Deutsche Glasfaser has invested heavily in fiber infrastructure in underserved rural and sub-urban communities in Germany. Today, it provides high-speed internet access to more than 600,000 households and 5,000 businesses. Looking ahead, it plans to continue the rapid growth of the company by pursuing a large scale deployment of FTTH internet access in rural Germany. Deutsche Glasfaser will be combined with EQT Infrastructure IV portfolio company inexio to form a FTTH player in rural Germany

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Narine Has New Role

Florence Narine is senior vice-president, head of Canadian institutional and key accounts, for AGF Management Limited. She will be responsible for accelerating its Canadian institutional sales presence, while also growing cross-functional and cross-jurisdictional client relationships across the firm.

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Liquid Alts Featured

A liquid alts workshop and panel discussion will be featured at the ‘11th Annual Alternative Investment Outlook Forum.’ The event, hosted by CFA Vancouver, CAIA Vancouver, and AIMA Canada, will also look at the evolution of alternatives and private assets. It takes place March 11 in Vancouver, BC. For information, visit http://www.cvent.com/events/11th-annual-alternative-investment-outlook-forum/event-summary-36527cbc7aac4c358a80d537afb415f6.aspx

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February 11, 2020


Pension Fund Assets Bounce Back

Global institutional pension fund assets in the 22 largest major markets (the P22) bounced back in 2019, soaring by 15 per cent to $46.7 trillion at year-end, says the Thinking Ahead Institute’s ‘Global Pension Assets Study.’ The growth recovery was driven, in part, by strong gains in equity markets during the year, with Mexico (22.2 per cent), Canada (18.9 per cent), and the U.S. (17.8 per cent) leading the way. This represents a significant swing in fortunes from 2018 which saw an overall 3.3 per cent decline in global pension assets. The seven largest markets for pension assets (the P7) ‒ Australia, Canada, Japan, the Netherlands, Switzerland, the UK, and the U.S. ‒ account for 92 per cent of the P22, marginally higher than the previous year. The U.S. also remains the largest pension market, representing 62 per cent of worldwide pension assets, followed by the UK and Japan with 7.4 per cent and 7.2 per cent, respectively. The research also shows the shift to alternative assets continues apace and marks two decades of considerable change in pension fund asset allocation globally. In 1999, just six per cent of P7 pension fund assets were allocated to private markets and other alternatives, compared to nearly a quarter of assets (23 per cent) in 2019. This shift comes largely at the expense of equities and bonds, down 16 per cent and one per cent, respectively, in the period. The average P7 asset allocation is now equities 45 per cent, bonds 29 per cent, alternatives 23 per cent, and cash three per cent. Total defined contribution assets continue to grow, representing slightly over 50 per cent of total P7 pension assets. Last year, defined contribution exceeded defined benefit assets for the first time, a culmination of 10 years of faster DC assets growth than DB (8.4 per cent versus 4.8 per cent annually), reflecting increased member coverage and, in some markets, higher contributions. Australia continued to have the highest proportion of DC to DB pension assets, with 86 per cent of its total pension assets in DC funds. Japan (95 per cent), Canada (94 per cent), the Netherlands (94 per cent), and the UK (82 per cent) continue to be markets dominated by DB pension assets.

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ESG Issues Weigh On Credit Decisions

Environmental, social, and governance (ESG) issues are weighing more heavily on credit assessments and investment decisions, says Moody’s Investors Service. Its report found that the impact of climate change and the transition to a low carbon economy are increasingly relevant to global credit markets. “Investors are seeking more disclosure from companies about how they are addressing these risks as the financial implications are becoming clearer,” says Ram Sri-Saravanapavaan, an ESG analyst at Moody’s. Stricter climate-related policies will increase transition risk for industries that are most exposed to carbon regulation, such as utilities, oil and gas, auto manufacturing, airlines, building materials, and shipping. Rising concerns of future asset write-downs and reduced cash flow may raise companies’ cost of capital or reduce access to funding, impairing their ability to raise, service, or refinance debt, it says. Alongside climate change, public interest in “preserving natural assets, such as land, water and living things, will increase significantly over the coming years.”

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Hub Acquires Azur

Hub International Limited has acquired the assets of Azur Consulting Services Inc. Located in Longueuil, QC, Azur provides employee benefits consulting, including group and health benefits solutions.

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VC Has Record Amount

Canadian VC-backed companies raised $4.1 billion in 469 deals during 2019. This record funding amount also marked the third year of increased VC funding. While funding was up 16 per cent compared to the previous year, deal activity was down 11 per cent, says a report from PwC Canada and CB Insights. “While total deal count did decline, median-deal size has risen by 13 per cent, indicating a healthy and scaling ecosystem. Canada has stood out amongst its global peers as investors continue to recognize the value of Canadian innovation,” says Sabrina Fitzgerald, national tech sector leader at PwC Canada. As the top Canadian market, Toronto funding surpassed $1.3 billion for the second year in a row. The deal count of 175 was only five below the number of deals in 2018.

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Google To Call OPTrust Building Home

A group of co-investors, including OPTrust, has announced a major, long-term, downtown Toronto, ON, office leasing transaction at 65 King East, which will be home to Google. The building is owned by Carttera in conjunction with institutional co-investors: OPTrust, the Manitoba Civil Service Superannuation Board, and the Investment Management Corporation of Ontario. Goggle will occupy 400,000 square feet of office space across 18 floors.

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Private Equity On Track To Cross Trillion Mark

Fundraising for the private equity real estate industry on track to cross the $1 trillion assets under management (AUM) threshold by the end of the year, says Preqin’s ‘2020 Future of Alternatives.’ As of June 2019 (the latest available data), assets under management stand at $992 billion. If it continues on this trajectory, the asset class is on course to hit $1.2 trillion in AUM by 2023. Fundraising in 2019 has reached record heights, beating 2018’s record as fund managers secured $151 billion through 295 funds closed. Ashish Chauhan, executive editor of the report, says, “Fund managers were able to secure the highest amount of capital ever seen and this boom looks set to continue in 2020. With this in mind, fund managers will have to keep exploring new sectors and regions to meet investors’ expectations.”

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Berova Visits Bodhi

Kalina Berova (CFA) is visiting researcher at Bodhi Research Group. She is responsible for manager research, co-investments, private equity, and portfolio diagnostics. Previously, she was part of the external relationships team at the New York office of OMERS.

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Vision 20/20 Theme Of Conference

‘Vision 20/20’ is the theme of the 2020 CPBI Ontario Regional Conference. In the keynote address, Joze Piranian, a corporate motivational speaker, will share his personal journey of transformation, from holding back immensely to performing on stages worldwide. It takes place May 6 to 8 in London, ON. For information, visit http://www.cpbi-icra.ca/Events/Details/Ontario/2020/05-06-CPBI-2020-Ontario-Regional-Conference

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February 10, 2020


PIAC Wants Annuities Back On Table

The Pension Investment Association of Canada wants the federal government to put variable payment life annuities (VPLAs) and advanced life deferred annuities (ALDAs) back on the table. In a letter to Bill Morneau, the federal minister of finance, it says the implementation of the required Income Tax Act changes was interrupted by the federal election of last October. “As you prepare for the 2020 budget, we strongly encourage you to put these changes back on the table as part of the upcoming budget,” it says. PIAC strongly supports the introduction of VPLAs and ALDAs into the realm of registered accounts as it believes they have the potential to meaningfully improve the options available for managing longevity risk for Canadians who save for retirement outside of traditional defined benefit plans. The proposals were well-received by all commentators, it says, and “we do not see any rationale for further delaying implementation.” Since the Income Tax Act changes to facilitate VPLAs in a registered plan context are only the first step as federal and provincial pension legislation may well require conforming amendments, it will be a multi-year process to make these structures available to more Canadians, but “it starts with the Income Tax Act,” says PIAC.

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Firms Exposed To ESG Could Contribute To SDGs

Investors should consider a number of ESG (environment, social, and governance) themes in 2020 that could help advance the UN Sustainable Development Goals (SDGs), says a research report from Sustainalytics. It makes the case that firms exposed to the themes could positively contribute to the achievement of applicable SDGs. As recognition grows that SDGs and rates of return are not at cross-purposes, it contends that the SDGs encapsulate many of the most exciting upside opportunities in today’s equity markets and are closely linked with global economic growth and overall macroeconomic health. It identifies opportunities with digitization of the mining industry to reduce cost and capture ESG value. Under health and society goals, the report covers opportunities for medical device producers that have internet connections and apparel companies implementing slow fashion principles. Examples of working towards SDG goals on ecosystem stewardship include how some banks are factoring biodiversity risk into credit assessments.

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Incentives Needed For Collective Plans

Member states in the European Union (EU) should provide incentives for social partners – trade unions and employer bodies – to set up collective pension plans that ensure risk-sharing between members, says a group of pension experts established by the European Commission. Its final report addresses challenges affecting the concept and design of supplementary pensions and their role in relation to sustainable finance and sustainability. It also recommends that member states and providers ensure that occupational pensions provide pension credits for career breaks linked to childcare or other caring responsibilities and the EU, member states, and social partners need to develop tools and methodologies to assess EU pension providers’ vulnerability to long-term environmental and social sustainability risks.

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CDPQ In Private Credit Financing in India

The Caisse de dépôt et placement du Québec (CDPQ) and Piramal Asset Management Private Limited, a wholly‑owned subsidiary of Piramal Enterprises Limited (PEL), have announced a platform of US$300 million to target private credit financing opportunities in India. CDPQ is contributing 75 per cent of the investment and Piramal will commit the remaining 25 per cent. The platform will offer private credit solutions to companies across various industries in India including manufacturing, consumer, industrial, healthcare, pharmaceuticals, and logistics.

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Small Cap Returns Make Big Jump In 2019

With 95 per cent of the investment managers reporting their fourth quarter performance data, the most recent ‘GMR Institutional Performance Report’ indicates 2019 was a very strong year for small cap equity funds available to Canadian investors. The largest year over year jump can be seen in Canada where the median return in 2019 was 22.25 per cent versus a -16.3 per cent median return in 2018. The same trend is noticed in both the U.S. and global regions where double-digit increases have been recorded with swings from negative to positive returns.

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Castiglio Joins Fiera

Gabriel Castiglio is chief legal officer and corporate secretary at Fiera Capital Corporation. He most recently served as partner at Fasken, where Fiera Capital was a key client. He is recognized in corporate finance and securities law and mergers and acquisitions by the Canadian Lexpert Directory, the International Financial Law Review, and the Best Lawyers in Canada.

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Legal Update Offered

The International Foundation of Employee Benefit Plans’ ‘Canadian Legal and Legislative Update’ covers recently enacted and proposed legislation as well as regulations pertaining to pensions and benefits. Topics include ethical investing, ‘The Power and the Pain of Privacy,’ and ‘The Quest for Sustainability in Pension Plans with Contingent Benefits.’ It takes place May 27 to 28 in Nashville, TN. For information, visit https://www.ifebp.org/education/schedule/Pages/canadian-legal-and-legislative-update-2060.aspx

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February 7, 2020


Institutions Want ESG In Hedge Funds

An increasing number of institutional investors are requiring their hedge fund managers to incorporate environmental, social, and governance (ESG) factors in the course of their investment activities. Such investors now see ESG investing as serving their own long-term interest as much as those of wider society, a report from KPMG, the Alternative Investment Management Association (AIMA),the Chartered Alternative Investment Analyst Association (CAIA), and CREATE-Research. ‘Sustainable investing: fast forwarding its evolution’ shows that investors now expect their asset managers to deliver attractive financial returns while considering the environmental and social risks associated with their investments. “Thus, the traditional risk-return equation is being rewritten to include ESG factors,” says Anthony Cowell, head of asset management for KPMG in the Cayman Islands and co-author of the report. “In the hedge fund industry, ESG has gone from being a nice-to-have to a must-have.”

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GM Contributes To Non-U.S. Plans

General Motors Co. plans to contribute about $500 million to its non-U.S. pension plans in 2020. In a 10-K filing with the U.S. Securities and Exchange Commission, it also says it plans to contribute about $70 million to its U.S. plans. In 2019, GM contributed $532 million to its non-U.S. plans and $83 million to its U.S. plans. It says that “over the next five years we expect no significant mandatory contributions to our U.S. qualified pension plans and mandatory contributions totaling $368 million to our UK and Canada pension plans.” As of December 31, U.S. pension plan assets totaled $59.2 billion, while projected benefit obligations totaled $64.7 billion, for a funding ratio of 91.5 per cent, down slightly from 91.7 per cent a year earlier. Non-U.S. pension plan assets as of December 31 totaled $15 billion, while projected benefit obligations totaled $21.4 billion, for a funding ratio of 70 per cent, up from 68 per cent a year earlier.

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Canadians Turning To RRSPs

Canadians are turning to and investing in their RRSPs more than ever, says the annual ‘BMO Registered Retirement Savings Plan (RRSP)’ study. It shows 69 per cent now hold an account at an average amount of $111,922 dollars. Canadians who have already contributed to their RRSP say they have contributed $6,409 – this is up from $5,247 in 2018. Those who plan to contribute are likely to invest an average of $6,033, which is up 55 per cent from last year ($3,828). The report revealed that on average, Canadians plan to retire by age 62. But 25 per cent of Canadians do not know when they will retire and 10 per cent don’t think they will ever be able to retire. As well, 59 per cent are unable to estimate how much money they would need to retire comfortably. While only half are hopeful they will have enough money by their retirement, those surveyed who can estimate a dollar amount say they would need between $1 million and $1.5 million.

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Overcrowding Fears Not Justified

Despite the significant flows into factor investing strategies, fears about overcrowding are not justified, says Aon. In ‘Factor Investing ‒ Standing out from the Crowd,’ it makes the case that the evidence of overcrowding in factor strategies is not strong enough to support the idea that flows into the sector are eroding factor premiums on a permanent basis. Andrew Peach, principal consultant and one of the authors of the paper, says: “Given the growing popularity of factor strategies, clients often ask us, if everyone is doing this, does the benefit go away? “Our principal stance is that these are separately identifiable rewarded risks that exist for structural reasons. Therefore, even if everyone piles in, these risks should not be arbitraged away.” It is unrealistic to foresee a situation where factor premiums are wiped out completely, owing to the majority investors allocating to factors, says Peach.

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OCIOs Used As Search Consultants

Providers estimate that 36 per cent of their clients make use of a fourth type of organization: OCIO search consultants, says a survey by Cerulli Associates. The outsourced chief investment officer (OCIO) industry in the United States is comprised of approximately 96 active providers managing an estimated $1.9 trillion in global assets under management (AUM). In many OCIO arrangements, there are three types of organizations involved: the institution, the OCIO provider, and the asset managers selected by the provider to manage the institution’s assets. OCIO search consultants ‒ who aid institutions in the evaluation, search, and review of providers and assist clients in selecting a provider that best matches their needs ‒ have a significant amount of influence. “They often have the greatest insight into the OCIO space and can provide their clients with clarity and transparency in an industry that can be opaque,” says Chris Swansey, an analyst at Cerulli. “Despite myriad challenges that search consultants face, the service they offer will become more valuable as more OCIO clients evaluate their existing relationships and conduct a greater number of replacement searches for their providers.”

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CLHIA Wants Drug Access Assured

The Canadian Life and Health Insurance Association (CLHIA) wants Quebec to ensure access to drug insurance. In its submission on the 2020-2021 Quebec budget, it says since the creation of the public drug insurance plan in 1997, Quebecers’ access to drugs has improved as the Quebec model guarantees that all citizens are covered, either by the public plan or privately. The public plan is managed in partnership with the insurance industry and Quebecers covered privately have timely access to more than 14,000 prescription drugs. In 2018, insurers paid to Quebecers close to $2.6 billion as reimbursement for drugs. On the public side, some 8,000 drugs are covered. It calls this plan is the “most generous and comprehensive plan in the country.” However, given the federal government’s plans for national pharmacare, it says any drug insurance reform must protect and enhance existing insurance plans, guarantee drug coverage for all, and ensure affordability.

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EDHEC-Risk Collaborates On Retirement Solutions

Building upon fundamental research on risk allocation and goal-based wealth management conducted in recent years, EDHEC-Risk Institute is collaborating with the Bank of America to develop new research on goal-based investing for the construction of retirement investment solutions for individuals. The aim of the research is to develop a holistic goal-based investing framework for analyzing optimal retirement investment decisions for individuals in the transition or de-accumulation phase of their investment life cycle by using a broad range of investment product categories including stocks, bonds, and annuity-related products.

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Efforts On Workplace Dignity Bolstered

Amid growing recognition of a connection to business performance, more employers plan to bolster their efforts to build a culture of “workplace dignity,” says research by Willis Towers Watson, in collaboration with Robert F. Kennedy Human Rights. The research also revealed a great disparity between employees’ perspectives on how they are treated in the workplace and those of employers. A culture of workplace dignity promotes an environment in which employees can experience a sense of self-respect, pride, and self-worth and it influences an organization’s ability to foster wellbeing, engage talent, and drive business results. The ‘Willis Towers Watson Workplace Dignity Survey’ shows virtually all employers (94 per cent) recognize workplace dignity will be important to their future success, including their ability to attract and retain talent, promote employee wellbeing, engage employees, and boost productivity. That’s a big increase from 70 per cent over the past three years; however, three in 10 employers have experienced difficulties in building and maintaining a culture of dignity. Among the key barriers they plan to address are lack of diversity, discrimination, exclusion, abuse of power, and bullying within the workplace.

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TDAM Offers Global Real Estate Fund

TD Asset Management Inc. (TDAM) is now offering its latest alternative investment solution for institutional investors ‒ the TD Greystone Global Real Estate Fund L.P. “As investors increasingly look to manage portfolio risk, there is now a greater demand for adding a global real estate allocation that can complement an existing Canadian real estate mandate by providing additional diversification, a greater opportunity set, and the potential to enhance risk-adjusted returns,” says Colin Lynch, vice-president and director, global real estate investments, at TDAM. The investment objective of the fund is to seek strong long-term, risk-adjusted returns by investing in a diversified portfolio of direct and indirect global real estate investments. The fund was seeded in 2019 and is diversified by location, property type, and risk strategy from the first dollar invested. It has exposure to over 500 properties located in approximately 15 countries.

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Unlisted Infrastructure In Midst Of Record Boom

The unlisted infrastructure industry is in the middle of a record boom in activity, says the ‘2020 Preqin Global Infrastructure Report.’ Fundraising hit record highs in 2019 and assets under management (AUM) passed the $500 billion mark as of the end of 2018. The industry is now on track to hit $1 trillion by the end of 2022. Four out of five investors plan to maintain or increase their allocations in the months ahead. They are being drawn to infrastructure by its strong performance: unlisted fund performance has equaled or surpassed public indices in recent years. As well, almost 90 per cent of investors expect it to maintain or improve in 2020.

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Canadian ETF Flows Start Strong

Flows into Canadian ETFs started the year and decade off strong, with inflows exceeding $4 billion for the third consecutive month, says a report from National Bank of Canada. January attracted $4.1 billion in inflows spread across all asset classes and saw 25 ETF launches from seven providers. It was also the biggest month for new environmental, social, and governance (ESG) ETFs since March 2019. Fixed income ETFs led the board once again, taking in another $2 billion in January. Large monthly inflows were seen by Canada aggregate bond ETFs and cash-alternative savings account ETFs. Canadian government bond ETFs saw a slight outflow. Equity ETFs saw an even spread between U.S. and international equities.

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Domsy Has New Role

Ryan Domsy is co-head of fixed income at Foyston, Gordon & Payne Inc. He joined the firm in 2010 as a credit analyst and was, most recently, vice-president and portfolio manager ‒ fixed income.

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Pension Management Offered

The Quebec CPBI will hold a session for people who wish to learn general knowledge about all aspects of pension management and administration. Speakers will include Félix Poulin, a pension consultant; Lorraine Allard, of Royal Trust; and Jean-François Poitras, of Desjardins. It takes place March 23 and 24 in Montreal, QC. For information, visit http://www.cpbi-icra.ca/Events/Details/Québec/2020/03-23-Formation-régimes-de-retraite-niveau-1

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February 6, 2020


Drug Price Controls Ill-Advised

Ottawa has the prices of drugs in its sights. On the one hand, it has made changes to the calculation method for the price ceilings imposed on drugs sold in Canada. On the other, the idea of national government pharmacare to replace the provinces’ mixed plans is still in the air. These ill-advised public policies could actually raise total healthcare spending, while threatening Canadians’ access to the best available treatments, says Peter St. Onge, author of ‘Pharmaceuticals: Life-Saving Benefits That Pay for Themselves’ and senior economist at the MEI. Studies carried out in Canada and the United States have shown that the sums spent on new drugs lead to savings four or five times higher than other medical expenses. “Greater drug spending actually reduces total health spending compared to what it would have been given other reasons like the aging of the population,” he says. “However, the price of the drug is more visible and becomes an easy target for bureaucrats or politicians.” The high prices of new drugs, moreover, is explained by the enormous cost of research. Developing and bringing a new drug to market can take 15 years and cost nearly US$3 billion. Moreover, many drugs submitted to clinical trials never make it to market: Only 12 per cent of them are approved for marketing. “If seven out of eight drugs don’t make it to market, those seven failures must be paid for by the profits of the single drug that does make it. This creates an obvious target as alleged price-gouging, but these drugs are highly valuable for patients who use them and see their quality of life improve,” says Germain Belzile, senior fellow at the MEI and collaborator on the publication. Instead of intervening even more in the drug market, the government should scale back the overregulation that needlessly inflates research costs. At the very least, Ottawa should refrain from making things worse by nationalizing drug insurance and further constraining Canadian prices from reflecting the reality of this market that is so important to everyone’s well-being.

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New Phase Of JSPP Conversions Underway

Conversions of pension plans to jointly sponsored pension plans (JSPPs) began with the Ontario Teachers’ Pension Plan in 1990. Now, however, a new phase in the conversion process is underway with some JSPPs taking on the plans of other employers and accepting asset and lability transfers from smaller plans, says Murray Gold, of Koskie Minsky. While in some cases they are only accepting employers and employees in certain industries, some ‒ like the CAAT Plan ‒ are opening up to public and private sector plans across many industries, he said in the ‘Conversion of Pension Plans to Joint Governance Model’ session at the OBA Institute’s ‘Pension And Benefits Law: What To Expect In 2020.’ Moving to a JSPP offers certain advantages including risk sharing for deficits and surplus. This distinguishes them from single employer plans. As well, there is no Pension Benefits Act requirement for terminal funding. This means if a plan like the Ontario Teachers’ Pension Plan ‒ although it will never happen, he said ‒ was wound up, benefits could be reduced. For plans like CAAT which are accepting smaller plans, it gets rid of the divide between pension haves and have-nots, lowers the per unit pension cost, and ensures these pensions will survive. Employer who convert get accounting considerations, greater contribution stability, lower administrative and investment costs, and better access to alternative asset classes. Currently, these conversions are taking place in Ontario and Nova Scotia. The Nova Scotia Public Service Superannuation Plan is open for business in the public sector and there is a line-up of small municipalities waiting to move their plans. In Ontario, the CAAT plan is opening up to pension plans across Canada. However, he said the regulatory approaches to conversions differ between the two jurisdictions. Ontario is more prescriptive and requires the consent of two-thirds of active members and no more than one-third of retirees. Nova Scotia is a friendlier regime. It requires a simple majority vote to approve a conversion and it leaves more up to the parties, said Gold.

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MSCI Develops Climate VaR

MSCI Inc. has developed a metric to give investors a reading on corporate climate risks. Climate value-at-risk (Climate VaR) will provide investors with assessments of the potential impact of climate change on company valuations. “The tool provides insights into the potential stressed market valuation of investment portfolios and downside risks, translating climate-related costs into potential valuation impacts,” its says. The Climate VaR covers more than 10,000 companies, along with their equities and corporate bonds. “The world’s attitude to climate change is rapidly evolving due to dramatic environmental, social, and governance shifts driving a move to a low carbon economy. As we reach this inflection point, investors are now publicly expressing a desire to take action and address the urgent reality of climate change themselves and they are also urging others in the investment industry to do so too,” says Remy Briand, head of ESG at MSCI.

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Prohibition Of Cannabis Use Employer Right

Employers have the right and, in some cases, an obligation for safety reasons to prohibit the use of cannabis in the workplace, just as with alcohol, says Laura Blumenfeld, of Blake, Cassels & Graydon. She told the ‘Landscape: Cannabis Legalization Issues in Employment Law and Benefit Plan Arrangements’ session at the OBA Institute’s ‘Pension And Benefits Law: What To Expect In 2020’ that in many cases, it just requires updating existing policies and communicating these to employees. If there is a medical necessity to use marijuana, the employer has a duty to accommodate to the point of undue hardship. However, the accommodation analysis requires careful balancing of workplace safety versus medical need. There is no need to accommodate the recreational use of cannabis, she said. Adam Ngan, of Blake, Cassels & Graydon, said the second wave ‒ Cannabis 2.0 ‒ came into effect last October. With it came the opportunity to produce such as edibles and topicals. These products must undergo a 60-day notice period before they can be sold in the market. However, not all provinces permit the sale of all types of cannabis. Quebec and other jurisdictions have said they will set limits on potency and product types that can be sold.

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Canadians Prefer More Vacation Time

Canadians would rather take more vacation time than an equivalent pay increase, says a survey by Rakuten.ca. It found travel is top of mind for Canadians this year and 57 per cent would opt for more vacation time over a pay hike. In fact, 26 per cent of Canadians plan to take four weeks or more of vacation time in 2020. “Not only are Canadians prioritizing time off over salary increases,” says Claire Sweeney, vice-president of marketing and shopping expert at Rakuten.ca, “57 per cent don’t consider it a vacation unless they travel somewhere.” This means saving for travel is a priority with 78 per cent of Canadians doing so. In fact, over half (51 per cent) of Canadians budget for travel in lieu of other personal expenses. This is particularly true for Canadians under 35 with a whopping 84 per cent stating they ensure to save for travel.

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ELHTs Replacing HWTs

Health and welfare trusts (HWTs) which have not converted to employee life and health trusts (ELHTs) by the end of this year will become employee benefit plan trusts, says Simon Archer, of Goldblatt Partner. Speaking at the OBA Institute’s ‘Pension And Benefits Law: What To Expect In 2020’ on ‘Proposals to Convert Health and Welfare Trusts to Employee Life and Health Trusts (ELHTs),’ he said HWTs were first established in 1966 to provide employees with group sickness or accident plans, private health service plans, and group term life insurance. They were often used in bargained sector, particularly multi-employer arrangements. ELHTs were initially created to enable the 2008 auto industry restructuring to allow GM and Chrysler to offload retiree healthcare benefits to a trust. They were introduced more broadly in 2010 after amendments to the Income Tax Act. They are similar to HWTs, but there are differences. Both deliver similar benefits to employees and retirees. However, unlike HWTs, ELHTs can pre-fund benefits, have no restrictions on surplus accumulation, and can carry capital losses back three years or forward for 20 years. One flaw, he said, is contributions are made on the basis of hours worked by employees which is an ongoing irritation because not all work is hourly.

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Cybersecurity Breaches Prompt Mandate Reviews

A cybersecurity breach at a money manager is a key reason for an unplanned review of a mandate, says a survey of institutional investors from around the world by CoreData Research. It found 57 per cent said a breach would trigger a review. It also showed that an increase in fees by a manager would also be a review trigger for 57 per cent of the surveyed investors. Some 54 per cent also cited a change at the fund manager as a review trigger. They also said style drift was another reason to review a mandate, while 42 per cent said a trigger would be a significant change in the fund’s assets under management.

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CWB Appointed As Custodian

CWB Trust Services has been appointed as the custodian for the retirement plan for non-teaching staff at School District 43 (Coquitlam, BC). Valued at more than $130 million in assets, School District 43’s non-teaching staff pension plan services over 930 members. As part of the mandate, CWB Trust Services will act as custodian and trustee for the plan, providing online benefit payment services for the plan’s members and additional ancillary support services for the plan. Plan members were notified of the change in late-2019, with the mandate taking effect in December 2019.

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HUB Acquires Benefex

Hub International Limited has acquired Benefex Consulting Inc. Based in Edmonton, AB, Benefex is an employee benefits and retirement consulting firm that specializes in group insurance programs, retirement, wellness solutions, and special risk coverage that addresses clients’ needs. It currently serves clients in British Columbia, Alberta, Saskatchewan, Ontario, and the Yukon and Northwest Territories.

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Dunn Serving As Interim Chief Pension Officer

Susan Kay-Dunn has been appointed by the board of trustees as the interim chief pension officer and plan manager for the single employer pension plan (SEPP) to jointly-sponsored pension plan conversion of the Workplace Safety & Insurance Board (WSIB) Employees’ Pension Plan. She takes on this role after having spent the last 10 years as director, total rewards and plan manager, with the WSIB.

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Forum Features Institutional Main Stage

The ‘6th Annual AIMA Canada Investor Forum’ will feature an institutional main stage and breakout tracks covering the advisor channel, family offices, and regional focuses from across the globe. Sessions will look at key growth markets for private credit in 2021 and beyond, shareholder activism and engagement, and niche private credit strategies. It takes place October 1 and 2 in Toronto, ON. For information, visit https://www.aima-acif.org/?dm_i=2LZ3,1JDTW,6DGDL6,570SS,1

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