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May 12, 2020


Merger Concerns PIAC

The Pension Investment Association of Canada (PIAC) is concerned about the impact of the impending merger of Aon and Willis Towers Watson (WTW) on pension plans and funds. In a letter to the Canada Competition Bureau, it says its members use actuarial consulting services to support the effective fiduciary management of pension plan assets and benefits. The availability of impartial, high quality, and cost-effective services in these areas is imperative to the sustainability of its members’ plans affecting thousands of Canadians. Its members are concerned the ‘mega-merger’ will dramatically reduce the competitive market for actuarial services as Aon and WTW are currently major players in the area of actuarial consulting professional services across Canada, including pension fund asset management. After this merger, the only other firms providing these services nationally will be Mercer, Eckler ,and Morneau Shepell. There are significant barriers for competition in the sector, it says. Actuarial services require the ability of handling large volumes of sensitive personal data, as well as deployment of sophisticated software, resulting in very material upfront fixed investment in advanced IT infrastructure. These capabilities cannot be easily developed, replicated, or purchased from foreign suppliers. It urges the competition bureau to carefully consider the impact of this merger on pension plan and fund clients and the degree of competition across Canada as it believes that this merger may leave the competitive field for actuarial services in Canada too narrow, resulting in a reduction in service quality and/or higher costs.

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Principles May Not Be Working

The United Nations’ Principles for Responsible Investing may not be working as intended, say researchers at the Georgia Institute of Technology and Northwestern University. Their study ‒ ‘There Are 2,698 Signatories to the United Nations’ ESG Code. Has It Changed Anyone’s Behavior?’ ‒ shows while active asset managers get more money from investors after they sign onto the stewardship code, they don’t show “meaningful improvements” in how they incorporate environmental, social, and governance (ESG) factors into their investment strategies. Asset managers on average experience a 4.3 per cent increase in inflows per quarter after signing onto the UN PRI. But fund returns “significantly deteriorate” in the six quarters after managers sign on. All the while, ESG scores at portfolio companies remain flat. “Only a small number of funds improve ESG, while many others use the PRI status to attract capital without making notable changes to ESG,” it says.

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CAAT Adds Two Employers

The newest participating employers to join the CAAT Plan’s DBplus are Skills Ontario and Fraser Group. Skills Ontario is an organization dedicated to building Ontario’s skilled trades and technology workforces. Skills Ontario joined retroactive to January 1. Fraser Group, a marketing information and research firm that works with the employee benefits and insurance markets in Canada, joined on March 1. Since the launch of DBplus 18 months ago, CAAT has attracted 33 additional participating employers and more than 15,000 new members, representing nine industries across the for-profit, not-for-profit, and broader public sectors. The plan design marries traditional defined contribution plans and defined benefit plans for a workplace retirement solution. It provides fixed contributions and no balance sheet risk for employers, and pension certainty, more security, and less risk for employees.

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Data Analytics Provides Sales Edge

Amid the current focus on investor innovation in data analytics to gain an edge in their portfolios, asset managers are using analytics to create a competitive advantage: sales. A report from Greenwich Associates finds that top quartile distribution professionals attract close to three times the amount of assets annually as median professionals. The secret weapon is data analytics that allow them to precisely locate attractive targets and tailor custom sales pitches. “To win in today’s hyper-competitive market, asset management sales teams must be laser-focused on the highest probability prospects and equipped to maximize every opportunity,” says Mark Buckley, Greenwich Associates principal and author of ‘Sales Performance Excellence: Strategic Prospecting and Engagement.’ To have a lasting impact on sales effectiveness, asset managers must have the right data and analytic platforms, and incorporate them into a sales approach that combines highly talented sales professionals with an organizational commitment to the strategy and the process. 

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Companies Enhancing Programs

Companies in the U.S. are making enhancements to their healthcare, wellbeing, and leave programs, says a Willis Towers Watson survey. It found that nearly half of respondents (47 per cent) are enhancing healthcare benefits, 45 per cent are broadening wellbeing programs, and 33 per cent plan to make changes to paid time off (PTO) or vacation programs. While some companies are reducing costs in other ways ‒ furloughs, pay cuts, and reductions in 401(k) matching contributions ‒ many are preserving wellbeing plans at a time when employees are facing significant challenges. Supporting physical and emotional health is a top priority for most employers as 64 per cent believe COVID-19 will have a moderate to large impact on employee wellbeing. More than three in four (77 per cent) are offering or expanding access to virtual mental health services. Maintaining physical health is also important with 60 per cent of employers offering new easy-to-implement virtual solutions such as virtual workouts to support employees who work from home. The survey found a majority of employers don’t expect their healthcare benefit costs to rise substantially. Fifty-seven per cent of respondents anticipate a small to moderate increase in costs, 24 per cent expect no increase or decrease, and only three per cent expect a large increase.

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Volatility Unprecedented

The worldwide spread of COVID-19 has created unprecedented volatility in financial markets, driven by fears over the economic impact and intense levels of uncertainty about what happens next, says Joseph Little, global chief strategist at HSBC Global Asset Management. However, over the last month, investment markets have recovered nearly half of the drawdown experienced. This recovery came from the perception that the virus is getting under control, alongside extraordinary policy actions from central banks and governments around the world. However, the economic outlook continues to be challenging. Recent macro data suggests the world is experiencing a large fall in economic activity. A global recession is now a likely outcome, but the critical question for investors is how deep and how long this economic slowdown is likely to be.

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iA Teams Up With Dialogue

iA Financial Group is facilitating access to healthcare for its clients by teaming up with Dialogue, a virtual healthcare service which is available 24/7. The platform enables the whole family to speak with healthcare professionals, anywhere in Canada, at any time. It is fully confidential, available online or on any mobile device, and provides services including live chat with a multi-disciplinary team, prescription renewal and free delivery of prescription drugs, secure video appointment with a physician or a mental healthcare professional, referral to a specialist when medically required, and diagnostics co-ordination when medically required. More than 70 per cent of medical problems which would normally require a visit to a clinic can be treated remotely through the service. It will be free until July 31. Clients whose group insurance plan includes supplemental health insurance who wish to add the telemedicine service to their group benefits offering can take advantage of a preferred rate.

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CDPQ Acquires Smelter Royalty

Monarch Corporation has signed an agreement with the Caisse de dépôt et placement du Québec (CDPQ) to sell a three per cent net smelter return royalty on gold production at the Beaufor mine. The two have also agreed to retain the services of GoldSpot Discoveries Corp., a technology company that applies expert geoscience and advanced artificial intelligence algorithms to increase the efficiency and success rate of mineral exploration. The objective is to optimize the drilling program on the Beaufor property using advanced analytical technology.

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May 11, 2020


Guidance Lifts Transfer Freeze

OSFI has updated a guidance on its freeze on transfers from pension plans. It will now automatically consent to portability transfers to locked-in vehicles for members within 10 years of pensionable age as long as the amount transferred out of the pension plan does not compromise the plan’s financial position. It says “Some plans allow members who are within 10 years of pensionable age […] to transfer the value of their pension benefit out of the plan. Therefore, the portability freeze has resulted in individuals not having expected access to funds that they had planned on using for their retirement.” The updated directive will help accommodate plan members who were counting on being able to access funds, while at the same time guarding against transfers out that would impair plan solvency. It applies only to transfers to locked-in retirement vehicles, such as LIRAs or LIFs. Transfers to other pension plans or to purchase an annuity still require the consent of the superintendent. Any transfers to locked-in vehicles that were in process on March 27 for members who were within 10 years of pensionable age at the time their plan membership ended would be processed. However, any amounts in a plan on March 27 would continue to be subject to the freeze, save for transfers allowed with the consent of the superintendent. It also indicated that plan administrators must process transfers on behalf of members who are eligible for early retirement. The freeze is meant to be temporary, but an end date was not announced. OSFI says it “will need a better understanding of the solvency position of pension plans and evidence of some level of financial market stability before considering adjustments to the freeze.”

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Gori Cautions About Reopening Economies

Manulife Financial Corp’s chief executive has cautioned against reopening economies shut by the COVID-19 pandemic. A “dramatic increase” in testing and contact tracing, and progress on development of treatments and a vaccine are needed before economies can begin returning to normal, said Roy Gori said at its annual shareholder meeting. “We cannot afford to get this wrong,” he said. “Subsequent pandemic waves could create greater economic and social devastation than we’ve already seen.”

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Access To 401(k) Assets Eased

A majority of U.S. companies are making it easier for employees to access their 401(k) plans’ assets even as some companies are cutting matching contributions amid the COVID-19 pandemic, says a pulse survey by Willis Towers Watson. The survey also revealed companies are increasing their emphasis on financial wellbeing resources to help workers cope during the crisis. Many employers are making adjustments to their 401(k) plans as a result of the CARES Act, the law designed to help protect American workers from the economic impact of COVID-19. Almost two-thirds of respondents (65 per cent) increased access to in-service distributions from participants’ 401(k) accounts while 16 per cent either plan to or are considering doing so this year. Nearly as many (64 per cent) are now allowing participants to defer loan repayments while 48 per cent increased the maximum amount available for plan loans. Another 17 per cent are planning or considering making either adjustment this year.

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Toll Exceeds GFC

Baseline 2020 GDP forecasts and leading indicators now capture the scale and breadth of the economic toll from the Great Lockdown, which far exceeds that of the Global Financial Crisis (GFC), says FTSE Russell’s ‘Canada Fixed Income Report for May.’ The sharp deterioration of labour markets underscore the severe hit to economies, despite government schemes. The oil price collapse has dragged U.S. inflation break-evens towards zero. A global growth contraction of three per cent in 2020 – the IMF’s baseline – compares with 1.7 per cent in 2009, when emerging market economies grew three per cent. So the breadth and scale of the contraction would be the biggest since the 1930s. The other risk is the shape of the recovery being flatter, for longer, as the Great Lockdown is more protracted.

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RI Funds Outperform

Despite history-making market volatility in the first quarter of 2020, 83 per cent of Canadian responsible investment (RI) funds outperformed their average asset class return in the three-month period and a significant majority (80 per cent) outperformed over the one-year period ending March 31, says data provided by Fundata. RI funds also performed well over longer-term periods relative to their average asset class return, highlighting the long-term value of incorporating environmental, social, and governance (ESG) factors into investment decisions. More than seven in 10 RI funds outperformed their average asset class return over the three-year, five-year, and 10-year periods ending March 31.

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Medavie Adds Online Doctors

Medavie Blue Cross has strengthened its suite of digital health offerings by adding the ‘Online Doctors’ group benefit to allow plan members greater flexibility and access to virtual consultations. It says studies show that employers who add Internet-enabled healthcare to their benefit plans can achieve significant cost savings in health-related absenteeism and lost productivity. As well, as Canadians deal with the new realities of the COVID-19 pandemic, the demand for virtual healthcare is continuing to grow as it becomes an even more important part of health benefit plans. The benefit offers consultations with 100 per cent Canadian-licensed doctors and speaking with a doctor immediately with no triage with nurses or other professionals before a potential callback or consultation. 

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AGA Joins Alliance

Quebec-based AGA Benefit Solutions is the newest member of the Benefits Alliance Group. This addition gives the group 29 member firms, with more than 175 advisors. Collectively, it administers over 7,500 employee benefits plans with $1.4 billion of group insurance premium and 1,500 group retirement plans with over $3.5 billion in retirement plan assets.

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Pensions Provide GRAIL Funding

The Public Sector Pension Investment Board and the Canada Pension Plan Investment Board are in a Series D financing round with GRAIL, Inc., a healthcare company whose mission is to detect cancer early, when it can be cured. Hans Bishop, chief executive officer at GRAIL, says “Nearly 80 percent of cancer deaths result from cancers for which there is no screening test today, and GRAIL’s mission is to change that through the early detection and localization of more than 50 cancers. Enabling this through a single blood draw could improve patient access and adherence to cancer screening and address disparities in cancer care by improving access for rural, vulnerable, and under-served populations.” The funding will support continued development and commercialization of GRAIL’s multi-cancer early detection blood test.

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May 8, 2020


COVID Impacting Mental Health

A Teladoc Health  study of Canadians highlights the negative mental health impact of the COVID-19 pandemic and underscores the need for continued awareness, education, and support of mental healthcare in the workplace, especially during the current public health crisis. It also indicates that a growing number of employers are offering proactive mental health support, mirroring employees’ interest and comfort in virtual care options as part of their mental health and wellness. As a result of COVID-19, one in two respondents indicate their mental health has been negatively affected. The data shows the negative impact on female respondents (57 per cent) is far greater than male respondents (43 per cent) and 52 per cent of respondents between the ages of 18 to 34 were negatively impacted. Respondents over the age of 65, an age group that has been deemed most at risk for the virus, experienced the lowest reported negative impact in Canada (37 per cent). To support the growing impact on employees’ well-being, there is progress in opening the dialogue and closing the gap for mental health support in the workplace. Nearly 40 per cent of respondents in Canada, far more than the 27 per cent reported in the U.S., indicated that their employers have responded to the pandemic by offering additional mental health support, raising the discussion of employee mental health needs, and waiving fees for mental health support.

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Contribution Rule Suspended

The minimum one per cent employer contribution rule applicable to defined contribution pension plans is temporarily suspended, says a Hicks Morley ‘FTR Now.’ In addition, the federal department of finance has confirmed that it will recommend an amendment to the Income Tax Regulations (Regulations) to extend the deadline for electing to purchase a leave of absence on a current-service basis. These measures are intended to temporarily assist the sponsors and administers of DC and defined benefit registered pension plans in light of the COVID-19 pandemic. While the suspension of the minimum contribution rule for DC plans is welcome news to many DC plan sponsors, it should be noted that plan administrators must continue to satisfy any requirements under applicable minimum standards pension legislation to provide notice to members of an amendment to reduce future employer contributions, along with any related amendment filing requirements.

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Union Facing Pension Cuts

Unionized employees at Dominion Diamond could face pension cuts if a shortfall in the company’s defined benefits pension plan is not addressed in the company’s court-ordered creditor protection process, says the Union of Northern Workers. Dominion, one of the most significant employers in the Northwest Territories, is under court-ordered creditor protection until at least June 1 because it could not pay its bills. It owes creditors around the world approximately $1.2 billion, including up to $20 million to the pension plan. It sought creditor protection in April because it couldn’t pay a $20 million bill that it says could have led to bankruptcy if left unpaid. Part of the creditor protection process is the restructuring and settling of debts. However, it’s not certain the pension deficit will be met. Government regulators had previously identified the issue and the company was working to address it, but it is unknown whether it had been fully addressed. 

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Speed Of Recovery Surprising

A lot of people have been a little bit surprised by the speed at which markets recovered in April, says Clyde Rossouw, a portfolio manager at Ninety One. Speaking at its ‘Perspectives on the Search for Resilient Alpha,’ he said markets bounced back quite strongly buoyed by about $1 trillion of liquidity and fiscal support that has been provided to them. This has clearly been driven principally by the actions taken in the United States which has led the charge. “If you look at the expansion of the Fed’s balance sheet, for example, you can see that the actions taken so far are closing in on roughly $3 trillion of extra liquidity,” he said. These actions have potentially altered the sentiment with regards to risky assets. With the impact on the high yield and equity markets, there is potential to come through this in good shape. However, there’s a big tug of war between poor economic data which will continue to hit the wires for the course of the next two quarters and poor earnings which will be released in the near future.

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Report Centre Redesigned

Northern Trust has launched a new version of its ‘Online Report Center’ as a cloud-based service with a redesigned user interface, available through Northern Trust Passport. It applied a human-centered design approach to create a contemporary user experience that enables global clients to access an extensive range of information. The breadth and depth of information available is enhanced by the performance and speed of the application. The report centre is used by more than 80,000 asset manager and institutional investor clients in more than 50 countries, generating three million reports per month. New features include enhanced scheduling and interactive reporting and report packaging capabilities; event-based and time-based report generation triggers; and secure eMail attachments, eMail notifications, and SFTP (SSH File Transfer Protocol) report delivery.

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Pacific Blue Cross Sponsors Stronger Mind

To support mental wellbeing through the COVID-19 crisis, Pacific Blue Cross has joined as a sponsor of ‘Stronger Minds by BEACON’ – a free digital program available for all Canadians. This resource is a supplement to the suite of health and wellness offerings provided by Pacific Blue Cross including its employee and family assistance program. Through the BEACON digital platform, Stronger Minds offers resources focused on resilience building, videos, and quick reads from mental health experts. The program provides participants the opportunity to engage as much or as little as they wish to access guidance that addresses their challenges; however, unlike one-to-one therapy, there is no clinical assessment required to participate. Topics covered continuously evolve based on participants’ requests and include overcoming worry, isolation, and parenting. Stronger Minds will be offered indefinitely, in recognition that this crisis has an uncertain timeline.

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Strategic Relationship Expanded

Wellington Management Company LLP and the Ontario Teachers’ Pension Plan have expanded their strategic relationship to further integrate leading climate science research into the pension plan’s investments. This partnership is based on a common investment philosophy and long-term perspective. The focus on climate risk is an example of forward-looking initiatives the two organizations are exploring together that focus on far-reaching changes in the investment landscape. They will collaborate with Woods Hole Research Center, a climate change think tank, to apply findings from its research to the execution of Ontario Teachers’ investment strategies, which span a diverse set of geographies, sectors and asset classes, and include long-term assets such as private equity, real estate, and infrastructure.

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Morneau Shepell Provides iCBT To Ontario

Morneau Shepell is partnering with the government of Ontario to provide its internet-based Cognitive Behavioural Therapy (iCBT) program to Ontarians aged 16 and over, as part of its investment in mental health during the COVID-19 pandemic. Its AbilitiCBT program addresses depression and anxiety symptoms related to the uniquely challenging aspects of pandemics: uncertainty, isolation, caring for family and community members, information overload, and stress management. The program is guided by professional therapists who are trained to support and ask precise questions to guide people through the program’s modules. It will be offered as part of a suite of mental health supports, now available to Ontarians.

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CDPQ Acquires Return Royalty

Monarch Corporation has signed an agreement with the Caisse de dépôt et placement du Québec (CDPQ) to sell a three per cent net smelter return royalty on gold production at the Beaufor mine. The two have also agreed to retain the services of GoldSpot Discoveries Corp., a technology company that applies expert geoscience and advanced artificial intelligence algorithms to increase the efficiency and success rate of mineral exploration. The objective is to optimize the drilling program on the Beaufor property using advanced analytical technology.

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May 7, 2020


PIAC Seeks Collaborative Approach

This exceptionally challenging time for the Canadian economy will require a collaborative approach between pension plan sponsors and regulators for a number of years to come, says the Pension Investment Association of Canada (PIAC). In a letter to provincial finance ministers, it says with many companies experiencing dramatic declines in operating cash flow, short-term relief is required to ensure that scarce capital be used to maintain operations, jobs, and investment. It encourages provincial governments as a short-term measure to follow the lead of the federal government and allow companies to opt out of making any special payments for a period of six to 12 months, or until greater visibility on economic recovery is apparent. No conditionality or approval requirements should be applied to such relief, other than a requirement by companies to inform regulators of their funding plans. Over the medium term, it recommends that provincial ministers of finance be flexible in terms of adapting pension funding and other regulatory requirements to the difficult economic environment and to maintain an open dialogue with plan sponsors. It encourages provinces that have not yet implemented fundamental pension funding reform to do so.

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Resumption Of Activity Raises Questions

The Quebec government’s announcement of a gradual resumption of activity in specific economic sectors is also raising some questions for employers, says Langlois Lawyers. Questions include how to go about calling employees back to work as well as what measures to put in place to ensure smooth operations while team members observe applicable health and safety regulations. Recognizing that a heightened level of uncertainty and unknowns can create anxiety for both managers and employees, it will be useful for employers to provide a clear framework and precise rules so that activities can resume calmly and effectively. Questions may arise over who should be called back to work and in what order; what rules in the collective agreement, if any, need to be followed; and how to manage workers for whom specific public health recommendations apply (e.g. workers aged 60 and over or workers with compromised immune systems). There may also be questions over health and safety measures such as the need to administer a health questionnaire or take a temperature reading as employees arrive at work, supplying personal protective equipment (e.g. a mask) to each worker or to install physical protective barriers (e.g. plexiglass. It may also be necessary to reorganize work procedures or workspaces to allow for social distancing.

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Access Allowed To LIRAs

Ontarians experiencing financial difficulty resulting from the Covid-19 pandemic may be able to access money from their locked-in retirement accounts (LIRAs) or their life income funds (LIFs). The Financial Services Regulatory Authority (FSRA) of Ontario guidance applies to plan members who are eligible under the rules governing their pension plans or under Ontario’s Pension Benefits Act (PBA). While money held in LIRAs or LIFs are required to be used to provide a retirement income and is inaccessible for any other purpose, there are a variety of exceptions under which money may be withdrawn. An individual whose employment and plan membership has ended, but who has left their pension benefit in the plan (as opposed to having transferred it out), may still have the option of transferring the value of the pension to a LIRA or LIF, depending on the terms of the plan and the individual’s age. Once the value of the pension benefit is transferred to a LIRA or LIF, money may be accessible for existing financial hardship. This could be, for example, where a LIRA or LIF owner has fallen behind on rent after being laid off as a result of Covid-19. That individual could apply to their financial institution to unlock enough money in the LIRA or LIF to pay the rent arrears and 12 months’ worth of future rent, as long as they have been given a written demand by the landlord to pay the arrears.

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Impact Investing Stands To Benefit

Impact investing in Europe stands to benefit from a surge in demand from fiduciaries, driven by stakeholders’ and beneficiaries’ quest for purpose and solutions in a world upended by the coronavirus global outbreak, says research from Cerulli Associates. The pandemic has highlighted many of the challenges that impact investors have been seeking to combat for years, from population density to the absence of rights for low-paid workers. Supporters of impact investing ‒ already one of the fastest-growing areas of asset management ‒ believe that a surge in demand from fiduciaries could push it into the mainstream. Its research shows that for a long time, impact investment was hindered by the fact that many impact funds put positive outcomes ahead of market returns. This left the sector dependent on discretionary capital, because most asset owners have a fiduciary duty to achieve returns. In recent years, however, impact investment has sharpened its focus on returns. The entry of renowned return-seeking firms into the sector has further bolstered its commercial credentials. Nevertheless, the sector still faces significant headwinds, not least a scarcity of asset managers offering impact strategies. To operate effectively in the impact space, asset managers need to develop a different set of skills to those used in traditional investment. They need to be able to measure impact as accurately as they measure returns. It predicts that the growth in impact investment will lead to a shake-up in asset management as firms redefine their value propositions to address customers’ new needs. In addition, asset managers need to develop impact products across asset classes.

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CN Using EQ Care

EQ Care is providing virtual healthcare to essential workers at CN. CN joined the EQ Care community earlier in the year, allowing its Canadian railroaders to benefit from access to virtual healthcare services, from wherever they are via any internet-connected device. As part of the partnership, it has been providing CN Canadian employees and their family members an online concierge healthcare service, accessible through secure voice, text, and video conferencing. Its care includes access to physicians, mental health specialists, and other medical and paramedical professionals and is available via mobile, tablet, or computer in English and French.

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SSQ Contributes To Stronger Minds

As part of Mental Health Week, SSQ Insurance is contributing to the ‘Stronger Minds by BEACON’ program as a way to support the mental well-being of Canadians. A free digital program, it was created to help during the pandemic through resources provided by a team of clinical psychologists. Launched at the beginning of April, this initiative has already provided support to many people by helping them cope with social isolation, stress, financial insecurity, or the need to be resilient for the sake of their loved ones.

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May 6, 2020


Health Canada Works To Stabilize Drug Supply

Amidst reports that drug shortages in Canada are happening more frequently due to the COVID-19 pandemic, Health Canada has been working closely with manufacturers, distributors, hospitals and pharmacies to buttress the stability of this country’s drug supply chain, says a Telus ‘Health Benefits Hub.’ “All stakeholders are working in a unified way on two levels: to prevent the hoarding of medications in the short term and to protect the viability of the global supply chain in the long term,” says Jason Kennedy, director, health business consulting, at TELUS Health. Most pharmaceutical manufacturers operate globally, which often means that they source their ingredients from multiple countries. While most typically have several months of finished products on hand in any given market, it’s unknown how the economic disruptions caused by COVID-19 will affect the supply chain beyond that. “In March, almost double the number of drugs were on back order compared to January or February,” says Lavina Viegas, director of drug operations at TELUS Health, citing numbers from drugshortagescanada.ca, the Health Canada website for drug shortages and discontinuations. These back orders, however, do not necessarily translate into shortages for patients. That’s because the majority of back orders involve drug categories that have two or more generic drugs available in addition to the brand. The pharmacy is, therefore, able to dispense an alternate drug, usually a generic, once adjudication takes place. However, in the coming weeks, back orders could be indicators of possible problems in the long-term global supply chain. There are possible cost implications of some of the strategies to mitigate drug shortages. For example, claims for 30-day supplies have increased and claims for 90-day supplies are decreasing resulting in three dispensing fees billed to the plan rather than one. As well, a handful of drug classes have begun to experience back orders for all their generic options at the same time. In that case, coverage is temporarily linked to the original brand-name drug until supply is restored for one of the generics.

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Equity Losses Hurt Median Return

The median return of the BNY Mellon Canadian Master Trust Universe was down 7.23 per cent for the first quarter of 2020 as COVID-19 became a global pandemic. The one-year median return as of March 31 was -1.13 per cent, while the median 10-year annualized return was +7.24 per cent. “Equity markets experienced significant losses during the first quarter, marked by severe price declines and increased volatility in response to the COVID-19 pandemic and the ongoing OPEC dispute. With unprecedented market losses experienced during the first three months of the year and a worldwide economic decline, all equity asset class performance was in negative territory,” says Catherine Thrasher, head of strategic client solutions and global risk solutions at CIBC Mellon and BNY Mellon. Among traditional asset classes, the Canadian equity universe median posted the lowest performance, with a quarterly median return of -20.1 per cent and a one-year return of -14.03 per cent. Fixed income returns posted a slightly negative performance of -0.13 per cent. Among non-traditional asset classes, private equity delivered the highest performance for the quarter, returning +9.64 per cent, albeit on lagged valuations.

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Hedge Managers Using Alternative Data

The Alternative Investment Management Association (AIMA), in collaboration with fund services and technology provider SS&C, has found 53 per cent of hedge fund managers use alternative data. Alternative data is unconventional or non-market data that doesn’t fall within the realms of traditional financial and economic data. Examples include data from consumer spending, weather patterns, and satellite imagery. The report ‒ ‘Casting the Net’ ‒ says of managers using alternative data, 25 per cent are considered ‘market leaders’ or hedge fund managers that have been using this type of data for more than five years. The remaining 75 per cent of users have been using alternative data for less than half a decade. The analysis revealed concerns around regulatory and compliance challenges on the horizon, including data owner consent, privacy issues, intellectual property rights infringement, consumer protection, and practices that could provide an unfair advantage. The top alternative data sets used by hedge fund managers are consumer spending and lifestyle data (e.g., retail footfall in shopping centres and malls, credit card receipts), web-crawled data: extracting information stored within web pages; and data sourced from expert networks: bespoke research that may include data from unconventional sources.

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Leslie, Marathon Merge

The Leslie Group Ltd and Marathon Benefit Corp have merged to enhance the value they offer their clients through service, innovation, technology, and expert advice. For the Leslie Group Ltd, this is a step in expanding in western Canada to offer local service to its growing client base. For Marathon Benefit Corp, this merger will provide existing clients with access to additional resources and products that were not previously available, as well as additional buying power.

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Europe Watches Financial Market Infrastructure

Amid the unprecedented volatility sparked by the COVID-19 crisis, European regulators are watching the region’s financial market infrastructure closely to see how it performs under extreme stress and for signs of where rules should be adjusted once the current turbulence subsides, says Greenwich Associates. Two years after the implementation of MiFID II, regulators entered 2020 weighing a series of possible revisions to that set of regulations. However, the COVID-19 outbreak likely will delay any broad changes as regulators respond to the crisis. Regulators continue to examine the role ‘dark trading’ plays in the system, especially during extreme volatility. To date, the region’s equity market infrastructure has held up well. “The shift of trading volume from ‘dark trading’ to ‘lit’ venues like exchanges and MTFs during the COVID-19 crisis highlights an impressive mobility of order flow,” says Shane Swanson, senior analyst for market structure and technology and author of ‘European Investors’ Take on Market Structure Issues 2020.’ To regulators, the recent migration of trading volumes to exchanges and MTFs will also highlight the importance of a holistic approach in reviewing potential changes to market structure. Among the changes currently under consideration are reforms to the rules governing when and how much trade volume can be executed on dark venues and revisions to rules on ‘periodic auctions’ to ensure that they are not being used to circumvent transparency requirements.

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Market Dislocation Moves Against DB

The effects of this market dislocation on Canadian defined benefit pension plans is significant as the two parameters that constitute the funding ratio moved against them: the plummeting of both yields and equities, says François Hélou, director, head of balance sheet solutions sales, institutional sales and service, at BMO Global Asset Management. Writing in its ‘Institutional Quarterly,’ he says during the first quarter, the S&P/TSX Composite index declined by 21.59 per cent, while the S&P500 index and the MSCI World index dropped by 20 per cent and 21.44 per cent, respectively. Meanwhile, AON estimates that during the same quarter, the decline in long bond yields increased the value of Canadian pensions’ solvency liabilities by 6.3 per cent. Looking beyond COVID-19, the prospect of a global economic recession, combined with accelerating government deficits and central banks’ aggressive quantitative easing, will likely lead – at least in the short term – to continuous market volatility and further declines in long-term rates. The prospects of further declines in long-term yields and the need to improve the plan’s funding ratio following the latest market sell-off pose a dilemma to many DB plans: how do they maintain or even increase growth assets while increasing their hedge ratio? One solution is dynamic liability driven investing (LDI) which addresses this dilemma through asset allocations that incorporate synthetic instruments ‒ a bond overlay: a synthetic bond strategy combined with physical growth assets and an equity-linked LDI: a synthetic growth asset strategy combined with physical hedge assets. Both could be used separately, or in a single combined strategy.

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Empire Includes Mental Health Navigator

The Empire Life Insurance Company is now automatically including the ‘Mental Health Navigator’ in its group benefit plans. Provided by Best Doctors, it is a confidential and personalized service that delivers expert assessment, treatment recommendations, and an action plan. It offers continuous guidance and support from a ‘navigator’ (a registered nurse or social worker specializing in mental health) throughout the plan member’s journey. Drawing on a care team of clinicians, psychologists, psychiatrists, and physicians, it enables members to receive care on their terms regardless of location.

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Murray Joins Board

Susan Murray is on the board of directors for Blue Pier. The founder and CEO of SA Murray Consulting Inc., she is honorary director and former chairman of the board at the National Ballet School of Canada, a former director of the MS Scientific Research Foundation board, and a director of the Shannon School of Business national advisory board at Cape Breton University. Susan has also served on numerous volunteer and corporate boards.

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