February 21, 2012
Severance Arrangements Pay Cash
Approximately 75 per cent of large U.S.-listed public companies maintain change in control (CIC) severance arrangements that provide cash severance to senior executive, says Meridian’s ‘2011-2012 Study on Change in Control (CIC) Severance Arrangements.’ The study also found that companies have responded to recent external pressures by modifying key elements of CIC severance arrangements in areas including reduced participation levels in CIC arrangements; reduced cash severance multiples; subjected future equity awards to double-trigger vesting; and eliminated excise tax gross-ups. From a governance standpoint, it says Canadian companies may find it useful to keep an eye on U.S. developments around CIC arrangements as these practices may help shape Canadian best practices. However, having said that, there are currently some notable differences between these arrangement and those maintained by large Canadian companies. For example, the cash severance multiple used to determine CEO and other NEOs’ cash severance in generally more conservative in Canada and tax gross-up provisions are generally not used in Canada.
Unit Preserves Wealth
FTSE Group has launched the FTSE Wealth Preservation Unit, a stable global currency unit which aims to allow global investors to preserve wealth over the long-term by providing protection from currency and inflation risk. It provides investors with a transparent tool which aims to mitigate both risk of loss arising from changes in relative valuation in currencies as well as internal loss from inflation erosion of purchasing power in order to preserve wealth over the long-term.
Pool Provides Global Diversification
Russell Investments Canada Limited (Russell) now offers a pool designed for investors looking for global fixed income diversification. The Russell Global High Income Bond Pool is a global fixed income pool that currently targets 60 per cent high yield bonds and 40 per cent emerging markets debt. It is sub-advised by DDJ Capital Management, LLC, a U.S. high yield bond specialist; Logan Circle Partners, LLC, a global high yield bond specialist; and Stone Harbor Investment Partners LP, an emerging markets debt specialist.
ETF Capitalizes On Price Trends
Claymore Investments, Inc. is trying to capitalize on the price trends of a diverse universe of commodity, currency, equity, and fixed income futures contracts through a systematic trend-following strategy. Its Managed Futures ETF tracks the performance of the Guggenheim Managed Futures Index and offers investors the potential for downside protection, true asset class diversification, and a hedge against inflation. The strategy focuses on risk management, while also capturing the true uncorrelated ‘beta’ that managed futures strategies can provide.
Call Issued For Sustainable Capitalism
Al Gore and David Blood, chairman and senior partner, respectively, of Generation Investment Management, have issued a call for ‘sustainable capitalism.’ In a white paper that examines some of the academic research into economic and market sustainability, they put forward some “key actions for immediate adoption.” These include identifying and incorporating risks from stranded assets, mandating integrated reporting, ending the default practice of issuing quarterly earnings guidance, aligning compensation structures with long-term sustainable performance, and encouraging long-term investing with loyalty-driven securities. It also argues that businesses should integrate both their financial and ESG performance into one report.
Small Businesses Get Tools
Ceridian Canada Ltd. has launched an online service that gives small business owners the tools necessary to pay and manage their people in one convenient location. Ceridian for Small Business (www.ceridiansmallbusiness.ca) provides employee-related solutions which will result in up to a nine per cent reduction in labour costs for organizations with less than 50 employees. It provides a single-source provision of employee-related services by allowing employers to simply go online to arrange the monthly service plan that best suits their needs. Upon registering, they can access Ceridian's range of payroll services and, when the need arises, on matters such as employment law advice, recruiting, background checking, and training.
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February 13, 2012
Inheritance Expectations Falling
More than half of Canadians are expecting an inheritance (53 per cent) and of those who believe they know the size, 57 per cent expect the value will be over $100,000. However, research from Investors Group suggests the estimated $1 trillion transfer of wealth forecast to occur in the next 20 years may result in fallen expectations for some. Nearly half (45 per cent) of Canadians aged 60 or more are concerned they are going to need their savings to fund their retirement and won’t have money left to give to their survivors. Significantly, only one-quarter (25 per cent) are willing to make personal sacrifices to ensure an inheritance for their family. “As people live longer and have higher expectations for their retirement, younger generations may have to adjust their own expectations about the anticipated transfer of wealth,” says Christine Van Cauwenberghe, director, tax and estate planning. “This has financial planning implications and strategies that must be considered by both recipients and benefactors – ranging from retirement planning and saving to tax planning and insurance planning.”
Share Ownership Aligns Interests
Significant share ownership aligns executives’ financial interests with shareholders and encourages an appropriate level of risk taking, says Meridian Compensation Partners. Its study examined executive share ownership practices at the S&P/TSX 60 index companies and determined that most have formal share ownership requirements for the CEO and that actual ownership by CEOs substantially exceeds those requirements. However, compensation committees should examine their share ownership guideline design and long-term incentive award practices to determine if their share ownership requirements are truly creating the desired alignment with the company’s shareholders.
Monterey Car Week A Must
For vintage auto aficionados, a visit to Monterey Car Week needs to be at the top of their bucket lists, writes Peter Volny on the Private Wealth Canada website. The article ‘#1 on your bucket list ‒ Monterey Car Week’ at http://www.privatewealthcanada.ca/articles/MontereyCarWeek2011.php provides tips on everything from dining to accommodations and vantage points for those who plan to make the trek to the annual event in Monterey, CA, which takes place August 13 to 19 this year.
Canadian Businesses ‘App’ Use Growing
‘There's an app for that’ may apply to more than four in 10 Canadian businesses before the year is over, says a survey by Robert Half Technology. Thirty-one per cent of CIOs polled recently said their companies already offer a mobile application, while another 12 per cent said they plan to offer one in 2012. The survey found the two greatest challenges for IT teams developing these applications are keeping them up to date and finding IT professionals with the skills to build them.
Debt, Marriage Don’t Mix
The TD Canada Trust Valentine's Day poll found 77 per cent of Canadians would not marry someone who was bad at managing their personal finances or if they held excessive debt. It shows 29 per cent say they would date but never marry someone who couldn't manage their money well, while 37 per cent say they wouldn't even date someone who didn't have their finances under control. Another 11 per cent reported they were recently in a relationship like that, but wouldn't do it again. And, despite the trend of combining finances, 82 per cent say they would not consider a pre-nuptial agreement. Canadians who are currently separated or divorced are the most likely to consider one for their next relationship (29 per cent versus 16 per cent nationally).
Stock Ownership Helps Retainment
Employees in the U.S who had employee stock ownership were four times less likely to be laid off during the recent recession than employees without employee stock ownership, says the General Social Survey. It found that three per cent of employees with employee stock ownership were laid off in 2009-2010 compared to a 12 per cent rate for employees without employee stock ownership. In addition, the data indicated that 13 per cent of the employees with employee stock ownership intended to leave their companies in the coming months whereas the rate was 24 per cent for employees without employee stock ownership. This indicates significantly lower expected turnover for workers with employee stock ownership.
First Phase Of Modernization Complete
The Canadian Securities Administrators (CSA) has completed the first phase of its ‘Modernization Project’ which seeks to update the product regulation of publicly offered investment funds. The purpose of the project is to modernize investment fund regulation, making it more effective and relevant in today's more diverse and increasingly innovative retail marketplace. Specifically, the amendments introduced in the first phase recognize the proliferation of Exchange Traded Funds (ETFs) and streamline their access to the market by eliminating the need for them to apply for regulatory exemptions. This will reduce regulatory costs, which is also expected to benefit investors. The amendments are also designed to enhance the resilience of money market funds to certain short-term market risks, by introducing new liquidity requirements and term restrictions.
Investor Sentiment More Positive
Investor sentiment in Canada is at its most positive since the stock market collapse of 2008, says a Franklin Templeton survey. It found 40 per cent of investors describe themselves as opportunistic, risk-taking, or analytical, the three categories that typically suggest buying behaviour. The number of investors describing themselves as ‘opportunistic’ has risen by 75 per cent since July 2011. These are the most bullish results since the investment management company began tracking investor sentiment after the global financial crisis three years ago. Notwithstanding the rise in positive sentiment, investors remain divided in their outlook with 42 per cent in the two most risk-averse categories describing themselves as ‘suspicious’ (27 per cent) or ‘timid’ (15 per cent). The number of investors saying they were ‘not sure’ has dropped from 30 per cent in June 2011 to 17 per cent, suggesting that sentiment is hardening.
ADR Provides Mediation
The Portfolio Management Association of Canada (PMAC) will use the ADR Institute of Canada (ADRIC) to provide mediation and arbitration services for PMAC member firms and their clients. This service is designed to assist PMAC members in complying with the requirement in National Instrument 31-103 ‘Registration Requirements, Exemptions and Ongoing Registrant Obligations.’ It requires that registered firms provide independent dispute resolution services, such as mediation or arbitration, at their expense for their clients to resolve complaints. “We believe this is an optimal solution for all parties,” says Katie Walmsley, PMAC president. “We want to ensure that investors can choose a mediator or arbitrator from a roster of local, qualified independent professionals and that the mediation or arbitration process adheres to nationally accepted standards and best practices.”
Shorter Term Adds More Value
Generally, everything else being equal, a structured product with a shorter term adds more value than one with a longer term, says ‘Analysis of Structured Products in the Context of their Historical Performance,’ a white paper by Jim Otar, of Aftcast.com. Presented at the Structured Products Association annual meeting, it analyzes the historical performance of selected structures products ‒ such as index-linked CDs, principal protection funds, equity-linked notes, equity-linked certificates, and market-index securities. All share a common thread, the protection of the principal and an interest credit that is correlated to an equity performance. The white paper also indicates that over the long term, for the average investor, structured products will provide a larger median asset value compared with holding equity investments.
Canadian Dollar Could Strengthen Again
As economic turmoil around the world starts to abate, it is not a stretch to believe the Canadian dollar will strengthen again, says Giulio Martini, chief investment officer of currency strategies with AllianceBernstein. Speaking on ‘Unappetizing Choices: Resolving the Canadian Investors’ Local Currency Dilemma,’ he said typically the Canadian dollar is sold off during times of market turmoil. This accounts for its recent slip after reaching record highs. However, the dilemma for Canadians who want to hedge their foreign holdings is that the “big four” currencies ‒ the U.S. dollar, Japanese Yen, British Pound Sterling, and the Euro ‒ are all in crisis and it is “hard to decide which one is worse.” Because the big four are so unattractive, the Canadian dollar is attractive as a global reserve currency. However, the attractiveness of the Canadian dollar is limited by the central bank’s inability to raise interest rates and its large current account deficit. For investors who want to hedge, they should avoid the Euro and the Pound among the big four. Or, they can switch to small country currencies and take a market neutral approach using a basket of these currencies.
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February 6, 2012
Beliefs About Innovation Inaccurate
Canada's weak innovation performance is partly a result of Canadian business leaders' sometimes inaccurate beliefs about the innovation environment, says a Conference Board of Canada report based on results from the World Economic Forum's ‘Global Competitiveness Survey 2011-12.’ "Canadian business leaders may be less inclined than their global counterparts to adopt innovation as a business strategy because they do not see it as rational or necessary in their current environment," says Daniel Munro, principal research associate. "Many Canadian business leaders feel that competitive pressures are not strong enough to motivate innovation, capital markets are too weak, and the tax burden is too high. But their perceptions do not always align with reality." The report, ‘From Perception to Performance: How Canadian Business Leaders View the Innovation Environment,’ shows Canada ranks 11th among the 142 countries ranked on innovation in the WEF's report, trailing key competitors such as Japan, the United States, and Germany as well as small advanced economies such as Switzerland, Sweden, and Finland. Perceptions of high taxation, less intense competition, and weak capital markets help to explain why Canadian firms are less likely to innovate than global peers.
Advisors Bullish On Equity Markets
After reasonably strong equity returns during the last quarter of 2011, the majority of Canadian investment advisors believe equity markets should increase again during the first quarter of 2012, says Horizons Exchange Traded Funds Inc.’s ‘Q1 Advisor Sentiment Survey.’ Roughly two out of three Canadian advisors (60 per cent) were bullish on Canadian equities as represented by the S&P/TSX 60 (Total Return) Index after this index posted a positive 2.07 per cent return on the quarter. Similarly, bullish sentiment increased more than seven percentage points from the previous advisor survey on U.S. large cap equities as represented by the S&P 500 to 58 per cent after an 11 per cent gain on that index last quarter.
Fisker Comes To Canada
The Fisker Karma, the world’s first true Electric Vehicle with extended range, is coming to Canada. As its initial entrée into the Canadian market, Fisker Automotive has partnered with established retailers to bring its uncompromised responsible luxury cars to locations in Toronto, ON; Calgary, AB; and Vancouver, BC. Fisker, an American car company, was founded in 2007. The company is designing and developing the world’s first line of premium electric plug-in hybrid luxury autos for the modern sports car buyer.
Senior Management Involved In Benefits Decisions
As the benefits decision-making process continues to gain importance in corporate America, there is growing trend of senior management, boards of directors, and finance/treasury, as well as human resources, increasingly becoming involved in or making these decisions, says ‘A Changing Benefits Landscape,’ the third in a series of research briefs from Prudential’s ‘Sixth Annual Study of Employee Benefits: Today & Beyond.’ It found that 40 per cent of plan sponsors say the employee benefits decision-making process in their company has changed to some extent over the past five years, demonstrating increased attention to the bottom line impact of benefits. The influence of senior management has increased the most, with 45 per cent of respondents saying they are more involved in these decisions. More than 20 per cent of plan sponsors indicated that the boards of directors, finance/treasury, and employees themselves are all playing a more important role in the benefits decision-making process.
Denison Warns About Protectionist Measures
The head of the Canada Pension Plan Investment Board (CPPIB) is calling for policymakers to carefully consider the implications of protectionist measures on capital flows. In a speech to the Canadian-Australian Chamber of Commerce, David Denison, president and chief executive officer, said “at a time when the world arguably most needs to accelerate trade, capital flows, and economic activity to stimulate growth, we see growing signs that economic nationalism and protectionism continue to influence outcomes." Instead, "our overarching belief is that there needs to be a large and strong presence of long-term investors for capital markets to function well and economies to flourish.” The various roles played by long-term investors, including how they help stabilize markets in times of stress, provide patient capital, and support for companies to pursue long-term value creation, helps offset the predominant “quarter-by-quarter mindset.” Citing the shrinking universe of long horizon investors, he encouraged policy makers to consider carefully the implications of policy frameworks and rule changes on the availability of true long-term capital.
Equity Managers End Year Positively
The year ended on a positive note for large cap Canadian equity investment managers with 76 per cent outperforming the S&P/TSX Composite Index’s return in the fourth quarter of 2011 – the highest outperformance since the second quarter of 2004, says the ‘Russell Active Manager Report.’ That compares to only 40 per cent who beat the benchmark in the third quarter. The median large cap manager return was 4.7 per cent in the fourth quarter compared to the S&P/TSX Composite’s return of 3.6 per cent, the largest outperformance in three years. “The focus came back to fundamentals, with many of the companies that were beat up in the third quarter rebounding strongly in the fourth, primarily in the month of October,” says Kathleen Wylie, senior research analyst. “The market seemed to recognize that good companies, with good management, trading at reasonable valuations, should be rewarded.”
HSBC Identifies Opportunities
Investment grade and emerging corporate bonds and emerging markets sovereign debt are providing among the most attractive investment opportunities, says HSBC Global Asset Management’s ‘Investment Quarterly Report.’ The report shows that other themes where valuations are considered to be attractive include selective commodities (hard and soft) via outright exposure or to stocks in the sector and exposure to emerging consumption and infrastructure themes via both emerging and developed market stocks. Philip Poole, global head of macro and investment strategy, says “We currently favour the so-called cyclical sectors in emerging markets, namely industrials, materials, financials, and energy as central banks in countries including China, Brazil, Indonesia, and Thailand have cut interest rates (or reserve ratios) to stimulate growth as concern about inflation recedes. And many such countries still have the scope to ease further and to fund development projects with bond sales. In many Western countries, rates are already near zero and public debt is significant.”
RBC Brings Funds To Canada
RBC Global Asset Management Inc. has made the BlueBay Emerging Markets Corporate Bond Fund, RBC U.S. Mid-Cap Value Equity Fund, and RBC U.S. Small-Cap Core Equity Fund available for purchase by individual and institutional investors in Canada. BlueBay Emerging Markets Corporate Bond Fund invests primarily in debt securities of corporations based in emerging market countries. The fund is appropriate for investors seeking a combination of income and capital growth potential while looking to diversify the fixed income portion of their portfolios through exposure to emerging market debt securities. The RBC U.S. Mid-Cap Value Equity and U.S. Small-Cap Core Equity Funds invest primarily in equity securities of U.S. mid-cap and small-cap companies that are deemed to be undervalued in order to provide broad exposure to economic growth opportunities in the equity markets.
Business Optimism Improves
Optimism among Canadian small- and mid-size businesses continues to improve, but at a reserved pace, says the Canadian Federation of Independent Business (CFIB). Its ‘Business Barometer Index’ ended January at 65.2, just slightly above the 65 registered in December, but not enough to register as a statistically significant movement. The East-West divide on economic performance continues. Alberta businesses lead the way as Canada's most optimistic with an index level at a very healthy 73.3. In fact, all four Western provinces are well above the national average. Ontario and Quebec businesses slide in just below average, while the Atlantic region remains least optimistic.
U.S. Economy Expected To Grow
The U.S. economy is expected to grow by 2.7 per cent in 2012, but even this modest gain depends on whether governments on both sides of the Atlantic Ocean deal with their respective debt challenges, says the Conference Board of Canada's ‘U.S. Outlook-Winter 2012.’ The outlook assumes that even if Europe enters a recession, its governments will find a way to keep the euro currency from collapsing. The forecast also includes the assumption that the United States adopts fiscal policies that support continued growth in the economy. Lower payroll taxes and maintenance of unemployment insurance benefits are two measures that would stimulate the economy in the short term. However, Congress and the Obama Administration must reach an agreement on these measures, otherwise the effects of tighter fiscal policy will reduce economic growth this year.
Business Confidence On Knife Edge
Global business confidence is balancing on a knife edge heading into 2012, says a report from Grant Thornton International. The fourth quarter results of the ‘International Business Report (IBR)’ shows the global economic outlook is still dominated by the crisis in the eurozone and fears are increasing that business growth will become even more difficult than in 2011. Global business optimism in the fourth quarter of 2011 stands at net zero per cent, indicating a balance between those business leaders feeling optimistic about their economies in 2012 and those feeling pessimistic. It represents a further deterioration from three per cent in the third quarter of 2011 and 31 per cent in the second quarter. Canada, which stood out in the third quarter by posting net business optimism of 60 per cent, saw this fall to 46 per cent in the fourth quarter. Though not immune from the global slowdown, Canada is still significantly above the global average and, alongside Germany, is the most optimistic mature economy.
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January 30, 2012
CEOs See Global Decline
Nearly half (48 per cent) of the CEOs polled worldwide believe the global economy will decline even further in the next 12 months, says PwC's ‘15th Annual Global CEO Survey.’ Just 15 per cent said the global economy will improve during 2012. The outlook was almost identical for the 130 Canadian CEOs who responded to this year's survey, with 48 per cent seeing a decline over the next year and only 13 per cent believing the market will improve. However, Canadian CEOs believe their organizations have been less affected by global turmoil than leaders in other countries. For instance, while the sovereign debt crisis was cited as the key global issue to affect Canadian businesses, a reduced number of Canadian CEOs (38 per cent) said the crisis had an impact on their operations this year compared to 56 per cent of CEOs globally. Similarly this held true for other significant global events, including the Japan earthquake and nuclear crisis (18 per cent compared to 29 per cent globally) and the political upheaval in Arab economies (14 per cent compared to 21 per cent globally). "In general, CEOs in Canada believe their companies have greater resilience and growth prospects than their global peers," says Gino Scapillati, national managing partner, markets. "Compared to other leaders, Canadian CEOs found their companies to be less affected financially by major 2011 crises events."
CN Suspend Ex-CEO’s Pension
Canadian National Railway Co. has suspended Hunter Harrison’s pension payments, alleging that its former chief executive officer will breach provisions of his retirement deal and poses a serious threat to CN if he joins rival Canadian Pacific Railway Ltd., says a report in the Globe and Mail. Harrison is in the midst of a proxy battle by U.S. hedge fund Pershing Square Capital Management LP on CP which is lagging behind other freight carriers in the industry. It wants to replace current CEO Fred Green with Harrison. Now CP’s largest shareholder, it hired Harrison as a consultant last fall to help the hedge fund assess its potential investment in CP. The report says Pershing Square is prepared to guarantee Harrison’s retirement benefits if CN prevails with its suit. Harrison had a non-compete clause that expired at the end of 2011. His pension benefits have a present value of $20.6 million and restricted share units worth $17.9 million.
Special Rolls Sells Out In China
Luxury car sales in China show no signs of slowing. In fact, a special edition Rolls-Royce Phantom built to commemorate the Chinese New Year sold out within two months of being announced, even though it was priced from $1.2 million. Torsten Mueller-Oetvoes, Rolls-Royce CEO, Chinese customers aren’t satisfied with plain old luxury cars but prefer highly bespoke models. Already, some 56 per cent of orders for the entry-level Ghost sedan contain some element of bespoke personalization, ranging from custom paint through picnic sets and cigar humidors. The automaker plans to build even more dealerships in China on top of the existing 14 it has just to keep up with demand.
Investors Suffer From Fatigue
The Canadian stock market has become narrower with more exposure to resource and financials, says Jeff Tory, a partner at Pembroke Management Ltd. Speaking at its ‘Outlook 2012,’ he said this is compounded by the fact that Canadian investors are too focused on Canada. Heading into 2012, he also said that investors being bombarded by negative news and experiencing a loss of faith in government. This has left them suffering from “fatigue” and feeling “no love for equities.” The end result is inaction as they are uncertain about what to do.
Monetary Policy Needs Watchdog
Canada should improve its oversight of financial stability in the economy with a watchdog committee co-chaired by the Bank of Canada and Finance Canada, says a report by the C.D. Howe Institute. ‘Financial Stability: The Next Frontier for Canadian Monetary Policy’ says the next goal of monetary policy, in Canada as elsewhere, is to achieve and maintain financial stability in the economy. A new Canadian institutional framework to oversee financial market regulation with an eye to enhancing financial stability would take a systemic approach to safeguarding the financial system as a whole and clearly define the role of the Bank of Canada within it. It says while Canada weathered the recent financial crisis well, a better system could improve the odds of forestalling the next one.
North American Investors Optimistic
North American investors are feeling optimistic, say ‘Investor Sentiment Index’ (ISI) surveys from Manulife Financial and John Hancock. In the first-ever comparison of the two surveys, results suggest that Canadians are nearly twice as likely to view the present as a ‘good’ or ‘very good’ time to be investing in a range of investment vehicles as are their American counterparts. The Canadian index rose five points and hit a year end high of +26, while the American index also increased five points, ending the year at +15. "Growing consumer confidence is an important barometer when looking at the future health of the economy on either side of the border," says Bill Cheney, chief economist for the companies. "Consumer confidence usually translates into increased spending, a critical component to keep their economies moving forward."
ETF Servicing Capability Enhanced
State Street Corporation has expanded its global servicing capability for exchange traded funds (ETFs). Now leveraging state-of-the-art cloud-enabled technology, its ETF servicing solution, TotalETFSM, drives full automation throughout the lifecycle of an ETF from the basket-creation process to trade processing and settlement. The enhancements provide complete integration to core applications, end-to-end automation, and full client transparency via an ETF dashboard available on the company’s client website. Additional functionality includes the geographic expansion of its Fund Connect ETF order management system and a daily performance attribution capability.
RBC Commits To ‘Impact Investing’
The Royal Bank of Canada will commit $10 million to ‘impact investing.’ The RBC Impact Fund will help finance projects by organizations and entrepreneurs that address social and environmental challenges. And, it's also making a $10 million investment by the RBC Foundation of its own assets into socially responsible investment funds. The bank will assemble an advisory panel to assist an internal group in developing criteria for the fund (including types of organizations eligible for funding, terms of funding, geographical limitations, etc.), an appropriate governance structure, and processes. Details on the eligibility criteria and application process for the fund will be communicated in the coming months.
Effort Needed To Educate ETF Investors
The exchange traded fund (ETF) industry needs to be responsible in developing new products and make greater efforts to educate investors about ETFs, says Gus Sauter, CIO at Vanguard. In a speech at the IndexUniverse ‘Inside ETFs’ conference, he said the ETF industry has been characterized by “growth and innovation.” From 2000 to 2010, assets in ETFs grew by about 30 per cent per year. The rapid growth of ETFs has been largely good news for investors, providing them with greater access to diversified, low-cost index funds and giving advisors simple, flexible investment tools for building well-constructed portfolios for their clients. However, he encouraged ETF providers and investment advisors to play the role of an educator when it comes to ETFs. “I believe that as providers of ETFs and as distributors of ETFs, we have a responsibility to make sure the investing public is as informed about ETFs as it can be,” he said.
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January 23, 2012
Economic Prospects Optimistic At Most Companies
Fewer Canadian executive chartered accountants are predicting a recession in Canada and a majority are forecasting a positive outlook for their company's revenues and profits, says the CICA/RBC ‘Business Monitor. ‘Only 14 per cent of the executive CAs in leadership positions in privately and publicly held companies across Canada believe that a Canadian recession will occur in the next six months, down 13 per cent from the previous quarter. The respondents are also feeling better about the prospects for the American economy, with 44 per cent projecting a recession stateside, down 18 per cent from the third quarter of 2011. Still, almost half (45 per cent) feel that the economic state of the U.S. will represent the strongest challenge to the growth of the Canadian economy, down from 57 per cent last quarter. Almost a quarter of respondents (22 per cent) feel that the European debt crisis is the greatest challenge to economic growth in Canada, an increase of 13 per cent from last quarter.
Luxury Shoppers Want One-On-One Attention
Nearly a third of consumers consider highly knowledgeable and well-trained employees as the most important element of their luxury purchase experience, says Empathica Inc. The ‘Consumer Insights Panel’ of 5,000 U.S. and Canadian consumers found that consumers are very willing to walk out of a luxury retail store if they are not receiving the one-on-one attention they need. In fact, three out of four consumers said they buy either nothing – or less than what they would normally purchase – if there are not enough employees in the store to assist them. Despite the importance of individual attention at luxury retailer stores, many consumers think today’s brands aren’t delivering. Only 38 per cent of consumers said they receive better customer service in luxury retail than in non-luxury retail. On the other hand, if employees are eager to serve customers, a full 80 per cent of survey respondents said it would have a positive impact on their perception of the brand and affect their future business with the store. The top luxury service elements valued by consumers were highly knowledgeable and well-trained employees, one-on-one customer service, brand exclusivity, a welcoming store atmosphere, and many employees available to serve them.
Fortune 500s Alter Incentive Programs
Companies continue to shift away from stock options and other ‘appreciation’ awards toward a greater emphasis on full-value awards in their equity compensation plans, says Towers Watson. Full-value awards now comprise 47 per cent of the number of shares granted and 75 per cent of the grant-date fair value of all equity awards at the typical company, compared to 29 per cent of the shares granted and 57 per cent of the value five years ago. The annual study of equity incentive programs at Fortune 500 companies found the median dollar value of equity award programs increased by 29 per cent in 2010, bringing the median value just slightly below 2008 levels. Over the same period, the median Long-Term Incentive (LTI) fair value as a percentage of average market capitalization decreased by five per cent as the market recovery outpaced the increase in award values. Equity plan participants in aggregate exercised 90 per cent more options and other appreciation awards in 2010 than in 2009. This increase was attributable to improved market conditions and contributed to a reduction in overhang from 10 per cent to 9.7 per cent at the median.
Richest Irishman Goes Bankrupt
Once Ireland’s richest person, Sean Quinn has declared bankruptcy as he is pursued for debts exceeding $2.7 billion. The bankruptcy judgment will force a thorough court investigation of Quinn's finances, which the Anglo Irish Bank hopes will reveal capital and assets that it can reclaim from Quinn, his wife, and five children. Quinn had a reported 2007 net worth of $6 billion, but sank much of his fortune into Anglo months before the bank ‒ the most aggressive lender to Ireland's construction barons ‒ suffered crippling losses as the country's decade-long property bubble burst. Ireland nationalized Anglo in 2009 to prevent its collapse, wiping out a Quinn family investment estimated at €2.8 billion.
Global Optimism Re-emerges
Some optimism has re-emerged among global investors, says a BofA Merrill Lynch ‘Survey of Fund Managers.’ The global survey of institutional investors finds that far fewer are now predicting a global slowdown. Only three per cent believe the world economy will weaken in the coming 12 months, down from 27 per cent in December – the biggest one-month improvement in the growth outlook since May 2009. It also reports that many investors are showing a greater appetite to take risk. Cash levels have fallen to their lowest levels since July 2011, representing 4.4 per cent of the average portfolio, down from 4.9 per cent in December.
No Room For Complacency
"There is no room for complacency in 2012, but hope springs eternal,” says Frédéric Buzaré, equity strategist at Dexia Asset Management. With equity markets still seeking a new valuation system at this time of an uncertain and unfavourable macro economy, he says the risk premium, which has been steadily rising over the past 18 months, has reached record highs that reflect extreme risk aversion on the part of investors. Investor disinterest in the equity asset class was even stronger as 2011 came to an end. As a result, in 2012, any rise in the equity markets will depend on changes in the risk premium. "The healthy profits of the past haven’t prevented valuation multiples contracting. All the measures and reforms designed to encourage greater financial stability should bring the risk premium down and inspire a clearly under-valued equity market,” says Buzaré.
No Single Solution To Crises
There is no single solution to the financial crises taking place around the world these days, says Paul Summerville, of the Centre for Global Studies (University of Victoria). Speaking at the CPBI Ontario region’s ‘7th Annual Pension Investment Forecast’ on macro-economics, demographics, and politics, he said contrary to what economists say, each country’s situation is influenced by social, cultural, and political factors, not just economics. Thus, in 1993 when the Japanese economy collapsed, they chose to take a cut in their standard of living rather than turning to American solutions such as injecting money into the economy. He also said the fabric of society is being eroded by these constant crises and nowhere is this more evident than in the U.S. It is in the process of losing part of a decade of economic growth because of its failure to invest in social areas such as healthcare and education. "The American combination of economic insecurity, social inequity, and minimal government welfare support is proving to be a model incompatible with competing in the present day global economy," he said. The speech is at http://www.excellentfuture.ca/
ETFs Show Strong Sales
Canadian-listed exchange traded funds continued to show strong sales for the fourth quarter of 2011, says the Canadian ETF Association. Its latest ‘Quarterly ETF Asset Flow Report’ shows that the Canadian ETF industry had nearly $3 billion in net new sales during the quarter, finishing 2011 with more than $7.6 billion in net new sales. Despite difficult market conditions in 2011, strong sales helped Canadian ETF assets grow by nearly 13 per cent to slightly more than $43.1 billion. Amongst the asset classes, the fixed income category saw the largest inflows. There was approximately $3 billion in net creations in fixed income ETFs during 2011, with $1.4 billion in net creations occurring in the fourth quarter alone.
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January 16, 2012
Value Of 'Golden Parachutes' Increase
The average change in control benefit provided to CEOs has increased 32 per cent over the past two years, says a study by Alvarez & Marsal Taxand. These ‘Golden Parachute’ payments increased to $30.2 million in 2011 from $22.9 million in 2009. The study, which analyzed current change in control arrangements among the top 200 publicly traded U.S. companies, revealed the increase was driven primarily by equity-based payouts. Similar to 2009, 78 per cent of CEOs and 80 per cent of other named executive officers are entitled to receive a cash severance payment upon termination in connection with a change in control. While cash severance payments for CEOs account for more than 25 per cent of average change in control benefits received, a majority (59.4 per cent) are long-term incentive benefits such as restricted stock/options that are tied to performance.
Intra-company Transfer Permits Undergo Revisions
Changes have been made to Canadian immigration policies to benefit employees holding intra-company transfer work permits who travel frequently outside Canada, says Norton Rose. The rule previously stated after reaching the maximum work permit duration (five years for specialized workers, seven years for senior management), they would have to complete one year of full-time employment with the company outside Canada if they wished to re-apply. If they were unable to complete one year outside Canada, then the foreign worker would have to obtain a work permit under the labour market opinion category. Under the new rules, the time spent outside Canada during the duration of the work permit can now be ‘recaptured.’ For example, if an American employee has a work permit for one year and spends two months over the course of the 12 months working in the U.S., then only 10 months would count against his or her five- or seven-year limit. For employees to benefit from this change, Norton Rose recommends that a travel chart of entry/exit dates be maintained. It also recommends that employees retain copies of travel itineraries and airline tickets, hotel stays, etc., showing precise lengths of stay in Canada each year.
Fund Seeks Four Per Cent Payout
The Brandes Sionna Monthly Income Fund is designed to offer clients a conservative 60/40 balance of Canadian equities and fixed income securities and seeks an annual payout of four per cent. It focuses on long-term consistency with equity management sub-advised by Sionna Investment Managers, Inc. and fixed income management sub-advised by State Street Global Advisors, Ltd. The equity component concentrates on large Canadian companies considered to be undervalued, with lower financial risk and paying attractive dividends. The fixed income component seeks to control risk and volatility versus the broad market while using fundamental credit and economic research to add value.
Porsche Unveils New 911
Porsche AG revealed the 2012 911 Carrera coupe. The 911 coupe goes on sale in the U.S. in February, with the convertibles — the cloth-top Cabriolet and open-top Cabriolet S — following a few months later. The Cabriolet roof, which raises and lowers in two seconds, consists of a heated glass rear window and fabric-covered magnesium. It can open when the car is going at speeds of 31 mph or lower. The Cabriolet has a 3.4-liter, 350-horsepower V6 and a seven-gear manual transmission. It will go from zero to 60 mph in 4.4 seconds and has a top speed of 176 mph. Pricing for the 911 Cabriolet starts at $93,700, while the Cabriolet S starts at $103,800.
Funds Meet Income Needs
CI Investments Inc. has launched two funds to meet the needs of income-seeking investors ‒ the Cambridge Income Fund and Signature High Yield Bond Fund. The income fund seeks to achieve returns through exposure to a mix of fixed income and higher-yielding equity securities. The high yield bond fund focuses on gaining exposure to high-yield corporate bonds. Both funds pay a regular monthly distribution.
Maserati SUV Close to Production
The Maserati sport luxury SUV concept is close to the production. It hopes to sell about 20,000 a year of the SUV, called the Kubang, mostly in the U.S. and China.
U.S. Poised For Stronger Growth
The U.S. economy is poised for stronger growth in 2012, partly because two early indicators of economic recovery finally kicked in during the fourth quarter of last year, says Joe Carson, chief economist at AllianceBernstein. Speaking at its ‘2012 Economic Outlook Luncheon,’ he said typically the early stages of economic recovery are driven by spending on consumer durable goods and housing. However, in this recovery, for the first time in history, it was actually U.S. exports and investment which contributed to early GDP growth. He said the recovery was also hampered during 2011 by several significant events starting with the rising energy prices and then by the impact of the Japanese earthquake on global supply chains and the financial crisis in Europe. With new orders exceeding low inventory levels and the inventory of existing homes dropping back to 2004 levels as the cost of rental accommodation has risen above the cost of home ownership in several major metropolitan areas, he said the U.S. economy can overcome challenges and could grow by as much as 3½ per cent.
BlackRock Acquires Claymore
BlackRock, Inc. is acquiring all of Guggenheim Partners, LLC's interest in Claymore Canada, the manager of the Claymore family of ETFs and closed-end funds. The deal will augment BlackRock's roster of investment fund products and deepen its footprint in Canada. It manages the iShares family of exchange traded funds as well as separate accounts, mutual funds, and other pooled investment vehicles. Canada brings a complementary set of ETFs to the iShares range of products and the acquisition enhances its ability to compete against other investment fund providers in Canada. At December 31, BlackRock offered 48 ETFs in Canada, representing $29 billion in assets under management. Claymore Canada offered 34 ETFs and two closed-end funds representing $6.9 billion in assets under management.
Investor Confidence Improves
Canadians' confidence in their investment options began to improve in late 2011, says Manulife Financial's ‘Investor Sentiment Index.’ Results from the latest report show an increase of five points. This increased optimism was driven by enhanced confidence in a number of vehicles including fixed income products, balanced funds, and investment property. Out of the six different investment categories reviewed, only confidence in cash investments decreased this quarter. Looking longer down the road, the index reveals that six out of 10 Canadians believe they will be in a better financial position five years from now. The index noted that this optimism was most felt by 92 per cent of Canadians between 18 and 29 years old and trended downward with age.
AGA Range Comes To Canada
AGA Marvel has brought the AGA Total Control Range Cooker to Canada. The range has been redefined with state-of-the-art touch screen controls giving ultimate programmability while retaining the classic design value that have made it a kitchen icon in the UK. With two hotplates and three large cast iron ovens ‒ preset at the correct temperature for roasting, baking, and simmering ‒ it can cook food in 10 different ways from grilling and toasting to roasting. It is expected to be available in March. In the UK, the price of the range starts at around $15,000.
Businesses Pessimistic About Future
Canadian businesses are becoming more pessimistic about the economy and their future prospects for sales both at home and in foreign markets, says the Bank of Canada. The central bank's survey of senior management at 100 representative firms shows confidence is well off post-recession highs across the broad spectrum of issues ‒ from sales expectations to their ability to pass through their costs to customers. But executives are most gloomy about sales. For the first time in almost three years, more firms on balance expect sales growth to slow rather than increase over the next 12 months. In the survey, 41 per cent expect their sales pace to slow, as opposed to 37 per cent that expect an increase.
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January 9, 2012
Top CEOs Make Average Worker’s Salary In Three Hours
The richest Canadians are now making 189 times the country’s average wage, says a report by the Canadian Centre for Policy Alternatives. The 100 highest paid chief executives at companies are listed on the S&P/TSX composite index made an average of $8.38 million in 2010, compared with the $44,366 an average Canadian made working full time. The ‘Canada’s CEO Elite 100’ report says this is a 27 per cent increase from the $6.6 million average compensation for the top 100 CEOs in 2009. It means that by noon on a regular working day, the average top executive will have already made as much money as the average Canadian worker makes in a year.
Pay Gaps Make Attracting Talent Difficult
Significant pay gaps for executive positions in the United States and Canada may make it more difficult for Canadian companies to attract American talent, says Meridian Compensation Partners. A study from the firm compared the outside director compensation practices at the S&P/TSX 60 index companies and at U.S. public companies with comparable revenue. It found U.S. companies pay their directors median total compensation of US$207,625, 22 per cent more than Canadian companies where median total compensation is $170,795. The gap is narrower for cross-listed Canadian companies, with U.S. companies paying only 13 per cent more total compensation at the median. U.S. companies pay a greater portion of total compensation (57 per cent) in equity, compared with 39 per cent in equity at Canadian companies.
Gold Can Rise As High As Currencies Fall
Gold is not rising in value, currencies are losing purchasing power against gold and, therefore, gold can rise as high as currencies can fall, says Nick Barisheff, CEO of Bullion Management Group Inc. And, since currencies are falling because of increasing debt, gold can rise as high as government debt can grow, he said in a speech ‘Why Rising Debt Will Lead To $10,000 Gold’ at the Empire Club of Canada's ‘18th Annual Investment Outlook 2012.’ He said going forward the real game changers will be the pension funds and insurance funds. At this point, they hold only 0.3 per cent of their assets in gold and mining shares. Continuing losses and growing pension deficits will make it mandatory for them to eventually include gold, the one asset class that is negatively correlated to financial assets such as stocks and bonds. When this happens, there will be a massive shift from more than $200 trillion of global financial assets to the less than $2 trillion of privately held bullion.
Low Interest Rates ‒ Good Idea Gone Bad
Extremely low interest rates lead to businesses and individuals that don’t want to spend, banks that don’t want to lend (except to governments), and massive government spending and rising debt levels that imperils all of us, all of which detracts from economic recovery and growth, says Peter Jarvis, executive director, Toronto CFA Society. Writing in the January 2012 ‘AlternativChronicle’ (http://www.alternativchronicle.com/201201.html), he says the basic theory is that low interest rates encourage risk taking, capital investment, and business development. However, while the underlying assumptions reflect conventional wisdom, “a growing body of evidence” says what started off as a good idea, when taken to extreme, can turn bad.
ABCP Programs Stable
The outlook for Canadian asset-backed commercial paper programs in 2012 is stable, says a report from Moody's Investors Service. It says that the credit quality of the assets backing the programs is strong and the rating outlook for the banks that supply their liquidity support continues to be stable. It expects the amount of Canadian ABCP outstanding to remain at current levels in 2012.
Canadian Equities Negative In 2011
After two years of solid gains in 2009 and 2010, equity funds in Canada had mostly negative returns in 2011, says preliminary performance numbers from Morningstar Canada. Among its 22 Canada fund indices, only the real estate equity and healthcare equity categories ended the year in positive territory with increases of 12.1 per cent and 7.1 per cent, respectively. Most other fund categories posted double-digit declines. Meanwhile, fixed income funds posted impressive rises. The Canadian long-term fixed income fund index had the biggest increase, 17.3 per cent. Hardest hit by the financial market uncertainty last year were Asian markets. The greater China equity fund index suffered a 21 per cent decline for the year, while the fund index that tracks emerging markets equity dropped 18.7 per cent.
IPO Market Grinds To Halt
The Canadian market for Initial Public Offerings (IPOs) nearly ground to a halt in the fourth quarter of 2011 as the total IPO market peaked at $2 billion, the third lowest total for any year since 2001, says the annual PwC review of IPO activity. Only 2008 (57 issues for $700 million) and 2009 (28 issues for $1.8 billion) were lower in the past decade.
Purchasing Power Better With Low Currency Rate
U.S. and Canadian dollar currency comparisons between 1970 and 2010 have found that Canadians received more discounts on goods when the dollar was at depressed levels, says Statistics Canada. The agency compared fluctuations in purchasing power based on prices for goods and services in Canada and the U.S. The most recent figures show that despite Canadians enjoying a dollar that averaged about US97¢ in 2010, prices in Canada gave consumers here a purchasing power that was about eight cents less. The study shows Canadians enjoyed a discount of almost 20 cents on the dollar compared to Americans in the early 2000s when the loonie was worth around US65¢, but our purchasing power at home was closer to US85¢.
Life Insurance Integral Part Of Plan
Life insurance products can be an integral part of a total financial plan, says Norm Ayoub, a director with HighView Financial Group. In the article ‘Investing With Whole Life Participating Insurance,’ online at Private Wealth Canada, he says they provide a valuable vehicle that can be part of an asset class that, in turn, forms part of the investment mandate in a portfolio structure. The article is at http://privatewealthmagazine.ca/articles/investing_with_insurance.php
Titanic Artifacts Go On Sale
More than 5,000 items recovered from the shipwreck of the luxury liner Titanic will be put up for auction in April, 100 years after its ill-fated maiden voyage. The artifacts, compromising the largest trove of Titanic relics, will be sold as a single lot at Guernsey’s auction house in New York City April 1.The recovered items from the shipwreck in the Atlantic have an estimated value of $189 million. The figure, however, is based on a 2007 appraisal and has not taken into account more recent intellectual properties found during a 2010 scientific expedition of the wreck that helped map the site.
Private Homes For Home Vacations
After hearing the pros and cons about booking holidays in someone else's home, D. Brian McKerchar, president of Powershift Communications, the publisher of Private Wealth Canada; decided to try it out with his extended family of three adults and two dogs. Read about his experience on vacation in Hilton Head, SC in the article ‘Private Houses, A Home Away From Home Vacation’ online at Private Wealth Canada. It is at http://privatewealthmagazine.ca/articles/PrivateHouses_PWJan11.pdf
Website Offers ETF Resources
State Street Global Advisors (SSgA) has launched ‘ETF Fact or Fiction,’ a website that provides individual investors with a resource for exchange traded fund (ETF) education. The site enhances SPDR ETF’s existing suite of educational resources, which includes www.spdrs.com and SPDR University (www.spdru.com). Featuring commentary, research, and thought leadership, it will detail nuances of the ETF product structure, address common questions and misconceptions, and highlight key industry trends to help investors better evaluate ETFs. In addition to white papers, articles, and reports, it will also offer insights from SPDR ETF executives and a thought leadership series that will help investors make better informed decisions. The first piece in this series is ‘An ETF’s Expense Ratio is Not the Only Factor That Determines Total Cost.’
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December 19, 2011
Lack of Information Deters Emerging Market Investments
Canada's affluent concentrate nearly three quarters (74 per cent) of their investments in Canada, says a national trend report by HSBC Bank of Canada. While 62 per cent confirm they feel it's important to have a diversified portfolio which includes emerging markets, only eight per cent of investments are currently concentrated in those areas. Furthermore, 55 per cent indicated that the United States was their second favourite investment market. The survey reveals that a lack of familiarity may be one of the key hurdles to investing in emerging markets with 71 per cent of respondents indicating they need to feel well-informed about a market before they invest there. Sixty-seven per cent of respondents are willing to invest anywhere they think there are opportunities.
Infiniti To Reveal Latest In Montreal
The newest addition to the Infiniti Canada lineup, the Infiniti JX luxury crossover, will make its Canadian debut at the 2012 Montreal International Auto Show (MIAS) in January. The all-new JX is designed to excel in the areas that luxury crossover buyers desire most – interior flexibility and roominess, safety, and advanced hospitality features. Inspired by versatility and convenience, it offers real third row utility with easy-access due to wide door openings and long forward slide of the second row seat. The new Backup Collision Intervention (BCI) feature and the currently available Blind Spot Intervention (BSI) system comprise the ‘All-around Safety Shield.’ Other available technology includes both Infiniti’s Lane Departure Warning (LDW) and Lane Departure Prevention (LDP) systems.
Investments Go Mobile
I Investments Inc. launched CI Mobile, an iPad app that offers on-the-go access to key facts about the company's products. Through CI Mobile, investors and advisors can find daily fund prices, fund codes and performance, the latest commentary from CI's portfolio management teams, and profiles of CI funds. Certain features, such as a fund code finder, were developed specifically for the application.
Investors Own Physical Gold
BMO InvestorLine has launched a new gold deposit and delivery program which offers a cost effective way for clients to buy and hold physical gold in their portfolios. The program allows investors to purchase physical gold through BMO InvestorLine and either have it held in a custodial account operated by BMO Nesbitt Burns at an approved third-party storage facility or delivered to their home. The program offers daily liquidity and physical withdrawal and delivery options.
Private Investment Program Expands
Fidelity Investments Canada ULC has expanded its Private Investment Program, an investment management solution designed for high net-worth investors. Since its launch in November 2008, the program has achieved close to $2 billion in sales. The new asset allocation pools are broadly diversified core offerings that seek to achieve high total investment returns. The pools will have a neutral mix of 50 per cent equity and 50 per cent fixed income with tactical bands extending from 20 to 70 per cent for both asset classes, and from zero to 40 per cent for money market securities. The portfolio manager also has the flexibility to invest in a wide range of extended asset classes such as convertible securities, emerging markets debt and equity, floating rate high income, and U.S. high yield.
Gold Pullback Healthy
Gold will continue rising in value over the coming years for one reason: the primary buyers are purchasing physical gold for wealth preservation and there simply isn’t enough physical gold to satisfy their appetites, says Nick Barisheff, president and CEO of Bullion Management Group Inc. In the article ‘Gold’s Healthy Pullbacks On Long Road To $10,000’ at http://privatewealthmagazine.ca/articles/GoldsHealthyPullbacks.html, he says the recent pullback was by no means the bursting of the gold bubble. “Bubbles are characterized by months of extended exuberance and consistently higher highs ‒ not the $200 and $300 corrections we’ve seen in the past few weeks. Such pullbacks are healthy as they indicate gold has much, much farther to go,” he says.
Euro Unlikely To Collapse
If the crisis in Europe worsens, foreign investors would likely be unable to liquidate their euro-denominated holdings quickly, says Amundi's December issue of ‘Cross Asset Investment Strategy.’ It asks the question ‘has the euro become a currency that is too big to fail?’ However, barring an extreme scenario in which all the countries in the Eurozone return to their national currencies, the Euro is unlikely to collapse. The euro (like the US dollar) is, in fact, a currency that international investors cannot suddenly abandon because no other financial market has the capacity to quickly absorb the demand for assets which would result. While the U.S. dollar remains the dominant currency of the international monetary system, the Fed's propensity for money printing is prompting investors to question the status of the greenback as a reserve currency. The euro – the second global currency of importance in international trade – ended up becoming the preferred investment currency by default. While the pressure on the euro could certainly increase in the near term, especially if the sovereign debt crisis worsens, it says, the sell pressure on the single currency will be presumably limited.
Widget Shows Personal Rate Of Return
Great-West Life group retirement and savings plan members can now access a personal rate of return widget to help assess their progress towards achieving retirement income readiness. The latest enhancement to ‘GRS Access’ – the company’s secure, transactional website for retirement plan members – this new widget (a kind of ‘mini-app’) provides plan members with a quick picture of their personal rate of return, from the date of their first contribution to their group retirement and savings plan(s), as well as one-, three-, five- and 10-year time periods. It calculates plan members’ personal rate of return using the internal rate of return method (also referred to as the dollar-weighted return). The distinguishing characteristic of the calculation is that, rather than ‘estimating’ a rate of return based on the starting and ending values and total deposits and withdrawals made, it takes into account the timing and amount of such deposits and withdrawals, factors that do have an effect on the rate of return. This provides members with a personal rate of return that reflects their actual investment behaviour.
Canadians More Optimistic About Markets
While CFA members from across the globe remain pessimistic about the prospects for capital markets in the coming year, Canadian CFA members are markedly more positive on Canada’s economic outlook, says the ‘CFA Institute 2012 Global Market Sentiment Survey.’ It says comparing Canadian predictions for domestic and global markets, 88 per cent predict the local economy will expand or stay the same in 2012 while only 11 per cent predict local economic contraction. At the same time 32 per cent predict contraction for the wider global economy. Though Canadians are optimistic about the local economy, 57 per cent of Canadian respondents cited weak economic conditions as the biggest potential risk to local capital markets in 2012. As well, globally, 59 per cent of respondents predict that asset classes other than equities will be top performers in 2012. This number was even higher among Canadian respondents, at 64 per cent. However, U.S. respondents are more bullish, with a majority predicting global equity markets to be top performers.
Real Estate Fund Venture Launched
Fiera Sceptre Inc. and Axia Investments Inc. have created a joint venture to offer national real estate fund vehicles and segregated account management services to investors. Fiera Properties Limited will be headed by Stuart Lazier, who has been appointed president and chief executive officer. Catherine Ann Marshall, who has close to 20 years of experience in the real estate industry, has also joined the company as vice-president.
Impact Investment In Infancy
The market for impact investing remains small, but it's growing, says a report from J.P. Morgan and the Global Impact Investing Network. It found that investors believe the niche is "in its infancy and growing." They indicate that they are planning to invest almost US$4 billion over the next year, and expect that impact investments will come to comprise five to 10 per cent of portfolios over the next 10 years, ranging from five per cent for institutions to 10 per cent for high net worth investors. Impact investment is investing in projects that aim to make a positive social impact along with a financial return.
Alternative Alpha Will Get Harder To Find
Private equity and hedge funds will find it harder to beat the market going forward than they have in the past, says a study by J.P. Morgan Asset Management. The study projects that median returns on PE during the next 10 to 15 years will match that of a midcap long-only stock portfolio, while the median hedge fund will underperform that portfolio. During the next decade and a half, the study projects that returns for such equities will return to their historical norms of 10 per cent. Investors may have to do even more due diligence because the study also finds that the dispersion of manager returns is significantly wider in the alternative strategies arena than in traditional asset classes.
Community Initiatives Make Good Business Sense
Organizations need to look at corporate social responsibility and corporate volunteering as activities that make good business sense, says Randstad Canada. The company’s president, Jan Hein Bax, says adopting corporate responsibility programs and policies will go a long way towards enhancing an employees' engagement level with their company as well as build a good reputation in the marketplace. The ‘2007 Canada Survey of Business Contributions to Community (CSBCC)’ found 82 per cent of respondents reported that they support employee volunteering programs.
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December 12, 2011
Director Compensation Rises Significantly
Compensation for directors of publicly traded Canadian corporations rose significantly between 2008 and 2010, says the Conference Board of Canada's '2011 Canadian Directors' Compensation and Board Practices' report. And it expects this trend to continue. The average total compensation paid to outside directors for their regular board service is $112,651 per individual, a substantial increase from $84,452 in 2008. Eighty per cent of firms have adjusted director compensation since 2008. Directors are expected to increase the time commitment to their duties, assume additional responsibilities for oversight, and take on greater personal liability. If workloads and expectations continue to rise, it is almost certain that director compensation will also continue to escalate at a rapid rate. The survey shows that large companies (defined as firms with more than $2 billion in annual revenue) and medium-sized firms ($150 million to $2 billion in revenue) paid their directors similar amounts. Total average compensation in large firms was $128,171; directors of medium-sized firms averaged $124,851. Small firms (under $150 million in revenue) recorded an average of $70,648 in total compensation per director.
Investors Seek Personalized Advice
Canadian affluent investors have a high propensity to seek investment advice from a professional advisor when compared to their counterparts in other countries, says TNS Canada. Nine out of 10 affluent Canadian investors (89 per cent) turn to professional advisors at least occasionally, the third-highest level of all 24 countries surveyed, behind only Sweden (100 per cent) and India (95 per cent). In fact, Canadians are tied with investors in Denmark as the most likely to agree that "I rely upon an investment professional or advisor to make most or all of my investment decisions", with 25 per cent stating that this best describes their investment approach. Outside of deposit accounts (held by 90 per cent), affluent Canadians are most likely to invest in mutual funds (held by 56 per cent). This is one of the highest levels of mutual fund ownership of all countries surveyed (Chinese investors top the list of mutual fund holders at 85 per cent). In contrast, Canadians are among the least likely to include stocks in their investment portfolio, with 44 per cent holding stocks, the fourth-lowest level. Stocks are most popular in China (100 per cent), Hong Kong (85 per cent), and Finland (82 per cent).
Rich Make Nine Times More Than Poorest
Governments need to do more to address a growing gap between rich and poor in Canada and around the world by fostering more and better jobs and perhaps even considering raising taxes, says a global economic think-tank. The Organization for Economic Co-operation and Development says that the average income of the top 10 per cent of Canadian earners in 2008 was $103,500, 10 times that of the bottom 10 per cent at $10,260. The ratio for Canada in the early 1990s was about eight to one. The aim of the study is to dispel the assumption that the benefits of economic growth trickle down automatically to those on the lower end of the earning spectrum. It noted that the economic crisis has added urgency to the debate as disenfranchised young people see little opportunity in the future. It also suggested governments may want to consider raising marginal tax rates on income, though cautioned it may not be the most effective way to raise revenue.
Developing Markets Investing Will See Boost
Nearly 40 per cent of companies worldwide plan to shift some foreign investment from developed to emerging markets within five years, says Ernst & Young. Its Economist Intelligence Unit paper, 'Canada in a Globalised Economy: An investment perspective' shows the trend has important implications not only for Canadian firms as investors, but also for Canada as a destination for investment. "Emerging markets account for more than half of all global foreign direct investment now, showing a continued upward trend that's likely to continue," says Colleen McMorrow, its entrepreneurial services leader in Canada, who points to the appeal of a six per cent growth forecast for these markets in 2012 compared to only 1.7 per cent in developed ones.
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December 5, 2011
Transparent Regime Needed
Ottawa should transform the Investment Canada Act to create a broader, more transparent foreign investment review regime to encourage investment inflows while protecting Canadian national interests, says a report from the C.D. Howe Institute. 'Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick' says that Canada should scrap the "net benefit test" that now restricts inbound foreign investment. The authors argue that such an overhaul could help reverse Canada's declining share of global foreign direct investment and bring Canada in line with its more open peers. Canada benefits from foreign investment, say the authors, but the Investment Canada Act creates unnecessary barriers to it. Currently, before approving any foreign investment above a specific dollar threshold, Canada imposes a test of its "net benefit to Canada," including its potential effect on Canadian employment, exports, and productivity. The current test is subjective and unpredictable, says the report, and does not necessarily cover many situations where Canada's interests might be involved beyond the narrow calculation of a net benefit. Furthermore, the test is a throwback to an outdated industrial policy that was detrimental to the economy's long-run growth.
'Twelve Days of Christmas' Costs More Than $100,000
Being someone's true love will cost you more than $100,000 this holiday season, says PNC's annual 'Christmas Price Index.' The analysis is based on the gifts described in the song, 'The Twelve Days of Christmas.' The price tag for the 364 items gifted by someone who repeats all the song's verses is $101,119.84 ‒ a 4.4 per cent increase over last year. The 3.5 per cent increase in the Christmas Price Index is close to the federal government's Consumer Price Index, which grew 3.9 per cent over the past 12 months, proving that inflation affects even true love.
Small Indulgences Just As Meaningful
Luxury is in the eye of the beholder, says a study by the Economic Policy Institute (EPI). The survey queried respondents on their last purchase in 15 categories. More than 90 per cent of affluent consumers surveyed said small indulgences can be just as meaningful as high-end products and over half said a luxury is the same thing as a treat. Responses varied widely, but pampering such as massages or spa facials were important, as well as travel. Two-thirds of affluent respondents said they define luxury differently than they did five years ago. For instance, affluent consumers no longer think value pricing hurts a luxury brand's cachet, as 90 per cent admitted to going out of their way to find the best price. The takeaway is that personal meaning in luxury is intertwined with the brands and their meanings and is much more about self-gratification.
Year-End Tax Tips for Small Business Owners
BMO Bank of Montreal says it is a good time to do a quick financial check-up with a small business specialist and accountant before the holiday rush to help minimize the amount of 2011 income tax payable. For small business owners in Canada (most commonly a sole proprietorship or partnership), BMO says there are a number of year-end strategies that can be applied to reduce the amount of income tax payable. In addition to financial check-ups, they can defer income, maximizing income tax deductions by ensuring all allowable receipts for business-related expenses (e.g. gas, stamps, customer lunches, coffee for the office) are itemized; and set-up a new RRSP or make the maximum annual RRSP contribution.
'Who Will Own My Business'
Never in the history of civilization has so much wealth been created inside businesses – equity now sitting as cash, inventory, receivables, intellectual property, and goodwill, says Tom Deans, an award-winning professional speaker and author of all-time best-selling family business book 'Every Family's Business'. While this wealth represents a lifetime of risk-taking by family business owners who created enterprises that beat the odds, lurking around the corner is a question that confounds and frustrates the brightest business minds: 'Who will own my business when I'm gone?' He provides one answer to that question in his article 'Here's A Radical Idea: Don't 'Pass-On' Your Family Business' now posted at www.privatewealthcanada.com. The story is at http://www.privatewealthcanada.ca/articles/Dean_PWNov11.pdf
Canadians Put As Much In RRSPs
Most Canadians say they plan to keep investing at least as much in RRSPs as they did last year, despite recent volatility in North American and global stock markets, says an Investors Group poll. Eight-of-10 (83 per cent) say they will increase or match their 2010 RRSP contribution. That's up slightly from the 79 per cent of Canadians who reported similar intentions last year. Three-quarters (76 per cent) say they have an RRSP or plan to open one in the coming year. That's similar to the 74 per cent last year. Among those who say they don't plan to invest, concern about stock market volatility remains near last year's level. Ten per cent said concern about the stock market was the reason they have decided not to invest this year compared to nine per cent last year.
Investor Confidence Up In November
Global investor confidence increased to 97.2 in November, up two points from October's revised reading of 95.2 for the State Street 'Investor Confidence Index.' In October, the gains in the global index originated in North American and Europe. In November, North American investor confidence increased 4.7 points to 95.2 from October's revised reading of 90.5, while confidence among European institutional investors rose 5.4 points from October's revised level of 96.1 to 101.5. "This month was a case of 'two steps forward, one step back' as strong reallocations to risk in late October and early November gave way to some pull-back from risky assets in the middle part of November," says Harvard University professor Kenneth Froot, one of the developers of the index. "To a large degree the ebb and flow was driven by persistent doubts about the way forward for European policy makers. At 97.2, global investor confidence is close to its three-year median, signaling that investors are adopting a wait-and-see attitude at this midway point of the fourth quarter."
Crestpoint Buys Properties
Crestpoint Real Estate Investments Ltd. has acquired two properties with a combined value exceeding $12 million. The first property is an 18,567 square foot freestanding Shoppers Drug Mart located in the retail commercial centre of Parksville, BC. The second property is Buro Plus, an 11 acre site located in Laval, QC. This is a 172,000 square foot state of the art Class 'A' distribution facility. Crestpoint, a business dedicated to providing institutional and high net-worth investors with direct access to commercial real estate assets in Canada, was launched earlier this year. Since then, it has acquired seven properties with total approximate value of $100 million. It is part of Connor, Clark & Lunn Financial Group.
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November 28, 2011
Canadians Manage Through Market Fluctuations
Half of Canadian investors stay calm and stick to their buy and hold strategy even in volatile market conditions, though some admit to worrying more about their portfolio during swings in the market, says CIBC. Its poll found per cent of Canadians say they remain calm when their investments are fluctuating with the market, sticking to a buy and hold philosophy Another 29 per cent say they "worry a little" about their investments and check their portfolios more often but don't make immediate changes to their investments. This steady hand in the face of short-term market volatility could be a function of their investment goals as the poll reveals that 53 per cent of Canadian investors say they are investing for the long term. Investment objectives vary by age and the majority of investors (66 per cent) – which are between 25 and 54 - say they are long term investors, with their investment goals many years in the future. Among those 55-64 (at the leading edge of the baby boom), one-third (35 per cent) in this age group remain focused on long term investment goals, while another 41 per cent invest for the medium term, a few years in the future.
911 Carrera Cabriolet Available In 2012
Porsche AG is introducing Cabriolet versions of the new 911 Carrera to go with the recently-launched coupe. Like the coupe, the 911 Cabriolet features aluminum-steel construction, along with an all-new convertible top design which preserves the typically sleek 911 roof line. As with the hardtop 911 models, Porsche has managed to reverse the weight spiral and make the new open-top models significantly lighter than their predecessors. Each of the two new cabriolets has the same engine as its coupe equivalent. The rear of the 911 Carrera houses a 3.4-litre flat engine generating 350 hp, driving the rear wheels through a seven-speed manual transmission. The open-top Carrera S comes with a 3.8-litre six-cylinder engine developing 400 hp. On sale at Canadian Porsche Centres in spring 2012, the 911 Carrera Cabriolet starts at $106,900, while the 911 Carrera S Cabriolet starts at $123,200.
Companies Lose Senior Executives By 2016
Corporate Canada and the public sector are facing a massive exodus of senior executives over the course of the next five years who are likely to be replaced by much younger executives with higher salary expectations, says Leger Marketing. It found 17 per cent of Canadian companies expect to lose more than 50 per cent of their senior executives by 2016 and one in four expects to lose more than 20 per cent. The outgoing executives, who are predominantly between the ages of 40 and 54, will be replaced by a younger cohort that ranges in age from 35 to 49. More than half (53 per cent) of companies anticipating a wave of younger executives say they will be forced to pay higher salary demands generated by a shrinking pool of executive talent.
Americans Still Make More
Even after the financial and housing meltdowns, Americans remain richer than their Canadian counterparts, says the Conference Board of Canada. It says if Canada had enjoyed the same income-boosting productivity growth seen in the U.S. since the late 1980s, average take-home pay in this country would be about 26 per cent higher. That amounts to a shortfall of about $7,500 per Canadian. The total pay gap is about twice this size since Canada's starting point was already lower,
Electric Sports Car in Development
A highly advanced, range-extending electric sports car concept is under development at car maker Infiniti. Set to emerge at the Geneva Auto Show in March 2012, this vehicle is being created to extend the potential for high performance, low emission electric cars. Infiniti already has hybrid and clean diesel models on sale and an all-electric sedan on the way. It offers a full-line of luxury performance automobiles including the G37 sports coupe, convertible and sedan, M37/56 luxury performance sedan, EX personal luxury crossover, FX premium crossover SUV, and the QX full-size luxury SUV. There are 29 Infiniti retailers across Canada.
CVCA Members Optimistic
There is a sense of optimism among those in Canada's private equity and venture capital industry, says a survey of CVCA members by CVCA ‒ Canada's Venture Capital & Private Equity Association and McCarthy Tétrault LLP. It found 80 per cent of the respondents say the investment pace over the next six months will be consistent with, or more active than, the previous six months. The investment focus will be on new investments over the next six months, rather than investing in existing portfolio companies or follow-on transactions. "These survey results demonstrate that venture capital and private equity funds see great opportunity in these turbulent times," says Gregory Smith, CVCA president and managing director of Brookfield Financial. "It is particularly encouraging to see the optimistic view of investing in Canada that emerges. Canada's attractiveness as an investment destination for venture capital and private equity is a competitive advantage for our member funds and for the country as a whole, given the central role the industry plays in fostering innovation and company growth."
Insurance May Exclude Pension Plans
Directors' and officers' insurance policies often have an exclusion clause for pension and benefit plans, says Jeremy Forgie, of Blake, Cassels & Graydon. In a session on 'Fiduciary Risk Management Decision-making ‒ Issues and Answers' at its 'Recent Developments in Pension and Employee Benefits Law,' he said fiduciary liability insurance provides protection for organizations and individuals responsible for the governance, management, and administration of pension and benefit plans. This coverage can extend to a wide range of fiduciaries including the employer, plan sponsor, plan administrator, officers and directors, the pension committee, a trustee or custodian, an investment manager, and other internal consultants or advisors, including actuaries and lawyers. The coverage provided is very similar to that of directors' and officers' insurance in that it covers losses incurred as a result of wrongful acts. However, the differences between the two types of insurance reflect the fact that fiduciary liability insurance relates to the specific duties and liabilities associated with being a fiduciary. Consequently, the definition of wrongful acts in a fiduciary liability insurance policy generally concentrates on the violation of responsibilities, obligations, or duties imposed by statute or the common law on fiduciaries, and any negligent errors or omissions that occur in the administration of a pension plan. Similarly for losses, the coverage resembles that of directors' and officers' insurance, except that it often excludes benefits due under a plan and losses associated with plan asset reversion or contribution holidays. It can also exclude coverage for issues such as disputes over ownership of pension surplus and the failure to fund, remit, or collect contributions owed to a plan.
Compensation System Will Create More Crises
Stock-based compensation for senior executives has created a system which will produce more financial bubbles and crises, says Roger Martin, dean of the Rotman School of Management at the University of Toronto. Speaking on 'Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL' at the Portfolio Management Association of Canada's '2011 Annual Meeting and Conference,' he said since this was first introduced in the mid-1970s as a means to align management interests with those of shareholders, senior executives have moved from managing their companies to managing expectations. As a result, they may resort to extreme measures to meet expectations or, since expectations cannot go up forever, tank performance to bring expectations down.
CRA Scrutinizes Taxable Benefits
The Canada Revenue Agency is increasing the level of audit scrutiny on taxable benefits received by employees, says a Borden Ladner Gervais LLP 'Tax Law Bulletin.' While the dollar amounts on individual items for each employee may be relatively small, the aggregate amounts for all employees of a business can be quite substantial and the CRA is becoming increasingly active in auditing businesses to ensure that all benefits enjoyed by an employee which might potentially fall within the tax net are taxed accordingly. CRA is also no longer willing to allow employers to make a payment to the CRA to resolve situations in which taxable benefits enjoyed by employees had been under-reported. Instead, the CRA will insist on re-assessing individual employees (or groups of employees) for taxes and interest (and potentially penalties) on amounts that constitute taxable benefits, a potential HR disaster for employers. Among the benefit-related issues most commonly re-assessed are unreported bonuses, commissions and incidental cash payments, motor vehicle benefits, and independent contractors determined to be employees instead.
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November 21, 2011
Advisors Developing Retirement Succession Plans
A survey of independent advisors in the U.S. finds that almost two-thirds have, or are working on, plans for their retirement from the business, says TD Ameritrade Institutional. The investment advisor found that 62 per cent of advisors say they have, or are in the process of developing, a succession plan ‒ up sharply from just 43 per cent in 2010. The survey found that 'satisfying client expectations' is the top reason advisors say they have a succession plan (66 per cent), followed by 'supporting the long-term viability of the firm' (51 per cent), and 'providing a smooth transition into their retirement' (49 per cent). For advisors nearing retirement without a plan, 'difficulty identifying an internal successor' (53 per cent) and 'lack of time to develop' a plan (21 per cent) were cited as the top reasons.
Canadians Lack Donation Strategies
Despite the recent market volatility and the challenging economy, 71 per cent of Canadians plan on donating the same amount or more compared to last year, says a BMO Harris Private Banking study. It found that in the past 12 months, Canadians gave an average of $487 to charitable organizations. However, the report found that 54 per cent of Canadians don't have a strategy when donating, and instead give on an ad hoc basis. The report noted that there are two kinds of giving – charitable giving and philanthropy. Philanthropy involves a longer-term commitment and a wealth management and donating strategy that is aimed at building a lasting legacy towards a specific cause. Charitable giving, on the other hand, refers to donations made on an ad hoc basis and may include a variety of causes and charities. The report also revealed that nearly two-thirds of Canadians have a good or strong understanding of how donating impacts them from a tax perspective.
Morningstar Introduces Fund Ratings
Morningstar Research Inc. has introduced analyst-driven global fund ratings for approximately 150 Canadian funds. The rating supplements the Morningstar rating for funds, commonly known as the 'star rating,' which assigns one to five stars based on a fund's past risk and return versus category peers. The scale has three positive levels ‒ gold, silver, and bronze ‒ in addition to neutral and negative ratings. Analysts arrive at a rating through an evaluation of five pillars they believe are crucial to predicting the future success of a fund, considering both numeric as well as qualitative factors: people, process, parent, performance, and price.
PRPP Legislation Introduced
The federal government has introduced legislation to create its new retirement savings vehicle ‒ pooled registered pension plans (PRPPs). The proposed plans are intended to fill the gap between traditional employer-sponsored pension plans and private savings plans such as RRSPs. They will provide a new Defined Contribution plan option for employers, particularly small businesses and the self-employed, who currently don't have access to workplace pensions. In addition to the federal legislation, the provinces will also need to introduce their own enabling legislation. As well, new federal tax rules for PRPPs need to be developed which will apply to both federally and provincially regulated plans.
Impact Of Major Illness Significant
Nine out of 10 Canadians anticipate a financial impact if they were to experience a major or chronic illness, with more than half (53 per cent) saying that impact would be significant or perhaps permanent, says the second annual 'Sun Life Canadian Health Index.' Despite these high awareness levels, only 58 per cent of Canadians are either preparing or are currently prepared financially in case they get sick. And only eight per cent of Canadians have a written financial plan that includes insurance and risk management ‒ two elements that address the economic impact that could come with a major health issue. "Canadians' understanding of the connections between health and personal finances are hard-earned," says Kevin Strain, senior vice-president, individual insurance and investments. "We found the majority of Canadians have either personally experienced or have had someone close to them suffer a serious health issue. However, fewer than one in five say they had evaluated or re-visited their finances following the experience."
VC Market Makes Gains
After a comparatively slow first half of 2011, venture capital (VC) market activity in Canada made gains in the third quarter, with particularly substantial year-over-year growth in dollars invested, says a report by CVCA Canada's Venture Capital & Private Equity Association and research partner Thomson Reuters. Canadian VCs invested $388 million between July and September, up 51 per cent from the same time in 2010. This occurred following two quarters of more moderate trend lines in the domestic VC market, especially as compared to activity in the United States. As a result of the third quarter activity, Canadian VC deal-making dollar flows totaled $1.1 billion at the end of September, up 30 per cent from the $882 million invested during the first nine months of 2010. Canadian technology sectors benefited from higher levels of VC activity with $177 million invested, up 31 per cent from the year before, while the life sciences sectors secured $106 million, up 83 per cent.
Businesses Holding Line On Prices
Despite rising raw material costs, 57 per cent of Canadian businesses have no plans to raise prices next year and more than three-quarters plan to invest the same amount or more in their businesses next year, says a report from BMO Bank of Montreal. "Current modest economic and wage growth and the lure of cross-border deals have convinced many Canadian businesses not to raise prices," says Sal Guatieri, senior economist, BMO Capital Markets. "Staying competitive is the name of the game, and will help Canadian businesses in the long run." He notes that with a slower economic growth rate for Canada of two per cent in 2012, price pressures will be contained. The survey found that Canadian businesses have taken a number of steps to improve their business performance during 2011. While 15 per cent say that lower interest rates have had the most positive impact on their business, 21 per cent point to productivity improvements such as upgrading equipment and processes, and one in four say lowering expenses/costs have had the most positive effect on their business this year.
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November 14, 2011
Credit Card Teams With Luxury Goods Site
American Express Co. and vente-privee.com have launched a website featuring member-only sales of luxury goods from European and American designers. The French online retailer vente-privee.com specializes in selling overstocked designer items. The first deal it is offering with American Express is items from French clothing designer Paul & Joe Sister. American Express is giving its existing cardholders incentives to shop at vente-privee.com, including a $20 statement credit for their first purchase before the end of the year.
Compensation Risk Disclosure Required
Recent regulations in the U.S. and Canada require all publicly traded companies ‒ not just financial institutions ‒ to disclose risks associated with their compensation programs in their annual proxy statements, says Towers Watson. These rules require companies to disclose whether their board of directors, or a committee of the board, considered the implications of the risks associated with the company's compensation policies and practices. Towers Watson has developed three approaches for evaluating the relationship between pay and risk that range from simple (compliance-focused) to more proactive (focus on integrating risk management and pay/performance management). In addition, Canadian companies must also disclose how they identify and mitigate these risks.
Private Jet Travel Back In Demand
The recession may have knocked the wind out of private jet travel, but the industry is making a comeback, says the Luxury Institute's wealth survey. With major airlines hiking airfares and cutting routes, private jet carriers are seeing the first increase in demand since 2008. Twelve per cent of wealthy Americans plan to boost spending on private jet travel this year, up from nine per cent in 2010. As well, less affluent consumers are also starting to trade up as some private jet firms lower prices to lure in new business through flight-sharing deals and social networking campaigns on Facebook that offer last-minute deals. In addition, some jet companies which let members share a small portion of the cost of owning a private plane (fractional ownership), have lowered prices significantly and are seeing more business. Flexjet, for example, says its fractional business is up 120 per cent year-over-year as of August.
Executors Need Time And Commitment
A majority of Canadian Boomers would appoint family as the executor of their will, but they may not appreciate the complexities of the tasks that come with the duty, says BMO Financial Group. Its study found 85 per cent of Canadians 45 years of age or older would appoint family as the executor of their will, while seven per cent would appoint friends. If appointed as executor, the majority of Canadians (65 per cent) would not, or are not sure if they would hire a professional to assist them. The study also revealed that those who have experienced being an executor (41 per cent) have encountered the issues or complications including administrative (47 per cent); emotional (31 per cent); and legal (26 per cent). Only one per cent of Canadians over 45 have appointed a trust company as the executor of their will.
New Book Targets Wealth Management Industry
Industry practitioners have to get 'Back-to-Basics' and focus on becoming 'stewards of wealth' rather than'developers and sellers of product' if they truly expect to fulfill their responsibilities, says HighView Financial Group. Its new book, 'The Wealth Steward: Preserving & Growing Capital With a Fiduciary Mindset,' presents an alternative perspective to meeting the goals and expectations for investors within a stewardship-based process. It says this will require new behaviours on the part of the counsellors including taking a collaborative approach to harnessing the expertise of other professional practitioners to truly address the wealth continuum for the client and a commitment to spending the time to understand the goals, expectations, and desires of the client.
Emerging Markets Story Changes
If China and India are going to account for 25 per cent of the global economy in 10 years, why not get into them now, says Andrew Barker, senior portfolio manager at Artio Global Investors. Speaking at its 'Global Economy: Structural Clarity/Policy Uncertainty' presentation, he said 10 years ago the story in emerging markets was their exports to developed markets. Now they are starting to focus on domestic consumption which means they are no longer as linked or co-related. In terms of investing in the developed world, he suggested investors look for companies that have recognized this shift in the emerging world and have strategies for a changing global economy. Part of the reason for the change is that U.S. consumers are of decreasing importance globally. In fact, companies that depend on U.S. consumption for their earnings should be avoided, he said. Another issue is that the U.S. has not come to grips with solving its problems. Politicians are treating it as a normal cyclical downturn, and it is isn't. Traditional methods for solving these issues such as stimulus programs no longer work because the money ends up leaving the country and doing more for the economies of Asia than that of the U.S.
Desjardins Launches Personal Finance Index
Desjardins Group has instituted the first-ever Canadian index of responsible personal finances. This index was inspired by the definition of financial literacy developed by the federal government's financial task force in June 2009. It's an original and comprehensive yardstick that provides a complete assessment of the public's ability to manage their personal finances, covering the two basic dimensions of knowledge and behaviour. It features an online self-evaluation tool to help individuals assess and improve their personal finance management skills and develop responsible habits.
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November 7, 2011
Reward Travellers Want Flexible Programs
Canadians are avid collectors of reward points, as six-in-10 (58 per cent) earn travel rewards towards flights and hotels, but an almost equal number (57 per cent) say they find limits on their loyalty programs to be frustrating, says an RBC Rewards survey. The poll found that family vacations were the most popular type of redemption (58 per cent) for Canadians who used reward points to redeem a trip for themselves, spouse, or family. If Canadians could only visit one landmark, 26 per cent say they would choose the ancient Pyramids. Honolulu (13 per cent) was the top choice among most reward travellers, given one city in the world to visit. Europe held the most allure among continents.
Wealthy Parents Hesitant To Discuss Wealth
For most parents, ‘the talk’ is about the birds and bees, but for the wealthy, ‘the talk’ is about money and it’s far more uncomfortable. Only a third of wealthy parents have discussed their wealth and its implications with their children before the age of 21, says an SEI ‘Private Wealth Management’ survey of families with an average net worth of more than $20 million. Only 16 per cent discussed their wealth with their kids before they turn 16. “Parents need to make talking about money a rite of passage with their children,” says Michael Farrell, managing director. “The most successful families talk about finances early and often, making children feel involved, empowered, and better prepared for the future.” Many of today’s self-made rich don’t want to raise spoiled children. So the less the kids know about their family’s wealth, they believe the better, and the more likely they are to pursue a career and have ambitions.
Challenging Quarter For Active Managers
The active management environment in the third quarter of 2011 was one of the most challenging on record, says Russell’s ‘Active Manager Report.’ Only 40 per cent of large cap Canadian equity investment managers beat the benchmark, down from 68 per cent in the second quarter – a dramatic decrease. “Bottom-up stock fundamentals did not seem to matter in the quarter, as macro concerns such as the on-going debt crisis in Europe, dominated,” says Kathleen Wylie, senior research analyst. “As well, we observed a significant spike in the correlations of stocks and when that happens it is very challenging for active managers to add value. There were few places to hide when 74 per cent of the stocks in the index declined in the quarter. For many investment managers, benchmark-relative performance in the quarter was their worst on record.”
Maximum Set At $50,100
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2012 will be $50,100, up from $48,300 in 2011, says the Canada Revenue Agency. The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada. Contributors who earn more than $50,100 in 2012 are not required or permitted to make additional contributions to the CPP. The basic exemption amount for 2012 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP. The employee and employer contribution rates for 2012 will remain unchanged at 4.95 per cent and the self-employed contribution rate stays at 9.9 per cent.
Uncertainty Only Certainty
Uncertainty continues to be the only certainty in the financial markets these days and the results of the ‘Russell Financial Health Index’ remain at low levels comparable to those seen in early 2010, an indication that Canadians are still concerned about volatility in the markets and the overall economy. For the third quarter of 2011, the index ‒ an online calculator that gauges the overall financial health of Canadian investors ‒ stood at 47.47, slightly lower than the same timeframe last year and approaching the lowest levels since the benchmark was established in early 2008. Of note this quarter was the fact that two of the 14 indicators surveyed were at an all-time high since the inception of the survey in 2008 as key concerns for Canadians about their financial health in retirement. Interestingly, these were life factors rather than financial factors. They were children and aging parents needing help and the financial impact of the death of a spouse.
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Private Wealth News Archive 2011
Private Wealth News Archive 2010
