Various bits from a busy week…
Some bright-light tried to advertise a connection to the Winklevoss twins as a way of drumming up business for his advisor practice. The Winklevoss brothers were due that battled Facebook’s Mark Zuckerberg over ownership of the original idea for the social networking site. Maybe the advisor could just try doing some financial planning rather than going to all the trouble:
Story here.
The latest issue of WP has a major feature on the leader in actively managed ETFs. The Canadian market is the world’s most advanced in this sector (see a profile of market leader HorizonETFs on page 44 of the e-mag, found here. But it seems mighty fund company Black Rock is jumping on the bandwagon as well.
Here’s a great quote on the fall from fame of former PIMCO manager, Bill Gross. The story, of course, is that Gross quit before he was going to be fired for “increasingly erratic” behavior. Now he finds himself at much smaller shop, Janus. Gross tried to explain that this was good. He’ll have a smaller “market footprint.” Which may be true, but come on: As one local Newport beach resident told a Bloomberg reporter out trolling for quotes, "He's going to manage a $13 million, million with and 'm,' global unconstrained bond fund after building an almost $300 billion, with a 'b,' fund…It's a little bit like Pavarotti singing at the community fair."
The latest IMF stability report suggests record low interest rates have not spurred economic growth, only more financial speculation. “More than half a decade in which official borrowing costs have been close to zero…[has] encouraged speculation rather than the hoped-for pick up in investment,” according to one media report. “Risks to stability no longer came from the traditional banks but from the so-called shadow banking system – institutions such as hedge funds, money market funds and investment banks that do not take deposits from the public.” José Vials, the IMF’s financial counsellor was quoted as saying, “Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.”
Private equity just keeps expanding: The media reported this week that Brookfield Asset Management Inc., the largest Canadian manager of alternative investments is “seeking a global private-equity fund three times the size of its last pool…The firm is targeting US$3 billion for Brookfield Capital Partners Fund IV LP, after its US$1 billion predecessor, raised in 2011, beat peers.”
A major pension summit took place in downtown Toronto this week. Organized by Canada's Public Policy Forum, the meeting convened a “pan-Canadian, multi-sector discussion group” that brought together speakers from the business community, federal and provincial governments, labor groups, and academia.
Speaking at the event, Dean Connor, from Sun Life, warned that the current culture hasn’t experienced a sustained rising interest rate environment in decades. Many could be in for a bit of a shock if rates do rise. According to a report on his appearance, “Baby boomers are too fond of debt…the most vulnerable – i.e., the 1 million Canadians whose current debt servicing costs are 40 per cent or more of disposable income – may have to sell their real estate, crystallizing losses and setting back their retirement plans.” Mr. Connor went on to point out that, “consumer debt in Canada has increased from 87 per cent of disposable income in 1990 to 164 per cent today (the highest among G7 countries)…the fastest growing segment for personal bankruptcies is among near-seniors and seniors…The parents of baby boomers – my parents – grew up in the Great Depression…They hated debt and did everything they could to pay it off. In contrast, baby boomers like debt…If interest rates go up by 200 basis points, and your mortgage payment jumps by $120 per month, it will crowd out retirement saving and/or current consumption.
Also this week insurance companies announced that the government has cleared selected companies to offer so-called federal Pooled Registered Pension Plans (PRPPs). PRPPs will allow insurance companies to offer small business owners a pension plan for employees. Almost a year ago the federal government chose several companies to get into this business. This week the government released approval for specific programs. For any advisor with clients who are self-employed or running a small business, this is big news. The PRPP is designed to be a pension plan for Canadians who currently do not have access to a retirement savings vehicle through their employer. “These are targeted to small business owners,” says Rebecca Freiburger, director of media relations at Manulife, one of the companies selected. Insurance companies will handle all the administration on the plan, including signing up new members. But the plans can be offered to small businesses and self-employed workers. Quebec recently became the first Canadian province to implement its own version of the PRPP, the Voluntary Retirement Savings Plan (VRSP). The new federal plan applies to the rest of the country, including the Yukon, Northwest Territories and Nunavut. “What we’ve heard from small business is that this is all about employee retention. Being able to offer this is an important tool for attracting and keeping employees. This is about retention,” said Freiburger.
Story here.
The latest issue of WP has a major feature on the leader in actively managed ETFs. The Canadian market is the world’s most advanced in this sector (see a profile of market leader HorizonETFs on page 44 of the e-mag, found here. But it seems mighty fund company Black Rock is jumping on the bandwagon as well.
Here’s a great quote on the fall from fame of former PIMCO manager, Bill Gross. The story, of course, is that Gross quit before he was going to be fired for “increasingly erratic” behavior. Now he finds himself at much smaller shop, Janus. Gross tried to explain that this was good. He’ll have a smaller “market footprint.” Which may be true, but come on: As one local Newport beach resident told a Bloomberg reporter out trolling for quotes, "He's going to manage a $13 million, million with and 'm,' global unconstrained bond fund after building an almost $300 billion, with a 'b,' fund…It's a little bit like Pavarotti singing at the community fair."
The latest IMF stability report suggests record low interest rates have not spurred economic growth, only more financial speculation. “More than half a decade in which official borrowing costs have been close to zero…[has] encouraged speculation rather than the hoped-for pick up in investment,” according to one media report. “Risks to stability no longer came from the traditional banks but from the so-called shadow banking system – institutions such as hedge funds, money market funds and investment banks that do not take deposits from the public.” José Vials, the IMF’s financial counsellor was quoted as saying, “Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.”
Private equity just keeps expanding: The media reported this week that Brookfield Asset Management Inc., the largest Canadian manager of alternative investments is “seeking a global private-equity fund three times the size of its last pool…The firm is targeting US$3 billion for Brookfield Capital Partners Fund IV LP, after its US$1 billion predecessor, raised in 2011, beat peers.”
A major pension summit took place in downtown Toronto this week. Organized by Canada's Public Policy Forum, the meeting convened a “pan-Canadian, multi-sector discussion group” that brought together speakers from the business community, federal and provincial governments, labor groups, and academia.
Speaking at the event, Dean Connor, from Sun Life, warned that the current culture hasn’t experienced a sustained rising interest rate environment in decades. Many could be in for a bit of a shock if rates do rise. According to a report on his appearance, “Baby boomers are too fond of debt…the most vulnerable – i.e., the 1 million Canadians whose current debt servicing costs are 40 per cent or more of disposable income – may have to sell their real estate, crystallizing losses and setting back their retirement plans.” Mr. Connor went on to point out that, “consumer debt in Canada has increased from 87 per cent of disposable income in 1990 to 164 per cent today (the highest among G7 countries)…the fastest growing segment for personal bankruptcies is among near-seniors and seniors…The parents of baby boomers – my parents – grew up in the Great Depression…They hated debt and did everything they could to pay it off. In contrast, baby boomers like debt…If interest rates go up by 200 basis points, and your mortgage payment jumps by $120 per month, it will crowd out retirement saving and/or current consumption.
Also this week insurance companies announced that the government has cleared selected companies to offer so-called federal Pooled Registered Pension Plans (PRPPs). PRPPs will allow insurance companies to offer small business owners a pension plan for employees. Almost a year ago the federal government chose several companies to get into this business. This week the government released approval for specific programs. For any advisor with clients who are self-employed or running a small business, this is big news. The PRPP is designed to be a pension plan for Canadians who currently do not have access to a retirement savings vehicle through their employer. “These are targeted to small business owners,” says Rebecca Freiburger, director of media relations at Manulife, one of the companies selected. Insurance companies will handle all the administration on the plan, including signing up new members. But the plans can be offered to small businesses and self-employed workers. Quebec recently became the first Canadian province to implement its own version of the PRPP, the Voluntary Retirement Savings Plan (VRSP). The new federal plan applies to the rest of the country, including the Yukon, Northwest Territories and Nunavut. “What we’ve heard from small business is that this is all about employee retention. Being able to offer this is an important tool for attracting and keeping employees. This is about retention,” said Freiburger.
