Briefly:

(February 5, 2004) The worldwide value of mutual fund assets hit $12.83 trillion US by the end of the third quarter of 2003, marking a 4% increase during that quarter, according to a report from the Investment Company Institute.

The increase was due to both the ongoing recovery in equity markets and an increase of new cash flowing into funds, with $65 billion US in new money coming into funds. This was down significantly from the second quarter, however, which saw inflows of $165 billion US.

While fund assets grew in almost every country, when calculated in local currency, the growth was even greater when converted into the sagging U.S. dollar. Net assets in equity funds hit $5.1 trillion US, while bond funds were worth $6 trillion US. Both sectors saw net inflows, while money markets were hit by net redemptions.

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Manulife reports record earnings

(February 5, 2004) Manulife Financial today reported net income of $1.5 billion in 2003, a 12% increase from the previous year. Fourth-quarter earnings were also a record at $428 million, 15% higher than the same period in 2002.

“The excellent results were driven by the resurgence in the equity markets in 2003, good business growth, favourable claims experience in Canada and Japan, and continued tight expense management,” Manulife said in a statement.

The record earnings were partially offset by the rising Canadian dollar, which reduced shareholders’ net income for the year by an estimated $92 million, Manulife added.

“Manulife Financial is extremely well positioned in all of its businesses as we enter a milestone year with the expected merger with John Hancock,” said Manulife president Dominic D’Allesandro.

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McGuinty supports single regulator

(February 5, 2004) Ontario Premier Dalton McGuinty has thrown his political support behind the federally favoured single regulator plan, saying the fragmented nature of Canada’s regulatory regime put the country at a disadvantage.

“The markets have spoken, and they have done so loudly: they want one regulator and one set of securities laws,” McGuinty said in a speech to the Calgary Chamber of Commerce. “Our government is listening and we’re ready to work with others to help build a stronger economy for all.”

The single regulator scheme is favoured by the federal wise persons’ committee and the Ontario Securities Commission. The plan is opposed by regulators in British Columbia, Alberta and Quebec.

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GAAP changes lead Fidelity to close one fund

(February 5, 2004) Fidelity Investments has announced the termination of the Fidelity Managed Income Fund, due to changes to Canadian Generally Accepted Accounting Practices (GAAP).

“It’s a fund we’ve run for our retirement plan sponsors and participants. With the change in GAAP, the way we’d structured that fund and were valuing it, we can’t do that anymore,” says Kimberly Flood, vice-president of external communications at Fidelity. “So we have to convert the fund into another kind of investment. This is meaningful only if you’re a retirement plan sponsor or a retirement plan member who might be in the fund.”

The new GAAP rules no longer allow book value accounting, which was intrinsic to the fund’s originally intended strategy. With this practice no longer accepted, the fund will be terminated on or about June 30, 2004.

A press release from Fidelity says that in the meantime, the assets of the fund “may be invested in any of money market fixed income securities, reverse repurchase transactions, cash and, when permitted, units of Fidelity Canadian Money Market Fund. The fund may or may not also invest in wrap contracts.”

Fidelity says it will work with retirement plan sponsors currently offering the fund to “identify and offer a suitable alternative to plan participants.”

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Entrepreneurs see value of RRSPs

(February 4, 2004) Canadians who run their own small business are more likely to take control of their retirement planning than employees who do not have a corporate pension plan, according to a survey released by CIBC.

Not only are small business owners more likely to have an RRSP — 70% compared to 55% of employees — but they also contribute more to their RRSPs.

“The average annual RRSP contribution made by a small business owner is more than $6,000 — and that’s about 50% more than employees who don’t have a pension plan,” said Rob Paterson, senior vice-president of CIBC’s small business banking division. “It just goes to show you that entrepreneurs are self-reliant in more ways than one.”

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Meritas launches rebalancing fund portfolio

(February 4, 2004) Meritas Mutual Funds has launched the Meritas Balanced Portfolio Fund, the country’s first automatically rebalancing portfolio fund for Canadians seeking socially responsible investment (SRI) funds.

“With the rise and fall of markets in the last few years, many investors understand the value of a portfolio approach to investing rather than pinning their retirement hopes on one or two stocks,” said Gary Hawton, CEO of Meritas Mutual Funds. “This fund allows them to get excellent diversification and to automatically rebalance their portfolios back to the original benchmarks.”

The Meritas Balanced Portfolio Fund will invest in five other Meritas funds. The fund manager will need to rebalance the fund should one asset class begin to outperform while others underperform.

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Ontario regulator bans Web fraudster

(February 4, 2004) A Toronto resident who operated a Web site promising guaranteed investment returns of up to 70% a year has been hit with a permanent trading ban by the Ontario Securities Commission (OSC).

The securities regulator ruled that Monte Friesner and First Federal Capital engaged in illegal trading and advising in securities by operating the Web site and distributing written materials that contained “misleading representations and exorbitant investment promises.”

The prosecution is the result of an OSC Internet crackdown that began four years ago.

Friesner, whose conduct in the case was described by a commission panel as “reprehensible,” was also ordered to pay the OSC’s investigation and prosecution costs.

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Scotia: Canadians save too little

(February 3, 2004) Canadians seem to be underestimating the cost of a comfortable retirement, according to a survey released by Scotiabank today. The study found 37% of respondents believed $250,000 in RRSP savings would be enough to fund their retirement, while Scotia calculated the average investor should aim for $400,000.

“While $250,000 might sound like a lot of money to most people, it’s not that much to fund a comfortable retirement for 15 or 20 years,” said Ron Laursen, senior vice-president of day-to-day banking at Scotiabank. “The good news is that starting a regular RRSP contribution plan will help close the gap.”

The survey found 20% of respondents thought they would need to save less than $100,000, while 28% just didn’t know. A million-dollar retirement plan was reported by 13%.

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Healthcare and tech led fund gains in January

(February 3, 2004) Innovation paid off in January, as mutual funds focused on healthcare and technology were the top performers, according to a preliminary survey by Morningstar Canada.

“Several leading biotech companies began the year by reporting favourable fourth-quarter earnings,” said David O’Leary, senior analyst with Morningstar Canada. “The biotech sector also benefited from a positive outlook, with analysts and biotech firms projecting strong revenue growth in 2004 driven by increased sales of existing drugs and promising drug candidates currently in the pipeline.”

The healthcare index earned 7.7%, while Asia, excluding Japan, equity funds gained 7.5% and technology picked up 7% gains.

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Tax agency changes name

(February 3, 2004) Amid the hustle and bustle of RRSP season, Canadians might not have noticed the government tax collection agency has changed its name again. According to the CCRA Web site, the agency changed its name to Canada Revenue Agency as of December 12, 2003.

“We are using our new name, but until it’s officially modified by an act of Parliament, CCRA remains the only name that can be used on documents of a legal or contractual nature,” read a statement on the Web site, which is still www.ccra-adrc.gc.ca at this point.

The name change results from the splitting of taxation and customs duties, with customs now handled by the Canada Border Services Agency (CBSA). Press releases as recent as February 3 still carry the CCRA branding.

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(02/03/04)