Briefly:

(April 2, 2004) Canadian homeowners have taken advantage of the low interest rate environment to cash out $29 billion in home equity, according to CIBC, using the cash to consolidate debt and renovate the home.

Homeowners have also saved $7 billion more by renewing their mortgages at the low rates over the past two years.

“Nearly one in two mortgage holders refinanced between 2002 and 2003,” said Benjamin Tal, Senior Economist, CIBC World Markets. “A cocktail of surging home prices and falling interest rates put $36 billion of extra purchasing power in the hands of mortgage holders. This is equivalent to the annual income from one million new jobs being created.”

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CPPIB names external managers

(April 2, 2004) The CPP Investment Board has announced the appointment of Connor, Clark & Lunn Investment Management and UBS Global Asset Management as the first two external portfolio managers under its Active Overlay Program.

“The Active Overlay Program is an innovative way of engaging world-class investment managers in a cost-effective and risk-controlled fashion,” said Don Raymond, vice-president of public markets, CPP Investment Board. “In addition, these relationships will help inform our overall thinking about portfolio design, risk management and other means to fulfill the pension promise to all Canadians.”

Each firm will manage a $500 million equity portfolio within the $66.3 billion CPP portfolio. The managers will identify securities in the portfolio that it believes are overvalued, and reinvest the proceeds from the sales of those issues. The managers are barred from short selling.

The performance weighted compensation structure holds back part of the fees, paying out this reserve if the manager proves consistency.

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CI proposes fund mergers

(April 2, 2004) CI Mutual Funds is asking unit holders for permission to merge several funds in an effort to streamline operations.

The plan calls for merging CI American Growth Fund with the Value Trust Sector Fund; CI American Growth RSP Fund into CI Value Trust RSP Fund; CI World Equity Fund into CI Global Value Fund; CI European Growth Fund into CI European Fund; CI European Growth RSP Fund into CI European RSP Fund; CI Canadian Stock Fund with Signature Select Canadian Fund; and Synergy Canadian Growth Class with Synergy Canadian Momentum Class.

CI is also renaming Synergy Canadian Income Fund as Signature Income & Growth Fund and Synergy Canadian Small Cap Class will be renamed Signature Canadian Small Cap Class, effective May 21, 2004.

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Jovian closes Accumulus deal

(April 2, 2004) Jovian Capital has announced the closing of its acquisition of Accumulus Management Ltd., manager of the Accumulus North American Index Momentum RSP Fund, and the trustee and manager of a family of recently-launched Accumulus funds.

“This transaction is another continuing step toward building a company that invests in companies with diversified skills in wealth and asset management,” said Jovian president & CEO Philip Armstrong.

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GGOF launches new U.S. income fund

(April 1, 2004) GGOF Guardian Group of Funds has launched the GGOF U.S. Diversified Monthly Income Fund, which will invest in preferred shares, high-yield bonds, real estate investment trusts (REITs), dividend-paying common shares and federally guaranteed mortgage-backed securities known as “Ginnie Maes.”

“We’re capitalizing on our expertise in designing income products that generate tax-efficient monthly income from a well-diversified mix of assets,” said Gavin Graham, vice-president and director of investments for GGOF. “These asset classes generally demonstrate little correlation with each other, thereby diversifying both income and capital risk.”

Lazard Asset Management will manage the Ginnie Mae, high-yield bond and dividend-paying common share components of the fund. Towerhouse Capital Management will manage the preferred shares and REITs.

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Dow dismisses three firms

(April 1, 2004) For the first time in 65 years, the Dow Jones Industrial Average will not include AT&T, as the index replaces the telecom operator with Verizon Communications, which is a descendant of the 1984 antitrust break up of AT&T.

Also out of the “bluest of the blue chip” index are Eastman Kodak and International Paper, which are being replaced by American International Group and Pfizer. The index has remained unchanged since November 1, 1999, when four companies were shuffled out. The changes in composition take effect April 8 and weightings are calculated to avoid immediately affecting the index value.

“None of these changes was triggered by an event such as an imminent merger, which was the case in the past three instances of changes dating back to the early 1990s,” said Paul E. Steiger, managing editor of the Wall Street Journal. “Rather, they recognize trends within the U.S. stock market, including the continued growth of the financial and healthcare sectors and the diminishing relative weight of basic materials stocks.”

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Jovian to take control of Pescara Partners

(April 1, 2004) Jovian Capital Corporation has announced it has inked a deal to acquire 50% of the issued and outstanding shares of fund of funds manager Pescara Partners Inc. Through a 50% stake in RJS Global Investments, Jovian will effectively control 75% of Pescara stock.

“We have been very pleased with our affiliation with Pescara to date, and as hedge funds have become more and more popular with investors, we felt that this was a good opportunity to increase our stake in Pescara,” said Jovian president and CEO Philip Armstrong.

The cash-and-stock deal is expected to close on or about July 30, 2004, subject to regulatory approval.

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Davis-Rea acquires Cunningham

(April 1, 2004) Davis-Rea Limited Investment Counsel, investment portfolio manager for institutional and individual investors, has announced the acquisition of Toronto’s Cunningham Investment Counsel.

“We are pleased that Joy M. Cunningham, president of Cunningham Investment Counsel, will join Davis-Rea as a vice-president,” says Douglas Davis, Davis-Rea’s president. “Joy’s knowledge of capital markets adds even greater depth to the expertise we offer our clients.”

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Sun Life confirms SEC settlement

(March 31, 2004) Sun Life Financial has confirmed its subsidiary Massachusetts Financial Services Company (MFS), has settled with the U.S. Securities and Exchange Commission (SEC) over mutual fund trading practices.

“Today’s announcement reflects our ongoing determination to resolve outstanding regulatory matters in the best interests of our customers and Sun Life Financial investors,” said Sun Life CEO Donald A. Stewart. “We are continuing to work with the new management team at MFS to strengthen its policies and procedures to ensure they meet the highest possible standards.”

While MFS has neither admitted nor denied wrongdoing, the firm is paying the SEC $50 million.

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Small-business confidence steady

(March 31, 2004) The quarterly report by the Canadian Federation of Independent Business (CFIB) has found small-business confidence remained level in the first quarter of 2004.

The index dipped slightly to 109.0, off 0.9 from December, but unchanged from the first quarter of 2003. Forty-three per cent of respondents said they expected business to improve in the coming quarter.

There are some problems, however, as the agricultural sector struggles to recover from mad cow fears and rising insurance rates and energy costs take a toll on small firms.

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Two top REITs to merge

(March 30, 2004) Two of Canada’s largest real estate investment trusts are merging. Canadian Apartment Properties Real Estate Investment Trust (CAP REIT) will acquire all of the outstanding units of Residential Equities Real Estate Investment Trust (ResREIT) for $18.60 per unit, a 15% premium over the 20-day moving average.

“With the integration of our combined assets, operations and people, we are confident our hands-on approach to managing properties will generate significant returns for unitholders over the long-term,” said Thomas Schwartz, CAP REIT’s president and CEO.

The deal has the support of the Ontario Municipal Employees Retirement System (OMERS), ResREIT’s largest unitholder at about 18%.

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E*Trade moves into F-class funds

(March 30, 2004) Online discount brokerage, E*Trade Canada has begun dealing in low-MER F-class mutual funds. The trailer-stripped funds carry a transaction fee similar to equity trades, costing $26.99.

“E*Trade Canada’s FundPlus Program reinforces our commitment to provide all customers with tangible tools to improve their investment options,” said Bruce Seago, chief operating office of E*Trade Canada. “Our ongoing mission is to support customers in making informed financial decisions.”

So far, only AIM Trimark and Elliott & Page have made their fee-based fund units available through the online brokerage’s FundPlus program.

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Loonie seen weakening

(March 30, 2004) The Canadian dollar should retreat to more familiar values against its American counterpart in 2004 and 2005, according to the Conference Board of Canada.

The group predicts the economy will lag despite “torrid” growth in the U.S. because of the current high value. This underperformance will lead the Bank of Canada to cut interest rates once again in 2004, allowing the dollar to fall to an average of 74 cents US. The think-tank expects a further devaluation to 72 cents US by the end of 2005.

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GMP targets HNWs with private client division

(March 30, 2004) GMP Capital has announced the launch of its private client division, naming James Werry as CEO of the division. The unit will focus on high net worth clients.

“We see an opportunity in Canada to pursue a high-end niche in the retail market, satisfying both clients’ and investment advisors’ need for nimble execution and full service,” said Werry.

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New CSA rules take effect Tuesday

(March 29, 2004) The Canadian Securities Administrators (CSA) are reminding the investment industry of several new rules which come into effect March 30, 2004, and apply to almost all reporting issuers except investment funds. There are four National Instruments (NI), as well as two Multi-lateral Instruments (MI) which were not adopted in British Columbia.

“The net result of these rules is that investors will receive more consistent disclosure on a more timely basis and they can be more confident in the quality of the information they receive,” said Steve Sibold, chair of both the CSA and the Alberta Securities Commission. “International investors can remain confident that Canada’s disclosure and governance standards continue to be as stringent as those anywhere in the world.”

The new rules include NI 51-102 Continuous Disclosure Obligations; NI 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency; NI 52-108 Auditor Oversight; NI 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers; MI 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings; and MI 52-110 Audit Committees.

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Arrow closes Series 3 Notes

(March 29, 2004) Arrow Hedge Partners has announced the closing of Arrow Multi-Strategy Notes, Series 3 product. But investors looking to get into this product line will likely have another chance.

“Based on the continuing market demand, we would expect to offer another series of this product in the near future,” stated Mark Purdy, managing director at Arrow. “The Arrow Multi-Strategy Notes product provides investors with the assurance of guaranteed principal repayment, the benefit of consistent return potential through a fully diversified fund of hedge funds and comprehensive risk management from an industry leader.”

The notes are linked to the Arrow Multi-Strategy Hedge Fund and offer guaranteed principal repayment at maturity, plus any appreciation in the value of the fund. The fund’s annual absolute after-fee return objective is between 7% to 9%.

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ROI hails investor response

(March 29, 2004) Return on Innovation (ROI) Advisors Ltd. has announced the ROI Fund raised $20 million in new money during the 2003-2004 RRSP season, bringing the total capital raised to $35 million over two years.

“After only two years of operation, the ROI Fund is one of the fastest growing retail private equity funds in the country,” says John Sterling, CEO of the ROI Fund. “We believe that these results demonstrate that Ontario investors and financial advisors are looking for investments that provide stability and yield.”

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Study: Unsheltered GICs erode wealth

(March 29, 2004) Researchers at York University’s Schulich School of Business have concluded that short-term GIC returns are completely wiped out by taxes and inflation, if held outside of a registered account.

The study was conducted by the Individual Finance and Insurance Decisions (IFID) Centre and used Ontario’s highest marginal tax bracket in its calculations. Using the posted GIC rates from 1974 until 2003 and factoring in the diminished purchasing power caused by inflation, the study found real after-tax returns were in negative territory. Due to the higher rates offered, the returns from long-term GICs were slightly better.

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(03/29/04)