Briefly:

(March 17, 2006) The Canadian Coalition for Good Governance has named a new chair to replace Michael Wilson, who has departed to become ambassador to the U.S. The new chair is Doug Pearce, CEO of the British Columbia Investment Management Corporation.

“The coalition has made great strides in working with regulators, exchanges, educational institutions and corporations to improve the overall condition of corporate governance in Canada,” said Pearce. “We will continue to use the investment strength of our membership — 46 members with more than $900 billion in assets under management — to further our mission to promote best corporate governance practices and to align the interest of boards and management with those of the shareholder.”

In addition to his role as CEO and chief investment officer for the B.C. Investment Management Corporation, Pearce is also chair of the San Francisco-based Pacific Pension Institute.

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Canadians’ net worth reaches $4.5 trillion

(March 17, 2006) Canada’s net worth increased by 1.4% in the final quarter of 2005, reaching $4.5 trillion, or $137,300 per person, according to StatsCan. That’s up sharply from 0.7% growth in the third quarter, when net worth was limited by increased net foreign debt.

In nominal terms, the national balance sheet firmed up to the tune of $60.4 billion, thanks to improved savings and undistributed corporate earnings. In the credit column, Canada increased its wealth by $53.5 billion, while the foreign debt dipped to make up the remainder of the net gain.

Despite a slower housing market, residential real estate made up about half of the gain, supported by increased values of non-residential structures and machinery.

Still, growth in total household debt is still outpacing personal disposable income, as Canadian households currently carry about $1.08 in debt for every dollar of disposable income.

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BMO seeks fund changes

(March 17, 2006) BMO Investments has proposed changes to the investment objectives of three of its funds, which would take effect May 5, 2006, if approved by unitholders.

Among the changes, the BMO NAFTA Advantage Fund would be allowed to invest primarily in dividend-yielding common and preferred shares of North American companies, rather than the current objective of investing in firms that benefit from NAFTA. The change would remove the 20% minimum exposure to each of the three NAFTA trade partners.

The BMO Global Bond Fund is seeking approval to invest in debt issued by governments and corporations from around the world, instead of high-quality bonds and debentures denominated in foreign currencies and issued by Canadian governments and their agencies, corporations, international agencies.

Investors in the BMO U.S. Dollar Bond Fund are being asked to approve the merger of the fund with the BMO U.S. Dollar Monthly Income Fund, which will afford them greater diversification by giving investors exposure to equities as well as fixed income instruments.

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Insurance brokers partner with small business group

(March 17, 2006) The Insurance Brokers Association of Canada has announced that it will join forces with the Canadian Federation of Independent Business to work together and present a united voice on issues affecting insurance brokerages and small businesses.

In a release, IBAC points to past “hard markets” that put pressure on small business insurance availability and pricing, while at the same time placing brokers in a difficult position with both carriers and small business clients.

Going forward, the organizations say they plan to work together on a series of initiatives that improve conditions for members of both organizations. Among them the group plans to provide a joint handout to CFIB members that will discuss how insurance products affect them, how the industry determines pricing and how business cycles impact consumers.

The two groups also expressed support for the new Conservative government’s position on raising the small business corporate income tax threshold from $300,000 to $400,000 and eventually lowering corporate tax rates from 12% to 11%.

Most interestingly, however, the two associations have taken the position that banks or credit unions should not be allowed to sell insurance directly out of bank branches. In a joint statement, Robert Kimball, IBAC president and Catherine Swift, CFIB president and CEO, say “both our organizations believe that credit-granting institutions should not be allowed to easily cross-sell insurance products with other banking products. This would put even more undue influence on banking consumers and increase the preponderance of tied-selling.”

Both organization hold the position that such a move would ultimately lead to less choice, less competition and increased consolidation of the financials services industry. “These eventualities are not in the interest of small businesses, brokerages, consumers or Canadians,” they say.

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Genworth to insure 30 and 35-year mortgages

(March 17, 2006) Genworth Financial Canada has announced that it will begin offering mortgages loans as long as 35-years, in line with a Canadian Mortgage and Housing Corporation pilot project permitting longer amortization periods.

The extended period gives borrowers the chance to reduce monthly mortgage payments in the initial years of homeownership, while managing overall interest costs, Genworth says. Clients may reduce the number of years it takes to pay off their mortgage by choosing bi-weekly payment schedules, increasing monthly payments and taking advantage of lump sum prepayments.

“The new longer amortizations open up new possibilities for homebuyers, particularly buyers in larger urban centres where rising home prices have affected affordability,” says Andrew Moor, president and CEO of Invis, one of Canada’s largest mortgage brokerage firms.

Insurance for loans under the new 30 and 35-year mortgage amortization program will include a 0.20% premium surcharge for every five years of amortization beyond the traditional 25-year mortgage period. Thirty year amortizations were introduced in Canada last month by CMHC.

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Domestic demand will drive economic growth: RBC

(March 16, 2006) RBC Economics says solid domestic demand will outweigh the downward pressures from Canada’s trade sector and help the economy grow by 3.5% in 2006.

“While the drag from net trade will linger in 2006, most of the impact has already been felt,” says the bank’s vice president and chief economist, Craig Wright. “Our strong dollar will not prevent Canada’s growth.”

According to the economic forecast report, the economy is expected to accelerate this year with investment in machinery, equipment and non-residential structures emerging as key economic drivers, thanks to strong corporate balance sheets, coupled with the strong Canadian dollar making imports of machinery and equipment cheaper.

Consumer spending is also expected to remain healthy during the year, rising by 3.4% in 2006. Oil and natural gas prices are expected to soften but remain high enough to sustain the investment boom in fossil fuel producing provinces.

“We don’t expect the dollar to continue to trade at such high levels,” says Wright. “We believe it will end 2006 a little lower, at 84 cents U.S.”

Economic drivers are shifting in the U.S. as well. Consumer and investment sectors are cooling while the trade sector and inventory accumulation is expected to boost U.S. growth.

RBC also forecasts that the Bank of Canada will continue to raise the overnight rate to ward off any threat of inflation. The U.S. Federal Reserve is expected to increase key lending rates by 50 basis points by May.

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Ontario Teachers’ Pension Plan reports healthy returns

(March 16, 2006) The Ontario Teachers’ Pension Plan’s net assets rose to $96.1 billion last year, up from $84.3 billion in 2004. Income from investments totaled $14.1 billion in 2005, a $3.3 billion increase from the previous year.

The pension plan’s one-year rate of return was 17.2%, 4.5% above its benchmark, a combination of Canadian and foreign indexes, in proportion to the fund’s asset mix policy.

Since the fund was created 16 years ago, its rate of return has averaged 11.7% per year.

“Our investment managers have delivered performance ahead of composite benchmark performance not only for the past year, but over the longer term,” said CEO Claude Lamoureux. “Over the past four years this over-performance has produced $11.1 billion in additional value.”

The plan paid out a total of $3.6 billion in pension benefits in 2005. Contributions from active teachers were matched by the Ontario government and other employers and totalled $1.6 billion for the year. A total of 5,700 new pensions were added to the pension payroll in 2005.

Equities represent the bulk of the fund’s assets at 49%, while fixed income stands at 19% and real estate, 13%.

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Quotential reaches $5 billion mark

(March 16, 2006) Franklin Templeton Investments announced this morning that its Quotential program, a portfolio wrap program launched in 2002, has grown to $5 billion in assets under management.

“Our high net worth specialists developed this program in response to our clients’ demands for a simple way to bundle together a portfolio of funds that could meet their varying investment goals and risk tolerances,” says president and CEO, Don Reed.

Since the program’s launch, the company has expanded the product offering from four to seven portfolios that allow clients to diversify by asset class, market capitalization, geographic region and investment style. The program is managed by the Franklin Templeton Investment Private Client Group.

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Morningstar kicks off training road show

(March 16, 2006) The Morningstar Canada’s PALTrak training road show kicks off this year in Montreal on April 6 before moving on to cities across the country. The two and three hour live, in-class seminars are designed to help advisors make better use of the program and improve their analysis, productivity, sales and client retention.

PALTrak 101 covers the basics of moving around in PALTrak, including how to find funds and benchmarks, create custom column groups, and how to create and save a recommended list of funds. PALTrak 201, for users already acquainted with the mutual fund research tool, explains how to use ratios, filters and graphs to find the right funds, time saving tips, and covers the program’s research and sales features.

Both sessions are accredited by Advocis for continuing education credits. Each session costs $99.

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BMO Harris launches bond portfolios

(March 15, 2006) BMO Harris Private Banking has introduced two new bond portfolios, aimed at outperforming Canadian benchmarks, such as the Scotia Capital Universe Bond Index.

The BMO Harris Opportunity Bond Portfolio and BMO Harris Income Opportunity Bond Portfolio will take a unique ‘core plus’ approach, the company said in a release, using the full set of available fixed income strategies, such as non-interest rate anticipation, global bond and high-yield bond strategies.

PIMCO, one of the world’s largest fixed income managers, will act as sub-advisor on the new portfolios, which will be exclusive to BMO Harris private banking clients.

“The core plus approach is a well established strategy for many investors and is a natural fit for a private banking organization that focuses on wealth preservation and legacy building,” said Paul Taylor, chief investment officer at BMO Harris Private Banking. “These portfolios offer income and capital appreciation and the low correlation between the sectors adds value without substantially altering the risk level from that of the benchmark.”

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Canadians missing out on tax savings

(March 15, 2006) Nearly 30% of Canadians believe they have overlooked a potential tax write-off or exemption, according to a new survey. That’s because most of us take a last-minute approach to filing taxes, according to tax preparation software manufacturer UFile, which commissioned the study.

Almost half of those surveyed by Decima Research file their taxes in April, the deadline month in which to submit returns and about the same number do their taxes in less than three hours.

Nearly one-third said they had found a charitable donation receipt or other write-off receipts after they have filed their taxes. And 19% admitted to missing a tax deadline in the past.

“This survey reveals that the tax filing habits of many Canadians may inadvertently cost them money,” says Joanne Birtch, UFile’s director of marketing and communications. “It is clear that taxpayers need some guidance and advice, either from a tax professional or tax software on how best to complete and submit accurate tax returns to ensure they are able to get the best returns possible for themselves and their families.”

Of course, a last-minute approach to tax filing may be systemic in nature. Although this was not part of the study, firms aren’t required to send employees their T4 forms until the end of February and many RRSP and charitable donation receipts trickle in during March and April.

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Financial and telcos tops in disclosure

(March 15, 2006) Financial services and telecommunications firms lead the pack in the quality of social and environmental information they disclose, according to a survey released by Stratos.

Vancity and Telus took the top two spots in the 2005 survey, while BC Hydro and Suncor tied for third. Other top 10 finishers included BCE, PotashCorp, Weyerhaeuser, TransAlta, Inco, Syncrude and the Vancouver International Airport Authority.

Stratos, an Ottawa-based sustainability consulting firm, also found that 70% of TSX-listed firms now disclose sustainability information, up from 35% five years ago.

More than 100 Canadian firms publish stand-alone corporate sustainability or social responsibility reports or integrate such information into their annual reports, Stratos notes.

“More and improved public disclosure of non-financial information by Canadian corporations is informing decisions by company personnel and improving company relations with a range of external stakeholders,” said Stratos chair George Greene.

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Fidelity to launch China Fund

(March 14, 2006) Fidelity Funds has filed a preliminary prospectus for the Fidelity China Fund, which will, as the name suggests, focus on stocks listed in Hong Kong, China and Taiwan. The prospectus was filed on March 8, 2006. The fund will be available in series A, B, F and O.

The fund will be managed by K.C. Lee, who used to manage the Fidelity Far East Fund, until July 2003. Lee has remained an investment manager with Fidelity Investments Management (Hong Kong) in themean time, but the launch of the China Fund will mark his return to the Canadian fund industry.

In the same filing, Fidelity announced the launch of a Global Real Estate Fund, which will invest in listed companies involved in the real estate industry. REITs will make up a portion of the portfolio, along with equities of firms that invest in or operate real estate assets.

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New research tool will calculate global bond flows

(March 14, 2006) State Street has introduced the new Sovereign Bond Flow Indicator, which will measure purchases and sales of domestic bonds by institutional investors in more than a dozen countries.

The research tool will aggregate data representing approximately 15% of the world’s investable assets, State Street says, and will be available daily, with a two-day publication lag.

“This new measure of institutional investors’ appetite for sovereign bonds extends our groundbreaking range of research tools to the fixed income asset class,” says Stanley Shelton, head of State Street Global Market. “Until now, investors in sovereign bonds have had to rely on official surveys for information that offer data with a one- or two-month time lag. Now for the first time ever, our clients can access investment flows of sovereign bonds in a timely and accurate way.”

The SBFI employs net flows at each monthly point along the yield curve as its unit of analysis to most accurately represent the net demand for securities at different maturities. It includes sovereign bond data for Canada, U.S., Austria, Belgium, Germany, Spain, France, Britain, Italy, Netherlands, Sweden, Japan and Australia.

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Front Street closing fund

(March 14, 2006) Front Street Capital is closing its Special Opportunities Canadian Fund to new investors, as of March 31, 2006, saying the fund had reached its capacity for effective management.

The closure applies to series A, B and F, but existing unitholders with pre-authorized purchase plans will not be affected. Unit-holders have until March 31 to arrange such a plan if they have not already.

Front Street may decide to re-open the Fund to new purchases at any time, at its discretion.

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Strategic Energy president resigns

(March 14, 2006) The president of Strategic Energy Management Corp., which manages the Strategic Energy Fund income trust, has announced his resignation, effective March 31, 2006. Gordon Thompson will also be resigning as COO of the firm.

“Gord Thompson has made a tremendous contribution to the growth and success of Strategic Energy Fund,” said John Driscoll, chairman and CEO. “Under his leadership, the Fund’s assets have increased from $20 million to more than $240 million and the Fund is now very well-positioned to attract additional capital from investors in order to exploit opportunities in Canada’s oil and gas sector.”

Driscoll will take over as president of the company until a successor can be found.

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Westminster Savings Credit Union Deploys PlanPlus Web Advisor

(March 14, 2006) PlanPlus Inc. has signed up another client for its PlanPlus Web Advisor, as B.C.-based Westminster Savings Credit Union has announced it is adopting the system.

“Recent surveys indicate WSCU members who deal with the credit union’s Financial Planners are substantially increasing the percentage of investable assets they hold with the credit union,” said Kevin O’Rourke, AVP of Wealth Management at WSCU. “We credit much of our success in this to the planning approach and service we have delivered with PlanPlus over the years. The new Web Advisor version is more streamlined and easier to use which will let us service more members more efficiently.”

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CIBC in talks to buyout Caribbean partner

(March 13, 2006) CIBC has announced it is in talks to buy a majority stake in FirstCaribbean International Bank, the largest regionally-listed bank in the English-speaking Caribbean, with assets of over US$9.6 billion and a market capitalization of over US$3.3 billion. The bank was created when CIBC merged its Caribbean operations with those of Barclays Bank in 2002.

“FirstCaribbean is an excellent fit for CIBC and is well-positioned for long-term success in a region that we believe has attractive growth prospects,” said Gerry McCaughey, CIBC’s president and CEO. “We have enjoyed our partnership with Barclays in building a strong leader in the Caribbean financial services industry and we are committed to FirstCaribbean’s strength and success.”

So far, CIBC has only signed a non-binding letter of intent with Barclays, but a deal is expected later this year. CIBC will likely pay about US$1.08 billion for a 43.7% stake, taking its ownership to 87.4%.

FirstCaribbean has over 3,400 staff, 100 branches and banking centres, and offices in 17 countries. The bank has approximately 780,000 active accounts and is rated as “A-Stable” by Standard & Poor’s.

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RBC launches investable hedge index

(March 13, 2006) RBC’s Alternative Assets Group has launched a new structured product meant to track the hedge fund industry. The RBC Hedge 250 Index includes nearly six times as many hedge funds as other investable indices.

“We have capitalized on RBC’s significant experience and relationships in the industry to create the RBC Hedge 250 Index which we believe to be the most representative investable hedge fund index in the market,” said Winson Ho, co-head of the Alternative Assets Group and co-creator of the index. “There has been a great need in the market for an investable hedge fund index which does a better job of representing the performance of the asset class.”

Funds represented in the new RBC index capture approximately 20 per cent of total hedge fund assets under management, including many funds that are closed to new investors, have longer lock-up provisions or have recently launched operations.

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Dynamic offers global dividend exposure

(March 13, 2006) Dynamic Funds has announced the launch of the Dynamic Global Dividend Value Fund, a conservatively managed global equity fund focusing on companies likely to increase or initiate dividend payments.

“Dynamic Global Dividend Value Fund offers a time-tested approach to capital appreciation,” says portfolio manager David Taylor. “History has shown that companies that pay dividends tend to have healthier long-term profits than those that don’t. Buying profitable companies at less than their true value is a proven formula for success.”

Dynamic points out that dividend growth tend to drive higher share values, making this fund “ideal” for investors seeking long-term capital growth and global diversification.

(03/14/06)