Briefly:

Previously: | MON | TUE | WED | THU |

In a typical recession, the average Canadian usually trims as much as they can from their cash out-flows: consumers consume less and investors pretty much stop investing. But so far, the latter has yet to happen, according to a survey by global market research firm Synovate.

“Some Canadians think that now is actually a good time to invest since stocks are more affordable,” says Adrian Murphy, vice-president of syndicated research with Synovate in Canada. “While the percentage of people with at least one deposit has generally held steady during the current economic crisis, the impact of falling portfolio values can be seen by the lower number of people investing $300,000 or more.”

There has actually been a 1.3% increase in the number of people investing amounts between $10,000 and $99,999. This bracket makes up 31.3% of the survey sample of 36,000 total respondents.

There was also some growth in the bracket between $200,000 and $299,999. Presumably, those who once may have invested $300,000 or more have scaled back somewhat, and can now be found in the lower cohorts.

The latest survey by ? found that 85% of Canadians have deposits or investments at some type of financial institution, compared to 82% who did a year ago. This includes chequing/savings accounts, GICs, RRSPs and mutual funds.

% of people investing stated dollar amounts – Total Canada
	Sept – Nov 08	Dec 08 – Feb 09	Difference
No investment / deposit activity	16.0%	15.3%	-0.7% pts.
$1 – $9,999	30.5%	30.4%	-0.1% pts.
$10,000 – $99,999	30.0%	31.3%	+1.3% pts.
$100,000 – $199,999	10.6%	10.5%	-0.1% pt.
$200,000 – $299,999	5.1%	5.2%	+0.1% pt.
$300,000 or more	7.8%	7.2%	-0.6% pts.
Source: Synovate

• • •

Firing your fund manager? Think twice

Just because an investment manager turns in bad performance, it doesn’t mean you should fire them, according to Watson Wyatt Worldwide. Bad returns are bound to hit most managers, but if they are accompanied by a loss of skill within the firm, or worse, the failure of risk controls, then maybe they should be shown the door.

“In the extreme situation, where there has been poor market and relative performance, trustees and other fund owners are naturally biased to action, but we would caution against reactionary like-for-like manager changes,” says Craig Baker, global head of manager research at Watson Wyatt. “While the interpretation of past performance is complex, it is essential to do this analysis before automatically concluding that a manager has done very poor work.”

Bad performance can usually be chalked up to one of four reasons:

• Poor skill A manager has not been skillful, either because something has happened to affect their skill or the original assessment of that skill was incorrect. • Poor decisions A manager has made some misjudgments. A few bad judgments should be expected and do not make a manager bad overall provided that there are good decisions also being made. •Poor luck A manager has made some sensible decisions that proved unsuccessful due to events that could not have been anticipated. •Timing A manager has a number of positions that have so far been unsuccessful, but there are reasonable hopes that they will turn around.

Baker points out that alack of skill should result in firing, but that the other three may require closer consideration, possibly with the manager being placed under review. He suggests that in extraordinary circumstances, such as the credit crisis, many decisions were made under duress as a result of forced de-leveraging and were not entirely the fault of the manager.

Changing managers simply because of a run of bad luck can introduce additional volatility to the fund as the new manager adjusts the portfolio to their own liking. This is often accompanied by the sale of assets that are simply outside of their style, and not necessarily bad investments.

“It is instinctive to have a bias to action, which is particularly true when the prospect of worse outcomes still remains,” Baker says. “Yet care should be taken with this reaction, as past analysis suggests that a bias to action generally loses the fund more than it gains.”

• • •

CAW pensions at risk: McGuinty

Canadian autoworkers may want to consult a financial planner. The premier of Ontario has warned that the province will not be able to bail out the pensions of General Motors or Chrysler if either of those companies declares bankruptcy.

Premier Dalton McGuinty said that the best way to protect autoworker pensions is to ensure the health of the companies they work for.

The provincial Pension Benefits Guarantee Fund holds just $100 million, a far cry from the $6 billion shortfall that General Motors’ pension plan faces. McGuinty said that the province has no intention to inject that kind of capital into the fund.

(04/22/09)