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Russell Investments Canada has announced the termination of three of its LifePoints target date portfolios, citing relatively low numbers of unitholders and assets.

Effective immediately, units of the LifePoints 2010, 2020 and 2030 portfolios will no longer be available. The portfolios will be terminated on or about Nov. 2, 2009.

Prior to termination, unitholders will have the option to switch their investments to any of the other Russell LifePoints portfolios or to redeem their units.

On termination, Russell will liquidate all assets held in the portfolios and distribute the proceeds to remaining unitholders. Investors will not face any redemption fees, sales charges or other fees associated with the termination.

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TFSA holders need more education

Amid June 16’s announcement that Ontario residents with tax-free savings accounts (TFSAs) can now designate a beneficiary, a survey by Mackenzie Financial found that many TFSA holders are in the dark about the rules pertaining to this type of account.

The survey found that 48% of TFSA holders were uncertain whether the account would be taxable to beneficiaries on death. In addition, 69% didn’t know if the beneficiary would require TFSA contribution room to continue tax-free growth.

“These results suggest that Canadians are setting up TFSA accounts without a complete understanding of the estate planning implications,” says Wilmot George, director, tax and estate planning, with Mackenzie Financial. “TFSAs are generally passed to beneficiaries tax-free. To continue tax-free growth after death, contribution room would normally be required unless a spouse or common-law partner receives the asset.”

Most respondents (36%) indicated that they are using TFSAs for the purpose of meeting long-term goals, such as retirement and children’s education. In terms of investments in the TFSA, the majority of respondents (51%) said they were invested in short-term vehicles, such as cash, short-term GICs or money market funds.

In light of why people invest, purchasing short-term vehicles may not be suitable, according to George — this further suggests that appropriate investor education is needed on this subject.

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BNY predicts many asset manager positions to be cut

A record number of asset managers for pension funds and endowments will be replaced in the second half of 2009, predicts Mellon Transition Management (MTM), the transition management specialist for BNY Mellon Asset Management.

Mark Kelecher, CEO of MTM, said that many institutions are looking to reduce risk, which includes cutting loose some firms that are currently managing assets. The trend over the past six months has been for institutions to increase exposure to indexing and longer-duration bond strategies.

Institutions use transition managers such as MTM to minimize their costs and risks when they’re changing managers. They make these changes if they are unhappy with the performance of an asset manager or are changing their asset allocation strategies.

“Market turbulence accelerated the rising dominance of transition managers such as MTM that follow the fiduciary model,” says Kelecher.

The prediction is based on the more than 40% increase in the number of pre-trade inquiries during the first five months of 2009 and the substantial jump in executed transitions in the second quarter of 2009 versus the first quarter of 2009.

Pre-trade inquiries have proven to be a good predictor of transition activity, often leading actual transition activity by several months. Pre-trade inquiries are done by institutions to gauge the costs and risks of switching managers.

(06/17/09)