Briefly:

The return of investors to the market is giving a boost to the exchange-traded funds sector, according to one provider of these vehicles. For details, and to read other financial services industry updates, click the “full story” button below.

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The return of investors to the market is giving a boost to the exchange-traded funds (ETFs) sector, according to one provider of these vehicles. Barclays Global Investors (BGI) has revealed that its ETF lineup has hit an all-time high in assets under management in Canada.

“There has been a visible shift in the investing habits of Canadians over the past six months as net inflows have increased and investors join a global trend,” said Deborah Fuhr, global head of ETF research and implementation strategy at BGI. “ETFs continue to enjoy considerable momentum as an investment vehicle, given their ability to offer exposure to such a wide variety of asset classes.”

On a year-to-date basis, the ETF industry has grown its assets 49%, from $19.4 billion to $28.8 billion, at the end of September. Fixed income ETFs gathered $2.4 billion in net new assets, while assets under management have doubled.

Income-focused ETFs gathered $521 million in net new assets so far this year, while international equity ETFs have seen $517 million in net new money.

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Proposed Front Street merger

Front Street shareholders are being asked to consider a merger between Front Street Mutual Funds Ltd. and Front Street Special Opportunities Canadian Fund Ltd. The merger would allow investors to switch their investments between the different mutual funds within Front Street Mutual Funds on a tax-deferred basis. A meeting to debate the proposal will be held on Nov. 24, 2009.

As part of the amalgamation, one new class of shares of Front Street Mutual Funds would be created: the Front Street Special Opportunities Canadian Fund class of shares (of which Series A, B and F shares would be created). Existing holders of the Series A, B and F shares of Front Street Special Opportunities Canadian Fund would receive Series A, B or F shares, respectively, of the Front Street Special Opportunities Canadian Fund class of shares of Front Street Mutual Funds.

The merger is subject to regulatory approvals. If permitted, the process will be completed on Dec. 1, 2009.

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Boomers redefining retirement, says Sherry Cooper

The traditional concept of retirement was outdated well before the global financial crisis, thanks to the boomers’ rebellion against every institution their parents had built. Now, the generation that invented the generation-gap concept is working longer not only because it has to but also because it wants to, according to economist and retirement expert Sherry Cooper.

In an article in U.S. Banker, Cooper explains how boomers — unlike their parents — view retirement as a “period of personal diminishment, dependency, social isolation and stagnation, and they want none of it.” They will work longer partly out of necessity and partly because doing so “provides a sense of belonging and purpose, interaction with people of all ages and structures our daily living.”

“Retirement was never meant to last for decades, and current longevity is the reason why uncapped defined benefit (DB) pension plans are an unsustainable financial burden on business,” writes Cooper. “The demise of DB plans, as well as the sharp decline in employment tenure, has pushed the headache of retirement planning onto individuals. Most boomers are unprepared to support themselves (and often their ailing parents or adult children) over a multi-decade retirement period.”

Household wealth relative to income has fallen sharply, and roughly one-third of American boomer homeowners find themselves with mortgages that exceed the value of their homes. The recent rise in savings rates — while beneficial — has largely been the result of the government’s tax-cut boost to disposable income. Spending as a share of pre-tax personal income has not declined at all. “The savings rate needs to climb much further to rebuild nest eggs and to lower household debt ratios to the pre-credit-boom levels of the mid-1990s,” says Cooper.

In the wake of the global financial crisis, the rules regarding portfolio longevity no longer apply, Cooper explains. Early retirees who were compelled to sell portfolio assets in 2008 have drastically reduced the longevity of their nest eggs, forcing many to return to work, slash their spending or start their own business.

“Boomers are still the healthiest, wealthiest generation in history,” she says. “They can and will work longer, cut their budgets and lower their expectations regarding retirement lifestyle and large bequests.” The “new frugality,” as she describes it, will consist of “affordable luxuries and travel-like experiences” such as home entertainment and personalized recreation. “Insurance-related products, such as annuities and guaranteed income products, though expensive, will become more popular as boomers reduce risk. People will want their banks to help them simplify their financial lives as the economy recovers.”

Cooper expects the effect on the workforce to be palpable, with a decline in the number of workers between ages 35 and 44 who cannot fully fill the gap in either numbers or experience, leaving the door open to returning boomers. Eager to retain their experience, employers will offer job flexibility and increasingly offer remote employment.

“To be sure, many boomers have been forced into temporary retirement by the crisis-induced downsizing, and some will need to switch careers or relocate for future re-employment,” she says. “For the vast majority, continued employment well beyond age 65 will be possible.”

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Roubini warns of market slump: Bloomberg

New York University Professor Nouriel Roubini says investors should be ready for a drop in stock and commodity markets in coming months as the economic recovery continues its slow pace.

“Markets have gone up too much, too soon, too fast,” Roubini told Bloomberg on Oct. 3. “I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U-shaped. That might be in the fourth quarter or the first quarter of next year.”

Stocks markets have enjoyed a surge in the past six months as confidence about the global economy builds. However, Roubini joins billionaire investor George Soros and others in cautioning investors on the sluggish economic recovery. Soros characterized U.S. consumers as “over-debted” and the banking system as “basically bankrupt.”

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Mackenzie launches Canadian Shield Fund

Mackenzie Financial has filed a preliminary prospectus for an initial public offering (IPO) for combined units of the Canadian Shield Fund. Each combined unit consists of a redeemable unit and a half of one warrant to purchase a unit.

The fund’s objective is to preserve capital in all market environments while generating “superior risk-adjusted absolute returns” denominated in Canadian dollars. The proceeds of the IPO will be invested in a portfolio consisting mainly of Canadian securities. This portfolio will be managed by Parador Asset Management, LLC.

(10/05/09)