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(October 24, 2008) AIC Limited is reportedly cutting 20% of its work force, according to media reports.

The vast majority of the job cuts are apparently in the marketing and information technology departments of the company. There have been no announced cuts to any of the portfolio management teams.

No reason has been given for the cuts, but AIC has had longstanding redemption problems for years now, as the company’s value-oriented investment style and heavy emphasis on financial service stocks fell out of favour with investors. AIC has $4.6 billion in assets under management, a mere shadow of the more than $15 billion it managed during the early part of this decade.

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Plan sponsors keeping their heads

(October 24, 2008) Canadian pension plan sponsors are staying relatively calm during the current market turbulence, according to survey.

Morneau Sobeco’s latest 60 Second Survey of 93 defined benefit (DB) and defined contribution (DC) plan sponsors reports that they are not panicking, in spite of the ongoing financial crisis.

Forty-one percent of respondents said they were very concerned and 50% somewhat concerned, but few plan to take any dramatic measures to cope with the situation.

Of the 32% of DB plan sponsors that plan to take significant action, 63% said they would reduce the plan’s equity weighting or raise cash, while 15% said they would be converting to a DC plan or closing off their DB plan.

Of the 27% of DC plan sponsors who said they were very concerned or somewhat concerned, 48% have planned a special communications effort to help plan members cope with investment losses. Only 7% of respondents plan to change their investment options and none planned to change investment managers or contribution rates in reaction to the market volatility.

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Pace of inflation slows

(October 24, 2008) The rate of inflation declined from August to September, according to Statistics Canada.

Consumer prices rose 3.4% in the 12 months to September, due to high energy and food prices. It was nonetheless a slower pace than August’s 3.5% increase, when the pace of consumer price growth was the highest since March 2003.

The consumer price index, excluding gasoline, increased 2.2% in the 12 months to September, StatsCan notes. Stripping away all energy components, the CPI advanced only 1.9%.

A large upward contributor to the 12-month change in the CPI was gasoline. Prices at the pump still rose 26.5% in September and varied considerably during the month. For example, at mid-September, gasoline prices rose by over 10 cents a litre in many regions of the country, as Hurricane Ike caused a significant reduction in crude oil production.

At the opposite end of the spectrum, purchase and lease prices for passenger vehicles declined by 9.3%. This was the largest drop since February 1956.

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U.S. crisis stalls global economy

(October 24, 2008) The global economy is “buckling under the weight” of the worst financial crisis to affect the U.S. economy in the last half-century, according to the Conference Board of Canada’s World Outlook.

The Conference Board says global economic growth is forecast to slip to 2.8% in 2008 and 2.4% in 2009.

“A number of developed countries are close to recession, and given the current state of financial markets, weak economic growth is expected to last through 2009,” said Kip Beckman, a principal research associate with the Conference Board. “Developing countries such as China and India have picked up the slack in the world economy, although they, too, are now being affected by the global slowdown.”

Strong exports enabled the U.S. economy to avoid a technical recession over the first two quarters of 2008, but the Conference Board expects poor consumer spending to push the country over the edge into a recession. They expect real GDP growth of 1.8% this year and 0.5% in 2009.

Europe and Japan are expected to follow the U.S. decline. In fact, there was evidence that the United Kingdom is already in the midst of a recession, according to a report by IHS Global Insight.

While contraction in the third quarter does not put the U.K. officially into technical recession yet — defined as two successive declines in quarter-on-quarter growth, and the economy was flat in the second quarter — the depth of the decline means that we are there to all intents and purposes,” the report states.

The turmoil in the United States is expected to limit Canadian economic growth to 0.8 % in 2008, but the Conference Board’s current projection is that Canada will skirt a recession.

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Capital International tweaks portfolio management

(October 24, 2008) Capital International Asset Management (Canada) announced Friday a change in the portfolio managers of two of its mutual fund portfolios: Capital International U.S. Equity and Capital International Global Small Cap.

The Capital International U.S. Equity fund will be managed by William Hurt, Shelby Notkin, Ted Samuels and Todd James, who are managers of affiliated sub-advisor Capital Guardian Trust Company.

The Capital International Global Small Cap fund will be managed by Capital Guardian portfolio managers Richard Havas, who has been a manager of the fund since its inception, Kathryn Peters and Larry Solomon.

Capital International says these changes will be implemented on or about October 31, 2008.

(10/24/08)