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(February 8, 2007) Financial authorities should level the playing field and force independent mutual fund companies to adhere to the same strict standards as the more highly regulated banking sector, according to Desjardins Group.

“A financial institution such as Desjardins applies a rigorous integrated risk management process and yet is the object of frequent inspections by the regulatory bodies to which it is accountable,” said Bruno Morin, senior vice-president, investment funds and trust services at Desjardins.

He was speaking before the provincial Public Finance Committee in Quebec City, in a consultation session on a report dated March 2006, Les fonds communs de placement : la protection des épargnants au Québec (Investment Funds: Investor Protection in Quebec).

Independent fund companies, he went on to say, were not held to the same standard on issues such as capitalization, leverage, insurance protection or liability.

“In order to ensure greater protection for investors, not only the products offered, but those who produce them as well, should be subject to the regulations and laws in force,” he said. “In our opinion, a better harmonization in the application of the rules, framework and controls seems to be the best path to follow since it is the most likely to have an immediate impact on investor protection.”

Desjardins representatives also argued that various regulation projects are currently under study in Canada with a view to further tighten the controls governing the administration of mutual fund producers, particularly as regards governance and compliance, and thus promote investor trust and protection.

Morin thinks the study is a good idea as long as it can be practically implemented across Canada.

“We must be sure that any measure adopted following the works of the Commission will truly entail an enhancement of investor protection, in addition to ensuring harmonization with the regulations of other Canadian jurisdictions,” he said.

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Budget consultations launched

(February 8, 2007) Finance Minister Jim Flaherty has launched online consultations that will allow the public to participate in the development of Budget 2007.

“By offering these consultations, we are giving all Canadians an opportunity to play a role in the federal budget process,” Flaherty said. “I encourage everyone to take the time to submit any ideas and comments they might have. Their input will be seriously considered for this budget and future budgets.”

Last year, nearly 6,000 Canadians participated in the online consultation process. People provided a wide range of responses touching on everything from tax reductions to infrastructure investments. This year, responses will be organized under five headings: spending, personal tax, corporate tax, debt and other. Responses will be limited to no more than 50 words per topic to ensure succinctness and allow for quick evaluation. The consultations will end at 12 midnight EST on February 28, 2007.

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Private equity firm submits prospectus for new fund

(February 8, 2007) Private equity investor Kensington Capital Partners announced that it has filed a preliminary prospectus in connection with the initial public offering of units of Kensington Global Private Equity Fund.

The new fund, which will be managed by Kensington Investment Management, was created to provide exposure to a diversified portfolio of global private equity investments, including private equity funds, funds of private equity funds and direct investments in private companies.

The investment objective of the fund is to maximize long-term total returns for investors through distributions of net income and net realized capital gains.

Kensington plans a public offering that will be led by CIBC World Markets and Scotia Capital, and proposes to issue the units to investors at a price of $20.00 per unit, payable in three installments. The first installment of $10.00 is payable upon the closing of the offering. The second installment of $5.00 is payable on or before December 5, 2007, and the third installment of $5.00 is payable on or before March 31, 2009.

A preliminary prospectus relating to these securities has been filed with securities commissions in each of the provinces and territories of Canada but has not yet become final for the purpose of a distribution to the public.

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CPP grew $7.5 billion in 2006’s final quarter

(February 8, 2007) The CPP fund, which includes investment earnings and the portion of CPP contributions not needed to pay current pensions, grew by $7.5 billion to $110.8 billion during the quarter ended December 31, 2006.

The strong finish to the nine months ending December 31, 2006, helped the CPP fund experience a year-to-date investment rate of return of 10.1%, or $10.3 billion, while the fund added $2.5 billion from CPP contributions not needed to pay current pension benefits. The result is a $12.8 billion overall increase in the fund since April.

“The strong performance of Canadian and foreign equity markets was the largest factor behind the positive investment returns this quarter for the CPP fund,” said David Denison, president and CEO, CPP Investment Board. “We are pleased that further diversification of the CPP fund into a broader range of asset classes and geographies has also contributed to these strong returns.”

The pension fund said it expects CPP contributions to exceed annual benefits paid until 2022, providing a 15-year period before a portion of the investment income is needed to help pay CPP benefits. Over the next 10 years, the Chief Actuary of Canada estimates that the CPP fund will grow to approximately $250 billion, making it one of the largest single-purpose pools of investment capital in the world, which will hopefully secure the CPP for the long term.

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(02/08/07)