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(June 20, 2007) Canada will not be immune to rising interest rates that are going to put the brakes on global economic growth, says TD Bank’s chief economist, Don Drummond.

In the June issue of TD’s Quarterly Economic Forecast, Drummond predicts that over the longer term, the global economy will ride out higher interest rates. He thinks financial markets could experience greater volatility as investors adjust to the high-rate environment and expects that equity markets will not replicate the double-digit gains of the past few years.

The report predicts that in the months ahead, every G-7 central bank, with the exception of the U.S. Federal Reserve, will increase its policy rates.

“A global rebalancing in monetary policy is underway, and the Bank of Canada will join the fray this summer,” he says. “However, while the global economic expansion will be dented by the rebalancing in monetary policy, it should not be thrown off the rails.”

Drummond says this is because despite the expected slowdown, which he predicts will be at its worst in 2008 and early 2009, global economic growth will still pace forward at a healthy 4%.

Canada, on the other hand, will likely lag, says the report, as the BoC’s higher interest rates — which will fuel a higher Canadian dollar — might slow economic growth to 2.5% of real GDP in 2008.

TD’s forecast of economic growth is only marginally below the Bank of Canada’s estimate of 2.8%. Drummond says that given Canada’s poor productivity performance in recent years, he wouldn’t be surprised if growth actually ends up lower than estimated.

“As a result, 2.5% economic growth may be the best that Canada can do, and there is a risk that the Bank could be forced to engineer a weaker performance with even higher interest rates if Canadian productivity does not improve on a sustained basis,” says Drummond.

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Acuity proposes makeover for funds

(June 20, 2007) Acuity Funds will seek approval from its unitholders to make fundamental changes to some of its socially responsible investment funds.

The company has proposed to merge the assets of the Acuity Clean Environment Global Equity Fund into the Acuity Clean Environment Equity Fund. It also proposed to change the investment objective of the newly merged fund to allow it to invest up to 100% of its assets in foreign issuers.

In addition, Acuity proposes to expand the current “sustainable development” objectives of its Clean Environment Balanced Fund to include other socially responsible investment opportunities. To reflect its broader spectrum of assets, it would also like to change the name of the fund to the Acuity Social Values Balanced Fund.

The proposals will be subject to approval from unitholders at meetings to be held on or about August 7, 2007. If approved, the changes are anticipated to become effective by the end of August.

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Sun Life touts U.S. variable annuity sales

(June 20, 2007) At its Investor Day, Sun Life Financial announced that it exceeded the $1 billion US mark in U.S. variable annuity gross sales for the first five months of 2007. This is a 66% growth over the same sales period last year.

“Sun Life’s innovative Income on Demand annuity product combined with the continuing execution of our distribution strategy are fuelling impressive sales growth in the United States and solidly positioning us within key retirement and demographic markets,” says Donald A. Stewart, CEO of Sun Life Financial.

Sun Life also announced that its Chinese joint venture life insurance company, Sun Life Everbright Life Insurance Company, received China Insurance Regulatory Commission preparatory approval. The company expects sales in Shanghai to begin in the fourth quarter.

Sun Life now has a presence in 14 Chinese cities.

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CLHIA names new chairman

(June 20, 2007) At the annual general meeting of the Canadian Life and Health Insurance Association, Inc. (CLHIA) on Monday, Peter C. McCarthy, president and CEO of AIG Life Insurance Company of Canada, was elected chairman of the association for the year ahead.

McCarthy will be heading up a board that is made up of CEO and presidents of many of the top insurers in Canada, including chair-elect Pierre-Yves Julien, CEO of Medavie Blue Cross, and past chairs James A. Brierley, president of Munich Reinsurance Company, Canada Branch, and Yvon Charest, CEO of Industrial Alliance Insurance and Financial Services.

“I am pleased and honoured to serve the industry over the months ahead, and I am looking forward to the opportunity of working together with so many respected and experienced colleagues in continuing the fine tradition of consensus building and constructive dialogue with regulators and policymakers as the association enters its 113th year in operation,” McCarthy says.

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RBC launches Series 3 of commodity PPN

(June 20, 2007) RBC has announced it will issue the next series of its Principal Protected Commodity Booster Notes.

Series 3 of the notes will allow investors access to a basket of commodities that includes Brent crude oil, copper, nickel and zinc. The notes are marketed heavily for their booster zone, which guarantees investors a 50% return at maturity as long as the appreciation in the commodity basket is above 0% and less than 50%. If the notes post a loss, investors will receive their original principal.

There is also potential for an interim coupon payment of 20% at year three, RBC says. If, on the third anniversary date, the commodity basket has a positive appreciation, the investor will receive a 20% coupon. RBC says that whether or not the 20% interim coupon is paid at year three, the note will remain in effect for the entire five-year term and is eligible for the 50% payout at maturity.

The notes can be purchased through FundSERV (code RBC323) and are available to self-directed investors, as well as through advisors until July 20, 2007. The maturity date is July 25, 2012.

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CI terminates fund

(June 20, 2007) CI Investments has issued a reminder that the CI Global Opportunities II Fund will terminate, as scheduled, on June 30, 2007.

Immediately prior to termination, CI says the fund will make a final distribution of its net income and net capital gains, if any, to unitholders of record at the close of business on June 29, 2007.

The final distribution and the remaining net asset value of the fund will be paid to unitholders on or about July 13, 2007.

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(06/20/07)