Briefly:

(July 29, 2005) Canadian pension funds maintained their growth momentum in the second quarter of 2005, thanks largely to a “surprise” rally in the bond market and stronger energy prices, according to a report from RBC Global Services’ BENCHMARK analytics division.

“The recent buoyancy of the bond market defies conventional wisdom. Rising interest rates normally depress prices,” observed Don McDougall, director, BENCHMARK, RBC Global Services. “Fixed income managers were unexpectedly caught offside and underperformed by almost 20 basis points for the quarter.”

Hefty 4.5% bond index returns, combined with strong oil-driven Canadian equities gave balanced funds a gain of 3.2% for the quarter, boosting 12 month returns to 11.3%.

“Over the last year, actively managed Canadian equity portfolios are up a whopping 19%, surpassing the broad market index by 1.5% thanks to superior stock-picking in eight of the ten major sectors,” said McDougall.

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GMP Capital names new CFO

(July 29, 2005) GMP Capital has announced the appointment of Christine Drake, CFA, CA to the position of Chief Financial Officer and Corporate Secretary. Drake most recently served as managing director and controller at RBC Dominion Securities.

“We are very pleased to welcome Christine to the team at GMP,” said Kevin Sullivan, CEO of GMP. “We look forward to her contribution as we continue to grow as a public company.”

Drake will join the firm August 8, 2005, replacing Adina Masson-Crocker, who has resigned from both positions, effective July 29, 2005, in order to pursue other interests.

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AIM Trimark alters fund names, names new manager

(July 29, 2005) AIM Trimark Investments has received unit-holder approval to change the name of AIM Global Fund Inc. and AIM Canada Fund Inc. to Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc., respectively.

The firm also announced Heather Peirce will join the portfolio management team of AIM Trimark Core American Equity Class, effective August 15, 2005.

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RBC reaches settlement in Enron lawsuits

(July 28, 2005) Royal Bank of Canada has agreed to pay US$25 million to settle lawsuits stemming from its involvement in the collapse of Enron.

We are pleased with this resolution and the opportunity to put this matter behind us on favorable terms,” said Charles M. Winograd, president and CEO of RBC Capital Markets.

Other financial institutions involved in the so-called MegaClaims litigation include Barclays PLC; Canadian Imperial Bank of Commerce; Citigroup Inc; Credit Suisse First Boston, Inc.; Deutsche Bank AG; J.P. Morgan Chase & Co.; Merrill Lynch & Co., Inc.; Royal Bank of Scotland; and The Toronto-Dominion Bank.

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BoC names journalist as special adviser

(July 28, 2005) The Bank of Canada has appointed Bruce Little, retired finance journalist from the Globe and Mail, to the position of Special Adviser for the year 2005-06.

The position was created in 1998 to bring additional perspectives to monetary policy discussions and to give university and private sector professionals in economics and finance first-hand knowledge of the Bank of Canada.

Mr. Little will advise on and participate in the Bank’s various communications initiatives. He will also be involved in issues related to the Bank’s economic research and planning activities, including the 2006 renewal of the inflation-targeting agreement between the Bank of Canada and the government.

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IDA imposes compliance monitor on Union Securities

(July 27, 2005) The Investment Dealers Association of Canada has announced the placement of a Compliance Monitor in the offices of Union Securities Ltd. of Vancouver.

“We felt we needed to act decisively and proactively to ensure that Union Securities Ltd. made the necessary changes to their compliance operations” said Warren Funt, IDA vice-president member regulation, western Canada. “We will monitor the situation closely to ensure improvements are made and that the firm fully meets IDA compliance standards.”

Grant Thornton LLP has been appointed to oversee day-to-day operations at the firm, and make recommendations to the Union Securities’ board of directors on how to bring the firm in line with IDA by-laws. A recent review found the firm in non-compliance with undisclosed regulations.

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Declining interest rates hurting Canadian pension plans

(July 27, 2005) Falling long term interest rates are pushing up pension plan liabilities. Overall, the financial health of Canadian pension plans declined further in the second quarter of 2005, according to a pension index released today by Mercer Human Resources Consulting.

Paul Purcell, retirement leader at Mercer, says pension fund managers bet that long term interest rates will rise. He says long term interest rate dropped off by 0.5% in the quarter, increasing plan liabilities. “Given that the liabilities for most pension plans are much more sensitive to long term rates than the pension fund assets, the bet is that long term rates are going up,” he says. “The index show their interest rate bet hasn’t been paying off, at least not so far. A small but growing number of sponsors are aligning the interest rate sensitivity of their assets and liabilities, but most plans sponsors are still willing to ride out their bet.”

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No bubble in housing: TD

(July 27, 2005) Canadian residential real estate shows little sign of being in a bubble as prices are beginning to cool in the second quarter, according to a report TD Economics. In the second quarter of 2005, home prices climbed by more than 8% as mortgage rates dipped by as much as 15 basis points.

“The pace of today’s inflation-adjusted home price gains is much slower than the late 1980’s,” the report said. “The annual rate of home price appreciation has already begun to moderately cool from the double-digit pace registered last year thanks to an increase in housing supply.”

The report points out that unemployment remains relatively low, which, combine with low interest rates, supports the home affordability.

“We can effectively rule out the existence of a nationwide housing bubble since national home prices do not appear to be irrationally overheating, but are in fact already cooling,” the report said.

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Trusts considered for MSCI index inclusion

(July 27, 2005) The firm that constructs some of the most widely recognized stocks indices, MSCI Barra, is considering inclusion of Canadian income trusts to its benchmarks.

The firm has announced it will conduct consultations with Canadian market participants to determine if the fast-growing trust universe should be included with standard corporate-structured equities.

MSCI Barra will take into consideration the foreign ownership limitations imposed by the federal government, limitations on pension ownership, issues of personal liability and taxation faced by international equity investors.

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Money Concepts turns 20

(July 26, 2005) Money Concepts Canada is celebrating its 20th anniversary, having grown to 50 employees and $2.5 billion in assets in that time.

“Our industry has faced a lot of change over the last 20 years,” said Money Concepts President Scott Sinclair. “Most of the independent financial planning brands that began in Canada 20 years ago have long since been consolidated or absorbed.”

In the summer of 2001, Money Concepts joined with AEGON Dealer Services Canada Inc. (formerly known as Money Concepts Group Capital Corp.), becoming a member of the AEGON Group.

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Russell launch 3 LifePoints portfolios

(July 26, 2005) Russell Investment Group has announced the launch of three LifePoints Target Date Portfolios in its LifePoints family of multi-manager portfolios. The portfolios have set target dates for when the investor plans to start accessing their money. The three new target dates are 2010, 2020, and 2030.

“An investment solution that requires just one decision; when will I most likely begin to draw down my investment funds (such as upon retirement), eliminates complexity, which opens the door for action,” said Joe Perrin, president and managing director of Russell Canada.

The three portfolios offer different mixes of equity and fixed income, ranging from a 41-59 split for 2010, to 64-46 for the 2030 target. Each year, the portfolio will become more conservative until it reaches an allocation of 35% equity, 65% fixed income on its target date, and 20% equity / 80% fixed income 20 years later.

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U.S. insiders dumping stock

(July 26, 2005) American insiders are unloading their equity positions, indicating a less-than-optimistic view on the future of share prices, according to BCA Research.

” The massive increase in insider selling in the past quarter is a bearish signal,” the group said in a report, posted to the Bank Credit Analyst website. “It hints that insiders may expect earnings growth to slow in the near future and want to reduce exposure in advance.”

The group predicts that strong earnings reports for S&P 500 member companies will soon peak, heading into a slower growth trend for the coming year.

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Oil prices to hamper world economy

(July 25, 2005) The high price of oil continues to drag on the global economy, limiting output growth to just 3% for the year, according to the Conference Board’s World Outlook — Summer 2005.

“Surging oil prices have cut into global consumer spending, and manufacturers have been forced to cut production and employment due to rising inventories,” said Kip Beckman, Principal Research Associate. “Interest rate increases, intended to limit the inflationary effects of energy prices and a global housing boom in the United States and parts of Europe, are also weakening overall growth.”

The 3% growth rate is expected to persist into 2006, with China and the U.S. doing the lion’s share of the work in keeping the world economy afloat. A global downturn in manufacturing will have its greatest impact in Europe, where real GDP growth seen at just 1.8% this year.

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Basel II costly, benefits questionable: survey

(July 25, 2005) The world’s largest banks are struggling to meet their obligations under the Basel II Framework, despite increasing efforts to live up to the agreement, according to a survey by Accenture.

Basel II sets new standards of risk management and capital adequacy for the world’s financial institutions. The Basel II rules are expected to take effect globally in January 2008. European banks are making more progress than their North American counterparts, with several top bankers questioning the benefits compliance will bring.

“We were expecting more progress than we found over the last 12 months,” said Paul Cartwright, managing partner of the Finance & Performance Management practice in Accenture’s financial services operating group. “On the other hand, we’re seeing a greater focus on moving forward on compliance, especially in North America. That’s good, because the survey indicates that complying with Basel II is more difficult than most bankers thought.”

Ten percent of survey respondents are unsure of what compliance will eventually cost, but 45% say it will be in excess of 50 million euros (about US$60 million). At the same time, 79% of respondents said they expect Basel II to improve their banks’ capital positions only slightly or not at all.

Filed by Advisor Staff

(07/29/05)