Briefly: “Capital spending to fall, despite stimulus” and more news

Even with government stimulus, investment in non-residential construction, machinery and equipment is expected to fall 6.6% in 2009, to $237.5 billion, according to StatsCan.

Public sector spending is expected to rise 9.5% to $79.6 billion, but that will be more than offset by a 13.1% reduction in private sector spending. Overall, private capital investment is anticipated to be $157.9 billion for the full year.

Falling commodity prices have cut into exploration and extraction plans, and the oil and gas industry is likely to reduce investment by $44.9 billion, or 26.4%.

Not surprisingly, the largest cutbacks will be in Alberta and British Columbia, as energy companies suspend projects. Total capital investment, both public and private, will fall by 15.3% to $62.5 billion.

The cuts won’t stop there, however. The manufacturing sector, which was struggling under the strong loonie long before the credit crisis hit, will reduce capital investment by 8.5%.

Despite slowing investment in manufacturing, Ontario will see overall capital investment fall just 1.6%, as the government opens its wallet. Public spending in Quebec will keep that province on an even more steady tack, with investment falling just 0.4%.

Nationwide, StatsCan anticipates provincial spending will rise 37.6%, while municipalities will raise their capital investment by 49.8%. The federal government will appear stingy by comparison, with a miserly increase of 12.6%.

Among the biggest investments will be improvements in utilities, transit and ground passenger transportation.

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Claymore offers corporate bond ladder ETF

Claymore Investments has announced the launch of the Claymore 1-5 Yr Laddered Corporate Bond ETF, which will aim to track the DEX 1-5 yr Laddered Corporate Bond Index, less expenses.

“Building a fixed income ladder can be a great investment strategy, but can be difficult for many investors,” said Som Seif, president and CEO of Claymore Investments, Inc. “Given the higher yields that corporate bonds are currently providing relative to government bonds, we believe that the risk/return opportunity of corporate bonds is attractive at this time.”

The firm already offers the Claymore Government Bond Ladder ETF.

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Charities call for public displays of philanthropy

It’s only natural that people may want to tighten their purse strings during tough economic times, focusing on their own household balance sheet. But the world’s most famous philanthropist is urging those who can afford it to continue their charitable giving.

Despite investment losses that shaved 20% off of the Bill & Melinda Gates Foundation, the former Microsoft CEO has announced the foundation will increase its donations.

“Especially in tough times, donors have a responsibility to boldly share their philanthropic story so that their good work can be an inspiration to others,” says Julia Howell, founder of Community Investment Partners, a new strategic philanthropy consulting company.

This call has not fallen on deaf ears in Canada, as TD Bank CEO Ed Clark announced he will donate $3 million of his compensation to charity.

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U.S. consumer confidence reached new low

Americans’ confidence in the economy sank to new lows in February as consumers showed growing fear over staff downsizing and diminishing retirement accounts.

The New York-based Conference Board said today that its Consumer Confidence Index fell to 25 in February from 37.4 last month. The January figure also broke new lows since the index began in 1967. A year ago, the consumer confidence reading was 76.4.

The Present Situation Index, which measures consumers’ assessment of current economic conditions, fell to 21.2 from 29.7 last month. The Expectations Index, indicating consumers’ outlook over the next six months, dropped to 27.5 from 42.5.

“The decline in the Present Situation Index, driven by worsening business conditions and a rapidly deteriorating job market, suggests that overall economic conditions have weakened even further this quarter,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “Looking ahead, increasing concerns about business conditions, employment and earnings have further sapped confidence and driven expectations to their lowest level ever.”

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Investment in direct hedge funds, private equity increases

Pension funds continued to diversify into direct hedge funds and private equity but are allocating significantly less to real estate, according to Watson Wyatt Worldwide.

The consulting firm said it conducted 30% more searches for direct hedge funds in 2008 compared with 2007. And fund-of-hedge-fund mandates fell as a proportion of total hedge fund searches from 44% to 35%. Mandates for single-manager hedge funds now account for roughly two-thirds of searches — long/short equity and multi-strategy are the most popular.

“Diversification using alternatives is now commonplace, but it comes at a price, with large demands on governance budgets and high fees,” said Paul Trickett, European head of investment consulting with Watson Wyatt. “We have seen progress through better-aligned fee structures recently, and more pension funds are now either raising their game by adding to their governance or simplifying their strategy by moving to lower-cost passive solutions.”

According to Watson Wyatt, the number of new private equity mandates given increased by more than 40% in 2008 compared with 2007. This was mainly due to larger funds implementing their diversification strategies directly rather than via fund of funds. As a result, there were more direct allocations than fund-of-fund allocations in 2008.

“The era of cheap and readily available debt combined with rising prices is over and the new world will reward those long-term and selective managers with strong track records of creating value through accelerating the earnings growth of their portfolio companies,” said Craig Baker, global head of manager research with Watson Wyatt.

Last year, U.K. pension funds awarded approximately one-quarter of the number of real estate mandates they did the previous year. According to Watson Wyatt, there was a continuation in the shift away from pure U.K. real estate mandates to those including overseas allocations.

(02/25/09)