Investment Solutions and Other Risk Optimization Strategies (Online Seminar)

Investment Solutions and Other Risk Optimization Strategies (Online Seminar)

Discover how your plan can:

  • Achieve a higher return/benefit for the same level of risk.
  • Maintain the same level of benefits with lower risk.
  • Optimize risk to the benefit of your members.

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The PBI Canadian Pension Solvency Index for the Period Ending June 30, 2017

The PBI Canadian Pension Solvency Index for the Period Ending June 30, 2017

iStock_000009294197XSmall-Investment-Opportunity-Research-300x199

The PBI Canadian Pension Solvency Index illustrates the development of solvency positions for a sample pension plan.

Canada’s GDP rose an annualized 3.7% during the first quarter of the year with strong growth in consumption, residential construction, inventories and fixed investment, which outweighed negative net exports.  Canada continues to lead the G7 countries in GDP growth since the 2008 credit crisis as Canada’s recovery continues, with growth broadening across regions and sectors.  As the economy approaches full capacity, the Bank of Canada (BoC) has been more optimistic in its outlook, causing it to raise interest rates from 0.50% to 0.75%, which was expected by the market.  The BoC now expects economic growth to be 2.8% for 2017 (up from 2.6% in April and 2.1% in January), 2.0% for 2018 (from 1.9%) and 1.6% for 2019 (from 1.9%).  On the other hand, the BoC cut its inflation forecast to 1.6% for 2017 (from 1.9%) and 1.8% in 2018 (from 2.0%).  Any future rate hikes will be guided by incoming data and are expected to be gradual over the next couple of years

Since the end of 2013, gains made in a typical pension plan’s solvency have been eroded by the combination of lower yields, lower capital market returns and the adoption of the CPM 2014 mortality table.  Since reaching a cycle high of 108% funded status in March 2014, the Pension Solvency Index declined in almost every successive quarter to a low of 87% funded status in February 2016.  Since then, pension plans’ funded ratios have improved once again, beginning a reversal of the erosion experienced since 2014.  At the end of June 2017, the PBI Canadian Pension Solvency Index has risen to 98%, up from 90% where it was a year ago.

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The PBI Canadian Pension Solvency Index for the Period Ending June 30, 2017

The PBI Canadian Pension Solvency Index for the Period Ending March 31, 2017

The PBI Canadian Pension Solvency Index for the Period Ending March 31, 2017

iStock_000009294197XSmall-Investment-Opportunity-Research-300x199

The PBI Canadian Pension Solvency Index illustrates the development of solvency positions for a sample pension plan.

Canada’s GDP during the fourth quarter of 2016 grew at an annualized 2.6% following last quarter’s strong 3.8% growth.  Canadian GDP growth only started to slow down as oil prices started declining in 2014.  In fact, 2015 and 2016 were the only two years since the credit crisis where Canadian GDP growth was outpaced by the United States due to plummeting oil prices and the brief disruption in oil production due to the Fort McMurray wildfires.  Although there may seem to be concerns about the future of the Canadian economy, Canada continues to lead the G7 countries in GDP growth since the 2008 credit crisis.  Most of the contribution to GDP during Q4 was driven by net exports and consumption.

The Bank of Canada’s latest announcement in March provided a darker side on economic data as exports remain challenged with uneven export growth (uncertainty from possible U.S. trade policies), the temporary CPI increase in January, and continued weak earnings growth despite an increase in total jobs.  As a result, Bank of Canada Governor Poloz has kept the interest rate unchanged at 0.5% as Canada isn’t “out of the woods” yet and that the recovery following the past two years has been modest.  The Bank of Canada has since updated its outlook for 2017 with economic growth at 2.6% (up from 2.1% in January), 1.9% for 2018 (down from 2.1%) and 1.8% for 2019.

Since the end of 2013, gains made in a typical pension plan’s solvency have been eroded by the combination of lower yields and the adoption of the CPM 2014 mortality table.  Since reaching a cycle high of 108% funded status in March 2014, the Pension Solvency Index has declined to a low of 87% funded status in February 2016.  At the end of March 2017, the PBI Canadian Pension Solvency Index has risen to 105%, up from 99% at the end of December 2016.

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The PBI Canadian Pension Solvency Index for the Period Ending March 31, 2017

Charles Manty’s Article on Private Investments Published in Benefits Canada

Charles Manty’s Article on Private Investments Published in Benefits Canada

Benefits Canada Magazine

Sounding Board: Holy grail of higher returns comes with a catch

Article written by Charles Manty, Investment Consultant at PBI Actuarial Consultants Ltd., published in Benefits Canada.

Extract

Investors have seen fixed-income yields pushed lower as central banks venture into uncharted policy waters. Meanwhile, equities are once again vacillating in the face of multiple economic headwinds, following years of barely a rest on their march to ever-greater heights from their 2008-09 nadir.

In response to decreasing yields and increasing volatility, institutional investors continue to reduce their holdings of traditional fixed-income and equity assets in favour of private investments that promise the holy grail of higher returns and lower volatility. But the holy grail comes with a catch.

Private investments (whether debt, equity or real assets) usually have base management fees of between one and two per cent. With few exceptions, private investments also charge a performance fee — also known as carried interest — that often includes a nasty thing called a catch-up provision. All of these fees contrast with traditional actively managed fixed-income and equity investments that generally have base management fees that rarely exceed 0.8 per cent. With so many components to the fees for private investments, it’s often difficult to realize how much they’re biting off of returns.

Please click on the link above to view the article.

The PBI Canadian Pension Solvency Index for the Period Ending December 31, 2016

The PBI Canadian Pension Solvency Index for the Period Ending December 31, 2016

iStock_000009294197XSmall-Investment-Opportunity-Research-300x199

The PBI Canadian Pension Solvency Index illustrates the development of solvency positions for a sample pension plan.

Canada’s GDP rose an annualized 3.5% in Q3 driven by net exports, consumption and inventories, following a 1.3% decline in Q2.  While a quarter of Canada’s oil production was temporarily halted in Q2 due to the Fort McMurray wildfires, oil production resumed in Q3 and this led to a surge in exports.  Canada is expected to further rebound with positive GDP growth in Q4.  The Bank of Canada has revised its outlook for Canada’s growth to 1.3% for 2016 and 2.1% for 2017, down from April’s projections of 1.7% and 2.4%, respectively.  Although oil prices have risen from the lows reached in early 2016, the viability of many energy-related companies continue to be challenged.

Gains made in a typical pension plan’s solvency since mid-2013 have been eroded by the combination of lower yields, negative capital market returns and the adoption of the CPM 2014 mortality table.  Since reaching a cycle high of 108% funded status in March 2014, the Pension Solvency Index has declined in almost every successive quarter.  At the end of December 2016, the PBI Canadian Pension Solvency Index stands at 99%, up from 90% at the end of September 2016.

Download the PDF:

The PBI Canadian Pension Solvency Index for the Period Ending December 31, 2016

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