Bank of Montreal is reshaping its investment and corporate banking division in a major way by winding down its energy sector coverage outside of its home market.
Going forward the bank’s investment dealer, BMO Nesbitt Burns, will devote its energy sector resources to the Canadian market, employees were told Monday. The move is expected to affect the bank’s long-standing Houston office, and the news comes amid a prolonged slump in the energy sector – particularly for U.S. shale producers.
“We’re allocating our resources to businesses where we are well-positioned from a market share position and to deliver strong returns now and in the future,” BMO said in a statement to the Globe. “As part of these efforts, we’ve made the financial decision for an orderly wind-down of our non-Canadian investment and corporate banking energy business.”
The bank’s energy business, which includes investment banking and corporate lending, will now focus on the Canadian market where BMO said its “competitive positioning is strongest, our financial opportunity is most attractive, and we have a deep and long-standing commitment to supporting clients.”
BMO has a rich history in Houston, having opened its doors there in the early 1960s. Former chief executive Bill Downe, who retired in 2017, spent his early days as a credit analyst and corporate lender in the energy-focused Houston office.
The bank’s American energy business has been known for its acquisitions and divestitures arm, which focused on trading land assets. BMO has also advised on large U.S. deals, including serving as Spectra Energy Corp.’s financial adviser on its $37-billion sale to Enbridge in 2016.
But in recent years the outlook for U.S. energy has shifted dramatically, as the boom supported by shale oil and gas flamed out. Many producers created a bubble by overpaying for shale assets, often with a lot of debt, only to find out many of the wells are not as prolific as once hoped.
At the same time, the outlook for energy prices has taken a hit. Not only has the pandemic altered energy demand, but there has also been an oversupply of oil, which is expected to suppress prices for the near future.
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'It's a worthwhile investment': Council set to vote on $129 million plan to revamp ByWard Market – CTV News Ottawa
While the COVID-19 lockdown has quieted the usually bustling ByWard Market, according to Councillor Mathieu Fleury, that’s not the only reason.
“For an area like the ByWard Market that’s so iconic and so important for our local economy, it’s a worthwhile investment,” says Fleury.
In preparation to one-day welcome visitors back to the market, the Rideau-Vanier councillor says it’s a perfect opportunity to revamp the downtown hotspot.
“The best way the city can support it is in terms of beautification. In terms of renewal. In terms of having one look and feel in the public spaces. The sidewalks, the streets, the street furniture, the lighting, the benches, the trees,” says Fleury.
Council votes Wednesday on a $129 million proposal to revamp the ByWard Market, including the roads and sidewalks.
“When you look at that you say, ‘well, OK that’s a big number’, and it is,” says Fleury. “But it’s really like redoing two main streets. Elgin street was $60 million, so redoing two Elgin streets.”
Restaurateaur John Borsten also serves as a member of the ByWard Market BIA, and says there’s no place in Ottawa worthier of an investment.
“If your family comes to visit you, from Toronto or Montreal or wherever, you’re going to end up in the market,” says Borsten. “It’s just a whole neighbourhood of activity there. You’re connected to the canal, you’re connected to the Rideau Centre and Rideau Street. It’s really the crux of the city there.”
Although the COVID-19 pandemic brought new challenges, Bornsten tells CTV News Ottawa it also highlighted where the market needed to make improvements.
“The amount of support from all angles, from the little stores, to the restaurants. People want to tweak it and they have some issues with parts of it. But far and away it’s got full support, which you never see,” says Borsten.
Fleury maintains this heart of Ottawa is in dire need of a facelift. Council though will decide with a vote Wednesday.
“We really hope to see an entire district where there’s one common look and feel,” says Fleury. “It’s a welcoming space. All storefronts are occupied, and it’s friendly for everyone.”
Borsten adds, “I think it’s going to happen. It’s just a question of how quickly.”
What's a sustainable investment in RRSP season? – NOW Toronto
No industry organization or government in Canada has set a standard for a “sustainable investment.”
Ben185 / iStock / Getty Images Plus
Many Canadians want to invest their retirement savings in environmentally sustainable enterprises.
But according to Vancouver-based Dermot Foley – who spent 17 years as a sustainable investment-portfolio manager and shareholder-advocacy analyst – it’s not always easy for the average person to figure out how to do this.
“It’s not a putdown of people, because we’re all extremely busy,” Foley explains. “We don’t want to spend a lot of time thinking about where our retirement money is being invested, mainly because it’s one more thing in the great juggling act that we all do day to day.”
Moreover, the former Vancity employee said that there’s a broad spectrum of activities that are being described as “sustainable,” depending on the lens that is being applied.
No industry organization or government in Canada has set a standard for a “sustainable investment.”
“Just as an example,” Foley said, “I can imagine the government talking about sustainable oil, you know, or uranium.”
According to him, even tobacco companies or weapons manufacturers could, theoretically, obtain a high sustainability rating, depending on their business practices. Then they could be included in a mutual fund that scores well on a chart prepared by a rating agency.
Prior to his retirement last year, Foley said, he became involved in “a little bit of an argument” with people who prepared ratings of investment funds with one well-known agency.
“I looked deeper at the methodology and had a lot of things confirmed as to how they were doing this,” Foley recalled. “It really isn’t about sustainability. It’s more about coming up with a standard for the industry that the industry can live with.”
Sustainable RRSP: Find the right investment advisor
So where does that leave the average retail investor who doesn’t want their money contributing to planetary ruin?
“I think it’s really important to have an investment adviser who understands your concept of sustainability,” he said. “What are you concerned about?”
As for himself, Foley is particularly keen not to invest in the fossil-fuel sector. It’s not just because of the havoc that this industry is causing with rising greenhouse-gas emissions. It’s also because he doesn’t think the industry is sustainable.
“We’re going to see a transition away from fossil fuels, and I would like to help see my limited resources go toward helping that transition, investing in funds that have a substantial number of renewable-energy companies or clean-water companies,” he said.
Back in the early and mid-1990s, Foley was one of Vancouver’s more vocal advocates for addressing climate change.
As a one-term park commissioner and as a case manager with the B.C. Energy Coalition, he frequently spoke out about the need for proper planning to take into account all the social and environmental costs of capital projects.
“I got involved in climate-change debate in the 1990s,” Foley noted.
Back then, the concentration of greenhouse-gas equivalents in the atmosphere was 354 parts per million.
Last October, NASA’s Jet Propulsion Laboratory reported that the concentration of carbon-dioxide equivalents stood at 412 parts per million. That’s 47 per cent higher than the beginning of the Industrial Age and 16.4 per cent higher than 1990, the year Foley was elected to the Vancouver park board.
Climate-related financial disclosures
Since then, concern over the climate has expanded from hardcore environmental activists to the money-management industry.
The Task Force on Climate-related Financial Disclosures, known as TCFD, is pushing for increased corporate reporting in this area. The organization, which is chaired by billionaire Michael Bloomberg, wants money managers to be in a better position to evaluate climate-related risks and opportunities.
Foley pointed out that there are trillions of dollars in institutional investment pools such as the Canada Pension Plan, the B.C. Investment Management Corporation, and other entities around the world.
“Financial-risk disclosure is really important for these much bigger pools of capital,” he said.
That’s because the Canada Pension Plan, for example, has to be able to think on a much longer time horizon than an individual who is investing to save up for a down payment on a home.
In 2020, the Canadian stock market, as a whole, fared much worse than many other markets because the Toronto Stock Exchange is so heavily weighted toward fossil-fuel and banking companies.
“Those areas have lagged a bit,” he said, “whereas the more future-looking companies – the Googles, the Apples, the Microsofts, even Amazon – have done much better.”
Then there’s the electric-vehicle manufacturer Tesla, whose stock rose 695 per cent in 2020, briefly making its CEO, Elon Musk, the richest man in the world.
“The notion of a visionary is, I think, what people are investing in,” Foley said.
A version of this story originally appeared in the Georgia Straight.
Big Investment Firm Bought Up Gold Stocks and Microsoft. Here’s What It Sold. – Barron's
An investment firm owned by a royal family recently made major adjustments in its investment portfolio.
LGT Capital Partners, which is owned by the Princely House of Liechtenstein, bought up gold stocks
(ticker: NEM) and
(MSFT), while selling
(SWI) shares in the fourth quarter. LGT disclosed the trades in a form it filed with the Securities and Exchange Commission.
LGT, which manages $65 billion in assets, didn’t respond to a request for comment on the stock transactions.
LGT bought 340,410 additional shares of Newmont in the fourth quarter to end 2020 with 1.4 million shares.
Newmont stock surged 37.8% in 2020, and so far this year, shares have risen 3.1%. In comparison, the
S&P 500 index,
a measure of the broader market, rose 16.3% last year, and has risen 2.3% year to date.
Newmont is one of Barron’s top stock picks for 2021. “Gold remains a good hedge against ultraloose monetary policies worldwide and possible higher inflation,” we wrote.
The investment firm bought 769,890 more American depositary receipts of South African-based miner AngloGold to end the fourth quarter with 1.9 million ADRs.
AngloGold ADRs managed to eke out a 1.3% gain in 2020. So far this year they are up 2.6%.
In November, AngloGold halted operations at an Argentina mine for 10 days following the detection of Covid-19 cases among its workers. In December, AngloGold said that strong cash-generation will support a sharply higher dividend payment. Also that month, BMO Capital Markets analyst Raj Ray upgraded AngloGold to Outperform from Market Perform. “[W]e see some potential near-term positive catalysts that could drive share price performance,” Ray wrote in a research report.
Microsoft stock surged 41.0% last year, and so far in January it is up 1.6%.
Microsoft has benefited by focusing on the cloud, a move that paid off as the coronavirus pandemic pushed office workers to work from home, creating a critical mass of remote workers. Last week, the software giant announced an investment in
’ (GM) self-driving-car unit Cruise.
LGT bought 299,720 Microsoft shares in the quarter to end 2020 with 1.2 million shares.
The investment firm also sold 90,000 SolarWinds shares to end the year with 430,000 shares of the provider of IT infrastructure management software.
SolarWinds stock crumbled in December after the company disclosed that it was the victim of a cyberattack. Shares ended 2020 with a loss of 19.4%, but they are up 6.6% so far in January.
In January, J.P. Morgan analyst Sterling Auty wrote in a report that SolarWinds stock was “an attractive opportunity” for those tolerant of risk.
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.
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