Canadian pension fund giant Caisse de dépôt et placement du Québec has seen a loss on its investments for the first time since the financial crisis more than a decade ago, hit largely by its exposure to shopping centres amid the coronavirus crisis. Its chief executive sees more pain ahead.
The Montreal-based institution, Canada’s second-biggest pension fund, on Friday disclosed a negative return of 2.3 per cent for the first half of the year – its first decline since the $40-billion, 26-per-cent loss of 2008. Net assets fell to $333-billion at the end of June from $340-billion at the end of December.
In the months to come, the Caisse said it would speed up a pivot to more promising real estate holdings and boost investments in technology companies, in which the pension fund has been underinvested of late. It is also writing down to zero the US$170-million invested in Cirque du Soleil since 2015, but declined to say whether it could come back with partners and make an offer for the insolvent company.
“This is a historic crisis that is not done yet,” Caisse CEO Charles Emond told reporters on a conference call. “We have difficult months ahead of us. We are hoping for the best but we are ready for the worst and for any situation.
“The markets will remain difficult to predict. We will have to be prudent, rigorous, selective because the next year will be difficult given this economic crisis that is going on and we are not immune to it. If it lasts, good companies could go under.”
The results highlight the scope of the challenge ahead for Mr. Emond, a former Bank of Nova Scotia executive who took over as CEO of the pension-fund manager in early February as global stock markets were climbing to record highs. The coronavirus pandemic has altered the picture completely since, creating deep problems in many sectors of the global economy even as it opens up private-equity buying opportunities.
Exceptional central-bank monetary policies coupled with historic government assistance programs have prevented the recession from becoming a depression, but there is a growing dichotomy between the real economy and financial markets, Mr. Emond said. The pandemic has accelerated certain trends that were already under way, particularly in technology and retail, he said.
Trouble in the Caisse’s shopping-centre investments, intensified by the COVID-19 pandemic as many malls were shut down, contributed to an 11.7-per-cent loss for the real estate portfolio, the pension fund said in a statement Friday. The Caisse said it would speed up plans for each of those assets and shift resources to other market segments, such as warehousing and logistics. The bulk of its shopping centres are in Canada, including Vaughan Mills in the Toronto region and Market Mall in Calgary.
Like other major real estate players, the Caisse’s Ivanhoé Cambridge property arm is facing an extraordinary economic crisis, with malls suffering and the future of office towers coming into question as tech giants such as Shopify and Twitter embrace permanent work-from-home arrangements. Ivanhoé head Nathalie Palladitcheff is trying to whittle down the company’s stake in malls, but she told The Globe and Mail in June that she still has faith in office buildings and wants to increase investments in residential and industrial real estate.
Infrastructure, private equity and credit investments were all bright spots for the Caisse in the quarter. The pension fund has sufficient liquidity to meet the needs of its depositors while supporting Quebec companies and investing opportunistically, Mr. Emond said. He said the pension fund came into the coronavirus crisis with a “defensive position.”
It might have been too defensive. The Caisse took a major hit in the first half of the year from a loss of 5 per cent in equities, which it pinned on its limited exposure to technology stocks that punched to record highs.
To illustrate the dynamic, shares of the world’s five tech giants – namely Google, Apple, Facebook, Amazon and Microsoft – soared 31.4 per cent during the first half of the year while some 3,000 other stocks tracked by the MSCI All Country World Index fell by a combined 4.8 per cent, the Caisse said. The five companies together now make up about 20 per cent of the S&P 500 index, a concentration not seen since the 1990s, it said.
“Caisse analysts are used to evaluating companies based on historical modelling, weighing things like past cash flow,” said Michel Nadeau, a former vice-president at the pension fund who now works for Montreal’s Institute for Governance. “Now they’re going to have to make a leap of faith. When these companies are such huge fixtures in the index, it’s hard to say ‘I won’t [own them].’ “
Given the tech sector’s increasing economic importance, the Caisse has to “look at it through a new lens, open our minds,” Mr. Emond said.
The Caisse, which operates under a dual mandate to generate returns and contribute to Quebec’s economic development, in March created a $4-billion fund to help Quebec businesses affected by the COVID-19 pandemic. The aid includes loans and lines of credit. About 45 per cent of the funds have already been allocated, the pension fund said Friday.
The pension fund was a 20-per-cent owner in Cirque du Soleil, which filed for bankruptcy protection in late June. A court-supervised process to sell Cirque is now under way, with a credit bid worth about US$1.2-billion from the company’s lenders approved by the court as the offer to beat.
To succeed in the future, Cirque needs “a strategic operator” among its owners in order to reinvent itself as well as a reasonable level of debt, Mr. Emond said. Whether the Caisse puts more money in play and makes a bid for the company will depend on how things unfold, he said.
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Manulife Investment Management earns top scores from United Nations-supported Principles for Responsible Investment – Canada NewsWire
C$ unless otherwise stated
TSX/NYSE/PSE: MFC SEHK: 945
An A+ was awarded for the strategy and governance, listed equity incorporation, and fixed-income SSA modules
TORONTO, Sept. 18, 2020 /CNW/ – Manulife Investment Management announced today that it has been recognized with top scores from the United Nations-supported Principles for Responsible Investment (PRI) annual assessment report. For the second year in a row, Manulife Investment Management received a score of A+ for strategy and governance from the PRI for integrating environmental, social, and governance (ESG) considerations into investment practices across a range of asset classes. An A+ was also awarded in the listed equity and fixed-income sovereign, supranational, and agency (SSA) integration modules.
Other notable achievements included:
- Manulife Investment Management’s public markets received an A in all other direct investment and active ownership PRI modules for which it was assessed. Other modules covered its investments in corporate bonds and securitized debt. Manulife Investment Management saw notable increases in its scores as compared to 2018 in areas such as: communications regarding ESG screens, and integration and implementation of analysis of the ESG information for internally managed listed equity holdings. There was also improvement in the number of companies engaged with and the intensity of engagement and effort. Similarly, for fixed income, Manulife Investment Management saw improvements in the integration and implementation of the ESG issues reviewed and its disclosure of approach with the public. For securitized, an outcome of either financial/ESG performance was also noted as an additional assessment indicator.
- Manulife Investment Management’s private markets continued to be recognized as a leader with real estate receiving an A for the third consecutive year under the property module. In addition, Manulife Investment Management demonstrated its commitment to sustainable investing within private markets by expanding the scope of the assessment in 2019 to include submissions for infrastructure and private equity, achieving a B in each respective module.
“Manulife Investment Management strives to be a leader in ESG investment practices as a responsible steward of client capital,” said Christopher P. Conkey, CFA, global head of public markets, Manulife Investment Management. “We are very proud of our investment teams for achieving an A+ for ESG strategy and governance for the second year in a row and for earning superior marks in the screening, integration, and engagements modules for listed equities and in direct fixed-income SSA. This is not only important for our clients who entrust us to implement ESG for specific portfolio goals, but also for the overall relevance of our strategies as we look to the future of investment management.”
“Sustainability is one of the keys to creating long-term value for our clients within private markets,” added Stephen J. Blewitt, global head of private markets. “It is important for us to consider sustainability because we’re generally long-term investors across a diverse range of private markets asset classes and submitting to the PRI is an opportunity for us to demonstrate transparency while tracking our progress. It is rewarding for the work we have done to be recognized.”
The key activities within Manulife Investment Management’s investment teams in 2019, which helped to achieve the PRI scores include:
- The release of its inaugural sustainable and responsible investment report in 2019.
- Increased integration in industry analysis, sovereign analysis, and securitized fixed income. Manulife Investment Management developed a proprietary sovereign ESG assessment model in 2019, which is currently in use by its investment teams as an input into credit analysis. The model produces sovereign-specific baseline views on ESG issues.
- The use of scenario analysis—a key tool for companies in demonstrating planning for climate change.
- Engagement with 724 companies in 940 separate engagements across all investment teams. In 2019, 26% of engagements had an environmental factor focus, 20% had a social factor focus, and 54% had a governance factor focus.
For more information on Manulife Investment Management, please visit manulifeim.com/institutional
About Manulife Investment Management
Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship and the full resources of our parent company to serve individuals, institutions, and retirement plan members worldwide. Headquartered in Toronto, our leading capabilities in public and private markets are strengthened by an investment footprint that spans 17 countries and territories. We complement these capabilities by providing access to a network of unaffiliated asset managers from around the world. We’re committed to investing responsibly across our businesses. We develop innovative global frameworks for sustainable investing, collaboratively engage with companies in our securities portfolios, and maintain a high standard of stewardship where we own and operate assets, and we believe in supporting financial well-being through our workplace retirement plans. Today, plan sponsors around the world rely on our retirement plan administration and investment expertise to help their employees plan for, save for, and live a better retirement.
As of June 30, 2020, Manulife Investment Management had CAD$900 billion (US$660 billion) in assets under management and administration. Not all offerings are available in all jurisdictions. For additional information, please visit manulifeim.com.
SOURCE Manulife Investment Management
For further information: Media contacts: Brooke Tucker-Reid, Manulife Investment Management Canada, 647-528-9601, [email protected]; Elizabeth Bartlett, Manulife Investment Management US and Europe, 857-210-2286, [email protected]; Carl Wong, Manulife Investment Management Asia, 852-2510-3180, [email protected]
Rural communities receiving money for job creation and investment – AM800 (iHeartRadio)
Rural communities are getting almost $1 million in cost-share funding to diversify their economies, retain skilled workers and create jobs.
Details about the funding were released by Ernie Hardeman, Minister of Agriculture, Food and Rural Affairs, in Leamington on Friday.
A portion of the funding will go towards the revitalization of downtown Leamington.
The money is being provided through a new targeted intake of the Rural Economic Development program (RED).
“This funding will focus on diversifying regional economies and improving the competitiveness of rural businesses across the province,” said Minister Hardeman. “Due to the COVID-19 crisis many people are struggling, and this funding will support job creation and investment to help lift up individuals, families and businesses.”
The intake is directed at not-for-profit organizations with a mandate towards regional economic development and eligible projects would be eligible for up to 70 per cent of total costs to a maximum of $75,000 in provincial funding.
Minister Hardeman also announced more than $3 million in funding cost-shared with applicants to be invested in 65 projects through a previous RED intake.
This funding will support economic development efforts such as:
Capital improvements to enhance an uptown arts and cultural hub to increase tourism;
Implementing new and accessible streetscaping to develop a more inviting downtown;
Waterfront development to expand and revitalize local trails.
“I am very pleased to see our government stepping up to the plate, now more than ever, to help rural Ontario,” said Chatham-Kent-Leamington MPP Rick Nicholls.”Assisting in the revitalization of downtown Leamington and supporting not-for-profit organizations are key to helping the region on its road to economic recovery.”
Leamington Mayor Hilda MacDonald says they are thankful for the funding to help complete key infrastructure projects.
“The John Street Centennial Park and Shotton Parkette upgrades are just two projects in a series of initiatives we are undertaking to reinvent public spaces and attract renewed interest and investment into Leamington’s uptown core,” said MacDonald.
Applications will be accepted from Sept. 21 – Oct. 9, 2020
UTAM looks under the hood at investment managers' ESG approaches – Benefits Canada
With a team of about 30 people, the University of Toronto Asset Management Corp. managed more than $11 billion of the university’s endowment, pension plan and short-term working capital assets as of the end of 2019.
When the UTAM first looked at responsible investing, it considered what it wanted to accomplish and how to do that, given its small team and the fact that it predominantly invests through funds and not directly, says Daren Smith, the organization’s president and chief investment officer. “How are we going to integrate these considerations as part of our manager selection and monitoring process?”
The UTAM decided to embed responsible investing across the organization and has implemented a comprehensive approach to evaluating managers, which includes a relevant section in its investment due diligence memos. “Of course, we’re going to continue looking at performance, people, process and philosophy, but now we’ve added this additional lens, which is how managers do responsible investing.”
However, Smith notes it can be difficult to look under the hood at a manager’s approach. “The reality is there’s a lot of marketing spin on responsible investing and you really have to get into the weeds many times just to figure out what a manager is actually doing.”
To overcome the challenge on the public equity side, the UTAM is using an existing third-party system that analyzes position-level data to evaluate a manager on ESG metrics based on an ESG data feed from MSCI Inc. It does so by collecting manager holdings at each month-end going back five to 10 years, depending on the length of the track record, and uploading the data into the system.
The system allows the organization to look at a manager’s portfolio characteristics on the environmental, social and governance sides, he says, and then the UTAM uses the data along with other qualitative and quantitative information to evaluate that manager.
“Then we’re also looking for names where there are some perceived issues coming out of the ratings from MSCI,” says Smith, noting the organization tries to be thoughtful about how it talks to managers about these names, particularly where it looks like there are potential ESG considerations.
When it comes to ESG, the UTAM also considers the investment holding period. “Many of the ESG concerns are more long term. So we think that for private equity, ESG considerations would almost always be very relevant. And there are some other strategies that are perhaps more short term in nature; for example, on the hedge fund side, we have some shorter frequency strategies where the holding period might be just a few months as opposed to multiple years, where we think it’s less relevant.”
Getting to know
Job title: President and chief investment officer
Joined UTAM: 2008
Previous role: Partner and director of manager research at Keel Capital, which at the time managed investments for what’s now the Nova Scotia Health Employees’ Pension Plan
What keeps him up at night: Employee mental health and engagement amid the coronavirus crisis
Outside of the office he can be found: Spending time with his children, travelling and playing golf
The organization’s approach for public equity doesn’t work on the private side because it uses data from a provider that doesn’t have the same information available for private assets. For these assets, the UTAM relies on a series of questionnaires and conversations with managers.
“We don’t have a system like we do on the public side for privates, but to some extent, those portfolios tend to be very concentrated and it’s easier to take that one-off approach where you look at individual holdings from prior funds.”
Overall, Smith’s advice for small or mid-sized plan sponsors investing through funds is to start slowly and have good discussions with their boards and investment committees to develop objectives and a game plan. “It could be a multi-year game plan, but it is important to start and to make progress. Things evolve and there is a lot that organizations of our size can do, but it does take time and effort and you do need buy-in from the board or the investment committee.”
Yaelle Gang is editor of the Canadian Investment Review.
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