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CPP Investment head says governments needing money should look at selling off infrastructure – The Globe and Mail

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CPPIB CEO Mark Machin speaks in Calgary on March 8, 2020.

Randy Risling/The Globe and Mail

The head of the Canada Pension Plan Investment Board says cash-strapped governments around the world should put airports, toll roads, utilities and other infrastructure up for sale to ease their current financial pains.

“There’s so much capital chasing private assets that if governments want to raise money, they’ll get incredible prices for infrastructure assets – operating and revenue-producing infrastructure assets – wherever you are in the world,” chief executive officer Mark Machin said Thursday in a meeting with Globe and Mail editors and reporters. “Just a ton of capital will go for it.”

Mr. Machin’s view, of course, is not a disinterested one: The CPPIB is one of the world’s biggest investors in private assets, such as infrastructure and real estate. At Sept. 30, the CPPIB had $37-billion invested globally in infrastructure, plus another $60-billion in real estate and energy assets.

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There is room for more. “We’d be delighted to compete for it,” Mr. Machin said – even as he conceded the competition makes that more difficult.

As interests rates have fallen, stayed low and then fallen again, all sorts of investors have piled into private assets, seeking better returns. Increasingly, Mr. Machin says, infrastructure is replacing fixed income or bonds in some portfolios because it has some similar characteristics, such as long-term income generation with less volatility than some other investments.

“It’s causing this enormous amount of money around the world to go to all of these areas,” he said. “And it makes it hard to find opportunities that offer sufficient returns for us.”

The CPPIB reported its results for the quarter ended Sept. 30 earlier this week, reporting a 5-per-cent return in the three-month period. While publicly traded stocks are the largest component of the portfolio, they make up less than one-third of the total pie. The CPPIB’s heavy reliance on private assets means it can outperform the stock market when it drops sharply, as it did in the March 31 quarter, but also means it lags considerably when equities zoom, as they did in the three months ended June 30.

Mr. Machin said that the CPPIB wasn’t heavily invested in certain areas that have borne a particular brunt of the COVID-19 economic decline. The pension fund’s real estate group has never cared for hotels or casinos, he said, and the fund also hasn’t invested much in movie theatres or airlines. While CPPIB loves airports, it keeps getting outbid for them by other institutional investors.

But the CPPIB is invested in theme parks and cruise lines, and earlier this month said it and partner TPG Capital LP put an additional US$500-million into Swiss-based Viking Cruises Ltd., whose business model targets retired customers. People will take cruises again, Mr. Machin says, and Viking will be a survivor.

While there’s a positive outlook reflected in that particular decision, Mr. Machin says the CPPIB doesn’t have an overarching optimism across all its investment calls, and it remains cautious about what happens next.

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“We don’t expect the global economy to be back up at pre-COVID levels until late 2022,” Mr. Machin said. “So there’s a long recovery here. And when we’re stress-testing individual companies, we’re not predicting a rosy outlook. There’s going to be troubled times through to 2022 and potentially beyond.”

During COVID, the CPPIB has benefited from investments in data centres, logistics and e-commerce – “a move to digital has been accelerated by five to 10 years,” he says.

And, “we will invest in things that are part of the rebuilding of economies. So things like the greening of the economy, continued investments in renewable energy. I think people want to build back better, as is the tagline right now.”

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Feedback Isn’t Just A Gift-It’s An Investment – Forbes

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It’s often said that feedback is a gift. But the truth is—feedback is an investment.

A colleague and I recently received feedback from a client about a session we had facilitated that did not meet their expectations. The client reported that participants were not adequately engaged by the content and that we didn’t leave enough room for discussion. They even complained about our choice of closing music. (I guess not everyone appreciates Kelly Clarkson.)  The feedback was thoughtfully delivered, but it still hit hard. I took a few deep breaths, thanked the client and discussed how to improve the next session. My colleague and I incorporated the feedback into our next workshop plan, and they loved it. Their critical feedback was key to our success. 

If someone cares enough about you to give you feedback, it is a sign that they care about the relationship. Our client was able to deliver important critical feedback to us because we had built a foundation of trust. We had been working with them for more than a year, conducting workshops, having frequent calls, getting to know one another as professionals and as human beings. We had also invested in the relationship in big and small ways. This meant that when we stumbled, our client did not see us as just another vendor who could be easily replaced. Instead, they came to us and shared their concerns. And though the feedback was a bit painful, it helped us grow and strengthen the relationship. 

For many people, the investment of giving critical feedback feels risky.  A 2017 study of managers, whose job it is to give feedback, found that 44% report discomfort giving negative feedback and 21% avoid it. Why? In my experience conducting feedback trainings, many professionals express fear that they will encounter defensiveness, worry that the feedback will damage the relationship, and hopelessness about people’s ability to change. These perceived risks are a lot to overcome.

So if someone who is not required to give you feedback takes the risk of offering you what Warren Buffet calls the “very expensive gift” of honesty and gives you critical feedback, they are signaling that (1) the issue matters to them, (2) the relationship matters to them, and (3) they believe—or at least hope—that improvement is possible. That is good news.

Getting critical feedback stings. When someone tells you that something you did harmed them or bugged them or didn’t work for them, it is natural to feel embarrassed, hurt or defensive. But there is something even worse than getting critical feedback about a blind spot: when someone withholds important feedback, denying you the opportunity to learn, improve and repair. So the next time someone gives you critical feedback, even if it stings, remember that it signals that they are investing some of their personal capital in you. Really listen with curiosity. How can you make their investment pay off for both of you?

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Investment regulator accuses Gary Ng of fraud – The Globe and Mail

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The former owner of Vancouver-based investment bank PI Financial Corp. is facing accusations of fraud after allegedly falsifying documents and creating fake brokerage accounts to borrow approximately $172-million, part of which he used to purchase PI Financial.

Gary Ng, co-founder of Winnipeg-based broker Chippingham Financial Group Ltd., acquired PI Financial for $100-million in 2018 through a personal holding company. He financed the all-cash deal with a pair of loans – worth $80-million and $20-million – that were supposedly secured against assets he claimed he held in his own investment accounts. He borrowed an additional $72-million in 2019 and 2020 for separate deals.

According to a statement of allegations filed by the Investment Industry Regulatory Organization ahead of a disciplinary hearing, Mr. Ng greatly inflated his net worth to fool three lenders: an unnamed U.S. “investment firm,” an unnamed Canadian “asset management firm,” and an unnamed Canadian “private company.”

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He altered documents to put his name on corporate client accounts that he did not own and created other fake accounts and account balances, which were used as collateral for the loans, IIROC alleges. Mr. Ng’s business partner Donald Metcalfe assisted in the ruse, IIROC alleges.

At one point, Mr. Ng e-mailed an account balance to a lender that purported to show $90-million worth of marketable securities. In reality there was only $4 in the account, IIROC alleges.

“Mr. Ng and Metcalfe perpetrated a fraudulent scheme by deceiving lenders into providing them with millions of dollars in loans in reliance on falsified and fictitious documentation purportedly evidencing substantial financial assets as security when this was not true,” IIROC said in the statement of allegations.

When reached by phone, Mr. Ng declined to comment. The Globe was unable to reach Mr. Metcalfe for comment.

The IIROC hearing against Mr. Ng and Mr. Metcalfe is scheduled to begin in January. The pair face fines of up to $5-million per offence and a permanent ban from participation in the Canadian securities market, among other potential penalties. The allegations have not been proven.

PI Financial, a mid-sized investment bank with more than 300 employees, is no longer owned by Mr. Ng. In July the company announced that its ownership was being transferred to a joint venture controlled by H.I.G. Capital and RCM Capital Management. The company did not give any explanation for the sale at the time.

IIROC says that PI Financial reported Mr. Ng and Mr. Metcalfe’s fraudulent behaviour after becoming aware of it in late January, 2020.

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“We identified unusual correspondence during an unrelated document request,” PI Financial said in a statement about the allegations.

“[We] immediately alerted our regulators, and have been co-operating with IIROC on its investigation. None of the alleged misconduct was related to the firm’s capital or client accounts, and throughout this entire period we have been serving our clients as usual – there has been no impact on our operations whatsoever,” the firm said.

Mr. Ng and Mr. Metcalfe, who served as chairman and vice-chairman of PI Financial, respectively, resigned from the company in February. Both have since failed to show up for scheduled interviews with IIROC and face additional counts of failing to co-operate with investigators.

Over the past several years, 36-year-old Mr. Ng had presented himself to investors and the media as a financial prodigy. As IIROC puts it: “[he] represented himself to others as an extremely successful businessperson who created enormous personal wealth through highly successful technology, real estate and manufacturing investments in Canada and China.”

Mr. Ng co-founded Chippingham Financial in Winnipeg in 2012. In 2018, he began acquiring other financial services firms through his holding company, Ng Group, including Montreal-based Rothenberg Capital Management Inc. and PI Financial.

During its investigation, IIROC found no evidence that PI Financial clients had suffered losses as a result of the alleged fraud.

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“There has been no suggestion that PI was remiss in its procedures, however, in light of the issues raised in this investigation we undertook a review of our internal controls,” PI said in a statement. “That review concluded that PI’s controls and governance were and are not deficient. We continue to cooperate with regulators in this matter.”

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How To Invest Money Based On Advice From Warren Buffett – Forbes

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How to invest money for beginners can be confusing at best. It’s an important decision with long-term consequences, and everybody seems to have an opinion on the “best” approach. In this article we’ll turn down the noise and listen to the one voice we can trust—Warren Buffett.

Wall Street is noisy. It’s like a craps table in Las Vegas surrounded by conference attendees who have lost count of how many drinks they’ve had.

You’ve got investing apps designed to do one thing—get you to trade. Trade anything. Options, crypto, gold, stocks. They don’t care. As long as you keep trading, the app owners get one step closer to a BDB—a billion-dollar buyout.

You’ve got the media designed to do one thing—get you to watch, listen or click. From pretending that the daily stock market news matters to honking horns or flashing the ticker, they’ll do anything to keep your attention. It keeps the advertising dollars flowing.

You’ve got advisors designed to do one thing—manage your money for a “small” fee. To justify their costs, they’ll create a Rube Goldberg portfolio so complex it makes fluid dynamics seem like child’s play. Add in a little fear-mongering about the next stock market crash, and they’ve convinced you to fork over a percentage of your wealth for the rest of your life.

Warren Buffett on Investing

And then you have Warren Buffett. He eats at McDonalds and drinks Cherry Coke every day. He lives in the same house he bought during the Eisenhower administration. Here’s what he has to say about how both institutions and individuals should invest:

“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.”

This advice is not exactly the kind of thing to make drunken craps players cheer. It’s hard to imagine a stock prognosticator blaring a horn on TV after repeating Mr. Buffett’s advice.

On the other hand, it is the best advice you’ll ever get if your goal is to build wealth. And the good news for new investors is that it’s extremely easy to implement.

Here are a few simple investing strategies that anybody can use to implement Mr. Buffett’s investing advice.

2-Fund Portfolio

In his 2013 letter to Berkshire Hathaway shareholders, Mr. Buffett described how he has advised trustees to manage the money he will leave to his wife: “Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”

As Steve Jobs believed, simplicity is the ultimate sophistication. Investors can implement the above portfolio with just two Vanguard funds:

  • Vanguard 500 Index Fund Admiral Shares (VFIAX)
  • Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX)

3-Fund Portfolio

The one thing missing from the 2-Fund Portfolio is direct exposure to international stocks. Some might argue that such exposure is unnecessary. Most of the companies in the S&P 500 index do business all over the world. For those, like myself, who prefer to have more investment in international markets, the 3-Fund Portfolio is a good option.

It’s a simple asset allocation plan consisting of just three asset classes, U.S. stocks, foreign stocks, and U.S. bonds. This portfolio can easily be implemented with just three mutual funds.

As an example, one could implement this investment plan at Vanguard with the following funds:

  • Vanguard Total Stock Market Index Fund (VTSMX)
  • Vanguard Total International Stock Index Fund (VGTSX)
  • Vanguard Total Bond Market Fund (VBMFX)

You can find an excellent description of this simple investment plan at Bogleheads.org.

Target Date Retirement Funds

A target date retirement fund enables investors to get instant diversification with just one mutual fund. These funds take your contributions and split them among multiple stock and bond mutual funds. In addition, there is no need to rebalance your investments as you get closer to retirement. Target date retirement funds adjust the allocation between stocks and bonds as the investor nears retirement.

These types of funds are readily available in most 401(k) and other workplace retirement accounts. They are not all created equal, however. Some cost more than others, and the investment strategies vary from one fund family to the next. As a result, it’s important to check the expense ratio of the fund before investing.

Final Thoughts on How to Invest

As one gains more investing experience, he or she may choose to move away from the above options. Some like to take a more active role, particularly as they study and learn more.

The above options, however, are an excellent way to get started as an investor. And these strategies will also serve well those that chose to stick with them over a lifetime of investing.

There is more to investing than just picking a few funds. First, there’s the question of whether to invest in a taxable account or retirement account. And if one chooses a retirement account, there’s still the question of which type of retirement account. There’s also the question of how much to invest and where to open an investment account.

You’ll find these questions covered in detail in this video:

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