The evident failure of many government programs to identify promising companies and to provide adequate capital for corporate needs explains the continued search for an effective program.
Several different policy approaches would improve circumstances and make a difference. For example, government programs could promote greater reliance on individual Canadians to identify and invest in promising small companies, placing less weight on bureaucratic decisions. Personal tax credits on the purchases of small-cap shares would encourage investment, offsetting significant related risks. Further, tax-assisted financings have the advantage of flexibility for growing companies, enabling small firms to raise capital at different stages of enterprise growth — in private and public markets, and through secondary rounds of financing as business operations expand and as markets are receptive to financing initiatives.
Finally, a system of personal tax credits, unlike direct grants and loans, is a more effective use of tax expenditures, given the associated multiplier effect on the economy. The hidden value of tax-assisted financing is it acts as a catalyst to cycle equity capital within Canadian communities, as individual investors often focus on familiar small business prospects in local communities. The startup and expansion of local enterprise bring more skilled job opportunities, increased incomes and greater economic vibrancy to communities across the country. Tax-assisted financing also facilitates the clustering of local small enterprise in communities, combining with educational institutions and the available local workforce, to reinforce success.
A second policy approach is to encourage large investment funds, notably pension funds, to invest in Canadian small business. Many large pension funds have been reluctant to invest in small business, private and public equity reflecting credit risk and small-scale investments having relatively high investment costs.
The federal government could mandate federally regulated pension funds to invest a minimum small business investment threshold as a share of total invested assets. This minimum investment threshold could release a significant amount of equity capital to the small business sector, and yet would have a minimal impact on overall portfolio returns for pension beneficiaries. This approach would encourage Canadian pension funds to follow the lead of the superannuation pension funds in Australia that support and contribute importantly to small business investment.
Ian Russell is a partner with Russell Deacon & Co. and past president of the Investment Industry Association of Canada.
Investment funds that are moving to defensive positions, and some that are not – The Globe and Mail
What are we looking for?
ETFs and DIY mutual funds that made notable changes to their defensive-sector exposure over 2022.
The year is off to a great start for equity investors, with most equity indexes posting single-digit gains on a year-to-date basis, perhaps fuelled by investors’ reinvigorated confidence that the world’s central banks have inflation under control. That said, a new economic environment of higher interest rates might prompt some investors to have a look at their sector exposures, perhaps allocating more to defensive sectors for risk-reduction purposes, or to more cyclical sectors if they’re bullish on market prospects. To help identify potential candidates, I thought to analyze funds that have made noticeable moves over the course of last year. To start with, I screened the Morningstar Direct database for Canadian-domiciled equity ETFs and DIY mutual funds for those that have a reasonable track record, denoted by their Morningstar Rating for Funds or “star” rating of three stars or better, implying that the initial universe performed at least as well as category peers.
I then looked at the sector allocations of each fund as they appeared at the end of 2022 and 2021. Specifically, I used Morningstar’s “super-sector” definitions to determine which funds have the largest changes in exposure to defensive sectors. Recall that Morningstar’s classification structure for stocks divides global companies into three “super sectors”: (1) cyclicals, which include basic materials, consumer cyclical, financial services and real estate stocks; (2) defensive, which includes consumer defensive, health care and utilities stocks; and finally (3) sensitive, which includes communications services, energy, industrials and technology companies. I used the change in exposure to the defensive sector over the 2022 calendar year as the sole metric to rank the list of three-star-or-better funds.
What we found
The accompanying table includes 10 funds that have shifted their exposure toward defensive sectors the most, and the 10 funds that have shifted the furthest away from defensive sectors. The table also displays fees, trailing performance, ratings and inception dates. It is worthwhile noting that the three funds that have moved most into defensive sectors (XMTM-T, FCIL-T and IQD-T) are “smart beta” products, which are rules-based in nature and do not follow the discretion of a portfolio manager. Interestingly, the three funds are exposed to quite different factors. Also noted is the fact that several smart beta products that look for exposure to dividends (such as FCUD-T, XHU-T and VIDY-T), have shifted away from defensive sectors, while RBC’s actively managed mutual funds have increased their exposure to defensive sectors.
This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.
Ian Tam, CFA, is director of investment research for Morningstar Canada.
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CPP Investments Anchors New IndoSpace Fund with US$205 Million Investment – Yahoo Canada Finance
MUMBAI, India, Jan. 30, 2023 /CNW/ – Canada Pension Plan Investment Board (CPP Investments) today announced an investment of US$205 million as an anchor investor in IndoSpace‘s new real estate fund. IndoSpace is a leading real estate company in India. The investment marks the first close for IndoSpace Logistics Parks IV (ILP IV), the company’s fourth development vehicle, targeting US$600 million of total equity commitments.
This is the latest venture between CPP Investments and IndoSpace. The first joint venture, IndoSpace Core, was established in 2017 and now owns the largest portfolio of stabilized modern logistics assets in India. CPP Investments has also invested in ILP III. Following the investment in ILP IV, the partnership will exceed US$1 billion in assets.
ILP IV will add an additional 25-30 million square feet to the IndoSpace portfolio, furthering IndoSpace’s leading position in the Indian market. ILP IV will focus on India’s largest logistics real estate markets: Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune. The establishment of ILP IV follows on from the first three development funds, which have a combined total of 56 million square feet of modern logistics real estate in India.
Hari Krishna V, Managing Director, Head of Real Estate India, CPP Investments, said, “Over the past few years, we have made numerous investments in India’s industrial space, where we see strong demand as the manufacturing sector continues to grow and the e-commerce sector matures. We are pleased to be working with our longstanding partner IndoSpace to further capitalize on opportunities in this space and believe this investment will deliver strong risk adjusted returns for CPP contributors and beneficiaries.”
Brian Oravec, Managing Partner and CEO, IndoSpace Capital Asia, said, “We are excited to extend our successful partnership with CPP Investments. CPP Investments’ commitment to ILP IV is a testament to IndoSpace’s leadership in the industrial and logistics real estate space in India. ILP IV will allow us to continue to expand our unique national network to better serve our customers. Industrial and logistics infrastructure is a key enabler of economic growth. To meet India’s aim of becoming a US$5 trillion economy by 2025, IndoSpace is excited to continue to be one of India’s key infrastructure creators.”
About CPP Investments
Canada Pension Plan Investment Board (CPP InvestmentsTM) is a professional investment management organization that manages the Fund in the best interest of the 21 million contributors and beneficiaries of the Canada Pension Plan. To build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As per September 30, 2022, the Fund totalled C$529 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
IndoSpace (www.indospace.in) is the largest investor, developer, and operator of grade A industrial and logistics real estate in India. IndoSpace has the largest national network of 50 logistics parks with 56 million square feet delivered/under development across 10 cities. With India’s largest and most experienced industrial real estate team, IndoSpace continues to lead the development of key logistics infrastructure for India’s economic growth. For more information, visit www.indospace.in and follow us on LinkedIn, Twitter, and Facebook.
SOURCE Canada Pension Plan Investment Board
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/January2023/30/c6051.html
Zacks Investment Ideas feature highlights: Meta Platforms, Alphabet, Snap, Oracle and Global Social Media ETF
For Immediate Release
Chicago, IL – January 30, 2023 – Today, Zacks Investment Ideas feature highlights Meta Platforms META, Alphabet GOOGL, Snap Inc SNAP, Oracle ORCL and Global Social Media ETF SOCL.
TikTok Ban Coming: 3 Stocks That Would Benefit
The Social Media Landscape Is Evolving
The social media landscape has changed dramatically over the past few years with the rapid ascent of the personalized video platform app TikTok. Despite TikTok’s rapid rise, Meta Platforms and Alphabet are still the dominant players. In terms of monthly active users, three Meta platforms make up the top four rankings globally: Facebook (#1), Whatsapp (#3), and Instagram (#4).
Alphabet holds the second spot with its video platform Youtube and TikTok is ranked #6. Even with the continued dominance of existing players like META and GOOGL, stock performance has been lackluster in recent years. The Global Social Media ETF is the most followed social media ETF (note that it does not include TikTok).
What has Led to the Underperformance of Existing Players?
For one, Meta CEO Mark Zuckerberg is paying less attention to his lucrative social media business and instead investing valuable resources in what he sees as the future – the metaverse. Approximately 20% of Meta’s current investments are aimed at this project. While the bold bet has not panned out for Zuckerberg and Meta yet, he plans to stay the course.
The other major factor leading to the underperformance in domestic social media platforms such as Instagram, Youtube, and Snap Inc’s Snap Chat platform is TikTok’s success.
Chinese-based ByteDance launched TikTok in the United States in 2016, and since then, the platform has dominated. The app, which allows users to create and modify short-form videos, has caught on, especially with the younger generation. TikTok’s competitors have noticed. To win eyes back, Instagram has launched “Reels” and Youtube has created “Shorts” –aimed at users who prefer short, customizable videos like Tik Tok.
SnapChat, already in the short video space, has suffered the most from TikTok’s rise.
National Security Concerns
Though TikTok is one of the dominant global social media players and shows little signs of slowing growth – other factors may play a significant role in the social media space moving forward. Concerns are growing that ByteDance is collecting unnecessary personal data on its users and possibly supplying it to the Chinese government (the biggest rival of the U.S.).
Former President Donald Trump attempted to ban TikTok in 2020, but ultimately the app was able to remain active. The Biden administration struck down the potential Trump ban on TikTok but ordered a national security investigation.
A Potential Catalyst for Domestic Social Media Platforms
Even with the failed TikTok bans of the past, momentum is growing for a new possible attempted ban. In the past year, FBI director Christopher Wray, FCC Commissioner Brendan Carr, and Senator Josh Hawley have called for a domestic TikTok ban. Meanwhile, several U.S. colleges have implemented their own bans (via WiFi) amid security concerns.
Tuesday, Josh Hawley announced he would introduce a bill to ban the app. Investors who follow the social media space should keep a close eye on how the efforts to ban the app play out. If the app is ultimately banned, SNAP will benefit the most, along with META and GOOGL. Software giant Oracle, which supports TikTok via its cloud platform, would stand to lose.
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