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How to adapt portfolios in a low-rate world – Investment Executive

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Government bonds provided reliable ballast earlier this year when equity markets tanked in response to the Covid-19 pandemic. Government of Canada seven- to 10-year bonds returned 9.5% in the first three quarters of the year, and long-duration (20+ years) Government of Canada bonds returned almost 20%, according to a report from FTSE Russell.

Seven- to 10-year U.S. Treasuries returned 11.5% as of Sept. 30, while long Treasuries returned 20.8% (in USD).

“It’s going to be really hard to extrapolate that going beyond this,” Taylor said, since he doesn’t see North America moving to negative rates anytime soon.

Phil Mesman, head of fixed income with Picton Mahoney Asset Management in Toronto, said strategies need to shift now, even though the 40% fixed income part of portfolios served investors well this year.

Replicating the benefit from government bonds this year would require a -10 basis point U.S. Treasury yield, he said.

“All of the backward numbers look great in fixed income,” Mesman said. “The typical advisor portfolio looks amazing but, at current yields and current duration, it makes sense to be a little more creative.”

Taylor said investors can look to investment-grade corporate bonds to find yield through active management. Beyond that, he said investors will have to consider alternative strategies such as options writing and private debt, as well as hard assets such as real estate, infrastructure and precious metals.

“We think there’s going to be a rework of the traditional 60-40 portfolio,” he said.

Mesman said he’s focused on long and short opportunities in developed-market BBB- to B-grade bonds.

The Federal Reserve’s willingness to purchase corporate bonds has made the market more expensive and masked credit risk, he said. This has created opportunities on the short side to both protect the portfolio and provide alpha in cases “where the real economy’s impact on financial assets has yet to be felt,” he said.

Jonathan Hausman, managing director and head of global strategic relationships with the Ontario Teachers’ Pension Plan, warned about the risks of wading into high-yield credit.

“That works until it doesn’t,” he said earlier this month on a panel at the Global Risk Institute’s summit.

Rating agency Moody’s warned investors this week that a record number of companies are in danger of slipping from investment grade to junk territory due to the uneven economic recovery.

Speaking on a webinar earlier this month, FTSE Russell director of fixed income research Robin Marshall also expressed concerns about a “high-yield value trap.” Canadian credit spreads were wider during the economic downturn in 2015-16 than they are now, he said — a “conundrum” given the depth of recession investors are now facing.

High-yield valuations have moved to “demanding” levels relative to current default risks, he said.

Hausman also pointed to strategies such as infrastructure and real assets to provide protection as well as some return on the fixed income side, which is hard to come by.

“That requires some creativity,” he said, “but not much creativity because that’s how folks get into trouble.”

A report from Richardson GMP this month also warned against relying on government bonds and made the case for long-short credit strategies. It pointed to Japanese and German bonds, which started the year with lower yields and “provided nearly no ballast at all” in March.

“With the U.S. and Canada yields now at similarly low starting points, it is unlikely that they can provide anywhere near the same historical hedging properties as in previous downturns,” the report said.

Rather than diving into lower-quality assets to find yield, the report recommended long-short strategies for investment-grade credit.

Mesman also warned about duration risk on government bonds.

“I think the risk of government bond yields going higher, particularly in the long end of the market — longer-dated government bond yields — that’s something that’s underappreciated,” he said.

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Sooke poet publishes narrative poems – an investment in life's third chapter – Vancouver Island Free Daily – vancouverislandfreedaily.com

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It started with a bookmark from the Sooke Writer’s Collective at the local library.

“Interested in being part of a writing group?” it asked. Clare Winstanley was, so she called the number on the bookmark and has been a member ever since.

Winstanley has written poetry her whole life, but only since joining the group did she share them. Mid-pandemic, the poets of the collective decided to self-publish a chapbook. Winstanley contributed poetry and illustrations and enjoyed the whole thing so much she decided to do a solo project.

Bits of String and Thread: a tapestry of poemsis a collection of 17 narrative poems, drawings and photographs the semi-retired tutor self-published this summer.

As writing has taken centre stage in her life – she’s working on a novel right now – Winstanley wants to tell other adults to revisit the hobbies of their youth.

“As we mature, and perhaps finished taking care of families, perhaps a money-earning career becomes less central, we can invest in the second or third chapters of our lives and pick up things we had given up,” she said.

“It’s time to go back now and complete the things you started when you were younger.”

ALSO READ: Award winners revealed for Sooke Fine Arts Show

She said that her poems are layered with history, often going back in time, and they’re best read aloud.

“My aim as a poet is to create an effect with the sound of the words.”

Winstanley will read a selection of her poetry on Aug. 27 at 6 p.m. at the Sooke Arts Council Gallery at the corner of Church and Sooke roads. It’s a free event and can accommodate up to 25 people. The book is available for $15 at the gallery or through her website cemwinstanley.com .


Do you have a story tip? Email: zoe.ducklow@blackpress.ca

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Ontario’s investment in improving school air quality provides benefits beyond pandemic, experts say – Global News

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In the wake of the Ontario government adding millions in funding for schools to help ventilate air better, experts say the focus shouldn’t be on whether the money is enough but rather that this be a long-term investment for the future beyond COVID-19.

Ontario Education Minister Stephen Lecce announced $25 million will be put toward adding approximately 20,000 new standalone high-efficiency particulate air (HEPA) filters to the approximately 50,000 devices currently used in areas such as classrooms, gyms, libraries and other instructional spaces without mechanical ventilation.

So far, the government has committed more than $600 million to date for ventilation improvements across Ontario schools.

Read more:
Ontario’s education minister says more money for ventilation, HEPA filters coming by 1st day of school

Schools with mechanical ventilation are expected to use the highest-grade filters possible and turn their systems on at least two hours before school starts, and schools without are expected to have standalone HEPA filter units in all classrooms.

Jeffrey Siegel, a professor in the department of civil and mineral engineering at the University of Toronto, told Global News on Wednesday that while the filters and improving ventilation systems will help in the fight against COVID-19, schools need more guidance than the government is putting out there.

“There are a lot of good words in the document but there’s also not a lot of detail, a lot of specifics,” he said. “Every school is a little different so there needs to be not just resources … but there also has to be information.”

Martin Luymes, VP of government and stakeholder relations for the Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI), told Global News that portable HEPA units are an “appropriate solution” in the situations where classrooms don’t have fresh air circulation, such as older schools where the only form of ventilation would be to open windows.

“You will have a range of schools … for those that are 100 years old … those are environments where a HEPA filter or standalone filter might be a good solution or partial solution,” Luymes said, adding schools should know to hire professionals — engineers or HVAC contractors who are familiar with the installation process because it is not a “do-it-yourself system.”

Read more:
Ontario’s back-to-school plan encouraging, but lacks vaccine policy: experts

Both men agreed however that things like HEPA filters are only part of the solution and that they are part of what they said should be a layered approach in regard to school safety.

“Any measures that are installed that involve air movement and air control and filtration are supplemental to measures including distancing, hand washing and all the other controls that have been introduced over the last year and a half,” Luymes said.

While Siegel argued there are things such as masking that are an even more important “layer” than filters.

“We need lots of different layers between an infected individual and an unaffected one so certainly things like filters are a good layer … but there are other things that are probably even more important – masks are a fantastic layer to reduce transmission, physical distancing. And I don’t just mean keeping people a little apart from each other but looking at the whole picture of how students and staff move through the school,” he said, highlighting students moving between classrooms and gym classes where breathing becomes more intense.

For Siegel, another potential shortcoming in the plan is where the resources are being targeted, saying they should go to where they will have the most benefit — to areas of society where health disparities have been exposed in the pandemic.

“It would make the most sense to invest the resources into those schools, to help correct that disparity.”

Siegel also pointed to looking beyond the announced $25 million on Wednesday and focus on how improving the ventilation systems in all schools contributes to the success of students’ futures and health beyond COVID.

If the HEPA filter is sized appropriately for the location it is placed — meaning it produces enough clean air for the space — then Spiegel said there will “absolutely” be a reduction in the risk of COVID-19.


Click to play video: 'Ontario investing $25 million additional funding for ventilation filters for schools, Lecce says'



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Ontario investing $25 million additional funding for ventilation filters for schools, Lecce says


Ontario investing $25 million additional funding for ventilation filters for schools, Lecce says

However, Siegel said regardless of whether the filter helps to decrease the transmission of infectious diseases, improving air quality comes with a long list of other, long-term benefits for staff but also students, in particular.

“In a school, those benefits are things like improved performance on standardized tests, better cognitive performance, lower absenteeism for the students, reduced asthma frequency and severity … none of those things are up for debate, those are well-established in science,” Siegel said.

“The way I look at it as is the worst outcome is a pretty good one and I think we’re also going to do something about the infectious disease risk,” he continued.

“We always focus on the cost and I get it, there’s a lot of economic pressures right now and $25 million is a big number no matter how you slice it but the other side of it is why don’t we also look at the benefits – reduce absenteeism … avoided healthcare costs – that’s the reason to do this – the benefit is much larger than the investment.”

With files from Gabby Rodrigues and Sean O’Shea

© 2021 Global News, a division of Corus Entertainment Inc.

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5 Downsides of ESG Investing – Wealth Professional

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2. ESG may mean sacrificing returns: lower returns or higher risk

When you limit your investment options and pay more to include your ESG factors, you may give up on some investment return as you narrow the field that can provide you with returns.  Many have written on why this kind of sustainable investing can feel like a money pit because the funds you favor can underperform compared to others that are less socially responsible and perhaps less risky, too.

Take time to do your ESG research and find companies that not only align with your values, but have the best returns, as there may now be more than one option to choose from if you spend time researching upfront before you invest.

3. Slightly higher fees

You may have to pay a little more in management fees for some ESG funds, which can also eat into your earnings. That’s because ESG funds require managers to do research and they’re often working with a smaller asset base, so you may pay more to be in their funds.

But, as one study showed, 66% of people around the globe are willing to pay more for sustainable goods. That number jumped to 73% with millennials. It’s always smart to focus on performance, but if you’re doing your research, you may discount the extra cost knowing that you’re investing in a higher cause.

4. No reporting requirements

While there are different analytic firms that can rate stocks on the socially responsible scale, the biggest pitfall these days in the ESG investment process is that there are no standards or ESG ratings to measure these funds’ performance. So, they can market themselves as good for the environment, but they may not be, and if you start comparing companies, it may feel like apples and oranges. You don’t have a way to tell because there are no reporting requirements and what is self-reported isn’t consistent across industries or companies since there is no universal standard.

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