Connect with us

Investment

Hutchins Roundup: Small businesses, foreign investment, and more – Brookings Institution

Published

 on


Studies in this week’s Hutchins Roundup find nearly 40% of small businesses reported access to capital a major COVID-19 challenge, foreign investment leads to technology spillovers in investors’ countries, and more.

Want to receive the Hutchins Roundup as an email? Sign up here to get it in your inbox every Thursday.

In an April survey of more than 66,000 small business owners and employees, conducted via Facebook, Georgij Alekseev of NYU’s Stern School and co-authors explore the impact of the COVID-19 shock on operations, employment, and financing. The biggest challenge—reported by nearly 40% of businesses—was access to capital. While 78% of businesses were concerned about their cash flows for the spring, only a quarter could access formal sources of financing, and most relied on informal or personal sources of saving. Access to loan and credit guarantees, alongside salary subsidies and tax deferrals, were the most popular policy proposals among respondents. The authors note pervasive gender disparities in the responses. Older and larger, but also majority-male, businesses were more likely to be open and more optimistic about their survival. Female employers and employees reported greater effects of the pandemic on their work, particularly with regards to balancing caretaking and household responsibilities, and women were more likely to quit their jobs in response to school closures.

Foreign venture capital investment can help otherwise unfunded domestic firms succeed—but when the technologies are in critical areas such as artificial intelligence, fintech, and robotics, foreign investment has the potential to launch the U.S. into economically and militarily detrimental arms races, says Ufuk Akcigit of the University of Chicago and co-authors. Using data from foreign investments in U.S. companies between 1976 and 2015, the authors find that when there is foreign investment in a U.S. company, the investor’s country sees an increase in patent applications in similar technology and in citations of the U.S. start-ups’ patents. These “knowledge flows” are larger in patents subject to government secrecy orders. Moreover, the larger the technology gap between the U.S. and a given country, the more that country invests in the technology. But foreign investment also is associated with more patents generated by the U.S. startup. The authors conclude that, when weighing the merits of foreign investment, the U.S. government should consider both the benefits to U.S. innovation and the potential economic and military consequences of technology spillovers to other countries.

Keith A. Bailey and James R. Spletzer of the Census Bureau use the Longitudinal Employer-Household Dynamics (LEHD) survey data to measure multiple jobholding and find that 7.8% of workers in the U.S. are multiple jobholders and this rate has been trending upward over the past 20 years. The estimate is about 2 percentage points higher than the widely cited Current Population Survey (CPS) measure. The new measure counts individuals as multiple jobholders if, based on unemployment insurance records in the LEHD, they held at least one job consistently over three quarters and held one or more additional jobs within the same period; the CPS relies on a combination of survey responses and    point in time evidence of wages. The authors note that while differences in definitions and reference periods (quarterly vs. monthly) explain the different levels of multiple jobholding, they do not explain the different trends. Moreover, the new measure is strongly cyclical, increasing during expansions and decreasing in contractions; the CPS-based measure is not cyclical.  Using the new data, the authors find women and younger people are more likely to hold multiple jobs. In addition, they find that multiple job holding occurs across income groups and second or third jobs account for 25% or more of multiple jobholders’ incomes.

Federal Debt Held by the Public as a Percentage of GDP

Source: Congressional Budget Office

“I think financial conditions are very accommodative, unless you’re a small business or mid-size business in a person-to-person contact industry. I think we could do more. I think we should continue to look at whether there’s more that can be done there. The challenge on that is, we’re lenders not spenders. If we’re going to do more on, say, Main Street to make that a more accessible program, that’s more of a decision for Treasury and Congress than the Fed, because it’s going to involve taking greater risk of losses. But I do think looking at that will be appropriate,” says Robert Kaplan, President of the Federal Reserve Bank of Dallas.

Let’s block ads! (Why?)



Source link

Continue Reading

Investment

Home Economics: Financial recovery worries, a warning on investment fees – BNN

Published

 on


Home Economics aims to help Canadians navigate their personal finances in the age of social distancing and beyond.

Bank of Canada sees low interest rates until 2023

During its latest policy decision this past week, the Bank of Canada reiterated its commitment to keep interest rates at historical lows over the next few years to support the country’s economic recovery out of the COVID-19 pandemic.  By the bank’s forecast, rates will likely stay near-zero until 2023. “The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the two per cent inflation target is sustainably achieved,” Bank of Canada Governor Tiff Macklem said Wednesday. Sustained low rates may be good news for those who need it, according to CTV’s Chief Financial Commentator Pattie Lovett-Reid. However, she adds the temptation to borrow more could spell trouble for a nation already hampered by historic levels of household debt.

30% of Canadians fear they won’t ever financially recover from COVID: Poll

About one-third of Canadians polled on behalf of FP Canada feel they won’t ever recover financially from the pandemic. Those in their 40s and 50s may be in the worst financial position, according to the findings, which showed 36 per cent of that age group not believing they will recuperate. Meanwhile, the survey suggests the worst may be yet to come for Canadians between the ages of 18 and 34, over half of which have taken advantage of government programs such as the Canada Emergency Response Benefit (CERB). Half of younger Canadians polled said they’ve already borrowed money to make up for financial shortfalls as aid winds down.

Beware of falling into a fee trap when seeking investment advice

Market volatility and economic uncertainty caused by the COVID-19 pandemic have sent stressed-out investors flocking to advisors. A recent survey commissioned by Manulife Investment Management shows 63 per cent of respondents plan to seek investment advice in 2020 compared with half in 2019, and over half of Canadians want professional advice about retirement planning.  While seeking help from a professional is a positive step, personal finance columnist Dale Jackson warns decisions driven by fear can lead investors into fee traps as many popular investment products – such as mutual funds – carry hefty fees that ultimately eat away at potential returns. 

Many Canadians have no financial plan for when financial aid ends

Some Canadians who have relied on financial support from the government, or took advantage of deferral programs, are turning to alternative forms of aid as support measures wind down. But two-in-five surveyed by Credit Canada have no plan for when government aid runs out. One-in-10 respondents said they will turn to traditional forms of borrowing such as family loans or credit cards, and only two per cent will seek bankruptcy of credit counselling. The good news: almost half of respondents who were receiving financial assistance say they will no longer need it once aid programs have ended.

TIP JAR

“Canadians who plan to stay in their existing home for the long-term might consider a 10-year fixed rate, which is available at around three per cent and would guarantee their mortgage payment for an entire decade” – James Laird, co-founder, ratehub.ca

Let’s block ads! (Why?)



Source link

Continue Reading

Investment

Province to review investment strategy for Alberta's battered Heritage fund – CBC.ca

Published

 on


The Alberta government is launching a review of the investment policy for Alberta’s Heritage Savings Trust Fund, which was battered by heavy losses earlier this year.

At the fund’s annual general meeting in Edmonton on Thursday, Alberta Treasury Board and Finance assistant deputy minister Lowell Epp announced his department will launch a “major review” of the $17-billion fund’s overall investment strategy and asset portfolio.

The review will be the first of its kind since 2011. It comes after a year that saw the Heritage fund — a rainy-day account financed by oil and gas royalties — pummelled by COVID-19 and risky investment decisions.

Seven years of gains were wiped out from the portfolio this spring after a volatility-based investment strategy left the fund’s investments vulnerable to the economic toll of the pandemic.

“There is a legislative requirement to invest the Heritage Savings Trust Fund in order to maximize long-term earnings with a prudent level of risk,” Jerrica Goodwin, a spokesperson for Treasury Board and Finance, said in an emailed statement Friday.

“This internal review will take place over the next year and will only evaluate how the fund is invested. This is not a review of the purpose of the fund, how it is used, nor will it consider changes to legislation.”

Kevin Uebelein, CEO of the Alberta Investment Management Corporation (AIMCo), which manages the Heritage fund, said he only learned of the review at Thursday’s meeting but wasn’t surprised. 

The review could result in changes to the fund’s overall asset mix, and how much risk its investments are allowed to take, Uebelein said.

“That kind of review, which is going to be thinking about the investment thesis, the investment policy, and then ultimately, the asset allocation that comes from that policy — those are all the responsibility of the Alberta government,” Uebelein said in an interview Friday.

“How does that impact the investment philosophy of the Heritage fund? Those are conversations that hopefully both the government and AIMCo will be able to have together.”

AIMCo operates at arm’s-length from the government. In addition to the Heritage fund, it manages 30 other government investment funds, along with three huge public sector pension plans for nearly 375,000 Albertans.

Uebelein said AIMCO’s investment strategy was ill-equipped to handle the unprecedented economic volatility caused by the pandemic.

AIMCo has succeeded in taking measured investment risks for years but this past year was the exception, he said.

The fund’s weakness was in an investment strategy that saw it make bets against volatility in the markets. This spring, amid unprecedented swings in the market, AIMCo lost billions on derivatives, investments that pay off only if stock prices remain stable.

‘An extremely painful lesson’ 

“It had been for many years quite a successful strategy. And then there was a week in March, I remember it, it’s sort of tattooed in my psyche,” Uebelein said. 

“The world experienced volatility like it really never seen before and a strategy that had been a perennial winner really was quite a large loser. 

“That strategy is shut down now … And that was an extremely painful lesson.” 

AIMCo came under fire this spring when it lost $2.1 billion on the volatility-based investment strategy.

The missteps cost the Heritage fund $411 million. In combination with global market losses in February and March, the fund was valued at $16.3 billion on March 31, its lowest point since 2011-12, according to the fund’s most recent annual report, released in July. 

The value was down about 10 per cent from the same time last year.

The value of the Heritage fund dropped $1.9 billion during 2019-20 — $1 billion was transferred to the province’s general revenue fund, and net losses, including unrealized losses, were $887 million for the fiscal year.

The investment breakdown included 44.8 per cent in equities, 19.5 per cent in fixed income and money market and 34.9 per cent in inflation-sensitive and alternative investments.

‘A marathon recovery’

Uebelein said AIMCo has already analyzed its losses extensively and is making changes to the investment portfolio. 

“Accountability includes being willing to talk about what happened, what we’re doing,” he said. 

“It includes making the necessary changes to the organization to make sure that those things never happen again and that we will learn and that we improve from that.” 

The Heritage fund has slowly started to recover. As of June 30, the fund was worth $17.2 billion. 

Investment income for the quarter was pegged at $4 million with a five per cent rate of return. 

Despite the gains, Uebelein said it will take years for the account to fully recover.

“You know, that may sound quite promising, but I just have to say, the recovery for the Heritage fund is really quite like the recovery in all of our lives and the economy writ large,” he said.

“We’re in a marathon recovery here. It’s not going to happen overnight. And we have to find a gear so that we can grind through this.”

Let’s block ads! (Why?)



Source link

Continue Reading

Investment

CIAC Welcomes Alberta Government's Plan to Level the Investment Competitiveness Playing Field, Attracting Global-Scale Chemical Manufacturing Investments – Canada NewsWire

Published

 on


OTTAWA, ON, Oct. 30, 2020 /CNW/ – The Chemistry Industry Association of Canada (CIAC) congratulates the Government of Alberta on launching the Alberta Petrochemical Incentive Program (APIP). Building on the strong chemical manufacturing focus within the recently unveiled Natural Gas Vision and Strategy, APIP will help level the investment competitiveness playing field and attract a surge of global-scale, multi-billion dollar investments in the province’s low-carbon natural gas-based petrochemical sector. 

“The Alberta government has a bold vision for growth of Alberta’s chemical manufacturing sector,” said Bob Masterson, President and CEO, CIAC. “The Alberta Petrochemical Incentive Program levels the playing field with other jurisdictions competing for new investment and makes that vision of a top global chemicals producer possible. The opportunity for growth in this sector exists in the province and that is good news for jobs, new global scale investment, and Alberta’s economy.” 

The Alberta Government recognizes the importance and growth opportunity of a $12 billion sector that is Alberta’s largest manufacturing sector by exports and resource value-added. Alberta has an opportunity to diversify and build its economy on petrochemicals, a sector that has been resilient throughout the COVID-19 pandemic and is poised to see sustained demand continue for the foreseeable future. CIAC looks forward to working with the Alberta Government to attract new investment to the province. 

About CIAC 
The Chemistry Industry Association of Canada is the association for leaders in Canada’s chemistry and plastic sectors—adding C$54 billion and C$28 billion respectively to the Canadian economy. The Association represents close to 200 members and partners across the country. We provide coordination and leadership on key issues including innovation, investment, plastics, taxation, health and safety, environment, and regulatory initiatives. 

SOURCE Chemistry Industry Association of Canada

For further information: Devon Babin – Communications Manager, Chemistry Industry Association of Canada, [email protected], T 613-237-6215 ext. 225, C 613-620-3386

Related Links

www.canadianchemistry.ca/

Let’s block ads! (Why?)



Source link

Continue Reading

Trending