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Is shifting retirement investments into safe havens a good idea?

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Selling out of equities can have tax implications. Even if holdings are down in any given year, it doesn’t mean clients are facing an overall capital loss.FatCamera/iStockPhoto / Getty Images

Equity market volatility tends to send investors fleeing for fixed income. But with stocks and bonds suffering in tandem this past year, advisors say clients are beginning to ask about long-maligned guaranteed investment certificates (GICs), which have become an appealing proposition as interest rates have risen.

“I haven’t been using GICs [for] a long time because rates have been so low. They haven’t been attractive,” says Ian Calvert, vice-president and principal, wealth planning, at Highview Financial Group in Oakville, Ont. “But now … they’ve become more attractive for short-term needs.”

Jennifer Tozser, senior wealth advisor and portfolio manager with Tozser Wealth Management at National Bank Financial Wealth Management in Calgary, says she has also seen clients’ desire for safety lead to inquiries about GICs.

“People are [saying], ‘If I own fixed income, I want to own something where I don’t have to deal with price fluctuation because the market is volatile,’” she says.

“For people who aren’t used to this [volatility], the frustration is that what’s supposed to be a stable part of their portfolio has shown price movement.”

Rona Birenbaum, certified financial planner and founder of Toronto-based Caring for Clients, says her firm normally gets inquiries from clients looking to reduce their equity exposure and pile into bonds during times of market turbulence. (She counsels them against doing so.)

But this past year, the firm saw fewer of those inquiries as rising interest rates have depressed bond returns.

“That has scared some investors away from bonds,” she says.

Ms. Tozser says she has cautioned her bond-wary clients against worrying about price risk – pointing out that governments and companies continue to make their bond payments, and investors will still receive the bond’s face value at the end of its term. She also sees opportunities in longer-term bonds as the yield curve has inverted to lock in a higher interest rate before interest rates start to fall again.

Ms. Birenbaum says she also thinks investors are set up for good bond returns in the next couple of years. Any money going into both stocks and bonds is now “generating a much higher yield than it was a year ago” as prices have fallen.

“For new money and new savings, the future looks brighter than it has for the past couple of years,” she says.

Approaches to preserving capital

GICs, at current rates, can be “very useful tools” for clients in retirement or those who are approaching that stage of their life, providing capital stability and a reasonable yield, Ms. Birenbaum adds.

She’s begun building a laddered portfolio of GICs for retiree clients to fund their next three to four years so they don’t need to consider withdrawing from more volatile assets and can benefit from the eventual market recovery.

“That brings some peace of mind to clients and it’s also just a smart thing to do,” she says. “If we do experience a painful recession next year and stocks fall, these retirees won’t be selling equity investments at that time.”

They might not be in the position to add equities, she says, which would be the “icing on the cake” if they could, but at least they don’t touch them.

Ms. Birenbaum says clients’ GIC purchases are being funded by new cash deposits, which might have otherwise gone toward other bond strategies.

She may also move money from clients’ existing fixed-income positions, but is “doing that more cautiously, because if we’re nearing the end of the interest rate cycle, bond [mutual] funds and [exchange-traded funds] returns could easily outperform GICs. Plus, they have liquidity.”

However, she says this may be a worthwhile trade for more anxious clients who want peace of mind.

“The risk is just the opportunity cost if bond strategies outperform GICs, but it’s just [an] incremental difference,” Ms. Birenbaum says.

When shifting investments makes sense

Ms. Tozser says buying GICs or shifting toward a more conservative asset allocation right now can make sense for clients who are well into retirement and/or have exceeded the financial goals they’ve set for themselves.

“We’ve had a lot of good years [recently], and even though we’ve had a negative year, they might be further ahead in their financial plans than they thought they’d be,” she says. “So. if they want to have GICs they can.”

However, she says clients should never eliminate stocks as a long-term asset allocation strategy.

For those who are on the cusp of or just entering retirement, Ms. Tozser says she emphasizes their long-term goals and encourages them to stay the course. She also points out that selling out of equities can have tax implications. Even if their holdings are down on any given year, it doesn’t mean they’re facing an overall capital loss.

Mr. Calvert advises only moving assets that were in savings into GICs, rather than selling out of equities – and potentially locking in losses – to fund those investments.

He notes GICs may do well over the next two years but come with re-investment risk if interest rates are no longer as high.

“It can be a good place to park funds in the short-term, there’s no doubt,” he says. “But if these are longer-term funds, obviously it’s going to be challenging to keep renewing at higher interest rates, and you will absolutely lose out on a market rebound, whenever that happens.”

To get around GICs’ challenging lack of liquidity, Ms. Birenbaum says she designs clients’ portfolios in conjunction with their cash flow projections to ensure they also have some capital that’s more liquid.

When GICs mature, putting the funds into a high-interest savings account with set monthly withdrawals works well for clients who have registered accounts like a registered retirement income fund. Those without registered accounts typically receive the full amount, which they can put into their own savings account and withdraw as needed.

 

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Investment regulator imposed $14M in enforcement penalties in latest fiscal year

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TORONTO — Canada’s investment product regulator says it imposed more than $14 million in fines and other financial enforcements in its last fiscal year.

The Canadian Investment Regulatory Organization (CIRO) says the total also includes imposed costs and the forced return of ill-gotten profits.

The regulator says it also ordered suspensions and permanent prohibitions in a significant proportion of proceedings against individuals.

Enforcement efforts included a $2 million fine against Fortrade Canada for recommending a high-risk product to unsophisticated retail clients, and a $1.7 million fine and permanent ban on securities-related business against Paul Walker for a range of misconduct including soliciting more than $1.5 million in investments for an outside business activity.

CIRO was created at the start of 2023 through a combination of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.

The new self-regulatory organization says it is focused on harmonizing its regulatory approach to create more consistency and timeliness with enforcement action.

This report by The Canadian Press was first published July 16, 2024.

The Canadian Press

 

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Conditions on Simandou investment now satisfied

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LONDON, July 15, 2024–(BUSINESS WIRE)–All conditions have now been satisfied for Rio Tinto’s investment to develop the Simandou high-grade iron ore deposit in Guinea, including the completion of necessary Guinean and Chinese regulatory approvals. The transaction is expected to complete during the week of 15 July 2024.

Along with the recent approval by the Board of Simfer1, this allows Simfer to invest in and fund its share of co-developed rail and port infrastructure being progressed in partnership with Winning Consortium Simandou2 (WCS), Baowu and the Republic of Guinea.

More than 600 kilometres of new multi-use trans-Guinean railway together with port facilities will allow the export of up to 120 million tonnes per year of mined iron ore by Simfer and WCS from their respective Simandou mining concessions in the southeast of the country3. Together, this will be the largest greenfield integrated mine and infrastructure investment in Africa.

Rio Tinto Executive Committee lead for Guinea and Copper Chief Executive Bold Baatar said: “We thank the Government of Guinea, Chinalco, Baowu and WCS for their partnership in reaching this milestone towards developing the world class Simandou project.

“Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development.”

Under the terms of the transaction, Simfer will acquire a participation in the WCS project companies constructing rail and port infrastructure, commit to perform a portion of the construction works itself and commit to funding its share of the overall co-developed infrastructure cost, in an aggregate amount of approximately $6.5 billion (Rio Tinto share approximately $3.5 billion)4.

Chalco Iron Ore Holdings Ltd (CIOH) has now paid its share of capital expenditures incurred or required by Simfer to progress critical works up to completion. A first payment of approximately $410 million, for expenditures until the end of 2023, was made on 28 June 2024, and a second payment of approximately $575 million, for 2024 expenditures, was made on 11 July 2024. These amounts settle all expenditures incurred up to date.

The co-developed infrastructure capacity and associated cost will be shared equally between Simfer, which will develop, own and operate a 60 million tonne per year5 mine in blocks 3 and 4 of the Simandou Project, and WCS, which is developing blocks 1 and 2.

Under the co-development arrangement, Simfer and WCS will deliver separate infrastructure scopes to leverage expertise. Simfer will construct the approximately 70 kilometre Simfer spur rail line and a 60 million tonne per year transhipment vessel (TSV) port, while WCS will construct the dual track approximately 536 kilometre main rail line, the approximately 16 kilometre WCS spur rail line and a 60 million tonne per year barge port.

Once complete, all co-developed infrastructure and rolling stock will be transferred to and operated by the Compagnie du Transguinéen (CTG) joint venture, in which Simfer and WCS each hold a 42.5% equity stake and the Guinean State a 15% equity stake6.

First production from the Simfer mine is expected in 2025, ramping up over 30 months to an annualised capacity of 60 million tonnes per year5 (27 million tonnes Rio Tinto share). The mine will initially deliver a single fines product before transitioning to a dual fines product of blast furnace and direct reduction ready ore.

Simfer’s capital funding requirement for the Simandou project as a whole is estimated to be approximately $11.6 billion, of which Rio Tinto’s share is approximately $6.2 billion, broken down as follows.

US dollars in billions (nominal terms) Simfer

capex

  Rio Tinto
share
Mine and TSVs, owned and operated by Simfer
Development of an initial 60Mt/a mine at Simandou South (blocks 3 & 4), to be constructed by Simfer $5.1 $2.7
Co-developed infrastructure, owned and operated by CTG once complete
Simfer scope (funded 100% by Simfer during construction)

Rail: a 70 km rail-spur from Simfer mine to the mainline, including rolling stock
Port: construction of a 60Mt/a TSV port

$3.5 $1.9
WCS scope (funded 34% by Simfer during construction)

Port and rail infrastructure including an approximately 552 km trans-Guinean heavy haul rail system, comprised of a 536 km mainline and a 16 km WCS rail spur

$3.0 $1.6
Total capital expenditure (nominal terms) $11.6 $6.27

Rio Tinto’s share of expected capital investment remaining to be spent from 1 January 2024 is to be $5.7 billion. Rio Tinto’s expected funding requirements for 2024 and 2025 are included in its share of capital investment guidance for this period, with project funding expected to extend beyond this timeframe.

Further details on the Simandou project can be found in the 2023 Investor Seminar presentation at https://www.riotinto.com/en/invest/investor-seminars.

As Chinalco, Baowu, China Rail Construction Corporation and China Harbour Engineering Company are Chinese state-owned entities, and given Chinalco indirectly holds 11.2% of shares in the Rio Tinto Group, they, and WCS, may be considered to be associates of a related party of Rio Tinto for the purpose of the UK Listing Rules. Rio Tinto’s funding commitment pursuant to the infrastructure co-development arrangement (Rio Tinto share $3.5bn) is a smaller related party transaction for the purposes of Listing Rule 11.1.10R and this announcement is, therefore, made in accordance with Listing Rule 11.1.10R(2)(c).

___________________________
1 Approval has been granted by the Board of Simfer Jersey Limited, a joint venture between the Rio Tinto Group (53%) and Chalco Iron Ore Holdings Ltd (CIOH) (47%), a Chinalco-led joint venture of leading Chinese SOEs (Chinalco (75%), Baowu (20%), China Rail Construction Corporation (2.5%) and China Harbour Engineering Company (2.5%)). Simfer Infraco Guinée S.A.U. will deliver Simfer Jersey’s scope of the co-developed rail and port infrastructure, and is, on the date of this notice, a wholly-owned indirect subsidiary of Simfer Jersey Limited, but will be co-owned by the Guinean State (15%) after closing of the co-development arrangements. Simfer S.A. is the holder of the mining concession covering Simandou Blocks 3 & 4, and is owned by the Guinean State (15%) and Simfer Jersey Limited (85%).
2 WCS is the holder of Simandou North Blocks 1 & 2 (with the Government of Guinea holding a 15% interest in the mining vehicle and WCS holding 85%) and associated infrastructure. WCS was originally held by WCS Holdings, a consortium of Singaporean company, Winning International Group (50%) and Weiqiao Aluminium (part of the China Hongqiao Group) (50%). On 19 June 2024, Baowu Resources completed the acquisition of a 49% share of WCS mine and infrastructure projects with WCS Holdings holding the remaining 51%. In the case of the mine, Baowu also has an option to increase to 51% during operations. After Closing, Simfer will hold 34% of the shares in the WCS infrastructure entities during construction with WCS holding the remaining 66%.
3 WCS holds the mining concession for Blocks 1 and 2, while Simfer S.A. holds the mining concession for blocks 3 and 4. Simfer and WCS will independently develop their mines.
4 A true-up mechanism will apply between Simfer and WCS to equalise most of their costs of constructing the co-developed rail and port infrastructure. The figures shown here are pre-equalisation.
5 The estimated annualised capacity of approximately 60 million dry tonnes per annum iron ore for the Simandou life of mine schedule was previously reported in a release to the Australian Securities Exchange dated 6 December 2023 titled “Simandou iron ore project update“. Rio Tinto confirms that all material assumptions underpinning that production target continue to apply and have not materially changed.
6 Ownership of the rail and port infrastructure will transfer from CTG to the Guinean State after a 35 year Operations Period, with Simfer retaining access rights on a non-discriminatory basis and at least equivalent to all Third Party Users.
7 By the end of 2023, Rio Tinto spent $0.5 billion (Rio Tinto share) to progress critical path works. Rio Tinto’s share of expected capital investment remaining to be spent from 1 January 2024 was $5.7 billion.

This announcement is authorised for release to the market by Andy Hodges, Rio Tinto’s Group Company Secretary.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240621382292/en/

Contacts

Please direct all enquiries to media.enquiries@riotinto.com

Media Relations,
United Kingdom
Matthew Klar
M +44 7796 630 637
David Outhwaite
M +44 7787 597 493

Media Relations,
Australia

Matt Chambers
M +61 433 525 739
Jesse Riseborough
M +61 436 653 412
Alyesha Anderson
M +61 434 868 118
Michelle Lee
M +61 458 609 322

Media Relations,
Americas

Simon Letendre
M +1 514 796 4973
Malika Cherry
M +1 418 592 7293
Vanessa Damha
M +1 514 715 2152

Investor Relations,
United Kingdom
David Ovington
M +44 7920 010 978
Laura Brooks
M +44 7826 942 797

Investor Relations,
Australia

Tom Gallop
M +61 439 353 948
Amar Jambaa
M +61 472 865 948

Rio Tinto plc
6 St James’s Square
London SW1Y 4AD
United Kingdom
T +44 20 7781 2000
Registered in England
No. 719885

Rio Tinto Limited
Level 43, 120 Collins Street
Melbourne 3000
Australia
T +61 3 9283 3333
Registered in Australia
ABN 96 004 458 404

riotinto.com

Category: Simandou

 

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BlackRock Pulls Ad Featuring Trump Rally Shooter Thomas Matthew Crooks

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A screengrab of Thomas Crooks from the BlackRock ad that aired in 2022.

Thomas Matthew Crooks, the 20-year-old who shot at former president Donald Trump at a rally in Pennsylvania, had briefly appeared in a 2022 advertisement for BlackRock Inc, the world’s largest money manager.

The ad, filmed at the Bethel Park High School in Pennsylvania, featured Crooks and several other unpaid students in the background, said the investment giant in a statement. Crooks graduated from the school in 2022.

BlackRock said it has pulled the ad but the video will be available to authorities. The ad, however, is being widely shared by social media users.

“The assassination attempt on former President Trump is abhorrent. We’re thankful former President Trump wasn’t seriously injured, and thinking about all the innocent bystanders and victims of this awful act, especially the person who was killed,” the company added in its statement.

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BlackRock, whose earnings figures are expected today, has faced scrutiny after shooting incidents since some of its index funds own shares in gunmakers.

Trump Assassination Attempt

Trump survived an assassination attempt on Saturday after a gunman opened fire at him at a rally in Pennsylvania ahead of the Presidential elections. The attack left him with a bloodied face as the former president said the bullet pierced his “upper part of right ear”.

Latest and Breaking News on NDTV

A bystander died in the attack while shielding his family and Crooks – a registered Republican – was shot dead by a Secret Service sniper.

Trump, whose Republican candidature will be finalised today, shared a message of unity after the attack and said Americans must not allow “evil to win”. “It was God alone who prevented the unthinkable from happening,” he said on social media.

Biden, too, appealed to the nation to “lower the political temperature” in a rare Oval Office address. “Politics must never be a literal battlefield, God forbid a killing field,” he said.

The US markets are expecting Trump trades to gain momentum after the attack. It has already been pinning hopes for the return of Republicans, especially after Biden’s poor performance in last month’s debate. Those trades are likely to take deeper hold as the attack sparks a wave of sympathy and support for Trump.

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