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Metro Vancouver investment deals could top $13 billion this year

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This year’s rapid rise in the Bank of Canada’s policy rate slammed the brakes on investment activity in the second half of the year, but better times await in 2023.

Quarterly deal volume reached an all-time high of $21 billion in the first quarter of this year, according to a report JLL released Nov. 28. But it has fallen steadily since, dropping to just $11.2 billion in the third quarter. Deal activity is on track to fall by half in the final quarter of the year.

CBRE Ltd, is calling for $56.1 billion in transactions this year, down about 5 per cent from last year’s peak of $59.1 billion. Vancouver – the epicentre of investment activity in B.C. – will see about $13 billion worth of transactions.

During a lending and investment market update on November 28, Peter Senst, president of the firm’s national investment team, was optimistic on the outlook.

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“We’re still trading with reasonable velocity. The size and significance of the deals that we’re doing in Canada, particularly in the second half of the year, will be the biggest in the world,” Senst said during the online presentation.

With inflation easing, he believes rate hikes are nearing an end.

“We’re thrilled with where inflation has seemingly hit a peak and is starting to come down,” he said.

“I believe we’re through the rate hikes, substantially,” he said. “Cost of financing we think will ultimately moderate through 2023 going into 2024, which is great.”

This will give investors the confidence to begin investing here once again, with industrial on track to benefit the most.

Deal activity will be led by industrial, which has knocked commercial assets – office and retail – out of the top spot as institutional investors and lenders rejig their exposure.

“This reflects the reweighting that’s going on in balance sheets and portfolios,” Senst said.

Vancouver is particularly well placed, with development constraints and low vacancies pushing rents to $20.67 a square foot. Growth is set to continue as companies seek space in an extremely competitive and constrained market.

“It’s not going to be an overbuilt market,” he said.

The optimism reinforces the findings of the recent Emerging Trends in Real Estate report, produced annually by the Urban Land Institute in partnership with accounting firm PricewaterhouseCoopers LLC.

“While some interviewees said that they were watching for signs of a slowdown in Vancouver’s industrial market and the impacts of rising interest rates, others emphasized that land scarcity makes this asset class a best bet,” the report stated.

It gives top marks to Vancouver, which leads the country in almost every measure except with respect to capital availability and the number of opportunities for development.

“Vancouver continues to be the top market to watch for both its investment and development prospects,” the report stated.

On the office side, the significance of the tech sector – a proxy for the city’s attractive lifestyle – was a key factor in its favour.

“Among the factors buoying the office market are a vibrant technology sector as well as a higher propensity for employees to return to the workplace in Vancouver and other cities in Western Canada,” the report stated.

While the current office development cycle is over as lenders hit pause on financing new projects, CBRE noted that Vancouver is well-positioned to navigate the challenges thanks to a market whose inventory of space is balanced between downtown and suburban locations.

This makes it easier for workers to meet in person, and also helps shorten commute times, which CBRE described as “the last compelling reason why people are not returning to the office.”

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Forget ChatGPT — an AI-driven investment fund powered by IBM's Watson supercomputer is quietly beating the market by nearly 100% – Yahoo Canada Finance

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The Watson-powered ETF is beating a total market fund by nearly 100%.PhonlamaiPhoto/Getty Images

  • While the language bot ChatGPT has gone viral, a Watson-powered ETF is making nearly double the returns of the broader market.

  • The AI Powered Equity ETF is up 10.4% in 2023, whereas the Vanguard Total Stock Market Index is up 5.67%.

  • IBM’s Watson supercomputer helps balance the fund’s portfolio holdings.

The popular language bot ChatGPT has shown a humanlike ability to render articles, emails, and even dating-app messages. But if you ask it to generate a portfolio that can beat the market, it spits out boilerplate information and reminds you it doesn’t have access to live stock data.

Yet, the $102 million AI Powered Equity ETF (AIEQ), which launched in 2017, has been quietly fulfilling that request so far this year. Issued by ETF Managers Group in partnership with the fintech firm Equbot, the fund leans on IBM’s Watson supercomputer to balance its portfolio.

That 114-holding portfolio is up 10.4% so far in 2023, while the Vanguard Total Stock Market ETF is up 5% over the same stretch.

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Still, as ETF.com highlighted, the former is actively managed, and thus more expensive than the benchmark fund, cutting into actual returns to investors. The AI-powered ETF charges 0.75%, whereas Vanguard’s costs 0.03%. Both funds include JPMorgan and UnitedHealth Group in their top-10 holdings.

Chris Natividad, the chief investment officer of Equbot, said the Watson-powered fund can look beyond standard market data and cull information from tweets and earnings calls, according to ETF.com.

“We’re focused on investment related data, looking at how these different types of signals impact security practices across different time horizons,” Natividad said, per ETF.com.

“The best days of the fund are still ahead of it,” he added. “And just as you’ll see ChatGPT’s responses change and evolve with time and data, so will our fund.”

Meanwhile, ChatGPT’s parent company, OpenAI, this month secured a $10 billion investment from Microsoft this month, and the technology continues to make waves across sectors.

Online media outlet BuzzFeed announced last week it plans to leverage the technology to create content, educators are warning about the bot’s repercussions in schools, and chipmakers are poised to cash in.

Read the original article on Business Insider

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Pension funds suffer largest investment losses since 2008 financial crisis

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Canadian defined-benefit pension plans collectively suffered their largest losses since the 2008 financial crisis in 2022, recording a median decline in assets of 10.3 per cent despite a partial recovery in the final months of the year, according to a survey from Royal Bank of Canada RY-T.

Pension assets suffered heavy losses in the first two quarters of 2022 before starting to recover in the back half of the year. In the final quarter, pension assets returned 3.8 per cent, as measured by the RBC Investor and Treasury Services All Plan Universe, which serves as a benchmark for performance.

Pension plan investors were battered by unusually volatile markets driven by high inflation and rapidly rising interest rates, as both stocks and bonds returned losses, instead of helping offset each other as has often been the case in past market downturns. And although plans earned positive returns to finish the year, they are facing many of the same pressures in 2023.

“In the next few months, plan sponsors will need to be attentive to risk factors such as the economic impact of the central banks’ actions, ongoing geopolitical tensions and ongoing efforts to contain the COVID virus outbreak in certain emerging markets,” Niki Zaphiratos, managing director for asset owners at RBC I&TS, said in a news release.

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Canadian pension plans’ bond portfolios had median losses of 16.8 per cent in 2022 – the largest annual decline in more than 30 years – and also trailed the benchmark FTSE Canada Bond Index. The losses were driven by the drastic action central banks took to tame inflation by raising interest rates, with longer-duration bonds that are most sensitive to inflation accounting for some of the largest declines.

Yet for pension plans, there was a silver lining to rapid interest-rate increases, which caused future liabilities to fall. As a result, more pension plans finished 2022 in surplus, meaning their assets were greater than their liabilities. And higher yields from fixed-income securities could also give pension plan investment managers more options to reduce risk-taking in their portfolios over the coming year.

Stocks also suffered, rather than acting as a counterweight to falling bond prices. Foreign equities returned 9.7 per cent in the fourth quarter, but closed the year down 11.3 per cent, according to RBC I&TS. And Canadian equities returned 6.3 per cent in the final quarter of the year, bringing their annual loss to a comparatively modest 3.6 per cent. In general, value stocks performed better than higher-risk growth stocks in the quarter.

The last time pension assets declined so sharply was in 2008, when Canadian defined-benefit pension assets posted a median loss of 15.9 per cent.

Defined-benefit pension plans pay fixed benefits for as long as a beneficiary lives based on their contributions and years of service.

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Intel Cuts Pay Across Company to Preserve Cash for Investment

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(Bloomberg) — Intel Corp., struggling with a rapid drop in revenue and earnings, is cutting management pay across the company to cope with a shaky economy and preserve cash for an ambitious turnaround plan.

Chief Executive Officer Pat Gelsinger is taking a 25% cut to his base salary, the chipmaker said Tuesday. His executive leadership team will see their pay packets decreased by 15%. Senior managers will take a 10% reduction, and the compensation for mid-level managers will be cut by 5%.

“As we continue to navigate macroeconomic headwinds and work to reduce costs across the company, we’ve made several adjustments to our 2023 employee compensation and rewards programs,” Intel said in a statement. “These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy.”

The move follows a gloomy outlook from Intel last week, when the company predicted one of the worst quarters in its more than 50-year history. Stiffer competition and a sharp slowdown in personal-computer demand has wiped out profits and eaten into Intel’s cash reserves. At the same time, Gelsinger wants to invest in the company’s future. He’s two years into a turnaround effort aimed at restoring Intel’s technological leadership in the $580 billion chip industry.

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Gelsinger will keep using cash to reward shareholders, meanwhile. Intel said last week that it remains committed to offering a competitive dividend. Analysts have speculated that the company may lower its payout to cope with the slowdown.

Under Gelsinger’s plan, the company is looking to introduce new production technology at an unprecedented pace. It will also build new plants in Europe and the US and try to win orders from other chipmakers as an outsourced manufacturer. That move will put Intel in direct competition with Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., two Asian companies that have passed it in the rankings of chipmakers by size and capabilities.

Intel isn’t the only big company trimming executive pay. Apple Inc., one of the few tech giants to forgo major layoffs, is cutting the pay of CEO Tim Cook by more than 40% to $49 million for 2023. Some high-profile finance firms have made similar moves, with Goldman Sachs Group Inc. CEO David Solomon seeing his 2022 compensation trimmed by about 30% to $25 million.

Intel is taking other steps to rein in expenses. That includes headcount reductions and slower spending on new plants — part of an effort to save $3 billion annually. That figure will swell to much as $10 billion a year by the end of 2025, the company has said.

Intel, which informed staff of the latest cutbacks earlier Tuesday, is also reducing the match it offers to pension contributions. The Santa Clara, California-based company thanked employees for their patience and commitment.

Hourly workers and employees below the seventh tier in the company’s system won’t be affected.

(Updates with spending plans and earnings report starting in fourth paragraph.)

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