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SPACs Are The Hot Investment Trend For 2020, Should You Participate? – Forbes

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One pronounced trend for 2020 is the growth of funds flowing to Special Purpose Acquisition Companies (SPACs), sometimes called blank-check companies. SPACs have raised over $20 billion so far this year.

This is a banner year for SPACs, setting records for the number of deals and amount raised. Prominent figures have launched SPACs. such as Paul Ryan former speaker of the House of Representatives and Gary Cohn former director of the National Economic Council. Last month, hedge-fund manager Bill Ackman raised a $4 billion SPAC, the largest ever. The resulting deals are getting attention too, Draft Kings used a SPAC structure to go public in April as did Virgin Galactic

SPCE
in late 2019. Both have seen positive returns since.

How SPACs Work

The alternative name blank-check company is a useful summary of how SPACs work. Deal-makers raise money based on their credentials and expertise. They then specify plans for the area they want to invest in, such as U.S. fintech companies, for example.

Once the SPAC is funded, they have a war chest established and hunt for an attractive acquisition target. Despite the term blank check, investors in SPACs do have some protections. Once the deal is announced, if investors don’t like it they can typically redeem their shares, and if a deal doesn’t occur within a specified time frame, investors can get the remaining cash out. Also, investors typically hold both shares and warrants in the SPAC. The warrants enable the investor to increase their holding at a fixed price should the deal ultimately perform well.

For companies, SPACs can offer a quicker and less complex route to market than a full IPO process.

Risks

SPACs are, in one sense, just a means of enabling companies to trade publicly. Similar to an IPO process, the crucial element is the quality of the company being acquired. However, unfortunately the historic data on SPACs is not encouraging.

First off, SPACs can fail to find a suitable acquisition candidate. Yes, investors typically get their money back when this happens, but that can mean a return equivalent to Treasury bills for a period of years, rather than being invested in the market. That can be a big opportunity cost. With an IPO you can be confident your money will be put to work, with a SPAC you can’t be so sure.

Secondly, historically SPACs have not performed all that well. Historically SPACs are found to have lost about 3% a year compared to the market according to research from Jog and Sun. Though this is historical data, and more recent SPACs could fare better.

That said, when compared to a SPAC, the average performance of IPOs is not too hot either, since IPOs tend to underperform the market in their first year according to history. This does not bode well for today’s crop of SPACs. The same research found that SPAC managers do incredibly well from the transactions given they typically receive shares at discount prices, while investors may lose money, SPAC managers can accumulate substantial wealth via the SPAC process even if shareholders see gains depending on the terms of the deal.

Blank-check companies can trace their origins back to the blind pools of the South Sea Bubble of the eighteenth century. That’s not a great omen. SPACs can certainly benefit their managers, but the benefits to investors are less clear and this may be another sign of a relatively frothy stock market environment. As with IPOs, the success or failure of any SPAC, will depend on the specifics of the company being acquired. As with IPOs, deal-makers can reap large short-term rewards, but investors bare much of the long-term risk.

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Four trends in group retirement, investment programs – Benefits Canada

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The coronavirus pandemic is highlighting many trends in group retirement and investment programs, pushing the industry to be flexible and quick with some of the newer offerings.

As plan sponsors review their group retirement plans in the coming months, they may want to consider some, or all, of these four trends.

1. Financial wellness becoming a must.

A survey published by Manulife earlier this month found 80 per cent of U.S.-based employers are planning to offer a financial wellness program by 2023. Currently, fewer than half of these employers said they have a financial wellness program.

Read: How RBC is fitting debt payment into employees’ financial journeys

Employees are becoming more interested in employer assistance with their current financial situations as well as long-term retirement planning. In the short term, student debt is on the minds of many young employees. Manulife estimated about 40 per cent of students will have difficulty saving for retirement because of debt payments. Some record keepers are now offering plans that assist in paying down debt while contributing to group retirement at the same time.

Plan members are also asking about registered education savings plans offered through the workplace. Typically, insurance companies weren’t willing to offer a group RESP because of heavy administration. But recently, some have been able to overcome these hurdles and offer the option.

2. Investment choice assistance prevalent in these uncertain times.

Many plan members are uneasy about the uncertainty caused by the coronavirus. They’d like to speak directly with an advisor and appreciate feedback about risk tolerance and asset mix. This can be done alongside a review of investments in an employer-sponsored plan, which is available to most plan sponsors via their advisor or plan provider. 

3. Virtual offerings are a requirement during social distancing.

Virtual platforms have gained much traction over the last few months. During the pandemic, face-to-face meetings and member education sessions have been replaced by webinars, voiceovers and links to educational websites. In the recent past, many of these meetings were conducted in person out of respect and courtesy. But where it may have been an insult in the past to conduct a Skype meeting, the virtual mode is now preferred.

4. The rise of socially responsible investments.

With social issues at the forefront of our minds and demographic changes in the workforce, we’re seeing a rise in the demand for socially responsible investments in fund lineups. Some insurance companies have started developing their own socially responsible pooled funds, as well as adopting third-party funds to fill the needs of contemporary investors. For many, the rate of return is no longer the only issue of interest; they are interested in how those investments reflect the values of current societal pushes.

Read: Most pension funds barely scratching surface on sustainable investment

The development and adoption of some of the above offerings is accelerating due to the current extraordinary social climate. While many of these offerings have been available for some time, they weren’t being offered by plan sponsors as quickly as the market thought they might be. But that’s now changing and I’d encourage plan sponsors to consider these industry trends.

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Unpacking the finance sector's climate related investment commitments – NewClimate Institute

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First analysis of financial sector climate-related investment pledges

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Financial institution’s climate-related investment targets have rapidly grown in recent years. In this report, we provide insights into the magnitude and ambition of these targets, and investigate their relationship with GHG emissions in the real economy. Specifically, this report maps out the financial sector’s climate-related investment targets against a range of indicators, such as monetary investments in ‘green’ projects, and required ‘green’ investments and GHG emission reductions. It thereby considers both climate-related investment pledges made by individual financial institutions as well as those made by major finance-related international cooperative initiatives (ICIs).


Main Findings:

Financial institution’s climate-related investment targets have rapidly grown in recent years. We find financial institutions with cumulative assets of at least USD 47 trillion under management are currently committed to climate-related investment targets. This represents 25% of the global financial market, which is around USD 180 trillion. The number and growth of such targets is significant and represents considerable momentum – even if the individual targets vary in their ambition and do not cover all assets under management.

While the trend and efforts of the financial sector are promising, it should be noted that financial institutions do not have full control over their investees’ emissions. Reducing the carbon intensity of a portfolio by divesting, with the objective of aligning it with the Paris Agreement, does not necessarily always lead to emission reductions in the real economy, as others can invest in the emission intensive assets that were sold. Only if a large share of the financial sector sets and works to actualise robust climate-related investment targets and effectively implements them, investees have to react and reduce their emissions. Currently, most financial institutions that have set such targets are located in Europe, the United States of America, and Australia. To align all financial flows with the Paris Agreement temperature goal, it is crucial that institutions in other parts of the world also commit to ambitious investment targets.

We distinguish between three main types of climate-related investment targets – or mechanisms – that financial institutions can use to influence global GHG emissions: divestment, positive impact investment, and corporate engagement. These mechanisms influence the actions investee companies must take – and correspondingly, global GHG emissions – in different ways (see Figure).

Cause effect relation between the different mechanisms, investee companies and global GHG emissions.

We identified a number of factors at the financial institution, company, and country level that can increase the likelihood that a climate-related investment targets will have an impact on actual emission levels. These include for example the size of a financial institution (measured by assets under management) and whether the targeted investee company has previous experience with ESG. The more these factors point in the right direction, the more likely that investment targets will lead to emissions reductions.

The factors play out differently per asset class and per target type. For example, a divestment target related to a government bond share may produce a different outcome than a divestment from a corporate bond; and corporate engagement is usually more effective if there is direct access to investee’s management.

Insights into the factors or impact conditions may support financial institutions in setting potentially more effective targets, policymakers to consider effective regulation and the scientific community, and the wider public, to better assess financial sector targets.


Contacts for further information: Katharina Lütkehermöller, Silke Mooldijk

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$90 million investment into connectivity infrastructure across B.C. – CKPGToday.ca

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Photo Courtesy: ID 180348991 © Michael Nesterov | Dreamstime.com

By Veronica Beltran

connecting B.C.

Sep 22, 2020 5:00 AM

VICTORIA—The Province is investing $90 million in connectivity to encourage a rapid expansion of high-speed internet access and drive regional economic development in rural areas, Indigenous communities, and along B.C.’s highways.

The one-time $90 million investment is part of B.C.’s Economic Recovery Plan for the Connecting British Columbia program and will target connectivity infrastructure projects for a new Economic Recovery Intake.

“Rural and Indigenous communities are an essential part of the province’s economic engine. Now is the time to invest in modern infrastructure so people living outside the city can also benefit from today’s technologies.”—Anne Kang, Minister of Citizens’ Services

“Ensuring people have the connectivity they need to be successful is a key part of our recovery from the COVID-19 pandemic. This investment will bring real and lasting benefits to families, workplaces and communities throughout B.C., ensuring the province emerges stronger than ever,” adds Kang.

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