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ISSUE

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BLAZING A TRAIL

The pensions leader inspiring other women

Page 6

SPECIALTY DRUG COSTS

Diabetes drugs are in demand, but what lies ahead?

ELITE WOMEN 2024

BPM salutes the best women leaders in the industry

Page 15

SEE PAST THE CLOUDS

AND POSITION FOR THE FUTURE

Our active investment platform was built to lead in times of change and draws on 100 years of experience. Find the silver lining at mfs.com/silverlining.

CONTENTS

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UPFRONT

02 Editorial

Alberta’s CPP threat ill-conceived

04 Statistics

Breakdown of drug coverage

48 Other life

Dave Talbot on a life transformed by running

FEATURES

08 Drug plan management

What lies ahead for specialty drugs?

12 HR and AI

Will AI help your bottom line?

14 Chronic illness

Employers breaking barriers to health care

44 Obesity drugs coverage

Plan sponsors need a strategy

46 Real estate

The impacts of a turbulent market

PEOPLE

36 Real change

Picton Mahoney Asset Management CEO on portfolio construction in 2024

03 A Goldilocks scenario? Unlocking value for investors

Benefits boosting EVP

Four ways to help employees change their relationship with alcohol

Private credit

The lifeline for pension funds in a ‘higher for longer’ landscape

Pension plans

The effects of inflationary pressures

A

Alberta’s CPP threat hasty, ill-conceived

Alberta threatening to leave the Canada Pension Plan is the province taking its proverbial ball and going home, forgetting it’s less fun to play alone and more formidable to have strength in numbers. It also grates against Canada’s collective national pride

CPP is a global leader in its field, so why leave? A 2024 report by Global SWF, a New York-based pension industry specialist, measured 10-year returns for sovereign wealth funds and public pension funds between 2013 and 2022 1 CPP ranked first among national pension funds for annualized rate of return.

But while media reports have suggested the majority of Albertans are against leaving,2 divisions between the prairie province and the rest of Canada are not a secret. A survey by Angus Reid Institute3 asked residents of each province whether they felt fairly treated by the national government. Alberta, at 36 percent, had the worst score. It also asked people whether they thought their province contributed more to the

Leaving a global standard-bearer like CPP invites risk

country than it got back. Unsurprisingly, given the revenue generated by the oil and gas industry, Alberta scored highest with a whopping 86% ticking ‘yes’.

Is that fair? Does it warrant this proposed pension protectionism? Arguments will rage, but leaving a global standard-bearer like CPP invites risk.

Even if it got the amount the province claims it will be owed if it leaves (53 percent or $334 billion of assets) – the CPP Investment Board calculates Alberta’s contribution to be 16 percent – there are several future scenarios that need to be considered

While the oil and gas industry is thriving right now, there is an undeniable long-term shift to renewables. Will it be able to adapt? It’s also a young province demographically, but this may change, raising the prospect of higher contribution rates for residents.

There is no denying that Alberta leaving would hurt CPP from an economies of scale perspective. But the province would also start with a relatively small pot. Greater scale allows for better diversification across asset classes and geography.

Proponents want a return more commensurate with the share of revenue Alberta sends to Ottawa. But while not blessed with the same natural resources, Quebec’s Caisse de dépôt et placement (CDPQ) offers warning signs. While CPP had a 10 percent annualized net return on investments of $570 billion over the 10 years up to March 31, 2023, Quebec’s pension funds returned 8 percent – 20 percent less 4

Surely, looking generations down the line, we will be a stronger nation with a combined CPP, a fund that will benefit all Canadians, including Albertans.

James Burton, global managing editor

EDITORIAL

Managing Editor

James

Lead Production Editor

Roslyn Meredith

Production Editor

Christina Jelinek

ART & PRODUCTION

Art Director Marla Morelos Designer Khaye Cortez

Production Coordinators

Kat Guzman Loiza Razon

Customer Success Executive

Michelle Tamayo Vice President, Production

Monica Lalisan

SALES & MARKETING

Business Development Director

Abhiram Prabhu

Business Development Manager

Doris Holinaty Account Manager

Michael Hughes

Webinar Producer

Kristyn Dougall

CORPORATE President

Tim Duce

Director, People and Culture

Julia Bookallil

People and Culture Business Partner

Alisha Lomas-Oliver

Chief Revenue Officer

Dane Taylor

Chief Information Officer

Colin Chan

COO

George Walmsley

CEO

Mike Shipley

EDITORIAL ADVISORY BOARD

Celine Chiovitti, OMERS

Katie McNulty, CAAT Pension Plan

Greg Hurst, Greg Hurst & Associates

Robert Weston, Pharos Platform

Kevin Minas, Mawer Investment Management

Mark Newton, Newton HR Law

Jim Helik, James Helik Consulting

Tim Clarke, tc Health Consulting

EDITORIAL INQUIRIES

james.burton@keymedia.com

SUBSCRIPTION INQUIRIES tel: 416 644 8740

fax: 416 203 8940 subscriptions@kmimedia.ca

ADVERTISING INQUIRIES

Michael Hughes michael.hughes@keymedia.com

Doris

WEALTH

OPINION

A Goldilocks scenario?

Active

management

is key to assessing potential risks and rewards in private credit, says Parul Garg

AGAINST A backdrop of ongoing uncertainty – Fed interest rate cut decisions, the US election, geopolitical tensions, wars, and AI – investors are rightly apprehensive. At the same time, as always, there are bright spots in the market, if you know where to look. One pocket of attractive opportunities is in stressed and distressed credit. Today’s market is, like the tasty porridge in the classic 19th century fairytale, Goldilocks and the Three Bears, “Not too hot, not too cold, just right.” This may be the ideal time for investors to partake.

Last year, as interest rates rose, the number of corporate defaults climbed to 153, up 80 percent from 2022. (The media and entertainment sector drove defaults with 31,

to continue into 2024 since companies may use distressed exchanges as a tool to manage looming maturity dates, especially as high interest rates keep refinancing out of reach for some of these issuers.

Strategic deleveraging

Passive investors are adopting a cautious waitand-see stance regarding macroeconomic issues and underlying fundamental improvements. The high-yield bond market’s overall health remains robust, although issuers must address upcoming maturities. While current credit spreads offer limited appeal for straightforward gains, there are opportunities in segments that did not fully benefit from

A selective investment approach can provide avenues for strategic deleveraging despite a weakening macroeconomic environment

more than triple the previous year’s tally and matching its highest annual tally since 2009.) Yet the high-yield market remained resilient. This resilience can be attributed to robust economic data, growing optimism surrounding a potential soft landing, and better-thanexpected corporate earnings. The lack of significant maturities facing the leveraged credit market has also been a positive factor supporting high-yield bonds and leveraged loans maturing through the end of 2025.

However, lower-rated credits still face a disproportionate percentage of debt maturing in the next two years. Distressed exchanges were the largest driver of defaults last year, accounting for over 40 percent of defaults for the third straight year. This trend is expected

previous narrowing spreads. A selective investment approach, especially with stressed and distressed credit opportunities, can provide avenues for strategic deleveraging despite a weakening macroeconomic environment.

Pender employs a 13-point checklist encompassing all potential risk and return factors, with the understanding that no two credit opportunities are alike. One current example is Emergent BioSolutions, a US-based specialty pharmaceutical company and a critical supplier to the US government. The company encountered operational challenges in 2022 in its manufacturing division. Last year, it introduced a new product addressing overdose prevention in the opioid crisis. It is targeting US$1 billion in revenues for 2024

and currently has US$900 million in debt. The distressed first-lien term loan is trading at 88 cents on the dollar, representing a yield-tomaturity of 17 per cent. The unsecured bonds are trading at less than 40 cents on the dollar, yield-to-maturity of 27 per cent. Based on our analysis of the company’s fundamentals, we view this as a very attractive opportunity.

External factors play pivotal role

In a credit cycle, external factors often play a pivotal role. Renewed concerns about the banking sector or an increase in defaults among commercial real estate borrowers could be the exogenous factors that spill over into corporate debt markets. Prices in the US commercial real estate sector have plummeted more in the present monetary policy tightening cycle than in previous episodes. To avoid fire sales, some lenders have been offering indebted property owners flexibility; however, this strategy has its limits, and once those are breached we may see rising delinquencies and defaults. This could restrict lending and trigger a vicious cycle of tighter funding conditions, falling commercial property prices, and losses for financial intermediaries, with adverse spillovers to the rest of the economy.

Historically, well-managed and well-capitalized businesses tend to strengthen during market downturns, while weaker entities face harsher penalties for negative news and are overlooked for positive fundamental improvements. Anticipated increases in corporate defaults due to shifting maturity schedules have not deterred investors, as current yield levels in stressed and distressed credits are compelling. As the market continues to grapple with economic, political, and geopolitical dynamics, active management and careful credit selection to correctly assess the potential risks and rewards will be key to unlocking value for investors. Smaller and more nimble teams with experience and proven success in workouts in distressed debt are well positioned to generate alpha during this changing – and challenging –credit cycle.

HOW OPTIMISTIC ARE CANADIANS ABOUT 2024?

46% of Canadians expect to see improvements in their physical health

BREAKDOWN OF DRUG INSURANCE COVERAGE

Many Canadians require prescription drugs to manage their health. The graph shows the percentage of men and women aged 12 and over covered by a drug insurance plan, by type of plan and select demographic characteristics.

Governmentsponsored plan Employersponsored plan

Characteristics

41% expect an improvement in their quality of life

39% expect an improvement in their mental health

25–64 years (ref.)

20% expect finances to worsen

19% expect stress levels to get worse

Source: Angus Reid Institute

Associationsponsored plan Age group Percentage covered by plan 12–24 years 78.8% 80.5% 16.0% 16.3% 53.4% 55.6% 7.9% 16.0% 5.3% 5.2% 80.4% 81.3% 11.9% 12.7% 62.2% 63.5% 4.9% 3.6% 4.7% 4.7% 80.1% 79.5% 50.8% 53.6% 26.5% 23.5% 3.9% 2.9% 10.2% 9.4%

65 years and over

Private plan Men Women Men Women Men Women Men Women Men Women

OMERS REPORT

A report by the Canadian Centre for Economic Analysis analyzed data related to the OMERS’ pension payments, operations, and assets. Key numbers for 2023:

97,000

9.3% $5bn 45,300 $8.7bn

Share of retirement benefits paid out in Ontario

Number of jobs members’ retirement income supported

Contribution of members’ retirement income to province’s GDP

Additional jobs created by OMERS’ investments

Amount OMERS’ investments contributed to province’s GDP

Source: Canadian Centre for Economic Analysis

TOP 10 PENSION FUNDS

New research found that about 42% of enterprise-scale organizations (over 1,000 employees) surveyed have AI actively in use in their business. The figures below highlight some of the areas in which it is used most.

‘WE’RE NOT WHERE WE WOULD LIKE TO BE’

Jesusa Chow, OPTrust senior VP, has blazed a trail in the pension industry and hopes to inspire other women

AS SOMEONE whose mother had to fight for the chance to go to university, it’s not lost on Jesusa Chow that opportunities for women have come a long way. Yet she is also well aware that there is still more to achieve.

Today, Chow is senior vice president, member experience and pension operations, at OPTrust (OPSEU Pension Plan Trust Fund), a legal trust formed by two plan sponsors, the Ontario Public Service Employees Union (OPSEU) and the Government of Ontario.

“My mother wanted to go to university but was told she didn’t need to go,” says Chow. “She did go and was one of the few females in her classes.”

It was the support of strong people like her parents that helped Chow build a successful career in the pension industry. “It’s important to have mentors around and hear their stories. I find that very inspiring,” she says.

Chow graduated from the University of Toronto with a degree in arts management but soon discovered that the industry was quite small in Toronto. It was while navigating this sector that she ventured into the pension industry, specifically OPTrust, as an “accidental tourist”.

OPTrust was formed in 1995, and Chow joined the company in 1997 in its client services area. “I never looked back,” she says.

“It was an exciting time to join an organization because it was just starting, and it was small. There were probably 30 to 50 of us.”

Growing with a maturing organization

“As the organization matured, it was great to grow a career and learn about pensions,” Chow says. “There were amazing opportunities in this organization as it grew, and we watched it become more sophisticated over time.

OPTrust now has over 106,000 members and retirees. Chow and her team offer a

“Eventually, we will put them on that pension.” Chow is still as enthusiastic about her work as she was when she first started, if not more so. “We are always looking at strategies and trying new things, like OPTrust Select,” she says.

A different option

OPTrust Select, a defined benefit (DB) offering, was announced in 2018 and offers a secure retirement solution at a moderate cost for both employers and employees by utilizing the advantages of the organiza-

“We work to make sure that we’re delivering pensions to the members. Then we provide education so they understand the value”

full range of pension operations on the administration side and work with employers to bring in the contributions, support members, and collect data needed to provide the pensions.

They offer comprehensive education, partnering with the firm’s communications team to make sure members understand the value of their benefit, the options they have, and the choices they need to make.

tion’s large scale and investment expertise. It is targeted at Ontario workplaces in the broader public sector, charitable organizations, and not-for-profit groups that do not have a workplace DB pension plan but may have a defined contribution (DC) plan, a group RRSP, or no retirement savings arrangement at all.

“OPTrust Select is an option for people who are often not covered by pensions, and these

organizations – such as non-profits – are predominantly female.”

OPTrust Select also benefits the OPSEU Pension Plan by creating greater sustainability over the long term through the allocation of risk and operational costs over a broader membership base.

“We also have a project team working to launch a new pension administration system,” says Chow. “They are working with our finance and business partners to make sure that we will be able to deliver on the pension promise. The new system will launch in four years.”

Another important challenge is communication. Chow says her team must ensure they communicate with members in a way that will make them pay attention to their pensions.

A holistic look at retirement

“We work with the teams across our organization to make sure that we’re delivering pensions to the members. Then we provide education so they understand the value of those benefits,” Chow says.

“We need members to understand they have this great pension, they have financial security, but we also need to help them think about what else they might need if they’re going to live to 90 or 100. Have they planned for health care? What’s housing going to look like? Will they have a social network?

“Our team is looking at this closely because we want members to have financial security in retirement but also confidence in all these other areas. We want our members to be aware, and to help them to think holistically about their retirement.”

Purpose and mission

Chow says International Women’s Day (March 8, 2024) is an important day on which to reflect and celebrate.

“Women inspire me. The talented and bright women in our industry inspire me every day, especially the women at OPTrust. We have inspirational women in various

“We’re fortunate to be in a society and in a generation where we’re thinking about diversity”

leadership positions and a lovely supportive network. It’s those women that excel in the workplace and at being a mother and are caught in the sandwich generation – those everyday women I work with inspire me to think about myself as a leader.

“I hope that I inspire them too and make them feel supported.”

“We get so busy day to day with our jobs and families to support, and I find women are very humble too. International Women’s Day gives us a chance to stop and think about

how we got here and how we’re helping and sponsoring others. It’s also a reminder that there is still so much to do.

“We see a lot of women at managerial levels, but not necessarily in the C-suite. There’s progress, but we’re not necessarily where we would like to be. It’s not just about gender equity but about diversity in general.

“We’re fortunate to be in a society and in a generation where we’re thinking about diversity. It’s important for us to continue to have those conversations.”

Specialty drug costs are levelling off, but what lies ahead in 2024?

Research indicates noticeable impacts on prescription medications post-pandemic, with diabetes overtaking inflammatory diseases as the top drug category

THE ANNUAL drug spend per plan member increased by 6.3 percent in 2022, driven primarily by a 5.4 percent increase in plan members who made a claim. At the same time, the spend per claimant grew by 0.8 percent, according to Express Scripts Canada’s 2023 Drug Trend Report. For the first time in more than 10 years, the growth rate for specialty drugs fell behind that of traditional drugs.

The spend per plan member for traditional drugs increased by 6.9 percent in 2022, and the spend per claim by three percent. A key driver was the 10 percent rise in spend per claim for diabetes medications.

Specialty drugs represented 27 percent of overall spend and 0.7 percent of claims. Spend

the start of the pandemic. Two of the top-10 categories – diabetes and attention deficit hyperactivity disorder (ADHD) – are seeing very strong growth for drugs that are relatively high-cost compared to other traditional drugs.

Biosimilar switching policies also influenced cost trends in 2022, with their dampening

“Group carriers and plan sponsors should be working together on high drug costs” Éric Trudel, Beneva

per plan member increased by 4.8 percent. Utilization, the proportion of plan members making a specialty claim, rose by 5.4 percent. Telus Health’s 2023 Drug Data Trends and National Benchmarks report agrees that diabetes replaced inflammatory diseases, such as rheumatoid arthritis, as the top drug category for claims in Canada in 2022. Plan members already diagnosed with diabetes saw rising eligible amounts, in part due to increased use of higher-cost, second-, or third-line therapies. The positive impact these drugs have on weight loss also drove prescribing activity – including the potential for off-label use by people who do not have diabetes.

Drug plan utilization has rebounded since

effect expected to continue in 2023 and 2024 as more provinces and territories roll out these policies for public plans, prompting some private payers to adopt similar approaches. The Telus Health report says biosimilar switching policies were likely a driver behind three years of moderate spend by private drug plans. As well, provincial biosimilar-adoption policies have had a ripple effect on private drug plans, particularly in British Columbia and Quebec.

Nationally, biosimilars’ share of claims for biologics has grown from just 4.2 percent in January 2019 to 32 percent in December 2022. That will likely accelerate in 2024 as remaining provinces and territories complete their transition periods.

The report says increasing the use of generic drugs continues to be an important element of cost management in private drug plans, and mandatory generic policies are an essential vehicle for achieving those savings.

Alarming trend

Éric Trudel, executive vice-president and leader, group insurance, at Beneva, says the top two percent of claimants account for 40 percent of the cost of drug insurance. “This means the other 98 percent make up just 60 percent of the cost. This compares to the top two percent accounting for 25 percent of costs in 2016 and 10 percent in 2009,” he says. “This is a sign that group carriers and plan sponsors should be working together on the high drug costs, because that is an alarming trend.”

With the high cost of drugs for rare diseases being the primary reason behind these statistics, Trudel says rare diseases should probably be something the federal government’s pharmacare plan covers. “That would provide public access across the board. There are people who don’t have private drug plan coverage, and public coverage would give more Canadians access to those specialty drugs.”

Restricting off-label use of medications is another way plan sponsors can contain costs, says Trudel. As an example, Beneva saw a new trend last year with the diabetes medication Ozempic. “This drug is not so expensive – around $3,000 per patient per year – but it was very popular. Many people were using it for one of its side effects, weight loss, which is not what Health Canada has approved it for. In mid-2023, to help mitigate costs for our plan sponsors, we put in place mandatory prior authorization by our pharmaceutical team to check that it is really prescribed for diabetes. If not, we don’t reimburse.”

For drugs approved by Health Canada as anti-obesity drugs (which Ozempic is not currently), Trudel says plan sponsors can choose to allow reimbursement; Beneva would just make that an option for that specific sponsor. “We offer the anti-obesity drug clause as an option to our plan sponsors. They can

then decide if they want their plan to cover it or not, depending on their philosophy.”

What will the next few years look like?

“We haven’t seen the double-digit trend rates or cost increases in the last few years,” says Massimo Nini, vice-president, consulting, underwriting and actuarial, at AGA Benefit Solutions. “We negotiate with carriers all the time around prescription drugs and largeamount pooling costs. However, at this point, there are so many new drugs hitting the market, it will put a lot of pressure on plans.

“The question becomes, what are the next couple of years going to look like? New drugs

it be considered in the same way as drugs for diabetes or another medical condition? Arguably, someone could be healthier and more engaged if they could generate weight loss. Some plans exclude weight loss drugs from their plan offering and some exclude fertility drugs. Do those decisions make sense in terms of the company’s values around wellness, diversity, equity, and inclusion? It’s about balancing the cost containment, accessibility, and the wellness aspect.

“In some cases, the ROI will be clear because members will be more productive at work. But it can also reduce disability costs and absenteeism and things like that. There is also a

“At this point, there are so many new drugs hitting the market, it will put a lot of pressure on plans” Massimo Nini, AGA Benefit Solutions

will hit the market, but what will the prevalence be or the number of individuals that will need to use those drugs? How will they impact private plans?”

Nini says in order to manage any benefit plan, sponsors need to think about why they are offering the plan and how they will measure ROI. “They want to cater to the majority while at the same time recognize there are individual needs and find ways to level the playing field in the context of benefits for all plan members.”

He adds that employers want to attract and retain diverse workforces, so their benefits should reflect this. “What do you add and what do you exclude to satisfy a diverse group while maintaining cost containment?”

Plan sponsors could change the way they view and offer benefits. Instead of fertility benefits, offer family building, he says. “A part of that would be prescription drugs, but there is a part that is not. Same-sex couples might need support or education around how to build their families that doesn’t include drugs.

“When it comes to obesity, are drugs offered considered lifestyle drugs, or should

measure that’s hard to quantify, which is just members’ general well-being.

“From a cost containment standpoint, plan sponsors may make decisions to keep drug costs or group benefit costs in check, but what ramifications could that have down the road? What type of pressure is that putting on plan members? Especially in the last couple of years as the inflation levels have increased, an extra $800 or $900 being paid tax-free from a group benefits program could have a huge impact on Canadians. If they forego a treatment in order to afford food or housing, that could have a negative impact on their work and ultimately create a cost for the employer.”

Plan sponsors must remember that while the number of plan members making claims appears to be returning to pre-pandemic levels, the backlog in Canada’s health care system may take several more years to address to catch up on delayed medical appointments, diagnostic tests, and surgeries. During that time, there is a significant risk of chronic diseases and serious illnesses going undetected or worsening as a result, and this may impact drug plan costs.

From sailboats to rowboats: Embracing active management

Adapting to market shifts, BMO GAM’s Earl Davis on crafting tailored solutions for fixed income

AS WE CHART the course of BMO Global Asset Management’s (“BMO GAM’s”) transformation into a powerhouse team, the ethos that underpins the journey is the commitment to a winning culture – a sentiment that resonated deeply with Earl Davis from the outset.

“What initially captivated me about BMO was the narrative of a winning culture that the firm was fervently building. This echoed my experiences at my previous organization, Ontario Teachers’ Pension Plan, which thrived on a similar philosophy of success and excellence,” says Davis, current Head of Active Fixed Income and Money Markets at BMO GAM.

He continues, “The robust foundation of the fixed income team was apparent, and since my joining – when we were just a team of five – we’ve grown to a team of 11. This growth isn’t just in numbers; it’s a strategic enhancement of our capabilities through the deliberate addition of diverse investment

professionals who embody our innovative and forward-thinking spirit.”

Part of BMO GAM’s success to date stems from the investment team’s ability to customize tailored solutions that precisely meet clients’ needs. This capability, particularly evident in Davis’ team, represents the cornerstone of his approach to active fixed income management.

Davis gives an analogy: “Imagine navigating a sailboat with robust tailwinds propelling you towards the idyllic white sands of a Caribbean beach,” he says. “This journey symbolizes the financial market’s previous trajectory – a steady course of declining interest rates, low inflation, and rising values in equities, real estate, and other risk assets. However, the onset of COVID-19 dramatically altered this scenario, transforming these supportive tailwinds into a chaotic gale, disrupting the previous steady course.

“This shift led me to a crucial realization: we’ve transitioned from a predictable journey towards a destination, akin to sailing effortlessly towards the Caribbean, to navigating in an environment where winds blow unpredictably from all directions. In such a scenario, abandoning the sailboat for a rowboat becomes imperative. An active manager in this context is like a skilled rower, capable of manoeuvring with or against the wind, seizing opportunities as they arise.

Volatility and active management

Reflecting on his 12-year tenure at the Ontario Teachers’ Pension Plan, Davis highlights the importance of understanding long-term trends in investment. He predicts a period of higher inflation and volatility for the next 10 to 20 years, requiring a dynamic approach to interest rates, which he expects to fluctuate rather than follow a single direction.

Davis says, “For 2024, we have two primary convictions. First, we anticipate continued market volatility, similar to the patterns seen from 2020 through 2023. Second, we believe that by the end of 2024, interest rates across the term structure will generally be lower than what we saw in the second half of 2023. This expectation stems from the maturation of the business cycle and the delayed effects of cumulative interest rate changes.

“We’ve seen this volatility already, exemplified by the Canada 10-year bonds’ movement since January. My experience in the markets since 1994 leads me to view market dynamics as a pendulum, swinging between buying and

selling. This binary nature of market movements, influenced by multifaceted information, often results in extreme fluctuations.

“In terms of fixed income, we believe that most of the returns in 2024 will come from the yield of bonds and selective corporate investments. We are now shifting to a buying stance for the first time since 2021, anticipating capital appreciation opportunities alongside the yields.”

Currently, Davis perceives a “6 o’clock” position on the pendulum, indicating a likelihood of further sell-offs, yet the team remains open to buying opportunities without certainty of market turnaround timing.

One reason for this cautious approach is the negative carry trade involved in buying 10-year bonds when the overnight rate is at 5 percent, especially for any investors using leverage. The team’s investment strategy focuses on generating above-benchmark returns. In their highest-risk portfolio, they seek coupons of 5 percent or higher from reputable companies, combined with sovereigns and tactical use of short positions and hedges for risk-off or opportunistic moments. This approach to portfolio construction reflects their market insights and experience in pension plans and asset management, prioritizing active management to navigate market volatility and capitalize on sell-offs.

Sector preferences

Discussing investment strategies, Davis underlines the importance of robust discussions within his team to avoid blind spots in their outlook. He is optimistic about financials and telecoms, citing attractive spreads and strong business models in these sectors. Specifically, he sees potential in companies like Rogers Communications, noting their ability to pass through inflation costs to consumers, and the favourable outcome of a recent spectrum auction.

“Our preference for financials stems from several reasons,” Davis says. “Firstly, the attrac-

tive spreads in this sector are notable. This has been partly driven by increased bank mergers, such as the acquisition of HSBC by Royal Bank of Canada, necessitating significant funding and leading to an upsurge in issuance and consequently wider spreads. These widened spreads are typically due to either supplydemand dynamics or a weakening business

Sponsored by

quantitative and qualitative decision-making,” Davis says.

Davis takes pride in the team’s development and the confidence they instill in their institutional clients. “The feedback we consistently receive is a testament to the trust and confidence placed in us. It’s a reflection of our collective strength as a team and the effec-

“[In an unpredictable market] an active manager is like a skilled rower, capable of manoeuvring with or against the wind”

Earl Davis, BMO Global Asset Management

model. However, in this case, despite the strong and diversified business models of North American banks, the spreads remain high due to the volume of issuance, making financials an appealing sector from a yield perspective, rather than for capital gains.”

The banking sector’s robust model, which includes a significant presence beyond Canada, and the ongoing employment and income generation, which supports regular mortgage payments, underpin Davis’ confidence.

Revitalizing BMO GAM’s active fixed income team, Davis identifies geopolitical risk and wage inflation as two primary challenges facing fixed income markets. However, through active management, his team is equipped to steer through these uncertainties. By adjusting duration and being selective in credit quality, Davis’s team demonstrates resilience and adaptability in the face of market fluctuations.

“Another key aspect of our strategy involves leveraging technology to enhance our capabilities. Early on, we prioritized transforming our Excel-based analysis into more sophisticated, Python-powered analytics. This shift has significantly improved our ability to process and visualize data, enabling a blend of

tiveness of our process, all of which are integral to the winning culture that drew me to BMO GAM.” He adds, “The expansion of our team, particularly following Sadiq Adatia’s arrival as Chief Investment Officer in 2021, has been a significant milestone in reinforcing this culture of excellence. BMO is not just an organization that professes values; it is one that actively ‘walks the talk,’ a fact that is increasingly evident in our results.”

Theviewpointsexpressedbythesubjectmatterexpertrepresentstheir assessmentofthemarketsatthetimeofpublication.Thoseviewsare subjecttochangewithoutnoticeatanytime.Theinformationprovided hereindoesnotconstituteasolicitationofanoffertobuy,oranoffertosell securitiesnorshouldtheinformationberelieduponasinvestmentadvice. Pastperformanceisnoguaranteeoffutureresults.

Thisarticleisforinformationpurposes.Theinformationcontainedhereinis not,andshouldnotbeconstruedas,investment,taxorlegaladvicetoany party.Particularinvestmentsand/ortradingstrategiesshouldbeevaluated relativetotheindividual’sinvestmentobjectivesandprofessionaladvice shouldbeobtainedwithrespecttoanycircumstance.Anystatementthat necessarilydependsonfutureeventsmaybeaforward-lookingstatement. Forward-lookingstatementsarenotguaranteesofperformance.Theyinvolve risks,uncertaintiesandassumptions.Althoughsuchstatementsarebasedon assumptionsthatarebelievedtobereasonable,therecanbenoassurance thatactualresultswillnotdiffermateriallyfromexpectations.Investors arecautionednottorelyundulyonanyforward-lookingstatements.In connectionwithanyforward-lookingstatements,investorsshouldcarefully considertheareasofriskdescribedinthemostrecentsimplifiedprospectus.

BMOGlobalAssetManagementisabrandnamethatcomprisesBMOAsset ManagementInc.andBMOInvestmentsInc.

Will implementing AI help your bottom line?

A new HR report looks at the benefits of businesses using AI tools. How cost-effective are they? And will they help HR departments make better decisions?

AS EMPLOYERS continue to deal with ongoing challenges around staffing, human resources departments are increasingly challenged by the tension between the need to adapt and innovate versus the need to control costs.

The current economic climate remains characterized by instability and unpredictability, so organizations need to prepare for the uncertain future of work over the coming year, says the HR Trends Report 2024 from HR research and advisory firm McLean & Company. The report suggests that the rise of generative artificial intelligence will likely bring even more change to the workplace, but it can also be used to adapt to and prepare for change.

“HR leaders will be helping companies with digital transformation and organizational behaviours that will affect the adoption and good use of technology,” says Lisa Highfield, principal director, HR technology and artificial intelligence, at McLean & Company. She says addressing technology challenges only from an IT or business perspective can fall flat. “We really need to start thinking about this more holistically in terms of the impacts to the organization and the people as we start to move through these changes.”

Leaders must come together

Firms need to look at the return on investment in AI tools and whether it is actually feasible to use them, Highfield says. Different organizational leaders will have a different idea of what AI can or can’t do for their organization.

“I see a lot of the value in all strategic leaders – including HR – coming together around the

as AI will be very beneficial, creating efficiencies and allowing the automation of HR functions and operations. “It will also enable us to do better with data, insights and decision-making.”

The report says 65 percent of HR leaders are already making better use of technology, and those that are making better use are 1.3 times more likely to be high-performing,

“There really isn’t any one area where I don’t see AI or technology having opportunities to help us and make things more efficient and automated”

Lisa Highfield, McLean & Company

strategy and vision of the organization and working to align the technological strategy around that,” she says. As technological innovation experiences exponential growth in 2024, HR’s role in supporting change and enabling innovation will be increasingly important to organizational success.

Highfield believes new technologies such

changing quickly at scale to capitalize on new opportunities. Sixty-three percent of HR leaders are leveraging data for talent decisions, and this demonstrates that HR is seeking to deliver on its priorities through a data-driven approach, enabled by technology.

However, the report shows that HR remains slow to adopt newer technologies

such as generative AI, with just 28 percent of HR organizations taking steps to implement generative AI in 2024.

Technology a key part of employee experience

“In our research around the HR trends, one of the areas that we looked at was the employee experience, and we see technology as being part of that employee experience story,” says Highfield.

Employees’ expectations for a great employee experience have grown in recent years, and meeting these expectations has been a top-two organizational priority since 2022. Whether organizations have delivered on this is a different story. The report says a more systematic and intentional approach is needed for organizations to improve employees’ perceptions of their cumulative lived experiences with an organization. A positive employee experience is directly linked to multiple success measures, including overall organizational performance.

Technology is one of five crucial areas (along with physical space, social and relationships, culture, and task) for improving the employee experience, as accessible and reliable technology is central to ensuring a smooth day-to-day experience. Technology is also vital to improving HR functions and operations.

As for generative AI, since ChatGPT launched in late 2022, the HR world has been buzzing with the potential of the technology. Despite this potential, HR teams have been slow to assess the new technology, citing a lack of time to assess the possibilities as the number one reason they are waiting.

The report says that in 2024, as technology vendors embed new generative AI products into software already used by HR, like human capital management platforms, it will make it easier and faster for organizations to assess and embrace the possible use cases.

Unfortunately, the risks of AI remain a concern for many HR professionals, with 32 percent citing risk as a reason for not implementing the technology.

“In our research around the HR trends, one of the areas we looked at was the employee experience, and we see technology as being part of that employee experience story”

Lisa Highfield, McLean & Company

Potential for AI in all business areas

“There’s a lot to explore around AI,” says Highfield. “There really isn’t any one area where I don’t see AI or technology having opportunities to help us and make things more efficient and automated.”

Importantly, “it’s not a one-size-fits-all approach, and, oftentimes, a lot of foundational work will have to be done around HR technology enablement. Organizations will have to do a current state application portfolio assessment in terms of what HR tools they have available, including data that resides in the system, and then take a fresh approach to building an HR technology portfolio that will work for the organization in the future.

“Along the AI maturity curve, organizations typically start with exploration. They can

look at all of the functional HR areas and find where they can get the most return on investment, and then they could initiate some pilot programs around AI.”

Providers can help organizations with assessment, education, installation and utilization of new technologies. They can look at the opportunities within an organization, prioritize what is most feasible and where it could potentially get the most value, and develop a roadmap.

Leaders will “need to be prepared to seize opportunity and mitigate risk at the same time. They don’t want to shy away from these opportunities,” Highfield says. “They will want to be prepared for them, and they will also want to do their due diligence. It’s likely going to be a reiterative process because it’s a changing environment.”

CHRONIC ILLNESS

Employers breaking down barriers to health care

Businesses are offering innovative services and technologies that increase their value proposition for employees

IN CANADA, nearly half (44 percent) of adults have a chronic condition, such as heart disease or diabetes, that can have significant ramifications for employee well-being and productivity. Annually, the cost of absenteeism and presenteeism resulting from unmanaged chronic disease is $190 billion and, from 2019 to 2022, there was a 23.3 percent increase in per capita spend on chronic diseases, according to data from Medavie Blue Cross.

At the same time, there is an increased expectation among employees that their employers will support them with disease awareness, prevention, and management. This provides opportunities for employers to help their employees, while also increasing productivity and employee retention and, ultimately, building their bottom line.

Chronic illness on the rise

Chronic disease is on the rise, and mental health issues are outpacing all other chronic diseases, says Tara Anstey, director, business development client value, at Medavie Blue Cross. “Coming out of the pandemic, there were unmet needs around mental health, diabetes, hypertension, and other chronic diseases. Unmanaged chronic diseases – presenting as increased absenteeism and reduced productivity in the workplace – are costing Canadian employers about $190 billion a year.

“It presents a crisis for businesses in terms of staffing their workplaces, but it’s also creating challenges around attraction and retention in this market. It’s important for employers to understand that employees are in the driver’s seat and are looking for employers that support them and the totality of their health needs.”

The increase in spend on the management of chronic health care reflects higher utilization, and that is good news. Anstey says this is due to better and increased access to care, which is helping people meet their chronic illness care needs.

EVP of greater importance

“The employee value proposition is of greater importance in terms of attraction and retention,” Anstey says. “Where in the past access to care may have taken a backseat to public health measures, employers today realize

how they can expand access to care via other modalities and technologies that go beyond traditional services and benefits.

“Employers that take the time to make sure they are offering the best possible EVP will be able to help support multigenerational workforces with employees that are increasingly demanding benefit plans to meet their unique health conditions. This will help in attracting and retaining top talent as well as lower the incidence of disability by keeping people healthy and productive in the workforce.”

Providers like Medavie Blue Cross offer

“Employees are in the driver’s seat and are looking for employers that support them and the totality of their health needs” Tara Anstey, Medavie Blue Cross

they need to take a more active role around bridging the gaps in primary care.”

Employers can help in many ways, Anstey adds. One example is by creating a culture that reduces stigma and provides more options for discussions around support for employee needs. It is also important to provide vetted, accurate health care and wellness information.

“We are seeing much more interest from plan sponsors to improve the EVP, so they are looking at the totality of the services and benefits they offer to ensure they deliver value for both employees and the company. They want to know what barriers there might be in terms of the design of the programs and also

innovative solutions and strategies such as a ‘managing chronic disease’ program that connects people with professionals in their communities for one-on-one counselling and education services to gain the knowledge and confidence they need to self-manage their conditions. Additionally, by integrating employee and family assistance programs (EFAPs) into an overall benefits plan design, employers can provide additional pathways to care for their employees. Taken a step further, with a digital-first EFAP approach, employees have access to more support channels and barrier-free resources for their health and wellness needs.

Canada’s women leaders in the benefits, pensions and institutional investments industry make broad impacts by pushing boundaries of excellence

CREATING A BRIGHTER FUTURE

BENEFITS AND PENSIONS MONITOR has named 45 influential women leaders to its inaugural 2024 list of Elite Women, a passionate cohort dedicated to breaking down barriers and raising standards in the financial services sector.

“The industry overall has evolved, yet we still have a long way to go,” reflects Roxana

Nache, a national director of wealth at Canada Life, who commented on this year’s report. “We need to be each other’s greatest allies and cheerleaders.”

This year’s Elite Women are at the forefront of the Canadian benefits, pensions and institutional investments industry. They are leading with authenticity, they value diversity, and they

“Through my own actions, I’m working to improve this industry for the better. By empowering more women to rise, we’re going to see a meaningful and positive transformation”

Helen Hurlbut, Equiton

are helping reshape industry standards for the next generation of women leaders by:

• prioritizing gender equality and equity

• promoting an inclusive workplace in which everyone can thrive

• emphasizing mentorship

• achieving extraordinary results for their organizations

• breaking new ground on products and solutions

ELITE WOMEN BY LOCATION

As the following five award-winning women leaders illustrate, their achievements and impact transcend traditional practices and norms.

Helen Hurlbut – Equiton Co-founder and CFO

Drawing on her three decades of transformational leadership in the real estate business, Hurlbut seized an opportunity nine years ago to establish private equity firm Equiton, an emerging leader in Canada’s real estate investment space.

Since the beginning, she has consistently prioritized inclusion and team empowerment while delivering remarkable growth:

• the company now boasts over 190 employees after beginning with three staff

• Equiton reached a milestone of $1 billion assets under management within a decade of launching

In support of Hurlbut’s nomination for BPM’s Elite Woman award, a former direct report acknowledged, “Helen has a vision for more than just the numbers. She has always been invested in the professional growth of her team, often setting lofty and challenging goals to which they can rise.”

It’s no surprise that Hurlbut cites leading Equiton’s team on its growth journey as rewarding. She also finds joy in seeing the smiles on employees’ faces as she walks the halls, a testament to her dedication to building a diverse workforce in which everyone feels valued, respected, and supported.

“In the real estate industry, female representation is less common,” Hurlbut remarks. “It’s important to me to make women feel they have the chance to thrive and achieve their goals.”

Christina Iacoucci – BGO Head of Canada and Canadian chief investment officer

As the first female CIO and head of Canada in BGO’s 100-year history, Iacoucci has broken barriers and now serves as an inspiration to aspiring women leaders in the real estate investment space.

With more than 30 years of experience in commercial real estate, Iacoucci’s accomplishments underscore her commitment to pushing boundaries:

• creating and overseeing the Innovation Lab at BGO, which focuses on strategic property technology investments in support of the firm’s ESG goals

• continuously raising the bar on sustainable real estate investing and innovation initiatives; this has become one of the hallmarks of her leadership

“The most rewarding aspect of my work is leading and collaborating with my team, who incorporate diverse perspectives while seamlessly integrating innovation, sustainability, and positive social impact on the asset that we build and manage for our clients,” she explains. “It’s not just about enhancing the built environment around us but also enhancing the experience of the people these assets impact.”

Iacoucci also embraces the opportunity to share her story of personal and professional challenges with partial deafness to help others face their obstacles with strength and resolve.

She firmly believes that these challenges should not define one’s potential, and, with the support of an important mentor, Iacoucci was able to build a rewarding career. She continues to be actively engaged in speaking engagements despite some of the challenges her hearing loss poses.

“The ability to positively influence others with my story is worth the initial discomfort

METHODOLOGY

In October 2023, Benefits and Pensions Monitor invited professionals from across the country to nominate their most exceptional female leaders for the inaugural Elite Women list. Nominees had to be working in a role that related to, interacted with, or in some way impacted the financial services industry, and to have demonstrated a clear passion for the benefits and pensions industry.

Nominators were asked to provide details of their nominee’s achievements and initiatives over the past 12 months, including specific examples of their professional accomplishments and contributions to the industry as a whole.

The BPM team reviewed all nominations, examining how each individual had made a meaningful contribution to the industry, to narrow down the list to 45 Elite Women.

“There are challenges in the financial sector that we all strive to overcome. I’m trying to ensure the road I create for those behind me has fewer bumps along the way”

Gayle Shurvell, Alberta Health Services

“When we look back and see all Canadians having access to appropriate health and product solutions for their unique needs, that is the impact I hope to have”

Marie-Chantal

Côté,

Sun Life Canada

“My goal is to help shape an industry that thrives on diversity, mentorship, and a commitment to creating sustainable spaces that truly serve the diverse needs of people”

Christina Iacoucci, BGO

I felt in sharing it because it teaches others that self-imposed limitations are the only real barriers.”

Gayle

Shurvell – Alberta Health Services

Director, employee benefits and retirement programs

Regarded by her peers as a resilient, caring,

and compassionate leader, Shurvell’s passion for delivering group benefit programs of the highest standards is unparalleled. She wears two operational hats in her current role, including supporting the trustees of the Health Benefits Trust of Alberta (HBTA).

Over a 35-year career, Shurvell has honed a forward-thinking leadership style that has catapulted her to the top of her field. Her

recent achievements are a testament to the positive contributions she has made:

• introducing the At-Work Services program, in collaboration with Canada Life, to participating HBTA employers and employees; this early intervention tool supports employees at risk of disability, prevents disability claims, and identifies non-medical issues in the workplace

• strengthening the governance and related education for the HBTA

In support of Shurvell’s nomination, a colleague commented, “Gayle is a visionary and always thinks about innovative ways to serve HBTA participants better while sustaining its programs. Her motto is, ‘Not if, but how, we can make things happen’.”

Beaming with pride, she reflects on the team she has built over her eight years on the employer side of the group benefits,

pensions and institutional investments industry. Shurvell emphasizes that she ensures everyone feels valued, connected, and supported. That has translated into high talent retention, comprised of people passionate about the organization’s mandate.

“Get me into a meeting where we’re brainstorming and talking about what the future looks like – that completely inspires me,” she says, adding that her team plays a crucial role in that process. “Being able to embrace change, adapt, and shift your mindset to long-term goals is key for me.”

Anne Meloche – Sun Life Global Investments

Head of institutional business

An actuary by training with over three decades of experience in pension and investment consulting, Meloche has led SLGI’s institutional business team to become the 16th largest pension manager in Canada on the defined contribution side. Its institutional pension assets were $21.2 billion as of December 31, 2023.

She strives to build strong relationships with colleagues by communicating clearly and encouraging diversity of thought.

Meloche has been instrumental in paving the way to innovative retirement and investment initiatives and solutions, resulting in meaningful contributions to the financial industry and all Canadians.

Highlights for which she has received Elite Woman distinction include:

• initiating and implementing significant and complex changes in the company’s flagship investment product, involving the conversion of $11 billion into institutional pooled funds

• long-serving board member for the Quebec Breast Cancer Foundation and its audit committee, where she oversees the foundation’s asset investment policy

“Managing and promoting talent has been and still is the most important quadrant of my leadership success,” she explains. “I’ve always put a lot of energy into building and leading a harmonious team, balancing that with the right dose of managerial courage.”

Not one to back down from challenges, Meloche has honed an approach that enables her to take a step back to understand what people need to function at their best. She gleaned this strategy from early advice that sparked a turning point in her career and continues to reap dividends.

Marie-Chantal Côté – Sun Life Canada

Senior vice president of group benefits

With a career journey spanning 25 years at Sun Life Canada, Côté has held progressively senior roles across the business. She values diversity and strives to create a space for it in the workplace.

In 2021, her relentless drive, focus, and commitment to excellence culminated in her appointment to her current position, a testament to her impressive achievements, which include:

• spearheading the launch of several research and product initiatives, specifically emphasizing mental health and DE&I

• under Côté’s leadership, Sun Life offered fertility, surrogate, and gender affirmation coverage

“She believes it’s OK for employees and leaders to reveal vulnerabilities, including struggles related to mental health,” a nominator remarked of Côté’s compassionate leadership. “She’s also passionate about improving the dynamics of workplace equity for women and 2SLGBTQIA+community members.”

“I encourage women to explore this industry and discover new interests or skill sets; they’ll have more well-rounded experience, and career progression will be at their fingertips”

Anne Meloche, Sun Life Global Investments

INSIGHTS

As part of our editorial process, Key Media’s researchers interviewed the subject matter expert below for an independent analysis of this report and its findings.

Roxana Nache National Director Wealth Canada Life

An unwavering dedication to leading authentically is near and dear to Côté’s heart. She brings her whole self to the office and talks candidly with her team about mental health challenges, as well as her professional experience as a member of the 2SLGBTQIA+ community.

“I always tried to do things that excite me with people who inspire me,” she explains. “I need to feel that I’m doing something meaningful and purposeful because then my passion and strengths come out; boundaries don’t exist anymore.”

Anne Meloche

Head of Institutional Business Sun Life Global Investments

Phone: 1 (514) 3476137

Email: anne.meloche@sunlife.com

Website: slgiinstitutional.com/en

Christina Iacoucci

Head of Canada and Canadian Chief Investment Officer

BGO

Website: bgo.com

Gayle Shurvell

Director, Employee Benefit and Retirement Programs

Alberta Health Services

Phone: 7802176995

Email: gayle.shurvell@albertahealthservices.ca

Website: albertahealthservices.ca

Helen Hurlbut

Co-founder and CFO Equiton

Phone: 1 905 635 1381

Website: equiton.com/institutional-investors

Lauren Bloom, CFA Head of Canada

T. Rowe Price

Phone: (416) 360 7214

Email: lauren.bloom@trowprice.com

Website: troweprice.com

Marie-Chantal Côté

Senior Vice President, Group Benefits

Sun Life

Phone: 514 451 3119

Email: marie-chantal.cote@sunlife.com

Website: sunlife.ca

Samantha Cleyn, CFA Managing Director, Head of Institutional Sales & Service BMO Global Asset Management

Phone: +15142142773

Email: samantha.cleyn@bmo.com

Website: bmogam.com/institutional

Janine Guenther

LinkedIn: linkedin.com/in/janineguenther/

Jill Wagman

Principal and Chair, Board of Directors Eckler

Phone: 416 696 3021

Email: jwagman@eckler.ca

Website: eckler.ca

Tami Dove

Director, Member Experience Co-operative Superannuation Society

Phone: 3064778544

Email: tdove@csspension.com

Website: csspension.com

Andrejka Massicotte Head of Group Benefits RBC Insurance

Carole Field

Managing Director, Pension Plan at Canadian Pacific Railway Canadian Pacific Railway

Catherine Ann Marshall Principal Realalts

Catherine Heath, CFA Principal, Portfolio Manager - Institutional Clients Leith Wheeler Investment Counsel

Celine Chiovitti Chief Pension Officer

OMERS

Christine Wyatt

VP, Distribution, Group Solutions Empire Life

Danelle Brown

General Counsel and Corporate Secretary Ontario Pension Board

Gillian Brown

Executive Managing Director, Capital Markets

Ontario Teachers’ Pension Plan

Janet Julé

Chief Investment Officer

Saskatchewan Healthcare Employees’ Pension Plan

2024

Krista Pell

Jennifer Katzsch

Regional Vice President, Western Canada Desjardins

Jennifer Shum

Senior Managing Director, Structured & Private Credit, Healthcare Ontario Pension Plan

Jennifer Urquhart Director, Pension Client Services NS Health Employees’ Pension Plan

Jillian Kennedy Canadian Leader of Defined Contribution and Financial Wellness Mercer Canada

Joan Tanaka Consultant/Advisor (Past President) Prudent Benefits Administration Services

Joanne Woodrow Senior Group Retirement Consultant AGA Benefit Solutions

Ju Hui Lee

Head of Market Risk United Nations Joint Staff Pension Fund

Julie Joyal

Director, Edmonton, AB Vice President, Pension Services Alberta Teachers’ Retirement Fund

Kandrice (Kandy) Cantwell Partner

Montridge Advisory Group, a Westland Company

Kathy T. Licata

President and Consulting Actuary

Mondelis Actuarial Servies, wholly owned by NFP Canada

Kelly Wilson

President and Chief Executive Officer Saskatchewan Blue Cross

Kimberley-Anne Maxwell

VP, Employer Benefits and Savings Strategies

Matheis Financial Group

Chief People, Culture & Engagement Officer

Alberta Investment Management Corporation

Lisa Copland

Aon Health Solutions, Senior Vice-President – Central Region Leader, Client Relationship Aon

Lucie Tedesco

Director, Board of Directors Financial Services Regulatory Authority of Ontario

Marie-France Amyot

Senior Vice President of Group Benefits and Retirement Savings Desjardins Insurance

Mary Medeiros

Chief Operations Officer Harvest ETFs

Natasha D. Monkman Chair of Pension, Benefits, and Executive Compensation Practice Group

Hicks Morley

Rachel Arbour

Head of Plan Benefits, Design & Policy HOOPP

Renee Bilodeau

Director of Board Services BC Pension Corporation

Rupe Prasad Partner

PBI

Sarah Beech

CEO, Benefits & HR Consulting Division – Canada

Gallagher

Sarah Sissons

Secretary of the Board

TELUS Health

Shannan Corey Executive Director

Saskatchewan Pension Plan

Susan Bird President The McAteer Group of Companies

Susan Nickerson Partner

McCarthy Tétrault LLP

ANNE MELOCHE

Head of Institutional Business Sun Life Global Investments

CHRISTINA IACOUCCI

Head of Canada and Canadian Chief Investment Officer BGO

Phone: 1 (514) 3476137

Email: anne.meloche@sunlife.com

Website: slgiinstitutional.com/en

Anne Meloche is head of institutional business for Sun Life Global Investments. She oversees the development and growth of the business, providing Canadian plan sponsors, consultants, and advisors with investment solutions that are focused on delivering strong retirement outcomes.

Reflecting on her journey, she notes, “I joined Sun Life Global Investments in 2012 when the business was still establishing itself in the institutional market. Through new and innovative capabilities and our client-centric approach, we have grown the business to become a top 20 manager of Canadian pension assets and a leader in target date funds.”

Beyond her business ambitions, Meloche mentors the next generation and helps to create a stronger, more equitable wealth management industry. She is an active mentor in Sun Life’s Mentoring Québec DE&I program and also sits on the Board of Directors for the Québec Breast Cancer Foundation to help support the financial well-being of women affected by breast cancer.

Meloche is a dynamic and authentic leader, focused on developing top talent and fostering DE&I. “As a woman in a male-dominated industry, I see the value in creating a culture that helps drive greater diversity to develop innovative and sustainable retirement solutions that benefit all Canadians for generations to come.”

Website: bgo.com

Christina Iacoucci firmly believes that real estate is about people and relationships. Building and maintaining genuine relationships has been the cornerstone of her industry success.

As head of Canada and Canadian CIO at BGO, she leads the firm’s fully integrated Canadian real estate investment management, development, and services business. She is a member of BGO’s Global Management Committee, chairs BGO’s Canadian Investment Committees, and is a voting member of the Independent Investment Committee.

With over 30 years of commercial real estate experience specializing in portfolio management, investments, asset management, development, and valuation, she is a major proponent behind BGO’s sustainable investing and innovation initiatives.

“2023 was a challenging year, navigating dynamic and shifting market landscapes,” Iacoucci remarks. “It required deep experience, resiliency, collaboration, innovation, and a willingness to adapt. BGO’s long and extensive experience in Canada and our global platform provided us with invaluable insight that enabled us to make decisions with conviction.”

GAYLE SHURVELL Director, Employee Benefit and Retirement Program Alberta Health Services

Phone: 7802176995

Email: Gayle.Shurvell@albertahealthservices.ca

Website: albertahealthservices.ca

HELEN HURLBUT

Co-founder and CFO Equiton

Appreciated by her team as a resilient and compassionate leader, Gayle Shurvell has a knack for delivering group benefit programs of the highest calibre. She wears two operational hats in her current role, including supporting the trustees of the Health Benefits Trust of Alberta (HBTA).

Over 35 years, her forward-thinking leadership style and natural ability to earn the trust of her peers have catapulted her to the pinnacle of her chosen field. Recent positive achievements include Strengthening the governance and related education for the HBTA and introducing the At-Work Services program, in collaboration with Canada Life, to participating HBTA employers and employees. This early-intervention tool supports employees at risk of disability, prevents disability claims, and identifies non-medical issues in the workplace.

“Gayle is a visionary and always thinks about innovative ways to serve HBTA participants better while sustaining its programs,” one colleague wrote in support of her nomination. “Her motto is, ‘Not if, but how, we can make things happen’.”

Shurvell strives daily to ensure everyone feels valued, connected, and supported. It’s an approach that translates into high talent retention and staff who passionately build the organization’s mandate.

Phone: 1 905 635 1381

Website: equiton.com/institutional-investors

Transformative leader, Helen Hurlbut, is an accomplished senior executive with over 30 years’ experience in the commercial, industrial, and residential real estate industries. She is a CPA and holds an Honours BA in Economics and Business from York University. She has held executive leadership roles at several leading financial, real estate investment, and development companies.

In 2015, Hurlbut took a significant entrepreneurial leap when Jason Roque selected her as the co-founder of Equiton. She and Roque worked together to ensure private equity investments were made available to all Canadians. By leveraging her expertise and strong record of running smooth transactions, Equiton recently reached an impressive milestone of $1 billion AUM. Her business acumen and tireless leadership drove Equiton to become an emerging leader in Canada’s private equity real estate investment space.

Hurlbut’s dedication to mentorship, particularly for women and marginalized groups, is evident through her roles at the Women Presidents Organization and within Equiton, where she champions diverse talent and fosters an inclusive environment. Her commitment extends to community support, exemplified by Equiton’s charitable endeavors, reflecting her ethos of giving back and making a meaningful impact.

LAUREN BLOOM

Head of Canada

T. Rowe Price

MARIE-CHANTAL CÔTÉ

Senior Vice President, Group Benefits Sun Life

Phone: (416) 360 7214

Email: lauren.bloom@trowprice.com

Website: troweprice.com

Lauren Bloom deeply appreciates the philosophy that an organization succeeds when its clients succeed. That was the belief system of the founder of T. Rowe Price, a global investment management firm where Bloom has flourished since joining the organization in 2018.

As vice president and head of Canada Distribution for the Americas division, she shares the view that a notable legacy is ultimately reflected through your clients’ success.

“The single biggest achievement of my career was taking on the role of head of Canada for T. Rowe Price,” she states. “Being asked to lead our Canadian business validated the years of hard work that I had put in. I am proud to represent this collaborative, purposeful culture.”

The past five years have proved rewarding as she has excelled in a culture whose values align with her own.

“I look to cultivate an environment that enables our team to excel, continuously stay abreast of industry trends, and exchange best practices. We prioritize actively listening to our clients and prospects, with the ultimate objective of comprehending their challenges and requirements. Utilizing this knowledge, we collaborate with our investment teams to develop solutions that meet those needs,” she adds. “From that, our clients can succeed.”

Phone: 514 451 3119

Email: marie-chantal.cote@sunlife.com

Website: sunlife.ca

Marie-Chantal Côté has navigated a purposeful career path, seizing exciting opportunities and projects aligned with her goal of helping Canadians live healthier lives.

The senior vice president of group benefits at Sun Life views her accomplishments through a people-centric lens. Building diverse teams, creating spaces for employees to identify with their leaders, and championing mental health and 2SLGBTQIA+ inclusivity stand out as her most significant career achievements.

Her most substantial professional quality is thinking outside the box. She challenges the status quo and advocates for innovative solutions with a fresh and creative approach, resulting in groundbreaking initiatives in women’s health, gender affirmation, and mental health coaching.

“I choose to be authentic in my leadership style and approach every day [by] being open about belonging to the 2SLGBTQIA+ community, sharing my mental health experiences, being transparent about my wins and successes and my misses and learnings,” she says.

Côté creates psychologically safe work environments where everyone can thrive. A commitment to asking hard questions and natural curiosity is the cornerstone of her leadership style.

Phone: +15142142773

Email: samantha.cleyn@bmo.com

Managing Director, Head of

BMO

Website: bmogam.com/institutional

As managing director and head of institutional sales and service at BMO Global Asset Management, Samantha is responsible for leadership of the firm’s institutional business. Her previous experience includes leading institutional efforts nationally at T. Rowe Price Canada and, prior to that, 11 years in investment consulting with Mercer and Pavilion Advisory Group.

As she celebrates her one-year anniversary with the organization, Samantha says she is excited about what the future holds. “We’re investing in the business, developing new capabilities, and we have an ambitious growth plan. To be part of shaping what the future looks like is energizing.”

Under her leadership, BMO GAM is poised to bolster their institutional presence and brand in Canada. “In my first year, I put in place a lot of structure and set out a vision that was manageable and executable. I have an exceptional team, and 2024 is shaping up to be the best year ever for the institutional business.”

Samantha is also a strong mentor to young talent in the industry, and a passionate advocate for diversity, equity, and inclusion, especially for the advancement and elevation of women. “The future of the industry is what we make it and it starts with supporting one another to our true potential.”

Make the most of the fixed income golden age

Canadian institutions can have a striking “home bias” in their bond allocations. It could be the ideal time to consider going global

IS IT time for plans to rethink the “home bias” in bonds? Canadian pension plans are a paradox compared to their global peers. They have long been the most likely to take a global approach to equities but the least likely to take a global approach to bonds, according to Willis Towers Watson’s annual Global Pension Asset Study.

Canadian plans only really seemed to dip their toes into global bonds in 2018. Today their “home bias” is rivalled only by the Americans and the Brits. Oddly, in equities, the picture is reversed. No other major pension markets, from the Swiss to the Australians or the Japanese, are more open to global allocations than Canadian investors.

Canadian fixed income has often underperformed other regions

Canada was one of the worst-performing global bond markets in 2023 (Figure 1), and its ranking has also been volatile over time. In most years, including 2023, a globally diversified approach would have likely benefited investors.

Further, Canada is a sliver of the fixed income opportunity set. Canada represents just 3.5% of the global investment grade bond market (Figure 2). A domestic approach leaves a wealth of opportunity off the table, in both developed and emerging economies.

Allocating

to the US a good first step

Looking to Canada’s southern neighbour is

an obvious choice when seeking to diversify. Although Canadian central bank rates are currently similar to those in the US, allocating to the US would mean more diversification.

The US aggregate bond markets are US$25 trillion in size, accounting for 40 percent of global aggregate investment grade bond markets, or 12 times the size of Canada’s market.1

The US market is by far the deepest, broadest, and most liquid market in existence. Even the less mainstream US submarkets,

such as the US$8 trillion mortgage-backed securities market, the US$1.6 trillion municipal bond market, and the US$1.3 trillion high-yield market, collectively dwarf the entire US$2.3 trillion Canadian market.1

A global approach can offer the most latitude for active investors

Global fixed income markets can often trade inefficiently relative to each other. We believe this is partly a result of the domestic focus most investors have, which can create artificial silos

FIGURE 1: CANADIAN FIXED INCOME UNDERPERFORMED MOST OTHER REGIONS IN 2023

Canada

In most years, including 2023, a globally diversified approach would have likely benefited investors. A domestic approach leaves a wealth of opportunity off the table

Sponsored by

between pricing drivers in different markets.

For example, credit spreads in two different markets can occasionally diverge for no fundamental reason. This can provide opportunities for active investors to overweight one region and underweight the other (Figure 3).

This is not limited to broad markets. The same inefficiency can occur within a corporate sector between two different regions, a securitized market, or even a single issuer’s bonds.

Many large borrowers often issue multiple bonds in different currencies. Through the life of those bonds, pricing can diverge for months. Active investors with a global mandate can overweight one bond and underweight the other for potential profit and no change in underlying credit risk.

The golden age of fixed income

For plans interested in extending their fixed income allocations to the US or globally, we believe they need to work with well-resourced managers that have investment and credit analyst teams working on the ground in the US and beyond.

Further, we believe in avoiding particularly large strategies, which may not be able to take large enough positions in relative value opportunities (such as when one issuer’s bond offers a higher spread in a certain currency) to impact performance. As such, managers should be large, but with the capability to be nimble.

1Bloomberg,Insight,January2024

Disclosures:

Pastperformanceisnotindicativeoffutureresults.Investmentinany strategyinvolvesariskoflosswhichmaypartlybeduetoexchangerate fluctuations.

Unlessotherwisestated,thesourceofinformationandanyviewsand opinionsarethoseoftheauthorandshouldnotbeconstruedasinvestment oranyotheradviceandaresubjecttochange.

FIGURE 3: PRICING INEFFICIENCIES IN GLOBAL MARKETS POTENTIALLY CREATE PLAYGROUND FOR ACTIVE PLAYERS

FIGURE 2: THERE IS MORE OUT THERE THAN

The time is now, the question is how

Managers are calling

it ‘the greatest opportunity in decades,’ but the environment remains complex

AN UNPRECEDENTED tightening cycle has given rise to unprecedented opportunities. While the last few years have been challenging, interest rate hikes have helped to rejuvenate the fixed income landscape. According to Franklin Templeton, now that rates have likely peaked, the environment is ready to flourish, and many experts believe this is a generational moment with opportunities across the fixed income spectrum.

“Fixed income managers are calling this the greatest opportunity in decades,” says Stephen Dover, head of the Franklin Templeton Institute. “We know that fixed income markets are more volatile than ever. But there are many different ways to navigate that complexity… The time is now, the question is how.”

De-risk portfolios

After the global financial crisis in 2008, the funded status of corporate pension plans plunged from around 100 percent to only 80 percent, erasing years of hard-fought gains. It has taken more than a decade for most plans to slowly climb back to healthier funded status levels – the average pension was just 88 percent funded at the end of 2020. But the rise in interest rates has resulted in many

corporate DB plans reaching fully funded status, now 104 percent on average, in less than two years, creating a critical opportunity to further de-risk their portfolios.

A study from Franklin Templeton conducted by Coalition Greenwich says 73 percent of pension plans report funding ratios of 100 percent or higher, while 23 percent report ratios in excess of 110 percent. The challenge pension funds now face is preserving these healthy funding levels; 70 percent of plans in the study indicate that protecting funded status at current

are correlations that we can talk about. But things are happening – whether it’s monetary policy, fiscal policy, geopolitical issues, all these factors create opportunities, and this is why we think investors need to be active and

“Fixed income managers are calling this the greatest opportunity in decades”

Stephen Dover, Franklin Templeton

levels is a top investment priority, compared with 20 percent that cite generating returns to maximize funded status as their top investment priority.

Every market is not the same, and not every market is on the same cycle, says Brian Kloss, portfolio manager at Brandywine Global, a Franklin Templeton company. “There are some that are much closer to others. And there

not passive with respect to the allocation.

“If you can think holistically about the impact of valuations across asset markets, you can have a very attractive return, given what we’re starting with today.”

Canada – a frustrating economy

“ The Canadian economy has been frustrating for some time,” says Tom O’Gorman,

director of fixed income at Franklin Templeton Fixed Income. “There’s been frustration around the ability for energy products to get off the ground. Some of the housing metrics that we’ve seen over the last number of years have been so far off the historical averages, the amount of GDP coming from residential investments has been off the charts. Over the last five to six months, there’s been no economic growth.”

He adds, “Everything that happens in the US is so important because the US economy is about 10 times that of Canada. Monetary policy is extremely important because Canada is open. And a lot of the economy comes through trades. So, the currencies are a big factor.

“When we think about just fixed income in general, there’s been a lot of movement in rates. We’re not getting stuck in trying to predict rates and when they’re going to cut.

But if you just look at the level of inversion in the yield curve, the Canada tenures at about 3.4 percent, it had been well over four. And it traded as much as 100 basis points through the US tenure. So, you can see the markets expect a worse macro outcome here.

For us, when we think about risk-adjusted returns, we want that diversification, we want lower correlation, which allows us to generate higher returns with less risk to us. That’s the holy grail of our process – better

“When we think about risk-adjusted returns, we want that diversification, we want lower correlation”

Tom O’Gorman, Franklin Templeton

“We think it’s been a little bit slower in coming because of all the things we’ve talked about in the past about access stimulus, but in our portfolios, diversification is super important. You have a smaller fixed income market, it’s less diversified, less breadth.

risk-adjusted returns over the long term.

“More than ever, investors need security selection, active asset allocation, and extremely robust risk – market risk process and overlay with hedges – to deliver better risk-adjusted returns and less risk, more return.”

Insights on 2023: A roller-coaster year

Q4 saved the day, but central banks will be ultra careful, says FTSE Russell director

LONG DURATION eventually proved the investor’s friend in 2023, after falling inflation and hints of a federal pivot sharply reversed the direction of G7 yields, says FTSE Russell in its Global Investment Research – Market Maps on Fixed Income Insights report. Yields ended December back at firstquarter 2023 levels. Canadian long government, municipal, and provincial bonds took centre stage, with returns of up to 16 per cent in the fourth quarter.

The Canadian economy slowed sharply after real GDP contracted by 1.1 per cent in the third quarter – its first contraction since the second quarter of 2021 – contrasting significantly with market expectations of a slight expansion, following growth of 1.4 per cent in the second quarter of 2023, says the FTSE Russell report. Even so, the economy is expected to have grown by 1.1 per cent in 2023, according to consensus forecasts.

Canadian policy rates have remained at five percent since September 2023. The growth slowdown and disinflation may give the Bank of Canada the opportunity to at least match the US Fed’s easing moves in 2024, given lower core inflation, but the BoC did not match the Fed pivot in the fourth quarter.

Bonds gained 16 percent

Long government, municipal, and provincial

“All fixed income gains in the year were in the fourth quarter, and the market was lower in the balance of the year”

Robin Marshall, FTSE Russell

bonds gained up to 16 percent in the fourthquarter Canadian bond rally, however, as the Canadian curve continued to disinvert in December as 20-year bond yields fell sharply

on expectations of aggressive rate cuts, despite the BoC’s caution on its rate policy.

Yield curves remained deeply inverted after G7 curves bull flattened. The fourth quarter,

“The Bank of Canada forecasts inflation will come back up a bit before it finally gets down to target in 2025”

Robin Marshall, FTSE Russell

notably December, saw a brisk decline in bond yields across the curve, which erased 12 months of yield rises as median federal dot plots show 75bp in cuts for 2024 (see chart).

The FTSE Russell report also says the Climate World Government Bond Index (WGBI) and adjusted Climate WGBI outperformed, helped by duration.

German and UK government bonds performed best in the fourth quarter after the US dollar and European yields fell following the federal pivot, boosting returns in non-US markets.

Canada also outperformed the US market, with Canadian government bonds outperforming US bonds, says Robin Marshall, director, global investment research, at FTSE Russell. “For a Canadian-based investor there was also actually a bit of a currency effect, so it paid to stay at home. Given that, in a way, the US pivot came from the Feds on policy, one would have thought that treasuries might have outperformed because the Bank of Canada actually struck a much more cautious note in its policy statement in December. That, to me, was a bit of a surprise.”

SHARP DECLINE IN G7 BOND YIELDS IN FOURTH QUARTER

A roller-coaster year

Marshall says 2023 was a roller-coaster year, with the long-short up 16 percent in the fourth quarter.

“Basically, all the gains in the year were in the fourth quarter, and the market was lower in the balance of the year. Looking at 10-year yields, I noticed that they were almost at exactly the same level as they were 12 months ago. We started the year at about 3.20 percent and went to above four percent. It reached almost 4.25 percent briefly, and now we’re back to about 3.20 percent. It was all fourth-quarter gains.”

For both Canada and the US, and to some extent Europe, the risks in this have skewed towards the central banks not doing as much as expected, Marshall adds. “Before the December meetings, particularly before the Fed signal, the markets were still slightly on the ‘higher for longer’ narrative.

“That all changed dramatically in December when the US priced in about 150 basis points off policy rates in 2024. Canada showed only 75 basis points of cuts. We had this exact same phenomenon in 2023, when markets got very rattled about rate caps. They never came through at the beginning of the year.”

As for policy rates going forward, Marshall says the central banks will manage the process of easing rates quite carefully.

“The Bank of Canada says it’s prepared to raise rates if it has to, because it actually forecasts inflation to come back up a bit. The rate is down at just over three percent at the moment, and BoC forecasts it will come back up a bit before it finally gets down to target in 2025.

“Labour markets are still quite tight, so that could make 2024 more difficult. That may be partly why the BoC is forecasting inflation to go up a bit before it comes down. It’s often the case that that last bit of getting from three to two percent is the most difficult and most costly.”

ADDENDA CAPITAL INC.

Contact: Janick Boudreau, CFA, Executive Vice President, Business Development and Client Partnerships

Address: 800 René-Lévesque Boulevard West, Suite 2750, Montreal, QC, H3B 1X9

PH: 514.908.1989

Fax: 514.287.7200

Email: j.boudreau@addendacapital.com

Web: www.addendacapital.com

Management Style: Yield Curve, Structured Products, Immunized, Index

Ownership: Principals: 3%, Third Party: 97%

Professional Staff: 40

Year Established: 1985

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $5M, Separate: $20M

ALLIANCEBERNSTEIN LP

Contact: Wendy Brodkin, Managing Director

Address: 200 Bay Street, North Tower, Floor 12, Toronto, ON, M5J 2J2

PH: 647.375.2803

Email: wendy.brodkin@alliancebernstein.com

Web: www.alliancebernstein.com/americas/en/ institutions/home.html

Management Style: Active – blend of quantitative and fundamental

Ownership: Principals: 62%; Publicly Held: 25%; Third Party: 13%

Professional Staff: 42 Analysts; 44 Portfolio Management; 16 Traders

Year Established: 1971

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M;

Separate: Varies

ALPHAFIXE CAPITAL

Contact: Stéphane Corriveau, Président, Directeur Principal

Address: 1800 Avenue, McGill College, Suite 2420, Montreal, QC, H3A 3J6

PH: 514.861.3493

Fax: 514.861.4838

Email: s.corriveau@alphafixe.com

Web: www.alphafixe.com

Management Style: Active

Ownership: Principals: 100%

Professional Staff: 17

Year Established: 2008

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: No Minimum, Separate: $50M

AMUNDI CANADA INC.

Name: Tanya Bishop, Senior Vice President

Address: 2000 McGill College Avenue, Montreal, QC, H3A 3H3

PH: 647.201.4225

Email: tanya.bishop@amundi.com

Web: www.amundi.ca

Management Style: Yield Curve, Structured Products, Index, Quantitative

Ownership: Principals: 69%; Publicly Held: 29%; Third Party: 2%

Professional Staff: 100

Year Established: 1950

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $5M; Separate: $20M

BAKER GILMORE & ASSOCIATES INC.

Contact: Brent Wilkins, Senior Vice President, Head of Institutional Sales (Canada), Connor, Clark & Lunn Financial Group

Address: 1800 McGill College Avenue, Suite 1300, Montreal, QC, H3A 3J6 PH: 416.364.5396

Email: bwilkins@cclgroup.com

Web: www.bakergilmore.com

Management Style: Duration, Yield Curve, Cross Markets, Sector/Quality, and Security Selection. Baker Gilmore manages various types of fixed income strategies such as portfolio-managed versus FTSE indices/custom benchmarks, absolute return strategies, and LDI solutions. We can also manage passive strategies if requested

Ownership: Principals: 50%; Third Party: 50%

Professional Staff: 7

Year Established: 1988

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $5M, Separate: $10M

BEUTEL, GOODMAN & COMPANY LTD.

Contact: Tim Hylton, Senior Vice President, Client Service and Business Development

Address: 2000-20 Eglinton Avenue West, Toronto, ON M4R 1K8

PH: 416.485.1010

Fax: 416.485.1799

Email: thylton@beutelgoodman.com

Web: www.beutelgoodman.com

Management Style: Yield Curve, Interest Rate Anticipation (Duration), Credit Sector Allocation, Security Selection, Foreign Pay Bonds

Ownership: Principals: 51%; Third Party: 49%

Professional Staff: 9

Year Established: 1967

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M; Separate: $25M

BMO GLOBAL ASSET MANAGEMENT

Contact: Samantha Cleyn, Head of Institutional Sales and Service

Address: 100 King Street West, Toronto, ON, M5X 1A1

PH: 514.862.2653

Email: samantha.cleyn@bmo.com

Web: www.bmogam.com/institutional

Management Style: Yield Curve, Structured Products, Index. Other: Credit and ESG; Passive: FTSE Canada 20+ Strip Bond Index, FTSE Canada Mid Term Federal Bond Index, FTSE Canada Short Term Federal Bond Index, FTSE Canada Mid Term Corporate Bond Index, FTSE Canada Short Term Corporate Bond Index, FTSE Canada Mid Term Federal Bond Index, FTSE Canada Universe Bond Index, FTSE Canada NHA MBS 975 Index, Bloomberg Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged

Ownership: Third Party: 100%

Professional Staff: 11

Year Established: 1982

Performance Presentation Standards: While BMO GAM is not GIPS compliant, the performance of each of the BMO Mutual Funds and BMO ETFs complies with the requirements

under Part 15 of NI 81-102

Minimum Investment: Pooled: $10M; Separate: $100M

BURGUNDY ASSET MANAGEMENT LTD.

Contact: Mike Sandrasagra, Vice President, Head of Canadian Institutional Group

Address: 181 Bay Street, Suite 4510, Toronto, ON, M5J 2T3

PH: 416.869.8980

Fax: 416.869.1700

Email: msandrasagra@burgundyasset.com

Web: www.burgundyasset.com

Management Style: Active, Bottom-up, Credit

Ownership: Principals: 100%

Professional Staff: 3

Year Established: 1990

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $5M; Separate: $10M

CANSO INVESTMENT COUNSEL LTD.

Contact: Patrick McCalmont, Chief Strategy and Operating Officer

Address: 550–100 York Boulevard, Richmond Hill, ON, L4B 1J8

PH: 905.881.8853

Fax: 905.881.1466

Email: pmccalmont@cansofunds.com

Web: www.cansofunds.com

Management Style: Credit Analysis/Bottom-up Fundamental Security Selection

Ownership: Principals: 100%

Professional Staff: 30

Year Established: 1997

Performance Presentation Standards: Modified

Dietz method as recommended by GIPS

Minimum Investment: Pooled: $10M;

Separate: $250M

Minimum Investment: Pooled: $10M;

Separate: $250M

CAPITAL GROUP CANADA

Contact: Kevin Martino, Vice President

Address: Brookfield Place; 181 Bay Street, Suite 3100, Toronto, ON, M5J 2T3

PH: 416.815.2128

Fax: 213.486.9223

Email: kevin.martino@capgroup.com

Web: www.capitalgroup.com/ca

Management Style: Yield Curve, Immunized, Credit, Fundamental Research

Ownership: Principals: 100%

Professional Staff: 91

Year Established: 1931

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $15M; Separate: $120M

DESJARDINS GLOBAL ASSET MANAGEMENT

Contact: Natalie Bisaillon, Vice President, Chief of Partnership and Institutional Client Relations

Address: 1 Complexe Desjardins, 20th Floor, South Tower, Montreal, QC, H5B 1B2

PH: 514.214.5742

Fax: 514.281.7253

Email: natalie.bisaillon@desjardins.com

Web: www.dgam.ca

Management Style: Yield Curve

Ownership: Third Party: 100%

Professional Staff: 13

Year Established: 1998

CIBC ASSET MANAGEMENT

Contact: Carlo DiLalla, Managing Director and Head, Institutional Asset Management

Address: 161 Bay Street, Suite 2230, Toronto, ON, M5J 2S1

PH: 416.980.2768

Email: carlo.dilalla@cibc.com

Web: www.cibcam-institutional.com

Management Style: Yield Curve, Structured Products, Immunized, Index, Quantitative, Multi-alpha; Passive: FTSE Universe Bond Index, FTSE Short-term Bond Index, FTSE Long-term Bond Index, FTSE Real Return Bond, Customized Liability Benchmark

Ownership: Publicly Held: 100%

Professional Staff: 30

Year Established: 1972

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M; Separate: $25M

CONNOR, CLARK & LUNN INVESTMENT MANAGEMENT LTD.

Contact: Brent Wilkins, Senior Vice President, Head of Institutional Sales (Canada), Connor, Clark & Lunn Financial Group

Address: 1111 West Georgia Street, Suite 2200, Vancouver, BC, V6E 4M3 PH: 416.364.5396

Fax: 416.363.2089

Email: bwilkins@cclgroup.com

Web: www.cclinvest.com

Management Style: Yield Curve, Quantitative, Credit Ownership: Principals: 71%; Third Party: 29%

Professional Staff: 20

Year Established: 1982

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M; Separate: $15M

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M;

Separate: $25M

FIERA CAPITAL CORPORATION

Contact: Maxime Ménard, President and Chief Executive Officer, Fiera Canada and Global Private Wealth

Address: 1981 McGill College Avenue, Montreal, QC, H3A 0H5

PH: 514.954.3300

Fax: 514.954.9692

Email: mmenard@fieracapital.com

Web: www.fieracapital.com/en

Management Style: Yield Curve, Structured Products, Immunized, Credit, Quantitative

Ownership: Principals: 13%; Publicly Held: 80%; Third Party: 7%

Professional Staff: 31

Year Established: 2003

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $5M; Separate: $20M

FRANKLIN TEMPLETON

Contact: Dennis Tew, Head of Sales, Canada

Address: 200 King Street West, Suite 1400, Toronto, ON, M5H 3T4

PH: 416.957.6023

Email: dennis.tew@franklintempleton.ca

Web: www.franklintempleton.ca

MANAGERS OF FIXED INCOME DIRECTORY

Management Style: Yield Curve, Immunized, Index, Quantitative. Other: Domestic Fixed Income (Canadian), Emerging Market Debt, Global Sovereigns, Local Asset Management, Mortgages/ABS, Corporate High Yield and Investment Grade, Municipals, Bank Loans and Low Duration, Private Credit

Ownership: Principals: 36%; Publicly Held: 64%

Professional Staff: 346

Year Established: 1947

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $1M; Separate: $20M–$250M (depending on mandate)

GUARDIAN CAPITAL LP

Contact: Robin Lacey, Head of Institutional

Asset Management

Address: 199 Bay Street, Commerce Court West, Suite 2700, Toronto, ON, M5L 1E8

PH: 416.947.4082

Fax: 416-364-9634

Email: rlacey@guardiancapital.com

Web: www.guardiancapital.com

Management Style: Yield Curve, Structured Products, Immunized, Quantitative

Ownership: Third Party: 100%

Professional Staff: 9

Year Established: 1962

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $1M; Separate: Varies by mandate

LEITH WHEELER INVESTMENT COUNSEL LTD.

Contact: Ben Homsy, Portfolio Manager and Head of Institutional Business Development

Address: 400 Burrard Street, Suite 1500, Vancouver, BC, V6C 3A6

PH: 604.655.3625

Fax: 604.683.0323

Email: benh@leithwheeler.com

Web: www.leithwheeler.com

Management Style: Yield Curve, Credit Duration

Ownership: Principals: 100%

Professional Staff: 11

Year Established: 1982

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $3M; Separate: $10M

MAWER INVESTMENT MANAGEMENT LTD.

Contact: Neeraj Jain, Institutional

Portfolio Manager

Address: 79 Wellington Street West, TD South Tower, Suite 3410, Box 276, Toronto, ON, M5K 1J5

PH: 416.865.3929

Fax: 416.865.3357

Email: njain@mawer.com

Web: www.mawer.com

Varies by mandate

JARISLOWSKY FRASER

Contact: Chad Van Norman, Head of Institutional

Address: Head Office: 1010 Sherbrooke Street West, 20th Floor, Montreal, QC, H2A 2R7

PH: 1.800.736.8666

Email: cvannorman@jflglobal.com

Web: www.jflglobal.com

Management Style: Yield Curve, Credit;

Products: Universe; Global Bonds; High Yield; Long; Core Plus; Corporate; Absolute Return; Liability-Driven

Year Established: 1955

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M; Separate: $25M

Management Style: Yield Curve, Credit Ownership: Principals: 100%

Professional Staff: 6

Year Established: 1974

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $10M; Separate: $50M

MFS INVESTMENT MANAGEMENT

CANADA LIMITED

Contact: Christine Girvan, Senior Managing

Director – Institutional Sales

Address: 77 King Street West, 35th Floor, Toronto, ON, M5K 1B7

PH: 416.361.7273

Email: cgirvan@mfs.com

Web: www.mfs.com

Management Style: Asset and Sector

Allocation, Security Selection, Duration and Yield Curve, Region, Currency

Ownership: Principals: 20%; Third Party: 80%

Professional Staff: 117

Year Established: 1924

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $0M; Separate: Dependent on strategy

PENDERFUND CAPITAL MANAGEMENT

LTD.

Contact: Tom Sawchuck, Associate, Institutional and Family Office Wealth Services in Institutional Sales

Address: 1830–1066 West Hastings Street, Vancouver, BC, V6E 3X2

PH: 604.688.1511

Fax: Front Desk: 866-377-4743 | 604-688-1511

Email: tsawchuk@penderfund.com

Web: www.penderfund.com

Management Style: Active

Ownership: Principals: 89%; Third Party: 11%

Professional Staff: 6

Year Established: 2003

Minimum Investment: Pooled: $10M; Separate: $25M

PICTET ASSET MANAGEMENT

Contact: François Forget, Head of Distribution – Canada

Address: 1000 de la Gauchetière Ouest, Suite 3100, Montreal, QC, H3B 4W5

PH: 514-518-8587

Email: fforget@pictet.com

Web: www.am.pictet

Management Style: Yield Curve, Index, Emerging Market Debt, Global Sovereigns, Absolute Return Fixed Income, Corporate High Yield and Investment Grade, Sustainable Credit, Strategic Credit

Ownership: Principals: 100%

Professional Staff: 124

Year Established: 1980 (Parent company in 1805)

Performance Presentation Standards: GIPS

Minimum Investment: Pooled and Separate: Varies by strategy

MANAGERS

PICTON MAHONEY ASSET MANAGEMENT

Contact: Taras Klymenko, Head of Institutional Business

Address: 33 Yonge Street, Suite 830, Toronto, ON, M5E 1G4

PH: 416.955.4845

Email: tklymenko@pictonmahoney.com

Web: www.pictonmahoney.com

Management Style: Yield Curve, Structured Products, Immunized, Passive, Index, Quantitative. Other: Fixed income strategies include Long/Short Credit and Event-driven Credit

Ownership: Principals: 100%

Professional Staff: 7 – including Portfolio Managers, Analysts and Traders

Year Established: 2004

Minimum Investment: Pooled: $5M; Separate: $25M

QV INVESTORS INC.

Contact: Kathleen Wylie, Manager, Business Development and Client Relations

Address: 1008, 222 3 Avenue SW, Calgary, AB, T2P 0B4

PH: 403.265.7007 x 330

Fax: 403.266.6524

Email: kwylie@qvinvestors.com

Web: www.qvinvestors.com

Management Style: Credit, Duration Ownership: Principals: 100%

Professional Staff: 2

Year Established: 1996

Performance Presentation Standards: Verified by ACA Compliance Group

Minimum Investment: Pooled: $0.5M; Separate: $5M

SLC MANAGEMENT

Contact: Heather Wolfe, Senior Managing Director, Head of Canadian Business Development

Address: 1 York Street, Toronto, ON, M5J 0B6

PH: 416.408.7834

Email: heather.wolfe@slcmanagement.com

Web: www.slcmanagement.com

Management Style: Immunized, Credit

Professional Staff: 187

Year Established: 2013

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $M varies; Separate: $M varies

TD GLOBAL INVESTMENT SOLUTIONS

Contact: Mark Cestnik, Managing Director

Address: 161 Bay Street, 34th Floor, Toronto, ON, M5J 2T2

PH: 416.274.1742

Email: mark.cestnik@tdam.com

Web: www.tdgis.com

Management Style: Yield Curve, Immunized; Passive: FTSE Canada Universe Bond Index, FTSE Canada All Government Bond Index, FTSE Canada All Corporate Bond Index, FTSE Canada

Long Term Overall Bond Index. Short Liability Driven Benchmark – The custom benchmark is a portfolio of provincial bonds that is structured to match the future obligations of a typical Canadian pension plan consisting of a high proportion of retirees; Mid Liability Driven Benchmark – The custom benchmark is a portfolio of provincial bonds that is structured to match the future obligations of a typical Canadian pension plan consisting of a blend of retirees and active members; Long Liability Driven Benchmark – The custom benchmark is a portfolio of provincial bonds that is structured to match the future obligations of a typical Canadian pension plan consisting of a high proportion of active members; FTSE Canada

Long Term Corporate Bond Index, 50% FTSE Canada Short Term Corporate Bond Index + 50% FTSE Canada Mid Term Corporate Bond Index, FTSE Canada Universe Bond Index, FTSE Canada 20+ Strip Bond Index, FTSE Canada Real Return Bond Index, FTSE Canada Long Term Government Bond Index, FTSE Canada Long Term Provincial Bond Index, 3x FTSE Canada Long Term Provincial Bond Index minus 2x one-month CDOR, 2 x FTSE Canada Real Return Bond Index – 1 month CDOR, FTSE Canada Mid Term Provincial Bond Index

Ownership: Third Party: 100%

Professional Staff: 87 Year Established: 1987

Performance Presentation Standards: GIPS

Minimum Investment: Pooled: $17M; Separate: $50M active and $200M passive

T. ROWE PRICE

Contact: Lauren Bloom, Head of Canada

Distribution

Address: 77 King Street West, Suite 4240, Toronto, ON, MSK 1A2

PH: 416.360.5777

Email: lauren.bloom@troweprice.com

Web: www.troweprice.com

Management Style: Global Bonds, Mortgages, High Yield, Long, US Bonds, Core Plus, Corporate, Emerging Markets Debt, Fixed Income ETFs. We implement a bottom-up, fundamental investment approach across all of our fixed income strategies, performing deep and focused credit research.

Ownership: Publicly Held: 100%

Professional Staff: 237

Year Established: 1937

Performance Presentation Standards: Global Investment Performance Standards (GIPS®)

Minimum Investment: Pooled: varies; Separate: varies

PRIORITIZING POSITIVE FUNDAMENTAL CHANGE

Portfolio

construction that

de-emphasizes interest rate sensitivity is one of most important focuses this year, says Picton Mahoney’s CEO

DAVE PICTON, president and CEO of Picton Mahoney Asset Management, says everything his firm does revolves around its belief in positive fundamental change.

“We’ve done a lot of quantitative research that focuses on best performance through time and factors that stand out as consistent strong performers over time,” he says.

“In the Canadian landscape it is factors around changes – changes in earnings, changes in revenues, changes in earnings forecasts, and positive surprises around earnings. Those things make us think about a company differently.”

Picton Mahoney has a team of independent fundamental analysts and independent quantitative researchers. “They both look for this positive fundamental change in their day-to-day jobs, and they come at it from two different perspectives.

“The quantitative researchers use significant amounts of data. They build models that scour the market, looking at these positive change metrics. Then we get them to build their own independent portfolios that are optimized to give us as much positive change for the dollar as they can.

“Meanwhile, we have an independent team of fundamental researchers who meet with companies, go to site visits, go to conferences, build their own models, and again their focus is also on positive fundamental change. Maybe it’s a new management team that comes in, maybe it’s a new product that’s

being developed, or maybe it’s a new way of optimizing business processes. We’re looking for something that causes a real change in the trajectory of the earnings of a company, both on the positive side and on the negative side because we also do shorting along the way.”

Looking for overlaps

“It is our jobs as portfolio managers at our firm to look at the overlaps between the

It soon gained some institutional clients and, as it began to generate some cash flow, it moved into alternatives and ran hedge funds.

Twenty years later, Picton is “extremely active in the business on two fronts. I oversee our entire investment team, and I’m the keeper of the investment philosophy. It is our belief to use risk control to maximize returns per unit of risk.” Today, the firm has a team of approximately 40 investment professionals.

“We’re looking for something that causes a real change in the trajectory of earnings of a company, both on the positive side and on the negative side”

independent signals from the quantitative teams and the independent signals from the fundamental teams. We measure them to see if they’re strong contributors over time to our investment process.

“We believe that if they overlap, we should have higher conviction in their output.”

Picton says the firm is also “very much cognizant that companies that are changing positive metrics, such as DEI and ESG, for the better tend to do better as well.”

Picton Mahoney Asset Management was founded in 2004 by a team of five investment management professionals led by David Picton.

Picton is passionate about investing and says there is a massive opportunity for almost all investors to improve their portfolio construction.

Construction of a modern portfolio

“Our firm built its own research process on understanding portfolio theory and how modern portfolios are constructed,” Picton says. In fact, the firm has published a white paper on the topic and also offers a portfolio construction service to help investors optimize their portfolios.

“When we look through individual investor

“Companies that are changing positive metrics, such as DEI and ESG, for the better tend to do better”

and even many pension plan portfolios, we notice an alarming amount of interest rate sensitivity that exists in them. Although many massive and sophisticated pension plans in Canada have dealt with this issue, as you move down the scale towards individual investors, this interest rate sensitivity increases.

“We’ve just had two years where rates went up significantly because of inflation in 2022, and it hurt both the stock and bond portfolios. And, in fact, the combined 60:40

portfolio had one of its worst experiences in decades as a result of that.

“Similarly, although inversely related in 2023, as inflation came off and interest rates came down, stocks and bonds again acted in the same way, this time to the upside. As a result, the 60:40 portfolio had one of its best performances in decades.

“The point is that for the last 40 years, we’ve been using bonds as a diversifier to stocks and portfolios. They’ve acted significantly differently from each other,

and here we are now coming off two years where they have acted very much the same as each other. The diversification benefit has disappeared, and our belief is that inflation is coming down, but the underlying causes of it haven’t really gone away. The supply issues and issues around housing, employment, and commodities are simply lying dormant, waiting for the next upcycle. And when this next cycle takes off, inflation expectations again are going to grow in our opinion, which means that this 60:40 portfolio would get potentially hit again.

“So, portfolio construction that de-emphasizes interest rate sensitivity and adds in diversification or inflation protection is one of the most important things to focus on as we go through this year. We’ve staked a lot of our firm’s collateral around education on this topic, trying to democratize this understanding of portfolio construction so that everybody can gain access to it.”

A believer in continuous improvement

Picton says he is a “massive believer in continuous improvement. You may have an investment process that makes you differentiated, but that doesn’t mean you just stop working on it,” he says. “You have to be continually improving your inputs in the way you build your portfolios.”

He also believes in positive energy.

“We go through ups and downs in this business, but it’s important to have a positive mental framework and try to be positive in the way you interact with people.”

When Picton took the portfolio management program at the University of British Columbia, he learned you only get one reputation, and it can be lost very quickly.

“We try to implement that as best as we can across our organization. We have very strong controls around ethics and values. Our reputation has been hard-earned over time, including in countless numbers of meetings with individual advisors where we just try to provide our best. We try to give clear and concise information and build a reputation on trust.”

Four ways to help employees change their relationship with alcohol

Dr.

Terri-Lynn Mackay discusses how to create a workplace culture that supports employees who want to reduce their intake

AS INVALUABLE as flexibility has become for remote and hybrid workers, the lack of in-person social contact and the heightened proximity to potentially harmful substances during the workday have contributed to concerning increases in the use of a variety of substances, particularly alcohol. Rates of alcohol and substance use increased during the pandemic, and adults aged 35–50 reported the highest rate of alcohol use ever for this age group. Meanwhile, data shows that sustained remote work contributes to alcohol-use disorders as employees may be in close proximity to alcohol all day. These trends are requiring HR professionals to consider substance-use – in particular, alcohol-use –support as part of their comprehensive workplace well-being strategies.

For benefits professionals, understanding that one’s relationship with alcohol is not an “all-or-nothing” proposition for employees is important. Instead, it exists on a spectrum from people who do not drink to those who have a diagnosable disorder. However, because many of us often think only about the individuals who have a diagnosed condition – those whose alcohol use has become disruptive emotionally, socially, and behaviourally – the millions of people who use alcohol daily and want to cut back go unnoticed.

The business case

While the three-martini lunch may no longer be common practice, alcohol is still present in today’s workplace. From champagne toasts over a big sale or business transaction, to happy hours or cocktail parties with important

per week for both men and women.

• Alcohol use is responsible for 15,000 preventable deaths in Canada each year.

• Alcohol is the most societally costly substance in Canada, contributing $5.4 billion in healthcare costs each year.

[Remote work] trends are requiring HR professionals to consider substance-use – in particular, alcohol-use – support as part of their comprehensive workplace well-being strategies

business partners, to the cash bar at industry conferences, serving alcohol at a business event is rarely considered questionable. But how does this affect business performance, and what toll does it take on your workplace culture?

• Any amount of alcohol use can harm the health of your employees. In fact, alcohol use has been linked to cancer, heart disease, brain function, liver and kidney disease, and much more. The potential harm related to alcohol is so strong that health guidelines indicate risk starts to increase at two units

• Alcohol use is estimated to be responsible for nearly $40 billion in combined healthcare costs, criminal justice costs, and lost productivity each year in Canada.

Helping employees

Approximately 2.3 billion people in the world drink alcohol, while 18 percent of Canadians over the age of 15 will meet the criteria for a diagnosed alcohol-use disorder in their lifetime. Employers and benefits professionals should heed this data and be empowered to support employees on their journey toward

well-being by educating them about the needs and challenges associated with alcohol use. Here are four things employers can do to prevent the misuse of alcohol by employees and to support those employees with a diagnosable alcohol-use disorder:

1 Offer benefits that support education and prevention , as well as recovery. Currently, for insurance to pay for services, an employee’s alcohol use must reach a high level of severity before they qualify for disability management or alcohol-addiction treatment. Look for solutions that can be easily integrated into your benefits program and that will support employees across the alcohol-use spectrum. For example, on-demand virtual resources and education about alcohol and substance use is an effective way to deliver confidential support for alcohol and substance use. At ALAViDA, a product of LifeSpeak, 80 percent of people who use these resources are successful in reducing or stopping their alcohol or substance use, with an average reduction of two drinks per day.

2. Create an accepting, alcohol-free workplace culture. Help employees understand that reducing or removing alcohol from their lives does not have to mean avoiding social situations. Strive to create an environment at work events in which employees don’t feel like they are obligated to drink, or anxious about jeopardizing their sobriety. HR leaders and employers need to recognize that there is a growing population of sobercurious or sober-sometimes employees who want to change their relationship with alcohol and reduce their intake. Rather than hosting an open bar at work functions, consider serving a limited selection of low-alcohol drinks or alcohol-free drinks that have become popular due to the sobercurious movement. While these drinks can be triggers for some people who have given up alcohol, they can also be a positive reward for others.

3. Create self-awareness and an understanding of what the spectrum of alcohol use looks like. An important aspect of managing alcohol use is understanding that it exists on a spectrum. Through education and open dialogue, HR teams can

help employees see themselves and their co-workers in the spectrum of alcohol use – whether they are the mom who drinks a bottle of wine with girlfriends on the weekend to de-stress over her hectic life, or the young employee who hits up happy hour after work three days a week. Becoming self-aware of their alcohol use can help employees manage their relationship with substances, while potentially identifying challenges among family members, such as children who may be sneaking alcohol or binge drinking on the weekends with friends.

4. Focus on prevention and harm reduction. Help employees understand how alcohol use can impact their health by sharing the latest research findings in small, understandable bites, with information about lifestyle risks and associated problems. For example, it may surprise employees to learn that not only is alcohol associated with several chronic and life-threatening conditions but it is a known level-one carcinogen like tobacco and asbestos. Couple this type of content with hands-on support to help employees understand and change their health behaviours – no matter where they are in their readiness to change.

For centuries, alcohol use has been an acceptable social norm. However, the world is gaining a better understanding of the health effects related to alcohol use, and HR teams need to factor this into their well-being initiatives. By educating employees about available resources and benefits and supporting those who want to move toward abstinence and harm reduction, HR teams can drive significant improvements in employee well-being and corporate performance.

Dr. Terri-Lynn Mackay is the mental health director of ALAViDA, a LifeSpeak company. She leads a care team that provides members with compassionate, nonjudgemental, evidence-based care.

The lifeline for pension funds in a ‘higher for longer’ landscape

The elevated interest rate landscape has been a boon for pension plans, but the picture isn’t uniformly rosy, writes the CEO of Third Eye Capital

IN ITS October 2023 monetary policy meeting, the Bank of Canada held its overnight rate steady at five percent. This move, coupled with the backdrop of five percent year-over-year wage growth and a threemonth annualized underlying inflation rate of 3.5 percent, hardly came as a shock. At the tail end of last year, BoC signalled a willingness to further tighten if inflationary pressures persist, fuelling a ‘higher for longer’ narrative that has catapulted the Canadian 10-year yield to its highest level since 2007.

For pension funds, this elevated interest rate landscape has been a boon, considerably diminishing the actuarial liabilities associated with future retirement benefits. The Aon Pension Risk Tracker reports that corporate defined benefit (DB) pension plans within the S&P/TSX Composite Index now boast their strongest funded status since data tracking began in December 2012.

However, the picture isn’t uniformly rosy. Higher interest rates and inflation have lifted the hurdle rate – the return required to maintain current funded ratios. Furthermore, unless plan sponsors have frozen or shut down their DB plans, burgeoning benefits and service costs remain an obligation. The situation is further

compounded by recent setbacks in investment returns; in 2022, Canadian DB plans posted a median annual loss of 10.3 percent, the most dismal performance since the 2008 financial crisis, according to an RBC Investor & Treasury Services survey.

itional asset classes falter. Plans that are either underfunded or have longer horizons could profit from a greater tilt toward illiquid private market assets, given their superior upside and diversification benefits.

Amid today’s challenges of inflation and

As we navigate through a landscape of decelerating growth, interest rate volatility, and acute sensitivity to inflation, the prudent move for pension funds is clear: augment allocations to private credit

Pensions face an uphill task

This presents a dilemma. With dwindling investable assets to cover fixed cash payments, pension funds face the uphill task of earning sufficient returns to maintain their funded status. With fewer assets to cover the same outgoing cash commitments, generating sufficient returns becomes a pressing concern. This exigency sharpens the focus on asset allocation, particularly as trad -

elevated hurdle rates, pension fund sponsors should consider turning to private credit markets to optimize performance. Exhibiting sensitivity to interest rate movements – akin to pension liabilities – private credit has historically demonstrated strong positive returns even when equities sell off or rates decline.

Private credit, consisting of privately negotiated loans extended by non-bank

entities, has grown significantly over the past decade and now stands as a pivotal financing mechanism in the global economy. Additionally, it contributes to a more structurally resilient financial system.

Pension plans that are more resilient to illiquidity and credit risk compared to banks could capitalize on this market as banks exhibit vulnerabilities, notably asset–liability mismatches and subpar default risk management. Private credit provides material return premiums over public credit (high yield) that are derived from alpha (i.e., returns not explained by risk exposure) and fortified by superior downside protections in the form of capital structure seniority and security. It represents, as one former CalPERs CIO put it.1

Canadian market ripe for private credit

The Canadian market and current climate is particularly ripe for private credit, thanks in part to banks reducing their risk exposure, and the growing acceptance of this funding mechanism among small and mediumsized businesses. Furthermore, asset-based financing (ABF), a subcategory within private credit, offers an inflation hedge as its cash flows are often contractually secured by tangible collateral, the value of which tends to rise in an inflationary environment.

As we move into the new year and navigate through an economic landscape characterized by decelerating growth, interest rate volatility, and acute sensitivity to inflation, the prudent move for pension funds is clear: augment allocations to private credit, particularly ABF. This strategy stands to outperform equities, provides a valuable hedge against liabilities, and offers diversification in an investment climate fraught with evolving inflation risks.

1 Mark Anson, former CIO of CalPERs and current CEO and CIO of Commonfund, September28,2023

Arif Bhalwani is CEO and managing director of Third Eye Capital, one of Canada’s largest and longest-running private credit firms serving both institutional and retail clients.

Navigating the storm: Inflation’s impact on pension plans

Whether this inflationary period is transitory or structural, managers must understand the potential risks, writes Joseph Pochodyniak

OVER THE past three years, we’ve found ourselves sailing through turbulent waters of remarkably high inflation. This surge in inflation can be attributed to a multitude of factors – the unprecedented government support during the pandemic, the relentless expansion of government deficits, supply chain disruptions due to geopolitical issues, the accelerating shift toward renewable energy as part of the green transition, and the retirement of the boomer generation.

Since the middle of 2020, we saw prices rise from a modest one percent to slightly over nine percent by mid-2022. In response, both the Federal Reserve and the Bank of Canada have undertaken an assertive tightening cycle, increasing interest rates from a meagre 0.25 percent to five percent. As of July 2023, inflation has gradually subsided and wage pressures have eased, with the inflation rate resting at a little over three percent. Unemployment figures also shifted from 3.4 percent to 3.8 percent in the US and from five percent to 5.5 percent in Canada.

Naturally, every asset manager is grappling with a critical question: Is this inflationary surge structural or transitory? On the one hand, substantial indicators are suggesting that inflationary pressures will persist over the next few business cycles. Factors like

structural deficits, deglobalization, and a shrinking labour force paint a picture of enduring inflation. On the other hand, we’ve witnessed an aggressive tightening cycle and the potential for increased productivity through technological advances like generative AI, which could counteract inflation by boosting productivity. Regardless of the outcome, to understand the effects of inflation on pension plans is imperative for both a beneficiary and a pension manager.

There are two types of pension plans: defined contribution (DC) and defined benefit

(DB) pension plans. Under DC, the beneficiary takes the risk of a shortfall, while under DB, the sponsor takes the risk of a shortfall.

Effects of inflation on DB plans

In theory, the rapid surge in long-term interest rates, coupled with increasing inflation, should shrink pension plan liabilities due to a higher discount rate applied to these liabilities. However, this reduction in liabilities will be counterbalanced by the forecasted duration of inflation under the indexing method or the projected wage increases under the final

average of earnings method used to calculate pension payouts.

On the asset side, the rapid rise in interest rates has affected fixed income portfolios, especially those highly exposed to long-duration bonds. If these assets were used to match liabilities, the sell-off should not be an issue. However, if the asset manager was overexposed, this could be problematic over the long term if inflation persists and rates stay high. For non-fixed-income assets, performance depends on the manager’s exposure. Over the past year, long-duration equities were flat to down from their 2022

may pressure pension plans for cost-of-living adjustments or retroactive payout increases to match inflation, jeopardizing the plan’s funding status and increasing pension costs for sponsors.

Effects on DC plans

In DC plans, the beneficiary bears the risk of a shortfall. Therefore, beneficiaries must select managers with experience in managing assets during inflationary periods. These managers should offer more complex strategies than simple 60/40 or glide path strategies, as plain vanilla bonds, a significant component of

Persistent inflation could spell trouble for pensioners on a fixed income with plans lacking automatic indexing

peak. However, value stocks, especially those in the energy space, have performed significantly better. Therefore, if the manager rotated into sectors that benefited the most under an inflationary environment, the asset side of the balance sheet may have performed well. Additionally, if the manager held alternative assets, especially residential, industrial, and storage real estate, returns may have been even better.

In the short term, the plan’s status hinges on the asset mix and the offsetting effects on the liability side. Generally, well-funded plans will incur lower cash and accounting pension costs for the sponsor.

However, looking ahead over the long term, persistent inflation could spell trouble for pensioners on a fixed income with plans lacking automatic indexing. Small differentials in inflation can lead to substantial losses in purchasing power since losses compound. For instance, a two percent inflation rate over a decade results in a 22 percent loss of purchasing power, while three percent inflation over the same period leads to a 34 percent loss. If inflation lingers, retirees

these strategies, tend to underperform during inflationary periods.

Which asset classes shine during inflationary periods?

In periods of high inflation and high growth, the top-performing assets typically include:

• Commodities: Commodities tend to be in high demand during periods of high economic growth coupled with high inflation. Furthermore, specific to this cycle, the world has underinvested in commodities for at least the past 10 years, creating shortages in metals and energy. A significant CAPEX cycle would be needed to bring the market into balance.

• Real estate: Real estate tends to be a good hedge in inflationary periods since rents reset at higher rates. As a rule of thumb, real estate assets with short leases and high demand tend to perform best. For example, short-term rentals and storage units perform better than commercial leases due to their shorter lease terms.

In periods of high inflation and low growth

(stagflation), historically, the best-performing assets are:

• Inflation-protected bonds (TIPs): These government-issued bonds carry no default risk and are highly sought after in low-growth periods with increased default risks. Additionally, coupon payments also adjust to reflect the higher principal amount, indexed to inflation, safeguarding investors against inflation.

• Gold: This asset class excels in high-inflation, low-growth periods, serving as a haven asset. Gold performs best when nominal yields dip below the inflation rate, a scenario often seen in stagflation, as central banks are cautious about raising rates significantly due to fears of pushing the economy from low growth into recession.

Looking ahead

In the short term, the inflationary pressures seen over the past few years may have improved the funding status of defined benefit pension plans. However, if inflationary pressures persist over the long term, sponsoring entities may face demands for cost-of-living adjustments from beneficiaries/retirees, potentially undermining the plan’s funding position.

For DC plans, beneficiaries must seek experienced managers with flexible mandates that incorporate alternative strategies to hedge against inflation. During inflationary periods, simple strategies like 60/40 portfolios or glide path strategies prove inadequate.

Today, the certainty of this inflationary period being transitory or structural remains elusive. Compelling arguments exist for both scenarios; only time will unveil the truth. Nonetheless, pension managers must prepare for a scenario in which inflation and rates remain elevated for an extended period.

Joseph Pochodyniak is a senior portfolio manager at MacNicol & Associates focused on real estate, private equity, hedge funds, and alternative asset class strategies.

Plan sponsors need to decide how they will cover obesity drugs

GLP-1 drugs have revolutionized diabetes coverage, and as obesity treatments roll out in Canada, plan sponsors are a critical juncture

GLUCAGON-LIKE peptide-1 (GLP-1) diabetes drugs like Ozempic and Mounjaro have become household names. They have grabbed headlines for their success not only in treating diabetes but also in controlling appetite. Because of that success, plan sponsors and insurance companies have worked to ensure that people with diabetes have access and coverage for these drugs at a cost that is manageable for plan sponsors.

Tim Clarke, president of tc Health Consulting, says GLP-1 drugs have made diabetes the number-one category across nearly all drug plans.

“Diabetes has been a top-three cost category within most drug plans for years, but the GLP-1s have changed diabetes from being a priority to being the priority for the benefits industry,” he says.

Now, a new generation of GLP-1 drugs approved for the treatment of obesity are heading toward the Canadian market, raising another set of new questions that plan sponsors need to be ready to answer. While some of these obesity drugs have been approved

by Health Canada, their supply has been limited as pharma companies focus on giving diabetics access. Many plan sponsors have been working to limit the “off label” use of diabetes drugs like Ozempic for obesity and weight loss treatments. As they engage in that work, Clarke says they have only a matter of months before GLP-1 obesity drugs arrive on the market and force plan sponsors to decide who and how much they will cover.

“The best estimates right now are that GLP-1 drugs for weight loss will be available in Canada around mid to late spring, which means plan sponsors have between February and May to figure out exactly how they’re going to handle this, because once they’re available you better have your thought process done,” Clarke says. “It may be challenging for some employers to accept the costs, given what we expect to be significant demand for these treatments.”

Additional qualifications

Health Canada guidelines designate anyone with a BMI over 30 as obese, and eligibility could expand to anyone with a BMI over 27 with an underlying condition. Those numbers would make a significant proportion of the working population eligible for coverage. According to Statistics Canada, about a quarter of Canadians are living with obesity. Plan sponsors are probably going to have to set additional qualifications beyond just those baseline numbers to ensure that the individuals who need these drugs can access them, while ensuring the cost doesn’t balloon to a place of unsustainability.

Anti-obesity medications have been available in Canada for many years. Their cost impact to date has been quite modest, but their coverage – or lack thereof – has evolved in parallel with the scientific and societal shift in viewing obesity as a chronic disease rather than a result of poor lifestyle decisions.

While many people argue that there is significant overall value derived from GLP-1

drugs in terms of population health and reductions in cost to the healthcare system, the value proposition for a Canadian plan sponsor is less clear. If an employee gets their obesity drug covered, they may not need to claim expenses for medical devices or other drug treatments later in life. However, through the narrow lens of positive financial impact for a plan sponsor, Clarke does not see the numbers working out.

While there may be an ROI for the healthcare system overall, much of the return will come from reductions in future

perceptions, and the options to treat it – all of these are changing and will continue to change for years,” Clarke says. “For benefits plan sponsors and insurers, your obesity strategy today will need to reflect these changes as they happen.”

Clarke views GLP-1 drugs as a tremendous health innovation that will improve the lives of many Canadians, starting with those suffering with diabetes or obesity. He believes that obesity should be viewed by plan sponsors as a complex chronic condition, and that view should inform a supportive approach.

“It may be challenging for some employers to accept the costs [of GLP-1 drugs], given what we expect to be significant demand for these treatments”

Tim Clarke, tc Health Consulting

health costs, most of which will accrue to the public health system. For employers, the ROI must be seen as a combination of better health and the positive business impact of healthy, engaged employees who feel supported by their employer.

‘Obesity is changing’

While drugs like Ozempic, Mounjaro, and Wegovy are dominating the conversation today, Clarke notes that a great deal of innovation is ongoing in this space, and we should expect this to continue. This innovation is positive for the health of Canadians, but Clarke expects costs are unlikely to drop materially until these drugs go generic. Until that time, there are cost considerations, and Clarke believes plan sponsors need to have their policies and their answers ready as soon as possible.

“Obesity is changing. Its prevalence, our understanding of the science behind it, our

However, that support needs to balance cost against other business priorities, which means plan sponsors need to have their GLP-1 obesity strategies in place soon.

“For plan sponsors, it is critically important to have a strategy for how you’re managing obesity, and it needs to be articulated internally relatively quickly,” Clarke says. “You will need to answer the question of, ‘Are we covering obesity drugs in our plan, and why?’ Because once GLP-1s approved by Health Canada for obesity are available, plan members will ask for them, and you better have a solid answer – even if it’s ‘we want to support the health of our plan members, but we need time to fully understand how new drugs fit into our overall benefits plan.’ You don’t need to have all the answers the day these hit the market, but you better have given thought in advance to how you’ll answer the questions plan members will inevitably be asking.”

A cornerstone asset class for pension fund investors

Turbulent market conditions are having profound impacts on real estate investment, according to Steve Marino of GWL Realty Advisors

REAL ESTATE is now a cornerstone asset class that serves a purpose in all long-term diversified portfolios as it can achieve a variety of objectives such as growth, inflation protection, stable income, and diversification, and provide exposure to an inversely correlated asset class to traditional asset classes. However, it is not without its challenges.

Real estate has a role in supporting capital preservation and generating long-term growth and performance with the objective of delivering superior risk-adjusted returns, says Steve Marino, executive vice-president, portfolio management, Great West Life (GWL) Realty Advisors. Speaking at an ACPM webinar by Canada Life on Understanding the Benefits of Direct Real Estate Property Exposure for Pension Plans, he said, “It’s important to note there are some meaningful changes happening within the global economy that directly relate to real estate, and those changes are having profound impacts on individual asset classes, and the result is that portfolio construction is more critical today than ever before.”

Four pillars supporting increased investment

There are four primary pillars underpinning

the increased investment in real estate by all types of investors, Marino explained.

“The first and foremost is the predictability of the return profile, and that predictability is really driven by the rent or income profile it generates,” he said. “Historically, about 70 percent of total performance has been driven by that income component of return. Society needs places to live, work, and play, and, as investors, we certainly take a lot of comfort in knowing where that rental profile is and how it’s going to be able to generate cash flow moving forward.

“The second pillar is the limited correlation, and in many cases inverse correlation, to other asset classes. Private market real estate valuations remove some of the inherent volatility associated with public markets, helping to stabilize overall return profiles and provide complementary return profiles over the long term.

“Thirdly, [real estate investment] provides a very meaningful hedge against inflation as the asset class has historically participated in periods of economic expansion, helping to preserve purchasing power as replacement costs increase during those eras. Short-duration lease strategies such as multi-

family residential and small-bay industrial have historically proven to be very effective as they provide opportunities with increased frequency to reset rent and really participate in that inflationary environment.”

The fourth pillar is that “the combination of these three factors allows investors to remain invested over cycles, taking the comfort of the stability of cash flow, with limited correlation or inverse correlation, and knowing that there is hedging relative to inflation. These pillars help to keep investors sleeping at night and keep them invested through the cycle rather than potentially trying to time markets, which we have proven time and again to be a bit of a failing strategy.”

Economic changes impacting real estate market

There are key structural and cyclical changes across the economy that are impacting real estate investment, Marino said. One change is the government of Canada’s significant immigration targets.

“More than a million people arrived in Canada last year, and 91 percent of those new arrivals locate into large urban areas within Canada, making the ongoing urbaniz-

“Canadians really appreciate the value of going to those large shopping centres, and appreciate the social experience that retail can provide”

Steve Marino, Great West Life (GWL) Realty Advisors

ation and densification of our communities a critical challenge as we cope with the limitations of our infrastructure and the associated development timelines to help accommodate growth for those new arrivals. This theme is critical to our asset class. More people are generally good for real estate because it means inherently there is more demand for the real estate.”

Deglobalization is another factor impacting real estate investment. “Global instability is resulting in an increase in demand by governments and organizations to control their own destiny,” said Marino. “There is an increase in reshoring or onshoring as entities look to migrate to ‘just in case’ inventory systems to find redundancy in their local communities. That has created more demand for indus-

trial real estate, and we’re seeing some of the implications of that across the industrial asset class.”

Changes in the office space market are also impacting the real estate market. Marino said the declaration of the death of the office market was premature. “The extended lockdowns together with favourable employee conditions proved consequential in delaying the return to the office. Today, however, utilization rates are materially improving month over month. Current rates of utilization are somewhere between 60 to 80 percent of pre-COVID levels. Employers are moving to hybrid models necessitating three to four days of in-office work weeks. It is contingent on us to ensure we have assets that are positioned to perform and positioned to meet the needs of tenants moving forward.”

The penetration rate of e-commerce as a percentage of the entire economy increased during the pandemic because consumers didn’t have any other options. Once lockdowns were lifted, that penetration rate slowed, and Marino believes part of the reason is the appeal of brick-and-mortar real estate across the country. “Canadians really appreciate the value of going to those large shopping centres, and appreciate the social experience that retail can provide,” he said. He added that e-commerce could co-exist with physical stores, and retailers now provided an exemplary omnichannel experience.

Turbulent market conditions are having profound impacts on real estate investment, Marino said. However, these conditions and trends provide opportunities for active management of this asset class. Real estate investing is about “buying the right property on the right street and investing capital prudently to create value. The active-management approach allows assets and, ultimately, portfolios to create value over time, stacking together solid outcomes irrespective of the capital-market conditions. It allows investors to benefit from resilient and sustainable cash flow and value creation.”

“The Foresters GO app helps me stay on track with my goals. It’s a fantastic tool and rewards me for active living and giving back”

2,500

MARATHON MAN

How taking up running transformed my life: Dave Talbot tells his story

AS AN insurance professional at Foresters Financial, I work with insurance advisors to extend financial protection to families when illness or the loss of a loved one occurs. It’s important to me that my own family has the right financial support they need in the event I can’t be there – which includes securing personal life coverage to supplement my workplace benefits. Interestingly, a few years ago, I realized I wasn’t leading a life destined for lasting health.

So, I laced up some running shoes and attempted a run. Half a kilometre later,

I was in the fetal position ready to give up. However, I persevered, and within 12 months I finished an ultra marathon –these races start at 50km in distance!

I caught the bug! I began seeking out new challenges that redefined what I thought possible. Next were cold-exposure events such as the NateFit Exposed 5k charity run. A group of us ran 5km shirtless in -40°C weather raising funds for Inn from the Cold. And as a Foresters policyholder and member, I applied for and received a $200 Foresters Care grant to

help provide meals for homeless families.

Experiencing how nutrition and mental and physical health have completely transformed my life, I wanted to share that experience with others, so I became a certified holistic nutrition and health coach.

This year marks the 150th anniversary of Foresters, and it has me busy helping financial advisors and their clients understand the value of securing personal life and critical illness solutions to supplement their corporate plans, ensuring families have the adequate financial protection they need.

2021

Talbot ran shirtless in -40°C for Inn from the Cold charity

Family members per year supported by Inn from the Cold

Benefits and Pensions Monitor’s special reports provide an expert-collated resource for the industry when looking for best-in-class partners and the most revered service providers.

The special reports also provide an opportunity to honor the top companies and individuals in the industry for their hard work and commitment to innovation. In 2024, BPM will produce a comprehensive portfolio of special reports covering a plethora of topics and agendas that are top of mind for professionals and most pertinent to the industry.

• Elite Women

• Hot List

• Top Benefit Providers

• Top Consultants

• Top Employers

• Top Money Managers

If you would like further details on how to be involved, please get in touch via email at sophia.egho@keymedia.com.