money managers of 2004 by sdaferv

VIEWS: 40 PAGES: 7

									INVESTMENTS




       FORTY
 TOPmanagers of 2004
 money
     From 1994 to 2004, Canadian pen-           After declining in 2003, pension assets under management rebounded
     sion plan sponsors witnessed it all: a     sharply this year, according to the annual Top 40 survey by BENEFITS CANADA.
     powerful bull market, a remarkable
     investment bubble, a wrenching bear
     market, and finally, a tentative recov-
     ery. Over those 10 volatile years,         By Jim MacDonald
     Canada’s institutional money man-
     agement industry tripled in size from
     $463 billion in total managed assets       ‘barbell’ shape, evolving into a busi-     income and alternative strategies.
     to $1.4 trillion. Moreover, the think-     ness of large players and specialty bou-   Then again, there was more opti-
     ing around pension fund manage-            tiques. But the passage of time reveals    mism in the mid-nineties—a bull
     ment underwent a major shift.              fascinating changes. For starters, there   market was underway, discount rates
        The past is not entirely foreign ter-   was a change in ‘management.’ In           were higher, pension liabilities were
     ritory for today’s pension investment      1994, people talked about the era of       lower, the Persian Gulf War had
     industry. In 1994, the industry was        wealth management; in 2004, the talk       been settled quickly, and the Mon-
     talking about the consolidation of         is about risk management.                  treal Expos were the “best” team in
     money managers and the influence of            The move to offshore equities was      baseball. Today, equities inspire less
     U.S.-based managers; ditto for 2004.       a major trend in 1994, but in 2004,        confidence, interest rates are much
     The industry did take on more of a         there is growing interest in fixed         lower, liabilities have risen, Iraq is


28     NOVEMBER 2004                                                                                    www.benefitscanada.com
anything but settled, and the Expos
left the country.                          THE BIG PICTURE                                                                                                            As of June 30, 2004 (millions)


                                            $400,000
THE NUMBERS
Using the 1994 BENEFITS CANADA




                                                                                                                                                                       $307,652.5
                                                                $365,976.4
Top 40 article as a guide, the focus        $350,000




                                                                                                                                                         $277,431.2
then was on managing assets. The
word ‘risk’ did not appear in the           $300,000
1994 article, nor did ‘liabilities’. At
June 30, 1994, pension assets of the        $250,000
Top 40 totaled $169 billion. Their
pension assets had tripled over the




                                                                                                                           $148,605.4
                                            $200,000
previous 10 years (rising from $56.6
billion in 1985), as more money




                                                                                                                                                                                               $104,700.6
managers entered the field. The             $150,000




                                                                                              $81,062.4
report included data from 147 man-
agers, whereas 185 provided data for        $100,000




                                                                                                                                           $48,502.8
the 2004 survey.

                                                                                $34,973.4




                                                                                                              $31,935.8
   As of June 30, 2004, the holdings
                                              $50,000




                                                                                                                                                                                    $2,950.0
of the Top 40 had grown to $499.4
billion in pension assets, according to
the data provided to the annual BEN-                $0

EFITS CANADA Top 40 Money Man-
                                                               Mutual Fund*                                                                            Corporate Assets
agers survey (see “Top 40” chart,
                                                               Insurance Segregated Fund*                                                     Pension Pooled Fund
page 34). Assets climbed a solid
14.7% from the 2003 total of $435.3                            High Net Worth*                                                          Pension Segregated Fund

billion, when pension assets declined                          Endowment Fund                                                    Non Tax Assisted Trust Fund
0.8% from the previous year.                                   Insurance Company                                                                                          *Other
   The top 10 firms reported $293.2                                                                                                                               * Includes CI Funds
billion in pension assets, which rep-
resents half of the industry total.
   Total industry assets under man-        POOLED FUNDS                                                                                                               As of June 30, 2004 (millions)

agement had grown to $1.4 trillion,
an increase of $300 billion from the              Cdn. Equity $32,804.9                                                                  $9,281.1
decline posted in 2003 (see “The
Big Picture”). Note that the 2004
total includes assets of CI Funds, a
                                                   U.S. Equity $11,253.6                                            $16,762.9
new respondent.
   A few newcomers cracked the Top
40 this year from the 2003 list.
                                             Non-N.A. Equity $20,228.6                                       $4,987.6
Wellington Management Company
placed 30th, while AIM Trimark
Investments is in the number 38
spot, and Foyston, Gordon & Payne               Global Equity $8,018.3                      $5,902.0
Inc. moved into the 40th position.
Meantime, Barclays Global Investors,
the Caisse de dépôt et placement du                Cdn. Bond $50,577.2                                                                                 $21,274.1
Québec, McLean Budden and Jaris-
lowsky, Fraser Limited were the lead-
                                                                             $10,000                        $30,000                       $50,000                         $70,000
ers in the fastest growth of assets (see
                                                              $0                            $20,000                       $40,000                        $60,000                          $80,000
charts, page 35).
   This year’s recommended pension
                                                                             Active                       Passive
portfolio mix, drawn from the
                                           Source: Firms participating in BENEFITS CANADA‘s 2004 Top 40 Money Managers Survey
responses of balanced managers, is


www.benefitscanada.com                                                                                                                                                              NOVEMBER 2004           29
     TOP 20 ENDOWMENT FUND MANAGERS
                                                                                                    As of June 30, 2004


          Company                                                                              Assets (millions)
                                                                                                                            32% fixed income product, 33.5%
     1    Jarislowsky, Fraser Limited                                                                        $3,323.0       Canadian equities, 14% U.S. equities,
     2    Phillips, Hager & North Investment Management Ltd.                                                 $2,690.4
                                                                                                                            9% non-North American equity, 4%
     3    TD Asset Management Group                                                                          $2,348.0
                                                                                                                            cash, 7% other investments and 0.2%
     4    Natcan Investment Management 1                                                                     $2,263.0
     5    TAL Global Asset Management Inc.                                                                   $1,849.2
                                                                                                                            real estate. Compare this to 1994’s
     6    Addenda Capital Inc.                                                                               $1,433.0       recommended portfolio: 40% fixed
     7    McLean Budden Ltd.                                                                                 $1,365.0       income, 35% Canadian equity, 9.3%
     8    Barclays Global Investors Canada Limited                                                           $1,103.7       U.S. equity, 6.5% non-North Ameri-
     9    Burgundy Asset Management Ltd.                                                                     $1,088.6       can equity, 6.3% cash, 1.3% other
     10   YMG Capital Management Inc.                                                                        $1,069.6       and 0.5% real estate. Current recom-
     11   Pareto Partners                                                                                    $1,053.0       mended holdings of U.S. and non-
     12   Franklin Templeton Investments Corp.                                                                $988.5        North American equities, cash and
     13   Fiera Capital Management Inc. 2                                                                      $932.0       other investments are all much higher.
     14   UBS Global Asset Management (Canada)                                                                $830.0
     15   Scotia Private Client Group 3                                                                        $696.0
                                                                                                                            THE NEW NORMAL
     16   Letko, Brosseau & Associates Inc.                                                                   $559.0
     17   KBSH Capital Management Inc.                                                                         $512.0
                                                                                                                            If the 1990s were about managing
     18   Mawer Investment Management Ltd.                                                                     $463.0       assets, this decade, so far, has been
     19   Montrusco Bolton Investments Inc.                                                                   $446.8        about managing risk. As a result, more
     20   Beutel Goodman & Company Ltd.                                                                        $435.0       energy has been spent on managing
                                                                                                                            pension fund portfolios so that assets
          Top 20 Total                                                                                    $25,448.8
                                                                                                                            are more directly matched to liabilities.
          Money Management Industry Total: 2004                                                           $31,935.8
                                                                                                                               “People are looking for return in
          Money Management Industry Total: 2003                                                           $28,486.8
          % Difference                                                                                       12.1%
                                                                                                                            different ways than maybe they did
                                                                                                                            before,” said Chris Brisebois, senior
                                                                                                                            investment consultant with Watson
     TOP 20 MANAGERS OF HIGH NET WORTH                                                                                      Wyatt Worldwide, in Toronto. “In
                                                                                                    As of June 30, 2004
                                                                                                                            the 1990s, you could basically have
          Company                                                                              Assets (millions)            been invested in a straight Canadi-
     1    TD Asset Management Group                                                                        $12,339.0        an equities portfolio and would
     2    Scotia Private Client Group 4                                                                     $8,220.0        have done fine.”
     3    BMO Harris Investment Management Inc.                                                             $5,552.6           Not any more. Now, there is a gen-
     4    RBC Private Counsel                                                                               $5,460.0        eral feeling that the equity risk premi-
     5    Jarislowsky, Fraser Limited                                                                       $5,348.0
                                                                                                                            um has shrunk, as equity markets
     6    Phillips, Hager & North Investment Management Ltd.                                                $3,702.3
                                                                                                                            struggle, and that high volatility is
     7    Franklin Templeton Investments Corp.                                                              $2,907.0
     8    SEAMARK Asset Management Ltd.                                                                     $2,904.5
                                                                                                                            here to stay. A bull market was under-
     9    Natcan Investment Management                                                                      $2,815.0        way in 1994, so not surprisingly, the
     10   Brandes Investment Partners, LLC                                                                  $2,810.0        industry was focused on growing
     11   McLean Budden Ltd.                                                                                $2,633.0        assets. Today, more pension fund
     12   TAL Global Asset Management Inc.                                                                  $2,038.3        sponsors are looking at alternative
     13   NT Global Advisors, Inc.                                                                          $1,996.3        strategies, such as hedge funds and
     14   Burgundy Asset Management Ltd.                                                                    $1,977.0        private equity, as potential sources of
     15   Letko, Brosseau & Associates Inc.                                                                 $1,745.0        precious extra risk-adjusted returns.
     16   Mirabaud Canada Inc.                                                                              $1,321.0        They are also looking to a golden
     17   Montrusco Bolton Investments Inc.                                                                 $1,300.5
                                                                                                                            oldie, bonds, to help improve the
     18   Howson Tattersall Investment Counsel Limited                                                      $1,221.6
                                                                                                                            match of their assets to their liabilities.
     19   Magna Vista Investment Management                                                                 $1,163.2
     20   HSBC Asset Management (Canada) Limited                                                            $1,119.5
                                                                                                                               “There’s a significant change in
                                                                                                                            paradigm in terms of thinking of
          Top 20 Total                                                                                    $68,573.8         how to efficiently build up a fund
          Money Management Industry Total: 2004                                                           $81,062.4         structure in terms of how do you run
          Money Management Industry Total: 2003                                                           $71,989.6         assets long term versus the objective,
          % Difference                                                                                       12.6%
                                                                                                                            which is to fund the liability stream,”
          1. Includes religious institutions. 2. Formerly listed as Elantis Investment Management Inc. 3. Formerly listed   said Carl Bang, chief investment offi-
          as Scotia Cassels Investment Counsel Limited. 4. Formerly listed as Scotia Cassels Investment Counsel Limited.
                                                                                                                            cer, fixed income, for State Street
          Source: Firms participating in BENEFITS CANADA‘s 2004 Top 40 Money Managers Survey
                                                                                                                            Global Advisors in Montreal. “In


30   NOVEMBER 2004                                                                                                                         www.benefitscanada.com
     THE TOP 40 MONEY MANAGERS OF 2004                                                                                                                As of June 30, 2004


                                                                                     Total Pension Assets (millions)
     2003 2004           Company                                                                 2004          2003                     Variance       Total Assets

     1        1          Caisse de dépôt et placement du Québec 1             $97,190.0                             $88,944.0            $8,246.0         $132,389.0
     4        2          Barclays Global Investors Canada Limited             $33,764.1                             $24,650.0            $9,114.1          $45,561.2
     2        3          Phillips, Hager & North Investment Management Ltd. $28,781.6                               $25,006.4            $3,775.2          $46,984.3
     3        4          TD Asset Management Group 2                          $26,195.0                             $24,886.0            $1,309.0         $124,031.0
     5        5          Jarislowsky, Fraser Limited                          $25,144.0                             $20,980.0            $4,164.0          $41,952.0
     6        6          McLean Budden Ltd.                                   $22,587.0                             $18,052.0            $4,535.0          $31,303.0
     8        7          State Street Global Advisors Ltd.                    $20,343.4                             $16,872.2            $3,471.2          $26,100.6
     10       8          Greystone Managed Investments Inc.                   $14,153.8                             $11,725.8            $2,428.0          $19,832.5
     9        9          UBS Global Asset Management (Canada)                 $12,571.0                             $14,901.8           -$2,330.8          $25,033.0
     11       10         Bimcor Inc.                                          $12,449.1                             $11,513.1              $936.0          $12,449.1
     13       11         Connor, Clark & Lunn Financial Group                 $11,549.4                              $8,392.6            $3,156.8          $19,290.2
     14       12         Addenda Capital Inc.                                 $11,243.0                              $8,119.0            $3,124.0          $17,617.0
     15       13         Capital Guardian Trust Co.                           $10,621.0                              $7,652.8            $2,968.2          $11,944.2
     7        14         TAL Global Asset Management Inc.                     $10,336.5                             $13,051.0           -$2,714.5          $52,684.9
     16       15         Beutel Goodman & Company Ltd.                         $9,430.0                              $7,560.0            $1,870.0          $10,745.0
     12       16         Legg Mason Canada Inc.                                $9,348.0                              $9,861.0             -$513.0          $12,323.0
     27       17         AllianceBernstein Institutional Investment Management $9,084.0                              $5,452.0            $3,632.0          $15,590.0
     22       18         Bentall Capital                                       $8,957.0                              $6,100.0            $2,857.0           $8,957.0
     21       19         Franklin Templeton Investments Corp. 3                $8,120.0                              $6,244.8            $1,875.2          $33,522.3
     25       20         Natcan Investment Management                          $7,949.0                              $5,904.0            $2,045.0          $27,644.0
     17       21         Northwater Capital Management Inc.                    $7,927.0                              $6,946.0              $981.0           $8,140.0
     23       22         JPMorgan Fleming Asset Management                     $7,885.4                              $6,081.0            $1,804.4           $8,838.7
     19       23         Guardian Capital LP                                   $7,750.0                              $6,492.0            $1,258.0          $13,569.0
     18       24         Standard Life Investments Inc. 4                      $7,332.0                              $6,543.4              $788.6          $20,098.4
     20       25         GWL Investment Management Ltd.                        $6,825.6                              $6,335.3              $490.3          $13,469.4
     26       26         New Brunswick Investment Management Corp.             $6,527.0                              $5,681.5              $845.5           $6,527.0
     30       27         Sprucegrove Investment Management Ltd.                $6,293.2                              $4,527.0            $1,766.2           $8,117.0
     28       28         MFC Global Investment Management                      $6,183.7                              $5,024.9            $1,158.8          $76,146.3
     34       29         Letko, Brosseau & Associates Inc.                     $6,115.0                              $4,207.0            $1,908.0           $9,594.0
              30         Wellington Management Company, LLP                    $5,596.9                              $2,987.6            $2,609.3           $7,747.4
     33       31         GE Asset Management                                   $4,984.7                              $4,214.8              $769.9           $5,407.5
     36       32         Brandes Investment Partner, LLC                       $4,934.0                              $3,535.0            $1,399.0          $12,165.0
     35       33         AMI Partners Inc.                                     $4,425.0                              $3,817.2              $607.8           $4,755.0
     32       34         YMG Capital Management Inc.                           $4,360.7                              $4,234.1              $126.6          $14,466.7
     24       35         Sceptre Investment Counsel Limited                    $4,162.5                              $6,031.0           -$1,868.5           $7,317.7
     37       36         SEAMARK Asset Management Ltd.                         $3,911.5                              $3,483.6              $427.9          $10,929.2
     29       37         KBSH Capital Management Inc.                          $3,895.0                              $4,576.3             -$681.3           $6,526.0
              38         AIM Trimark Investments                               $3,623.0                              $2,895.0              $728.0          $41,737.0
     40       39         Pareto Partners                                       $3,453.0                              $3,018.0              $435.0           $4,506.0
              40         Foyston, Gordon & Payne Inc.                          $3,421.0                              $2,097.0            $1,324.0           $5,917.0

                         Top 40 Total                                                       $499,423.1
                         Last Year                                                          $435,274.6
                         $ Difference                                                        $64,148.5
                         % Difference                                                           14.7%
                         2004 Pension Industry Total                                        $585,083.6

     1. Assets are as of December 31, 2003 2. TD Asset Management Inc. and its affiliates 3. Assets include Templeton, Bisset and Franklin Templeton Institutional
     4. Total pension asset figure excludes $3,269.2 million (U.S. equities) managed by SLI in North-America on behalf of UK clients. Total asset figure excludes $5,310.4
     (U.S. equities) managed by SLI in North-America on behalf of UK clients.


     Source: Firms participating in BENEFITS CANADA‘s 2004 Top 40 Money Managers Survey




34   NOVEMBER 2004                                                                                                                     www.benefitscanada.com
that context, what you are seeing is
much more dynamic management               TOP 20 FASTEST GROWING $                                                             As of June 30, 2004

of your assets to your liabilities.”                                                          Pension assets (millions)
   For example, plan sponsors want             Company                                                2004        2003                Variance
more customized bond portfolios. “It
                                           1   Barclays Global Investors Canada Limited              $33,764.1      $24,650.0           $9,114.1
used to be that a pension plan would
                                           2   Caisse de dépôt et placement du Québec                $97,190.0      $88,944.0           $8,246.0
come in and get a universe mandate.
                                           3   McLean Budden Ltd.                                    $22,587.0      $18,052.0           $4,535.0
Now, they come in asking for a long
                                           4   Jarislowsky, Fraser Limited                           $25,144.0      $20,980.0           $4,164.0
mandate, they might be looking for a
                                           5   Phillips, Hager & North Investment
real-return bond mandate, a mix of
                                               Management Ltd.                                       $28,781.6      $25,006.4           $3,775.2
different indices—just so they can
                                           6   AllianceBernstein Institutional Investment
get a cash flow that looks more and
                                               Management                                             $9,084.0       $5,452.0           $3,632.0
more like their liabilities,” said Bang.
                                           7   State Street Global Advisors Ltd.                     $20,343.4      $16,872.2           $3,471.2
   “It’s not about maximizing
                                           8   Connor, Clark & Lunn Financial Group                  $11,549.4       $8,392.6           $3,156.8
returns at all costs; it’s now ‘maxi-
                                           9   Addenda Capital Inc.                                  $11,243.0       $8,119.0           $3,124.0
mize my risk-adjusted returns’,”
                                           10 Capital Guardian Trust Co.                             $10,621.0       $7,652.8           $2,968.2
said Barbara Palk, president of TD
                                           11 Bentall Capital                                         $8,957.0       $6,100.0           $2,857.0
Asset Management in Toronto.
                                           12 Wellington Management Company, LLP                      $5,596.9       $2,987.6           $2,609.3
   John Montalbano, a vice-presi-
                                           13 Greystone Managed Investments Inc.                     $14,153.8      $11,725.8           $2,428.0
dent with Phillips, Hager &
                                           14 Natcan Investment Management                            $7,949.0       $5,904.0           $2,045.0
North Investment Management in
                                           15 Letko, Brosseau & Associates Inc.                       $6,115.0       $4,207.0           $1,908.0
Vancouver, says the pension
                                           16 Franklin Templeton Investments Corp.                    $8,120.0       $6,244.8           $1,875.2
industry is reviewing its percep-
                                           17 Beutel Goodman & Company Ltd.                           $9,430.0       $7,560.0           $1,870.0
tions of risk in a big way. “I think
                                           18 JPMorgan Fleming Asset Management                       $7,885.4       $6,081.0           $1,804.4
the industry is turned on its head
                                           19 Sprucegrove Investment Management Ltd.                  $6,293.2       $4,527.0           $1,766.2
now, whether you are a plan spon-
                                           20 London Life Investment Management Ltd.                  $3,065.9       $1,419.9           $1,646.0
sor or a money manager.”
   Whereas risk was once asset
volatility, there is a better under-       TOP 20 FASTEST GROWING %                                                             As of June 30, 2004

standing that liabilities are volatile,                                                       Pension assets (millions)
too. The industry, Montalbano                  Company                                                2004        2003                Variance
said, is now trying to understand          1   London Life Investment Management Ltd.                 $3,065.9       $1,419.9             115.9%
how assets move in relation to the         2   Fidelity Investments Canada Ltd.                       $1,431.3         $757.0              89.1%
movement of liabilities.                   3   Wellington Management Company, LLP                     $5,596.9       $2,987.6              87.3%
   “Ten years later, people are now        4   ABN AMRO Asset Management Canada Ltd.                    $414.7         $232.1              78.7%
more willing to accept a customized        5   Morgan Stanley Investment Management                   $1,507.0         $844.9              78.4%
approach to their portfolios… A lot        6   Integra Capital Management Corp.                       $2,090.0       $1,235.6              69.1%
of them are realizing that peer sam-       7   AllianceBernstein Institutional Investment
ples really don’t matter anymore.              Management                                             $9,084.0       $5,452.0              66.6%
They need a customized approach            8   Foyston, Gordon & Payne Inc.                           $3,421.0       $2,097.0              63.1%
to their pension plan,” he said.           9   Howson Tattersall Investment Counsel Limited $387.9                     $251.7              54.1%
   Portfolio customization and             10 Baillie Gifford Overseas Limited                        $3,219.7       $2,122.0              51.7%
greater specialization of mandates         11 Bentall Capital                                         $8,957.0       $6,100.0              46.8%
have influenced fixed-income invest-       12 Letko, Brosseau & Associates Inc.                       $6,115.0       $4,207.0              45.4%
ing and sparked a growing interest         13 PCJ Investment Counsel Ltd.                               $365.5         $256.1              42.7%
in alternative investment strategies,      14 Brandes Investment Partners, LLC                        $4,934.0       $3,535.0              39.6%
which were not on the radar in             15 Sprucegrove Investment Management Ltd.                  $6,293.2       $4,527.0              39.0%
1994. ‘Other’ investments, which           16 Capital Guardian Trust Co.                             $10,621.0       $7,652.8              38.8%
could include alternatives, represent-     17 Addenda Capital Inc.                                   $11,243.0       $8,119.0              38.5%
ed 1.3% of the recommended asset           18 Connor, Clark & Lunn Financial Group                   $11,549.4       $8,392.6              37.6%
mix of balanced managers in 1994;          19 New Star Canada Inc.                                      $244.4         $177.9              37.4%
today they comprise 7%. Ten years          20 Barclays Global Investors Canada Limited               $33,764.1      $24,650.0              37.0%
ago, the new asset mix trend was the
                                           Source: Firms participating in BENEFITS CANADA‘s 2004 Top 40 Money Managers Survey
increased allocation to U.S. and


www.benefitscanada.com                                                                                                     NOVEMBER 2004              35
  THE NUMBERS                                    TOP POOLED FUND MANAGERS                                                            As of June 30, 2004


  • Total assets under management                     Company                                                                    Assets (millions)
  increased from $1.1 trillion as at June        1    Caisse de dépôt et placement du Québec                                                 $97,190.0
  30, 2003, to $1.4 trillion one year later.     2    Barclays Global Investors Canada Limited                                               $24,744.8
  The 20 largest firms had $911.5 billion
                                                 3    TD Asset Management Group                                                              $16,351.0
  in total assets under management.
                                                 4    State Street Global Advisors Ltd.                                                      $15,655.0
  • Canadian pension assets under
  external management are nearing the            5    McLean Budden Ltd.                                                                     $12,457.0
  $600-billion mark. As of June 30, 2004,        6    Bimcor Inc.                                                                            $11,357.8
  the firms surveyed are reporting $585          7    Phillips, Hager & North Investment Management Ltd.                                      $6,981.3
  billion in aggregate assets. That repre-       8    New Brunswick Investment Management Corp.                                               $6,527.0
  sents a 14.7% increase over the previ-         9    Jarislowsky, Fraser Limited                                                             $5,848.0
  ous year’s total.
                                                 10   Standard Life Investments Inc.                                                          $4,447.0
  • The entry point to the Top 40
                                                 11   UBS Global Asset Management (Canada)                                                    $4,261.0
  climbed a notch, from $3 billion last
  year to $3.4 billion in 2004.                  12   Sprucegrove Investment Management Ltd.                                                  $3,653.2
  • Balanced managers were asked to              13   GWL Investment Management Ltd.                                                          $3,646.6
  offer their recommended asset mix:             14   AIM Trimark Investments                                                                 $3,623.0
  Here is the average mix, with the 2003         15   SEI Investments                                                                         $3,387.6
  recommendations in brackets, as of             16   Legg Mason Canada Inc.                                                                  $3,304.0
  June 30, 2004:
                                                 17   Northwater Capital Management Inc.                                                      $3,279.0
  - Canadian fixed income: 32.1% (33.6%)
                                                 18   Capital Guardian Trust Co.                                                              $3,156.9
  - Canadian equity: 33.5% (33.5%)
  - US equity: 13.6% (16.1%)                     19   Franklin Templeton Investments Corp.                                                    $2,942.5
  - Non N.A. equity: 9.2% (7.9%)                 20   TAL Global Asset Management Inc.                                                        $2,882.0
  - Cash: 4.0% (3.6%)
                                                      Top 20 Total                                                                         $235,694.7
  - Real estate: 0.2% (0.3%)
  - Other: 7.3% (5.1%)                                Money Management Industry Total: 2004                                                $277,431.2
  • Breakdown of ownership structures:                Money Management Industry Total: 2003                                                $235,699.8
  – Wholly owned by principals: 41.9%                 % Difference                                                                             17.7%
  – Wholly owned subsidiary of a
                                                      Source: Firms participating in BENEFITS CANADA‘s 2004 Top 40 Money Managers Survey
  financial institution: 28.5%
  – Partnership between principals and
  financial institutions: 11.0%
                                               portfolio of the largest pension funds                  tage of,” said Brisebois.
  – Publicly held company: 4.7%
  – Other: 14.0%
                                               in this country included a hedge fund                      “The whole pension community
  • The S&P/TSX composite total return         allocation of 0.7%, or 1% if managed                    has much more of a risk focus, which
  index rose 24.5% over the year end-          futures were included. The allocation                   means they want to make sure they are
  ing June 30, 2004. Over the same peri-       to private equity stood at 0.8%, or                     not taking a huge amount of risk for a
  od, the S&P 500 total return index           1.3% if private placements are                          given level of return. That’s why the
  gained 3.4%, the Scotia Capital Uni-         included. (For more on alternatives,                    community has turned toward separat-
  verse Bond index climbed 3.3%, and
                                               see “Alpha Waves”, page AG1.)                           ing assets in terms of those assets that
  the MSCI EAFE total return index
  jumped 31.4%.
                                                  Still, many plan sponsors are                        provide a market return and those
                                               standing on the sidelines of the alter-                 assets that provide a value-added-to-
                                               native gridiron. The learning curve is                  the-market return,” said Bang.
non-North American equities.                   steep, there are concerns about high                       Plan sponsors are also more sensi-
   Alternative strategies are now firm-        fees and a lack of transparency, and                    tive to costs in the current low-return
ly established in the portfolios of            alternatives can be a hard sell to pen-                 environment. “While it has not been
many of the biggest pension funds,             sion committees. Also, some                             substantial, there has been some pres-
especially in the United States. Propo-        observers express skepticism about                      sure on [management] fees and I
nents say these strategies are potential       the ‘magic-bullet mindset’ associated                   would expect that to continue,” said
sources of added value, for example,           with alternative strategies.                            Tim Hicks, chief investment officer at
to complement a bond portfolio, yet               “In alternatives, I think if you                     Russell Investment Group in Toronto.
at the same time, they help manage             are going to invest in them, you
risk more dynamically. According to            have to believe there is active man-                    TO BOLDLY GO
the 2004 Top 100 Survey of BENEFITS            agement skill and there are ineffi-                     Having looked at the past and the
CANADA (May issue), the average                ciencies that can be taken advan-                       present, what could Canada’s institu-


www.benefitscanada.com                                                                                                                NOVEMBER 2004        39
                                                                                                                 ings have made it very difficult for
       TOP 20 TOTAL ASSETS                                                                                       employers to actually run these sys-
       UNDER MANAGEMENT                                                                    As of June 30, 2004   tems,” said Por.
                                                                                                                    The details of the Monsanto case
            Company                                                                     Assets (millions)
                                                                                     2004          2003          are gradually unfolding, however,
                                                                                                                 and the case could have a signifi-
       1    Caisse de dépôt et placement du Québec1                           $132,389.0         $122,397.0
       2    TD Asset Management Group                                         $124,031.0         $109,509.0
                                                                                                                 cant impact on the investment
       3    MFC Global Investment Management                                   $76,146.3          $60,906.2      policies of DB plans, especially the
       4    TAL Global Asset Management Inc.                                   $52,684.9          $50,874.0      risk-reward trade-off that plan
       5    CI Fund Management                                                 $49,604.0          $33,858.0      sponsors would accept.
       6    Phillips, Hager & North Investment Management Ltd.                 $46,984.3          $39,567.0         “In general, what I think is going
       7    Barclays Global Investors Canada Limited                           $45,561.2          $35,261.0      to happen with Monsanto is the
       8    Jarislowsky, Fraser Limited                                        $41,952.0          $35,661.0      whole idea of managing surplus is
       9    AIM Trimark Investments                                            $41,737.0          $34,500.0      going to come more into play. And
       10   Mackenzie Financial Corporation                                    $39,823.3          $32,996.0
                                                                                                                 plan sponsors are probably going to
       11   Franklin Templeton Investments Corp.                               $33,522.3          $27,534.4
                                                                                                                 try to have a fully-funded plan, but
       12   Fidelity Investments Canada Ltd.                                   $32,671.8          $27,255.0
                                                                                                                 they won’t be incented to go much
       13   McLean Budden Ltd.                                                 $31,303.0          $24,815.0
       14   Natcan Investment Management                                       $27,644.0          $20,521.0
                                                                                                                 more than that,” said Brisebois, who
       15   State Street Global Advisors Ltd.                                  $26,100.6          $18,844.7      noted that one likely consequence of
       16   UBS Global Asset Management (Canada)                               $25,033.0          $26,344.9      this will be increased costs to both
       17   Industrial Alliance Life Insurance Company                         $24,720.0          $17,900.0      plan sponsors and members.
       18   Standard Life Investments Inc.                                     $20,098.4          $18,270.5         The Monsanto case is but the lat-
       19   Greystone Managed Investments Inc.                                 $19,832.5          $15,780.0      est impetus behind the shift toward
       20   Scotia Private Client Group                                        $19,700.0          $18,908.0      placing a greater emphasis on manag-
                                                                                                                 ing the various risks of pension funds
            Top 20 Total                             $911,538.6
                                                                                                                 in Canada, be they DB or CAPs. It
            Money Management Industry Total: 2004   $1,403,833.7
                                                                                                                 won’t be the last. Many industry
            Money Management Industry Total: 2003 2 $1,154,695.2
                                                                                                                 observers say this is a healthy and
            % Difference                                  21.6%
                                                                                                                 necessary process that can improve
            1. Assets are as of December 31, 2003. 2. 2003 industry total restated                               the management and sustainability of
            Source: Firms participating in BENEFITS CANADA‘s 2004 Top 40 Money Managers Survey                   pension plans, to the benefit of both
                                                                                                                 plan sponsors and members, well
     tional investment industry be talking                     of pension fund portfolios, resulting             into the future.
     about in 2014? Many observers say                         from the eventual raising of the foreign             “Risk—not returns—should be
     look to the search for alpha, using                       content limit and the effect of aging             the starting point for pension man-
     alternative strategies and even more                      societies on Western capital markets.             agement,” said John MacNaughton,
     specialized mandates, for harbingers                      “There will be, I believe, huge growth            president and CEO of the Canada
     of things to come.                                        in international equities because of              Pension Plan Investment Board, in a
        “In a world where you are being                        demographics. The growth will hap-                speech to a conference of pension
     paid to seek alpha, and in a world                        pen in emerging countries,” said Por.             industry professionals in Vancouver
     where there is so much growing effi-                         The pension industry is also fig-              this past September.
     ciency in the market, the way in which                    uring out what the ‘post-Monsanto’                   Within this shift toward risk man-
     to capture alpha has got to be in                         world will look like, with many pre-              agement, the job of institutional
     unconstrained mandates,” said Palk.                       dicting an acceleration of the trend              money managers in Canada is
        Watson Wyatt’s Brisebois said                          of converting defined benefit (DB)                expanding in order to meet the expec-
     pension funds may start looking at                        plans into capital accumulation                   tations of today’s pension plan spon-
     structuring longer-term mandates                          plan schemes. “It [the Monsanto                   sors. “Investment managers are no
     for asset managers, which would                           decision] just seems like another                 longer just called on to manage a
     provide the incentive to manage the                       nail in the coffin of defined benefit             strategy,” said Bang. “We’re becoming
     best way for the individual plan, as                      plans,” said Hicks.                               more and more risk managers.” BC
     opposed to a benchmark.                                      “Our legal system does not really
        John Por, president of Cortex                          appreciate the risks imposed on the               Jim MacDonald is the editor of Benefits
     Applied Research in Toronto, expects                      employer by the very existence of the             Canada.Jim.macdonald@bencan-
     to see a greater “internationalization”                   pension promise. Recent court rul-                cir.rogers.com


40     NOVEMBER 2004                                                                                                           www.benefitscanada.com

								
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