38% of Canadian Pension Funds Are Investing in Alternatives

Driven by a desire to diversify their portfolios at a time synonyms with low returns, it appears that more Canadian pension plans have been choosing alternative investments. Preliminary figures from an ongoing Mercer survey reveal that (so far) in 2013, 38 percent of Canadian pension funds are investing in alternatives, up from 25 percent of investment funds in 2010. Also, the percentage of the portfolio that pension funds' allocate to alternative investments has increased to 18 percent in 2013, up from 15 percent in 2010 (Mercer survey).

Although there is an obvious rise in the popularity of alternative assets, the figures from the survey also revealed that there is not much diversification within the plans’ alternative allocations. It would seem that at the moment, Canadian pension funds limit themselves mainly to real estate and infrastructure. Without much surprise, many investment analysts feel that this is a mistake. Challengers say that pension plans would benefit from venturing into hedge funds, private equity and hard assets. The fact of the matter is that Canadian plans still do not have sufficient knowledge of alternative investments or how to introduce them.

“Alternatives can be complex, so it’s pretty hard to convince people that they need to advance on that front ... A pension fund doesn't want to be the first one investing in a certain alternative so plans look around to see if others are doing it."- Mercer's Investment Management Business Leader for Canada and Latin America

Identifying and implementing are two very common barriers to investing in alternatives, especially for smaller pension funds. Difficulties with implementation range from finding the right money manager, to detailed planning and voluminous paperwork. In this case, the best recourse for smaller pension funds is to delegate the implementation to a third party, to ensure a smooth transition. As for identifying the best alternatives, take the time to do the proper research and learn about investment offerings before making any sort of commitment.

Canada Will Soon Sign Free Trade Agreement With European Union

Canada is currently in negotiations to sign a free trade deal with Europe in the coming months and just what it will be the content of this agreement is anybody’s guess, at this time. Regardless of the details, the Canada-EU Comprehensive Economic and Trade Agreement (CETA), will be a major turning point in the history of Canadian foreign trade. Just as the North American Free Trade Deal (NAFTA) has had some lingering effects (both positive and negative) on Canadian businesses and workforce, this new deal with Europe will undoubtedly have a profound effect, moving forward into the future.

It almost seems that every month or so, a new global free trade agreement is being negotiated and signed by two or more countries in the world, in an ongoing effort to grow their shared economic prospects. Just like any particular deal of any kind, the best deal is when both parties benefit equally, However, with virtually all these international trade agreements, it usually takes many years to come to any meaningful kind of determination, as to which country benefited most. No sense trying to speculate about CETA just yet. But rest assured, just like investors everywhere, both sides are trying to enjoy a great investing experience by negotiating as much as they can; in the long-term deal.

The global economy has really started to become a truly global economy, that is encompassing most of the world’s nations. There is a veritable network of trade agreements signed between participating countries and these individual agreements have encouraged more international trade that is relatively less expensive (with the reduction of tariffs) for involved parties but also they have resulted in more prospects for exports as well as imports and many countries with these free trade agreements have already begun to prosper as a result.

These trade agreements have been one major reason why the shipping industry has had to restructure it’s trade routes and port infrastructures in order to become more efficient and effective at meeting the needs of the growing global economy. They almost did not have a choice as in the last twenty five years, the global economy has grown by leaps and bounds and continues to increase in value and boundaries as the world heads toward an economic boom before 2020 according to some industry analysts. Overall, Free trade agreements between countries are a good thing for the global economy. They simply make it easier and more appealing for businesses and investors who wish to invest and conduct business in a foreign country, that (obviously) has a shared interest in their long-term investment success. In the end, it is the entire global economy that ultimately benefits.

Canadian Investors Have a New Perception of Emerging Markets

On the never ending voyage to economic fortune, a new strategy is being sought by Canada in 2013. Canadian investors have realized that they must focus on the prosperity in emerging markets and move away from Canada’s reliance on the United States. It is important for Canada to now branch off from the United States and become an independent trading nation. This may be a stretch for some, as Canada is not typically recognized as a country for financial investment and economic growth. For this to change, Canadian investors understand that they must ensure ongoing outward investments, into the emerging markets around the globe.

Canada will need to boost trade with emerging markets, in order to limit its dependence on the United States. This is an essential step, if the country expects to grow in the years to come. Canada’s historical reliance on the U.S may perhaps have been sufficient for previous centuries but hasn't prepared Canada for what’s to follow in coming centuries. At the moment, nearly three-quarters of Canada’s exports, go to the U.S. That is too concentrated, especially considering the United States' circumstances and mounting debt issues. Canada now has a window of opportunity, considering the performance of a strong dollar and monetary system, while other nations are affected by many economic obstacles. Because such great opportunities to invest have a have a habit of closing quickly, it is imperative that this nation develops strong independence, and becomes a friendly trading partner with current emerging markets, such as Brazil, China or India.

Bank of Nova Scotia’s Rick Waugh argues that too many Canadian companies are stuck in an old way of thinking.  A portion of Canada’s trades remain within the United States but Canada must change its philosophy and be more open to trading with other opportunistic markets. Mr. Waugh’s organization, Scotiabank, is considered Canada’s biggest international investor with operations in more than 50 countries. Last year alone, Scotiabank purchased 51 percent stake in Colombia’s Banco Colpatria for $1-billon dollars. Other companies should take guidance from Waugh’s strategy and introduce openness towards investments in emerging markets and budding economies.

Ultimately, Canada has to build its independence in the global trading market by introducing new markets and becoming a friendly and well-known trading partner. If Canada fails to increase trade partners with emerging markets they will never establish a strong economic foundation which would benefit them for years and years to come. Canada must demonstrate their economy’s autonomy when discussing global trade, as relying on one source proves unstable correlating conditions.