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© Copyright 2000 Rogers Media. The following article first appeared in the April 2000 edition of
BENEFITS CANADA magazine.
E-Poll: "What do you believe the foreign property limit should be?"
This month, we introduce a new feature to BENEFITS CANADA. Each month, this space will feature the
results of an online poll we've conducted on our Web site, with commentary from our readers. Visit the main
page at www.benefitscanada.com to cast your vote.
Canada's Foreign Property Rule has been raised in the new federal budget. It now dictates that no more than
25% of the book value of a registered pension fund's assets be held in non-Canadian securities. That
ceiling will be increased to 30% in 2001.
Our online poll this month suggests the federal government could have gone even further and eliminated
foreign content limitations altogether. To the question 'what do you believe the foreign property limit
should be?,' 64% of respondents to our online poll say it should be unlimited. Another 34% suggest a
foreign content limit of 30% would be sufficient. Only 2% say the foreign content limit should be 25%.
The Hospitals of Ontario Pension Plan's (HOOPP) vice-president of investment strategy, Paul Grisé,
says the plan expects to eventually increase its foreign content as a result of the announcement in the
February budget. HOOPP's foreign content sits at about 20% today. "We don't feel an urgent need to do it
because, quite frankly, we like the Canadian market," says Grisé. "We will take advantage of it, it's
just a matter of when we think the appropriate time is."
John Hasyn, portfolio manager, U.S. equities, at Gluskin Sheff + Associates in Toronto, says he's received
direction from pension fund clients to increase foreign content levels.
The government caught some in the industry off-guard by raising the limit to 30% in 2001. Many expected the
increase to come in 2% increments over five years. Hasyn believes the foreign content limits will increase
above even 30% over the next decade. "Companies are globalizing so why shouldn't portfolios globalize too,"
he says. "I think it [foreign content level] should be unlimited. I think they should give people as much
choice as they possibly can."
A secondary advantage to the increased limit (on top of gaining greater access to foreign markets) is that
pension funds can now use money managers to access foreign markets, as opposed to derivatives and other
methods. "To be able to use direct managers for the extra 5% as opposed to derivatives is a positive," says
Grisé.
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