Canadian money managers have had a lot to deal with over the past five years, such as the global financial crisis and recessions in most of the developed world. In this online-only story, we look back at the themes we covered from 2008 and on.
In the spring 2008 report, the theme was consolidation. Earlier that year, RBC announced it was acquiring Phillips, Hager & North, while The Co-operators said it would purchase Addenda.
Michael Quigley, then the senior vice-president, distribution, with Natcan Investment Management, had this to say: “Our industry is about consolidation, and consolidation will continue. If current market conditions continue for a few quarters, chances are, consolidation will accelerate.”
Unfortunately, that wasn’t the case. In the summer of that year, Freddie Mac and Fannie Mae were nationalized by the United States government, Lehman Brothers filed for bankruptcy protection, AIG was bailed out, “too big to fail” became a catchphrase, and markets were in a freefall. Here in Canada, total pension assets under management in the fall Top 40 list were down 4.1%, the first decline ever. But no one was panicking just yet.
By spring 2009, most stock indexes had fallen 50% or more from their all-time highs, and nearly all the money managers had seen a decline in their assets. The outlook was very bleak at the time.
John Akkerman, then a senior managing director at AllianceBernstein, said this: “It’s going to be awhile before people feel as good as they did last summer. And I don’t think they’ll ever feel that good. Anyone who experienced 2008 will always have this lingering in the back of their minds, regardless of how good things seem.”
In the fall, markets had begun to bounce back, and, as U.S. Federal Reserve chair Ben Bernanke had said, there were “green shoots” beginning to appear in the economy.
Fast-forward to fall 2010 and while markets had made up most of their gains, the sentiment wasn’t too positive. While Canada’s economy was already recovering, the U.S. didn’t experience job growth until the spring of that year, but the pace was slower than past recessions.
Kevin Barber, senior vice-president at Pyramis Canada, said the uncertainty and volatility was difficult for plan sponsors: “The markets are in a better spot, but there is still a lot of anxiety among plan sponsors. For the most part, they are only about 85% to 95% funded, on average.”
One year later, while volatility was still a challenge for money managers, it also presented them with an opportunity.
“We’re picking off individual securities of companies that we haven’t had a chance to buy previously because of their valuations,” said Gordon Gibbons, senior vice-president and portfolio manager with Leith Wheeler Investment Counsel. “We’re able to buy these companies at pretty attractive prices.”
Last year, plan sponsors and their asset managers were continuing to look at different ways to reduce volatility and address the plan’s funding and liability constraints.
“Whereas before it would have been just equities and bonds and maybe cash, people are now going in a much more granular way in terms of seeking other sources of alpha,” explained Roger Renaud, president of Standard Life Investments. “It means more global, more alternative and possibly less-liquid investments.”
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