Institutional Newsletter — September, 2014

Leon Frazer - Canada's Authority on Dividend Investing INSTITUTIONAL NEWSLETTER – CANADIAN EQUITY DIVIDEND INVESTING – A POSITIVE “CURE ALL” FOR INSTITUTIONAL INVESTMENT MANDATES SEPTEMBER, 2014

The Institutional Investment Management Industry is comprised of many types of investment pools with various long term objectives. For example, we have both Defined Benefit and Defined Contribution type retirement plans, Endowments and Foundations created to accrue and preserve capital in light of particular societal causes and Charities which build capital towards Medical Research in one instance.

How can each of these pools of capital benefit from including a Canadian Equity Dividend Investment Style within their overall investment mix?

Defined Benefit Retirement Plans

‘Plan Solvency’ results from the retirement plan having sufficient assets to meet the plan liabilities comprised from the demographics of the group the plan was intended to benefit in their retirement.

Canadian Equity Dividend Investing not only significantly contributes to successful asset/liability matching within the plan during the ideal market conditions but also provides prudent “defense” when downside protection is needed to preserve the solvency ‘bill of health’ during the more ‘challenging’ market conditions.

Defined Contribution Retirement Plans (Building Assets)

Plan members can be hampered within their employers’ plan in the situation of too many investment options or in the case of too few investment options. Most members will benefit from a balanced fund whether offered as a ‘default’ option, an actively managed option or a target date investment option. Within that ideal balanced mix is the inclusion of a Canadian Equity Dividend ingredient.

While ‘accumulating’ assets, the Canadian Equity Dividend ‘ingredient’ provides the much needed investment horsepower to build their retirement savings while balanced with fixed income assets.

Equally important in the spirit of “low volatility”, the Canadian Equity Dividend ingredient provides much needed downside protection of the member’s accrued assets in times of ‘softness’ of the markets during the member’s active years of building assets for retirement. This downside protection also reduces the likelihood of members selling everything during market corrections.

Defined Contribution Retirement Plans (Decumulation of Assets)

Employers and the plan administration service providers they utilize, have been sharpening their pencils and broadening their ‘paternal’ responsibilities in assisting the newly retiring plan member capture the greatest ‘bang for their buck’ when preparing for the “decumulation” process at retirement.

Employers do not want to see their former employees encounter ‘retail-like’ fees schedule charged by advisors at the time of creating their schedule of retirement payments, intended to last for the rest of their lives. Retail-like fees could infringe upon the total asset base at the time of retirement in amounts of 10-20% or more.

Employers including a Canadian Equity Dividend option during the “decumulation” phase, permit the retiree to continue earning competitive returns on their retirement assets as they draw down pension income while at the same time including a preventative investment strategy of downside protection should the market conditions fall ‘out of favour’ for a period of time during retirement.

Endowments, Foundations and Charities

All of these institutional pools of capital strive to earn at least 3.5% annual return in order to maintain their status as either as an endowment, foundation or charity but most importantly, the money is needed to ‘pay out’ in respect to their “cause” and goal.

Canadian Equity Dividend investing provides each of these groups with the necessary ‘income’ to make their scheduled withdrawals and the potential for capital growth which can increase future income levels.

The downside protection feature of the Canadian Dividend Fund also helps to preserve the capital that has been donated and invested for these entities to continue existing.

Recently, my colleague Portfolio Manager, Ryan Bushell, participated in an online chat with the Globe and Mail regarding markets, companies, and our Leon Frazer investment strategy, following a year of outsized Canadian stock market performance.

Please click here for the content of the discussion.

If you have any questions please e-mail me at wmcdonnell@leonfrazer.com, or call me at 416-642-5562.

Best regards

Bill

LEON FRAZER & ASSOCIATES WEBSITE

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