By Staff | July 26, 2006 | Last updated on July 26, 2006
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(July 26, 2006) It’s official — the second quarter of 2006 was a tough time for investors. Major markets from around the world struggled through May and June, according to Mercer Investment Consulting’s Pooled Fund Survey.

Even the relative safety of Canadian balanced funds proved shaky, as poor performance in both equities and fixed income trimmed the category’s median return to -3.1%. On the upside, the downturn was not significant enough to pose a threat to most retirement plans.

“Despite negative market returns, the second quarter did not have a material impact on the funding status of pension plans,” said Peter Muldowney, business leader for Mercer Investment Consulting in Canada. “Although equity market performance provided little support to pension plan assets, long-term bonds, which act as a proxy for pension liabilities, experienced a decline. The improvements in the funding status seen in the first quarter of the year were slightly bettered in the second.”

The Bank of Canada’s decision to raise its trend-setting rate by 50 basis points trimmed the value of bond investments, while the S&P/TSX Composite Index posted a loss of 3.5% during the second quarter.

While growth stocks tended to outperform value investments, neither style managed a positive return. Large cap stocks (S&P/TSX 60) returned -3.8% compared to small caps, which were down 5%, as represented by the BMO Nesbitt Burns Small Cap Index.

According to the Mercer Canadian Pension Health Index, plans showed a solvency rate of 86% at the end of June, down 1% from the end of the first quarter.

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BCSC settles insider trading case

(July 26, 2006) The British Columbia Securities Commission has reached a settlement with Darryl Wayne Halisky, who has admitted he failed to file insider reports and operated used nominee accounts to circumvent purchase limits placed on an initial public offering.

In 2000, Halisky bought close to 23% of the shares of Corra Capital at the time of the firm’s IPO, in November 2000, exceeding the 2% limit placed on ownership by securities exchange rules. He did not file any of the required insider reports for trades involving Corra shares. Corra was delisted from the TSX Venture Exchange on August 6, 2002.

Halisky is barred from buying securities for five years and may not serve as a director or officer of any issuer during that period. He must also pay a fine of $8,000.

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Empire Life names new international fund advisor

(July 26, 2006) Empire Life has appointed Sanford C. Bernstein & Company LLC (AllianceBernstein) as portfolio advisor for the international segment of some of its segregated funds, replacing UBS Global Asset Management.

“AllianceBernstein is a world-class fund manager known for its industry-leading research and innovation. Their investment style and philosophy is very similar to that of our own investment team,” says Deborah Frame, vice-president and chief investment officer of Empire Life. “AllianceBernstein will employ a focused approach to the portfolios with typically no greater than 60 equities in each fund. This is in keeping with our own philosophy of value and capital preservation.”

AllianceBernstein will act as portfolio advisor for the Global Equity Fund, International Equity Fund and International Equity Sub-fund, which provides foreign equity exposure for a number of Empire Life Segregated Funds.

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Legg Mason closing 12 funds

(July 26, 2006) Legg Mason Canada has announced the termination of its Private Investor Series of 12 funds, effective September 25, 2006. The firm will cease to offer the funds effective July 31, 2006.

The affected funds are: The Legg Mason T-Plus Fund, Canadian Index Plus Bond Fund, Canadian Active Bond Fund, Accufund, Diversifund, Canadian Core Equity Fund, North American Equity Fund, Canadian Small Cap Fund, Brandywine Fundamental Value U.S. Equity Fund, Batterymarch U.S. Equity Fund, U.S. Value Fund and Brandywine International Equity Fund.

Legg Mason also announced it had already changed the name of the Legg Mason Canadian Growth Equity Fund to Legg Mason Canadian Small Cap Fund, effective April 28, 2006, and that the Legg Mason International Equity Fund had been renamed Legg Mason Brandywine International Equity Fund, effective July 24, 2006.

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Weak gas prices cut into energy profits

(July 26, 2006) Canada’s oil patch might be posting record revenues right now, but increasing labour costs and low gas prices should dampen profits through the remainder of 2006 and beyond, according to the Conference Board of Canada.

“Rising global demand and persistent geopolitical risks to supply mean that oil at US$30 per barrel is likely a thing of the past, and prices are expected to remain above US$60 per barrel through 2010,” said Louis Theriault, director, Canadian Industrial Outlook. “Even with cost overruns and labour shortages affecting the industry, especially in Alberta, prices will remain high enough to ensure that revenues exceed costs.”

Low natural gas prices, which have not kept pace with crude oil values, are also expected to cut into profits. Natural gas accounted for about $14.4 billion of the industry’s record $25 billion earnings in 2005. Profits from gas are expected to fall to $9 billion in 2006, due to an unusually warm winter. The Conference Board is predicting industry profits will recover in 2007 to average about $21.9 billion a year through 2010.

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