Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Retired Money: Is the dream of Retiring Abroad still alive in the Covid era?

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My latest MoneySense Retired Money column, just published, looks at the commonly held dream of many in the FIRE community (Financial Independence/Retire Early): that of geo-arbitrage and retiring outside Canada to an exotic location with a much lower cost of living. Click on the highlighted text for the full column: Has the Pandemic ended the dream of Retiring Abroad?

As I note in the piece, places like Mexico, the Far East or parts of Europe have such a relatively low cost of living that average Canadians might be able to retire early just on the strength of CPP and OAS. Add in any employer pensions and registered or unregistered savings and that would be gravy.

The column looks in particular at two locations in Mexico that are quite popular with both American and Canadian expatriates seeking nicer weather and a lower cost of living. One is Lake Chapala, the subject of a new edition of a book by regular Hub contributors Akaisha and Billy Kaderli. The book, pictured on the left, is titled The Adventurer’s Guide to Chapala Living.

“Chapala isn’t the only town/city where living in Mexico is wonderful. There are so many from which to choose,’ Akaisha told me via email, “ We believe retiring abroad is still feasible, without a doubt.”

At one point my wife and I seriously considered leaving the Land of Snow and High Taxes (aka our Home and Native Land) for Mexico. We took one trip to Chapala and nearby Ajijc, and a few years later the more inland and mountainous San Miguel de Allende, more on which below.

However, as the years went by and we neared our Findependence Day (i.e. Semi-Retirement), we concluded that there was too much crime in Mexico for our liking and that we are for the most part quite content to live in our current home in Long Branch, Ontario, just steps from Lake Ontario.

Even so, and as the MoneySense column relates in more depth, we do know a couple who actually took the plunge and sold their Toronto home to start a new life in San Miguel de Allende. Five years ago, the Hub recalled that trip and how we ran into a former Financial Post colleague of mine, Dean Cummer, and his partner.

They visited Toronto recently and I got the chance to catch up over lunch with Dean, who became one of the main sources for the MoneySense column: my editor wanted to know whether the dream of Retiring Abroad is still alive in the Covid era. Continue Reading…

ESG and evaluating Risk in Fixed Income

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Franklin Templeton/Getty Images

By Ahmed Farooq, CFP, CIMA, Franklin Templeton Canada

(Sponsor Content)

ESG (environmental, governance and social) has become a hot topic in investment circles.

Sustainable investing is a key consideration for most asset managers nowadays, reflecting changing attitudes among investors.

Responsible or sustainable investing was once a very niche part of the market, but now accounts for US$35.3 trillion worldwide, according to recent data from The Global Sustainable Investment Alliance (GSIA).

This rise of ESG is most closely associated with equities, but this approach to investing can also be applied in the fixed income space too. Being able to minimize downside risk is a key objective for fixed income investors, and this certainly aligns with the characteristics of ESG investing.

Green Bonds evidence of ESG’s growing significance

ESG’s growing significance was displayed further earlier this year when the federal government’s 2021 budget included a plan to issue $5 billion in green bonds to support environmental infrastructure development in Canada.

Speaking at the recent Exchange Traded Forum, Brandywine Global Investment Specialist Katie Klingensmith discussed the firm’s investment philosophy and how ESG has become an important element of its strategies in recent years.

One of the specialist investment managers brought under the Franklin Templeton umbrella after its acquisition of Legg Mason in 2020, Brandywine Global has US$67 billion in assets under management globally.1

Of that total AUM, US$53 billion is in fixed income, where the investment team combines a global macro perspective with a disciplined value approach to select suitable holdings for the Brandywine  funds.

A signatory of the UN-supported Principles for Responsible Investment (PRI) since 2016, approximately 99% of the firm’s assets under management now feature ESG integration.

Brandywine has built its own proprietary ESG portfolio management dashboard as a result, and will publish its first Annual Stewardship Report in 2021. Continue Reading…

Long term trends drive global sports and gaming industry

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(Sponsor Content)

The global sports industry is worth between US$400 to $500 billion a year and in the five years leading up to the pandemic in 2020 had been growing at an annual rate of 14%, according to NewZoo.

The industry is far more than professional teams in hockey, football, baseball and basketball. These North American favourites are dwarfed by soccer which is the world’s most popular games.

When it comes to pro teams, in addition to game tickets, fans buy branded merchandise and play in fantasy leagues. The teams earn more TV revenues as they advance in playoffs. But sports business is more than that. It also involves online gaming, gaming software developers and internet sports gambling. These last areas are large and rapidly growing. While the United States is the world’s largest sports market, China and other parts of Asia are emerging as leaders in eGaming and iGambling.

Harvest Portfolios Groups Ltd. has launched the Harvest Digital Sports & Entertainment Index ETF (TSX:HSPN) to take advantage of the attractive dynamics of this sector.

In the interview below, Harvest CEO Michael Kovacs discusses the ETF, the sector’s outlook and how the ETF aligns with the Harvest philosophy of creating value through ownership of the best global businesses.

Financial Independence Hub [The Hub henceforth]: Why did you launch the Harvest Digital Sports & Entertainment Index ETF?

Michael Kovacs [MK henceforth]: Sports entertainment is a global industry with great growth characteristics. It is regaining a foothold after more than a year of empty stadiums and lost revenues. At the same time, there have been bright spots, including new forms of sports entertainment such as online gaming and internet gambling where the pandemic has been a catalyst.

At Harvest, we seek to identify trends like this. Sports is one that continues to grow globally and also offers reopening opportunities as the pandemic issues decline.

The Hub: How is the ETF designed?

MK: It is passively managed ETF with 40 global stocks that follows the Solactive Sports & Entertainment Index. The companies are publicly traded, mostly in North America, with some in Europe. The ETF is diversified across five areas of the sporting world, with different weightings for each area. It is rebalanced quarterly.

The Hub: What is the strategy?

MK: As mentioned, the ETF is diversified to capture all segments of the industry. Professional sports organizations make up five of the 40 holdings, or 12.5%. There are a number that either trade under their own name or as part of companies that own them. The English soccer team Manchester United Plc is one example. It is one of the game’s strongest brands. It is listed in New York and has a market capitalization of about US$2.7 billion. Another example is Liberty Media-Liberty Formula One. which trades on Nasdaq. It owns the Formula 1 racing and has a market cap of US $18 billion. Madison Square Gardens Sports Corp.  is another. It owns the New York Rangers of the NHL and the NBA’s New York Knicks. It has a market cap of US $4.5 billion. These are examples of some of the great sporting franchises out there.

The Hub: Are event and ticket companies and sports equipment and apparel companies another component?

MK: Yes, they are. Together they are about 38% of the ETF. Ticketing makes up five holdings or 12.5%. There are a lot of companies that people would recognize. Live Nation Entertainment Inc. owns the familiar ticketing company, Ticketmaster. Live Nation is a global company that manages ticket sales and resales and also owns and operates entertainment venues and manages careers. In fact, they own and operate several of the premier venues that many Canadians have attended concerts and events.

Sports equipment and apparel is another 10 holdings or 25% of the ETF. Again, many of the companies are household names. Nike Inc. is a global leader in the manufacture and marketing of athletic shoes, branded clothes and equipment. It also sells baseball bats and balls, tennis rackets and golf clubs. Nike’s annual revenues are more than US $18 billion.Adidas which is the second largest global sports apparel company after Nike, owns Reebok and part of the German soccer club Bayern München. Cross ownership like this gives these companies incredible brand power.   Continue Reading…

Can Dynamic Pension Pools strengthen Canadians’ Retirement Income Security?

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Image courtesy National Institute on Ageing

A new report published by the National Institute on Ageing (NIA) and the Global Risk Institute (GRI) being published today aims to help overcome the $1.5-trillion Decumulation Disconnect in the Canadian Retirement Income System.

Titled Affordable Lifetime Pension Income for a Better Tomorrow, the report makes the case for how Dynamic Pension (DP) pools can strengthen retirement income security for millions of Canadian seniors. Here is the link to the full report.

The urgency is apparent when you consider that 10 million Canadian baby boomers are now entering retirement: with longer life expectancies and a greater dependency on private savings to sustain them. As the report’s authors write, “it’s more important than ever to find solutions that will help retiring Canadians turn their accumulated savings into low-cost lifetime pension income.”

Bonnie Jeanne MacDonald/Ryerson/National Institute on Aging

Lead author Dr. Bonnie-Jeanne MacDonald, Director of Financial Security Research at the NIA, says fears that retiring Canadians’ savings won’t sustain them in retirement are “legitimate …  Financial markets, inflation and health expenses are just some of the big unknowns that retirees will need to face over 10, 20, 30 or even 40 years.”

According to the report, Dynamic Pension [DP henceforth] pools have the potential to transform the Canadian retirement landscape. Their goal is simple: to help people optimize their expected lifetime retirement income while ensuring they never run out of money. In other words, gurantee that they won’t run out of money before they run out of life.

Pooling Longevity Risk

While protecting individuals from outliving their savings (i.e., longevity risk) can be prohibitively expensive, the same protection becomes affordable when spread across a large group. Pooling longevity risk allows retirees to spend their savings more confidently while they are alive, says the report.

In a DP pool, pension amounts are not guaranteed but may fluctuate from year to year. This means retirees can stay invested in capital markets and benefit from the higher expected returns.

DP pools have a risk-reward profile that is fundamentally different from current options and products available for older Canadians: such as guaranteed annuities purchased through insurance companies or individually managing and drawing down savings from personal retirement savings accounts, says another of the report’s authors, Barbara Sanders, Associate Professor at Simon Fraser University,  “Retirees who are comfortable with some investment risk can stay invested in equity markets and reap the associated rewards, which is important in today’s low-interest and high-inflation environment.” Continue Reading…

Canadians eager to continue pandemic budgeting habits through recovery

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By D’Arcy McDonald

Special to the Financial Independence Hub

In the last year and a half, Canadians have had to change almost every aspect of their lives. They have formed new habits to adjust to the many changes that the COVID-19 pandemic has brought. This includes how they have been dealing with their finances, and how much they have been spending and saving.

Opportunities to engage in pre-pandemic activities have increased as our economy reopens, including the return to work, international travel, and frequenting our favourite bars and restaurants. One may assume that Canadians are taking full advantage of the opportunity to save more and spend less, but that has not been the case.

Our latest Scotiabank Money Habits survey provides some interesting insights into Canadian’s personal spending habits. Despite Canadians having the freedom to reemerge into the retail and recreational world, many are not planning to return to pre-pandemic levels of spending.

In fact, the survey, driven by the responses of over 1,500 Canadians found that two out of three respondents (63%) say they do not plan to return to their pre-pandemic spending habits, while half indicate they plan to cut back (53%).

We found that the budgeting habits that Canadians developed while hunkering down are here to stay, including curbing their spending, keeping a closer watch on their finances, and refining their money habits.

Canadians pivoted and started taking up activities at home like baking and cooking, participating in online fitness classes, ordering in, and catching up on their favourite TV shows. Apparently, these habits are here to stay, respondents to the survey said they plan on continuing these activities this year to the same extent as they did last year.

These results reinforce our previous Money Habits Survey from Spring 2021 when Canadians were eager to get back to normal life. We have missed those dinners out with friends and international travel to warm and sunny beaches, but most Canadians are still not planning to return to their pre-pandemic spending patterns.

Despite best efforts, anxieties continue

Even with good financial habits, 42% of Canadians are still anxious about the future of their finances as we transition to the new normal.

We also know that the pandemic has disproportionately affected certain groups such as women and young people working in the service sector. It’s no surprise that The Scotiabank Money Habits Survey found that financial anxiety is higher among younger Canadians (51%) and women (48%).

Leaning on banking advisors will help Canadians develop the strategies and financial foundation to provide the peace of mind needed to face whatever the future brings. Canadians recognize the benefit of carrying less debt and spending less, allowing them to increase their savings contributions.

This is a great time for Canadians (especially young people) to figure out what they need to do now to accommodate their long-term goals.

Top Tips to Manage Financial Anxiety

1.) Don’t go at it alone: Seeking advice from an advisor can calm some of those post-pandemic finance anxieties. Scotiabank advisors can provide you with the support and financing that you need in the months ahead. Continue Reading…