The gender gap in modern day companies begins in the preferences of CEOs developed during seminal years and produces significant real effects including reduced productivity and company performance according to a new academic study.

The origins and real effects of the gender gap: evidence from CEO’s formative years authored by professors Ran Duchin from the University of Washington, Mikhail Simutin from the University of Toronto and Denis Sosyura from the Arizona State University, looked at the gender gap in US conglomerates, where it originates and what it means for investors. Because conglomerates account for more than 60 per cent of the S&P 1500 this has important economic consequences, the study says.

The study shows that male CEOs allocate more investment capital to male division heads than they do to female division heads in the same firm, and that the effect of gender on capital budgeting introduces frictions and erodes investment efficiency. It shows that this gender gap can be traced back to CEO preferences developed during formative years and is influenced by their parents, schools and neighbourhoods.

“The resource allocations reflect the decision maker’s personal gender attitudes, and their attitudes can be traced to formative years,” Mikhail Simutin from the University of Toronto says.

“CEOs who have experiences of gender imbalances in their formative years under-allocate to divisions where it is needed and over-allocate where it is not. Capital does not flow in the best possible way. We observe worse operating performance by CEOs with that gender imbalance,” he says. “The background of the CEO appears to translate into decisions that are potentially sub optimal. This manifests in worse returns for the company.”

The study shows that operating performance and profitability of firms with a mis-allocation of capital, due to the gender imbalance of the CEO, perform differently to those that don’t mis-allocate capital. It also looks at stock returns and those companies run by CEOs with this gender imbalance, underperform in stock returns Simutin says.

“That degree of underperformance is not huge but it’s there. It’s a statistically significant relationship. Our results say companies with a greater imbalance perform less well, allocate less efficiently and have lower returns. We find an association and this needs to be a bit better understood.”

This result, that formative years matter, has been demonstrated in other studies too, Simutin says, including a study of the CEO expectations of inflation linked to the inflationary environments they experienced in their formative years.

“It is important to be aware of how we deal with others, whether it is conscious or sub conscious. The board and overseeing power can pay attention to that too, the fact that formative years matter,” he says. “From an investor’s point of view it is an incremental variable they can pay attention to and there are certainly implications they can draw from that.”

Simution says companies where there is more balance in place, such as more women on the board or a woman chair, have more checks and balances and the mis allocation is more muted.”

The 2019 McKinsey Women in the Workplace study, which looks at more than 600 companies over a five year period, shows that women continue to be under-represented at every level of a corporation’s hierachy. But it also shows that the culture of the workplace is as important as changing the number of women represented at all levels of the corporation.

“All employees should feel respected and that they have an equal opportunity to grow and advance. Employees care deeply about opportunity and fairness, not only for themselves but for everyone. They want the system to be fair,” the McKinsey report says.

Barbara Zvan, chief risk and strategy officer at Ontario Teachers’ Pension Plan, says decades of research prove how diversity and inclusion boosts financial performance, innovation, market share, and team collaboration.

“While the idea of bias in decision making has been well documented, this is important research that more directly ties characteristics and background like family, community, country of origin to gender related attitudes and behaviours ultimately impacting CEO decision making as it relates to capital allocation,” she said of the Simutin research.

Zvan points to evidence of diversity having an impact on the bottom line of companies including that from Catalyst – a global non-profit working with some of the world’s most powerful CEOs and leading companies to help build workplaces that work for women – which found companies with three or more female directors significantly outperformed those with fewer women.

The research showed outperformance by 84 per cent on return on sales, 60 per cent on return on invested capital and 46 per cent on return on equity. Similarly, a study by Credit Suisse looking at 27,000 senior managers at more than 3,000 companies across the world found companies with 50 per cent or more women on boards had a 20 per cent higher average ROA compared with companies listed on the MSCI All Country World Index  (5.7 per cent versus 4.7 per cent).

But Catalyst and other leading experts are encouraging companies to ‘go beyond the business case’ by focusing on diversity and inclusion as talent issues, rather than the bottom line. They argue that focusing solely on the ROI of diversity inevitably becomes more about compliance than about building a culture that leverages the innovation of a diverse workforce.

“Companies are discovering that by supporting and promoting a diverse and inclusive workplace they are gaining benefits that go beyond the optics. Inclusive and diverse companies perform better in the face of disruption, shifting workforce demographics and changing consumer preferences,” she says. “Organizations best positioned to compete will be those that bring together diverse perspectives but create inclusive cultures where teams can thrive.”

The good news, is that Simutin and his colleagues are working on a revision of the paper which will include generational results, specifically looking at younger CEOs.

“All these effects we document in our paper are more pronounced for an older generation – the generation is important not the age.”

The average age of a CEO in the S&P1500 is about 60, he says, and future CEOs will be very different. “I find it interesting in conjunction with the generational result – it’s a bit depressing but also optimistic. Our kids are growing up in a different environment, if there is a refreshment of CEOs with the next generation coming in, our results suggest change will continue to happen.  To the extent you believe these results and firms run by current CEOs with a gender imbalance make sub optional decisions around capital allocation, and if they are replaced by others who don’t do that, then companies could perform better in the future.”

When considering the opportunity to create a standard Model Limited Partnership Agreement (Model LPA) for the private equity industry, the Institutional Limited Partners Association (ILPA) had concerns.

For certain, there was a persistent need in the class given the cost, time and complexity of negotiating the terms of investment.

General Partners (GPs) had an interest in reducing the length of side letter agreements, providing fundraising certainty, and lowering their fund formation costs. Similarly Limited Partners (LPs) wished to have fair and transparent terms that explain rights and obligations while also lowering their legal negotiation costs. Yet the process to craft standard legal language from a broad group of attorneys each with their own provisions was daunting at best.

However, ILPA had done this before. The Model LPA was part of ILPA’s broader LPA Simplification Initiative and originated out of discussions at the 2016 ILPA LP-GP Roundtable which comprised top PE industry leaders from around the world.

The need to promote standardisation of legal terms and documents and reduction of side letters was clear. Previously ILPA had produced a Model Subscription Agreement for the industry in late 2017; the Model LPA was the next step and drafting began in 2018.

Led by Chris Hayes, senior policy counsel at ILPA, a group of approximately 20 attorneys representing both GPs and LPs in the global marketplace undertook an extensive process of drafting and negotiation.

Throughout 2018 and the first half of 2019, the working group drafted the Model LPA for private equity based on a draft that was used by European DFIs and was LP-favourable.

Then, in June 2019, the group compared it to the recently released ILPA Principles 3.0 to ensure consistency.

From there agreements were made for the final provisions and the Model LPA was released at the end of October to a receptive audience.

Value to the industry

The Model LPA is a comprehensive, Delaware-law based “whole of fund” waterfall limited partnership agreement that can be used in its entirety to structure investments into a traditional private equity buyout fund. Additional versions of the Model LPA, including one based on a “deal-by-deal” waterfall, are planned for the future.

There is significant value to the private equity market to have a publicly available, complimentary template LPA for all to reference.

Bespoke versions of private equity LPAs are currently covered by non-disclosure agreements and not available to the public for comparison or adoption.

Value to LPs

The Model LPA is useful for negotiation by LPs and LP counsel with established fund managers which have an existing LPA.

Individual provisions in this document can be easily negotiated or adopted, with draft language that LPs know will be acceptable to them, and familiar to GP counsel.

It is also useful to LPs as a benchmarking tool to compare against existing LPAs they have signed, and funds they are evaluating, allowing them to have actual Principles 3.0 verified legal language which they can compare against terms in the marketplace.

Additionally, the Model LPA is an excellent starting point for programs that seek to provide capital to emerging managers as part of a designed program. These programs can adopt the ILPA Model LPA and encourage the GPs applying for seed capital in the program to use the document for raising their funds.

Value to GPs

All GPs which are interested in putting forth a fair, equitable LPA for their fund can use this document as a starting point to ensure they are attractive from a terms perspective to the LP community.

New managers or managers in the emerging markets who wish to attract LP capital and establish best practices for their fund can adopt this document with reduced legal costs, effectively lowering organisation expenses of the fund and sending a signal to LPs about the importance of a strong partnership between the GP and the LP.

GPs and GP counsel can also use this document as a baseline to what terms are important to LPs and can seek to implement provisions from the ILPA Model LPA into their own form for forthcoming funds to minimise the number and scope of side letter agreements with their LPs and the cost of negotiation.

Setting the Standard

Since its release, the Model LPA has been extremely well received, with LPs and GPs alike making note of its provisions and using it as a discussion point around the fund formation process.

Unlike previous ILPA standard templates such as the Reporting Template for Fees, Expenses and Carried Interest and the Portfolio Reporting Template, ILPA is not requiring the full use of the document, but rather encouraging flexibility in its application.

Whereas the standardisation of fund economics reporting requires strict adherence to a template, significant benefit from legal document models can be obtained by adopting some or all provisions.

Additionally, ILPA is not seeking endorsements of the Model LPA. It should be considered an industry resource, and ILPA encourages its use by all.

Next Steps

ILPA plans to continue to educate and engage with industry stakeholders around the Model LPA and will monitor sentiment in the market going forward. The association is also considering development of additional versions of the Model LPA, such as a “deal by deal” waterfall version or geographic or domicile targeted versions.

The demand for a broad set of model legal documents remains high, and ILPA remains committed to providing these important resources for the private equity industry.

Samantha Anders is a research associate at Institutional Limited Partners Association.

 

Asset owners and managers can help solve modern slavery and invest to stem the suffering of the 40.3 million workers in the world trapped in some form of labour abuse in what Fiona Reynolds, chief executive, PRI, and chair of The Financial Sector Commission on Modern Slavery and Human Trafficking called “a huge and growing human tragedy.”

Speaking at the Fiduciary Investors’ Symposium at Harvard University, Reynolds outlined the scale of the illegal industry, worth an estimated $150 billion annually. It costs countries battling to counter it dearly, and impacts women and children the most.

“One in four victims are children,” she said.

Timea Nagy Payne wasn’t a child when she was trafficked. But her ordeal working as a sex slave in Canada where she was trafficked from eastern Europe thinking she was travelling to work as a nanny tipped her life into chaos.

“My life was taken,” she told delegates. A feeling which endured long after her escape.

Reintegrating into society and “becoming a real person” took years due to a combination of trauma, financial exclusion, language barriers and the fact “nobody wants to hire victims,” she said.

Modern slavery is a market failure that governments cannot solve on their own, said Reynolds.

The need for solutions based on expertise from the public and private sectors was the genesis behind last year’s establishment of The Financial Sector Commission on Modern Slavery and Human Trafficking.

Rather than just detail the problems, its inaugural blueprint strives to provide the financial world with action-orientated steps outlined in five goals that investors and banks can use to help solve the problem.

Reynolds told delegates the banking sector “had stepped up” to navigate privacy rules that allowed the Commission to get the information it needed, and urged the financial community to use the leverage it has, particularly around building financial inclusion and preventing slavery in supply chains.

“Lots of companies say they are not responsible for their supply chains, but this is not an answer.”

She noted that microfinance was a crucial tool to help rebuilding victims’ access to the financial system.

Hiding in plain sight

“You all influence the supply chain,” Sharon Prince, chair and president, Grace Farms Foundation which works to raise awareness of the prevalence of forced labor in construction projects, present on building sites and in the building material supply chain – particularly timber, told delegates.

“Banks and insurers have the ability to get full disclosure; you also own projects. You don’t want to be invested in a supply chain that uses forced labour.”

She warned delegates that companies are often subsidizing their business with slavery, and that these companies are “part of the ecosystem.”

She said investors wield “lots of power in terms of compliance.”

Modern slavery is illegal in most countries with landmark acts like the UK’s Modern Slavery Act and similar regulations in Australia and the Netherlands driving change.

Elsewhere the US’s supply chain transparency regulation “doesn’t have much teeth” but could affect multinationals.

“Modern slavery a developed country issue hiding in plain sight,” she said.

Poor relation Social issues are the “poor cousin” in ESG, said Anders Stromblad, head of external managers, AP2.

“There is a lot of focus on climate and governance, but social issues are more difficult,” he said.

One reason for that is a lack of data and corporate transparency, he said.

“We shouldn’t think of it in silos because we live in a more complex world. Regulation is coming out and this area will continue to grow.”

Perhaps countries should look to Brazil, a surprising leader in supply chain transparency. Authorities now publish details available to all of blacklisted corporations and farms where slavery has been prevalent. Detailed information on laggards available in a “dirt list” allows companies to source their goods responsibly and banks to check before granting loans, said Leonardo Sakamoto, journalist and member of the board of trustees, UN Trust Fund on Contemporary Forms of Slavery and commissioner, The Financial Sector Commission on Modern Slavery and Human Trafficking.

“If a company is on the list it will have problems raising money on the stock market,” he said. “Brazil has developed lots of tools to help companies be open and transparent here and we are getting results.”

Amol Mehra, managing director, Freedom Fund also warned delegates of the growing regulatory risk around modern slavery. Strengthening regulation around human rights and modern slavery, driven in a large part by civil society, will increasingly impact companies.

“Governments are flexing their regulatory muscle,” he said. “Look at this in your investment portfolios.”

Mehra flagged that regulations around prohibited goods from the mining (particularly Cobalt) and apparel sectors because of these industries’ links to slavery, will increasingly tighten.

“These are all supply chains with known risk,” she said.

One recent Friday Elizabeth Burton, CIO of the Employees’ Retirement System of the State of Hawaii (HIERS), called three CIO peers with a quick question on contributions and cashflows at the $16.8 billion fund. All got back to her that day, and one emailed over the weekend offering additional suggestions. Out of all the calls Burton makes from her Honolulu office to asset managers, banks or the fund’s consultants it is those to her peer network she values most.

“The CIO community is very helpful,” she says noting that despite the pressure for returns, pension funds work to different benchmarks, mandates and reporting structures that softens the competitive edge.

It was a team spirit she particularly relied on when she took the helm at HIERS in October 2018, aged 36, after her predecessor Vijoy Chattergy’s abrupt departure which press reports have linked to losses after a low volatility strategy backfired.

“When I got the job, a couple of CIOs emailed me and said ‘call me over the summer; I can help you through the first 90 days,” she recalls.

Burton took over a portfolio split into risk buckets divided between broad growth (71.7 per cent) real return (3.2 per cent) principle protection (6.9 per cent) and crisis risk offset (15.3 per cent). The balance sits in an opportunity bucket of different strategies that she says don’t naturally fit anyway else. Today, much of her work is focused on building the allocation to crisis risk offset (CRO) to include new diversified strategies which will increase that bucket, making it “quite a bit larger” than its current 16 per cent target allocation. The rationale for the change comes with expectations for lower equity returns going forward, she explains.

“A new allocation to diversifying strategies will now sit within CRO. We are trying to look for additional sources of uncorrelated return at this point because we think returns from traditional betas are going to be more challenging.”

Diversifying strategies could include a new allocation to hedge funds beyond HIERS existing CTAs and risk premia allocations already in the CRO bucket.

“Some of the strategies I envision for the diversifying strategy do come under a hedge fund banner,” says Burton who used to run $55 billion Maryland State Retirement and Pension System’s $4 billion hedge fund portfolio.

“If hedge funds can give us access to an uncorrelated strategy that we can’t get in a more efficient wrapper then yes, they make sense.” She also believes they could slot easily into the allocation since they don’t belong in their own asset class and, referencing her own experience, says she values the expertise they engender.

“Hedge funds aren’t an asset class, so a top-down strategy doesn’t really work. They are also a great breeding ground for someone who wants to do top down asset allocation at a senior level. You have to have your eye on a bunch of different asset classes.”

Burton is also mulling other allocations. She believes an all-weather credit strategy expanded beyond HIERS existing, long-only corporate credit and distressed parameters to include opportunistic, private credit and speciality financed opportunities, would add value. She is also looking for more assets to fill the real return and real asset portfolio that comprises agriculture, timber and non-core real estate.

“We have some room to allocate more to real assets because we are underweight target. Inflation expectations are also somewhat different to what they were a couple of years ago so there may be some opportunity to reorient that portfolio and potentially earn an incremental return over what we were expecting.” Here she is looking at partnering with asset managers to access the best opportunities in “extension of staff” relationships.

The new allocation to diversified strategies will involve manager searches for new partners beyond Hawaii’s existing cohort. The fund currently has around 50-60 foundation managers across public markets, private equity, and real estate, a tally which increases by 100 when she adds in the private markets managers

“Because the CRO portfolio is growing and new diversifying strategies are being added, we would have to add additional managers. Our current managers don’t, for the most part, operate these strategies that we are looking to add.”

She’d also like to build out HIERS internal capabilities. The pension fund doesn’t run any assets internally and she believes the fund is uniquely placed to trade different markets between Asia and the US. That said, she does see the benefits of a small team. She likes how it enables getting in a “huddle,” everyone knowing the whole portfolio and an ability to move and work out details quickly. However, resources are stretched. “Everyone is at capacity and there isn’t a tonne of slack. I’d like to double the team in coming years.”

Stretching for returns against the backdrop of HIERS 55 per cent funded status, down from 94 per cent in 2000, is also a challenge. Burton says the deficit has changed her perspective on “how she allocates” and makes the long haul and not following fads even more important.

Hawaii recently increased state contributions and now regularly stress tests the portfolio. The fund returned 5.83 per cent for the fiscal year ended June 30 and has returned an annualised 9.07 per cent, 6.06 per cent and 9.2 per cent respectively, above equivalent benchmark returns of 8.08 per cent 5.3 per cent and 8.9 per cent.

Returns she hopes will be continue with another idea up her sleeve. She is currently reaching out to CIOs and portfolio heads with a new investment strategy shaped around cooperation she’s been developing for a couple of years.

“It might come to fruition in the next quarter,” she says. “I find people who have been in their seats for a long time are keen to help the next generation of leaders.”

One of Belgium’s biggest pension funds, KBC, has recently increased its allocation to real assets and switched more of its equity allocation to alternative beta.

“Our defined benefit plan is closed for new entrants and quite mature, and a larger minimum variance allocation within equity will protect us better when, or if, equity markets fall off a cliff,” says CIO Luc Vanbriel from Brussels-based €2.5 billion KBC Pensioenfonds, founded in 1941 and the fund for employees of KBC, Belgium’s banking and insurance group.

The boosted allocation to minimum variance, which has increased from about a third of the equity allocation to half, is in line with its de-risking trajectory, while the push into infrastructure and real estate (increased to 15 per cent from 12 per cent) is driven by a desire to escape fixed income’s low yields and a need for inflation linkage.

Infrastructure and real estate will be built up over the next couple of years with a wary eye on high valuations, although Vanbriel notes this isn’t unique to real assets. “Everything is expensive at moment. Equity and bonds are expensive, and the present value of our liabilities is expensive. We are having to live with this kind of uncertainty.”

In real estate, he favours core brownfield projects without development risk where investment is equally split between Belgium – where the fund invests directly mostly alongside KBC Real Estate – and the wider Eurozone where the pension fund invests in funds.

“In Belgian real estate we prefer going direct if possible. We know the market in Belgium and it’s cheaper because we can avoid management fees.” In contrast, all infrastructure investment is via funds.

KBC’s portfolio, which was merged from three separate funds into one last year, is currently split between a €2.1 defined benefit fund and much smaller defined contribution scheme. Within the DB scheme, assets are divided between fixed income (18.5 per cent) real assets (15 per cent) private equity (2 per cent) and listed equity (34.5 per cent) plus a 30 per cent allocation to LDI introduced in 2007 to protect the fund against falling yields.

Back then yields on Belgium-government bonds was 4.5 per cent compared to today’s negative -0.13 per cent.

“Everybody thought at that time yields would increase not decrease,” recalls Vanbriel.

The fund has set a trigger that will increase LDI levels when rates hit 75 basis points, but at current levels those triggers remain far off. The LDI strategy also allows the fund to hedge inflation risk in a cost-effective way, on Vanbriel’s radar despite historically low inflation in the Eurozone, because of the potentially troublesome link between inflation and salaries.

“If inflation increases salaries increase which means our pension liabilities also increase. We have to protect ourselves against inflation and while everything is expensive, hedging inflation is actually quite cheap,” he says. And although inflation is low, the risk is never far away – take the US China trade war and its impact on rising prices, he flags. “Rising inflation is not in our base scenario, but we want to close the risk. Suppose something happens that triggers unexpected inflation.”

That cautionary eye has also led to a strategy to safeguard and insure assets in the DC allocation via introducing a floor to the portfolio. If the valuation of the portfolio falls below 90 per cent of its current value, Vanbriel will gradually sell risky assets, buy bonds and even switch to cash.

“Our potential to deviate from the strategic benchmark is much bigger and this really distinguishes us from other pension funds,” he says. “We can protect against worst case scenarios.”

Under his watch – Vanbriel became CIO in 2017 – the fund has also introduced ESG in all the passive equity and corporate bond allocations, tailored to push ESG themes without venturing too far from the benchmark. KBC limits its investment universe to the best performing ESG companies. For example, the fund used to invest across the entire MSCI North American index in its US equity allocation, but now only invests in the top 40 per cent of ESG rated corporates in each sector.

“We limit our universe to the best performing companies,” he says. An active small and mid-cap equity allocation remains out of this ESG scope.

Within this smaller universe, the fund remains sector and geographically neutral to limit tracking error and maintain close to benchmark returns.

“We considered only investing in the top 20 per cent of ESG rated companies. But we decided it would be too tough and that we would deviate too far from the index.” So far, the returns are good, he says.

“The portfolio is doing well and returns stay close to the MSCI. Last year it outperformed – this year it is a bit volatile but doing exactly what we thought it would be doing.”

Elsewhere, integrating ESG in corporate bonds is “relatively easy” because picking the best scoring corporates isn’t overly complex. However, it does bring risk, namely the potential of a high turnover as poorly scoring bonds are sold.

“We are cautious about the potential turnover in the portfolio. It’s not a huge problem but it could be a challenge if there is not enough liquidity in the corporate bond market.”

In contrast, integrating ESG into sovereign bonds is tricky and something he hasn’t begun yet.

“In the corporate bond market it is do-able but in government bond market it is more difficult, and we are reluctant to implement it,” he says.

Stefan Dunatov, head of investment strategy and risk at Canada’s BCI, says long term investors should forget about diversification at the strategic level and instead focus on buying growth beta assets.

Dunatov, who joined British Columbia Investment Management two years ago, said the most successful portfolios over the last 40 years invested in equities, real estate and infrastructure which were all just various plays on growth. Under his guidance, the $170 billion fund has increased its allocation to private assets and focused on buying investments with predictable income flows.

“We have to be honest with ourselves and admit that being long growth beta is the answer to investing in the long term,” Dunatov told a roomful of asset owners and consultants at a recent Conexus Financial conference. “It exposes what I call the fallacy of composition when it comes to portfolio theory. Diversification works at a portfolio level. Diversification doesn’t go up, it doesn’t work at the strategic level and at the strategic level you want to own growth beta.”

The former chief investment officer of Coal Pension Trustees Services said that with interest rates near zero, institutional investors had to think differently about monetary policy, which could mean the markets will have to contend with negative interest rates for the next 20 years. He said it was time to “think outside the box and think a little more laterally and unconventionally.”

“When you are sitting down to current long term strategy that you have, you have to disconnect current zero rates from what valuations are telling you,” he said. “How do you reconcile a zero rate world with valuations and equity risk premiums still telling you that you are probably going to get 6 or 8 per cent in the equities space? How does that work?”

Dunatov said the challenge for asset owners right now was figuring out how to invest in a zero rate policy world that was still growing, albeit slowly. He said BCI, which manage assets for British Columbia’s public sector, spends a lot of time focused on liquidity in the portfolio to make sure the strategy of owning growth assets is robust enough in the event of a downturn.

“That is probably the most important thing,” he said. “How do I know that I’m not going to sell them in a drawdown? We spend a lot of time on the liquidity aspect of that. Just imagine that there are only two sorts of bad worlds – a hard stop world like 2008 or a slow stop world like 1991,1992, 1993. We need to know that we will have the liquidity to get through both of them. As we are in net outflow mode, crystallising losses destroys wealth.”

Even so, one of Dunatov’s three key changes at BCI has seen the fund increase its allocation to private assets, a repeat of his strategy at Coal Pension where private assets had doubled by the time he left to make up closer to 45 per cent of the portfolio. The other changes include investing down the capital structure, particularly in private credit, as yields have rallied and a focus on owning assets with predictable income streams.

“Whether that is in equities, private credit, infra, real estate (we are looking for) more predicable income flows,” said Dunatov. “When it comes to equities, I would point that even in the crisis, lots of companies kept paying their dividends. Nestle still sold lots of milk products around the world and still kept paying dividends. So there are really good companies around that world that still do that.”

As a result, the strategy has seen BCI switch money into real estate, sell public equities in favour of private credit and real estate and buy more private equity, where the fund is “looking at deals that maybe (it) would not have done beforehand,” said Dunatov. He added that the fund had also sped up the reduction in exposure to the Canadian market to make the portfolio more global.

As for emerging markets, the investment strategist said while he was less convinced on the debt side the fund had made a “general push” into more peripheral markets. “We are not far off what you would call a benchmark position,” he added.