The federal government’s decision to tax income trusts isn’t expected to have a considerable impact on most pension funds.
For some plans, such as the Colleges of Applied Arts & Technology Pension Plan, the changes are immaterial. “Our Canadian equity managers had very little invested,” Julie Cays, director, investments and CIO of the plan says. “Under 1% of our Canadian equity portfolio was invested in income trusts. I don’t think we’re atypical so I don’t think it will be that material to most of us.”
Marc Poupart, director of pension and retirement programs at Hudson’s Bay Company agrees. He says its managers haven’t made a huge investment in trusts because they didn’t see many opportunities.
“At least our experience has been, even with the newness of income trusts, we didn’t really have a lot of emphasis on it,” Poupart says. “For us as an investment vehicle, it’s a little piece in the bigger pie.”
The fact that the market dropped nearly 300 points yesterday will have a short-term effect, says Steve Bonnar, a principal at Towers Perrin. However, it’s not as though funds had specific allocations to income trusts, they had specific allocations to Canadian equities.
“But the change in taxation of income trusts isn’t fundamentally going to change how institutional managers select between Telus as an income trust or Telus as a [corporation],” he says. “I don’t see that as causing a fundamental difference for the majority of pension funds.”
And pension plans aren’t running for the exit just yet. “We won’t abandon the area if we see value,” says Jim Leech, senior vice president of Teachers’ Private Capital. “We’ll still be a holder of income trusts.”
-with files from Brooke Smith
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