ONCAP II Hits Home Run With Sale of Canadian Securities Institute

Canadian Securities Institute Global Education Inc. was recently sold by one of Onex’s private equity funds to Moody’s Analytics for $155 million Cdn.

ONCAP paid $25 million for a 91% stake in the company which was spun off by the securities industry back in 2006. Onex’s share of the company was 40%.

When the sale was made back in 2006, the multiple that ONCAP paid was somewhat frothy. However, closing regional offices, converting all exams to mutiple choice for quick computerized marking, coupled with 200% fee increases to take an industry exam made CSI extremely profitable on what can be considered a monopoly as an education content provider in the securities industry in Canada.

As an industry participant, one can only hope that Moody’s will keep fees reasonable as educational requirements keep increasing and double digit course fee increases seem to be the norm.

Your comments are always appreciated.

Consider Corporate Bonds over Alberta Capital Bonds

The Alberta government announced the rate on Capital bonds on Friday with a rate of 3.3%. The rate is equivalent to what is available on 5 year GIC’s. Considering limited liquidity, you may want to consider buying corporate bonds or 5 year Fixed Rate Reset Preferred shares.

The rates on corporate bonds can be as high as 7% depending on quality and maturity and a select number of preferreds are yielding above 5% with preferrential tax treatment.

Call your Rothenberg Investment Advisor today discuss the various options available in the market place. Your comments and thoughts are always appreciated.

Alberta Capital Bonds On Their Way

Albertans are sure to be inundated with marketing on Alberta Capital Bonds in the coming weeks as the Alberta government looks to individuals to raise capital to fund their current deficits. Details of the offering were provided to financial institutions such as ourselves this week. The bonds will go on sale February 16th until March 1.

Unlike Canada Savings Bonds, Alberta Capital Bonds are not redeemable and must be held until maturity except for some very limited circumstances. The bonds will be dated March 15, 2010 and have a 5 year term. Interest can be paid annually or compound annually.

The minimum purchase amount will be $1,000 with a $25,000 maximum regardless of how the bonds are registered. You would not be able to buy $25,000 for yourself, $25,000 for your RRSP account and $25,000 jointly with your spouse. The government will not provide certificates which is also a different format compared to Canada Savings Bonds.

While the bonds are not CDIC insured, they do have the full backing of the Alberta government. They will be eligible for RRSP’s within a Self Directed Plan. The only thing that we don’t know about the bonds is probably the most important number.

What are they going to pay? The highest 5 year GIC is currently 3.30%. Expect the announcement to come in around that level.

If you are interested in higher rates, please don’t hesitate to contact us. We have access to some Alberta Capital Finance Authority which is a government agency accrual notes yielding over 5%.

Your thoughts and comments are always appreciated.

It’s Time to Rename Tax-Free Savings Accounts

Reading the Financial Post this weekend, an incredible statistic was reported about TFSA’s. About 90% of all tax-free savings account contributions were held in actual savings accounts earning a paltry .25% give or take. With interest rates like that, who cares if the earnings are tax free as you earned $12.50 over the course of the year on a $5000 contribution.

Part of the problem no doubt were the teaser rates that companies offered for the first three months of the year at 3% – 4%. After that, the rates came down but who could bother changing things at that point. Obviously, 90% of contributors couldn’t be bothered.

Tax Free Savings Accounts should be renamed Tax-Free Investment Accounts. After all, we are allowed to buy stocks, bonds, mutual funds, etc… in these accounts. Corporate bonds still offer yields in the 4% – 7% range that can be very attractive when no tax is being paid. A $5000 investment would yield $200 – $350 per year depending in the bond purchased. Considerably higher than the $12.50 more than 90% of TFSA holders earned last year.

If you did open one of these accounts last year, its time for a review. Oh!!! If you did put your contribution in a savings account, consider talking to a financial advisor about your options as your bank or trust company didn’t do you any favours by paying you .25%. Your comments are always appreciated.

RRSP Loans…Now More Than Ever

With Christmas around the corner, the last thing most people are thinking about right now are taxes and RRSP contributions. That being said, this season is the perfect time to start thinking about saving taxes and building your retirement nest egg.

A recent survey has shown that most Canadians have not contributed to RRSP’s in the last couple of years with the recession and poor equity markets in 2008 as the major culprits. Another sobering statistic is that Canadians closing in on retirement in the next 5 years are those that have stopped contributing the most which will lead to a more difficult retirement.

We have just received our details for RRSP loans for this 2010 season and the borrowing rates are lower than ever starting at 3% on loans up to 24 months. Considering investors can borrow at these low rates and get higher returns on corporate bonds, it becomes very attractive to build back your savings and save some taxes at the same time.

To contact us for more information, you can click “HERE“. Your feedback is always welcome.

Canadian Investment Idol Competition

We would like to congratulate Mr. Joseph Weisz of Montreal, Quebec for winning the first Rothenberg Capital Management Canadian Investment Idol Competition powered by Claymore ETF’s. Mr. Weisz had a return of 15.02% over the eight week time frame.

To view all of our weekly winners, you can click on the link HERE.

 

Have a great week.

Life Settlements in Difficulty in Canada

I have seen some ads in the Calgary Herald advertising life settlements yielding 10%. The ads definitely peaked my interest as this was something different than real estate, commodities, equities or even the bond market.

To have a different asset class paying a 10% yield would be quite attractive. Of course, with the rash of real estate deals going south and ponzi schemes rearing their head, one can only be skeptical.

The underlying concept behind life settlements is that a company offers an individual that is diagnosed with a life threatening illness a lump sum while they are alive in return for the proceeds from a life insurance policy upon death.

The company raises money from individuals paying them the 10% interest rate. They are supposed to pay the individuals from the proceeds of the policies which is difficult to pinpoint as they cannot guarantee when a policyholder will die.

The industry is growing in the US with about $12 Billion in policies sold in 2007 according to an article in this weeks investment executive. In Canada, the purchasing of policies is illegal in most provinces so the ones being offered for sale are from jurisdictions outside of Canada.

The main issue that is now plaguing this sector is similar to other unregulated industries. The individuals selling the policies are not registered to do so and are not offering proper documentation to potential investors outlining the risks.

Two companies in Ontario selling these policies have been shutdown while one in Alberta is currently being investigated.

All one needs to do is visit the Ontario Securities Commission or Alberta Securities Commission websites and do a search on life settlements to get more details on some of the issues.

If you have had any positive or negative experiences in this area, your feedback would be greatly appreciated.