AFTER MATH – RT Capital Loses C$1 Billion in Assets in Wake of Scandal

August 17, 2000 (PLANSPONSOR.com) - RT Capital Management has lost a net C$1 billion in assets ($768 million) since the settlement of the stock trading scandal and appointment of former finance minister Michael Wilson as CEO three weeks ago.

Sixteen of the money manager’s 700 clients have pulled their accounts because of concerns about the activities at the Canadian fund manager, according to The Globe and Mail newspaper.

The firm also picked up 10 new clients with C$250 million during the period, but others are still considering the matter – including the City of Toronto, which froze its account at RT Capital on June 30.

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“There are some [clients] who are absolutely rigid in their values and the integrity of the people they deal with, and this is something that was obviously unacceptable to them,” Wilson told The Globe.

Settlement After “Math”

RT Capital paid a $3-million fine, while six senior executives resigned or retired, to settle charges that it artificially inflated the prices in 53 stocks over a nine-month period.

Wilson’s arrival has gone a long way toward restoring confidence in the fund manager, according to rivals. 

Several fund managers have reportedly been trying, without much success, to lure clients from RT Capital, according to The Globe.

In the past RT Capital relied on brokerage houses to detect and stop illegal activities, such as “high-closing.”

They have reportedly improved their systems so that RT Capital can now monitor all its trading activity.

Pru Confident on Real Estate Returns

May 7, 2001 (PLANSPONSOR.com) - The real estate sector is poised to outperform other markets this year, according to Prudential Real Estate Investors (PREI).

The group’s latest report shows the sector to be well positioned to withstand the current weakening demand in contrast to a decade ago, when an overbuilt market struggled with rising vacancies and falling rents.

Real Estate Investment Trusts (REITs) fell 0.5% in the first quarter, outperforming the S&P 500, which fell 12.1%. REITS also beat the NASDAQ, which plunged 25.5%, and the Dow Jones, which slid 8.4%.

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Through the first quarter, REITs raised $4.82 billion in new capital, mostly in the form of unsecured debt, the highest quarterly total since the second quarter of 1999 saw $5.17 billion raised.

Forecasts Still Upbeat

Though the economic slowdown is affecting the sector, PREI forecasts are still optimistic.

In particular:

  • debt issuance is expected to remain stable, with about $72 billion in commercial mortgage-backed securities to be issued in the US. That’s in comparison to $61 billion a year ago
  • the apartment sector should grow 300,000 units annually
  • total new construction should reach $25 billion this year.

Prudential remains optimistic that REITs will continue to outperform private real estate and will access the capital markets through new debt and equity offerings, despite increased selectivity by these markets.

This in turn may lead to increased M&A activity during the year, resulting in slower funds from operations (FFO) growth to about 8% this year, down from 9% last year.

Property Markets

PREI analysts anticipate that employment growth, the key driver of demand, will fall below 2% this year and may yield some loosening in the office market, particularly in suburban areas and tech-heavy markets as San Francisco.

Analysts also anticipate that:

  • though near-term rental rate growth could decline, longer-term office investments will provide some protection. The outlook remains strong overall, with returns between 8.25% and 8.5% in 2001
  • the apartment market will remain a favorite among investors, thanks to aging Baby Boomer demand
  • the warehouse sector could weaken a bit as smaller companies that rely on warehouse space fail
  • investors will shy away from hotels and retail space, as consumer confidence wanes
  • interest in retail will remain low, fueled by scaled-back expansion plans by such retailers as JC Penney and Nordstrom, and the failures of some online retailers.

PREI’s report can be viewed at PREI’s Web site at: http://www.prudential.com/inst/business/prei/itbrz1005.html

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