CANADA - A huge majority of Canadian investment managers do not believe that the elimination of the foreign property rule (FPR) will have a "material adverse" impact on the Canadian marketplace, according to a survey carried out by Mercer Investment Consulting.
Mercer found that 84% of the 31 investment managers said that they did not believe elimination of the FPR would have a materially adverse impact on the Canadian financial markets and economy. Sixteen per cent of managers said that the elimination of the FPR would have an impact.
The survey, which was carried out to obtain the initial assessment of the implications for the markets and the asset mix of balanced funds, found that 16 out of the 31 managers said they planned to increase the foreign allocation within their balanced funds.
Average allocation to Canadian equities is expected to decrease from 33% to 26%, while the average allocation to non-Canadian equities is expected to increase from 26% to 35%.
Foreign bonds is the most likely new asset class to be introduced into balanced funds.
The 2005 Federal Budget announced that the government plans to amend the Income Tax Act to eliminate the FPR, with effect from January 1, 2005.
The FPR imposed a 30% book value limit on foreign investments made by registered pension plans and other deferred income plans.
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