Poll reveals Canadians, especially baby boomers, don't know rising rates
can hurt their investment portfolios for retirement
TORONTO, Jan. 24, 2014 /CNW/ - A new poll from CIBC Asset Management by Leger finds that almost 60 per cent of Canadians with a retirement
portfolio are unaware that rising interest rates can erode the value of
some of their investments. And, those investors closest to retirement -
the "baby boomer" generation between the ages of 55 and 64 - are
particularly in the dark, with 65 per cent unaware of the impact of
Rising rates can negatively impact investors who own bonds or fixed
income securities because when interest rates rise, bond prices fall.
An extended period of falling interest rates, and a flight to safety
from equity market volatility has resulted in many Canadians investors
loading up on bonds in recent years. But, most experts agree that this
era of record-low interest rates has reached an end.
Key poll findings include:
58 per cent of Canadians are unaware that rising rates will cause some
investments to lose value, with that number climbing to 65 per cent for
baby boomers (55-64 years of age - a demographic typically with a
higher percent of fixed income assets), and;
54 per cent of Canadians are not thinking about changing their
retirement savings strategy in a rising interest rate environment, with
that number climbing to 62 per cent for baby boomers.
"Nobody knows exactly when and how fast interest rates will rise, but
Canadians need to understand the risk this poses to their retirement
funds and plans," said Steve Geist, President, CIBC Asset Management
Inc. "Canadians understand the impact that rising rates have on
household expenses, such as mortgages and loans. But, it's equally
important for Canadians, especially those approaching retirement and
preparing to draw income from their portfolios, to be aware of the
impact that rising rates can have on their investments."
Strategies for investors to prepare for rising rates:
Work with an advisor to find the right fixed income mix: The fixed income market is complex and a financial advisor can help
you assess your portfolio and understand its overall sensitivity to
rising interest rates. Fixed income will remain an important part of
investors' overall portfolio mix, however diversifying into corporate
bonds could be a favourable strategy in a rising rate environment. An
advisor can help you find the right mix for your financial goals.
Consider "floating rate" investments for additional rising rate
protection: Unlike typical bond investments, the interest on floating rate loans
rises with benchmark rates. CIBC Asset Management recently introduced
an investment solution that provides Canadians access to this unique
Look at shorter bond durations: Duration is a measure of how sensitive the price of a bond is to
changes in interest rates. The shorter the length of time for a bond to
reach maturity, the less interest rate risk is involved. Portfolio
managers will often use this strategy as one way to mitigate risk in
actively managed mutual funds.
The poll was conducted by Leger through a Web survey in December 2013
among a representative sample of 1,503 English- or French-speaking
Canadians, 18 years of age or older, who have an investment portfolio
for retirement. Using data from Statistics Canada, the results were
weighted according to gender, age, region, language spoken at home,
education and whether or not children are present in the household to
ensure a sample representative of the entire population under review.
About CIBC Asset Management
CIBC Asset Management (CAM), the asset management subsidiary of CIBC,
provides a range of high-quality investment management services and
solutions to individual and institutional investors. CAM's offerings
include: a comprehensive platform of mutual funds, strategic managed
portfolio solutions, discretionary investment management services for
high-net-worth individuals, and active portfolio management for
institutional clients. CAM is one of Canada's largest asset management
firms, with more than $90 billion in assets under management as of Dec.
SOURCE: Canadian Imperial Bank of Commerce
For further information:
Media contact: Caroline Van Hasselt, Director, External Communications and Media Relations, at 416-784-6699 or e-mail:firstname.lastname@example.org.