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UBC FACULTY PENSION PLAN
PENSION FORUM M R . JOOST B LOM , C HA IR , B OA R D OF TR USTEES
M S . OR LA C OUSINEA U, EX EC UTIV E D IR EC TOR , PENSIONS
M R . M IKE LESL IE , EX EC UTIV E D IR EC TOR , INV ESTM ENTS
M A Y 1 0 , 2 0 1 7
2
• Welcome by Chair
• 50 years!
• 2017 Board Initiatives and Projects
• Plan’s Financial and Membership Update
• 2016 Operations Update and 2017 Operations
Objectives
• Investment Review for 2016 and First Quarter
2017
• Board of Trustees
• Questions 2
Agenda
3
• Brief history of FPP prepared for this anniversary
• From 1924 UBC and faculty members paid into
pension funds at TIAA-CREF
• In 1964 the UBC BoG and the Faculty Association
created a joint committee to review pension
arrangements
• Committee’s March 1966 report became basis for
the FPP, which was approved by BoG in November
1966 and formally commenced April 1, 1967
• Debt we members owe to all those who helped build
the FPP over the 50 years
50 Years
4
• Major features of the FPP, then and now
• 5% employee + 10% UBC, minus CPPcontributions (original)
• Defined contribution plan (original, withminimum benefit provision - removed in 1991)
• Board of Trustees as administrator (original)
• Investment options• Balanced Fund (original, though modified)
• Equity, Bond, STIF (all 1993, separate Canadian andForeign Equity 2005), GICs (2012)
• Retirement options• Variable Payment Life Annuity (original)
• RRIF, LIF-type payments (from 2004)
• Using funds to purchase on market (from 1982)
50 Years - Continued
5 5
2017 Board Initiatives and Projects
• Investment Structure Review in 2016 resulted in
changes to foreign equity manager structure which
affected the Balanced Fund and Foreign Equity
Fund options
• Increasing member engagement and awareness
through new Plan website launched last year, new
tools available through Sun Life and webcast of
this event
6 6
2017 Board Initiatives and Projects
• Continued oversight of Plan’s investment
managers including how they consider/implement
ESG factors in their investment process
• Variable payout life annuity (VPLA) implemented a
new mortality table as members are living longer,
reflected in monthly amounts effective April 1, 2017
7
Plan Statistics December 31, 2016
7
Active Deferred Retired Total
Members 3,412 1,527 1,051 5,990
57% 25% 18% 100%
Assets
(millions)
$1,173 $270 $696 $2,139
55% 13% 32% 100%
Total assets of $2.1 billion
8 8
Membership Growth –
to December 31, 2016
1,800 1,922 2,231
3,091 3,412
468
921
1,071
1,272
1,527
120
227
258
461
1,051
1976 1986 1996 2006 2016
Active Deferred Retired
5,990
4,824
3,560
3,070
2,388
9
2016 Operations Update
• Launched new Plan website
• Improved transparency of fees – August 2016
Newsletter
• Changed to bi-weekly remittance of contributions
effective January 1, 2017
• Significant benefit of UBC FPP is low management
fees, and in fact the administration fee was reduced
effective March 1, 2017
10 10
2017 Operations Objectives
• Quarterly Member Statements
– Moving from paper to online, unless you opt for paper
statements
• Work with Sun Life to promote awareness of tools
available
– Asset Allocation Tool
– Retirement Income Estimator
• More information about fees
– April newsletter – How to calculate your Investment Fees
– On quarterly member statements
11 11
2017 Operations Objectives
• Ensure Plan members approaching retirement
contact the Pension Administration Office for
information
• UBC and the FPP do not endorse any financial
planners
– Certain financial planners or advisers target UBC
Faculty and their invitations and communications
are often misleading
12 12
Investment Review of 2016
13 13
Agenda
• Plan – Fund Weightings & Asset Mix
• Fund Returns
• Investment Market Update
• Question Period
14
Plan’s Fund Weightings as of December 31, 2016
Balanced Fund 81.7%
Foreign Equity 5.9%
Canadian Equity 7.5%
Bond Fund 2.6%
STIF 1.5% GIC's 0.8%
*Total Assets $2.1 Billion
15
Canadian Real Return Bonds 8.0%
Fixed Income 32.0%
Canadian Real Estate
10.0%
Canadian Equities 20.0%
Global Equities 30.0%
* Global Equities includes investments in both U.S. Equities and Non-North American Equities
Balanced Fund – Policy Asset Mix
16
2016 Fund Returns / Peer Rankings
Fund Returns (%)
Return Ranking (percentile)*
Risk** Ranking
(percentile)*
1 Yr 5 Yr 10 Yr 1 Year 10 Years 4 Years
Balanced 6.1 9.6 6.1 80th 39th 77th
Bond 1.8 3.1 5.1 80rd 35th 5th
Canadian
Equity 21.3 10.9 6.3 20th 30th 31st
Foreign Equity 3.2 18.0 5.7 65th 48th 30th
Short Term 0.7 1.1 1.5 56th 63th N/A
Gross returns to Dec. 31/16
* 1st percentile – highest ranking best performance, 100th percentile – lowest ranking
** Risk - as measured by annual standard deviation of returns
- a lower ranking number (say 80th percentile) means less risky
16
17
Investment Changes in 2016
1. Canadian Equity
• Terminated PCJ, reallocated to other 3 managers
2. Foreign Equity
• Replaced U.S. Equity only mandate with Global Equity mandate
• Hired new Global Minimum Volatility equity manager (BlackRock)
3. Changed Target Objective in Investment Policy
• Was “achieve a reasonable income replacement ratio (i.e. 60-
70%)”
• Changed to “50% or higher”
• Based on 30 years service, retiring at 65, invested in the
Balanced Fund17
18
• Global Monetary Policy still very
accommodative
• However Fed started to hike rates in US
• Canadian bond yields declined for most of
the year then moved up in Q4
• Energy prices improved
• WTI – January 2016 – $27
• WTI – December 2016 – $53
• Commodity prices improved
• Brexit
• Trump
Key Themes In 2016
19
Review Of 2016
Q1 Q2 Q3 Q4 1 Year
Canadian Equities 4.5% 5.1% 5.5% 4.5% 21.1%
U.S. Equities (C$) -5.0% 2.8% 4.7% 6.3% 8.6%
International Equities (C$) -9.1% -1.2% 7.3% 1.6% -2.0%
Bonds 1.4% 2.6% 1.2% -3.4% 1.7%
20
Commodities Prices
Increased During 2016
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
Dec 2
014
Ja
n 2
015
Fe
b 2
01
5
Mar
2015
Apr
2015
May 2
01
5
Ju
n 2
015
Ju
l 20
15
Aug 2
01
5
Sep 2
01
5
Oct 2015
Nov 2
015
Dec 2
015
Ja
n 2
016
Fe
b 2
01
6
Mar
2016
Apr
2016
May 2
01
6
Ju
n 2
016
Ju
l 20
16
Aug 2
01
6
Sep 2
01
6
Oct 2016
Nov 2
016
Dec 2
016
WTI Oil Natural Gas Copper Gold Silver
Commodities up 26 % on average in
2016, more than offset the losses seen
21
S&P/TSX Capped Composite Index
Sector returns vs. Sector weights
1 year ending 31 December 2016
Past performance is not necessarily indicative of future performance
Sources: FactSet Research Systems Inc., BlackRock
Sector returns
S&P/TSX Capped
Composite
Index returned
21.08%
Sector weights
-100%
-50%
0%
50%
Materials Energy Financials Industrials Utilities Telecom Real Estate ConsumerDiscretionary
ConsumerStaples
InformationTechnology
Health Care
Outperform Underperform
0%
10%
20%
30%
40%
Materials Energy Financials Industrials Utilities Telecom Real Estate ConsumerDiscretionary
ConsumerStaples
InformationTechnology
Health Care
22
2016 Global Market Performance • After significantly
enhancing foreignequity returns in 2015,currency detractedfrom performance in2016
• The British Pound fellsignificantly post-Brexit
• Japan and Europeunderperformed duringthe year
• Emerging marketssubstantiallyoutperformeddeveloped markets
Stock Market Local
Currency
Canadian
Dollars
Canada 20.3% 20.3%
United States 10.9% 7.6%
Pacific (Ex. Japan) 8.3% 4.6%
Japan -0.7% -0.7%
United Kingdom 19.2% -3.1%
Europe (Ex. U.K.) 2.3% -3.5%
MSCI World 9.0% 4.3%
Emerging Markets 9.7% 7.9%
* Source: MSCI Developed & Emerging Market Indices
23
MSCI World Index Country returns vs. country weights
1 year ending 31 December 2016
Past performance is not necessarily indicative of future performance.
Sources: FactSet Research Systems Inc., BlackRock
Country returns
MSCI World
Index returned
CAD 3.79%
0%
10%
20%
30%
40%
50%
60%
70%
Can
ada
New
Zea
land
Norw
ay
Austr
alia
Austr
ia
United S
tate
s
Neth
erland
s
Fra
nce
Port
ugal
Germ
any
Japan
Hon
g K
ong
Sin
gapore
Sw
ed
en
United
Kin
gdom
Spain
Fin
land
Sw
itzerland
Irela
nd
Belg
ium
Italy
Den
mark
Isra
el
Outperform Underperform
-30%
-20%
-10%
0%
10%
20%
30%
Can
ada
New
Zea
land
Norw
ay
Austr
alia
Austr
ia
United S
tate
s
Neth
erland
s
Fra
nce
Port
ugal
Germ
any
Japan
Hon
g K
ong
Sin
gapore
Sw
ed
en
United K
ingd
om
Spain
Fin
land
Sw
itzerland
Irela
nd
Belg
ium
Italy
Den
mark
Isra
el
Country weights
24
Global Bond Yields Have Moved Higher
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017
Yie
lds
%
Global 10 Year Yields Source: Bloomberg, Leith Wheeler Investment Counsel
US Generic Govt 10 Year Yield Canadian Govt Bonds 10 Year No Japan Generic Govt 10Y Yield Germany Generic Govt 10Y Yield
• Global bond yields have started to rise, led by the United States.
• Canada has followed, although yields in Europe and Japan remain extremely low.
25
Canadian bond market Sector returns vs. sector weights
1 year ending 31 December 2016
Past performance is not necessarily indicative of future performance
Sources: BlackRock; FTSE TMX Global Debt Capital Markets Inc .
Sector & term returns
FTSE TMX Canada
Universe Bond
Index returned
1.66%
Sector & term weights
0%
1%
2%
3%
4%
Corporates Municipals Provincials Federal Short Mid Long
0%
10%
20%
30%
40%
50%
Corporates Municipals Provincials Federal Short Mid Long
Sector Term
26
History Of Interest Rate Settings
0
2
4
6
8
10
12
14
16
18
16
94
17
04
17
14
17
23
17
33
17
43
17
52
17
62
17
72
17
81
17
91
18
01
18
10
18
20
18
30
18
39
18
49
18
59
18
68
18
78
18
88
18
97
19
07
19
17
19
26
19
36
19
46
19
55
19
65
19
75
19
84
19
94
20
04
Ban
k O
f En
glan
d In
tere
st R
ate
Long-Term Central Bank Interest Rate Source: Bank of England, The Guardian
Interest rate
27
Stocks VS Bond Returns
28
(Note: Approximately 10% of Balanced Fund)
Real Estate
Returns to December 31, 2016
1 Year 5 Year 10 Year
Gross 5.7% 7.7% 7.8%
Net 4.9% 6.9% 7.0%
Property Type (Overall) as at
March 31, 2016
Office 38.0%
Retail 24.5%
Industrial 18.4%
Residential 14.5%
Other 4.6%
By Region
BC 24%
Prairies 27%
Ontario 43%
Quebec/Man 6%
29
FPP Fund Option Fees (as of April 2017)
Administration Investment
Manager
Operating
Expenses of
I. M.
Total Fee
Balanced 14 19 14 0.47%
Bond 14 16 5 0.35%
Canadian
Equity
14 24 6 0.44%
Foreign
Equity
14 23 11 0.48%
STIF 14 2.5 0.5 0.17%
Note: The Administration Fees were reduced from 16 bps to 14 bps as of March 1, 2017.
(basis points) 1bp = 0.01%
30 30
Results to March 31, 2017
31
Equity Markets – Good Quarter, Great Year
47.2
22.1
23.4
20.9
19.4
13.2
20.4
18.6
18.3
9.8
16.5
12.3
10.8
6.3
6.9
5.5
2.4
5.8
Brazil
India
China
Emerging Markets
Asia
Europe
US
Canada
Developed…
Quarter 1 YearPercent
*Note: Preliminary un-reconciled returns, subject to change. All returns in Canadian dollars. All returns are MSCI Index returns,
except Canada, which is S&P/TSX Equity Index.
32
S&P®/TSX® Capped Composite Index Sector Returns Vs. Sector Weights
1 year ending 31 March 2017
Past performance is not necessarily indicative of future performance
Sources: FactSet Research Systems Inc., BlackRock
Sector returns
S&P/TSX Capped
Composite
Index returned
18.62%
Sector weights
-60%
-40%
-20%
0%
20%
40%
Materials Industrials Financials Energy Utilities ConsumerDiscretionary
InformationTechnology
Real Estate Telecom ConsumerStaples
Health Care
Outperform Underperform
0%
10%
20%
30%
40%
Materials Industrials Financials Energy Utilities ConsumerDiscretionary
InformationTechnology
Real Estate Telecom ConsumerStaples
Health Care
33
MSCI World Index Country returns vs. Country weights
1 year ending 31 March 2017
Past performance is not necessarily indicative of future performance.
Sources: FactSet Research Systems Inc., BlackRock
Country returns
MSCI World
Index returned
CAD 18.33%
0%
10%
20%
30%
40%
50%
60%
70%
Austr
ia
Austr
alia
Spain
United S
tate
s
Hon
g K
ong
Can
ada
Germ
any
Japan
Norw
ay
Neth
erland
s
Fra
nce
Sw
ed
en
Port
ugal
Sw
itzerland
Sin
gapore
Fin
land
Italy
New
Zea
land
United
Kin
gdom
Irela
nd
Belg
ium
Den
mark
Isra
el
Outperform Underperform
-15%-10%-5%0%5%
10%15%20%25%30%
Austr
ia
Austr
alia
Spain
United S
tate
s
Hon
g K
ong
Can
ada
Germ
any
Japan
Norw
ay
Neth
erland
s
Fra
nce
Sw
ed
en
Port
ugal
Sw
itzerland
Sin
gapore
Fin
land
Italy
New
Zea
land
United K
ingd
om
Irela
nd
Belg
ium
Den
mark
Isra
el
Country weights
34 34
Fund Rates of Return* to March 31, 2017
* Before investment manager and administration fees
Fund Q1/2017 1 Yr. 5 Yrs. 10 Yrs.
Balanced Fund 3.1% 10.4% 9.4% 6.3%
Bond Fund 0.9% 1.9% 3.4% 5.2%
Canadian Equity Fund 2.9% 19.7% 10.5% 6.2%
Foreign Equity Fund 6.0% 16.6% 16.9% 6.2%
Short Term Investment Fund 0.2% 0.7% 1.1% 1.4%
35
Asset Class Winners And Losers
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Highest 14.2 33.9 28.3 39.2 37.7 31.7 13.7 8.8 11.3 26.7 14.5 24.1 26.3 9.8 6.2 35.1 20.6 18.8 14.8 48.4 24.0 21.0 21.1
7.4 26.3 23.4 27.7 28.5 19.7 7.4 5.7 2.5 20.5 12.0 14.0 18.3 4.4 3.3 14.4 17.6 4.4 13.8 41.5 17.9 18.3 17.7
5.4 25.0 17.5 18.6 15.0 14.3 5.5 4.7 -7.1 13.4 10.2 10.4 17.3 4.4 -15.6 12.6 12.1 1.0 13.5 31.3 14.4 14.0 8.6
4.0 19.9 16.9 16.2 13.4 14.1 3.4 -3.7 -12.4 12.4 10.2 10.0 15.7 0.9 -17.9 8.7 9.5 1.0 8.3 14.8 11.4 6.0 7.2
1.8 14.5 14.1 15.0 4.7 12.8 0.8 -6.5 -16.6 8.0 9.0 2.6 13.0 -5.7 -21.9 8.1 9.3 -2.0 7.2 13.0 10.6 4.5 1.3
-0.2 8.2 6.4 6.2 4.4 4.7 -5.5 -12.6 -21.1 5.3 3.3 1.6 4.0 -10.5 -29.8 1.2 2.4 -8.7 4.0 1.0 3.7 0.6 0.5
Lowest -7.8 7.4 5.0 3.2 -1.6 -6.2 -10.8 -16.6 -22.7 2.9 2.3 1.3 3.9 -16.5 -33.0 0.6 0.5 -10.2 1.0 -7.0 0.9 -8.3 -2.0
Small Cap: Russell 2000 (C$)
Large Cap: S&P 500 (C$)
Large Cap: TSX Composite
International: MSCI EAFE - Net (C$)
Long Term Gov't Bonds: FTSE TMX Canada Long
Gov't
Treasury: 91 Day T-Bills
Diversified
* Diversified: 25% TSX Composite, 20% S&P 500 (C$), 15% MSCI EAFE – Net (C$), 40% FTSE TMX Canada Universe Bond Index
36
• Political uncertainty and policy risks still abound
• Our large plan size ($2.2 billion) allows for low fees and broad diversification by asset classes and managers
• Returns have been reasonably good over the last 5-10 years
• Changes in interest rate policies may affect bond returns going forward
Conclusions
36
37 37
Mr. Joost Blom, Chair
Professor, Faculty of Law
Dr. Ken Carty
Professor Emeritus, Department
of Political Science
Dr. Robert Heinkel, Vice-
Chair
Professor, Sauder School of
Business
Dr. Joanne Emerman
Professor Emerita, Department of
Cellular and Physiological
Sciences
Dr. Joy Begley
Associate Professor, Sauder
School of Business
Dr. Lorenzo Garlappi
Associate Professor, Sauder
School of Business
Dr. Joyce Boon
Associate Professor Emerita,
Barber Arts & Sciences, UBCO
Mr. Vijay Verma
Researcher Emeritus, TRIUMF
Board of Trustees
38 38
Thank You!
Questions?
39 39
Appendix
40
Long Term Asset Class Returns
$90
$900
$9,000
$90,000
1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015
Investment Results (Growth of $100 from December 1949 to December 2016)
Value of $100
(Annualized
Rate of Return)
Canada
Equities:
$52,300 (9.8%)
US Equities in $C:
$147,354 (11.5%)
Bonds:
$12,050 (7.4%)
T-Bills:
$3,197 (5.3%)
Inflation
$1,054 (3.6%)
41
Time, Diversification and the Volatility of Returns
-39%
-8%
-15%
-3% -2%
1%
-1% 1% 2%
7%
1%
5%
47%
43%
33%
28%
23% 21%19%
16% 16% 17%
12%14%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
1-yr. 5-yr.rolling
10-yr.rolling
20-yr.rolling
Source: Barclays, FactSet, Federal Reserve, Robert Shiller, Strategas/Ibbotson, J.P. Morgan Asset Management.Returns shown are based on calendar year returns from 1950 to 2016. Stocks represent the S&P 500 Shiller Composite and Bonds represent Strategas/Ibbotson for periods from 1950 to 2010 and Barclays Aggregate thereafter. Growth of $100,000 is based on annual average total returns from 1950 to 2016.Guide to the Markets – U.S. Data are as of December 31, 2016.
Range of stock, bond and blended total returnsAnnual total returns, 1950-2016
50/50 portfolio 8.9% $553,221
Bonds 6.0% $318,764
Stocks 11.1% $823,015
Annual avg.
total return
Growth of $100,000
over 20 years
Inve
stin
g
prin
cip
les
42 42 42
Administrative Staff
Orla Cousineau
Mike Leslie
Debbie Wilson
GV Fragante
Helena Huynh
Diana Iampietro
Lorraine Heseltine
Lily Lee
Louise Mah
Maricres De Leon
Kathy Pang
Chelsey Maher
Shirley Lim
Claudia Chan
Executive Director, Pensions
Executive Director – Investments
Associate Director
Systems Analyst
Systems Analyst
Faculty Pension Plan Manager
Member Services Specialist
Member Services Associate
Pension Clerk
Pension Plan Accountant
Communications Manager
Communications Assistant
Project Coordinator
Office Administrator
43
43
Plan Considerations
• Lower risk through broad diversification
- 12 Managers, 14 Mandates
• Provide flexibility regarding contribution,
investment, retirement and withdrawal options
• Low cost
• High level of member service
• One part of member’s overall retirement plan
Recommended