Building the Portfolio
The Asset Mix is the most important investment decision in building an institutional portfolio. The Pension Committee supported by the Pension Fund Management office work with external advisors to complete Asset-Liability studies to determine the appropriate Asset Mix for the risk and return objectives of the Retirement Fund. These studies quantify the projected long-term level of return of different asset mixes relative to the risk as measured by funding ratio volatility and asset risk metrics.
Target Asset Mix
The Statement of Investment Policies & Procedures (“SIP&P”) approved Asset Mix is as follows:
Following Asset Mix approval, portfolio construction is the next step of hiring external investment managers to invest the Retirement Fund’s capital in each of the approved asset classes. For example, within Global Infrastructure there are investment managers that may focus on GDP-linked transportation assets such as toll roads, ports, and airports or investment managers that focus on contracted revenue streams such as hydro, solar, and wind assets.
The last portfolio decision is managing the costs of the Retirement Fund otherwise known as managing the implementation style. Costs are monitored on an ongoing basis to ensure the Retirement Fund is delivering value-add after fees relative to the Benchmark Portfolio. Each asset class has a benchmark, for example Canadian Equities are measured against the TSX Index. The Benchmark Portfolio is outlined in the SIP&P.
The Retirement Fund net of fees return track record is below:
|As of June 30, 2023
|BNY Mellon Universe Median*
*The BNY Mellon Canadian Master Trust Universe results are based on $300 billion worth of investment assets in Canadian pension plans and comprises 78 Canadian corporate, public and university pension plans.