Performance Review. University of Guelph Pension Plans. 4 th Quarter 2014

Transcription

1 Performance Review University of Guelph Pension Plans 4 th Quarter 2014 Prepared by: Pavilion Advisory Group Ltd René-Lévesque Blvd. West, Suite 4030 Montreal, Quebec H3B 4W8 Canada

2 Pension Plans Results Overview (Gross returns for the 12 months ended December 31 st, 2014) The Total Plan returned 10.9% for the last 12 months, effectively in line with the benchmark. Canadian Equity The Canadian equity portfolio returned 10.6% in 2014, effectively equaling the return of the S&P/TSX index. Results were mixed for the plan s large cap managers with one outperforming (CC&L) and two underperforming (Burgundy, Sionna). Despite the relatively poor performance of small cap stocks in Canada, the plan s manager (Sionna) performed extremely well, outperformed the index by 1600 basis points. Global/Non-North American Equity In Canadian dollars, Non-North American equity underperformed both Canada and the U.S. in 2014 with the MSCI EAFE index returning 4.1%. The plan s Non-North American equity managers performed fairly well with value added of 80 basis points. While LSV underperformed the benchmark by 180 basis points, Tweedy outperformed by 330 while having a larger weight in the portfolio. Global equity, as measured by the MSCI World ex-canada index, returned 16.0% in 2014, falling between U.S. and Non-North American equity returns as expected. The pension s only Global equity manager, Acadian, outperformed the index by 190 basis points. U.S. Equity U.S. equity markets performed very well in Canadian dollar terms with a 2014 return of 23.9% for the S&P500. The plan s U.S. equity investments performed well with a return of 25.3%, outperforming the benchmark by 140 basis points. The allocation to small cap stocks was a drag on performance, but it was mitigated by the low weight of 2.1%. While the plan s large cap manager (Barrow) was in line with the Russel 1000 index return, significant value of roughly 500 basis points was added versus their respective indexes by the small- and mid-cap portfolios managed by Wedge. Fixed Income The Canadian fixed income portfolio is indexed to the FTSE TMX Universe and, as expected, matched its return of 8.8% in The 6.3% return for Cash includes a private equity investment that was held at book for many years and was written up to market value and exited in The real estate portfolio managed by Greystone outperformed its index by 130 basis points in Currency hedging, which is implemented for risk control rather than to generate returns, was a drag on performance in 2014 as it cost the portfolio 90 basis points. University of Guelph Pension Plans Page 2 of 9

3 Portfolio Vs Composite Benchmark Annualized periods ending December 31, 2014 (Gross of Fees) Quarter to date 1 Year (% ) (%) %) Return 1.5 Ret urn ( (%) (%) Return 9.0 Ret urn urn Ret Plan Return Benchmark Return Returns are presented gross of fees in CAD. Current Composite Benchmark: 25% S&P/TSX Comp Capped + 20% MSCI EAFE ($CAD) + 20% S&P 500 ($CAD) + 28% FTSE TMX Universe + 2% FTSE TMX 91 Day T-Bill + 5% IPD Canada Annual Property Index University of Guelph Pension Plans Page 3 of 9

4 Annualized Asset Class Performance Periods Ending December 31, 2014 (Gross of Fees) As of December 31, 2014 Allocation Performance(%) Market Value ($) % of portfolio 1 Year Canadian Equity 304,441, S&P/TSX Composite Index Relative Performance US Equity 215,990, S&P Relative Performance Non-North American Equity 208,813, MSCI EAFE Index Relative Performance Global Equity 103,373, MSCI World Ex Canada Relative Performance Canadian Fixed Income 368,497, FTSE TMX Universe Index Relative Performance Real Estate 56,372, N/A N/A N/A N/A N/A N/A N/A N/A IPD Canada Property Index Relative Performance N/A N/A N/A N/A N/A N/A N/A N/A Internal Cash (STIF)* 19,003, FTSE TMX Canada 91 Day T-Bill - C$ Relative Performance *Cash amounts and percentages presented exclude residual manager cash balances and FX overlay (currency hedging). However, they include the proceeds of the former Banyan Private Equity position, which explains its high 6.3% return in All returns are reported gross of fees in CAD except for the Plan where returns are displayed both net and gross of fees. EAFE Stands for Europe, Australasia and Far East. Current Composite Benchmark: 25% S&P/TSX Comp Capped + 20% MSCI EAFE ($CAD) + 20% S&P 500 ($CAD) + 28% FTSE TMX Universe + 2% FTSE TMX 91 Day T-Bill + 5% IPD Canada Annual Property Index. University of Guelph Pension Plans Page 4 of 9

5 Annualized Asset Class Performance Periods Ending December 31, 2014 (Gross of Fees) As of December 31, 2014 Allocation Market Value ($) % of portfolio 1 Year Performance(%) 1,274,417, Composite Benchmark Relative Performance Net of fees 1,274,417, Composite Benchmark Relative Performance ex. FX overlay 1,276,492, N/A N/A N/A N/A N/A N/A N/A Composite Benchmark Relative Performance N/A N/A N/A N/A N/A N/A N/A Effect of Passive Currency Hedge -2,075, N/A N/A N/A N/A N/A N/A N/A *Cash amounts and percentages presented exclude residual manager cash balances and FX overlay (currency hedging). However, they include the proceeds of the former Banyan Private Equity position, which explains its high 6.3% return in All returns are reported gross of fees in CAD except for the Plan where returns are displayed both net and gross of fees. EAFE Stands for Europe, Australasia and Far East. Current Composite Benchmark: 25% S&P/TSX Comp Capped + 20% MSCI EAFE ($CAD) + 20% S&P 500 ($CAD) + 28% FTSE TMX Universe + 2% FTSE TMX 91 Day T-Bill + 5% IPD Canada Annual Property Index. University of Guelph Pension Plans Page 5 of 9

6 Performance Attribution Plans Vs Composite Benchmark 1 Year Ending December 31, 2014 Fund Performance Total Value Added:3% Total Value Added 3% Asset Allocation 0.40% Total Fund Benchmark 10.89% Manager Value Added 0.51% Total Fund 10.92% Other % 0% 4.00% 8.00% 12.00% 16.00% % % % 0% 0.64% 1.28% Total Asset Allocation:0.40% Total Manager Value Added:0.51% Canadian Equity 8% 3% 0% US Equity % % 0.23% Weight (%) Non-North American Equity Global Equity Canadian Fixed Income % % 8.30% 0.20% 0.59% 4% 0% 1% 0.17% Real Estate % 8% 0% Internal Cash (STIF) % 0% 0.10% % % 0% 8.00% 16.00% % % 0% 0.80% 1.60% 0% 0.10% 0.20% 0.30% 0.40% Average Active Weight Asset Allocation Value Added Manager Value Added Returns are presented gross of fees in CAD. Current Composite Benchmark: 25% S&P/TSX Comp Capped + 20% MSCI EAFE ($CAD) + 20% S&P 500 ($CAD) + 28% FTSE TMX Universe + 2% FTSE TMX 91 Day T-Bill + 5% IPD Canada Annual Property Index. The composite Benchmark does not assume currency hedging, the effect of which is outlined above. Other includes the effects of all other factors on the Fund s relative return, including rebalancing and part of the foreign currency exposure of the Pension Plans. University of Guelph Pension Plans Page 6 of 9

7 Pension Plans Asset Mix Actual Allocation vs. Investment Policy Allocation As of December 31, 2014 December 31, 2014 : $1,274,417,077 Canadian Equity $295,773, % 25.0% 23.2% U.S. Equity $267,795, % 2% 21.0% Non-North American Equity $237,219, % 2% 18.6% Canadian Fixed Income $367,742, % 28.0% 28.9% Real Estate $56,375, % 5.0% 4.4% Cash $49,510, % 3.9% 1.9% -8.0 % % 8.0% 16.0% 24.0% 32.0% 4% Target Allocation Actual Allocation Allocation Differences Note: this actual allocation displays the aggregate managers' holdings regardless of their mandate. Cash presented includes internal cash (STIF) and manager residual cash balances (data from CIBC Mellon). Real Estate includes Greystone Real Estate and a residual position in Banyan Private Equity ($3,337). University of Guelph Pension Plans Page 7 of 9

8 Pension Currency Exposure As of December 31 st, % 90% Other 80% JPY U.S. Dollar: 70% 24.7% CHF 60% GBP EUR 50% USD 40% CAD 30% Canadian Dollar: 58.5% 20% 10% 0% December 31st 2014 Unhedged 100% 90% U.S. Dollar: Other 80% 12.5% JPY 70% CHF 60% GBP EUR 50% USD 40% Canadian Dollar: 78.4% CAD 30% 20% 10% 0% December 31st 2014 Hedged December 31st, 2014 Unhedged Gross Exposure (CAD) Hedge (CAD) December 31st, 2014 Hedged Net Hedged Exposure (CAD) Currency Canadian Dollar 58.5% 747,331, ,350, % 999,681,191 U.S. Dollar 24.7% 315,703, ,894, % 159,808,992 Euro 5.6% 71,085,256-35,643, % 35,441,668 British Pound 3.3% 41,591,891-19,916, % 21,675,891 Swiss Franc 2.4% 30,480,654-15,100, % 15,380,438 Japanese Yen 2.1% 27,296,015-13,436, % 13,859,519 Other 3.4% 43,076,984-14,435, % 28,641,861 Note: The Net Hedged Exposure equals the fund s original currency exposure to its total investments (Gross Exposure) plus the currency hedge implemented by Mesirow, which is designed to protect the pension fund form excessive foreign currency fluctuations. University of Guelph Pension Plans Page 8 of 9

9 Growth of Pension Assets End-of-Year Market Values and Net Annual Returns as of December 31 st, 2014 $M Pension Fund Market Value $1,400 $1,200 $1,000 $800 $600 $ % $ % $859.2 $ % $ % $ % $904.5 $ % 11.5% $ % $1,160.6 $1, % 25.0% 2% 15.0% 1% 5.0% % -5.0% -1% Net Annual Returns $200 $0-14.4% % -2% Prof Plan Non-Prof Plan Retirement Plan Total % CAD$ Return (Net) Over the last 12 months the portfolio increased $113.8 M to $1,274.4 M consisting of: Total contributions of $ 60.1 M and disbursements of $ 64.3 M Annual return (net of investment management fees) of 10.5 % compared to 19.3% for University of Guelph Pension Plans Page 9 of 9