Endowment Funds Performance (Year ending March 31 st, 2013)

Transcription

1 Endowment Funds Performance (Year ending March 31 st, 2013) Investment Management Committee Meeting May 16 th, 2013 (Note: all returns and values are expressed in Canadian Dollars- CAD s) 1

2 Total Endowment Portfolio Vs Benchmark (Gross Of Fees) Annualized Periods Ending March 31 st, 2013 Endowment Policy Benchmark : 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI Emerging Markets Index 2

3 Growth of Endowment Assets Net Annual Returns and Market Values at March 31 st, % $ % 25.0% $ M Endowmwent Market Value % $ % 9.5% $145.4 $ % $186.9 $ % $ % $179.6 $ % $ % 13.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Net Annual Returns -20.0% % Heritage General Total % CAD$ Return (Net) 3

4 Investment Return Summary for March March 2013 Annualised Return Summary YTD 1 Year 2 Years 3 Years 4 Years 5 Years 6 Years 7 Years 8 Years 9 Years 10 Years Total Fund Gross 7.3% 13.6% 8.4% 9.7% 13.4% 6.0% 3.2% 4.5% 5.1% 5.5% 6.7% *Total Fund Net 7.2% 13.0% 7.8% 9.2% 12.8% 5.5% 2.7% 4.0% 4.6% 5.0% 6.2% Benchmark 5.5% 9.5% 6.1% 7.3% 11.5% 3.8% 1.7% 3.2% 4.4% 4.5% 6.2% Annual Return Summary YTD Total Fund Gross 7.3% 13.6% 3.4% 12.4% 25.2% 18.8% 10.0% 12.3% 9.8% 8.4% 18.8% *Total Fund Net 7.2% 13.0% 2.9% 11.9% 24.4% 19.2% 10.3% 12.0% 9.5% 8.0% 18.5% Benchmark 5.5% 9.5% 2.9% 9.9% 24.9% 22.0% 8.4% 12.6% 13.9% 5.1% 22.5% Endowment Policy Benchmark : 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI Emerging Markets Index * 8-10 Year Net of Fee returns are internal estimates 4

5 Asset Class Performance Annualized Periods Ending March 31 st, 2013 YTD 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr % % % % % % % % % % Total Gross of Fees *Total Net of Fees Total Fund ex Currency Overlay (Gross) **Endowment Benchmark Canadian Equity S&P/TSX Comp Index US Equity S&P 500 Total Return Index ($CAD) Non-North American Equity MSCI EAFE Net ($CAD) Fixed Income Dex Bond Universe **Endowment Policy Benchmark: 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI Emerging Markets Index 1 Currency hedging manager was added in November 2010 * 8-10 Year Net of Fee returns are internal estimates 5

6 Endowment Asset Mix as of March 31 st, 2013 (Total Assets $ Million) EAFE Equity, $46.1M, 18% EM Equity $13.5M, 5% Cash & Equivalents, $9.2M, 3% Canadian Fixed Income, $71.4M, 27% U.S. Equity, $74.2M, 28% Canadian Equity, $49.4M, 19% Note : Cash includes manager residual cash balances. Internal cash balance of $ 279 K and a positive currency hedging position of K 6

7 Endowment Currency Exposure as of March 31 st, 2013 Endowment Currency Exposure % 90.00% 80.00% 70.00% Other 60.00% 50.00% Swiss Franc British Pound Japanese Yen 40.00% 30.00% 20.00% Canadian Dollar, 46.3% Canadian Dollar, 73.2% Euro Currency Unit U.S. Dollar Canadian Dollar 10.00% 0.00% March 31st 2013 Unhedged March 31st 2013 Hedged Currency Mar. 31 st, 2013 Unhedged % Gross Exposure (CAD in millions ) Hedge (CAD in millions) Mar. 31 st, 2013 Hedged % Net Hedged Exposure (CAD in millions) Canadian Dollar $121.7 $ $193.2 U.S. Dollar $95.6 -$ $47.4 Euro Currency 6.25 $16.4 -$ $7.9 Japanese Yen 2.57 $6.8 -$ $3.4 British Pound 3.69 $9.7 -$ $4.8 Swiss Franc 2.65 $7.0 -$ $3.5 Other 2.2 $5.6 -$ $3.5 7

8 Endowment Policy Allocation Percentage of Fund at Market Values Interim Target Actual Final Target Permitted Component Asset Classes Asset Mix* Weight Asset Mix Range March 31st, 2013 Low High Canadian Equities 20% 19% 17.5% 7.5% 27.5% U.S. Equities 25% 28% 20% 10% 30% International Equities (EAFE) 20% 17% 20% 10% 30% Emerging Markets Equities 5% 5% 5% 0% 10% Total Equities 70% 70% 62.5% 50% 80% Infrastructure 0% 0% 7.5% 0% 10% Fixed Income 30% 27% 30% 10% 50% Cash & Cash Equivalents 0% 3% 0% 0% 20% Toal Fixed Income and Cash 30% 30% 30% 20% 50% Note : # Prior to June 2010, the Endowment Fund did not have a portfolio benchmark. A formal investment policy (including a benchmark) was recommended by the IMC and approved by the University's Board of Governors. The new policy and Asset Mix Target or benchmark (approved in June 2010) will be implemented over time as the IMC considers opportunities for Infrastructure. While not fully implemented, this report presents results relative to the interim benchmark contained in the new policy. * The Interim Mix was effective Jan 1 st,

9 Asset Mix by Manager as of March 31 st, 2013 Management Manager Date Hired Asset Mandate Market Value % of Portfolio Mandate Objective over 4 yrs Fees ($M) (%) Burgundy Aug 12 Canadian Equity % S&P/TSX Total Return + 1.5% 0.45 SPDRS (ETF) Aug 12 U.S. Equity % S&P 500 Total Return 0.10 CIBC Aug 12 Canadian Fixed Income % Dex Bond Universe 0.06 Sionna All Cap Sep 07 Canadian Equity % S&P/TSX Total Return + 1.6% 0.45 Tweedy Browne Dec 03 EAFE Equity % LSV Asset Mgmt. Sep 07 EAFE Equity % MSCI EAFE Index (in CAD $) + 3.0% 1.35 MSCI EAFE Index (in CAD $) + 2.5% 0.66 LSV Emerging Mkts Oct 10 EM Equity % Outperform MSCI EM Index 1.00 Wedge Oct 06 U.S. Midcap % Russel Midcap Value + 2.0% 0.70 Wedge Small Cap Jun 08 U.S. Small Cap % Russel Small Cap Value + 2.3% 1.00 Internal Cash % Mesirow Nov 10 Passive Currency Hedge % Hedge 50 % of Foreign Currency 0.04 Total $ % Note: Market Values include Cash & Equivalents 9

10 Annualized Manager Performance Periods Ending March 31 st, 2013 YTD 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr % % % % % % % % % % % Burgundy Canadian Equity (Gross)* Burgundy Canadian Equity (Net)* Sionna (Gross) Sionna (Net) S&P/TSX Comp Index SPDR US Equity(Gross)* SPDR US Equity(Net)* S&P 500 Total Return Index ($CAD) CIBC (Gross)* CIBC (Net)* Dex Bond Universe Wedge (Gross ) Wedge (Net ) Russell Midcap Value Wedge Small Cap (Gross) Wedge Small Cap (Net) Russell Small Cap Value Tweedy Browne (Gross) Tweedy Browne (Net) LSV (Gross) LSV (Net ) MSCI EAFE Comp ($CAD) LSV EM (Gross) LSV EM (Net ) MSCI Emerging Markets Index * New mandates added in Q ; Former Managers; PH& N(June 1995 December 2001), EBS (September 2006-January 2010), JF (July August 2012) 10

11 Endowment Fund Results Summary of Major Events: (for the 12 Months Ended March 31 st, 2013) Global Markets: The following is a summary of the major changes in indices for the year ended March 31 st, 2013; Canadian equity - S&P/TSX index 6.1% International equity markets - MSCI EAFE index 13.1% Emerging Markets MSCI EM Index 4.0% US equity market - S&P 500 index 5.8% Canadian fixed income - DEX Universe 4.9% Total Endowment portfolio increased $ 36.4 M to $ M consisting of: Net additions of $ 6.3 M Annual return (net of investment management fees) of 13.0 % compared to 2.9 % for the same period in Review of / Changes to Managers: In August 2012 the relationship with Jarislowsky Fraser was terminated and the assets were reallocated as follows: Canadian Equity to Burgundy Asset Management. US equity is being managed passively via an index ETF until the US equity manager search is completed. Fixed Income to a passive mandate with CIBC Global Asset Management 11

12 Endowment Fund Results: Relative to major asset class indices (for the 12 Months Ended March 31 st, 2013) Results relative to major asset class indices: Canadian equity outperformed the S&P/TSX by 3.6%. Sionna outperformed the benchmark by 7.4% Most of the value add stemmed from the Energy and Materials sectors. In the case of materials the relative underweight benefited the portfolio. International equities also outperformed 15.6% versus 13.1% for the MSCI EAFE Net index (CAD$). Tweedy Browne and LSV outperformed the index for the period returning18.3 % and 15.1% respectively. Emerging Markets lagged the developed markets over period however LSV emerging markets mandate outperformed the MSCI EM index by 2.9%. US equity returned 22.8% versus 15.8% for the S&P 500 (CAD$) index. The exposure to the mid and small cap sectors continues to benefit the portfolio. The Wedge midcap mandate outperformed the index by 5.1% while the small cap mandate also outperformed, beating its index by 2.0%. JF s US equity mandate was terminated in the last quarter and replaced with a passive US equity ETF ( State Street SPDR). A large cap US equity manager search is currently underway. Bonds outperformed for the 12 month period: 4.9% versus 4.5% for the Dex Bond Universe. JF s core plus mandate was terminated in August and CIBC s passive universe mandate was added. As a result future performance is expected to be in line with the Dex Universe. 12

13 Endowment Fund Results: Relative to Endowment Policy Benchmark (for the 12 Months Ended March 31st, 2013) Endowment Fund Policy Benchmark: 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI Emerging Markets Index 12-month Total Gross Portfolio return of 13.6% versus Composite Benchmark returns of 9.5%. The chart below summarizes the attribution of returns relative to the Benchmark. The selection effect measures the investment manager s ability to select securities within a given segment relative to a benchmark. The allocation effect measures the value added by deviating from the benchmark weights. The combined effect is the Net Management Effect. The Chart below shows strong security selection across the board. % Performance Attribution by Asset Class Allocation Effect Selection Effect Net Management Effect Total Fund Canada Equity US Equity International Equity 0.1 Fixed Income 0.2 Cash Note : Emerging Market equity is combined with EAFE equity and shown as international equity. Cash return includes currency hedging effect. 13

14 Market Values and Cash Flows March 31 st, 2013 (in millions $) HERITAGE FUND: Market Value of Fund Balance at Quarter end Capital Additions to Fund in period Distributions to University in period GENERAL ENDOWMENT: Market Value of Fund Balance at Quarter end Capital Additions to Fund in period Distributions to University in period TOTAL MARKET VALUE OF ENDOWMENTS