McGill University Pension Plan Annual Meeting of Plan Members. Wednesday, May 3, 2017

Transcription

1 McGill University Pension Plan Annual Meeting of Plan Members Wednesday, May 3, 2017

2 2 Agenda Comments from the Chair Overview of Pension Plan Structure Overview of Voting Procedures Results Continuance of Voting Procedures Results Administrative & Support Staff Election Register of Conflicts of Interest Amendments in Investment Performance Report 2016 Administrative Activities Other Savings Programs

3 Mrs. Lynne B. Gervais 3

4 4 Pension Plan Structure University Plan Sponsor Funds ongoing contributions Puts forward Plan amendments for Board approval PAC Pension Administration Committee (PAC) Plan Trustees acts in a fiduciary capacity Plan Administrators PIC Pension Investment Committee (PIC) Develops detailed investment policies Recommends strategy

5 5 Pension Plan Structure (continued) Pension Administration Delegated responsibility for administrative functions Delivers plan communications & educational services to members Office of Investments Accountable to the PIC & the PAC Delegated responsibility for investment and financial functions Implements and monitors investment strategy Monitors investment managers Prepares annual financial statements

6 6 Pension Administration Committee Mrs. Lynne B. Gervais, Chair (Principal appointed) Ms. Cristiane Tinmouth (Principal appointed) Ms. Kim Holden, Vice Chair (Board of Governors appointed) Mr. Michael Keenan (Board of Governors appointed) Professor Julia Scott (Academic elected) Professor Christopher Ragan (Academic elected) Ms. Rosemary Cooke (Admin. & Support Staff elected) Mr. Simon Fulleringer (Admin. & Support Staff elected) Mr. Pierre Lavigne (Independent Member appointed)

7 7 Pension Investment Committee Mr. Michael Boychuk, Chair Mrs. Lynne B. Gervais (Chair of PAC) Ms. Kim Holden (PAC) Mr. Clifford Isings Mr. Gilles Horrobin Mr. Pierre Lavigne (PAC) Mr. Francois Lemarchand Ms. Caroline Miller

8 8 FOR/AGAINST Continuance RESULT: FOR CONTINUANCE: AGAINST CONTINUANCE: 1044 votes 25 votes

9 9 Two nominations received: Simon Fulleringer Slawomir Poplawski RESULT: Simon Fulleringer elected to a new three year term

10 10

11 There were no amendments made to the Plan in

12 Ms. Sophie Leblanc, Chief Investment Officer & Treasurer Office of Investments 12

13 13 Senior Pension Management Office of Investments Sophie Leblanc, M.Sc., CFA Chief Investment Officer & Treasurer Mathieu Boivin, CFA Senior Manager Investments Line Beauregard, CFA, CPA, CA Senior Manager Finance & Governance

14 2016 Market Overview 14 Equities outperformed fixed income securities Investors shifting from a defensive profile to a growth one Yields started to go up Slow down in Central Banks' intervention (Quantitative Easing) Confidence sentiment towards U.S. and Canada's economic growth Oil price rebounded in 2016 Pushed up by accelerating growth and OPEC deal CAD appreciation was supported by raising oil price USD vs other major currencies remained strong due to: Growth prospect Rising yield for the U.S. economy

15 Funds of the Pension Plan 15 Accumulation Fund Holds assets of: Active members Inactive members (who have not yet settled their holdings) Pensioner Fund Closed fund Members receiving an internal annuity (prior to Jan. 1, 2011) Internal annuities are no longer issued Supplemental Fund Holds: Contributions (actuarial funding) DB Minimum Assets are invested in: the Balanced Account & included in the Accumulation Fund This presentation will focus on these 2 Funds

16 Accumulation Fund Statement of Change in Net Assets Accounting Basis 16 The assets increased by $50M over the 1 year ended Dec. 31, 2016 (from $1,260M to $1,310M) 90 $ $73 $50 $M Contributions & Transfers In $108 Benefit Payments $3 Total Admin. Expenses Returns (Net of Management Fees) Net Variation (December 2016)

17 Accumulation Fund Evolution of Assets Actual Market Value 17 1,400 1,300 1,257 1,307 $M 1,200 1,100 1,000 1,118 1,119 1,068 1,119 1,044 1,124 1,203 5 yr without decreases 1 st time crossing the $1.3B mark

18 Accumulation Fund Asset Allocation Dec. 31, Accumulation Fund Equity Pool Canadian Equity (31%) Global Equity (67%) Cash Equivalent (2%) Currency Forward Contracts (0%) $1,307M (100%) $616M (47.1%) Alt. Assets $279M (21.3%) Fixed Income Pool $365M (27.9%) Real Assets (32%) Listed Real Assets (7%) Private Investments (23%) Absolute Return Strategies (35%) Cash Equivalent (3%) Currency Forward Contracts (0%) Nominal Bonds (99%) Cash Equivalent (1%) Money Market Pool $19M (1.5%) SRI Pool $28M (2.2%)

19 Pensioner Fund Asset Allocation Dec. 31, Total Market Value: $165M Policy Cash Equivalent 3% Fixed Income 53% Equity 35% Real Estate 9% Fixed Income 65% Equity 35% Asset Allocation vs Policy All asset classes were within permissible policy ranges

20 Accumulation Fund Performance Dec. 31, (1 Year) 5 Years (Ann.) Gross Gross Fund Value Added Fund Value Added 20 Balanced Account Equity Pool 6.4% 0.1% 10.2% 1.3% 8.0% 3.5% 13.0% 0.4% Fund Performance Fund weighted average of market indices Fund Gross Value Added Fixed Income Pool 4.2% 2.5% 4.3% 1.0% Money Market Pool 0.8% 0.3% 0.9% 0.1% SRI Pool 8.4% 0.4% 9.5% 0.7% 1) Balanced Account performance for 2016 is good but lags the 5-year strong returns 2) Equities had a strong 1 year performance and had the best 5-year performance 3) Equity managers, being defensive in nature, lagged the benchmark. A reversal from strong 2015 and the last 5 years 4) Fixed income managers had a very good performance over the 1 and 5 year periods 5) SRI Pool did very well in 2016

21 Accumulation Fund Long Term Annualized Performance Dec. 31, Years (Ann.) Fund Long Term Objective Gross Value Added Balanced Account 6.2% 5.3% 0.9% Outperformed its long term objective Equity Pool 6.2% 6.6% 0.4% Fixed Income Pool 5.1% 3.1% 2.0% Great outperformance of the Fixed Income Pool Money Market Pool 1.4% 0.6% 0.8% The long term objective of the Balanced Account corresponds to: 3.7% plus the annual change in the Canadian Consumer Price Index (1.6%)

22 Pensioner Fund Performance Dec. 31, (1 Year) Gross Fund Value Added* 5 Years (Ann.) Gross Fund Value Added* Pensioner Fund 3.3% 0.7% 8.1% N/A Equities Fixed Income Real Estate Cash Equivalent 1.2% 2.9% 13.6% 2.9% 3.9% 2.2% 4.7% 1.5% 5.3% 0.2% 9.0% 3.7% 0.7% 0.2% 0.8% 0.0% Important disclaimer: Schedule 8 (on p.17 of the printed Annual Report) have been revised. Please refer to the website. Pensioner Fund performance has been very impressive over 5 years given the conservative asset mix (low level in equities) Relative performance vs benchmark has been strong for the 1 and 5 year periods 10 years performance of 6.0% was well above the long term objective of 4.3% (CPI + 2.7%) *Gross returns except Real Estate which is net of fees

23 Changes made in A) Managers In Municipal Bond mandate $50M (Fixed Income Pool) 2 Private Debt mandates $55M (Alt. Assets) 1 Real Estate $20M (Alt. Assets) Out Small Cap U.S. Equity $34M (Equity Pool) 2 Absolute Return Strategies $20M (Alt. Assets) Reasoning High spread vs Gov. bond; low risk Diversification & good risk adjusted returns Global Diversification Disappointing performance Disappointing performance & reduction of assets in Absolute Return Strategies B) Other Segregation of the Alternative Assets from the Equity Pool assets In house Hedging Program: better flexibility & use of currency options Note: The amounts reported under new managers represent committed capital

24 Compliance Statement of Investment Policy (SIP) Regulatory requirements PAC, PIC and Office of Investment s staff s compliance with the Terms of Reference CONFIRMED Managers compliance with individual mandate guidelines

25 Fees as a % of Investment Pool Assets Investment Fees Admin. Fees (1) Balanced Account Equity Pool Fixed Income Pool Money Market Pool SRI Pool Pensioner Fund 0.72% 0.63% 0.23% 0.27% 0.45% 0.45% 0.26% 0.27% 0.23% 0.21% 0.24% 0.27% 0.08% 0.09% 0.31% 0.27% 0.21% 0.20% 0.26% 0.27% 0.38% 0.38% 0.16% 0.22% Note 1 (not applicable to the Pensioner Fund): In 2016, admin. expenses were allocated based on costs incurred by each pool and an amount allocated based on the pro rated fair market value of each pool s assets relative to total assets. Prior to 2016, admin. expenses were allocated based on fair market value of each pool s assets relative to total assets.

26 Mr. John D Agata, Director Pensions & Benefits Human Resources 26

27 27 Information Sessions 2016 Type Number of Sessions No. of Participants General Information Session 8 82 Retirement Information Session Séance sur la retraite 2 15 Settlement Options Information Session 9 95 Decumulation Session NEW! 4 64 Total

28 28 Information Sessions Schedule 2017/2018 Type General Information Session Retirement Information Session Dates May 29, Sep 25, Oct 30, Nov 27, Jan 29, Feb 26, Mar 26, Apr 30, May 28 May 30, Sep 26, Nov 1, Nov 29, Jan 30, Feb 27, Mar 27, May 1, May 29 Settlement Options Information Session May 15, Sep 11, Oct 16, Nov 13, Jan 15, Feb 12, Mar 12, Apr 16, May 14 Decumulation Session NEW! June 14, Sep 14, Nov 6, Jan 8, Feb 5, Apr 9 Dates, times, locations & online registration available at:

29 29 Settlements 2016 Number Total Amount Transfers to LIRAs/LIFs 215 $70,918,488 Lump Sum Payments 208 $7,194,403 Other 1 90 $1,678,052 Transfers to McGill University Group LIF 51 $23,964,915 Death Benefits 8 $2,223,655 Transfers to other Pension Plans 6 $1,270,174 Annuity Purchases 3 $1,250,955 1 Includes transfers to RRSPs, RIFs as well as marriage breakdown settlements

30 30 Glide Paths Introduced in 2014 Evolving asset mix based on a member s age and risk tolerance Conservative, moderate and aggressive risk profiles available Asset mix becomes more conservative as a member approaches retirement

31 31 Glide Paths (continued) CONSERVATIVE RISK PROFILE Age 66 + Age Age Age Age Below 30 Fixed Income Pool 65% 65% 50% 40% 30% 20% Equity Pool 25% 25% 35% 45% 55% 65% Alternative Assets 10% 10% 15% 15% 15% 15% MODERATE RISK PROFILE Age 66 + Age Age Age Age Below 30 Fixed Income Pool 65% 50% 40% 30% 20% 10% Equity Pool 25% 35% 45% 55% 65% 75% Alternative Assets 10% 15% 15% 15% 15% 15% AGGRESSIVE RISK PROFILE Age 66 + Age Age Age Age Below 30 Fixed Income Pool 50% 40% 30% 20% 10% 10% Equity Pool 35% 45% 55% 65% 75% 75% Alternative Assets 10% 15% 15% 15% 15% 15%

32 as at December 31,

33 33 Solvency Valuation Assumes Plan termination date = valuation date. Assumptions used are largely dictated by regulators Results December 31, 2015 December 31, 2012 Market Value of Assets $1,447,067,000 $1,281,442,000 Solvency Liabilities $1,673,461,000 $1,555,323,000 Solvency Surplus (Deficit) ($226,394,000) ($273,881,000) Overall solvency ratio of the Pension Plan 86.5% 82.4% Degree of solvency (per Art. 127 of SPPA) 80.8% 74.8% Degree of Solvency: ratio of total solvency assets to total solvency liabilities excluding balances for members who would not have been entitled to any benefits under the Defined Benefit Minimum Provision of the Plan.

34 34 Going Concern Valuation Assumes the Plan will continue indefinitely. Determines current & past service costs. Results December 31, 2015 December 31, 2012 Market Value of Assets $1,447,567,000 $1,281,942,000 Actuarial Liabilities $1,525,574,000 $1,379,148,000 Funding Excess (unfunded liability) ($78,007,000) ($97,206,000) Funded Ratio 94.9% 93.0%

35 35 Funding Requirements until the Next Valuation Year 2016 Year 2017 Year 2018 Current service contributions in respect of the DBM $4,588,100 $4,725,700 $4,867,500 Contributions to amortize going concern deficit $7,700,400 $7,700,400 $7,700,400 Total DBM $12,288,500 $12,426,100 $12,567,900 Degree of Solvency Top Up $18,372,344 $5,317,966 1 Part A Member Cost Sharing 2.2% (retained in DC) 1 Amounts to April 13, 2017 $5,945,316 $1,799,270 1

36 36 Pensioner Fund Composition as at December 31, 2016 OLD POOL (prior to January 1, 2000) NEW POOL (from January 1, 2000) Number of Members Average Age 86.1 years 74.9 years Deaths in members 7 members

37 37 Pensioner Fund Annuity Dividend Pensioner Fund remains in a deficit position Likelihood of future annuity dividend increases remains low

38 Group Retirement Savings Plan (GRSP) Group Life Income Fund (GLIF) 38

39 39