McGill University Pension Plan

Transcription

1 McGill University Pension Plan Annual Meeting of Pension Plan Members May 2 nd,

2 2 Welcome

3 Pension Administration Committee (Plan Trustees) 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) Prof. Reuven Brenner (Academic - elected) Prof. Christopher Ragan (Academic - elected) Mr. Jim McVety (Admin & Support Staff - elected) Ms. Kathleen Tobin (Admin. & Support Staff - elected) Mr. Pierre Lavigne (Independent Member appointed) 3

4 Pension Investment Committee (as at December 31, 2013) Mr. Mark Smith, Chair Professor Reuven Brenner (PAC) Mr. Stephen Cotsman Ms. Lynne B. Gervais (Chair of PAC) Mr. Russell Hiscock Ms. Kim Holden (PAC) Mr. Francois Lemarchand Mr. Scott Taylor 4

5 Chief Investment Officer Sophie Leblanc Chief Investment Officer, Ms. Leblanc provides input to senior management, the PAC and the PIC on the review and development of investment plans and objectives. More than 17 years of experience, most recently as directrice, Placements et Gestion des caisses de retraite at Bombardier, Inc. Holds a maîtrise en sciences de la gestion modélisation et décision from École des Hautes Études Commerciales and a Bachelor s in Business Administration from Université Laval. 5

6 Comments from the Chair Ms. Lynne B. Gervais 6

7 7 Procedures for the Meeting

8 Pension Plan Structure Pension Administration Committee (PAC) Plan Trustees acts in a fiduciary capacity Plan Administrators Pension Investment Committee (PIC) Develops detailed investment policies, recommends strategy University Plan sponsor Funds ongoing contributions Puts forward plan amendments for Board approval. 8

9 Pension Plan Structure (continued) Pension Administration: Delegated responsibility for administrative functions Deliver plan communications and educational services 9

10 Pension Plan Structure (continued) Office of Investments: Accountable to the PIC and the PAC Delegated responsibility for investment and financial functions Implements and monitors investment strategies Monitors investment managers Monitors fund performance Prepares annual financial statements 10

11 Voting Procedures/ Election Results Voting Procedures Results: FOR/AGAINST Continuance 9616 total eligible voting population 11

12 Voting Results FOR/AGAINST Continuance 12

13 RESULTS Administrative & Support Staff Representative 13

14 14 Register of Conflicts of Interest

15 Plan Amendments Effective January 1, 2013 Increase to employee required contributions: Age Group Old Rate New Rate Up to age % 5.0% Age % 7.0% Age % 8.0% 15

16 Plan Amendments Effective January 1, 2014 Cost sharing of funding requirements Part A members only 2.2% increase in contributions for all age groups 16

17 2013 Performance Review Mr. Robert Hall, CPA, CA, CFA Interim Director, Investments Office of Investments 17

18 Senior Management Office of Investments Sophie Leblanc, M.Sc., CFA Chief Investment Officer Robert Hall, CPA, CA, CFA Senior Manager, Compliance & Reporting Guillaume Gosselin, M.Sc., CFA, FRM Senior Manager, Investments 18

19 2013 Market Overview Interest rates increased US equity market hit an all time high Slowing of US monetary stimulus Developed countries low inflation Slowing emerging market economies 19

20 Main Index Returns in 2013 $ CAD Local 41% 32% 36% 28% 32% 24% 13% 13% 4% -2% -1% -1% S&P TSX S&P 500 MSCI World MSCI EAFE MSCI EM DEX Universe The majority of equity indices around the world were strong in 2013 The Canadian dollar depreciated 6.7% relative to the US dollar and 11.5% against the Euro. Negative returns for bonds in Source: CIBC Mellon and Bloomberg

21 Portfolio Changes Gold asset class was eliminated Philips, Hager & North s Real Return & High-Yield fixed income mandates were eliminated New active fixed income mandate was established, managed by Fiera Capital Pembroke hired for a Small Cap US Equity mandate Commitments were made to two private equity funds investing in infrastructure 21

22 Portfolio Changes New manager in the SRI Pool: PH&N (January 2014) (PH&N Community Values Balanced Fund) Improved SRI process Added benefits: Lower management fees Historically has provided better risk-adjusted returns 22

23 Portfolio Changes PH&N Community Values Balanced Fund Exclusionary screen: alcohol, gambling, military weapons, tobacco and pornography. Excluded if generated revenues are greater than 5% (producers) and 10% (sellers). Qualitative screen: community, employee relations, corporate governance, occupational health & safety, environmental performance Encourages positive social performance 23

24 Balanced Account Asset Allocation Policy as of December 31, 2013 Asset Class Balanced Account Allocation (%) Policy (%) Equity Allocation 70.5% 65.0% Fixed Income Allocation 29.5% 35.0% Balanced Account 100.0% 100.0% 24

25 Balanced Account Performance as of December 31, 2013 Asset Class Annualized Rates of Return 1 Year 3 Years 5 Years 10 Years Balanced Account 16.1% 9.6% 11.0% 7.7% Benchmark 13.2% 7.4% 10.4% 7.0% 25

26 Balanced Account Calendar Returns Calendar Year Returns (%) Balanced Account Benchmark

27 Performance as of December 31, 2013 Return Benchmark Return Value Added Equity Pool 24.1% 22.1% 2.0% Fixed Income Pool -0.5% -1.9% 1.4% SRI Pool 13.2% 13.0% 0.2% Money Market Pool 0.9% 1.0% -0.1% Returns are reported in Canadian dollars and are gross of fees. 27

28 Manager Performance as of December 31, 2013 Canadian Equity Annualized Rates of Return Amount 1 Year 3 Years 5 Years ($C million) Pyramis $ % - - Van Berkom $ % 21.4% 26.9% SSGA 60 $ % 3.6% - Total $ % 8.5% 13.9% Benchmark (S&P TSX) 13.0% 3.4% 11.9% Returns are reported in Canadian dollars and are gross of fees. 28

29 Manager Performance as of December 31, 2013 US Equity Annualized Rates of Return Amount 1 Year 3 Years 5 Years ($C million) SSGA S&P 500 $ % 19.1% - Pembroke $ Total $ % 19.1% 16.4% Benchmark (S&P 500) 41.3% 18.7% 14.8% Returns are reported in Canadian dollars and are gross of fees. 29

30 Non-North American Equity Manager Performance as of December 31, 2013 Annualized Rates of Return Amount 1 Year 3 Years 5 Years ($C million) EAFE Equity Hexavest $ % - - Benchmark (MSCI EAFE) 31.6% 11.1% 9.6% EAFE+EM Equity William Blair $ % 11.3% 11.3% Benchmark (MSCI EAFE+EM) 24.4% 8.4% 8.0% Emerging Market Equity Aberdeen $ % 4.8% 16.9% Benchmark (MSCI EM) 4.3% 0.5% 12.3% Total NNA $ % 7.0% 9.9% Benchmark (Custom NNA) 16.0% 5.2% 8.9% Returns are reported in Canadian dollars and are gross of fees. 30

31 Manager Performance as of December 31, 2013 Alternative Assets Annualized Rates of Return Amount 1 Year 3 Years 5 Years ($C million) Real Estate Portfolio $ % 17.9% 10.0% Private Equity Portfolio $ % 15.5% 6.2% Absolute Return Strategies $ % - - Total $ % 15.1% 7.8% Benchmark - Real Estate (4% + CPI) Benchmark - Private Equity (2/3 S&P /3 MSCI Europe + 3%) Benchmark (DEX 30 day T-bill + 5%) 5.2% 7.8% 5.0% 42.1% 21.5% 18.0% 6.0% - - Returns are reported in Canadian dollars and are gross of fees. 31

32 Manager Performance as of December 31, 2013 Fixed Income Annualized Rates of Return Amount 1 Year 3 Years 5 Years ($C million) Canso DEX Corporate $ % - - PH&N DEX Universe $ % - - Fiera DEX Universe $ TDAM DEX Universe $ Total $ % 4.6% 6.0% Benchmark (DEX Bond Universe) -1.9% 4.1% 6.4% Returns are reported in Canadian dollars and are gross of fees. 32

33 Pensioner Fund Asset Allocation as of December 31, 2013 Asset Class Pensioner Fund Allocation (%) Policy (%) Equity & Real Estate 46.5% 35.0% Fixed Income 50.5% 65.0% Cash & Equivalents 3.0% 0.0% Total Pensioner Fund 100.0% 100.0% 33

34 Pensioner Fund Performance as at December 31, 2013 Asset Class Annualized Rates of Return 1 Year 3 Years 5 Years 10 Years Canadian Equity 17.4% 9.1% 14.6% 7.4% Benchmark (S&P/TSX Composite Index) 13.0% 3.4% 11.9% 8.0% Real Estate 10.5% 15.9% 10.1% 11.2% Benchmark (4% +CPI ) 5.2% 7.8% 5.0% 9.7% Fixed Income* 0.4% Benchmark (DEX Universe Bond Index) -1.2% TOTAL PENSIONER FUND 6.6% 7.7% 7.5% 6.1% Return Objective 6.3% 6.3% 6.4% 6.5% * Prior to 2012, Pensioner Fund Fixed Income holdings comprised of a pro rata share in the Accumulation Fund Fixed Income Pool. 34

35 Fees as a Percentage of Average Net Assets ACCUMULATION FUND Balanced Account 0.73% 0.66% Equity Pool 0.87% 0.81% Fixed Income Pool 0.40% 0.38% SRI Pool 0.80% 0.97% Money Market Pool 0.28% 0.32% PENSIONER FUND 0.52% 0.52% 35

36 Pension Fund Universe Comparison Pension Fund Universe Percentile Rank 1 Year 3 Years 5 Years 10 Years Balanced Account Equity Pool Fixed Income Pool Compares McGill s performance to other Canadian pension plans in the custodian s universe (CIBC Mellon). There were 86 pension plans in the CIBC Mellon Universe as of December 31,

37 Canadian University Returns McGill vs. 14 Canadian Universities McGill-Balanced Account McGill-Balanced Benchmark year 2 years 3 years 4 years 5 years 7 years 10 years McGill-Balanced Account Maximum Median Percentile Minimum Source: The Bank of New York Mellon Corporation

38 2014 Market Outlook Europe is generally weak, facing possibility of deflation Improved economic outlook in the US High valuations in developed markets could impact performance going forward Emerging markets environment remains challenging 38

39 2013 Administrative Activities Mr. John D Agata Director HR Pension Administration & Benefits 39

40 Administrative Changes/Update New recordkeeping platform (Morneau Shepell): Increased web access for members Retirement Income Calculator (RIC) Account updates including defined benefit minimum Investor profile questionnaire Daily valuations Introduction of investment glide paths RRSP and LIF options 40

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51 Administrative Changes/Update 2013 and future editions of the Annual Report: For active members: default = electronic delivery (must request hardcopy in writing) For inactive members: option of receiving electronic delivery or hardcopy Information sessions continue (monthly): Dates, times & locations available on our web site: 51

52 2013 Settlements Number Total Amount Transfers to LIRAs/LIFs: 412 $118,836,932 Lump-Sum Payments: 142 $1,638,606 Other 1 : 82 $456,589 Annuity Purchases (external): 19 $4,318,177 Death Benefit Payments: 12 $1,315,343 Transfer to Other Pension Plans: 11 $891,992 1 Includes transfers to RRSPs, RIFs and Marriage Breakdown Settlements 52

53 Pensioner Fund Composition as at December 31, 2013 OLD POOL (prior to Jan 1, 2000) NEW POOL (from Jan 1, 2000) No. of Members Average Age 83.2 years 71.3 years Deaths in

54 Pensioner Fund Annuity Dividend Pensioner Fund in deficit position Likelihood of future annuity dividend increases is low 54

55 Triennial Actuarial Valuation as at December 31,

56 Triennial Valuation Solvency Basis Assumes that the Plan would have been totally terminated and benefits fully settled on the valuation date, the assumptions used are largely dictated by regulators. Results December 31, 2009 December 31, 2012 MarketValue of Assets $1,233,297,000 $1,281,942,000 Solvency Liabilities $1,348,138,000 $1,555,323,000 Solvency Surplus (Deficit) ($114,841,000) ($273,881,000) Overall solvency ratio of the MUPP 91.5% 82.4% Degree of Solvency (per Art. 127 of SPPA) 84.0% 74.8% Degree of solvency: ratio of total solvency assets to total solvency liabilities, excludes both solvency assets and solvency liabilities for defined contribution balances for members who would not have been entitled to any benefits under the defined benefit minimum provisions of the Plan. 56

57 Triennial Valuation Going-Concern Basis Assumes that the Plan will remain into effect indefinitely and is therefore based on long term actuarial assumptions and methods, used to determine the minimum funding requirements under the Plan. More liberal assumptions used in order to smooth values. (Investment return of Balanced Fund and discount rate ) Results December 31, 2009 December 31, 2012 Total Surplus/(Deficit) Pensioners Segment DB Minimum Segment Total Surplus/(Deficit) ($37,589,000) ($8,724,000) ($46,313,000) ($51,689,000) ($45,517,000) ($97,206,000) 57

58 Funding Requirements until the Next Valuation Year 2013 Year 2014 Year 2015 Current service contributions in respect of the DBM $3,605,000 $3,713,000 $3,825,000 Contributions to amortize going-concern deficit $1,879,000 $9,396,000 $9,396,000 Total DBM provisions $5,484,000 $13,109,000 $13,221,000 Funding required to maintain 100% payout for those in DBM: $5,759,624 $6,000,000 (est.) $2,064,453 1 N/A 1 to March 31,

59 Questions/Comments 59