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2 T A B L E O F C O N T E N T S Our Vision Dean s Message Board Chair s Message Director s Message Our Research Program Research Completed / In Progress 2009/ New Research Funding ICPM Professorship in Pension Management Rotman International Journal of Pension Management Our Research Partners Discussion Forums Discussion Forum Participants Financial Statement Board of Directors / Research Committee O U R V I S I O N The vision of Rotman International Centre for Pension Management (ICPM) is to be catalyst for improving the management of pensions around the world. a recognized global Through its research funding, discussion forums, and publications, the Centre produces a steady stream of innovative insights into optimal pension system design and the effective management of pension and investment organizations. Using Integrative Investment Theory as its guide, research and discussion topics focus on agency costs, governance and organization design, investment beliefs, risk measurement and management, and strategy implementation. Through these activities, we also create opportunities to raise pensions-related content in regular and executive courses at the Rotman School of Management and other education-oriented institutions and forums around the world. D E A N S M E S S A G E The Rotman School s global reputation for thought leadership and knowledge creation continues to grow. This past January, our faculty s research was ranked 11th in the world by the Financial Times tied with INSEAD and NYU and ahead of MIT and Columbia University. The Rotman International Centre for Pension Management typifies the world-class research being done at the School. I C P M s focus on strengthening pension fund governance through organizational design reflects the Rotman School s dedication to building new models for business through Integrative Thinking TM. Just five years since its inception, ICPM has garnered a global reputation as a source of expertise in this key area of the economy. 2 ROGER MARTIN Dean and Professor of Strategic Management, Rotman School of Management, University of Toronto In these challenging times, ICPM s work is more relevant than ever, and last year s launch of the Rotman International Journal of Pension Management is enabling the Centre to expand its reach and influence. In addition, I C P M continues to create new opportunities to increase pension-related content in regular and executive education courses at Rotman, helping us train tomorrow s leaders to employ Integrative Thinking to shape their world for the better. The Rotman community is extremely proud to serve as the home base for this world-class source of thought leadership, and we look forward to another year of innovation and excellence for ICPM.

3 B O A R D C H A I R S M E S S A G E In the past year, the Board of Directors took a number of important steps towards strengthening I C P M s governance foundation and expanding its overall breadth of capabilities. Late in 2009, the Board formally adopted a set of governance practices that codify, among other things, the responsibilities of the Board and Research Committee, Board member and Research Partner criteria and selection process, planning, budgeting and expense management. DONALD M. RAYMOND Chair of the Board Rotman International Centre for Pension Management, Rotman School of Management, University of Toronto With funding provided by the four Toronto-based Research Partners, CPPIB, HOOPP, OMERS, OTPP, as well as by ICPM itself, Prof. Alexander Dyck was appointed the inaugural ICPM Professor of Pension Management, based at the Rotman School of Management. As a result, Prof. Dyck has stepped down from the Board and is now an ex-officio member of the Research Committee. He will also conduct research in various aspects of pension and investment management, and will add pension related content to the MBA, Executive MBA, and Master of Finance programs at Rotman. On a related note, we would like to welcome new ICPM Board members Prof. Glen Whyte, who takes over from Alexander Dyck as the Rotman representative, Else Bos (PGGM, Netherlands) and Ole Beier Sørensen (ATP, Denmark) as well as the new chair of the Research Committee, Stefan Lundbergh (APG, Netherlands). We thank them for their willingness to serve and look forward to working together in the future. In closing, I would like to draw your attention to some recent recognition ICPM received from the Toronto Financial Services Alliance (TFSA), which represents business, academia, and all three levels of government. In their November 2009 Report for the TFSA, the Boston Consulting Group identified priorities to strengthen and promote the areas where there is existing or potential competitive advantage and legitimate claim to a global leadership position in financial services. In relation to becoming a leader in retirement financing solutions, the report stated that Toronto should continue to be developed as the leading centre of pension management expertise worldwide, particularly through continued support of the Rotman School of Management's International Centre for Pension Management. We couldn t agree more! D I R E C T O R S M E S S A G E In its five years of operation, ICPM has consciously built a knowledge pipeline that moves pension and investment research findings from discovery to practical implementation. A fresh I C P M invitation to submit research proposals is meeting with a strong response from the global pension and investment research community. The I C P M Research Committee, chaired by Stefan Lundbergh (APG, Netherlands), is currently in the process of evaluating these proposals and funding those that meet our demanding criteria. Case Studies have also become an important ICPM learning tool. The inaugural discussion and debate on our fourth Case Study (on managing climate change risk) will take place in Copenhagen in October. KEITH AMBACHTSHEER Director, Rotman International Centre for Pension Management, and Adjunct Professor of Finance, Rotman School of Management, University of Toronto ICPM Discussion Forums make up another critical part of the pipeline. These Forums now cover 2 ½ days, starting with a series of informal networking events on Monday afternoon/evening, followed by two full days of intense, interactive sessions involving a mix of invited outside experts and delegates from twenty-five I C P M Research Partner organizations. The June session is held at the Rotman School in Toronto, and the October session is co-hosted by one of our international ICPM Research Partners and a local university somewhere else in the world. For example, we were in Melbourne last October, and will be in Copenhagen this coming October. A third part of the pipeline is the Rotman International Journal of Pension Management. With publication of the Spring 2010 edition, the total article count for the Journal since its inception in Fall 2008 now stands at thirty-seven. So ICPM, its Research Partners, and the Journal s outstanding editorial Advisory Board can take credit for being the catalyst to the creation of a substantive, wide-ranging international body of knowledge on the management of pension and investment organizations. With a fresh batch of on topic manuscripts working its way through the editorial process, that body of knowledge will continue to grow steadily in the years ahead. My colleague Ann Henhoeffer and I look forward to working with you to strengthen the ICPM knowledge pipeline even further in the year ahead. 3

4 Back row: Paul Halpern, Rotman School (Canada) Middle row: Else Bos, PGGM (Netherlands); Rob Prugue, Lazard Asset Management (Australia); John Crocker, Healthcare of Ontario Pension Plan (Canada) Front row: James Leech, Ontario Teachers Pension Plan (Canada); Jeroen Tielman PensionSummit (Netherlands); John Grace, Office of the Superintendent of Financial Institutions (Canada); David Blitzstein, United Food & Commercial Workers International Union (United States); Grant Howell, Alberta Local Authorities Pension Plan (Canada) O U R R E S E A R C H P R O G R A M The Rotman International Centre for Pension Management (ICPM) is a research centre based at the Rotman School of Management, University of Toronto. The Centre is supported by an international consortium of twenty-five major pension organizations. ICPM s vision is to be a recognized catalyst for improving the management of pension systems and organizations around the world. This vision is achieved through funding relevant research projects, organizing discussion forums, and publishing the Rotman International Journal of Pension Management. ICPM Research Partners are interested in both macro and micro perspectives. Relevant macro issues include optimal pension system design, regulation, and collaboration. Micro issues include agency costs, governance and organization design, investment beliefs, risk measurement and management, and strategy implementation. Research findings are shared at Discussion Forums and communicated to the global pension community through the Journal. Scott Donald, Australia Super System Review utoronto.ca/icpm 4

5 R E S E A R C H C O M P L E T E D / I N P R O G R E S S / Pension Fund Per formance and Risk-Taking Under Decentralized Investment Management completed July 2009 Project Lead David Blake, CASS Business School (United Kingdom) Co-author Allan Timmermann, University of California, San Diego (United States) Co-author Ian Tonks, University of Exeter (United Kingdom) Co-author Russ Wermers, University of Maryland (United States) The paper will be presented at the ICPM June 2010 Discussion Forum. A future article is planned for the Rotman International Journal of Pension Management. Why Have US Firms Abandoned Traditional DB Pension Plans? completed March 2010 Project Lead Irina Stefanescu, Indiana University (United States) Co-author Joshua Rauh, Northwestern University, NBER (United States) Tore Hayward New Zealand Superfund Research findings were presented at the ICPM June 2009 Discussion Forum. An article based on the findings was published in the Fall 2009 issue of the Rotman International Journal of Pension Management. Pension Plan Design and Individual Welfare in progress Project Lead Eduard Ponds, APG, and Tilburg University (Netherlands) Co-author Jiajia Cui, Tilburg University (Netherlands) Research findings will be presented at the ICPM June 2010 Discussion Forum. A future article is planned for the Rotman International Journal of Pension Management. Investment Beliefs that Matter: New Insights in the Value- Drivers of Pension Funds Project Lead Kees Koedijk, Tilburg University (Netherlands) Co-author Alfred Slager, Tilburg University, and Pensioenfonds Stork (Netherlands) Co-author Rob Bauer, Maastricht University (Netherlands) Rob Bauer, Maastricht University (Netherlands). Research findings will be presented at the ICPM June 2010 Discussion Forum. A future article is planned for the Rotman International Journal of Pension Management. Is Bigger Really Better? Fund Size, Asset Allocation and Per formance in progress Project Lead Alexander Dyck, Rotman School of Management (Canada) Co-author Lukasz Pomorski, Rotman School of Management (Canada) Research findings will be presented at the ICPM June 2010 Discussion Forum. A future article is planned for the Rotman International Journal of Pension Management. 5

6 N E W R E S E A R C H F U N D I N G Stefan Lundbergh, APG All Pensions Group (Netherlands) ICPM issued its third Call for Research Funding Proposals in February The Research Committee assessed forty-two submissions of interest from researchers from around the world. The Committee has invited eighteen of these researchers to prepare detailed proposals. Topics range from the optimal structure of the pension industry, to measuring risk perceptions and realities, to investing in infrastructure. These eighteen submission are now in the process of being reviewed, with the successful ones receiving funding later this year. Research findings will be presented at future Discussion Forums and short versions of the resulting papers may be published in the Rotman International Journal of Pension Management. All research papers accepted by the Research Committee will be posted on the ICPM website. I C P M P R O F E S S O R S H I P I N P E N S I O N M A N A G E M E N T Four of Canada s leading pension funds and ICPM have established the ICPM Professorship in Pension Management at the Rotman School. Prof. Alexander Dyck will undertake research in various aspects of pension Management, including governance, organization design, and the drivers of organizational performance. An additional goal is to add pension-related content into the MBA, Executive MBA, and Master of Finance programs at the Rotman School. The professorship was established with the generous support of: Canada Pension Plan Investment Board Ontario Teachers Pension Plan Healthcare of Ontario Pension Plan Rotman International Centre for Pension Management Ontario Municipal Employees Retirement System Prof. Alexander Dyck T H E R O T M A N I N T E R N A T I O N A L J O U R N A L O F P E N S I O N M A N A G E M E N T Fall 2008 Effective Pension Governance: New Insights and Research Findings nine articles Spring 2009 Investment Beliefs, Risk Management, and Pension Funds nine articles Fall 2009 New Insights into Pension Management, Design, and Shareowner Stewardship nine articles Spring 2010 Pension Institutions in the 21st Century: Structure, Governance, and Stakeholder Relations ten articles utoronto.ca/icpm 6 The editorial stance of the Journal is part of a conscious ICPM strategy to share its research and discussion forum findings with a larger global audience. To this end, we have made arrangements for the electronic version of the Journal to be widely distributed via pension associations around the world, at no charge. It is also made available to the media and the international academic community through the University of Toronto Press and through the Social Science Research Network A bound printed copy can be purchased for C$50 per copy. icpm@rotman.utoronto.ca. To request a print or online copy please contact

7 O U R R E S E A R C H P A R T N E R S Our Research Partners play a vital role in establishing I C P M research priorities, identifying top research talent, and in assembling I C P M Discussion Forum agendas. They have preferred access to I C P M-sponsored research findings, opportunities for knowledgesharing and network-building, and receive preferred invitations to I C P M Discussion Forums. Through these activities, our Research Partners have the satisfaction of participating in building a leading Centre that converts integrative research into effective pension fund management. This will benefit their stakeholders directly, and at the same time improve the quality of retirement income systems around the world. ICPM has a goal to work with about twenty-five thought-leading Research Partners from around the globe on a long-term basis. Each Research Partner makes a financial commitment of C$25,000 to further pension research as well as to fund the organization and execution of the Discussion Forums. These commitments are renewed annually at the option of each organization. New Research Partners may be approved at the discretion of the Board of Directors / R E S E A R C H P A R T N E R O R G A N I Z A T I O N S A u s t r a l i a Australian Superannuation Australia Future Fund Australian Prudential Regulation Authority (APRA) SunSuper UniSuper Management Victorian Funds Management Corp (VFMC) C a n a d a Alberta Local Authorities Pension Plan (ALAPP) Alberta Investment Management Corp (AIMCo) Canada Pension Plan Investment Board (CPPIB) Caisse de dépôt et placement du Québec Healthcare of Ontario Pension Plan (HOOPP) Ontario Municipal Employees Retirement System (OMERS) Ontario Teachers Pension Plan Board (OTPP) D e n m a r k Danish Labour Supplementary Pension (ATP) T h e N e t h e r l a n d s All Pensions Group (APG) De Nederlandsche Bank (DNB) Mn Services PGGM Syntrus Achmea Asset Management N e w Z e a l a n d New Zealand Superannuation Fund S w e d e n The Second Swedish Pension Fund (AP2) U n i t e d K i n g d o m Universities Superannuation Scheme (USS) U n i t e d S t a t e s TIAA-CREF Washington State Investment Board J a p a n Nomura Research Institute 7

8 D I S C U S S I O N F O R U M S Geraldine Pace, University of Sydney (Australia) Joshua Rauh, Northwestern University (United States) ICPM sponsors two Discussion Forums annually in June in Toronto and in October at a Research Partner location somewhere else in the world. These highly interactive events provide access to ICPM-sponsored research findings, as well as opportunities for knowledgesharing and network-building with like-minded Research Partners and pension industry leaders from around the world. The two 2009 Discussion Forums were both compelling and productive. There were two themes for the June 2009 Forum held in Toronto: Financial System Reform, and Pension Reform. Both Presentations, academic topics produced excellent presentations and follow-up discussions. The October Forum took place working papers, and case at the Melbourne Business School in Australia. Again, there were two themes: Pension Things studies that are presented that Australia and New Zealand Can Teach the World and Vice Versa, and How the Financial Crisis is Impacting Pension Fund Management. Once again, excellent presentations during our Discussion were followed by animated, intense discussions. Forums are publicly available at no charge The agenda for the June 2010 Discussion Forum, to be held June 7-9 in Toronto, is completed. We kick things off on June 7 with a series of informal networking meetings. June 8 is fully devoted to new on the ICPM website. research findings on pension design and investment management. June 9 will take a hard look at the shareowner stewardship question. The agenda for the October 2010 Discussion Forum, to be held October in Copenhagen, is still under construction. Risk management will be an important focus and will also feature debate and discussion on our fourth Case Study. Managing climate change risk is the focus of our new Case Study and is being written by Prof. Rob Bauer of Maastricht University. ICPM also collaborated on events sponsored by the World Bank and OECD last year. World Bank Treasury sponsored a conference on the governance of various types of national reserve funds in developing economies. OECD, together with IOPS (International Organization of Pension Supervisors), sponsored a conference on pension supervision and risk management for a group of pension utoronto.ca/icpm 8 supervisors and other officials from around the world. In both cases, ICPM was invited to participate in structuring the agendas and in providing specialized best practices expertise. A number of I C P M Research Partners participated in these events.

9 D I S C U S S I O N F O R U M P A R T I C I P A N T S A U S T R A L I A ASFA Ross Clare Australia Future Fund Paul Costello David Neal Australia Super System Review Pedro Café Jeremy Cooper Scott Donald Peggy Haines Brad Tallents Sophie Trumble Australian Prudential Regulation Authority (APRA) Katrina Ellis Julian Marks Maria Napolitano Irene Shiu Wilson Sy Ramani Venkatramani Gordon Walker AustralianSuper Allistair Barker Cathy Bowtell Mark Delaney Centre for Investor Education Melda Donnelly Frank Gullone Department of Innovation, Industry and Regional Development Xavier Csar Hugh Moor Ian Woods Ernst & Young Josef Pilger Lazard Asset Management Pacific Co Rob Prugue Melbourne Centre for Financial Studies (MCFS) Syd Bone Kevin Davis David Michell Deborah Ralston Mercer (Australia) Ltd David Knox Monash University Michael Skully Madhu Veeraraghavan QSuper John Carpendale Helen Davis Brad Holzberger RMIT University Richard Heaney SunSuper Peter Annand John Battams Graham Drummond David Hartley Graham Heilbronn Tony Lally Bill Ludwig Sydney University of Technology Jack Gray The Australia Institute Josh Fear UniSuper Management Robert Lu Paul Murphy Dennis Sams David Schneider University of Melbourne Matt Pinnuck Zhen Shi University of Sydney Geraldine Pace Victorian Funds Management Corporation (VFMC) Malcolm Ashbolt Andrew Elliott Justin Pascoe C A N A D A Alberta Investment Management Corp. (AIMCO) Leo de Bever Alberta Local Authorities Pension Plan Corp Grant Howell Ron Liteplo Meryl Whittaker Bank of Canada George Pickering Basel Accord Implementation Group Nick Le Pan BIMCOR Inc. Paul Gauthier British Columbia Investment Management Corp (BCIMC) Douglas Pearce Chris Lawless C.D. Howe Institute William Robson Caisse de dépôt et placement du Québec Richard Guay Hélène Jacques CEM Benchmarking Chris Flynn Mike Heale Terrie Miller CN Investment Division Russell Hiscock CPP Investment Board David Denison John Ilkiw Steven James Don Raymond Healthcare of Ontario Pension Plan (HOOPP) John Crocker Victoria Hubbell Jim Keohane Barbara Thomson Institute of Corporate Directors Beverly Topping Mercer (Canada) Ltd Jane Ambachtsheer Office of the Superintendent of Financial Institutions (OSFI) John Grace Ontario Ministry of Finance Alex Mazer Ontario Municipal Employees Retirement System (OMERS) Blair Cowper-Smith Patrick Crowley Andrew Fung Philip Haggerty John Macdonald Michael Nobrega Graham Pugh Ontario Teachers Pension Plan (OTPP) James Davis Jim Leech Barbara Zvan Rotman ICPM Keith Ambachtsheer Ann Henhoeffer Rotman School of Management Alexander Dyck Paul Halpern Lukasz Pomorski York University Edward Waitzer Cynthia Williams D E N M A R K Danish Labour Market Supplementary Pension (ATP) Ole Beier Sørensen Chresten Dengsoe J A PA N Nomura Research Institute Sadayuki Horie N E T H E R L A N D S All Pensions Group (APG) Stefan Lundbergh Roderick Munsters Edwina Neal Menno Snel Tom Steenkamp Cardano Risk Management Bart Oldenkamp Cordares Alwin Oerlemans De Nederlandsche Bank Sybille Grob Maastricht University Rob Bauer Mn Services Harry Corbijn van Willenswaard Pensioenfonds Stork Alfred Slager PensionSummit Jeroen Tielman PGGM Else Bos Gert-Jan Sikking Syntrus Achmea Asset Management Kees de Vaan N E W Z E A L A N D New Zealand Retirement Commission David Feslier New Zealand Super Fund Tore Hayward David Iverson S W E D E N Third Swedish National Pension Fund (AP3) Erik Valtonen U N I T E D K I N G D O M Personal Accounts Delivery Authority (PADA) Tim Jones Universities Superannuation Scheme Limited (USS) David Russell U N I T E D S TAT E S CalPERS Joe Dear ExxonMobil Colin Kerwin Indiana University Irina Stefanescu Millstein Center for Corporate Governance and Performance (Yale) Stephen Davis The New School Teresa Ghilarducci Northwestern University Joshua Rauh TIAA-CREF Investment Management Brett Hammond Erwin Martens United Food & Commercial Workers Int l Union David Blitzstein Washington State Investment Board Stephen Lerch Theresa Whitmarsh 9

10 F I N A N C I A L S T A T E M E N T ( a l l i n C a n a d i a n D o l l a r s ) O P E R AT I N G R E V E N U E F O R F I S C A L / Research Partner Fees $ 600,000 Rotman International Journal for Pension Management 6,378 Other Revenue 16,925 $ 623,303 O P E R AT I N G E X P E N D I T U R E S F O R F I S C A L / Director Compensation/Travel $ 107,133 Planning and Operations Support 94,870 Rent and Utilities 37,351 Events: June 2009 ICPM Discussion Forum 31,178 October 2009 ICPM Discussion Forum 60,632 Outreach Networking Events (World Bank and OECD Conferences) 9,914 Board Meetings 2,166 Research: Research Funding 56,742 Rotman International Journal of Pension Management 47,394 ICPM Professorship in Pension Management 20,000 PR/ Marketing/ Website 4,342 Office Supplies and Services 15,481 $ 487,202 E X C E S S R E V E N U E F O R F I S C A L / $ 1 3 6, A C C U M U L AT E D E X C E S S R E V E N U E As at Beginning of the Year $ 247,209 As at End of the Year $ 383,310 utoronto.ca/icpm 10

11 B O A R D O F D I R E C T O R S F Y / The Rotman I C P M Board of Directors approves and oversees the implementation of the strategic and operating plans of the Centre. The I C P M Board is comprised of internationally recognized academic and pension industry leaders with an interest in seeing ICPM achieve its vision. The Board holds quarterly board meetings and its members attend the Discussion Forums each year. I C P M Chair, Donald Raymond, Canada Pension Plan Investment Board (Canada) Rob Bauer, School of Finance and Economics, University of Maastricht (The Netherlands) Leo de Bever, Alberta Investment Management Corp (Canada) Syd Bone, Melbourne Centre for Financial Studies (Australia) Alexander Dyck, Rotman School of Management, University of Toronto (Canada) Ron Liteplo, Alberta Local Authorities Pension Plan (Canada) Tom Steenkamp, APG Investments (The Netherlands) Theresa Whitmarsh, Washington State Investment Board (United States) Barbara Zvan, Ontario Teachers Pension Plan (Canada) Ron Liteplo and Tom Steenkamp are stepping down from the Board this year. We thank them for their service and valuable contributions to ICPM. They will be replaced on the Board by Else Bos, PGGM (Netherlands) and Ole Beier Sørensen, ATP (Denmark). With his appointment as I C P M Professor of Pension Management, Alexander Dyck will also be leaving the Board. He will become an ex-officio member of the Research Committee. Joining the Board in his place is Prof. Glen Whyte, a faculty member at the Rotman School of Management. R E S E A R C H C O M M I T T E E F Y / The ICPM Research Committee evaluates proposals resulting from the ICPM Call for Research Papers and monitors progress to completion on the research projects that received funding. The Research Committee meets twice yearly and attends the semi-annual Discussion Forums each year. The Research Committee meets twice yearly and attends the semi-annual Discussion Forums each year. Paul Halpern (I C P M Research Committee Chair) Rotman School of Management, University of Toronto (Canada) Jaap van Dam, PGGM (The Netherlands) Jack Gray, Centre for Capital Market Dysfunctionality, Sydney University of Technology (Australia) Brett Hammond, TIAA-CREF (United States) Steven James, Canada Pension Plan Investment Board (Canada) Paul Halpern has retired from the University of Toronto and stepped down as Chair of the Research Committee. We thank Paul for taking on the Chair role at ICPM s inception in His leadership role has been invaluable. Stefan Lundbergh, APG All Pensions Group (Netherlands), has been appointed the new Chair of the Research Committee. As noted above, Alexander Dyck has become an Ex-Officio Member of the Research Committee since his appointment to the ICPM Professorship. 11

12 Please contact us to learn more about Rotman I C P M Keith Ambachtsheer Director, Rotman ICPM Adjunct Professor of Finance Ann Henhoef fer Associate Director, Operations and Planning icpm@rotman.utoronto.ca Rotman International Centre for Pension Management 151 Bloor Street West, Suite 702 Toronto ON Canada M5S 1S ICPM Rotman International Centre for Pension Management Rotman School of Management, University of Toronto CANADA Photo credit: Cris Ponce / envisiondigitalphoto.com (pages 4,5,6,7,8) Annual Report: WatermarkDesign.ca Photo Credit: Tashka Lloyd (pages 4,5,6,11)