McGill University Pension PlanMcGill University Pension Plan Annual Meeting of Pension Plan Members...

transcript

McGill University Pension PlanAnnual Meeting of Pension Plan MembersMay 4th, 2012

Welcome

Pension Administration Committee (Plan Trustees)

• Ms. Lynne B. Gervais, Chair (Principal – appointed)• Ms. Cristiane Tinmouth (Principal ‐ appointed)• Ms. Kim Holden (Board of Governors ‐ appointed)• Mr. Warren Simpson (Board of Governors ‐ appointed – until March 31, 2012)• Mr. Michael Keenan (Board of Governors – appointed ‐ effective April 2012)• Prof. Reuven Brenner (Academic ‐ elected)• Prof. Gerald Ratzer (Academic ‐ elected)• Dr. Saul Ticktin, Vice‐Chair (Admin & Support Staff ‐ elected)• Ms. Kathleen Tobin (Admin. & Support Staff ‐ elected) • Mr. Étienne Brodeur (Independent Member – appointed)

Pension Investment Committee(as at December 31, 2011)

• Mr. Mark Smith, Chair • Professor Reuven Brenner (PAC)• Mr. Stephen Cotsman• Ms. Lynne B. Gervais (Chair of PAC)• Ms. Maureen Farrow• Mr. Russell Hiscock• Ms. Kim Holden (PAC)• Mr. Scott Taylor

Comments from the Chair

Ms. Lynne B. Gervais

Procedures for the Meeting

Pension Plan StructurePension Administration Committee (PAC)

• Plan Trustees – acts in a fiduciary capacity• Plan Administrators

Pension Investment Committee (PIC) – previously referred to as the Pension Investment Board

• Develops detailed investment policies, recommends strategy

University• Plan sponsor• Funds ongoing contributions• Puts forward plan amendments for Board approval.

Pension Plan Structure (continued) Staff

• Administers daily administrative & investment operations.

Pension Administration:

• Delegated responsibility for administrative functions

• Deliver plan communications and educational services

• Provide recordkeeping and day‐to‐day administration of the Plan

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• Calculates monthly unit values • Prepares annual financial statements

Voting Procedures/Election Results

Voting Procedures Results: • FOR/AGAINST Continuance• 9658 total eligible voting population

Voting Results FOR/AGAINST Continuance

Results ‐ in Numbers Results ‐ %

FOR CONTINUANCEAGAINST

CONTINUANCE FOR CONTINUANCEAGAINST

CONTINUANCETotal of Voting Members: 1312 539 70.88% 29.12%

Percentage of Total Members Voting: 19.16%

AcclamationAcademic Staff Representative

Professor Reuven Brenner

Register of Conflicts of Interest

Plan Amendments

Effective January 1, 2012• University contributions cease at the month‐end of a member’s Normal Retirement Date (NRD –age 65)

• Stipends limited to defined contribution component only

Plan Amendments (continued)

Effective January 1, 2013 • Increase to employee required contributions:

Age Group Old Rate New Rate

Less than 39 5.0% 5.0%

Age 39 – 49 5.0% 7.0%

Age 50 – 65 5.0% 8.0%

Plan Amendments (continued)

Effective January 1, 2014 (Part A members only)• Subsequent to the results of actuarial valuations,

in deficit situations where additional contributions are required, Part A members will assume an equal share of the additional funding requirements

2011Administrative Activities

Mr. John D’AgataDirector – HR

Pension Administration & Benefits

Administrative Changes/Update2011 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:

www.mcgill.ca/pensions/infosessions/registration• French session being planned for June 7 (main

campus) and June 15 (Macdonald campus)

Administrative Changes/UpdateSearch for new recordkeeping platform:

• Increased web access for members (including calculators and projection tools)

• More frequent valuations• Greater flexibility with investment allocations

Group Annuity & Group LIF Arrangement with Sunlife:• Non‐commissioned annuities• Low management fees for LIFs

*sample of fund lineup

INVESTMENT FUND/PROGRAM MCGILL RATE – LIF/RRIF

BlackRock EAFE Equity Index 0.40%

BlackRock Moderate Balanced Index 0.35%

BlackRock S&P/TSX Composite Index 0.35%

BlackRock Universe Bond Index 0.35%

BlackRock US Equity Index 0.35%

Jarislowsky Fraser Canadian Equity 0.40%

McLean Budden Balanced Growth 0.40%

McLean Budden Global Equity 0.65%

Sun Life Financial Money Market 0.15%

Sunlife Life Income Fund Options

2011 Settlements

1 Includes transfers to RRSPs and RIFs

Number Total AmountTransfers to LIRAs: 147 $41,297,709Lump‐Sum Payments: 88 $2,994,690Transfers to LIFs: 75 $38,664,540Annuity Purchases (external): 15 $4,345,587Transfers to Other Pension Plans: 21 $1,899,499Other1: 10 $191,608Death Benefit Payments: 7 $1,367,442Marriage Breakdown Settlements: 3 $1,362,491

Pensioner Fund – Compositionas at December 31, 2011

OLD POOL(prior to Jan 1, 2000)

NEW POOL(from Jan 1, 2000)

No. of Members 880 468

Average Age 82.0 years 69.4 years

Deaths in 2011 52 5

Pensioner Fund – Annuity Dividend

Likelihood of future annuity dividend increases is low;

Provision for adverse deviations

Triennial Actuarial Valuationas at December 31, 2009

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.

Triennial Valuation – Solvency Basis

Results December 31, 2006 December 31, 2009

Market Value of Assets $1,316,539,000 $1,233,297,000

Solvency Liabilities $1,327,597,000 $1,348,138,000

Solvency Surplus (Deficit) ($11,058,000) ($114,841,000)

Overall solvency ratio of the MUPP 99.2% 91.5%

Degree of Solvency (per Art. 127 of SPPA) 97.0% 84.0%

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.

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 )

Triennial Valuation – Going‐Concern Basis

Total Surplus/(Deficit)

• Pensioners Segment

• DB Minimum Segment

Total Surplus/(Deficit)

$16,896,000

$16,701,000

$33,597,000

($37,589,000)

($8,724,000)

($46,313,000)

Triennial Valuation ‐ Current Service Cost(Going‐Concern Basis)

The total University current service cost is the sum of the contributions in respect of the DC portion of the MUPP

Members $13,550,000 $14,703,000

University $24,386,000 $27,769,100

Total (in $) $37,936,000 $42,472,100

University (as a % of covered payroll) 7.04% 7.35%

Year 2010 Year 2011 Year 2012

University current service contributions in respect of the DBM $1,549,100 $1,599,400 $1,651,400Minimum University contributions to amortize going‐concern deficit1 $937,000 $937,000 $4,684,800Minimum University contributions to amortize the solvency deficiency2 Nil Nil NilTotal DBM provisions $2,486,100 $2,536,400 $6,336,200

Funding required to maintain 100% payout for those in DBM (to April 30, 2012): $956,898 $2,064,453 $689,693

Funding Requirements until Next Valuation

1 With respect to the going-concern unfunded liability, the University has given instructions to the PAC to take advantage of the temporary funding relief measure available for the years 2010 and 2011, under which the past service payments required to amortize the unfunded liability could be set for those two years at a level corresponding to 20% of the past service payments that would have been required under the regular provisions of the applicable legislation.

2 The University is exempted from making special contributions to amortize solvency deficiencies.

2011 Performance Review

Mr. Dave BrochetDirector ‐ InvestmentsOffice of Investments

Office of InvestmentsSenior Management

Dave Brochet, CFA Director, Investments

Robert Hall, CA, CFA Senior Manager

Guillaume Gosselin, CFA Senior Manager, Investments

Compliance & Reporting

2011 Market Overview• Numerous pitfalls for investors: Japanese tsunami, the Arab spring,

US downgrade, European debt crisis, etc.

• Deterioration of US economic data in the 2nd half of 2011

• The European Central Bank calmed market anxiety by making inexpensive financing available to banks

• Corporate profits exhibited resiliency

• Fixed income and income‐oriented investments benefited from risk aversion in 2011

Main Index Returns in 2011

• The majority of equity indices around the world finished 2011 in negative territory, with the exception of the U.S.

• Fixed income indices made large gains which generated an 18% difference between the Canadian equity and fixed income indices.

• The Canadian dollar depreciated 2.31% relative to the US dollar

-9.7%-11.5%

-11.7%

-16.5%

S&P/TSX S&P 500 MSCIWorld

MSCIEAFE

MSCIPacific

MSCIEurope

DEXUniverse

$ CAD In local currencies

Source: CIBC Mellon and Bloomberg

Changes to Portfolio Implemented in 2011

• Managers Terminated: TDAM Enhanced Equity, LSV, Capital International, Addenda

• New Allocations: Pyramis (Canadian Equity), Canso (Corporate Bonds) and MSCI Emerging Market Equity ETF

• William Blair mandate was transitioned to: International Growth Strategy, which includes investment in Emerging Markets

• Allocation to Absolute Return Strategies in consultation with Cambridge Associates

Balanced Account – Asset Allocation Policyas at December 31, 2011

• Balanced Account ended 2011 very close to policy

Asset Class Actual Balanced Account (%) Policy (%)

Equity Allocation 61.0% 60%Fixed Income Allocation 39.0% 40%Balanced Account 100% 100%

Balanced Account Performance as at December 31, 2011

Asset Class 1 year 3 years 5 years 10 years

Balanced Account: 1.9% 9.2% 2.4% 6.1%Benchmark: 0.9% 10.1% 2.1% 5.7%

Annualized Rates of Return

Balanced Account Performance as at December 31, 2011

Asset Class 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Bal. Account: -4.2% 16.5% 11.8% 14.8% 13.2% 1.4% -14.9% 14.2% 12.0% 1.9%Benchmark: -7.2% 16.5% 11.4% 14.4% 13.6% 2.3% -18.5% 18.5% 11.3% 0.9%

Asset Class 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

S&P/TSX: -12.4% 26.7% 14.5% 24.1% 17.3% 9.8% -33.0% 35.1% 17.6% -8.7%S&P 500: 22.9% 5.3% 2.8% 2.3% 15.4% -10.5% -21.2% 7.4% 9.1% 4.6%DEX Bond: 8.73% 6.69% 7.15% 6.46% 4.06% 3.68% 6.41% 5.41% 6.74% 9.67%

Calendar Year Returns

Returns are reported in Canadian dollars and are gross of fees.

Performanceas at December 31, 2011

(All returns are in Canadian dollars)

Equity Pool -2.5% -4.8% 2.3%Fixed Income Pool 8.9% 9.7% -0.8%SRI Pool -1.7% -1.0% -0.7%Money Market Pool 0.9% 0.9% 0.0%

ReturnBenchmark Return

Value Added

Manager Performance as at December 31, 2011

Amount

Manager (C$ millions) 1 year 3 years 5 years

Canadian Equity Managers:

Jarislowsky Fraser: 48.6 -6.8 % 9.4 % 1.3 %Pyramis Global Advisors: 34.9 n/a n/a n/aS&P/TSX 60 (SSGA): 93.1 -9.1 % n/a n/aVan Berkom & Associates: 46.2 1.3 % 23.1 % 6.7 %

Total Canadian Equity: 222.8 -7.4 % 11.6 % 1.7 %Benchmark S&P/TSX Composite Index: -8.7 % 13.2 % 1.3 %

Amount

US Equity Managers:

LSV Asset Management Large Cap: 16.2 -1.1 % 15.6 % -1.2 %S&P 500 Index (SSGA): 102.4 4.7 % n/a n/a

Total US Equity: 118.6 3.7 % 9.3 % -2.7 %Benchmark S&P 1500 Index: 4.3 % 7.5 % -2.5 %

Manager Performanceas at December 31, 2011

Amount

Non-North American Equity Managers:

William Blair & Company: 30.8 -10.7 % 3.4 % -6.5 %Hexavest: 36.2 n/a n/a n/aBenchmark MSCI EAFE Index: -9.6 % 1.4 % -6.8 %

Emerging Markets Equity Managers:

Aberdeen Asset Management Ltd.: 49.9 -7.7 % 20.5 % n/aMSCI Emerging Markets ETF: 3.9 n/a n/a n/aBenchmark MCSI EM Index: -16.1 % 13.8 % n/a

Total Non-North American Equity: 120.8 -12.2 % 4.8 % -4.6 %

Amount

Real Estate Portfolio: 39.9 16.7 % 4.7 % -2.3 %Benchmark REALpac/IPD Property Index: 15.9 % 4.9 % 2.6 %

Private Equity Portfolio: 43.9 18.9 % 1.4 % -1.1 %Benchmark (2/3 S&P 500 + 1/3 MSCI Europe): 5.3 % 10.4 % -0.2 %

Absolute Return Strategies 29.2 n/a n/a n/aBenchmark Candian T-Bill + 5%: n/a n/a n/a

Total Alternative Assets 113.0 17.9 % 4.1 % -1.6 %

Manager Performances as at December 31, 2011

Amount

Bond Managers:

TD Asset Management - Bonds: 137.6 9.7 % 7.0 % 6.2 %PH&N – Short-Term: 85.1 4.2 % 5.1 % 5.2 %Canso Investment Counsel: 41.8 n/a n/a n/aBenchmark DEX Universe Bond Index: 9.7 % 7.3 % 6.4 %

PH&N – Real-Return: 79.4 17.1 % 13.4 % 8.4 %Benchmark Dex Real Return Bond: 18.3 % 14.6 % 9.0 %PH&N – High-Yield: 26.7 5.8 % 11.7 % 8.3 %Benchmark ML Global High Yield Index: 3.4 % 20.1 % 3.4 %

Total Fixed Income: 370.6 8.9 % 8.3 % 5.9 %

Pensioner Fund – Asset Allocation

% of Total

Asset Class Fund Policy (%)Equity 21.9 23.0Real Estate and Mortgages 19.4 42.0Fixed Income 42.9 30.0Other 15.8 5.0Total Pensioner Fund 100.0 100.0

Pensioner Fund Performanceas at December 31, 2011

Asset Class 1 year 3 years 5 years

Canadian Equity: -1.6% 14.4% -0.2%Benchmark S&P/TSX Composite Index: -8.7% 13.2% 1.3%

Real Estate Portfolio: 17.3% 5.4% 7.8%ICREIM/IPD Benchmark: 15.9% 4.9% 9.0%

Fixed Income*: 8.9% 8.3% 5.9%Benchmark DEX Universe Bond Index: 9.7% 7.3% 6.4%

Mortgage Portfolio: 2.1% 2.4% 4.7%Benchmark DEX Mortgages – 3 Year: 5.0% 6.6% 6.9%

TOTAL PENSIONER FUND: 6.40% 7.00% 3.80%Return Objective: 6.25% 6.25% 6.25%

* Returns represent Fixed Income Pool returns for 2011

Fees as a Percentage of Average Net Assets

ACCUMULATION FUND 2011 2010Balanced Account 0.53% 0.54%Equity Pool 0.65% 0.68%Fixed Income Pool 0.32% 0.30%Socially Responsible Investment Pool 0.94% 0.94%Money Market Pool 0.26% 0.26%

PENSIONER FUND 0.55% 0.55%

Canadian Pension Plan Returns

• Compares McGill performance to other Canadian pension plans in the custodian’s universe (CIBC Mellon).

• The universe consists of 82 members, with an median size of $1.4 billion.

Canadian University ReturnsMcGill vs. 11 Canadian Universities

47Source: CIBC Mellon

1 year 3 years 5 years 10 years

Maximum 4.48 11.11 4.35 5.9225th Percentile 2.84 10.23 2.40 5.77Median 0.75 8.93 1.70 5.2975th Percentile -0.69 8.00 1.01 4.36Minimum -1.22 7.59 0.11 3.8

McGill Bal. Acct. 1.94 9.23 2.38 6.11Quartile Ranking 2 2 2 1

2012 Market Environment• Improving US job market and enhanced access to credit are lifting consumer confidence but downside risks remain:– Continued housing weakness;– Higher gasoline prices;– Tax increases and spending cuts likely to take effect after the elections

• Powerful headwinds from China: Uncertainty concerning market data

• Europe: Spain is facing the perfect storm

How can the MUPP generate a better return while simultaneously de‐risking the portfolio?

• Higher dividend yields• Absolute return strategies • Adding corporate credit• Insurance against risk through purchases of gold investments

• Infrastructure• Low volatility products• Liability Driven Investing

?Questions/Comments

McGill University Pension PlanMcGill University Pension Plan Annual Meeting of Pension Plan Members...

Documents