INVESTMENT COMMITTEE UPDATE NPP BOARD OF DIRECTORS 24 January 2011 MGen Bob Bertrand, CMA DG Fin...
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Transcript of INVESTMENT COMMITTEE UPDATE NPP BOARD OF DIRECTORS 24 January 2011 MGen Bob Bertrand, CMA DG Fin...
INVESTMENT COMMITTEE INVESTMENT COMMITTEE UPDATEUPDATE
INVESTMENT COMMITTEE INVESTMENT COMMITTEE UPDATEUPDATE
NPP BOARD OF DIRECTORS
24 January 2011
MGen Bob Bertrand, CMADG Fin Mgmt/COMMITTEE CHAIR
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Current Investment Policy approved by NPP BoD in May 2006) new investment policy and transition to an external investment manager selected
CIBC was selected through a competitive process in Jan 2007
$130M of CFCF assets transferred in Apr 07 Investment Committee membership in 2010:
Chair – MGen Bob Bertrand (DG Fin Mgmt) 2 External Members: Mr. Jim Frank and Mr. Stephen Cotsman SA/VCDS Rep: Col Tammy Harris ECS Reps:
CAS GO (BGen Neville Russell) CLS RSM (CWO Giovanni Moretti)
Ex-officio – DGPFSS CFO (Shirley Tang-Jassemi)
BackgroundBackground
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Long term asset mix policyLong term asset mix policy
Most critical element is the long term asset mix policy defined by the Benchmark Portfolio (“market neutral position” in the current policy)
Determines the risk/return profile of the Fund by defining the long term asset mix and acceptable deviation
Most of the level and variance of a portfolio’s return can be explained by the asset mix
Should be determined taking into account objectives, risk tolerance, market expectation
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Fixed incomeMortgages
Bond risk rating at BBB
20% Foreign holdings not limited to U.S.
Canadian Corporate bond holdings limit at 40%
Private investments authorized with approval of
Investment Committee
Investment PolicyInvestment Policy
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Canadian EquitiesClearer definition of sector limits
Real estate authorized through REITs
Private investments authorized with approval of Investment Committee
No minimum market capitalization for individual investments (max of 25% in companies under $1B)
Investment Policy (Cont’d)Investment Policy (Cont’d)
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Investment Policy (Cont’d)Investment Policy (Cont’d)
Foreign Equities U.S. and International managed as a single group Emerging market investments authorized with
approval of investment committee
Specific performance objectives established for each asset class if an active investment style is selected
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No change over the last year A real rate of return of four percent over a four-year moving period
Achieve 1.25% added-value on a four year moving period as
follows:
o Cash and Bonds (DEX Universe): 0.25%
o Canadian Equity (S&P/TSX Composite): 1.50%
o Foreign Equity (MSCI World Ex-Canada in Cdn$): 1.50%
o Asset Class Mix: 0.25%
Investment Policy Asset Class Weights
o Cash & Bonds: 40% (Range: 30% - 50%)
o Canadian Equity: 30% (Range: 20% - 40%)
o Foreign Equity: 30% (Range: 20% - 40%)
Performance ObjectivesPerformance Objectives
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CFCF Performance Revenues and ExpensesCFCF Performance Revenues and Expenses
FY 09/10 FY 10-11 YTD Nov 10
TOTAL
Investment Interest/Dividends 4,138,505 1,651,893 5,790,398
Realized Gains/(Losses) (2,839,914) 1,218,049 (1,621,864)
Available Revenue 1,298,592 2,869,942 4,168,534
Unrealized Gains/(Losses) 20,653,164 2,233,202 22,886,366
Currency Gains/(Losses) 0 0 0
Total Revenue 21,951,756 5,103,144 27,054,900
Custodial Fees 48,262 29,164 77,426
Management Fees 185,752 121,081 306,833
Total Expenses 234,014 150,245 384,259
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CFCF Performance (Under CIBC Management)CFCF Performance (Under CIBC Management)
Quarter ending
Dec 2010
Jan 2010 to
Dec 2010
May 2007
to
Dec 2010
Added Value
PPs
May 07 to
Dec 10
Target
Total Portfolio 3.47% 8.71% 1.89% 0.33
1.25 Portfolio Benchmark 4.11% 9.78% 1.56%
Cash and Bonds (Index Plus) -0.49% 7.44% 5.99% 0.18
0.25 DEX Universe Bond Index -0.71% 6.74% 5.81%
Canadian Equities (Active Value) 8.42% 14.96% 2.33% -0.71
1.50 S&P/TSX Composite Index 9.45% 17.61% 3.04%
US Equities (Index) 7.36% 8.57% -5.68% -0.63
1.50 S&P 500 Index (Cdn$) 6.97% 9.35% -5.05%
International Equities (Active Value) 0.43% 0.68% -3.11% 3.53
1.50 MSCI World ex Canada Index (Cdn $) 5.36% 5.49% -6.64%
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CFCF Performance (Under CIBC Management)CFCF Performance (Under CIBC Management)
Period CPI Change (%)
CFCF Target (Inflation + 4pps) (%)
CFCF Performance
(%)
May 07 – Apr 08 2.1 6.1 -1.2
May 08 – Apr 09 2.1 6.1 -11.9
May 09- Apr 10 0.5 4.5 13.8
May - Nov 10* 2.0 6.0 7.3
Average 1.5 5.5 3.1
Investment policy aims at 4.0% real return
At the end of November 2010: 1.6% real return
Market crash explains
* May – Nov 2010 is an approximation
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Determine investment asset mix that will match CFCF returns to the return liabilities (return options) as selected by the contributors to CFCF
Revisit Committee’s Terms of Reference and Investment Policy as required
Develop consultation process on withdrawals for real estate investments purpose
Develop advice on CFCF withdrawal amounts while sustaining purchasing power
Future WorkFuture Work
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Questions?Questions?