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Investment Performance Report at March 31, 2009 Saint Mary’s University Pension Plan

June 2009. Investment Performance Report at March 31, 2009 Saint Mary’s University Pension Plan. Yvan Breton, Montreal. Agenda. Market review – what happened in 2008 Performance review of SMU funds Active manager issues Managing risk. Market Review What happened in 2008.

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Investment Performance Report at March 31, 2009 Saint Mary’s University Pension Plan

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  1. June 2009 Investment Performance Reportat March 31, 2009Saint Mary’s University Pension Plan Yvan Breton, Montreal

  2. Agenda • Market review – what happened in 2008 • Performance review of SMU funds • Active manager issues • Managing risk

  3. Market ReviewWhat happened in 2008

  4. Lower quality borrowers were granted mortgages easily Low quality debt repackaged for resale 2008 2007 • Financial Institutions having difficulty borrowing at reasonable cost • U.S. Government intervention • Worldwide collapse of confidence • Many mortgages defaulted • Financial Institutions /Buyers of repackaged low quality debt started reporting huge losses What happened? Mid-2000s Low Interest RateEnvironment Sub-PrimeMortgage Crisis Liquidity Crisis

  5. Market Indices Return As at March 31, 2009 (1-year and 4-year)

  6. Market Indices Return As at May 29, 2009 (YTD) UPDATED

  7. Distribution of Market ReturnsHistorical Look at Annual Stock Market Returns

  8. Fund Performance Review

  9. Gross Performance to March 31, 2009Money Market ( Sun Life Financial ) (3.6% of funds)

  10. Gross Performance to March 31, 2009Canadian Equity (Barclays Global Investors) (22.9% of funds) ¹ Benchmark for the Fund is S&P/TSX Equity Index

  11. Gross Performance to March 31, 2009International Equity (Acadian) (15.0% of funds) ¹ The Acadian fund was only used from March 31, 2007 onward. For 3, 4 and 5-year periods, the result shown is a combination of the UBS performance (to March 31, 2007) and Acadian (from April 1, 2007).

  12. Gross Performance to March 31, 2009Index (passive) Funds (bonds: 32.8%; US Equity: 15.9% of funds)

  13. Active Managers Issues

  14. Active Managers Issues Downgrade of Barclays Global Investors (BGI) • The BGI Active Canadian Equity strategy was recently downgraded by Mercer • Reflects our concerns over recent changes to the strategy • Pillar of success for BGI’s Active Canadian Equity strategy has come from its commitment and dedication to research • According to BGI, 90% of its added value comes from its research • BGI has increased the workload of the Canadian research team to include non-Canadian responsibilities • We believe this may distract them and cause the strategy to lose its competitive advantage

  15. Active Managers Issues Underperformance at Acadian • Acadian’s international equity strategy has underperformed recently • Acadian uses a quantitative model to rank stocks into quintiles • Historically, the model has been effective and highly ranked stocks have outperformed lowly ranked stocks • Acadian attributes their recent underperformance to a market dislocation during which stocks of lesser quality (i.e., high debt, poor earnings, high P/E multiples) have been outperforming • When markets become “normal” again, Acadian expects performance to improve • Mercer continues to rate this strategy highly and believe it has above-average prospects for outperformance

  16. Managing Risk

  17. Short-Term Risk Spectrum (1) USEquity MoneyMarket Balanced Portfolios Canadian Equity 5-YearGICs InternationalEquity Bond Long-Term Risk Spectrum (2) Risk/Return of Investment Options Offered Risk Return Spectrum (1) Short term risk is defined as volatility of returns and account balance(2) Long term risk is defined as inadequate long term real returns to reach retirement objectives

  18. Basic Concepts of Sound Investments Asset Diversification • Diversification by: • Type of investments (stocks, bonds, short-term investments, etc...) • Geography • Risk reduction without necessarily impeding expected return • Also need to counter the long term effect of inflation

  19. Tools Offered under the SMU Plan • Five target risk asset allocation portfolios • Sun Life Tools • Risk assessment questionnaire • Retirement planning tools • www.sunlife.ca/member • Risk tolerance will likely change over your career • Check your risk tolerance periodically and make changes as you deem appropriate • If not using a target risk portfolio, periodically check to see whether you need to re-balance your allocation back to your target

  20. www.mercer.ca

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