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Pension Fund Investment in Canada Trends, Regulation and Pension Governance

Pension Fund Investment in Canada Trends, Regulation and Pension Governance. April 2002 Rio de Janeiro, Brazil. Rudy R. Dabideen, CFA. Presentation Outline. PIAC Pension Assets / Market Regulations Investment Trends Fund / Plan Governance. Pension Investment Association of Canada. PIAC .

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Pension Fund Investment in Canada Trends, Regulation and Pension Governance

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  1. Pension Fund Investment in CanadaTrends, Regulation and Pension Governance April 2002 Rio de Janeiro, Brazil Rudy R. Dabideen, CFA

  2. Presentation Outline • PIAC • Pension Assets / Market • Regulations • Investment Trends • Fund / Plan Governance

  3. Pension Investment Association of Canada PIAC • 200 Plus Members • Total Assets of PIAC members • Approx $600 Bill • Investment Focus • 5 Main Committees • Investment • Communications • Member Services • Government Relations • Corporate Governance • Web Site: www.piacweb.org

  4. Total Pension Asset Growth Total Pension Assets (US MM) Source: Intersec

  5. Top 10 Pension Plans in Canada As of Dec 2000 Cdn $’s Bill Source: Benefits Canada - April 2001

  6. Average PIAC Asset Mix - 2000 Source: PIAC

  7. Typical Market Indexes • TSE 300 Canadian Equity • MSCI World Global Equity • MSCI EAFE International Equity • SC Universe Canadian Bonds • S&P500 US Equity • MSCI Japan Japan Equity

  8. Regulation • Limit on global investments • 30% outside of Canada (2001) • Statement of Investment Policies & Procedures (SIP&P) • Harmonization of “regulators” • Pension Benefit Act • Prudent Person Rule • Actuarial Valuations • Solvency valuations

  9. Investment Trends • Increase in Foreign Investments • Derivatives to go beyond the legal limit • Canada: 2% of World market capitalization • Alternative Investments • Private Equity • Hedge Funds

  10. Investment Trends • Changes to the Canadian Bond index • Corporate bond content of index changed from 13.9% in 1996 to 25.9% at end of 2001 • Increase % of BBB • 4.6% of index • 17.8% of all corporate bonds • Concentrated on shorter maturities • Higher focus on credit analysis

  11. Investment Trends • Risk Management • Risk Budgeting • Defined Benefit to Defined Contribution Plans • Social Investing / Ethical Investing • Settlement Improvements • T + 1

  12. Fund Governance • Pension Plan Governance Model • PIAC / ACPM / OSFI • Structure of Pension Plans • Trustee’s Role • Management’s Role • Monitoring • Feedback

  13. Plan Governance • Enron in USA • Nortel & JDS in Canada • Ontario Teachers’ Model (Summary from Teachers’ Website) • Fiduciaries report on how they vote shares • Corporations report the results of shareholders vote within 1 day of the annual general meeting • Independent directors on Board • Board should have meetings in absence of management • All press releases based on GAAP earnings • Auditors earn only audit fees

  14. END

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