The Fund is comprised of the assets of the Pension Plan. The CBC Pension Board of Trustees, directly or through agents retained by it, is responsible for investing the Fund and, in doing so, identifies and pursues investment opportunities in accordance with the Pension Benefits Standards Act, the Regulations and the Fund’s Statement of Investment Policy and Procedures (SIP&P).
The long-term objective of the Plan (Plan Objective) is expressed as a function of the Plan liabilities and is designed to replicate the Plan’s solvency liabilities sensitivity to changes in interest rates and inflation. The long-term Plan objective is derived from the results of the actuarial valuation. At the total Fund level over the long term, this objective is designed to generate a rate of expected return that will allow the Plan to meet its obligations while mitigating the risk of a Plan deficit.
The Fund’s assets are invested using a Liability-Driven Investment (LDI) strategy. The strategy is designed to achieve appropriate long-term returns at the total Plan level while more closely matching the characteristics of the Fund’s assets to those of its pension obligations and to reduce the volatility of the Plan’s financial position. The asset mix is comprised of two broad categories of assets. The first, the fixed income class (or “matched assets”), shares the Pension Plan obligations’ sensitivity to changes in interest rates and inflation. The second category, which includes publicly traded equities as well as strategic alternative type investments (the “unmatched assets”), includes assets whose value over time is generally not as sensitive to factors affecting the value of the Plan obligations. The long-term target asset mix policy of the Fund is: 43.5% fixed income, 42% equities and 14.5% real assets. Under the LDI strategy, the target long-term asset mix also calls for the hedging of the interest rate and inflation sensitivities through the use of derivative fixed income instruments, referred to as the bond overlay, equivalent to 23% of assets.
The Fund is actively managed by a group of internal and external portfolio managers under the guidance and direction of the Managing Director/CEO. The Fund management objective is to generate returns after deductions for management fees and administrative costs related to the investment activity that equals the annual average increase in a benchmark portfolio plus 0.5% on a four-year moving average basis. The benchmark return is calculated by combining the return of the asset class benchmark indices in the proportions in which they are represented in the Fund’s asset mix policy.
as of December 31, 2021
Bond Overlay notional exposure was 23.5% of assets.
as of December 31, 2021
Plus a “Bond Overlay” equivalent of 23% of assets.
For the year ending December 31, 2021, the one-year rate of return was 8.2% as compared to 3.6% for the Plan’s Asset Benchmark. The return over a four-year period was 9.8%, higher than the Asset Benchmark return of 8.5%. This assessment of the Plan’s performance measures the Plan’s investment returns against a composite reference portfolio of relevant financial market return indices. A liability benchmark allows for the tracking of the movement in the Plan’s asset values to its estimated solvency funding liabilities, the net difference between the two providing a proxy of the impact of market and interest rate movements on the Plan’s estimated solvency funding position. The Plan’s annual return of 8.2% in 2021 was higher than the Liability Benchmark return of -0.8%. The long-term Plan Objective is to achieve time-weighted average annual rates of return which consistently exceed the Liability Benchmark. The time-weighted annualized four-year rate of return for the Plan was 9.8%, which was above the long-term Plan Objective return of 5.8% over the period.
Investment Returns and Benchmarks
|Fund Rate of Return||Asset Benchmark||Value Added/(Lost) to Asset Benchmark||Liability Benchmark||Value Added/(Lost) to Liability Benchmark|
|4 years annualized||9.8%||8.5%||1.3%||5.8%||4.0%|
The Plan’s financial position is viewed from two different perspectives: on a going concern basis and a solvency basis.
Going concern basis: this is used for financial reporting purposes and estimates the cost to make future pension benefit payments assuming ongoing operations.
Solvency basis: this is used to simulate a wind-up of the Plan, and estimates the cost to the Plan to purchase annuities in the open market to cover future payment of pension benefits.
These results reflect the positive market performance that increased the market values of the Fund’s assets.
|(in millions of dollars)||2021||2020||2021||2020|
|Net Assets Available for Benefits||$9,191.7||$8,706.0||$9,191.7||$8,706.0|
|Accrued Pension for Benefits*||(5,474.1)||(5,392.5)||(8,126.3)||(8,324.8)|
|Funding Excess / (Deficit)||$3,717.6||$3,313.5||$1,065.4||$381.2|
*Includes $7.0 million in 2021 and $6.9 million in 2020 for wind-up expenses for Solvency Accrued Benefits.