Download Municipal Pension Plan AGM

Managing the
Municipal Pension Plan in a
Low Return Environment
Municipal Pension Plan AGM
Bryan Thomson
October 13, 2016
bcIMC
MPP’s Investment Manager
bcIMC is an investment management corporation for BC’s public sector funds
and entities
•
Largest institutional investor in Western Canada and the 4th largest Assets
Under Management (AUM) amongst Canadian pension
fund managers
•
Globally diversified investment portfolio of $122 billion
(at Mar. 31, 2016)
•
Based in Victoria, British Columbia
bcIMC takes a long-term investment perspective
•
•
Historically, bcIMC has been a conservative, long-term investor
Invests in all major asset classes
2
Primary Investment Goals
•
Provide the highest possible investment return that meets the Plan’s:
– funding needs
– investment objectives
for a given level of risk
3
Importance of Investment Returns
Composition of a Pension Benefit Payment ($1)
75% Investment Return
25%
Contribution
4
Municipal Pension Plan Value
Municipal Pension Plan Fund – 10 Year Moving Market Value
50,000
$42.7B
45,000
40,000
$ Millions
35,000
30,000
25,000
$21.5B
20,000
15,000
10,000
5,000
0
Mar-06
2006
Mar-07
2007
Mar-08
2008
Mar-09
2009
2010
Mar-10
2011
Mar-11
2012
Mar-12
2013
Mar-13
Mar-14
2014
2015
5
Mar-15
2016
Mar-16
MPP’s Annualized Returns (%)
For the period ending March 31, 2016
7.7
Actuarial
Target
is 6.5%
7.3
9.4
8.0
6.8
6.3
6.6
5.9
-0.2
20 Year
15 Year
10 Year
Annualized Pension Returns
4 Year
-0.3
1 Year
Benchmark
6
1985 to 2014 was a “Golden Era” for Investment Returns!
Real
Returns
TotalTotal
Real
Returns
Annualized Returns
Source: McKinsey Global Institute
7
Economic and Business Drivers of Asset Returns are Shifting
Inflation has been tamed
GDP growth blues
Interest rates at historic lows
Corporate profits under pressure
Source: McKinsey Global Institute
8
Aging Populations are a Headwind
2015
2050
% of population 65+
Source: BofAML
9
Rising Debt Levels are a Headwind
$199 Trillion
286% of GDP
$142 Trillion
269% of GDP
2007
2014
Source: McKinsey Global Institute
10
Is the Balance Shifting Between Wall Street and Main Street?
52%
10000
9000
8000
7000
48%
6000
5000
46%
Index
% of GDP
50%
4000
44%
3000
2000
42%
1000
40%
1948
1953
1958
1963
1968
1973
1978
1983
Wages as % of GDP (LHS)
1988
1993
1998
2003
2008
2013
2018
0
50/50 Equity/Bond (RHS)
Source: BofAML
11
Long-Term Return Expectations Have Shifted Downwards
Capital Markets – Long-Term Expectations
18%
Private Equity
16%
Real Estate
14%
Return
12%
8%
Private Equity
Global Equities
Real Estate
6%
2%
2%
4%
6%
8%
10%
Risk
Emerging Markets
6.5%
Canadian Equities
2016
Mortgages
Nominal Bonds
Short-term Bonds
4%
Canadian Equities
1990
Mortgages
Nominal Bonds
Short-term Bonds
10%
0%
Global Equities
Emerging Markets
12%
14%
16%
18%
bcIMC's Target return
____
Clients‘ Target Return
12
20%
Overall Business Plan Roadmap
2017
F2016-17
• 3-Year Business Plan
• Establish targets
& milestones
• Continue rebuilding
the base
• Begin implementing
strategies
F2017-18
• Report net returns
& cost savings
• Expand & grow
investment strategies
• Meet incremental
targets in public markets
F2018-19
• Report net
returns & cost
savings
• Expand & grow
strategies
F2019-20
• Realize benefits
• Continue to
grow
13
Summary
•
A history of strong returns which has contributed significantly to the
Plan’s funded status
•
Future returns are likely to be lower
•
With Municipal Pension Plan’s support and guidance, bcIMC’s
3-year plan is responding to the challenges
14