Download RETIREMENT INCOME PROGRAMS

Pension Fund Investment in
Canada
Trends, Regulation and Pension
Governance
Rudy R. Dabideen, CFA
Chairman - PIAC
March 15, 2001
Santiago, Chile
Presentation Outline
• PIAC
• Canada’s Capital Markets
• Pension Assets
– Growth of assets
– Asset mix
• Regulations
• Investment Trends
• Fund Governance
2
PIAC
Pension Investment Association of Canada
•
•
•
•
200 Members
Total Assets of PIAC members: $550 Bill
Asset Focus
4 Committees
–
–
–
–
Investment
Member Services
Government Relations
Corporate Governance
• Web Site: WWW/PIACWEB.ORG
3
Capital Markets Overview
• Equity Markets
– Canada $ 520 B
– USA
$ 13.0 T
Capitalization in US $$’s
UK 2.4 T
Japan 3.0 T
• Bond Market
– Canada $ 540 B
– USA
$ 14.6 T
UK 940 B
Japan 5.7 T
4
Capital Markets Overview
• Population
– Canada 31 M
– USA 276 M
Capitalization in US $$’s
UK
60 M
Japan 127 M
• GDP
– Canada 700 B
– USA 10.1 T
UK
1.3 B
Japan 4.7 T
5
Total Pension Asset Growth Canada
Total Pension Assets (US Bill)
500
450
400
350
300
250
200
150
100
50
0
Canada
1994
1999
2004
Source: Intersec
6
Total Pension Asset Growth
Total Pension Assets (US Bill)
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
USA
Canada
UK
Japan
1994
1999
2004
Source: Intersec
7
Asset Growth 1985 - 1999
600
70
Total Assets
% of GDP
500
60
50
400
40
300
30
200
20
100
10
0
0
1985
1987
Source: Statistics Canada
1989
1991
1993
1995
1997
1999
8
Top 10 Pension Plans in Canada
As of Dec 1999
Ontario Teachers
Quebec Public Employees
OMERS
Hospitals of Ontario
BC Municipal
Quebec Teachers
Ontario Electrical Financial Corp
BCE
CN Railways
BC Public Services
Source: Benefits Canada - April 2000 Issue
Cdn $’s Bill
67.1
51.7
35.5
17.0
14.0
13.3
11.9
11.7
11.6
11.5
9
Average PIAC Asset Mix - 1999
Canadian Bonds
32%
Internationl Equities
1%
Real Estate
4%
Cash / Other
6%
Canadian Equities
32%
Internationl Equities
15%
US Equities
10%
10
Source: PIAC Data Base of Pension Funds
Asset Mix Change - 1990 & 1999
Cash / Other
11%
Real Estate
4%
Canadian
Equities
24%
Internationl Equities
1%
Canadian Bonds
32%
Real Estate
4%
Cash / Other
6%
Canadian Equities
32%
US Equities
5%
Internationl
Equities
2%
Canadian
Bonds
54%
1990
Internationl Equities
15%
US Equities
10%
1999
Source: PIAC Data Base of Pension Funds
11
Typical Market Indices
•
•
•
•
•
•
TSE 300
MSCI World
MSCI EAFE
SC Universe
S&P500 / MSCI USA
MSCI Japan
Canadian Equity
Global Equity
International
Canadian Bonds
US Equity
Japan Equity
12
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
• Financial Statements
13
FOREIGN INVESTMENTS
1990 - 1999
30
25
20
15
10
5
0
1990
1991
Source: Statistics Canada
1992
1993
1994
1995
1996
1997
1998
1999
14
Investment Trends
• Increase in Foreign Investments
– Derivatives to go beyond the legal limit
• Alternative Investments
– Private Equity
– Hedge Funds
• Reduced Bond Market
– Government Surplus
– Increase credit analysis
15
Investment Trends
• Risk Management
– Risk Budgeting
– VAR
• Defined Benefit to Defined Contribution Plans
• Social Investing / Ethical Investing
• Settlement Improvements
– T+1
16
Governance
• Pension Plan Governance Model
– PIAC / ACPM / OSFI
• Structure of Pension Plans
– Trustee’s Role
– Management’s Role
– Monitoring
– Feedback
17
END
18