Investing like a pension fund
Canada’s six largest pension funds collectively manage $1.3 trillion on behalf of their beneficiaries, representing 62% of the $2.1 trillion total pension fund assets in the country (based on reports from the Pension Investment Association of Canada). To provide context, the total estimated value of Canada’s equity and bond markets is approximately $6 trillion, giving pension funds a formidable presence on the investment landscape. Pension funds have a fiduciary responsibility to diversify and be prudent when investing capital in order to meet the future obligations due to beneficiaries. Historically, in a higher interest rate environment, pension funds were able to fulfill these responsibilities by investing mainly in bonds. Bonds generated the required rate of return while keeping portfolio volatility low. The secular decline in interest rates over the past four decades, however, has forced most pension funds to gradually venture away from a bond-focused portfolio in search of higher returns. As an example, bonds represented 73% of Canada Pension Plan’s (the country’s largest pension fund) asset mix as recently as 2001, compared with a 2018 bond weighting of only 22%.
While the objectives remain the same, these days the asset mix for most pension funds is multi-dimensional: bonds/equities/real estate, public/private, domestic/foreign, short-term/long-term (see exhibit 1). Due to the sheer magnitude of their portfolios, a derivative of the global migration by pension funds away from bonds has contributed to price appreciation in other asset classes. At The Rosedale Group, our asset allocation strategy takes cues from the pension fund philosophy of diversifying across various asset classes with a goal of achieving risk-adjusted returns for our clients. With equity valuations near historically peak levels, we too have shifted exposure to other asset classes such as real estate, mortgages, emerging market debt, and long/short and alternative strategies. We look forward to discussing our outlook, current asset allocation, and recent investments at your portfolio review meeting.
NEW Tax procedure for 2019 tax season only
The Rosedale Group’s transition from ScotiaMcLeod to Wellington-Altus overlapped the 2019 tax season. For one year ONLY we request you gather all tax slips that are mailed directly to you. Once all have been received put them in the mail to us and we will then continue with our standard practice of coordinating the tax process. This will involve consolidating Wellington-Altus’ tax package with your slips from ScotiaMcLeod.
Full details on this execution, are forthcoming in the mail. Please watch for this in your mailbox the first week of February.
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