Pension Fund Investment in Canada Trends, Regulation and Pension Governance

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Pension Fund Investment in CanadaTrends,
Regulation and Pension Governance
Rudy R. Dabideen, CFA

• April 2002
• Rio de Janeiro, Brazil

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Presentation Outline

• PIAC
• Pension Assets / Market
• Regulations
• Investment Trends
• Fund / Plan Governance

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PIAC
Pension Investment Association of Canada

• 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

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Total Pension Asset Growth
Total Pension Assets (US MM)
Source Intersec
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Top 10 Pension Plans in Canada
As of Dec 2000
Cdn s Bill
Source Benefits Canada - April 2001
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Average PIAC Asset Mix - 2000
Source PIAC
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Typical Market Indexes

• TSE 300 Canadian Equity
• MSCI World Global Equity
• MSCI EAFE International Equity
• SC Universe Canadian Bonds
• SP500 US Equity
• MSCI Japan Japan Equity

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Regulation

• Limit on global investments
• 30 outside of Canada (2001)
• Statement of Investment Policies Procedures
  (SIPP)
• Harmonization of regulators
• Pension Benefit Act
• Prudent Person Rule
• Actuarial Valuations
• Solvency valuations

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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

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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

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Investment Trends

• Risk Management
• Risk Budgeting
• Defined Benefit to Defined Contribution Plans
• Social Investing / Ethical Investing
• Settlement Improvements
• T 1

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Fund Governance

• Pension Plan Governance Model
• PIAC / ACPM / OSFI
• Structure of Pension Plans
• Trustees Role
• Managements Role
• Monitoring
• Feedback

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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

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END