The University of Victoria has two pension plans and although each plan has taken a distinct approach to managing its assets, conducting prudent analysis, considering governance and administration and keeping liabilities top of mind have been key for both plans.
The university has a faculty and professional staff pension plan, which is a hybrid defined contribution with a defined benefit guarantee, with over $1 billion in assets. It’s known as the combination plan. It also has a defined benefit plan for unionized staff with about $300 million.
For the faculty and professional staff plan’s investments, the approach to date has been very conservative, said Keith Dixon, chair of the Board of Trustees of the combination plan at the Canadian Investment Review‘s 2019 Global Investment Conference. “Mainly the reason is we have not had any particular solvency problems,” he said.
When Canada’s foreign investment rules changed in the mid-2000s, the plan started increasing its foreign equity, but aside from that it has stayed quite traditional and local. It did introduce some real estate in 2008, Dixon said.
The plan decided not to move towards further alternatives after careful analysis through stochastic modelling, Dixon said. The modelling showed that even if the plan introduced 15 per cent infrastructure this would have only made the funded status slightly worse in the most favourable cases and slightly better in the least favourable cases.
The trustees were not convinced that the move was justified, he noted. “We’re a very small plan and we try to keep the administrative costs low — typically about 25 basis points. We weren’t convinced that those scenarios were worth the extra governance and administrative cost. And so we’re still studying, but at the moment that’s where it stands.”
Administrative costs and governance are also key considerations for the union pension plan, said Andrew Coward, treasurer at the University of Victoria and a member of the investment advisory committee of the plan.
The plan’s investment committee meets five to six times per year and has recently shifted its focus to looking at assets and liabilities together on a quarterly basis when making investment decisions, Coward said.
The plan has been invested in real estate since 2008, and it was not until 2012 that it decided to allocate to infrastructure. Then, in 2018, the plan moved to more global equity exposure and further increased its infrastructure and global real estate as well, he said.
When implementing these changes considering internal and external expertise was important. “In evaluating each of the asset classes we always did an education session before we added it to our target asset allocation,” Coward said, noting considerations included the administration costs, potential capital calls, additional work that would be required from consultants and staff, benchmarks and whether hedging would be required.
“I think it’s good to have some purposeful conversations at your board or your investment committee meetings just to make sure that you do align your investment strategy with your governance and administration.”