The Teachers’ Pension Plan’s investment portfolio earned 14.6 per cent net of fees for 2013, exceeding the market benchmark of 12.3 per cent and adding over $2.6 billion in value for the plan. Taking into account contributions and fees received and benefits paid out, the market value of the investments increased from $18.3 billion to $20.7 billion.
The plan achieved healthy investment results as global economic growth continued to improve throughout the year. Although the year started with Europe still in economic recession, stock market returns were strongly positive, primarily in the United States, Europe, and Japan. As the year moved into its second half, capital markets reacted negatively to the political gridlock in the U.S. and concern that the U.S. Federal Reserve would taper its monetary stimulus thereby triggering an economic slowdown. Fortunately, these events did not prove to be as negative as originally feared and many stock markets around the globe ended the year with higher returns than anticipated.
Overall, the plan’s investments did very well in 2013. Combined public equities achieved extraordinary returns of 24.3 per cent. Investments in Canadian real estate were a solid contributor to the plan’s returns at 7.9 per cent, while infrastructure and private equity investments returned 13.1 per cent and 23.8 per cent respectively. Only fixed income returns were negative, losing 2.3 per cent due to rising long-term interest rates.
Responsible investing and the plan
Responsible investing continues to play an important role in the management of the plan’s funds. This philosophy is based on the belief that well-governed companies responsive to environmental and social issues will positively affect long-term investment performance, and mitigate risk, for the plan. The investment agent for the Teachers’ Pension Board of Trustees, British Columbia Investment Management Corporation (bcIMC), is a founding signatory to the United Nations Principles for Responsible Investment, an international network of investors working together to put responsible investing principles into practice. Its goals are to promote the importance of sustainability for investors and support signatories to incorporate these principles into their investment decision-making and ownership practices.
With the support of the board, bcIMC engages and encourages companies to apply best practices for corporate governance, adopt good standards of safety and employee welfare, and be responsible in their operations by effectively managing relationships with suppliers, customers and communities. bcIMC ranks among the top performing investment managers globally in implementing the United Nations Principles for Responsible Investment. Implementing change also occurs through collaboration with like-minded investors and organizations such as the Canadian Coalition for Good Governance, the CDP (formerly known as the Carbon Disclosure Project) and the Investor Network on Climate Change. Learn more about bcIMC’s responsible investment activities on its website.
Managing investment costs is important to the board. bcIMC’s fees (0.20 per cent of assets) continue to be significantly below those of other large Canadian pension plans and investment managers. This is because bcIMC operates on a cost recovery, not‑for‑profit basis and its large asset size provides access to substantial economies of scale. By carefully managing the plan’s investment management expenses, a greater proportion of investment return passes to the plan, contributing to its long-term sustainability.
A sample of the plan’s investment porfolio
TimberWest Forest Corp. is uniquely positioned as western Canada's largest private timber and land management company. TimberWest is a leader in sustainable forest management and is committed to Vancouver Island communities. The company complies with ISO 14001 and the Sustainable Forestry Initiative®, and provides approximately 1,000 direct and 2,000 indirect jobs to workers on Vancouver Island. bcIMC first invested in TimberWest in 2009 and took the company private in partnership with the Public Sector Pension Investment Board in 2011. Source: TimberWest Forest Corp.