Vancouver Webcast Pension Fund Investment Report Accountable To You 4th Annual General Meeting...
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Transcript of Vancouver Webcast Pension Fund Investment Report Accountable To You 4th Annual General Meeting...
Vancouver Vancouver WebcastWebcast
Pension Fund Investment Pension Fund Investment ReportReport
Accountable To Accountable To YouYou
4th Annual General 4th Annual General MeetingMeeting
October 15, 2005October 15, 2005
22
OverviewOverview
Structure of investmentsStructure of investments
Examples of investmentsExamples of investments
Performance results and current Performance results and current outlookoutlook
Corporate governanceCorporate governance
SummarySummary
33
STRUCTURE OF INVESTMENTSSTRUCTURE OF INVESTMENTS
44
Governance of the PlanGovernance of the Plan
Trustees determine plan’s investment Trustees determine plan’s investment policies and strategic directionpolicies and strategic direction
Day-to-day management is Day-to-day management is responsibility of investment responsibility of investment professionals at bcIMCprofessionals at bcIMC
Fund is managed for long-term, with Fund is managed for long-term, with the goal of securing pension benefits the goal of securing pension benefits for current and future beneficiariesfor current and future beneficiaries
55
Structure of InvestmentsStructure of Investments
At $18.2 billion, Municipal Pension Plan At $18.2 billion, Municipal Pension Plan is one of the largest pension plans in is one of the largest pension plans in CanadaCanada
Highly diversified investment portfolio—Highly diversified investment portfolio—follows the old adage of “not putting all follows the old adage of “not putting all your eggs in one basket”your eggs in one basket”
The plan has investments in 36 The plan has investments in 36 countries, in thousands of securities and countries, in thousands of securities and other income producing assets (e.g., other income producing assets (e.g., real estate)real estate)
66
Growth of the Municipal Pension Growth of the Municipal Pension PlanPlanBasic and Inflation Adjustment AccountsBasic and Inflation Adjustment Accounts
Municipal Pension Plan Municipal Pension Plan 1990 to 20051990 to 2005
00
22
44
66
88
1010
1212
1414
1616
1818
2020
19901990 19931993 19971997 20002000 20042004
Billion
sB
illion
s
Basic AccountBasic Account Basic + InflationBasic + Inflation
77
Market Value of Basic, IAA & Market Value of Basic, IAA & RAARAAas at December 2004 as at December 2004 ($ Billions)($ Billions)Total Portfolio = $18.2 Total Portfolio = $18.2
billionbillionReal Estate,Real Estate,
Mortgages andMortgages and
Foreign Foreign CurrencyCurrency
$2.5 (14%)$2.5 (14%)
PrivatePrivate
PlacementsPlacements
$0.5 (3%)$0.5 (3%)
US EquitiesUS Equities
$2.9 (16%)$2.9 (16%)CDN EquitiesCDN Equities
$3.7 (20%)$3.7 (20%)
BondsBonds
$5.4 (30%)$5.4 (30%)International International
Equities Equities
$3.0 (16%)$3.0 (16%)
Short-termShort-term
$0.2 (1%)$0.2 (1%)
88
EXAMPLES OF INVESTMENTSEXAMPLES OF INVESTMENTS
99
Real Estate InvestmentsReal Estate Investments
Yaletown 939Yaletown 939VancouverVancouver
Western Canadian Western Canadian PlacePlace
CalgaryCalgary
1010
Real Estate InvestmentsReal Estate Investments
Marché CentralMarché Central
MontrealMontreal
1111
Real Estate InvestmentsReal Estate Investments
Menkes Office & Menkes Office & IndustrialIndustrialTorontoToronto
Livingston PlaceLivingston Place Calgary Calgary
1212
Private Placements Private Placements InvestmentsInvestments
Owns and operates six Owns and operates six state-of-the-art waste-state-of-the-art waste-to-energy facilities to-energy facilities located major located major northeastern U.S. cities northeastern U.S. cities
Household garbage is Household garbage is used to generate used to generate electricityelectricity
American Ref-Fuel Company
1313
Private Placements Private Placements InvestmentsInvestments
Is one of North Is one of North America’s largest America’s largest makers of wire makers of wire products products
With production With production facilities located in facilities located in Canada and U.S., Canada and U.S., company company headquarters are in headquarters are in Richmond Richmond
Tree Island Industries
1414
Public Equity InvestmentsPublic Equity Investments
Developing an Developing an integrated oil sands integrated oil sands project in Long Lake, project in Long Lake, ABAB
Using its OrCrudeUsing its OrCrudetm tm
process, OPTI is able process, OPTI is able to extract crude oil to extract crude oil using steam injection using steam injection
OPTI Canada Inc.
1515
Public Equity InvestmentsPublic Equity Investments
13 billion barrels of 13 billion barrels of crude oil reservescrude oil reserves
Strategically located Strategically located in Fort McMurray, ABin Fort McMurray, AB
Suncor Energy Inc.
1616
PERFORMANCE PERFORMANCE RESULTS & OUTLOOKRESULTS & OUTLOOK
1717
Investment PerformanceInvestment PerformanceBasic Account as at December 31, 2004Basic Account as at December 31, 2004
Reason for strong Reason for strong returns in 2004:returns in 2004: High oil prices and High oil prices and
strong demand for strong demand for commodities led to commodities led to good year from good year from Canadian stocksCanadian stocks
Hedging has mitigated Hedging has mitigated the impact of falling the impact of falling US$ US$
Lower interest rates Lower interest rates provided good returns provided good returns on bonds on bonds
4.2%
10.0%
4.6%
10.1%
0%
2%
4%
6%
8%
10%
12%
1 Year 5 Year
Fund Return Total Fund Benchmark
1818
Value AddedValue Added
Investment performance is assessed Investment performance is assessed relative to market conditionsrelative to market conditions
Investment managers can add value Investment managers can add value through managing the asset mix, through managing the asset mix, security selection, and risks (e.g., security selection, and risks (e.g., hedging against currency fluctuations)hedging against currency fluctuations)
Over past five years, bcIMC and its Over past five years, bcIMC and its managers have added $235 million in managers have added $235 million in additional return relative to market additional return relative to market benchmark (after fees)benchmark (after fees)
1919
Investment CostsInvestment Costs
Industry surveys find that bcIMC is a Industry surveys find that bcIMC is a low-cost service providerlow-cost service provider
Investment costs in 2004 were about Investment costs in 2004 were about 15 cents for every $100 invested. 15 cents for every $100 invested. Retail mutual funds often charge Retail mutual funds often charge between $2 to $3 for every $100 between $2 to $3 for every $100 invested invested
2020
Review of 2005 To DateReview of 2005 To Date
Canadian equity markets continue to be one of Canadian equity markets continue to be one of the best performers as global demand for the best performers as global demand for commodities persistscommodities persists
Economic impact of Hurricane Katrina will be Economic impact of Hurricane Katrina will be devastating for the region but minimal relative devastating for the region but minimal relative to US economyto US economy
Bank of Canada recently raised interest rates Bank of Canada recently raised interest rates for the first time since October 2004for the first time since October 2004
Expectation is for modest returns in 2005 and Expectation is for modest returns in 2005 and on a go-forward basison a go-forward basis
2121
Investment RisksInvestment Risks
US Current Account deficitUS Current Account deficit
Use of leverage in financial marketsUse of leverage in financial markets
Higher interest rates and debt levels Higher interest rates and debt levels
2222
CORPORATE GOVERNANCECORPORATE GOVERNANCE
2323
Corporate Governance & Proxy Corporate Governance & Proxy VotingVoting
Exercising shareholder rights (e.g., voting Exercising shareholder rights (e.g., voting proxies) is an important duty as a fiduciary proxies) is an important duty as a fiduciary and responsible investorand responsible investor
Trustees delegate voting rights to bcIMC and Trustees delegate voting rights to bcIMC and have instructed bcIMC to act in the best have instructed bcIMC to act in the best financial interests of the Planfinancial interests of the Plan
bcIMC votes in accordance with our bcIMC votes in accordance with our Corporate Governance and Proxy Voting Corporate Governance and Proxy Voting Guidelines. Guidelines. These guidelines were developed These guidelines were developed based on input frombased on input from MPP and other clientsMPP and other clients
2424
Corporate Governance & Proxy Corporate Governance & Proxy VotingVoting
The goal of the proxy voting process is to influence The goal of the proxy voting process is to influence corporate behaviour and to encourage changes in corporate behaviour and to encourage changes in practices that do not meet expected standards practices that do not meet expected standards
bcIMC reports quarterly to the Trustees on bcIMC reports quarterly to the Trustees on corporate governance and proxy voting issues. In corporate governance and proxy voting issues. In addition, a summary of our voting record is addition, a summary of our voting record is prepared annually.prepared annually.
bcIMC voted more than 4,200 issues in 2004bcIMC voted more than 4,200 issues in 2004
bcIMC’s proxy voting results are posted on the bcIMC’s proxy voting results are posted on the website at website at www.bcimc.comwww.bcimc.com
2525
Advocacy for Social Advocacy for Social ResponsibilityResponsibility In addition to voting proxies, bcIMC may In addition to voting proxies, bcIMC may
approach corporate management directly on approach corporate management directly on matters of social responsibilitymatters of social responsibility
bcIMC expects companies to approach social bcIMC expects companies to approach social and environmental issues in a manner that is and environmental issues in a manner that is responsible to the communities and that responsible to the communities and that serves to maximize shareholder valueserves to maximize shareholder value
Example 1Example 1
bcIMC supports all shareholder proposals bcIMC supports all shareholder proposals asking companies to adopt International asking companies to adopt International Labour Organization (“ILO”) standardsLabour Organization (“ILO”) standards
2626
Advocacy for Social Advocacy for Social ResponsibilityResponsibility
Example 2Example 2
Until the mid-1980’s, James Hardie Industries Until the mid-1980’s, James Hardie Industries was Australia’s largest manufacturer and was Australia’s largest manufacturer and supplier of asbestos-containing building supplier of asbestos-containing building products products
bcIMC contacted company management bcIMC contacted company management advocating that employees who are victims of advocating that employees who are victims of asbestos poisoning be treated appropriately asbestos poisoning be treated appropriately and that they be fairly compensated for their and that they be fairly compensated for their work related illnesseswork related illnesses
2727
Corporate Governance & Proxy Corporate Governance & Proxy VotingVoting
Member of:Member of: Canadian Coalition of Good Governance Canadian Coalition of Good Governance
(CCGG)(CCGG) bcIMC is on CCGG’s Board bcIMC is on CCGG’s Board
International Corporate Governance International Corporate Governance NetworkNetwork
Asian Corporate Governance AssociationAsian Corporate Governance Association
2828
SummarySummary
Expectation is for more modest Expectation is for more modest returns on a go forward basisreturns on a go forward basis
The focus of Trustees and bcIMC is to The focus of Trustees and bcIMC is to grow the asset base to secure grow the asset base to secure pension benefitspension benefits