Subject: Investment Policies and Goals for the Pension Plan for Faculty, Librarians and Senior Administrative Officers
Group: Faculty, Librarians and Senior Administrative Officers
Approved by: The Executive Committee
Approved date: September 2, 2005
Effective date: September 2, 2005
Revised: April 13, 2007; April 23, 2010; April 27, 2011; May 14, 2013; May 17, 2016.
Administered by: Vice-President (Finance and Administration)
1 — PURPOSES
1.1 Mount Allison University (the "University") provides a Pension Plan for Faculty, Librarians and Senior Administrative Officers of Mount Allison University (the "Plan") to eligible employees. The primary goal of the Plan is to provide Plan members (“Members”) with investment options so that they can accumulate funds to provide retirement incomes. The prudent and effective management of the Plan’s assets (the “Fund”) will have a direct impact on Member’s retirement income.
1.2 This statement of investment policies and goals (the "Statement") addresses the manner in which decisions will be made concerning the investment options that will be made available to Members, the monitoring of the performance of investment managers, the responsibilities of those associated with investments made under the Plan, and other related matters. The Statement is intended to comply with all relevant legislation and the May 28, 2004 Guidelines for Capital Accumulation Plans (“CAP Guidelines”) published by the Joint Forum of Financial Market Regulators.
2 — FUND GOVERNANCE
2.1 The University is the administrator of the Plan and is responsible for its overall management. The University acts through its Board of Regents (the "Board") in discharging its responsibilities. The Board has delegated tasks to its Investment Committee, to its senior Administration ("Administration") and to various agents to assist it in carrying out its responsibilities. The Administration, in turn, delegates tasks to various agents to assist it in carrying out its responsibilities and is further assisted in carrying out its responsibilities through recommendations that are provided from consultants and from the Plan's Pension Advisory Committee. The Board has allocated its responsibilities as set out below.
2.2 The Executive Committee of the Board of Regents shall
- approve the Statement
- review the Statement at least once every three years,
- amend the Statement from time to time as required,
- approve the investment options to be offered to members, and
- authorize the appointment of managers and custodians.
2.3 The Investment Committee shall
- recommend to the Executive Committee amendments to the Statement,
- review the Statement at least once every three years and advise the Executive Committee of the Board of Regents the results of these reviews,
- recommend to the Executive Committee the investment options to be offered to Members,
- recommend to the Executive Committee the appointment of managers and custodians, and
- review the performance of managers and custodians periodically and advise the Executive Committee of the results of these reviews.
2.4 The Administration shall
- assist the Investment Committee in its work,
- review the Statement at least once every three years and advise the Investment Committee of the results of these reviews,
- following each review of the Statement by the Executive Committee of the Board of Regents, file with the New Brunswick Superintendent of Pensions any amendments made to the Statement or a confirmation that no amendments have been made,
- recommend to the Investment Committee the investment options to be offered to Members,
- recommend to the Investment Committee the appointment of investment managers (the "Managers") and of the administrator/custodian (the "Custodian") to hold the assets invested,
- ensure that information is provided by the Custodian, and by the Managers where appropriate, to Members to help in their selection of appropriate investment options,
- evaluate the Managers and their performance, both quantitatively and qualitatively, as provided in section 4 below, and
- in general administer this Statement.
Pension Advisory Committee
2.5 The Pension Advisory Committee shall
- offer advice to the University concerning the Plan,
- promote awareness and understanding of the Plan on the part of Members, and
- in general carry out its responsibilities as set out in its terms of reference.
2.6 The Members shall
- inform themselves of the risks and rewards of alternative investment strategies,
- decide on the allocation and re-allocation of their contributions within the available range of investment choices to optimize returns, given each member’s investment horizon and risk tolerance,
- decide on their level of any voluntary contributions to the Plan (under current design they can contribute up to an extra 4.0% of pay),
- determine their needs for investment and retirement planning advice as provided by a qualified advisor and arrange for such advice should they deem it appropriate to do so,
- use the investment information and decision making tools made available to them to assist in investment making decisions; and
- decide on appropriate retirement income vehicles.
2.7 The Managers shall
- manage the assets invested by Members with them according to their investment mandates, subject to all relevant legislation and to the constraints and directives contained in the Statement and in any supplementary document provided by the Administration,
- if they are engaged directly by the University and not through the Custodian, meet with the Administration as requested to present their analysis of their investment performance and to describe their current and future investment strategies regarding their specific investment mandates,
- meet with the Custodian at least annually to present their analysis of the investment performance and to describe their current and future investment strategies regarding their specific investment mandates,
- prepare quarterly written reports of investment performance results and provide them to the Custodian,
- submit annual certificates to the Custodian attesting to their compliance with their own policies and with any such supplementary documents provided by the Custodian or the Administration and immediately notify the Custodian if at any time an investment or group of investments does not comply with such policies and requirements,
- identify to the Custodian any provisions in their pooled fund investment policies that may need to be revised due to new investment strategies or changes in the capital markets;
- monitor the assets for which it is responsible to ensure ongoing compliance with all legislation governing money laundering and terrorist financing, including (without limiting the foregoing) the United Nations Suppression of Terrorism Regulations, and
- be governed by the Code of Ethics and Standards of Professional Conduct of the CFA Institute.
2.8 The Custodian shall
- perform the duties required of an administrator/custodian by law,
- ensure that the managers made available to the University through the Custodian meet their responsibilities under the Statement,
- perform the duties required of the Custodian pursuant to agreements entered into from time to time with the University,
- provide the University with a written annual credit rating report about the Custodian and the provider of GICs and immediately inform the University in writing of any credit changes,
- provide the University with current descriptions and investment policies of the Pooled Funds,
- ensure that all investment options provided to Members meet all legislative requirements and inform the University in writing of any change to such options,
- receive contributions from the University and Members and, on the same day, remit the appropriate amounts to the Managers,
- maintain individual accounts for the Members to record their investments and administer the payment of termination/retirement and other benefits as required,
- provide the University with periodic portfolio printouts of all the unit holdings and assets invested as well as transactions during the period,
- assist the University in providing information and support to Members to help them with their selection of investment options,
- periodically review the inter-fund transfer activity of Members and report the frequency of such activity to the University,
- provide the University with an annual list of Members whose assets may exceed the protection offered by Assuris,
- conduct itself in accordance with the CAP Guidelines, and
- if investments are provided to the University through the Custodian, submit annual certificates attesting to the compliance of all managers with the Statement, and notify the Administration if at any time an investment or group of investments does not comply with the Statement.
- at least once every year, meet with Administration and provide a monitoring report for the Plan fund, including an analysis of the Managers and their performance; and
- provide such other information and analysis as may be requested from time to time, in a competent and professional manner.
3 — PLAN OVERVIEW AND INVESTMENT IMPLICATIONS
3.1 The Plan is a registered pension plan, which provides contributory, defined contribution benefits for Members. The University contributes to each member's account 7.5% of the Member’s basic earnings. Members are required to contribute 6% of their basic
earnings. Members may elect to make additional voluntary contributions.
3.2 Under a defined contribution pension plan, the member bears the investment risk. A member’s account balance is directly related to the amount and timing of contributions to the member's account and to the performance of the investment options selected by the member. The amount of a member’s pension will be the amount of income which can be provided with the accumulated assets in the member's account.
3.3 The Members have diverse demographics, diverse investment and financial experience,
and diverse risk tolerance. The University believes that the best way to address the diverse investment needs of Members is to offer a wide range of investment options that
cover the major asset classes and the entire risk/return spectrum appropriate for pension
funds. In particular, the investment options shall:
- cover a range of asset classes with imperfect correlations and differing risk/return characteristics,
- be distinguishable and have different investment styles or objectives,
- be well-diversified and professionally-managed, and
- have fees that are reasonable for their asset class and investment mandate.
The demographics and investment sophistication of Plan members shall be considered in deciding on the number and types of investment options to offer. In particular, the number of options should not be so vast as to impede the communication and supervision of the Plan’s investment offering.
3.4 The range of investment options shall include GICs of various terms, and selected Pooled Funds, all as provided by the Custodian. Fund descriptions and investment policies of the Pooled Funds are attached as Appendix A and the University adopts these guidelines for the Pooled Funds.
3.5 Members are permitted to invest in any or all of the investment options in any proportion. Members may change their investment instructions for future contributions and existing assets at any time.
3.6 The objective of each Member should be to select investment options to maximize the amount of retirement income available, subject to an acceptable level of risk for the Member. This objective may be achieved by
- diversifying investments across asset classes,
- investing primarily in those asset classes that are expected to perform the best in the long term, and
- making long-term asset mix decisions on a life-cycle and personal event driven basis.
3.7 Member’s selection of investment options shall be facilitated by offering a series of target date portfolios (“Target Date Portfolios”) as described in Section 4.2.
3.8 It is anticipated that all Members shall actively select their investment options. In the event a Member fails to make a selection, the default investment option shall be the Target Date Portfolio with the maturity date closest to the year in which the Member will
attain age 65.
4 — MANAGER EVALUATIONS
4.1 The quantitative performance of a Manager shall be considered satisfactory if the Manager’s rate of return meets the objective shown below in reference to the indicated
Fund / Option (abbreviated): Sun Life Market Fund
Benchmark: FTSE TMX 91-Day T-Bill
Objective: + 0.10%
Fund / Option (abbreviated): Guaranteed Investment Accounts
Benchmark: Average rate of largest Canadian banks
Objective: + 0.25%
Fund / Option (abbreviated): PH&N Bond Fund
Benchmark: FTSE TMX Universe
Fund / Option (abbreviated): MFS Global Equity Fund
Benchmark: MSCI World
Fund / Option (abbreviated): MFS International Equity Fund
Benchmark: MSCI EAFE
Fund / Option (abbreviated): BlackRock U.S. Equity Index Fund
Fund / Option (abbreviated): Beutel Goodman Canadian Equity (value bias)
Benchmark: S&P/TSX Capped
Fund / Option (abbreviated): Connor, Clark & Lunn Q-Growth Canadian Equity (growth bias)
Benchmark: S&P/TSX Capped
Fund / Option (abbreviated): Connor, Clark & Lunn Small Cap Canadian Equity*
Benchmark: S&P/TSX Small Cap (60%) /S&P/TSX Completion (40%)
Fund / Option (abbreviated): Bentall Kennedy Canadian Real Estate Plus Fund*
Fund / Option (abbreviated): Lazard Global Listed Infrastructure Fund*
Benchmark: FTSE Macquarie Global Infrastructure Index (hedged)
Fund / Option (abbreviated): Templeton Global Bond Fund*
Benchmark: J.P. Morgan Global Government Bond
Fund / Option (abbreviated): Integra (Analytic) Global Low Volatility Equity*
Benchmark: MSCI World
Objective: ±1.00% and also < 80% of the volatility of the benchmark
Fund / Option (abbreviated): Schroders Diversified Growth Segregated Fund
Objective: +4.00% and < 70% volatility of MSCI World
Fund / Option (abbreviated): Sun Life Schroder Emerging Markets Fund*
Benchmark: MSCI Emerging Market
* Only available through Target Date Portfolios or the Diversification Growth Portfolio.
4.2 A series of Target Date Portfolios are offered to Members to assist them with their initial asset allocation decisions and with the management of their asset mixes throughout their careers. The asset mix of each Target Date Portfolio becomes more conservative (i.e. the allocations to equity reduces) as the target retirement date approaches. The University has selected a particular glidepath for this equity allocation reduction process as described in greater detail in Appendix B.
The Managers and Funds chosen for each component of the Target Date Portfolios are the performance of the target date portfolios will be a function of the assigned weights to the components and the actual performance of the Funds used for each component. The Target Date Portfolios will be evaluated periodically to assess whether:
- the Custodian has appropriately re-balanced the components of the target date portfolios; and
- the broad target allocations (fixed income vs. equity) are reasonably similar to pre-built institutional target date funds available in the Canadian marketplace.
4.3 For the purpose of measuring rates of return of the Pooled Funds, all returns shall be measured before investment management fees, but after transaction costs, over rolling four-year periods in the case of active management and over one-year rolling periods in the case of passive management. All index returns shall be total returns. All foreign index returns shall be Canadian dollar returns.
4.4 At the end of each quarter the Administration will report to Members of the Investment Committee the returns as reported by the Custodian on each investment option offeredto Members.
4.5 The consultant shall provide such advice, at the request of the Administration, as may be required from time to time to assist the Administration in its duties in respect of this Statement.
4.6 Each year the Administration shall report to the Investment Committee on the Managers using the following criteria, as may be appropriate for specific managers:
- overall adherence by a Manager to the Statement;
- consistency of a Manager's portfolio activities, style and philosophy with its stated style and strategy;
- retention of a Manager's professional staff, replacement of a Manager's staff lost by retirement, resignation, etc.;
- quality of a Manager's communication with the University;
- competitiveness of fees;
- characteristics of a Manager's firm (e.g., ownership, growth in assets under management, client retention/loss, etc.); and
- consistency of key personnel and their role in the investment decision.
5 — CONFLICT OF INTEREST
5.1 These section applies to the University, the Board, the Administration, the Managers, the Custodian, and any employee, agent, or third party retained by any of the foregoing to
provide services to the Plan.
Conflict of Interest
5.2 No person listed above may exercise his powers in his own interest or in the interest of a third person, nor may he place himself in a situation of conflict or potential conflict between his personal interest and his duties with regard to the investments made by Members.
5.3 Any person listed above shall disclose any direct or indirect association or material
interest or involvement that would result in any actual, potential or perceived conflict of interest with regard to these investments. Without limiting the generality of the foregoing, this would include material benefit from any assets held, or the Membership on the boards of other corporations, or any actual or proposed contracts with the issuer of any securities.
Procedure on Disclosure
5.4 An individual listed above shall disclose in writing the nature and extent of his interest to the University immediately upon first becoming aware of the conflict. The disclosure must be made orally if the knowledge of the conflict arises in the course of discussion at a meeting.
5.5 If the party disclosing the conflict has the capacity to participate in or to make decisions affecting investments, the party may only continue to participate with the approval of the University. The party may elect not to participate with respect to the issue in conflict. If the person disclosing the conflict has voting powers, he may continue to participate with respect to the issue only with the unanimous approval of the other participants with voting rights. His notification shall be considered a continuing disclosure on that issue for purposes of the obligations outlined by these guidelines.
5.6 If any perceived conflict of interest arises in assisting Members with the selection of investment options, the University shall be notified and the Member's decision shall
6 — MISCELLANEOUS
Lending of Cash or Securities
6.1 The Fund itself may not lend cash or enter into securities lending agreements, although the Pooled Funds may enter into securities lending agreements if their policies so permit.
6.2 The Fund itself may not invest directly in derivatives, although the Pooled Funds may do so if their policies permit.
6.3 The GICs and Pooled Funds are valued daily and are highly liquid.
6.4 The trustees of the Pooled Funds exercise all voting rights acquired through the investments of the Pooled Funds.
Valuation of Investments
6.5 The trustees of the Pooled Funds shall value the Pooled Fund units. The Custodian shall value the GICs.
6.6 Assuris and/or CIDC shall protect investments in GICs up to their respective limits.
Rate of Return Expectations
6.7 The expected returns of the various investment options change over time with the economic environment. Appendix C provides capital market expectations for these investment options on a real return or net of inflation basis.
It is recognized that the pooled fund rates of return will be significantly affected by capital market rates of return, and accordingly the Managers’ performance relative to the above-noted long-term real return expectations will not be used to evaluate their performance.