On May 12, GENMO director Garry Marnoch met with Dave Courtney to review performance of our plan for the quarter ending December 31, 2013. Not present was the new Vice-President of Finance, Ines Craviotto, who just succeeded Jeff Rolfs, a usual participant at these reviews. Ines comes to Canada after spending several years as CFO of GM Mexico and she has also spent time at the New York Treasurer’s Office. Also absent was GENMO VP Mike Powell who was meeting with retirees in St. Catharines.
Over the last year, the value of the assets in the combined hourly and salaried plans have dropped because return on investment and contributions did not cover the payouts. We are in the period of maximum benefit payouts. Because the Defined Benefit class is closed, the number of members can only decrease going forward, and payouts will drop from today's high point.
The latest adjustment to the asset categories was approved in February, as GMAM continues to balance types of investments to best meet long-range pension plan goals. As an example, there was a reduction of Canadian equities and an increase in US equities to better balance to world market weightings. Fixed income investments have not changed, but the direction will be to exit long-term US corporate bonds and retain only Canadian long-term corporate bonds. The de-risking that has been applied to our plan does not take full advantage of short-tern equity gains but seeks long-term stability, and avoidance of precipitous declines as in 2008.
The quarter was good to the plan. All equities advanced very well, with the US component leading the way and Europe also extemely strong. Emerging markets and private equity showed acceptably, but not spectacularly. Most bond categories held pretty well flat for the quarter, after declining over the year because of rising interest rates; although US high-yield bonds returned very well for the quarter and okay for the year. The Absolute Return Strategy envelope gives fund managers some latitude to make investment decisions, and they did very well for the quarter, okay for the year.
Most asset categories slightly outperformed their benchmarks. Canadian real estate and private equity slightly underperformed. GMAM watches the performance of all the fund managers and makes reassignments when trends are detected, not just because of single quarter performance.
In February, GMAM received a new CEO, Dhivya Suryadevara.
The annual valuation of hourly and salary plan funding will be presented to the pension regulator FSCO by May 30. Because of the generally favourable year, we might anticipate a reduction in the level of underfunding.