Pension Committee Meeting- May 12, 2017
On May 12, 2017, GENMO’s Pension Review Committee—represented by Garry Marnoch—met with Dave Courtney, the financial analyst for our plan, and Ines Craviotto, Vice President of Finance and Chief Financial Officer for GMCC, to review the performance of the plan for the quarter ended December, and for the 2016 year.
Background to the discussion was the cheery thought that GMCC had its best sales year since 2008, which put us into a good mood.
The deck of information did not have the charts that display payments to pensioners versus contributions and earnings; however, the net was positive. This info is helpful and we hope to see it again in future. At the end of May the Actuarial Valuation for September 1, 2016 will be filed, and is expected to be a percent or so higher than the funded level of 85% for 2015. Although FSCO regulations allow actuarial valuations to be filed only every three years when 85% funding is maintained, GM is filing back to back years.
The salaried plan de-risking target is 60% high quality fixed investments, and its actual is almost there, at 59% bonds. There is an intention to introduce some flexibility into the ratio by hedging bonds to de-risk higher than the 60% target as discretion suggests.
Our fund returned 3.3% for the year, ahead of its benchmark 3.1%. However, in the final quarter it declined 2.3%, when its benchmark was negative 2.5%. Interest rates rose 33 basis points over the year, and 73 basis points in the fourth quarter. When interest rates go up, bond values decline, and we have 59% of our assets in high quality fixed investments. Although the fixed portion of our portfolio rose 2.9% over the year, it declined 5.6% in the final quarter. But when interest rates rise, the plan’s liabilities decline, all 100% of them. So the plan is better off.
A tenth of our plan is invested in real estate, and that did poorly, dragging down the overall performance. You may ask, how can one lose on Toronto real estate? But this is temporary; the loss is on valuation only, not real sales, and will rebound when the properties return to profitable uses.
The other asset classes outperformed their benchmarks, and the fund is in good shape.