Canadian Pensions Report Seventh Consecutive Positive Quarter

All pension plans within the BNY Mellon Canadian Master Trust Universe produced positive results during the fourth quarter of 2017, with a median return of 4.29%, according to BNY Mellon Global Risk Solutions.

It was the seventh-consecutive quarter of positive results for the fund-level tracking service, which returned 9.83% for the year, compared to its 10-year annualized return of +6.68%.

US Equities were the top-performing asset class during the quarter, with a median return of 6.65%, despite underperforming the S&P 500 Index’s 6.84% return, and international equities were the best-performing asset class for the year, posting gains of 20.01%. Meanwhile, real estate was the worst-performing asset class in the quarter, with a median return of 2.39%, and fixed income had the weakest returns for the year with gains of 3.27%.

Emerging markets equity was the top-performing sub-asset class, with a median return of 7.03% for the quarter, while US large-cap equities rose 6.75% during the same time period. Canadian long-duration fixed income was the top-performing Canadian fixed-income sub-asset class in the fourth quarter, rising 5.2%.

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Private equity earned a median return of 4.42%, while infrastructure, real estate, and hedge funds gained 3.04%, 2.39%, and 2.2% in the quarter, respectively. Fixed income had a median fourth quarter return of 2.98%, outpacing the FTSE TMX Canada Bond Universe Index return of 2.02%.

Canadian Equity posted a quarterly median return of 4.3%, compared to the S&P/TSX Composite Index return of 4.45%. International equity and non-Canadian equity had median returns of 5.45% and 6.03%, respectively, beating out the MSCI EAFE Index and MSCI World Index returns of 4.46% and +5.81%.

Canadian universities posted a median return of 4.22% in the fourth quarter, with a one-year median return of 10.4%, while Canadian foundations and endowments had median returns of 4.11% during the quarter, and 10.03% for the year.

The BNY Mellon Canadian Master Trust Universe consists of 88 Canadian corporate, public, and university pension plans, and has a market value of more than $241.9 billion, with an average plan size of $2.7 billion.

Tags: BNY Mellon, BNY Mellon Canadian Master Trust Universe, Canada, Pension

Faced with a teachers’ retirement plan that is 55.97% funded and a growing state budget deficit, Connecticut will hold a public hearing to hear recommendations for the viability of the teachers’ pension system on Wednesday in Hartford. Proposals are due by 4:30p.m. Tuesday.

Last year, the teachers’ contribution rate was raised by 1%, yet the pension’s funding levels still dropped from 59% to 55.97% with $13.1 billion in unfunded liabilities, and the state is obligated to pay the tab by 2032. The unfunded actuarial accrued liability grew by $1.776 billion due to interest and decreased by $1.654 billion due to the amortization payments over the two-year period, according to the November 2017 Connecticut State Teachers’ Retirement System Actuarial Valuation.

The struggling pension fund was historically underfunded at 80 to 85 cents on the dollar until 2008 when the state issued a $2 billion bond to fund the pensions, according to a person familiar with the matter. A bond covenant mandated the state’s full funding of the pension each year thereafter.

Gov. Dannel P. Malloy has made proposals to shift the burden of responsibility partially onto municipalities. His 2018 proposed budget, announced Monday, recommends dropping the assumed rate of return from 8% to 6.9% and adopting a new amortization schedule. With the overall state budget still showing a $244.6 million deficit, Malloy proposed ideas to close the gap, including requiring towns to contribute to the Teachers’ Retirement System. Critics say the contribution requirement could affect tax rates, and argue that municipalities never had a seat at the table when the state negotiated its teacher benefits.

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The Teachers’ Retirement System Viability Commission, charged with developing and implementing a plan for the financial viability of the plan, will hold the public hearing at the State Teachers’ Retirement Board office. Those wishing to testify by email or in person are to email Charlene.hill@ct.gov by 4:30 p.m. on Tuesday, February 6, and, if testifying in person, to submit 25 copies of written testimony to the Commission beforehand. The hearing will take place from 3-5 p.m.

Tags: Connecticut, Connecticut State Teachers’ Retirement System, Governor Dannel Malloy, Pension