The C$135.5 billion (US$108.2 billion) British Columbia Investment Management Corporation (BCIMC), one of Canada’s largest institutional investors, reported an annual combined pension return, net of costs, of 12.4% for fiscal year 2017, beating a combined market benchmark of 11.7%
The return generated C$680 million ($542 million) in added value for its pension plan clients, said BCIMC. Infrastructure, private equity, real estate, and renewable resources outperformed for the calendar year, and exceeded benchmark returns. The company said that tactical decisions to underweight fixed income in favor of public equities provided increased returns.
“A key contributor was the outperformance of global equities relative to their benchmark,” said BCIMC. “In a low-return environment for fixed income, the decision to underweight nominal bonds added value, and was further enhanced by outperformance relative to the benchmark. Strong performance in illiquid asset investments also provided value-add.”
Gordon Fyfe, BCIMC’s CEO and CIO, said that over the past 20-year period, the pension fund exceeded its actuarial return requirements, and has added $7.7 billion in cumulative value-add.
“Although annual returns provide us with a short-term perspective,” said Fyfe, “it is the longer term that matters.”
BCIMC has consistently outperformed its benchmark over the past one-year, four-year, 10-year, 15-year, and 20-year periods. Over the past four years, the fund returned 10.1%, compared to a benchmark of 9%; over the past 10 years, it has returned 6.6%, compared to a benchmark of 6%; over the past 15 years the fund has returned 7.4%, compared to a 6.8% benchmark; and over the past 20 years, it returned 7.7%, compared to a benchmark of 7.3%.
BCIMC’s “new investment model emphasizes a greater degree of active management over indexing strategies, and creating new and diversified sources of market return and active return to increase the probability of meeting our clients’ actuarial rate of return,” said Fyfe.
“Our strategy refocuses BCIMC to become an in-house asset manager that uses sophisticated investment strategies and tools,” said the company in its annual report. “By increasing the percentage of assets managed by BCIMC’s investment professionals, we will transition from a reliance on third parties to a more cost-effective model of managing illiquid assets.”
In fiscal 2017, the fund increased its managed net assets C$13.6 billion from the previous year, to C$135.5 billion. The fund’s asset mix as of March 31, 2017 was: Public Equities (48.3%, or C$65.5 billion); Fixed Income (19.2% or C$26 billion); Real Estate (13.5% or C$18.2 billion); Infrastructure (8.1% or C$11.0 billion); Private Equity (5.8% or C$7.8 billion); Mortgages (2.1% or C$2.9 billion); Other Strategies–All Weather (1.5% or C$2.1 billion); and Renewable Resources (1.5% or C$2 billion).
Tags: active, active vs. passive, BCIMC, British Columbia Investment Management Corporation, indexing, Returns