Canadian Universities Launch Jointly Sponsored Pension Plan

The University Pension Plan unites 35,000 members and five pensions into one plan with assets of C$10.5 billion.


Canada’s University Pension Plan (UPP), a new jointly sponsored pension plan serving Queen’s University, the University of Guelph, and the University of Toronto, launched July 1. The plan unites more than 35,000 members and five pension plans into a single administration with total assets of approximately C$10.5 billion (US$8.4 billion).

The three universities said they decided to combine their pension plans in order to reduce costs and improve efficiencies and investment opportunities. According to UPP’s backers, years of low interest rates, volatile investment markets, and rising life expectancies have led to funding shortfalls and increased contribution rates for university plans. They say the current model for single-employer plans is unsustainable, and combining multiple plans will allow universities to focus on providing education for students rather than diverting resources to managing their pension plans. 

“UPP was born from the extraordinary efforts of the employees, administrators, and governors of our founding universities, all committed to strengthening defined benefit [DB] pensions,” Gale Rubenstein, chair of the UPP’s board of trustees, said in a statement. “We’re starting from a strong foundation with an outstanding board and leadership team that are guided by our members’ values and needs.”

The UPP is a DB pension plan that is based on its members’ best average earnings and the number of years of credited service earned after joining the UPP. Pension benefits earned under existing university pension plans will be preserved.

For more stories like this, sign up for the CIO Alert newsletter.

At inception, the UPP pension for credited service earned after joining the UPP will be based on: 1.6% of average earnings below the average year’s maximum pensionable earnings (YMPE), multiplied by credited service, plus 2% of average earnings above the average YMPE, multiplied by credited service. Average earnings will be based on average earnings during the best 48 months of eligible employment, and average YMPE will be based on the average YMPE for the last 48 months of eligible employment. The YMPE for 2018 was C$55,900 (US$44,933).

For example if a participant has average earnings in the last 48 months of eligible employment of C$75,000, and 20 years of credited service earned after joining the UPP, the 48-month average YMPE is C$54,925. And, as is the case with all registered pension plans, the UPP pension benefit will be subject to the maximum pension limits under Canada’s Income Tax Act.

The new fund is being led by Barbara Zvan, president and CEO. She previously worked at the Ontario Teachers’ Pension Plan for 24 years.

Although the UPP will initially cover three universities, it will be open to other universities across the Canadian province of Ontario to join. The UPP follows the model of other multiemployer plans such as the Ontario Teachers’ Pension Plan and the Ontario Municipal Employees Retirement System (OMERS).

Related Stories:

Why a Canadian Pension Fund Performs Better Than Yours

CPPIB Taps Edwin Cass as Pension Giant’s First CIO

Funded Levels of Canadian DB Plans Climb to 20-Year High

Tags: , , , , , ,

Welcome Big Tech Back to the Head of the Class

Amazon, Microsoft, and the gang are posting better returns and will keep on rising, says Barclays.


Big Tech is the comeback kid of the moment, after its long-running rise sputtered during the first quarter and those old stalwarts, cyclicals, ascended in the re-opening trade. The tech titans have caught up, and are going to really cook from now on, as they reassert their leadership of the market, says Barclays.

The pandemic recovery trade has run its course, and now it’s time to get back into Big Tech stocks, according to the bank’s top US analyst.

“We believe market leadership is likely to change from cyclical to secular growth stocks as the COVID recovery trade has mostly run its course,” Maneesh Deshpande, head of US equity research at Barclays Capital, said in a note. “Secular growth stocks look favorably positioned to benefit from the digital transformation that got accelerated during COVID.”

Last year, the tech big guys romped, as the Nasdaq 100 shot ahead 47.6% while the broad S&P 500 increased 16.2%. As of Wednesday’s close, the S&P was up 14.4%, with the Nasdaq index not far behind, at 12.9%, a big improvement since March.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

Value and cyclical stocks have had a nice 2021. But a number of Wall Street analysts, including Deshpande, think their pandemic bounce back has already been priced into those recovery names.

“Following positive news on the vaccine front in November 2020, as the path to a cyclical economic recovery in 2021 became clearer, there was a rotation that began away from stocks with positive exposure to COVID-19 and into stocks with negative exposure to it,” Deshpande wrote. “We think this rotation is now complete.”

Tech names, particularly the largest ones, are well-positioned for the rest of the year owing to the speed-up of digital transformation during the pandemic, Barclays argued. The whole panoply of tech advances, in this view, has embedded itself into Americans’ daily lives and demand for them will only grow. That includes e-commerce, digital advertising, work-from-home systems, and cloud infrastructure, the bank said.

The Barclays report zeroed in on FANMAG stocks—those mega-cap monsters that last year so dominated the field. Facebook, Amazon, Netflix, Microsoft, Apple, and Google-parent Alphabet are enormous competitors. Plus, the bank said, they enjoy the advantages of being relatively cheap, at least compared to 2020.

“We prefer FANMAGs as their valuations have declined to 2019 levels,” Deshpande said, referring to before they really took off in 2020.

Of these, the best prospects lie with Alphabet, Amazon, and Microsoft, he said. “We expect these stocks to hold on to their COVID market share gains and continue to benefit from the acceleration of digital transformation,” Deshpande wrote.

His reasoning: Google will benefit from rising digital ad revenue as the economy improves. Amazon’s solid position in e-commerce and cloud computing services will continue to build its lead. Microsoft will benefit from people who continue to work from home and also those who go back to the office. Thanks to its software and cloud business, it has benefited from the work-from-home shift during the pandemic and also could see a lift as workers return to offices.

Netflix and Apple are the exceptions to this rebound tale thus far, as both are flat for the year. Netflix has posted slower than expected subscriber gains, amid strong challenges from the likes of Disney Plus and HBO Max. Apple’s centerpiece iPhone has seen sales lag, as consumers wait for an upgrade tied to 5G.

Of course, should inflation keep rising, it wouldn’t be good news for the tech hotshots. Higher rates mean lower earnings in the years ahead for them.

Related Stories

Buy Tech, But Not the Big Boys, and Use Private Equity, UBS Says

About That Tech Slowdown: The Big Digital Tomorrow Will Restore Its Place

Tips from Druckenmiller: Commodities, Asian Stocks, Big Tech

Tags: , , , , , , ,

«