CAAT Pension Plan Gains 16% in 2019

May 28 23:05 2020 Print This Article

Yaelle Gang of the Canadian Investment Review reports that CAAT pension plan returns 16% in 2019, well-positioned to weather coronavirus storm:The Colleges of Applied Arts and Technology pension plan saw a strong 2019, delivering a 16 per cent return, net of investment management fees, while growing its assets under management to $13.5 billion.“On an absolute basis, all asset classes contributed positively to returns in 2019, with global developed equity, long bonds and real assets being the largest contributors,” said the annual report. “Interest rate and inflation hedging asset classes returned 11 per cent in aggregate, while return-enhancing asset classes returned 20.5 per cent. The plan’s currency hedging policy added 1.8 per cent to returns.” For 2019, the CAAT plan is 118 per cent funded on a going-concern basis.While 2020 markets have gotten off to a bumpy start, the CAAT plan has a long-term perspective. “Even though we are monitoring what’s going on in the marketplace, I don’t have any real concerns from an investment perspective at this time,” says Derek Dobson, chief executive officer of the CAAT plan.He highlights the plan’s fairly large funding reserve and asset smoothing reserve, at $2.9 billion and $0.8 billion, respectively. “And the volatility in the marketplace hasn’t even used up our asset smoothing reserve yet. So we’re still very much [in] a strong, well-funded position.”Further, the plan has a globally well-diversified portfolio, adds Dobson, noting the portfolio is performing as expected. “Clearly, with a 16 per cent net rate of return in 2019, I’m super pleased and proud that our asset mix and our team’s performance is exceeding my expectations.”The CAAT also regularly conducts asset-liability modelling studies to measure its health against different scenarios. These studies have confirmed the plan can weather severe downside situations.For its Jan. 1, 2020 valuation, the plan’s discount rate was lowered from 5.5 per cent to 5.15 per cent to reflect expected lower returns in the future. “The lower discount rate marginally lowers the plan’s 2020 funded status, but increases the likelihood that its funded status will improve in the future because it is more likely that future investment returns will exceed the lower discount rate,” the annual report said.Overall for 2019, Dobson says he’s most proud of the work the CAAT plan has done to expand defined benefit coverage in Canada, noting in 2019, it added more than 10,000 members by welcoming single-employer plans into its DBplus plan. “If we were to look at our purpose, which is to make simple, secure, valuable workplace pensions accessible to all Canadian workplaces, I think we made a major step — or even two or three major steps in 2019 — to contribute to the retirement income security industry.”A little over a month ago, the CAAT Pension released its 2019 results, gaining 16% net and ending the year with $13.5 billion in assets (I waited till now to cover the annual year-in-review webinar):The CAAT Pension Plan’s financial results, released today, confirm that the Plan is well-funded and has ample reserves to weather the recent investment market downturn. The Plan has been steadily building reserves over the past decade, consistent with the focus on benefit security. The CAAT Plan concluded 2019 with a total of $13.5 billion in assets, up from $10.8 billion the previous year. The fund returned 16.0%, net of investment management fees, over the one-year period, and moved its 10-year annualized rate of return net of fees to 10.0%. The health of the Plan is very strong. Based on prudent assumptions about the future, the Plan is 118% funded on a going-concern basis, with a $2.9 billion funding reserve, plus an additional $0.8 billion in asset smoothing reserves to absorb investment market volatility.CAAT also regularly conducts asset-liability modelling studies to measure its health against a variety of diverse economic and demographic scenarios. These studies confirm the Plan will remain strong even under the most severe downside scenarios.“The markets’ response to the COVID-19 pandemic has created near-term investment declines; but the Plan has prepared well for the unexpected,” explains Derek W. Dobson, CEO of the CAAT Plan. “The Plan’s globally diversified asset portfolio has also helped mitigate recent declines in the equity markets.” “The lifetime pensions members have earned are not affected by short-term investment market fluctuations,” adds Dobson. “Our stability and focus on benefit security provide beneficiaries with peace of mind in an uncertain world.”CAAT’s DBplus plan design has made secure defined benefit pensions accessible to more working Canadians in different sectors across the country. More than 15,000 members from 28 new employers have joined CAAT, representing nine industries across the for-profit, not-for-profit, and broader public sectors, and includes the support and participation of 14 different unions. Welcoming more groups of workers from across Canada will continue to strengthen the Plan.Read the complete 2019 CAAT Pension Plan Annual Report, Valuable workplace pensions made simple (PDF).Take the time to carefully read the complete 2019 CAAT Pension Plan Annual Report here, it's very well written and extremely transparent.Yesterday afternoon, I had a chance to discuss CAAT's results and new membership drive with its CEO, Derek Dobson and its CIO, Julie Cays.I want to thank both of them for taking the time to chat with me via Microsoft Teams and also thank John Cappelletti, Special Advisor to the CEO, for setting this up.I began by asking them to go over last year's results. It was an exceptional year and Derek told me the CAAT Plan’s 10 year return is ranked #1 of the 39 funds with market value above $1 billion in the BNY Mellon Canadian Master Trust Universe.Readers of my blog will recall that the Healthcare of Ontario Pension Plan (HOOPP) gained 17% last year, etching out CAAT Pension's return, but it's a much larger pension plan and unlike CAAT, it used a lot more leverage to achieve these incredible gains (CAAT's gains are unlevered not that there's anything wrong with the intelligent use of leverage).What CAAT has in common with HOOPP is its funded status, 118% versus 119%, which is the ultimate measure of success of any pension plan (more on that later).Anyway, below you will find 2019 highlights from the Annual Report:

Read More

About Article Author

Pension Pulse

Leo Kolivakis is an independent senior economist and pension and investment analyst with years of experience working on the buy and sell-side. He has researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de dépôt et placement du Québec (Caisse) and the Public Sector Pension Investment Board (PSP Investments). He's also consulted the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system.

Related Items

Top Funds' Activity in Q1 2020

Jason Orestes of The Street reports Amazon is clearly what hedge funds are betting on these days:Amazon has been a major beneficiary of the Covid-19 chaos, and hedge funds have taken notice.The fastest bear market in history saw a 30% plummet followed by a rapid 30% rebound. But there has been a l ...

CPPIB Gains 3.1% in Fiscal 2020

Pete Evans of CBC News reports CPP adds $17 billion to assets now worth more than $409 billion despite the pandemic:The Canada Pension Plan earned a return of 3.1 per cent after expenses during the financial year ended March 31, the board that manages the fund's money reported Tuesday.Net assets fo ...

CAAT Pension Plan Gains 16% in 2019

Yaelle Gang of the Canadian Investment Review reports that CAAT pension plan returns 16% in 2019, well-positioned to weather coronavirus storm:The Colleges of Applied Arts and Technology pension plan saw a strong 2019, delivering a 16 per cent return, net of investment management fees, while growin ...

Filing your clients’ 2019 taxes: what’s new and noteworthy

The Thursday, April 30 tax filing deadline for individuals is coming up fast. Here’s a summary of new limits, new rates, tax changes and new services. Tax filing season is upon us, and the first thing to note is the filing deadline: Thursday, April 30. For business owners and their spouses, the t ...

Market Update: Investors Optimistic as Global Economies Reopen

The quickest bear market in the history of the US S&P 500 turned into the best 50-day bull market rally in history in May. By market close on June 3, 2020, the S&P 500 Index was up 37.7% from its March 23, 2020 low. This bullish investor sentiment has been based on the continued decline in new coro ...

5 from 5i: Shopify displaces RBC to become Canada's most valuable company

Weekly stock market update & five stock related articles we thought were a must-read this week ...

IMCO's Big Stake in Apollo's New Fund

Christine Idzelis of Institutional Investor reports that Apollo took just two months to raise a credit fund that seeks to profit from tumultuous markets — and it got a swift and significant contribution from Canadian pension manager IMCO:When Apollo Global Management approached the Investment Man ...

US Public Pensions Less Than 60% Funded?

Steffan Navedo-Perez of Chief Investment Officer reports that Goldman Sachs estimates public pensions are now less than 60% funded on average: Average funding ratios for public pension funds have declined to 60% and below, down from 74% before the crisis, according to Goldman Sachs Senior Pension ...

Don’t write an obituary for shipping’s dirtiest fuel

High sulfur fuel oil, once the cheap staple diet of the shipping industry, has been usurped by an abundance of low-cost, premium quality bunker fuel. That’s led to seafarers freezing orders for equipment to remove the sulfur from HSFO and maximizing compliant fuels. But don’t write off shipping ...

Agriculture markets eye normality as countries ease export restrictions

The global food supply chain, as well as demand for agricultural products, faces an unprecedented threat from the coronavirus pandemic. Livelihoods have been destroyed and economies dragged down, while prices of basic foodstuffs soared and countries imposed measures to limit exports and shore up do ...

How To Buy Bonds

Over time, bonds should find a place in your portfolio. How much you should have will definitely depend on your investment strategy and appetite for market swings. If you are in the market for bonds, you can get in on ... Read more ...

Question and Answer session on The Citizen’s Guide to Climate Success

Here is the video recording of my Question and Answer session on The Citizen’s Guide to Climate Success on May 12, 2020. Thank you to the group, Climate Crisis Legislation Needed Now, particularly Ken Johnson and Kathleen O’Hara. ...

The state of COVID-19 testing

In these unprecedented times, we know that controlling the spread of novel coronavirus requires social distancing and testing. While all of us are doing our parts to stay at home, there’s a lot of confusion, chaos and frustration surrounding coronavirus testing in the US.  Before going further, ...

Gold About To Breakout $1800

It was 2008 and we were in the middle of the Great Financial Crisis.  At the time I was working as a math teacher with a small family.  I was already investing in junior gold miners for 10 years before I took the plunge to go full time into becoming a mining entrepreneur leaving a secured tenure ...

Stat Arb, Algos and the Difference Between Cats and Dogs

A co-founder of Quantigic Solutions has presented what he calls “the freshmanlevel” answer to the question: why did dollar-neutral quant trading strategies, such as equities stat arb, fail so markedly during the COVID-19 market sell-off? Zura Kakushadze, a professor at the Free University of Tbl ...