Report: Pension Committee - March 24, 2021

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Via Virtual Meeting

REPORT NUMBER 44 OF THE PENSION COMMITTEE
March 24, 2021


To the Governing Council,
University of Toronto.

Your Committee reports that it held a virtual meeting in closed session on Wednesday, March 24, 2021 at 4:00 p.m. with the following members present:

Present:
Cynthia Messenger (Chair), Janet L. Ecker (Vice-Chair), Brian D. Lawson (Vice-Chair of the Governing Council), David N. Bowden, Colleen Burke, Louis Florence, Anna Kennedy, Rajiv Mathur, Alex D. McKinnon, Kim McLean, Jun Nogami, Andrew Szende, Maureen Stapleton, Paul Whittam, Bruce Winter, Lara Zink, Terezia Zoric

Regrets:
Joan Johnston, Sameer Lal, Andrew Padmos

Non-Voting Assessors:
Sheila Brown (Chief Financial Officer), Scott Mabury (Vice-President, Operations and Research Partnerships)

Secretariat:
Patrick McNeill, Committee Secretary

In Attendance:
Pierre Piché (Controller and Director of Financial Services), Allan Shapira (Plan Actuary, Aon), Daren Smith (President and Chief Investment Officer, University of Toronto Asset Management Corporation (UTAM))

The Committee met in closed session


  1. Chair’s Remarks

    The Chair welcomed members and guests to the virtual meeting.
  2. Reports of the Administrative Assessors

    There were no reports of the assessors.
  3. Review of Investment Performance as of December 31, 2020

    Sheila Brown reminded members that the investment performance report had reflected a partial year return for the period July 1, 2020 to December 31, 2020. The full year results for the Pension Master Trust (PMT) would be reported and cover the period from July 1, 2020 to June 30, 2021.

    Mr. Daren Smith presented a report on the Review of Investment Performance to December 31, 2020. Mr. Smith stated that the University evaluated investment performance for the PMT against the investment return targets, the risk limits, and the Reference Portfolio returns, as specified in the Statement of Investment Policies and Procedures (SIPP).

    Highlights of Mr. Smith’s report regarding the above-noted 6-month reporting period for the PMT included the following:
  • the target investment return for the PMT was 2.9%;
  • Pension assets increased by $801 million during the first half of fiscal year 2021 and the investment portfolio returned 14.5%;
  • in H1 FY 2021, the Pension portfolio outperformed the Target Return by 11.6%.
  • over the 10 year period ending December 31, 2020, the Portfolio exceeded the Target Return by 3.1% per year.

    Mr. Smith stated that capital markets performed well over the 6-month period (June 30 to December 31) and this was reflected in the portfolio return – figures were net of investment fees and expenses, including UTAM costs. He noted that in the first half of fiscal year 2021, the actual return had exceeded the Reference Portfolio benchmark return by 3.2%, and that over the most recent 10 year period, the actual return had exceeded the Reference Portfolio benchmark return by 1.0% annualised, resulting in $320 million of value added.

    Mr. Smith reported that Active Risk remained well within the target zone at December 31, 2020. He also confirmed that as of December 2020, the Pension assets had been managed in compliance with the SIPP during the 6-month reporting period.

    In response to a members’ questions and comments, Mr. Smith noted the following:
  • peer comparisons with other pension plans are not typically undertaken because of differences in risk tolerances, return objectives, and asset mixes;
  • the definition of engagement included meeting with the management and Boards of different companies to better understand a company’s position on various Environmental, Social and Governance (ESG) issues and communicate UTAM’s views with the goal of improving management of ESG risks and opportunities at portfolio companies;
  • the Pension portfolio’s carbon footprint (emissions per million dollars invested) decreased significantly during calendar year 2020 and was 37% lower than the value in the base year of 2017 that is used for the 40% reduction goal. Importantly, absolute carbon emissions were 21.1% lower than in 2017; and
  • more information on UTAM’s responsible investing activities would be provided in the annual Responsible Investing report, which was expected to be published in the Fall. UTAM also updated its website frequently throughout the year with responsible investing news stories.

    The Chair agreed with a member’s comment about the positive rebound in value added and the success in manager selection.

    The Review of Investment Performance as of December 31, 2020, was received for information.
  1. Report of the Previous Meeting

    On motion duly moved, seconded and carried

    IT WAS RESOLVED

    THAT the Pension Committee Report Number 43, from the meeting of December 9, 2020, be approved.
  2. Business Arising from the Report

    There was no business arising from the report of the previous meeting.
  3. Date of Next Meeting

    The next meeting of the Pension Committee was scheduled for Wednesday, May 26, 2021.
  4. Reports of the Administrative Assessors

    There were no reports of the Assessors.
  5. Other Business

    There were no items of other Business.


The meeting adjourned at 4:43 p.m.


March 25, 2021