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Investments & Funding

Investment Management

The LPF is designed to provide members with a defined pension benefit when they retire.  To do so, the Fund must achieve results that will meet its long-term financial obligations.  In other words, the Fund must earn enough investment return so that, together with contributions, the pension earned over each member's working lifetime can be paid out at retirement.  To honour this promise, the Fund is seeking a long-term annualized return in excess of 6% annualized on its investments.  We must balance the earning potential of high-growth investments with the need to provide a stable, secure, and predictable retirement Fund with lower risk assets.  

The Fund's investment assets are managed externally by professional investment managers and advice from external professionals including legal experts and investment consultants.  Each manager has a specific investment mandate - such as stocks, bonds, real estate or infrastructure - and that manager is governed by the guidelines set out by the Board of Trustees in the Fund's Statement of Investment Policies and Procedures (SIP&P).  The objective of each investment manager is to obtain an average annual rate of return greater than its designated benchmark.  The benchmark is the yardstick against which the investment performance can be compared for the purposes of determining investment skill within their respective sector.

Asset Mix

The Fund continuously seeks out investments that provide higher expected long-term rates of return in order to maximize the value of our members' pensions, while managing risk and volatility through diversification and other strategies.  The Pension Committee and Board of Trustees monitors the Fund's performance on a continuous basis and takes the necessary steps to safeguard the assets.  For example, in recent years, we've found that increasing our holdings in private companies, real estate properties, and infrastructure assets has proven to be a very successful strategy for growing the Fund.  

Asset Allocation December 31, 2019

Asset Allocation Pie Chart

 
Canadian Equities 8%

 
Cash & Equivalents 2%

 
Fixed Income 29%

 
Global Equities 19%

 
Infrastructure 7%

 
Other 1%

 
Private Equity 19%

 
Liquid Diversifying Strategies 1%

 
Real Estate 14%

Fund Performance

The average annual rate of return for the five years ending December 31, 2019 was 7.6%. During 2019, the Fund earned an annual rate of return of 10.3%. This return was driven primarily by strong equity market performance which ranged from +17% to +22%.  In addition to the Fund's equity investments, bonds and non-traditional investments also generated positive returns for the year.  We expect the long-term performance results of the Fund to continue to exceed the greater than 6% annual goal.  

Although past performance is not necessarily an indicator of future results, we are continuing with our strategy of a diversified portfolio for continued growth. The Fund continues to search for ways to earn stable, less-volatile returns by expanding investments in the types of alternative arrangements explained above. Over the long-term, the Fund’s asset mix is expected to produce higher and more stable returns that will continue to strengthen the Fund and benefit members.

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