Our Investment Approach
Based on PSP Investments’ mandate and risk appetite, the Board of Directors has implemented an investment approach founded on two key pillars:
- Policy Portfolio
PSP Investments’ Policy Portfolio defines the asset mix, or how assets will be allocated among various asset classes. Reviewed at least annually, it is designed with the aim of achieving a return at least equal to the long-term actuarial rate of return used by the Chief Actuary of Canada in his latest valuation of the Plans (i.e., a real return of 4.1%2), assuming a level of risk that is within the defined risk appetite. In the absence of other factors affecting the funding of the post-2000 obligations of the Plans, it is the rate of return required to maintain funding requirements and pension benefits at their current levels.
- Active Management
Active management activities are designed to generate returns over our Policy Portfolio. We believe that selected active management activities can accomplish this without materially impacting risk.
Our investment approach, including our Policy Portfolio, is outlined in our Statement of Investment Policies, Standards and Procedures.
Our Performance Objectives
The success of our investment approach is measured by the following objectives:
- Investment approach: achieve an absolute return, net of expenses, at least equal to the actuarial rate of return over 10-year periods;
- Active management: achieve a return exceeding the Policy Portfolio benchmark over four-year periods.
Our Competitive Advantage
As one of the only large pension plans in the world which can expect net positive inflows until at least 2030, PSP Investments is in a unique position. This situation enables us to act on opportunities and maintain our investments for the long term, even in difficult market conditions and without the burden of liquidity constraints.
- These amounts are liable for pension obligations for service on or after April 1, 2000 except, in the case of the Reserve Force Plan, where they are liable for service on or after March 1, 2007.
- Real rate of return used in the actuarial reports on the Plans for the Public Service and Royal Canadian Mounted Police as at March 31, 2011.