Public pension plans largely stick to convention and offer little information on pandemic impact

The Canada Pension Plan Investment Board is about to give Canadians insight into what COVID-19 has done to the investments of the country’s public pensions in the past few months – but for members of most other major plans, the damage that’s been done from a sharp, sudden decline in markets may remain a mystery.

CPPIB, which reports results quarterly, is one of a few Canadian pension managers that has a March 31 fiscal year-end. It plans to release its results, including a lengthy annual report, on Tuesday. By revealing returns as of March 31, CPPIB will show where its portfolio stood just days after global equity markets bottomed and the economy cratered as the world fought COVID-19.

Many of Canada’s major pension plans, however, have fiscal years that ended Dec. 31. They don’t release quarterly numbers – and they’re not making an exception in these extraordinary times.

Alberta Investment Management Corp., or AIMCo, acknowledged it lost $2.1-billion this year on a volatility-based trading strategy after media reports exposed it, but has yet to release its full 2019 results, and it will only provide a first-quarter report on its broader financial performance to its money-management clients, not the public.

The first three months of 2020 were certainly a bad one for the plans. A study by RBC Investor & Treasury Services showed the median return among 29 public- and private-sector pension plans was a loss of 7.1 per cent – the worst quarterly number since 2008.

Morneau Shepell’s survey of fund managers who provide investment management for pensions revealed an even worse median return of negative 10 per cent. A fund with roughly $100-billion in assets or more – as the major Canadian plans have – would see a paper loss in the billions of dollars from Dec. 31 to the end of March.

Still, the results will vary. At Ontario Teachers’ Pension Plan, $93-billion, or 46 per cent, of the plan’s portfolio was in bonds at year-end 2019, with $75-billion, or 37 per cent, in equities. The plan had less exposure to stocks in 2019 than other major public-sector pension plans, causing it to miss its benchmark return goals for last year, chief executive Jo Taylor said in March, but sheltering it, to a degree, from this year’s equity market turmoil.

“This more defensive stance ... helped us navigate current conditions,” he said. He declined to provide specific results, citing Teachers’ disclosure obligations to holders of its debt. Several large plans, such as Teachers', CPPIB, the Caisse de dépôt et placement du Québec and the Ontario Municipal Employees Retirement System issue corporate-level debt.

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British Columbia Investment Management Corp. had about 40 per cent of its portfolio in the public stock markets at March 31, 2019. In a May 12 message, the chair of B.C.'s Municipal Pension Board of Trustees, one of BCIMC’s clients, said the board "has been anticipating for some time a correction in the decade-long market growth and has been working with BCIMC ... to adjust the portfolio holdings to reduce risk.” BCIMC declined to answer questions on what this meant for its returns.

Peter Lindley, CEO of OPSEU Pension Trust, known as OPTrust, said “market volatility has affected us only about one-tenth as much as it has affected the TSX and Dow."

The Globe and Mail asked the largest Canadian public pensions to address the markets and their results from the first calendar quarter, and none would provide an exact investment-return figure for the period ended March 31. Public Sector Pension Investment Board, the plan for federal employees, and BCIMC said they would release the figures for their years ended March 31 in the coming weeks. Teachers’ and the Caisse will release some midyear results in late summer for their returns to June 30.

The Globe also asked the funds whether their executives were taking salary reductions, as the leaders of the Caisse did in late March, or whether they were furloughing employees or reducing hours, as some major Canadian law and accounting firms had.

Mr. Lindley said there were no pay cuts or employee reductions at OPTrust, the pension plan for Ontario provincial government employees, “given that the plan remains healthy and our approach to investing is long term."

AIMCo spokesman Denes Nemeth said layoffs and furloughs were unnecessary because its employees “are able to effectively work remotely." The fund “has had certain salary restraint measures in place,” implemented by the government of Alberta, "but remains mindful of our need to continue to attract and retain the investment and operations professionals necessary of a globally diversified institutional investor.”

Other plans, including the three that were working on their year-end results, declined to explicitly answer the question, with some making general comments about their efficiency or low expenses, such as the response from Healthcare of Ontario Pension Plan.

“From a leadership perspective, I believe this is a good time for the C-suites of Canada’s large pension organizations to be seen and heard,” says Keith Ambachtsheer, a long-time pension industry consultant who was one of the early advocates for large, actively managed public pensions with strong governance systems. “I would hope that the boards of directors/trustees of our major pension organizations are leaning on their C-suites to signal solidarity with Canadian workers – in other words, pay cuts.”

“Rather than focus on Q1 returns, I’d prefer to have them talking about the longer-term sustainability of their pension plans, and about whether their risk management systems are working as expected,” Mr. Ambachtsheer said in his e-mailed comments, citing AIMCo as an example of a pension plan that needed to speak up.

Most plans are emphasizing their long-term focus to reassure members their pension payments are safe.

“I’m very confident in long-term recovery. ... Our portfolio is built for the long term and is set to weather the short-term concerns," said Satish Rai, chief investment officer at OMERS, in comments at the fund’s annual meeting in early April.

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