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› Asset-Mix Policy
› Risk Management
› Statement of Investment Policies and Procedures (115 KB PDF)

We invest with a long-term focus because the pension plan will
be paying benefits to today's young teachers 70 years from now.
We look at the plan's liabilities and how long they will be paid,
and carefully match the cost of future pensions to the best set of assets to meet the plan's long-term needs, within appropriate risk limits.

 

The plan relies heavily on the investment program to generate the returns required to pay pensions. Due to the importance of investment income, we continually look for the best new opportunities and techniques to earn the required investment returns within the fund's risk parameters.

 

Our goal is to generate strong enough investment performance so that the plan assets plus contributions equals the cost of future benefits over the long term. Contribution rates and benefit levels are set by the plan sponsors – the Ontario Teachers’ Federation and the Ontario government.

 

Our investment approach as a long-term, value investor remains constant. However, we continually refine our investment strategy as assumptions, market conditions and the plan's funding status change.

 

Teachers' faces a formidable two-fold funding challenge. We must generate the returns required to support pensions. But the desire for stable contribution rates and the low ratio of working teachers to pensioners (1.5 active teachers per retiree) means that managers must be cautious about the fund's risk exposure. Conditional inflation protection, approved by the plan sponsors in 2008 for benefits earned after 2009, will increase the plan’s tolerance for risk, but only over time.

 

Teachers' investment managers address these competing concerns by operating within an asset mix that is more conservative than other large pension funds, while working to maximize returns within the target mix. We have successfully diversified our holdings beyond traditional stocks and bonds by making direct investments in real estate, infrastructure and timberland assets, private businesses and by investing in commodities. These investments each have attributes that help the fund generate the returns required to pay pensions over the long term.

 

For more information, please see asset-mix policy.

 

We believe that passive investing through market indexes cannot, with confidence, generate the risk-adjusted returns the plan requires. To increase overall returns, we strive to add value above the fund benchmark each year. We use several methods to outperform market benchmarks. For example:

 

• We use a total fund management style that encourages the sharing of information and movement of capital among asset classes and portfolios to optimize risk-adjusted returns. During 2009, we took steps to reinforce and enhance the approach, including maintaining a portfolio-wide view of exposure categories, and coordinating value-added decisions across various portfolios.

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• We use a mix of active and passive strategies so that we can shift capital from index funds to active portfolios when we see opportunities to add value. Active management means selecting securities we believe are undervalued, as well as under- or overweighting asset classes, sectors or foreign currency positions relative to an index.

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• We use internal absolute return strategies and externally managed hedge funds. The goal of these strategies is to generate positive investment returns regardless of market movements.

 

At the same time, we monitor and manage risk carefully to understand our risk exposures and avoid undue losses. For more information on how we do this, see risk management, risk budgeting and monitoring.

 

Our investment approach is outlined in our Statement of Investment Policies and Procedures (SIPP) (115 KB PDF).