We invest with a long-term focus because the pension plan will be paying benefits to today's young teachers 70 years or more from now.

In 2010, we refined our long-term investment strategy to better meet the plan’s future needs. We adjusted our asset-mix policy and increased collaborative decision-making across investment portfolios.

Our goal is to minimize the volatility of the contribution rates teachers pay while earning a return sufficient to ensure the sustainability of the plan. To accomplish this, we construct the best asset mix possible given our assessment of macroeconomic trends, medium-term risks and the constraints imposed by the plan’s liabilities. This means we must consider factors such as asset valuations and demographic trends as well as future pension costs, how long they are to be paid and how they might change in the future. We then invest in asset classes that match these characteristics as much as possible.

We believe that passive investing through market indexes cannot, with confidence, generate the risk-adjusted returns the plan requires. Therefore, to increase overall returns, we strive to add value over and above the fund benchmark each year. 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.

One of the ways we do this is by embracing a total-fund perspective that fully integrates the individual portfolios. We take advantage of our expertise across the Investment Division and its support groups and diversify the risks that the fund takes across many asset classes. Effective communication allows us to maximize the use of risk and capital across the total fund, as we select diversified assets that have the best chance of providing the investment returns needed to meet the plan’s long-term needs.

Managing funding and investment risks carefully is critically important to our investment strategy. For more information, see risk management and risk budgeting and monitoring.

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