Active Management Produces Value Beyond Index Investing
We do not believe that passive investing through conventional public equity market indexes on its own can generate the risk-adjusted returns our plan requires to pay future pensions. As such, our actively-managed equity portfolios search for additional, incremental value.
We employ our own investment teams as well as external investment managers to carry out our active equities mandate.
We buy shares of companies that we think should rise in value more than market benchmarks. Our approach is to select shares of companies that are undervalued using a "bottom-up" method of analysis. This includes analyzing each company's:
- financial performance
- operational efficiencies
- industry position
- management quality
- long-term business plan
- board independence and corporate governance practices
- quality of capital allocation decisions
External equity managers play an important role within our investment program. At its core, our external manager program is based on relationships with approximately 12 global equity managers that we believe can consistently deliver returns that significantly outperform the relevant benchmark (MSCI All Country World ex Canada Total Return Index).
We generally select investment managers who are valuation conscious and run concentrated, low-turnover portfolios. We also employ a number of specialized regional or country managers that provide significant above-market performance based on their expertise and presence in specific markets that are expected to provide significant long-term return potential.