Annual General Meeting
November 18, 2013
Prepared by Aon Hewitt Consulting
Presentation to U of S Non-Academic Pension Plan
Aon Hewitt and the University of Saskatchewan
 Aon Hewitt
– Investment Consultants
– Investment Team based on out of Regina leads relationship
– Supported globally; professionals located across Canada, U.S. and U.K.
 Two decade relationship
 Services provided for the Non-Academic Plan
– Performance Measurement
– Performance Reporting—How are we doing?
– Investment Manager Reporting and Evaluation—How are our Managers doing?
– Investment Policy Reviews—What should we invest in?
– General Investment Research—What should we know ?
– Anything the Committee asks for!
08700/Non-Academic/003/JAK.ppt Nov 2013
1
Non-Academic Pension Plan AGM - Agenda
What is our Investment Objectives?
Have we met our Objectives?
What is our Asset Mix?
Why do we have this Asset Mix?
What is our Manager Structure?
Why do we have this Manager Structure?
How has our Plan performed?
How have our managers performed?
What are our fees?
08700/Non-Academic/003/JAK.ppt Nov 2013
2
What is our Investment Objectives?
1. Accumulate assets to provide members with retirement benefits as promised
2. Earn a long term return of 4.25% over inflation
3. Earn a rate of return, net of fees, in excess of a Total Fund benchmark portfolio
4. Earn a rate of return, net of fees, in excess of individual asset class benchmarks
08700/Non-Academic/003/JAK.ppt Nov 2013
3
Have we met our Objectives?
1. Accumulate assets to provide members with retirement benefits as promised
- As of December 31, 2012, Plan assets were $243 million; liabilities were $279 million
(going-concern)
2. Earn a long term return of 4.25% over inflation*
- Four-year return is 5.4% over inflation
- Ten-year returns is 4.3% over inflation
3. Earn a rate of return, net of fees, in excess of a Total Fund benchmark portfolio*
- Total Fund Benchmark – Four-years = 7.2% + 0.51% fees
- Total Fund Return – Four-years = 7.2%
- Total Fund Benchmark – Ten-years = 6.2% + 0.51 % fees
- Total Fund Return – Ten-years = 6.1%
4. Earn a rate of return, net of fees, in excess of the individual asset class benchmarks*
- Canadian Equities** – 7.3% vs. 5.9% S&P/TSX Index + (0.50% fees)
- Global Equities** – 7.2% vs. 9.3% MSCI World Index + (0.64% fees)
- Bonds** – 5.1% vs. 4.5% DEX UB Index + (0.24% fees)
- Real Estate** – 10.8% vs. 11.6% IPD Index + (0.89% fees)
* Returns are as of September 30, 2013
** Four-Years Returns
08700/Non-Academic/003/JAK.ppt Nov 2013
4
What is our Asset Mix?
Total Fund Benchmark and Asset Component Ranges (at market value)
Equities
Canadian equities
Global equities
Total Equities
Real Estate
Fixed Income
Bonds and mortgages
Short term investments
Total Fund
Minimum
%
Benchmark
%
Maximum
%
10
20
40
0
20
40
60
5
30
60
70
10
25
0
33
2
100
50
10
The Total Fund Benchmark and Ranges are effective May 1, 2012.
08700/Non-Academic/003/JAK.ppt Nov 2013
5
Why do we have this Asset Mix?
Asset mix Designed to Achieve our Primary Investment Objectives
- Accumulate assets to provide members with retirement benefits as promised
- Earn a long term return of 4.25% over inflation
Why do we have Canadian Equities ?
- Utilize long term investment horizon to invest in higher risk/higher returning asset
classes
Why do we have Global Equities ?
- Utilize long term investment horizon to invest in higher risk/higher returning asset
classes
- Diversify our exposure to the Canadian market
- Access investment opportunities globally
Why do we have Bonds ?
- Stable asset class to counter balance to riskier/higher returning equities
- Consistent income
- Matching properties relative to liabilities (promised pension payments)
08700/Non-Academic/003/JAK.ppt Nov 2013
6
Why do we have this Asset Mix?
Why do we have Real Estate?
- Stable asset class to counter balance to riskier/higher returning equities
- Diversification against traditional asset classes
- Consistent income
- Returns in excess of bonds
- Inflation protection
08700/Non-Academic/003/JAK.ppt Nov 2013
7
What is our Manager Structure?
Investment Manager
(% of Market Value)
Minimum
%
Target
%
Maximum
%
5
5
10
10
25
0
10
10
20
20
35
5
15
15
30
30
60
10
Canadian Equity Manager–Burgundy
Canadian Equity Manager– CC&L
Global Equity Manager–Harding
Global Equity Manager– Sprucegrove
Fixed Income Manager–PH&N
Real Estate Manager–Greystone
The Investment Manager Guidelines are effective May 1, 2012.
08700/Non-Academic/003/JAK.ppt Nov 2013
8
Why do we have this Manager Structure?
 Specialty Manager Structure
– Access best in class managers in all mandates
 Burgundy – Canadian Equities
– Deep value manager
– Lower volatility (lower risk)
– Good in down markets
 CC&L – Canadian Equities
– Core style manager
– Tight risk controls relative to benchmark
– Consistent performer in all market environments
 Harding Loevner – Global Equities
– Growth style manager
– Protects value in down markets, despite growth focus
– Good offset to other manager (Sprucegrove – value)
08700/Non-Academic/003/JAK.ppt Nov 2013
9
Why do we have this Manager Structure?
 Sprucegrove – Global Equities
– Value manager focused on high-quality companies
– Consistent performer in all market environments
– Sought after strategy, closed to new investors
– Low fees
 PH&N – Bonds
– Consistent performers
– Multiple sources of added value
– One of the largest bond managers in Canada
– One of the largest bond teams in Canada
 Greystone – Real Estate
– Core portfolio – fully leased, Class A, high rent portfolio
– Diversified across Canada and across all market segments
– Largest real estate pooled fund in Canada
– Long track record, with stable team
08700/Non-Academic/003/JAK.ppt Nov 2013
10
How has our Plan performed?
Periods Ending September 30
Return Summary
Performance Statistics
Added Value History (%)
%
Quarters
Market Capture
Up Markets
27
102.5
Down Markets
13
107.5
Up Markets
27
70.4
Down Markets
13
38.5
Overall
40
60.0
Batting Average
Quarter
xx
Benchmark consists of:
Longer Term
xx
-20%
S&P/TSX Capped Composite
-40% MSCI World
-33% DEX Universe Bonds
- 5% Investment Property Databank
-2% DEX 91-Day T-Bills
08700/Non-Academic/003/JAK.ppt Nov 2013
11
Plan Performance — Key Drivers
 Year to Date: Total Fund 9.9% to 8.9% Benchmark
 One-Year Performance: Total Fund 12.4% to 11.4% Benchmark
– U.S. and international equity markets were strong in the year
– Burgundy and CC&L excelled in adding value in Canadian equities
– Harding trailed notably in global equities
– Greystone delivered healthy 10.6%, yet was 1.8% below the IPD Index
 Four-Year Performance: Total Fund 7.2% to 7.2% Benchmark
– All asset classes delivered mid to high single digit returns, real estate up 11%
(annualized) over the period
– PH&N bonds performed well, adding value
– Asset mix and manager structure was completely restructured in May 2012, past
performance not a reflection of current investment strategy
08700/Non-Academic/003/JAK.ppt Nov 2013
12
How have our managers performed?
Periods Ending September 30
Performance (%)
4
Years
1
Year
Year
To Date
Total Fund
9.9
(32)
12.4
(44)
7.2
(47)
Benchmark
8.9
(50)
11.4
(51)
7.2
(47)
Value Added
1.0
Diversified Funds Median
8.9
1.0
0.0
11.4
6.9
Burgundy
14.5
(12)
18.8
(19)
-
S&P/TSX Capped Composite
5.3
(94)
7.1
(96)
5.9
Value Added
9.2
Canadian Equity Median
9.8
CC&L
11.5
(37)
14.6
(34)
-
S&P/TSX Capped Composite
5.3
(94)
7.1
(96)
5.9
Value Added
6.2
Canadian Equity Median
12.4
7.0
(65)
-
7.5
12.4
9.8
(65)
-
11.7
7.0
Harding Loevner
16.6
(87)
19.5
(90)
-
MSCI World (Net) (CAD)
21.1
(55)
25.6
(57)
9.3
Value Added
-4.5
Global Equity Median
21.4
(71)
-
-6.1
26.4
10.3
Sprucegrove
20.4
(61)
25.3
(62)
-
MSCI World (Net) (CAD)
21.1
(55)
25.6
(57)
9.3
Value Added
-0.7
Global Equity Median
21.4
PH&N
-0.9
(23)
-0.4
(24)
5.1
(31)
DEX Universe Bond
-1.6
(70)
-1.3
(76)
4.5
(94)
Value Added
0.7
26.4
10.3
0.9
0.6
4.9
-1.3
-0.9
Greystone
7.6
10.6
10.8
REALpac / IPD Canada Property Index
5.9
12.4
11.6
Value Added
1.7
-1.8
-0.8
Canadian Bonds Median
Parentheses contain percentile rankings
08700/Non-Academic/003/JAK.ppt Nov 2013
13
(71)
-
-0.3
What are our Fees?
Account
Fee Schedule
Total
Market Value
Percentage of
Portfolio
Estimated
Annual Fee (%)
Average Retail
Mutual Fund Fee
(%)
$263,114,133
100.0%
0.508%
1.750%
PH&N
0.500%
0.300%
0.200%
0.150%
0.100%
of the first $5 Million
of the next $15 Million
of the next $100 Million
of the next $380 Million
of the balance
$80,790,043
30.7%
0.237%
1.500%
Greystone
1.000%
0.800%
0.600%
0.500%
of the first $10 Million
of the next $25 Million
of the next $65 Million
of the balance
$21,364,064
8.1%
0.894%
N/A
Burgundy
1.250% of the first $2 Million
0.750% of the next $3 Million
0.500% of the balance
$26,465,364
10.1%
0.585%
2.000%
CC&L
0.500% of the first $5 Million
0.400% of the next $20 Million
0.300% of the balance
$25,321,003
9.6%
0.418%
2.000%
Harding
1.000% of the first $20 Million
0.500% of the next $80 Million
0.450% of the balance
$51,924,320
19.7%
0.693%
2.600%
Sprucegrove
0.900%
0.650%
0.550%
0.500%
0.250%
0.200%
$57,214,075
21.7%
0.583%
2.600%
Operating & Transition Accounts
08700/Non-Academic/003/JAK.ppt Nov 2013
of the first $5 Million
of the next $10 Million
of the next $25 Million
of the next $35 Million
of the next $225 Million
of the balance
$35,265
14
Non-Academic Pension Plan AGM
Questions ?
08700/Non-Academic/003/JAK.ppt Nov 2013
15