University of
Northern BC
Investment
Presentation
Agenda
• Defined Benefit vs Defined Contribution Plan
• Mutual funds vs Segregated funds
• What is risk?
• Relationship between risk & return
• Investment management styles
• Choosing your funds
• Investment tools
• Sun Life Financial services
DB vs. DC- What’s the difference?
Defined Contribution Pension Plan (DCPP):
• One of the more popular pension plans in Canada
• The contributions are “Defined” known today – we know how
much you contribute to the plan
• The sum of money you will have in retirement will depend on
much is contributed and how you choose to invest the money
Defined Benefit Pension Plan (DBPP):
• The benefit you receive at retirement is based on a formula so
the benefit at retirement is “Defined”
• The dollars to fund the retirement can vary based on how the
money is invested
• The investments are managed by the sponsor of the plan
DB vs. DC- What’s the difference?
DB
Pension
Benefit
Company
Contributions
Predictable; based on
defined formula
DC
Unpredictable; based on DC
account value and interest or
investment returns after
retirement
Variable
Defined % of employee
pensionable earnings
Investment
Decisions
Made by company
Made by employee
Investment
Risk
Company assumes risk
Employee assumes risk
Termination
Lump sum value of earned
pension
Value of retirement account
Mutual funds vs. Segregated funds
• Segregated Funds are typically investment options
available through insurance companies
• Mutual funds and segregated funds combine
money from a large number of investors and these
assets are invested and controlled by a
professional money manager
• The monies in the segregated funds offered in
your plan are pooled together and invested in the
underlying mutual fund
• Segregated funds are held in trust for you and are
kept separate from the insurance company's
assets
What is risk?
Determining your risk profile
 Risk tolerance is the degree to which you are comfortable with:
• Volatility of annual returns
• Likelihood and size of negative returns
 In the long term:
• Higher returns typically come from taking more risk, but
• Need to be able to sleep comfortably at night?
 The risk required to achieve your goals:
• What is my investment time horizon?
• What are my retirement income expectations?
• What is the value of additional sources of potential retirement
income?
Two different risks need to be managed
1. Volatility of short term performance
• Assess your “risk tolerance”
• Diversify your portfolio to address market risk
and
2. Longevity Risk
• Risk of failing to accumulate sufficient assets to
build desired pension
• Not having sufficient assets to pay your desired
pension for life
When to re-evaluate your risk tolerance
 Major life events such as:
– Marriage or divorce,
– Children are born, go to university, leave home,
(return home?)
– Debt levels change or net worth changes
considerably
– Inheritances
– Death of a spouse
 As your investment time horizon to retirement shortens
 If your tolerance for risk changes for any other reason
Longevity risk
65
Retirement
91
50% chance
one spouse will
live to age 91
95
25% chance
one spouse will
live to age 95
Source: Canadian Institute of Actuaries – 1994 Uninsured Pensioner Mortality Table Projected to 2020.
Investments – Risk vs. Return
Canadian, US, & Foreign Equities
Guaranteed
• Guaranteed interest during fixed term
• Less long-term growth potential
Money Market
• Government treasury bills (T-Bills)
• Less long-term growth potential
“Balanced
Funds”
Bonds (Fixed Income)
• Promise to repay debt
• Pays a rate of interest
• Government and corporate
Equities (Stocks)
• Share in company profits
• Canadian, U.S. or Foreign
• Greater long-term growth potential
Bonds
Balanced Funds
Low
Money Market
• “One-stop” shopping
• Automatic diversification
Guaranteed Funds
Low
Risk
High
Growth of $10,000
(June 1995 – June 2010)
$50,000
$40,000
$ 34,583
$30,000
$ 28,893
$20,000
$ 17,120
$ 13,291
$10,000
$0
Jun 95 Jun 96 Jun 97 Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10
Consumer Price Index
S&P/TSX Composite Index
DEX 91-Days T-Bill Index
DEX Universe Bond Index
Investing in volatile markets
Be patient and don’t panic
• Corrections are a normal part of the market. Markets eventually recapture
losses, reaching and surpassing former levels. This can present
opportunities for long-term investors
Work with your Financial Advisor
• Working with an advisor who is focused on helping you achieve lifetime
security. Consumers with well-balanced, disciplined investment plans, who
have taken the risk of market volatility into account when creating their
investment plans, should have minimal impact on long-term goals
Diversify
• A diversified portfolio with a variety of investments, can carry less risk
• During market volatility, members with proper asset allocation and
disciplined investment plans will be impacted less by short-term events
Diversify your investments
• Diversification: holding different types of investments in
your portfolio
• Lower your overall risk by: not putting all of your eggs in
one basket
Ways you can diversify
Asset Class
Manager
Style
Foreign
Markets
Sector
Allowed 100% foreign content
The cycle of market emotions
Point of maximum
financial risk
Euphoria
Thrill
Excitement
Anxiety
Denial
Fear
Optimism
Desperation
Optimism
Panic
Relief
Capitulation
Hope
Despondency
Depression
Point of maximum
financial opportunity
Source: Westcore Funds / Denver Investment Advisers LLC
Investment
Styles
Investment Manager approaches
Active
Passive/Index
Objective is to outperform a
market index based on research
of current market conditions and
company prospects (actively
buys and sells securities in
individual funds)
Simply buys and sells assets to match
characteristics of an index, fund
performance should be similar to the
index, i.e. S&P TSX
Fund Manager applies an investment
“style” to their approach
Fund Management Fees tend to
be lower than an Active Fund Manager
Investment styles
Value
Growth
Focuses on stocks that a fund
manager thinks are currently
undervalued in price and will
eventually have their worth
recognized by the market
Believes that the single most
important thing driving stock prices
is rapidly rising corporate
earnings -- and that's what they
look for
If the manager is right, the stock
will increase in price as others
in the market recognize the
true value of the stock
If the manager is right, the company’s
stock will increase in price as the
company achieves business and
earnings growth
Investment styles
GARP
Core
Growth at a reasonable price
- looks for stocks of growth
companies that they can buy
for a reasonable price
Fund manager includes both
growth and value styles
– objective is to
not allow any one style
overweight the other
This is a combination of value
and growth investing
By not allowing one style to
overweight they maintain
a neutral position
Choosing your
funds
my money- Investment Risk Profiler
Assess your personal
risk tolerance by
completing the
investment risk profiler:
• online
• paper-based version
Investment Risk Profiler
Example:
A score of 36 to 85 points = Moderate
15%
International Equity
10%
Money Market
15%
U.S. Equity
40%
Fixed Income
20%
Canadian Equity
Your investment fund choices
* Fund Management Fees as at August 31, 2010. FMF for this plan are expressed as an annualized percentage, and exclude applicable
sales tax as of July 1, 2010
Asset Class
Fund Name
Management
Style
FMF*
Low
Core
N/A
0.39%
N/A
Low – Moderate
Universe
Universe
0.44%
0.66%
Moderate
Value
Value
Growth
1.55%
0.73%
0.64%
Core-GARP
Value
Growth
Core-GARP
Value
0.45%
0.73%
0.64%
0.65%
0.74%
Risk
Guaranteed/
Money Market
• Sun Life Financial Money Market
• Sun Life Assurance 1,3,5 Year Guaranteed
Bonds
• BlackRock Bond Index
• PH&N Bond
Balanced
• Bonavista Balanced
• Beutel Goodman Balanced
• McLean Budden Balanced Growth
Canadian Equity
• BlackRock S&P/TSX Composite Index
• Beutel Goodman Canadian Equity
• McLean Budden Canadian Equity Growth
• McLean Budden Canadian Equity
• Beutel Goodman Small Cap
Moderate – High
U.S. Equity
• BlackRock U.S. Equity Index
• CI American Value
• McLean Budden U.S. Equity
Moderate – High
Core-GARP
Value
Core-GARP
0.45%
1.25%
0.71%
Foreign Equity
• McLean Budden Global Equity
Moderate – High
Core-GARP
0.67%
High
Rebalance to match your risk
tolerance
Current Asset Mix
Target Asset Mix
15%
20%
40%
Back to target
asset mix
20%
30%
30%
20%
25%
25%
25%
25%
25%
Rebalancing strategy
Sell Bonds
Buy Equities
Investment
Tools
Getting information about your funds
(Morningstar®)
• Morningstar can be
accessed by selecting
Investment
Performance from the
Accounts menu
Getting information about your funds
(Morningstar®)
Investment Information
• Capital market performance
• Individual fund performance
• Investment style, fund and manager updates
Portfolio X-Ray
• Analyze different combinations of funds as a single portfolio; including the
effect of asset allocation changes to the portfolio
Fund Compare
• Compare and analyze funds in your plan with the full list of available funds
Performance Reports
• Generate investment performance reports for your plan’s funds
Investment Information
Morningstar Portfolio X-Ray
Morningstar Fund Compare
Performance Reports
Sun Life
Financial Tools
& Services
my money Retirement Planner
If you’re not sure how much money you
need to set aside for your desired
lifestyle in retirement, the my money
Retirement Planner can help
The planner lets you determine how much you need to save now to
provide you with your desired income level in retirement. You can
adjust a number of variables as they change over time by updating
your calculations in the retirement planner.
**The Retirement Planner is one of many tools that you can use, in planning for your retirement, it
does not take the place of a real financial planner/advisor**
Additional on-line tools to help
Planning Tools
• Withdrawal Calculator
• Capital Gains vs. RRSP Calculator
• Mortgage vs. RRSP Calculator
• RRSP Loan Calculator
• Non Resident Tax Calculator
Retirement Tools
• Annuity Premium Calculator
• Old Age Security Calculator
• Registered Retirement Income Fund (RRIF) Calculator
Keeping you involved
Internet
www.mysunlife.ca
Customer Care Centre
1-866-733-8612
• 24 hour automated phone
account access
• Representatives available every
business day (8 am to 8 pm ET)
• Account updates
• 150 languages supported
•
•
•
•
•
Receive up-to-date account balances
View transaction history
Make investment changes
Link directly to investment reports
View online member statements
Keeping you involved
Read your personal statements
• Quarterly
• Mailed to your home
• Available online
• Easy to read
• Personal rates of return
• Summary of all plans
• Transaction history
Your action plan
1. Use the Investment Risk Profiler to determine your
recommended portfolio allocation
2. Determine your investment approach
3. Use the Retirement Planner to determine your required
savings level to meet your retirement goals
4. Make your investment decisions
5. Monitor your savings and investments
6. Talk to a Financial Advisor
Thank-you!