The CAAT Plan's investment strategy is developed out of an asset-liability analysis and detailed risk assessment. The Plan’s $10.8 billion pension fund is well-diversified across a broad range of public and private asset classes and return sources. The guiding principles laid out in our Statement of Investment Policies and Procedures (SIPP) help ensure our assets are invested in a prudent and skillful manner, and follow the highest standards for quality, compliance and performance that will contribute to the long-term sustainability of the pension fund.
Our team of investment professionals oversees the Plan’s investment strategy as set out in our Board of Trustees-approved investment policies. We select investment management firms, funds and co-investments that meet our criteria and quality standards, and we monitor their performance against targets for both returns and for risk. The end result is a well-diversified portfolio of public and private market investments that reduces risk and is expected to meet our long term required rate of return.Julie Cays, Chief Investment Officer
The Plan employs several strategies for managing investment risk, including diversification and liability-sensitive investing.
Diversification helps reduce the risk that certain market fluctuations and economic factors will have a negative impact on large portions of our portfolio at the same time. Asset classes that experience strong performance under certain economic conditions can balance out those with weaker performance. Examples of diversification include:
- Asset classes (e.g. equity, fixed income, real assets and commodities)
- Regional (e.g. Canadian, global, emerging markets)
- Company type (e.g. large or small cap, public or private).
Liability-sensitive investing helps reduce risk by considering that part of the fund will behave in a similar way as the Plan’s liabilities. The CAAT Plan's fund is divided between the following:
- "Liability sensitive" investments that are split between “interest rate sensitive” assets (such as nominal bonds) and “inflation sensitive” assets (such as real return bonds, real assets and commodities) help to hedge the interest rate and inflation and sensitivity of our liabilities.
- "Return enhancing" investments such as public and private equities are expected to grow faster than the liabilities over the long term.
Asset-Liability Modelling Study
To ensure the strategy continues to meet the needs of our membership, the Plan periodically undertakes an Asset-Liability Modelling (ALM) Study to identify the best possible asset mix for the Plan. The study takes into consideration the Plan's liabilities, risk tolerance and long-term return requirements.