Annual Public Meeting. Paul Cantor, Chair Gordon J. Fyfe, President & CEO Ottawa, October 28, 2010

Transcription

1 Annual Public Meeting By Paul Cantor, Chair Gordon J. Fyfe, President & CEO Ottawa, October 28, 2010

2 Paul Cantor Chair 2

3 Gordon J. Fyfe President and CEO 3

4 Agenda Investment Strategy Fiscal Year 2010 Results Preliminary Fiscal Year 2011 Results (As at September 30, 2010) Questions 4

5 Agenda Investment Strategy Fiscal Year 2010 Results Preliminary Fiscal Year 2011 Results (As at September 30, 2010) Questions 5

6 Long term Investment Strategy Diversification strategy began in FY2004. Strongest competitive advantages: large cash inflows and size. Ability to invest in illiquid assets like Private Equity, Real Estate and Infrastructure. Improve portfolio match to liabilities. Not forced to sell assets control timing of exits. 6

7 Rate of Return Objective 8 7.2% % 5.9% PSP Target (CPI + 4.3%) % FY01 FY03 FY04 FY10 PSP s performance is calculated net of fees for comparison purposes. 7

8 Policy Portfolio Diversification FY2004 FY2010 Fixed Income 35% Cash & Cash Equivalents, 3% Canadian Fixed Income, 32% Cash and Cash Equivalents, 2% World Government Bonds, 5% Canadian Fixed Income, 8% World Inflation Linked Bonds, 5% Infrastructure, 8% Real Estate, 10% Nominal Fixed Income 15% Real Return Assets 23% EAFE Large Cap, 15% Small Cap Dev. World Equity, 5% EAFE Large Cap, 5% US Large Cap, 5% US Large Cap, 15% Emerging Market, 7% Equity 65% Private Equity, 10% Equity 62% Canadian Equity, 35% Canadian Equity, 30% 8

9 Policy Portfolio Geographic Diversification FY2004 Europe, 15% FY2010 Other, 1% Mexico/South America, 2% Asia, 8% United States, 15% Europe, 13% United States, 21% Canada, 70% Canada, 55% 9

10 55 50 Share of World GDP Emerging economies will represent more than half of the world s GDP in (%) Forecast

11 World Market Capitalization Proportion of Emerging Market equities in world market capitalization doubled from 2004 to In % 82%

12 Internal Active Management More assets are managed internally. Greater proportion of active management is internal. 75% 65% 55% 45% 35% 25% 57% 29% 61% 35% 62% 40% 67% 45% Q4 FY07 FY07 FY08 Q4 FY08 Q4 FY09 FY09 FY10 Q4 FY10 Internal as a % of total AUM. Internal active management as a % of gross actively managed assets. 12

13 Internal Active Management Less expensive to manage assets internally. External active management is 3.5 to 7 times more expensive. Outsourcing all assets to fund managers would cost approximately $140 million more per year. 13

14 Operating Expenses Peer Comparison Total Operating Expenses Total Operating Expenses Ratio (BPS) AUM PSPIB FY10 $92M 22.9 $46B PEER GROUP * FY10 / 09 $224M 23.6 $100B *Peer group is composed of major Canadian pension fund asset managers (assets > $50B). 14

15 Agenda Investment Strategy Fiscal Year 2010 Results Preliminary Fiscal Year 2011 Results Questions 15

16 Annual Performance As at March 31 (%) Net Assets As at March 31 ($ billion) % 19.1% 21.5% 11.3% 7.9% 0.3% 22.7% FY04 FY05 FY06 FY07 FY08 FY09 FY $46 $39 $35 $34 $28 $19 $14 FY04 FY05 FY06 FY07 FY08 FY09 FY10 16

17 Top Ten Holdings As at March 31, 2010 Public Markets Equity (*indexed) Royal Bank of Canada Toronto Dominion Bank/The Bank of Nova Scotia Suncor Energy Inc. Canadian Natural Resources Ltd. Research In Motion Ltd. PotashCorp Bank of Montreal Barrick Gold Corp Manulife Financial Corp Private Markets Revera Inc. Telesat Lone Star Fund VI Natural Gas Pipeline Company of America (NGPL) Transelec Sword Energy Nova PE Partners MBK Partners Apollo Overseas Partners APAX Europe VII 17

18 Revera Inc. One of the largest providers of accommodations and care for seniors in Canada. 217 retirement and long term care homes. Date of investment: 2007 Partners: 100% owned Investment thesis: Demographics Shift from public to private sector 18

19 Telesat Fourth largest fixed satellite operator. Date of investment: 2007 Partners: Loral Space & Communications Ltd. MHR Institutional Partners Nimiq 5 Investment thesis: High barrier to entry (licenses, costs) Stable cash flow, strong backlog Strategic partnerships / merger with Loral Skynet 19

20 Natural Gas Pipeline Co. of America (NGPL) One of the largest natural gas pipeline/storage systems in the U.S. (Chicago & Northern Indiana). Date of investment: 2008 Partners: Kinder Morgan and others. Investment thesis: Recurring cash flows with an attractive yield. Very difficult to replicate in today s environment. Partnership with premier pipeline operator. 20

21 Transelec Largest electricity transmission company in Chile. Date of investment: 2006 Partners: Brookfield Asset Management, CPPIB and bcimc Investment thesis: Strong cash flows (inflation linked). Long term contracts with power generating companies. Attractive future development opportunities. 21

22 Lone Star Fund VI Opportunistic Real Estate Fund. Date of investment: 2007 Investment thesis: Capitalize on U.S. distressed real estate assets. General partner with one of the best track records. Unique expertise not replicable internally. 22

23 Top Five Private Investments Performance Annualized return: 12%* $4.3B $3.3B * Unhedged return Cost Value at March 31,

24 Asset Mix by Investment Unit As at March 31 (%) $5.4B 12% $5.1B 11% $2.1B 4% $31.8B 69% Public Markets Private Equity Real Estate Infrastructure Note: 4% in cash & cash equivalents. 24

25 FY2010 Performance by Asset Class Public Market equities 37.9% Public Market fixed income 3.9% Real Estate 0.6% Private Equity 28.8% Infrastructure 7.2% PSP Total 21.5% Public Equities: Canadian Eq., U.S. Large Cap Eq., EAFE Eq., Emerging Eq., Small Cap Eq. Public Fixed Income: Domestic Bonds, Global bond, Real Return bonds. The total portfolio return includes asset allocation, absolute return strategies and cash equivalents. 25

26 Public Markets Performance Investment income: $6.4 billion. Public Markets equity portfolios recorded investment returns between 20.1% and 47.4%. 26

27 Private Equity Performance Investment income: $1.2 billion. Investment return of 28.8%. Performance drivers: Direct and co investments portfolio Telesat China Network Systems 35 potential investments reviewed only two selected. 27

28 Real Estate Performance Investment return of 0.6%. 58% of assets in defensive sectors (apartments, senior homes). Continuing direct investments in emerging markets. 28

29 Real Estate Brazil Rio de Janeiro Real Estate Colombia 29

30 Infrastructure Performance Investment return of 7.2%. Investment return of 6.2% since inception (3.75 years) stable returns. Energy, utilities, transportation sectors. Few transactions overall in infrastructure market. 30

31 Agenda Investment Strategy Fiscal Year 2010 Results Preliminary Fiscal Year 2011 Results (As at September 30, 2010) Questions 31

32 FY2011 First 6 Months Investment return of 5.0% Investment income of $2.4 billion. Growth in assets: 9.7% includes contributions of $2.1 billion. Net assets of $50.8 billion. Most Private Markets are valued at year end. 32

33 FY2011 Objectives More assets managed internally. Enhanced risk management. Refine Policy Portfolio alignment. Talent management. 33

34 Agenda Investment Strategy Fiscal Year 2010 Results Preliminary Fiscal Year 2011 Results (As at September 30, 2010) Questions 34