Friday, July 19, 2013

PSP Investments Gains 10.7% in FY 2013

The Public Sector Pension Investment Board (PSP Investments) reported its fiscal year 2013 results:
The Public Sector Pension Investment Board (PSP Investments) announced today that it recorded an investment return of 10.7% for the fiscal year ended March 31, 2013 (fiscal year 2013) with all investment portfolios recording positive investment returns.
The solid overall performance for fiscal year 2013 was driven primarily by strong results in Public Market Equity portfolios as well as in Private Equity, Real Estate and Infrastructure. The fiscal year 2013 investment return exceeds the Policy Portfolio return of 8.6%, representing $1.4 billion of value-added over the benchmark return.

Consolidated net assets increased by $11.6 billion, or 18%, to a record level of $76.1 billion. During fiscal year 2013, PSP Investments generated investment income of $7.0 billion after expenses and received $4.6 billion in net contributions.

Over the four years since the global financial crisis of 2008-2009, PSP Investments has achieved an annualized return of 12.2%, generating $23.7 billion in investment income and $3.7 billion of value-added over benchmark returns. The comparable figures for the ten-year period are 8.2%, $25.3 billion and $1.7 billion.

"A solid company-wide effort drove strong results with all asset classes performing well," said Gordon J. Fyfe, President and Chief Executive Officer. "This sustained performance over a period punctuated by lingering economic uncertainty and market volatility indicates clearly that our strategic focus on increased diversification in Private Markets and internal active management is paying off. Our investments in Public Markets, Real Estate, Private Equity, Infrastructure and our newest asset class, Renewable Resources, all contributed to value-added over benchmark returns."

For fiscal year 2013, returns on Public Markets Equities ranged from 4.9% for the Emerging Markets Equity portfolio to 19.2% for the Small Cap Equity portfolio. The Fixed Income portfolio generated a return of 3.4% while the return for the World Inflation-Linked Bonds portfolio was 7.0% for fiscal year 2013.

In Private Markets, all asset classes posted solid investment returns led by Renewable Resources and Private Equity with returns of 16.7% and 16.0% respectively. Real Estate recorded an 11.5% investment return while the Infrastructure portfolio earned an investment return of 10.1%.

The asset mix as at March 31, 2013 was as follows: Public Markets Equities 52.8%, Nominal Fixed Income and World Inflation-Linked Bonds 20.1%, Real Estate 12.4%, Private Equity 9.1%; Infrastructure 5.1% and Renewable Resources 0.5%.
For more information about PSP Investments' fiscal year 2013 performance, you can consult PSP Investments' Annual Report here. You can also consult the investment highlights here.

PSP's fiscal year 2013 results are very impressive. Consider these key points:
  • Consolidated net assets increased by $11.6 billion or 18% to $76.1 billion.
  • Investment income of $7.0 billion after expenses and value-added of $1.4 billion above benchmark return of 8.6%. 
  • For fiscal year 2013, PSP Investments generated a total portfolio return of 10.7%, outperforming the Policy Portfolio by 2.1%. Over the past four fiscal years, PSP Investments recorded a compound annualized rate of return of 12.2%, compared to the Policy Benchmark rate of return of 10.5% for that same period. This is a significant outperformance.
  • Gains were widespread as all investment groups (public and private markets) outperformed their respective benchmarks. The gains in private markets were exceptional but gains in public markets were equally impressive when you consider the volatility in stock and bond markets during their fiscal year.
  • This was PSP's best four-year value-added performance, achieving an annualized return of 12.2%, generating $23.7 billion in investment income and $3.7 billion of value-added over benchmark returns. The comparable figures for the ten-year period are 8.2%, $25.3 billion and $1.7 billion.
  • Recent investment gains have erased the impact of past investment losses, including the 23% loss during FY 2009. More importantly, over the ten year period, PSP's total portfolio return is 7.9% (net of expenses), which is significantly higher than the actuarial target rate of return of 6.1%.
  • Assets managed internally increased by $7.9 billion to reach $55.8 billion. Assets actively managed internally totalled $29.1 billion, an increase of 25% over fiscal year 2012.
  • PSP launched a US$3 billion commercial paper program in the United States and received AAA credit ratings from Moody’s, DBRS and Standard & Poor’s.
I urge my readers to carefully read PSP's Annual Report 2013. In particular, go over the President's report where Gordon Fyfe, PSP's President, CEO and CIO, goes over the fiscal year results in much more detail.

I congratulate Gordon Fyfe, the senior VPs and all of PSP's employees for the strong performance delivered over the last four years, completely erasing the losses of FY 2009 and adding significant value-added. I was the first investment professional Gordon hired back in October 2003 and know firsthand the incredible work and dedication it takes from everyone to deliver these results.

Below, John Liu, New York City comptroller, discusses the pension fund's record setting performance and Eliot Spitzer's run for comptroller.