Wednesday, April 23, 2014

CAAT Gains 13.9% Net in 2013

Benefits Canada reports, CAAT posts 13.9% return for 2013:
The Colleges of Applied Arts and Technology (CAAT) Pension Plan reported a 13.9% net return for the year that ended on December 31, 2013.

The DB plan’s net assets climbed to $7.1 billion, up from $6.3 billion the previous year.

In its valuation filed as of Jan. 1, 2014, the pension plan is 105% funded on a going-concern basis and has a funding reserve of $525 million.

The plan returned 14.5% before investment management fees. Since the 2008 economic meltdown, the CAAT Pension Plan’s investment portfolio has produced an average annual return of 11.7% gross and 11.1% net of investment management fees.

Last year, contributions to the CAAT plan, which are shared equally by employees and employers of the Ontario college system, amounted to $368 million. Income from investments was $860 million. The plan paid $344 million in pension benefits for the year.

The CAAT plan has 22,000 members working in the Ontario college system, which is made up of 24 colleges and seven affiliated non-college employers. It also has 15,000 members who are retired or have a deferred pension.

For every dollar paid in pension, at least 70 cents come from investment income. The remaining 30 cents come from equal member and employer contributions.
CAAT pension plan posted a press release last week, CAAT Pension Plan earns 13.9% net:
The CAAT Pension Plan today announced a 13.9% rate of return net of investment management fees for the year ended December 31, 2013.The Plan’s net assets increased to $7.1 billion from $6.3 billion the previous year.

In its valuation filed as at January 1, 2014, the CAAT Pension Plan is 105% funded on a going-concern basis with a funding reserve of $525 million.

The Plan returned 14.5% before investment management fees totaling 60 basis points. Since the economic crisis of 2008, the CAAT Pension Plan’s well-diversified investment portfolio has earned an average annual rate of return of 11.7% gross and 11.1% net of investment management fees.

Contributions to the CAAT Plan, shared equally by employees and employers of the Ontario college system, were $368 million in 2013, while income from investments was $860 million. The Plan paid $344 million in pension benefits for the year.

The CAAT Pension Plan has 22,000 members employed in the Ontario college system, which is made up of 24 colleges and seven affiliated non-college employers, and 15,000 members who are retired or have a deferred pension.

For every dollar paid in pension, at least 70 cents comes from investment income. The remaining 30 cents comes equally from member and employer contributions.

The average annual lifetime pension for all retired members and survivors is $23,700. In 2013, members on average retired at age 62 after 24 years of pensionable service. The 730 members who retired last year collected an average annual lifetime pension of $37,400.

The CAAT Plan seeks to be the pension plan of choice for single-employer Ontario university pension plans interested in joining a multi-employer, jointly sponsored plan in the sector. The postsecondary education alignment and similar demographic profile of university and college employees makes the university plans an ideal fit with the CAAT Plan’s existing asset and liability funding structures. The CAAT Plan has been in discussions with individual universities, employer and faculty associations, and with government officials, about the feasibility of building a postsecondary sector pension plan that leverages the Plan’s infrastructure and experience, reducing costs and risks for all stakeholders.

“We believe the merger of interested university pension plans with the CAAT Plan would benefit all stakeholders by delivering predictable costs and more secure benefits at a lower risk,” says Derek Dobson, CEO of the CAAT Pension Plan. “We can achieve this through an alignment of interests within the sector that provides the added advantage of seamless portability of pensions between colleges and universities.”

Created at the same time as the Ontario college system in 1967, the CAAT Plan assumed its current jointly sponsored governance structure in 1995. The CAAT Plan is a contributory defined benefit pension plan with equal cost sharing. Decisions about benefits, contributions and investment risk are also shared equally by members and employers. The Plan is sponsored by Colleges Ontario, OCASA (Ontario College Administrative Staff Association) and OPSEU (Ontario Public Service Employees Union).
There is not much to say on my end except that CAAT is doing an outstanding job in managing their members' pension plan. It's delivering excellent investment results and the shared risk model of this plan is a major reason why it remains fully funded and a true testament as to why well governed defined-benefit plans are the way to go.

Last year I wrote about the CAAT and Optrust edge, praising Julie Cays, CAAT's chief investment officer. Julie is an exceptional pension fund manager and in a male dominated industry, she doesn't receive the recognition she rightfully deserves. Posting 13.9% net in 2013 after posting 11.3% net in 2012 and remaining fully funded is outstanding and this is why I say CAAT is one of the best Canadian public pension plans you never heard of.

CAAT's Annual Report is not available yet but it will be released in May and you can click here to view it once it's released. Julie Cays did share this with me:
Our annual report will be out in a few weeks with a lot more detail but in short, our 13.9% net return in 2013 was driven by positive absolute performance in all of our asset classes (with the exception of bonds of course), the strongest coming from our 30% weighting in non-Canadian equities. It was also a good year for positive relative performance – again in virtually all asset classes. Added value was 210 bps net of fees or $130 million over the year.
I congratulate Julie and the entire staff at CAAT for another great year. I urge all universities, especially my alma mater, McGill University, to join CAAT's Pension Plan. McGill recently hired Sophie Leblanc away from Bombardier to be their new CIO of their pension and endowment fund. I don't know much about Ms. Leblanc except that Bombardier was one of the worst Canadian corporate plans but she helped changed things around over the last ten years. You can read McGill Pension Plan's 2013 Annual Report here.

Below, Derek Dobson, CEO of the CAAT Pension Plan, discusses the benefits of the plan. I also urge you to watch a video on inflation protection CAAT posted on their website.