UPP Growing Nicely, Adds a New Member

Diane Peters of University Affairs reports Ontario’s joint pension plan is growing, less than a year after its inception:

When the University Pension Plan (UPP) – which amalgamates pensions from the University of Toronto, Queen’s University and the University of Guelph – went live in July 2021, it boasted assets worth over $11 billion and 35,000 members.

And already, the newly minted pension has a new addition, which UPP CEO Barbara Zvan calls a “big milestone.” Trent University’s faculty association voted to transfer its pension last May and officially joined in January 2022. (The university hopes to gain approval to move its staff pension plan to the UPP in the future.)

Solvency deficits in pension funds have been an ongoing problem for Ontario universities. Trent has long been concerned about its own pensions, said president Leo Groarke. “When I came to Trent seven years ago, the number one item on the risk agenda was pension liabilities,” he said. When the idea of a jointly sponsored pension plan for the university sector was first proposed in 2014, Trent was one of the six universities that took part in initial negotiations, along with Wilfrid Laurier University and King’s University College (affiliated with Western University). “Our attitude is that our core business is not running a pension,” Dr. Groarke said.

Part of the UPP’s pitch is that it can take advantage of economies of scale, bring in top experts in pension plan management and investing, and put its considerable assets into a diverse and ambitious portfolio — think of the Ontario Teachers’ Pension Plan, which invests in real estate and has a controlling interest in numerous companies. And as the UPP grows, the idea is it will provide a seamless experience for people who are hired by different member universities in Ontario. “Their pension just moves with them,” said Herb Kunze, a professor of mathematics at the University of Guelph and a member of the UPP’s employee sponsor committee. Another upside: small groups of employees who don’t yet have pensions can apply to join. (The faculty association staffs of both U of Guelph and the U of T signed onto the UPP recently, and U of Guelph’s consists of just four people.)

Fifth potential member

Officials at Laurier have been keeping their eyes on the evolution of the UPP and they hope to port the university’s sole pension plan over to it. They have been educating the university’s community and expect to start serious talks with its six unions and other non-union employees in the coming months. “It’s a long-term sustainability goal for us,” said Pamela Cant, Laurier’s chief human resources and equity officer. “We’re interested in providing a competitive, comprehensive defined benefits plan and we want it to be financially sustainable and secure into the future.” While Laurier’s pension is well funded at the moment, the university is aware that could change if markets shift.

Officials at Laurier also said they appreciate the UPP’s governance model, which is highly transparent and shares risk between employers and plan members. But Ms. Cant admitted that the university would prefer to move to the UPP once it has established a central administrative system. “The founding universities are doing their own administration still, and we’d ideally like to join when all that has been set up.”

Indeed, the UPP is still working out its infrastructure and, is in the process of moving over the last of the assets from the three founding universities’ pension plans by the end of April. “There are a lot of things you have to build in the background and we’re doing that at speed,” said Ms. Zvan. “It takes a few years.” The UPP has a request for proposals out for a vendor to create and deliver an administrative platform. It is also seeking input from members on the issue of responsible investing.

Questions over green investing

While the UPP has a policy that says it is “committed to embedding responsible investment practices throughout our investment activities,” some remain skeptical. A group representing faculty members from the three founding universities has sent two signed research documents to the UPP asking for greater transparency around climate strategy and, among other things, a commitment to divest from fossil fuels by 2025 and to achieve a zero-emission portfolio by 2040.

One of the members of the group is Marcus Taylor, an associate professor in global development studies at Queen’s, who said he and his colleagues are concerned the plan will take a watered-down approach to divestment. “The initial statement on its policies could have been cut and pasted from the most mundane kind of mid-2010 policy,” said Dr. Taylor, who also penned an op-ed for the Globe and Mail on this topic last fall. “We’re in 2022 now and our concerns about climate change are at a very different point now. There’s a real opportunity here to set up something not bogged down by institutional baggage, but to do something really new,” he added.

Ms. Zvan has experience with sustainable investing in her previous role as chief risk and strategy officer for the Ontario Teachers’ Pension Plan, and she expects the input her team gets from members will influence investment priorities. “I’m confident we can come up with an effective approach,” she said. “We want to make sure we’re evaluating the risks related to climate change and investing in a more sustainable future.”

Once many of these foundational issues are worked out at the UPP, Ms. Zvan expects to ramp up outreach and education efforts. “The UPP was created to be a sector-wide plan. I see my job as making the UPP as attractive as possible for other universities to join.”

Since the process of gaining approval from employee groups takes time, Dr. Kunze estimates the UPP could see three or four new schools join on over the next five years. As for Dr. Groarke, he said officials at Trent have no regrets about the decision to sign on. “We’re very convinced that this is the right move for us, and I would expect that it’s the right move for many other universities.”

UPP welcomed Trent University as a new member at the start of the year:

This week, University Pension Plan (UPP) welcomed Trent University as its fourth member institution, with the participation of TUFA pension plan members. Also joining Ontario’s newest jointly sponsored, defined benefit pension plan on January 1, 2022, are staff of the University of Guelph and University of Toronto faculty associations and eligible UPP employees.

“We are thrilled to welcome UPP’s newest members, thanks to the hard work of our Joint Sponsors and new university partners,” said Barbara Zvan, President and CEO of UPP. “This marks another exciting step forward in our mission to fulfill the historic vision of UPP’s creators – to bring enhanced retirement security to current and future members, provide excellence in member service, invest responsibly, and give members a stronger voice in their plan.”

The new members join UPP at a formative stage, as the Plan builds its long-term foundations, develops its member service infrastructure, and further defines its investment roadmap. This strategic work includes dedicated engagement with members on their needs, values and expectations. Winter 2022 will mark a new round of member engagement, with a survey and discussion series focused on Responsible Investing.

Launched on July 1, 2021, by its founding universities – Queen’s University, University of Guelph and University of Toronto – UPP encompasses more than 35,000 members and over $11 billion in assets under management. As a jointly sponsored pension plan, decisions on new entrants and the timing of entry are made by UPP’s Joint Sponsors. UPP’s focus is on creating a platform that will excite others to join and make the transition as seamless as possible.

“As we welcome new entrants to the Plan, UPP’s commitment to our mission remains steadfast,” said Gale Rubenstein, Chair of UPP’s Board of Trustees, “We look forward to working with our Joint Sponsors to strengthen defined benefit pensions in the university sector across Ontario.”

Gale Rubenstein and UPP's Board which includes OTPP's former CEO, Ron Mock, know what they're doing and they remain focused on their mission, working with their Joint Sponsors to strengthen defined benefit pensions in the university sector across Ontario.

They hired Barb Zvan as president and CEO of the organization and she then hired an experienced executive leadership team, all in record time during a pandemic (working from home).

Think about it, UPP was launched in July of last year and it already has a solid leadership team that includes a CIO and Senior Managing Director of Private Markets. The Plan’s inaugural Chief Investment Officer (CIO), Aaron Bennett and its Senior Managing Director of Private Markets, Peter Martin Larsen, were hired late last year

There is an entire team already in place and I'm just giving you the two heads of investments, but have a look at the entire senior leadership team.  

Not only is this an experienced team, it's a team which represents the diversity of Canada and UPP's members.

I'm hardly surprised since Barb Zvan takes diversity & inclusion very seriously.

She's also an expert in responsible investing but reading the article above, I am reminded of my old McGill days when I used to sit in professor Tom Naylor's office and he would tell me all about the infighting within the Economics department and other departments.

Academics are really smart people and not surprisingly, some are highly opinionated. Sometimes, it's hard to convince them that some issues aren't as black & white as they think. 

Divesting out of oil & gas is one such issue. It may seem sensible and worthwhile but in reality, we will need the fossil fuel industry for decades to come as we transition to net zero and it's much better engaging with this industry than divesting from it.

Not to mention, divesting isn't free, there's a cost especially in an inflationary environment where commodities are booming:

And that cost is borne by pension plans and its members.

They may be fine with it but it needs to be clearly communicated to them and what divesting out of oil & gas really means.

Now, Barb Zvan is extremely intelligent, she knows all this and she's very transparent and welcomes the input from all of UPP's members.

I caught up with her last July when UPP launched its operations and it struck me how keen she is on communications and engaging her members.

I'm sure she will have some very interesting discussions and she will welcome different views.

But at the end of the day, UPP's governance is what counts and members have to trust this governance and that the Plan is being run in their best interest.

It's still early days, not even a year has passed since UPP officially launched, but there's no doubt in my mind whatsoever that the Board, CEO and senior leadership team have set the right foundations. 

Lastly, I envision a day when all of Canada's universities join UPP and have their pension assets managed and administered by this organization.

I've seen good and bad pension management at Canada's universities and I have more faith in UPP, its governance and leadership team than anywhere else.

You should all track UPP's activities here, they are very busy setting the right foundations.

I look forward to catching up with Barb in the summer or sooner to go over activities of the last year.

Below, an interesting panel discussion featuring Barb Zvan and Eduard van Gelderen, Senior Vice President and Chief Investment Officer of PSP Investments, which took place last November. 

I covered it here and think it's well worth watching it again.